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Operator: Good morning, and welcome to Novavax's Fourth Quarter and Full Year 2025 Financial Results and Operational Highlights Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Luis Sanay, Vice President, Investor Relations. Please go ahead. Luis Sanay: Good morning, and thank you all for joining us today to discuss our fourth quarter and full year 2025 financial results and operational highlights. A press release announcing our results is available on our website at novavax.com, and an audio archive of this conference call will be available on our website later today. Please turn to Slide 2. Before we begin with prepared remarks, I need to remind you that this presentation includes forward-looking statements, including, but not limited to, statements related to Novavax's corporate strategy and operating plans, its strategic priorities, its partnerships and expectations with respect to potential royalties, milestones, cost reimbursements, the current macro and regulatory environment, the development of Novavax's clinical and preclinical product candidates, the timing and results of clinical trials, timing of regulatory filings and actions, its APA agreements and related negotiations, projected market opportunity, full year 2026 financial guidance and revenue framework, and Novavax's future financial or business performance, including long-term growth, savings and profitability targets. Each forward-looking statement contained in this presentation is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Additional information regarding these factors appears under the heading Cautionary Note Regarding Forward-Looking Statements in the presentation we issued this morning and under the heading Risk Factors in our most recent Form 10-K and subsequent Form 10-Qs filed with the Securities and Exchange Commission available at sec.gov and on our website, novavax.com. The forward-looking statements in this presentation speak only as of the original date of this presentation, and we undertake no obligation to update or revise any of these statements. Please turn to Slide 3. This presentation also includes references to non-GAAP financial measures, which are total adjusted revenue, adjusted licensing, royalties and other revenue, combined R&D and SG&A expenses plus partner reimbursements and non-GAAP profitability. Please turn to Slide 4. Joining me today is John Jacobs, our President and CEO, who will highlight our growth strategy. Elaine O'Hara, Chief Strategy Officer, will focus on progress with our partnership strategy. Dr. Ruxandra Draghia, Head of R&D, will discuss our R&D updates; and Jim Kelly, Chief Financial Officer and Treasurer, will review our financial results and 2026 financial guidance and revenue framework. Please turn to Slide 5. I would now like to hand over the call to John. John Jacobs: Thank you, Luis. I'm excited to be here today with members of our executive team to share our fourth quarter and full year 2025 financial results. We made significant progress on our corporate strategy in 2025, successfully executing against our existing partnerships while advancing our organic pipeline, innovation efforts with our Matrix technology and making progress towards new potential partnerships. Our progress in 2025 was possible because of how we have reshaped the company since 2023 and with our new strategy, which we launched last year. Since the launch of our new strategy, we have evolved Novavax from a vertically integrated global commercial organization with a singular focus on COVID to a company that is focused on driving both near- and long-term value with our proven technology platform via partnering and R&D, supported by a lean and efficient operating model. We've also come a long way in stabilizing the company financially, doing so in a thoughtful, stepwise manner to maintain the capabilities needed to advance our strategy. And we are successfully executing our plan. For example, just this January, we announced a new agreement with Pfizer for Matrix-M. This new partnership allows Pfizer to utilize Matrix-M in 2 disease areas within their vaccine portfolio with one disease area already identified. If Pfizer commercializes just one significant product based on this agreement, this partnership could generate billions of dollars of revenue for Novavax over time through a combination of milestones and royalties. This agreement further demonstrates the value other companies with vaccine portfolios see in Matrix-M. Please turn to Slide 6. The changes we have made to date continue to strengthen our company, and we believe we can do even more to create value both today and in the future. As you can see on the slide, today from our existing partnerships, we have earned and received upfront and milestone payments, including those from our agreements with Pfizer and Sanofi, with over $800 million in nondilutive capital earned in the last 18 months. Anticipated continued royalties from our marketed and partnered products, including Nuvaxovid and the R21/Matrix-M malaria vaccine. And we're pleased by the progress made by Takeda in 2025, where they delivered over 12% market share for Nuvaxovid in Japan and more than 30 million doses of the R21/Matrix-M malaria vaccine marketed by Serum Institute have been distributed to help people fight this disease. In the mid- to long term, we intend to amplify this value through upfront payments from new potential partnerships, milestone payments from both new and existing partners for continued development of their assets with our technology. For example, Sanofi's combination vaccines with their flu products and our Nuvaxovid for which we are eligible for a $125 million milestone when their Phase III study initiates and/or development of additional assets with Matrix-M, for which we are eligible to receive launch and sales milestones of up to $200 million plus mid-single-digit royalties for each new vaccine Sanofi may choose to develop in the future using Matrix-M, plus a growing set of potential royalty revenue streams from multiple partners. Please turn to Slide 7. In addition to partnering, the other key lever in our growth strategy is R&D innovation. We are focused on leveraging R&D to strengthen our technology platform, expand its utility both within and potentially beyond infectious disease and drive further proof points and data to develop new assets with which we can partner. Our Matrix technology is a cornerstone of our partnering model, and we believe that we can build on our proven technology and expertise to create a portfolio of Matrix-based adjuvants to serve as an engine of innovation and value creation, reflecting our conviction that differentiated adjuvant offerings could represent a significant and expanding long-term growth opportunity for Novavax. Importantly, this model potentially positions us to generate diversified recurring revenue across multiple partnered programs. For example, we're exploring the potential development of new Matrix-based adjuvants for oncology and some hard-to-treat infectious diseases, potentially opening an even wider opportunity set. And we are exploring new formulations of Matrix-M, such as dry powder with the intent to increase its utility in our own and in partnered candidate vaccines. You will hear more about our approach to building a Matrix-based adjuvant portfolio from Elaine and Ruxandra later on in the presentation. Please turn to Slide 8. In 2025, we continued our commitment to operate in a lean and efficient manner. Of note, during the year, we significantly decreased our R&D and SG&A spend. As we continue to advance our growth strategy, we intend to continue reducing our operating expenses while maintaining the capabilities needed to support the strategy. Jim will provide an overview of our operating expenses and guidance later on in the call. We are pleased with the progress we made last year in 2025 and are excited about the potential that lies ahead in 2026, such as the potential for more partnership announcements, making continued progress across the spectrum of our R&D efforts, including the advancement of our preclinical pipeline and continuing to support our existing partners with implications for incremental milestone revenue. Elaine will address this component in her next remarks. Before we continue with the call, I want to acknowledge that the current macro and regulatory environment in the United States poses some significant uncertainties for vaccine companies. However, we remain optimistic about the future of vaccines and of Novavax. Deadly diseases are here to stay, and people still need proven approaches to protect themselves and their loved ones from those diseases. This is a long-term, serious and meaningful endeavor to be part of, not a short game. And with continued execution of our growth strategy, we intend to see our technology fueling multiple new vaccines and immunotherapeutics across multiple partner portfolios with the potential to save millions and potentially even billions of lives over time, driving significant value for our stakeholders and leaving a global health legacy we can all be proud of. We look forward to the year ahead, and we approach it with enthusiasm. And with that, I'll turn it over to Elaine to talk about our business development efforts. Elaine? Elaine O'Hara: Thank you, John. As John said, we're excited about the potential for 2026. On the business development front, we're focusing on driving immediate value with our existing technology platform. Please turn to Slide 10. We're pleased with the progress we have made on partnerships to date and have honed our capabilities in this area to drive future success. And we have proof points that this model is working. We are successfully executing on multiple partnerships and business deals since the launch of our company transformation. Some of the highlights include, in January, we signed a license agreement with Pfizer, which provided Novavax with an upfront payment of $30 million with the potential for up to another $500 million in development and sales milestones across 2 disease areas, $70 million in development milestones and up to $180 million in sales milestones for each disease area, respectively, plus future sales royalties for 2 decades. We have also signed new and expanded existing MTAs with a variety of pharmaceutical companies who are presently evaluating the potential of utilizing Matrix-M in their vaccine portfolios. This has included a new MTA with a large pharma company in the fourth quarter -- in February, the expansion of an existing MTA with a major global pharmaceutical company to include an additional field for exploration. And just this week, we signed a new MTA with an oncology company. So as you can see, we are quite active on the partnering front, and there is a depth of interest in our Matrix technology. We're seeing that once vaccine-focused companies experiment with our adjuvant, they often come back to us to explore more broadly after seeing results from their initial experiments. We have also continued to execute on our Sanofi partnership with all $225 million in eligible milestones achieved in 2025, and the expansion of our agreement to include Matrix-M in Sanofi's pandemic flu candidate program, which has recently received funding by BARDA. In addition, we're excited about the progress of Sanofi's combined flu and COVID-19 vaccine candidates with each combined Nuvaxovid with their leading flu candidate as further proof of the potential value that our platform can generate. We are encouraged by the recent public updates from Sanofi that included positive Phase I/II results from both flu/COVID combination programs shared in December and their recent comments highlighting this product as a key driver of future new product growth for them. Importantly, market research presented by Sanofi at last year's World Vaccine Congress suggests that 82% of those people who receive both influenza and COVID vaccines and 54% to 69% of those who receive one would adopt combo barring no material impact to reactogenicity and/or efficacy, thus indicating potential significant value over the current standard of care. We've also seen continued execution of our other partnerships, where, as John mentioned, we saw market share gains for both Takeda with Nuvaxovid in Japan and Serum with malaria. Finally, we executed agreements related to our facilities as we rationalized our footprint. Agreements signed with AstraZeneca to transfer one U.S.-based facility and sell certain equipment netting $60 million in cash and resulting in future cash savings of up to $230 million and the sale of our Czech Republic manufacturing site to Novo Nordisk for $200 million. So please turn to Slide 12. As we look to generate new partnerships, our goal is to create a funnel of interested organizations, all of whom may be in various stages of discussions with us, and we are partnering closely with our R&D team to facilitate these conversations in 1 of 3 ways: First, generating our own data to share with potential partners and providing Matrix-M to potential partner companies for their experimentation to help determine if they want to move forward in a formal partnership. Secondly, continuing the exploration of potential new Matrix-based adjuvants. Matrix-M is our cornerstone adjuvant with broad utility, and this unique product is in our existing marketed products. We are working with our Matrix platform to develop new adjuvants each with their own unique attributes. The intention of this work is to create tailored adjuvants for disease areas such as oncology and difficult-to-treat infections. Third, advancing our recombinant technology with our own internal pipeline of vaccine candidates such as C. difficile, shingles and RSV combinations. In summary, as you can see from the slide, our strategy has several core pillars. We generate data for partner discussions, we expand the utility of Matrix to enable a portfolio of Matrix-based adjuvants and we create data from our preclinical programs to facilitate partnering discussions. Please turn to Slide 13. Importantly, the focus of our R&D efforts is grounded in where we see market opportunity. The markets we are targeting have the potential to reach over $100 billion by the early 2030s, with the global vaccine market projected at over $60 billion in the next 4 or 5 years and the immunotherapeutic vaccines subset of the oncology marketplace projected to reach over $42 billion by 2032. In addition, we're strategically directing our development work with the intent of creating differentiated assets. For example, our R&D team is exploring a multivalent adjuvanted C. diff vaccine candidate with potential for enhanced activity in a market where others have failed. If successful, this vaccine would address significant unmet need in this underserved population. Not only do we see this as a significant opportunity to reduce human suffering, but it also has the potential to tap into a projected over $2.5 billion total addressable U.S. market opportunity. We believe our partnering strategy best positions Novavax for long-term success and shareholder value creation while maintaining the flexibility to internalize assets when strategically advantageous. With each partnership, including existing, expanding and new partnerships, we have the opportunity for upfront payments, development milestones and royalties for current and future commercial sales, ultimately creating the potential opportunity for Novavax to earn billions of dollars over time, assuming, of course, successful execution. So Ruxandra will provide more detail on these programs supporting our business development efforts, and I'd like to turn the call over to her now. Ruxandra Draghia-Akli: Thank you, Elaine. Please turn to Slide 14. As John and Elaine have said, we are very excited about the potential in 2026 for R&D. We believe that our R&D efforts can generate incredible value for both our shareholders and the people who will benefit clinically from our innovations. The driving force behind [ this ] is our technology, which is front and center in our own pipeline of assets and R&D work and now in our partners' development efforts and pipelines. Let's take a look at each. Please turn to Slide 15. On our in-house R&D efforts, first, we are expanding our efforts in infectious diseases with our internal early-stage pipeline, including programs targeting C. diff, shingles and an RSV triple combination. We are making steady progress with the intent to advance at least one of these assets into the clinic as early as 2027. As Elaine mentioned, we are intentional in moving forward with work that targets an unmet medical need and offers the opportunity for differentiation. Please turn to Slide 16. Let's take C. diff, for example. This disease is a major public health threat, in particular, in the United States, Europe and in the elderly population, causing nearly 500,000 infections and tens of thousands of deaths annually in the U.S. Currently, there is no vaccine available. We have learned from existing data and applied available learnings when designing our antigens and implementing experimental plans. Multiple hypothesis might explain the type of data generated by previous vaccine candidates. Previous vaccine candidates were toxin-based designed to neutralize toxins rather than kill the bacteria themselves. Consequently, vaccinated individuals could still become colonized and the vaccines might not have reduced the overall burden of C. diff in the gut. Second, previous vaccine candidates might have generated insufficient mucosal immunity. Because C. diff infection is restricted to the gastrointestinal tract, protection is sought to require robust mucosal immunity, which we assessed in our very preliminary studies. Third, previous vaccines might have targeted only 2 toxins, A and B. However, a proportion of clinical C. difficile isolates express a binary toxin, which these vaccines candidate did not cover nor did they cover any of the pathogens/antigens. Please turn to Slide 17. As we started exploring how our technology might make a difference, we have been encouraged by early data. Our early-stage Matrix-M adjuvanted C. diff vaccine candidate uses a multivalent antigen approach, targeting a vast majority of circulating clades and rybotypes. Aside from immunogenicity studies, we have explored mucosal immunity and conducted challenge studies, results of which showed that this vaccine candidate outperform a 2-toxin alone comparator. We look forward to next steps and if successful, bringing this vaccine candidate into the clinic. We are sharing C. diff just as an example today. As we've previously stated, we believe we can advance one of our preclinical assets into the clinic as early as 2027. Please turn to Slide 18. Next, our R&D work is also looking at driving life cycle management and innovation for the Matrix-based adjuvant platform. Matrix positions us as a platform partner that can help to enable next-generation bacterial and viral vaccines because it has the potential to be utilized across multiple platforms such as in protein-based vaccine, our own vaccines are based on that platform, nanoparticles, inactivated toxoid conjugate or VLP vaccines. Matrix-M has a remarkable broad utility. But in addition to Matrix-M and based on our expertise with this asset, we have used the know-how and history to explore the potential creation of other Matrix-based adjuvants with differentiated properties. In fact, a key focus for our R&D work with our Matrix technology is to broaden the utility of Matrix, both inside and outside infectious diseases, while also evolving the life cycle of this critical technology. This includes potential new versions of Matrix-M and new Matrix-based adjuvants as we look to build a portfolio of new adjuvants. These efforts could enable expansion beyond infectious diseases, such as powering next-generation immuno-oncology strategies. Early research on this potential new adjuvants indicates that modifications to our technology have the potential to drive specific responses such as robust CD8 positive T cell activation responses as part of a comprehensive immune response. Please turn to Slide 19. Beyond our in-house R&D efforts, the impact of our technology has the potential to be amplified via our partners. First, we have marketed products, which include our technology, Nuvaxovid and the R21/Matrix-M malaria vaccine. In line with our strategy, our R&D efforts are designed to be an innovation engine for Novavax, supporting partnerships through our BD team. Elaine discussed the development work Sanofi is undertaking and could undertake in the future and the recently announced partnership with Pfizer with the potential for development of 2 vaccine products utilizing Matrix-M with one disease area already identified. And as Elaine mentioned, we have multiple MTAs in place as well as ongoing conversations with other parties about the potential of Matrix-M and the portfolio of new Matrix-based adjuvants. Our partnering discussions have the potential to result in collaborations and partnerships focused on a variety of areas across the respiratory, nonrespiratory and oncology markets and other areas, perhaps not yet contemplated. Of course, our approach hinges on the fact that in every instance, whether it's adding our technology to other platforms, creating new candidates with our own platform or creating a new portfolio of adjuvants, we strive to offer something new and different to potential partners. This R&D model, coupled with the infrastructure we have built using our deep bench of expertise and AI and machine learning enable us to quickly and efficiently explore opportunities in a low-cost, high-throughput manner with the potential for earlier value creation for the company. With that, I'll now turn the call over to Jim to discuss our financial results in more detail. James Kelly: Thank you, Ruxandra. Please turn to Slide 20. This morning, we announced our financial results for the fourth quarter and full year 2025. Details of our results can be found in our press release issued today and in our Form 10-K filed with the SEC. Please turn to Slide 21. I will begin with key highlights from our fourth quarter and full year 2025 financial results. We reported total revenue of $1.1 billion, a 65% increase year-over-year. As a reminder, our current year revenue results include $625 million that is primarily noncash revenue recognition from the resolution of Nuvaxovid APA agreements with Canada and New Zealand announced in the first quarter of 2025. For the fourth quarter of 2025, we reported total revenue of $147 million, a 67% increase compared to the same period in 2024. In addition, we reported positive income for both the full year and fourth quarter of 2025. We believe this reflects important progress as we improve our financial performance on many fronts, including addressing historical liabilities. During 2025, we continued to drive down our combined R&D and G&A expenses. On a non-GAAP and net of partner reimbursement basis, we reduced these costs by 42% and 53% for the fourth quarter and full year 2025, respectively. We accomplished these reductions while continuing to execute on partnership commitments and targeted core R&D investments to drive value. Novavax ended 2025 with $857 million in cash and accounts receivables. In addition, we added another $80 million of nondilutive cash in the first quarter of 2026 including a $30 million Pfizer agreement upfront payment and a $50 million initial draw from the new $330 million credit facility announced today. We executed this new credit facility with MidCap Financial to enable flexibility and continued access to nondilutive capital as we execute on our growth strategy. Based on the combination of our year-end 2025 cash and receivables and the $80 million in nondilutive cash in the first quarter of 2026, we believe we can fund our operations into 2028 without contemplating any new cash flow to Novavax. That said, we do anticipate the addition of significant cash flow from partners over time. Please turn to Slide 22 for a recap of our full year 2025 financial performance compared to our revenue framework and expense guidance. A reminder for all is that our non-GAAP adjusted total revenues exclude Sanofi supply sales and royalties that totaled $22 million in 2025. On a non-GAAP basis, we achieved $1.1 billion in adjusted total revenues. This was approximately $50 million higher than the midpoint of our revenue framework range and was driven by additional Nuvaxovid product sales, primarily to Israel as we delivered doses on an amended APA schedule. Additional adjuvant supply sales and royalties from Takeda and the Serum Institute as they continue their successful marketing of Nuvaxovid in Japan and R21 malaria vaccine in Africa, respectively. And finally, $22 million additional from R&D reimbursements from Sanofi related to clinical supply and support for commercial manufacturing preparations for the 2026, '27 season. These points highlight strong execution as we support our customers and partners and advance our growth strategy. For combined R&D and SG&A, I'll begin with GAAP performance of $500 million that was approximately $20 million favorable to the midpoint of our guidance. This was primarily related to R&D cost reductions and lower spend in the fourth quarter. On a non-GAAP basis, the approximately $42 million favorability result comes from a combination of the $20 million in lower GAAP R&D spend and the $22 million increase in Sanofi R&D reimbursement noted earlier. Please turn to Slide 23 for a detailed view of our fourth quarter revenue results. For the fourth quarter of 2025, we recorded total revenue of $147 million, a 67% increase year-over-year. A few comments on fourth quarter results. Nuvaxovid product sales of $20 million was split between Israel APA deliveries and Novavax sales to other global markets. Supply sales of $19 million reflected both Nuvaxovid finished goods sales to Sanofi and Matrix-M adjuvant sales to our partners. Sanofi licensing, royalty and other revenue of $98 million was primarily driven by the $50 million in milestones for the achievement of MAH transfers for both the U.S. and Europe and $28 million from R&D cost reimbursement in the period. We look forward to Sanofi's Nuvaxovid commercial efforts in 2026 and beyond. Importantly, 2026 reflects the first year where Sanofi is in a position to leverage all the commercial tools to compete effectively in the U.S. and global markets. Please turn to Slide 24. We made significant progress improving our cost structure in the fourth quarter of 2025, and I will focus my comments on our non-GAAP results for combined R&D and SG&A net of partner reimbursements. We delivered a 53% decrease in the fourth quarter of 2025 with major contributions from both R&D and SG&A as we executed on our cost reduction program. This highlights that excluding the R&D reimbursed by partners, our fourth quarter cost structure is just under half the size of where we were a year ago and annualizes to a $328 million run rate, highlighting that we are on track for a significantly lower spend profile as we enter 2026. Please turn to Slide 25. Now since I've covered most of fourth quarter and full year financial results already, I'll emphasize the positive operating and net income for both the fourth quarter and full year 2025. Please turn to Slide 26. Taking a moment to recap accomplishments made towards improving Novavax's financial strength and performance. Key takeaways from this work are that we've put Novavax in the position to have an estimated cash runway into 2028 and prior to contemplating any new cash flow into the company as we drive towards our goal of non-GAAP P&L profitability as early as 2028. Keys to the timing of our path to non-GAAP P&L profitability are the successful development and regulatory approval of the Sanofi flu/COVID combination program and successful commercial execution by Sanofi on both the COVID and combination programs. This could be further supported by any additional cash flow from new business development agreements and further cost reductions. Please turn to Slide 27 for a review of our multiyear combined R&D and SG&A expense guidance. We are committed to continuing to streamline our operating expenses to enable value creation. Today, and for the first time, we are providing our 2028 guidance of $200 million or below. This 2028 target calls for a $200 million and approximately 50% decrease compared to 2025. For 2026 and 2027, we're improving our non-GAAP combined R&D and SG&A expense guidance by $25 million each year to $325 million and $225 million, respectively, at midpoint. Importantly, in 2026, we anticipate operating at an approximately $200 million core spend profile when excluding costs tied to completion of partner and APA performance obligations. These include non-reimbursed Sanofi R&D support and COVID strain change and commercial manufacturing support of approximately $125 million and $25 million in 2026 and 2027, respectively. As these near-term activities are completed, we expect to be in a position to further decrease our cost. We recognize that reducing cost is only part of the value equation. Novavax's core combined R&D and SG&A run rate of approximately $200 million or below is focused on a targeted R&D investments to unlock value from our technology, including advancement of the early-stage pipeline with the potential to bring at least one program into the clinic as early as 2027, generation of new data supporting partnering Matrix-M, advancing our adjuvant technology for both infectious disease and oncology use, including new formulations as we look to build a portfolio of adjuvants and support for our ongoing Matrix-M manufacturing operations. Please turn to Slide 28. Now turning to our 2026 revenue framework. For 2026, we're following an approach similar to the 2025 revenue framework in that our non-GAAP adjusted total revenue excludes Sanofi supply sales, royalties and milestones from CIC and Matrix-M. This means there may be revenues in 2026 that are additive to our expectations for adjusted licensing royalties and other revenue. We believe that in the 2026, '27 season, Novavax royalties will grow significantly as compared to 2025 as 2026 reflects the first year where Sanofi is in a position to leverage all the tools needed to compete effectively in the U.S. and global markets. For 2026, we expect to achieve adjusted total revenue of between $230 million and $270 million. This includes $35 million to $45 million of Nuvaxovid product sales under existing orders to Israel and Germany, $40 million to $50 million of adjusted supply sales to our license partners, which primarily reflects sales of Matrix-M, $155 million to $175 million in adjusted licensing, royalties and other revenue consisting of $70 million to $80 million in R&D reimbursement as we continue our R&D support and technology transfer activities for Sanofi. $50 million to $60 million from other partner revenue from Takeda, Serum Institute and Pfizer, including the $30 million upfront payment under the Pfizer agreement received in the first quarter of 2026. And finally, $35 million of noncash amortization related to the previously received upfront and R&D milestone payments from Sanofi. While our current revenue framework excludes the potential for the $125 million milestone linked to the initiation of a Sanofi flu/COVID combination Phase III study, we are encouraged by Sanofi's progress and public comments and look forward to sharing updates in the future. In addition, we are highlighting our expectation that we will be earning the Sanofi $75 million technology transfer milestone although we are excluding this milestone from our 2026 revenue framework at this time. This is due to the recent Sanofi request that we complete a subset of these tech transfer activities at a new manufacturing site, and we are evaluating the potential timing impact of this request. We don't anticipate the outcome to impact either our stated estimated cash runway or vaccine supplies for the current or future seasons. We look forward to sharing additional updates as we improve Novavax's financial performance, cost structure and strength to deliver shareholder value. With that, I'd like to turn the call back over to John for some closing remarks. John Jacobs: Thank you, Jim. In summary, we are proud of our progress in 2025 and look forward to continued progress this year. We have started the year off strong with the new Pfizer partnership and look forward to executing against this agreement and our Sanofi agreement this year while continuing to pursue new partnerships. We're also excited about the continued advancement of our R&D efforts, including our early-stage pipeline, Matrix-M life cycle management and the exploration of new potential Matrix-based adjuvants. We are executing our growth strategy and believe that we are on a path to deliver long-term sustainable value. Thank you to our shareholders for your support. And as always, we appreciate all of the hard work and dedication of our employees without whom the success would not be possible. I would now like to turn the call over to our operator for Q&A. Operator? Operator: [Operator Instructions] Your first question comes from Roger Song with Jefferies. Jiale Song: Maybe 2 from us. So one is we know Sanofi is about to have a new CEO. Just curious, based on your interaction with them or recent interactions, any updated views, strategies on their vaccine business? We saw quite a few M&A in the past couple of months, but just curious about the new management or the new leader for the vaccine business. And particularly, if anything you can give us some comments around the 2026 expectation for the COVID sales, that would be very, very helpful. And secondly, totally here, you used the C. diff as the example for your pipeline showcase. Just curious about your early pipeline, any prioritization you are contemplating understand the first IND as early as next year into clinical. John Jacobs: Thank you, Roger. Great to hear your voice. Appreciate you joining us today. Let me take on your first question about the new CEO. The new CEO for Sanofi is not in place yet. There's a long history with Sanofi. But we -- our connectivity with our partner has not changed at all. They're outstanding partners, completely transparent and positive relationship. We're very pleased with Sanofi as a partner. And the folks we work with on a daily basis are there fully engaged and nothing has changed. So we see a continued bright future with that partnership. And I think you had a follow-up question then from there on potentially the fall season. Elaine, did you want to touch base on that? Elaine O'Hara: Yes. Thanks, John. I'll just take that. Hopefully, Roger, this is the question that you asked around the COVID, the upcoming COVID season. So we're very excited about the upcoming COVID season. Just to pick up on John's point, we obviously have multiple teams that work across both companies as it relates to COVID and future programs with Sanofi. And we've been working expeditiously over the last -- since we signed the collaborative license agreement back in 2024, both for last year's season and this upcoming season. This season is going to be the first real full season that Sanofi will be selling Nuvaxovid globally. And so all of the plans that we've been engaged on with Sanofi over the last year, very deep. Obviously, they've had a time to get through their contracting cycle at the retail level. This is the first full year that they'll have had the ability to do that. And so yes, the upcoming season looks very promising. They have direct-to-consumer advertising programs that they will be initiating later this year as well. So it looks like all systems go from a good -- for a good season in the 2026, 2027 year and season for Nuvaxovid. John Jacobs: And then Ruxandra, did you want to take Roger's question? Roger, I believe you were asking about our pipeline. And if we have priorities, we chose to share some information about C. diff today as an example. Rux, did you want to take that one? Ruxandra Draghia-Akli: Yes. Thank you, Roger. So indeed, we have chosen to give an example in C. diff. But of course, we are advancing with all the other early programs, the VZV, the RSV triple combination as well as the work around Matrix in -- both in the sense of new formulations and maybe new Matrix-based adjuvants. So all these programs are advancing each and every one at their own pace. There are actually very interesting results that we are generating in the preclinical space with each and every one of these programs, and we are looking forward in the future to sharing with you data from other programs. And thank you for the question. Operator: Your next question comes from Tom Shrader with BTIG. Thomas Shrader: Just kind of a broad question. I assume you don't want to build another vaccine commercial framework or at least you'd love help. As you look for partnerships for the Matrix-M, are co-promotes attractive? Is that something we might hear about. And then a very different question for Ruxandra. You've obviously piqued our interest that you've already tweaked Matrix-M to get a bigger T cell response. How do you develop from here? Do you need a partner with a vaccine, maybe a cancer vaccine? What are the next steps we might look for because it's certainly an exciting comment? John Jacobs: Tom, thank you for your questions, as always. And number one, as you know, Novavax has gone through a remarkable transformation in the last 3 years with this -- with the new management team and our focus and new strategy. And we've cut out our commercial capabilities, reduced expenses and are really focusing on partnering business development under Elaine O'Hara's leadership, who's with us here today and R&D under Ruxandra's leadership. And so we reserve the right always, of course to think about down the road, doing some kind of commercialization or co-promote, et cetera, with a product that might really be a game changer in a blockbuster if we were to get one out of the clinic. But our core focus right now is not that. So we'll be open-minded. If we get a real winner coming out of there and it looks exciting, we'll make the right decision to drive value for our stakeholders, for Novavax and for everyone who's counting on us when that time and if that time were to come. But our intention is lean investment, drive data and proof points for our tech, invest in Matrix as a platform creating -- our intent is to create new adjuvants tailored specific adjuvants for different purposes, both within and outside of infectious disease. We have a vision to have a portfolio of adjuvants based on this Matrix technology, starting with Matrix-M, which as we all know, is a remarkable adjuvant and product. That's our focus. And our new pipeline of assets, which we shared a bit about C. diff today, we're very excited. We're excited about all 3 of those assets right now, but we chose that as an example. Such significant unmet need there with C. diff. And I will say very quickly, Tom, we -- my family felt the impact of that as my sister-in-law lost her best friend to C. diff infection and the sequelae following that on a routine procedure in a hospital. So quite a difficult condition to treat, and we really hope we can bring forward a vaccine that would be meaningful. So then the other point on your question, go ahead, Ruxandra, about Matrix. Ruxandra Draghia-Akli: Yes. Thank you, Tom, for the question. So we are actually using our know-how and historical knowledge of not only Matrix-M, but this entire adjuvant field in order to create new formulations and new variants, versions of Matrix-based adjuvants that can be tailor-made to specific immune responses. Of course, that is a type of work that is undertaken in-house by our teams -- and when those types of new variants of Matrix will be actually completely tested and ready to partner, of course, that we are going to offer them to our partners in different fields like in oncology or in hard-to-treat infectious diseases as we have actually -- we, Elaine and her team went and realized these fantastic deals around Matrix-M. So internal work in view of partnership. Operator: Your next question comes from Anupam Rama with JPMorgan. Unknown Analyst: This is Joyce on for Anupam. It's great to see the continued progress on new Matrix-M partnerships. I think you noted one of your agreements this month was expanded to explore an additional field. I was just wondering if you could provide any more color on that. And then just broader, what is your view on the potential time horizon for these MTAs to turn into more formal partnerships? Just at what stage of development or evidence generation do you think you could start having those conversations with your partners? John Jacobs: A really great question. I'll have Elaine elaborate on that. Elaine's team leads our efforts on business development and the strategy on how we approach partners, which she shared some of in our prepared remarks earlier today. There's a methodology to that, that starts with R&D, with data that Ruxandra and her team generate and then Elaine and her team are able to share that data in partnership with our R&D colleagues with potential partners. And one comment I'll make and hand it over to Elaine for a little bit more elaboration on the process and what we might be able to expect. But what we're seeing is as other companies start to experiment with Matrix, learn more about it, most often, they're coming back to us to do more. And you heard that in some of Elaine's comments today. Elaine, you might want to elaborate there. Elaine O'Hara: No, thanks very much, John. So in some instances, we create and generate data ourselves internally to utilize and have that presented to various partners in partnering discussions. In other instances, we allow and provide Matrix-M to companies to test and experiment in their own clinic and in their own preclinical situation across either existing vaccines or vaccines that they may have in development. And as John mentioned, what we're seeing at the moment is several companies are coming back and asking to expand that opportunity to other fields, whether it's bacterial, viral situations and most recently, even oncology as well. So we're very excited about that. The time line is TBD. We don't have any -- necessarily any control over that because it's up to the partner in terms of what they're developing and how long that time line is going to sort of unfold. But that's why, obviously, we work with our partners then to gain an upfront payment for the ability to utilize Matrix-M and go through a collaborative license arrangement then where we can receive various milestone payments depending on when those partners hit those milestones as well as royalties in the future as well. So that's really the structure of the and strategic sort of direction that we move in with our partners, and we work very closely with them in many situations to get them from the start to the finish. And then obviously, they take it over themselves as well as they move Matrix-M through their own pipeline. So hopefully, that answers your question. Thank you. John Jacobs: Well said, Elaine. And Pfizer was one of -- just to build on that a little bit, Pfizer was one of the first organizations as our new strategy began to launch to begin assessing the potential of Matrix-M as we were focused on out-licensure of our technology and making this a cornerstone of the future for Novavax. There's been multiple potential partner discussions behind that and all at different stages. And we're not in a position to ever promise or commit that we're guaranteeing anything about another partner coming on board, but we can say that we have a pipeline of potential partners that is now building and growing. And as Elaine said, we had a large global pharmaceutical company, a top 10 kind of company that came back to us to expand their MTA into another field to explore. So as these companies learn and they see Matrix, Matrix won't work for everything, nothing works for everything. But it often works to solve problems and help these other companies unlock value or value potential in their pipelines. And as they see that, they're coming back again and again to us to expand and create additional opportunities with this asset. So we're excited. We anticipate and intend to drive additional partnerships in the future, and we will share those with you when they're inked and done should that occur. We can't say much more about it before that other than a lot of traction, a lot of work behind the scenes, all at different stages of progress and dialogue toward that eventual intended end. Operator: Your next question comes from Mayank Mamtani with B. Riley Securities. Mayank Mamtani: Congrats for the momentum you have on partnerships and pipeline... John Jacobs: Thank you, Mayank. Mayank Mamtani: Impressive discipline on spend scale down. So my 2 questions. One on the respiratory vaccines, FDA and also ex U.S. regulatory road map, what's your best understanding since you do have some correspondence relating to your own Phase III stage programs, CIC and flu. And there's obviously the Sanofi-partnered CIC program -- I don't know to what extent you've compared the 2, the Sanofi partnered and your own wholly owned CIC program. And I was just curious if this uncertainty starts to clear up, like what is sort of the way to assess value of your own 2 clinical stage programs? And then I have a follow-up. John Jacobs: Mayank, I apologize. So I just want to make sure we understood your questions. So first, I believe you were noting that we had received some feedback in the past on our CIC and flu programs. Obviously, we're not making further investment ourselves in those programs. We're looking to out-license those and partner those. And I believe you were asking us to compare and contrast that with some of the things that have been disclosed in the public domain from Moderna and others recently. Was that your question [indiscernible] any insight? Mayank Mamtani: And also the Sanofi data, we learned some in December. So there is, I think, a way to compare at least a high level, your CIC program with the Sanofi program. So I was just curious if that Sanofi program does go into Phase III, is there a way to ascribe value to the 2 programs, which I understand you're not investing, but are partnerable assets? John Jacobs: Got it. Well, what I can say about that, Mayank, is we were very pleased to see our partners advance both of those programs, 2 combination vaccines with their 2 flu vaccines, their leading high-dose flu vaccine, right, and Flublok and Fluzone High-Dose with our proven COVID vaccine. Very exciting. And there's been more recently -- and as you know, we can't and won't speak for our partners. But what we're excited to see are their comments in the public domain and their CFO was recently out on the road with analysts and investors, and they've publicly been speaking about the importance of these combination programs to their future as they start to contemplate the post-Dupixent Sanofi and how important that is. So I encourage everyone to take a look at those comments from Sanofi leadership in the public domain as they're getting ready for further leadership change, they've been quite direct about how important these assets are and how excited they are about it and have noted regulatory review, this is their words, not ours, expected in the '27, '28 time frame. So we're very excited about that. They're outstanding partners. They have tremendous capability in the vaccine space and a leadership position in flu globally, and we see a bright opportunity there. There's a pathway forward, we believe, and that we're encouraged by Moderna's progress with their flu vaccine. So what we're seeing there in the public domain, you can see and our investors can also see. So we're seeing a pathway forward there and ability to negotiate and work with the current administration. We're also hearing from the current administration that they believe in vaccines and want them to move forward. Obviously, some of the positions they've taken our industry and our scientific community may not agree with all the time, certainly. But there seems to be a pathway forward here, at least from what we can see together. So just making comments on what we see publicly, what our partners have said publicly, we couldn't be more excited about our future here and looking forward to next steps and hearing more from Sanofi. Mayank Mamtani: Very helpful color. And if I could ask a follow-up on your expected annualized run rate you want to be at ending this year. I know you mentioned you're at about $320 million ending 2025. So I want to understand target for year-end since it's a big step down '27 -- sorry, '26 to '27. And maybe just a bit more color on the new manufacturing site request from your partner, Sanofi, if any color you can give there more on time line of resolution there? John Jacobs: Thank you, Mayank. So I think I'll have Jim cover your questions about costs. I think very importantly, you heard in Jim's prepared comments, some non-GAAP description about the core costs for our company and then obligations we have that are trailing and the end stage of those trailing obligations on remaining APAs and tech transfer activities and things like that, that we're supporting our partner, Sanofi with. And that you can see very -- hopefully, very clearly in the provided slides and here in Jim's commentary, how those costs are anticipated to roll off towards the end of this year in a large part, those extra costs on those trailing obligations and that we then get closer to the core where we're operating our business. Jim, why don't you comment further on that for Mayank? James Kelly: Yes, certainly. Mayank, as you've watched the evolution of our cost structure, a couple of important points to think about in 2026. One in particular is that, a, we exit 2025 fourth quarter and an annualized rate that is consistent with the non-GAAP $325 million that we are guiding to in 2026. That said, when you -- while I'm not providing quarterly guidance, it is worth noting that it will be a bit front-end weighted for the following reasons. When you think about our preparations for the fall season and the type of manufacturing support and route to the fall, much of that work happens in the first and the second quarter of the year. So that's the first reason why you'll see a higher amount in the first part of the year. A second part is, as you might remember, we're supporting Sanofi on numerous R&D activities, including a post-marketing commitment, the majority of which will be front-end loaded into the year, a portion of which we're covering as well. So on that net of reimbursement basis, you'll see some incremental spending there as well. So therefore, the shape of our spend throughout the year towards our full year targets will be more front-end loaded for the reasons I just mentioned. And that is why as we look towards our ability to hit the appropriate both quarterization at the end of 2026 but also acknowledging that there'll be a drop-off in certain spend profiles as we complete activities, that's the shape of the business for 2026. So hopefully helpful on that front. John Jacobs: And Elaine, did you want to address the question about the tech transfer? Elaine O'Hara: Yes, absolutely, John. So thank you. Yes. So we -- as I mentioned earlier in one of the questions-and-answer sessions, we have multiple teams working very collaboratively, both with Novavax and Sanofi and one of those is actually a tech transfer team as well. And Sanofi made the decision to actually fully realize all of the tech transfer to a U.S. facility. And so as a result, that's just going to extend the time line for the tech transfer and take a little bit longer. That decision was recently made. All of their capability for the manufacture of Nuvaxovid will actually occur in the U.S. So again, we're supporting them and working with them to make that happen. Again, it doesn't affect, as Jim mentioned, our -- the health of Novavax from a cash perspective. And so I just wanted to give a little bit of additional information and context on that. John Jacobs: Jim, any further comments there? James Kelly: I would reiterate that, first of all, Sanofi, amazing partner. We've got the same conviction and confidence that we're working with the right partner, and we're going to help them do what they need to do to get all the technology transferred into their hands to manufacture effectively and have supply available for coming periods. So we don't see any impact on that. It's just simply working with the team on what I outlined as a subset of activities. So that's fine. And then I made a reference earlier about the milestone, $75 million. We'll come back to you regarding the implication and timing on that. It doesn't impact our cash runway. It doesn't impact, in our view, the likelihood of achievement. It's just simply working through some details with what we think is an excellent partner. Operator: Your next question comes from Pete Stavropoulos with Cantor Fitzgerald. Unknown Analyst: This is Sarah on for Pete. Congrats on the quarter progress. John Jacobs: Thanks, Sarah. Unknown Analyst: Question on Nuvaxovid. You've described 2025 as the transition and 2026 is the first commercial year for Nuvaxovid under Sanofi control. And so how much of that COVID 2026 uptake assumption depends on contracting wins versus physician patient-driven pull-through? And then additionally, can you just remind us how many MTAs are currently in place? John Jacobs: Good questions. I'll have Elaine comment a bit on the nature of contracting. We wouldn't be able to disclose for our partners the percentage or the wins or things like that. But certainly, contracting matters in the United States is the vast majority, over 90% in my recollection of COVID distributions in the United States have been through retail pharmacy. And that contracting begins the year before wraps up in sometime around second quarter the next year, and they're deep into that process right now, and it's very important. They were able to start that process this cycle for the first time because they had the BLA now in hand, the full -- all the tools, all the pieces in place at the end of last year, so they could start that full cycle negotiation with retail. So it absolutely matters in the U.S. marketplace, and they're in it from the beginning, and that's the first time for Nuvaxovid under BLA that we've been able to have our asset in the hands of a partner at that full cycle with all the pieces in place for them to work their knowledge and experience to begin to optimize over time, the penetration of the market for our asset. Elaine, anything to add to that? Elaine O'Hara: No, that's it, John. I mean, again, the cycle for Sanofi starts in November of the previous year. By the time they hit March, April time frame, those contracts should be wrapped up. I can't speak to the volume or the level of detail since they have full commercialization rights. So that is TBD yet, but we're very inspired by the conversations that we've had at our joint commercial committee that the 2026, 2027 season is going to be a full cycle season, again, based upon all of the components from a marketing perspective that they aim to put in place. So hopefully, that answers the question. John Jacobs: Yes. And the other question was about the number of MTAs. So we haven't disclosed all of the MTAs that might be signed. We're being very careful and selective. Like I said earlier, Sarah, in my prepared comments, since I joined the company in January of 2023, I've never seen this level of interest, but it's not surprising because Novavax historically, when they had first acquired the asset, brought it forward, right, through eventually R21 and a COVID vaccine. So those were the first assets that showed the world this adjuvant can make a difference. And then we transformed this company over the last 36 months to focus on out-licensing our technology and really making the world aware of that. And our R&D team was generating data to show that we have utility across multiple vaccine platforms, which was part of our comments today. And that Elaine, I brought Elaine in as our Chief Strategy Officer. She created a new capability here in Novavax to really start to negotiate these kind of things, reaching out to partners. And it's through the efforts of our employees here, Elaine and her team, Ruxandra and our R&D team and the concerted efforts and focused strategy that we've enabled the awareness of this amazing technology and help to enlighten others as to its potential. And then when they experiment with it themselves, most often, they're seeing the results and they're seeing it has the potential to unlock problems they might have been wrestling with for a while, unlocking value potentially in their portfolios. And then we see the actions from Sanofi. We see the actions from Pfizer. And under the new strategy, Pfizer was one of the first to be approached by Elaine and her team in this new construct post the Sanofi deal. That's turned into a deal that could, assuming successful execution by Pfizer, result in billions of dollars in future revenues and value for Novavax and all of our stakeholders. So there are many MTAs in place. We announced that we had existing partners ask for expansion or amendment of that MTA. Elaine, you may want to comment a little more. You just signed a new one in the last week with an oncology company. Elaine O'Hara: Correct, John. Yes. Actually, we've had some interesting weeks here in February with signing a new MTA with an innovative oncology company and then also an additional signature for an amendment for a large-cap pharma company to expand their initial MTA to cover another pathogen that they're interested in pursuing. So lots of interest. And again, we're delighted with that. Our goal is to accommodate our partners in every which way that we can from our research and development perspective to support all of the initiatives that we have with our partners at the moment. And so we're very excited about the future. Operator: Your next question comes from Chris LoBianco with TD Securities. Christopher LoBianco: Congrats on all the progress over the last few months. John Jacobs: Thank you, Chris. Christopher LoBianco: Can you provide any color on the specific characteristics or potential differentiating factors of Matrix that were most attractive to Pfizer? And then I had one follow-up question. John Jacobs: So we're -- Chris, just so my team could hear it, we had a little bit of trouble hearing the question. I believe you were asking, can we comment on the differentiating characteristics of Matrix that were attractive in particular to Pfizer? Is that -- did we hear you correctly on your question? Christopher LoBianco: Yes. John Jacobs: Yes. We won't be able to comment specifically on what Pfizer might have found attractive because Pfizer is keeping that confidential due to competitive reasons. But obviously, they saw significant value to sign such a meaningful potential deal with Novavax that's now on the books, and they're moving forward with their work. One of the 2 fields that they're allowed to explore with Matrix through the agreement has already been selected and they're contemplating the second. So -- but I think Ruxandra and Elaine could comment, maybe Elaine from a business perspective and Ruxandra from a scientific perspective, in general, why Matrix is such a powerful tool and why others in general, may be interested in it, Elaine. And then Ruxandra, please. Elaine O'Hara: Just very quickly, from a business perspective, I think Ruxandra said this in her commentary earlier on, Matrix has a lot of flexibility. The platform, the technological platform is very flexible, and it can support many vaccine platforms. I think that's very attractive. The whole nature of an adjuvant is that it can provide and enable a more targeted or specific or a broader immune response. And so with each one of those value propositions, what we -- when we have discussions with partners, obviously, they're interested in any or all of those. And that is largely the discussion that we have. And as I said earlier, they then take that back to their clinic to their preclinical situation of their clinic. And then that, as John mentioned, potentially helps them to either solve a problem or unlock additional value for their vaccine or their portfolio of vaccines. Rux? Ruxandra Draghia-Akli: Yes. Thank you, Elaine. Excellent point. On the top of what Elaine just mentioned, we might remember that in the clinical studies, we have generated significant amount of data showing that Matrix-M as an adjuvant is associated with a very favorable reactogenicity tolerability profile. So together with this broad type of immune response in combination with different vaccine platforms and different types of antigens being bacterial, being viral, now in our latest explorations in oncology, we are looking to actually capture and capitalize on all these characteristics, a broader immune response plus a tolerable profile. So I think that those might be some of the criteria that are serving as an impetus for potential partners to come to the table and start the conversation. Christopher LoBianco: That's great. That's very helpful. And then second question is, do you think there is more upside or downside risk for Nuvaxovid from the upcoming [indiscernible] 2026 ACIP meeting? And can you remind us if there is data that shows differentiation on long COVID and safety for Nuvaxovid relative to the mRNA COVID vaccines? John Jacobs: So I'll let Ruxandra comment on the long COVID question and the differentiating data. Regarding ACIP and upcoming interactions with the FDA and regulators and different decision-making bodies, we see -- we're optimistic about a pathway forward. Last year, the season rolled out and everyone was out at the same time, et cetera. We're anticipating the same thing to happen this year. But until it happens, you know what we know. So we can all see it in the public domain. There's a meeting now on the books. So that's good. And we'll pay attention to that. And as that unfolds, we'll roll with it. But we are doing everything we can to ensure that we are prepared to support Sanofi in their commercial efforts in the U.S. marketplace this year. So we're ready with supply for Sanofi. We understand the strains that are circulating, and we've been focused on that. Our team knows how to do that. Sanofi certainly is a global expert at doing that with their flu. We collaborate very closely with them. So we are ready. We are poised and what's beyond our control, we'll watch unfold together with you, and we'll go with the flow on that. But we're anticipating a pathway forward. We do not anticipate choice being completely removed from the American population on important tools like vaccines. But again, that's my personal opinion. That's our team's thought about it. We know what you know. We can watch it in the public domain. So let's see. But we do expect and anticipate optimistically a season to unfold this fall and are looking forward to seeing, assuming that smoothly goes this spring from the regulatory authorities, how well Sanofi can perform now in their first full cycle launch. Ruxandra Draghia-Akli: As far as your question around long COVID, epidemiological data published in high-level peer-review publication has actually pointed to the fact that vaccinated individuals have a lower risk of developing long COVID compared to unvaccinated individuals in different populations and geographies. And obviously, with any vaccinations, in particularly boosters are associated with this lower risk of long COVID per the published literature. So I don't know if that answers your questions, but at least whatever is out there as peer review data is showing this particular association. Operator: Your next question comes from Geoff Meacham with Citigroup. Unknown Analyst: This is Jarwei on for Jeff. Really exciting and encouraging to hear that you guys are expanding the pipeline opportunities beyond respiratory vaccines. Maybe just thinking about C. diff, shingles and RSV, what will inform timing for moving that into 2027? Could we -- could this possibly be more of a 2028 situation? And then also, could partnerships or potential partnerships for these programs influence expediency and selection on which one gets moved in the clinic first? And is that something you're exploring as well, partnerships that is? John Jacobs: Thank you for your question. And very importantly, your question focuses on one of the key elements of our R&D strategy and how R&D is supporting our efforts. Very importantly, the investments we're making in R&D are multiple and important to support primarily Matrix, that technology to expand the utility of Matrix to create new formulations of Matrix-M, such as dry powder, et cetera, and also working on the creation of new adjuvants based on the Matrix platform with the intention over time, should we succeed there of having a portfolio of adjuvants that are tailored and specific to target some very difficult to treat infectious diseases to go beyond infectious disease into oncology for specific types of oncologic conditions. So very -- that's where we're really focusing a lot. We have experts here on the scientific side in Sweden with Novavax that understand Matrix and for years, have worked with it and a lot of expertise in Rux's shop on that. Another key element, generating data and proof points that our business development team can utilize. And then third, but not last, that's important, we have some early-stage assets in development. The goal of that is to further -- to your point, Jarwei, is to further partnering opportunities and also to generate more proof points and data. So all along the way, and we're learning from each of these approaches. And combining that synergistically with our efforts on Matrix to further inform how we approach building this potential library of adjuvants, if you will, that we're working on. When it comes to expediency or timing, what we've said is as early as 2027, we could be in the [indiscernible] humans with one or more of these assets should we choose. We're not disclosing exactly where we are on time lines right now, but we feel confident in saying that at this point. Elaine, did you want to elaborate further? Elaine O'Hara: Thanks, John. I mean the only thing I would say is, a, we selected these antigens and these programs because we believe that they have a significant market opportunity, but also address unmet medical need. Each one of the programs has its own unique path forward from a preclinical perspective and also its unique opportunity in the marketplace as well. The way that we selected these programs was based upon competitive landscape, opportunity and other characteristics. And as John said, we will attempt and move into the clinic in 2027. That is our goal. And as we have data that's relevant to a potential partner, we will begin those discussions with those partners as they become available. That's the goal. John Jacobs: And Ruxandra, we're deeply into the preclinical work on all 3 of these programs, slightly different stage for each. We chose to share some information today on C. diff because it's obviously such a huge unmet need globally. There's no vaccine available. Others have -- importantly, Jarwei, others have tried and failed at least in their initial attempts to create a vaccine for C. diff, and we see companies going for that again now and trying. Our team was able to learn from there's a lot of data out there in the public domain and publications learn from those past attempts. And you heard some of the commentary from Ruxandra on how we're approaching this very differently from a multivalent antigen perspective, antigen versus toxin perspective, other things like that, that are very important. And of course, we have Matrix-M. And so we're very excited about what we're seeing. We're standing by our commentary that as early as '27, we could be in the clinic with one or more of these. And again, it's providing value to us in these behind-the-scenes discussions on business development. And the last point there, obviously, any management team, executive team working on a strategy like ours will always know more about where we are than we're allowed to share with everyone in the public domain. We won't make and cannot make promises about success on any of these endeavors. They have risk, they're challenging, but we're excited about what we're seeing on progress with potential partners what they're seeing in their own experiments and what we're learning from our R&D efforts, and we look forward to keep bringing you information as we can and as the story continues to unfold. Operator: Your next question comes from Alec Stranahan with Bank of America. Unknown Analyst: This is Matthew on for Alec. Maybe 2 from us. Can you just speak to the current agreements for Matrix-M that have been signed, whether those agreements also apply to sort of the portfolio of adjuvants you're thinking about developing going forward and sort of different formulations of Matrix-M? And then maybe on the pipeline as well. Curious if 1 of the 3 programs is sort of ahead of the others? And if they're all sort of similar stage, I guess, which one you would think about bringing forward? Is it dependent on developments in the therapeutic area, sort of updates there or something else? John Jacobs: Thank you for your question. I'll let Elaine comment on the current agreements that are signed regarding Matrix. Go ahead, Elaine. Elaine O'Hara: Thanks, John. Yes. Clearly, all signed agreements, all material transfer agreements that we have signed today focus exclusively on Matrix-M. So that's the answer to that question, sorry. And then, John, back to you. John Jacobs: No, you're right. And any new adjuvant, should we succeed in developing one or more additional adjuvants, that's our intent. That would be purely Novavax. And importantly, we have not exclusively out-licensed Matrix-M to any party. That's Novavax asset. And so we give licenses for particular indications and things like that to partners. So this would be -- should we succeed with one or more additional targeted adjuvants, that would be -- those would be ours, our IP. We can work with those, we can out-license those. We see that as a potential future engine for continued innovation and partnering opportunity, both within and our intention is to go beyond infectious disease in that regard. And you asked also about pipeline assets in that way. Ruxandra? Ruxandra Draghia-Akli: Yes. Thank you for the question. As far as the early pipeline assets, you might remember from our previous presentations and from my intervention that each and every one of them actually is addressing a different unmet medical need. For C. diff, there is no vaccine. For shingles, the issue was the reactogenicity that is associated with current vaccines. For RSV, it's a triple combination. So we are going and adding other antigens to that particular antigen of RSV. So each and everyone have their own complexities. We started these programs by designing a very rigorous target product profile that is based on where we are in the field and where we are from a business opportunity. That TPP is evolving as the ecosystem is evolving, it is a living document. And as we go along in our discovery and development efforts, we are always relating back to that TPP. If new data is created by somebody else, we are taking that into account, and we are asking the question, are we good enough, are we better, what do we need to do or what data should we develop in order to convince a partner and to convince ourselves that, that is a program that is worth pursuing. Operator: Your last question comes from Sean Lee with H.C. Wainwright. Xun Lee: Most of my questions have been answered, but I just have one more on the early pipeline. So it's for these 3 products that are in preclinical right now, can we expect to see any milestones this year regarding data disclosures? I mean, specifically, are you targeting any specific conferences where we can see some of the preclinical data on these? John Jacobs: Let's have Ruxandra go into a little more depth on the answer. But we're excited about what we're seeing. We're going to be very cautious about how much we share for competitive reasons. So for instance, in one scenario, if we think we have unlocked a potential pathway forward with an asset, I'm not saying that today, I'm saying that scenario, let's call it a hypothetical. We wouldn't want to share how we figured that out in the public domain, even though that might be exciting. So we're going to be cautious. Next steps, as we wrap up the work in the near term on our preclinical efforts, we could ready one or more of these assets. That's our intent for IND with the regulatory authorities. We would expect the potential of that to occur this year. And that's why we say as early as 2027 for -- to be in humans with one or more of these programs. So yes, we will continue, as we did today, begin to unveil first for C. diff here as an example, some of what we're learning and the progress we're making. We're going to remain cautious and a bit guarded on some of it because we want to be careful from a competitive standpoint. But we're making excellent progress. Our lean and careful investments are paying dividends internally from what we can see, and we're excited to continue to bring these forward with the intent of success with one or more of these down the road. So we'll keep you informed. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to John Jacobs for any closing remarks. John Jacobs: Just want to thank everyone for joining us today. I want to thank all of our investors who believe in Novavax, believe in our technology. I want to thank our investors for being patient with us as we converted this company and transformed it from a company focused on COVID alone with one asset and the remarkable effort of our employees to unwind the large global organization built to commercialize one asset and do so without hurting our capabilities while changing strategy and while starting to move forward and teach the world about the technology this company had and was sitting on and made one asset with and to then start to enlighten others about the potential of that technology and the effort and the time that takes -- and everyone likes to see things right away. Show me yesterday, why did do a deal in a day. But this took time to convert the company. It took time also to enlighten others and share data and generate data to show them how this product might work with their pipeline assets or technology platform, then they do their own experiments. We saw Pfizer, one of the first that we started with our new strategy come forward. We're telling everyone we've got a pipeline of potential partners behind that. We'll never promise anything until we deliver it, but we want you to know we're working really hard every day. Our employees are having fun. We're excited to be engaged deeply into this new strategy and really optimistic about the legacy we can leave on global public health and the value we can drive for all of our stakeholders. Thank you again for your patience, your belief in us and our technology. We're working really hard for you. We're going to work hard not to let you down and to keep growing this business. Thank you, everyone. Operator: This conference has now concluded. Thank you for attending today's presentation. You may now disconnect, and have a wonderful rest of your day.
P. Williams: Well, good morning, everyone, and welcome to Derwent London's 2025 Full Year Results Presentation. And before moving on to the results, you will see another news this morning and a strong set of a building in Whitfield Street, more to follow. Now the order of today's presentation is slightly different. As well as, you'll be hearing from Emily and Damian. While Nigel is not on the stage, he is, of course, here for some Q&A. Now turning to Slide 2. The group's business model and portfolio provide strong foundations on which to build on an exciting and successful future. Our portfolio is strategically positioned with 75% in the West End and 81% within a 10-minute walk of Elizabeth line station. These are London's best performing areas. It is high quality with significant embedded reversion potential, a diverse tenant base and robust vault. Flexibility has always been fundamental to our approach, and we look to continually adapt our portfolio to evolving market conditions to ensure that we are well positioned for future market evolution. We have an exciting West End focused development pipeline in some of the strongest submarkets, presenting a real opportunity to drive rents and, therefore, returns. Our schemes are designed to meet the full spectrum of occupier demand from the London commands, headquarter space, which serves our core customer base as well as furniture flex product, all delivered to our exacting standards and complemented with high-quality amenity. We also have good visibility on income growth. Our reversionary potential of GBP 70.9 million will come through into earnings as we continue to lease up and deliver the best phase of next phase of schemes. but we're not standing still. There is substantial opportunity ahead to create further value. Now turning over. 2025 was a solid year of execution. We completed asset management transactions with rental income of nearly GBP 60 million, a record year. And in the context of a low vacancy rate, we agreed over GBP 11 million of new lettings at rents 10% above ERV. In terms of disposals, we sold GBP 216 million in 2025 and 2026, we're off to a good start. Since the start of the year, we've exchanged contracts of GBP 140 million, including Whitfield Street announced today with a further GBP 140 million under offer, broadly in line with December book values. Proceeds will be redeployed into higher return opportunities, including selective developments, acquisitions and other accretive alternatives. Emily will provide more detail in this shortly. 2026 has started with strong momentum with GBP 1.5 million of new leases completed, and we're under offer with a further GBP 14.4 million, including all of the offices and network. In addition, there is GBP 4.4 million in negotiations. Slide 4. This momentum provides a momentum -- a springboard for growth. Our market outlook informs our immediate action plan, which is focused on accelerating returns through active portfolio management and disciplined capital allocation. We are now past the inflection point with the outlook characterized by 3 powerful drivers. Firstly, London, which is our market, we have an unrivaled expertise in demonstrating its enduring dominance as a European and -- on the European and global stage. Once again, it is proving its resilience and agility in adapting to change, reinforcing its position as Europe's undisputed business capital. Secondly, the ongoing strength of the occupational market, supported by high demand and very limited supply. You will hear more on this from Emily in due course, who'll provide further context on this. Finally, improved liquidity in the investment market driven by a return of capital flows both into London and into offices. Turnover is up with larger lot sizes now transaction. The combination of our proactive execution and positive market dynamic gives us the confidence to increase our 2026 ERV guidance for our portfolio to plus 4% to plus 7%. I will now hand over to Emily and Damian, who will take you through our immediate strategy and provide more detail on the financial outlook. Thank you. Emily Prideaux: Thank you, Paul. Looking now at our immediate priorities. Our near-term strategy is clear, firmly focused on returns, position the portfolio to capture the strongest rental growth and capital appreciation opportunities through active portfolio management and disciplined capital allocation with a clear focus on execution and total return on capital. Recycling will accelerate. We plan to dispose of up to GBP 1 billion over the next 3 years and at a faster pace than our historic run rate of GBP 200 million per annum. These disposals will be focused primarily on mature assets where the business plans have been delivered or where prospective returns are lower than alternative opportunities available to us. Capital redeployment will be disciplined and returns driven. We will systematically assess the relative merits of all options open to us at any one point in time. The foundations of our capital allocation framework will be built on maintaining a strong balance sheet and a net debt-to-EBITDA below 9.5x. Within that framework, we will consider share buybacks alongside selective development where we have confidence in strong returns and strategic acquisitions that support a pipeline for the next decade and contribute to long-term value creation. Overall, our focus is to proactively manage the portfolio to ensure an appropriate risk return profile that delivers both earnings growth and attractive total accounting returns. Damian will cover this in more detail shortly. So what does this look like in practice? HQ offices will remain our core business, where we continue to have strong conviction. We will also continue to deliver flex and do so at proportionate levels aligned to market demand and in a way that ensures sensible cost ratios and a simplified operational model that is portfolio rather than asset by asset led. As such, our overall flex offering will likely grow to circa 10% to 15% of the portfolio from the current circa 8%. Both our HQ and flex workspace are supported and enhanced by our DL member platform. Whether we're buying, selling or investing, we will do so within a disciplined risk return framework that balances income resilience and earnings growth with value creation. This may well involve the acquisition of core plus assets in the future as well as the development projects we are well known for. We will selectively develop those office schemes where we have confidence in the medium- to long-term returns. These include Holden House and Middlesex, where we are already on site as well as Greencoat & Gordon and 50 Baker Street, both due to start later this year. In addition, we will seek to drive value via strategic unlocking and alternative uses on sites, working alongside relevant partners to maximize returns. These include Blue Star House, Old Street Quarter and 230 Blackfriars Road, and we'll touch more on these later. Finally, we have an established brand and platform, and we believe there's opportunity to leverage this more effectively. This could take the form of development management fees, promotes, partnership structures or other arrangements that are returns accretive. I'll now hand over to Damian, who will provide more detail on the balance sheet as well as the outlook for earnings and total accounting return. Damian Wisniewski: Thank you, Em, and good morning, everyone. So taking a look at our returns outlook and earnings first. The 2 large recent projects at Network and 25 Baker Street are now essentially complete. Baker Street provides annualized rent on a net effective basis of about GBP 18 million a year or GBP 22 million headline. Based off ERV at the year-end, Network's annualized rent will be about GBP 11 million or GBP 13.7 million headline, and we expect rental income here to commence around the middle of the year. Our debt refinancing is complete for now. Our average interest rate increased in June '25, but is now expected to be largely stable through to 2031. Admin expenses were reduced in 2025, and we're targeting further cost savings to come. So with rental values growing and cost inflation easing, we now expect to see another period of earnings growth over the medium term. This feeds into our total accounting return outlook, too, also expected to benefit from improving development surpluses on our carefully chosen schemes and accelerated capital recycling. We will not lose our well-established financial discipline. That is based on low leverage, a focus on balancing value creation against interest cover and earnings and our 18th consecutive year of increased ordinary dividends. Now looking at the earnings outlook in more detail. We currently expect 2026 rental income from 25 Baker Street and Network to be about GBP 18 million higher than it was in '25. This will be supported by rent reviews and other new lettings across the portfolio. We've allowed for disposals of about GBP 400 million this year, but the earnings impact is small as the average IFRS rental yield is close to our marginal interest rate. West End projects, including Holden House and the refurbishment of Middlesex House, will, however, reduce earnings in the short term. There are also additional voids at Page Street, which is being marketed for sale and 50 Baker Street. We're targeting further cuts in admin costs this year. And after disposals and CapEx, we forecast our average debt to fall. However, the refinancing of the convertible bonds in June last year increased our weighted average interest rate by about 50 basis points. We're also expecting about GBP 6 million less interest to be capitalized in 2026 than in '25. Putting this all together, we therefore expect 2026 earnings to be about 42p to 44p a share in the first half, followed by 52p in the second half. That is 10% ahead of H2 '25. So overall, about 3% to 5% lower than in '25, but rising significantly in H2. 2027 should then see EPRA earnings step up. We estimate that about 5% to 10% growth from the 2025 level or about 15% above '26 levels. And this is as growing rents are captured and we capitalize more interest. And then by 2030, we see earnings rising very substantially. Our models indicate at least 25% to 30% of uplift as rental reversion is captured and income flows from completed projects at Holden House, 50 Baker Street and elsewhere. Now considering the total accounting return. The 3 main building blocks are shown on this chart: earnings, capital growth and development returns. These are now supplemented by a fourth, a renewed focus on accelerated disposals to provide further options to boost our returns. Earnings first and assuming investment yields in our sector remain stable, 3% or a little more based on NTA is a realistic level. As the NTA grows, so will earnings. Next, capital growth, where we believe 3% to 5% of NAV is a reasonable outlook, allowing for the rental growth we're now seeing, backed by stable investment yields and allowing for a typical 1% or so adjustment for CapEx and voids. The third aspect is the increasingly attractive development returns, now growing again after being squeezed over recent years. IRRs up to expected letting are now regularly hitting 10% or more for our current and future projects, but rental growth could push these further. Our analysis shows a positive development contribution every year since our first major scheme in 2010. The final element is to free up capital from the higher disposals mentioned earlier into an improving investment market. This could be for future value creation schemes as well as potential share buybacks should that be more attractive at the time. We've set a GBP 1 billion sales target over the next 3 years, which could provide up to about GBP 250 million of excess capital. That's after allowing for planned schemes and the acquisition of Old Street Quarter in late '27. So now moving back to our 2025 results and the financial highlights. We show a solid performance for 2025, the net tangible assets up to 3,225p per share and a 5% total accounting return. Gross and net rental income was slightly higher than 2024, but EPRA earnings were affected by lower surrender premiums and higher finance costs after the midyear refinancing. Note also that our trading profits are excluded from the definition of EPRA earnings. Our debt metrics were all very sound, helped by the disposals totaling GBP 216 million and a busy year of refinancing. Finally, the dividend, which has been increased again by 1.2% and remains well covered by EPRA earnings. Next, the 2.4% uplift in EPRA NTA over the year. After dividends, the group retained 25p per share from earnings, including 8p from disposal profits and other items. The trading profits all came from our 25 Baker Street scheme, the majority from the sale of 24 out of the 41 residential units at George Street. The revaluation surplus in 2025 was equivalent to 51p per share. Of this, 20p or about 40% came from development surpluses. These figures are after slightly higher-than-normal deductions for additional CapEx and voids in 2025, together about 40p per share. Now the next slide, some additional valuation data. As in 2024, our ERVs grew at about 4% with the West End outperforming. Valuation yields remained stable, helped by the rental growth outlook and moderating central bank rates and inflation. Our topped-up initial yield on an EPRA basis at the year-end was 5.1% and the true equivalent yield was 5.71%. The portfolio remains good value with average topped-up rents around GBP 65 per square foot. Now EPRA earnings. These are set out here with the 3 main categories: property, admin and finance. Gross rents were up by GBP 3.5 million. And after property costs and impairment, net rental income was slightly higher than 2024 too. However, surrender premiums were GBP 2.5 million lower this year. So overall, net property and other income was GBP 1.7 million down on 2024. As mentioned earlier, we focused on cost efficiencies again in '25 and admin expenses were down by GBP 2.4 million on an EPRA basis despite inflationary cost pressures. Net finance costs were up significantly in the second half of the year. This is mainly due to the GBP 175 million of convertible bonds, which had an IFRS rate of 2.3%, being refinanced in June with new 7-year bonds at 5.25%. This took our weighted average interest rate up by about 50 basis points over the year. Average debt was also GBP 110 million higher than in '24, though this was partly offset by GBP 2 million -- GBP 2.9 million more capitalized interest. The higher finance costs took EPRA profits down to 98.4p per share. But if we add back the trading profits, which are excluded from EPRA EPS, adjusted EPS was 102.1p. The next slide shows movements in gross rents. After a delayed completion date, 25 Baker Street contributed GBP 5.4 million in 2025 and the retail units at Soho Place, another GBP 0.9 million. Other lettings and asset management transactions added GBP 7.6 million. GBP 10.2 million of income was lost due to space taken back or becoming vacant. Like-for-like gross rents were up 2.4%, impacted by our EPRA vacancy rate increasing from 3.1% to 4.1% through the year. We incurred GBP 182 million of CapEx in 2025, almost half of which was at Network and 25 Baker Street. The ungeared IRR up to PC at Baker Street was 11.3%, with network expected to deliver between 8% and 9% and we'll update these figures later in the year. These both represent good returns after significant yield expansion through the life of each project, helped by disciplined cost control and rents almost 20% above original appraisal levels. CapEx in 2026 is expected to be 22% lower at about GBP 142 million. 50 Baker Street is not yet committed, but we do expect it to move ahead in the summer and are particularly optimistic about return prospects here. Emily will take you through these later. Next, the ERV bridge, which we're now showing on a net effective rent basis to help make earnings forecasting easier. The previous headline rent basis is also shown at the bottom of the chart. Total rental income reversion is now GBP 70.9 million after incentives allowed at 20% and with GBP 216 million of future CapEx. Note that the pure reversion on the right-hand side from reviews and expiries remains at GBP 15.9 million, but this figure is after reclassifying GBP 3.8 million of reversion into the major projects category. Now refinancing. And as noted earlier, we were busy in June, issuing new unsecured 7-year bonds and redeeming the convertibles. As noted, this caused our weighted average interest rate to rise, giving an average through the year in 2025 of 3.8%, up from 3.3% for the whole of 2024. We expect our spot rates to fall in March 2026 when we repay the 6.5% LMS bonds. This should keep the average for 2026 at around 3.8%, but we believe lower in the second half than in the first. Redeeming those LMS bonds will also mean that by the end of Q1, all of our debt will be unsecured. At the moment, we're not expecting to issue any more fixed rate debt in 2026, any funding needed most likely coming from bank facilities. However, it's good to know that other debt capital markets remain both liquid and competitive with margins looking increasingly attractive. Our debt position is summarized on the last slide with all debt ratios and covenants comfortable. Cash and undrawn facilities rising over the year to GBP 627 million. Fitch retained our A- senior unsecured rating last year since when our gearing has fallen. Our borrowings had a weighted average unexpired term of 4.2 years at year-end and net debt to EBITDA was reduced to 9x. We anticipate it falling further through 2026. Thank you. And now back to Emily. Emily Prideaux: Before moving to our operational activity, let me set the scene with an overview of the London office market, where we have good reason to be optimistic as we look ahead. Firstly, London itself, where we have the highest concentration of top universities worldwide, providing an unmatched talent base. It is Europe's unicorn capital and #1 VC investment as well as Europe's leading financial center. It also ranks third globally for AI venture capital investment behind only the Bay Area in New York in the U.S. and is Europe's biggest hub for generative AI. We recognize the ongoing debate on this topic, and it will, of course, change how people work. Overall, we do not believe AI will remove the need for high-quality offices, and we believe London is one of the global cities best positioned to benefit given its depth of talent, innovation and global connectivity. As with any fast-moving driver of change, we will stay close to these developments and be ready to adapt as the opportunity evolves. London's strength is also reflected in sector diverse office demand, underpinned by a broad knowledge-based economy and finance, technology and creative industries all in growth. This global city attracts both blue-chip corporates and high-growth occupiers, and its diversity makes it significantly more resilient through the cycles. London is where global businesses want to be. And the office occupier market fundamentals are strong. 2025 saw robust activity, 11.4 million square feet of take-up with over 3.5 million square foot under offer. Importantly, 80% of deals over 20,000 square foot were expansionary, signaling genuine business growth. Vacancy remains low and prime vacancy sub-2%. Looking ahead, we expect a significant supply punch, rental growth and lease events working in landlords saver with occupier renewals extending income and rent reviews now delivering good reversion. The occupational market is inflecting positively, and we're well positioned to benefit. And what are occupiers looking for? Real estate quality matters more than ever, buildings with a rival impact, rich amenity, flexibility and quality, be that retrofit or new build. Location and connectivity, very important, proximity to crossrail, transport more generally, talent and amenity. But critically, all that London has to offer is what makes it a city, which attracts domestic and European businesses and HQs. The scale and depth of industry and skill is unmatched in Europe. We understand these drivers. Our portfolio is built around them, and our forward-look strategy is designed to capture the value they create. Finally, turning to the investment market. Liquidity is now improving. Investment volumes in 2025 totaled GBP 7.1 billion, a 40% increase on the year previous. Yields have stabilized. The market has inflected and investor confidence is improving, driven by a strong occupier market and supply crunch, as we heard earlier. 2025 also saw the return of the large lot size transactions with double the numbers seen in the year before. This is a trend we're expecting to continue in 2026 as debt costs reduce, boosting overall levered returns. GBP 23.5 billion of equity is now targeting London, an 18% increase on 2024, and Knight Frank reported in a recent survey that offices are the most targeted sector by investors in 2026. Geopolitical events elsewhere are enhancing London's appeal and its position as global safe haven. All this means that we are expecting a further increase in turnover in 2026 to over GBP 10 billion, and this will contribute positively to our plans for disposals. Now to our own portfolio activity. We completed GBP 216 million of disposals in 2025, and we exchanged contracts for disposals totaling GBP 145 million in 2026 so far. In addition, we have GBP 135 million under offer and are in discussions on GBP 100 million. These sales support our target of GBP 1 billion of capital recycling into an improving investment market where proceeds can be more effectively redeployed elsewhere into higher return opportunities. In addition, we will continue to selectively hunt for value-creative opportunities to acquire, be that to support medium, long-term value through development or to support income in the nearer term. Turning to leasing performance. 2025 was a resilient year with GBP 11.3 million of new leases signed, around 10% ahead of ERV. As the chart shows, leasing activity across the standing portfolio has been broadly consistent with long-term averages for a number of years. Excluding pre-let, this highlights the strength of underlying demand for our space. And we've started '26 with strong momentum, GBP 14.4 million under offer, including all of the space at Network as well as the GBP 1.5 million transacted and a further GBP 4.4 million in negotiations. These figures support a strong year ahead for leasing activity. Turning to Slide 29 and asset management. '25 was a record year for asset management with transactions completed across GBP 59 million of income, almost 30% above our previous peak. More importantly, though, was the quality of what we achieved. Our focus was on capturing reversion, extending income and aligning lease profiles with our longer-term asset strategies. Through early and proactive engagement with occupiers, we were able to structure transactions that balance flexibility with greater income visibility while mitigating void risk and future capital expenditure. Rent reviews of GBP 37.4 million secured over 7% above previous rents, reflecting the strong rental growth across submarkets and renewals and regears with long-standing occupiers, extended lease lengths and deepened relationships. Transactions such as Adobe at White Collar Factory and Burberry at Horseferry House demonstrate the strength of our occupier partnerships and reflect the positives for us of occupiers taking the stay put option, while major rent reviews at Brunel and 80 Charlotte Street enabled us to capture good reversion. Overall, this was a year where active management translated directly into stronger income security and enhanced reversionary potential. And this will be an important part of business activity as we look ahead in this market. Moving to developments. At 25 Baker Street, which completed in August 2025, offices were 100% pre-let at 16.5% above appraisal ERV, generating headline rent of GBP 21.7 million and an ungeared IRR of 11.3%. And at Network W1, the offices are now fully under offer. Practical completion of the building is expected within the next week. Full details of the financials on this will be confirmed once transacted in coming weeks. We've maintained good returns on these schemes in spite of significant outward yield shift. Looking ahead, we have a focused and disciplined development pipeline, which remains a core part of our business model and driver of future returns. We're making good progress on site at Holden House and strip-out works have commenced at Greencoat & Gordon. Both of these schemes are in well-connected locations in submarkets with strong demand and limited supply with completions targeted in 2027 and 2028, respectively. We're also on site now with the comprehensive refurbishment of Middlesex House, where we're giving new life to this tactful 1930s Art Deco warehouse building in the heart of Fitzrovia. Together, these schemes, 2 of which are traditional refurbishments, represents a substantial value opportunity for the group with double-digit attractive expected returns. And importantly, this growth potential is already within the portfolio, driven by projects under our control, providing clear visibility over future earnings and value creation. At 50 Baker Street, we're due to commence an exciting new build development later this year. This is a scheme positioned in a submarket with very limited supply, great connectivity and strong growth prospects, which deliver all those things on the occupier wish list, amazing arrival and amenity, large floor plates, flexibility and quality design and architecture, of course. Our base appraisal shows strong returns with rental growth expected to enhance them further given the strength of the Marylebone occupier market as well as the product to be delivered. Alongside our near-term development pipeline, we also have over 1 million square foot where we are actively exploring alternative primarily living-led uses and strategic partnerships to maximize long-term value creation. At Blue Star House working with an operating partner, planning consent is in place for apart-hotel development scheme. At Old Street Quarter, we are working with related Ardent in a development management capacity for the time being to progress a mixed-use living-led campus. Importantly, the structure of this allows flexibility over delivery, including joint ventures, forward funding or indeed plot sales, allowing us to deploy capital selectively and efficiently. And at 230 Blackfriars Friday Road, early feasibility work indicates significant residential-led potential with scope to materially increase floor area. Together, these assets provide meaningful optionality to partner, develop directly or realize value through sales. So in summary, operationally, 2025 has been a strong year, accelerating capital recycling as liquidity improves, resilient leasing activity, record asset management activity, successful delivery and pre-letting of major developments and a disciplined pipeline with attractive expected returns. Now over to Paul, who will wrap up. P. Williams: Thank you very much indeed, Emily. Now to outlook on Page 35. As you heard, there is significant activity across the business. We are busy. GBP 140 million of disposals signed since the start of the year with a similar amount under offer and a further GBP 100 million in negotiations. The stage is set for 2026 to be a strong year for leasing. And we're on site of 3 really exciting projects, which we have forecast will deliver an average IRR in excess of 10%. We have a clear plan for the accretive redeployment of disposal proceeds as we seek to balance near-term income with value creation in the medium term. This includes potential share buybacks. London feels different. The fundamentals are good. The office cycle has really turned a corner. Rents are growing strongly. Investment liquidity has improved markedly with London offices being the most demand sector. There has been a notable pickup in activity. We're seeing more inquiries from potential occupiers and increasingly broad range of investors are knocking on our door. And this is the foundation of our ERV increase for 2026 to plus 4% to plus 7% and our confident financial outlook. Now a personal reflection. As you know, I've made a decision to retire after 38 years at Derwent. I've been with the business man and boy, and I'm proud of what we have achieved over that time. I'm excited for 2026 and beyond and that the business is well placed with a great team. Thank you. We're now going to take questions from the room and then from those who are joined remotely. P. Williams: Questions, please. Thomas Musson: It's Tom Musson at Berenberg. A question first on the perceived AI risk to tenants. The market is beginning to price some of this in recent share price moves. Interestingly, a lot more in the U.S. Would you expect property valuers to react here, perhaps assuming greater tenant covenant risk or changing assumptions around lease renewal probabilities? Just would be interested if any of this has been part of conversations you've had with them. Emily Prideaux: Yes. I think, firstly, one of the benefits we obviously have is how close we are to our occupiers and indeed other occupiers in the market. So any area of change like this will always stay close to. I think in terms of the property sector more specifically in the valuation point you read, there's 2 strands to the AI debate at the moment. One is the direct demand versus the indirect impact, if you like. To date, we're not seeing that reflected negatively by any means in the valuation piece. I think the covenant point is as with any of the other big tech booms we've seen over the cycles. There will obviously be winners and losers in that. And from our perspective, we always take that covenant risk piece very seriously. But on a more general piece in terms of the AI story, I think we feel, as I mentioned, that globally, I think London is somewhere that should really position themselves well for that. But it's something we're going to stay very close to as things evolve. Thomas Musson: Second one, you mentioned potential share buybacks in the event of being in a surplus capital position. At what point would you consider yourselves to be in a surplus capital position? Do we wait until you've cleared this year's CapEx requirement, for example, or some of next year's too? Just interested how you think about that. P. Williams: Look, we have a plan to sell something over GBP 1 billion over the next 3 years. We started off really well this year. We have got some investment going into the portfolio for really accretive developments. But as we build up those resources, I think we should have a good look at that and be open-minded. Damian, do you want to add a bit to that? Damian Wisniewski: Yes. Tom, it's a good question. I think let's get some disposals out of the way. We've made a good start to the year. Personally, I think we need to get sort of 200 plus under our belt before we can seriously look at what we do. We do have Old Street quarter coming up in probably late 2027. So we need to look at that in our forward funding plans as well. So I think the GBP 400 million this year is a good start. We've mentioned there could be up to GBP 250 million of excess capital over the 3 years. That doesn't mean to say we have to wait for 3 years. So I think we will look at this as we go, and we will see how things progress. I don't want to commit to a particular number today, but I hope you can see how we're thinking about this. Thomas Musson: That's helpful. Maybe if I could ask one last one, just on the residential sales at 25 Baker Street. I think at the half year, you'd exchanged on 23 of the 41 units today. I think you say you sold 24, so one more. What's the demand like right now for those? And are you having to meaningfully adjust price there to generate interest at this point? And should we address our trading profit expectations for the rest of the units? P. Williams: I think we started off really well with prices well above our underwrite and there's some very strong prices, particularly for the bigger units, GBP 3,700 a square foot. We've got a little one that's left. They will take a little bit longer time, but they're great flats in great location, but it will take a little bit longer. Damian, do you want to add to that? Damian Wisniewski: Yes. Just one other point to make is that the 2025 result included the cost of all the affordable housing. So from here on, it's essentially profit. Now the market has definitely got slower, and I'm pretty sure we'll see pricing coming off a bit. But we've got quite good headroom here. So confident that at some point, we will see a pickup. A lot of beds for sale. So if anyone is interested, please let us know. Adam Shapton: Adam Shapton at Green Street. I had to put my hand down then when Damian bed didn't want to look I was volunteering. Firstly, congratulations, Paul and Nigel, on retirement, let me say that. Before I get into questions. Just a clarification on the GBP 1 billion of disposals number. Is that in addition to what's already exchanged and under offer or... Damian Wisniewski: No, GBP 1 billion includes the figures that we've done this year. So GBP 1 billion over -- we would have done GBP 280 million, I think, as the deals get done. So that's a good start. So we're hoping that we're going to get something close to GBP 400 million this year. So that's the plan. Adam Shapton: And just in that context, if I may say 3 years sounds quite conservative to do another GBP 750 million. What's the limiting factor there? I mean you talked about improving market. You quoted Knight Frank on all the equity... Emily Prideaux: Don't view the GBP 1 billion as a cap. I think what we're looking to do is proactively dispose here mature assets where the business plan is delivered and where we think we can deploy other more accretive opportunities. So it's not a fixed number per se. And depending on the market and where we're at in terms of other opportunities that may move. Adam Shapton: So both the number and the time scale might conservative. Is that fair? P. Williams: We're seeing liquidity improving because obviously big assets are GBP 100-odd million today. Last year, I think they doubled GBP 100 million the year before we difficult. So I think as we see liquidity go up, and if we can get a strong price for those assets, we're going to be realistic and sensible. But I think we want to make sure when we do sell, we sell well and we sell at the right price with the balance sheet in good place. I want to make sure that we do it strategically. Richard and his team are well set up to do that. And I'd say we will accelerate disposals and we see a strong price for something and we can use the money more accretively, we would certainly do that. Adam Shapton: Great. Just 2 more. On the flex growth, Emily, you mentioned going from 8% to 10% to 15%. I think I'm right in saying the 8% is a mixture of F&F and third-party operators. Emily Prideaux: Yes. Adam Shapton: So what's the shape of that? Emily Prideaux: The growth from 8% to 15% is more around our portfolio and what expires within that time frame of a size and location where we think will naturally move to flex. So it's not proposing that we're going out shopping per se for an extra 7% of that stuff. It's more that we're looking at where the sub 10,000 square foot units coming back in the right submarkets and they will likely convert. Adam Shapton: Okay. But we should expect to be more your in-house as it were rather than leasing? P. Williams: We've got a number of refurbishments at the moment, which I think we're ideally placed for that sort of thing. Adam Shapton: Okay. And maybe somewhat related to that, on admin costs, you made some good progress. How should we think about a floor of where that could get to in today's money? Given your strategic ambitions, you want to sweat the platform more, where could the... Damian Wisniewski: I think our target for this year is another couple of million. I think at that stage, that feels like it's quite lean. There would have to be quite structural changes before we can go much lower than that. But that's a reasonable target for now. Callum Marley: Callum Marley from Kolytics. A couple of questions. Outlined the new strategy today with disposals and buybacks. But the stock has obviously been trading at a material discount now for a few years, and you've had a while to act on it. Why are you committing to this now? Emily Prideaux: I think in terms of the strategy, in terms of -- we're looking at all optionality here. So we're disposing, but then obviously focusing on the balance sheet. You've seen track record of development and investment where we're committed and where we want to commit. Obviously, looking at the dividend and as Damian touched on, which you can pick up on the share buybacks come as and when we reach that surplus. So it's looking at the whole picture and that optionality around that, keeping open-minded to that. Damian Wisniewski: I think also the key really is how the investment market is now opening up. we have had 2 years where it's been quite challenging to sell large lot sizes. And as a result, the leverage has crept up a bit. The balance sheet is still strong, but maintaining a strong balance sheet has always been one of our foremost requirements. we now have more options coming open to us as well. So -- and the other thing, of course, is maintaining earnings. And you've got the situation now where the IFRS yield on most of the things we're looking to sell is probably very close to our marginal interest rate. So the earnings impact of disposals is much less than it was, say, 3 or 4 years ago. So I hope that gives you some idea as to how... P. Williams: I think that's the point with the market opening up more liquidity, give more opportunity to sell and consider what we do with that money. So I think that the market equity has improved a lot. Callum Marley: Got it. And then the 25% earnings growth target, is that built on sustained rental growth? And if so, what's the number? Damian Wisniewski: The rental growth to 2030, essentially, what we're doing is we're building into our models some growing reversion from rental growth of around about 4% per annum. We've also got, I think, expecting increasingly attractive returns from projects like 50 Baker Street and Holden, where the gearing impact as well, it improves those returns still further. You factor that in, about half of the rental growth comes from those 2 projects and about half of it comes from the rest of the portfolio. Callum Marley: So 4% is the... Damian Wisniewski: So roughly 4% per annum is what we're putting in our models going forward, yes. Callum Marley: And if I could just ask on Page 22, just looking at the prime office rents, seem to be flat from 2015 to 2019. What makes you think that '25 to 2030 that is going to be 4% a year going forward? P. Williams: I think -- firstly, I think there's a pretty tight supply crunch and that demand is pretty good. People are growing. 80% of the deals last year with 20,000 square foot people were growing. Rents do need to increase in order to -- a small proportion of people's outgoing. So I think if people want to be in good locations, they need to pay the right rent for the right location. So I think it is time for landlord to earn a bit more money. So I think we feel pretty positive about it. Last few years, despite the difficult macroeconomics, we've been consistently letting at 10% above ERV. We have strong visibility about inspections and viewings and tenant demand. So I think we feel pretty positive about. London is a place to be. People want to be in town. Emi, do you want to add to that? Emily Prideaux: Yes. I think the 4%, if you look at the sort of big houses prospects over the next 5 years, that's probably pretty conservative. I think the supply crunch is a big driver at the moment. London has got a supply shortage that we haven't seen before. Part of our repositioning is making sure we're in the right place for that. But I think the 4%, we're pretty comfortable with from a market perspective. And this year, we're in a place where every submarket in London is now projecting growth, whereas before it has been much more spiky following COVID. So you're really seeing that evening out now in terms of a more lateral growth across the city. Damian Wisniewski: Rents have fallen behind other costs quite substantially over the last 5 years. They're now beginning to catch up, and we're seeing our rents growing now at a slightly faster rate than overall cost. But really, that's been squeezed quite a bit over the last 5 years. If you go back to the last big rental cycle, which was sort of 2012 onwards to 2015, our earnings pretty much doubled in that period. And I'm not forecasting a doubling, that would be nice. We'll come back next year, hopefully. But I think our 30% increase feels very realistic given that we are seeing really quite a shift in the dynamics and overdue, I think. Zachary Gauge: It's Zachary Gauge from UBS. A couple of questions from me. One is on the ERV growth conversion into capital growth during '25. Obviously, 4% ERV growth. I think at the portfolio level, you're only 0.8% on capital growth. Can you touch on why the value was -- aren't giving you the uplift when yields were effectively stable and why you're confident that going forward, that will convert into the 3% to 5% capital growth that you've guided to? And then the second one, sort of again, picking up on the share buyback point and capital allocation. I noticed that the net debt-to-EBITDA target seems to have shifted slightly from getting it below 9 at the end of this year to now sort of 9.5 going forward. Bearing that in mind and the capacity that gives you, should we sort of see the GBP 250 million of excess capital from the GBP 1 billion of disposals as the high watermark for buybacks? And would that then be sort of flexible depending on where you sit on the net debt-to-EBITDA ratio and obviously doing potentially more disposals than GBP 1 billion. P. Williams: So Damian, do you want to start with... Damian Wisniewski: I'll start with the second question. So the 9.5 isn't a target. We've currently got it down to 9, I'd prefer it to be lower than that. We're expecting it to be lower by the end of this year. So 9.5 is really where I think we see the upper limit over the next few years. Could there be a bit more available? Yes. I think we need to see how we go on this. We'll update you as we go. But the 9.5 is very much an target. On the valuation point, I think I mentioned earlier, we've got about 40p a share of additional CapEx and discounting for voids and the time effect of rental growth coming through. That did impact us in 2025. We've looked over the last 10, 15 years. And the average amount by which we see valuations impacted by CapEx and voids is roughly 1% per annum. Last year, it was more like 2%, 2.5%. We have been looking at a number of new schemes to try and grow rents. And I think that was one of the reasons you've seen a bit of a step-up in 2025. But we don't think that is a normal level, and we think it will come back down closer to its 1%. The only other point to make is that our 3% to 5% is on NTA -- and the -- obviously, the rental growth is on the gross asset value. So there's an impact there as well, which helps. Zachary Gauge: Sorry, on the GBP 250 million being the top end of buybacks and dependent on additional disposals? Damian Wisniewski: Not a top end at this stage. I mean let's wait and see. I think -- I don't think it's all going to come in one go either. I think we need to get the disposals underway, look at the capital allocation at the time, and we'll take it from there. But -- so 3 years isn't forever either. So let's see where we go. Emily Prideaux: I think it's going back to the plan we've talked about, Zach, in terms of looking at all of those -- the options available to us alongside one another. P. Williams: Paul, I think you had your hand up. Yes. Paul May: It's Paul May from Barclays. Just 3 questions, I think, for me. You regularly provide the ERV target, but I think through the presentation, I've noticed sort of welcomed increased focus on earnings and cash flow moving forward. Do you think you'll consider providing a like-for-like rental growth target per annum moving forward? I appreciate you said the 4%, but just sort of give some color there in terms of converting ERV growth into actual cash flow would be sort of welcome. Regarding the disposal of Whitfield Street, obviously, I understand Lone Star is a pretty high cost of capital enterprise. Do you have any indication as to what they're expecting on that site and why they can hit their sort of 20% plus IRR targets versus what you would have expected to achieve on that site? And then just on the 2030 targets, is it reasonable to assume that that's relatively back-end loaded. There will be a little bit of bumpiness between '27 and '29. And then as those schemes complete, that should come through into 2030? P. Williams: Well, just touching on Wakefield Street first. I mean, obviously, they will have a fairly -- probably a bit more aggressive view on rental growth. We're very happy with the price. I think a net initial of the price of 5%. [indiscernible] on the 5% is good. bit of vacancy coming up. It's a 20-year-old building. I can't really speak for them as to where they think their returns could be. They're probably reflecting the same thing we are as much as the West End is very tight, rents are growing and a very good location. So they're probably targeting pretty aggressive rental growth. But for us, we think recycling support and getting some more money into the portfolio, we can secure a strong price, which we did, and we're investing elsewhere. So I think it's all about their view about where rents might grow. We're not renowned for being overly aggressive on where we see rents growth. So I say we're delighted with the start of the year, how much sales we've done, how much we've got under offer. We wish them well with the purchase. I'm sure they'll be delighted with it some time. As I say, we've done -- we've made our money there. It's a 20-year-old building, and we've got plenty of other opportunities to spend the money. Do you want to talk about… Damian Wisniewski: Yes. First of all, on the like-for-like rent, it's an interesting idea. I think we'll certainly consider it. I mean the point to make here is that the rental growth grows the reversion and it takes time for that to be captured into earnings. And so you tend to get this cycle where initially, the like-for-like rents lag behind ERV growth. But at the end of the cycle, they can often outpace it. So we found -- in that period, we mentioned earlier that 5 years when rental growth was very low. For the first 2 or 3 years of that, our like-for-like rents were still growing nicely because they were based on previous reversion. So you get this slightly different timing impact coming on. We'll think about how we might guide to that going forward. In relation to the earnings, you are right. A lot of the uplift comes from 50 Baker Street and Holden House and others coming through probably in late '29, early '30. So it is quite a step-up in '30. We do think though that there will be some nice solid earnings growth in '28, '29, but it's really then a step up in '30. Paul May: Perfect. Sorry, last couple. One, coming back to the initial question on AI. Do you think your portfolio or your tenant base of smaller -- generally smaller tenants, smaller floor rates actually offer some protection in that AI world given it's probably larger entities that are cutting back on some of the graduate recruitment. P. Williams: Well, short answer, yes. I think very big banks, et cetera, who knows. I think one of London's great benefits is to buy a diverse space. Average -- I think average size of our lettings across our portfolio, about 15,000 square foot. I think that gives quite a lot of resilience with such a range of different occupiers. Emily, do you want to add to that? Emily Prideaux: I think that covers it most other than to say, obviously, the way we look at our portfolio generally and AI falls into this is to make sure we've got everything to meet that match demand. So the high growth at the lower end, probably in the fitted space growing up to the 50 Baker Street. So I think like any other, I think we'll make sure it's balanced in that way. Paul May: I am sorry, just final one linked to that. The 10% to 15% on flex, given that 15,000 square foot sort of average tenant mix, and that's probably skewed by a few large ones and then quite a few even smaller ones. Could flex become a significantly larger part of your portfolio than the 10% to 15%? Emily Prideaux: At the moment, we think the 15% is probably where it still makes sense from maintaining everything that we have to look at in terms of cost ratios, operational efficiencies and overall net-net returns in terms of extra CapEx and everything else that goes into it. So at the moment, that's where we think we will always continue to kind of mirror the market and make sure we're delivering what we believe the market is. Over the years of flex and all the headlines it's grabbed, it's never really moved much from the sort of 4% to 7% of the total market activity. So it feels -- we're looking at that on all the financial metrics, but also where we think the market is. So -- of course, it could change in the future and we'll adapt as we need to, but that's where we feel it's right at the moment. P. Williams: I think that's a good point as a percentage of the market. It's relatively small. We got a lower headlines and it's done well. But we also like our headquarters, nice long leases, helps our valuations. Thank you, Paul. Any other questions we've got from the room more? Do we have anyone online on telephone? Operator: First question from the phone comes from the line of Marc Mozzi from Bank of America. Marc Louis Mozzi: My first question is around how is the Board weighting M&A optionality as a way to boost shareholder returns and addressing the gaps that have been created by the recent senior departures. Emily Prideaux: I think it's a question around how -- was the question just bear with me that the -- how do we think about perspective of addressing succession matters. P. Williams: I mean, obviously, we're very focused on our business at the moment. And obviously, I've made a decision that I'm going to retire and there is a process going ahead with finding a successor. So the focus is on the business. There's nothing to report to say about M&A, particularly. Unless we misunderstood your question, Marc, it wasn't a great line. Marc Louis Mozzi: It was a question. My second question is around effectively given AI-driven derating of New York office stock prices, do you still view share buybacks as the right call in that environment? And the next one related to that is how confident are you in the long-term earnings and total return specifically target that you've provided through 2030? P. Williams: Well, I think firstly, it's always got to be a balance between buybacks and investment and all the rest of it. And obviously, it's got to be seen as an opportunity at the moment. Damian, do you want to add anything to that? Damian Wisniewski: Yes. I mean the principal things we're trying to do, we're trying to accelerate disposals to give us more options. The first thing we do is maintain a strong balance sheet. The second thing is we invest in our accretive returns for our schemes. After that, we have options. And the AI is one of the many factors we take into account in looking at investment decisions. And we're all trying to work out what it means short term, medium term and long term. For now, though, I think hopefully, our capital allocation outlook is clear, and we will keep our eyes and ears open to see how things move forward. But I'm not sure we can say much more at this stage. Marc Louis Mozzi: I just wanted to have your thought. And the final question for me is, how much disposals are you assuming in your 2030 target? Damian Wisniewski: 2030. So we're assuming about EUR 1 billion in the next 3 years and I think a couple of hundred million a year per annum after that. Is that right, Jennifer? Unknown Executive: Yes. Damian Wisniewski: Jennifer does all the modeling, so she knows. Marc Louis Mozzi: GBP 1.2 billion, GBP 1.3 billion? Damian Wisniewski: About GBP 1.3 billion, GBP 1.4 billion over the 5 years. P. Williams: We got one more. Operator: The next question comes from the line of Alex Kolsteren from Van Lanschot Kempen. Alex Kolsteren: Two questions on this presentation. So you mentioned EUR 2 million of cost savings target in 2026. What's the reasonable amount to assume for 2027 on top of that? Damian Wisniewski: Yes. So we took about GBP 2.4 million came off our EPRA cost in 2025. We're anticipating a similar level in 2026. I think our models assume inflation after that, but we will be looking to make this business as efficient as we possibly can. So anything we can do after that to reduce costs will be done. There isn't a specific cost target, I think, in the 2027 model at this stage, but that doesn't mean to say we won't look at further efficiencies. Alex Kolsteren: And then one more on the capitalized interest. On Slide 9, you say that the capitalized interest in 2027 is about GBP 8 million higher than in 2026. On Slide 51, where you break down your CapEx pipeline, the 2026 number is GBP 6 million and 2027 number is GBP 8 million. So where does the remaining GBP 6 million increase come from? Damian Wisniewski: Yes. I mean these figures in the back here are for essentially the committed schemes. If you look at the top half of the report. There is -- in the bottom, it says consented 50 Baker Street. That is not yet in the top half of the project because it's not been committed. When it does get committed, and we're assuming it will do, then it will go into the top half, and we'll show you the capitalized interest. So that figure in the outlook includes capitalized interest for 50 Baker Street, the appendix doesn't. Unknown Executive: There are 2 questions on the webcast. The first says, while you've mentioned the possibility of share buybacks, are you taking any other active steps to reduce the gap between the current share price and the net asset value? P. Williams: Well, we're hoping this presentation will help. I mean we're selling, we're letting. We think the market is improving. The fundamentals are good. So actively, we're looking at other options of whether buybacks or something similar. Emily? Emily Prideaux: That's exactly that. The plan you've heard today is laser-focused on shareholder returns and what we get and where our focus is in that regard. Unknown Executive: And then the last question is, within the 2030 guidance, does it take account of a potential share buyback? Damian Wisniewski: No. P. Williams: That's an easy answer. Thank you, everyone, for today. We're all around if anyone wants to have a chat afterwards, pick up the phone or obviously on tour as well. So thank you for your attending today. I know it's a busy week for everyone, and have a good day. Thank you very much.
Operator: Hello, and welcome to the Acushnet Company Fourth Quarter 2025 Earnings Call. My name is Josh, and I will be the moderator for today's call. [Operator Instructions] At this time, I'd like to introduce your host, Mr. Cameron Vollmuth, Director of Investor Relations. Cameron, you may proceed. Cameron Vollmuth: Good morning, everyone. Thank you for joining us today for Acushnet Holding Corp's Fourth Quarter and Full Year 2025 Earnings Conference Call. Joining me this morning are David Maher, our President and Chief Executive Officer; and Sean Sullivan, our Chief Financial Officer. Before turning the call over to David, I would like to remind everyone that we will make forward-looking statements on the call today. These forward-looking statements are based on Acushnet's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these expectations. For a list of factors that could cause actual results to differ, please see today's press release, the slides that accompany our presentation and our filings with the U.S. Securities and Exchange Commission. Throughout this discussion, we will make reference to non-GAAP financial measures, including items such as net sales on a constant currency basis and adjusted EBITDA. Explanations of how and why we use these measures and reconciliations of these items to the most directly comparable GAAP measures can be found in the schedules in today's press release, the slides that accompany this presentation and in our filings with the U.S. Securities and Exchange Commission. Please also note that references throughout this presentation to year-on-year net sales increases and decreases are on a constant currency basis, unless otherwise stated. As we feel this measurement best provides context as to the performance and trends of our business and when referring to year-to-date results or comparisons, we are referring to the 12-month period ended December 31, 2025, and the comparable 12-month period in 2024. With that, I'll turn the call over to David. David Maher: 2 Good morning, everyone. Cameron has been with our team for a while, and it is my pleasure to welcome him to his first quarterly earnings call. We appreciate your interest in Acushnet and look forward to sharing our 2025 results and future outlook today. As a starting point, we are pleased with our fourth quarter performance as our teams executed our year-end plans and did good work preparing for the 2026 season and several product launches. As Sean will outline, revenues were up 7% for the period, and we generated nice momentum in our operating segments. Turning to Slide 4. For the full year, Acushnet achieved net sales of $2.56 billion and adjusted EBITDA of $410 million in 2025, growth of 4% and 1.5%, respectively. These results were made possible, thanks to the talented and dedicated associates who make up Acushnet and our committed trade partners who are on the front lines wherever golf has played. There are several highlights within these operating results, led by the Titleist Golf Equipment segment, which grew 6% on the year as investments in product development, precision manufacturing and fitting paid dividends across our golf ball and golf club businesses. As you will note from our revenue growth, the company is benefiting from recent capacity expansion projects, which will continue with a focus on cast urethane golf ball production and custom golf club assembly. In 2025, New Pro V1 posted gains across all regions, contributing to a 4% increase in golf ball net sales on the year with EMEA, Japan and the U.S., our fastest-growing markets. We are pleased with increasing demand for our AIM or alignment integrated marking golf balls. And operationally, we continue to benefit from the expansion of our automated custom imprinting capabilities, which is driving efficiencies and reducing lead times. Within equipment, 2025 was a strong year for Titleist Golf Clubs, which grew more than 7%, led by the successful launch of new T-Series irons and steady growth in metals and Scotty Cameron putters. Our Vokey wedge franchise also posted strong results in year 2 of the SM10 product cycle. Ongoing investments in product development and our global club fitting network frame how we characterize the Titleist Golf Club opportunity. Acushnet gear business increased 6% on the year with especially strong increases by Titleist Gear in EMEA and the U.S. and growing momentum for Club Glove travel products. Now moving to FootJoy. We are pleased with the direction this business has pointed. Sales were down 1%, mainly due to reduced discounted sales versus last year. On the strength of products like Premiere and HyperFlex, we are seeing a favorable mix shift towards our premium high-performance footwear franchises. And the FJ mobile FitLab program is delivering a value-added fitting experience, which helps golfers select the best footwear performance and comfort option for their games. And growth in gloves and apparel added to FootJoy's momentum and improved profitability for the year. Rounding out our portfolio, we continue to generate strong growth with our shoes brand up 9% on the year, led by double-digit gains in the U.S. Titleist Apparel also delivered a promising year, led by growth in China and our business in Korea. As to Acushnet's regional performances, full year 2025 results affirm our previous commentary about the Titleist Equipment segment, posting gains in all major regions, led by the U.S. and EMEA and softer conditions in Japan and Korea, where our equipment gains have been offset by declines in the correcting apparel and footwear categories. Acushnet's strong financial performance in 2025 supported ongoing investment across our business and the company's commitment to returning capital to shareholders. For the year, dividend and share repurchases totaled $268 million, bringing our total return over the past 4 years to more than $1.1 billion. And furthering Acushnet's commitment to our shareholders, I am pleased to announce that our Board of Directors has approved an 8.5% increase to our quarterly dividend payout in 2026 to $0.255 per share. This marks the ninth consecutive annual dividend increase since the program was initiated in 2017. These actions reflect the Board's confidence in Acushnet's ability to execute and their positive outlook towards the company's leading positions within the structurally healthy golf industry. As you will note, the company remains focused on investing to position the company for future growth while also returning capital to shareholders as appropriate. Now looking ahead, we start by pointing to the game's global momentum with worldwide rounds projected to have increased about 2% in 2025 with growth in EMEA, the U.S. and Japan and a flat year in Korea. In the U.S., our largest market, the number of golfers again increased, contributing to this rounds of play momentum. The global golf industry, as defined by golf courses, teaching centers and golf retailers continues to be healthy with strong financials supporting ongoing investments as the industry adapts to meet ever-evolving golfer preferences. Within Acushnet, we are enthused by our new product pipelines and sustaining momentum our brands carry into 2026. As is customary in even numbered years, we successfully launched a comprehensive lineup of new Titleist golf balls in this first quarter, including Pro V1x Left Dash and new AVX, TourSoft and Velocity models. It's also a busy year for Titleist golf clubs with new Vokey SM11 wedges and a new lineup of Scotty Cameron mallet putters launching in Q1. Both products debuted on worldwide tours earlier this year and initial responses have met our very high expectations. Plans are well underway for our new driver launch in late June earlier than our customary Q3 timing. Titleist drivers are #1 on the PGA Tour, and we are enthused by the great work from our product development and operations teams to provide added flexibility around launch timing. We will share more details about this product on our May call. One of our key narratives in recent years has been our focused investments in golf equipment R&D, operational efficiencies and capacity expansion and point to these investments as drivers to our recent growth and confidence in our ability to deliver enhanced innovation, product development and best-in-class golfer experiences, core attributes to the long-term success of Titleist Golf Equipment. Acushnet's gear business is well positioned coming off a strong 2025, and we are planning for growth led by gains in the U.S. and EMEA. Within gear, we pursue exceptional performance and quality to differentiate our products with discerning core golfers. The FJ brand continues to move forward in 2026 as we leverage high-performance Premiere and Pro/SL franchises to strengthen our position as the #1 shoe in golf. And we continually evolve our outerwear and apparel offerings with a focus on our premium segments as we position FJ for the future and manage near-term tariff headwinds. As to our investments in 2026, in support of Acushnet's priorities and our longer-term growth opportunities, we will prioritize strategic capacity expansion and the build-out of our global fitting networks for golf equipment and footwear, expand our B2B and D2C capabilities to new regions and invest in the future of the Titleist Performance Institute, where demand for PPI's golf-specific health, fitness and swing expertise is outpacing our available capacity. Collectively, we expect these investments will support our future growth plans and enable operating leverage over the long term. In summary, we are optimistic about the structural health of the golf industry and are focused on expanding our momentum in the Titleist Golf Equipment segment, strengthening our gear and FJ wearables business and investing in key initiatives that we believe will pay dividends over the next several years. I have confidence in the Acushnet team and their ability to provide dedicated golfers with leading products and services as we seek to build long-term value for shareholders. Thanks for your attention this morning. I will now pass the call over to Sean. Sean Sullivan: Thank you, David. Good morning, everyone. Turning to our 2025 financial results. Fourth quarter net sales were up 7% when compared to the fourth quarter of 2024, primarily driven by higher net sales in Titleist Golf Equipment. Adjusted EBITDA was $9.8 million, lower than last year's fourth quarter of $12.4 million. Looking at our segments, Titleist Golf Equipment was up 10% in the quarter, largely due to higher sales volumes of our T-Series irons and SM10 wedges, partially offset by lower GT driver sales, which comped against last year's launch. FootJoy net sales grew 4.5% during the fourth quarter, driven by favorable mix shift and higher average selling prices in footwear. Golf Gear net sales decreased 5% in the fourth quarter. Overall, 2025 fourth quarter gross profit of $211 million was up $3 million compared to last year's fourth quarter. As a reminder, during last year's fourth quarter, we recognized a onetime benefit related to a PTO policy change that impacted gross profit by approximately $7 million. Gross profit for the full year was $1.2 billion, up 3% or $34 million, primarily resulting from higher sales volumes, higher average selling prices and favorable mix. Gross margin fell to 47.7%, down 60 basis points from last year, primarily related to incremental tariff costs of approximately $30 million. SG&A expense of $206 million in the quarter increased $13 million compared to the fourth quarter of 2024. Last year's SG&A expense included a onetime PTO policy change benefit of approximately $9 million. SG&A expense of $833 million for the full year increased $32 million or 4% from 2024. Excluding the $9 million onetime PTO policy change benefit, the $23 million increase was primarily related to higher employee expenses, including the support of our fitting initiatives, higher A&P expenses related to product launches and higher information technology-related expenses. Interest expense was up approximately $6 million for the full year due to a year-over-year increase in borrowings. Additionally, we recognized a $17 million charge from debt extinguishment related to our fourth quarter refinancing, which I will discuss in a moment. Our full year effective tax rate was 21.9%, up from 19.2% last year. The increase in ETR was primarily driven by changes in our jurisdictional mix of earnings and a reduced income tax benefit related to the U.S. deduction of foreign-derived intangible income. Moving to our balance sheet and cash flow highlights. We continue to maintain a strong balance sheet and cash flow profile, enabling us to invest back in the business while also returning capital to shareholders. In the fourth quarter of 2025, given attractive market conditions, we proactively strengthened our balance sheet by extending our revolving credit agreement out to 2030 and refinancing our senior notes into a 2033 maturity at a more favorable interest rate. Our net leverage ratio at the end of 2025 was 2.2x. Our inventory levels increased $33 million or about 6% from year-end 2024, primarily due to higher tariff costs as well as increased inventory to support the accelerated metals launch in Q2. Capital expenditures in 2025 were $74 million, in line with 2024. Free cash flow, which we define as cash flow from operations less CapEx, totaled $120 million in 2025. This was down from $170 million in 2024 due to the increased inventory levels, additional spend related to the ongoing implementation of our new ERP system and our 2025 voluntary retirement program. During 2025, we returned $268 million to shareholders, consisting of $56 million in cash dividends and $212 million in share repurchases or approximately 3.1 million shares. As of February 21, 2026, the remaining amount on our share repurchase authorization was approximately $241 million. Turning to our full year 2026 outlook. Full year net sales are projected to be between $2.625 billion and $2.675 billion on a reported basis. On a constant currency basis, our current expectation is that consolidated net sales will be up between 2.5% and 4.5% compared to 2025, with growth across all reportable segments as well as growth both domestically and internationally with strength in EMEA and Rest of World markets. Turning to tariffs. As we discussed previously, we expect approximately $70 million of tariff costs in 2026, reflecting the tariff environment in place prior to the Supreme Court's February 20 ruling. While the decision impacts certain tariff programs, the timing, implementation and durability of any changes remain uncertain. As a result, our 2026 financial guidance reflects the continued assumption of approximately $70 million of tariffs. As we gain greater clarity on the path forward, we will update you with any material changes to our outlook. We expect our full year 2026 adjusted EBITDA to be between $415 million and $435 million. At the midpoint, our adjusted EBITDA margin would be approximately 16%, flat with 2025. As we remain focused on driving sustainable long-term growth, we continue to invest in the business through a number of strategic initiatives, including expanding our global fitting network across our Titleist Golf Equipment and FootJoy segments, strengthening our global B2B and D2C capabilities and enhancing consumer engagement through the Titleist Performance Institute. In 2026, we will continue the implementation of our new global cloud-based ERP system, which we expect to enhance our customer service, supply chain and finance capabilities and support operating efficiencies across the business. As a result, we anticipate approximately $6 million of incremental operating expense in 2026 related to the implementation. Given these investments, we expect full year 2026 SG&A growth, excluding the incremental ERP expense, to be generally in line with our sales growth projections as we believe these initiatives position the company for sustained growth and operating leverage. Looking ahead, our capital allocation strategy remains unchanged. We continue to prioritize investing back in the business and returning capital to shareholders through our dividend and an opportunistic share repurchase program. From a financial policy standpoint, we remain focused on maintaining net leverage at or below 2.25x on average, while allowing for flexibility to account for seasonality and other business needs that may arise. We expect capital expenditures in 2026 to be approximately $95 million. This step-up primarily reflects investments in golf ball manufacturing capacity and increased club production throughout the world as we scale our facilities to support the continued demand for our products. We view $95 million in 2026 as a high watermark with capital spending expected to step down in the subsequent years. In addition, we expect to invest approximately $25 million in capitalized costs associated with our ERP implementation in 2026. Turning to free cash flow. We expect 2026 to improve meaningfully versus 2025 and normalize back towards recent run rates. This improvement reflects the absence of several onetime cash outflows incurred in 2025, which I highlighted earlier. Moving to calendarization. We expect reported first half 2026 net sales to be up mid- to high single digits compared to the first half of 2025, with growth primarily coming from Titleist Golf Equipment driven by the launch of new SM11 Vokey wedges and the acceleration of our new metals launch to June. We expect first half 2026 adjusted EBITDA to also increase mid- to high single digits year-over-year as increased sales resulting from new product launches more than offset the impact of higher tariff costs. From a quarterly perspective, we expect first half growth in both net sales and adjusted EBITDA to be heavily weighted towards the second quarter, again, driven by the Vokey wedge launch and the acceleration of our metals launch into June. We expect first quarter net sales to increase low single digits, primarily related to the strength in our Titleist Golf Equipment segment. In closing, as David mentioned, the golf industry is structurally sound. Our product portfolio is well positioned, and our performance in 2025 reflects strong results by our entire team. We remain focused on execution in 2026 despite continued economic uncertainty with tariffs while also making the necessary investments intended to continue to deliver long-term growth for all stakeholders. With that, I will now turn the call over to Cameron for Q&A. Cameron Vollmuth: Thanks, Sean. Operator, could we now open up the line for questions? Operator: [Operator Instructions] The first question comes from the line of Simeon Gutman with Morgan Stanley. Lauren Ng: This is Lauren Ng on for Simeon. First, we just wanted to get more color on the 2026 product calendar. I know you guys alluded to this earlier in the call. But can you comment on your innovation pipeline for the new driver and new wedge launches? David Maher: So as we often do, we'll point you in an even numbered year '26, 2 years back to 2024, that's the best like-for-like view of our timing and product pipeline. And that holds true really in golf balls and wedges and putters for this year, also across our gear and wearables business. What's different, and we did call it out, is that we've elected to accelerate the launch of our new driver into late June. Typically, that happens in early August. So more to follow in terms of timing and product details, et cetera, but we wanted to give you that visibility to let you know that the model will be a bit different in '26 solely because of the driver launch timing change. We haven't brought that story to our trade partners. They're aware of it, but we haven't brought the product story to our trade partners. So until we do that, we're going to keep that under wraps. Lauren Ng: That's helpful. And just a quick follow-up. If you could just give us any more color on your expectations for the U.S. market specifically in '26 and maybe how we should think about volume versus price for these categories. David Maher: Yes. I'll start and maybe Sean can get into volume, price. But U.S. market, we've said for a while, has been our healthiest and it really starts with a strong consumer base, right? Rounds of play in the U.S. over the last 5, 6 years are up 25% and really driven by, I think we said it 7 or 8 years in a row of golfer increases. So from a golfer base and a participation standpoint, very, very healthy. I might add also, and I've talked about this before, in the late 2016, '17, '18 period, the industry corrected. We saw a contraction of retailers, manufacturers. So the industry got lean and fit, at the end of the 20-teens, and then we've seen this pandemic-led surge the last 5, 6 years. So came in fit and then went on a bit of a growth birth. So we like the fundamentals, industry participants, whether it's golf courses or teaching centers or golf specialty retailers are financially sound. So structurally, the U.S. market is probably our healthiest around the world. But part 2 to that, it's also benefiting from a very, very strong golfer base consumer participation momentum that we've seen over the last handful of years. So -- and the final point I would add is just in terms of how we think about the market today. It's February. The market is from an inventory standpoint, where it should be. Inventories are full and vibrant in open markets and lean and almost dormant in closed markets. That will change here in the next 4, 6 weeks. But no, we're enthused about the U.S. market and really led by what's happening at the golfer base in the U.S. Sean Sullivan: And Lauren, maybe what I'd add just on a segment basis, really, the focus for you should be in the golf equipment, again, reiterating and reinforcing the 2-year product introduction cycle. So '26 is obviously not a Pro V1 launch year. Historically, we have seen flat to down volumes in the ball business. But if you look at where we're at versus 2 years ago, we feel very good about where the golf ball business is performing and delivering. And then on the club side, again, you see the strong growth we experienced in '25. But if we look at volumes versus 2024, we expect good growth from the club business with the metals launch in '26 versus '24. Operator: The next question comes from the line of Randy Konik with Jefferies. Randal Konik: I think, David, for you, you had a meaningfully more constructive tone around the FootJoy business. It seems like all the efforts around product architecture, the FitLab are really paying off. So kind of maybe walk us through a little deeper on where we are with the FootJoy business. It seems like people are moving towards the premium products. And then after that, can you give an update on Japan and Korea? I think you said Japan will be up this year. I think that's a change. Korea flat to an improvement from down. But that -- you talked about apparel and footwear still languishing a little bit in those markets. Maybe give us an update on where we go from here with those markets in those categories. David Maher: Yes. Great. Thanks, Randy. So starting with FootJoy, we noted a year or so ago that coming out of what was an 18, 24-month correction period in the footwear industry following the pandemic surge, right? We had a whole lot of demand and just the way that supply chain works, we chased that demand as an industry. Demand normalized yet supply kept running. So we had an inventory correction issue that we dealt with as an industry, we feel we got through it about a year or so ago. So what it meant for FootJoy and FootJoy has got a wonderful long history, over 100 years, been the #1 shoe in golf for over 75 years. So we continually lean into the high-performance heritage of that brand as we think about innovation in the future. And we said a while ago, we're going to be more focused on the bottom line than the top line, again, coming out of this correction period. The team has done a really nice job of that. I made the comment earlier that while sales were down slightly, it really is -- it was a commentary or a function of lower closeout reduced volume sales. So I've called out a handful of our products, whether it's Premiere, whether it's Traditions, whether it's HyperFlex or Pro/SL. We're really leaning into our premium performance products, and we're rationalizing the product line down at some lower price points and raising the floor, if you will, on some of the lower price points. So structurally, we like where we are. I haven't really commented about what's happening with apparel, but it's a similar story. And the team is doing a really good job. So I'm pleased with the direction and trend lines of the FootJoy business, again, moderating top line, slower top line, but a more accelerated bottom line. The caveat to that is, of course, tariffs. So that business, more than others, heavily burdened by tariffs. We're doing a good job mitigating, offsetting the best as best we can. And then the final piece is FitLab, right? We're -- we've benefited as a company with ball fitting and club fitting going back into the '90s. Footwear fitting has arrived in full force with footwear, both in the U.S. and around the world. So FitLab is just another -- is another -- I talk a lot about products and services. That's another service, that helps optimize our products and make sure golfers have the very best experience, whether it's from a performance standpoint or a fit standpoint. So that's, again, high level on FootJoy. Your comments, Randy, on Japan and Korea, maybe just some level setting. Both those markets, we had some nice growth in equipment in certainly balls and clubs in 2025. Gear, wearables, FootJoy softer businesses. We run a Korea, Asia specific apparel business, Titleist apparel over there. So we've been pleased with the equipment business in Japan and Korea, but wearables have been soft for us and the industry. I'll make a couple of comments about Japan as we look ahead. We do expect growth, again, similar led by equipment, maybe tempered expectations in gear and wearables. And similar to Japan, we -- really a similar story in Korea, where we're a little bit more bullish about equipment and are taking a tempered measured, conservative outlook vis-a-vis wearables and footwear. So -- but in terms of rounds of play and what's happening in those markets, if I look at Japan, up slightly, rounds up slightly, that's a positive last year, up about 10% versus 2019. Korea is a little bit of a different story, similar, about last year, up about 20%, 25% versus 2019. So healthy markets, equipment landscape similar in Asia as it is in the U.S., the key differentiator is really wearables. Footwear and apparel has been softer for the last couple of years, which leads to our tempered expectations in those segments. Randal Konik: Super helpful. Just last question. A lot of the commentary has come through around, I guess, pricing. So is your view that the -- we still are in a very firm pricing environment across all categories, it looks like, in particular, balls and clubs, it feels pretty good. The consumer is very much willing to pay higher prices for more innovation, et cetera? David Maher: Yes. We're careful, right? We've said this before. We're careful with pricing, but we're dealing with the realities of input cost and distribution costs and labor and all that, but not to mention tariffs. So as we think about pricing, we took action more notably with FootJoy and gear in the second half of '25. You'll see some pricing action in equipment in the first half of '26. Yes, our job is any time you take price, you got to work a little bit harder to show value and whether it's improved product or a better fitting experience. We don't take it lightly, but so far, so good in terms of how we've both mitigated higher cost and in -- within that had to pass along some of those costs. So we don't take it lightly, but again, so far, so good. And again, first half of '26, you'll see some equipment price increases across our lines really attached to new club products. And then on golf balls, it's going to be more a U.S.-Canada story around Pro V1, where rest of world, we took some pricing measures last year. So we're trying to be thoughtful and strategic. We look at it case by case. We look at it market by market. But so far, so good. But again, as I said, every time we take price, it compels us to work a little bit harder on the product side and the experience side to make sure we're showing value. Operator: The next question comes from the line of Joe Altobello with Raymond James. Joseph Altobello: First question on the quarter. I was not expecting 19% club growth. And based on your guidance, I'm not sure you were either. So maybe talk about what drove that upside? Was there a timing issue? And why didn't we see that flow through on the EBITDA line? Sean Sullivan: Yes, Randy, I'll take it, Sean. I'm sorry, Joe. So yes, no, I think we saw in the quarter top line, we saw better-than-expected performance across all segments. particularly in clubs, as you called out, just really great execution by the team, continued strong demand. I think David talked about the T-Series iron. So just really pleased with how that played out. So as it relates to the conversion rate, again, we had the impact of tariffs in Q4, as you know, was $15 million, the largest quarter of the year against the total of $30 million. So not particularly a surprise to us in terms of how the bottom line delivered relative to our expectations. Joseph Altobello: Okay. That's helpful. Maybe on the subject of tariffs, I think you mentioned this morning, $70 million total, so that's, call it, $40 million incremental. How much of that is IEPA? Sean Sullivan: That is all IEPA. The incremental $40 million is the IEPA tariff. So as I said in my prepared remarks, we're going to -- similar to the approach we took last year, we're going to let things settle in, and we'll update you as appropriate rather than trying to follow the towing and throwing on this topic. So that's the current situation. Joseph Altobello: Have you filed for a refund yet? Sean Sullivan: No, we have not. But we're obviously monitoring the market, obviously, talking daily with advisers and assessing our approach and the ability to get a refund for sure. So still early days. Operator: The next question comes from the line of Matthew Boss with JPMorgan. Amanda Douglas: It's Amanda Douglas on for Matt. So David, with the healthy golf industry backdrop, as you cited, could you speak to your top priorities into 2026 to capture additional market share within the equipment category? And specifically, any initial feedback you've received from channel partners on your new launches as we look ahead to the core selling season? David Maher: Yes. Amanda, so just in terms of how we think about growth and share, I'll really bring it back to really what our core principles are, and that is, number one, get the product right, get it as good as we can get it. We validate it through the pyramid. And then we really invest behind our fitting experience. So we're trying to bring to golfers great product, and a world-class fitting experience that helps them decide that what we're bringing to market is better than what's in their bag, and that's it. So no magic tricks up our sleeve beyond get the product right, get the golfer experience right. Within that, we work real closely with our trade partners to educate them, to partner with them to make sure our golfer connections are effective and working. So that's as much the long-standing proven playbook. Amanda, help me. Part 2 of your question was about what? Repeat that, please. Amanda Douglas: Just any feedback you've received from channel partners on your new product launches. David Maher: So I'll just level set. It's February in the golf industry. Most of the industry is still under cover of snow as we are here. But early days, we like. We've launched a whole series of golf balls as planned, as expected. We're pleased. Almost too early to say on wedges and putters. Those are just arriving in the market here now. So I don't have a lot of great color to talk about how new products have been received. But what I can say about the market is when the weather is okay, people are playing golf. And when it's not, they're not. So we had a little bit of some ice storms across the Southeast in January, as you'd expect, that slows things down. But it's January. But by and large, when weather is okay, people are playing golf and the game is alive and healthy. In terms of really getting a sense for the market and what's happening. We've always said first quarter is really about shipment in. Second quarter gives you a read on what's happening in the market, how the consumer is behaving and how they're responding to your products. So we tend to reserve our commentary or assessment until a little bit later in the year. But yes, no, for this time of the year, we like where we are with the exception of, again, we're under 3 feet of snow here in New England. Amanda Douglas: That's helpful. And Sean, just as a follow-up, maybe if you could speak to your overall expectations for gross margins in 2026, maybe relative to the 60 basis point decline in 2025? And any differences you see between front half and back half gross margin drivers? Sean Sullivan: Yes. Just to reiterate what I said in my prepared remarks, as we look at 2026, we're expecting gross margins to be relatively flat to 2025. So I think in the context of higher input costs and particularly in our Golf Equipment segment as well as the incremental tariff landscape that we've talked about and some of the pricing actions we've taken, we feel very good about the ability to deliver and hold margins flat year-over-year. As it relates to gross margin first half, second half, again, I would guide you to what we talked about in terms of the growth. So seemingly, given what I've talked about in terms of first half sales and EBITDA contribution, I'll leave it to you to model how that gross margin may impact. You're probably going to see slightly higher in the first half, and maybe less so in the back. But overall, on a full year basis, like I said, consistent with 2025. Operator: The next question comes from the line of Noah Zatzkin with KeyBanc Capital Markets. Noah Zatzkin: I guess just to kind of follow up on pricing and not only specific to you guys, but across the industry. What are you kind of seeing from competitors in terms of pricing? If you've seen it kind of broadly up, like have you, I guess, heard chatter or have a sense for how kind of retail partners are responding to that? And then kind of like within that framework, how do you think that positions you relative to some others? Meaning, are others kind of been more aggressive on pricing, similar? Just trying to understand kind of the pricing landscape. David Maher: Yes. So I guess, Noah, a couple of observations. One would be -- and I said this about Acushnet. I do think you could make this analogy to the total industry, and this is just from what we've seen. Again, the early pricing moves were gear and wearables just due to the life cycles of those segments. And we saw industry-wide that play out in the second half of 2025. You didn't see as much pricing action in equipment, balls and clubs in '25. So I think you're starting to see that now. So again, I think our profile and flow is similar to what you'll see in the industry. In terms of what we -- how we think about our positioning in all this, we're a premium positioned product, and we work hard to earn that position. And I know our competitors will as well. But by and large, yes, we are seeing price increases flow through retail. It's early, right? As I've said, it's early, it's February. But we are seeing some price increases flow through retail. I don't think anybody is surprised by that. We all saw that coming in as much as the fourth quarter. But in terms of how it stacks up and how the consumer responds, it really is -- it's going to take a few more months to get a read on how the consumer processes company A versus company B versus company C. But we do believe and feel pretty good about our position and our ability to take price. And I say that principally because of the belief we have in our products and the belief we have in the experience we can bring to golfers. So a little bit of more to follow in terms of how the market reacts, but that's common for this time of year. So I think that's the best we can frame it for you. Noah Zatzkin: No, that's really helpful. And you touched on this, I think, a little bit kind of as it relates to top line trends across different regions. But anything to call out in terms of maybe health of the sport across international markets? It's obviously early in the year, but any changes in how you're thinking about different markets? David Maher: Yes. I would just -- a good year for golf in 2025, right? U.S. was up, Canada, U.K., Mainland Europe, up, up, up, all good. So that's the first thing I'll point to. Many of those regions are now in their off-season. So again, I'll have a different answer 2, 3, 4 months from now, but they certainly come in with favorable positive trends. I will say we continue to be -- we see the consumer strongest in the U.S. That's not a surprise. We see durability -- the most durability across equipment, balls and clubs. And we've called out the watchouts of Korea and Japan, notably as it relates to really apparel in those spaces. But that's the regional view. But any time I can sit here in February and say rounds were up in most regions around the world, certainly in Western markets. That's terrific. And just to round out, Japan and Korea about flat last year. So didn't have bad years. They just didn't post the big growth in '25 that we saw elsewhere. Operator: The next question comes from the line of Doug Lane with Water Tower Research. Douglas Lane: Staying on around the golf. The resilience is impressive, another good year in the U.S. and elsewhere. But last year, if I remember right, the U.S. started out slowly and then it made it up -- more than made it up in the back half. So why was the difference between the first half and the second half last year in U.S. round of golf? David Maher: Doug, weather. Yes, really, that's simple. You had some tough weather. You had some tough weather in the Southeast that slowed things down, and that's just a fact of life in the golf business, Mother nature has her say. But that was the issue. We had a slow start due to weather, and then we saw weather normalize and nice to see the comeback in the U.S. market. Douglas Lane: And have you talked about who's playing the more rounds of golf? Is it more retirees? Is it more people in the South? Is it more amateur, teenagers? Really what's driving the increased rounds of golf, the persistent increased rounds of golf over the last several years? David Maher: Yes. So we point to -- we really point to the NGF, National Golf Foundation. They do a nice job, collecting data to help us understand the evolving golfer base. It's really coming from all angles, but I would say the avid is certainly playing and alive and well. But the 2 call-outs that, again, there call-outs that I'll pass along would be the fastest-growing segments over the last several years have been women and juniors. So they're certainly providing outsized contribution to the growth we've seen over the last handful of years. And just for context and just using some big round numbers, in 2019, there were about 800 million rounds of golf played worldwide. And that number is going to be just shy of $1 billion this year. So it's about a 23% increase. But in real-world terms, it's 180 million, 190 million more rounds of golf being played today. And as I say that, I'm always compelled to point to the PGAs and the PGA Club professional and the outsized role and contribution and importance of their work in taking care of the game and really growing the game. But that's -- hopefully, that answers your question. Douglas Lane: No, that's very helpful. And just one more, if I might. We read about and hear about the bifurcated consumer these days where the higher end continues to spend and the lower end seems to be a little squeezed. And you've got a pretty wide variety of products. You have low ticket, high ticket, consumables, durables. So how are you seeing consumer behavior here in your ecosystem? David Maher: I think we've talked a lot about it in terms of how our products are performing, but I will package your question to sort of point to our dedicated golfer, right? They're avid, they're passionate. They'll play if you can prove to them. If you can prove to them that you've got a better product, they're inclined to purchase it, and it's going to help them play better. So we like the construct and demographic that is this dedicated golfer we talk about. We characterize them as middle class plus. So they're a nice demographic. And we've said over time, they're recession-resistant. They're not recession-proof, but over cycles, we've seen they're committed and avid. So golf has a great consumer. You're right, we have a broad and vast portfolio of products in terms of varying price points. But by and large, we focus on premium performance, and that's where the bulk of our story is. That's where the bulk of our R&D efforts reside. That's where the bulk of our product line is constructed. So -- but I think the heart of your ask is this dedicated golfer, which the company sort of used as the sun to our solar system. And they're a strong cohort for sure. Operator: The next question comes from the line of JP Wollam with ROTH Capital Partners. John-Paul Wollam: If we could just start first on G&A. I think last time in November, we were maybe expecting to see some leverage there, just given you have the voluntary retirement program and kind of a good year or 18 months of prior investment. So just curious to see what kind of changed there. It sounds like G&A growth is expected kind of in line with revenue. So are there incremental? What kind of changed? Sean Sullivan: Yes, JP. So when I look at 2025 versus '24, I think if you normalize for the PTO in '24, you normalize for the ERP and some of the onetime things that I talked about, I think we have effectively delivered OpEx growth at less than the rate of sales. So I feel good about that in terms of '25. And I think as you -- as I talked about for OpEx in '26, again, we have some incremental expense as well, but overall, expect growth to be in line with sales. So again, we're making progress and delivering incremental benefits. And again, it's not a onetime unlock that's going to happen here. I think you're going to start to see that gradually over the coming years in terms of delivering operating leverage. John-Paul Wollam: Okay. Understood. And just one follow-up on tariffs. So understanding that it's obviously an extremely fluid situation. But if I think about kind of the -- what we maybe discussed as sort of the 4 levers to offsetting, pricing, vendor cost sharing, some G&A leverage. And then I think we talked about maybe being able to tighten some advertising and promotional expenses. And so really, the question is, as you think about the '26 guide, is there any tightening in terms of the advertising and promotional that if tariffs went away in the next 3 to 4 months, like you actually have an opportunity to invest more there and could see some top line upside? Is that -- how are you thinking about that? Sean Sullivan: Yes. I guess how I'm thinking about it is I feel really good about the guide, feel really good about the performance of the business, the ability to overcome the incrementality of the tariff landscape, albeit obviously seemingly changing. But now, we are continuing to invest in A&P. You'll see it in the filings. We increased A&P in '25, not significantly, but low single digits, and you've seen that the last couple of years. So we have incredible confidence in our Golf Equipment franchises in FootJoy. So we're going to continue to invest behind those. Certainly, given the -- as David said, it's early. It's February. But overall, we're not using this as an opportunity to pull back on A&P to support our long-term growth. So I think it's business as usual despite the tariff landscape. And again, we'll have to see how the year goes by, but we feel good about the guide in the context of all those. David Maher: Thanks, everybody. As always, we appreciate your time and interest this morning and look forward to getting back with you in a few months to provide updates on the quarter. Operator: Ladies and gentlemen, thank you for attending today's conference call. This now concludes the conference. Please enjoy the rest of your day.
Operator: Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Green Brick Partners Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Jeff Cox, Chief Financial Officer. Jeff, the floor is yours. Jeffery Cox: Good afternoon, and welcome to Green Brick Partners Earnings Call for the Fourth Quarter ended December 31, 2025. Following today's remarks, we will hold a Q&A session. As a reminder, this call is being recorded and will be available for playback. In addition, a presentation will accompany today's webcast, which is available on the company's Investor Relations website at investors.greenbrickpartners.com. On the call today is Jim Brickman, Co-Founder and Chief Executive Officer; Jed Dolson, President and Chief Operating Officer; and myself, Jeff Cox, Chief Financial Officer. Some of the information discussed on this call is forward-looking, including a discussion of the company's financial and operational expectations for 2026 and beyond. In yesterday's press release and SEC filings, the company detailed material risks that may cause its future results to differ from its expectations. The company's statements are as of today, February 26, 2026, and the company has no obligation to update any forward-looking statements it may make. The comments also include non-GAAP financial metrics. The reconciliation of these metrics and the other information required by Regulation G can be found in the earnings release that the company issued yesterday and in the aforementioned presentation. With that, I'll turn the call over to Jim. James Brickman: Thank you, Jeff. I am pleased to announce our fourth quarter results, particularly given that we achieved these results against the backdrop of ongoing and persistent affordability challenges faced by many consumers in this housing market. Our performance remained resilient despite eroding consumer confidence and an increasing supply of housing inventory. Our builders adapted quickly to a volatile housing market as we continue to balance price and pace to maximize returns in each of our communities. Net income attributable to Green Brick for the fourth quarter was $78 million or $1.78 per diluted share. We delivered 1,038 homes in the quarter, a 1.9% increase year-over-year and a record for any fourth quarter in company history. We also achieved 883 net orders, also a record for any fourth quarter. As Jed will discuss in more detail, driving our sales volume in Q4 required additional price concessions and other incentives, which caused our homebuilding gross margin to decline 490 basis points year-over-year and 170 basis points sequentially to 29.4%. The decline was due to higher incentives and changes in product mix. Still, our gross margins remain the highest public homebuilders. While the macroeconomic landscape presents headwinds for the entire industry in the short term, we believe the core strengths that have driven Green Brick's success over the past decade will enable us to continue to navigate any challenges with confidence and flexibility. As always, we will focus on maintaining operational excellence centered on our disciplined approach to land acquisition and development to position us for future growth. We are laser-focused on maintaining an investment-grade balance sheet to support our targeted expansion in high-volume markets. In 2026, we believe that our financial services platform will generate more pretax income than the interest cost on all of our debt. As Jed will discuss in more detail, we also continue to reduce construction cycle times. We believe we are well positioned to sustain our return metrics over the long term that rank among the very best in the industry, providing long-term value to our shareholders. We remain focused on growing our business, particularly in our Trophy brand. Trophy's growth in DFW in Austin, combined with our first open community in Houston during the spring of 2026 selling season, we believe presents significant opportunities for sustained growth over the next few years. This expansion allows us to continue to serve the critical first-time and move-up buyer segments while further diversifying our revenue base and strengthening our presence in key Texas markets. While the overall market conditions remain challenging due to macroeconomic and political uncertainty, we remain vigilant in monitoring and responding to shifts in buyer preferences. We believe that our experienced team and robust land pipeline and desirable infill and infill adjacent locations will continue to drive our success in the quarters to come. With that, I'll now turn it over to Jeff to provide more detail regarding our financial results. Jeffery Cox: Thank you, Jim. Given the challenging economic conditions and increased supply of housing inventory in our markets, discounts and incentives increased year-over-year as a percentage of residential unit revenue to 9.2% from 5.2%. Our average sales price of $530,000 was up 1.1% sequentially and down 3.1% year-over-year. Home closings revenue of $550 million declined 1.3% compared to the same period last year, and our homebuilding gross margins decreased 490 basis points year-over-year and 170 basis points sequentially to 29.4%. SG&A as a percentage of residential unit revenue for the fourth quarter was 10.6%, a decrease of 30 basis points year-over-year, driven primarily by lower personnel costs. Excluding SG&A from our wholly owned mortgage and title companies, our homebuilding SG&A for the fourth quarter was 10.1%. Net income attributable to Green Brick for the fourth quarter decreased 24.5% year-over-year to $78 million, and diluted earnings per share decreased 23% year-over-year to $1.78 per share. For the full year, deliveries increased 4.2% year-over-year to 3,943 homes, a record for any full year in company history. Our average sales price declined 3.1% to $530,000. We generated home closings revenue of $2.1 billion, an increase of 1% from 2024. Homebuilding gross margin for the year decreased 330 basis points to 30.5% Net income attributable to Green Brick decreased 18% to $313 million, and diluted earnings per share declined 16.3% to $7.07. Excluding the impact of the sale of Challenger, which occurred in the first quarter last year, the diluted earnings per share declined 14.2%. Net new home orders during the fourth quarter were up slightly year-over-year to 883 and down sequentially only 1.7%. For the full year, net new home orders increased 3.1% year-over-year to 3,795. Average active selling communities of 101 was down 5% year-over-year. Our sales pace for the fourth quarter increased marginally to 2.9 per month compared to 2.8 per month in the previous year. We started 884 new homes, which was down 14% year-over-year and 7% sequentially. Units under construction at the end of the quarter were approximately 2,048, down 12.5% year-over-year. We reduced starts in Q4 to better align with our sales pace to focus on balancing margin and pace. We will continue to monitor market conditions and seasonal trends and align our starts to our sales pace to appropriately manage our investment in spec inventory. Our backlog value at the end of the fourth quarter was $354 million, a decrease of 28.5% year-over-year due primarily to a higher proportion of quick move-in sales, including greater percentage of our sales being generated by Trophy that as a spec builder, typically has shorter times between contract execution and closing. Backlog ASP decreased 8.2% to $681,000 due to elevated discounts and incentives across all of our brands in addition to product mix. Trophy, our spec homebuilder, represented only 14% of our overall backlog value, but they accounted for nearly half of our closing volume. In Q4, we repurchased 359,000 shares of our common stock for approximately $23 million. And for the full year 2025, we repurchased 1.4 million shares for approximately $83 million. In December, the Board of Directors authorized a repurchase of up to $150 million of the company's outstanding common stock. This new authorization provides us with the ability to opportunistically return capital to our shareholders when we believe our stock is undervalued while continuing to invest in the long-term growth of the business. We recognize the heightened importance of liquidity in the current period of economic uncertainty and market volatility. We believe our investment-grade balance sheet and low financial leverage provide us with flexibility to navigate and adapt to evolving market conditions, ensuring we have capital available for strategic opportunities as they arise. At the end of the year, our net debt to total capital ratio decreased to 8.2% and our debt to total capital ratio decreased to 14.7%, among the best of our small and mid-cap public homebuilding peers. Excluding cash and debt from Green Brick Mortgage, our homebuilding debt and net homebuilding debt to total capital ratio at the end of the quarter was 12.8% and 6.3%, respectively. During Q4, we renewed our unsecured revolving credit facility, which extended the facility to December 2028 and provided a meaningful reduction in the interest rate. At the end of the quarter, we maintained a robust cash position of $155 million and total liquidity of $520 million. With $365 million undrawn on our homebuilding credit facilities, we believe we are well positioned to weather the challenging market conditions to opportunistically deploy capital to maximize shareholder returns and to accelerate growth as the housing market improves. With that, I'll now turn it over to Jed. Jed Dolson: Thank you, Jeff. We continue to see a challenging sales environment within all our consumer segments, which have been impacted by affordability challenges and a weakening job market. Our team responded well to the challenging market conditions as evidenced by our record fourth quarter sales volume and our low cancellation rate of 7.6% in Q4, which was an improvement from 7.8% in Q4 2024. We continue to have one of the lowest cancellation rates in the public homebuilding industry, and we believe it demonstrates the creditworthiness of our buyers, quality of our product and desirability of our communities. We continue to address the affordability challenges faced by consumers by providing our homebuyers with price concessions, interest rate buydowns and closing cost incentives. Incentives for net new orders during the fourth quarter increased to 10.2%, an increase of 380 bps year-over-year and 130 bps sequentially. Rate buydowns remain a necessary tool to drive traffic and sales especially with our quick move-in homes. With our superior infill and infill adjacent communities and industry-leading gross margins, we believe we are strategically positioned to adjust pricing as needed to meet market demand and maintain our sales pace. While we recognize the importance of preserving our margins, we also recognize that our industry-leading margins provide us with significant pricing flexibility to compete effectively in a volatile market. Green Brick Mortgage, our wholly owned mortgage company, closed and funded over 380 loans in the fourth quarter. The average FICO score was 746, and the average debt-to-income ratio was 40%, consistent with previous quarters. Green Brick Mortgage began serving our Austin communities in Q1 of this year. We expect to complete the rollout of Green Brick Mortgage to all DFW communities by the end of the first quarter of 2026. To Houston when our first community there opens for sale during the spring 2026 selling season and to Atlanta by the middle part of this year. As Green Brick Mortgage continues to expand its service to most of our communities, we anticipate by year-end, this capture rate will range from 75% to 85%, typical of captive mortgage companies. We continue to reduce our construction cycle times, which were down 20 days from a year ago to 130 days. Trophy's average cycle time in DFW was under 90 days, the lowest in their history. Labor availability remains relatively stable across all of our markets. We recognize the concerns surrounding tariffs and continue to work closely with our vendors and suppliers to mitigate any potential impact. While we believe tariffs will have a minimal impact on earnings next year, we are still assessing the Supreme Court's ruling against the Trump administration's tariffs and the administration's potential response to the ruling. As we navigate through various macro challenges, we are carefully recalibrating our capital allocation plan to align both our long-term growth objectives and to respond to changing market conditions. During the quarter, we spent $36 million on land and lot acquisition and excluding cost share reimbursements, $90 million on land development. This brings spend for 2025 to $267 million for land acquisition and $323 million for land development, respectively. Many of our land development projects involve special financing districts that provide reimbursement for public infrastructure costs. As work is completed, we are able to recoup a portion of these costs, which reduces our net development spend. We believe our superior land position provides a competitive advantage that will be the foundation for strong growth in subsequent years. Given the strength of our existing land and lot pipeline, we remain patient and selective with future land opportunities without compromising the ability to grow our business in the near and intermediate term. As noted in our earnings release and 10-K, we changed the definition of lots controlled to lots under contract, which includes all land or lot parcels that we have a contractual right to acquire pursuant to a fully executed option contract or purchase and sale agreement. We previously referred to lots controlled, which included only lots past feasibility studies for which we did not hold title but had contractual rights to acquire. Under the new definition, our total lots owned and under contract at the end of the year increased by 10% year-over-year to approximately 48,800, of which 37,000 lots were owned on our balance sheet and approximately 11,800 lots were under contract. Trophy comprises approximately 70% of our total lots owned and under contract. Excluding approximately 25,000 lots in long-term master planned communities, our lot supply is approximately 6 years. With that, I'll turn it over to Jim for closing remarks. James Brickman: Thank you, Jed. In short, we remain optimistic about our long-term prospects, and we believe we are well positioned to continue to produce strong results. We believe our strategic land position, high-quality and diverse product offerings that appeal to multiple segments of the homebuyer market and our investment-grade balance sheet will lay the path to future growth and industry-leading returns for our shareholders. Being consistent matters, we are very pleased that we had no turnover at the divisional president level in 2025. So we entered 2026 with experienced, hard-working managers that have worked for us a very long time. I also want to thank the entire Green Brick team for their passion and dedication to delivering exceptional results in the face of a challenging market. This concludes our prepared remarks, and we will now open the line for questions. Operator: [Operator Instructions] Your first question comes from Rohit Seth with B. Riley Securities. Rohit Seth: Jeff, just on Q2, can you -- last quarter, you broke out the gross margin decline between buydowns and mix. Can you give us a sense of the puts and takes on the gross margin and the drivers there? Jeffery Cox: Yes. We looked at the mix ratio. And I would say that while there's certainly some mix components there, most of it is really just driven through higher incentives and discounts. We're seeing compression really kind of across the board and in all of our regions. In some cases, we've got a couple of anomalies within some of our smaller builders, but that's mostly due to community mix more so than anything else. Rohit Seth: Okay. Where are you guys buying down rates to at this point? Jeffery Cox: So we're buying... Jed Dolson: 4.99% with 321s on our entry level. Rohit Seth: Okay. So it's about the same where you were in the prior quarter? You said just in the 5%. James Brickman: Yes. This is Jim Brickman. So rates ran down, I guess, just a little bit today. The went sub-6% for the first time in a long time. And basically, every 0.25 point is about in the buy down 1 point in incentive cost to us. So it will be interesting to see if rates go down, whether we'll be able to harvest any more margin from having less incentives or not. Rohit Seth: Okay. Just on your costs, it looks like sequentially, the cost per home went up a few points. Can you just give us a sense of is that coming in direct costs, land costs? James Brickman: Jed, why don't you talking about direct costs? Jed Dolson: Yes. We're seeing direct costs continue to go down. We are -- as we cycle out of older legacy communities, our new lot prices are higher. Jeff may have a percentage he can share on that. But as far as direct go, they continue to go down. Jeffery Cox: Yes. On the lot costs they are relatively stable, looking year-over-year, whether for the full year or quarter-over-quarter, but maybe $1,000 or $2,000 a lot. No big movement there. The biggest thing that you're seeing, Rohit, is the increase in our selling and closing costs, which still ran through cost of sales at the end of last year. That's really the biggest driver showing the increase in that number. We've touched on this a little bit in previous calls, but starting later this year, we'll start doing segment reporting as the mortgage company becomes a more material part of our business. And as we do that, those selling and closing costs will become contra revenue as opposed to cost of sales. James Brickman: Yes. Let me add to that. We have very low debt. So our debt is capitalized into all of our inventory and our land is very low because our debt is very low. one of the other differentiators for us versus many peers is that because we don't lot bank, our lots are not increasing in cost based upon the lot banking cost of capital. And we think that's going to be an advantage year after year. Rohit Seth: Interesting. Okay. And if I could squeeze one in. Do you mind commenting on how the spring selling season has been going on traffic or orders? Any color would be helpful. James Brickman: Yes, I can give you a little color. We usually don't talk month-to-month. Anybody that was in Texas in January knows that we had one of the worst weather events really in our history. So it's really hard to bench sales January to February because January, we were basically out of business for what, 10 days, Jed? Jed Dolson: Yes, 7 to 10 days. James Brickman: Which was almost 1/3 of the month. That said, February looks to be off to a good start for us, and we're really quite encouraged. Operator: Your next question comes from the line of Alex Rygiel with Texas Capital. Alexander Rygiel: Can you talk a little bit about your inventory level as well as the broader inventory level across your markets? Jed Dolson: Yes. This is Jed. I can answer that, Alex. We are seeing across all of our brands a really a very high desire for finished specs. So we are carrying higher inventory levels, especially on the spec and finished spec side that we did. And that goes all the way from our $250,000 price point to our $1.2 million price point. Jeffery Cox: And Alex, this is Jeff. I'll just add on to that, that at the end of the year, we were carrying roughly 5 finished specs per community. Half of those belong to Trophy. But when you look at their sales pace, in particular based on what Jim just referred to with February sales, it only equates about a month to maybe 1.5 months supply. Jed Dolson: Of finished inventory. Jeffery Cox: Correct. Jed Dolson: Yes. Alexander Rygiel: And then as it relates to sort of broader inventory in your geographies across your competitors? Jed Dolson: We think we're keeping pace or maybe -- I'd say we're middle of the pack. There's some of our competitors that are carrying more finished inventory than us. There's some that are carrying a little bit less. But typically, as Jeff mentioned, everybody is carrying at least 1 month of finished specs on the ground, 1 month of sales of finished specs. Alexander Rygiel: That's helpful. And then any directional guidance on community count growth in 2026? Jeffery Cox: Yes. This is Jeff. We ticked down a little bit this year in 2025 versus where we were in 2024, and we've been aggressively adding to our lot pipeline, as you know. We don't usually give guidance on community count because it can take us somewhere between 18 to 24 months to bring new deals to market. But certainly, our goal is to continue to increase our community count by the end of this year. James Brickman: Yes. One of the things that's a little difficult for analysts or really investors to get a grip on with Green Brick is that as Trophy becomes a bigger part of the business as it does quarter-to-quarter to quarter, Trophy sales pace is double, at least Southgate's, which is our high-end builders sales pace. So we really don't need community count to grow to have a significant growth in either top line or unit growth. Jed Dolson: I would just add that it's -- as Jeff mentioned, it's a little hard to predict what our community count will be at the end of the year, but we can see 2 to 3 years out that we will have meaningful acceleration in community count. James Brickman: Yes, we have a number of active couple of communities that will be coming on stream. Alexander Rygiel: And then lastly, it kind of sounded as if your commentary would suggest that your spend on land in 2026 will be down from 2025. Is that fair? Jeffery Cox: This is Jeff, Alex. We haven't disclosed specific spending amounts for this year yet. We wanted to get through the spring selling season before we gave any kind of guidance on that. But given the increase in lot supply that you've seen over the last couple of years, we do anticipate that land spend will be higher this year, but we're not ready to give a specific number yet. Jed Dolson: And Alex, this is Jed. I would mention that we are adding a lot of horizontal development dollars to previous year's land acquisition with the goal of getting our community count up much higher in the coming years. Operator: Your next question comes from the line of Ryan Gilbert with BTIG. Ryan Gilbert: First question is on deliveries, and I guess, the trajectory of deliveries in 2026. I've generally thought about delivery growth kind of tracking growth in starts or homes under construction, and we've seen certainly outperformance this quarter, but then also the past few quarters as well. I'm just wondering if that relationship between delivery growth and starts should -- we should think about that reasserting itself in 2026? Or if you think you could still have deliveries outpace starts and homes under construction here? Jeffery Cox: This is Jeff. I think that you've seen us pull back on starts here, in particular, in Q4 as we try to rightsize our inventory. And our goal is to make sure that we're starting roughly the same number of homes that we sell each period. But given kind of the prior comment on increasing community count here towards the end of the year, certainly, we would expect to see an increase in starts. We may not necessarily benefit from all the deliveries of those starts depending on when we get those in the ground this year. But certainly, in the future years, we're looking to grow community count and closings. Ryan Gilbert: Okay. Got it. And then I wanted to ask about spec strategy as well. It sounds like as Trophy Signature continues to grow, your spec mix should also continue to increase. We've heard from some of your competitors about shifting back to build-to-order sales. And I'm just wondering how you're thinking about specs versus build-to-order in 2026. James Brickman: To expand on this, but really, at Trophy, we're seeing really great success in that buyer profile that wants a house, they want the certainty of a mortgage rate. They have an immediate need, and we're finding really a great number of buyers that are out there that want that product at that price and can move in quickly. Jed? Jed Dolson: Yes. I think we, as an industry, are doing a very good job of putting the product on the ground that the consumer wants with the right packages. And we've seen that even go into our -- we've seen the spec desire even go into our $600,000, $700,000 even or $1 million price point. So we are going to continue to put a lot of specs on the ground because that's what we think the buyer is telling us that they desire. On paper, theoretically, it sounds great that some of our competitors are wanting to be more build job oriented. We have yet to see that in any of our marketplaces really play out other than, say, at the $1 million-plus price point. James Brickman: Yes. Let me chime on one other point that I think is important to understand, and that is that, first of all, we never want to give up any incentive that we don't have to give up. But when you're making a 29% or a 30% margin, demand is very elastic, meaning that an incentive, you can really harvest an incremental an incremental amount of buyers out there. So we can pull levers if we ever want to on specs that really -- they will impact our profitability. But when you're making 29% or 30% margins and you take a 2% or 3% hit, it's not the same as when you're making a 15% margin. We haven't had to do that, but we can view our spec inventory a lot differently than I think some of our low-margin peers do. Operator: Your next question comes from the line of Jay McCanless with Citizens. Jay McCanless: So the first one I had, could you talk about what type of pricing power you had during the quarter and maybe what you've seen into the spring? What percentage of your communities were you able to raise prices? Jed Dolson: Yes, sure. This is Jed. I can take that. Very few communities have we've been able to raise prices. So the good news is we're seeing that the quantity of buyers are a lot stronger in the spring so far. We have been able to raise prices in some communities. But by and large, we are still, as an industry, working through inventory. We're still competing with big publics and big privates that are still trying to make their business plan and not shrink units dramatically. So it's still a competitive landscape out there. James Brickman: Yes. I think one of the other differentiators in our company, particularly some of our peers is our quality of our backlog. And when we sell a spec -- when we sell a home is much better. We only had about a 7% cancellation rate. So people that buy our specs close. Jay McCanless: Great. So -- and thank you for the comments on traffic, Jed. Is that both foot traffic, web traffic, all the above? What are you seeing on those? Jed Dolson: Yes. We're seeing it on all of the above. So February weather has been good in the regions that we operate in. We're not in the Northeast. So we missed out on that big storm. But the -- yes, so February has been off to a record start. Jay McCanless: That's great. Okay. So the second question I had, -- and thank you for the commentary you gave around build-to-order. But I was just wondering, when you look at new deals that are coming to market and maybe some stuff that's being retraded, are you all seeing some better pricing on land in the markets you all want to acquire land? Or how is that trending for new deal activity from a pricing perspective? James Brickman: This is Jim. On land that we don't want or lots that we don't want, we're seeing weak demand and lower prices. on land that produces high margins that we do want. Prices have been very sticky. We expect them to remain very sticky because for the very reasons that those type of properties can produce high margins at much lower risk. So it's a tale of 2 cities right now. The inferior locations, there's lots of trading going on, but we really have no interest in those deals. Jay McCanless: Okay. And then just my last question, just asking on incentives, and thank you for the color on backlog where you talked about Trophy only being 14% of the backlog. If you look at that other 86%, I guess, how -- what is the incentive load on that now versus maybe where it was a year ago? And essentially, what I'm asking is for those higher priced maybe to-be-built, a little more customization homes, are you having to throw in more incentives on those right now? Or is the all-in incentive load pretty similar to where it was at this point last year? Jed Dolson: Yes. I -- this is Jed. I'll answer that, and then Jeff can add some numbers to it. So we are having to -- on, say, $1 million-plus build job, we're having to give higher design center monies than we were a year ago. On a $600,000, $700,000 house, we've mentioned that we're shifting the buyers are more interested in the finished specs than the build to orders for those. So we are having to do closing cost incentives, rate buydowns, things we weren't having to do a year ago. Jeffery Cox: Yes. This is Jeff. So I'll just add that when we looked at incentives on closings during the quarter, we were 9.2%, up from 5.2% a year ago. And looking at incentives on new orders during the quarter, they did tick up a little bit to 10.2%. But so far, we've, again, had a tremendous month of February here. If we can pull back on incentives and maintain momentum, we'll certainly take a look at doing that. Operator: That concludes our question-and-answer session. I will now turn the conference back over to Jim Brickman for closing comments. James Brickman: Thank you for participating in our call today. If anyone has any questions, we're available to enhance what we discussed today and just give us a call. We appreciate your interest in our company. Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Good day, and welcome to the Tecnoglass, Inc. Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Blake Warren of Investor Relations. Please go ahead, sir. Unknown Executive: Thank you for joining us for Tecnoglass Fourth Quarter and Full Year 2025 Conference Call. A copy of the slide presentation to accompany this call may be obtained on the Investors' section of Tecnoglass website. Our speakers for today's call are Chief Executive Officer, Jose Manuel Daes; Chief Operating Officer, Chris Daes; and Chief Financial Officer, Santiago Giraldo. . I'd like to remind everyone that matters discussed in this call, except for historical information, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding future financial performance, future growth and future acquisitions. These statements are based on Tecnoglass' current expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary in a material nature from those expressed or implied by the statements herein due to changes in economic, business, competitive and/or regulatory factors and other risks and uncertainties affecting the operation of Tecnoglass' business. These risks, uncertainties and contingencies are indicated from time to time in Tecnoglass' filings with the Securities and Exchange Commission. The information discussed during the call is presented in light of such risks. Further, investors should keep in mind that Tecnoglass' financial results in any particular period may not be indicative of future results. Tecnoglass is under no obligation to and expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events, changes in assumptions or otherwise. I will now turn the call over to Jose Manuel, beginning on Slide #4. Jose Daes: Thank you, Blake, and thank you, everyone, for participating on today's call. We are pleased to report another year of strong performance for 2025, our record revenues of $984 million reflect the strength across our businesses and our consistent ability to gain market share and capitalize on demand for our differentiated offerings. These results are a testament to the dedication of our team and the durability of the competitive advantages we have built over many years. Our single family residential business delivered yet another record year with revenues growing to an all-time high of $403 million. Growth was driven by our expanding dealer network, geographic diversification into new markets, a strong pricing execution, and the momentum in our vinyl product line. Our multifamily and commercial businesses was similarly strong with revenues growing to $580 million on robust demand for our high-performance products in high-end residential and luxury lodging projects. From an operational standpoint, I am particularly proud of our team's ability to maintain our industry-leading margin profile through a unique challenging year. This reflects our consistent pricing discipline and significant cost control measures. These actions more than offset the impact of tariffs and increased raw material costs supporting a stable gross margin for the year. We also continue to ramp up our vinyl windows product portfolio and diversified our manufacturing footprint through the Continental Glass System acquisition, both of which help us expand our presence into different markets and diversify our operational platform. This robust operational performance, along with our disciplined working capital management translated directly into strong cash generation. Cash flow from operations of $136 million for the full year allowed us to return substantial value to our shareholders through dividends and our share repurchase program. To that end, we repurchased $118 million in shares during the year, including $88 million in the fourth quarter alone. We announced today the Board has expanded our share repurchase authorization by $100 million, reflecting the confidence in our continued cash flow generation capabilities, the strength of our balance sheet and our commitment to delivering superior returns to shareholders. In summary, 2025 was a year that demonstrated the durability and adaptability of our business model. We grew revenue to nearly $1 billion, maintained our gross margin profile in the face of significant external headwinds, diversified our manufacturing and product platform and returned substantial capital to shareholders. Our performance, along with our record backlog positions us well for another year of record revenue and value creation in 2026. I will now turn the call over to Chris to provide additional operating highlights. Christian Daes: Thank you, Jose Manuel. Moving to Slide #5 and 6. We maintain a sharp focus on operational execution throughout 2025. Our overall performance through a dynamic macroeconomic environment reflects the durability of our differentiated platform and the dedication of our team to delivering best-in-class products and service to our customers. In 2025, we delivered double-digit revenue growth in our multifamily and commercial business driven by continued strong performance in our key markets and incremental contribution from our Continental Glass System asset acquisition completed at the beginning of the year. Continental continues to integrate smoothly into our operation, enhancing our capabilities in high-end architectural glass and glazing while providing us with a diversified manufacturing presence in Florida. Activity remains healthy across our commercial markets, given our expansion into new markets and ability to gain market share, which is reflected in our double-digit revenue growth expectations for 2026. The strength of our activity is also reflected directly in yet another backlog record number, which closed the year up 16% to a record $1.3 billion. Our book-to-bill ratio of 1.1x in the fourth quarter extended our track record to 20 consecutive quarters above 1.1x. Our project cancellation rate is near 0 given our late-stage installation profile and our backlog has demonstrated consistent sequential growth every quarter since 2021. I will also reiterate a key point that the composition of our backlog has shifted more towards high-end, large-sized projects recently, which tend to be less sensitive to higher interest rates and overall affordability constraints. Moving to Slide #7. Our single-family residential business achieved record full year revenues of $403 million compared to $372 million in 2024. The year-over-year improvement reflects dealership growth, geographic expansion and ongoing contributions from our vinyl products. Despite challenging macro conditions, we were encouraged to see orders received during the fourth quarter grow by double digits year-over-year with additional momentum into the new year as January orders outperformed the prior 2 months, giving us confidence heading into 2026. Over the course of 2025, our dealer base expanded considerably, driven largely by expansion into new geographies beyond our traditional core markets. Our Los Angeles showroom is expected to open in the first quarter of this year, adding to our existing showrooms in Florida, South Carolina, New York, Texas and Arizona and serving as a hub for our legacy light aluminum line in the Southwest. Our vinyl expansion continues to progress well with robust quoting activity validating the significant market opportunity ahead. Across all product lines, our quality, efficient lead times and superior service and competitive pricing continues to be key difference makers in attracting and retaining dealers. Turning to Slide #8. The broader market backdrop as we enter 2026 gives us additional confidence in our long-term trajectory. Total U.S. construction spending is expected to grow approximately 1% this year with residential spending projected to increase approximately 2% as affordability conditions improve. Contractor sentiment has moved back into expansion territory with the National Remodeling Conditions Index at 54.5 and the backlog component strengthened meaningfully to 70.4 in the first quarter of 2026 from 54.6 in the fourth quarter of 2025, a leading indicator that aligns well with what we are seeing in our own order activity. From a regional perspective, the South Atlantic, Mid-Atlantic and West South Central census divisions where our business is more concentrated are projected to be among the strongest performing regions for residential construction spending in 2026. This geographic alignment between our platform and the market expected to outperform underpins our growth outlook for 2026. Additionally, we continue to expect that market share gains in the new geographies and product segments will allow us to outperform market growth in years to come. I will now turn the call over to Santiago to discuss our financial results and full year outlook. Santiago Giraldo: Thank you, Christian. Turning to the drivers of revenue on Slide #10. Total revenues for the fourth quarter increased 2.4% year-over-year to $245.3 million. The growth was driven by positive momentum in our multifamily and commercial business. This was partially offset by a modest decline in single-family residential, which saw pricing and share gains that we had a very challenging prior year comparison. Full year revenues increased 10.5% to a record $983.6 million. The full year growth came from both our multifamily and commercial and single-family residential businesses, reflecting strong execution on our record backlog, healthy conditions in our core Southeast high-end commercial portfolio, geographic expansion and continued traction in our vinyl product line. Looking at the profit drivers on Slide #11. Full year adjusted EBITDA reached $291.3 million, representing a margin of 29.6% compared to 31% in the prior year. On a full year basis, gross margin increased slightly to 42.8% compared to 42.7% in the prior year. The essentially stable full year gross margin despite challenging macroeconomic factors during the second half reflects stronger pricing and operating leverage that more than offset the impact of tariffs and higher raw material costs, a strengthening Colombian peso and higher salary expenses throughout the year. Full year SG&A as a percentage of revenue was approximately 20% compared to 17.2% in the prior year, mainly due to the tariffs paid during 2025, which increased our selling expenses year-over-year. Full year performance was stronger in the first half given different macro headwinds that started toward the middle of the year. Accordingly, adjusted EBITDA for the fourth quarter 2025 was $62.2 million, representing an adjusted EBITDA margin of 25.4% compared to $79.2 million or 33.1% in the prior year quarter. Consistent with the dynamics we highlighted on our last earnings call, the fourth quarter carried the full weight of the cost headwinds and stronger local currency that intensified through the second half of the year. Fourth quarter gross margin was 40% compared to 44.5% gross margin in the prior year quarter. The year-over-year change in gross margin was driven by 3 key factors: first, an unfavorable revenue mix with a higher proportion of installation revenues, which reached a record high during the fourth quarter; second, near all-time high U.S. aluminum costs, which continued their steep climb throughout the fourth quarter and significantly impacted our raw material costs; and third, a significant revaluation of the Colombian peso, which strengthened approximately 9.5% year-over-year in the quarter, creating an unfavorable effect on our margins. These headwinds were partially offset by stronger pricing flowing through from the adjustments we implemented earlier in the year. SG&A for the fourth quarter was 21.8% of revenue compared to 16.4% of revenue in the prior year quarter. The increase primarily reflected aluminum and reciprocal tariff expenses on stand-alone component sales, higher personnel expense from annual salary adjustments and stronger Colombian peso during the period and higher transportation and commission expenses associated with revenue growth. We provide a closer look at the primary headwinds that impacted our margins in the second half of 2025 on Slide #12, namely aluminum and FX, which continued to move sharply following our last earnings call. With respect to aluminum, it is important to distinguish between the 2 separate dynamics. The $25 million tariff impact we communicated earlier in the year was fully offset through our pricing actions. The more significant headwind was the sharp escalation in underlying aluminum cost independent of tariffs. Global aluminum spot rates spiked higher. And on top of that, U.S. Midwest aluminum premiums more than doubled during the year, creating industry-wide margin pressure that accelerated materially in the second half of the year. Separately, we faced aluminum and reciprocal tariffs on stand-alone component sales, which we have proactively addressed through targeted mitigation actions, including pass-through pricing on standalone glass and aluminum products and securing U.S. aluminum supply to mitigate tariff headwinds. As cost mitigation offsets our pricing adjustments implemented earlier in the year partially offset a portion of the higher aluminum cost in the fourth quarter. Looking ahead, our continued expansion into vinyl windows and eventual normalization of input costs or potential future pricing adjustments to reduce the impact of aluminum cost as a percentage of sales over time. We continue to evaluate incremental pricing actions as warranted by market conditions, but have not embedded this assumption within our guidance scenarios and could represent potential upside to our outlook. Looking at foreign exchange dynamics, the Colombian peso appreciated approximately 12% during full year 2025, moving from COP 4,308 to COP 3,791 per dollar. Given the approximately 20% to 25% of our costs are peso denominated, this appreciation made our Colombian cost base more expensive and pressure margins, compounded by salary adjustments in Colombia during the year. To partially mitigate this exposure, we hedged a portion of our Colombian peso exposure during 2025 and will continue to be opportunistic in executing hedges in 2026 above our current guidance assumptions, creating potential upside to guidance. Now examining our strong cash flow and balance sheet on Slide #13. We generated $135.8 million in operating cash flow for the full year 2025, driven by effective working capital management and solid underlying profitability. Capital expenditures of $89 million included scheduled payments on previous investments as well as expenditures related to the Continental Glass Systems acquisition. Our balance sheet remains solid with liquidity of approximately $465 million at year-end, including a cash position of approximately $100.9 million and $365 million of availability under our revolving credit facility and bilateral lines of credit. In September, we refinanced our senior secured credit facility, expanding capacity to $500 million, reducing spreads by 25 basis points and extending the maturity to 2030. We have no significant debt maturities until year-end 2030. With net debt to LTM adjusted EBITDA of 0.24x, we maintain a conservative leverage profile that provides significant financial flexibility to continue investing in growth initiatives and returning capital to shareholders. On Slide #14, our strong track record of generating returns above the broader industry continues to validate our disciplined capital allocation approach. Over the past 3 years, our strategic investments in operational excellence and capacity expansion have consistently delivered superior returns for our shareholders, driven by our industry-leading profitability, vertically integrated platform and significant improvements to working capital. These strengths continue to generate sustainable cash flow and shareholder value while preserving financial flexibility to pursue additional growth opportunities. We're also pleased to have returned substantial capital to shareholders through share repurchases and dividends during the year. During 2025, we repurchased $118 million in shares, including $87.6 million in the fourth quarter alone, partially funding that activity through a draw on our revolving credit facility, reflecting our conviction in the intrinsic value of the business. In total, we returned approximately $146 million to shareholders through repurchases and dividends. Given the Board's confidence in our continued cash flow generation capabilities, prudent balance sheet management and commitment to delivering superior returns to shareholders, they approved an expansion on our share repurchase authorization to $250 million in total, resulting in approximately $110 million of remaining repurchasing power. In addition to the expansion of the buyback program, our Board also approved the redomiciliation of the company from the Cayman Islands into the U.S.. Subject to shareholder approval, which will be sought within the next couple of months, the company would now be both headquartered and domiciled in the U.S., continuing our long-term strategy to become even more U.S.-centric as we become a larger company with a complete nationwide footprint. The redomicile into the U.S. will help us achieve tax efficiencies from a corporate level perspective as well as to facilitate dividend distributions to shareholders. Now moving to our outlook on Slide 16. Our full year 2025 performance demonstrated the strength of our business in a toughening macro environment into year-end that has continued into early 2026. Based on the visibility provided by our residential order book and multiyear backlog, we are introducing our full year 2026 outlook for revenues to be in the range of $1.06 billion to $1.13 billion, representing growth of approximately 11% at the midpoint of the range. Additionally, we're introducing our adjusted EBITDA outlook in the range of $265 million to $305 million. Our high-end outlook assumes continued downward trends in interest rates benefiting mortgage rates and improved affordability, a more favorable interest rate environment supporting a broader acceleration in project invoicing. The high-end outlook assumes continued market share gains and strong execution in new geographies and vinyl as well as full backlog execution without significant project delays. At the top end, we expect aluminum input costs to soften approximately 10% by the middle of the year versus year-end 2025 levels and the Colombian peso to trend toward COP 4,000 per dollar, which is essentially stable year-over-year. The top of the range also assumes annual salary adjustments in Colombia that are offset by favorable operating leverage and efficiency gains. The low end of our range contemplates a more challenging environment in which the Fed does not cut rates during the year, constraining residential invoicing momentum with high single-digit revenue growth driven primarily by backlog execution, market share gains and flattish single-family revenues. Under this scenario, we also assume a more gradual expansion in new geographies and vinyl and potential timing shift in certain commercial projects into 2027. The low scenario further assumes stable aluminum input costs versus year-end 2025 and the Colombian peso remaining below COL 3,800 per dollar with annual salary adjustments in Colombia not being fully offset by operating leverage. As mentioned earlier, our guidance range establishes a baseline that excludes several potential upside levers. Specifically, our outlook does not factor in additional pricing actions or opportunistic hedging strategies that we are actively evaluating to further protect margins. From a seasonal perspective, we expect the first quarter of the year to be softer as some of the aforementioned headwinds remain in place currently and the level of orders started picking up earlier this year with actual invoicing expected to take place within the second quarter and beyond. Both assumptions also bake in an incremental amount of installation revenue, in line with our previous discussions around the shift in backlog composition geared to larger projects in which we do both supply the windows and perform installation. Under both scenarios, we expect another year of strong free cash flow generation. Working capital should continue to be a source of cash as we further penetrate residential markets, though this will be partially offset by longer cash conversion cycles in our growing installation business. Capital expenditures are projected to be in the range of $60 million to $75 million, which includes maintenance CapEx at approximately 1% of revenues and the remainder for planned investments in efficiency initiatives. As previously disclosed, in 2025, we initiated a feasibility study for a new state-of-the-art largely automated facility in the U.S. If we decide to move forward with the project and the diligence process is completely favorably, our 2026 investment related to this would be limited to an estimated of $20 million to $25 million for the land acquisition only. This potential land purchase is not included in our current 2026 capital expenditure guidance and remains subject to a final investment decision and the ongoing assessment of demand trends and overall market conditions. Beyond the land purchase, we do not expect significant additional capital deployment on this initiative in 2026 as we complete equipment testing and continue to monitor demand trends. In conclusion, our fourth quarter and full year 2025 results demonstrate our ability to deliver strong results in a dynamic environment. We are leveraging our competitive advantages, including our vertically integrated manufacturing platform, our expanding geographic footprint and our diversified and growing product portfolio to gain share and drive long-term value for our shareholders. With a record backlog, a growing national presence in single-family residential, a strengthened balance sheet and multiple growth initiatives advancing, we entered 2026 with strong momentum. These advantages are structural and durable. Our share gains and geographic expansion are on track, and we remain confident in our ability to continue outperforming the market for years to come. With that, we will be happy to answer your questions. Operator, please open the line for questions. Operator: [Operator Instructions] And the first question today will come from Sam Darkatsh with Raymond James. Sam Darkatsh: So I'm just going to ask some clarification or quantification questions, Santiago. Apologies for this. You mentioned that the first quarter was softer. Can you give us a sense, generally speaking, of sales, gross margin, EBITDA type of thing that we should be expecting for the first quarter, knowing that 2/3 of it is done at this point? Santiago Giraldo: More or less in line with Q4. That's what we would expect. Remember that in Q1, you also have a couple of weeks of scheduled maintenance shutdown. So you have a shorter quarter in line with Q4 when we shut down at the end of the year. So it would be more or less in line with that. Sam Darkatsh: Got you. And then within the '26 framework at the low end and the high end, what are your expectations for gross margins, general and administrative and then also tariffs? Santiago Giraldo: On tariffs, just the ongoing tariffs on stand-alone product, we continue to supply aluminum from the U.S. by being able to mitigate that impact. On the gross margin from the low to the high end, you have a 200 basis points of difference, from high 30s to low 40s, depending on where we are. And obviously, the main impact would be the input cost as it relates to raw materials, the FX. As you saw in the presentation, we are providing different scenarios that outline what the assumptions would be on either case. SG&A, we expect it to go down in terms of percentage of our sales based on the fact that we will not incur aluminum tariffs as we did in 2025. But obviously, on a nominal basis, when we're growing 11% at the midpoint, you have some variable expenses related to transportation and commissions and salary adjustments that increase the nominal base. But as a percentage of sales, the idea is that we should be slightly lower. Operator: The next question will come from Rohit Seth with B. Riley. Rohit Seth: Santiago, can you talk a little bit about the pricing actions that you have not yet implemented? What products are on? And when do you expect to put those price levels out? Jose Daes: Well, this is Jose Manuel. We have to wait and see the reaction of the total market in order to raise our prices. We would like to raise the prices. Obviously, we have done it in all the new jobs, but in residential, our competition is struggling. So they have not raised their prices in order to gain market share, and we have not raised them not to let them take the market that we do have. So we'll have to wait and see. Rohit Seth: Okay. And just a follow-up on the vinyl and your new product lines. Can you just quantify how much of the new product lines you achieved in 2025 and what you're expecting to see in 2026? Santiago Giraldo: Our base case shows that we ended up with vinyl roughly around $10 million for the year. We expect that to increase at least 2.5, 3x for 2026. We feel that there is upside to that base case and the cadence of sales will dictate how much we're able to ramp that up at the end of the year. As we had discussed in previous calls, the main issue was not having the full availability of the products, which we feel good about at this point in time. The dealer base has increased over 20% year-over-year. A lot of that is vinyl dealers. So in essence, the seed has been planted to execute and grow that a few times over year-over-year. Rohit Seth: Understood. And so the certification of those products is done. You have the full product line set up and ready to go? Santiago Giraldo: Yes, that is the case. It's just a matter of executing on sales now. Operator: The next question will come from Tim Wojs with Baird. Timothy Wojs: Maybe just kind of first question. I guess, would you expect to see the U.S. commercial revenue accelerate in '26? I think it grew 11% in '25, but your backlog has clearly been up more than that over the past few years. So should we start to see those growth rates emerge as that backlog starts to convert in a bigger way in '26? Jose Daes: Yes, sir. Commercial is going to grow in '26 and '27 because not only we have a big backlog in Florida mostly, but we are expanding our reach into other markets by our installer GM&P. So we expect to -- the commercial side to keep growing at a very big pace, double digits or more. Timothy Wojs: Okay. And I guess when you're -- if you're thinking about kind of the backlog and the pipeline, I mean, has anything -- I know the market is choppy, but has anything changed there? I mean, do you guys still expect to see some pretty good backlog growth in '26 as well? Jose Daes: Yes. Yes, for sure. We see a lot of commercial activity in the Northeast that wasn't seen before. And now we are landing jobs in Texas, Utah, Colorado, and we expect with our new brand in California to get a lot of traction there, too. Timothy Wojs: Okay. Okay. Great. And then Santiago, just what is the residential assumption for revenue at the midpoint of the guide? I think they did, what, $403 million this year? Santiago Giraldo: We ended up $403 million. What we're expecting is on the kind of legacy Florida business to be up low single digits. And then the rest of the growth coming from vinyl and non-Florida opportunities. And we expect that, obviously, altogether to equate to a double-digit growth year-over-year as well. So both segments, we are projecting to grow double digits and on the resi side, coming more from geographical expansion in vinyl. Operator: The next question will come from Julio Romero with Sidoti & Company. Julio Romero: Thanks for the vinyl breakout earlier of about $10 million in '25. I think you said about 2.5 to 3x of that expected in '26. Kind of same question, but for the showrooms, your 5 showrooms, soon to be 6 in the first quarter. Just help us level set the contribution there. And is that separate from the vinyl contribution expected? How would you have us think about that? Jose Daes: Yes, yes, because the showrooms not only have the new vinyl lines, but they have the new legacy line and many new products that we are -- we developed last year, like, for example, the garage door. We have a garage door now, but it was only for impact, hurricane impact in Florida. Now we developed the garage door nationwide, and we expect that to ramp up a lot. And also we have a new few doors and windows that have had, I mean, tremendous success with our clients. They love it. And I think we're going to grow double digits, but we hope it's going to be a lot in the high double digits. Julio Romero: And I guess just to rephrase that a little bit, I guess I'm just asking how much incremental aside from the $10 million in vinyl came from the showrooms in '25 and how much kind of separate from that is '26 that doesn't overlap? Santiago Giraldo: On the showrooms, remember that, that's both commercial and residential, right? So if we wanted to kind of break that out on the resi side for the showroom revenues, we ended up at about $10 million, and we're expecting to do $30 million to $35 million this year. So again, that segment of the business in line with the answer to Tim's question earlier is what is going to drive the single-family residential growth. Both vinyl and non-Florida resi are expected to grow 2.5, 3x this year. Julio Romero: Very helpful. And I guess you also mentioned that on the new plant that you're evaluating, you're also looking at new opportunities such as Buy America projects and a quick turnaround. I was just hoping you could dive into that a little bit for us. Christian Daes: Well, we are in the stage. This is Christian. We are going to be testing the new technology in Colombia first and make sure that we can reach a level of automation enough, so we require the least amount of people to work. I mean we don't want to have another place with 9,000 employees. We want to have 1,500 or the most 2,000 and be able to first deliver faster, also make about the same amount of money because there will be some savings on transportation and the tariffs and all that. And it will be to have also a good thing to have in the states. But obviously, this is not going to take care -- take place this year because we're going to be testing at the end of the year, all the technology. So it will be a decision that we'll make by February or March of next year of what to build in the U.S. and how to build it. We are close to buying the land. But it's also important for us to -- I mean, to our products to be Buy American. And another thing is that regardless of the product being manufactured in Colombia, almost all raw materials come from the U.S. So we are a Buy American company anyways. Julio Romero: Yes, absolutely. And I think maybe just to look at Christian, for another angle is just when I hear Buy America projects, I think about like federally funded infrastructure projects or something of that nature. So could your window products potentially participate in projects such as those? Christian Daes: Well, they used to be able to participate with the free trade agreement that we had in place because all the materials were manufactured in the U.S., but not anymore. So with the new plant, if we build it next year, that will be an advantage that we will have to be able to do federal buildings, too. So we're trying to keep growing and our idea is to double our sales in the next 3 to 5 years. And you know that we don't -- we're not doing this only for the money, but because it's our life, and we love what we do. And we've been doing it for over 40 years. So this is the way to go. Operator: The next question will come from Jean Veliz with D.A. Davidson. Jean Paul Ramirez: I apologize perhaps repeating some of the things you mentioned. But could you just kind of like walk me through with some of the cadence of the nonresidential -- the commercial and single-family kind of work that you'll be doing through first half and then second half compared with 2025. I guess what I'm getting to is I'm wondering, is there -- as you're expanding into Northern Florida and some of perhaps dynamic changes that it's occurring in your commercial side, is that influencing how you move to the backlog? Santiago Giraldo: So let me rephrase and make sure I'm getting your question right. In terms of cadence of revenues, the way that we're projecting this is that each sequential quarter is going to be incremental revenues as we move through the year. As we said earlier, the first quarter is expected to be kind of more or less in line with Q4. And then sequentially, both because of the backlog visibility that we have and the geographical penetration and the vinyl ramp-up, we're expecting revenues both in the single-family residential and the commercial segments to go higher as we move through the year. So it's going to be backloaded based on those assumptions. Jean Paul Ramirez: Okay. Appreciate that. And then just thinking about the impact of aluminum, is that under your assumption, does that alleviate then in the second half? Or is there a sequential taper coming off your 1Q guidance? Santiago Giraldo: No. I mean if you look at the presentation that we put together and what we discussed here is that there's 2 scenarios. On the downside, we're assuming stable pricing in line with what you saw at the end of last year, which is kind of more or less what we're seeing today. If you're looking at the upside, we're assuming that aluminum prices taper off and we get a benefit in the second half of the year because as of now, we're almost 2 months into this and aluminum prices remain elevated. Jean Paul Ramirez: Makes sense. And just on the vinyl, is there a space for a bigger upside as you have more and more products available, and you mentioned that there is better bundles that you -- and better opportunities when you sell these different products that have vinyl in them. Can we look -- is the 3x -- yes, is the 3x just the top? Or is there more of an upside that you could grow from there on that vinyl? Jose Daes: 3x is the minimum we expect. We are very conservative on that side. If everything falls into place, we expect to do -- let's assume that this year, we were selling around $1 million a month. We expect from the second half of the year to do 5x, $5 million a month. And we believe that we're going to do -- that's going to ramp up next year to do at least $10 million. That's what we expect. But we'll have to see. But $30 million is a conservative estimate. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Jose Manuel Daes for any closing remarks. Jose Daes: Well, thank you, everyone, for participating on today's call. And in spite of all that is happening in the market, in spite of the tariffs, in spite of the aluminum going up, in spite of the devaluation of the dollar, we have done very well. The company is going to keep striving. We have a lot of plans of growth for '26, '27 and '28. And we're going to make our clients happy and our investors more than happy. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Chemed Corporation Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Holley Schmidt, Assistant Controller. Please go ahead. Holley Schmidt: Good morning. Our conference call this morning will review the financial results for the fourth quarter of 2025 ended December 31, 2025. Before we begin, let me remind you of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 apply to this conference call. During the course of this call, the company will make various remarks concerning management's expectations, predictions, plans and prospects that constitute forward-looking statements. Actual results may differ materially from these -- from those projected by these forward-looking statements as a result of a variety of factors, including those identified in the company's news release of February 25 and in various other filings with the SEC. You are cautioned that any forward-looking statements reflect management's current view only and that the company undertakes no obligation to revise or update such statements in the future. In addition, management may also discuss non-GAAP operating performance results during today's call, including earnings before interest, taxes, depreciation and amortization or EBITDA and adjusted EBITDA. A reconciliation of these non-GAAP results is provided in the company's press release dated February 25, which is available on the company's website at chemed.com. I would now like to introduce our speakers for today, Kevin McNamara, President and Chief Executive Officer of Chemed Corporation; Mike Witzeman, Chief Financial Officer of Chemed; and Joel Wherley, President and Chief Executive Officer of Chemed's VITAS Healthcare Corporation subsidiary. I will now turn the call over to Kevin McNamara. Kevin McNamara: Thank you, Holley. Good morning. Welcome to Chemed Corporation's Fourth Quarter 2025 Conference Call. I will begin with highlights for the quarter, then Mike and Joel will follow up with additional details. I will then open the call for questions. The fourth quarter of 2025 fell short of our expectations for both subsidiaries. We will touch on the circumstances that led to these results, but more importantly, we will discuss what's being done to improve these results for 2026 and beyond. VITAS continues to execute the strategies required to fully mitigate potential Florida Medicare Cap billing limitations for the government's fiscal 2026. Admissions at VITAS during the quarter totaled 17,419, which equates to a 6% improvement from the same period of 2024. An important metric that we've been tracking related to Florida admissions is the percentage of total admissions that come from hospitals. Our analysis indicates that an appropriate balance for sustained long-term stability in the Florida patient base, given the current mix of referral sources is that between 42% and 45% of total admissions come from hospitals. During our Community Access program, this ratio dipped below the preferred range for a sustained period. In the fourth quarter of 2025, this ratio was 44.8%, which represents a high watermark during the post-pandemic period. The continued emphasis on short-term hospital-based admissions had 2 main impacts on the results for the fourth quarter of 2025. The first impact is that the Florida Medicare Cap position in the fourth quarter improved by almost $25 million in 2025 -- compared to 2025. It is important to remember that our fourth quarter is the first quarter of the government fiscal year. The year-over-year improvement gives management even more confidence that the Florida Medicare Cap problem of 2025 is behind us. The second impact is that due to the overwhelming success of garnering elevated short-stay patient admissions, our revenue growth and EBITDA margin were lower than anticipated. Ultimately, the percentage of total admissions that come from hospitals was higher than we originally budgeted in both the third and fourth quarters of 2025, resulting in this muted revenue growth and EBITDA margin. In mid-January 2026, VITAS management responded to the improved Florida Medicare Cap position by instructing operating personnel to begin the process of refocusing admissions to a more balanced approach between hospital admissions and preadmission -- other preadmission locations. That process is underway. In the guidance that Mike will discuss further, we have anticipated that the more balanced approach will start being reflected in the financial results mainly in the second half of the year. All patients are short-term patients for the first 30 days after admission regardless of their pre-admission location. As a result, refocusing the admission patterns will result in revenue growth and EBITDA margin building over the course of 2026. Finally, in December, we were granted a certificate of need to begin operating in Manatee County, Florida. Manatee County is in Western Florida between Hillsborough and Sarasota. Approximately 3,000 Medicare patients received hospice care in Manatee County during the government's fiscal 2024, which is the most recently published government information. Manatee represents another significant opportunity for VITAS in 2026 and beyond. Now let's turn to Roto-Rooter. Roto-Rooter revenue declined 3.7% in the fourth quarter of 2025 compared to the same period of 2024. Branch commercial revenue increased 1.6% compared to the fourth quarter of 2024. We continue to add commercial business managers to select branches during the quarter. Branches with commercial business managers had percentage revenue increases, 10% more than those without them. Roto-Rooter management intends to continue and expand this program in 2026. branch residential revenue declined 3.1%. Total leads were flat in the fourth quarter of 2025 compared to the same period of 2024. As discussed in the past few quarters, the trend of increasing paid leads offset by declining natural leads continues. During the fourth quarter, paid leads increased 9.4% compared to the same quarter of 2024. The decline in natural leads essentially offset the increase in paid leads. Roto-Rooter management has contracted with a new third-party search engine optimization provider in late December. The new provider does not provide services to any of our private equity competitors. Additionally, they focus on understanding and responding to the underlying code used by internet search engines to develop their search algorithms. We believe that these 2 factors will give us the ability to more positively impact our natural search results in 2026. Write-offs related mainly to our water restoration business increasingly became an issue over the course of 2025. In the fourth quarter of 2025, implicit price concessions and credit memos increased at Roto-Rooter by $4 million or 57% compared to the fourth quarter of 2024. A similar increase in write-offs was seen in the third quarter of 2025. The company has put into place modifications to the billing and collection support functions. Collection experience began to improve in early 2026, and we anticipate improvement to accelerate through the course of the year. Our guidance reflects management's belief that 2026 is expected to be a transition year for both VITAS and Roto-Rooter. VITAS's financial results are expected to build over the course of the year as we rebalance our patient mix. We are very confident that Florida Medicare Cap limitations in 2025 is fully behind us. The demographic makeup of the U.S. population, along with the addition of new territories in Florida, provides VITAS with significant growth opportunities over the next several years. Roto-Rooter continues to deal with a difficult operating environment. However, we have initiatives in place that I believe can lead to modest growth, mainly coming in the back half of 2026. We anticipate continued improvement in overall leads based on the past few quarters of paid lead generation improvement plus the impact of the new search engine optimization company. Improved overall leads should lead to modest organic growth in 2026. The addition of more commercial sales resources is anticipated to further improve organic growth. As Mike will discuss further, improvements we are working out with respect to water restoration billing and collections should provide $4 million to $6 million tailwind in 2026. We believe these improvements, along with an aggressive program to find and reacquire franchises in desirable territories, gives us confidence that we can meet or exceed our 2026 guidance. We believe that the difficult operating environment is temporary, and there has not been any impairment in their underlying long-term growth outlook for Roto-Rooter. With that, I would like to turn this teleconference over to Mike. Michael Witzeman: Thanks, Kevin. VITAS' net revenue was $418.8 million in the fourth quarter of 2025, which is an increase of 1.9% when compared to the prior year period. This revenue increase is comprised primarily of a 1.3% increase in days of care, and a geographically weighted average Medicare reimbursement rate increase of approximately 2.2%. The acuity mix shift negatively impacted revenue growth, 143 basis points in the quarter when compared to the prior year revenue and level of care mix. The combination of Medicare Cap and other contra revenue changes negatively impacted revenue growth by approximately 20 basis points. A $2.4 million Medicare Cap billing limitation was accrued in the fourth quarter of 2025. There was no Medicare Cap billing limitation accrued for our Florida program in the fourth quarter of 2025. Average revenue per patient day in the fourth quarter of 2025 was $208.01, which is 86 basis points above the prior year period. During the quarter, high acuity days of care were 2.2% of total days of care, a decline of 32 basis points when compared to the prior year quarter. Adjusted EBITDA, excluding Medicare Cap, totaled $91.6 million in the quarter, which is a decline of 1.7% when compared to the prior year period. Adjusted EBITDA on -- the adjusted EBITDA margin in the quarter, excluding Medicare Cap, was 21.7%, which is 79 basis points below the prior year period. The lower EBITDA margin in the quarter reflects the impact of admitting more hospital-based short-stay patients. Now let's turn to Roto-Rooter. Roto-Rooter branch residential revenue in the quarter totaled $155.6 million, a decrease of 3.1% from the prior year period. This aggregate residential revenue change consisted of plumbing increasing 6.3%, excavation essentially flat offset by water restoration declining 10.3% and drain cleaning declining 3.2%. As Kevin mentioned, water restoration write-offs also referred to as implicit price concessions and credit memos have been increasing over the course of 2025. Historically, total write-offs have been slightly below 3% of gross revenue. There was an uptick to the mid-3% range in the first half of '25. We then experienced a significant jump in the second half of 2025 to over 4.5%. As a result of those increases, total write-offs increased $11 million in fiscal 2025 compared to 2024. Primarily through the use of artificial intelligence, many insurance companies have increased their scrutiny of every line item on every job we bill. This has led to the higher write-off percentage. Roto-Rooter management also believes that it has led to a reluctance to bill for certain water restoration services at the branch level. As the scrutiny on collections has increased over the year, billing employees in some branches have reduced their billings per job to help ensure a higher collection rate. This was the biggest factor that led to the 10.3% decline in residential water restoration revenue in the fourth quarter of '25. In response to this issue, Roto-Rooter is taking steps to improve its documentation through better use of technology. They have also undertaken a project to centralize water restoration billing and collections. Billing and collections were historically performed at each branch. This led to some inconsistent practices across the company. Centralizing these processes is expected to create more concentrated expertise and result in better billing and collection results. The financial impact is expected to be seen mostly in the second half of the year as these improvements take hold. Additionally, during the transition period, we expect some duplication of costs and investment in technology which will cause some marginal headwinds in the first half of the year. Roto-Rooter branch commercial revenue in the quarter totaled $55.2 million, an increase of 1.6% from the prior year period. This aggregate commercial revenue change consisted of excavation increasing 10.9%, drain cleaning increasing 2%, plumbing essentially flat between years, offset by a 20% decline in water restoration. The water restoration decline is a symptom mainly of the increased insurance scrutiny previously discussed. Roto-Rooter management believes that our commercial business continues to represent a significant opportunity for growth in 2026 and beyond. Commercial customers generally use our services more often than residential customers, they also have direct access to our local managers and thus generally do not search for us over the internet. In response to the commercial business opportunity, Roto-Rooter management hired commercial business managers at select branches during 2025. The preliminary results in the branches with commercial business managers are encouraging. As a result, Roto-Rooter continues to add commercial business managers in early 2026. It is a roughly 45-day process to get these positions trained and productive, which also may cause some marginal drag in the first half of '26. Adjusted EBITDA at Roto-Rooter in the fourth quarter of 2025 totaled $47.5 million, a decrease of 21.1% compared to the prior year quarter. The adjusted EBITDA margin in the quarter was 21.5%. The fourth quarter adjusted EBITDA margin represents a 477 basis point decline in the fourth quarter from the fourth quarter of 2024. The decline in EBITDA margin was caused by higher marketing costs and higher water restoration write-offs. During the quarter, we repurchased 400,000 shares of Chemed stock at an average price of $436.39. These purchases were funded by the free cash flow generated by both VITAS and Roto-Rooter since the beginning of the program, we returned over $2.9 billion to shareholders through repurchases at an average cost of approximately $167 per share. Now let's turn to the 2026 guidance. VITAS revenue prior to Medicare Cap is estimated to increase 5.5% to 6.5% when compared to 2025. Average daily census is estimated to increase 3.5% to 4%. Full year EBITDA margin prior to Medicare Cap is estimated to be 17.5% to 18%. Medicare Cap billing limitations are estimated to be $9.5 million in calendar 2026 compared to $27.2 million in calendar 2025. The estimate for 2026 is in line with our historical run rate prior to 2025 and includes no limitations related to our Florida combined program. Roto-Rooter is forecasted to achieve full year 2026 revenue growth of 3% to 3.5%. Roto-Rooter's adjusted EBITDA margin for 2026 is expected to be 22.5% to 23%. We believe this forecast is achievable based on anticipated improved lead volume in 2026, improved billing and collections in our water restoration service line and a lift in our commercial business through a commercial focused sales force. Based on the above full year 2026 earnings per diluted share, excluding noncash expense for stock options, tax benefit from stock option exercises, costs related to litigation and other discrete items, is estimated to be in the range of $23.25 to $24.25. This compares to full year 2025 adjusted earnings per diluted share of $21.55. The 2026 guidance assumes an effective corporate tax rate on adjusted earnings of 24.5% and a diluted share count of 13.9 million shares. It's important to note that the 2026 earnings trajectory is weighted towards the second half of the year. We estimate 55% of the consolidated adjusted net income and consolidated adjusted EBITDA prior to Medicare Cap is projected to be generated in the second half of the year. I will now turn the call over to Joel. Joel Wherley: Thanks, Mike. In the fourth quarter of 2025, our average daily census was 22,462 patients, an increase of 1.3%. In the quarter, hospital directed admissions increased 9.9%, home-based patient admissions increased 4.1%, assisted living facility admissions increased 5.6% and nursing home admissions declined 8.7% when compared to the prior year period. Our average length of stay in the quarter was 115.1 days. This compares to 105.5 days in the fourth quarter of 2024. Our median length of stay was 17 days in the fourth quarter of 2025, 1 day less than the median in the fourth quarter of 2024. As Kevin discussed above, we have very successfully transitioned our admission pattern towards more hospital directed admissions in our Florida combined program. To add some context to that success, at the end of the fourth quarter of 2025, that Medicare cap billing limitation was less than $2 million. As of the end of January '26, we have no billing limitation in our Florida combined program. This success has allowed us to begin the process of balancing the admission patterns to a better mix of hospital-based admissions and other preadmission locations. It's important to remember that hospital-based admissions generally provide for shorter-stay patients than other preadmission locations, admitting more short-stay patients results in ADC pressure in lower margins, as previously mentioned. However, in the first roughly 30 days of any patients stay with us, the economics are the same for us regardless of their pre-admission location. Only when a patient exceeds that 30 days do we see the more positive financial impacts. Balancing the mix of admissions will lead to accelerated revenue growth and improved EBITDA margins as the year progresses. In December 2025, we were notified that we received the new CON to operate in Manatee County, Florida. As Kevin mentioned, this represents another opportunity for significant growth over the next few years. This is the fourth CON awarded to VITAS over the past 2 years. The previous awards in Pinellas, Marion and Pasco Counties have met or exceeded our expectations. Currently, Marion and Pasco are admitting between 40 and 50 first-time Medicare patients per month. In just its second full month of operation, Pinellas admitted 28 first-time Medicare patients. We will continue to aggressively pursue CON opportunities in Florida in the territories in which we do not currently operate. Now that we believe the Florida Medicare cap issue is behind us, we are focused on returning VITAS to a more normal, sustainable organic growth pattern. We will look to achieve higher overall growth through the pursuit of new starts, not only in Florida but other CON states as well. We also continue to evaluate strategic acquisitions to add to VITAS' overall growth. With that, I'll turn it back to Kevin. Kevin McNamara: Thank you, Joel. I will now open this teleconference to questions. Operator: [Operator Instructions] Our first question comes from the line of Joanna Gajuk of Bank of America. Joanna Gajuk: So I guess, first, a couple of questions on the Roto business. So thanks for the details around, I guess, different issues, I guess, happening at the Roto-Rooter. But I guess just to summarize because I think you tried to address a couple of these things. What gives you confidence you can actually grow revenues 3% or so in '26 after revenues were pretty much flat in '25. Kevin McNamara: Well, let me start, Joanna. And this is -- I'll start with from 20,000 feet. We revised guidance in -- at the end of the second quarter of last year. And we talked at that time -- there were struggles at Roto-Rooter. The problem at VITAS was we were on our way to running a Medicare cap liability of Florida, we announced that we were going to have to make changes to push our mix of hospital-based admissions and community access to a different level, okay? So we make those adjustments to that point. And actually, from our perspective, from our calculations at the end of the third quarter, we were basically right at our guidance. I mean it might have been a little below what analysts were predicting. But that's -- the difference was only seasonality. We were at our level. The fourth quarter was $0.70 per share miss, okay? Massive, big problem. And raises questions like, okay, you've given guidance. How are you going to -- how are you going to reach those numbers, okay? Now to answer your question, let's start with Roto-Rooter, okay? Roto-Rooter, as we've said, has been going through a transition, okay? The transition -- the most significant transition is going from a majority of free leads that is from natural search to paid leads, okay? And Google is a smart company. They say, why should we give paying customers free leads? And they've been very successful in engineering their algorithms to yield that, that has a negative effect on us as far as number one -- answer your question on sales, has an effect of reducing our natural search leads, okay? As we mentioned at the end of the fourth quarter, we look back in the quarter, and we said, okay, we have an improvement there. Our paid leads have increased almost 10%. Unfortunately, natural leads are down almost the equivalent number. So our -- so our total leads were flat. If you look at our sales, we would expect sales to be relatively flat in that case and then making improvements growing to the following year. Well, we had a problem, as we said, with water restoration. And it was an overhang from the first half of the year. Again, we were -- we had various decentralized billing practices, insurance companies kind of sharpen their pencil, and basically, during the course of the year, increasingly, we weren't collecting at the same rate we were expecting that dramatically goes right to profitability and sales, okay? We believe that has normalized, as Mike said, not to the 2024 level or 2023 level, but certainly better than the 2025 level. So when we talk about growth, to the extent that we -- the way I look at the Roto-Rooter numbers, I look at, okay, what's going on with paid search and natural. The paid search is growing nicely. Last 3 quarters, almost 10% per quarter, okay? It comes at a cost. We're paying $94 lead compared to previously 0 on a lot of those leads, but that's still a good business as long as it's stable and growing, that's fine. We look at our natural leads, okay? Why are the natural leads -- why were they so negatively affected last year? As we've said in the past, the most -- the place that most people get their natural leads from is what's known as the map section of Google, okay. In October of 2024, Roto-Rooter was showing up on the maps nationwide 72% of the time, okay? Within a few months, that fell to a low of 24% of the time, okay? Massive change in visibility as known in the industry. And accordingly, leads were falling -- leads were falling, sales are falling. Tough time for Roto-Rooter. Looking ahead to 2026, what do we see? Well, we see a business that, on the paid lead side, continues to improve. We see on the -- let's focus on the visibility, okay? Our visibility, both through some of the internal changes we made and the use of our -- basically AI-centric natural search for our visibility up to about 35%, up from 24%. So that -- to answer your question, that gives me some confidence in saying, yes, as long as those -- we don't have to -- just have to continue those improved rates for growth in Roto-Rooter on the revenue side. I mean there's nothing that has changed in the nature of and quality of the service mark of Roto-Rooter. And then you add one thing Mike mentioned -- again, it's not that surprising given the difficulty of home services, it seems like the availability of repurchases of other franchises is speeding up, which has given Mike enough confidence that included that in his remarks. Again, those issues give me a lot of confidence that Roto-Rooter sales are going to be higher this year than the previous year. Now I was just going to say the other point is, you got to remember that I think it's an important one. When you talk about overall strength of the business. As we've talked about the VITAS with the, call it, preloading of Medicare Cap cushion in Florida, that's so significant. Just order of magnitude, we're at about a $28 million better position in cap cushion sitting right now. But right now, I'd say it's probably higher, that's probably more like $35 million. Okay. So the question is, can we -- will VITAS be able to grow census to take advantage of that cushion. And as we said during the prepared remarks, they're doing that, probably beyond our expectations. So in sort of a sense that lower margin and lower sales we saw in the fourth quarter was basically just lending, it was -- we were borrowing from last quarter to see profits and revenue that we're going to see in this year. So all of -- those are some of the basic points of what I see happening to what looks like on paper, a very bad miss in the fourth quarter. And just let me -- just in terms of dollars and cents, the $0.70 miss, probably about 33% was that -- was associated with VITAS's getting more a higher percentage of their admits being short stay rather than long stay. So -- and that's not something I see as a good thing. That was something ultimately they were trying to do and just we're a little more successful at it than initially anticipated. With regard to -- on the Roto-Rooter side, the lion's share of the miss was associated with the water restoration situation, which we've talked about and there's every indication that's being ameliorated somewhat. And the rest of Roto-Rooter, it's largely the marketing costs, the increased marketing costs that comes from getting that 10% increase in paid leads. So it's not a good situation. Again, it shows -- it's one where we went a long period of time with always exceeding analyst estimates. And we can't kid ourselves, a $0.70 per share miss is not to be trifled with. It's big and it's causing a lot of change, a lot of renewed emphasis on important matters here at the company and both subsidiaries. Mike, anything to add? Michael Witzeman: Just to summarize, particularly for Roto-Rooter, Joanna, I would characterize our confidence in the 3% to 3.5% revenue growth in '26 based on 3 specific things. As Kevin mentioned, some things we've done to change the lead trajectory, hopefully, to provide some organic growth, but modest organic growth is built in. The increase in commercial sales force will also lead to some more modest organic growth. And then as we've talked about, the water restoration write-offs, we've estimated that of the $11 million that the increase of write-offs of $11 million, we're going to recover maybe half of that this year. So that's a $5.5 million tailwind. So I would say those are the 3 very key components of how we get to the 3% to 3.5%. Joanna Gajuk: Great. And if I may, on the margin, so for the segment, obviously, things impact the margins and you gave us the guidance for '26. But on the last call, when you kind of were talking about targeting longer term, I guess you were talking about '26, maybe the margins should be closer to 24%, but clearly, they will not be there, but then you also said like longer term, this business should get 25%, 26% margin. So are those still -- those targets -- are those targets still on the table? Or sort of like we have to think about the business differently. Michael Witzeman: I think that -- the answer to that question depends on how quickly Roto-Rooter gets back to a more normalized top line growth path. If they get to somewhere 5% or north revenue growth, I think the 24% to 25% is still achievable. We -- I don't anticipate the marketing costs to improve dramatically. And so we need to really to drive top line and get some leverage based on that revenue growth to offset the marketing costs. So yes, I believe it's achievable. But the path isn't as clear maybe as it had been in the past because of the marketing, the additional marketing spend. The other thing I would just mention, and I think it's obvious, Joanna, to you, you followed us long enough. We are not too far away from where our margins were pre-pandemic. So the 24% to 25% that we've talked about is higher than in the historical Roto-Rooter margins. So we're right now pretty close to what the pre-pandemic margin is. It's just we need to drive some top line and get some leverage from that. Operator: Our next question comes from the line of Brian Tanquilut of Jefferies. Brian Tanquilut: As I think about VITAS first, right? So I know on the -- in previous calls, you've given some insight into what you thought growth would be in the top line. And obviously, in the guidance that you formally gave last night, it's below that range that you previously provided. So just curious -- what is the delta there? And then how do we think about the progression of VITAS's revenues and EBITDA over the course of the year? Michael Witzeman: Yes, sure. So the -- from a top line perspective, and this also will, I guess, dovetail into your second question about the time line. We're sitting right now with a patient mix that for the second half of the year, we -- of '25. We really emphasized the short-stay preadmission locations, mainly hospitals. As you well know, long-stay patients are the ones that generally provide for more revenue growth and EBITDA margin growth. And so we're sitting today with a patient mix that has let us moderate, not moderate, eliminate the Florida Medicare Cap issue. So now we need to refocus the admission pattern. By doing that, we will get back to the normalized growth rate that we think is somewhere in the 7% to 9% top line area. We'll get there. It's just going to take -- it's going to build during the year because every patient, essentially, when you first admit them in the first 30 to 45 days or short-stay patients, they are negative margin for us for a period of time. They'll become long-stay patients over time. But in the first quarter, we're going to continue to have a very elevated number of short-stay patients regardless of the preadmission location. So it builds over the course of the year. That's why in '26, the revenue is a little bit below our targeted range. And the cadence of how it goes quarter-to-quarter, the first quarter is going to be muted from a revenue and perspective and then start to grow and normalize in the second through fourth quarter. Kevin McNamara: And let me just add one thing. When you're talking about revenue at VITAS, you're talking about ADC. If VITAS is able to grow ADC, they will grow their revenue. And to the extent that they have the ability -- a much larger ability in Florida to go out and seek longer-stay patients. That's -- longer stay patients is how you grow ADC essentially. It takes 10 short-stay patients to have the same contribution as 1 medium stay patient as far as going to your ADC number. But I think what you'll find is that VITAS is already well on its way. This isn't speculation with VITAS. They're well on their way to growing that average daily census in Florida and beyond. Brian Tanquilut: That makes sense. And then maybe, Kevin, since I have you, shifting gears to Roto-Rooter. This is a business that used to be very stable and predictable. One question we're getting asked a lot by investors is, is there a structural change or structural impairment that has happened, whether it's VITAS or Roto as an asset or the plumbing industry as a whole. So I'm just curious how you're thinking about the cleanliness or the smoothness of the trajectory for Roto going forward because it feels like every quarter, we're bumping up against some speed bumps that are of different nature. So just curious how you're thinking about how ... Kevin McNamara: Certainly in the last seven quarters, that's the case what you're describing. We can't get away with it. Yes, certainly, that's the case. Now what has been going on during this period? I mean I would say that the 2 major issues, let's start with private equity, introduction of private equity money and practices into the -- into our sector, okay, had an immediate effect on us. We hired our branch managers with a promise of great riches, that has stopped. And they -- several of them have seen trees don't grow to heaven and they've come back to our employee. The biggest impact aside from just existing and offering services at below cost on the plumbing side. They have disrupted the paid search model. We are paying more per lead than we did 2 years ago. But it is -- keep in mind, we paid the same amount in the last 3 quarters. So it is not -- it hasn't continued to go up. And we're winning that battle. Last 3 quarters, we've gotten a 10% increase in each of the last 3 quarters. So I consider the threat of private equity largely diminished at this point, okay? And I'm speaking to the overall -- saying has there been something changed in the plumbing industry? I think private equity came in and they said, look, they have a different investment horizon. We're in a marathon, they're in a sprint. They want to build the top line and flip it. That's a tough competitor, okay? And also, as I said, I'm going back, I'm repeating myself, but they're basically HVAC companies that said, we're very happy with paying $124 per lead, okay? And a lead on a job that they'll say they'll clean any drain for $90, okay? And the reason they're happy doing that is they view as that becomes a long-term customer for their HVAC services. I mean that's a tough competitor, if you're in the plumbing side. Roto-Rooter has dealt with that. I mean I just -- I'm kind of spinning off here into a different discussion, but I think that of the 2 major things that Roto-Rooter has been dealing with the last 7 quarters, private equity, definitely one of them. I don't see that as a long-term problem for Roto-Rooter at this point, okay? One that is a problem. We're still going on in the transition. We are going through a transition where Google -- we used to get in excess of 55% of our leads on the natural search. Somebody just finds Roto-Rooter in the Google, ignoring the sponsored ads. That has totally flipped. We're out of way to almost -- just over 40% of our leads come on the natural side. And I think there's a firming up in that market -- in that percentage, just again by some of the things that Roto-Rooter is doing, having to do with fighting back on visibility. But to answer your question, is that a significant -- is Google going away? No. That is a change in the business. But as Mike says, it's a change that kind of leads us more back to pre-pandemic numbers as far as sales growth and margin, which wasn't at the worst of all worlds, okay? So what I would say to your clients that say what has happened to the plumbing industry? I would say private equity has come in, disrupted everything, but they're seeing that it's tough to give away the service -- to provide the service at a loss. They're not growing. Companies have stopped buying our competitors. It's just -- the problem is diminishing rather than increasing. Google, we can't kid ourselves. Google is -- we're dependent on Google. We deal with them. we hope we can keep just having slight improvements in it. But the thing that has changed is we've gone from a business where the leads were predominantly free, and now they're predominantly we're paying them out. Now let me go back and say, there's nothing wrong with the leads, they're very profitable. The business is a good business paying -- getting leads to paid ads. It just has a negative comparison to getting them for free. So no, I would say that we got to Roto-Rooter, good cash flow, strong growth on the excavation and water restoration side. The water restoration has been a real black eye for us for the last 3 quarters, but it's something we've looked to put behind us. Not by wishful thinking, by the way, by centralizing billing and using our technology to make sure that the support for every bill is almost redundant. I mean just -- that's how you get past the AI sensors as it were and ultimately get paid. So no, I don't have any long-term concerns on Roto-Rooter at this point, to be honest with you. Michael Witzeman: Brian, the only thing I would add is from an industry perspective, there's been a lot of talk and a lot of things published that the trade, including the plumbing industry are pretty resistant to the changes that are coming from artificial intelligence and those sorts of things. So we definitely believe that plumbing the industry itself has not -- it has not and is not going to have major changes in the viability of the industry as a whole. I think, I mean, honestly, just to the point of your question, 2026 is the year that Chemed management and Roto-Rooter management show or don't show, but we believe will show the ability to manage that and get back to a more profitable, more sustainable level of growth for Roto-Rooter itself. Kevin McNamara: Well, let's put this way. It comes down to leads. This past quarter -- as bad as this past quarter was, our total leads were flat, okay, total leads were flat. Unfortunately, I say just -- there was a shift between paid and unpaid. But leads were flat, okay? And from those leads, we're increasingly improving our ancillary services, that is excavation and water restoration. So if you say, how does Roto-Rooter continue to grow? It's by having the leads be a little better than flat, continue to grow the ancillary services. And our goal for Roto-Rooter historically has not been double digit growth, okay? It's not been 30% margins. It's been growth on the top line of 7% to 8% with 24%, 25% margins depending on the seasonality in the quarter. And from that, with that cash flow, that has achieved over, let's say, prior to this year, over the previous 21 years, that is with the years in which we owned both VITAS and Roto-Rooter. They grew their net income at 11% per annum compounded. I mean that -- and they did that with just the basic blocking and tackling and benefit of good cash flow. So we get a lot of questions. I mean I can talk about this all day because we're going to talk about it all day. People are going to say, "Is there something significantly wrong with Roto-Rooter?" No, they're going through a difficult period. They're paying for leads that they used to get for free if you want like a one-sentence capsule commentary. Operator: Our next question comes from the line of Ben Hendrix of RBC Capital Markets. Benjamin Hendrix: Just starting with VITAS. I appreciate all the commentary about Florida Cap and the dynamics in the fourth quarter. I appreciate that you have a little bit more visibility on the -- not having a capital liability in that state, but we're getting a lot of questions on how we square that with some of the -- with the broader higher level cap stat that we're seeing, specifically the greater than 10% cushion coming down over the last couple of years and also an increase in the 0 to 10% cushion bucket and the liability buckets. Can you kind of help us think about the cap more broadly, how we think those stats might evolve kind of given the dynamics that we're seeing in Florida? And then also just a little detail on are we at cap risk in other markets. Kevin McNamara: I'm going to turn it over to Joel. And let me start by saying, keep in mind, in Florida where we have a down position, I want to end the year with a small percentage. I want to monetize as much of that cap room that we created as possible. We don't want to cut it -- we don't want to cut it too close. We want to be -- but I just feel in Florida, we have more control over our destiny than any other state. So I would -- whenever we talk about cap buckets and whatnot, I personally look at it, Florida and everywhere else. But Joel, why don't you give..? Michael Witzeman: Let me start with just sort of the specific metrics you were talking about then, and then we'll let Joel talk about the color commentary around it. But in '26, we see again, $9.5 million, which is pretty consistent with where we've been for the 5 or so years before 2025. That's comprised of California, mainly, California is by far the largest. But because of some of the things we learned in Florida -- the cap liability in California, actually, Joel and his team did some of the same things to help improve California. So California has actually gotten a little bit better. I don't think we're in a position or we don't think it's going to ever go to 0, but in a very manageable position right now, but there's always -- there always has been and there probably always will be some of our smaller programs that bounce in and out of cap based on they're so small and the cap calculation is so sensitive that if in a smaller program, if we lose IPU relationship in 1 hospital, it can have a temporary impact that, that particular program jumps into cap for a short period of time. And that's what you're seeing is the capital liability in total has not changed. But it's a couple of short -- small programs that we think are currently projected to be in cap, but it's 50-50 and they're very small liabilities. But that's why you see -- the number of programs look like it's going up, but the dollar amount isn't because it's just small programs that from time to time do this, and they always have for the entire time that we've owned VITAS. Kevin McNamara: Joel, to give your opinion. I don't want to color it. Are you that concerned with non-California or Florida cap? Joel Wherley: I am not and primarily for this reason. We are utilizing all of the very effective strategies that we have lifted up within the Florida CCN in every single potential cap market we have out there. Now if you look at fourth quarter specifically, that's the first quarter of the Medicare Cap year. So you have full revenue, but you -- the fleet is wiped clean on admissions, so you are starting over on a new year. We always see some of the small programs dip into cap in that first quarter of the Medicare Cap year. We have no additional concerns about major programs out there that will we expect a Medicare Cap billing limitation for '26 that we have not seen previously. And to Mike's point, we've made very good progress in the state of California with our historical programs that have been in Medicare Cap. And we've talked previously about why that happens in California. But the short answer to that, Ben, is that no, we have no additional concerns specific to cap and in fact, we're very happy with the progress we're making and our ability to minimize that billing limitation in CCNs outside of Florida. And as we indicated, with no billing limitation within the Florida CCN. Benjamin Hendrix: I appreciate the color. Just a quick one on Roto-Rooter. We also have a lot of questions on kind of how we model this, the marginal -- the margin impact on the paid search mix versus the natural search mix specifically that $90-some-odd per lead number that you've thrown out there, kind of how does that look on like on a conversion adjusted basis? Assuming some of those leads don't quite convert or there's no follow-through, is there a set that we can think of in terms of the conversion adjusted dollars per lead on a paid search? Kevin McNamara: Sure. So as you mentioned, we paid roughly $90 per lead, and that hasn't changed over the last few quarters historically and then continuing today, it takes between 1.5 to 2 leads to convert to a paying job. So you're looking at $150 to $180 customer acquisition cost for a paying job on the jobs we do from a pay-the-lead standpoint. And that's, I think, roughly 60% to 65% of our leads are paid at the moment. Operator: Thank you. This concludes the question-and-answer session. I would now like to turn it back to Kevin McNamara for closing remarks. Kevin McNamara: Well, my remarks are limited to the fact that we had a tough quarter, but there is, at least on this side of the line, abundant confidence that the guidance we make is guidance we can -- is we want to hit. We know that it's bad enough to have bad results, but it's even worse to miss guidance. And so to the extent that the guidance that's out there, we are very confident. But based on our results in the most recent quarters, I can see why reasonable investors might say, okay, forget last year, but how are they even going to make this year? I was going to say that when you combine some of the trends we've talked about and insight, again, we're more confident now than we are on the normal guidance to be honest with you. But with that, I would just like to thank everyone for your attention, and we'll be back 3 months from today. Thank you. Operator: Thank you for your participation in today's conference. This concludes the program. You may now disconnect.
Operator: Good morning, and welcome to the CIBC First Quarter quarterly results conference call. Please be advised that this call is being recorded. I would now like to turn the meeting over to Geoff Weiss, Senior Vice President, Investor Relations. Please go ahead, Geoff. Geoffrey Weiss: Thank you, and good morning. We will begin this morning's call with opening remarks from Harry Culham, our President and Chief Executive Officer; followed by Rob Sedran, our Chief Financial Officer; and Frank Guse, our Chief Risk Officer. Also on the call today are a number of our group heads including Christian Exshaw, Capital Markets, Kevin Lee, U.S. region, Hratch Panossian, Personal and Banking, Canada and Susan Rimmer, Commercial Banking and Wealth Management, Canada. They're all available to take questions following the prepared remarks. As noted on Slide 1 of our investor presentation our comments may contain forward-looking statements, which involve assumptions and having inherent risks and uncertainties. Actual results may differ materially. I would also remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results. Management measures performance on reported and adjusted basis and considers both to be useful in assessing underlying business performance. With that, I will now turn the call over to Harry. Harry Culham: Thank you, Geoff, and good morning, everyone. We are pleased to start the fiscal year on strong footing with exceptional first quarter results. Our performance was driven by our team's collective focus on accelerating our proven client-focused strategy and unlocking further value through disciplined execution. Before I comment on our quarter 1 results, I want to offer some perspective on how our clients are managing through today's dynamic environment. We are staying close to them as they navigate a fluid operating backdrop with heightened focus on trade developments and geopolitical tensions. For my conversations with CEOs and industry leaders over the past few months, clients are generally managing near-term uncertainty well and remain optimistic about the longer-term. Our roots as the Bank of Commerce are very relevant today. Our bank was formed in 1867 to help capital flow to businesses that we're building our nation. Today, we stand ready to help our clients advance their agendas, including key infrastructure initiatives. We have a long history of being a trusted partner to the businesses and families we serve, and we remain focused on helping them grow in 2026 and beyond. Now turning to our quarter 1 results. On a reported basis, earnings per share of $3.21 were up 47% from the prior year and included income tax recoveries, which we have treated as an item of note. The remainder of my comments will focus on adjusted results. We reported adjusted earnings per share of $2.76, which were up 25% from the prior year, driven by a robust top line. Revenues of $8.4 billion were up 15% from the prior year. Importantly, our revenue growth is well diversified with record revenues across each of business units. Expenses were up 12% from the prior year. We delivered operating leverage of 3.6%, marking the tenth consecutive quarter in which we delivered positive operating leverage. Our critically remains resilient. Provisions for credit losses this quarter were largely aligned with our expectations. We continue to proactively stress test our portfolio for a wide range of scenarios to ensure our bank can navigate all market conditions. We are well prepared should we see a downturn in the environment while also being well positioned to grow with our clients. Our return on equity was 17.4% this quarter on the foundation of a robust 13.4% CET1 ratio. We returned roughly 78% of earnings to shareholders in the first quarter in the form of dividends and 8 million common share buybacks. These results reflect our unwavering commitment to delivering sustainable value for our shareholders and maintaining a solid foundation for future growth. Let me provide some highlights across each of our 4 strategic priorities that underscore the momentum we've achieved across our bank. Our first strategic priority is to grow our mass affluent and private wealth franchise. Across our managed mass affluent offering, we are connecting clients with dedicated advisers to help them achieve their goals. However, simple or complex. It's clear that this approach is working. Managed clients in Personal Banking are generating roughly 4x the revenue of an unmanaged client with Net Promoter Scores that continue to hit all-time highs. Within the past year, qualified clients in our managed offering grew by 6%, helping deliver money and balance growth of 12%. And from here, we are prioritizing client acquisition and growth with key client segments. We are also unlocking efficiencies to scale adviser capacity with mass affluent clients per adviser up 7% from the prior year. Our second strategic priority is to expand our digital-first personal banking capabilities. 48% of our retail products sold during the first quarter were through digital channels. That's up 5% from the prior year. As we implement continued enhancements through digital, we're putting more power in the hands of clients to deepen their relationships with our bank. We're also equipping our advisers with digital tools to create efficiencies for them, enabling them to spend more time with clients. Our third strategic priority is to deliver connectivity and differentiation to our clients. We built a highly connected culture that drives steady referral business across the bank, supported by an innovative suite of products designed to deepen relationships with our client base. Record revenues in Canadian Commercial Banking this quarter were fueled by single-digit volume growth on both sides by high single-digit volume growth on both sides of the balance sheet, robust margin expansion and strong connectivity across our teams. That collaborative momentum is also fostering greater cross-business engagement. This quarter, our Capital Markets platform captured elevated volume from client-driven demand, complemented by healthy referral activity from our Commercial and Wealth businesses. Earlier this month, we confirmed our role as a partner of the Defense Security and Resilience Bank Development Corp Group. As new opportunities emerge in Canada's key sectors, we are ready to work alongside our clients and industry leaders. Our fourth strategic priority is to enable, simplify and protect our bank by investing in technology, data and AI to drive operational excellence and further modernize our bank. We frame AI value through 3 pillars: revenue growth through better client experiences, operational efficiency and risk mitigation. These pillars guide where we invest and how we prioritize use cases. From a revenue perspective, these capabilities are enabling us to engage clients more intelligently, bringing the right insight adviser offer at the right moment. We're also using AI to accelerate and improve the consistency of credit decisions, supporting growth while maintaining discipline. On efficiency, we're simplifying our bank by reducing manual and repetitive work, so our teams can focus on higher-value activities. This includes automation, faster issue resolution and meaningful productivity improvements for our technology teams. And from a risk perspective, AI is helping protect our bank by strengthening fraud prevention, credit monitoring and AML functions. We've deployed these capabilities with governance built in from the start, ensuring transparency, control and regulatory alignment. Culturally, we see AI as an opportunity to rethink how work gets done, not just to automate existing processes. Our teams are encouraged to challenge legacy workflows, supported by training and clear policies for responsible AIUs. Having every CIBC team member doing this will propel us forward not just today, but also with future upcoming technologies. Rather than leading with a single enterprise value number, we focus on what is observable and repeatable such as scaled adoption, operational outcomes and improved risk performance. Over time, these benefits flow through to revenue, efficiency and returns in a disciplined and sustainable way. In closing, the positive momentum across our bank continues to build. We're focused on accelerating our execution in 2026 to drive robust, well-diversified growth by proactively preparing for uncertainty and staying close to our clients, we are well equipped to successfully navigate evolving market environments. And with that, I'll now turn it over to Rob for a deeper look at our financial results. Over to you, Rob. Robert Sedran: Thank you, Harry, and good morning, everyone. Let's start with 3 takeaways. First, the year is off to a strong start with another record earnings quarter and an ROE that was well above our current medium-term target. Second, the strong and broad-based revenue growth and solidly positive operating leverage reinforce our confidence in our strategy and demonstrate our focus on disciplined execution. And third, helped by strong reported earnings, our CET1 ratio edged higher even as we accelerated our capital return strategy by repurchasing 8 million shares during the quarter. Please turn to Slide 8. For the first quarter of 2026, earnings per share were $3.21 and included income tax recoveries, which we have treated as an item of note. Absent that, our effective tax rate was in line with expectations. On an adjusted basis, EPS was $2.76, up 25% from a year ago. Adjusted ROE was 17.4%, up 210 basis points from the same quarter last year. Let's move on to a detailed review of our performance. I'm on Slide 9. Adjusted net income of $2.7 billion increased 23% and pre-provision earnings were up a strong 19%. Revenues benefited from balance sheet growth, improving net interest margins and higher fee income. We continue to manage expenses prudently relative to revenues, delivering 360 basis points of operating leverage. Impaired losses were within our guidance range. Frank will discuss credit in his remarks. Please turn to Slide 10. Excluding trading, net interest income was up 13%, with continued balance sheet growth and expanding margins. All bank margin ex trading was up 17 basis points from the prior year and 6 basis points sequentially due to a combination of higher deposits, business mix and improved product margins. Those same factors drove Canadian P&C NIM of 300 basis points, which was up 10 basis points sequentially. In the U.S. segment, NIM of 401 basis points was up 17 points from the prior quarter due to continued strength in deposits, which was partially seasonally driven. After accounting for the seasonal drag on margin, we often see in Q2, we maintain our expectation of a stable to gradual positive bias on our net interest margins over time. Slide 11 highlights fee revenue trends. Noninterest income of $4.1 billion was up 18% with growth across payments, institutional, trading and consumer fees. Market-related fees also increased 18%, helped by constructive markets with particularly strong growth in trading, underwriting and advisory and mutual fund fees. Transaction-related fees were up 10% driven mainly by higher credit and FX fees. Slide 12 highlights our expense performance. Expenses were up 12%, driven by increased business activity, revenue-linked costs and technology investments across our bank. These expenses were paced relative to the robust revenue growth, and so we once again delivered positive operating leverage. Slide 13 highlights the consistent strength of our balance sheet. Our CET1 ratio at the end of the quarter was 13.4%, up 5 basis points from the prior quarter. We delivered strong organic capital generation, helped by strong reported earnings, partially offset by an increase in risk-weighted assets and the accelerated share buybacks. As a reminder, and as we disclosed last quarter, we will see a roughly 30 basis point benefit to our CET1 ratio in Q2 related to a reduction in operational risk weights. Our liquidity position is very strong with an average LCR of 133%. Starting on Slide 14. With Canadian Personal and Business Banking, we highlight our strategic business unit results. Adjusted net income growth of 25% and pre-provision earnings growth of 19% were revenue-driven. Revenues were up 13%, helped by margin expansion, loan growth and higher fee-based revenue. Net interest margin was up 34 basis points year-over-year and 9 basis points sequentially. We continue to see tangible results from our focus on deep and profitable client relationships, selective balance sheet deployment and disciplined pricing decisions. Expenses were up 7%, mainly due to higher spending on technology and other strategic initiatives and higher employee-related compensation. On Slide 15, we show Canadian Commercial Banking and Wealth Management, where net income and pre-provision pretax earnings were up 9% and 16% from a year ago. Revenues were up 13% from last year. Commercial Banking revenues were up 9%, driven by volume growth and margin expansion. Commercial loan and deposit volumes were up 7% and 8%, respectively, from a year ago. Wealth Management revenue growth of 16% was driven by higher average fee-based assets and increased client activity driving higher commissions. AUA and AUM were up 14% and 15%, respectively, compared with Q1 of '25. Turning to U.S. Commercial Banking and Wealth Management on Slide 16. Net income was up 19% from the prior year, mainly due to lower loan loss provisions and pretax -- pre-provision pretax earnings that increased 7%. Revenues were up 6% from last year. Net interest income was up 10% from improved loan and deposit growth and wider deposit margins. Fee income growth was impacted by lower annual performance fees in our Asset Management business. Expenses were also up 6% due to higher employee compensation, including costs related to severance and strategic initiatives. Turning to Slide 17 and our Capital Markets segment. Net income was up 42% and revenues were up 28% year-over-year. Global Markets revenue saw growth across most products. Investment Banking benefited from higher underwriting and advisory activity and Corporate and Transaction Banking revenues were up due to volume growth and higher fees. Slide 18 reflects the results of Corporate and Other, which was a net loss of $100 million compared with a net loss of $60 million in the prior year with both revenues and expenses influenced by some unusual items this quarter. In closing, we generated strong revenue growth, delivered positive operating leverage, returned significant amounts of capital to shareholders and strengthened our balance sheet. A strong start to the year. With that, I'll turn it over to Frank. Frank Guse: Thank you, Rob, and good morning, everyone. Through the first quarter of 2026, our credit portfolio performance has remained aligned with our expectations given the fluid operating environment. Mid ongoing tariff-related headwinds and negotiations, we remain vigilant and proactive in managing our credit portfolios to address both expected and unexpected changes. Our increases in allowances over the past 12 months and show a strong coverage against the economic environment, and we maintain a high level of confidence in the overall quality and stability of our credit portfolio. Turning to Slide 22. Our total provision for credit losses was $568 million in Q1, down from $605 million last quarter. Our allowance coverage remains robust at 79 basis points. Our performing provision was $48 million this quarter, reflecting the impact of credit migration and the evolving economic environment. Our provision on impaired loans was $520 million, up $23 million quarter-over-quarter. Higher provisions in our Canadian and U.S. Commercial Banking segments were partially offset by lower provisions in Capital Markets and Canadian Personal and Business Banking. Turning to Slide 23. In Q1, impaired provisions moved slightly higher with the impaired loss rate at 35 basis points. Impaired provisions in Canadian Personal and Business Banking and Capital Markets were down this quarter. Canadian Commercial Banking impaired was up in Q1, driven by losses across unrelated sectors. The losses in this portfolio are attributable to a small number of impairments, and the overall portfolio remains strong, and we do not expect losses to remain elevated to this degree through the balance of the year. Impaired provisions in U.S. Commercial Banking were up in Q1, but remained lower compared to the same period last year. Slide 24 summarizes our gross impaired loans and formations. Our gross impaired loan ratio was 64 basis points, up 3 basis points quarter-over-quarter. New formations were down in Q1, with a decrease in business and government loans, partially offset by an increase in consumer loans. While the impaired loan ratio on mortgages increased modestly this quarter, given continued softness in the housing market, our loan-to-value ratio for the mortgage book remains strong at 57% for the overall book and 68% on impaired balances. Overall, we do not expect material loss -- material increases in losses within our mortgage portfolio. Slide 25 outlines the 90-plus day delinquency rates and net write-offs of our Canadian consumer portfolios. The 90-plus day delinquencies in our Canadian consumer portfolios increased quarter-over-quarter primarily reflecting the current macroeconomic backdrop. Our consumer net write-off ratio increased modestly, mainly driven by the credit card portfolio, which continues to be affected by elevated unemployment and ongoing economic uncertainty. While we closely monitor evolving economic conditions, we remain confident in the overall strength and stability of these portfolios, which are aligned with our client-driven strategies. In closing, while impaired loan losses were slightly higher in Q1, our credit performance remains stable and resilient, reflecting our prudent risk management and disciplined portfolio oversight. We will continue to foster strong client engagement and proactively assess our portfolios, ensuring they remain robust amid the evolving market conditions. Our strong allowance levels continue to provide prudent coverage for changing economic conditions. And notwithstanding the higher impairments in our Commercial Banking portfolios this quarter, we remain comfortable with our full year guidance. I will now ask the operator to open the line as we welcome your questions. Operator: [Operator Instructions] Our first question comes from Ebrahim Poonawala with Bank of America. Ebrahim Poonawala: I guess maybe first question for you, Harry or Rob. When we look at sort of the margin expansion that occurred this quarter and just the overall profitability, I think the ROE at 17.4%, appreciating, we can't run rate 1Q as the go-forward ROE profile. But just talk to us as we think about over the medium term, like why commerce, even with the 13.5% or higher CET1 should not earn somewhere between a 16% to 17% ROE and if the capital ratios were to decline, maybe even better. Like what would be the argument against that statement? Harry Culham: Ebrahim, nice to hear from you. I'll kick it off and maybe I'll pass it over to Rob in a moment. But the first thing I'd say is that our strategy has been consistent, and we believe we have unique competitive advantages that really position us well to deliver profitable growth. We target the right client segments where we can deepen relationships and be meaningful to our clients. We have the right product focus. If you think about deposits, investments, transaction accounts across each of our businesses, we have the right technology. As I mentioned earlier, we've invested in AI-enabled technology and perhaps you'll hear from Hratch later around what he's doing in the retail space because it's excellent. And we have the right culture, our team members are focused on delivering the entire connected bank to our clients. And so we're very confident in our ROE trajectory and that journey that we're on. And maybe, Rob, if you want to quantify some of the drivers, that would be great. Robert Sedran: Yes. Thanks, Harry, and Ebrahim, last quarter, we guided for the full year that we'd be above 15%. And I would -- obviously, the year is off to a very strong start. We're less worried about a specific target, though we do acknowledge the need to refresh our target. But as I said last quarter, when we talked about '26, once we cross 15%, it's not like it was mission accomplished for us. As Harry said, we think we've got the right strategy, the right investments, the right technology and the right people to drive what we think is a premium ROE, right? So we expect to continue to move this higher. And it's based on, to your point, the current level of buyback, the current capital levels, we're not doing anything particularly unnatural to get there. But I do want to maybe just stop for a second and talk about how we get there matters to us. Like we talk a lot about disciplined execution. The other word we use a lot around here is the word balance, right? And so when we think about where ROE is, we also think about it in the context of earnings per share growth. We're not over-rotating to ROE at the expense of earnings growth. Like there's a lot of unnatural things you can do to try to get your ROE higher in the short-term. That balance to us means over time, we can get both the earnings growth and the ROE expansion. And it's something that we've been doing rather successfully over the last little while. So our focus is on controlling what we can control and keep doing what we've been doing. We think that means the ROE is going to continue to move higher over time. Ebrahim Poonawala: Understood. And maybe, I guess, question for Hratch. I mean we've not seen this play out in the Canadian banks as much, but there's been obviously a lot of concern around AI, AI disruption risk. Perhaps you spent a lot of time around just the consumer franchise thinking about this. One, talk to us kind of your perspective on how you think about the opportunity versus the disruption risk for consumer deposits and banking and then maybe just your strategy as you kind of leading the business? Hratch Panossian: Yes. Thank you, Ebrahim. Thanks for the question. And look, I think the short answer is we think it's an opportunity as with any other technology, the way we look at it is how do we adopt the available technologies that are emerging in order to further our business strategy. And keying off a bit of what Rob was saying, right, our business strategy in retail is to continue to generate value for all of our stakeholders. That's how we believe the balance is achieved. And you're seeing that in the results, like I will say, very proud of what the team has delivered once again at 13%. Growth is there, top market revenue growth. But at the same time, after several years, we're inching back to the 30% ROE level. And I think that's because of everything that we've done in the business and we'll continue to do. So on the AI front, it does support our strategy. As we've talked about before, we've been very, very focused on where we're trying to grow and create differentiation. In the retail business, there's 3 priorities for us, lead in every day banking solutions for all of our clients, lead in investments and advice in the mass affluent segment and continue to drive the efficiency and simplification of our business, which benefits both our team and how easy it is for them to do their work as well as the shareholders through the efficiency. And we've been using, frankly, AI. You saw Harry's slide at the enterprise level. We've been using AI across all 3 of those things. But maybe one example I can give you, which I think is a good one that cuts across all of them is our Cortex platform that was referenced on the slide before. And the reason I think this is a good one, it actually highlights that AI itself and a lot of the attention there is right now on models and LLMs and some of our peers talk a lot about that. But the differentiation isn't really in the models. It's about how you build your business processes and change your business model to actually leverage what AI can do. And some of that is built on years of foundational investments. So Cortex is built on foundational investments in the quality of our data that we've made for many years. Foundational investments in our eCRM platform, which cuts across all of our channels, whether it's the front line and the branches, the contact centers or digital, foundational investments in our martech stack as well as many others. And now what AI allows us to do is to use some traditional, I'll call it, machine learning models to begin with in Cortex to allow us to understand on a personalized level, what clients need, get that to the right place, whether that's the digital channel or our advisers to be actioned and start leveraging even LLMs on top of that to help our advisers prepare for that conversation. And over time, even having a conversational interfaces to bring that LLM interface to clients directly. And we're also building Agentic flows on top of that to start processing things in the back end for our clients. And so when you put all of that together, we focused Cortex particularly. We launched at the end of last fiscal. This quarter, we focused particularly on the savings side and deposits. And what we're seeing is that 44% conversion rate uplift that you see there. That's relative to controls if we didn't follow the personalized approach that Cortex allows us to do. And that's just the beginning. We're going to rise from there. And again, if you look at the impact of that in units for the first quarter in the products that we applied the Cortex use cases to about 10% of unit sales actually came out of Cortex results. Operator: Our next question comes from the line of Matthew Lee with Canaccord Genuity. Matthew Lee: I know, Rob, you gave some color on NIM, but I just want to maybe understand how much the quarter-over-quarter expansion in Q1 was seasonality versus some of the deposit portfolio benefits and other? And then how much of a reversion should we expect throughout the year? Robert Sedran: Matthew, it's Rob. So I've often spoken in the past about the margin in 3 main buckets, right? There's the hedging and positioning, the so-called tractoring strategy, there's business mix and then there's the product margin, which kind of reflects the competitive environment. And I would say this quarter, the margin uplift has been about 1/3, 1/3, 1/3 roughly in those 3 categories. The hedges work, they do what they're going to do. The tractoring strategy will continue to roll on as we've discussed in the past. Mix was positive and both from a deposit volume perspective and a deposit mix perspective. So a little bit more noninterest-sensitive deposit, a little bit less term product and this deposit volumes were strong as they often are, particularly in the commercial businesses. Now in terms of going forward, often what we see -- and you saw it last year in Q2 as well, where we had a sequential downtick in net interest margin. There's some seasonality to it. I mean checking accounts tend to go down a little bit. Credit card balances tend to go down a little bit, Those commercial balances roll off, again, just seasonally as some of the -- some of our commercial clients are using funds for whether it's bonus payments, tax payment, restocking inventory, all kinds of reasons. So last year, we saw a slight downtick in Q2 as well. It wouldn't surprise me if that happened again this Q2. But the overall margin story otherwise continues to be that stable to gradual increase that we've been guiding to over time. Matthew Lee: Okay. So when we say stable NIM, it's kind of stable from the Q1 levels? Robert Sedran: Yes. Like I said, beyond factoring in potential seasonality in Q2 where it might give back a basis point or 2. The story beyond that is to continue to move stable to gradually higher. Operator: Our next question comes from the line of John Aiken with Jefferies. John Aiken: Frank, when I take a look at the 90-plus day delinquency rates in the Canadian portfolio, I understand that your confidence in terms of your own portfolio, your credit adjudication and everything else like that. But when I look at the upward trend in these numbers, how concerned should we be? Do you think that we're at or near a peak in terms of these levels? Do we think they may actually inflate a little bit more? And what do you think the impact could be in terms of your broader portfolio? Frank Guse: Yes. Thank you, John, for the question. I do believe there is also some seasonality in those numbers, say, in particular, if you look into the credit cards that usually tend to be a little higher in the Q1 pattern given the seasonal patterns there. But overall, I would say those numbers actually fairly well reflect our expectations against the ongoing macroeconomic backdrop. So that is why we do feel very confident with our guidance given because that would be included in those expectations. And I mean, we are seeing still some ongoing, I would say, softness in the economy. We have seen unemployment going up, going down a little bit, but having to a certain extent, plateaued. We do have the USMCA negotiations coming our way. So there's some uncertainty still ahead of us. But I'm not overly concerned with those numbers. We have the right strategies underneath both from a business perspective and from a risk management perspective to manage those portfolios very proactively. And as I said at the beginning, those broadly expect -- reflect our expectations that we had going into the quarter as well. John Aiken: And if I could, Rob, you to make some commentary about service in Caribbean, where it actually does look like the gross impaired loans are heading in the right direction. Is there anything you can comment about that region? Robert Sedran: No. I mean they are headed. As you said, there is a little bit of a trend there, but nothing really to call out. Operator: Our next question comes from the line of Doug Young with Desjardins Capital Markets. Doug Young: Just wanted to go back to Harry. I think you said 10 consecutive quarters of positive operating leverage. Just looking at your expense ratio, it's improved quite a bit. Maybe can you unpack a little bit about what you're benefiting from maybe Harry or Rob, what could throw a wrench into this? And then Hratch, maybe if you can kind of tag in, like it looks like you brought your expense ratio down in Canadian Personal and Small Business Banking quite a bit. Like how do we think about it going forward? Robert Sedran: Doug, It's Rob. Maybe I'll get started. And we -- the revenue visibility has been pretty good for us over the last little while. And so we've taken the opportunity to advance some spending that otherwise might have happened later this year or even next year to bring it forward a little bit and invest in future growth, right? So aside of the fact that revenue-linked expenses have also been rising, we've been managing that revenue to expense gap fairly well. And that's just how we think about our expense outlook. We do like to have that positive operating leverage. We're not going to -- we target it every quarter. We're not saying we're going to deliver it every quarter. It's nice to have a 10-quarter winning streak for sure, and we intend to continue it. But we do target on an annual basis. And with the environment that we've had, our expense in terms of absolute dollar or absolute percentage has been a little on the higher side, but it's been conscious and intentional spending to advance the priorities of the bank. So when we look forward, if revenue were to slow from here, we're confident that we have the levers to pull back some of that spending to maintain that operating leverage gap. Maybe I'll hand it over to Hratch for the second part of your question. Hratch Panossian: Yes, sure. Thanks, Doug. Look, it's an area of focus for us, right? We talk about the bank-wide operating leverage. But as you see in the trend, the same applies in the retail business. So our approach has been all along to try to grow our revenues in that 7% to 10% plus range that we've targeted and we've exceeded that and to generate positive operating leverage on top of that. And how do we do that? It's focusing on scaling the businesses where we already are carrying some of the expenses on and we've done a good job of doing that as we scale and take advantage of a lot of the investments we've made over the last while. But even without the revenue side, I think the expense side is something that we've been very sharply focused on. And we're applying the same approach in retail as we do elsewhere in the bank. We have to continue investing in the business. And what you do over time is you create a flywheel of you make the investments and a lot of the investments are also driving efficiency on the cost side and time of our team side. And that allows you to increase productivity, and that makes more room for us to invest in, so we can continue investing while keeping expenses more modest. And so I think for the rest of this year as well, you will see over the years, some of our expense growth moderate without our investment levels going down, actually continuing to increase. And part of it is we could talk about AI here as well and automation, but I think there's a lot of opportunity for us over time. If I touch just on our front line, who is a big part of the resources that we have at our disposal. We set a goal a couple of years ago to try to get to 1 million hours saved for the front line through automation and some of the new use cases and they're now Gen AI as well, and we reached that goal this year, a year ahead of schedule. We've now looked at multiples of that going forward to create more hours for our team, as Harry referenced in his remarks to spend time with clients. And so we're seeing the number of meetings with clients, the number of hours with clients each adviser is spending or each front line person is spending go up. We're doing the same thing with several use cases in our contact centers, where AI is allowing us to either divert calls, take calls through our AI voice bot that we've highlighted in the results or when a human has to pick up the phone. We've got some workflows in the back end that are leveraging AI that also help them. And I think there's efficiency there. And then there's the back end. We're looking at a lot of our processing of products, whether it's origination or servicing as I spoke about before. And I think what the Agentic workflows you can create today allow you to do is to create far more automation, which is good for everybody. It's good for clients. It's good for our team, not having to handle some of those exceptions and it's good for the shareholder and it's good for operational resilience, frankly, from a regulatory perspective. So I think all of that creates opportunity to continue generating positive operating leverage, which we will continue to focus on and to continue getting that mix ratio to a better and better place. And obviously, ROE continuing to trend to the 30% level it is now and higher. Doug Young: So just one follow-up for us. Like where do you think you can take that expense ratio? Hratch Panossian: I think, look, in the long-term at this point, I'll say directionally, we'd like to see it trend downwards. And we've talked about the business, and we think the potential of our franchise is to continue to grow above market, which we have been doing and continue to take the profitability metrics, whether that would be the mix ratio or the ROE to a premium level relative to the peer group. So I think we've got some room to go. Operator: Our next question comes from the line of Mario Mendonca with TD Securities. Mario Mendonca: Maybe this is for Rob. Could you help me interpret Slide 33. Is it a -- I'm talking about the interest rate environment where you show us the roll on and the roll-off rates? Is it as simple to suggesting that this chart will not change. If everything were static, that the margin expansion continues through to 2026, the end of '26 and even maybe in the first half of '27, and those 2 lines cross and it comes to an end. Is it really that simple? Robert Sedran: Well, Mario, yes, I mean, listen, when you think about the part of the margin expansion story that has been related to the balance sheet positioning, I mean, yes, it pretty much is that simple. By the time we get into middle of '27, you can see those lines start to intersect and it becomes more of a neutral. And that's based on the current forward curve, right? But based on the current forward curve, you can see that benefit start to slowly migrate towards neutral in '27. Now the other things that have been driving the margin, whether it's business mix and the focus on what we're doing in the retail bank to focus on bringing the money in like the deposit side, all of those things should continue to benefit the net interest margin beyond that period. But the structural benefit we've been seeing does start to roll off in '27. Mario Mendonca: It sounds like a little bit of a softball, but why is it that -- why has CIBC led the group in the last, say, 2 years, maybe 18 months in margin? I obviously compare all bank margin CIBC to the peers. And the gap is significant. I know you don't sit there worrying about what Royal is doing, but why would that margin be so much greater, the margin expansion be so much greater for CIBC than peers? Robert Sedran: Well, I'll try to handle softball notwithstanding. I'll try to handle it in a way that speaks more about what CIBC is doing rather than what others might be doing. We do manage for margin stability as best we can over time, which means that this benefit from the higher interest rates is bleeding in slowly. I can't speak to what the others have done or didn't do. But that benefit has been rolling in over time. And you've heard Hratch speak repeatedly on these calls about how we're looking at the mortgage business and how we're looking at our business mix generally in retail and where we're focused, those transaction accounts, the credit card businesses, the checking and savings accounts being more of a focus than say, the mortgage business has been helping the margin. And particularly in a period where mortgages haven't been growing very rapidly, it's been NII accretive as well. So for us, it comes down to executing on that treasury strategy of maintaining margin stability over time. And then the business strategies have been focused in the right areas, and we're going to continue to focus that way. Mario Mendonca: Last softball question, and I'll stop. We're still seeing this very, very strong growth in the financial institutions like the business and government lending. When you talk about what is CIBC up to there? And the reason I'm being so direct in asking the question is -- this is -- this pattern is familiar to me. Not for CIBC necessarily, but it's familiar to me in the Canadian banks where a particular lending loan category grows much stronger than peers. And 2 years later, we're all talking about what went wrong. So maybe just talk about where this financial institutions group growth is coming from? And how do you get comfortable this isn't going to be a sad story 2 years now? Christian Exshaw: Mario, this is Christian. So let me, I would say, try to unpack this. And I thought we actually spoke about it on last call. So if you look at that line item, we actually grew dramatically, I would say, in the second half of last year. And what we're trying to do now, as I said on last call, is to moderate this growth. So whilst the growth year-over-year is substantial, if you were to look at it on a quarter-over-quarter spot basis, then that growth is moderated to roughly 2%, which is in line with what I said, which was high single digit by the end of this fiscal. This is a business we're very comfortable with. It leads to a number of other products that we can market with those clients. We discussed the business consistently with our colleagues in risk management, just to make sure that as you said, we don't have any issues going forward. We're not in the storage business, we are in the moving business. So there's a lot of velocity in some of these books. So we're very comfortable with the risk. But I'll probably pass on to Frank, if Frank has anything else to add. Frank Guse: Yes. Thank you for the question. And as Christian said, I mean, we do feel comfortable with the books. We have the right guardrails in place. We have the right strategies in place on how we think about the various businesses that actually fit in our financial institutions line and we don't have any material concerns on that business. And as Christian said, we do see the growth moderating. Operator: Our next question comes from the line of Sohrab Movahedi with BMO Capital Markets. Sohrab Movahedi: Okay. Rob, Harry, I mean, I heard you balanced, disciplined, profitable growth. I just wanted to look at our Hratch's business and Christian's business. I mean they are giving you similar ROEs have over the last, let's say, 5 quarters you're allocating more or less similar equity to each one of these businesses and earnings are within 10% of each other. So is this what balanced growth looks like? Is the capital markets can be as big as Canadian Personal Business Banking? Robert Sedran: Sohrab, it's Rob. I mean I would think of it a little bit more as over time, that balance will appear. As we think about the market environment we've been in, capital markets is doing quite well. and the environment is constructive. We're taking advantage of businesses that we've been building for many, many years that are ultimately being done well within risk appetite and well within all of our just business mix appetite. So when we think about -- I don't see a world -- or certainly, it's not our goal to have the world you just described happen. We think more each of our businesses can grow and over time at roughly the same rate. I mean, even the capital markets business, when we talk about the long-term targets for it, it's a 7% to 10% earnings growth kind of business, the same thing we target for the bank, the same thing we target for the retail bank. So I think there's a bit of a cyclical benefit or cyclical tailwind for us right now in the capital markets. But over time, we would expect that to normalize and see our businesses growing more in balance with each other. So when we talk balance, it's more in terms of growth rate rather than size. Sohrab Movahedi: Okay. And so if Christian could continue to give you good ROE, is there a finite on the capital that you're willing to allocate to him? Or is he open for business for as much capital as he needs? Harry Culham: Sohrab, It's Harry. I would say that the answer to the last question is no. We are -- we take a very balanced approach to where we allocate our capital. And when it comes to capital allocation, really, our approach is anchored in our client-focused strategy. This is all about our clients. So we're directing resources where we've seen strong client demand and, of course, long-term value creation. And that's what we're seeing right now. Obviously, this is a very interesting business capital markets as we speak in this cycle. And we believe that we are very well positioned to service our clients as we move through this cycle. We are delivering capital markets products, I might remind you Sohrab to the entire organization. So our commercial bank, our wealth clients , our retail clients all have the benefit of capital market solutions. So this is a very well diversified business within capital markets as part of the diversified bank that we run. Sohrab Movahedi: Yes. I wasn't debating you on it, Harry. I mean it looks like it's doing well. It's been a source of stability. I mean there's great track record over there. So I'm just curious as to why it couldn't be a bigger part of the bank but on a consistent basis. But that was my question. Operator: Our last question comes from the line of Gabriel Dechaine with National Bank Financial. Gabriel Dechaine: I just want to revisit that margin discussion in a slightly different angle here. For a while now, you've been guiding to something, I forget the language exactly stable to positive bias or upward bias, whatever it is. And you've been exceeding your guidance. And I'm just wondering, what's -- what drivers are doing better than you expected? Is it the mix that's shifted a lot more favorably? Is it the shape of the yield curve that's been a positive surprise. Just to give a sense of why you keep outperforming our expectation on that -- in that area? Robert Sedran: Gabe, It's Rob. So it does come down, I think, largely to mix and product margin as well. When we think part of mix is client preference, right? Like if mortgages were growing more rapidly in the industry, our mortgages will be growing more rapidly, that's positive for net interest income. It's not necessarily positive for NIM, right? And so when we think about client preference for -- at one point, it was client preference for GIC was a bit of a margin headwind. Some of that is rolling off, and now it's becoming more of a margin tailwind like that mix is something that can fluctuate over time. What doesn't fluctuate is where our focus is and what our strategy is and offering solutions to clients as opposed to a product level strategy, but clients often choose different things in that strategy. So with the mix evolving in a positive way, the margin has been doing better. And the other part that we can never really forecast is the competitive set and product level margins have been relatively stable, where we often in our guidance, assume there's going to be a little bit of price competition or a little bit of margin compression sometimes from some of the margins that we see in the market. So the hedging strategy has been doing what we exactly we thought it would do. The mix and the product margins are behaving well and in line with what our strategy is. But we don't always guide to exactly what clients are going to do because we never are positive on that going into a quarter. Overall, though, controlling what we can control, as I've said before, is what gives us the constructive view on margins. So we do think it's going to continue to migrate higher over time based on the things that we're doing. Gabriel Dechaine: And how important is the combination of slow mortgage growth plus the competitive dynamic based on that one graph in your slide, looks like the new inflows or renewals are still contributing to wider spreads. Hratch Panossian: Yes. Thanks, Gabriel. I'll jump in. It's Hratch here. So it's been a factor, but the mix is a much bigger factor than the inflow outflow differential, if you will. So if you look at over the last year, that differential between inflows and outflows had been, call it, a couple of basis points a quarter to the PBB margin positive. It is getting a little bit more muted. I would expect going forward, it's still a positive. We're still seeing, as you see on the chart, a bit of a differential there, maybe not as big as it was. And so for the next several quarters, I would still expect in the order of a basis point a quarter help from that. But the bigger factor is, as Rob said, the mortgages growth versus cards growth. And we've seen muted market on the mortgage side, right? We were expecting sort of mid- to low single digits this year, and that would have been part of our guidance and the market has been a bit slower than that. Now it's more low single-digit growth on mortgages. And we continue to do really well in our cards franchise, both because of our co-brand portfolio as well as our premium travel portfolio and some of our new everyday rewards cards. And so I think if that mix continues, that will be a bigger factor than the mortgage repricing. Gabriel Dechaine: The revolvers or proportion of revolving balances is increasing as well. Is that kind of a... Hratch Panossian: It is. We've seen utilizations are not up that significantly, but we are seeing interest earning balances and the reward balance is growing at a healthy pace, obviously, in a responsible way from a risk perspective. We have been very prudent on the card portfolio. We've actually taken some actions going back 1 year, 1.5 years ago to tighten up a bit, and I think you're seeing that in the results of our charge-offs and cards versus some of the peers. Operator: There are no further questions at this time. I would now like to turn the meeting over to Harry. Harry Culham: Thank you, operator, and thank you all for joining us this morning. I wanted to reiterate 3 key messages, which I hope resonated with you all today. One, we're delivering robust profitable growth. We continue to demonstrate that our ability to outperform is sustainable through different market environments. Two, we're focused on accelerating our execution. The cumulative effect of delivering strategic progress each quarter is significantly improving our capabilities across the bank. And three, we are well positioned to continue delivering high-quality financial results. We have a strong balance sheet and deep client relationships to continue growing organically. We are excited for the many opportunities ahead across each of our businesses. And before I close, I wanted to thank the entire CIBC team for putting our clients first each and every day. Thank you, everyone, and have a good morning. Operator: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation, and you may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. At this time, I would like to welcome everyone to Millrose Properties Fourth Quarter and Full Year 2025 Earnings Results Conference Call. [Operator Instructions] I will now turn the call over to Jesse Ross, Millrose Head of Financial Planning and Analysis. Jesse, you may begin your conference. Jesse Ross: Good morning, and thank you for joining us. With us today to discuss Millrose Properties Fourth Quarter and Full year 2025 results are Darren Richman, our Chief Executive Officer and President; Robert Nitkin, our Chief Operating Officer; Garett Rosenblum, our Chief Financial Officer; and Steven Hensley, our Senior Market Risk Analyst. Before we begin, I'd like to remind everyone that today's call may include forward-looking statements and references to non-GAAP financial measures. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Please refer to our fourth quarter and full year 2025 earnings release and investor presentation, both available on our website under the Investor Relations heading for a discussion of these matters and a reconciliation of non-GAAP measures. With that, I'll turn the call over to Darren. Darren Richman: Thank you, Jesse, and good morning, everyone. I'm pleased to discuss our results for the fourth quarter and full year 2025, our first year as a public company. For years, we have seen a clear opportunity in a housing market defined by persistent undersupply and builders seeking greater balance sheet efficiency. Even as the industry faced meaningful headwinds, affordability challenges, elevated rates and macro uncertainty, the structural need for housing capital remained unchanged. If anything, the industry shift towards capital efficiency has only accelerated and Millrose was designed for exactly this moment. Our permanent capital model provides builders with just-in-time homesite delivery system. We acquire and fund development under option agreements, builders take down homesites on a predetermined schedule and our shareholders receive predictable recurring income underpinned by U.S. housing demand. That income is not tied to home prices, land values or the pace of home sales. We generate contractual monthly option payments that spend multiyear contracts and are owed regardless of market conditions. We do not speculate on land appreciation, take entitlement risk or participate in homebuilding margins. Our capital is structurally insulated from the cyclicality of our builders' operating businesses. That is a fundamental distinction from every other land-based real estate business in the public markets today, and it is the foundation on which 2025 was built. 2025 was a defining year for Millrose. Despite a cautious homebuilding environment, we were embraced across the industry with a reception that exceeded even our own expectations, validating both the concept and our team's execution. Our investment balance outside the foundational Lennar master program agreement finished the year at approximately $2.4 billion, surpassing the $2.2 billion stretch target we had previously discussed. That outperformance reflects something important. Builders weren't just willing to work with us. They sought us out, both initiating new relationships and deepening existing ones. In a year when builders were exercising appropriate caution on an activity level, Millrose was aggressively taking share and pioneering new use cases for land banking capital. That is a direct reflection of what we offer, an experienced trusted partner with deep operational and technological integration, the ability to transact rapidly and at scale and a national team that understands the homebuilding business from the ground up. That accelerating pace of adoption translated directly to financial outperformance. We had previously provided a year-end run rate AFFO guidance range of $0.74 to $0.76 per share. Our 4Q AFFO came in at the top end of that range at $0.76, but the growth we delivered over the course of the quarter puts our normalized year-end run rate at $0.77, ahead of where we expected to be. We also demonstrated the uniquely cash-generative capital recycling nature of our business model with $3.4 billion of net homesite sale proceeds generated in 2025. Beyond the financial implications of that liquidity, we're proud of the real-world impact embedded in this number. Over the course of 2025, we delivered more than 31,000 homesites to builders across the country, projects with an average home selling price of approximately 20% below the national average for newly built single-family homes. Housing affordability remains one of the defining challenges facing the American housing market, driven in large part by the scarcity of entitled, well-located land. What we do isn't just financially compelling, it is genuinely additive to the housing supply where it is needed most. Looking ahead, we enter 2026 with a pipeline that gives us real confidence in our growth trajectory. Based on the transaction volume we demonstrated in 2025 and the depth of our current opportunity set, our base case expectation is that we can grow invested capital outside the Lennar master program agreement by an additional $2 billion, bringing total invested capital to approximately $10.5 billion, with over 40% of that balance outside the foundational Lennar relationship. That would represent a meaningful milestone in the diversification of our platform. I want to be transparent about how we think about funding that expansion because growth for its own sake has never been part of our objective. We remain committed to a conservative leverage policy with a current target of 33% debt to cap, and we will not issue equity below book value, which currently stands at $35.28 per share. On that basis, we can point with confidence today to funding approximately half of that $2 billion demand increase through existing debt capacity. We expect to deploy that $1 billion in invested capital growth by approximately midyear, exiting Q2 2026 with a quarterly AFFO per share run rate in the range of $0.78 to $0.80 a share. For the second half of that pipeline, we are being highly selective by design, concentrating capital toward the strongest counterparties, the most durable structures and the best located underlying properties. The opportunity set exceeds what we can fund today, and that is a position of strength, not a constraint. The equity optionality we retain is upside for existing shareholders, not a bottleneck to our business. On a valuation, our current AFFO multiple implies a meaningful discount to the competitive set of REITs, a gap we believe is difficult to justify given our lower leverage, our contractual income structure with high-quality counterparties and the projected 10% annual AFFO per share growth implied by our $2 billion growth expectation as described on Page 14 of our earnings presentation. Here, we've laid out an illustrative bridge from our current AFFO run rate to year-end 2026. At the low end, deploying $1 billion of net new capital at current yields would drive more than 7% growth in AFFO per share. Executing on this $2 billion opportunity set we see in front of us, funded with a prudent mix of debt and equity consistent with our stated leverage targets implies a 10% growth in AFFO per share. We believe that this valuation discount to our peers reflects the market still getting comfortable with a business model that is genuinely new to the public markets, and that is a fair and reasonable dynamic. But one we expect to resolve itself as we continue to demonstrate consistent execution. We operated through a challenging homebuilding environment in 2025 without a single builder terminating or threatening to terminate an option agreement. As that track record compounds, we expect investor confidence and our valuation to follow. We are optimistic that a re-rating is coming and that we will be able to raise equity above book value in 2026, which would allow us to fully capture the pipeline in front of us. Finally, the macro backdrop entering 2026 is the most constructive that we have seen since our spin-off. In many markets, the supply and demand imbalance that weighed on builder activity through much of 2025 is showing early signs of rebalancing. Lower housing starts have begun to work through excess inventory and moderating mortgage rates are supporting a gradual return of buyer demand. Against that backdrop, land values have proven remarkably resilient. According to a recent survey from John Burns Research and Consulting, one of the most respected voices in the residential housing market, land prices remain stable through 2025 and continue to increase in many markets. For Millrose, that is an important data point. It affirms the unique character of our entitled homesite assets, irreplaceable non depreciating perpetual options on U.S. home values and confirms that our portfolio is well positioned as the market continues to recover. 2025 proved the model. 2026 is where we intend to begin showing its full potential. We believe we have the platform, the pipeline, the partnerships and the track record, and we are just getting started. With that, I'll turn the call over to Rob. Robert Nitkin: Thank you, Darren. I want to spend a few minutes on what it actually takes to operate this platform at the scale we've described because the numbers deserve context. As of year-end, Millrose manages approximately 142,000 homesites across 933 communities in 30 states serving 15 distinct counterparties, 9 of which rank among the top 25 homebuilders in the country. During 2025, we deployed $5.5 billion in new land acquisitions and development funding and received $3.4 billion in takedown proceeds. Transaction volume of this magnitude is made possible by significant operational infrastructure working in sync with a large and experienced team. Every homesite takedown we process is a real estate transaction, not just a wire transfer or a ledger entry. As Darren mentioned, in 2025, we executed over 31,000 of those closings, each involving title work, deed transfer and state-specific closing requirements on a schedule that cannot slip because builders are running construction time lines that depend on us. What makes that reliability possible is our technology, a platform that gives builders real-time lot selection capability with every selection triggering automated portfolio updates, title tracking and closing workflows. But technology alone does include real estate transactions. Equally important is an experienced team of underwriters, servicers and asset managers with deep multiyear operating relationships with our builder partners and the willingness to pick up the phone and work through any time-sensitive request or transaction nuance. Growth amidst this volume of activity required the same level of discipline on the deployment side, expanding from one counterparty to 15 required demonstrating both homesite delivery reliability and new deal underwriting capacity, the ability to evaluate, diligence and close with high volume on externally driven deadlines. Our proprietary data set and underwriting tools built from years of transacting across every market we operate in allow our underwriting team to rapidly form a view on new opportunities before passing to our real estate diligence teams for legal and development review. These tools also provide real-time signals on local market dynamics, and you'll hear more on what we're currently seeing from Steven Hensley in a moment. Combined with close coordination between our underwriters and builder partner land teams, our diligence is both rapid and rigorous. That speed of execution alongside the unique reliability and permanence of our capital is a competitive advantage builders notice and consistently cite. Every new builder relationship benefits from our track record of efficient execution at scale, first with Lennar and now with 14 additional partners as well as the institutional credibility our team built at Kennedy Lewis in the years before Millrose launched. That combination of platform history and team pedigree that creates a level of credibility that cannot easily or quickly be replicated. We also bring to these relationships market insights and intelligence from our operations across 30 states that most individual builders simply don't have access to. We believe sharing that perspective makes us a more valuable partner and deepens relationships. The expanding share of wallet Darren referenced isn't just a financial outcome. It's a reflection of the compounding spirit of partnership we are committed to building across the industry. I also want to elaborate on our cross-termination pooling structures present on 96% of our portfolio by investment balance because pooling is more than a negotiated legal protection. It is, first and foremost, a relationship-defining mechanism. When a builder agrees to a pool, they are self-identifying as a partner seeking capital efficiency, not risk mitigation, and that distinction matters. These are builders who understand our model, embrace the off-balance sheet structure and are committed to a long-term programmatic relationship. It is worth being clear ride about what pooling does and does not do. It does not prevent a builder from walking away from an option contract. What it does is raise the cost of doing so, creating a meaningful economic disincentive that protects the integrity of the relationship without eliminating the builder's optionality. That balance is intentional and is part of what makes pooling a durable alignment tool rather than a blunt legal instrument. Beyond that initial alignment function, pooling is also a live risk management discipline. We maintain a real-time pooling analysis that tracks every pool by geography, duration and risk exposure as communities advance through their life cycle. Enabled by our technology platform, we monitor shifts in each pool's risk profile continuously, directly informing go-forward deal allocation. This active management is what keeps pools meaningful of over time, and it is a capacity that we believe is genuinely difficult to replicate without the scale and systems we have built. Looking ahead, the opportunity in front of Millrose is both substantial and highly actionable. Our pipeline is deeper, more diversified and more geographically balanced than at any point since launch. We are seeing increased engagement from existing partners and meaningful interest from new builders looking to shift more of their land strategy into off-balance sheet structures. As Darren described, we are being selective, but the pipeline gives us the luxury of that selectivity, and we are confident in the quality of what we are choosing to pursue. To fully capture this opportunity, we continue to build incremental capital and liquidity to enhance balance sheet flexibility and reinforce confidence for our counterparties. We are currently working with our bank group on additional floating rate debt capacity, both to diversify our fixed rate bond structure and to better match the floating rate nature of a portion of our option payment income. 2025 was the year we built and stress tested the infrastructure of this platform, the technology, the team, the processes and the capital relationships required to scale across the industry. That foundation is now firmly in place. With a pipeline that reflects deepening builder engagement and an improving broader market, we enter 2026 with a conviction in a further expanded accretive growth opportunity for Millrose and our shareholders. With that, I'll turn it over to Steven to share what we're seeing across our markets and why we're optimistic about the macro landscape ahead. Steven Hensley: Thank you, Rob. As we enter 2026, we're seeing encouraging signals that the spring selling season could look more like a normal healthy market. And I want to walk you through both the macro picture and what our proprietary data is telling us on the ground. At the macro level, a resilient consumer and broader economic stability provides near-term optimism for steady demand. Affordability is also moving in the right direction, supported by arising incomes, moderating home prices and lower interest rates, creating a constructive backdrop heading into the spring. These are not dramatic reversals, but they are consistent, reinforcing trends and that consistency matters. Operationally, the signals are similarly positive. Homebuilders demonstrated strong discipline through the second half of 2025, proactively reducing starts to align with demand and working down standing inventory. They've also made meaningful progress lowering construction costs, easing margin pressure and improving cycle times, giving them greater agility to respond across a range of demand scenarios to the spring. The shift toward more to-be-built sales and fewer spec homes is keeping inventory in check while supporting healthier margins. Taken together, the industry enters the spring selling season on solid footing and better position than it was 12 months ago. Turning to our proprietary MSA monitoring system. The data reinforces a mixed but improving landscape with some important distinctions by market. Last summer, we highlighted a handful of markets undergoing recalibration, particularly certain secondary coastal markets in Florida and parts of Texas. In Florida, inventory levels moderated meaningfully through the back half of the year with months of supply now below year ago levels in most markets. That is a notable improvement and reflects the builder discipline I just described playing out in real time. Texas continues to work through elevated supply and affordability challenges. We expect that normalization to remain a 2026 story and our underwriting reflects that patience. Las Vegas is another market where our model is signaling caution. Softer sales activity in the second half has led to rising supply pressure, and we are monitoring it closely. Conversely, we are seeing clear and broad-based strength across most of the Southeast. [ Charlotte ] remains one of the top-performing markets in our coverage, supported by strong employment growth and relatively tight supply. Our model is also picking up notable performance in several smaller Southeast markets, including Greenville, Columbia, Charleston and Myrtle Beach, where solid job growth, low supply and comparatively affordable housing are creating healthy, durable demand. These are not flash in the pan dynamics. They reflect structural demographic and employment trends that we expect to persist. Overall, we believe these signals point toward a more typical spring selling season and reinforce our positive long-term view of the housing market. The geographic diversity of our portfolio, spanning 30 states and 933 communities means we are not dependent on a single market's performance. We are well positioned to benefit from the markets that are strengthening now, while our underwriting discipline protects us in the markets that are still normalizing. With that, I'll hand the call over to Garett to walk through our financial performance. Garett Rosenblum: Thank you, Steven, and good morning, everyone. I'm pleased to walk you through our fourth quarter and full year 2025 financial results, which continue to demonstrate the cash-generating power of our business model and the direct translation of capital deployment into shareholder returns. For the fourth quarter, we reported net income of $122.2 million or $0.74 per share, driven by $179.5 million in option fees and $10 million in development loan income. For the full year, we reported net income of $404.8 million or $2.44 per share, our first fiscal year as a public company and one that delivered on every financial commitment we made at the outset. Fourth quarter adjusted funds from operations came in at $0.76 per share at the high end of our guidance range of $0.74 to $0.76 per share. But as Darren noted, the invested capital growth we delivered over the course of the quarter puts our normalized year-end run rate at $0.77 per share, ahead of where we expected to be. This outperformance reflects exactly what our model is designed to do. Every dollar deployed in other agreements at average yields of approximately 11% against the cost of debt of 6.3% drives directly accretive AFFO growth and expanding dividend capacity. That spread and our ability to sustain and grow it is the engine of our earnings trajectory. Book value per share at year-end stood at $35.28. For full year context, interest expense was $91.8 million, income tax expense was $20.5 million and management fee expense totaled $87.8 million. As a reminder, our management fee is calculated transparently at a fixed rate of 1.25% of gross tangible assets. Turning to the balance sheet. We ended the year with total assets of approximately $9.3 billion and total debt of $2.1 billion, resulting in a debt-to-capitalization ratio of approximately 26%, well inside our stated maximum of 33%. That headroom is intentional. It gives us meaningful capacity to fund the next phase of growth without compromising the conservative financial posture that underpins our investment-grade counterparty relationships and our dividend reliability. We ended the year with approximately $1.3 billion in total liquidity, providing ample capacity to support our investment pipeline. And as Rob noted, we are working with our banking partners to further expand that capacity, and we expect to deploy approximately $1 billion in additional invested capital by midyear, exiting Q2 2026 with an expected quarterly AFFO run rate of $0.78 to $0.80 per share. Our dividend performance reflects the quality and consistency of our earnings. For the fourth quarter, we paid a dividend of $124.5 million or $0.75 per share, an 8.4% annualized yield on equity, roughly 80 basis points higher than our first quarter dividend. That progression over the course of a single year is a direct result of the accretive deployment of capital and other agreements, exactly the strategy we outlined when we became a public company. Millrose remains committed to distributing 100% of AFFO to shareholders, and we expect that commitment to compound meaningfully as our invested capital base continues to grow. With that, I'll turn the call back to Darren. Darren Richman: Thanks, Garrett. I want to leave you with a few thoughts before we open the line. 2025 was not an easy year for the homebuilding industry, and that is precisely what made it such a meaningful proof point for Millrose. We operated through affordability headwinds, elevated rates and a cautious builder environment without a single option agreement terminated or even threatened. Our contractual income held, our capital recycled, our platform grew. That is not a coincidence. It is the design of this business working exactly as intended. What gives me the most confidence entering 2026 is not just the pipeline in front of us, but the flywheel nature of what we are building. Every community we deliver, every builder relationship we deepen and every dollar of capital we recycle adds to the platform that becomes harder to replicate and more valuable to the industry over time. We are still early in that process, and that is an exciting place to be. To the team, the execution you delivered in our first year as a public company was exceptional, and it did not go unnoticed. To our homebuilder partners, your trust is the foundation of everything we do, and we do not take it lightly. And to our shareholders, we are committed to earning your confidence every quarter, not by telling you what this platform can be, but by showing you. Operator, let's open the line up for questions. Operator: [Operator Instructions] Your first question comes from the line of Julien Blouin with Goldman Sachs. Julien Blouin: Well, congrats on the strong quarter team. Just given the strong pace of deployment and the clear demand from homebuilders, I was wondering, as you start to come up against your internally set leverage cap, would you be comfortable going above that leverage cap for a brief time until your shares sort of reach book value, especially given your confidence that as you continue to execute your business plan, equity markets will eventually sort of catch up? Darren Richman: Julien, that's a good question. This is Darren. Thank you. Thanks for your time today. Look, we're going to adhere to the -- we don't want to hem ourselves in too much on the leverage target. In the context of maybe something strategic, we might push it. In the ordinary course, we're really going to kind of adhere to that target. There may be circumstances where we might change that for some period, but that really is the threshold goal. And let's -- for those people who are kind of new to the story, the reason why we set it at that conservative level is these are still volatile assets. And the reality is that we cycle through about 1/3 of our balance sheet every year in the ordinary course. And having that visibility and that cash in the ordinary course to be able to pay down our debt or neutralize the debt with cash on the balance sheet is just a very important asset for this company. So to answer your question, there may be circumstances where for a brief period, we feel comfortable and we have line of sight to take it beyond 33%. But the long-term goal has really been purposefully set at 33% for the reasons I just cited. Julien Blouin: That makes a lot of sense. You also mentioned in your opening remarks how you distinguish yourself from every other land-based real estate business in the public markets. And I think Rob was mentioning how the current AFFO multiple discount is sort of difficult to justify. I'm just curious, in your own internal conversations, how do you view -- or who do you view as your most relevant comps? Why do you view them as your most relevant comps? And then how do you view your current valuation relative to that comp set? Darren Richman: I think you've given me the easy question. This is some meat all the question for you, Rob, to answer. Robert Nitkin: Yes. Thank you, Julien. I mean people just ask us a lot, particularly for a somewhat new business model in the public forum with this homeside option purchase platform, who are your comp set? And how should we value you? And it's not our job to debate the academics of our price AFFO multiple. But we did think after our first full year of results now that we have more proof points, just to point out some of the differences versus the various REITs out there. And you and others have heard us say out loud that we think ourselves more of a triple net or infrastructure-related equity REIT, which is what we believe. But what's new this quarter -- what's new this quarter is that we have just more proof points in terms of both our AFFO growth per share that we've demonstrated and that we're projecting in the forward scenario, really afforded by just the math of our accretive spread investing, right, the yields we're able to invest at versus our cost of capital. Pointing out the low leverage, achieving those yields and those growth targets with the leverage that we have right now that as we were just talking about is pretty much below any other REIT, at least in our eyes in the industry, which we feel good about. And honestly, that was a lot of what we are so excited about thinking back before we even launched Millrose, why we were so excited to bring this business model into the public forum was to show the power of the yield, the growth and therefore, the total return that we afford our shareholders with low leverage. And on top of that, lastly, I would just say it's worth pointing out that while we have low duration, and that's another slightly differentiating item, you may say positive or negative from other REITs, we view it as a pure positive in that from a credit and risk management perspective, we're constantly refreshing the basis to contemporary market conditions and evaluating new assets that are sort of refilling our portfolio from a risk perspective. But at the same time, we've signed up to these repeatable operationally integrated relationships with our builders' counterparties. So it's not as if we have a brand-new cost of origination on each individual deal. Our origination is not episodic. It's a self-refreshing relationship with these builders, which, again, from both a credit and origination perspective, we think is the best of both worlds. So that's what we wanted to point out. Darren Richman: Yes. And I might add to that, obviously, to everything Rob just said. But to add to it, these are mission-critical assets as we talked about. Not only are they mission-critical, but these are the exact assets that are in scarce supply. Having land that's already entitled, approved for development, is the gating item to why we don't see more growth in volume. And so we're financing those assets that are in short of supply. And then the other items I'd add is we're doing this against the backdrop of a housing shortage. And maybe lastly, I'd add that these assets don't require any capital enhancement from like a CapEx perspective to refresh. And so this is all contractually related. So I think when you put all these pieces together, plus the growth that we laid out in this report that even if we achieve just $1 billion of in the ground, that's almost an 8% growth in AFFO on top of the already strong dividend that we're achieving. So when you kind of put all this together, it creates what we think is a very unique package of baseline dividend plus growth that to us -- look, we're students of the market, we're obviously talking our book, but to us, should result in a much higher multiple. And we do think we'll get there. This is still a young company. We're a year into it, and we're continuing to show proof points. So we do think, ultimately, we will trampoline ahead from a valuation perspective. Operator: Your next question comes from the line of Eric Wolfe with Citi. Eric Wolfe: You talked about $1 billion of new capital deployment by the middle of the year. How much visibility do you have towards that incremental $1 billion at this point? Is it based on deals you've already sourced and signed? And would those be new relationships or sort of continued growth among your current 15 counterparties? Darren Richman: Yes. And I'll start, Eric. This is Darren, and Rob will jump in. We've talked about this in the past with these forward flow relationships that we have where the industry is really starting to coalesce around rather than homebuilders looking at discrete parcels and trying to get them land bank and financed to entering into more programmatic relationships where they'll come to us and say, we need $1 billion of buying power or $500 million of buying power. And so we've talked about that. That totals about $9 billion across roughly 10 different counterparties, those forward flow relationships. We're going to naturally cycle through about $3 billion of our land portfolio in the next year that will need to be replaced. So some of that $9 billion will go into replacing those assets. And then -- and so the point is we have a lot of visibility and a lot of confidence around it. Some of those deals ultimately fall away because, obviously, our due diligence process will kick out deals that we don't want to be financing. So as we kind of distill down that forward flow quantum, we feel very comfortable with the guidance that we put out. And we want to be very thoughtful about guidance we give to make sure that we can achieve that. Robert Nitkin: Yes. And I might just add, as you know, Eric, there's also built into our existing $2.4 billion of other agreements and investment balance, the future development funding commitments that we've already signed up for, and we're including in that $1 billion projection. And so that will do a decent amount of the work for us. And so you asked the question, does that require any new counterparties. Based on the existing baked-in development funding projections, even net of homesite takedowns as well as that the aggregate of those $9 billion forward flow relationships Darren alluded to, if you said we weren't going to add another counterparty next year, which I don't think is true, I would still feel pretty confident about that number. Eric Wolfe: That's helpful. And then you also mentioned that you are working with your banking partners to access floating rate debt to hedge out your -- not hedge out, but just to hedge your floating rate option exposure. I guess what percentage of your net invested capital at this point is sort of floating versus fixed? And I guess, given expectations that Fed will cut multiple times next year, is it becoming more of a sort of popular agreement with homebuilders to try to do more floating rate type deals? Robert Nitkin: Yes. I would use -- it's not perfectly precise in this way, but I would use the proxy that our Lennar master program agreement rate is fixed, which is true and subject to resets on forward deals as has been publicly disclosed. And our other agreements bucket is vast majority floating subject to a floor. So while there's not infinite downside of rate cuts, there is some volatility, and that's the reason that our existing credit agreement, use of that with the floating rate mitigates any movement there, and we made the comments that you alluded to on additional floating rate debt. And then that's been -- I would add, that has not -- there hasn't been a change in fixed versus floating in these agreements since any recent rate cut cycles or anything like that. That's been the nature of the structure of these other agreements since before we launched Millrose, I would say. Eric Wolfe: Got it. Maybe just to be illustrative, like the 11% you're signing today, I guess, what would be like the floor on that? Just to help me understand sort of like how low that could go if rates came down meaningfully on that. Robert Nitkin: Yes, floor is probably between 50 and 200 basis points below sort of where that rate is. Operator: Your next question comes from the line of Craig Kucera with Lucid Capital Markets. Craig Kucera: I see you added 2 counterparties this quarter. Were they the primary driver of the $690 million funded this quarter from third parties? Or are you seeing additional demand from your existing counterparties? Robert Nitkin: No. So it was 3 additional counterparties went from 12 to 15 this quarter, and the majority of the growth was from existing counterparties. And so the addition of new counterparties, we started to do initial deals with them and those initial deals with those incremental 3 counterparties were not the majority, but we've now brought them onto our platform. We onboarded them. We've negotiated docs with them, and it's our expectation that they'll continue to grow as we get more operationally integrated as a partner. Craig Kucera: Okay. Great. And just given your commentary on sort of the $2 billion of guidance, I guess, is it fair to say that we should think about that as being more or less in the bag? And when we think back to last year, you came out and were looking to close $1 billion when you first spun out of Lennar. We saw stretch targets throughout the year. Is that a potential just given the demand in the market? Darren Richman: This is Darren. It's a tough question to answer. We're not looking to sandbag anything. This is kind of our best assessment at this point in time, given the deal flow that's ahead of us and also given the need to raise additional capital. I'll remind you, last year, the volume was enhanced through M&A. And while we're aware of discussions that are out there from an M&A perspective, those are always difficult to model. And so none of that would be included in our forecast. So this really is our best estimate here and now. And I'll acknowledge one other thing that month-to-month, quarter-to-quarter, it's not -- it won't be a straight line in terms of that volume filling in, but we feel very confident given the pipeline and given the relationships that we will meet that year-end target of $2 billion. Craig Kucera: Okay. That's helpful. In the press release, you made have mentioned that you're delivering homesites to builders at an average sales price of 20% below the national average for new homes, which are predominantly Lennar homes just given that they've been closing the vast majority. But as you look at the third-party agreements you've entered into, is there any way to give us a sense from a budgeting perspective, whether or not those are more entry-level homes, maybe similar to Lennar or higher-priced homes? Or is that too difficult at this point? Darren Richman: Yes. I don't -- we're not going to go that deep into the guts of the operation at this point. Craig Kucera: Okay. Fair enough. Just one more for me. You made it clear that you want to issue equity below book, and you've got a debt target of 33%. You mentioned earlier, you might go a little above that. But given that the market is going to do what it does with your common stock, it would seem you could issue preferred that would be accretive to what you can deploy capital at. Is that a potential source of capital for you? Or do you view that as just more expensive debt? Darren Richman: It's not our preference to do that. As you would imagine, we're -- we ourselves are investors. We come from the credit landscape. We're very familiar with those type of products as well as converts and other arrangements that are equity-like. The goal here is really to keep the capital structure as clean as possible and as transparent as possible. Would we entertain them potentially, but that's not our plan right now. Operator: [Operator Instructions] I will turn the call back over to Darren Richman, CEO and President, for closing remarks. Darren Richman: Yes. I'd like to thank everybody again for joining us this morning. We're around if people have follow-up questions. Just in closing, really what we're looking for is durable fundamental growth, not short-term glitter. We're looking to continue to build new relationships and develop new use cases for land banking capital. We're very excited about the prospects for the business, where we are today and the reception we continue to get from our existing clients and new clients as well. So I want to thank everybody. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Welcome to Grupo Aval's Fourth Quarter 2025 Consolidated Results Conference Call. My name is Regina, and I will be your operator for today's call. Grupo Aval Acciones y Valores S.A., Grupo Aval is an issuer of securities in Colombia and in the United States SEC. As such, it is subject to compliance with securities regulation in Colombia and applicable U.S. securities regulation. Grupo Aval is also subject to the inspection and supervision of the Superintendency of Finance as holding company of the Aval Financial conglomerate. The consolidated financial information included in this document is presented in accordance with IFRS as currently issued by the IASB. Unconsolidated financial information of our subsidiaries and the Colombian banking system are presented in accordance with Colombian IFRS, as reported, the Superintendency of Finance. Details of the calculations of non-IFRS measures such as ROAA and ROAE, among others, are explained when required in this report. On November 27, 2025, Banco de Bogota's subsidiary, Multi Financial Holding, Inc. MFG, entered into a share purchase agreement with BAC International Corporation, BIC, a subsidiary of BAC Holding International Corp. for the disposal of 99.57% of the issued and outstanding shares of Multi Financial Group, Inc. MFG, the parent company of Multibank Inc. For comparability purposes only, we have prepared and present supplemental unaudited pro forma financial information for the periods prior to 4Q '25, which reflects the reclassification of the operations relating to MFG as noncurrent assets and liabilities held for sale and discontinued operations. This supplemental unaudited pro forma financial information does not intend to represent and should not be considered indicative of the results of operations or financial position that would have been achieved had the transaction occurred on the dates assumed nor is it intended to project our results of operations or financial position for any future period or date. The pro forma financial information is unaudited and the completion of the external audit for the year ended December 31, 2025, may result in adjustments to the unaudited pro forma financial information presented herein. This report includes forward-looking statements. In some cases, you can identify these forward-looking statements by words such as may, will, should, expects, plans, anticipates, believes, estimates, predicts, potential, or continue or the negative of these and other comparable words. Actual results and events may differ materially from those anticipated herein as a consequence of changes in general, economic, and business conditions, changes in interest and currency rates, and other risks described from time to time in our filings with the Registro Nacional de Valores y Emisores and the SEC. Recipients of this document are responsible for the assessment and use of the information provided herein. Matters described in this presentation and our knowledge of them may change extensively and materially over time, but we expressly disclaim any obligation to review, update, or correct the information provided in this report, including any forward-looking statements, and do not intend to provide any update for such material developments prior to our next earnings report. The financial statements of Grupo Aval Acciones y Valores S.A. in accordance with Colombian regulations must be filed with the market and with the Superintendency of Finance with the opinion of an external auditor. At the time of this quarterly call, this process is still ongoing. The content of this document and the figures included herein are intended to provide a summary of the subjects discussed rather than a comprehensive description. When applicable in this document, we refer to billions as thousands of millions. [Operator Instructions] I will now turn the call over to Ms. Maria Lorena Gutierrez Botero, Chief Executive Officer. Ms. Maria Lorena Gutierrez Botero, you may begin. Maria Gutierrez Botero: Thank you. Good morning, and thank you for joining Grupo Aval's fourth quarter and full year 2025 earnings call. I'm so sorry, but I have a little flu, oh, a terrible flu, but I'm trying to -- that you can understand me. I am joined today by Diego Solano, our Chief Financial Officer; Camilo Perez, Chief Economist at Banco de Bogota; Paula Duran, Corporate Vice President of Sustainability and Strategic Project. I would like to start by highlighting the positive evolution of our results during 2025, despite the challenging and volatile local and global environment. We reached COP 1.7 trillion in net income during 2025, a 70% increase compared to the previous year and more than twice that of 2023. This improvement was primarily driven by stronger contributions from our banking business and a record performance year by Porvenir. Since our last call, we completed important milestones in line with our strategic focus to strengthen our strategic priorities. First, we completed the merger of our trust company. Second, we reached an agreement to acquire Banco Itau's Colombian retail business. Third, we reached an agreement to divest MFG. And fourth, Corfi has successfully completed transaction that will grow in business in the short-term. On January 2, 2026, we successfully merged our fiduciary businesses from Fiduciaria Bogota, Fiduciaria de Occidente, and Fiduciaria Popular into Aval Fiduciaria. This transaction consolidates our trust services into a single strong entity, enhancing our value proposition for existing and new customers and generating operational efficiencies. We expect this to result in an increase of our market share in trust fee income and AUMs and improve the profitability of this business. On December 23, 2025, Banco de Bogota announced the acquisition of Banco Itau with the banking business in Colombia and Panama. This move reinforces Banco de Bogota's focus on the affluent segment, enhances the quality of our client needs and strengthens our competitive positioning in Colombia. The acquisition is expected to add around 267,000 clients with USD 6.5 trillion in loans and USD 4.1 trillion in deposits. The deal excludes Itau's corporate banking and is pending regulatory approval. On November 27, Banco de Bogota announced that it has reached an agreement to sell MFG, a Panamanian bank to [ CAB ], that is the Central American Bank. This unit has delivered modest results since its acquisition in 2020 and require a large scale to achieve the desired performance. The divestment of MFG strengthens Banco de Bogota's position to pursue a stronger growth in its core market and reallocate capital towards businesses with a stronger strategic alignment and long-term potential. The sale process for this operation is expected to close over the following months, following regulatory approvals in Panama. This quarter, Multi Financial Group's balance sheet and P&L have been classified as discontinued operations. Corfi announced 2 major acquisitions. The first one, Corfi announced agreement to participate with a 51% stake in Sencia, the concessionaire of the 20 -- 29 sorry, year public-private partnership for the renovation, construction, and operation and maintenance of Bogota Nemesio Camacho Stadium complex. Sencia will develop a USD 2.4 trillion project, includes a new 50,000-seat stadium, cultural and commercial components, public space development, and mobility solutions. In the energy and gas sector, Promigas signed an agreement to acquire 100% of Zelestra's renewable energy generation platform, reinforcing its transformation into a multi-energy platform with operations in Colombia, Chile, and Peru. This transaction has a portfolio of more than 19 solar and storage projects totaling 1.4 gigawatts of contracted capacity and over 2.1 gigawatts under development, supporting diversification of nonregulated businesses and stable long-term contracted revenues, subject to project approvals in Colombia and Peru. Regarding results from continued operation for the quarter, positive trends continued to consolidate during the quarter. Our risk-adjusted NIM on loans for the quarter stood at 3.34%, the highest level in 3 years, while our cost of risk continued its positive trend. Return on average equity came in slightly below our initial expectations, mainly due to a weaker-than-expected NIM on investments triggered by volatile local and international capital markets and the onetime effects related to the MFG sale agreement, which Diego will explain in detail. I will now pass on to Paula, who will go over our sustainability achievements for the year. Paula? Paula Duran: Thank you, Maria Lorena. Good morning, everyone. In the fourth quarter, we closed an extraordinary year for sustainability, further consolidating our ESG strategy. One profitability is built by integrating strong financial performance, measurable social impact, and responsible environmental management. Our framework is structured around 3 pillars: Returns with purpose, opportunities for all, and environmental value. Under our first pillar, returns with purpose, we continue to scale sustainable finance. Our sustainable loan portfolio reached COP 44.9 trillion, including COP 36.2 trillion in social lending and COP 8.7 trillion in green lending. Social lending included targeted credit lines for senior citizens, housing, women entrepreneurs, coffee growers, and micro businesses. Green lending supported renewable energy, infrastructure, sustainable mobility and water management projects, among others. In our investment portfolio, Maria Lorena already mentioned our agreement with Zelestra that reinforces our commitment to clean energy. We also received important external recognitions. In the S&P Corporate Sustainability Assessment, we achieved a historic score of 81 out of 100 and were included in the S&P Sustainability EU. Additionally, Banco de Bogota, Equity Colombia, Banco de Occidente and Villas were also included in the EU, demonstrating the consistency and consolidation of our sustainability strategy across the group. In the MSCI assessment, we improved our rating to BBB, driven by stronger social impact metrics and enhanced responsible investment practice. On our second pillar, opportunities for all, this pillar focuses on generating inclusive growth and shared value. We calculated the total economic value generated and distributed, which reached COP 41 trillion in 2025. In this value distributed to more than 31,000 suppliers that received COP 11 trillion, our 67,500 employees also earned COP 3.8 trillion. We also paid COP 3.4 trillion in taxes and generated COP 13 trillion in returns for our clients. Additionally, we invested COP 70 billion in voluntary social programs, benefiting more than 2 million people, focusing on community infrastructure, education and research, socioeconomic development, and the promotion of culture, art and sports. Through Mision La Guajira, the most significant private sector social initiative in Colombia, we fulfilled our commitment, benefiting more than 21,500 people across 80 communities with potable water, electricity, and connectivity. The program also included financial education initiatives and supported over 1,500 value artisans fostering sustainable live schools. We also supported the VAMOS Finances scholarship program exceeding our fundraising goals and reaching COP 1.1 billion, benefiting more than 1,200 students. For our third pillar, environmental balance, we joined the partnership for Carbon Accounting Financials, CAF, committing to measuring the contributions associated with our financial activities. We also launched our nature strategy aligned with the NSE and began a pilot implementation with one of our entities. At the group level, we also achieved tangible equal efficiency improvements. Energy consumption reduced by 9.6%, renewable energy use increased to 38%, water consumption reduced by 2%, and waste generation decreased by 9%. In summary, we closed 2025 with meaningful progress across all 3 pillars, reinforcing our position as the Aval that drives support and transform the group. We continue to generate opportunities for more sustainable development and create long-term value for our shareholders and all stakeholders. Thank you. Maria Gutierrez Botero: Thank you, Paula. Now moving to the macro environment. A lot has happened since our last call that has changed our expectation for 2026. A massive and technical increase in minimum wages has triggered a substantial increase in inflation expectations and has a strong terms from the Central Bank to control inflation expectations. These recent events add to the increase in real interest rate expectations that result from growing concerns on the current administration's fiscal discipline. As a result, since our last call, we have raised 200 basis points our expectation on 2026 inflation and 350 basis points year-end 2026 Central Bank intervention rate, changing the improvement trends we previously anticipated. 2025 was characterized by elevated global uncertainty. The year was marked by abrupt changes in U.S. economic policy, increased trade tensions and greater economic fragmentation. Despite these challenges, global growth proved resilient, reaching an estimated of 3.3%, supported by a second half recovery, higher investment, and accelerated adoption of artificial intelligence technologies. In Colombia, economic activity remained resilient. GDP growth closed at 2.6% for 2025, driven primarily by household consumption and public spending. However, the GDP outlook remains challenging. Investment level stand at historical low levels and the country's fiscal deficit is among the largest globally, despite interest savings achieved through the government's liability management strategy. Household consumptions and government spending alone cannot sustain structural economic growth if investment remains absent and the government continues to crowd out the private sector. Inflation closed the year at 5.1%, remaining above the Central Bank's target range. Furthermore, inflationary pressures derived from -- derived from the 23.7% increase in the minimum wage led to the beginning of a new restrictive cycle in monetary policy as evidenced by 100 basis points increase in the Central Bank rate in January. Moving on to the exchange rate. The weaker U.S. dollar and the heavy dollar inflows from remittances and the national government liability management strategies led to 14.8% appreciation of the Colombian peso relative to the U.S. dollar. Camilo will now elaborate on our economic outlook. Camilo? Camilo Perez Alvarez: Thank you, Maria Lorena. Good morning. The Colombian economy grew by 2.6% in 2025, below the consensus estimate and that of technical staff of the Central Bank. The surprise came from investment results with gross fixed capital formation growing only 1.3%. The weak growth in investment was offset by the divestment of machinery and equipment, which registered an annual increase of 9% due to the needs faced by businesses to meet higher domestic demand. Meanwhile, investment in housing, infrastructure, and intellectual property contracted annually. As a result, Colombia ended 2025 with an investment rate of 16.6% of GDP, the lowest level so far this century. Ultimately, high levels of uncertainty, elevated interest rates due to persistent inflation and large fiscal deficits have led the country to face a complex investment landscape with the financial mining and energy construction and communication sectors being the most impacted. Conversely, the economy found supporting household and public sector spending. On the household side, higher income from wages, remittances, government transfers, coffee exports, and tourism led to an acceleration in private consumption growth from 1.6% in 2024 to 3.6% in 2025. The growth in goods expenditures surpassed that of services. As a result, sectors such as commerce, lodging, food, transportation, recreation, and services in general continued their upward trend. In manufacturing, while growth was observed in line with the increased household demand for goods, the appreciation of the peso reduced the competitiveness of local production. Meanwhile, amid the suspension of the fiscal rule and the higher budget execution, public spending increased from 0.6% growth in 2024 to 7.1% in 2025, the highest rate since 2021. Also public spending boosted local activity, it was financed with increased debt, leading to a widening of the primary fiscal deficit. Thus the fiscal stimulus appears unsustainable and ultimately display the private sector in an example of carrying out. In the external sector, lower national competitiveness explained by the appreciation of the Colombian peso against the dollar and higher labor hiring costs led to exports moderating the growth rate from 3.2% in 2024 to 1.8% in 2025. By 2026, amid more adverse financial conditions, weakening private consumption, a more challenging fiscal situation and high uncertainty surrounding the elections, the Colombian economy is projected to moderate its growth rate to 2.4%. Turning to prices. Inflation ended 2025 at 5.1%, virtually unchanged from 2024. Here, inflation improvements in rents and regulated prices were offset by increased pressure of food, goods, and services different from rents. At this point, higher labor costs resulting from the significant minimum wage increase, the reduction in working hours and the approval of labor reform weighed on inflation on goods and services. Meanwhile, high household and government spending limited the scope of improvement in inflation. By 2026, the minimum wage increase of over 23%, which in real terms was the highest in history, will lead to a resurgence of inflation. Specifically, inflation is expected to end 2026 at around 6.2%. The impact on inflation is also greater, thanks to the appreciation of the Colombian peso and its effect on the prices of inputs as well as the policy of reducing gasoline prices and the lower indexation based on rents. On the fiscal front, the government closed 2025 with the highest primary fiscal deficit, which excludes interest payments since the crisis of the 1990s and the pandemic. The government addressed the high spending pressures with active debt issuance using alternative mechanisms such as the direct sale of debt to an important investment fund and so of short and long-term debt during the year. Calculations by our economic research team indicate that the Ministry of Finance issued more than COP 110 billion of treasury bonds in 2025 when the stipulated limit was COP 95 billion. For 2026, no major changes are anticipated on the fiscal front. In fact, the deficit could exceed 7% of GDP, given the absence of the fiscal rule and, again, considering high spending and weak revenues. With this scenario where inflation is rebounding and the fiscal situation remains vulnerable, the Central Bank would consolidate an upward trend in interest rates. Our economic research team expects the benchmark interest rate to rise from 9.25% at the end of the year-end of 2025 to 11.25% by mid-2026, a level at which it would remain for at least the remainder of the year. The risks are tilted upwards. With a scenario of higher domestic interest rates, a weak dollar globally due to the United States trade policies and expectations of lower rates from the Federal Reserve, the exchange rate closed 2025 at COP 3,780 per dollar, 50% lower than at the end of 2024. However, in the second half of the year, the downward trend in the exchange rate intensified due to the government sale of dollars. In the second half of the year, the government sold more than $7 billion, an amount not seen since the pandemic. In 2026, the Colombian peso is expected to continue finding support from the wider interest rate differential, the international outlook and the nation's ample dollar availability. However, the election results will be crucial. Currently, the exchange rate is expected to remain below COP 4,000 per dollar throughout the year. Regarding the dynamics of dollar flows in the Colombian economy, it is important to note that for the first time in history, remittances surpassed oil exports as the primary source of dollars of the economy. This further consolidated diversification of the export basket. Finally, the legislative and presidential elections to be held in the first half of 2026 will define the country's economic future. It is too early to draw conclusions about the election results, but the central scenario is based on the expectation that Colombia will have a more fiscally disciplined government, which will reduce uncertainty and promote investment and in general, will make public policy decisions based on technical criteria that boost economic growth. Thank you. Back to you, Maria Lorena. Maria Gutierrez Botero: Thank you, Camilo. Turning to our financial results. 2025 was a transition year. In the banking segment, gross loans ended the year at COP 190.1 trillion, increasing by 4.8% compared to 2024. Profitability improved meaningfully, supported by a sharp decline in funding costs that expanded the spread between loan yields and funding costs by 41 basis points. Cost of risk improved from 2.3% to 1.9%, reflecting a stronger consumer portfolio performance and disciplined underwriting. Expense growth remained below the increase in the minimum wage, improving efficiency metrics. As a result, return on equity in the banking sector reached double digits. Banco Popular, Banco AV Villas returned to the profitability and Banco de Bogota, Banco de Occidente continue improving the results. Despite a weak market results at year-end, Porvenir delivered its strongest annual performance to date. Assets under management reached USD 271.2 trillion, an increase -- sorry, an increase 14.9% and ROAE reached 21.2%. Corfi worked throughout the year to lay the foundation for a new growth cycle driven by portfolio rotation and entry into high potential sectors. Deleveraging efforts and decline in rates led to a 16% reduction in funding costs, reflecting lower debt levels and more favorable interest rates. Finally, operational efficiencies continued to materialize following the exit from financial services. Now I would like to pass the call to Diego, who will give details of our results. Diego? Diego Saravia: Thank you, Maria Lorena. I will start on Pages 11 and 12 with a few charts showing the growth rate and quality of our loan portfolio relative to the rest of the Colombian banking system. For comparability reasons, these are unconsolidated figures under Colombian IFRS as published by the Superintendency of Finance. Starting on Page 11. During 2025, loans for the banking system grew 2.1% in real terms with mortgages growing 6.3%, consumer loans 1.48%, commercial loans 0.7%, all in real terms. During 2025, we continue to focus on profitable growth. We focused on local currency commercial loans in segments other than large corporates and on personal loans and credit cards and consumer lending. Peso-denominated commercial loan market share remained unchanged at 26.3%. We are selective in large corporate commercial lending given the aggressive pricing competition present throughout the year, where we lost 204 basis points. However, we gained 131 basis points of market share in local currency-denominated commercial loans other than large corporates. We gained market share in products and segments where we were underweighted such as factoring, where we gained 543 basis points to 24.2% and government loans where we gained 219 basis points to 23%. Regarding our dollar-denominated commercial loans where we have historically been overweighted, we reduced our market share by 356 basis points to 35.3%. In addition, in peso terms, the balances of dollar-denominated commercial loans were negatively impacted by the 14.8% appreciation of the Colombian peso over the year. As a result of the above, our market share for commercial loans fell 37 basis points. Consumer loans, we focused on diversifying our portfolio towards higher yielding and short-term loans, reducing our concentration in payroll lending. We gained 138 basis points of market share on personal loans to 21.5%. The Itau consumer business acquisition will take us to market weight. To strengthen our credit card business where we lost 132 basis points to 17.4%, we launched the [indiscernible] and other initiatives. All of this while maintaining our leadership position in payroll lending where we have 42.2% market share. Overall, our market share for consumer loans closed at 28.9% with a 53 basis points decrease. Moving on to mortgages. We continue gaining market share with 117 basis points increase throughout the year. As a result of the above mentioned, we closed our market share in total loans at 25%, 28 basis points lower than in 2024. On Page 12, loan quality for both the system and Aval banks showed an improvement during the year across all categories. Our banks continue to exhibit better loan quality portfolio than the system in all categories. I will now move to the consolidated results of Grupo Aval under IFRS. As mentioned by Maria Lorena, Banco Bogota entered into a share purchase agreement to sell MFG of Romanian bank. As a result, in December 2025, we classified this operation as noncurrent assets and liabilities held for sale and discontinued operations. For reason of comparison with previously reported periods, we're showing retrospectively on this call pro forma balances and ratios, classifying MFG as noncurrent assets and liabilities held for sale and discontinued operations. On Page 13, we present assets and loans. Assets grew 6.4% year-on-year and 1.5% for the quarter to COP 349 trillion. Fixed income investments, which account for 15.8% of our assets reached COP 5.2 trillion, growing 21.2% year-on-year and decreasing 0.2% over the quarter. Gross loans, which account for 54.7% of our assets reached COP 190.9 trillion, growing 46% year-on-year and 1.5% over the quarter. Growth metrics were affected by a 4.2% depreciation of the Colombian peso during the quarter and 14.8% over the year. Peso-denominated loans that now account for 91.3% of gross loans grew 6.8% year-on-year and 1.7% during the quarter. Commercial loans expanded by 1.9% year-on-year and 1.1% over the quarter. Peso-denominated commercial loans that account for 84.7% of gross loans grew 5.5% year-on-year and 1.4% during the quarter. Dollar-denominated commercial loans, which accounts for 15.3% of commercial loans grew 0.4% in dollar terms year-on-year and 3.9% during the quarter. In peso terms, our dollar-denominated loans contracted 14.5% year-on-year and 0.5% quarter-on-quarter. Consumer loans grew 4.7% year-on-year and 1.2% during the quarter. Personal loans grew 12% year-on-year and 5% during the quarter. Credit cards contracted 1.5% year-on-year and increased 2.9% during the quarter. Our loans grew 0.6% year-on-year and 1.1% during the quarter. Payroll loans increased 3.2% year-on-year and decreased 0.9% during the quarter. Mortgages grew 19.6% year-on-year and 3.9% during the quarter. On Page 14, we present the evolution of funding and deposits. Total funding increased 8.7% year-on-year and 1.4% in the quarter. The bank borrowings grew 28% year-on-year, in line with the expansion of our trading investment portfolio, as mentioned before, and account for 8.2% of total funding. Deposits that account for around 3/4 of our funding grew 11.2% year-on-year and 3.6% quarter-on-quarter. Our deposit to net loan ratio closed at 113%. On Page 15, we present the evolution of our total capitalization, our attributable shareholders' equity and the capital adequacy ratio of our banks. Our total equity increased 0.3% over the quarter and 4.8% year-on-year, while our attributable equity increased 0.2% over the quarter and 5.7% year-on-year. Total solvency and Tier 1 ratios evidence a relative stability in most of our banks. On Page 16, we present NIM, our net interest margin. Net interest income reached COP 9.3 trillion for the year, increasing 17.4% compared to 2024. Total NIM for the year increased 28 basis points to 3.78% in 2025. Our consolidated NIM on loans expanded by 28 basis points year-on-year to 4.71%, while NIM on investments decreased by 8 basis points to 0.82%. NIM on loans incorporates an 84% year-on-year expansion of NIM on retail loans to 6.33% and an 18 basis points year-on-year contraction in NIM on commercial loans to 3.5%. Focusing on our banking segment, the total NIM of our banking segment expanded 8 basis points over the year to 4.47% due to the same dynamics that affected our consolidated net interest margin. NIM on loans was 5.24%, increasing 9 basis points year-on-year. This incorporates a 69 basis points year-on-year increase in NIM on retail loans to 6.9% and a 39 basis points year-on-year decrease in NIM on commercial loans to 4.02%. Quarterly NIM was negatively impacted by adverse capital market performance, driven by a 3.48% negative NIM on investments. In contrast, NIM on loans for the quarter reached 5.05%, 48 basis points higher than the previous quarter and the best result in 12 quarters. As discussed by Maria Lorena, the recent shift in the monetary cycle in response to recent government decisions will act as a headwind for NIM over the next quarters. The development of our financial diversification strategic pillar continues to pay off. We have diversified our funding sources towards less sensitive non maturing deposits, including deposits from individuals and cash management linked deposits. Our banks lowered maturities and repricing gaps and actively implemented interest rate hedging strategies. On Page 17, we present our yield on loans, cost of funds spreads. On a consolidated basis, the average yield on loans for the year decreased 126 basis points to 12.06%, while the annual average 3-month IDR decreased 158 basis points to 9.4%. Consolidated cost of deposits decreased 148 basis points during the year to 6.63%, while our cost of funds decreased 141 basis points to 6.8%. On Pages 18 through 20, we present several portfolio quality ratios -- starting on Page 18. Loan portfolio quality ratios continued to improve during the quarter. PDL metrics continue to improve in all categories. 30-day PDL formation for the year reached COP 4.2 trillion, 32.8% lower than for 2024. 30-day PDLs were 4.37%, a 98 basis points improvement over 12 months and 37 basis points over the quarter. 90-day PDLs were 3.29%, a 77 basis points improvement over 12 months and 11 basis points improvement over the quarter. Commercial loans 30-day PDLs were 3.84%, a 101 improvement year-on-year and 38 basis points improvement quarter-on-quarter. 90-day PDLs were 3.48%, a 91 basis points improvement over the year and 19 basis points over the quarter. Consumer 30-day PDLs improved 117 basis points year-on-year and 16 basis points over the quarter to 4.67%. 90-day PDLs improved 63 basis points year-on-year and 5 basis points during the quarter to 2.79%. Mortgage 30-day PDLs and 90-day PDLs improved 8 basis points and 10 basis points, respectively, over the quarter to 6.18% and 3.75%, respectively. Finally, the ratio of charge-offs to average 90-day PDLs for 2025 was 0.82x. On Page 19. The share of our portfolio classified as Stage 1 grew to 89.8%, while Stage 3 decreased for a 6-month consecutive quarter -- consecutive quarter to 5.7%, driven by improvements in our consumer portfolio. Coverage measured as allowances for Stages 2 and 3 as a percentage of Stages 2 and 3 was 33.6%, decreasing 545 basis points relative to a year earlier due to improvement in the mix. On Page 20, in 2025, cost of risk net of recoveries fell 38 basis points to 1.9%, in line with our expectations for the year. For consumer loans, cost of risk net of recoveries improved 157 basis points to 4.2%. This includes a 449 basis points improvement in personal loans to 8.4%. For commercial loans, cost of risk net of recoveries was 0.7%. During the fourth quarter of 2025, cost of risk net of recoveries fell 27 basis points to 1.7%, the lowest in 12 quarters, driven by a decrease both in commercial and consumer portfolios of 36 basis points to 0.6% and 23 basis points to 3.8%, respectively. On Page 21, we present net fees and other income. Annual gross fee income grew 6.8%, while net fee increased 5.3%, quarterly gross and net fee income increased 8.5% and 9.6% year-on-year. In terms of annual gross fees, pension and trust fees grew 9.1% and 14.9%, boosted by performance-based management fees that followed the positive returns of the financial markets throughout the year. Our annual income from the nonfinancial sector was 84% of that recorded in 2024, mainly due to a lower contribution from the infrastructure sector. Quarterly income was affected by a lower income from the energy and gas sector and the infrastructure sector as well. This was partially offset by income from hotels. Finally, at the bottom of the page, the annual increase in the operating income is mainly driven by a COP 605 billion improvement in derivatives and FX gains. Hedging strategies relative to the nonfinancial sector are registered under foreign exchange gains and account for COP 863 billion yearly improvement. During the quarter, one of Promigas transportation pipelines measured as fair value reverted to the company's PP&E and implied a onetime fair value recognition of COP 303 billion. This effect was registered under net income from other financial instruments mandatory at fair value to P&L. This positive effect was offset by a onetime remeasurement of the deferred tax liabilities to COP 359 billion. Net-net, the transaction had a COP 56 billion negative effect on net income and COP 12 billion negative effect on our attributable net income. On Page 22, we present some efficiency ratios. Cost to assets remained flat at 2.6% Annual cost to income improved 101 basis points to 52.2% over the quarter. On a quarterly basis, it reached 54.9%, 550 basis points lower than a year earlier. Annual expenses grew 9.6% during the year. General and admin expenses grew 9.4% year-on-year. Personnel expenses grew 6.9% year-on-year, well below the 9.5% increase in Colombia's minimum wage. Finally, on Page 23, we present our net income and profitability ratios. Attributable net income from continued operations for the quarter was COP 474 million, 57.5% higher than the same quarter of the previous year. Total attributable net income for the year reached COP 1.72 trillion or COP 72.5 per share, increasing close to 70% compared to the previous year. Our annual return on average assets was 1% and our average annual return on average equity was 9.6%, 28 basis points and 366 basis points above 2024, respectively. In terms of discontinued operations, the results contributed by MFG's operations as all attributable net income adding COP 18 billion. To wrap up, we are updating our guidance to reflect changes in the macro environment impacting our business. We expect loan growth in the 10% area with commercial loans growing at 7% and retail loans growing at 14%. Total NIM in the 4.3% area with NIM on loans in the 4.7% area. Our NIM of the banking segment in the 5.1% area with NIM on loans in the 5.4% area. Cost of risk net of recoveries in the 2% area, cost to assets in the 2.8% area. Income from the nonfinancial sector, 1.3x that of 2025. Our fee income ratio in the 21% area. And finally, we expect a 2026 return on average equity to be in the 10.5% area. This guidance does not incorporate the recently announced wealth tax, which we estimate will have an impact on our ROE of 1 percentage point area. Back to you, Maria Lorena. Maria Gutierrez Botero: Okay. Thank you, Diego. Before moving into questions and answers, I would like to share some final thoughts of Colombia and Grupo Aval in 2026. We expect 2026 to continue to be challenging in Colombia given the effects of political volatility and electoral uncertainty. Economic conditions are expected to remain challenging, both locally and globally. We expect GDP growth to remain moderate in 2026 and a restrictive monetary environment. The massive minimum wage increase will put pressure on our cost base that of our customers. Inflation will remain above the Central Bank's target range, which implies a return to a higher for longer interest rate environment. Despite this backdrop, we strongly believe that we should remain focused in our strategy and improving our business and abstain from echoing uncertainty. The financial sector will continue to be a pillar of trust and investment. We expect to continue growing our financial business and invest through core fee in the nonfinancial sector in the region during 2026. As a result, we expect to continue strengthening our core business, supported on an expansion of risk-adjusted NIM on loans, commercial and operational effectiveness and a stronger fee generation. In 2026, we will continue delivering new and innovative products. In addition, during this year, we expect to see increases in efficiencies from shared services and IT integration initiatives and strengthening a client-center unified corporate culture. So we are now open for questions. Operator: [Operator Instructions] Our first question will come from the line of Daniel Mora with CrediCorp Capital. Daniel Mora: I have a couple of questions. The first one is regarding the new tax for companies. I would like to know what did you understand for liquid equity as it says that it is gross equity minus debt for the tax? So I would like to understand how it will be applied for Bank of Aval, you already mentioned a 1% point for the consolidated ROE, but I would like to understand what will be the impact across Bank of Aval? That will be the first question. And the second one is also on regulatory issues and regarding taxes, considering the previous economic emergency decree was put on hold, what is the effective tax rate that you are using in your numbers? Are you considering the 15% tax surcharge or paying, for example, deferred taxes? Diego Saravia: Okay. I'll try to answer you, of course. I can't be a tax adviser here for you, but our understanding of how the network tax works is similar to what we've done -- we've experienced in the past, and it is subtracting from the tax base, the equity tax base of the bank or the company, its tax acquisition price of the shares it holds in its taxable balance sheet. That's the way it is expected to work, and it is similar to what has been in the past, the kind of language that we've seen in what has come up to date is basically the same that we saw in 2014. Regarding what happens to the group, yes, attributable should be something in the order of magnitude of 1 percentage point. And if you think that the attributable net -- the attributable equity of Grupo Aval is roughly 55%, 60% of the consolidated group. If you add what our group will be contributing to the tax in that sense would be almost twice of what we do attributable to our shareholders. Regarding how we calculate our tax in our guidance. The number comes out something similar to 35%. That is a combination of the taxes that we have to pay for our financial companies that have a surcharge in our numbers of 5% and then the taxes that other companies pay less those that have some exceptions. So... Maria Gutierrez Botero: But it means that is without the economic emergency... Diego Saravia: Exactly. Maria Gutierrez Botero: For the situation that we have before that. Diego Saravia: Exactly. That is what we expect on our base. And as I mentioned, the equity tax would add up to that around 5 percentage points if you were to make our calculation based on marginal tax. Operator: Our next question will come from the line of Brian Flores with Citibank. Brian Flores: Can you provide an update on the guidance you provided in the third quarter regarding loan growth, cost of risk, and ROE? I think it would be very useful. And then just to confirm, basically, you're saying your base case is no change in the tax rate, right? You're basically saying we have no surcharge and we have no wealth tax. That is the base case implied in the guidance, right? Diego Saravia: Yes. The 10.5%, you're right, the 10.5% basically takes taxes as well, not the taxes from the emergency, and that's why we are guiding into an additional effect that we could have from the wealth tax. Regarding our guidance, we have slightly reduced our guidance on growth. And regarding ROE, there is an implied 150 basis points reduction in guidance and ROE compared to our last call. Brian Flores: Okay. So just to confirm here, you were, if I'm not mistaken, guiding for a range of 12% to 12.5%. We're basically going to 11% or close to 11%. Is this... Diego Saravia: Just restating, we are in the 10.5% area guiding. Last time we were in the 12% area with an upward bias at that point. Brian Flores: Okay. If I may, you basically are explaining that you are seeing no changes in the tax rate, slightly lower loan growth. So which is the driver here on the reduction? Is it -- I know you're liability sensitive or not as asset sensitive as other banks, so it could be the NIM? Or do you think this is more related to cost of risk? Because you mentioned efficiencies should be better in 2026 and onwards from what I understood. Diego Saravia: Yes. It's a combination of several things. One and the main driver is a better mix of our loan portfolio that is also helping us to cope with the kind of behavior of the Central Bank rate that will imply a relatively better NIM year-on-year. There could be a reduction if you take the numbers that we had for the fourth quarter that was the best quarter in NIM, as I mentioned. However, year-on-year that there's an improvement. There's other things that are going to happen, and it is we expect Porvenir to have a better performance than what we had guided before, basically for 2 reasons. One, higher minimum wage implies higher fees from contributions from our customers. And then a higher interest rate environment is positive for Porvenir. On top of that, we have the other inorganic discussions that Maria Lorena pointed out that we expect to help us. We expect to see our mix improve. You've seen that throughout the past years, we've been moving towards retail to the retail segment. We've been working strongly on improving that organically and organically. That also improves our performance. And actually, when we compare our cost of risk, there is no change in cost of risk. The other area that -- where we could see a substantial improvement is NIM coming from investments. In general terms, we've seen volatility in this year, and there's been points in time as was fourth quarter where NIM on investments was negative on our results. Brian Flores: Super clear. I am very sorry to insist here. Just that I don't understand because if you're assuming no change in cost of risk and you're assuming a better mix and what I understood is a stable NIM, but then you're mentioning basically the reduction on ROE is of 100 bps year-over-year in the guidance. Is this only coming directly from a reduction in your expectations of loan growth, which I assume they were around 8% in the last call? Diego Saravia: Yes. I have to correct myself. I just pulled out our guidance last time. We have actually a slight pickup on retail. And we also have, as I mentioned before, when you look at our effective tax rate, we're also building in a higher tax rate for this year. Operator: [Operator Instructions] There are no further questions at this time. Ms. Maria Lorena Gutierrez Botero, I turn the call back over to you. Maria Gutierrez Botero: I just want to say thank you for being here with us and see you in 3 months. Bye. Operator: Thank you, ladies and gentlemen. This concludes today's conference. Thank you for joining. You may now disconnect.
Operator: Hello, and welcome to the TORM Full Year 2025 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Jacob Meldgaard, CEO. You may begin. Jacob Meldgaard: Thank you, and welcome to everyone joining us here today. This morning, we released our annual report for 2025, and we are satisfied with the results, which, once again, reflect our strong execution across the business. However, before I now turn to the results, I want to spend a little time talking about TORM and the foundation that enables these results and consistently differentiates TORM in the market. I want to talk about the key pillars of our business that have placed us in a strong position to date and that we believe will continue to do so in the future. We are immensely proud of what we have achieved here at TORM. Our ownership model and culture provides us with a clarity of purpose that streamlines our actions across the business. We are focused each and every day on staying one step ahead of other fleets to make the most of every opportunity. We believe our ability to deliver on this ambition for our shareholders is a distinct competitive advantage. Underpinning our strategic focus is the platform you will know as One TORM. We believe this is a point of difference that sets us apart. The model was originally built around a spot-oriented strategy to unite the business and accelerate decision-making and response time. It enables us to use real-time data and insights to share our deep expertise at the core of the business at a moment's notice. We are not complacent. Since its inception, we have continuously refined this model using the latest technology, advanced analytics and proprietary data at our disposal to ensure we remain as alert and responsive as we possibly can be. In short, we can identify and capture attractive trading opportunities even in the most challenging markets, and perhaps I should say, especially in challenging markets, exactly the type of markets which now characterize the shipping industry even as we see comparatively fewer headwinds here into 2026. For our shareholders, this approach offers a very clear advantage. We believe an industry benchmark for unrivaled consistency, strategic optionality and financial discipline that you can see once again in our numbers. And here, please turn to Slide #4. In here and on the next 2 slides, we show the key figures for the quarter and the full year. As always, I'll start with the quarterly numbers to give you a clear picture of how the business is developing. In Q4, TCE came in at USD 251 million, slightly above Q3, supported by firm freight rates throughout the quarter. This strong performance resulted in a net profit of USD 87 million, which enables us to declare a dividend of $0.70 per share, once again demonstrating our higher earnings translate directly into higher shareholder returns. During the quarter, we were active in the S&P market. We added 2 2016-built LR2s and 6 MR vessels built between 2014 and '18, while divesting 1 older 2008-built LR2. Several of the vessels were delivered before year-end, bringing our fleet to 93 vessels. And after completing the remaining deliveries at the start of 2026, our fleet comprises 95 vessels. Importantly, our investments were exceptionally well timed. Based on current broker valuations, the vessels we acquired have already been appreciated by a double-digit U.S. dollar amount. This reflects not only the quality of the assets and our disciplined approach to capital allocation, but also a market that continuously turned more positive, supporting higher asset values across the product tanker space. Now turning to Slide 5, we show the full year numbers. These are strong results. A year ago, our TCE guidance was USD 650 million to USD 950 million, and we closed the year towards the high end with USD 910 million. While not matching the all-time high in 2024, it remains a very satisfactory outcome. Freight rates strengthened from the first to the second half of the year and ended at attractive levels. In this environment, TORM achieved fleet-wide rates of USD 28,703 per day, which we are very pleased with and which again demonstrates our ability to outperform the broader market. Net profit for the year totaled USD 286 million, of which USD 212 million is being returned to shareholders. With that overview in place, let us take a step back and look at the broader market dynamics that shape the environment we operate in. And here, please turn to the next slide to Slide 7. And after a softer, but still historically strong 2025, product tanker freight rates have now returned to the average levels that were seen in the 2022 to 2024 market. Underlying demand for product tankers has remained steady, and the recent uplift in rates has been driven primarily by developments elsewhere in the tanker complex. The crude market has moved into territory that, while not unprecedented, is extremely rare. VLCC spot rates have surged to the USD 200,000 per day range, a unique and record-breaking level, and with charterers reportedly fixing 1-year deals above USD 110,000 per day. This strength is spilling over into the rest of the market, first into Suezmax and Aframax and then further into clean product tankers. If this momentum continues, we are potentially looking at a very interesting rate environment. At the same time, sanctions in the dirty Aframax segment have tightened vessel availability, triggering a large shift of LR2s from clean to dirty trade. This reduction in clean LR2 supply has further supported product tanker earnings. After several years of partial decoupling between segments, the product tanker market is once again being carried by the broader strength in crude. VLCCs, as mentioned in particular, continue to benefit from increased OPEC production, renewed stock building demand from China, heightened geopolitical tensions involving Venezuela and Iran and further consolidation in the segment. All these factors together have created one of the strongest cross-segment market backdrops we have seen in years. Please turn to Slide 8. And here, let's have a look at the product tanker demand side. Seaborne volumes of clean petroleum products have been trending upwards in recent months. However, the overall impact of the Red Sea rerouting has been largely neutral due to lower trade volumes and a partial return to Red Sea transits. Trade volumes from the Middle East and Asia to Europe have started the year at 30% below pre-disruption levels, which is largely a result of lower flows from India amid introduction of an EU ban on imports of oil products derived from Russian crude. At the same time, an increasing number of vessels have resumed transiting the Red Sea with an, on average, 40% of the clean petroleum product volumes on the Middle East, Asia to Europe route traveling via the Red Sea in 2025. This is up from under 10% in 2024. As a result, we see limited downside risk from a potential full normalization of the Red Sea transit as much of this effect has already been unwound and instead, a likely rebound in clean petroleum trade volumes after the normalization of the transit would increase ton-miles. This is reinforced by the closure of 5% of the refining capacity in Northwest Europe last year, which is driving higher import needs for middle distillates. Additional support comes from sustained strength in crude tanker rates, which limits the crude tanker cannibalization and also from rising clean product ton-miles driven by refinery closures on the U.S. West Coast. Kindly turn to Slide 9. Let's turn to now the supply dynamics. Newbuilding deliveries have increased here in 2025, but this has not translated into effective growth in the fleet trading clean products. In fact, since the start of 2024, nominal product tanker fleet capacity is up by 8%, yet the capacity actually trading clean today is 1% lower than it was at the beginning of 2024. This disconnect is primarily due to sanctions in the Aframax segment, which had incentivized a significant shift of LR2 vessels into duty trades. To illustrate this point, compared to the start of 2025, currently, there are 20 fewer LR2 vessels transporting clean petroleum products and, at the same time, 65 newbuildings have been delivered to the LR2 fleet during the same period. The scale of the sanctions is notable. 1 in 4 vessels in the combined Aframax LR2 segment is currently under U.S., EU or U.K. sanctions. This comes on top of the fact that the order book is already balanced by the high share of overage vessels in this segment. Next slide, please, Slide 10. And here, let me just elaborate a little on vessel sanctions. So most sanctioned vessels were added to the list last year. So in 2025 alone, more than 200 Aframax and LR2 vessels were sanctioned. This is 3.5x the number of newbuilding deliveries in the segment in 2025, and it is equivalent to almost the entire combined newbuilding program for a 3-year period from 2025 to 2027. With 60% of these now sanctioned vessels being older than 20 years, their likelihood of returning to the mainstream market even if sanctions were lifted appears to be limited. And now turn to Slide 11, please. Geopolitical developments continue to be a major driver of market dynamics. And in fact, the list of different geopolitical drivers has only gotten longer in the past 4 years. The growing number of policy interventions and geopolitical flash points increases uncertainty and associated inefficiencies. Beyond the policies directly affecting product tankers, developments in the crude tanker market such as a potential tightening of sanctions against Iran, rising OPEC production are also indirectly supportive for product tanker demand. We sincerely hope for a ceasefire between Ukraine and Russia. However, we see the likelihood of trade returning to pre-war levels as very low or nonexistent in the foreseeable future given the EU's clear determination to tighten sanctions. The EU ban on Russian crude oil and oil products has been by far the most significant sanction against Russia in terms of ton-miles. And the new 20th sanction package the EU is working on is potentially adding a full maritime services ban to it, pausing an even larger share of Russian oil flows into the shadow fleet. This would likely further increase the inefficiencies of the fleet trading Russian oil. Please turn to the next slide, Slide 12. And in summary, the key geopolitical forces continue to shape this year's market. While a potential normalization of Red Sea transit is unlikely to weigh on the market, the EU's ban on Russian oil will continue to underpin longer trading distances. On the demand side, ongoing shifts in global refining capacity continue to support ton-mile expansion. On the tonnage supply side, the increase in newbuilding deliveries will be balanced by a growing pool of scrapping candidates and reduced participation from sanctioned vessels, factors that will influence overall tonnage availability and market equilibrium. Against this backdrop, I'm confident that TORM is well positioned to navigate an environment marked by uncertainty and supported by our solid capital structure, strong operational leverage and our fully integrated platform. So with that, I'll now hand it over to you, Kim, who will take us through the numbers. Kim Balle: Thank you, Jacob. Now please turn to Slide 14, and let me walk you through some of the drivers behind our performance this quarter and for the full year. Starting with the market backdrop. The product tanker market stayed strong throughout the fourth quarter, and that supported another solid result for us. For Q4, we delivered TCE of USD 251 million, which translated into EBITDA of USD 156 million and net profit of USD 87 million. Across the fleet, our average TCE came in at USD 30,658 per day. Breaking that down, our LR2 earned above USD 35,000, LR1s were above $31,000 and MRs were just under USD 29,000 per day. For the long-range vessels, these numbers were actually a bit better than we indicated in our Q3 coverage, reflecting continued strong markets, helped in part by very firm crude tanker rates. For the full year, we delivered TCE of USD 910 million, EBITDA of USD 571 million and net profit of USD 286 million. These are solid numbers. As expected, earnings moderated from the exceptional levels of last year, but they remain robust and importantly, very much in line with the guidance we shared in November. And turning to shareholder returns. With a strong Q4, earnings per share reached $0.88, and the Board has declared a dividend of $0.70 per share, bringing total dividends for the year to USD 2.12 per share. We continue to believe that our capital return framework strikes the right balance, clear, disciplined and supported by robust cash earnings generation. And with that overview in place, let us move to Slide 15, where we break down the earnings in more details and talk through the underlying drivers. Slide 15 shows our quarterly revenue progression since Q4 2024. With this quarter's results, we see a meaningful uptick building on the positive trajectory in freight rates and earnings we delivered over recent quarters. It's a clear indication of the favorable market environment we are operating in. For the quarter, we delivered TCE of USD 251 million and EBITDA of USD 156 million, making our strongest quarterly performance this year. The underlying uplift is driven by firm freight rates supported by solid fundamentals and a positive spillover from the crude tanker segment, as mentioned. Given our operational leverage, we were well positioned to benefit from what we already see as very attractive freight rates. Please turn to Slide 16. Here, we show the quarterly development in net profit and the key share-related metrics. For the fourth quarter, earnings per share came in at $0.88. Our approach to shareholder returns remain clear, disciplined and consistent. We continue to distribute excess liquidity on a quarterly basis while maintaining a prudent financial buffer to safeguard the balance sheet. For Q4, this has resulted in a declared dividend of $0.70 per share, corresponding to a payout ratio of 82%. This is fully aligned with our free cash flow and debt -- after debt repayments and reflects both the strength of our earnings and our ongoing commitment to responsible capital allocation. And now please turn to Slide 17. As shown on this slide, broker valuations for our fleet stood at USD 3.2 billion at year-end. This reflects a continued positive sentiment in the market and results in an NAV increase to USD 2.6 billion. Importantly to note, average broker valuations for the fleet increased by 4.2% during the quarter, driven primarily by higher valuations for our LR2 vessels, which saw the strongest appreciation. This uplift further underscores the improving market backdrop and the quality of our asset base. In the recent quarter -- or sorry, in the central chart, you can see our net interest-bearing debt, which now stands at USD 848 million, corresponding to 29.4% in net LTV. The increase reflects the vessels acquired during the quarter, which naturally required incremental funding. Importantly, even with this investment-driven uptick, our leverage ratio remains within the range that we have maintained over recent quarters, typically between 25% to 30%, underscoring the strength of our conservative capital structure. This stable leverage -- sorry, this stable level continues to provide us with ample financial flexibility to pursue value-accretive opportunities while safeguarding balance sheet resilience across market cycles. On the right, you can see our debt maturity profile. We have USD 135 million in borrowings maturing over the next 12 months, excluding lease terminations that have already been refinanced. Beyond that, only modest amounts fall due in the following years. Overall, our solid balance sheet gives us sustainable financial flexibility to navigate current market conditions with confidence and to pursue value-creating opportunities as they emerge. Now please turn to Slide 18. This time, we have added a new slide to show what is actually -- what it actually means for the value creation when we consistently achieve rates above the market average. The MR segment is our largest exposure and a segment where competitors also have meaningful scale, making it the most representative benchmark for the product tanker market. We could, of course, perform a similar comparison for LR2 vessels. However, the benchmarking becomes less robust as many of our peers operate only a relative small LR2 fleet, limiting the comparability and statistical relevance for such an analysis. That said, based on the data available, a comparable calculation for the LR2 segment would probably show the same picture. As shown on Slide 24 in the appendix, we compare the rates we achieved with those of our peer group. Quarter after quarter and year after year, we have consistently delivered rates well above the peer average and in most quarters, even market-leading. This performance is a direct outcome of the One TORM that Jacob discussed and which continues to differentiate us in the market. But on this slide, when we take the analysis a step further by quantifying what that actually means, then, holding everything else equal, we calculate the premium TCE by taking our spot TCE relative to the peer average, multiplying it by our operating base and comparing that figure directly with our dividend in each quarter from 2022 to 2025. This provides a clear transparent view of the tangible financial value created by outperforming the market. Two examples illustrate the impact. In 2022, we returned USD 381 million in dividends. Our premium TCE was USD 38 million, around 10% of the total dividends paid. And in 2025, based on the first 3 quarters, the premium reached USD 49 million compared to our full year dividend of $212 million, that represents 23% of the total. So the message is clear. Our strong rates have a material and measurable impact on our dividends returned to our shareholders. Across that period, which includes different market conditions, we have returned USD 1.6 billion in cash dividends. And our analysis show that premium earnings from the MR fleet accounted for roughly 15% of the total dividends paid over the past 4 years. And now please turn to Slide 20 for the outlook. We're stepping into 2026 from a clear position of strength and solid momentum across our business. In Q1, we have already secured 70% of our earnings days at an attractive average TCE of USD 34,926 per day. This strong coverage provides a robust foundation for the year and reflects the positive traction we are seeing across all vessel segments. With the coverage already locked in and the encouraging market outlook ahead, we expect TCE earnings of USD 850 million to USD 1.25 billion and EBITDA of USD 500 million to USD 900 million. Both ranges are based on our midpoint internal forecast, after which we apply a defined range to reflect the uncertainty associated with the full year outlook and the potential volatility in the market conditions as the year progresses. And we are entering the year with confidence and real momentum behind us. And with this, I will conclude my remarks and hand it back to the operator. Operator: [Operator Instructions] Your first question comes from Frode Morkedal with Clarksons Securities. Frode Morkedal: First question I have is on the EBITDA guidance or the revenue guidance. If you could, I'm curious about what type of spot rate assumption you made there? Of course, I understand there's a lot of moving parts in this type of guidance, but let's say, LR2, MR rates in the high end, what are -- what's the implied rate, if you can share that? Kim Balle: Frode, I can tell you about our methodology that we use when calculating our guidance for the year. So we take the coverage, the fixed days we have already made for Q1, and then we apply the unfixed days for the rest of the year with the forward curve that we see in the market for the remainder of that period. And then you get to a midpoint. And from that midpoint of TCE, you then deduct our normal cost and get to an EBITDA. And depending on where the freight rates are, we stress that with an interval. And as they are higher right now, you will see, compared to last year, that the interval is slightly higher than we had a year ago. That is due to both what I just said, the higher rates, freight rates, but also more earning days, of course. So that's the methodology behind. So we are basically building it on what we have achieved already and then the markets. Frode Morkedal: Right. So is it just FFA market or time charter rates that you're looking at or... Kim Balle: It's forward freight rates. Frode Morkedal: And can you just say like the midpoint, is that -- roughly is that curve today when you made the guidance? Kim Balle: It's around $30,400 across the fleet. Frode Morkedal: Right. Okay. That's a good reference point. So yes, but just I wanted to discuss how you see the strength in the crude market impacting the products? Clearly, you talked about the switching. I'm curious to know if you think there's more to go there? I have noticed that crude Aframaxes are still trading with quite a significant differential to LR2 spot rates. So yes, curious to hear your views. Jacob Meldgaard: Yes. Obviously, time will tell. But I think clearly, the strength that we are seeing across the crude segments is first and foremost, having a direct one-to-one impact on the behavior of the LR2 fleet and LR2 owners. So the incentive currently to switch from being participating as an LR2 in the CPP market and potentially moving into the crude market is a little depend on whether you are in the Western hemisphere or the Eastern hemisphere. But just as an example, as you point to in the Western hemisphere, there's a clear financial incentive to switch over. I think we will see more of that as we showed in the graph. There is basically fewer vessels that are available due to the sanctions regime imposed, especially by the U.K. and EU, but also by OFAC. So that means that the compliant requirements for our customers, whether it's in CPP or in dirty trade, is serviced by fewer vessels, fewer assets. And that is pushing rates higher as we speak. We see term rates rising, and they are not to the extreme volatility that we see in the VLCC segment, but still significantly higher for a 1-year charter today than what it was at the beginning of the year. And I think this trend, let's see how it plays out, but I think it is here to stay. So we're quite optimistic in the earning power in the segments, to be honest. Frode Morkedal: I agree. I guess the acquisition you made, I think it was 8 ships, right, in Q4. That was a pretty good timing. I think we discussed it last time, but maybe you could just discuss how you thought about the investment case at the time. Clearly, it's been a -- was a good idea to buy these ships. And secondly, what's your view now at this point in time of further opportunities to acquire ships? Jacob Meldgaard: Yes. So I think it's like this, that we did -- when we had the conversation, I think also on this call in Q4, I think we illustrated that we are looking at it quite methodically and just saying what is the sweet spot in terms of our expectation of the free cash flow that we can generate from an asset and where is the asset [indiscernible]. And what we identified was these pockets of that we could buy some LR2s and we did some here actually towards sort of mid-December bought a couple of ships. And clearly, today, the price of these assets and one of them is actually only delivering tomorrow is already up by 20%. So if you isolate it out and just say, yes, that's good timing. But the backdrop of that is, of course, also that now when we had to sort of do our own thinking around potential other acquisitions, clearly, with assets rising like this, it gets harder to make the next acquisition. So I think we were fortunate about the timing on these 8 ships. We actually had hoped, to be very honest, to have upped the end a little on that in terms of number of assets, but they were simply not available at that point in time at attractive prices. So I think we just had to regroup a little. Asset prices are moving quite fast, and we just have to regroup and make sure we still follow our methodology and not get carried away. But I'm optimistic that we can maybe identify a few, let's say, some other deals that sort of fits the bill on our return requirements. Kim Balle: Frode, may I just -- I need to answer your question. You started a bit more precise than what we did, just so it's clear how we do it on the guidance. I just didn't have them in my head, but I have the numbers here. So if you take Q1, we had covered 8,177 days with $34,208. Then we take the uncovered days, that's 25,691 at $30,371. And then you do the math from there. Then you come to a total number of days, operating days and average TCE. And then you get to a TCE and you stress that. Frode Morkedal: Right. That's good. So on the stress test, do you have like a percentage plus/minus or... Kim Balle: That's -- we derived it a few years ago, but the way we use it is plus/minus TCE, and it depends on how much the stress depends on what the actual TCE level is. The lower it is, the lower the stress is, the higher it is, the higher the stress is. So it depends on where you are on the actual TCE levels. Operator: Your next question comes from [ Clement Mullins ] with Value Investors Edge. Clement Mullin: I wanted to start by following up on Frode's question on Afras and LR2s. Could you talk a bit about the portion of your LR2 fleet that traded dirty throughout the quarter? And secondly, on the LR1 side, have you seen an increase in the proportion of vessels trading dirty over the past few months? Jacob Meldgaard: Yes. Thanks for those very precise ones. So I'll start from the back end of this. So we have not really seen that the dirty market has affected the LR1s in our fleet and in our case. And when we look at our vessels and on the spot, we basically have 10% to 20% of our LR2s trading spot dirty. And then we've got another 10% that is on term charter dirty. Clement Mullin: That's helpful. And you continue to outperform peers on the MR side with your chartering team doing an excellent job. Could you talk a bit about what portion of your administrative expenses is attributable to the chartering team versus kind of the corporate side? Any color you could provide would be really helpful. Jacob Meldgaard: Yes. So we actually don't account like that. We -- as I tried to illustrate also in the beginning, on the One TORM platform, we believe that it's not actually the chartering team that is the secret sauce. It is actually the power of -- that you have in an organization ranging from the employees who bought a ship to the people doing the accounting and operations, technical. And of course, also, as you point to, the chartering team, but their success is not an isolated thing that has to do with their ability, it's the whole structure. So we don't -- I don't have an answer. I don't know the number. It's not the way we think about... Operator: There are no further questions at this time. I'll turn the call to Jacob Meldgaard for closing remarks. Jacob Meldgaard: Yes. Thank you very much, everyone, for listening in on the annual report 2021 for -- 2025, obviously, for TORM. Thank you very much for listening in, and have a great day. Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.
Operator: Good day, and welcome to Vistra's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded. I would now like to turn the conference over to Eric Micek, Vice President, Investor Relations. Please go ahead. Eric Micek: Good morning, and thank you for joining Vistra's investor webcast discussing our fourth quarter and full year 2025 results. Our discussion today is being broadcast live from the Investor Relations section of our website at www.vistracorp.com. There, you can also find copies of today's investor presentation and earnings release. Providing our prepared remarks today are Jim Burke, Vistra's President and Chief Executive Officer; and Kris Moldovan, Vistra's Executive Vice President and Chief Financial Officer. Other senior Vistra executives will be available to address questions during the second part of today's call as necessary. Our earnings release, presentation and other matters discussed on the call today include references to certain non-GAAP financial measures. All references to adjusted EBITDA and adjusted free cash flow before growth throughout this presentation refer to ongoing operations adjusted EBITDA and ongoing operations adjusted free cash flow before growth. Reconciliations to the most directly comparable GAAP measures are provided in the earnings release and in the appendix to the investor presentation available in the Investor Relations section of Vistra's website. Also, today's discussion contains forward-looking statements, which are based on assumptions we believe to be reasonable only as of today's date. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected or implied. We assume no obligation to update our forward-looking statements. I encourage all listeners to review the safe harbor statements included on Slide 2 of the investor presentation on our website that explains the risks of forward-looking statements, the limitations of certain industry and market data included in the presentation and the use of non-GAAP financial measures. I will now turn the call over to our President and CEO, Jim Burke. James Burke: Thank you, Eric, and good morning, everyone. Thank you for joining us to discuss Vistra's fourth quarter and full year 2025 results. 2025 was a transformational year for Vistra. We made a number of moves that I believe underscore the value of our integrated model. We executed strategic asset acquisitions and entered into long-term power purchase agreements, accomplishments that were made possible by close collaboration across the company, including development, operations and commercial as well as our retail and functional teams. This tightly coordinated execution is a direct result of the focus and discipline of our people and reflects the One Team culture that drives our strong performance at Vistra. These accomplishments demonstrate our ability to deliver industry-leading power solutions to our customers, execute complex transactions and deliver day-to-day operational excellence, all while driving significant value for our shareholders. We remain confident in the ever-increasing customer demand for power, enthusiastic about the growth opportunities that load growth presents for Vistra and eager to continue to partner with our customers to realize those opportunities and serve their needs. We look forward to building on this momentum as we move through 2026 and beyond. Turning to Slide 5. Our integrated business model once again demonstrated its value and effectiveness as we delivered another year of record financial performance. For the full year, we achieved approximately $5.9 billion of adjusted EBITDA and approximately $3.6 billion of adjusted free cash flow before growth, both meaningfully above the midpoint of our original guidance ranges. These results reflect consistent operational performance from our generation, commercial and retail teams. The importance of operating assets safely and reliably was underscored during Winter Storm Fern at the end of January. During the 9-day event, where we saw significant cold front impact most of the U.S., including temperatures below 0 in West Texas and the Northeast, the team and the generation fleet delivered very strong performance. Our team not only operated safely during difficult weather conditions, but also ran our assets extremely well during the event. This, coupled with our commercial risk management approach, enabled us to serve our millions of retail customers and deliver a positive financial outcome, despite the high volatility of both gas and power prices. Moving to growth. We took meaningful steps during the year to expand and strengthen our generation portfolio. In October, we closed the acquisition of 7 modern natural gas generation facilities totaling approximately 2,600 megawatts from Lotus Infrastructure Partners. This transaction added highly efficient dispatchable assets across key competitive regions, including PJM, New England, New York and California. Winter Storm Fern was our first weather experience with these new assets, and we were pleased with their performance and with the value they added to our overall fleet. Building on the Lotus transaction, we recently announced our agreement to acquire Cogentrix Energy, which includes 10 modern natural gas generation facilities totaling approximately 5,500 megawatts of capacity, including 2 plants, Patriot and Hamilton-Liberty that were completed in 2016 with heat rates well below 7,000. Together with the Lotus acquisition, these assets will further diversify our fleet, improve our geographic balance and significantly strengthen our ability to meet the growing demand for dispatchable generation across the country. Owning and operating high-quality dispatchable generation in competitive markets is core to our strategy. We believe strategic acquisitions and asset integrations are one of our core capabilities that continue to deliver value to our shareholders. We also made significant progress contracting long-term nuclear capacity, enhancing the amount and durability of our cash flows. We have now contracted approximately 3.8 gigawatts of nuclear capacity through multiple power purchase agreements, including a 20-year agreement with Amazon Web Services for 1,200 megawatts at our Comanche Peak nuclear power plant in Texas and 20-year agreements with Meta covering 2,176 megawatts of operating capacity and an additional 433 megawatts of upgrades at our PJM nuclear plants, the largest nuclear operate supported by a corporate customer in the United States. We are excited to partner with these world-class companies to be able to continue to provide reliable 0 carbon electricity decades into the future. Overall, these and other actions taken in 2025 continue to strengthen Vistra's ability to reliably and affordably support the nation's growing power needs. Turning to Slide 6. For the eighth consecutive quarter, we continue to see a structurally improved demand environment that supports our long-term outlook. U.S. electricity consumption reached an all-time peak of approximately 4,200 terawatt hours during 2025, up about 2.5% versus 2024. We expect calendar years 2026 and 2027 to continue to show growth, which would mark the first 4-year period of sustained growth since the 4-year period ending 2007. Demand growth no longer appears to be episodic, but increasingly durable, a dynamic with important implications for the power sector. While the near-term outlook remains strong, we continue to believe the impact of data centers on tightening supply-demand dynamics will not meaningfully begin until late 2027 or early 2028, given most build schedules and interconnect timing. This is something we've been consistently messaging for some time. Load growth is real and significant, but it is likely not at the extremely elevated levels in the rapid time frame that has been forecasted by many third parties. The fact that we see the load growth coming more slowly than some forecast does not dampen our enthusiasm for the tremendous opportunities in front of us. In fact, we view a measured pace of growth as a positive. It naturally takes some time for supply and demand to go from concept to reality. We believe our company and the markets in which we operate can meet the moment. Our primary regions continue to outperform. We maintain our view that annual peak load growth of at least 3% to 5% in ERCOT and low single-digit growth in PJM is achievable through 2030. Importantly, we expect overall load growth to outpace peak demand, resulting in higher expected utilization across the system rather than short duration peaks alone, implying the economics of existing generation assets will improve on a sustained basis. Data center development remains robust, and we believe key markets such as PJM and ERCOT will continue to attract a disproportionate share of new load growth. While not every announced project will ultimately be built, even applying conservative assumptions, the level of activity supports the load growth outlook that we've discussed. Recent commentary from hyperscale customers reinforces this view as they continue to emphasize expanding investment in AI and digital infrastructure. Capital spending by the hyperscalers continues to rise to record levels and is expected to eclipse $700 billion in 2026, equivalent to roughly 50% year-over-year growth. This level of investment is notable and provides further support for sustained load growth. Demand growth creates meaningful opportunity for Vistra. Following the closing of Cogentrix, our large modern fleet of combined cycle gas generation assets will total approximately 26 gigawatts of capacity. Importantly, our fleet currently operates at a utilization rate of approximately 60%, and we continue to believe higher energy demand should drive materially higher utilization of existing assets over time, providing a practical and cost-effective way to meet load growth. Taken together, these trends underscore a demand environment that is structurally stronger than prior cycles, and Vistra is well positioned to meet growing electricity needs in our core markets. Moving to Slide 7. The Cogentrix acquisition represents the second opportunistic expansion of our generation footprint over the last 12 months. Similar to Lotus transaction, it is an acquisition of high-quality dispatchable assets in competitive markets at an attractive price that we believe will drive meaningful per share accretion. As I mentioned earlier, we believe successfully integrating and operating generation assets at scale is a core competency of the company as we've demonstrated time and again, starting with the Dynegy transaction and continuing with our Energy Harbor and Lotus acquisitions. For Cogentrix, we see similar opportunities to boost the portfolio's earnings profile over time as we get into our normal integration activities. From a financial perspective, we view the purchase price as attractive at approximately $730 per kilowatt of capacity, net of expected tax benefits, and we expect the transaction to deliver mid-single-digit adjusted free cash flow before growth per share accretion in 2027, with a high single-digit accretion on average over the '27 to '29 period. We look forward to closing the transaction in 2026 and welcoming our new team members to the Vistra family. More broadly, we continue to believe that natural gas generation will play a critical role in delivering reliable, affordable and flexible power to U.S. electricity markets. Winter Storm Fern reinforced this view. During the tightest hours, thermal generation accounted for approximately 93% of all power delivered to the ERCOT grid. Once again, demonstrating that when conditions are the most demanding, firm dispatchable resources are relied upon much more than on a typical day. We've seen this story repeat itself time and again during Elliott, Mara, Heather and now Fern. Given this backdrop, we will continue to evaluate future inorganic opportunities that create value within our integrated model. Moving to Slide 8. Our nuclear power purchase agreements represent a significant milestone, not just for Vistra, but for the industry. We have now signed approximately 3.8 gigawatts of nuclear capacity, including up rates under long-term contracts, more than any other power company in the country. These agreements executed with 2 of the world's leading technology companies represent meaningful long-term commitments to the safe and reliable operation of nuclear power generation in the United States. The first agreement, which we announced in September last year, is a 20-year contract with Amazon at our Comanche Peak nuclear plant in Texas. Under this agreement, Amazon will cite a facility on our property to utilize the 1,200 megawatts of capacity. Importantly, Amazon also plans to bring one-for-one backup generation, a structure we believe supports future expansion at the site, while maintaining reliability across the system. Progress on the site continues to be made with initial energization still expected in the fourth quarter of 2027 and full ramp expected by the fourth quarter of 2032. The agreement also includes options to explore new nuclear development with a specific focus on possible uprates and small modular reactors. We are excited about this partnership and the long-term potential at the Comanche Peak site. Building on that momentum, in January of this year, we announced long-term power purchase agreements with Meta. The agreements, which are also for 20 years, cover 2,176 megawatts of operating capacity from our Perry and Davis-Besse nuclear power plants and an additional 433 megawatts of upgrade capacity from our Perry, Davis-Besse and Beaver Valley power plants. We expect delivery of the operating capacity at Perry to commence in December of 2026 and Davis-Besse in December 2027. Uprate capacity remains longer dated with Perry upgrades expected to be online in the fourth quarter of 2031, with each subsequent year seeing an additional upgrade online until all 4 upgrades are completed by the fourth quarter of 2034. From an operating perspective, the plants will continue to operate as they do today with power flowing to the grid for the benefit of all customers. The financial impact from all of our nuclear PPAs is significant, providing the financial backing to operate these facilities for decades to come and in the case of the PJM nuclear sites to apply for additional license renewals and extend site operations into the 2050s and 2060s. Upon achieving full ramp of all the nuclear agreements, we see a pathway to nearly 25% adjusted free cash flow before growth accretion on an annual basis. From a capital perspective, the Comanche Peak agreement will not require significant incremental spend from Vistra and the PJM agreements for operating capacity won't require any additional spend. The PJM nuclear uprates will require growth capital over an 8-year period with the majority of the spend occurring after 2028. We believe these investments represent attractive growth opportunities given the higher capacity, expected improvement in reliability and the enhancements that will allow for an additional operational license extension, all while exceeding our mid-teens levered return requirements. Taken together, these nuclear PPAs position Vistra to support reliable carbon-free power as demand continues to grow, while also increasing and extending the earnings profile of our company for the longer term. While these agreements are important for our company, we have more we can do. We still see an opportunity to contract up to an additional 3.2 gigawatts of nuclear capacity across our Beaver Valley and Comanche Peak sites, including potential upgrades of approximately 200 megawatts at Comanche Peak. Continuing with the theme of an enhanced and more predictable earnings profile, let's move to Slide 9. We continue to make meaningful progress in derisking our business, locking in higher levels of contracted revenue while at the same time growing our total earnings. It's important to emphasize this point. We are not trading growth for stability. We are achieving both. Our percentage of contracted wholesale will increase substantially and shift the earnings certainty longer term and more insulated from changes with tax policy. This is particularly noteworthy as the earnings profile of the business continues to grow significantly on an absolute basis as well. On a consolidated basis, based on the contracts signed to date, when combined with the reliable contribution from our retail business, we expect nearly half of our total adjusted EBITDA to be generated from highly stable earnings sources, with the potential to increase this percentage as we execute on additional opportunities. This will be a meaningful shift in the composition of our earnings, reducing volatility, enhancing visibility and improving our credit profile. We continue to pursue attractive arrangements to serve our customers given the accretion to our business on many levels. Finally, turning to Slide 10. Our 4 strategic priorities remain core to delivering long-term value. With our One Team approach, we've demonstrated superior execution on these priorities. The acquisitions of Energy Harbor, Lotus and soon Cogentrix have proven to be valuable through adherence to price discipline, best-in-class integration and enhancements of scale. Our measured approach to development has enabled us to generate attractive returns, whether through contracted renewables such as Oak Hill and Pulaski or high-return thermal additions like our coal conversions, gas plant augmentations or Permian new build gas units. Turning to the balance sheet. Our prioritization of liquidity and low leverage has placed us in a strong financial position. Combined with the improved earnings profile of the company, we continue to expect leverage to decline and have been pleased to see multiple rating agencies recognize our improved credit profile. While this chart highlights the last few years, I would like to spend a minute on the future and how the continued execution of our 4 key strategic priorities will unlock multiple growth opportunities in the years ahead. Our generation development teams will continue to pursue highly accretive capacity additions. We continue to advance our plans to convert our Miami Fort facility in Ohio from coal to gas. While our targeted 500 megawatts of augmentations at our Texas gas fleet are largely complete, the team continues to study options at our current PJM fleet, which could total approximately 300 megawatts. Further, the team remains hard at work reviewing new PJM plant additions, which would likely involve expanding existing sites. Contracting work also continues. As I already mentioned, we still see an approximately 3.2 gigawatts of opportunities at Beaver Valley and Comanche Peak that can be contracted on a long-term basis. On the thermal side, we continue to make progress in our discussions with customers on new and existing gas solutions. We will continue to provide updates as those opportunities materialize. Finally, our retail team continues to deliver novel products to customers to help them better manage their budget, while meeting their power needs. The ability for customers to choose their provider, their electric plan and ultimately have some control over their energy needs is a proven way to address the concerns related to affordability. No matter the product category, customers prefer having a choice, and our team is working hard to make sure that we are the preferred choice of customers from residential to industrial, including the hyperscalers. Ultimately, we believe the combination of these capabilities position Vistra to be the energy solutions provider to our customers by developing and delivering innovative strategies to meet our customers' needs in this growing demand environment. I'm excited about what our team has accomplished and what we can deliver in the years to come. Now I'll turn it over to Kris to provide more details on the fourth quarter and full year results, outlook and capital allocation. Kris? Kristopher Moldovan: Thank you, Jim. Turning to Slide 12. Vistra delivered $5.912 billion in adjusted EBITDA for full year 2025, including $4.290 billion from generation and $1.622 billion from retail. The Generation segment continued to realize material benefits from our comprehensive hedging program. The strong realized revenue across the fleet and 2 months of contribution from the Lotus assets more than offset extended outages at Martin Lake Unit 1 and our Moss Landing battery facilities. The Retail segment continues to perform extremely well, benefiting from strong customer count and margin performance. Although the retail business continues to generate strong earnings in a variety of market conditions, 2025's record result was partly driven by some tailwinds that are not expected to repeat in the future, including some supply cost benefits and gains related to the Energy Harbor acquisition. Over the medium term, we continue to expect retail to achieve adjusted EBITDA in the neighborhood of approximately $1.4 billion. Turning to Slide 13. Based on our expectations for 2026 and our previously communicated range of midpoint opportunities for 2027 as well as the expected contribution in 2026 and 2027 from the Meta PPAs and the closing of the Cogentrix acquisition, we project to generate more than $10 billion of cash through year-end 2027. Our confidence in our outlook and cash generation is supported by our comprehensive hedging program and the downside protection of the nuclear PTC, resulting in a highly hedged position over the coming years. Even after allocating approximately $3 billion to our equity holders through share repurchases and common and preferred dividends in 2026 and 2027 and approximately $4 billion towards accretive growth investments, including the Cogentrix acquisition, the development of the Permian gas units and the PJM nuclear uprates supported by PPAs with Meta, we still expect to have more than $3 billion of additional capital available to allocate through year-end 2027, all while achieving an attractive net debt to adjusted EBITDA ratio of approximately 2.3x by year-end 2027. Although changes in power market fundamentals and customer preferences have expanded the growth opportunity set, the capital framework used to allocate this additional capital remains consistent, balancing shareholder returns, a strong balance sheet and growth through strategic investments. Our share repurchase program continues to produce tremendous value. Since initiating the program in November 2021, we have retired approximately 167 million shares at an average cost below $36 per share, delivering over $20 billion of value for our long-term shareholders. We currently have approximately $1.8 billion of share repurchase authorization remaining, enough to meet our annual share repurchase target through 2027. We continue to believe share repurchases offer meaningful value to our shareholders, particularly in light of the recent deals we've announced as our shares are trading at an attractive free cash flow yield relative to the average of the S&P 500. We expect our share repurchase program will continue to operate utilizing a 10b5-1 plan, allowing us to stay in the market even when in possession of material nonpublic information. While this plan allows us to remain consistent buyers of our shares, we have designed it such that it accelerates repurchase amounts during times of market dislocation, including the recent share price weakness in January and February. Turning to the balance sheet. We continue to target leverage metrics consistent with investment-grade credit ratings. We believe the improvement in our net leverage levels, combined with the higher earnings visibility from more contracted earnings streams, could position us for additional ratings upgrades potentially as early as later this year. For strategic investments, we will continue to be opportunistic yet disciplined in the deployment of capital. We haven't wavered on our target return threshold, whether for organic or inorganic growth investments, which remains mid-teens or higher on a levered basis. Finally, moving to Slide 14. We are in the early stages of a multiyear execution plan, driving a sustainably higher level of earnings power for our long-term shareholders. You can see on the chart, based on forward curves as of February 20 and a stable share count as of December 31, we continue to see adjusted free cash flow before growth per share to exceed $12.5 for 2026. Given additional actions taken to date, including the Cogentrix acquisition and Meta power purchase agreements, together with a simplifying assumption with respect to the deployment of our cash available for allocation through 2027 to share repurchases, we project adjusted free cash flow before growth per share to increase to approximately $16. Other actions such as the PPA with Amazon and the uprate supported by contracts with Meta won't contribute to our free cash flow until further into the future, but will be meaningful sources of increased contracted earnings. Over the long-term, we believe these transactions as well as the roll-off of out-of-the-money hedges will result in a meaningful step-up in our adjusted free cash flow before growth per share. Despite already delivering on multiple key initiatives, we still have numerous opportunities to further grow and stabilize our business. We see heightened engagement from our customer base across a range of additional opportunities, and we remain confident in our differentiated ability to meet our customers' needs and continue to increase our adjusted free cash flow before growth per share. Of course, share repurchases, and balance sheet management will continue to be an important component of our capital allocation framework. I will now turn the call back to Jim for his closing remarks. James Burke: Thank you, Kris. 2025 was a record year for Vistra, reflecting strong execution across the business and continued progress against our long-term strategy. Our improving growth trajectory, supported by an increasing level of contracted revenue provides greater confidence in our future cash flows. We enter the next phase of growth with a diversified reliable fleet, a strong balance sheet and a customer focus that positions us well to meet rising demand across our markets. We remain disciplined in how we allocate capital, applying a consistent framework that balances growth, shareholder returns and financial strength. I want to thank our team for their tremendous efforts to deliver value day in and day out for our customers, our communities and our shareholders. One last thing. I regret that I will be unable to participate in the live Q&A portion due to an unforeseen personal matter, but I am proud to share these remarks given the team's hard work and the company's strong performance in 2025 as well as the fast start out of the blocks in 2026. You are no doubt in good hands as my team, whom you know well, including Kris, Stacey Doré, Scott Hudson and Shawn Stuckey will address any questions that you may have. I look forward to connecting with many of you in the coming days and weeks. With that, I'd like to turn the call back to the operator for questions. Operator: [Operator Instructions] Today's first question comes from Shar Pourreza with Wells Fargo. Shahriar Pourreza: Just maybe starting off on PJM. Do the rule changes impact the Meta deal if PJM changes how new load gets treated? I guess, could there be kind of incremental cost for Meta? And if PJM tariff changes, is that sort of could be a net positive for additional load contracting like with Beaver Valley as we're thinking about future announcements. So have you seen any impact around future discussions while the rule changes are up in the air? It's a little bit of a 2-part question. Stacey Dore: Shar, this is Stacey. Thanks for the question. The PJM activity, of course, as you know, is very high. There are many moving pieces of the puzzle in PJM right now. We do not believe that any of the current activity affects our Meta deal. That deal is more akin to a typical front-of-the-meter deal. It's not tied to colocation or to any particular load. So we don't believe any of the PJM activity affects that deal. As I've mentioned, there is a lot going on in PJM right now. And of course, all customers and stakeholders are watching the activity closely. We expect PJM to file any time now an extension of the existing price collar for the next 2 auctions. Just this week, PJM did make a filing regarding specific tariff provisions applicable to colocation arrangements. We do think that getting clarity on the colocation tariff provisions will be helpful to the discussions that we continue to have about Beaver Valley and other colocation opportunities. Of course, we're also watching the reliability backstop auction filing that we expect PJM to make in the coming months. PJM is also working on load forecasting improvements and expedited interconnection track for new generation and in the longer term, possibly additional capacity market reforms. We're actively participating in all of these proceedings. And at the last open meeting, FERC commissioners made clear that they are also paying close attention to these activities, and they are ready to rule on these various proposals, all of which will continue to provide more clarity and investment certainty in PJM. It's too early to tell what will become of all of these proceedings, including the tariff proceedings around colocation that I think you're asking about. But we view the overall backdrop as positive because the administration, the state governments as well as most PJM stakeholders are rightly focused on the same objectives we're focused on, which are getting large loads connected quickly, and that includes support from FERC and the White House for colocation with existing generation, properly allocating costs across load classes and doing what's necessary to incentivize an appropriate amount of new build. And finally, avoiding unnecessary disruption to our existing market and existing resources. These are all the right goals to focus on. We share those goals. But of course, the details will matter, and we'll stay engaged on all of those proceedings to advocate for Vistra's interest. So we do think, at the end of the day, the continuing clarity and transparency around some of these upcoming rule changes will facilitate getting a deal done at Beaver Valley and possibly other colocation deals in PJM. And we continue to see a very high level of interest in Beaver Valley in particular. Pennsylvania is a market that the hyperscalers continue to focus on, and we think that site is very attractive for either colocation or a front-of-the-meter deal, we could do either one at Beaver Valley. Shahriar Pourreza: Got it. And then just lastly, as we're looking at the next leg of contracting opportunities, do you sort of have a view around hyperscaler appetite around gas risk? I mean, is there a preferred structure for Vistra for existing or new build assets in terms of contract structure? A peer presented sort of this viewpoint around a fixed capacity plus [ e-way call ] type of arrangement. So curious to see if that's a preferred path for Vistra as you guys are thinking about contracting gas. Stacey Dore: Yes. Thanks, Shar. Stacey, again here. So we do think that hyperscalers will contract for new gas build going forward. We are engaged in a number of those conversations as well. And we agree that we think the customers will ultimately take the gas risk there, which we're well positioned to help them manage as well. And so I think the kind of structure you're talking about with a large fixed capacity payment along with a variable component that includes gas risk is a structure that we see a lot of customer interest in. Those deals take time. Frankly, new construction takes time. And so we continue to focus on those, but to focus at the same time on the advantage that Vistra has in offering speed to market with so many of our existing sites being available to help to get a data center online. So we continue to have a high level of interest from customers on all of these different arrangements, including colocation with existing new build, colocation with nuclear plants as well. and renewables, PPAs, bridge power solutions and front-of-the-meter retail deals. I think Vistra is uniquely positioned with our large fleet of dispatchable assets and our leading retail, commercial and regulatory capabilities to serve these customer needs creatively and reliably. So we remain very excited about the numerous opportunities ahead of us to enter into more contracts with our largest customers. Operator: And our next question today comes from Angie Storozynski with Seaport. Agnieszka Storozynski: So first of all, thank you for showing us longer-term projections of free cash flow per share. I know I've been asking for those for quite some time. So I really, really appreciate it. And hopefully, we will have more of those projections to come in the future. But my main question is about this sort of debate about contracting of existing assets versus bring your own generation requirements. We're waiting, obviously, for those commitments from hyperscalers to be made about how they're going to power their data center load. And so I'm just wondering, how you see that requirement or that push vis-a-vis your large and growing generation portfolio? And then secondly, I'm just wondering, in PJM gas-fired new build, how you think you see the demand for long-term contracts for gas-fired new build ahead of this RBA, if you see any interest to contract for gas-fired new build outside of the RBA? Stacey Dore: Yes, Angie, thank you. This is Stacey. So on your first question around contracting existing versus new build, I mean, I think, obviously, the 2 large deals that we've announced at Comanche Peak and also across our PJM nuclear fleet are both deals that involve contracting with existing assets. So we've demonstrated that the hyperscaler interest is high with respect to that. And I think the Meta deal, in particular, is a very thoughtful approach where they are taking existing -- purchasing existing offtake and also supporting the nuclear uprates. And then at Comanche Peak, we're able to offer a speed-to-market solution for Amazon there. So I think those 2 deals, which were both fairly recent, demonstrate the interest by hyperscalers in contracting with existing assets. And we continue to have a number of conversations around other existing assets, including, as I mentioned, Beaver Valley, but also gas plants as well. There is a constraint around some of those existing asset deals, and that is the interconnection process, which you still have to go through when you're contracting if you're locating near an existing asset if you're locating the data center there. So obviously, we continue to work on a number of fronts in the ongoing regulatory processes for interconnection. And I think most markets are trying to move those processes forward, recognizing that we need to get customers connected. So I think you will continue to see a lot of interest in both. I do think colocation with existing assets continues to offer a speed advantage versus new build. But you'll see a combination of all of those solutions, and we're in all of those types of conversations with hyperscalers and others. Regarding your question around PJM new build, I do think that given that there -- it appears that PJM is targeting a reliability backstop auction, as early as this September that, that will feed into the conversations around new build in PJM in terms of customers trying to figure out whether it would be better to participate in the RBA or to bilaterally contract outside of the RBA. But the good news is that those rules will become clear in fairly short order. And it has not slowed the actual commercial conversations. Those continue in parallel about all sorts of new build options. But I do think the whole market is looking for clarity around the reliability backstop auction rules. And as you can probably see from a lot of the information that's been published about the PJM RBA discussions, we are heavily engaged and have submitted our own proposal in that regard. Operator: And our next question today comes from Jeremy Tonet at JPMorgan. Jeremy Tonet: Sending our best to Jim here. Just want to start off with regards to the 2027 midpoint opportunity. I grant that this isn't something that you normally change, but you seem like some pretty big developments here recently. So why not include the Meta opportunity here? And also post the near-term potential of $16 per share, just wondering if you might be able to provide order of magnitude of some of the further upside drivers there. Kristopher Moldovan: Yes. Thanks, Jeremy. I think we've said previously, and you mentioned it that we don't expect to update our guidance or midpoint opportunities on a quarterly basis. But of course, as you noted, we did announce 2 very significant transactions with the Cogentrix and Meta transactions since we last provided 2026 guidance and the 2027 midpoint opportunity. I think we didn't want to really update -- I think our view is once the Cogentrix deal closes, we'll update both. I mean we do -- we have mentioned that we expect Cogentrix to close in the second half of this year. And so there's a -- depending on the timing of that closing, we would be updating 2026 guidance at that time. And our belief is that's just the right time for us to go ahead and update both 2026 guidance and the 2027 midpoint opportunity. The other thing that I'll say is we put out a lot of disclosure about these transactions. I think with the disclosure we've put out, you could get to a -- I think, pretty easily to an addition to 2027 from just those transactions of -- in the neighborhood of $700 million to $750 million. Now that is absent any other impacts, including curve changes, other things. So again, it's hard to just add that on top. We'd have to roll everything forward. But -- and that amount also, you have to remember, it includes the full year impact of only one of the assets from Meta, and that will -- which will begin in the late 2026. So it will be a full contributor in 2027, whereas the second contract begins in late 2027. So I think it will -- we will update as we move along with the Cogentrix transaction. As for the $16, I think it's important to talk about what that is and what it isn't. We show a 2026 adjusted free cash flow per share amount, but that's just simply using our original guidance. It doesn't include Cogentrix, and it doesn't include any share repurchases. We're holding shares flat for even 2026. And as you're aware, we're already buying shares. So what we showed is, I think, a conservative number for 2026, but we wanted to show the growth of transactions that we've already announced. And again, those are from Cogentrix, excluding the tax benefits, just what we think that's separate. We haven't included those and from operating PPAs with Meta. We did make a simplifying assumption because we are going to be buying in that indicative number, the $2 billion, we'll be using the $2 billion that's already set aside for share repurchases, but we made a simplifying assumption of an additional $3 billion. So that's not a -- that's not a projection or there's no time around that. That's a short-term number. If we think about going forward, to your question on where this could go, we're showing some of the tailwinds, which would be the hedge roll-off and the -- and as well as other -- the PJM nuclear upgrades. But if we do look at just our -- as we go forward and we look at our cash available for allocation moving forward, and if we made a simplifying assumption that we used all of that cash for share repurchases between 2026 and 2030 of what we think we can generate and we use it at a price per share that's reasonably above where we trade today. I do think that the free cash flow per share could be -- would be in the range of $22 to $25, and that doesn't include some upside that we would look for transactions that are more accretive than share repurchases. Jeremy Tonet: Got it. That free cash flow per share with 60% conversion points to a pretty big EBITDA number there. So that's very helpful. And I just want to take a step back. You've talked a lot about the long-term PPA discussions here. But just at a very high level, how would you characterize the level of discussion now versus any point in the past? And just any qualification, I guess, between nuclear versus gas discussions here? Stacey Dore: This is Stacey. Thank you for that question. We continue to see a very high level of interest in power PPAs for data centers. We really see 2026 as the year in which customers are focusing on what is real and what is credible after spending the last couple of years sorting through a lot of different alternatives. And we think that really gives Vistra an advantage because we do have so many sites. We have so much land available, and we have a demonstrated capability of developing and operating generation. Our deal with Meta is a great example of that. It combines the purchase of operating capacity with financial support for new megawatts across our PJM nuclear fleet. And so we continue to be in numerous conversations with all of the major customers in this space about all of the various structures that we've been talking about. And I think we've shown -- we've demonstrated a real ability to execute not just on PPAs, but as a reminder, we've augmented our ERCOT thermal fleet by 500 megawatts of upgrades. We've executed on the Oak Hill solar PPA last year with Amazon as well as Pulaski with Microsoft. So we have those existing customer relationships, and I think we're viewed as a credible and viable partner for these customers. We've also -- we have in process not only the 433 megawatts of nuclear uprates, but 2 coal-to-gas conversions at Miami Fort and Coleto Creek as well as our Permian gas plants that we're building in West Texas. If you add all of this up between what we've already added to the grid and what is currently underway, under construction and under development, it's over 3,600 megawatts of capacity. And that's just the beginning that if we have customer PPAs for building new generation or for our existing assets, we will continue on that trajectory. So I think we see the appetite as high as ever, but the difference now versus maybe a year ago is I think the customers themselves are very focused on the deals and the opportunities that are actionable as they have sorted through what is real and what is credible, and we think that positions Vistra extremely well to support these customers. Operator: Our next question today comes from Steve Fleishman of Wolfe Research. Steven Fleishman: Best to Jim. Hopefully, everything is okay. I guess, Stacey, first, on the -- on the idea of the new build you've already done, but also further opportunities there. Just how do you feel about your equipment and EPC capability to meet needs not too far out. A lot of other people talk about being well positioned there. Maybe you could just talk to that. Stacey Dore: Yes. Steve, sure. Happy to do that. So as you know, we have one of the largest gas fleets in the country. We have excellent and long-standing relationships with all of the turbine OEMs, and we're frequently in conversations with third parties and bridge power providers about equipment that, frankly, they are trying to market, including parties that have already purchased turbines and are looking for places to deploy them. Because of our pre-existing development pipeline, we also have ample access to high-voltage equipment, and we have long-tenured relationships with multiple EPC providers that we are currently using for our development projects. So we do not see equipment or EPC as the gating items to building new generation or to developing behind-the-meter interconnections for existing sites. Customers have choices. And when they're ready to sign PPAs, projects can move forward. Vistra is certainly prepared to do that and can offer a variety of both speed to power options as well as long-term new build. Steven Fleishman: Great. And then totally separate question for Kris. Just as you -- the free cash flow per share chart was very helpful, and it looks like you're going to be on '27. The balance sheet is very strong. But the EBITDA with some of these -- a lot of the drivers really show up after '27 and the EBITDA will be going up a lot, which probably leaves a lot more balance sheet room. So could you just talk to kind of how you're thinking about balance sheet targets beyond '27? And then what you going to do with the cash? Kristopher Moldovan: Yes, Steve, thanks for the question. I think as we showed on the capital available for allocation chart, we have $3 billion between now and 2027, and that's even at a 2.3x. And that level would be strong and we think would be strong in consideration for strong investment-grade ratings. So yes, as we said, I mean, there's -- as we move forward, we expect the cash generation to be significant. And we're going to continue to stay balanced with capital allocation. We're going to continue to return capital to shareholders and take advantage of opportunities. Again, when our stock is under pressure. We're going to continue to maintain the balance sheet. We are focused on investment-grade ratings. And as we've continued to say, we don't want to be right on the edge of investment-grade ratings. We would like to get to that strong investment-grade ratings. But I think we can get there without a lot of debt paydown, we're just -- we can do that with some growth. And then obviously, we're going to continue to look for inorganic and organic growth opportunities, but staying disciplined to our return thresholds. And that hasn't changed in the last several years, and it won't change going forward. And it's not always easy to find growth opportunities that meet our return thresholds, and you don't know when they'll come along, but we're consistently -- we have a lot of things in front of us, a lot of organic opportunities. And so we'll continue to evaluate those. In the meantime, we can always pay down some additional debt and be ready for when those opportunities arise. Operator: Our next question today comes from Andrew Weisel with Scotiabank. Andrew Weisel: First, a question on nuclear uprates. I think you've talked about potential in the neighborhood of about 600. You've identified the 400 and change with Meta, and I think you talked about 200 today with Comanche. Does that essentially cover the opportunity? Or do you see potential for more? Kristopher Moldovan: No, I think that covers it. The 433 megawatts with Meta, those were -- those are in process. The 200 megawatts, we still have some work to do on those, and that's a future opportunity. But that -- for operates at the existing plants that covers it. Obviously, we're continuing to look at new nuclear and other opportunities. But from an operate perspective, that I think you've got it covered. Andrew Weisel: Okay. Great. Then on the gas side in ERCOT, I believe you're planning to move forward with Permian Power 1 and 2. The news about the batching process potentially impact those? My understanding is you haven't yet decided if you're going to pursue TEF funding. And if you did, they probably wouldn't be eligible for data center contracts. But do those dynamics impact your thinking? Or are you just moving forward despite the potential changes or uncertainty? How are you thinking about that? Kristopher Moldovan: No, I think we continue -- we made the decision on those. We had a lot of advantages, including the pricing on some equipment we had ordered and some -- the pricing out in West Texas and the land that we had. We continue to see those as being high-return projects. I think we're still in a tough process, and I would expect us to continue to stay in that process. And we're working through that. With respect to contracts, I think that we're -- there is interest from a number of different counterparties about those assets. And I think our view is that being in the TEF process doesn't prohibit us from locking in some of the revenue on those assets, but we're going to continue to feel out those opportunities and move forward only if we see something that we feel like is the right deal for the company. Stacey Dore: Yes. And Andrew, the batching process doesn't affect the TEF units. It's a load interconnection process that's being considered to start studying load requests on a more grouped basis as opposed to one by one, but it won't affect our Permian TEF units. Andrew Weisel: Okay. Great. Then one last one, if I can. On repurchases, can you talk about the flexibility under the 10b5-1 program? You mentioned it, I see you were pretty active year-to-date with $200 million, which is quite a bit ahead of the ratable pace compared to $1 billion for the full year. Can you just explain a bit how that works and what sort of discretion you have over the pace and timing and how to think about the outlook going forward mechanically under the 10b5-1? Kristopher Moldovan: Yes. I can't really get into the specifics, but we -- as we've said, we have structured it, and there's ways to structure those programs where -- depending on where the trading values are, it can increase the pace, and we obviously do that. You can see that in January and February at the prices that we've been trading, we've been leaning in. Same thing happened last year. There was -- again, early in the year, there was some price pressure. We leaned in -- the program leaned in. And then as the price rebounded, it pulled back, and we ended up spending right around the $1 billion last year. But importantly, as we looked at last year, if you look at the weighted average price throughout the year, our program beat that by just under $10 a share. So that's just -- that's -- the intention is for it to be more active when we see some price pressure. And we continue to tweak how we go about that. And when we get into open windows -- as we get into open windows, we're able to make changes, and we continue to rethink and optimize that program so that it's doing exactly what we wanted to do. Andrew Weisel: Okay. Sounds good. Appreciate it. Operator: And our final question today comes from David Arcaro with Morgan Stanley. David Arcaro: Stacey, thanks for all the updates here on where your discussions stand with potential counterparties. I was curious if you could just maybe give us any color on timing as to what we might expect for the next iteration of data center contracting activity that you might be able to achieve on your fleet. I know you've been very busy over the last couple of months, clearly with your successes. But I'm just wondering if you could give -- are we going to have to wait for the backstop auction in PJM, for example, and not expect anything until we get more clarity there? What's the pace of those discussions? And yes, any color on [indiscernible] would be helpful. Stacey Dore: Yes. David, well, it's only been 6 weeks since we announced the Meta deal. So you're not giving me a lot of time there. But I'm not going to comment on specific timing. I can just tell you that we have a number of conversations underway. Customers are very motivated to start making some of these things happen because they're anxious to get going with the data center development. So we feel good about where our conversations stand. And as we've always said, when we have an actual contract and agreement to announce, as you've now seen us do twice, we will announce that. David Arcaro: Okay. Got it. And then maybe just on Comanche Peak. I was wondering, what the -- maybe timing or milestones as to what would drive the uprate opportunity there? And could you be involved in any other on-site power opportunities, whether it's new generation or would you be involved in the backup generation there? Curious any color on that. Stacey Dore: Yes. Thanks, David. Yes, on the uprate timing, we're continuing to study that possible uprate at Comanche Peak. And -- but right now, honestly, we're very focused on executing for our customer, all the things that need to happen to make sure the data center on-site at Comanche Peak gets online on time. That's our #1 focus at Comanche Peak at the moment. But certainly, the team continues to explore the uprate in the background. And as we've mentioned earlier, we have the opportunity potentially with the same customer to add that uprate to the portfolio. So we'll continue to keep you updated as there's news on that front. Certainly, we have a lot of land at Comanche Peak, and we definitely could explore new generation at that site. As you may know, in the past, the company had looked at Comanche Peak Units 3 and 4. There was plenty of land to do that. In fact, we had an early application in with the NRC to do that before we pulled it kind of around 2015, I think. It's also a site that has access to gas. So there's a lot of opportunities to make that site really a center for energy and hopefully a data center as well with Amazon coming on site. Operator: That concludes our question-and-answer session. I'd like to turn the conference back over to Kris Moldovan for any closing remarks. Kristopher Moldovan: Yes. I just want to thank everybody that participated on today's call. As Jim noted in our prepared remarks, we're very proud of what the team accomplished in 2025. And as we've been talking about, we're very excited to execute on the numerous opportunities in front of us. So thank you for your interest in Vistra, and have a great day. Operator: Thank you. That concludes our conference for today. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.
Operator: Hello, and welcome to Liberty Media Corporation's 2025 Year-end Earnings Call. [Operator Instructions] As a reminder, this conference will be recorded February 26. I would now like to turn the call over to Hooper Stevens, Senior Vice President, Investor Relations. Please go ahead. Hooper Stevens: Thank you, Kevin. Thanks, everyone, for joining us today on Liberty Media's Fourth Quarter and Year-end 2025 Earnings Call. This call today includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Form 10-K followed by Liberty Media with the SEC. These forward-looking statements speak only as of the date of this call and Liberty Media expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. On today's call, we will discuss certain non-GAAP financial measures for Liberty Media, including adjusted OIBDA, constant currency for MotoGP, the required definitions and reconciliations for Liberty Media can be found on Schedule 1 and MotoGP or Schedule 2 at the end of the earnings press release issued today, which is available on Liberty Media's IR website. Speaking on today's call, we have Liberty Media's President and CEO, Derek Chang; Liberty's Chief Accounting and Principal Financial Officer, Brian Wendling; Formula One's President and CEO, Stefano Domenicali; MotoGP CEO, Carmelo Ezpeleta and other members of management will be available for Q&A. With that, I'll hand the call over to Derek. Derek Chang: Morning. Thank you, Hooper. And before I start, I just want to welcome Hooper to our team. This is his first earnings call for Liberty. Many of you know, Hooper already, he has obviously been part in and around the Liberty Complex, but we are very, very happy to have him with us here. It has been an exceptionally productive and successful year for Liberty. We are energized by the slower progress we've built across our businesses and are focused on accelerating our momentum this year. We have delivered against each of the priorities we articulated last year, namely one to continue F1's growth trajectory; two, to augment our portfolio with the acquisition of MotoGP; and three, to execute the Liberty Live split-off. Following the split-off last December, we are now a premier global sports investment vehicle anchored by 2 world-class motor sport leagues and operating in an industry supported by strong secular growth tailwinds. Looking ahead to this year, operational excellence at MotoGP and F1, while remaining disciplined and opportunistic with our capital to drive value for our shareholders and across our portfolio. Turning now to our operating businesses. At MotoGP, we see tremendous upside over time and are in the early stages of unlocking that potential. We don't expect to see these investments bear fruit immediately, but are laying the necessary groundwork to drive this sport forward. Since closing the acquisition last July, we've continued building on our commercial functions. We hired key personnel across sales, public relations, social media strategy with more additions to come. We're focused on driving knowledge sharing between MotoGP and F1 and believe this can support long-term value over time. I just recently returned from our Partner Summit in Barcelona, where we clearly articulated our strategy to teams, promoters and partners across the ecosystem. The enthusiastic response was a very positive sign as we build share momentum with a strong collective commitment to the future of our sport. For Moto, our 3 key priorities are: first, we remain focused on strengthening MotoGP's foundation and expanding its global footprint. We recently announced we are moving our Australia race to Adelaide, marking our first modern era circuit in a city center and we are excited to return to Brazil this year after a 20-year hiatus and look forward to adding Buenos Aires to the calendar next year, strengthening our presence in major international cities. Second, we remain focused on elevating the Grand Prix experience into a must intend event at every circuit. We continue to further enhance our hospitality offerings and improve the on-site fan experience. Finally, this work underpins our efforts to unlock our brand value to scale the sponsorship roster. We remain disciplined in our approach to sponsorship and are prioritizing brand alignment with high-quality partners over near-term wins. Now turning to F1. F1 once again delivered an exceptional year with the sport firing on all cylinders across growth, engagement and commercial momentum. We renewed with multiple long-term existing partners, we signed several new marketing partners, including Standard Chartered, our official wealth management and banking sponsor. As you saw earlier this morning, we just announced our broadcast extension with beIN in the Pan Asia region. And earlier this week, we announced the extension of our ESPN partnership in Latin America. Our third year of the Las Vegas Grand Prix was a resounding success and our relationship with the Las Vegas community has never been stronger. Importantly, we finalized the new Concorde Agreement to cover the 5 years from 2026 which provides us with durable financial economics in all F1 constituencies and constituents a stable base to invest into the sport and drive long-term value creation and an even healthier ecosystem. And 2026 should be an exciting season on track with Cadillac and Audi joining the grid. The new brands, cars and engines should lead to an incredibly competitive racing season ahead. Stefano and Carmelo will both provide more updates on their businesses later in the call. We look forward to continuing to support their strategic vision. Now I'll turn it over to Brian for more on Liberty's financial results. Brian Wendling: Thank you, Derek, and good morning, everyone. At year-end, Liberty Media had cash and liquid investments of $1.1 billion, which includes $539 million of cash at F1 and $197 million of cash at MotoGP. Total Liberty Media principal amount of debt was $5 billion at year-end, which includes $3.4 billion of debt at F1, and $1.2 billion of debt at MotoGP, leaving $499 million at the corporate level. F1's $500 million revolver in MotoGP's EUR 100 million revolver are both undrawn. At year-end, F1 OpCo net leverage was 2.8x. This is down from 3.3 that we gave at 6/30 pro forma for the MotoGP acquisition. And MotoGP's net leverage was 4.7x at year-end, down from 5.6x at 9/30. We expect to continue delevering at MotoGP this year. Liberty Media's overall net leverage was 3.6x. Turning to the F1 business. I'll make some brief comments about the fourth quarter but focus on full year comparisons primarily. A reminder that every quarter in 2025 had incomparable race count and mix. 2026 will also have incomparable race count and mix except for the fourth quarter. Majority of the variability in Q4 year-over-year results is due to one more race being held in fourth quarter compared to the prior year period. Q4 '25 had 7 races compared to 6 races in Q4 '24, with Singapore being included in the current year period but not the prior year period. Note that we operated the same number of Paddock Clubs during the fourth quarter, given that the Singapore Paddock Club is operated by the local promoter. For the full year, the business performed exceptionally well. Revenue grew 14% and adjusted OIBDA grew 20%, driven by growth across all revenue streams. Sponsorship revenue continues to increase from new partners and underlying growth and contractual increases. Media Rights revenue grew due to underlying growth in contracts, continued growth in F1 TV and the onetime benefit of the F1 movie revenue that was recognized in the second quarter. Race promotion revenue increased due to underlying growth in contracts. Other revenue grew primarily driven by higher hospitality and growth in licensing and freight income. Higher hospitality revenue includes revenue from the Las Vegas Grand Prix, and also revenue generated at Grand Prix Plaza from its growing private events business and the various new activations we opened in May of last year. Touching briefly on the Las Vegas Grand Prix. As Derek mentioned, our third year operating the race was a success, and we saw improved financial performance year-over-year. We continue to see a material benefit accruing from LVGP to the broader F1 ecosystem across various revenue streams, especially sponsorship, hospitality and licensing. Vegas continues to serve as a very successful test bed for product expansion and is integral to the continued growth of our sport in the U.S. Adjusted OIBDA increased during the year, driven by the strong revenue growth discussed above, outpacing increased operating and SG&A expenses. Higher operating expenses included higher team payments, and increased expenses associated with servicing our revenue streams. The increase in SG&A and -- the SG&A expenses was due to higher personnel and marketing costs. Team payments as a percent of pre-team share adjusted OIBDA were 59.7% for the full year 2025, representing 185 basis points of leverage against 2024. Over the past 4 years, we've seen an average of roughly 200 basis points improvement in leverage each year, and we expect 2026 to be approximately in line with this average. After 2026, for the remainder of the term of the new Concorde Agreement out to 2030, we expect the payout percentage to remain relatively stable. A reminder that team payments are best analyzed on a full year basis due to quarterly fluctuations in team payments as a percent of adjusted OIBDA. Looking quickly at MotoGP's results. As a reminder here, we closed the MotoGP acquisition on July 3. Our financial results are presented on a pro forma basis as though the transaction occurred on January 1, 2024, and the trending schedule will be posted to our website after the 10-K is filed including results in U.S. GAAP for the full year '24 on a pro forma basis. The majority of MotoGP's revenue costs are euro denominated and as such, are subject to translational impacts from foreign exchange fluctuations. In the following discussion, I'll focus primarily on constant currency results. Similar to F1, I'll make a few comments about the fourth quarter, but we'll primarily focus on the full year. Year-over-year comparisons are impacted by the mix of races, and generally, MotoGP flyaway races carry higher costs, which includes freight, travel and higher earth fees. MotoGP held 5 races in the fourth quarter of both this year and the prior year. Revenue increased at MotoGP during the fourth quarter as increased race promotion fees due to the race mix and contractual uplifts were offset primarily by lower proportionate recognition of season-based income with revenue from 5 out of 22 races being recognized this year versus by about 20 races recognized last year. For the full year, MotoGP had 22 races compared to 20 and 2024. Revenue grew across all primary revenue streams, primarily due to the 2 additional races held and contractual fee increases. Media Rights revenue also increased due to growth in VideoPass subscription revenue and other revenue benefited from increased hospitality revenue, which saw 2 additional races and increased attendance, partially offset by a decrease in fees related to MotoE. Adjusted OIBDA grew for the year driven by the higher revenue, offset by growth in operating expenses. SG&A expenses were lower, primarily driven by recognizing less bad debt expense in 2025 compared to the prior year. Note that bad debt expense in '24 was primarily related to race cancellations from years prior to 2024. Looking briefly at Corporate and Other results for the year, revenue was $414 million. This includes Quint results up until the split off on December 15 and approximately $33 million of rental income related to Grand Prix Plaza. Corporate and other adjusted OIBDA was $5 million and includes Quint results up until split off, Grand Prix Plaza rental income and corporate expenses. As a reminder, Quint business is seasonal with the largest and most profitable events taking place in Q2 and Q4. Note that Quint intergroup revenue from MotoGP is eliminated in our consolidated results through the spin date. Going forward, Quint will no longer be reported in our operating results. F1 and MotoGP are in compliance with their debt covenants at quarter end. And with that, I will turn the call over to Stefano to discuss Formula One. Stefano Domenicali: Thanks, Brian. 2025 was a thrilling season as we celebrated the 75th anniversary of Formula One with standout performances across the grid. 9 drivers across 7 different teams reached the podium, including phenomenal performance from rookies like Isack Hadjar. Congratulations to Lando Norris for winning the Driver Championship and McLaren for winning the Constructors' Championship. 2026 is set up to be another captivating season as it represents the next generation in F1 incredible history with new cars, engine and regulations. All signs point to an exciting kickoff in Melbourne next week, which we know will sell after intensive precision testing in Spain and Bahrain. We look forward to welcoming Cadillac and Audi to the grid and for the return of Ford with Red Bull and Honda with Aston Martin. In December, we also successfully completed the signing of various elements of the new Concorde Agreement with all teams and the FIA. Engagement across our fan base continues to grow. We welcomed 6.75 million attendances last season, our largest combined attendance in history, up 4% relative to 2024. Australia, Silverstone, Mexico and Austin, each, respectively, welcome over 400,000 fans over races weekend, and we had 19 events sellout with 11 setting new attendances records. The Paddock Club serve 65,000 race day guests, up 10% on the prior year. Last season, many of our Paddock Clubs sold out, and we increased revenue 20% per race on average. Robust demand continues for 2026 with record preseason sales and in partnership with our promoters, we are increasing capacity at certain races while looking to keep enhancing our guest experience. For example, at our Austin Grand Prix, the promoter is currently constructing the new facility at Turn 1, which will host a new Paddock Club space to accommodate more guests. Our promoters also have plans to upgrade the Paddock Club space in Mexico and introduce a new Gordon Ramsay experience in the Paddock in Shanghai, just to name a few developments. We continue to see strong engagement and reach across viewership and our digital and social platforms. Cumulative viewership is up across our broadcast and digital platforms. Global Live TV viewership across all session was up plus 21% year-over-year, showing increased appeal for our core product. F1 race weekends continue to broaden, with practice sessions showing strong increases in viewership. Screen popularity continues to increase with Sprint session viewership up to 10% year-over-year, and qualifying delivered the largest growth across all sessions with audiences up 23% year-over-year. For the Sprint races, we are currently in active discussions to expand the Sprint format up to 12 races in 2027 due to the high demand for promoters and fans. The Sprint format has also demonstrated the impressive performance across fan engagement. Our YouTube content generated 1.65 billion views, up 48% relative to 2024 and with YouTube highlights view, increasing 21% year-over-year. Passenger Princess reached 7.6 million total views, including 1.5 million views within the first week of release, highlights from the first 3 days of the preseason test in Bahrain reached over 8 million views on YouTube, which represents an increase of plus 64% compared with the Bahrain preseason testing session in 2025. And highlights from our first ever Barcelona shakedown reached nearly 17 million views on YouTube. We hope you will be tuning in for season 8 of Drive to Survive. For the fifth consecutive years, F1 continues to be the fastest growing sport on social media. We ended the year with 150 million social media followers, up nearly 20% year-over-year. Commercially, we had another strong year of renewals and new partnership. We have an active year of media rights negotiations, signing or renewing with broadcast partners across multiple territories, including the United States, Pan-Asia, Canada, Brazil, Latin America, Mexico, New Zealand, Japan and India. Apple is now our U.S. Media right partner, and we are excited by their vision, innovation and unmatched ability to reach and engage wider audiences through their platform and marketing scale. This was clearly demonstrated by the success of the full-time Oscar-nominated F1 movie last summer. Apple will be a key driver of our U.S. growth strategy, and we are excited to work with them to drive our next phase of growth in the years ahead. We see major brand alignment between Apple and F1 as this partnership brings together 2 global brands with a shared passion for innovation, excellence and entertainment. We also renew our extended contracts with 9 of our race promoters, including most recently with our promoter in Barcelona. The race will now be officially called the F1 Barcelona-Catalunya Grand Prix, and we rotate with our Belgium race year-by-year throughout 2032. And we will host a Grand Prix in 2028, 2030 and 2032, in addition to the race scheduled for this year. We are also excited to welcome back Portugal to the calendar under a 2-year deals starting in 2027. The third year of the Las Vegas Grand Prix was an outstanding success. Congratulations to the Vegas leadership team for delivering an exceptional race weekend that showcase the very best of Formula One. We sold out the weekend and welcome over 300,000 fans to Las Vegas, while setting up a number of new event sponsors. Content related to our race generated 1.8 billion impression over the weekend, and we are gearing up for another phenomenal race this year. Picking up on sponsorship, we closed out another strong year of growth and continue rising the momentum into 2026, having built out a good pipeline of discussions. We recently signed Standard Chartered as our official banking and wealth management partner in a new multiyear deal. Equally impressive is growth across our other revenue streams, including licensing and hospitality. Our legal partnership delivered great results in its first full year, generating over 27.5 billion impression across marketing activation. Pottery Barn Kids and Pottery Barn Teen continued sales momentum following the launch late last year. Our collaboration with KitKat is also thriving with the new F1 KitKat bars available in stores, driving enhanced retail visibility, and we are excited to roll out a new dimension of our partnership with Disney later this year. Following the successful launch of House44, our premium Paddock Club hospitality partnership with Lewis Hamilton and Soho House, it will expand from 5 to 9 races this year. Visitors to Grand Prix Plaza enjoyed 90,000 track rides at F1 drive last year, and we are excited to reopen Grand Prix Plaza to the public at the end of the January. We are also encouraged by the growth of F1 exhibition, which has sold 1.3 million tickets across all its exhibition and F1 Arcade, which recently opened in Atlanta and has 3 more new locations planned to open later this year. Track side retail sales grew over 30% last year, and F1 hub pop-up merchandise experience operating in Austin, Miami and Las Vegas. This hub saw strong foot traffic and retail sales, and it is planned to open hubs in more locations this year, monetizing untapped merchandising opportunity in key locations. 2026 brings continued focus on inspiring the next generation of F1 fans through our creative activation, partnership and collection appealing to all audiences across our fan bases. We are seeing incredible momentum across all phases of our business. Our sport has delivered exceptional growth, and we see significant upside ahead. The strategy work we are doing now will deliver lasting benefit to our partners, shareholders and our fans. In only a few years, we have achieved so much as a sport and as a business. But we have only begun to scratch the surface of what is possible and the potential for F1 is not being underestimated as we enter another exciting new chapter in our history. Avanti tutta, full speed ahead. And now I will turn the call to Carmelo to discuss MotoGP. Thank you. Carmelo Ezpeleta: Good morning, and thank you, Stefano. Liberty Media commitment and support of our strategic vision has been a strong ride out of the gate. We are encouraged by the collaborative approach and early progress we are seeing and we are working together to build a strong foundation to drive our sport forward. The 2025 seasons delivered the very best of our sport, through racing and dramatic story lines. We saw a standout performance across the grid with 13 riders on the podium across 10 teams. Congratulations to Marc Marquez on extraordinary come back and winning his seventh MotoGP World Championship. We welcomed a record 3.6 million attendees last season up 21% year-over-year and set attendance record at 9 different circuits. First-time attendees, representing 27% of our total attendance for season, up from 18% in 2024. The 2026 season is gearing up to be another thrilling season. We held our second season launch event in Kuala Lumpur with global attendance and video viewership year-over-year. Fans enjoy musical acts by global artists, including The Script, DJ PAWSA and DOLLA. The 2-day event culminated in a live launch show featuring show runs from teams and riders. We look forward to kicking off the season in Thailand this weekend. Our global fan base now measures 632 million fans, up to 12% from last year, and we continue to strengthen our brand. We recently launched our first event season marketing campaign. Why that's different? Which bring our evolved brand positioning to life and create brand consistency and amplification across all fan channels and touch points. We continue to invest in our fan insight platform to track brand awareness and engagement. This will support the long-term scaling of our commercial functions and enable more targeted and localized content initiatives. We added over 3 million social media followers in 2025 and ended the year with nearly 61 million followers across our own platform, including 4.5 million followers on TikTok, social engagement increases plus 61% and video views across our digital platform, excluding VideoPass, increased 20%. Fans consuming 1 million minutes on our YouTube content last season. Average household tuning into our broadcast grew 9% year-over-year. Satellite sprint races ratios continued to close the gap to Sunday's race coverage with average audience viewerships growing over 26% year-over-year for the Sprint. Subscribers to VideoPass, our direct-to-consumer video service, grew 5% from 2024. We recently extended our Sky Italia broadcast rights deal, and we have also renewed our Moto partnership through 2030. We also had an active year promotor of renewals, including the recent renewal of the Thai Grand Prix through 2031. We are excited to return to Brazil this year after 20 years, and welcome to the grid Brazilian MotoGP rookie, Diogo Moreira. Initial capacity in Brazil has already sold out, underscoring strong demand, alongside coverage from ESPN 41 will be the free-to-air broadcaster of the Brazilian Grand Prix Estrella Galicia 0,0 as title sponsor. Finally, last week, we announced the move of the Australian Grand Prix into Adelaide beginning 2027 under a new 6-year agreement. The landmark race will be the first MotoGP race to be held in a city center, and we are able to do so without compromising our safety standards. Adelaide is an ideal location, bringing MotoGP closer to its fans, and we are excited to put on a fantastic 3-day fan experience. We look forward to continuing to update the investor community on our progress. Now I will turn the call back over to Derek. Derek Chang: Thank you, Brian, Stefano and Carmelo. We appreciate your continued interest in Liberty Media. And with that, we'll open the call up for Q&A. Operator? Operator: [Operator Instructions] Our first question today is coming from Stephen Laszczyk from Goldman Sachs. Stephen Laszczyk: Maybe 2 on margin at F1, if I could. Brian, I appreciate the commentary on team payment in 2026. It sounds like the expectation for team payment operating leverage is for it to be in and around 200 basis points in 2026. So 59.7 going to 57.7 in 2026. Just wanted to confirm that thinking and then see if there were any upside or downside factors that you think investors should be mindful of as we track performance on that throughout the year? Brian Wendling: Yes. I'd point you to, we said that we added the word generally or primarily or approximately around the 200 basis points. So I wouldn't lock it in stone. As you know, we talked about before, there are different things that can impact the team payment percentage depending on where the profitability is coming from. But generally speaking, we would expect to see about 200 basis points of leverage related to the team payment piece in 2026. Stephen Laszczyk: Great. And then maybe just beyond the team payment operating leverage point this year and thinking longer term opportunities to grow margins at F1 over the next 3 to 5 years. What factors are still available to you to grow margins maybe outside of the team payment line item that could expand margins for the foreseeable future? Brian Wendling: Yes. Certainly, as we grow primary revenue streams, you would expect to see some leverage around those revenues. But we continue to invest in the business. And when you look at some of our other revenue streams, they certainly have costs associated with them. We've looked at growth in other costs of F1 revenue in the past. And you can certainly see partner servicing costs there as we grow our sponsorship revenue base, there's incremental Paddock Club obligations that are associated with that. So there is certainly costs associated with growing those revenues. But as we grow the primary revenue streams, we would hope to see some leverage there, but we're also going to balance that with continuing to invest in the business and try new things and try to grow the overall pie. Stefano Domenicali: Yes. And Brian, if I may say -- add something on that to complete the answer that Brian said, is that all the costs related are connected to the growth of the marginality because, of course, the more we are getting stronger, the more we need to serve what is important to activate. Therefore, that's our philosophy. And in all the revenue stream that we are bringing home, that's the approach. And if I may, also when we are talking about a deal that we have with promoters in the long term, we have the leverage to increase the possibility of investing through them to acquire more possibility to invest with other experience with Paddock Club extensions. This is one example, for example. But that's the philosophy is cost. It's always associated to an increase of marginality related to increase of our revenues. Operator: Our next question today is coming from Kutgun Maral from Evercore ISI. Kutgun Maral: Maybe following up and expanding on the margin discussion. I had a high-level question on the durability of your EBITDA growth, which was very strong in '25 and looks positioned to be healthy again in '26. Maybe taking a step back for a second. Since Liberty took over the growth algorithm has been fairly consistent and straightforward. You had rising popularity of the sport and brand combined with strong execution, monetizing revenue streams with a lot of untapped runway. In other words, there was comfort that regardless of the quarter or even year, there would be a lot of room to grow over the upcoming 3 to 5 years, and that vision has clearly played out. As you look out over the next 3 to 5 years now, though, how should we think about what sustains that attractive EBITDA growth profile as some areas either face tough comps or see new dynamics, whether it's lapping very strong sponsorship growth, managing the strategic balance and media rights, a race calendar that's already largely contracted or the new team payout structure? And finally, are there any underappreciated drivers or levers you'd point to that helps support growth from here? Derek Chang: Stefano, why don't you take this because you've obviously got the thoughts around the growth of the business more holistically. So I think that's a good place to start. Stefano Domenicali: Absolutely. Thanks, Kutgun. I mean let me start on one thing that I take the opportunity to thank, first of all, our shareholders, our team, the FIA, the teams and all the relevant stakeholders because we have left an incredible moment of our sport. I remember all the earnings calls since I was involved in that, every time was what's next, what's next, what's next. That's a mindset, it's not a guidance. So we have always proven to invest in our future because we do believe in the growth of our sport. And we do believe that in the future, there are so many new opportunities to keep running this rhythm because this is exactly what we are doing together. And the more is strong the ecosystem, the more we are able to catch new opportunities and all the driving force of our revenue streams. And that's why you see what has happened so far in the last couple of years not only in terms of turnover, but also in terms of EBITDA. And this will continue because we see, as we said so many opportunities to keep growing. And the fact we are stabilizing in certain ways, certain promoters deal will allow us to leverage, as I said before, other investments that will bring us other opportunity to return. We are able -- we were able to explore the possibility of engaging with new categories of our partners and largely, for example, if you look at the financial services, we were able to contract with other -- with multiple partners because we are identifying different categories. We are opening up the opportunity of digitalization so new opportunity. We are having licensing that is just starting a great momentum with the big deals that we have just even today announced for the bigger relationship with business and so on. So there is a lot of things that we're going to bring and to keep growing the sport business at all level. That's I definitely confirm. That's our mindset, our approach, we wake up in the morning with these things. We are in a competitive world, not only on the track that remains our focus for sure, but that's the aim of all of us doing this job to increase the return of our investors for sure. Derek Chang: Yes, I think that's right, Stefano. And look, I think what's -- what people need to appreciate also is just the strength of Stefano's team and the creativity there and sort of what they've been able to accomplish over the last several years in terms of revenue streams and categories that may not have been fully sort of appreciated in terms of what they could be. And if you look out now, what they've done, for instance, in the U.S., where can you take -- what other geographic markets are still out there that are large significant and potentially untapped. So we are constantly looking for those opportunities and ways to drive the business. I think the heart of it is what Stefano keeps pounding at, which is to help the sport, the engagement that the sport creates and all that sort of stuff is really the fundamental basis for this. Operator: Our next question today is coming from David Karnovsky from JPMorgan. David Karnovsky: Maybe just zeroing in on the prior question, but for sponsorship, really strong results this year, though arguably, that sets up a tough comp this year. So wanted to get your view on '26 growth? And how we should think about the follow through, not only from deals executed last year, but maybe kind of what's in the pipeline? Stefano Domenicali: I can answer on that, David, stay tuned. As we always shown, we are not -- and also, as Derek says, we are quite creative in finding new opportunities. You're going to see already this year some deals have lifted with new opportunity that we can offer new quality and new things that we want to offer. We don't have to forget one thing at the end of the day. Of course, now that the quantity is really, in a way, great, we need to focus on the quality of what we're bringing in. And this is really the thing that we are focusing because of course, we have a trajectory of new projects in the pipeline, but our focus is to keep the quality of the partner that now are trusting and following Formula One. Therefore, it's a trajectory that will continue. It's a trajectory that will enable us also in a competitive landscape to make some decision. And as we have in the field of promoters, we have the quality problem to have more often than -- more demand than offer. We are in the same spot also on the sponsorship side. So as I said, all the partners are happy. Our point is to create quality content for them, qualitative experience, qualitative value of what they're investing in Formula One. And that has been so far the case and will continue because, of course, the more we are able to succeed on it, we are able to attract even new ones approaching from other disciplines that is happening already, as you have seen, new partners to us. David Karnovsky: Okay. And then maybe just following up here. The press release had called out contribution from digital advertising. I think that's the first. Can you just clarify, is that inventory on the website apps or F1 TV? And what's the opportunity here? Stefano Domenicali: Well, the opportunity is quite important because now we are not only in the world of physical advertising, we have the digitalization that will enable us to use in all the different channel possibilities to put to the advertising but we have different platforms. We have the Podcast, we have YouTube. We have other social media opportunity, we will monetize in the future even stronger. Operator: Our next question today is coming from Bryan Kraft from Deutsche Bank. Bryan Kraft: I guess I'll ask the Vegas question. It seems like Vegas didn't generate really incremental revenue versus last year, but it did generate significant incremental EBITDA due to the cost side. So I just -- I guess I wanted to ask, is that a fair assessment? And what do you think the opportunity is in 2026 to grow Vegas, both in terms of top line and bottom line? Are there any key changes in how you'll approach the event or go to market with tickets this year versus in 2025? Derek Chang: Stefano, do you want to just talk about Vegas broadly? And then Brian and I can you talk about some of the more specifics? Stefano Domenicali: Sure. Sure, Derek. I mean, first of all, in a synthesis, or trying to be set at that point, it has been an incredible strong progress in what will deliver in the short term, even a big cash flow aim in that investment. I think that the key turning point of that has been our ticketing proposition. The fact that we have also a new different way of proposing the partner, the experience and the sales to them. But the most important one that will have a factor in the next couple of years is the new dynamic that we are creating with the community. And with the new things that we will announce in the due time, this will enable us to have an impact also on the P&L of this that is incredible, positive. And you will see soon that we want to make sure that this Grand Prix will keep being something incredible to be a sort of a spotlight of the year because the focus is to keeping that as a unique experience. And of course, you reduce the cost that is associated to the building up of this event in a new city like Vegas. And so therefore, the huge potential is definitely there. We have been very happy about the outcome of this year, and we're definitely going to be even more happy in the projects that we're going to do together in the next couple of years in front of us. Brian Wendling: Yes. And then specifically on the -- on Vegas results for 2026, we did see revenue growth. It's a little bit difficult with our various categories within Vegas because it doesn't all show up in race promotion. Where we really saw growth was we saw increased sponsorship revenues. We saw increased hospitality revenue associated with Vegas. And then also 2026 was a year of trying to achieve some greater cost savings. So we definitely saw some cost savings there. So pretty significant incremental profitability. It just doesn't show up in the race promotion line. It shows up in other spots. Bryan Kraft: If I could just ask, I mean, it sounds like based on Stefano's comments that you do see the opportunity to continue to grow Vegas from here though. Just to make sure I'm interpreting that correctly? Stefano Domenicali: Yes. Absolutely, yes. Sorry, I can't show the different numbers, yes. Derek Chang: Yes, very happy and excited about it. Operator: Next question today is coming from Peter Supino from Wolfe Research. Peter Supino: A question on capital allocation and your communication and then another one on media rights. So I actually start with the media rights. We were excited about your deal with Apple because we've long believed that the movement of important sports rights to streamers was a growth opportunity for the intellectual property owner. In your case, we've had investors go as far as to call your deal with Apple "a disaster" because of their perception that Apple means less distribution for F1 in an important growth market, the U.S. And so I wonder if you could comment on why in your prepared remarks today, you expressed so much confidence that Apple can expand awareness and engagement of F1? And then on the communications side, and I guess this ties to capital allocation, your stock in the last 6 months has become, at least from our perspective, mired in sort of a myopic discussion about team payments, margins and operating leverage, and it's ironic because Formula One is a growth company. And so I wondered if you could talk at all about ways in which your communications might help investors appreciate the duration and magnitude of your growth opportunities going forward? Derek Chang: Stefano, why don't you start on Apple? Stefano Domenicali: Yes. Thank you, Peter. I mean, first of all, I think that we are very, very happy about the deal with Apple for many reasons. And I think that it's important that the one that in our opinion, not so many, but anyway we respect that, of course, they don't understand the deal is because beyond that, there is a huge opportunity to increase the reach. There is an incredible opportunity for Apple to use all their channels, all their platform to promote our sport in a way that has never been done before. There will be the opportunity for the younger generation to be connected with the tool that is more logical for them to use in living the sport and our business. So I do believe that this will represent a big step opportunity to increase also our revenue streams, not only in terms of direct one, but also in terms of awareness in the American market that will enable us to convince also the one that are not believing on that, that is the right move. But on that, we are not even a single doubt. It's a great move. It's great things that will happen that will give a big boost to our performance in the American market. And that our community has not even a single doubt. Derek Chang: Yes. And I would add on that. I mean, look, everyone understands that the landscape has been changing for many years now. And the former sort of terminology around reach and things like that are a bit antiquated. And we see from an Apple standpoint is complete 100% dedication to F1. I saw Tim Cook and Eddy Cue at Super Bowl, and they've got the full weight of the organization behind it. And in that respect, it's not just sort of Apple TV, it's Apple music, Apple news, the Apple stores. So from a reach standpoint, there's many different ways that we will be able to reach and engage with our fans. I think the other thing that's interesting about Apple here, and we saw the news with the broadcasting races and IMAX theaters, right? And this sort of draws on my prior life in the pay television industry, like you wouldn't be able to do something like that necessarily with the traditional broadcaster because of a lot of restrictions that get put into traditional media deals, right? So Apple in that sense, and I think you'll see here in the near future, other announcements along those lines that will sort of bring more life into that. But I think there is that sort of ability to create new ground here, which we will do with Apple, are committed to do. I think the other thing that will be something to watch closely over the next 5 years is sort of what happens with the actual product. As we know, Apple is at its heart a tech company. We are a tech company. The broadcast is sort of very technical in nature, what you can actually do with that as a collective force will be interesting to watch over the next several years. I think on the second question, which was capital allocation. What we talked about at our investor conference was familiar themes, which clearly, we're in a deleveraging phase right now. Everyone understands that will sort of hit a point that we feel comfortable with respect to making additional investments. We've been pretty clear about our discipline in this respect and our desire to invest around sort of into the actual businesses themselves in and around those businesses, certainly, and then in similar sorts of asset classes where we've got great IP, low capital intensity and the ability for us to actually bring value either through insights we have, relationships we have, capital structures that we have, things like that, that will continue to allow us to have ourselves be a growth vehicle. Operator: Certainly. Our next question is coming from Joe Stauff from Susquehanna. Joseph Stauff: I wanted to ask, just following up on the number of changes in F1 this year, engine, regulatory and how that affects certainly competition in parity. I'm sure that's naturally the goal over the long term sort of drives interest in the sport. But just wondering the best way to think about how maybe some of this higher competition could affect the P&L in the near term, call it, 2026 versus next year? What are the near-term sort of impacts of how we think about the financial implications of that? Derek Chang: Stefano, why don't you talk about the changes and what you're seeing and all that sort of stuff and then we can get into what the implications are? Stefano Domenicali: Yes. Well, first of all, the implication -- let me start from one thing. The F1 has the duty to be always an innovator league sport, has been always -- that has been always the duty of our sport because by innovative, we can attract new investors. And the immediate effect of this regulation has attracted new manufacturers back into the sport. We have Audi, we have Ford, we have Honda, we have Cadillac that did come in because of this regulation. And if I may, before, of course, that has taken the second part of the financial, this would be an immediate effect on the financial because they will invest in our sport. They will invest in our initiatives. They will invest in all the ecosystem that would generate for them a sort of a platform to invest to let the brand be known by the customer. So that's a direct effect. On the other side, of course, there is a great interest, a great opportunity to showcase that the level of technology is always relevant to what is needed in the technological world. We have sustainable too. We have hybrid engine, and we've been always the first to believe on that. And we create excitement because the nature of the regulation will allow all the teams to develop this year car race the race. You're going to see a season where every race will be different, that will be, for sure, at the beginning bigger gaps that will be restricted because of the nature of the regulation. And therefore, as always, F1 understand when there is the need to move forward faster than the others, and that has been always our philosophy. And that will attract the interest not only of the one that I said to you before, but the new fans that through the new content that we are generating will connect to us and of course, by enable to be connected directly with them, we can even leverage the fact that we will offer something new to them. They're going to be a big push on the merchandising side of it. It's going to be big push also to our partner Quint to create new packages to promote to them. So this is the reason why we change the things for multiple reasons. Derek Chang: Yes. I mean just to follow on that. I don't think we sat here and said we're building a kind of incremental into the '26 business plan because of these changes. But that being said, as Stefano hit on quite clearly, these changes are going to drive continued interest and engagement in the sport. And hopefully, as he says bring in new participants, new fans and all the sort of accrued benefit that comes with that, that ultimately results in monetization. I think the other thing in parallel here that is happening this year, as you know, there are some big names that have come into the sport between Audi and Cadillac and Ford, Honda coming back. It's pretty significant in terms of someone like Cadillac spending on a Super Bowl ad and what they're doing to promote their team on the track. So this is all part of the evolution of what F1 is and Stefano and his team have done a fantastic job of cultivating relationships, cultivating these partnerships, building the sport into something that we do look at on a multiyear basis, not sort of how this is going to drive something in the next week or next month. And that's constantly what we're trying to do is built for the long term. Joseph Stauff: Understood. Maybe one just quick follow-up. Could you maybe just give us an update on the changes of the commercial team at Moto? And any other obviously changes that you're making, obviously, now that you own it for about 6 or 7 months and how to think about that? Derek Chang: Sure. This is Derek. I mean, as we stated, or Carmelo stated, we're in the process of sort of putting out our brand and executing behind it, really. And I think that part of that is what's happening at the track in the hospitality, and we're going to see some pretty dramatic improvements, I believe, over the course of this year, where we're putting these tracks -- our races, excuse me, as we're getting them closer to cities where we can benefit from all the infrastructure and the attendance and all of that sort of stuff, including, as we mentioned, in Adelaide, it's going to be right in the city center. And then how we go about sort of ultimately monetizing, commercializing that, we need the right team in place. And that's probably an area where we haven't had the sufficient sort of personnel there and we are building that. It's obviously not a heavy lift to sit there and hire folks up. So that's what we're in the process of doing. As we have stated previously, this will take some time in terms of the ultimate commercialization. We'll see some areas pick up sooner rather than later. But over -- if you look at F1 as a parallel, we're in our 10th year and you're still seeing some of these new revenue streams sort of being activated. So we continue to be even more sort of bullish on Moto even if the results don't necessarily show in the short term, it's clearly a long-term proposition for us, which is -- which -- and we like to invest in for that long term. So we're very excited. Operator: Our next question is coming from Ryan Gravett from UBS. Ryan Gravett: Just to follow up on the media rights topic. Now that you're through the latest round of renewals, not just in the U.S. but some markets in Latin America and Asia as well. Just curious what your key learnings were and how you think you're positioned for the next round of renewals in Europe over the coming years? Do you expect similar interest for digital players in those markets as well? Derek Chang: Stefano, do you want to start? Stefano Domenicali: Yes. Thank you. I mean, I think that our position with the media renewal, as you see, is quite dynamic. And I don't want to anticipate anything, but stay tuned in the next days, you will see something else coming up. The real point on that is the interest is very strong. The numbers are very strong. And the key focus on what we need to make sure we keep doing is understanding if we keep going because we are a worldwide market in the so-called traditional way of the delivering our sport to our credit broadcaster or in certain markets, there is an opportunity. As we did in U.S. to move into the streaming platform because each country is different. We have the incredible opportunity to be so strong worldwide, that we cannot have one single way of delivering our content in the same way and there are different time lines that we need to consider. So it's a bigger ecosystem. And I think that we have proven so far to make appropriate analysis before taking the final decision. So for sure, we want to be active and proactive in this world because the media right is not totally media right on the sports, the media rights are following other things in this moment. Therefore, I think that the reason why you see so many good news coming in is because we want to be proactive, and we feel that we are able to understand the evolution of the market, considering the difference that we have from area to area. But stay tuned because already next week going to be something new happening. Operator: Our final question today is coming from Ian Moore from Bernstein. Ian Moore: When we look at trailing motor results, I think everyone sees an opportunity to drive monetization, particularly sponsorship to where F1 kind of is today. But F1 itself seems to continue to overdeliver on sponsorship. So I guess, more generally, what do you guys kind of see as the right mature mix directionally of media rights, race promo, sponsorship for these businesses? And then, I guess, for motorsport businesses more broadly? Derek Chang: Yes. I think -- look, it's early, but I think along the same lines is probably not a bad place to end up. And it's going to be over time that some of this stuff happened. But I think you've already seen that we're announcing new races next year, which will lead to some uptick there. And -- but then the sponsorship side of things probably lags a little bit as we build the brand and reengage with the potential partners. But I do think that the ability for us to draft off of what F1 has done there and the Liberty name being able to sort of have credibility around what we're going to deliver with respect to Moto is something that we are excited about. Again, it will take some time, but we feel comfortable that that's going to happen. I'll just end by saying there's good receptivity in the market. This -- we had a partner someone, as I mentioned in Barcelona last week, a lot of good enthusiasm, a lot of good energy there. There's a lot of good enthusiasm in the investor base around teams. I can't tell you how many people have reached out expressing interest. So I think people see it. The other thing about Moto in comparison to maybe other sports right now of its size, which tend to be more emerging sports, Moto has a long, long history to draw on and many stories to tell as a result and an established fan base and established brand recognition. So we're starting from a place that's much different, and hopefully, it's something that we can accelerate here over time. Hooper Stevens: Thanks, everybody, for your participation in today's call. Apologies if we didn't get to your questions, we'll look forward to speaking with more of you offline. Thank you. Operator: Thank you. That does conclude today's teleconference webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Codere Online Fourth Quarter 2025 Financial Results. [Operator Instructions] I will now hand the conference over to Guillermo Lancha, Director of Investor Relations and Communications at Codere. Please go ahead. Guillermo Lancha: Thanks, operator, and welcome, everyone, to Codere Online's earnings call for the fourth quarter of 2025. Today, you will hear from our CEO, Aviv Sher; and CFO, Marcus Arildsson, our Executive Vice Chairman; Moshe Edree, will also join us in the Q&A session. Please note that the figures reflected in today's presentations are preliminary and unaudited and include certain non-IFRS financial metrics, which should be considered in addition to our IFRS results. Reconciliations and further details are available in the appendix. During this call, we will make forward-looking statements, which are subject to risks and uncertainties. While these statements reflect our current expectations, we undertake no obligation to update them after this call. A replay and transcript will be available at codereonline.com, where investors can also sign up for e-mail alerts. With that, I will go ahead and pass the call on to Aviv. Aviv Sher: Thanks, Guillermo, and thanks to everyone for joining us today. Before we go into details, I would like to say that we are very pleased with how we finished 2025, especially considering the number of challenges we faced during the year. We delivered a strong set of results with a record net gaming revenue of EUR 224 million and adjusted EBITDA of EUR 13.8 million, more than double than prior year. And we once again met the guidance range we had provided for the year. This gives us a lot of confidence in the strength of our business and our ability to continue growing profitability in 2026 and beyond. Starting with the highlights of the fourth quarter of 2025 on Page 8. We delivered EUR 60 million in net gaming revenue, which represents a 15% increase versus the fourth quarter of 2024 and the highest quarterly NGR in the company's history. This strong finish to the year was driven primarily by Mexico, where net gaming revenue grew 31% year-on-year and by continued growth in Spain, where NGR increased by 7%, confirming that the reacceleration in top line that we started to see in the second half of the year continued through year-end. In terms of product mix, casino accounted for 64% of our total net gaming revenue in the quarter, with remaining 36% coming from sports betting, broadly in line with what we have seen over the last few quarters. We continue to see casino a very important growth and engagement driver for the business, especially in markets like Mexico. From an operating KPI standpoint, the performance in the quarter was mainly driven by continued growth in our active customer base. We reached around 177,000 average monthly actives in Q4, which is 20% above the same period last year, reflecting both the strength of our acquisition funnel and improvement in retention. Average monthly spend per active was EUR 114, approximately 4% below Q4 of last year, which is consistent with the larger and more diversified portfolio of customers, including a higher proportion of Mexican players. On the acquisition front, we continue to invest in growing our customer base. During the quarter, we acquired 89,000 first-time depositors at an average CPA of EUR 166, the lowest level since early 2023 and which remain an attractive level, given the quality of the customers we are bringing on to the platform. We will continue to optimize the mix of the channels and campaigns, particularly in Mexico, but always with a clear focus on profitability and payback rather than absolute volume. In relation to our share buyback plan, we have continued to execute on the program we announced last year. Through yesterday, we have purchased approximately 391,000 shares of a total consideration of around $2.7 million under the plan, which has a total authorized investment of $7.5 million and runs through December 31 of 2026. We see this as a very attractive use of capital at the current share price levels, and a clear reflection of the Board and management confidence in the medium-term outlook for the business. Looking ahead, as Marcus will detail later for 2026, we are guiding net gaming revenue in the range of EUR 235 million to EUR 245 million and adjusted EBITDA between EUR 15 million to EUR 20 million. This guidance incorporates the management initiatives we are planning for 2026 as well as the impact of recent regulatory and tax changes in our markets, and we think it reflects confidence that we can continue and grow both the top line and profitability going forward. With this, I will now turn the call over to Marcus for the first time, I think. Good luck, Marcus, and cover the financial highlights for the quarter. Marcus Arildsson: Thanks, Aviv, and hello, everyone. If we now move to Slide 10, you can see our consolidated net gaming revenue and adjusted EBITDA by country. So in the fourth quarter, NGR revenue increased by 15% year-on-year from EUR 52.6 million to EUR 60.7 million. This growth was driven primarily by our 2 core markets. Mexico, net gaming revenue grew by 31% to EUR 32.8 million and Spain, where it increased 7% to EUR 24.5 million. In our other markets, Colombia, Panama and City of Buenos Aires, these markets contributed EUR 3.5 million in the quarter, 25% less than in the prior year quarter, as a result of the decline in the Colombian revenue on the back of the 19% tax on deposits that have been in effect for most part of 2025, but expired towards the end of the year. This top line performance is translating into profitability and reflects operating leverage in our business model as we scale and as well as continued improvements in marketing efficiency and certain cost discipline. In the fourth quarter, we delivered positive adjusted EBITDA of EUR 6.7 million, which was EUR 4.8 million above Q4 of 2024 and included EUR 7.1 million of contribution from Spain and EUR 4 million contribution from Mexico, which has now clearly inflected towards profitability. For the full year 2025, adjusted EBITDA reached EUR 13.8 million, more than double the EUR 6.4 million we reported in 2024 and in line with the upper end of the guidance we provided a year ago. If we move to Page 11 to have a look at our consolidated P&L. There, you can see marketing expense was EUR 21.4 million, slightly below last year in absolute terms and significantly lower as a percentage of NGR, reflecting improved efficiency in our marketing spend. The rest of our operating expenses, namely platform and content costs, gaming taxes and personnel were essentially in line with the growth in NGR. Altogether, this cost structure resulted in an adjusted EBITDA of EUR 6.7 million in the fourth quarter, implying an EBITDA margin of around 11% compared to less than 4% in Q4 2024. Looking now at our consolidated figures on Page 12. You can see the key operating metrics that underpin these results. The 50% growth in net gaming revenue in Q4 was driven by higher average monthly active players, which reached approximately 177,000 players, 20% above those of Q4 2024. The growth in active customers was fueled by higher FTDs, which increased by 89,000 in the quarter, 22% above the prior year period. On the bottom right, you can see that customer acquisition efficiency remains at attractive levels with a consolidated CPA of around EUR 166 and trending downwards in the quarter. Taken together, these KPIs confirm that we're bringing more customers onto the platform at good unit economics and keeping them engaged over time. Turning to Spain on Page 13. Net gaming revenue in the fourth quarter was EUR 24.5 million, up 7% versus Q4 2024 as a result of a 14% increase in the number of active customers to 56,000. With Spain being a mature and tightly regulated markets, especially in terms of advertising, we are pleased to continue growing our portfolio of customers while maintaining a strong profitability. Looking at Mexico on Page 14. Net gaming revenue increased 31% year-on-year from EUR 25.1 million to EUR 32.8 million. As opposed to prior quarters, the Mexican peso was roughly flat in the fourth quarter of 2025 compared to the prior year period. Revenues were primarily driven by very strong growth in active customers, which grew to around 99,000 in the fourth quarter 2025 compared to 69,000 in the same period the previous year. In December, we reached more than 100,000 active customers in the country for the first time, a very exciting milestone for us as we continue to build a sizable portfolio ahead of the World Cup later on this year. As discussed during last year, player value from customers acquired throughout 2025 has been lower than in prior years, but they've also come with a lower upfront CPA. And our performance this quarter reflects that optimization between the existing portfolio and the new acquisitions. All in all, Mexico continues to be the growth engine for Codere Online. We're building scale, increasing brand awareness and improving our product and customer experience in the country, all while remaining focused on profitability. If we turn to the balance sheet on Page 15, you can see that we closed this year with EUR 50 million of total cash, of which approximately EUR 45 million is available. These figures include the impact of EUR 2.4 million in share repurchases that Aviv commented on. In terms of our net working capital position, we ended the year with a negative EUR 22 million or around 10% of our full year net gaming revenue, which is in line with prior quarters and our structural negative working capital position. This combination of negative working capital and growing scale supports our cash generation, which we expect will continue to improve and give us the flexibility to keep investing in growth. And as we have started to do, return capital to shareholders through the share buyback program. Turning to Page 16, looking at our cash flow. We generated EUR 13.4 million of cash flow before share repurchases and the FX impact on cash balances. This shows that the business is now delivering not only positive adjusted EBITDA, but also converting a significant part of it into cash flow. As a result, our available cash increased by close to EUR 10 million from EUR 35 million at the beginning of the year to EUR 45 million at the end of 2025. Finally, turning to Page 18, where we are providing our 2026 outlook. As Aviv mentioned earlier, we expect net gaming revenue in 2026 to be in the range of EUR 235 million to EUR 245 million, which at the midpoint represents around 7% growth versus 2025. We also expect adjusted EBITDA to be between EUR 15 million and EUR 20 million compared to EUR 13.8 million in 2025, which is more than 25% growth at the midpoint of that range. This outlook assumes a marketing -- excuse me, this outlook assumes a marketing investment broadly in line with that of 2025, which we believe is the right decision given that 2026 is a World Cup year and was also considering the current competitive landscape in Mexico. We want to make sure we fully capture this opportunity to reinforce our brand and further expand our customer base in what is already our key growth market. At the same time, we continue to see clear evidence of operating leverage in the model. As our brand matures and our customer base growth, we expect that over time, marketing as a percentage of the net gaming revenue will continue to trend down while still allowing us to grow the top line. In other words, 2026 is a year where we are leaning into the opportunity in Mexico, but we see a path forward towards a more efficient marketing profile in the medium term. That's all from my end. I will now hand it back to Aviv for some closing remarks. Aviv Sher: Thank you, Marcus. Before we move to the Q&A session, I would like to thank once again to the whole team. It's been a hard year, and we worked very hard in order to accomplish these results. The start, as you remember, was a bit bumpy, but we finished strong as expected and as we promised to the market. I would like also to thank the investors and the analysts that have joined us today for their ongoing support and interest in Codere Online. With that, I will hand the call back to the operator to open the line for questions. Thank you. Operator: [Operator Instructions] Your first question comes from the line of Michael Kupinski with NOBLE Capital Markets. [Operator Instructions] Michael Kupinski: I'm just wondering, how competitive is Spain currently on promotional activity? And are margins stabilizing in that market? And then I just have a couple of follow-ups on Mexico. Aviv Sher: Okay. So thank you, Michael. We still see it competitive, but we are seeing that it's kind of going into a plateau. And we are able to grow our customer base with the current promotional -- let's say, the current promotional activity or current promotional KPIs that we are using. It took us a couple of quarters to stabilize it, but we are seeing 2 consecutive quarters with growth. So I think we've kind of found out what to do with all these promotions going around. So it's competitive, but I think we are able to compete now. Michael Kupinski: Got you. And then in Mexico, I was wondering if you can update us on the regulatory environment there. I know that there was some discussions evolving around the federal regulations. And I was wondering if you can give us an update there. And then more recently, I know Mexico had some issues about some of these cartels and things like that. I was wondering if that had any impact on your business there? And in particular, how that might be affecting maybe some of your marketing efforts in Mexico? Aviv Sher: Regarding the regulatory framework or the federal regulatory framework, unfortunately, I have no news. It's been -- the government has been busy, as you probably know, with other things like what you've mentioned with the cartels, are there some internal fights. We are also aware that 2 of our largest competitors there were shut down due to, let's call it, regulatory problems, but it's more political problems internally. And they are not cooperating at the moment, building a regulatory framework, so I would say that the conversation with them are a bit stuck. Maybe it will -- at the beginning of this year, they will come back and continue this legislation process. As you know, they increased the tax. I think they chose that over completing the regulatory framework, and this is their solution at least for the short term. Regarding cartel and the news, the online business is not affected. We didn't see any changes in the numbers if this is the question. Retail location, I'm not sure I'm able to comment, but in general, if the government orders to close down locations or close down areas, than we are doing as the government are saying. But in the terms of online activity or our marketing efforts, nothing has changed at the moment. The city itself is safe. The areas around the cities are safe. So... Moshe Edree: It's Moshe here, Michael. I think that's an opposite. I think that towards the World Cup, both the regulator and the government will have motivation to keep things calm as possible and to give some sort of like a friendly environment to sport, which will support us in the online. Michael Kupinski: Yes. And I was thinking just weirdly that it may be that more people staying at home might play more casino games and things like that online. I thought that maybe that might even benefit you in a way. Moshe Edree: From what we hear from our guys in Mexico, it's not as big as it sounds in the news. I mean it's not like huge riots. It's very local and in certain areas. Operator: Your next question comes in the line of Jeff Stantial with Stifel. Jeffrey Stantial: Maybe just hitting on guidance and the Mexico tax hike, which is where we've been getting most of the questions. Can you walk us through the financial impact contemplated in guidance, both in terms of the gross impact as well as what you're assuming for mitigation? Aviv Sher: Yes. You want to start, Marcus, do you want to comment on that? Or you want me to take it? Marcus Arildsson: Sure. No, I can start. I mean, first point, maybe we don't give precise individual guidance on specific items in specific countries. Having said that, the increase in tax is a negative for us as it is for all players and all our competitors in the sector in general. The things we've been doing, when you think about the outlook for this year, it's -- the outlook is a net effect of many, many issues. One of the issues is the tax issue in Mexico. As you know, and as I think we detailed in the previous call, in the last call in November, we are taking a number of mitigation measures in Mexico, both in terms of, number one, our marketing front; number two, in terms of certain of our suppliers that we're working with and overall operational efficiencies. That's what we're doing principally in Mexico. And I don't know, Aviv, if you want to add something else to that... Aviv Sher: I just want to comment to answer your question. I think in terms of revenues, we don't see a risk to the revenue generation. We will continue to generate revenues. In terms of marketing investment decisions regarding this year budget 2026, we are -- we managed to -- through our models to keep at least the same level of investment or not even more with the World Cup coming. So this will not be smaller this year. Regarding the EBITDA, there will be an EBITDA effect. We see it. It's not as big as we thought. We are able to mitigate most of it. There is some effect, but it's not a danger to the business. The business will continue to grow. And I think the guidance that we gave is, let's say, very -- we don't bake in optimistic number there. This is very down to earth like we always do. And we believe that we can deliver those results. Jeffrey Stantial: Great. And I guess just to follow up on that a bit. Can you add some color on what you've seen from competitors following the tax hike? Have there been any immediate exits? Has promo and marketing behavior adjusted yet? And how do you see that adjusting going forward heading into the World Cup? Aviv Sher: Well, we all know, as I said, that from a regulatory point of view, 2 big competitors have shutdown just before the World Cup. We are still not -- we don't have the news that they are returning or coming back to the game. And we think that some -- we know that some competitors want to come into the market. We hear the rumors, we talk to people. The fact is that there is no change as we speak, in, let's call it, the advertisers map in Mexico, it's still the same, but minus 2 big competitors. I didn't see yet new comers with big budgets. I know that they are talking. We heard the rumors. I know some of them are contemplating whether to come in now or not with those tax changes. Eventually, I believe they will come in. But at the moment, as we speak, I didn't see any changes in this map. It's still the same as the last, let's say, 3, 4 quarters, minus 2 big competitors. Jeffrey Stantial: Great. And if I could squeeze one more in. Maybe given the change in player values in Mexico, how does this sort of change your prioritization of geographic expansion and investment elsewhere in Latin America? Aviv Sher: No, I think the opposite. I think we are seeing less -- our CPA went lower. The player value for Mexico is a bit higher or a bit lower or remains the same, let's say, around the same number, but CPA is lower. So the ROI is better. We will continue to invest into Mexico. Going into new markets at the moment before the World Cup, I don't think it's wise for us. I think we will continue if we have, let's call it, excessive income or excessive EBITDA, the next dollar, we will still invest into the 2 core markets that we have, which is Spain and Mexico. In Spain, also, we see good results, and we see opportunity to grow. We are growing. So still our money, ROI on the investments over those 2 markets is still big. I don't see us coming into new markets in the near future. Operator: [Operator Instructions] Your next question comes from the line of Arthur Roulac with Three Court. Arthur Roulac: I have a couple of questions. One, can you chat a little bit about Colombia now that the -- I guess, the VAT tax, I believe, has been removed and what that may mean or may not mean in terms of investment and opportunity going forward there? Can you hear me? Aviv Sher: We can hear you. I don't know if you want to start taking the question... Arthur Roulac: Oh, did you not hear my question? Aviv Sher: We have Internet problems, I think, on my end. Can you repeat it, please? Arthur Roulac: Sure. Sorry, Aviv. I was just asking about Colombia. Now that the VAT tax has been, I believe, repealed at the end of last year, maybe early this year. What do you view is like are you going to be putting money back into that market? Are you viewing it more positively? What are your thoughts about it? Aviv Sher: Yes. So yes, it's a good question. The straightforward answer is that we are still not sure if this VAT removal is permanent or not, I'm still not able to get a final answer from lawyers. Let's say, in the past few weeks, since the removal, we see good recovery in our clear database. At the moment, until it's clear to us whether this VAT removal is permanent or not, we will not continue to invest. Once we understand if this removal is permanent, then we are able to take this decision. For now, we are enjoying players coming back, enjoying our promotions. So it's a positive KPI. And right now, in our budgets, we are still treating the VAT as if it exists. So there is a small upside there if we understand that this VAT removal is permanent. Marcus Arildsson: Maybe just to add to the, Aviv as well. Of course, we have the elections on the horizon. And another point also just to mention, just recently within the last few days, there were some further legislative changes in Colombia which seems like there is a small tax that we may be caught up in, which is not a gaming tax, but it's a small additional tax that have been introduced under the last emergency decrees that have been instituted in this country. And so I just wanted to mention that the environment continues to be fluid, and we would like to -- we'll be a little bit more on the sidelines, so to speak, until that we see that the environment turns up and that we can have more certainty around the outlook for the medium term. Arthur Roulac: Got it. On the marketing side, obviously, revenues have grown a lot. I think when you originally raised money, you're doing about EUR 80 million and let's say, you do EUR 240 million, EUR 245 million, EUR 250 million this year. Marketing as a percent has come down a lot. Most of your competitors that are more mature, I think they'll be in like the low 30% range this year, are down at between 15% and 20%. Can we think about as a steady state marketing? Is there a reason to think you'd be materially different than the rest of the industry around the entire world from a marketing as a percent of revenue once you get in a more steady-state period? Aviv Sher: Yes. I'll answer to that. I think it's an easy question and an easy answer. In Spain, where we are more mature, you see those kind of ratios, even less, right? We are in the same way, the same behavior, let's say, like the rest of the world. In Mexico, we still believe we are in a growth phase, and we have a strong competition with Caliente and others that are putting heavy funds into the market. We do see low CPAs there. So we believe that we are still in a growth phase. In a growth phase, you cannot maintain those kind of ratios. So -- and right now, Mexico consists most of the marketing spend. So if you separate between Spain and Mexico, in Spain, we are meeting this criteria. In Mexico, I think in the future, not the near future, we will be able to meet this criteria. But we are still in a growth phase. I still want to make more investments and to take more market share, especially with 2 competitors right now that are down. World Cup is coming up. So let's say, Spain, we are already there. Mexico will take us more time to meet it. Moshe Edree: And I want to add something, it's Moshe. It's a very conservative approach to analyze the ratio between marketing spend and revenues. I think that what is more accurate and more I think that from our perspective, at least, it's about the cost per acquisition. And as far as we can lower with the same quality of players, the cost per acquisition, by many aspects of efficiency and some actions that we are taking with the CRM. So we prefer to approach and to purchase as much as we can in players as kind of like a firepower for the year ahead. So it's less about how much we're spending versus the revenues. It's more about how many players can we acquire with a certain amount of CPA as a target that we give ourselves, but we know that the ROI is on a certain multiple of returns over years. And in Mexico, as Aviv said, we still see a very good ratio. We see that we can maintain very stable and even getting lower the CPA over time. By the way, that's what dictates in the end, the market share. I mean that's how you build market share in the market. Arthur Roulac: I've got 2 more, I'll just squeeze in. One, in the revenue guidance, are you making any assumption about foreign exchange in there. Are you just assuming that where the foreign exchange was at the end of the year will be consistent throughout the entire year? Aviv Sher: Marcus, do you want to comment on FX? Marcus Arildsson: Yes, sure. Well, I mean, we have our forecast. So at the end of last year, the forecast that we had built in into observing the market, the foreign exchange market and the forwards with respect to the exchanges. That's what we have built into our guidance. Of course, the guidance will be subject to those exchange rates in reality moving up and down during the year. So I think so far in the year, the Mexican peso has improved a little bit with respect to the euro. So that is helpful for us. We'll see how it continues to develop during the year. But clearly, there is an FX component in the forecast. Arthur Roulac: Got it. And my final one is, can you share you what competitors have been perhaps rumored or market chatter with around who may or may not be interested in entering the Mexican market. Aviv Sher: Yes. So we are -- we heard about Hard Rock wants to come in. We know a company from Spain called VERSUS, which is R. Franco, that are planning to come in. We know Sportium with Ganabet that already bought a huge sponsorship with Tigres wants to come in. And we know that local players like Big Bola just changed platform and wants to make investments. I think those are like, let's say, the 4 big ones that are sitting on the fence. But in terms of advertisers map, I haven't seen them. Novibet is there on the background with the sponsorship with Cruz Azul that is not taking a lot of attention. So there are competitors. I think right now, the big ones are the ones that are taking position is Playdoit just behind us, I think, and Winpot is over there as well. So yes, the market is becoming more and more as, let's call it, saturated in terms of advertising on TV, still Caliente and us are leading the market by far. Operator: Your next question comes from the line of Ryan Sigdahl with Craig-Hallum. Ryan Sigdahl: Good day, guys. Nice execution. Sticking on kind of World Cup marketing spend. Last quarter, you said that you were going to kind of lean back into the higher player values, probably CPA going up just based on the channel mix you were going after. It feels like you kind of continued with the same trend you were -- or strategy you were doing last quarter or recently this year. I guess maybe talk through what you're seeing if that strategy changed from the update you gave last quarter and kind of where you're targeting and which channels for those players? Aviv Sher: Okay. So what happened in the last quarter, if you remember, is that we bought low player value with low CPA and this strategy, we ended it at the end of the first quarter, mid-second quarter. So this traffic from the mix has disappeared. What you see now is actually a lower CPA with the same player value. So it means that we are able to optimize our efforts and buy more players with less money. So the strategy didn't change, but I think the team did a good job in optimizing. It took us a little bit of a while and investing into technology and discipline, let's call it like that. So we are able to execute this way. And we will continue. We see, as Moshe said before, CPA goes down, probably, we need to increase investments in order to take more market share. So overall, we are happy. Strategy didn't change. The execution changed a bit, but the strategy is still the same. Ryan Sigdahl: Very good. And then just maybe the cadence of that marketing spend this year. Is it more concentrated Q2, Q3 at the World Cup? Or is it more spread out? And how much of that can you do kind of in anticipation and ahead of the World Cup starting? Aviv Sher: No. I think I commented in the past, right now, the World Cup prices are a bit too high for us. So in terms of spread, we will continue to spread or make the efforts the same as we did every year. And maybe just spreading it more evenly because usually during the summer, we are reducing the advertising spend. So here, we will continue to spend around the World Cup, but with no increase during those months. No increase relatively to other months, right? So I think in terms of cadence, we'll spread it more or less the same as we did in the previous years. Hopefully, with some upside from the World Cup because we will continue to invest around the World Cup in the summer, which we're usually lowering our investment there. And so I think this is the tactical way that we see this year. Ryan Sigdahl: Last question for me. You launched a poker app, I guess, talk through why -- or in Mexico, I should say, talk through why that makes sense in Mexico? And then if there's any other product or capabilities you plan on adding? Aviv Sher: Yes. So poker is a nice product. It will take us more time to push it, let's call it exclusively. Right now, it gives more benefits to our customers. We are about, I think, to launch, at least, to quiet launch bingo to have more products into our mix in Mexico. So in that sense, we have nice products coming up. But they are more supportive. I don't think they will become a main product but more supportive of our, let's call it, game portfolio to our -- to keep retention and to keep the players happy with more kind of products. If we see that there is an ROI in any of those products, we will start investing, let's call it, on a separate line of business, whether it's bingo or poker. But right now, we launched them as a supportive games. They are doing fine. At the moment, nothing exciting over there. Operator: [Operator Instructions] There are no further questions at this time. I will now turn the call back to Guillermo Lancha, Director of Investor Relations and Communications, for closing remarks. Guillermo Lancha: Thank you. So if there are no further questions, I guess we can leave it here. As usual, if you have any follow-ups, feel free to reach out to either Marcus, Aviv or myself. We will be speaking again with our Q1 '26 earnings around mid-May. So thank you, everyone, for joining us today. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good morning, and welcome to WEG's Earnings Conference Call for the results of the fourth quarter of 2025. I would like to highlight that interpretation is available on the platform through the Interpretation button accessed via the globe icon at the bottom of the screen. Please note that this conference call is being recorded and broadcast live. After its conclusion, the audio will be available on our Investor Relations website. [Operator Instructions] If we are unable to answer all questions live, please do present your question to our e-mail address at ri@weg.net and we will respond after the conclusion of this conference. We'd also like to emphasize that any forecast contained in this document or any statements that may be made during this conference call regarding future event,s, business outlook, operational and financial projections and targets and WEG's future growth, potential growth, constitute merely the beliefs and expectations of WEG's management based on currently available information. Such statements involve risks and uncertainties and depend on circumstances that may or not occur. Investors should understand that general economic conditions, industry conditions and other operating factors may affect WEG's future performance and mainly to results that differ materially from those expressed in such forward-looking statements. Joining with us today, we have our CFO, Andre Luis Rodrigues; Andre Menegueti Salgueiro, our Finance and Investor Relations Officer; and Felipe Scopel Hoffmann, Investor Relations Manager. André Rodrigues: Good morning, everyone. It is a pleasure to be with you once again for WEG's earnings conference call. In Slide 3, we have the operating revenue, which decreased by 5.3% compared to 4Q '24. In Brazil, industrial activity remained positive, supported by sustained demand for short-cycle products and deliveries of long-cycle projects. The decline in revenue compared to the same period last year was motivated by the absence of centralized wind and solar generation products. In external market, we continue to see a strong level of deliveries in the power generation, transmission and distribution business. Especially in the transmission and distribution segment in North America, combined with a solid demand in industrial, electrical and electronic equipment business across the main regions where we operate. Although revenue in Brazilian BRLs was impacted by exchange rate fluctuation. We closed the quarter with an EBITDA margin increase compared to the same period last year, and it was 22.4%. EBITDA reached BRL 2.3 billion, representing a 4% decrease compared to the fourth quarter of '24. Throughout -- and then our main financial indicators remained at a high level of 32.5% as we will see in more detail on the next slide. ROIC remained at a healthy level, driven by the maintenance of high operating margins. However, we observed a reduction in the quarter compared to the same period last year, mainly due to increase in invested capital related to investments in fixed assets and acquisitions during the period. I now hand it over to Andre Salgueiro. André Salgueiro: Good morning, everyone, and thank you, Andre. On Slide 5, I will show you the revenue performance across our business areas. Starting with Brazil, industrial activity was positive for short-cycle equipment with diversified demand across several segments in addition to strong demand for new traction systems and batteries for electric buses. Despite a still restrictive environment for new investments, long-cyle equipment also delivered solid results. In GTD, the decline in revenue was mainly due to lower deliveries in the generation business, especially because of the absence of centralized wind and solar generation projects. In addition, the T&D business also experienced fluctuations in deliveries, which is natural for this type of product. In Commercial and Appliance Motors, demand remained stable compared to the same period last year with solid performance in the construction and compressor segments. In coating and varnishes, demand remained positive, diversified across different segments with emphasis on the sale volume of liquid paints in the construction segment. In the external market, although revenue in Brazilian real was impacted by the exchange rate fluctuations, industry activity remained healthy in several markets, especially in the ventilation and refrigeration segments. We recorded a strong volume of long-cycle equipment deliveries, particularly high-voltage motors despite reduced new investments due to ongoing geopolitical uncertainties. In GTD, we continue to see strong delivery volumes in T&D business in the United States, although at a slower pace in other operations, particularly in South Africa. In the generation business, we saw a solid performance in North America and fluctuations in project deliveries in India. In Commercial and Appliance Motors, we observed sales growth in key regions, especially in China and North America, in addition to the contribution of both businesses to revenue in the quarter. In Coatings and Varnishes, we recorded revenue growth driven mainly by strong performance in Mexico and the contribution from the recently acquired Heresite site business in the United States. On Slide 6, we can see the EBITDA performance. The EBITDA margin closed the quarter at 22.4%, increasing compared to the same period last year, reflecting a better product mix and efforts to mitigate the impact of recent changes in international tariff legislation. EBITDA decreased by 4% compared to the fourth quarter of '24, mainly due to lower revenue in the quarter. On Slide 7, we show the evolution of investments, which totaled BRL 814 million with 50% allocated to Brazil and 50% to operations abroad. In Brazil, we continue the modernization and expansion of production capacity in T&D in addition to capacity increases and productivity gains in Jaragua do Sul and Linhares. Abroad, highlights include the progress of transformer investments in Mexico, the United States and Colombia as well as investments in expansion production capacity in China. With this, I conclude my remarks and hand it back to Andre. André Rodrigues: On Slide 8, before moving to the Q&A session, I would like to highlight the following. In December '25, we announced the acquisition of Sanelec, an Indian company specialized in the manufacture of ultra regulation and excitation system. With this acquisition, we expanded our international footprint, strengthened the solutions offered to existing customers and increased our participation in power generation control market. More recently, we announced the construction of a new plant dedicated to the production of battery energy storage systems in Itajai with conclusion expected for the second half of '27. And finally, I would like to address our outlook for this year. We continue to see strong revenue opportunities in our main businesses, both in Brazil and abroad. However, exchange rate impacts and the absence of centralized solar generation projects may weigh on growth, particularly in the first half of the year. We maintain a healthy operating dynamic with an ongoing focus on operational efficiency and productivity gains, which should continue to support solid operating margins and returns on invested capital. As part of our continued investment program, we approved a robust capital expenditure plan for '26 totaling BRL 3.6 billion, supporting the company's strategy of continuous and sustainable growth. It's always important to remain attentive to the global macroeconomic environment and potential risks and volatility. Even so, we maintain our expectation for business growth, strengthening our presence in Brazil and globally while pursuing opportunities in new markets. This concludes our presentation. We can now move on to the Q&A session. Operator: [Operator Instructions] And to kick off with the first question from Lucas, BTG Pactual. Lucas Marquiori: Well, thank you very much. I have 2 comments to make. First, on tariffs. And I would like to hear from you the announce -- your understanding. We know that the basis is 30%. And I would like to know how it works now since there -- is there a negotiation to accommodate prices? Would that affect any request? So the first topic is U.S. tariffs. And then number two, the auction with a lot of comments on Chinese participation. And so I would like to hear from you what would WEG's competitive differential be regarding this auction? André Rodrigues: Lucas, thank you for your question. I will talk a little bit about tariffs, and Salgueiro can update that as well. I would like to review what was mentioned before. Our understanding is that the tariffs that have been determined and announced for '25 in Brazil, which added up to 50%, lose their power, and initially, it was announced as stand, but it may be that it will increase to 15,%, 232 continues. It is the section of the law on commercial expansion applied above all to iron, aluminum, copper and imported products from the U.S. But it is too early, I would say. We do not know whether we're going to have new tariffs announced in the upcoming weeks. And therefore, it's a bit premature to discuss commercial strategies right now. It's important to highlight that the current situation gives us a better competitive approach. We will continue discussing it, evaluating the impacts and taking the necessary measures to mitigate all of these effects. But we have to wait a little bit longer so that we know -- so that we have a better idea of what is going on. André Salgueiro: Good morning. This is Salgueiro. And regarding the auction, it's important to highlight that it might happen now in the first quarter, and the expectation is for early June. But in practice, it has not been officially announced and published. We are monitoring it and tracking the development market estimates and what has been informed the auction would be for 2 gigs of installed capacity, but other information is being considered. We have been prepared for this for a while now. Since the purchase of the technology in 2019 of the NPS in the United States, we've been developing some small and midsized projects, both in the U.S. and here in Brazil. And now more recently, we were preparing ourselves for this more structured demand for large products in Brazil with a more recent announcement made in Itajai, and that will increase our productive capacity in Brazil so that we can meet the demands of this market. Regarding competition, it's only natural to imagine a competitive environment for this segment just as we have it for others such as wind and solar. So it's only natural that this will happen, and we are preparing ourselves the best way possible to address this market. And then, there are some other aspects that we like to reinforce. So we have a long-standing relationship with the operators of this project, which could be a differential for us, engineering support, aftersales support and the presence here in Brazil for many years. And of course, the competition aspect with the new plant, we have to be prepared for that. So we are following all of the regulatory aspects. They are not 100% defined, but we are monitoring, and we have to make the best use of opportunities that will come, not only this year, but in future years when we will have a lot of opportunities. Operator: Our next question is from Joao Frizo, Goldman Sachs. João Francisco Frizo: I have three. First, I would like to hear a little bit about [indiscernible], the area of electric and industrial motors here in Brazil, and worldwide will have uncertainties, which have had an impact on orders. Could we expect a weaker growth for '26 because of this? And regarding capital, you mentioned relevant figures for '26, but could you expand that? Regarding CapEx, we've been running for some years at 3% above revenue. And if you look at '27 -- in 2029, should we expect the same? Or should we expect a normalization? André Salgueiro: This is Salgueiro. I will start with the long industrial demand cycle, and then, we'll talk about CapEx. As you mentioned, we've had some quarters in industrial area, both in Brazil and in the external market with some volatility. The scenario is not poor, but there is some volatility. Here in Brazil, we do have the impact of interest rates. We also have the investment cycles of the main segments that demand these projects. We have oil and gas, mining, paper and cellulose and pulp actually. And we're going to have an increase this year. So we have these 2 factors. And abroad, what we've seen are some delays, especially because of the geopolitical aspects and lack of definition of tariffs, there is some volatility. It's not something that is reason because when we look at our orders, we do see some oscillation, which is only natural for this type of project. Revenue was good, both in Brazil and abroad for the projects and the deliveries made throughout the quarter, but we have to analyze on a quarter-by-quarter basis. And now I will talk a little bit about capital, which was disseminated yesterday with robust growth of BRL 3.6 million for '26, the greatest we've had this far to support our levels of growth. And then how can we break it down, 46% will be for the domestic market and 54% abroad. In Itajai, we have an expansion of the plant, looking at verticalization, increase of production capacity. And I think that the most relevant investment in is what we recently announced. The construction of the new plant in the second half of next year, it will be concluded, and we also have the auction, as mentioned during our presentation. It will be -- it will represent good opportunity. And then, we also announced growth in other areas, and the relevant growth will be the new plant to be concluded in '28 of electric large machines, where we will have a greater capacity of production of compensators and machines, where we developed in Jaragua do Sul in addition to increasing our capacity of larger motors high -- voltage motors. Part of this investment, I would like to remind you is related to the expansion of transformers that we announced in the past years and here in Brazil. Basically, we end the year with the expansion in the team, increasing the baton capacity, and we continue the expansion of transformers in Gravatai, and that will end in '27 end. And to conclude, in Linhares, we have the increase in our capacity. When we discuss what is happening abroad, we have the transformers and different investments. We also have a new liquid paint plan so that we can take this business to North America. And we also have verticalization in China, we have the high-voltage motors. In Turkey, we have a new plant with -- a new bearing plant. And then finally, the last investment package would be the modernization of one of the plants of special transformers in Missouri. And this is the last package, the last part of the package that we announced for transformers. Undoubtedly, last year, we were above 6.6% above our revenue. And this was necessary for us to conclude the expansion cycle and the transformer business. And then to consolidate that, we have the other opportunities. But looking ahead, what we are lacking in our investment package, which will continue after '27, the increase in the capacity of verticalization. It will go on in a more relevant manner after '27. But in the long run, we do not think that we will be operating outside the range of 26% of our revenue. But as I mentioned before, in '23 and '24, we had 4.9%, 5.1% in the upper limit. And therefore, it is likely that perhaps 2 -- 1 to 2 years later, we will operate at a higher level, and then, go back to normal. Operator: Next question from Andressa Varotto, UBS. Andressa Varotto: I have 2 right now. The first one would be regarding the margin we saw, a margin expansion that was a bit unexpected. Here in the market, we expected a stronger impact of tariffs on costs in this quarter, and we were positively surprised. I would like to know if there was any initiative or anything else that turned out to be better than expected? And a follow-up on the transformer capacity, what should we expect for the second half of this year? Would it be in the third or fourth quarter? And also what is the total to be expected? André Rodrigues: Andressa, thank you for your question. Let's talk a little bit about the margins and the market expectations, and then, we have the expectations of fluctuations for 2024. I think that this work is constant work that we do here at WEG. And of course, there are times when you faces challenges such as the tariffs that were imposed throughout '25 and where we anticipated a higher impact on the margins. And it's important to highlight that -- regarding the attempt to compensate tariffs, we were successful in our attempt. We reviewed our business strategy among other factors, but we are going through a very positive moment globally. So basically, this was positively impacted regarding our expectation. André Salgueiro: This is Salgueiro, Andressa. Regarding the T&D capacity I would like to remind you that we made some announcements from the end of '23, with the intention to double the capacity we had until the end of this year and early next year, these products have been happening. And I would say that part of it has already come in, and we do have a first and more relevant project coming early this year, and the new bidding capacity this year. And then, if you look at the figures and if you look at [ Betim ], we're probably close to 25% of the intention to double this capacity. And then, we would have about 55% of this capacity to add at the end of this year and then early next year because we're talking about Gravatai here in Brazil and the new plants in Colombia and Mexico in the external market. But I would also like to highlight when we talk about capacity that we are talking about the concluded plant, and we will not necessarily start operating at full capacity. It's only natural in this business, and we have a gradual occupation. From the point of view of revenue and contribution for the result, we will start strongly next year. And then, we will gradually have a contribution throughout '27, but it will be more significant after '28. Andressa Varotto: I understood. But Salgueiro, regarding the figures you mentioned, '25, are you talking about Mexico alone or to the total? And also a follow-up because I would like to know if you have started any efforts regarding the capacity that is coming in? André Salgueiro: Well, actually, this is the total number. We announced investments, both in Brazil and in the external market, but the idea was to double the global capacity of WEG in T&D. And so this is for anywhere. And we also have some projects that are moving forward. And when we have a better idea of the availability of the plant, we offer it to the market. We've also been communicating the demand is very needed and will remain so. So from a point of view of orders and portfolio, we do not see any risks. It's only a matter of being able to make the investments and have the plants available. Operator: Next question from Andre Mazini, Citi. André Mazini: I have two. The first one has to do with the back day regarding the solutions and services, so what is the impact in our -- what is the percentage of the revenue that you're allocating? And how far do you intend to go? And then number two, regarding growth of revenue for '26, based on the exchange rate of BRL 5.14, for the rest of the year, would it be more likely for the revenue to grow single digits? Or can we still consider 2 digits even if the exchange rate is not very good right now? André Salgueiro: I will answer your first question regarding solution and services, and then, Andre will talk about investments. In fact, we tried to show changes that have been taking place at the company, a company that until recently was more focused on products and has now become a solution provider. We have product sales. We more and more incorporate services. So in fact, this has gained some representation. We have the creation of a new department for large machines to meet the demands of this market, the service markets. We do see increasing demand, but there are services related to the other units as well, both in terms of wind generation, solar generation, operation, contracts, maintenance contracts and which is our thermal generation company. There is a very representative component in the area of services, especially in the alcohol sector in Tupi, electric mobility related to the areas of software services, drivers. So there are different areas being opened up in the company, and the trend is for the revenue to evolve and continue growing, including in the industrial area. The softer solutions for clients, monitoring industrial processes. So it's only natural to expect such a growth, but we do not have a specific target, and there are a lot of opportunities, not only looking at services, but also looking at the solutions, which include equipment sales, service offer. So now, let's talk a little bit about perspective of revenue for '26. The company will undoubtedly try to grow even in a geopolitical scenario, which will remain challenging. But it's always important to take into account that we're moving smoothly with a good demand for transmission and distribution areas in Brazil and abroad. But of course, this year, we're limited because of capacity. We showed you our expectation of increased capacity, but we can see good opportunities in businesses such as electric mobility in BESS as mentioned in WEG's preparation to capture opportunities not only this year, but later ahead. Synchronous alternators, the demand, increasing demand for data center solutions. And when I talk about data centers, we always think about transformers, but WEG has complete solutions, full solutions to guarantee back up with alternators and BESS and automation solutions. So this is something where we have been receiving a good demand. But Andre, where we have some expectation is to undoubtedly try to have 2-digit growth, but this would be with a more stable exchange rates of the BRL compared to the U.S. dollar. The situation is different now. Our currency is valuing. And we have a greater challenge to make this happen. But if the exchange rate remains as it is, it will be harder for us to deliver 2-digit results. It's important to highlight that what prevented a growth in the revenue, which actually went down in the last quarter and that will have an impact, maybe not the same as in the last quarter, but a little bit of the first and second quarters are the same factors. The lack of a renewable portfolio, which we had in the first half of last year and then better exchange rates. I would like to remind you that the exchange rate in the first quarter of '25 was in the order of BRL 5.84 and our situation now is that it is below BRL 5.20. And what is likely to happen is that we will have different growth profiles, lower in the first quarter because of the factors that I mentioned and a recovery in the second half with closer averages and also a little bit about -- related to the capacity announced by Salgueiro, and also, the comparison basis, which is more stable in the second half. Operator: Next question from Lucas Laghi, XP Investment. Lucas Laghi: Thinking about '26, but also talking about profitability. If we look at '25, as you commented, it was in the range of 23%, 24% in terms of the margin, as you commented. And it's always very good to have clearer visibility for margins for WEG. But I'm trying to understand this panorama for '26. And because exchange rate plays against us, T&D is high, but maybe because of a mix effect. It won't be as favorable, increasing price of raw materials and strong demand. So I would like to better understand the combination of all of these factors. And comparing it to 23%, 24%, does this range make any sense for '26? Or what should we consider now? I would like to know what the combination of all of these factors would result for WEG in '26? And then a second question regarding wind energy because we've been talking a little bit less about this, our perception is that the market will be looking ahead. We have the new 7 mega platform. We have to understand what the perspective is. And then, 4.2, which was well accepted domestically, but I would like to know what will happen in the foreign market. I would like you to talk a little bit more about this project and what we can expect for the future? André Rodrigues: Lucas, thank you for your questions. Let's talk a little bit about margins now. We are -- the management is very happy with the margins we've been delivering in the past years. It's very close to '22, and therefore, we're very happy with that. And we will start '26 with an expectation to deliver margins that are close to the average of the past years. It's very difficult to always have a margin projection. We can have some variations regarding the delivery of long-cycle products, special products that could change that. And of course, the mix could have an impact on that. But in the first quarter, I will tell you that we have a more favorable mix than we had in the first half of last year, and that is very positive. And then, part of this good performance, and I commented it already, has to do with the transformer business, which has had a positive impact in the past year. So it's also important to monitor whether that will change this dynamic or not with exchange rate variations. But in the short run, we always say that the correlation margin and exchange rate is not very good for us. But we also have the benefit of having stock, which was purchased with a different exchange rate, leading to benefits. And then -- but the other way around also happens with a valuation of the BRL that also has an impact, but in the midterm that will be compensated. But that will lead or might lead to changes between one quarter and the other. We also can expect some changes in tariffs. We continue monitoring relevant changes in commodities and that could also have an impact, especially copper, which is a very important raw material. But what I can tell you today is that for the year, we expect to have healthy margins aligned with what we've been practicing in the past years. Regarding wind energy, we have Brazil situation, and we have not seen significant investments in Brazil in the past years. But also, we have the regulated market, which is not very active. And then, we also have competition related factors, and basically, investments in wind energy have stalled. And there are eventual risks that for the future, we will have to consider new generation sources, and it's only natural to imagine that looking ahead, we will have new investments, and we should resume investments. We do have a sales profile that makes a lot of sense. But looking at the midterm, we do believe in the development of this market. And we have field tests and new developments in Brazil would take into account this new machine. We also have a market in India that you commented, and that would be with the 4.2 platform. It's already certified. The developments have been basically concluded, and we are now working around our first order. We also have the U.S. market that would be with the machine 7. We do not have a contract, but we are working with our business area, and we want to have everything prepared. And when we look at this year and probably next year, we will not have a contribution of in general, but what we will see is that this segment being more representative in the mid and long term. Operator: The next question comes from Pedro. Pedro Fontana: I would like to explore the capacity of transformers once again for '27, and I just wanted to understand because the margin expectation should be close to what has been practiced. But for '27, do you believe that we will have increased margins because of the changes in the mix with more transformers? And I also wanted to ask for '26 because you commented about the exchange rate and expectations of growth. But for '27, with increased capacity, do you expect that we will have an impact more towards the end of the year? Or could we expect resuming 2-digit levels earlier in '27 without exchange rate factors? André Rodrigues: Well, thank you for your question. I think it is too early for us to talk about the margin for '27. There is a very important slide in our investor presentation, which shows the dynamics of short and long cycles. And of course, if we consider that only the transformer business will go, we can think of better consolidated margins than we've had. But in reality at WEG, all of the other businesses are pursuing investment opportunities. And therefore, it will depend a lot on the mix, and we will have to wait a little bit so that we have better visibility. And the second aspect, more for the end of '27, we need to have variety for these plants. And just to give you a better idea, when we talk about increased capacity, just so you know, the training of a technician to work with transformer, it takes about 2 years for a person to be trained to manufacture a transformer with the quality demanded for this type of product. And of course, we will increase our capacity. We will observe what happens, but we will see these changes more towards the end of '27 and after that. Operator: Well, next question from [indiscernible]. Unknown Analyst: I have 2 questions here. First, you talk about T&D in Brazil. Could you give us an idea of how much the Brazil reduction was when compared to solar? And how many -- or what was the decrease in the T&D deliveries? We always make mistakes when we try to define what WEG's margins are going to be. But now we have a very strong component in the U.S. tariffs, the U.S. tariffs, and if you consider tariffs are 15% or not, we come to an estimate of -- margins of 1.1%, 1.2%. This will be more constant and relevant for WEG. So I wanted to better understand if there are any specific factors involved in terms of time, payment of tariffs, and when they will no longer be charged because I understand that you will wait for us to have a final decision, but in the meantime, will there be an impact? I wanted to understand if this makes sense, and when will this stop having an impact? André Rodrigues: Regarding T&D or else regarding Brazil, we had a significant decrease in the quarter. Unfortunately, we do not break down according to the different businesses, but I would like to share that most of it was in fact the impact of solar energy, where we had a very significant concentration in the end of '24, '25 in the deliveries of projects. And these projects are no longer present in our portfolio, so we can say that an important part of this decrease resulted from GC. And we also had a less relevant impact, but even more important than T&D, which was wind energy because we still had something happening in the end of '24. And we had basically nothing. The maintenance contract remains. But when we talk about new machines, we had an impact from wind energy in this comparison quarter-over-quarter. And then, we had T&D. And the new thing is that we didn't grow this quarter. There was a small decrease, but that was part of the issues we had in the development. This is related to solar energy. And this is something natural that happens with this type of project depending on the deliveries and on how we organize our projects. André Salgueiro: Well, I will talk a little bit about tariffs. We have to keep in mind that we're talking about 232, which doesn't change. And in the past, WEG focused more on Mexico because Brazil already had 50% tariffs. But now Brazil, as the rest of the world, will go into 232, which has to do with taxes on copper, aluminum and iron. But then, it will expire, from 40%, it will go to 10%, maybe 15%. But the impact of that will be seen later on. We have to keep in mind what the new orders are right now. So getting out of Brazil, we have the transit time, and so this impact on cost of imports going to the U.S. is something that will be seen in the second or third quarters. Now, we will have to monitor the impact this may have on business aspects that should be evaluated later on. Operator: I will continue with our next question from Marcelo Motta, JPMorgan. Marcelo Motta: Could you give us some light on the minorities because if you look at the volume related to profit, we can see that it's been growing, and is this a trend that we should expect from now on? And the other question has to do with the effective tariff rates and whether it would grow or not, but it is still at very low levels. You're trying to obtain new forms of tax efficiency. But should we expect that it will be below 20%? I wanted to better understand what range we can expect. André Rodrigues: Regarding the minority line, basically, what we have there are the results for the areas where WEG does not have 100% participation. So we do have some operations here in Brazil, and perhaps, we have a highlight to our joint venture in the reducers area, but the most relevant thing is the T&D operation in Mexico and the United States, where we have a partner. And then, it has to do with that. So what has happened is that the T&D business has grown at a very interesting result, both in terms of revenue, but also profitability. And this leads to better results. And then, if we look at this quarter, WEG's revenue went down on the consolidated results, but it increased significantly. And therefore, the debt line has reduced. But what will be the growth range of the other businesses, if we follow it quarter by partner, we know that it will keep on growing. And if we look at this alone, the expectation is for this line to grow a little bit, but we also have other businesses in the company that may evolve depending on the mix, and there will be some differences. And regarding the tariffs, the normalized one will be in the order of 20% as it was the average for '24. But what happened in '25 was that it ran below that, and this had to do with improved profits. And we also had a positive contribution of tax incentives, especially related to the technological innovation law. But our expectations didn't change. Operator: Our next question is from Lucas Melotti, Banco Safra. Lucas Melotti: We've seen an acceleration of announcements of new data centers in the U.S., including increased energy demand, which has grown exponentially, which will be significant in the U.S. and even taking into account the capacity of the industry, which will grow in the upcoming years, do you see any room for relevant price increases? André Rodrigues: Lucas, thank you. We've been tracking the development of the data center market, not only data centers, but energy consumption and demand, especially for our equipment. So this has been the main driver in T&D, especially in the foreign market. And this trend tends to continue. When we look at the market itself, the portfolio is robust. But we also see other players in the industry announcing an increase in the capacity. And what we've seen from a commercial point of view, at least for the past quarters is that we have good profitability without significant expansions, as we saw last year and in the past couple of years. And if the demand proves to be more heated for in the future, then we can eventually start a new price cycle that will help us grow. But this is not our basic scenario for right now. Right now, we will be at a good level with good profitability for the company. Operator: We now conclude our Q&A session. And as a reminder, if you have any further questions, please feel free to send them to our e-mail address at ir@weg.net. I would now like to turn over to Andre Rodrigues for his closing remarks. Andre, please go ahead. André Rodrigues: Well, once again, I would like to thank you all for your presence and participation. And we will talk to you again when we have our conference for the second quarter of '26. Operator: WEG's teleconference is now over. We thank you all for your participation, and wish you a good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Greetings, and welcome to Installed Building Products Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Darren Hicks, VP-Investor Relations. Thank you. Mr. Hicks, you may begin. Darren Hicks: Good morning, and welcome to Installed Building Products Fourth Quarter 2025 Earnings Conference Call. Earlier today, we issued a press release on our financial results for the 2025 fourth quarter and fiscal year, which can be found in the Investor Relations section of our website. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements within the meaning of federal securities laws. These forward-looking statements are based on management's current beliefs and expectations and are subject to factors that could cause actual results to differ materially from those described today. Please refer to our SEC filings for cautionary statements and risk factors. We undertake no duty or obligation to update any forward-looking statement as a result of new information or future events, except as required by federal securities laws. In addition, management refers to certain non-GAAP and adjusted financial measures on this call. You can find a reconciliation of such non-GAAP measures to the nearest GAAP equivalent in the company's earnings release and investor presentation, both of which are available in the Investor Relations section of our website. This morning's conference call is hosted by Jeff Edwards, our Chairman and Chief Executive Officer; Michael Miller, our Chief Financial Officer; and we are also joined by Jason Niswonger, our Chief Administrative and Sustainability Officer. Jeff, I will now turn the call over to you. Jeffrey Edwards: Thanks, Darren, and good morning to everyone joining us today. As usual, I will start the call with some highlights and then turn the call over to Michael, who will discuss our financial results in more detail before we take your questions. We closed out 2025 with a strong fourth quarter, delivering record sales and profitability for the year. While our core residential end markets experienced headwinds in part due to housing affordability, our commercial end markets performed extremely well as we focused on meeting the needs of our customers, profitability and product diversification across end markets. We continue to generate strong operating cash flow, which we use to support our growth-oriented capital allocation strategy. While we expect homebuilding activity to remain challenging in the near term, the long-term outlook for our installed services remains positive, and we believe we are well positioned to continue investing in strategic acquisitions while returning cash to our shareholders. Capital allocation decisions are among the most important we make as a company, and we take pride in our disciplined approach. For 2025, our adjusted return on invested capital was 24%, in line with the returns achieved over the previous 3 years. Even with industry-specific headwinds expected to continue to affect our new residential Insulation segment in the near term, our overall business has proved to be resilient. All the credit goes to the hard-working men and women across our more than 250 branches throughout the United States and those who support them from our office in Columbus, Ohio. To everyone at IBP, thank you for making 2025 a great year. As we continue to focus on profitable growth and maximizing returns for our shareholders, we remain committed to doing the right thing for our employees, customers and communities. Looking at our full year 2025 performance, consolidated sales increased 1% and same-branch sales declined 1%. Same-branch commercial sales growth was more than offset by residential same-branch sales growth headwinds. Residential sales growth within our Installation segment was down 4% on a same-branch basis for 2025 as both single-family and multifamily same-branch sales decreased from the prior year. With respect to our single-family end market, the spring selling season is underway, but it's too early to draw any conclusions for the rest of the year. We expect that given readily available labor and material and relatively short construction cycle times, construction activity is primed to accelerate without any of the production-related hurdles that existed in prior years. In our multifamily end market, our contract backlog continues to grow, which is encouraging. Our commercial end market was a real bright spot in 2025 with sales in our Installation segment up 10% on a same branch basis from the prior year period. Our heavy commercial end market continued to be the dominant driver of sales growth, which more than offset weakness in our light commercial end market. Based on the growth in our heavy commercial contract backlogs, we believe heavy commercial sales and profitability are poised to remain healthy in 2026. We completed 11 acquisitions, including bolt-ons during 2025, representing over $64 million of annual revenue. We remain disciplined in our approach to acquiring well-run businesses that make strategic sense, support attractive returns on invested capital and fit well culturally. Our core residential installation end market remains highly fragmented with considerable opportunity for consolidation. During the 2025 fourth quarter, we completed a total of 4 acquisitions, representing over $23 million of annual sales from a diverse product set in both residential and commercial end markets. Acquisitions included an insulation installer, a glass design and fabrication company, a drywall and framing company and a shower doors, shelving, mirrors, and accessories company. In addition, in January and February, we acquired an installer of insulation across new residential and commercial end markets throughout Texas, Louisiana, Arkansas, and Oklahoma with annual sales of approximately $5 million; a provider of a wide range of value-added mechanical insulation services for diverse commercial and industrial applications serving key commercial and industrial hubs across Wisconsin, Iowa, Minnesota, Michigan and Illinois with annual sales of approximately $13 million; and an installer of insulation primarily across new residential and light commercial markets throughout Kansas and Oklahoma with annual sales of approximately $3 million. Although deal timing is hard to predict, our current outlook for acquisition opportunities in 2026 is strong, and we expect to acquire at least $100 million of annual revenue this year. In terms of broader housing construction activity in the U.S., Census Bureau data for 2025 showed single-family starts decreased 7% from the prior year, while multifamily starts were up 18% for the same period. From a federal housing policy standpoint, we do not have any unique insight into the likelihood of changes in regulation coming to fruition or its potential impact or benefit. Our experienced leadership team has a history of operating through multiple housing cycles, and with our strong national market share and deep customer and supplier relationships, we are well positioned to continue to compete and win business. We remain focused on growing our operations profitably and allocating capital effectively to drive value for our shareholders. I'm proud of our team's continued success and commitment to doing an excellent job for our customers. Once again, to everyone at IBP, thank you. I remain encouraged by the fundamentals of our industry, our competitive positioning, and I'm optimistic about the prospects ahead for IBP and the broader insulation and complementary building product installation business. So, with this overview, I'd like to turn the call over to Michael to provide more detail on our fourth quarter and fiscal year 2025 financial results. Michael Miller: Thank you, Jeff, and good morning, everyone. Consolidated net revenue for the fourth quarter was roughly flat at $748 million compared to $750 million for the same period last year. Same-branch sales for the Installation segment were down 2% for the fourth quarter as a 23% increase in commercial same-branch sales almost fully offset a 9% decline in new residential same branch sales. Although the components behind our price/mix and volume disclosures have several moving parts that are difficult to forecast and quantify, we reported a 1.7% increase in price/mix during the fourth quarter. This result was offset by a 9.3% decrease in job volumes relative to the fourth quarter last year. It is important to note that our heavy commercial end market and the other Distribution and Manufacturing segment results are not included in the price/mix and volume disclosures. Our heavy commercial same-branch sales growth was incredibly strong at 38% during the 2025 fourth quarter. Including the heavy commercial installation sales, price/mix increased 6%, while job volume decreased 9% during the 2025 fourth quarter. With respect to profit margins in the fourth quarter, our business achieved record adjusted gross margin of 35%, an increase from 33.6% in the prior year period. The year-over-year increase in margin during the quarter was in part related to a shift in our Installation segment customer mix and successful management of direct operating costs in a demand environment that varied from challenging to healthy across end markets. Adjusted selling and administrative expenses were relatively stable compared to the 2024 fourth quarter. As a percent of fourth quarter sales, adjusted selling and administrative expense was 18.3% compared to 18.1% in the prior year period. Adjusted EBITDA for the 2025 fourth quarter increased to a record $142 million, reflecting a record adjusted EBITDA margin of 19% and adjusted net income increased to $88 million or $3.24 per diluted share. Although we do not provide comprehensive financial guidance, based on recent acquisitions, we expect first quarter and full year 2026 amortization expense of approximately $10 million and $38 million, respectively. We would expect these estimates to change with any acquisitions we complete in future periods. Also, we continue to expect an effective tax rate of 25% to 27% for the full year ending December 31, 2026. For the 12 months ended December 31, 2025, we generated $371 million in cash flow from operations. The 9% year-over-year increase in operating cash flow was primarily associated with an increase in net income and improvements in working capital management. Our fourth quarter net interest expense was $8 million compared to $9 million for the 2024 fourth quarter as higher interest income from investments combined with lower cash interest expense on outstanding debt. At December 31, 2025, we had a net debt to trailing 12-month adjusted EBITDA leverage ratio of 1.1x compared to 1.09x at December 31, 2024, which remains well below our stated target of 2x. At December 31, 2025, we had $377 million in working capital, excluding cash and cash equivalents. Capital expenditures and total incurred finance leases for the 3 months ended December 31, 2025, were approximately $17 million combined, which was approximately 2% of revenue. In January 2026, we closed a private offering of $500 million in aggregate principal amount of 5.625% senior unsecured notes due 2034. A portion of the proceeds were used to fully repay our $300 million notes due 2028. We also amended our existing $250 million asset-based lending revolving credit facility to, among other things, increase the commitments thereunder to $375 million and extend the maturity date to January 2031. Following the completion of these transactions, we have nearly $900 million in available liquidity and very modest financial leverage. Based on higher debt and cash balances, we estimate that first quarter interest expense will be approximately $11 million. With an even stronger liquidity position as a financial foundation, we will continue to prioritize acquisitions with long-term strategic benefits and attractive returns on invested capital. We expect positive free cash flow will continue to support shareholder returns and stock buybacks based on prevailing market conditions. During the 2025 fourth quarter, we repurchased 150,000 shares of common stock at a total cost of $38 million and 850,000 shares at a total cost of $173 million during the 12 months ended December 31, 2025. The Board of Directors authorized a new $500 million stock buyback program. The new authorization replaces the previous program and is in effect through March 1, 2027. IBP's Board of Directors approved the first quarter dividend of $0.39 per share, which is payable on March 31, 2026, to stockholders of record on March 13, 2026. The first quarter dividend represents a more than 5% increase over the prior year period. Also, as a part of our established dividend policy, today, we announced that our Board has declared $1.80 per share annual variable dividend, which is a nearly 6% increase over the variable dividend we paid last year. The 2026 variable dividend amount was based on the cash flow generated by our operations with consideration for planned cash obligations, acquisitions and other factors as determined by the Board. The variable dividend will be paid concurrent with the regular quarterly dividend on March 31, 2026, to stockholders of record on March 13, 2026. We are committed to continuing to grow the company while returning excess capital to shareholders through our dividend policy and opportunistic share repurchases. With this overview, I will now turn the call back to Jeff for closing remarks. Jeffrey Edwards: Thanks, Michael. I'd like to conclude our prepared remarks by once again thanking IBP employees for their hard work and commitment to our company. Our success over the years is made possible because of you. Operator, let's open up the call for questions. Operator: [Operator Instructions] The first question comes from the line of Philip Ng with Jefferies. Philip Ng: Congrats on a really strong quarter in a not easy environment. Your gross margin and EBITDA margin expanded nicely this year. So, pretty impressive. But in this current backdrop, when we look out to 2026, what's your confidence in protecting margins? Your largest competitor just reported results, they're calling out perhaps low single-digit price deflation in '26 and some price cost headwinds. So, how should we think about it as it relates to IBP? Michael Miller: Phil, this is Michael. Thanks for the compliment. We certainly are extremely proud with what the team has delivered not just in the fourth quarter, but this year. I mean, as it relates to margins, particularly gross margins, and I'll say at least probably 10 times today, like I do on every call, we don't provide guidance. But what I would say is that, as we look across the business, and we look at how well the commercial business is performing, we believe it will continue to do that. The other segment, which is the Manufacturing and Distribution segment is continuing to perform very well, and we think it will continue to do that. When we look at the core residential installation business, we really think of it as in 2 buckets. So, the first bucket being the regional private, move-up, custom, semi-custom builder. And we're really seeing relatively consistent demand there, which is -- we've seen that through really most of '25. And going into '26 as well, although clearly, which is something I'm sure we'll talk about on the call today, clearly, the year is off to a slow start, given some of the weather-related issues that have been experienced across the country. And so, what I would say is that where there's weakness and where there's pressure is within the entry-level production builder segment of our business. And right now, I think it's way too early to call whether or not there's an inflection and there will be an inflection in the spring selling season. Something that was a little bit encouraging, I would say, is that in the recent information released by the Census Bureau, if you look at single-family starts on a seasonally adjusted annualized rate, right? So, in the fourth quarter, those starts averaged about 6% higher than they did in the third quarter. Again, that was the seasonally adjusted annualized rate. So, that's a positive. And I think commentary from companies in our space that have reported have noted or highlighted that the production builders really decreased and slowed down their building in the fourth quarter in order for their standing inventory to catch up to demand. It's our belief that if the market is sort of flattish and we don't see an inflection on the entry-level side, that there'll probably be some level of rebuilding of those inventories. This continues to be a market where builders at the entry-level market are building spec. And we do believe there will be some recovery, if you will, in starts there that will be constructive. But as we look out from a macro perspective and sort of look at, again, that entry-level market, the affordability issue is still a real issue. And it's yet to be seen whether or not it is going to inflect positively this year and just how much it's going to inflect positively. If you look at -- I'm giving too much information on this one question, sorry. But I mean, if you'd look at what the public builders have disclosed from their guidance, I mean, they're talking about a pretty weak first quarter and really first half with an inflection -- pretty strong positive inflection in the back half of the year. Now obviously, we all know that's off of easy comps that helps drive that. But we think it's relatively constructive. And so, yes, I'm sorry if that was too much information on that one question. Philip Ng: No, that's great color, Michael. And then your commercial business has been a bright spot, right? It's growing nicely. It's a business you've improved and enhanced profitability. Is that an area where you guys can get behind a little more so from an investment standpoint, whether it's M&A or organic? Just kind of help us think through the opportunity set there, your ability to kind of continue to drive momentum? And do you plan to put a little more capital there to kind of support the growth? Jeffrey Edwards: Phil, this is Jeff. I would say, for sure, we'll -- as we always are, we'll be opportunistic as the situation kind of offers or demands. There is room for both organic growth and M&A growth. We haven't pursued it that hard yet because, quite frankly, we've been growing the base business enough where that hasn't been really tightening the screws. So, at this point, we feel very, very good about the business, and we do feel good about growth prospects going forward. Philip Ng: Okay. But Jeff, why haven't you put more thought or capital there? I mean, the base business has been a little squishier and this seems like a nice bright spot, and there's a lot of runway for heavy commercial, I think, for most companies that we cover. Jeffrey Edwards: I think it's really been probably the last 2 at most 3 quarters where we felt like it was really, really in a position where we didn't need to kind of continue to work the base business. But I think at this point, I'd say we're ready to try to grow that business. Well more than just organically because we've had a heck of a lot of growth really from an organic perspective. Michael Miller: Yes. And I think to Jeff's point, I mean, the key is that, that growth has been phenomenal, and it's not just been growth. It's been very profitable growth. And we wanted to make sure the team was ready to do additional acquisitions. The last thing we would want to do is kind of mess up their day, if you will, through the integration process of an acquisition and have them take the eye off the ball of the existing business. So, to Jeff's point, the past couple of quarters, we feel really confident that they've gotten to that point. Operator: Next question comes from the line of Stephen Kim with Evercore ISI. Aatish Shah: This is Aatish on for Stephen. I just want to talk about -- if you could talk about the M&A landscape? And has there been any change in terms of strategy in terms of what kind of companies could be targeted, specifically on that, just given interest from your largest competitor, has the commercial roofing market been an area of consideration? Jeffrey Edwards: Yes. This is Jeff again. As we've stated, I think, in previous calls, yes, we're definitely interested in the commercial roofing segment. And as you probably noted, we've done a few mechanical and industrial installation installers, and that's another area that we're interested in. So -- but again, I think we're on record previously as saying that we were interested in that business. So, I don't think it's a change in strategy. What I would say is that we've begun to really perform on those strategies a bit. But fundamentally, our core residential insulation installation business still presents tremendous opportunity for us, and we continue to pursue that area significantly just because we still have so much wide-open space as a company to acquire in that core business for us. So, it really is, if you will, a 3-legged stool in terms of our strategy there. Aatish Shah: That's helpful. And then, in the prepared remarks, you mentioned kind of a shift in customer mix in the Installation segment. Can you just detail that a little bit? Jeffrey Edwards: Yes. And just to clarify, that wasn't just insulation, it was the Installation business, so the kind of the residential installation business. And because we're continuing to see better sales rates with the semi-custom, custom builder and weaker sales rates with the production builder entry-level builder, that has a natural tendency, if you will, to improve and help gross margin. I mean just as a -- for example, during -- and this is based on the Census Bureau regions. But during the quarter, our Midwest Census Bureau region revenue was up mid-single digits, right? So -- and that market for us is -- it's, generally speaking, a higher gross margin market because of the higher amount of private semi-custom, custom homes that are built in that market. So, we definitely benefited in the quarter from our geographic mix as well as our customer mix from a gross margin and a profitability perspective. And I need to emphasize something that's very important is that our teams in the other regions of the country did an excellent job of maintaining profitability across the board with our customers and really highlighting and selling well to our customers the importance and quality of our installed services. And hats off to those -- to everyone in the field for doing such a great job. Operator: Next question comes from the line of Susan Maklari with Goldman Sachs. Susan Maklari: Let me add my congrats on a great quarter, guys. Well done. My first question is, talking about the growth that you've seen in the complementary products. That's something that you've really focused on recently. Can you talk about where we are in that process? And as you think about 2026 and the comps that you're going to face there, are there any implications we should be thinking about as that relates to the path for margins or for the growth that you're going to see coming through? Michael Miller: Yes. Sue, this is Michael. I mean, we have continued to see good uptake in the complementary products. The one thing I will say is, in the way that we sort of disclose those numbers in our investor PowerPoint, there's quite a bit of the complementary products that are related to the heavy commercial business. So that skews some of it. But I would say if we -- when we look at the information and we take out the heavy commercial business and look at just the complementary product sales growth and margin growth within the installed segment, again, excluding the heavy commercial business, it continues to improve, and we believe that we'll continue to see good uptake on the complementary product side. As we've talked several times, the lack of opportunity or the softness in the single-family market really helps drive uptake of the complementary products within the branches. Because compensation is so closely tied to profitability within the organization, the salespeople, the branch managers, the people that are running our branches are really focused on -- more focused on the complementary product opportunity when the insulation opportunity is a little bit softer, particularly at that production builder level. And within the production builders at the entry level, we do have very good complementary product penetration because of some of those efforts. Susan Maklari: Okay. That's great color. And then, you mentioned that you've recently done some more deals in the mechanical space. Can you talk about your interest there, where you are in that process? How we should think about what that could mean for the future of the business? And then maybe with that, any comments on your efforts to build out distribution as well and just where we are there? Jeffrey Edwards: Yes, Susan, this is Jeff. So, we definitely -- as Michael said, I mean, I guess if you wanted to consider it a third leg, we look at the mechanical and industrial as a huge opportunity for us. It's a business that's extremely fragmented. I would say, on average, the prospective businesses that we've looked at have been a little larger than what we see typically at some of our other kind of regular way acquisitions, and margins are very favorable in terms of overall for the company. So, we -- at this point, obviously, we think we'd love to find a little bigger business and kind of build out a platform. So, we'll see what the future brings, but that's definitely something that we're looking at. And on the internal distribution or the distribution side of the business, we've been very pleased with the progress we've made really in the last 2 quarters within that business. We -- at this point, I'd have to probably guess a bit, but I would bet that we are servicing 60% to 70% of our branches at this point from probably about 5 to 6 locations. And we have a few more to add. But otherwise, it's worked exactly as we thought it would, and it helped our margins. Michael Miller: Yes, certainly our gross margin. Operator: Next question comes from the line of Adam Baumgarten with Vertical Research Partners. Adam Baumgarten: Just on the -- you mentioned some positive mix impacts on gross margin from the better growth in custom and semi-custom and some regional factors like the Midwest. But the strong growth in heavy commercial, did that also contribute to the gross margin expansion? Michael Miller: Yes, absolutely. I think in the third quarter call, we sort of called out that we didn't expect that much of a tailwind, if you will, from the support or of the improvement -- profit improvement within the heavy commercial business. But I guess we were sandbagging a little bit there, quite frankly, because the heavy commercial business did continue its relative outperformance and we would estimate that the heavy commercial business added about 40 basis points or so to the gross margin improvement. Adam Baumgarten: Okay. Got it. Great. That's helpful. And then, just digging into the heavy commercial strength, I mean, was it pretty broad-based? Are there certain verticals like maybe data center that were kind of outsized contributors? Or just kind of what you're seeing there maybe by an end market vertical perspective in heavy? Michael Miller: Yes. And so, Brad Wheeler, our Chief Operating Officer, is here, and I'm going to have him add some color to this as well. But it's not data center related. I mean it's across the board with the big exception of high-rise multifamily. It's a lot of educational, it's health care, it's recreation, transportation. While we do some data center work, we don't chase it like other companies do. Brad Wheeler: This is Brad. Yes, it's really -- we've maintained our core, right, the educational and the -- even some of the offices is back, which has helped. Manufacturing has increased, which is great. So, it's really us sticking to our core and taking advantage of any data centers that we have in our platform. Operator: Next question comes from the line of Michael Rehaut with JPMorgan. Michael Rehaut: I wanted to first kind of go back big picture a little bit with the gross margins. We've had many quarters now where you've really executed very strongly and kind of at or above that 32% to 34% range that you've talked about. There's also been, as you've highlighted, good improvement in commercial. You're benefiting from the mix on the semi-custom and the geographic. And I'm just wondering, with all those factors kind of benefiting the margin, if you've kind of given any thought to perhaps thinking about gross margins over the next couple of years, maybe above that 32% to 34%, particularly given the strength in the fourth quarter. Michael Miller: Yes, that's a great question, and I'm glad that you asked it. We would -- it's our expectation that the gross margins would continue to be, particularly on a full year basis in that 32% to 34% range. As we were saying earlier to the answer to another question, I mean, fundamentally, when we look across the business, the only part that where we don't have really good visibility into either being flat or up is the production builder entry-level market. We believe when that market inflects and it will, we are very well positioned to participate in that upward inflection, but it will necessarily pressure gross margin just because that work is at a much lower gross margin. Now what it does come with is great OpEx leverage. So, it will improve -- it should improve OpEx leverage and improve EBITDA margins. So, right now, we're really just working hard to -- obviously, the parts of the business that are either flat or up, we're doing everything we can to maximize profitability there and positioning the business to really do well once that inflection happens. We really are confident about the team's ability to flex up to meet that demand when it comes. And it's way too early, as Jeff said in his prepared remarks, I mean, it's way too early in the spring selling season to say whether or not we're going to see the inflection this year. But I do think there is some opportunity with the production builders sort of rebuilding inventory, if you will, in the first half of the year. Michael Rehaut: Okay. No, I appreciate those thoughts. I guess, secondly, I was hoping you could review where you are from a price/cost standpoint in the fourth quarter. And you just had your competitor out earlier this morning talk about anticipated price/cost headwinds for 2026. I was curious on your thoughts of how that dynamic you expect -- how you expect that dynamic to play out for you in '26 and if that might be a headwind as well relative to what you're seeing in your current results? Michael Miller: Yes. I mean, certainly, at the entry-level part of the business, there's definitely price/cost pressure. The team is doing an excellent job of trying to manage through that. But there's definitely going to be pressure there until that entry-level aspect of the market inflects positively. But our team, again, I think they're doing a really good job of trying to manage that, but there's clearly pressure there for sure. And clearly, in the first quarter, we're going to have pressure from the weather. We estimated that in January and February that the weather impact was about $20 million to revenue in the first quarter. Now we're working to make that up, and we will work to make that up, but we're not going to be able to make that up in the month of March. It's just not going to happen. So, it's definitely making that up "is going to fall into the second quarter." So yes, we're going to face pricing pressure with our customers. But I think as a company, we know that we've done an excellent job, and we believe our results reflect our ability to effectively manage that price/cost pressure. Michael Rehaut: So, is it fair to say then, Mike, that you're not -- you're expecting the pressure to continue, but maybe not incremental relative to what you're seeing already in your 4Q results? Michael Miller: Yes. I think that's reasonable. Although the first quarter is always our weakest quarter, right? And the headwind that we have because of the weather impact, obviously, is going to be tough. But if we think of it, and we like to think of it on a full year basis as opposed to a quarterly basis, we feel good about what the team has been able to do. And if we have a flat to slightly down single-family market, excluding any acquisitions that we do, given the strength that we're seeing in the commercial business and the Manufacturing and Distribution business, we feel pretty good about the year in general, right? So, obviously, it's late February. It's hard to call a year at this point, but there's definitely reason to be pretty encouraged. Operator: Next question comes from the line of Mike Dahl with RBC Capital Markets. Michael Dahl: I want to take that last question and kind of flip it around and ask, in the fourth quarter, did you actually experience some effective price/cost benefits? I know there's a lot moving around in terms of mix and different types of mix, but it seemed like there was some opportunity for buyers such as yourselves to get some lower pricing on resi fiberglass in the fourth quarter and your reported pricing, again, understanding there's a lot of mix, but it was up. I'm just wondering if that -- if there was something like that, that actually also contributed to the gross margins because the heavy commercial disclosure was helpful, but margins being up 100 basis points year-on-year, even taking that aside is pretty impressive. Michael Miller: Yes. I mean it is predominantly mix related and the team's ability to manage the cost structure as effectively as possible in the current environment. So, I think there's been a lot of discussion around fiberglass pricing, the fiberglass manufacturers. In our opinion, and I'll have Jeff or Brad talk a little bit more about this. I think they've done a good job of managing capacity relative to the demand environment and I think they've done an excellent job of maintaining price. And I think it's clear to us that what they're focused on is maintaining price in the current environment so that when there's an upward inflection, they can keep that price as opposed to lowering price now and making it more difficult to get price back when there is an upward inflection. But I don't know if you guys want to add anything to that. Jeffrey Edwards: I think everything you said is accurate and I wouldn't add anything. Michael Dahl: Okay. Got it. Appreciate that. Second question, just on the commercial side and heavy commercial, it's interesting the comments on maybe doing some more inorganically now. Just on the organic side, I mean, with this type of strength in same-branch sales and the backlog that you're seeing, when we think about like organic OpEx or capacity expansions, how are you thinking about that in 2026? Do you really need to start to do more to support the growth that you're seeing in that segment? Michael Miller: Yes, that's a really good question given the growth rates that we're seeing. I mean, we clearly benefit from the highly variable cost structure. But I'll ask Brad to give some more commentary on our ability to bring up capacity to support the demand. Brad Wheeler: Sure. This is Brad again. Yes. So, a lot of it -- we expanded our geographic area as well. And part of the organic growth strategy would be, we go get jobs in other markets where we generally aren't participating. We build a backlog. And then once we have settled, we have employees and installers in that area, we're able to go and open an office. And that's sort of how we have our strategy set up right now. In addition, we are looking at other markets throughout the country that we feel would be a good fit to organically grow there as well. And, obviously, of course, acquisitions as well. Michael Miller: But our ability to flex both in the heavy commercial business, the light commercial business, all of the install businesses, our ability to flex up or down is very significant. I mean, obviously, we wouldn't disclose individual branch results, but there are some branches in Texas and Florida that have had pretty significant sales declines over the course of the year and particularly in the fourth quarter, but they have maintained their margins, right? And that speaks dramatically to the heavy variable cost structure of the business, and importantly, the manager's ability to manage effectively, right? One of the things that we believe, structurally, we benefit from is the highly variable compensation within the organization and particularly within the branch managers that provides a powerful incentive for them to manage the cost structure, whether that's managing it up or down based upon the volumes that they're seeing. Operator: Next question comes from the line of Ken Zener with Seaport Research Partners. Kenneth Zener: So, again, perhaps even more pronounced this quarter given your gross margin, the regional -- well, production builder versus your other bucket, right, has been affecting mix and you talked about margins, right, with customer mix, I think that's the same thing. Is there a way -- since you're disclosing so much, Michael, in terms of gross margin from commercial and they're up in res, is there a way for you to bucket the growth rates you're seeing in -- or the different rate of change within your production bucket versus your other regional bucket? [indiscernible] the magnitude is pretty good. I believe you said the regional you see flat or up, if I heard you correctly, you might have said that. Just any comments would be helpful. Michael Miller: Yes. So, if we look at it on a full year basis and we look at the private regional builders, basically, our business with them in the year was flat. If we look at our business with the production builders and when we say production builders, we mean the public builders, right? Because we can use them and talk about them in a different way because their information is public, right? So, when we're talking about sales with them, we're talking about, again, the public builders, not even a big private builder like David Weekly Homes. So, from the public's perspective, if we look at their homebuilding revenue, right, for the full year, it declined around 6%. And our revenue with them was down around 6%, which is exactly what you would expect. But that, again, was more than offset with the positive -- flat to positive growth that we had with the private builders. So, we feel that we're doing exactly what we're supposed to be doing. We're maintaining share with the publics, the production builders and working closely with them to not just maintain share, but maintain price and maintain profitability and to be there and to be able to support them when there's the inflection, but at the same time, leaning in and focusing very hard on our geographic weightings and our customers that are either growing or are at flat. So, the team is doing an excellent job of identifying where the opportunity is and working hard to maximize the benefits with that. Kenneth Zener: Really appreciated those comments. Now -- in regards to weather, which isn't something that historically, I think, is such a big deal, the seasonality 1Q from 4Q, it's been kind of all over the place. But if it's historically down, call it, mid-single digits, it sounds like you're expecting worse seasonality just because of the weather patterns we've had. Is that correct? Michael Miller: Correct. Operator: Next question comes from the line of Keith Hughes with Truist Securities. Keith Hughes: I've a question about multifamily. I've seen the government data, too, it shows a rebound -- pretty profound rebound in multifamily. Are we actually seeing that kind of boots on the ground? Is it that good? Or is it more just a bottoming going on? Michael Miller: Yes, Keith, that's a great question. And I'm really glad you brought it up because we wanted to talk about it. So, we believe based on -- so this is at a macro level, based on the information from the Census Bureau that was delayed a little bit, but that recently came out that multifamily cycle times have basically normalized to kind of pre-COVID, pre-supply side disruptions. And that was really driven by the fact that for the full year, multifamily starts were up like 18% and units under construction were down 13%. So, we believe that the multifamily market is coming into, if you will, equilibrium. There will still be some headwinds. I think in the first half of -- I don't think I know, in the first half of this year. Our team has done, as much as we sing the praises of the heavy commercial business, the reality is that multifamily team across the country and particularly CQ, we call out all the time, have done an incredible job of just outperforming dramatically the market opportunity that exists there. We have a lot of confidence in their ability to continue to do that. I mean their backlogs are growing and they're doing a great job of increasing the complementary product penetration within multifamily. So, yes, I mean, based on the starts for '25 coming into '26 and recognizing that the cycle time for multifamily is much longer than it is for single-family, we think that bodes well for full year '26 on the multifamily side, especially given the easy comps that all of us in the industry are going to be facing as it relates to multifamily. I would say, too, just because we're talking about cycle times, on the single-family side, cycle times are probably the best they've ever been. And I think a lot of the big production builders have talked about how efficient their cycle times are currently. And again, building on some of the comments that we made earlier, when we, again, look at the business and the only part of the business that we were not really confident in is the single-family production builder business, because those cycle times are so tight at the entry level, as soon as there is an inflection, the inflection to our install time is going to be very short. So we're going to feel it very quickly, and we'll scale up for it very quickly, unlike multifamily, right? Because the bid and book time on a project to when we actually do the install can be 12 to 18 months, right? So, this single-family inflection on entry-level production builder side can be pretty meaningful. It will be meaningful when it happens. We just don't know when it's going to happen. Operator: Next question comes from the line of Collin Verron with Deutsche Bank. Collin Verron: I was just hoping you can talk about IBP single-family branch sales growth relative to the national market in the fourth quarter and just how and why that might have changed from sort of how IBP performed versus the market in 2Q and 3Q? Michael Miller: Well, we continue to perform sort of above the market opportunity, I would say, and -- I mean, clearly, and we've talked about this for the past several quarters, we clearly benefit from our regional weighting towards the Midwest and the Northeast. I mean when we look at our single-family revenue and we look at our market share by census region, our largest, highest market share is clearly in the Midwest. And as I think pretty much everybody knows, the Midwest has been doing fairly well on a relative basis to the rest of the country. So, we feel good about the mix that we have. As I think we've said a couple of times, I mean, we're positioned very well with the production builders, entry-level builders once the inflection is there. But until that happens, we're continuing to lean in on our private and semi-custom, custom builders and to kind of work with the advantages -- inherent advantages we have from our regional diversification. Collin Verron: Great. That's helpful color. And then just really quickly on the commercial performance. I believe you characterized the backlog as healthy. But I was just curious if there's any more finer points you can put on sort of what you're seeing in the backlog in that early part of 2026 here and how much visibility that really gives you? Michael Miller: It's very healthy. So we feel very good about the business. I mean there's -- right now, it's just -- it's working incredibly well. And to be honest with you, since Brad's here, the team deserves a tremendous amount of the credit, but the leadership that Brad has brought to that team has been phenomenal. Brad Wheeler: Yes, absolutely. Michael Miller: And they've really stepped up. I mean it's just -- it's so impressive how well they've stepped up. It's just -- it makes us feel very proud. Operator: [Operator Instructions] Ladies and gentlemen, we have reached the end of question-and-answer session. I would now like to turn the floor over to Jeff Edwards for closing comments. Jeffrey Edwards: Thank you for your questions, and I look forward to our next quarterly call. Thank you. Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Ladies and gentlemen, thank you for standing by. I am Gellie, your Chorus Call operator. Welcome, and thank you for joining the OTE conference call and live webcast to present and discuss the fourth quarter and full year 2025 financial results. [Operator Instructions] And the conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Kostas Nebis, CEO of OTE Group; Mr. Babis Mazarakis, Chief Financial Officer; Mr. Panayiotis Gabrielides, Chief Marketing Officer, Consumer segment, OTE Group; and Mr. Evrikos Sarsentis, Head of IR and M&A. Mr. Nebis, you may proceed. Kostas Nebis: Thank you, and warm welcome, everyone. Thank you for joining OTE's Fourth Quarter and Full Year 2025 Results Call. 2025 was another successful year for OTE. We achieved solid results that highlight the effectiveness of our strategy and the dedication of our teams. Revenues increased, profitability growth gathered pace with positive momentum visible both in our Fixed and Mobile businesses. Throughout the year, our performance has accelerated. And in the final quarter of the year, this momentum became even more pronounced. In the Fixed segment, we have seen a return to retail growth after 4 years, marking a significant inflection point. We accelerated the transition to Fiber-to-the-Home, leveraging on the ongoing expansion of our FTTH network. In 2025, we delivered record high FTTH customer additions and this strong momentum continued throughout the fourth quarter. We have also seen increased utilization of our fiber infrastructure, which is essential for maximizing the returns on our investments. Additionally, the introduction of the new regulatory framework ending the sale of FTTC products in buildings already connected with FTTH will further support the shift to fiber connections. This will bring increased customer satisfaction, lower churn and meaningful cost savings. We remain, by a long way, the largest fiber network provider in Greece and the recent strategic acquisition of TERNA FIBER for the UFBB projects will allow us to extend the FTTH coverage in the coming years. At the same time, as the project becomes commercially available, we anticipate it will accelerate the fiber transition process of our customer base. We are particularly pleased that our fiber investments are delivering measurable national impact. In 2025, Greece improved its global Fixed Broadband ranking by 18 positions based on Ookla Speedtest Global Index, primarily driven by our accelerated rollout. This progress is fully aligned with our vision to elevate Greece at the forefront of digitization in Europe. Our FWA service launched in 2025 to bridge fiber connectivity gaps has gained strong momentum and is supporting our Fixed Retail positive trajectory. I would also like to highlight the outstanding performance of our Pay-TV business over the past year. We delivered robust double-digit growth, fueled by our strategic partnership for sports content sharing and the enhanced antipiracy measures. Additionally, the recent removal of the 10% special tax starting this year supports our confidence for continued momentum as the product becomes even more affordable. Turning to our Mobile segment. We continue to deliver outstanding results, further solidifying our market leadership. In the fourth quarter, our Mobile business achieved particularly robust growth, accelerating further from the positive performance that we had achieved throughout the year. The ongoing transition from prepaid to postpaid plans, rising demand for high data allowances and higher adoption of 5G-enabled devices have all contributed to this performance. We're especially proud to operate the only commercial available 5G stand-alone network in Greece, setting us apart from the competition. Through our 5G SA deployment, Greece now ranks fourth globally and first in Europe in 5G stand-alone speeds, once again based on Ookla global 5G stand-alone footprint, reinforcing our structural advantage in mobile. Our commitment to delivering top quality network performance was further validated this year as we once again received certifications from both Ookla and umlaut. These recognitions underscore our ongoing dedication to providing the best network experience in the country. In B2B, OTE played a pivotal role in advancing digitization. Our ICT business achieved robust double-digit growth and expanded to deliver international projects as well, further reinforcing our leadership in digital transformation and underscoring our commitment to Greece's digital future. We have expanded our services to private and international segments outside Greece to fill the gap once the EU RRF drives out next year. We continue to invest in our core competencies while strengthening at the same time our market differentiation and reinforcing the value that we deliver to our customers. Our non-phone services continue to grow and an energy partnership with Protergia brought new value-added benefits to our households. We introduced the Magenta AI platform, bringing the power of AI to the hands of our customers, a value-enhancing offering that fosters innovation, drives diversification and further strengthening our commitment to customer satisfaction. Finally, I would like to say a few words about our shareholder remuneration. In 2025, we streamlined our portfolio by selling our Romanian operations. And this has significantly enhanced our annual cash flow generation and enabled us to deliver additional value to our shareholders. Today, we announced our new remuneration policy, which from now on will be based on the actual free cash flow of the previous year instead of the projected free cash flow, marking a significant step forward and towards enhancing visibility, transparency and flexibility. We are proposing a 22% increase in the dividend and a 16% increase in our share buyback program. Our payout is virtually 100% of our free cash flow, clearly demonstrating our commitment to returning value to our shareholders. Beyond our financial performance, in 2025, we continue to pursue responsibly our growth. Our strong commitment to sustainability continue to deliver positive results as reflected in our sustainability statement. This year marked a major climate milestone since we achieved greenhouse gas neutrality in the group's own operation. Looking ahead, we remain steadfast in our mission to accelerate growth, drive digital and AI-led transformation, leading Gigabit networks with a clear aspiration to become Europe's top digital telco. We are committed to enhancing our operating and production model by leveraging innovative technologies, notably AI to boost efficiency and performance. We are confident that we will meet the evolving needs of our customers, creating lasting value for all and position Greece among the leaders in digitization in Europe. It is a strong market positioning that gives us the confidence to target a further growth acceleration this year to approximately 3% in EBITDA despite the challenges in the market. I will let Babis provide the details for the last quarter of the previous year. Briefly, I would like to emphasize that we continued our growth acceleration, boosted from all angles of our key revenue streams. Babis, to you. Charalampos Mazarakis: Thank you, Kostas, and welcome to everyone on the call from me as well. Before moving on to the details of the quarter, let me briefly walk you through our new shareholder policy, which we consider a significant step towards delivering attractive and sustainable returns to our shareholders. And this reflects our strengthened financial position and reinforces our clear commitment to delivering value to our shareholders. So following the completion of Romania disposal, we distributed an extraordinary dividend of EUR 40 million in December 2025. And now we adopt our new Shareholder Remuneration Policy to usual market practice by basing it on the actual free cash flow generated in the previous year, we call it [ ex-post ] free cash flow instead of the projected free cash flow, the example, free cash flow. This approach provides greater visibility and transparency on performance and the remuneration while maintaining the flexibility required to ensure a smooth and sustainable remuneration trajectory. In 2026, we intend to distribute virtually 100% of the actual 2025 free cash flow, including the funds used to undertake the processing of the UFBB II project. Overall, this translates into total shareholder remuneration of EUR 532 million, comprising EUR 355 million in dividends, equivalent to EUR 0.8777 per share and EUR 177 million allocated to share buybacks. This represents a 22% year-on-year increase in dividends and a 16% increase in share buybacks compared to 2024. Now turning on the quarterly analysis. In Greece, we achieved a robust 8.7% decrease in revenues, supported by strong performance in System Solutions, positive trajectory in Fixed Retail and accelerated growth in Mobile. Retail Fixed service revenues increased by 2.6% this quarter with higher FTTH uptake, the main engine of our Fixed Retail growth alongside strong TV growth and rising Fixed Wireless Access adoption. Turning to our FTTH. We had an excellent fourth quarter, adding a record of net 58,000 additions, bringing our total FTTH customer base to 567,000. Retail FTTH represents 24% of our total broadband base compared to only 17% a year ago. This continued momentum together with sustainable wholesale demand for our infrastructure is driving higher network utilization, which has increased to 34%, highlighting both the strong demand of our FTTH network and the resilience of our wholesale partnerships. Furthermore, the recently adopted regulatory framework allowing to stop-selling FTTC in buildings already connected with FTTH is accelerating the transition to fiber and improving the monetization of our network investments. During the quarter, we continue to make strong progress in the deployment of our Fiber-to-the-Home network, reaching 2.1 million home passed, in line with our plan and targeting 2.4 million homes passed by 2026. Our Fixed Retail trends continue to be supported by our FWA, Fixed Wireless Access service, which continues to gain strong momentum with total subscribers reaching 55,000, highlighting the growing contribution of FWA to our Broadband business. Our TV segment delivered another robust quarter with revenue growth maintaining its double-digit momentum. Our customer base continued to expand, increasing by 7.1% with 19,000 net additions in quarter 4 of 2025, exceeding the same quarter last year, a nice achievement more than a year after the agreement implementation. We have now reached the anniversary of the benefit from the ARPU increase. However, the antipiracy legislation in place and the recent removal of the 10% special tax on pay-TV as of January 2026 gives us confidence in further adoption for legitimate platforms. Turning to our Mobile operations. Service revenues grew by 5.2%, accelerating further and delivering the strongest quarterly performance of the year. Our Postpaid segment continues its strong growth trajectory with the customer base expanding by 7.2%, making the ninth consecutive year of growth. This performance was supported by ongoing pre- to post migrations and record postpaid customer additions of 60,000 in the quarter. Postpaid customers account for 43% of the total mobile base compared to 40% a year ago. We are also seeing continued progress in the adoption of unlimited packages, while 5G device penetration has now increased to 42.2% compared to only 33.5% in 2024. The strong growth in our Mobile operations is underpinned by our network leadership, which continues to be a key one of our competitive strengths. As Kostas mentioned, this was once again validated this year by our performance across key metrics. 5G now covers over 99% of the population, while 5G plus nearly 78%. Data usage continues its strong growth with average monthly consumption per user rising to 18.3 gigabytes, representing a 30% increase year-on-year. In our Wholesale segment, revenue declined by 5% in the quarter, reflecting the natural drop in national streams and the anticipated drop in almost zero-margin international wholesale activities, which began phasing out and are expected to decline significantly over the next 2 years with an estimated impact of approximately EUR 170 million in '26 and a further EUR 130 million in '27 in revenues with no impact in EBITDA. On the national wholesale front, we continue to see a steady decline, while at the same time, experiencing increasing volumes on our infrastructure as a result of wholesale agreements. Indicatively, we added 135,000 wholesale net additions in 2025 compared to 60,000 a year ago. Other revenues grew by 26.7% during the quarter, driven by solid performance across our ICT portfolio. In particular, our System Solutions segment delivered an exceptional performance, recording a 57.5% year-on-year increase, reflecting strong demand and continued execution momentum in this area. As the, Recovery and Resilience Facility, RRF, gradually reaches its conclusion, its value contribution is expected to taper off. However, nationally funded projects are anticipated to continue supporting activity levels, while our strategic focus has increasingly shifted towards the private sector and our EU presence. Total operating expenses, excluding depreciation, amortization and one-off items increased by EUR 65 million in the quarter, driven solely by costs directly linked to top line growth, most notably higher third-party fees recorded within other operating expenses, reflecting the strong momentum in our ICT. We are also continuing to incur operating expenses related to the expanding FTTH adoption, particularly costs associated with the final phase of customer connections. At the same time, we remain firmly focused on our cost discipline across the organization with savings most visible in personnel expenses, supported by the ongoing benefits of our voluntary exit programs. In parallel, as part of our transformation of our model, we selectively deploy AI-driven automation to structurally improve efficiency supporting a further improvement in our indirect cost to service revenue ratio. As a result, adjusted EBITDA after leases increased by 2.3% in the quarter 4 of 2025, marking our strongest quarterly growth rate of the year. This performance provides a solid foundation as we look ahead to 2026, where we expect to accelerate EBITDA growth to approximately 3%. Now let's have a look at the CapEx and cash flow. Firstly, CapEx in the fourth quarter amounted to EUR 174.5 million, bringing full year CapEx to EUR 612 million, up nearly 9% compared to 2024. The increase primarily reflects the continued expansion of our FTTH footprint as well as the ongoing rollout of our 5G stand-alone network, further supporting our FWA growth. For 2026, we expect CapEx to be around EUR 600 million. Free cash flow after leases from continuing operations reached EUR 168 million in the quarter, up from EUR 145 million in the same period last year. The increase was mainly driven by higher EBITDA in the quarter and improved working capital performance, which more than offset higher CapEx. For the full year of 2025, free cash flow stood at EUR 543 million. Turning now to our outlook for 2026. We expect free cash flow to amount to approximately EUR 750 million. This estimate is based on the assumption that the upcoming spectrum auction takes place in 2027. As you know, a public consultation process is currently underway and the final timing and costs have not yet been confirmed. Excluding the one-off tax benefits, which are coming from the Romanian disposal and the resulting lower tax prepayments, the underlying organic free cash flow for 2026 is estimated to be around between -- in the range between EUR 570 million and EUR 580 million. With that, we conclude our speech and we are happy to take your questions. Thank you, operator. Operator: [Operator Instructions] The first question is from the line of Draziotis Stamatios with Eurobank Equities. Stamatios Draziotis: Three quick ones, if I may, please. Firstly, on Mobile growth in Q4, which as you mentioned accelerated materially to 5.2% up. Could you just tell us to what extent this reflected pricing actions, i.e., what the impact of pricing was in isolation? Secondly, on the outlook for next year, the acceleration of EBITDA growth to 3% stems from what exactly as per your budget? I mean I know there are many things that you've considered, but what is the main driver? Is it the stronger mobile setup? Is it cost savings? And lastly, on the cash returns, just to clarify, you've guided for this EUR 570 million, EUR 580 million underlying free cash flow generation in '26. Given you will have basically already ring-fenced the spectrum-related amounts. Is it fair to interpret this as the likely envelope for total shareholder remuneration next year, obviously, subject to Board decisions? Kostas Nebis: Thank you, Stamatios, for the questions. Let me start with the first 2. As far as the Mobile growth is concerned, I mean, we are really pleased that throughout the year, we have seen Mobile growing in a healthy manner with a positive momentum across all quarters. It is true that in the last quarter of the year, we have seen a slightly higher growth rate. To a certain extent, this is also due to a stronger December, also part of it coming from the CPI implementation. Also the fact that the Christmas offerings of this year have had a slightly lower effect versus last year. So these are the 2 things. Now going forward, I mean, when it comes to the Mobile performance, we expect more or less similar trends like in 2025, and I'm referring to the annual trends. The levers, the growth levers are more or less the same. We are relying a lot on pre to post migration. We still have a big chunk of our customers still on prepaid. This is helping us drive ARPU up by providing extra value to our customers. This is one thing. The second one is also Babis commented, we are trying to push postpaid customers to high-value tariffs, including the unlimited. We still have a big part of our customer base who have not yet migrated to unlimited. And at the same time, we are facilitating that by penetrating deeper into our customer base, the 5G devices. So these are the key levers based on which we have been growing our Mobile service revenue in '23 -- or in '25, and we expect similar trends in '26 as well. Now when it comes to our EBITDA growth and moving from 2.1% that we managed to deliver this year to 3%, I think that the biggest difference is going to be on the IDC front on our costs because top line-driven growth, we expect more or less similar numbers as in 2025. But as a result of us running a couple of IDC-focused initiatives like a massive waste load reduction program in our front line. This in conjunction with our operating/production model transformation using technology, digital technologies, including AI, will help us also deliver an incremental boost to our EBITDA by rationalizing our costs. So this is the biggest difference comparing the 2 years. Charalampos Mazarakis: Yes, regarding the forecast, our guidance for this year's organic or underlying free cash flow, as you said, this estimate to be between EUR 570 million and EUR 580 million. That will be the base, which will conclude and decide in 2027, what will be the Shareholder Remuneration Policy. Obviously, the payout and the split will be decided in early 2027. Stamatios Draziotis: That's clear, Babis. If I can just follow up on this. I know it's early days, but is there any reason why this amount will be lower? I'm just trying to think because could there be anything else other than spectrum? I mean of significant size. Or is there anything that could swing this number or actually drag it lower? Charalampos Mazarakis: Well, the results of the spectrum auction cannot be predicted, of course, that's one thing. Also, what is -- what we are also taking under consideration, as it was mentioned in the Shareholder Remuneration Policy is the fact that all the one-off items which these years were the positive tax break and the prepayments that are associated with that one. Obviously, this will be repeated -- will go the other way around in 2027. So our ambition here is to ensure that these one-offs are smoothen out in order to have a proper trajectory in our shareholder remuneration growth. So we'll take this under consideration when the time comes to decide the shareholder policy for 2027. However, I want to be very clear that the organic base to decide upon is the range between EUR 570 million and EUR 580 million. Operator: The next question is from the line of Soni Ajay with JPMorgan. Ajay Soni: I've got 2. And the first is around your fixed growth of 2.6% this quarter. So you stated FTTH is a key driver. TV is growing double digit. I just want to understand the building blocks to get to the 2.6% between the growth within FTTH, TV, Fixed Wireless Access and then maybe some of the headwinds, which could be from copper or FTTC, so that's the first question. The second one was just a follow-up on -- you're talking about pushing clients to unlimited data bundles. I'm just trying to understand the size of the opportunity for you guys. So maybe a few questions within this, but it would be good to know what portion of your base is not on unlimited data bundles? And what's the ARPU uplift when you push them to the unlimited data bundle? And then also -- sorry, within this is maybe an understanding of how this trend has evolved this year? What have you been able to do so far this year on this initiative? Kostas Nebis: Okay. So let me start with the first question around fixed. Yes, indeed, I mean, Q4 was a very strong quarter. I mean on the back of both our Fixed Broadband performance as well as our pay-TV performance. I mean the main driver is, for sure, the FTTH penetration. So we recorded another record quarter, and we had a record year when it comes to FTTH net adds, moving customers from copper to FTTH is always coming with a plus when it comes to the ARPU. This is one lever. The second lever is, of course, Fixed Wireless Access. That was an important addition to our Fixed portfolio lineup because this allowed us to be more competitive in parts of the country where we were suffering from Starlink, especially the poor copper served part of the country. With us positioning ourselves with the Fixed Wireless Access product, we managed to, first of all, defend our customers while at the same time, generating some ARPU uplift moving them from copper to Fixed Wireless Access services. And pay-TV, I mean, we still believe that there's a lot more to come. The pay-TV penetration, the legitimate pay-TV penetration in Greece is still south of 35% when on average in Europe, it is ranging between 50% and 60%. So what we experienced now is all the benefits from the stricter antipiracy measures that the government has pushed through. This in combination with the fact that we have the elimination of the special tax levy that was effectively making the legitimate pay-TV prices 10% more expensive. This is out of the 1st of January. These all 3 are contributing to the growth that we have seen for the first time after 4 years in the Fixed Retail revenues. And this is more or less what we expect to see also stepping into 2026. Of course, taking into consideration the challenges in the competitive environment. But we believe -- I mean, we feel confident that when it comes to the Fixed Retail revenues, we are going to stay on the positive territory during the course of 2026. Now when it comes to Mobile, I mean, as I said, there are 2 key levers which are driving the Mobile service revenue growth. And these key levers have been behind this roughly 3% full year service revenue growth that we have experienced during 2025. As I said before, we are expecting a similar kind of growth trajectory in 2026 by moving customers from prepaid to postpaid. This is delivering roughly EUR 3 to EUR 4 uplift out of every transaction, but also moving customers from -- within the Postpaid segment from lower value bundles to higher value bundles including unlimited. Now in particular to your question with what is the percentage of our base who are still not migrated to unlimited is roughly 60% to 65%. And by moving customers not only to unlimited, it's not only one tariff. We are trying to progressively step up the customers from lower bundle tariffs, data tariffs to higher data tariffs, including the unlimited. We are generating roughly EUR 1 to EUR 2 out of every of these migrations transactions, just to give you some indicative numbers. Ajay Soni: Great. And what's that trend been? So what have you managed to move the unlimited base from and to during this year? Kostas Nebis: The unlimited base grew by 7 to 8 percentage points this year. This compares to roughly 10 percentage points last year. So this is the base. But we still have 65-ish percent of the base still not migrated to unlimited. So a lot of room to grow further. Operator: The next question is from the line of Rakicevic Sofija with Goldman Sachs. Sofija Rakicevic: I have 3 questions. The first one is, what are the key risks that you currently see in the German -- sorry, in the Greek market and your execution with it? And also, overall, what are the key risks to your 2026 guidance? The second question is you have implemented price increases on Mobile, but how are you thinking about price increases in Fixed, including both fiber and TV? Could you do more in 2026 and beyond? And lastly, could this rising fiber demand drive incremental CapEx beyond your current plans? And how do you expect for it to impact OpEx going into 2026? Kostas Nebis: Okay. Let me take the second question first about price increase. I mean when it comes to pricing, I mean you need to understand we are constantly monitoring the market developments. We are operating in a very competitive market. And we are adjusting our prices accordingly, aiming to always provide the best value to our customers. So I don't have anything particular to comment at this point in time. I'm just sharing our thinking and our attitude when it comes to pricing. When it comes to the FTTH and CapEx, I think that we have already guided for roughly EUR 600 million. This is what we have included in our envelope to support all our investment needs with FTTH for sure being one of the most important ones, but not the only one. And your last question -- I mean, your first question, when it comes to risk, I would not call them risk, we would call them challenges. As I said, we are operating in a very competitive environment. So what we are trying to do is to stay focused on our priorities, on our strategic priorities on our investment plan and play on our strengths. And these are good enough and strong enough in order to allow us to defend our relative position in the market, but also to grow going forward. Babis, I do not know whether you would like to add something. Charalampos Mazarakis: Just to add that the CapEx envelopes that we experienced in 2025, but also our guidance 2026 include already the rollout in the FTTH network that is necessary to support the growth that are supporting our guidance. So -- and as we, I think, repeatedly said in previous calls is that these levels of EUR 600 million is the peak that we see already as we are implementing the networks. Operator: Ms. Rakicevic, are you finished with your questions. Sofija Rakicevic: Yes. Operator: The next question is from the line of Patrick Maurice with Barclays. Maurice Patrick: It's actually Maurice Patrick at Barclays. I've got a few questions, please. The first one really relates to competitive fiber dynamics. We don't get a huge amount of details from PPC Group, although looking at your fiber numbers, it would suggest that really there isn't much disruption taking place in the fiber market from competing fiber networks. Maybe I'll ask the questions one by one. But if you could comment on your disruption from PPC and how you're seeing that impacting your business would be helpful. Kostas Nebis: Okay. I mean with regards to PPC, well, first of all, what we have seen out of them is that their activities have been limited to the introduction of a broadband-only product, in a relatively small footprint, at least compared to our footprint. I mean, to have -- I have to be honest here, we have not yet felt any material pressure or effect on our numbers. So we'll see how this is going to develop. So we are managing to defend our broadband market share, as you can tell from our broadband numbers. And what we are leveraging is, first of all, our FTTH footprint, the one that we have already completed, the one that we are already building as well as our wholesale agreements with our partners and to repeat one more time that we have the most comprehensive and differentiated portfolio at this point in time in the market. So these are the things that are helping us defend our relative position. Now does this cover your question you asked... Maurice Patrick: Yes, that's good. So I was going to ask a follow-up, and the next question really was about wholesale. I missed some of the points you made about the revenue lower wholesale, high infrastructure point. I caught the point where you talked about 125,000 wholesale adds this year versus 60,000. But clearly, you have reciprocal arrangements with Vodafone and Wind regarding fiber where they sell in your footprint and likewise, you on [ their. ] So very helpful if you can put -- maybe repeat those revenue -- wholesale revenue numbers that you gave, I think, in the presentation, I missed them. Kostas Nebis: Okay. Let me start with the wholesale numbers, the wholesale fiber numbers on the back of the wholesale agreement. What we have seen in 2025 is us effectively doubling the net additions on to our fiber infrastructure coming out of us serving both Vodafone as well as Nova, so just to give you some numbers back in 2024, we have had 60,000 net adds on our infrastructure on a wholesale level. This 60,000 was -- has grown to 135,000 during the course of 2025. So more than doubled during the course of the year. And when it comes to the wholesale revenues, is this what you are asking for? Or you want to -- beyond... Maurice Patrick: I think you made in your prepared remarks a few comments about the wholesale revenue direction. I didn't catch them. Charalampos Mazarakis: So the wholesale revenues for this year, as we also had guided in the previous calls, declined, the national wholesale revenues by roughly EUR 15 million. And we expect something similar lines also in 2026. So no change in the trend there. Kostas Nebis: Well, I understand that as we are rolling out, also Vodafone and Nova are rolling out in their part of Greece. And once they roll out, they are also migrating the customers to the retail customers to their own infrastructure, which has a pressure on our wholesale revenues. Maurice Patrick: Super clear. And then if I could ask a follow-up question to AJ's about FWA. So you've reported the FWA customer base. You seem to suggest in your remarks that it's really a defensive mechanism against Starlink as opposed to an alternative to OTE broadband. It would be very helpful if you could maybe expand a bit more in terms of what sort of -- what data usage do you see from these FWA customers? Is it typically in areas where you don't have fiber, where you're targeting them? Those sort of dynamics would be very helpful. Kostas Nebis: Good question. It is entirely in areas where we don't have fiber. So we have the right policies in place in order to make sure that this product is only sold in areas where we don't have fiber. And we call it more of a bridge technology in a sense that we are leveraging on our 5G network capabilities and particularly the 3.5 gigahertz and our stand-alone network, which allow us to allocate a slice of our network to these customers in order to provide faster speeds until we get there with our FTTH rollout, which takes more time in order to expand and to reach every corner of [ new countries. ] Now when it comes to traffic, what we see is, I would say, very similar to Fixed Broadband usages in the range of 300, 400 gigs. This is what customers normally do. And this is a result of us providing a very competitive product to the one that they would get from Starlink. So this has helped us a lot kind of slow down a bit, at least the amount of customers that we were losing to Starlink until we launched the service at the beginning of the year. And the traction has been extremely positive. We closed the year with slightly more than 55,000 customers now. We have exceeded the 65,000 customers. Very good reception from our customers, both as a defensive tool, but also in some cases, also as a slightly offensive one in areas where customers have chosen to take Starlink or some FMS solutions, we are not delivering on their expectations. But predominantly a defense and a bridge technology until FTTH gets there. Operator: The next question is from the line of Karidis John with Deutsche Bank. John Karidis: Firstly, can I ask about ICT revenue? It's really difficult from our side of the fence to sort of forecast this going forward. So anything you can say to help us would be useful. And in particular, on ICT revenue, with regard to business that you do outside Greece, how significant is that overall versus the total ICT revenue that you generate? And who do you sort of compete against? And why do you win versus your competitors? Secondly, I just wanted to confirm that essentially, in any one period with regard to wholesale cost to access Nova's premium sports content. If you both have the same number of ads, then your net costs are nothing. But if in any particular period, you add more customers than they do, then you actually have an incremental cost. Do I understand this correctly, please? And then very lastly, in terms of energy costs, I'm trying to understand how we should think about these going forward, both in terms of OTE becoming more efficient and therefore, using less of it or maybe growing less fast, the usage, but also what's happening to unit prices, the ones that you have to -- that you incur? Kostas Nebis: Okay. John, thanks for the question. So let me start with the ICT. I understand the stagger. It is a multifaceted kind of initiative, which cuts across both Greece, including public sector, private sector, but also our efforts in the European Commission. So first of all, if we could provide some guidance, I would say we are expecting 2026 to be in double digits growth. I would say, in between 10% and 20%. This is what we see out of the pipeline that we have already kind of lined up. This is one information I could possibly provide. Now with regards to the questions that what makes us different is, first of all, our credibility. We have a strong track record of delivering on time. This is the biggest challenge that all projects are facing. One thing is to assign, another thing is to deliver them. So we have managed to build credibility both in the Greek market as well as outside Greece, being very reliable. We have the right people, the right skill set, but also the right track record that makes everybody feel confident that once they assign the project to us, it will be delivered on time. When it comes to the contribution of our European business, it is not immaterial. It is progressively growing. It is, I would say, something around 15% and 20% of our total System Solution business. Now your second question was about pay-TV. I think that you have picked it up rightly. So yes, if we outgrow Nova when it comes to the way we scale our base, yes, there is some extra costs, which are already factored into our P&L. So whatever you see reported also includes this cost element. Charalampos Mazarakis: And regarding the energy, I think you framed it very well. We have, first of all, quite a few programs for energy saving around the network. So while we are expanding our network in terms of base stations and also via fixed infrastructure, we envisage that for 2026, we will manage to have a stable consumption. So therefore, whatever increase comes from the expansion of network is offset by the cost savings programs. Now regarding the pricing, given the turbulence in the previous years, we are now having a good percentage of our total energy consumption under PPA agreement. So we have a little bit more -- high visibility for the costs. Therefore, overall, we expect 2026 cost of energy to be broadly in line with 2025 after a reduction in '25 versus '24, thanks to the PPA that we signed. John Karidis: Congratulations to the entire team for a great set of numbers. Operator: Ladies and gentlemen, there are no audio questions at this moment. So we will now proceed with our webcast participant questions, the written questions. The next question is from Raciborski Piotr with Wood & Co. And I quote, "What is the exact value of the one-off tax item related to Telekom Romania sale? What apart from the tax item causes the difference between FCF and adjusted FCF?" Charalampos Mazarakis: So as we explained in the call, the difference between the, let's say, the top line expected free cash flow of EUR 750 million and the organic, which is between EUR 570 million and EUR 580 million is directly due to tax items. This comprised 2 things. One is the direct tax break we have from the sale of Romania. This is in the area of EUR 130-plus million. And the remaining is the fact that because of the lower tax payments this year, we are also called to pay less of the prepayment of the tax for the next year because this is the structure of the Greek tax system, of a difference around EUR 40 million to EUR 50 million. Now the latter part of the prepayment will be reversed next year because the tax break will not be present in 2027. Therefore, this prepayment that we see this year will be paid next year. So in order to normalize all these one-off effects, we have, I think, correctly guided for the organic part of the free cash flow, which is the base for our forecast. Operator: The next question is from our webcast participant, [ Katsikas George with Banking News. ] And I quote, "Could you tell us what plans you have for the EUR 500 million bond that matures in September?" Kostas Nebis: The plan is obviously to refinance it. And as the time approaches to this date, we'll be coming more explicit about how this is going to be refinanced. Operator: [Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you. Kostas Nebis: So thanks a lot for your attention, questions and for your interest in OTE. We will meet again in May to discuss the first quarter results. Until then, have a nice day. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good evening.
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.
Operator: Hello, and welcome to the TORM Full Year 2025 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Jacob Meldgaard, CEO. You may begin. Jacob Meldgaard: Thank you, and welcome to everyone joining us here today. This morning, we released our annual report for 2025, and we are satisfied with the results, which, once again, reflect our strong execution across the business. However, before I now turn to the results, I want to spend a little time talking about TORM and the foundation that enables these results and consistently differentiates TORM in the market. I want to talk about the key pillars of our business that have placed us in a strong position to date and that we believe will continue to do so in the future. We are immensely proud of what we have achieved here at TORM. Our ownership model and culture provides us with a clarity of purpose that streamlines our actions across the business. We are focused each and every day on staying one step ahead of other fleets to make the most of every opportunity. We believe our ability to deliver on this ambition for our shareholders is a distinct competitive advantage. Underpinning our strategic focus is the platform you will know as One TORM. We believe this is a point of difference that sets us apart. The model was originally built around a spot-oriented strategy to unite the business and accelerate decision-making and response time. It enables us to use real-time data and insights to share our deep expertise at the core of the business at a moment's notice. We are not complacent. Since its inception, we have continuously refined this model using the latest technology, advanced analytics and proprietary data at our disposal to ensure we remain as alert and responsive as we possibly can be. In short, we can identify and capture attractive trading opportunities even in the most challenging markets, and perhaps I should say, especially in challenging markets, exactly the type of markets which now characterize the shipping industry even as we see comparatively fewer headwinds here into 2026. For our shareholders, this approach offers a very clear advantage. We believe an industry benchmark for unrivaled consistency, strategic optionality and financial discipline that you can see once again in our numbers. And here, please turn to Slide #4. In here and on the next 2 slides, we show the key figures for the quarter and the full year. As always, I'll start with the quarterly numbers to give you a clear picture of how the business is developing. In Q4, TCE came in at USD 251 million, slightly above Q3, supported by firm freight rates throughout the quarter. This strong performance resulted in a net profit of USD 87 million, which enables us to declare a dividend of $0.70 per share, once again demonstrating our higher earnings translate directly into higher shareholder returns. During the quarter, we were active in the S&P market. We added 2 2016-built LR2s and 6 MR vessels built between 2014 and '18, while divesting 1 older 2008-built LR2. Several of the vessels were delivered before year-end, bringing our fleet to 93 vessels. And after completing the remaining deliveries at the start of 2026, our fleet comprises 95 vessels. Importantly, our investments were exceptionally well timed. Based on current broker valuations, the vessels we acquired have already been appreciated by a double-digit U.S. dollar amount. This reflects not only the quality of the assets and our disciplined approach to capital allocation, but also a market that continuously turned more positive, supporting higher asset values across the product tanker space. Now turning to Slide 5, we show the full year numbers. These are strong results. A year ago, our TCE guidance was USD 650 million to USD 950 million, and we closed the year towards the high end with USD 910 million. While not matching the all-time high in 2024, it remains a very satisfactory outcome. Freight rates strengthened from the first to the second half of the year and ended at attractive levels. In this environment, TORM achieved fleet-wide rates of USD 28,703 per day, which we are very pleased with and which again demonstrates our ability to outperform the broader market. Net profit for the year totaled USD 286 million, of which USD 212 million is being returned to shareholders. With that overview in place, let us take a step back and look at the broader market dynamics that shape the environment we operate in. And here, please turn to the next slide to Slide 7. And after a softer, but still historically strong 2025, product tanker freight rates have now returned to the average levels that were seen in the 2022 to 2024 market. Underlying demand for product tankers has remained steady, and the recent uplift in rates has been driven primarily by developments elsewhere in the tanker complex. The crude market has moved into territory that, while not unprecedented, is extremely rare. VLCC spot rates have surged to the USD 200,000 per day range, a unique and record-breaking level, and with charterers reportedly fixing 1-year deals above USD 110,000 per day. This strength is spilling over into the rest of the market, first into Suezmax and Aframax and then further into clean product tankers. If this momentum continues, we are potentially looking at a very interesting rate environment. At the same time, sanctions in the dirty Aframax segment have tightened vessel availability, triggering a large shift of LR2s from clean to dirty trade. This reduction in clean LR2 supply has further supported product tanker earnings. After several years of partial decoupling between segments, the product tanker market is once again being carried by the broader strength in crude. VLCCs, as mentioned in particular, continue to benefit from increased OPEC production, renewed stock building demand from China, heightened geopolitical tensions involving Venezuela and Iran and further consolidation in the segment. All these factors together have created one of the strongest cross-segment market backdrops we have seen in years. Please turn to Slide 8. And here, let's have a look at the product tanker demand side. Seaborne volumes of clean petroleum products have been trending upwards in recent months. However, the overall impact of the Red Sea rerouting has been largely neutral due to lower trade volumes and a partial return to Red Sea transits. Trade volumes from the Middle East and Asia to Europe have started the year at 30% below pre-disruption levels, which is largely a result of lower flows from India amid introduction of an EU ban on imports of oil products derived from Russian crude. At the same time, an increasing number of vessels have resumed transiting the Red Sea with an, on average, 40% of the clean petroleum product volumes on the Middle East, Asia to Europe route traveling via the Red Sea in 2025. This is up from under 10% in 2024. As a result, we see limited downside risk from a potential full normalization of the Red Sea transit as much of this effect has already been unwound and instead, a likely rebound in clean petroleum trade volumes after the normalization of the transit would increase ton-miles. This is reinforced by the closure of 5% of the refining capacity in Northwest Europe last year, which is driving higher import needs for middle distillates. Additional support comes from sustained strength in crude tanker rates, which limits the crude tanker cannibalization and also from rising clean product ton-miles driven by refinery closures on the U.S. West Coast. Kindly turn to Slide 9. Let's turn to now the supply dynamics. Newbuilding deliveries have increased here in 2025, but this has not translated into effective growth in the fleet trading clean products. In fact, since the start of 2024, nominal product tanker fleet capacity is up by 8%, yet the capacity actually trading clean today is 1% lower than it was at the beginning of 2024. This disconnect is primarily due to sanctions in the Aframax segment, which had incentivized a significant shift of LR2 vessels into duty trades. To illustrate this point, compared to the start of 2025, currently, there are 20 fewer LR2 vessels transporting clean petroleum products and, at the same time, 65 newbuildings have been delivered to the LR2 fleet during the same period. The scale of the sanctions is notable. 1 in 4 vessels in the combined Aframax LR2 segment is currently under U.S., EU or U.K. sanctions. This comes on top of the fact that the order book is already balanced by the high share of overage vessels in this segment. Next slide, please, Slide 10. And here, let me just elaborate a little on vessel sanctions. So most sanctioned vessels were added to the list last year. So in 2025 alone, more than 200 Aframax and LR2 vessels were sanctioned. This is 3.5x the number of newbuilding deliveries in the segment in 2025, and it is equivalent to almost the entire combined newbuilding program for a 3-year period from 2025 to 2027. With 60% of these now sanctioned vessels being older than 20 years, their likelihood of returning to the mainstream market even if sanctions were lifted appears to be limited. And now turn to Slide 11, please. Geopolitical developments continue to be a major driver of market dynamics. And in fact, the list of different geopolitical drivers has only gotten longer in the past 4 years. The growing number of policy interventions and geopolitical flash points increases uncertainty and associated inefficiencies. Beyond the policies directly affecting product tankers, developments in the crude tanker market such as a potential tightening of sanctions against Iran, rising OPEC production are also indirectly supportive for product tanker demand. We sincerely hope for a ceasefire between Ukraine and Russia. However, we see the likelihood of trade returning to pre-war levels as very low or nonexistent in the foreseeable future given the EU's clear determination to tighten sanctions. The EU ban on Russian crude oil and oil products has been by far the most significant sanction against Russia in terms of ton-miles. And the new 20th sanction package the EU is working on is potentially adding a full maritime services ban to it, pausing an even larger share of Russian oil flows into the shadow fleet. This would likely further increase the inefficiencies of the fleet trading Russian oil. Please turn to the next slide, Slide 12. And in summary, the key geopolitical forces continue to shape this year's market. While a potential normalization of Red Sea transit is unlikely to weigh on the market, the EU's ban on Russian oil will continue to underpin longer trading distances. On the demand side, ongoing shifts in global refining capacity continue to support ton-mile expansion. On the tonnage supply side, the increase in newbuilding deliveries will be balanced by a growing pool of scrapping candidates and reduced participation from sanctioned vessels, factors that will influence overall tonnage availability and market equilibrium. Against this backdrop, I'm confident that TORM is well positioned to navigate an environment marked by uncertainty and supported by our solid capital structure, strong operational leverage and our fully integrated platform. So with that, I'll now hand it over to you, Kim, who will take us through the numbers. Kim Balle: Thank you, Jacob. Now please turn to Slide 14, and let me walk you through some of the drivers behind our performance this quarter and for the full year. Starting with the market backdrop. The product tanker market stayed strong throughout the fourth quarter, and that supported another solid result for us. For Q4, we delivered TCE of USD 251 million, which translated into EBITDA of USD 156 million and net profit of USD 87 million. Across the fleet, our average TCE came in at USD 30,658 per day. Breaking that down, our LR2 earned above USD 35,000, LR1s were above $31,000 and MRs were just under USD 29,000 per day. For the long-range vessels, these numbers were actually a bit better than we indicated in our Q3 coverage, reflecting continued strong markets, helped in part by very firm crude tanker rates. For the full year, we delivered TCE of USD 910 million, EBITDA of USD 571 million and net profit of USD 286 million. These are solid numbers. As expected, earnings moderated from the exceptional levels of last year, but they remain robust and importantly, very much in line with the guidance we shared in November. And turning to shareholder returns. With a strong Q4, earnings per share reached $0.88, and the Board has declared a dividend of $0.70 per share, bringing total dividends for the year to USD 2.12 per share. We continue to believe that our capital return framework strikes the right balance, clear, disciplined and supported by robust cash earnings generation. And with that overview in place, let us move to Slide 15, where we break down the earnings in more details and talk through the underlying drivers. Slide 15 shows our quarterly revenue progression since Q4 2024. With this quarter's results, we see a meaningful uptick building on the positive trajectory in freight rates and earnings we delivered over recent quarters. It's a clear indication of the favorable market environment we are operating in. For the quarter, we delivered TCE of USD 251 million and EBITDA of USD 156 million, making our strongest quarterly performance this year. The underlying uplift is driven by firm freight rates supported by solid fundamentals and a positive spillover from the crude tanker segment, as mentioned. Given our operational leverage, we were well positioned to benefit from what we already see as very attractive freight rates. Please turn to Slide 16. Here, we show the quarterly development in net profit and the key share-related metrics. For the fourth quarter, earnings per share came in at $0.88. Our approach to shareholder returns remain clear, disciplined and consistent. We continue to distribute excess liquidity on a quarterly basis while maintaining a prudent financial buffer to safeguard the balance sheet. For Q4, this has resulted in a declared dividend of $0.70 per share, corresponding to a payout ratio of 82%. This is fully aligned with our free cash flow and debt -- after debt repayments and reflects both the strength of our earnings and our ongoing commitment to responsible capital allocation. And now please turn to Slide 17. As shown on this slide, broker valuations for our fleet stood at USD 3.2 billion at year-end. This reflects a continued positive sentiment in the market and results in an NAV increase to USD 2.6 billion. Importantly to note, average broker valuations for the fleet increased by 4.2% during the quarter, driven primarily by higher valuations for our LR2 vessels, which saw the strongest appreciation. This uplift further underscores the improving market backdrop and the quality of our asset base. In the recent quarter -- or sorry, in the central chart, you can see our net interest-bearing debt, which now stands at USD 848 million, corresponding to 29.4% in net LTV. The increase reflects the vessels acquired during the quarter, which naturally required incremental funding. Importantly, even with this investment-driven uptick, our leverage ratio remains within the range that we have maintained over recent quarters, typically between 25% to 30%, underscoring the strength of our conservative capital structure. This stable leverage -- sorry, this stable level continues to provide us with ample financial flexibility to pursue value-accretive opportunities while safeguarding balance sheet resilience across market cycles. On the right, you can see our debt maturity profile. We have USD 135 million in borrowings maturing over the next 12 months, excluding lease terminations that have already been refinanced. Beyond that, only modest amounts fall due in the following years. Overall, our solid balance sheet gives us sustainable financial flexibility to navigate current market conditions with confidence and to pursue value-creating opportunities as they emerge. Now please turn to Slide 18. This time, we have added a new slide to show what is actually -- what it actually means for the value creation when we consistently achieve rates above the market average. The MR segment is our largest exposure and a segment where competitors also have meaningful scale, making it the most representative benchmark for the product tanker market. We could, of course, perform a similar comparison for LR2 vessels. However, the benchmarking becomes less robust as many of our peers operate only a relative small LR2 fleet, limiting the comparability and statistical relevance for such an analysis. That said, based on the data available, a comparable calculation for the LR2 segment would probably show the same picture. As shown on Slide 24 in the appendix, we compare the rates we achieved with those of our peer group. Quarter after quarter and year after year, we have consistently delivered rates well above the peer average and in most quarters, even market-leading. This performance is a direct outcome of the One TORM that Jacob discussed and which continues to differentiate us in the market. But on this slide, when we take the analysis a step further by quantifying what that actually means, then, holding everything else equal, we calculate the premium TCE by taking our spot TCE relative to the peer average, multiplying it by our operating base and comparing that figure directly with our dividend in each quarter from 2022 to 2025. This provides a clear transparent view of the tangible financial value created by outperforming the market. Two examples illustrate the impact. In 2022, we returned USD 381 million in dividends. Our premium TCE was USD 38 million, around 10% of the total dividends paid. And in 2025, based on the first 3 quarters, the premium reached USD 49 million compared to our full year dividend of $212 million, that represents 23% of the total. So the message is clear. Our strong rates have a material and measurable impact on our dividends returned to our shareholders. Across that period, which includes different market conditions, we have returned USD 1.6 billion in cash dividends. And our analysis show that premium earnings from the MR fleet accounted for roughly 15% of the total dividends paid over the past 4 years. And now please turn to Slide 20 for the outlook. We're stepping into 2026 from a clear position of strength and solid momentum across our business. In Q1, we have already secured 70% of our earnings days at an attractive average TCE of USD 34,926 per day. This strong coverage provides a robust foundation for the year and reflects the positive traction we are seeing across all vessel segments. With the coverage already locked in and the encouraging market outlook ahead, we expect TCE earnings of USD 850 million to USD 1.25 billion and EBITDA of USD 500 million to USD 900 million. Both ranges are based on our midpoint internal forecast, after which we apply a defined range to reflect the uncertainty associated with the full year outlook and the potential volatility in the market conditions as the year progresses. And we are entering the year with confidence and real momentum behind us. And with this, I will conclude my remarks and hand it back to the operator. Operator: [Operator Instructions] Your first question comes from Frode Morkedal with Clarksons Securities. Frode Morkedal: First question I have is on the EBITDA guidance or the revenue guidance. If you could, I'm curious about what type of spot rate assumption you made there? Of course, I understand there's a lot of moving parts in this type of guidance, but let's say, LR2, MR rates in the high end, what are -- what's the implied rate, if you can share that? Kim Balle: Frode, I can tell you about our methodology that we use when calculating our guidance for the year. So we take the coverage, the fixed days we have already made for Q1, and then we apply the unfixed days for the rest of the year with the forward curve that we see in the market for the remainder of that period. And then you get to a midpoint. And from that midpoint of TCE, you then deduct our normal cost and get to an EBITDA. And depending on where the freight rates are, we stress that with an interval. And as they are higher right now, you will see, compared to last year, that the interval is slightly higher than we had a year ago. That is due to both what I just said, the higher rates, freight rates, but also more earning days, of course. So that's the methodology behind. So we are basically building it on what we have achieved already and then the markets. Frode Morkedal: Right. So is it just FFA market or time charter rates that you're looking at or... Kim Balle: It's forward freight rates. Frode Morkedal: And can you just say like the midpoint, is that -- roughly is that curve today when you made the guidance? Kim Balle: It's around $30,400 across the fleet. Frode Morkedal: Right. Okay. That's a good reference point. So yes, but just I wanted to discuss how you see the strength in the crude market impacting the products? Clearly, you talked about the switching. I'm curious to know if you think there's more to go there? I have noticed that crude Aframaxes are still trading with quite a significant differential to LR2 spot rates. So yes, curious to hear your views. Jacob Meldgaard: Yes. Obviously, time will tell. But I think clearly, the strength that we are seeing across the crude segments is first and foremost, having a direct one-to-one impact on the behavior of the LR2 fleet and LR2 owners. So the incentive currently to switch from being participating as an LR2 in the CPP market and potentially moving into the crude market is a little depend on whether you are in the Western hemisphere or the Eastern hemisphere. But just as an example, as you point to in the Western hemisphere, there's a clear financial incentive to switch over. I think we will see more of that as we showed in the graph. There is basically fewer vessels that are available due to the sanctions regime imposed, especially by the U.K. and EU, but also by OFAC. So that means that the compliant requirements for our customers, whether it's in CPP or in dirty trade, is serviced by fewer vessels, fewer assets. And that is pushing rates higher as we speak. We see term rates rising, and they are not to the extreme volatility that we see in the VLCC segment, but still significantly higher for a 1-year charter today than what it was at the beginning of the year. And I think this trend, let's see how it plays out, but I think it is here to stay. So we're quite optimistic in the earning power in the segments, to be honest. Frode Morkedal: I agree. I guess the acquisition you made, I think it was 8 ships, right, in Q4. That was a pretty good timing. I think we discussed it last time, but maybe you could just discuss how you thought about the investment case at the time. Clearly, it's been a -- was a good idea to buy these ships. And secondly, what's your view now at this point in time of further opportunities to acquire ships? Jacob Meldgaard: Yes. So I think it's like this, that we did -- when we had the conversation, I think also on this call in Q4, I think we illustrated that we are looking at it quite methodically and just saying what is the sweet spot in terms of our expectation of the free cash flow that we can generate from an asset and where is the asset [indiscernible]. And what we identified was these pockets of that we could buy some LR2s and we did some here actually towards sort of mid-December bought a couple of ships. And clearly, today, the price of these assets and one of them is actually only delivering tomorrow is already up by 20%. So if you isolate it out and just say, yes, that's good timing. But the backdrop of that is, of course, also that now when we had to sort of do our own thinking around potential other acquisitions, clearly, with assets rising like this, it gets harder to make the next acquisition. So I think we were fortunate about the timing on these 8 ships. We actually had hoped, to be very honest, to have upped the end a little on that in terms of number of assets, but they were simply not available at that point in time at attractive prices. So I think we just had to regroup a little. Asset prices are moving quite fast, and we just have to regroup and make sure we still follow our methodology and not get carried away. But I'm optimistic that we can maybe identify a few, let's say, some other deals that sort of fits the bill on our return requirements. Kim Balle: Frode, may I just -- I need to answer your question. You started a bit more precise than what we did, just so it's clear how we do it on the guidance. I just didn't have them in my head, but I have the numbers here. So if you take Q1, we had covered 8,177 days with $34,208. Then we take the uncovered days, that's 25,691 at $30,371. And then you do the math from there. Then you come to a total number of days, operating days and average TCE. And then you get to a TCE and you stress that. Frode Morkedal: Right. That's good. So on the stress test, do you have like a percentage plus/minus or... Kim Balle: That's -- we derived it a few years ago, but the way we use it is plus/minus TCE, and it depends on how much the stress depends on what the actual TCE level is. The lower it is, the lower the stress is, the higher it is, the higher the stress is. So it depends on where you are on the actual TCE levels. Operator: Your next question comes from [ Clement Mullins ] with Value Investors Edge. Clement Mullin: I wanted to start by following up on Frode's question on Afras and LR2s. Could you talk a bit about the portion of your LR2 fleet that traded dirty throughout the quarter? And secondly, on the LR1 side, have you seen an increase in the proportion of vessels trading dirty over the past few months? Jacob Meldgaard: Yes. Thanks for those very precise ones. So I'll start from the back end of this. So we have not really seen that the dirty market has affected the LR1s in our fleet and in our case. And when we look at our vessels and on the spot, we basically have 10% to 20% of our LR2s trading spot dirty. And then we've got another 10% that is on term charter dirty. Clement Mullin: That's helpful. And you continue to outperform peers on the MR side with your chartering team doing an excellent job. Could you talk a bit about what portion of your administrative expenses is attributable to the chartering team versus kind of the corporate side? Any color you could provide would be really helpful. Jacob Meldgaard: Yes. So we actually don't account like that. We -- as I tried to illustrate also in the beginning, on the One TORM platform, we believe that it's not actually the chartering team that is the secret sauce. It is actually the power of -- that you have in an organization ranging from the employees who bought a ship to the people doing the accounting and operations, technical. And of course, also, as you point to, the chartering team, but their success is not an isolated thing that has to do with their ability, it's the whole structure. So we don't -- I don't have an answer. I don't know the number. It's not the way we think about... Operator: There are no further questions at this time. I'll turn the call to Jacob Meldgaard for closing remarks. Jacob Meldgaard: Yes. Thank you very much, everyone, for listening in on the annual report 2021 for -- 2025, obviously, for TORM. Thank you very much for listening in, and have a great day. Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.
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, and welcome to WEG's Earnings Conference Call for the results of the fourth quarter of 2025. I would like to highlight that interpretation is available on the platform through the Interpretation button accessed via the globe icon at the bottom of the screen. Please note that this conference call is being recorded and broadcast live. After its conclusion, the audio will be available on our Investor Relations website. [Operator Instructions] If we are unable to answer all questions live, please do present your question to our e-mail address at ri@weg.net and we will respond after the conclusion of this conference. We'd also like to emphasize that any forecast contained in this document or any statements that may be made during this conference call regarding future event,s, business outlook, operational and financial projections and targets and WEG's future growth, potential growth, constitute merely the beliefs and expectations of WEG's management based on currently available information. Such statements involve risks and uncertainties and depend on circumstances that may or not occur. Investors should understand that general economic conditions, industry conditions and other operating factors may affect WEG's future performance and mainly to results that differ materially from those expressed in such forward-looking statements. Joining with us today, we have our CFO, Andre Luis Rodrigues; Andre Menegueti Salgueiro, our Finance and Investor Relations Officer; and Felipe Scopel Hoffmann, Investor Relations Manager. André Rodrigues: Good morning, everyone. It is a pleasure to be with you once again for WEG's earnings conference call. In Slide 3, we have the operating revenue, which decreased by 5.3% compared to 4Q '24. In Brazil, industrial activity remained positive, supported by sustained demand for short-cycle products and deliveries of long-cycle projects. The decline in revenue compared to the same period last year was motivated by the absence of centralized wind and solar generation products. In external market, we continue to see a strong level of deliveries in the power generation, transmission and distribution business. Especially in the transmission and distribution segment in North America, combined with a solid demand in industrial, electrical and electronic equipment business across the main regions where we operate. Although revenue in Brazilian BRLs was impacted by exchange rate fluctuation. We closed the quarter with an EBITDA margin increase compared to the same period last year, and it was 22.4%. EBITDA reached BRL 2.3 billion, representing a 4% decrease compared to the fourth quarter of '24. Throughout -- and then our main financial indicators remained at a high level of 32.5% as we will see in more detail on the next slide. ROIC remained at a healthy level, driven by the maintenance of high operating margins. However, we observed a reduction in the quarter compared to the same period last year, mainly due to increase in invested capital related to investments in fixed assets and acquisitions during the period. I now hand it over to Andre Salgueiro. André Salgueiro: Good morning, everyone, and thank you, Andre. On Slide 5, I will show you the revenue performance across our business areas. Starting with Brazil, industrial activity was positive for short-cycle equipment with diversified demand across several segments in addition to strong demand for new traction systems and batteries for electric buses. Despite a still restrictive environment for new investments, long-cyle equipment also delivered solid results. In GTD, the decline in revenue was mainly due to lower deliveries in the generation business, especially because of the absence of centralized wind and solar generation projects. In addition, the T&D business also experienced fluctuations in deliveries, which is natural for this type of product. In Commercial and Appliance Motors, demand remained stable compared to the same period last year with solid performance in the construction and compressor segments. In coating and varnishes, demand remained positive, diversified across different segments with emphasis on the sale volume of liquid paints in the construction segment. In the external market, although revenue in Brazilian real was impacted by the exchange rate fluctuations, industry activity remained healthy in several markets, especially in the ventilation and refrigeration segments. We recorded a strong volume of long-cycle equipment deliveries, particularly high-voltage motors despite reduced new investments due to ongoing geopolitical uncertainties. In GTD, we continue to see strong delivery volumes in T&D business in the United States, although at a slower pace in other operations, particularly in South Africa. In the generation business, we saw a solid performance in North America and fluctuations in project deliveries in India. In Commercial and Appliance Motors, we observed sales growth in key regions, especially in China and North America, in addition to the contribution of both businesses to revenue in the quarter. In Coatings and Varnishes, we recorded revenue growth driven mainly by strong performance in Mexico and the contribution from the recently acquired Heresite site business in the United States. On Slide 6, we can see the EBITDA performance. The EBITDA margin closed the quarter at 22.4%, increasing compared to the same period last year, reflecting a better product mix and efforts to mitigate the impact of recent changes in international tariff legislation. EBITDA decreased by 4% compared to the fourth quarter of '24, mainly due to lower revenue in the quarter. On Slide 7, we show the evolution of investments, which totaled BRL 814 million with 50% allocated to Brazil and 50% to operations abroad. In Brazil, we continue the modernization and expansion of production capacity in T&D in addition to capacity increases and productivity gains in Jaragua do Sul and Linhares. Abroad, highlights include the progress of transformer investments in Mexico, the United States and Colombia as well as investments in expansion production capacity in China. With this, I conclude my remarks and hand it back to Andre. André Rodrigues: On Slide 8, before moving to the Q&A session, I would like to highlight the following. In December '25, we announced the acquisition of Sanelec, an Indian company specialized in the manufacture of ultra regulation and excitation system. With this acquisition, we expanded our international footprint, strengthened the solutions offered to existing customers and increased our participation in power generation control market. More recently, we announced the construction of a new plant dedicated to the production of battery energy storage systems in Itajai with conclusion expected for the second half of '27. And finally, I would like to address our outlook for this year. We continue to see strong revenue opportunities in our main businesses, both in Brazil and abroad. However, exchange rate impacts and the absence of centralized solar generation projects may weigh on growth, particularly in the first half of the year. We maintain a healthy operating dynamic with an ongoing focus on operational efficiency and productivity gains, which should continue to support solid operating margins and returns on invested capital. As part of our continued investment program, we approved a robust capital expenditure plan for '26 totaling BRL 3.6 billion, supporting the company's strategy of continuous and sustainable growth. It's always important to remain attentive to the global macroeconomic environment and potential risks and volatility. Even so, we maintain our expectation for business growth, strengthening our presence in Brazil and globally while pursuing opportunities in new markets. This concludes our presentation. We can now move on to the Q&A session. Operator: [Operator Instructions] And to kick off with the first question from Lucas, BTG Pactual. Lucas Marquiori: Well, thank you very much. I have 2 comments to make. First, on tariffs. And I would like to hear from you the announce -- your understanding. We know that the basis is 30%. And I would like to know how it works now since there -- is there a negotiation to accommodate prices? Would that affect any request? So the first topic is U.S. tariffs. And then number two, the auction with a lot of comments on Chinese participation. And so I would like to hear from you what would WEG's competitive differential be regarding this auction? André Rodrigues: Lucas, thank you for your question. I will talk a little bit about tariffs, and Salgueiro can update that as well. I would like to review what was mentioned before. Our understanding is that the tariffs that have been determined and announced for '25 in Brazil, which added up to 50%, lose their power, and initially, it was announced as stand, but it may be that it will increase to 15,%, 232 continues. It is the section of the law on commercial expansion applied above all to iron, aluminum, copper and imported products from the U.S. But it is too early, I would say. We do not know whether we're going to have new tariffs announced in the upcoming weeks. And therefore, it's a bit premature to discuss commercial strategies right now. It's important to highlight that the current situation gives us a better competitive approach. We will continue discussing it, evaluating the impacts and taking the necessary measures to mitigate all of these effects. But we have to wait a little bit longer so that we know -- so that we have a better idea of what is going on. André Salgueiro: Good morning. This is Salgueiro. And regarding the auction, it's important to highlight that it might happen now in the first quarter, and the expectation is for early June. But in practice, it has not been officially announced and published. We are monitoring it and tracking the development market estimates and what has been informed the auction would be for 2 gigs of installed capacity, but other information is being considered. We have been prepared for this for a while now. Since the purchase of the technology in 2019 of the NPS in the United States, we've been developing some small and midsized projects, both in the U.S. and here in Brazil. And now more recently, we were preparing ourselves for this more structured demand for large products in Brazil with a more recent announcement made in Itajai, and that will increase our productive capacity in Brazil so that we can meet the demands of this market. Regarding competition, it's only natural to imagine a competitive environment for this segment just as we have it for others such as wind and solar. So it's only natural that this will happen, and we are preparing ourselves the best way possible to address this market. And then, there are some other aspects that we like to reinforce. So we have a long-standing relationship with the operators of this project, which could be a differential for us, engineering support, aftersales support and the presence here in Brazil for many years. And of course, the competition aspect with the new plant, we have to be prepared for that. So we are following all of the regulatory aspects. They are not 100% defined, but we are monitoring, and we have to make the best use of opportunities that will come, not only this year, but in future years when we will have a lot of opportunities. Operator: Our next question is from Joao Frizo, Goldman Sachs. João Francisco Frizo: I have three. First, I would like to hear a little bit about [indiscernible], the area of electric and industrial motors here in Brazil, and worldwide will have uncertainties, which have had an impact on orders. Could we expect a weaker growth for '26 because of this? And regarding capital, you mentioned relevant figures for '26, but could you expand that? Regarding CapEx, we've been running for some years at 3% above revenue. And if you look at '27 -- in 2029, should we expect the same? Or should we expect a normalization? André Salgueiro: This is Salgueiro. I will start with the long industrial demand cycle, and then, we'll talk about CapEx. As you mentioned, we've had some quarters in industrial area, both in Brazil and in the external market with some volatility. The scenario is not poor, but there is some volatility. Here in Brazil, we do have the impact of interest rates. We also have the investment cycles of the main segments that demand these projects. We have oil and gas, mining, paper and cellulose and pulp actually. And we're going to have an increase this year. So we have these 2 factors. And abroad, what we've seen are some delays, especially because of the geopolitical aspects and lack of definition of tariffs, there is some volatility. It's not something that is reason because when we look at our orders, we do see some oscillation, which is only natural for this type of project. Revenue was good, both in Brazil and abroad for the projects and the deliveries made throughout the quarter, but we have to analyze on a quarter-by-quarter basis. And now I will talk a little bit about capital, which was disseminated yesterday with robust growth of BRL 3.6 million for '26, the greatest we've had this far to support our levels of growth. And then how can we break it down, 46% will be for the domestic market and 54% abroad. In Itajai, we have an expansion of the plant, looking at verticalization, increase of production capacity. And I think that the most relevant investment in is what we recently announced. The construction of the new plant in the second half of next year, it will be concluded, and we also have the auction, as mentioned during our presentation. It will be -- it will represent good opportunity. And then, we also announced growth in other areas, and the relevant growth will be the new plant to be concluded in '28 of electric large machines, where we will have a greater capacity of production of compensators and machines, where we developed in Jaragua do Sul in addition to increasing our capacity of larger motors high -- voltage motors. Part of this investment, I would like to remind you is related to the expansion of transformers that we announced in the past years and here in Brazil. Basically, we end the year with the expansion in the team, increasing the baton capacity, and we continue the expansion of transformers in Gravatai, and that will end in '27 end. And to conclude, in Linhares, we have the increase in our capacity. When we discuss what is happening abroad, we have the transformers and different investments. We also have a new liquid paint plan so that we can take this business to North America. And we also have verticalization in China, we have the high-voltage motors. In Turkey, we have a new plant with -- a new bearing plant. And then finally, the last investment package would be the modernization of one of the plants of special transformers in Missouri. And this is the last package, the last part of the package that we announced for transformers. Undoubtedly, last year, we were above 6.6% above our revenue. And this was necessary for us to conclude the expansion cycle and the transformer business. And then to consolidate that, we have the other opportunities. But looking ahead, what we are lacking in our investment package, which will continue after '27, the increase in the capacity of verticalization. It will go on in a more relevant manner after '27. But in the long run, we do not think that we will be operating outside the range of 26% of our revenue. But as I mentioned before, in '23 and '24, we had 4.9%, 5.1% in the upper limit. And therefore, it is likely that perhaps 2 -- 1 to 2 years later, we will operate at a higher level, and then, go back to normal. Operator: Next question from Andressa Varotto, UBS. Andressa Varotto: I have 2 right now. The first one would be regarding the margin we saw, a margin expansion that was a bit unexpected. Here in the market, we expected a stronger impact of tariffs on costs in this quarter, and we were positively surprised. I would like to know if there was any initiative or anything else that turned out to be better than expected? And a follow-up on the transformer capacity, what should we expect for the second half of this year? Would it be in the third or fourth quarter? And also what is the total to be expected? André Rodrigues: Andressa, thank you for your question. Let's talk a little bit about the margins and the market expectations, and then, we have the expectations of fluctuations for 2024. I think that this work is constant work that we do here at WEG. And of course, there are times when you faces challenges such as the tariffs that were imposed throughout '25 and where we anticipated a higher impact on the margins. And it's important to highlight that -- regarding the attempt to compensate tariffs, we were successful in our attempt. We reviewed our business strategy among other factors, but we are going through a very positive moment globally. So basically, this was positively impacted regarding our expectation. André Salgueiro: This is Salgueiro, Andressa. Regarding the T&D capacity I would like to remind you that we made some announcements from the end of '23, with the intention to double the capacity we had until the end of this year and early next year, these products have been happening. And I would say that part of it has already come in, and we do have a first and more relevant project coming early this year, and the new bidding capacity this year. And then, if you look at the figures and if you look at [ Betim ], we're probably close to 25% of the intention to double this capacity. And then, we would have about 55% of this capacity to add at the end of this year and then early next year because we're talking about Gravatai here in Brazil and the new plants in Colombia and Mexico in the external market. But I would also like to highlight when we talk about capacity that we are talking about the concluded plant, and we will not necessarily start operating at full capacity. It's only natural in this business, and we have a gradual occupation. From the point of view of revenue and contribution for the result, we will start strongly next year. And then, we will gradually have a contribution throughout '27, but it will be more significant after '28. Andressa Varotto: I understood. But Salgueiro, regarding the figures you mentioned, '25, are you talking about Mexico alone or to the total? And also a follow-up because I would like to know if you have started any efforts regarding the capacity that is coming in? André Salgueiro: Well, actually, this is the total number. We announced investments, both in Brazil and in the external market, but the idea was to double the global capacity of WEG in T&D. And so this is for anywhere. And we also have some projects that are moving forward. And when we have a better idea of the availability of the plant, we offer it to the market. We've also been communicating the demand is very needed and will remain so. So from a point of view of orders and portfolio, we do not see any risks. It's only a matter of being able to make the investments and have the plants available. Operator: Next question from Andre Mazini, Citi. André Mazini: I have two. The first one has to do with the back day regarding the solutions and services, so what is the impact in our -- what is the percentage of the revenue that you're allocating? And how far do you intend to go? And then number two, regarding growth of revenue for '26, based on the exchange rate of BRL 5.14, for the rest of the year, would it be more likely for the revenue to grow single digits? Or can we still consider 2 digits even if the exchange rate is not very good right now? André Salgueiro: I will answer your first question regarding solution and services, and then, Andre will talk about investments. In fact, we tried to show changes that have been taking place at the company, a company that until recently was more focused on products and has now become a solution provider. We have product sales. We more and more incorporate services. So in fact, this has gained some representation. We have the creation of a new department for large machines to meet the demands of this market, the service markets. We do see increasing demand, but there are services related to the other units as well, both in terms of wind generation, solar generation, operation, contracts, maintenance contracts and which is our thermal generation company. There is a very representative component in the area of services, especially in the alcohol sector in Tupi, electric mobility related to the areas of software services, drivers. So there are different areas being opened up in the company, and the trend is for the revenue to evolve and continue growing, including in the industrial area. The softer solutions for clients, monitoring industrial processes. So it's only natural to expect such a growth, but we do not have a specific target, and there are a lot of opportunities, not only looking at services, but also looking at the solutions, which include equipment sales, service offer. So now, let's talk a little bit about perspective of revenue for '26. The company will undoubtedly try to grow even in a geopolitical scenario, which will remain challenging. But it's always important to take into account that we're moving smoothly with a good demand for transmission and distribution areas in Brazil and abroad. But of course, this year, we're limited because of capacity. We showed you our expectation of increased capacity, but we can see good opportunities in businesses such as electric mobility in BESS as mentioned in WEG's preparation to capture opportunities not only this year, but later ahead. Synchronous alternators, the demand, increasing demand for data center solutions. And when I talk about data centers, we always think about transformers, but WEG has complete solutions, full solutions to guarantee back up with alternators and BESS and automation solutions. So this is something where we have been receiving a good demand. But Andre, where we have some expectation is to undoubtedly try to have 2-digit growth, but this would be with a more stable exchange rates of the BRL compared to the U.S. dollar. The situation is different now. Our currency is valuing. And we have a greater challenge to make this happen. But if the exchange rate remains as it is, it will be harder for us to deliver 2-digit results. It's important to highlight that what prevented a growth in the revenue, which actually went down in the last quarter and that will have an impact, maybe not the same as in the last quarter, but a little bit of the first and second quarters are the same factors. The lack of a renewable portfolio, which we had in the first half of last year and then better exchange rates. I would like to remind you that the exchange rate in the first quarter of '25 was in the order of BRL 5.84 and our situation now is that it is below BRL 5.20. And what is likely to happen is that we will have different growth profiles, lower in the first quarter because of the factors that I mentioned and a recovery in the second half with closer averages and also a little bit about -- related to the capacity announced by Salgueiro, and also, the comparison basis, which is more stable in the second half. Operator: Next question from Lucas Laghi, XP Investment. Lucas Laghi: Thinking about '26, but also talking about profitability. If we look at '25, as you commented, it was in the range of 23%, 24% in terms of the margin, as you commented. And it's always very good to have clearer visibility for margins for WEG. But I'm trying to understand this panorama for '26. And because exchange rate plays against us, T&D is high, but maybe because of a mix effect. It won't be as favorable, increasing price of raw materials and strong demand. So I would like to better understand the combination of all of these factors. And comparing it to 23%, 24%, does this range make any sense for '26? Or what should we consider now? I would like to know what the combination of all of these factors would result for WEG in '26? And then a second question regarding wind energy because we've been talking a little bit less about this, our perception is that the market will be looking ahead. We have the new 7 mega platform. We have to understand what the perspective is. And then, 4.2, which was well accepted domestically, but I would like to know what will happen in the foreign market. I would like you to talk a little bit more about this project and what we can expect for the future? André Rodrigues: Lucas, thank you for your questions. Let's talk a little bit about margins now. We are -- the management is very happy with the margins we've been delivering in the past years. It's very close to '22, and therefore, we're very happy with that. And we will start '26 with an expectation to deliver margins that are close to the average of the past years. It's very difficult to always have a margin projection. We can have some variations regarding the delivery of long-cycle products, special products that could change that. And of course, the mix could have an impact on that. But in the first quarter, I will tell you that we have a more favorable mix than we had in the first half of last year, and that is very positive. And then, part of this good performance, and I commented it already, has to do with the transformer business, which has had a positive impact in the past year. So it's also important to monitor whether that will change this dynamic or not with exchange rate variations. But in the short run, we always say that the correlation margin and exchange rate is not very good for us. But we also have the benefit of having stock, which was purchased with a different exchange rate, leading to benefits. And then -- but the other way around also happens with a valuation of the BRL that also has an impact, but in the midterm that will be compensated. But that will lead or might lead to changes between one quarter and the other. We also can expect some changes in tariffs. We continue monitoring relevant changes in commodities and that could also have an impact, especially copper, which is a very important raw material. But what I can tell you today is that for the year, we expect to have healthy margins aligned with what we've been practicing in the past years. Regarding wind energy, we have Brazil situation, and we have not seen significant investments in Brazil in the past years. But also, we have the regulated market, which is not very active. And then, we also have competition related factors, and basically, investments in wind energy have stalled. And there are eventual risks that for the future, we will have to consider new generation sources, and it's only natural to imagine that looking ahead, we will have new investments, and we should resume investments. We do have a sales profile that makes a lot of sense. But looking at the midterm, we do believe in the development of this market. And we have field tests and new developments in Brazil would take into account this new machine. We also have a market in India that you commented, and that would be with the 4.2 platform. It's already certified. The developments have been basically concluded, and we are now working around our first order. We also have the U.S. market that would be with the machine 7. We do not have a contract, but we are working with our business area, and we want to have everything prepared. And when we look at this year and probably next year, we will not have a contribution of in general, but what we will see is that this segment being more representative in the mid and long term. Operator: The next question comes from Pedro. Pedro Fontana: I would like to explore the capacity of transformers once again for '27, and I just wanted to understand because the margin expectation should be close to what has been practiced. But for '27, do you believe that we will have increased margins because of the changes in the mix with more transformers? And I also wanted to ask for '26 because you commented about the exchange rate and expectations of growth. But for '27, with increased capacity, do you expect that we will have an impact more towards the end of the year? Or could we expect resuming 2-digit levels earlier in '27 without exchange rate factors? André Rodrigues: Well, thank you for your question. I think it is too early for us to talk about the margin for '27. There is a very important slide in our investor presentation, which shows the dynamics of short and long cycles. And of course, if we consider that only the transformer business will go, we can think of better consolidated margins than we've had. But in reality at WEG, all of the other businesses are pursuing investment opportunities. And therefore, it will depend a lot on the mix, and we will have to wait a little bit so that we have better visibility. And the second aspect, more for the end of '27, we need to have variety for these plants. And just to give you a better idea, when we talk about increased capacity, just so you know, the training of a technician to work with transformer, it takes about 2 years for a person to be trained to manufacture a transformer with the quality demanded for this type of product. And of course, we will increase our capacity. We will observe what happens, but we will see these changes more towards the end of '27 and after that. Operator: Well, next question from [indiscernible]. Unknown Analyst: I have 2 questions here. First, you talk about T&D in Brazil. Could you give us an idea of how much the Brazil reduction was when compared to solar? And how many -- or what was the decrease in the T&D deliveries? We always make mistakes when we try to define what WEG's margins are going to be. But now we have a very strong component in the U.S. tariffs, the U.S. tariffs, and if you consider tariffs are 15% or not, we come to an estimate of -- margins of 1.1%, 1.2%. This will be more constant and relevant for WEG. So I wanted to better understand if there are any specific factors involved in terms of time, payment of tariffs, and when they will no longer be charged because I understand that you will wait for us to have a final decision, but in the meantime, will there be an impact? I wanted to understand if this makes sense, and when will this stop having an impact? André Rodrigues: Regarding T&D or else regarding Brazil, we had a significant decrease in the quarter. Unfortunately, we do not break down according to the different businesses, but I would like to share that most of it was in fact the impact of solar energy, where we had a very significant concentration in the end of '24, '25 in the deliveries of projects. And these projects are no longer present in our portfolio, so we can say that an important part of this decrease resulted from GC. And we also had a less relevant impact, but even more important than T&D, which was wind energy because we still had something happening in the end of '24. And we had basically nothing. The maintenance contract remains. But when we talk about new machines, we had an impact from wind energy in this comparison quarter-over-quarter. And then, we had T&D. And the new thing is that we didn't grow this quarter. There was a small decrease, but that was part of the issues we had in the development. This is related to solar energy. And this is something natural that happens with this type of project depending on the deliveries and on how we organize our projects. André Salgueiro: Well, I will talk a little bit about tariffs. We have to keep in mind that we're talking about 232, which doesn't change. And in the past, WEG focused more on Mexico because Brazil already had 50% tariffs. But now Brazil, as the rest of the world, will go into 232, which has to do with taxes on copper, aluminum and iron. But then, it will expire, from 40%, it will go to 10%, maybe 15%. But the impact of that will be seen later on. We have to keep in mind what the new orders are right now. So getting out of Brazil, we have the transit time, and so this impact on cost of imports going to the U.S. is something that will be seen in the second or third quarters. Now, we will have to monitor the impact this may have on business aspects that should be evaluated later on. Operator: I will continue with our next question from Marcelo Motta, JPMorgan. Marcelo Motta: Could you give us some light on the minorities because if you look at the volume related to profit, we can see that it's been growing, and is this a trend that we should expect from now on? And the other question has to do with the effective tariff rates and whether it would grow or not, but it is still at very low levels. You're trying to obtain new forms of tax efficiency. But should we expect that it will be below 20%? I wanted to better understand what range we can expect. André Rodrigues: Regarding the minority line, basically, what we have there are the results for the areas where WEG does not have 100% participation. So we do have some operations here in Brazil, and perhaps, we have a highlight to our joint venture in the reducers area, but the most relevant thing is the T&D operation in Mexico and the United States, where we have a partner. And then, it has to do with that. So what has happened is that the T&D business has grown at a very interesting result, both in terms of revenue, but also profitability. And this leads to better results. And then, if we look at this quarter, WEG's revenue went down on the consolidated results, but it increased significantly. And therefore, the debt line has reduced. But what will be the growth range of the other businesses, if we follow it quarter by partner, we know that it will keep on growing. And if we look at this alone, the expectation is for this line to grow a little bit, but we also have other businesses in the company that may evolve depending on the mix, and there will be some differences. And regarding the tariffs, the normalized one will be in the order of 20% as it was the average for '24. But what happened in '25 was that it ran below that, and this had to do with improved profits. And we also had a positive contribution of tax incentives, especially related to the technological innovation law. But our expectations didn't change. Operator: Our next question is from Lucas Melotti, Banco Safra. Lucas Melotti: We've seen an acceleration of announcements of new data centers in the U.S., including increased energy demand, which has grown exponentially, which will be significant in the U.S. and even taking into account the capacity of the industry, which will grow in the upcoming years, do you see any room for relevant price increases? André Rodrigues: Lucas, thank you. We've been tracking the development of the data center market, not only data centers, but energy consumption and demand, especially for our equipment. So this has been the main driver in T&D, especially in the foreign market. And this trend tends to continue. When we look at the market itself, the portfolio is robust. But we also see other players in the industry announcing an increase in the capacity. And what we've seen from a commercial point of view, at least for the past quarters is that we have good profitability without significant expansions, as we saw last year and in the past couple of years. And if the demand proves to be more heated for in the future, then we can eventually start a new price cycle that will help us grow. But this is not our basic scenario for right now. Right now, we will be at a good level with good profitability for the company. Operator: We now conclude our Q&A session. And as a reminder, if you have any further questions, please feel free to send them to our e-mail address at ir@weg.net. I would now like to turn over to Andre Rodrigues for his closing remarks. Andre, please go ahead. André Rodrigues: Well, once again, I would like to thank you all for your presence and participation. And we will talk to you again when we have our conference for the second quarter of '26. Operator: WEG's teleconference is now over. We thank you all for your participation, and wish you a good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]