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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.]
Operator: Good morning, and welcome to Flowco Holdings Inc.'s fourth quarter and full year 2025 earnings call. Today's call is being recorded, and we have allocated one hour for prepared remarks and Q&A. At this time, I would like to turn the conference over to Andrew Leonpacher, Vice President, Finance, Corporate Development, and Investor Relations at Flowco Holdings Inc. Thank you. You may begin. Andrew Leonpacher: Good morning, everyone, and thanks for joining us to discuss Flowco Holdings Inc.'s fourth quarter and full year results. Before we begin, we would like to remind you that this conference call may include forward-looking statements. These statements, which are subject to various risks, uncertainties, and assumptions, could cause our actual results to differ materially from these statements. These risks, uncertainties, and assumptions are detailed in this morning's press release, as well as our filings with the SEC, which can be found on our website at ir.flowco-inc.com. We undertake no obligation to revise or update any forward-looking statements or information except as required by law. During our call today, we will also reference certain non-GAAP financial information. We use non-GAAP measures as we believe they more accurately represent the true operational performance and underlying results of our business. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. Reconciliations of GAAP to non-GAAP measures can be found in this morning's press release and in our SEC filings. Joining me on the call today is our President and Chief Executive Officer, Joe Bob Edwards, and our Chief Financial Officer, Jon Byers. Following our prepared remarks, we will open the call for your questions. With that, I will turn the call over to Joe Bob. Joe Bob Edwards: Thank you, Andrew. Good morning, everybody, and thank you for joining us today. I will begin today by reviewing our fourth quarter and full year performance, including operational details. Then provide an update on the Valiant acquisition we announced earlier this month. Jon will follow up with more details on our financials, capital allocation, and balance sheet, as well as the mechanics of the Valiant transaction. I will wrap up with our perspective on the current market environment, our outlook for next quarter, and key strategic priorities for the coming year before we open up the line for your questions. Flowco Holdings Inc. ended the year with a very strong fourth quarter, underscoring consistent execution and differentiated growth across both operating segments. In the quarter, we generated $83.5 million of Adjusted EBITDA, exceeding expectations. For the full year, Adjusted EBITDA grew 11% versus pro forma consolidated 2024, even after absorbing approximately $15 million of incremental public company cash costs. This performance demonstrates the strength and durability of our business model in a market environment that remained dynamic throughout the year. Importantly, in the fourth quarter, we maintained our industry-leading margins, driven by the continued strength of our resilient, high-margin rental business. We generated $63 million of free cash flow in the quarter, reducing leverage to levels below where we stood prior to the August acquisition of HPGL and VRU assets from Archrock. This reflects our disciplined approach to capital allocation and reinforces the strength and flexibility of our balance sheet. Turning to operational performance, our rental platform continued to build on strong momentum in the quarter. Rental revenues grew approximately 4% quarter-over-quarter, driven by steady demand for our HPGL and VRU solutions. Customers continue to value these technologies for the reliability and production uplift they deliver, as well as the attractive economics they generate across the life of the well. Importantly, our rental fleet generates contracted recurring revenue, adding durability and visibility to our overall business. We continue to see meaningful runway for these technologies as operators expand deployment across their asset bases, and we are already seeing incremental demand early in 2026 activities. Shifting to sales, we had a solid quarter of growth as anticipated. Within the Natural Gas Technologies segment, we saw healthy activity in vapor recovery sales, along with a notable rebound in natural gas systems. We were also pleased with the performance at downhole components, where we experienced less seasonality than expected. Particularly within conventional gas lift and plunger lift, operators remained focused on deploying these solutions to enhance existing production as they closed out the year, driving better-than-anticipated results and reinforcing the value of our differentiated offerings. Earlier this month, we announced our agreement to purchase Valiant Artificial Lift Solutions at an attractive valuation. Valiant is a leading pure-play provider of ESP systems with an established presence in the Permian Basin. This transaction expands our suite of artificial lift solutions, meaningfully broadens our addressable market, and allows us to support customers with both primary early life lift techniques deployed across the industry. Strategically, this combination strengthens our production optimization platform. Bringing ESP together with HPGL, conventional gas lift, and plunger lift creates meaningful cross-selling opportunities at key transition points over the life of the well, while enhancing our ability to deliver the right solution in each well, every time. We believe our expanded offering will enable us to deliver improved customer outcomes while generating attractive returns and durable free cash flow. The transaction remains subject to customary regulatory approvals, and we expect to close in the first week of March.... Our teams are actively preparing for integration with a focus on disciplined execution and maintaining continuity for customers and employees. Overall, I am very pleased with how the team executed in 2025. We expanded margins, generated robust free cash flow, reduced leverage, grew our rental platform, and laid the groundwork for a strategic step forward with Valiant. We believe Flowco Holdings Inc. is very well positioned for additional success as we move further into 2026. With that, I will turn it back over to Jon. Jon Byers: Thanks, Joe Bob. Before reviewing some of the key financial metrics and results for the fourth quarter, I would like to provide a reminder on our historical financial information, given the combination of Flowco Holdings Inc., Flogistix, and Estes in June of 2024. Note that any financial information presented prior to the June 20th, 2024 business combination, such as information contained within our full year 2024 performance, reflects only the historical performance for Estes. Financial information for the third and fourth quarters of 2025, as well as the fourth quarter of 2024, reflects the financials for the consolidated entities. Turning to our financials, fourth quarter performance exceeded expectations, reflecting continued growth in our rental fleet and strong performance and profitability across all our sales business units. We reported adjusted net income of $43 million on revenue of $197 million. Total revenue increased 11% sequentially, primarily driven by higher sales across both segments, with the largest contribution coming from Natural Gas Technologies. Supported by the sales growth and further underpinned by the continued expansion of our higher-margin rental portfolio, Adjusted EBITDA increased $6.7 million quarter-over-quarter. Notably, rental revenue, most of which is recurring, surpassed $110 million for the first time in the quarter. As Joe Bob mentioned, we maintained our industry-leading margins in the fourth quarter, achieving Adjusted EBITDA margins of 42.4%. That performance reflects strong operating leverage within our rental fleet, as well as the impact of the revenue mix shift as sales rebounded. In our Production Solutions segment, fourth quarter revenue increased 1.5% sequentially to $127 million, while Adjusted EBITDA increased 4% from the third quarter to $57 million. Adjusted EBITDA margins expanded 110 basis points quarter-over-quarter. Revenue growth was primarily driven by higher rental revenue at surface equipment and better than expected downhole components product sales, as the business unit outperformed typical seasonality. The improvement in Adjusted EBITDA and margin was largely attributable to increased high-margin surface equipment revenue, lower segment-level SG&A, and a more favorable revenue mix compared to the third quarter. In our Natural Gas Technologies segment, fourth quarter revenue increased 36% sequentially to $70 million, while Adjusted EBITDA increased 18.4% to $30 million. The growth was primarily driven by higher natural gas systems and vapor recovery sales during the quarter, along with strong vapor recovery rental performance. Adjusted segment EBITDA margin decreased 634 basis points, reflecting a revenue mix shift towards sales from rentals, particularly through an increase in sales of lower-margin natural gas systems. Turning briefly to corporate costs and SG&A, fourth quarter corporate expenses were roughly flat at $3.9 million. Looking to 2026, we expect annual corporate expenses of $18 million-$20 million associated with the consolidation of corporate functions and completion of the build-out of our public company capabilities. Consolidated fourth quarter Adjusted EBITDA was $83.5 million, as we delivered another quarter of profitable growth. In our first full year as a public company, we delivered 4% year-over-year revenue growth and increased Adjusted EBITDA by 11% versus pro forma consolidated 2024. This performance came despite a more challenging macro backdrop than when we entered the public markets, underscoring our ability to grow in a dynamic environment. This performance reflects the strength of our high-return investments, the scalability of our differentiated platform, and the value our solutions provide to our customers as they maximize recovery and generate cash flow from their existing production base. In the fourth quarter, we deployed $24 million of capital, bringing full-year CapEx, excluding M&A, to $127 million. With the majority of this capital allocated towards expanding our surface equipment and vapor recovery rental fleet to support sustained customer demand at attractive returns. Considering our CapEx investments in the context of return on capital employed, our annualized adjusted ROCE for the quarter was approximately 19%. The sequential increase reflects higher product sales, which more than offset incremental capital deployed for the asset acquisition completed in August. Looking ahead to 2026 and excluding any capital associated with Valiant or other M&A, we expect to invest total CapEx, including maintenance, of approximately $115 million, which should support higher free cash flow for the year. We will continue to assess market conditions and customer activity levels to calibrate the appropriate pace of capital deployment, prioritizing investments that support profitable growth and meet our return thresholds. With a typical investment lead time of approximately 6 months, combined with our vertically integrated manufacturing model, we retain meaningful flexibility to adjust capital investment as we monitor customer demand and broader market conditions. Earlier this month, we entered into a definitive agreement to acquire Valiant Artificial Lift Solutions for approximately $200 million in total consideration. The transaction represents an attractive valuation of approximately 3.9x projected 2026 Adjusted EBITDA, and does not consider any revenue or cost synergies. The purchase price consists of approximately $170 million in cash, and the issuance of roughly 1.5 million shares of Flowco Holdings Inc. Class A common stock, with the cash portion expected to be funded through our existing credit facility. Pro forma for the transaction, we expect leverage to remain conservative at below one turn, and we intend to utilize the combined business's meaningful free cash flow generation to further delever over the course of the year. We expect Valiant to generate approximately $52 million of Adjusted EBITDA for the full year of 2026. As Joe Bob mentioned, we expect the transaction to close in the first week of March, which would result in approximately 10 months of earnings contribution for Flowco Holdings Inc. As we move toward closing, we are focused on executing a disciplined integration plan designed to capture cross-selling opportunities and position the combined platform to drive incremental revenue synergies. Turning to our balance sheet, liquidity, and capital allocation, we ended the quarter in a strong financial position and have made continued progress into the start of the year. As of February 20th, 2026, we had $142 million of borrowings outstanding under our credit facility. With a borrowing base of $722 million, we had $580 million of available capacity. The improvement in liquidity was driven by strong free cash flow generation for the quarter, along with continued progress in net working capital efficiency. On January 30th, Flowco Holdings Inc. declared a quarterly dividend of $0.08 per share, payable on February 25th. The strength and consistency of our cash flow generation give us flexibility to invest in organic growth, execute on strategic opportunities, and return capital to shareholders, all while maintaining a conservative leverage profile. In summary, we delivered a strong fourth quarter, exceeding our Adjusted EBITDA guidance while delivering on the expected strength in sales. As we move into 2026, our rental fleet remains well-positioned to generate stable, predictable earnings, underpinned by durable demand and contracted revenue streams. Across our sales business, we expect continued operational resilience and meaningful free cash flow generation. As we integrate Valiant, we expect to further enhance our growth profile and deepen the advantages of our integrated platform. Supported by disciplined capital allocation and our differentiated operating model, we are confident in our ability to sustain performance and deliver attractive returns in the years ahead. Back to you, Joe Bob. Joe Bob Edwards: Thanks, Jon. Let us turn now to the market outlook. In 2025, U.S. oil production reached a new record of 13.9 million barrels per day, despite commodity price volatility and macro uncertainty. We believe this sustained production durability is not solely the result of consistent capital deployment, but increasingly reflects our customers' optimization of existing production and improvements in asset-level efficiency. That shift toward maximizing returns from existing production aligns directly with Flowco Holdings Inc.'s core strengths in production optimization, artificial lift, and emissions management and monetization, all of which are increasingly important for sustaining output. Against this backdrop, we are entering 2026 with continued momentum and expect a strong start to the year. For the first quarter, we anticipate Adjusted EBITDA of $82 million-$86 million. We expect continued incremental growth across our surface equipment and vapor recovery rental fleets, supported by strong utilization and contracted revenue visibility. Within Production Solutions, excluding Valiant, we anticipate segment revenue generally consistent with the fourth quarter of 2025. In Natural Gas Technologies, we expect sales activity to be similar to fourth quarter levels as well. As Jon described, we expect corporate expenses to increase modestly in the first quarter. This first quarter guidance also includes approximately one month of contribution from Valiant, assuming the transaction closes in line with our expectations in early March. Beyond the quarter, we remain focused on strengthening our business for sustained long-term value creation. The pending integration of Valiant represents an important next step in expanding our artificial lift capabilities, particularly in ESP, further enhancing the differentiation of our platform and increasing our addressable market in the lower 48 by approximately 70%. We are approaching integration with discipline and clear objectives: capture revenue synergies, leverage our combined expertise to better serve our customers, and build upon the solid operational foundation the Valiant team has built. During the first part of 2026, we are taking our first steps toward expanding our international presence. As we outlined on our investor call regarding Valiant, ESP represents a natural avenue for selective international growth, and we are fortunate to have leadership experience within both Valiant and Flowco Holdings Inc. that has successfully scaled artificial lift businesses globally. Separately, over the past few months, Flowco Holdings Inc. has signed two agreements with partners in the Middle East and Latin America, both of whom will enhance our ability to grow in these important markets. While we remain in the early innings of potential international expansion and will pursue it in a measured, capital-light manner, we are encouraged by the initial response from customers and excited about the long-term opportunity. Across the organization, we continue to advance operational initiatives to drive efficiency and margin expansion. Early applications of our internally developed machine learning capabilities are already improving maintenance planning, uptime, and profitability. Across rig and field footprint, we are identifying opportunities to streamline processes, enhance collaboration, and better leverage our full suite of solutions to serve customers over the life of the well. Looking ahead, we believe continued innovation, technology-enabled efficiency, disciplined capital deployment, and deeper customer partnerships will define the next phase of growth for Flowco Holdings Inc. As we integrate Valiant in 2026 and execute across our business segments, we are confident in our ability to drive incremental growth and long-term value while further advancing Flowco Holdings Inc.'s production optimization strategy. With that, I will turn it back over to the operator for Q&A. Operator: Thank you. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Arun Jayaram with JPMorgan. Please proceed with your question. Arun Jayaram: Good morning, gentlemen. Joe Bob Edwards: Good morning, Arun. Arun Jayaram: How are you doing, Joe Bob? Joe Bob Edwards: Doing great. Arun Jayaram: To see if you could just talk a little bit about the trends you are seeing between rentals and kind of product sales. It sounds like you hit $110 million in the quarter, how do you expect, you know, maybe just give us a sense of how that mix has been trending and maybe expectations as we think about, you know, 1Q and, you know, over the balance of the year? Joe Bob Edwards: No, happy to do it. Listen, we have been consistently investing in primarily our HPGL fleet and our VRU fleet, as you know, and that CapEx level, Arun, has driven our growth in rental revenue and rental EBITDA. It has led to a mix shift in the overall company. That is why you see margin improvements quarter-over-quarter, and we expect that to continue in 2026. Jon, we have invested growth CapEx in the $100 million per year range for the last several years. Jon Byers: That is right. That is right. Joe Bob Edwards: Arun, I think that is going to continue in 2026. You know, is it going to be at that level or slightly above, slightly below? Market conditions will dictate, but we see no reason to let our foot off the CapEx accelerator because these assets generate really attractive returns, customers like what they do for them, and we are going to continue to do that until there is no more market demand left to be had. Arun Jayaram: Understood. Joe Bob, you intrigued me on your commentary on pursuing some international growth initiatives. You know, the team and now with Valiant, maybe the product portfolio to do that. Can you maybe just give us a little bit more details on kind of the plans to scale globally? You mentioned two partners in the Middle East and LATAM, but maybe just talk a little bit about what the game plan is for 2026 as you pursue some of these international ambitions? Joe Bob Edwards: The international expansion is obviously very exciting, but to be clear, we are early, okay. I want everybody to know that it is something on our radar because our customers that we have so loyally supported in the U.S. are looking internationally to export their capability in unconventional development plays that look a lot like what we have experienced in the last 10, 15 years here in the States. We want to support that effort, and to do that, we are getting prepared to follow them, as well as to share with new customers, mainly national oil companies, who are importing U.S.-style innovation to help develop unconventional resource base. In the Middle East region, obviously, there are several very large national oil companies, as well as a handful of multinational independent oil companies, as well as, you know, some household names that are in the early stages of developing unconventional resource base. We want to be there to support them, and we feel like, in particular, with this Valiant acquisition, we have the capability to offer more than what we did before, and we want to set ourselves up for success there. The two agreements that we have signed are partnership agreements in various forms. They are companies that have deep experience in both of those geo markets. They have local service capability. As I said in the prepared remarks, we are going to take a capital-light approach to this first, make sure we have the right sort of local content, the right sort of balanced approach as we take steps into these two international markets. Arun Jayaram: Great. Thanks a lot, and well done. Joe Bob Edwards: Thank you. Operator: Thank you. Our next question comes from the line of Derek Podhaizer with Piper Sandler. Please proceed with your question. Derek Podhaizer: Hey, good morning, guys. Maybe just to keep going on the Valiant acquisition. It has been a few weeks now since you announced the deal. You are going to close here in a couple of weeks. As you acquired Valiant, even talking to your customers, what has been the initial reaction there now having the ability to fold in ESPs to your overall production optimization solution or toolkit? Just maybe some thoughts and comments around that initial reaction from your customers, you know, what gives you the excitement as you kind of step forward and being able to deliver, you know, all the artificial lift solutions at any time in the well? Joe Bob Edwards: Yeah, Derek, it has been very positive. As we talk to our customers as well as Valiant customers, and as you would assume, several of those are common. It has been a very welcomed collaboration. We now can truly deliver on what we say we want to do for customers, which is to offer the right solution in their well as they bring it online, right. Previously, we only had the ability to offer a high-pressure gas lift solution early in a well's life. There are wells in the U.S. that are clearly ESP wells. Now we have got both. We can quite credibly now say that we can be there for the life of the well, including both forms of early lift application. In addition to that, and what I said in the prepared remarks, this is a revenue synergy story, okay? The ESP application is only a first year or two or three application in the shale wells, where those systems make sense. What does that mean? Well, at the end of the life of the ESP, those wells go on something else, and they most commonly go on conventional gas lift. We are the market leader in conventional gas lift, so that is a natural sales pipeline for us to pick up as those ESPs get pulled and put on to the next form of lift. That is what we are most excited about, and that is what our commercial teams have been preparing for as we get into integration, when this business, hopefully, closes, early next week. Derek Podhaizer: Great. That, that is great color. The second question: the free cash flow really impressed this quarter, and conversion stepped up to 55% of EBITDA. Obviously, you have some assumption in there with Archrock acquisition pulling, you know, effectively pulling that CapEx forward. How should we think about the free cash flow conversion of the combined business now with the Valiant moving into 2026? You gave us the CapEx guide, you know, clearly, you had a significant step up. Just trying to work through the moving pieces and how we should think about pro forma, that free cash flow conversion, now with the Archrock assets and now with Valiant. Joe Bob Edwards: Yeah, Derek, yeah. The Valiant business has similar cash flow conversion characteristics to our business. You know, Q4 was a great quarter, obviously, in terms of cash flow conversion. As we finished our capital plan, we had the Archrock assets that allowed us to pull forward some of the CapEx, and our working capital came down mainly on the back of better DSOs than AR. You know, I do not expect to continue at that level in 2026. I think you see something more along the lines of what you saw over the course of the year in 2025. Derek Podhaizer: Got it. Very helpful. Appreciate it, guys. I will turn it back. Operator: Thank you. Our next question comes from the line of Phillip Jungwirth with BMO Capital Markets. Please proceed with your question. Phillip Jungwirth: Yeah, thanks. Good morning. We heard a lot from the E&Ps this quarter in the Permian about targeting deeper zones, just with Woodford Barnett across the Midland Basin in particular, higher pressure, higher GOR. Recognizing you now offer HPGL and ESP, just, how do you see the optimal lift solution for this type of development and opportunity for Flowco Holdings Inc. if we see more of this in the future? Joe Bob Edwards: Yeah, good question. Look, it is still early in those new zones. As our customers have pointed out, they are trying to figure out the right not only the right lifting technique, but the right completion technique, right? As one of our more prominent customers said, "Never bet against the American engineer," and that is the camp we sit in. We think that there is a lot of room to go in the additional formations in the Permian in particular. We are right there with them, helping them evaluate early production data as these wells get completed and turned on. You mentioned higher pressures and higher GORs. Look, both of those feed straight into our gas lift solutions. In particular, the high GORs, that is a tough application for ESPs, but it is early. The good news is we have got both, and we have got an active dialogue going with a lot of the folks that are targeting formations like the Barnett. Very exciting that they are making progress, and we are here to support them. Phillip Jungwirth: Okay, great. On the Valiant acquisition call, you did mention selling ESPs into non-Permian markets where they historically have not had a presence. Can you talk through how quickly you look to penetrate these markets? When you... Also, as somewhat of a new entrant, what are the things you look to do just to maintain comparable margins in these other basins to what Valiant has realized in the past? Joe Bob Edwards: The good news is, we have got a footprint that expands beyond the Permian to markets that are big ESP markets in the States. A lot of the work has, to an extent, already been done with local presence, with local infrastructure, and obviously, the customer day-to-day contacts and service that goes along with being in those markets. The natural markets are the Bakken and the MidCon, okay? These are two, you know, tried-and-true ESP markets. They are not nearly as large as the Permian, but these are areas where we have footprint, and we have active dialogue with customers to hopefully support them there. As for margin profile, I think time will tell. I think, we are expecting those markets to be pretty similar to the Permian from our past history. They are not as deep, but they are every bit as profitable for service companies compared to the Permian. Phillip Jungwirth: Great, thanks. Operator: Thank you. Our next question comes from the line of Keith Beckmann with Pickering Energy Partners. Please proceed with your question. Keith Beckmann: Hey, thanks for taking my question. I just wanted to ask another sort of M&A question around, you know, we had the Valiant acquisition that really broadened out the portfolio and opened up kind of the total TAM that you are going to be able to address here. Wanted to know if there is any other acquisition opportunities or products that you see you are missing at this point. You guys have a lot of other stuff, I expect it to be something smaller, but just wanted to get an idea, on if there is any other production optimization or elsewhere, holes in your portfolio you think that you could fill? Joe Bob Edwards: Yeah, Keith, we are always looking for the right opportunities, the right types of people, the right types of cultures to join our team. We do have a robust M&A pipeline, as you would expect. We have been very clear with investors that we want to round out the product portfolio, and we want to expand the geographies in which we operate, while always staying true to our production focus. Look, there are a handful of additional lift capabilities that we do not have in the toolkit. There are complementary services and technologies that go along with lift that we can either build or buy. As we said in the prepared remarks, there is a big international market out there that we can either go attack organically or via acquisition or both. All the above are on the table. I would say that we are going to stay true to what we have told investors and what we have told ourselves and our board, which is we are going to be disciplined. We are going to put every opportunity through the screen of returns and never lose sight of the fact that we are here to serve our customers in this production phase, which is what we feel like we do really well. Look, stay tuned, we are excited to get this transformative deal done hopefully early next week. Keith Beckmann: Awesome. That is really helpful. My second question was just kinda asking around CapEx lead times. If I remember right, I believe that you guys kinda have a 6-month investment lead time on customer projects was sort of the right way to think about it, I believe. I wanted to know if that changed at all, looking at the ESP market, has that changed at all? Excuse me. Is the ESP market different at all? Has the 6-month investment lead time changed at all here over the last year? Joe Bob Edwards: It is pretty consistent. The ESP business, the supply chain that supports the ESP business, not just for us, but for all of our competition, it is a slightly more complicated supply chain. You have got some international navigation you need to do. The 6-month lead time is pretty consistent. It is also not a build to order. It is a, you know, you are building inventory in advance of expected customer demand. This is the same thing we are doing in our other product lines. I think that the 6-month lead time is pretty accurate. Jon mentioned the cash flow conversion, the margin profile. It is all remarkably consistent with what we currently have. The only added complexity is the slightly more complicated supply chain, which we are very comfortable navigating. No, I think you are thinking about it the right way. Keith Beckmann: Okay, perfect. Thanks for taking my questions. I will turn it back. Joe Bob Edwards: You bet. Operator: Thank you. Ladies and gentlemen, as a reminder, if you would like to join the question queue, please press star one on your telephone keypad. Our next question comes from the line of Jeff LeBlanc with TPH. Please proceed with your question. Jeff LeBlanc: Good morning, Joe Bob and team. Thank you for taking my question. Joe Bob Edwards: You bet. Hey, Jeff. Jeff LeBlanc: As operators are more vocal about developing secondary horizons and continuing to extend lateral lanes, have you observed any shifts on how your customers are approaching artificial lift across a well's life, whether it be assuming the primary form of artificial lift is in place for longer or preemptively mapping out their solutions for the various stages? Thank you. Joe Bob Edwards: Look, I would say that operators are just more pointedly, they are focused on production. They are focused on making do with less. They are looking to their existing reservoirs for longevity, for durability, and lift is part of that conversation. As it relates to us, Jeff, we are increasingly talking with operators proactively about the prospective changes in lift as a well matures, okay? As a production profile gets to a level where the existing lift solution becomes less effective, we are right there with them to propose changes, to propose modifications. We do this early in the well's life. We also do this prospectively. We host four artificial lift schools per year for free to our customers in kind of the usual places you would expect: Houston, Midland, Oklahoma City, Denver. We are always talking with customers about the tools that we can provide them to give them that look at preventative and proactive lift change-outs, okay. It is not just lift, it is other things too that are helping them make their production more durable. We are just pleased to be part of that conversation and to be proactive with each one of our customers. Jeff LeBlanc: Thank you for the color. I will hand the call back to the operator. Operator: Thank you. Ladies and gentlemen, that concludes our question and answer session. I will turn the floor back to Mr. Edwards for final comments. Joe Bob Edwards: Well, thank you all for tuning in, and, everybody, have a great weekend and a great 2026. Operator: Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.
Operator: Hello, everyone, and welcome to the Ingevity Fourth Quarter and Full Year 2025 Earnings Call and Webcast. [Operator Instructions] I will now hand over to our host, Surabhi Varshney of Ingevity to begin. Surabhi, please go ahead. Surabhi Varshney: Thank you. Good morning, and welcome to Ingevity's Fourth Quarter 2025 Earnings Call. Last evening, we posted a presentation on our investor site that you can use to follow today's discussion. It can be found on ir.ingevity.com under Events and Presentations. Also throughout this call, we may refer to non-GAAP financial measures, which are intended to supplement, not substitute for comparable GAAP measures. Definitions of these non-GAAP financial measures and reconciliations to comparable GAAP measures are included in our earnings release and are also in our most recent Form 10-K. We may also make forward-looking statements regarding future events and future financial performance of the company during this call, and we caution you that these statements are projections, and actual results or events may differ materially from these projections as further described in our earnings release. Slide 3. Today, you will hear from Dave Li, our CEO and President; and Phil Platt, Senior Vice President, Finance and Incoming CFO. Mary Dean Hall, our outgoing CFO, will also be joining us for Q&A. Our prepared comments will focus on full year total company results and will include both continuing and discontinued operations, which refer to the divested Industrial Specialties product line. We will take any questions related to the quarter during the Q&A session right after the prepared remarks. Dave, over to you. David Li: Thank you, Suri, and good morning, everyone. Please turn to Slide 4. Before we discuss the financial results, I'd like to remind everyone that in early December, we shared the findings of our strategic portfolio review through a virtual event. During this presentation, we laid out our plans for growing adjusted earnings per share by 10% and free cash flow per share by 5% through 2027. We also announced the decision to initiate sales processes for our Advanced Polymer Technologies segment and Road Markings product line. If you've not had a chance to listen to the webcast, I would highly recommend reviewing the materials on our website under Events and Presentations. I'm also pleased to confirm that on January 1, 2026, we completed the sale of our North Charleston CTO refinery and the majority of the Industrial Specialties product line to mainstream pine products. With this transaction complete, we have reduced our portfolio volatility, strengthened our profitability and cash flow profile and enhanced our strategic flexibility. Looking at our 2025 results, we are incredibly proud of the strong execution by our teams globally that enabled us to grow total company adjusted EBITDA by almost 10% over 2024, along with delivering industry-leading margins of over 30%. These results generated $274 million of free cash flow, slightly exceeding our commitments. We used the cash to pay down debt and reduce leverage to 2.6x and to buy back over 1 million shares. Performance Materials continue to generate EBITDA margins above 50% and held revenue flat despite lower global auto production, which was impacted by tariff uncertainty and supply chain challenges, delivering another year of near record level sales. This strong performance is a testament to the differentiated value that our activated carbon technology delivers to customers globally. The momentum from continued adoption of hybrids and fuel-efficient ICE vehicles is encouraging and supports our view of a long runway for this business. We also continue to be encouraged by the optimization of our filtration business and see a bright future and good fit for the company in this application space. Within the Performance Chemicals segment, we meaningfully lowered CTO exposure ahead of the Industrial Specialties divestiture. Also, Pavement Technologies grew year-over-year as our innovative solutions facilitated the extension of the paving season into late fall to allow catch-up of projects delayed by adverse weather earlier in the year. Advanced Polymer Technologies continue to face tough market conditions due to tariff uncertainty and competitive pressure, which we are addressing with disciplined commercial actions and productivity initiatives. Overall, we start 2026 with confidence and optimism as we continue to drive performance in our core businesses. And with that, I'll turn it over to Phil. Phillip Platt: Thank you, Dave, and good morning, all. Please turn to Slide 5. Consistent with last quarter and with our November 2025 outlook for the full year, I'll focus my comments on total company results, which will include both continuing and discontinued operations. As previously noted, beginning in the third quarter of 2025, the results of Industrial Specialties product line have been reported within discontinued operations. As Dave has mentioned, we completed the sale of that product line earlier this year. Total company full year 2025 sales of $1.3 billion declined 8% compared to last year. Performance Materials sales remained flat versus 2024 despite lower auto production driven by industry volatility from tariffs and supply chain disruptions. Performance Chemicals sales declined by $86 million, primarily due to our repositioning actions within Industrial Specialties. We also continue to see weakness in demand from indirect tariffs and competitive pressures in Advanced Polymer Technologies. In 2025, we recorded a GAAP net loss of $167 million, which included $337 million of pretax special charges. These charges primarily consisted of a noncash goodwill impairment of $184 million in Advanced Polymer Technologies and a noncash asset impairment of $109 million in road markings. For the remainder of my remarks, I will focus on the non-GAAP results, which exclude these special charges. Reconciliations of our non-GAAP financial measures to the most comparable GAAP measures are included in the appendix to this presentation. Adjusted gross profit of $556 million increased 6.8% year-over-year, with gross margin expanding by 610 basis points. Total adjusted EBITDA increased 10% year-over-year to $398 million, with margins expanding 500 basis points to 30.8%. Total diluted adjusted EPS improved 30% to $4.55. This improvement in profitability reflects the successful execution of our PC repositioning actions, which has also resulted in lower overall raw materials, supply chain efficiencies and plant footprint optimization. SG&A increased primarily due to higher variable compensation expense, driven by improved business performance. We delivered industry-leading margins, and this performance is a clear testament to the resilience and strength of our business model. Moving on to Slide 6. In the top left chart, you'll see how our strong earnings performance and disciplined capital management translated into free cash flow of $274 million, the highest level that we have generated in the past 5 years and exceeded our updated guidance from November. The $220 million increase from 2024 was driven by the absence of approximately $180 million in cash outflows related to the Performance Chemicals repositioning, higher overall earnings and a working capital benefit in Industrial Specialties. With this free cash flow, we resumed share repurchases in 2025, deploying $56 million to repurchase approximately 1 million shares. At year-end, our remaining share repurchase authorization was just under $300 million. At the beginning of 2025, we committed to derisking our balance sheet and reducing net leverage from 3.5x to below 2.8x. Through our disciplined capital management, we exceeded that target, reducing net leverage to 2.6x, nearly a full turn improvement versus the prior year. Importantly, this reduction does not include any of the proceeds from the sale of our Industrial Specialties product line, which closed in early January. With that, let's dive into segment results, beginning with Performance Materials on Slide 7. Sales of $607 million were in line with the prior year, which is a strong result given that 2024 was a record year for that business. Throughout 2025, the automotive industry faced significant disruption from tariff uncertainties, fires and chip shortages. Against that backdrop, the resilience of our Performance Materials business becomes evident. While these dynamics led to slightly lower volumes, disciplined pricing actions helped to offset that impact, allowing us to hold year-over-year sales essentially flat. Segment EBITDA declined 2% year-over-year due to lower volume and higher SG&A. Despite this, EBITDA margin remained strong at 53.8%. Looking ahead, we remain confident that this business will maintain margins north of 50%, supported by its technology-leading position and proven high-quality solutions that provide a compelling value proposition for both automotive and filtration customers. Moving on to Performance Chemicals on Slide 8. The combined Performance Chemicals results presented here include both continuing and discontinued operations, which means results from the divested Industrial Specialties product line are in the numbers. A reconciliation of Performance Chemicals results on a continuing operations basis to the total segment results is provided on this slide. As you'll note, the sales of the previously reported Road Technologies product line have been split into, Pavement Technologies and Road Markings, which together represent Performance Chemicals continuing operations segment. Since we have initiated the sales process for Road Markings, we are now presenting its sales separately. Upon completion of that process, the segment will be renamed from Performance Chemicals to Pavement Technologies. Total segment sales declined primarily due to the execution of the repositioning actions of the Industrial Specialties product line. Pavement Technologies 2025 sales remained flat to 2024 as volume growth in NAFTA region was largely offset by lower infrastructure spend in South America. Pavement Technologies also benefited from pricing and favorable mix shift. While adverse wet weather impacted results in the first half of 2025, demand shifted into the second half and a combination of good weather and our season extending technology enabled many projects to be completed within the year. Road Markings continue to experience price pressure from competition, although volumes grew slightly. Total segment EBITDA increased by $45 million over prior year, driven by the successful execution of our PC repositioning actions, which have resulted in lower overall raw material costs, improved logistics costs and a more efficient manufacturing footprint. These actions helped to improve Industrial Specialties EBITDA by $40 million year-over-year. Performance Chemicals continuing EBITDA, which includes Pavement Technologies and Road Markings, increased by $7 million or 12%, supported by improved pricing, favorable mix and lower raw material costs, partially offset by volume declines and higher SG&A. As a result, combined segment EBITDA margin expanded to 13.5%, up from 4% last year. Please turn to Slide 9. During 2025, APT faced headwinds from the indirect impact of tariffs and continued weak end market demand, primarily in automotive, footwear and industrial end markets. In addition, competitive dynamics in China continue to pressure sales, most notably in the paint protective film markets. As a result, sales declined 15% and segment EBITDA was 18% lower year-over-year due to volume declines that more than offset improved operating efficiency. Despite these pressures, we held pricing and maintained a stable mix. The team remained focused on operational discipline, which drove more reliable plant production and reduced operating costs. These efforts, combined with favorable foreign exchange, enabled a strong EBITDA margin of 20%. Overall, 2025 was a great year. Our focus on execution generated solid earnings, driven by operational improvements and footprint optimization despite weak end market demand, tariff uncertainties and supply chain disruptions. We generated robust free cash flow, which enabled us to meaningfully reduce leverage and resume returning cash to investors via share buyback. Looking ahead, we expect to reach and maintain our target leverage ratio of 2 to 2.5x this year and complete $300 million of share repurchases through 2027. I will now turn the call back to Dave to share additional color on guidance for 2026. David Li: Thanks, Phil. Turning to Slide 10. Please note that the 2026 guidance includes a full year of APT and Road Markings. But excludes the divested Industrial Specialties product line. Sales processes for both APT and Road Markings are underway and we are encouraged by the interest shown in both. We will provide updates as they advance and revise our outlook accordingly. We expect 2026 adjusted EPS to be in the range of $4.08 and to $5.20 in a year where we do not expect meaningful recovery in the global economy. Sales are expected to be between $1.1 billion and $1.2 billion and adjusted EBITDA between $380 million and $400 million. Performance Materials sales are expected to grow low single digits supported by price increases in automotive, while delivering margins consistent with 2025. Sales in Performance Chemicals, including Road Markings, are expected to grow mid-single digits with EBITDA margins in the mid-teens, reflecting our strong industry leadership and strategic advocacy efforts. In APT, we expect flat to low single-digit growth with margins around 20% as recent commercial and productivity actions offset competitive pressures and weak end market demand. CapEx should be consistent with 2025 and be in the range of $40 million to $60 million. We expect to generate free cash flow of $225 million to $250 million. This amount does not include approximately $95 million in pretax litigation-related payments to BASF in the second quarter. We plan to use the free cash flow to continue buying back shares in line with our prior guidance of $300 million through 2027. So far in the first quarter, we've repurchased almost $20 million worth of shares. Additionally, we plan to reduce and maintain net leverage within our long-term target range of 2 to 2.5x in 2026. In 2025, we focused on stabilizing the business and optimizing our portfolio. That translated to total shareholder return of 45%, highest amongst our specialty chemicals peers and top quartile among the Russell 2000 materials companies. We entered 2026 with good momentum and we'll continue to execute the portfolio strategy, drive performance in our core businesses and build Ingevity into a premier specialty materials company. With that, I'll turn it over for questions. Operator: [Operator Instructions] Our first question comes from John McNulty of BMO. John McNulty: Maybe we can start out. Just can you give us an update as to the progress you may be seeing regarding the potential asset sales and I guess somewhat related to that on the $300 million of buybacks that you expect to do between now and the end of '27, does that come regardless of the asset sales? Is it dependent on the asset sales? I mean it looks like it generates really solid free cash anyway. But I guess if you could help us to put that into context, that would be helpful. David Li: Yes, thanks. I'll provide an update on the processes, and then I'll let Phil talk to sort of the cash flow. We're very encouraged, obviously, with the cash flow generation of the business. So for both processes for APT and Road Markings, they continue to progress. We're encouraged by the interest shown in both assets. Obviously, we're going to be focused on value, and we continue to expect that we'll announce something before the end of the year. And so things continue to progress, we'll obviously also update our guidance as things go along, but seeing good interest for both assets, and we'll be focused on value. Phillip Platt: Yes. And with respect to the share buybacks and the proceeds, John, as Dave mentioned during the prepared remarks, the outlook does not include any of the proceeds associated with the APT or the Road Markings potential sales. So we would expect to continue to execute those buybacks of $300 million over the next 2 years. And the way you could think about it is take a ratable cadence throughout the year is how we're thinking about it in our guide. John McNulty: Got it. Okay. Fair enough. And then maybe just as a follow-up, on the $15 million of stranded costs that you expect to exit by the end of the year. I guess, can you help us to think about how much of that's pretty much locked in stone at this point? And also maybe how to think about the cadence as that flows throughout the year? Is it pretty much even like each quarter? Or how does -- is it lumpier? I guess how should we be thinking about that? David Li: Phil, why don't you take that one? Phillip Platt: Yes. So as we said, we definitely have a clear line of sight to eliminate that $15 million by the end of the year. I think the way to look at it is it's going to be accumulating throughout the year. More so in the back end of the year than the front end of the year. Some of those costs are tied in the TSA that we expect to hopefully wrap up midyear. So that's how you can kind of think about the cadence throughout the year. Operator: [Operator Instructions] Our next question comes from John Tanwanteng of CJS. Lee Jagoda: It's actually Lee Jagoda for Jon. So I guess David, can we start on the Performance Materials business? And maybe talk through some of your assumptions on the auto production volume side. And if you can get into some geographic commentary, that would be helpful. And then also in terms of just the seasonal cadence, just given some of the headwinds we've seen in the U.S. coming out of Q4 into Q1, that would be helpful. David Li: Sure. So just as we think about the guidance that we just provided, what we sort of comprehended from an auto backdrop is stable, not predicting any very strong recovery. But if you pull back and think about what the auto industry has faced, it's -- in 2025, it's been remarkably resilient. So -- and Phil had some comments in the prepared remarks about the tariff uncertainty and supply chain challenges. But overall, we see it as a very resilient market. And then -- and if you also think about the recent trend, especially in North America, where you've seen the pace of EV adoption really slowed down. And I think there was just an announcement today by Stellantis of really leaning into some of their more ICE efficient hybrid product lines, and you've seen similar remarks by Ford. So especially in the key North American market where we have obviously the largest portion of our business, we see a positive trend there. But just to be clear, for 2026, what we've kind of baked in is a pretty stable environment. And then talking about the fourth quarter that we just reported, we did see some of those supply chain challenges, whether it was the aluminum fire affecting Ford F-150. I think they've been pretty public about how they think about that and that production delay, or Honda with the chip shortages. I think they're still working through those. And our assumption and understanding is that production and demand would be made up this year. Ford mentioned more second half based. But we think of it as a pretty stable environment with potentially some upside if those supply chain issues abate as well as in the backdrop of this reduced EV adoption trend that we're seeing in North America. Lee Jagoda: Great. And then I know at the investor event, you sort of talked about the ability or the want to grow outside of automotive in Performance Materials in a margin-accretive fashion. Is any of that -- any of those new products, new programs assumed in guidance? And just from a bigger picture standpoint, how long should we expect it to take to start to see some of the progress that you are making in the reported results? David Li: Yes. Thanks, Lee. So what I think you're referring to is our focus in the near term, or kind of nearing on filtration. And we're definitely encouraged by what we see there. Our focus is on the higher-value applications in filtration. So we are already participating in a pretty significant way. We sell millions of pounds of our activated carbon into the filtration markets and the opportunity is just to optimize that volume into the higher value applications. So those are -- we're definitely in the discovery process, thinking about where we have technical capabilities. Early on, we've identified, obviously, water as an area of focus, but also pharma and food and beverage. So if we think about where we have technical advantage over other activated carbons, it's about the speed of the separation that we're able to provide, the selectivity. So we're good at taking out large molecules. Good at taking out flavor and odor. There's also a mouth feel to some of our technical competence. So we're trying to -- we're definitely in the discovery process, but we're encouraged, and we've seen some good support from some of those end markets. So stay tuned. The filtration aspect is built into our guidance, but it's a pretty small base right now. We expect it to expand over the next couple of years. And then further out, we've talked about our interest to expand into energy solutions. So those are investments like Nexeon and CHASM. Those are not reflected in our next 2-year financial outlooks, but we're also encouraged by our participation in those areas. Operator: Our next question comes from Daniel Rizzo of Jefferies. Daniel Rizzo: So if we think about the 3 different segments as they are now, what -- how should we think about peak or mid-cycle margins for both the new Road Markings business or the new Pavement business and APT once a recovery occurs? And in Performance Materials, is this kind of are we at peak or maybe even -- I mean, a little bit below the peak of what we would expect, particularly given the moves you guys expect to make over the next couple of years? David Li: Yes. Dan, let me start and then maybe Phil can provide some more color. So for the 3 segments, Performance Materials, we're in the 50s. We've been in the 50s. That's a pretty heady space to be in, and we expect to maintain that. We will continue increasing prices in the automotive aspect area as we've done in the past. So there could be some upside as well as when we get traction in filtration. But obviously, 50%, it's a good place to be. So I'd assume somewhere north of 50% for Performance Materials. For Performance Chemicals, when and if we transact Road Markings, we would expect some uplift to the margins there. So -- and even in our investor update, we said sort of the higher teens or 18% that continues to be our expectation. APT has been in the 20s before. I think it's a very healthy profitable business for us and obviously, assuming we don't transact, we see some upside there as well as we go in some higher-value applications, but assume sort of kind of low to mid-20s for that business. But Phil, why don't you some more color. Phillip Platt: Dave, I think you pretty much covered it all. The only thing I would add is in the guide for Performance Chemicals for the full year, we're guiding mid-teens as Dave mentioned. That's a composition of both the businesses, Performance Technologies as well as Road Markings. Obviously, Road Marking is a lower-margin business and currently, diluting some of those margins. But also embedded in that is some of the stranded costs that are carried over into this year. So -- but as Dave just mentioned, looking further out in 2027, we would expect that segment Pavement Technologies by itself to put up around 18% margins. Daniel Rizzo: Okay. And then with the sale of Industrial Specialties and the new Pavement and Road Markings business, should we expect all the EBITDA for those 2 segments I say, almost all in the second and third quarters, just given the weather-related aspect of those businesses? Phillip Platt: Yes, Dan, that's actually a great question. We've always talked about the Performance Chemicals segment as being very seasonal Q2, Q3. It was muted in prior years by the Industrial Specialties business, which was pretty steady across all 4 quarters of the calendar year. Now that Industrial Specialties is gone from that portfolio, you'll be able to see the numbers in the 10-K when we release that later today. But about 90% of the annual EBITDA for that business is going to be recognized in Q2 and Q3 and 75% of the sales will be in Q2 and Q3. So it will become more prominent from a seasonality perspective. Operator: [Operator Instructions] Our next question comes from Mike Sison of Wells Fargo. Michael Sison: Nice quarter and outlook. Could you remind me for Performance Materials, I recall the fact that you use wood to create your activated carbon, gives you a pretty big edge in the auto side. Does that sort of technology or base help you in the other areas and maybe more chemistry-wise, why would that help you get a more premium area in other areas like water treatment and such? David Li: Thanks, Mike. We're definitely early in that process of identifying where we're actually adding value. Just to remind, this is a business that as an area of filtration that we've been participating in for many years. So the opportunity now is to spend more time with those end customers and understand exactly your question, where can -- where we actually differentiate in adding value. And we have, in many areas identified that this hardwood-based activated carbon, the way we engineer it has unique separation properties that are valued by our customers. So in certain application, we actually understand that our activated carbon is combined with a lower grade activated carbon because we're actually able to provide that key separation technology. So again, early on, but the sectors that we're going to be focused on are water pharma and food and beverage. Those we think we have a technical advantage on. And again, this is just also a benefit of having that simplified portfolio, having the ability to focus more resources in these high potential growth areas is something that we're excited to do and expect to hear more from us in the future. Michael Sison: Got it. And then could you remind us any major regulation over the next couple of years, to even decade that could sort of sort of generate some growth for Performance Materials. I think China may be going to a Tier 3 at some point? And maybe any other areas? And then just kind of the mix of the outlook when you talk to customers? I mean, hybrids have been good. Any thoughts on sort of more of that versus EVs or anything else? David Li: Sure. So I mentioned, I think, in the first question, North America, we feel really good about that, and that's obviously our core market, especially in the backdrop of this reduced EV adoption which we think will continue for the foreseeable future. You mentioned regulation. So the next most significant piece of regulation will likely be China 7. So that's China moving to essentially a Tier 3. Our teams are working closely with the folks in China. We continue to expect that to be adopted towards the end of the 2020. So 2028, 2029, you could see some buildup of inventory ahead of that. But that would be a pretty significant upgrade and more stringent emissions requirements that would require things like honeycombs, which obviously would be good for Ingevity. Another region, I think, to pay close attention to is India. So India is a growing and mobilizing population, and they also have a pretty significant pollution issue. They also have very hot summers there. And so they're going to need to do something from an emission standard perspective. We're also working closely with them in terms of the emissions, regulatory bodies there and would expect to see something there. They're obviously earlier on in their journey of emissions requirements. So I think that's been a positive. And then the last one, I mentioned North America. But recently, there's been some changes by the administration. Things like the Endangerment Act. We actually think that's going to be a positive for Ingevity because without getting into too much detail in the previous regulations that have now been taken away for an automaker to be in compliance, essentially a larger and larger portion of their mix would have to be EV. So now without those gone away, it really clears the runway for more ICE -- fuel-efficient ICE and hybrid parts of their portfolio, and you see them leading into that. So the North America backdrop also seems to be very promising for us as we look forward. Michael Sison: And one quick last one. For Pavement Technologies, are there opportunities for acquisitions? Your balance sheet is in pretty good shape. Maybe to add that as some growth over time? And maybe talk about some regions that could be a good area for you? Or are there other sort of technologies or product lines that would fit well? David Li: Yes. We love the technologies that we have. We see a lot of runway for growth, especially with Evotherm. So converting that hot mix asphalt to a warm mix with significant value and technology advantages for our customers. Never say never, but I think we've been pretty public about for the next at least a couple of years, acquisitions are not going to be a priority for us. Instead, we really want to focus on generating that cash flow and reducing the leverage on the balance sheet as well as buying back shares. Operator: We have no further questions registered on today's call. So I hand back over to Dave Li for any closing or final comments. David Li: Thanks. And as we wrap up, I would just like to remind our investors that new Ingevity is a simplified, more predictable and extremely profitable specialty materials company. The company is highly cash generative, and we are committed to returning cash to investors. Our focus in 2026 will be the continued execution of our commercial and operating strategies so that we can deliver growth year-over-year on every metric from sales to EPS. And lastly, as we close the call, I would like to again thank and congratulate Mary Hall, our outgoing CFO, on reaching this milestone in her career. This will be her last earnings call with us, and we are grateful for her years of service and contributions at Ingevity. Thanks everyone for their interest. And with that, Charlie, you can close the call. Operator: Thank you. Of course. Ladies and gentlemen, this does conclude today's call. Thank you so much for joining. You may now disconnect your lines.
Operator: Welcome to TP 2025 Annual Results Conference Call. [Operator Instructions]. Now I will hand the conference over to Thomas Mackenbrock, Deputy CEO. Please go ahead. Thomas Mackenbrock: Good evening, everybody, and welcome to our 2025 results presentation. And as you have probably seen, we have a lot of news to share. As always, with me in the room is Olivier Rigaudy, my dear colleague and CFO of the group. And we have a special guest today, Jorge Amar, our incoming new CEO for the group who will present and introduce himself later today. But let's first have a look at the agenda for today's call and what we will cover in the next 50, 60 minutes or so. First, I will give you an update on the key highlights of 2025, provide a strategy update of where we stand today with the implementation of our future forward plan and an outlook for the future. Olivier, as always, will cover in detail the financial results. And at the end, we have ample space for Q&A. Let's look at the key highlights, and let's focus first on the financial aspect and then talk about in a second step about some of the strategy and governance changes we're seeing. 2025 has been a turbulent year for the world and for our industry, but we as TP have delivered solid results. And as you have seen in our press release, we have met all our updated 2025 objectives. If you see on the group revenue, we are reporting again a bit over EUR 10 billion in net revenue, and we have grown on a like-for-like basis, excluding the hyperinflation effect of 1.3%. If you exclude that 1% on a reported basis, given the weak U.S. dollar minus 0.7%. It's particularly noteworthy, and we talked about this in our Q3, our H1 and our Q1 presentation that our Core Services are a stable growth momentum and a stable growth anchor for the group, with reported 2.7% like-for-like growth, which is remarkable in this environment, while at the same time, our Specialized Services division faced some unique challenges last year. On the profitability, again, we delivered our updated 2025 guidance. We have reported an EBITDA of almost EUR 1.5 billion, with a margin of 14.8%, excluding the currency effect, which means on a reported basis, 14.6% and this also translates into a very healthy net free cash flow. If you exclude the nonrecurrence of over EUR 900 million, and we had a record cash flow generation in the second half of the year with more than EUR 640 million. So we are quite proud about the results in 2025. And when we look at 2026, we provide the following guidance. For this year, we expect a growth rate again between 0% and 2%. But given how we started into the year and how we ended last year and given some of the uncertainty, in particular, in the core onshore market, the U.S. and Continental Europe, we anticipate for Q1 a revenue development, which will below the annual guidance. Secondly, and you will see later in detail some of the measures we are implementing. We also expect a stable EBITDA margin, which means 14.6% on a reported basis that assumes a dollar of $1.20. The net free cash flow generation is expected to be this year slightly below last year, given the strong euro. And so we see here a range between EUR 800 million and EUR 850 million excluding the nonrecurring items. In our proposal, we just had the Board meeting this afternoon to the annual shareholders assembly at the end of May is to increase the dividend from EUR 4.20 to EUR 4.50 per share. That's on the financial side. Let's take a look at some of the governance and strategy updates. So we are very happy sort of to announce the long-awaited process of our governance change. The Chairman Moulay Hafid, Daniel the founder and CEO and myself has recommended to the Board and the Board sort of followed that recommendation to appoint Jorge Amar, who is a very world-renowned AI expert and leader of McKinsey's global customer service practice, to be the new CEO of the group. He will start officially March 16. I've known Jorge for quite some time, and I'm very excited that he steps into this role. This also means naturally that Daniel, myself and Olivier will step down a day before. Daniel will also step down from the Board of Directors. And we also, at the same moment to really make sort of the governance renewal complete also co-opting to the Board for new members. One will be Jorge starting middle of March, sort of stepping into the role of Daniel. Myself, also, I will continue to support the group that is very close to my heart but then in a different role as a Board member and 2 very exciting new Board members who have been co-opted and are then up for the approval by the shareholders' assembly at the end of May, one lady from Qatar and one lady from South Africa, which I'll explain later her qualifications. So that's really, I think, quite exciting news. I have been many discussions over the last years, when will this happen? I do believe we have there the right team on the start, and I'm excited sort of to support this group in this new role and particularly Jorge in his new task. Then Future Forward. We launched this initiative last summer, you saw in Q3 a quick update. We are now in full swing and 2026 will be the first full year of implementation. We have really mobilized the organization with hundreds of different initiatives. And as I explained and hinted towards in our Q3 presentation, we are working strong on essentially 3 levers. We want to accelerate the growth. We want to drive efficiency also leveraging AI, and we want to transform the company and we are making sort of good steps on all 3 elements. And on the internal AI efficiency, we are starting a program as we speak that will drive efficiency savings for the group targeted to be over EUR 100 million in 2026. We have launched more than 500 AI projects last year and expected to scale further with our TP.ai strategy, and we are also happy to share that also under the new governance, we are launching a comprehensive strategic portfolio review of the group. So a lot to be discussed. Let's quickly look at the highlight numbers. I think no surprises here for the audience, of course, happy to answer more questions, but we see the strong Core Services that we saw throughout the year. There has been a little bit of weaker momentum in Q4 that we anticipated in our November presentation what for me particular positive is to see the momentum in the Americas. As you remember, it was a bit negative before, but we have seen an excellent development in India as well as Latin America. And given the strong momentum, we are reporting growth of 1.4% like-for-like in the Americas. In EMEA, again, very strong with close to 4% in 2025. We have seen great momentum in the U.K., South Africa, Egypt, APAC as well, sub-Saharan countries. So they're across the Board a very strong momentum, while also a bit subdued in Q4. Specialized Services, on the other hand, you know the challenges on the nonrenewable of the significant Visa contract and the market environment for our Specialized Services in the U.S. So from that perspective, minus -- a bit more than minus 9% like-for-like growth. If you adjust for the effect of the Visa services contract, we have as indicated and as expected, a slight positive like-for-like growth for Specialized Services. But important to note, yes, the momentum has been reduced but given all the measures we have taken last year, we have proven to maintain a strong profitability. There's only a slight decrease of this highly attractive business. Second comment, again, in times of uncertainty, having a broad client portfolio is key and giving our broad exposure to multiple different industries has been and will be a strength of TP. For 2025, we continue to see strong momentum in public sector, fast-moving consumer goods and strategically very important, the strong sector of financial services and insurance. This is really has been sort of supporting the growth last year, we saw a bit of lower activity, automotive and energy utilities last year. Also, the portfolio we talked about a lot, TP is not a company that stands still. Over the years, always have been able to develop new business lines and build out -- building on its capabilities, new services line, along with our articulated future forward plan. And you remember the presentations last year, we have seen strong growth momentum in AI data services, and we call this out for the first time. We have seen very strong high single-digit growth in sales, which is 7% of the group and which is a critical factor to provide Revenue as a Service for our clients. And also very strong momentum, double digit actually in our back office and BPO-related task, which is important to sort of have an end-to-end service chain for our clients. Trust and safety. As indicated, we saw some revenue decrease. There is some automation happen on our client side. And care overall, broadly in line with the overall Core Services growth, so also a healthy development but changing the way we operate for our clients. Now a quick update to our 2 new executive managers. Jorge Amar, as I said, very happy, I got to know him very closely really now for quite some time. He has been working with the group for quite some time. But Jorge, why don't you introduce yourself to the audience and to our investors. Jorge Amar: Thank you very much, Thomas, and thank you for the warm welcome into the group. Today is not the day to speak at length as I will officially become the group CEO starting March 16. But as a quick introduction, Jorge Amar, I was born in Argentina, but most of my professional career has been in the U.S. where I worked with some of the largest companies in topics around customer experience and service operations. And in particular, over the last few years on the topic of artificial intelligence. Not only from a technology perspective, but also how to think about consumer and employee adoption. So all these feels like the right combination of things that are leading me now to be very proud in joining the group. So again, more to come starting March 16, but very, very excited to join the group. Thomas Mackenbrock: So I think not just Jorge is excited, the entire group is excited. I think it will be a great addition for the company. And as he indicated, he brings 3 key components that are critical for the group; first, a deep understanding how AI works in enterprise environments which is absolutely critical for our journey ahead; secondly, he has a strong proximity to existing and potential clients of TP, understanding their needs, understanding their environment, having these relationships, which I think is super critical also for our path in the future; and thirdly, obviously, given his background, he has a strong analytical mind and sort of will shape the strategic path for TP in the years ahead. I can also -- he's not with us today, but also can only praise our new interim CFO, Benoît Gabelle, has been a Deputy CFO for TP for some years now. Before he was advising the group, he was a partner at EY, is an absolutely excellent person. We are very excited that he will sort of step up into this new role and will support Jorge from the financial side. Also, as I said, it's not just the executive management team, but also the Board has renewed and has co-opted today for new members, 3 of them immediately. Sheikha Hanadi bint Nasser Al Thani, a very renowned Qatari entrepreneur, investor and business leader. We are very excited that she brings her expertise, her network into the board realm for TP. She has strong expertise when it comes to investment and the investment in capital markets. Secondly, Ingrid Johnson, she's South African lady, also with a broad understanding about capital markets investment but also the banking insurance space where she led several companies. So quite excited for that sort of additional expertise on the Board as well. Jorge Amar will join middle of March. And as I said, I'm very dedicated to the group, and I'm excited to continue the journey with the group in this new role as well. Of course, all of these cooptations are subject to the shareholders' approval at the meeting at the end of May. Now let's look at the numbers, and Olivier will guide us through. Olivier Rigaudy: Thank you, Thomas. Good evening, everyone. I'm happy to present to you the 2025 figure. As mentioned by Thomas, I do believe that -- we do believe that we have delivered a very good year despite this global challenging business environment. As you can see here, you have the full P&L. But before commenting in detail, I just wanted to highlight 3 topics. The first one that was unexpected when the year started. The macro environment has been difficult all along the year and the growth at different market was probably lower than we expected. Secondly, we have the FX environment that was not really exactly what was supposed to be to happen. For you -- I remember that we start the year with a dollar that was at EUR 1.03 and finish it at EUR 1.17. So it has been a global wash all along the year, especially in the H2, we will come back in a minute to that. That was not exactly the plan. And lastly, the impact of the Trump administration policy on our major business of Specialized Services, I was thinking, of course, of LLS has also an expected impact on the growth that we were supposed to deliver this year. But beyond that, beyond -- despite that, we have been able to post a sales figure of EUR 10.2 billion, 1.3% like-for-like growth, excluding impair inflation. And EBITDA, which is above EUR 2 billion and EBIT before nonrecurring items close to EUR 1.5 billion, EUR 1.485 billion aiming to 14.6% growth rate -- sorry, to sales versus 15% last year. I'll come back to explain where I come from the difference. Finally, the net profit -- the operating profit is roughly equal to last year. We will see why. We have been able to reduce tax charge significantly, and our net profit is roughly the same than last year. As you can see, this is a 40 basis point difference in EBITDA margin, which -- of which 20% -- half of it is coming from the FX. Let's have a look to the figure of sales first. The first thing to tell is that, of course, when you start to have a look to the figure of last year, you start with 10 -- also EUR 10.3 billion and you have a currency effect of EUR 362 million, of which EUR 240 million came in the second part of the year. So you had a 50% increase of the negative impact in the second part of the year that was significant. So when you start to look at the precise figure the way they have been built, you have also, of course, a change in scope of consolidation which is a consolidation of ZP better together. You remember that we bought this company last year, and we consolidated early February 2025. And we are also a small company called Agents Only that came on board early July 2025. So you have a positive impact of scope of EUR 196 million covering the decrease of Specialized Service, EUR 132 million that was mentioned by Thomas a minute ago, of which most of it is coming from this U.K. contracts that we have not been able to renew last year. That has a big impact on our sales, EUR 140 million to be precise. And beyond that, the Core Service business -- the Core Service activity have been able to grow by close to 3%, 2.7%, which I believe is beyond the market figures that we will get in some weeks from now, showing that this group has been able to continue to deliver significant growth in different markets. It was mentioned by Thomas in U.K., in different sector, in public sector, in banking where we are able to match the demand of the client. Let's have a look to what happened specifically in this year. When you look the FX environment, things are clear. You have all our currency in which the group operates have been degraded versus last year. So it has an impact. Of course, the dollar, but not only the dollar, the Indian rupee, the Philippine pesos, Sterling, everywhere. So we are facing a situation where we have been able -- we have not been able to cover, of course, all the translation effect that has a final impact on our mix of margin. This is an adverse FX environment in 2025. That was effectively significantly higher than people who are waiting. If we look now to the result by, I would say, by sector or by zone and by activity. I would say -- I would -- I'll add 2 points. The first one is a strong EBITDA margin improvement that we have been able to do in Specialized Services in H2. You remember that in Q1, specifically, but also in H1, LLS has been hit by this Trump effect, if I may say. But the group has been able to react quickly and to adjust this cost quickly to match the global demand. So the demand is flat versus the volume is flat in Specialized Services, notably in LLS but we have been able to recover significantly the margin, and we have just a small negative effect for the full year that is going to be positive next year, again with LLS given the measures that has been taken all along the year 2025. When it comes to Core Service, there are 2 issues to be -- to have in mind. Of course, the FX impact, which is -- I just mentioned it very significant. And the group decided to put some money, some investment in AI and IT technology that has been, I would say, spend notably in holding, as we can see on this table to support the future growth that was absolutely needed for the future. So all in all, the result in margin are not dramatic if you look at it. They are much more -- they're positive. If you look what happened, you have versus last year, an impact of Specialized Services that is roughly neutral. Of course, we have lost 70 basis points with the TLScontact impact, notably the UKVI -- the U.K. contract, sorry. That has been covered by 2 things. One is the acquisition of ZP that came on time, and that has been made on time accordingly and also by the mix effect linked to the work that has been done all along the year with LLS to improve the margin. So all of that, meaning that the cost on the Specialized Services impact on the margin is neutral and has been -- and we have been able to swallow all the impact of the TLScontact that we lost. Beyond that, you have the 20 basis points that are linked to the FX roughly. And you have the 15 basis points, which are the costs related to AI, notably spend in holding, as I mentioned earlier on. So I do believe this delivery of EBITDA margin is really good and shows how the group has been able to adapt to this global environment, either in terms of demand for LLS or either in terms of adverse FX condition across the board. If we now move to the other part of the result, what we can say is that the amortization of intangible assets are flat versus last year and the nonrecurring items are a little bit better than last year. You remember that last year, we had a significant amount of money that was spent to deliver the synergy from Majorel. Of course, this year is significantly less. But we have been able to -- we have been obliged to get out of some country, of course, Russia, that was one of the actions that we did all along the year, but also 2 other countries like Guyana and Trinidad, where we wanted to get out. Besides that, we have been careful on the impairment of some assets, notably on PSG which is recruiting activity that we bought 4 years ago. And where we are really, I would say, cautious on the future market for 2026. And we thought it was clear, better to be cautious and to impair at least EUR 60 million -- EUR 67 million for this business. It doesn't that mean that the business is not good, but we are very, very careful here. I remind you that this impairment of goodwill has, of course, no impact on cash. So the operating profit is roughly flat, EUR 1.55 billion versus EUR 1.82 billion last year. And when you look what's happening on the final part of the P&L, we have been able to maintain our net financial charge at the same level despite the fact that we have an outstanding debt that was increased in the year. But of course, last year, you remember, we had a very, very positive hedge impact coming from the devaluation of the Egyptian pound that didn't happen again this year. The impact of this hedge was EUR 50 million that is not happening again. So besides that, we are flat in finance cost. What is interesting is that we have now finished -- mostly finished the integration of Majorel, and we have been able to reduce significantly the tax rate -- the accounting tax rate. The impact is EUR 56 million improvement in 2025 versus '24. And we are still more things to come and the full year effect of the decisions that we took and implement in 2024 and 2026. That's the reason why we believe that in 2026, our tax rate will be below 30%. Beyond that, very few things to tell that we are roughly at EUR 500 million at net profit level versus EUR 523 million last year. Remember, we impaired EUR 67 million from PSG, that has a big impact on the net profit. More interestingly, and it as was mentioned by Thomas a minute ago, is a strong free cash flow generation. You remember that was a question about our ability to deliver free cash flow for the full year following the performance of H1 that was hit by some one-offs that were, I would say, exceptional. We have been able to deliver the best cash flows that we ever had in the H2 -- in the second part of the year in 2025, EUR 642 million versus EUR 636 million for the following year -- for the previous year, sorry. We did that because we manage strongly the working capital management or strongly working capital as expected. But we did that without cutting in the CapEx. And that is absolutely key. We continue to invest reasonably, but clearly, in some place where the demand is rising, notably India, South Africa, where the market is asking for size and for volume. So we increased our CapEx to 2.4% sales -- to the sales this year. So at the end of the day, the free cash flow is at EUR 900 million, EUR 901 million. Keeping in mind that we have to pay, of course, remember that we have the French restructuring plan, voluntary restructuring plan that was partially paid in 2025 for EUR 25 million out of the EUR 31 million that are shown here. And of course, will continue to be paid in 2026. So as a whole, strong free cash flow generation, I know it was a concern about the market, but the company continued to deliver strong free cash flow, and will continue to deliver strong free cash flow. If we now move to the situation of the group in terms of balance sheet. As you can see, we have been able to stabilize the debt roughly at 2x -- below 2x net debt to EBITDA while returning to the shareholder 42% of the free cash flow through dividend and share buyback and continuing to invest in business. I just mentioned it a minute ago, but also acquiring ZP and establishing some AI partnerships that are going to be promised -- promise for the future. So all in all, we continue to have a strong balance sheet while continuing to develop the business. And when you look at the indebtness, there is no reason to be afraid. We are BBB rating -- Standards -- S&P. We are the -- we have launched -- I remember you that we launched early last year, a bond of EUR 500 million that has been easily covered by the market. And we have a debt that is, I would say, balanced between the financing source and by nature of rate. To be clear, the group has the ability to reach -- to have access to lately between EUR 3 billion and EUR 4 billion easily through commercial paper, through some medium-term bond or banking facility. So the average cost of the debt is below 4%. We have an average maturity, which is around 3 years and we are absolutely confident about the ability to continue to finance and support the business and the growth of the business in the future. That's what I wanted to tell you. I'm holding back to Thomas for the strategic part. Thomas Mackenbrock: Thanks, Olivier, and thank you also because this will be your last presentation to present in your results after 16 years with the company. So a big thank you on behalf, I think, of the entire Board, the entire organization for these wonderful sort of decisive action over the last 16 years. Olivier Rigaudy: Thank you. Thomas Mackenbrock: Let's look, and -- I'm in the interest of time, quickly as an update on Future Forward that you see where we stand and what will be continued. So as I said, the value creation office for Future Forward is in place, hundreds of initiatives activating. I brought for today's presentation, as promised last time, 4 examples, to give you a little bit of a flavor where do we stand and what is happening and to have a little bit more tangible view on these growth levers, transformation levers as well as efficiency levers. Internal AI, we talked about, we see 3 big levers on driving change in the organization, of course, leveraging AI in everything we do internally when it comes to recruiting, training, workforce management, supervisor quality, but all corporate function, if you will, and AI adoption allows us to reach another level of quality, but also efficiency. Hand-in-hand with this internal AI transformation goes the cost optimization addressing structural changes through delayering automation on our SG&A and our overhead parts as well as on our direct costs as well. There are many, many plans in place now that are being implemented and they allow us to drive the savings that you see below. And thirdly, that is part obviously of the new leadership role with Jorge to find a simplified organizational redesign and to choose some lever there to have a more agile, leaner organization. Overall, for all of these 3 levers, the current expectation is that this will be delivered above EUR 100 million run rate savings, and we expect a onetime cost this year, of course, on depending negotiation of some of the levers between EUR 70 million and EUR 90 million. These plans are already in action. If you look at our annual results, you see that in January, February, we have the first measures amount with a corresponding cost of EUR 56 million. So it is happening. It's being implemented, and it will be continued seamlessly also by Jorge in the future. So this is on track and in execution. Second one, transformation. All of you remember this chart what I presented in Q3 that we as TP, believe AI is not a piece of software that is being sold. It is an incremental part of our operating fabric to drive outcomes for our clients. This is true on the functional side, so industry agnostic, and we have made good progress on some of our functional solutions, as you see later, as well as of the industry solution side. You need to orchestrate like we do today with TOPS and BEST, the human dimension, you need to orchestrate the AI dimension as well that it really can unfold this ROI and impact for our enterprise clients because otherwise, it's just a nice demo, but not really something delivering value. For this, we have started, as you remember, at our Capital Markets Day, our Q3 presentation TPI fab, our foundational backbone, we've launched more than 500 AI projects this year, integrating what we have done in the past into our new solutions suite in really driving impact for our clients. The biggest impact because there we had a head start in the past is augmenting with AI, our existing human delivery engine. There, we have seen more than 270 projects last year of doing this human augmentation but we also started to see some traction on FAB Connect, which is basically orchestrating human and agentic AI; FAB Growth, enabling with AI revenue as a service for our client; and FAB Collect, agentic AI collection where we see a lot of potential. This is a journey that will basically carry on the next years ahead but the foundation is laid, we are continued to developing. And the examples are real. Wherever you look, whatever new proposal you have, whatever new win you have for a client, AI is part of our offering is attached and ingrained what we do today, whether this is for a leading health care insurance company in the U.S. where we build an AI-based tool that allows faster access to the knowledge base. We won a client last year in Asia, it's a large bank, where we integrated human customer support with agentic AI customers on board to manage high-volume cases. And at the same times, this orchestration between human AI and agentic AI was the winning case that the client entrusted their most treasured valuable resource, their clients to us with our FAB Connect solution. We have won a large telco company in Latin America, where we do agentic AI collection. So we can be earlier on in the building cycle, reach out with an agentic collection tool and then hand over in complex cases to a human. And this is an example, again, where is the value add for TP. We are knowing which AI technology is available in the market, depending on the situation, depending on the client need to plug it in our processes. But as we work with dozens of different telcos in different countries, we work on many different debt collection services. We have the data now how do you orchestrate the process to unfold the power of the AI. And we've seen great results after the implementation actually quite recently when I visited the client. And lastly, FAB Growth. 7% of our business today is sales. There, we are not a cost center, but a revenue engine for our clients, and it's obvious, but it's hard to implement how AI augments our humans to drive better sales for our clients. We have started working for many high-tech companies in that felt with really incredible success. And I see there's really a great momentum combining the human power of sales with the tools of AI. Maybe in the interest of time, just a quick sneak preview, and I'm sure you will see in the next years more from Jorge and the team. I really believe if you think about and sort of cut through all the noise in AI, finding the right recipe, how you orchestrate in a world where AI is ubiquitous, the human power with the AI power is key. It's not just about load balancing. This call is done by AI, this by a human. It's about understanding where hallucination happen, how do you design the data flow, where does AI play a role for better outcomes and maybe a human how do you manage this handover. We're investing quite a lot right now of building this tool, including in a responsible control center that can detect hallucination, accuracy problems, false answers, defines the right guardrails and really configures outcomes for the client. TP is not a company that is selling AI solution. We are a company that drives outcomes for our clients and managing the orchestration of an operating machine. And the operating machine has a human hand and an AI hand or AI leg and doing this orchestration in the right way is key in the future because our clients don't want to see a demo or buy a tool like in a software, they want to see an enterprise process managed with a measurable impact. And that's, I think, the role for TP, you will see more in the future, but it's on the move. It's being developed, it's being deployed in client places, and I think we're all around the table are quite excited about it. Then many of you asked what is happening? How -- can you show us more concrete examples for sales? I talked about it, 7% of the group, EUR 700 million in sales. We do B2B2C and B2B2B sales. Starting with high-tech clients. We invested last year and the team built it out to not just focus on high-tech block, fast-moving consumer goods, banking, telco with really some good traction. We've seen high single-digit growth last year. We expect nothing less this year from the team, and you see it's again, this blend of human talent with AI. And the same is true with data services for AI. We called it out now it's 2% of the group. I think we all wish it will be a higher number but we see double-digit growth with the team. It's a market that is growing. It has moved from general data labeling and notation based on general knowledge to way more specific needs, way more specific expertise for clients, really combining domain expertise on certain subject area experts and bring it again for enterprises to life and having enterprise solution for medical companies, for car companies, for banking companies and combining on our know-how is quite critical. We won their 5 new clients. And again, the expectation for this year is at least to continue the growth momentum we've seen in 2025. And with this, I think these 2 examples, it shows you how the portfolio of TP is changing over time. Last but not least, outlook. As you all know, the world is uncertain. Our market is uncertain. If you look at last year numbers, we expect a growth more or less in the same range, 0% to 2%. Based on how the year ended and started into the year, we expect Q1 to be a bit softer and to be below that guidance range. EBITDA margin with all the measures remained stable at 14.6%. Of course, assuming no major fluctuation on the FX side. Cash flow, again, EUR 800 million to EUR 850 million, excluding the nonrecurring cash-outs. This is due to if you look at this year's numbers, which is a bit higher, due to the stronger euro versus the dollar and dollar correlated currencies because if you think about India, Philippines, LatAm, the U.S., of course, where cash is generated and translated to euro, the amounts might be lower given the current FX environment and the AI efficiency program that I talked before. Overall, I would say TP is in a position of strength. We'll remain in a position of strength but needs to transform. Olivier, myself and I know also, Daniel, are quite excited about the future. We're stepping down, knowing the company in good sense with Jorge and are looking forward to any questions from the group. I think you have seen this. This is the proposal for the dividend. Of course, for our investors is important it's being up for approval. May 21 in the general assembly. It's an increase of 7%, if I remember well, to EUR 4.50 the share, which is an increase and in line, obviously, obviously, with the position of TP wherein -- and the midterm guidance, there's no change there. With this -- sorry, for that, open for Q&A, and I'm sure there are many. Operator: [Operator Instructions] The next question comes from Suhasini Varanasi from Goldman Sachs. Suhasini Varanasi: First of all, a lot of changes, just trying to make my way through all of that. But maybe 3 questions, just to keep it short. When we think about the guidance for 2026, especially on the top line, can you help us understand your assumptions in Core Services and Specialized Services here and the implications that you're seeing on margins as well? The second question is on the strategic portfolio review that you have announced. I see that you've taken a few impairments below the line in the last couple of years. Is that mainly in Specialized Services that you are directing with portfolio review? Or does it also encompass Core Services? And it's interesting to see some of the color that you have talked about on Fab deployment. And it's good to see the benefits as well. Is it possible to help us understand the impact on contracted revenues and profits, margins, et cetera, as a result of deploying all of these AI solutions? Thomas Mackenbrock: Okay. Let me start and then I hand over to Olivier for some of the impairment and financial topics. First one on FAB AI. If you look at the markets, Suhasini, I can -- I think it's too early to say what is the impact for the group. We are there in the beginning. It's part of the solutioning more and more. The question of, of course, how do you price some of these AI solution, how do you price some of the benefits. As we move forward, as we said in the past, there are some ideas to make this more tangible, but it's too early to tell what is the impact because we are also investing in the solution at the same time in terms of margin or not and in terms of pricing model in the future. But you see there is traction, there's interest from the client. Every new offer that we have has a Fab solution inside. And let's say, I would be positive to see in the next 9 months, some more traction granularity that provides you also some facts that you can put in the model what the impact might be. Strategic portfolio review, as also discussed in the past, of course, there's always the question on certain Specialized Services assets, but there is a clean sheet. Jorge Amar has the mandate for the Board to review the entire portfolio of the group. To be very clear, and as we put in the press release, including divestitures as well as including M&A. So both options are open. As I said here, he has a very strategic mind. I think many of our analysts has looked at the group, and he has a blank sheet from the Board also today to do a thorough review on the portfolio of the group. Guidance, 0% to 2%. What was the question? We see a weakness -- we don't -- as you know, we don't give a guidance for Specialized Services and Core. I think the story of 2 tails that we have seen in the past that the Core shows higher growth momentum than Specialized Service is also true for 2026. I think that's fair to say. We have invested, as you know, in business development and AI capabilities on our Core Services, and we do expect a successive increasing momentum on our Core Services throughout the year, but we don't give different guidance. Maybe on the impairment, Olivier? Olivier Rigaudy: On the impairment, so of course, we are going to continue to look at business plan for all the business. There is no, I would say, decision that has been made for 2026, as you can imagine. So we are going to look that very precisely. We will be very, very careful as we have always been in our business. But so far today, we have no specific reason to change what we have done in 2025. What we've done in 2025 was just to be on the safe side on PSG and to a lesser extent, on Health Advocate. That's it. It's not a big amount compared to the balance sheet of the group where we have EUR 4 billion of goodwill and EUR 2 billion of intangible assets. But we saw that in accordance with auditor, it was more careful to take this stance. Suhasini Varanasi: It was great working with you, Thomas and Olivier over the years. Wish you all the best for the future. Operator: The next question comes from Remi Grenu from Morgan Stanley. Remi Grenu: A few questions on my side as well. So the first one is on the organic growth guidance. Can you help us understand what you mean with a softer performance expected in Q1 based on any details on current trading discussion with clients? How should we expect that organic growth in Q1 versus the 0% to 2% for the full year? The second one is on your cost saving plan. So EUR 70 million to EUR 90 million of restructuring costs this year. But can you help us understand the net impact if we integrate the savings that you expect to generate as soon as 2026? And overall, a discussion on the payback that you expect on the EUR 70 million to EUR 90 million you're investing in restructuring? And the last one is probably a bit of a broader question, a lot to impact from the announcement tonight. So what do you think are the top priority for the group? Is it about first setting the right perimeter to do the divestment and potential M&A of delivering on the cost saving program, detailing the capital allocation, there's still a little bit of an uncertainty there? So just want to understand in your mind, what's the top priority in which order to understand when things are going to materialize? Thomas Mackenbrock: So I would start and hand over to Olivier, but I would ask for forgiveness that as we speak today, Jorge is still employed by McKinsey & Company. He will start with the group on March 16. We will be then available, myself and him, to go and talk to investors, obviously. But till then, he cannot speak for the group. And so I try to cover your question. First, guidance, yes, as we indicated in the press release, we expect based on the start of the year, we see, in particular, weakness in onshore markets. There is an increasing momentum for offshore and certain uncertainty with some clients to be below the guidance range, meaning below 0% for Q1. To be very clear, there's also the weakness with Specialized Services, but we expect for the group to be below 1% and then in continued and sustained improvement throughout the year to reach the guidance range. Second, on cost impact, we do -- I think we also stipulate this in the press release, of course, subject to negotiation with the employee representations subject to the implementation of some of our internal initiative measures, D&I deployment, et cetera. But we expect from the EUR 100 million plus savings this year, around EUR 50 million to materialize. And Olivier can give you more details what's the net effect will be for this year also on the cash side. But we expect from the EUR 100 million plus EUR 50 million to realize this year. And then you talked about capital allocation. I think also there, we had the discussion today in the Board. It is noted very well the request from our shareholders or for some shareholders who reached out to have an increased capital allocation by the group, and it will be considered going forward, obviously in strong collaboration with the management. And in terms of priorities, the good thing with TP, as you know, all of the things that you mentioned at the same time. So yes, of course, there is a strong focus on the existing business. There will be a strong focus on the transformation of the group. There will be, at the same time, that's why articulate a strong focus on the portfolio review. I do believe we act from a position of strength giving the situation we are in, but there is a moment of transformation for the group that is clear, and there will be not the luxury to focus only on one thing. Olivier? Olivier Rigaudy: Just to comment on the saving plan. Of course, the impact in 2026 will at best neutral. We have launched all these savings plan early this year, notably in domestic market in Europe. And we do believe that depending on what size at what speed this plan will be developing. We do believe that it will be neutral at best in 2026. And I'm sure you have noticed that we have announced flat margin in 2026 versus last -- versus 2025. That shows that we are reasonably confident that to deliver these savings. Of course, the main positive impact will be seen much more in '27 and onwards in 2026. All the job of the team today is just to make sure that we have no negative impact in 2026, which I believe we will be able to do. Thomas Mackenbrock: Next question, please. Operator: The next question comes from Karl Green from RBC. Karl Green: I appreciate Jorge can't speak on behalf of the company or anything to do with Teleperformance, but would it be possible for him to give any kind of broad view around the market potentially just in terms of how he potentially thinks about outsourcing unfolding organic consolidation in the market? That would be the first potential question. And then just in terms of more sort of technical questions. I think, Olivier, that you mentioned that the margin guidance does include an assumed negative impact from further U.S. dollar depreciation year-on-year. I just wondered if you could very simply just quantify roughly how many basis points of FX headwind are embedded in that flat margin guidance or stable margin guidance? And then a final, again, margin question would be just, again, you've indicated that you would expect the specialized services margin to improve further in '26. Any kind of quantification around that would be really helpful? Thomas Mackenbrock: Let's start with the market, Jorge. Jorge Amar: Excellent. I'll start with the market with just an overall expert view, not at all speaking on behalf of Teleperformance, as I mentioned before, and Thomas reiterated, I will be officially with the company starting March 16. But if I look at the market and what we are seeing today in terms of trends, there's definitely a component of the rise of the hybrid workforce. And this means just having AI and humans interacting together. Sometimes AI managing end-to-end interactions and many times AI augmenting the humans to deliver a better customer experience. So I would put that on the table as one big element that we're seeing because it informs some of the other implications. The second one that I see is, there are many companies out there right now offering their AI solutions. And some people talk about an AI bubble. Some people talk about like, hey, what is going to happen with all these companies. And I am confident that the companies that will win in that space will be the companies that have some sort of differentiation, not only from a technology perspective but also from a data perspective and the ability to integrate the solution vis-a-vis the humans. If we play forward the movie and we believe that in the doomsday scenario, customer care will become just a bunch of models that are owned by a software company. That is highly unlikely, and we would see then many companies returning to some sort of differentiation in their customer experience strategy that involves a combination of both AI and human. And I think that, that part is something that we will need to continue tracking and seeing how it unfolds. And then I think a little bit over your question was going is in this space, in this market, how do we see outsourcing versus moving more operations in-house? And look, right now, the market, the data that we have from external analysts is showing a slight increase in terms of outsourcing. We still believe roughly that 65%, 66% of the capacity is still in-house. So there is still ample space for growth when it comes to outsourcing. And I think that companies will be looking more and more for partners that can deliver not only on the geographic footprint but also on some of the technology solutions, the risk and compliance, the data security as they continue to do that. So that's hopefully as much as I can share right now, but a little bit on the perspective on the market. Olivier Rigaudy: Coming on the margin and the impact on dollar on 2026. I must confess it's a little more complex than the pure dollar because as mentioned by Thomas a minute ago, it's not only the dollar, it's dollar linked -- currently linked to the dollar, including Indian rupee, Philippine pesos and the mix of this currency versus the previous year. So what is difficult today is to predict this mix. So today, we have not a huge impact on the dollar, on the guidance on the dollar and linked -- currency linked to dollar impact in 2026 margin. There is a limited impact depending, of course, of the mix that might change. So we will update you. Probably people will be after me will update you about that because it's too early to tell. On the margin on Specialized Service, what we can say is that I'm not waiting a big change versus 2025, except that we'll probably be better in Q1 versus last year. You remember that in Q1 last year, we have been, I must say, amazed by the impact of the reduction of the growth that we were waiting for. So now we are absolutely ready to do that. So we will be able to pass on this Q1 that was difficult last year in terms of margin. So probably a little bit better in margin in Specialized Service, everything equal, which is not going to happen, I'm sure. Thomas Mackenbrock: But maybe as a reference, as we also indicated in our press release and the presentation, the EBITDA margin or the stable EBITDA margin guidance assumes a EUR 1.20 dollar exchange rate. Olivier Rigaudy: What I would say is that, of course, there are uncertainties, and you understood that. But what I would draw as a lesson from 2025 is the ability of this group across the board across a different division, across a different country to adjust quickly. Of course, it's not -- it's easier in some geographies than in others. We have been able to adjust it of course, easily in U.S., easily in India, easily in Philippines. It's more complex in domestic European market than other markets. But what you have to keep in mind that decisions are taken quickly. They are made thoroughly quickly and implement quickly in the country, and I'm convinced that the company will continue to deliver such a reaction in case of issues or specific topic. This is something that I want to highlight because we have systems that enable us to detect quickly what's happening on the field and to react if needed, as quick as possible. Of course, there are limits to adjust, but the company is able to do so. Thomas Mackenbrock: Maybe one last quick question in the interest of time, if there's any. Operator: The next question comes from Nicole Manion from UBS. Nicole Manion: I do have a few, but I'll try to be quick. The first one is just on the revenue outlook actually. So sorry to kind of go back there. But given the Visa exit should be fully annualized at least for the most part and your comments about Q1 and the growth outlook in general, the implication there is probably that the LLS situation is still deteriorating. So any kind of detail on that you can give will be great. Secondly, just on Trust & Safety, which I think was 8% of group revenue this year. That's down from, I think, 10% in the presentation last year, which obviously is a bit of a significant drop year-over-year. I know we've all seen the headlines about some of the companies in that space maybe scaling back some of the services. But I wonder if you could maybe talk about whether it is that that's driving the step down in your numbers or whether it's AI disruption or anything else? And then finally, just a very quick one on the onetime costs. You've indicated EUR 70 million to EUR 90 million for '26. But then you've talked about EUR 56 million of costs so far from measures that were launched starting January. Is that correct to think about that EUR 56 million as sort of relative to that EUR 70 million to EUR 90 million guide? Because obviously, that's already quite a significant chunk of that budget. So it's quite front-end weighted, if that's the case. Thomas Mackenbrock: Okay. Let's get started. So yes, the announcement and as you see in our annual results of the EUR 56 million, all the announced social plans already today. So these are sort of earmarked in our annual results and is part of the EUR 70 million to EUR 90 million. On second question, Trust & Safety, we do see effects, as you rightly said, for some of our clients, and it's also linked to increased automation and NI improvements in that space. So as I indicated before, there is some automation happening with this we called out a bit now what is really data services in that category. Remember, it was split between other and Trust & Safety, but it is also automation that we see in the Trust & Safety space, and that's why it's reducing. On revenue development and LLS. So we don't call out, in particular, the development on LLS or revenue. But if you look in the news and the situation in the U.S., I think you have an idea that it was not such an easy start for LLS this year. Anything to add, Olivier? Olivier Rigaudy: No, no. But it's far from being a collapse. Just to be clear. Of course, what's happening on the political stuff doesn't help. On top of that, the weather did help as well, but we are not in a disaster mode far from it. I just wanted to mention it. Thomas Mackenbrock: I see there is one last question. Maybe we squeeze that in, even though we are a little bit over the time. Olivier Rigaudy: From Deutsche Bank. Operator: The next question comes from Ben Wild from Deutsche Bank. Ben Wild: I've got 2 questions, please. The first is on the guidance and particularly the gap between your adjusted EBIT and your FCF guide. So the guide obviously implies adjusted EBIT close to flat or modestly up before FX and your FCF guide implies free cash flow down 9% year-on-year. Can you help us understand what's going on in '26 that the results in that differential? Is there working capital reversal or any other one-off effect in '25 that reverses next year on the free cash flow? The second question, just very, very broadly, your valuation is implying an existential trajectory for the group over the midterm. I suppose, very simply, you talked about the investment opportunities and potential divestments. But more broadly, how do you think about the relative returns of deploying capital organically in the group through OpEx and CapEx, inorganically through M&A versus returning the significant cash that you generate to your shareholders? Thomas Mackenbrock: So I'll start with the second part and then hand over to Olivier. Olivier Rigaudy: No, there is nothing either in terms of working cap or CapEx or tax to be paid. I just wanted to say that we know that a significant part of our cash flow is coming from Americas. Of course, there is a lag between the EBIT and the cash items. So this is mostly the lag between the working cap that is balance sheet as of today that will be paid in 2026. So the same for the tax. But there is no specific impact we might say that we are careful as always and there is uncertainties that lead us to -- just to be on the safe side on top of that. Thomas Mackenbrock: And the question was on... Olivier Rigaudy: Valuation. Thomas Mackenbrock: So as we -- I think, at this point in time, with the new CEO coming in, I cannot say more than what we have written in the press release. The Board has acknowledged the request from shareholders also for an increased return, and we look into this. So at this point, I've asked for your understanding, I don't want to preempt any decisions being made by the new management on that front. Ben Wild: Olivier, if I may just quickly follow up on the FCF as a clarification point. Does the adjusted FCF include the nonrecurring restructuring costs that you've talked about in the release today or? Olivier Rigaudy: Yes, of course. Thomas Mackenbrock: And then I thank you also, everybody, for your attention and your interest. I'm sure there are more questions in the weeks ahead. We're looking forward to answer them. Again, welcome to the group, Jorge. It's a pleasure to have you on board, and thank you, Olivier, for all the time, and thank you for your interest and continued support of the company. Thank you very much. Olivier Rigaudy: Thank you to all. Thomas Mackenbrock: Thank you.
Operator: Ladies and gentlemen, thank you for standing by. I am Mina, your Chorus Call operator. Welcome, and thank you for joining the Piraeus Bank conference call and live webcast to present and discuss Piraeus' 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 Piraeus Bank's CEO, Mr. Christos Megalou. Mr. Megalou, you may now proceed. Christos Megalou: Good afternoon, ladies and gentlemen, and good morning to those joining us from the U.S. This is Christos Megalou, Chief Executive Officer, and I am joined today by Theo Gnardellis, Chryssanthi Berbati and Xenofon Damalas to present and discuss Piraeus' fourth quarter and full year 2025 results. Today, I will take you through the first 2 sections of the presentation, covering the main financial and business achievements for the full year period and demonstrating our standing in the European banking landscape. This will be followed by a Q&A session. Let's begin with our presentation on Slide 4. Piraeus is a leading bank in Greece, ranking first across all major business lines. We serve 4.5 million clients with a workforce of 8,100 employees in Greece. Our total assets stand at EUR 91 billion with EUR 37 billion in client loans and EUR 66 billion in client deposits, representing 28% market share in deposits. We operate an omnichannel distribution platform with 370 branches, 1,500 ATMs and serving 3.2 million digital clients. Our mobile app is top ranked, reflecting our commitment to digital excellence and customer satisfaction. We are a leader in sustainable banking with EUR 5 billion in sustainable financing, EUR 2.2 billion in green bonds outstanding and a strong focus on supporting small businesses and farmers. All these outstanding results have been delivered thanks to our people and our clients. Let's move on to Slide 5 for the key highlights of our full year 2025 performance. We generated normalized return on average tangible book value of 16% or 14% on a reported basis. Our earnings per share reached EUR 0.82 post the AT1 1 coupon, fully absorbing the fast decumulation of base rates. On the back of our strong performance, we increased our payout ratio to 55%. We intend to distribute EUR 0.40 per share cash dividend in Q2 2026 on top of the EUR 100 million share buyback that was completed in the fourth quarter of 2025. In total, we are on track to a total distribution of EUR 592 million out of the 2025 profit, which corresponds to a 7% yield. We have expanded our loan book by a Europe leading growth rate of 11% year-on-year and achieved EUR 4 billion net credit expansion, maintaining pricing discipline at the same time. Importantly, net credit expansion reached EUR 300 million in the retail segment after 15 years of contraction. Our cost-to-core income ratio stands at 33%, among the best in the European banking market, confirming our strong cost discipline. Revenues from services reached EUR 700 million in 2025, up 7% year-on-year. Our revenue diversifying efforts are reflected in our services revenues over total revenues of 26% and fees over assets that exceed 80 basis points. Both metrics are best-in-class in Greece and close to or above average in Europe. We delivered EUR 2.7 billion net revenues in 2025 with net interest income arising in Q4 quarter-on-quarter, and we consider that we are now well past the trough in net interest income. Asset quality dynamics remain solid with the NPE ratio at 2%, while organic cost of risk shaped at 52 basis points. NPE coverage increased to 73% from 65% a year ago, solidifying our balance sheet. Our assets under management increased to EUR 14.5 billion in 2025, up 27% year-on-year with EUR 1.5 billion net inflows. Furthermore, client deposits rose by EUR 3.2 billion annually and are now at EUR 66 billion, practically our deposits almost fully funded our credit expansion in 2025. Our total capital ratio reached 18.7%, absorbing the Ethniki Insurance acquisition, 55% distribution accrual, the strong low growth and DTC amortization. We maintain a buffer of 275 basis points above Pillar 2 guidance with a CET1 ratio standing at 12.7%. Slide 6 presents the details of our fourth quarter and full year operating results. The reported pre-provision income was up 7% quarter-on-quarter. Below pre-provision income, the quarter has some one-offs aimed at further strengthening our balance sheet in the areas of nonperforming assets and non-core participations to lay out a clean backdrop for the new strategy. We sustainably grow our tangible book value per share now at EUR 5.9 per share, which is net of the EUR 0.30 per share cash dividend paid in June '25, the EUR 0.08 per share of share buyback in November '25 and the impact of the Ethniki Insurance acquisition. On Slide 7, we present our strong loan origination dynamics. Performing loans increased by 11% in 2025, driven not only by all business lending segments, but also by an increase in household lending. Importantly, Q4 marked a new cycle record of EUR 250 million for mortgage disbursements. On Slide 8, we present a detailed sector breakdown of our CIB net credit expansion of EUR 3.6 billion in 2025. As you can see, our corporate platform outreach is very granular, reaching all sectors of the Greek economy. Among other initiatives, we are increasing our presence in syndicated deals, and we are offering greenhouse technology financing solution. At the same time, we keep focusing on SME clients in Greece, as shown by the top performance in disbursements. Slide 9 demonstrates that we have achieved Europe's strongest corporate loan growth while maintaining pricing discipline, which is a testament to the commercially rigorous approach of all of our teams. We have been able to compete and win business while pricing at par with the market average and keeping risk-adjusted returns at the core of our business credit underwriting. Turning to Slide 10. The key milestone to note is that 2025 is the first year that mortgage loan growth, net of repayments has turned positive with net credit expansion of EUR 110 million. This follows net consumer loan growth, which already turned positive in 2024. Consumer disbursements have been growing since 2021 by 10%, but this growth was previously outweighted by heavy repayments. We now have reached an inflection point that bodes well for future expansion of our loan book and revenue streams. Slide 11 outlines the impressive evolution of our services revenues, which is being supported by loan originations, asset management and bancassurance. Ethniki Insurance contributed for circa 1 month with the growth of the new operating model still to come and expected to elevate services revenues with expansion across all segments of the market, namely life and health protection and P&C protection. More on this during our Capital Markets Day next week. Slide 12 demonstrates the growing trend of assets under management that reached EUR 14.5 billion in December, backed by strong net inflows of EUR 1.5 billion. We have upscaled our investment solutions offering to private banking and retail clients, incorporating robo advisors while our open architecture strategy, combining Piraeus asset management expertise with a wide suite of best-of-breed third-party products is paying off. Slide 13 presents detailed information regarding net interest income intrinsics. In a nutshell, our growing CIB loan book drove NII improvement, along with the stabilization of base rates. Spread erosion was milder in Q4 versus the previous quarter, while deposit costs stabilized. As a result, NII rose by 1% in a quarterly basis indicating that the trough of the cycle is behind us, given current yield curves. Turning to Slide 14. Our cost control efforts kept G&A costs under control while still making extensive IT investments. Overall, we remain cost conscious, maintaining cost-to-core income ratio below 35%. Slide 15 provides a summary of our asset quality indicators. Our NPE ratio stands at 2%, while the organic cost of risk shaped at 51 basis points in the fourth quarter. Our NPE coverage strengthened, reaching 73%, while our Stage 1, Stage 2 and Stage 3 coverage ratios are increasing, standing higher than EU average. Piraeus enjoys a superior liquidity profile presented on Slide 16. Our liquidity ratios remain strong as evidenced by the high balance of deposits at EUR 66 billion and 216% liquidity coverage ratio. Turning to our capital base on Slide 17. Our CET1 ratio stood at 12.7% at the end of December, post the Ethniki Insurance acquisition, absorbing loan growth, 55% distribution accrual and accelerated DTC amortization. Slide 18 depicts Ethniki Insurance performance in 2025. Profitability was significantly improved to EUR 45 million before tax at a recurring level from EUR 26 million in the previous year. With a leading 14% market share and 1.9 million customers, gross written premium posted growth in health and P&C. On Slide 19, we present an update on Snappi, our neobank with its own portable pan-European banking license. Snappi launched commercially in September, it is already gaining significant traction with its fully digital, app-based, branchless, low CapEx model, as it currently has 60,000 app users. Turning to the second section of our presentation for our positioning within the competitive landscape. I want to point out that Piraeus is in a leading position in Greece in terms of performing loans, deposits, equity brokerage and network as highlighted on Slide 21. In addition, Piraeus ranks at par or above average on all major KPIs in the European banking space. In Slides 22 to 27, we present the key metrics for Piraeus versus European bank averages. On Slide 22, Piraeus delivers best-in-class loan growth in Europe, outpacing EU peers by wide margin. On Slide 23, our net interest margin is far above the European average, reflecting our pricing power and effective balance sheet management. Slide 24, net fee and commission income over assets is well above the European average and the best in Greece. Slide 25, our cost-to-core income ratio is best-in-class in Europe, demonstrating our ongoing focus on operational efficiency and cost discipline. On Slide 26, Piraeus' return on tangible book value is well above the EU average, highlighting our ability to generate superior returns for our shareholders. Concluding with Slide 27, despite our strong fundamentals in absolute and relative terms in relation to our European peers, Piraeus trade below EU banks with similar earnings implying significant upside for our shareholders. And with that, let's now open the floor to your questions. Operator: [Operator Instructions] The first question is from the line of Sevim, Mehmet with JPMorgan. Mehmet Sevim: I have just a couple of questions, please. One on the fee income this quarter, which you renamed to revenues for service -- from services. It seems like a very good strong print. I was just wondering if there are any one-offs or anything else to highlight in that print? Or is this a good run rate for us to consider for 2026? And maybe related to that also, it seems like a strong initial contribution from the business in just 1 month. I was wondering how we should think about 2026 when it comes to revenue contribution and integration costs here and maybe anything else that we should be aware of when it comes to modeling the business? And finally, just wanted to ask on the payout ratio, which came in higher than expected with the EUR 0.40 per share dividend payment. But at the same time, your CET1 fell slightly below the target of 13%. So how do you balance this? And going forward, should we think about this level of payout ratio as the base? Or is there anything that you'd like to highlight here as well? Christos Megalou: Sevim, and thank you for the question. I'll start with the fee income. We had indeed a very strong fourth quarter, and this is highlighting the franchise value of Piraeus. We have always maintained that we are a strong earner in fees over assets and particular areas like asset management, the banking business, the bancassurance are areas of growth for us, and they will continue to be. For the fourth quarter, there were a few, let's call it, highlights, especially on the investment banking side. So I wouldn't extrapolate this number for the whole of the year. But I would just say, and of course, we will come with guidance on next week on our Capital Markets Day in London. I would just say that this is an indication of the strong franchise value that results in fees from services for Piraeus Bank. Now, on the payout ratio and the level of capital, first of all, we thought that we felt very comfortable with the level of capital that we were in, given the balance sheet and given the way the bank has derisked over the years. And therefore, to give an extra return to our shareholders from 50% to 55%, we thought it was more than appropriate given the fact that with the level of CET1 that we are currently at, we are at a total capital level of above 270 basis points above P2G. And of course, this whole exercise was facilitated by the fact that the P2G went down to 1%. So as you can imagine, given the strong fundamentals of the bank, we thought that this reduction on the P2G should be passed to our shareholders. And this is what we did right now rewarding our shareholders with an extra 5% on the payout ratio. Theodore Gnardellis: On your question, Mehmet about Ethniki, I mean this is really 1 month plus a few days that you're seeing here. Let's just wait for the 5th of March, where we're going to be giving you guys a detailed guidance. We're giving a preview of the solo result. I mean, it's still an audit, and it's going to be published by the end of March, but we're giving you kind of a preview on Page 18. But we'll discuss much more about Ethniki and the accounting effect and the value effect on the group consolidation on March 5. Let's just wait for that. Operator: The next question is from the line of Caven-Roberts, Benjamin with Goldman Sachs International. Benjamin Caven-Roberts: Just 2, please. Firstly, could you please provide some further color on the one-offs that were recorded this quarter? And if we should expect any further one-offs going into 2026, for instance, relating to the recent Katseli ruling? And then secondly, on the net credit expansion, just looking through the different categories, as you mentioned, a very positive pickup in mortgages, but large corporate net credit expansion was a little lower in Q4. Could you elaborate on how we should think about that mix and run rate going forward? Theodore Gnardellis: Ben, indeed, quarter 4, we found the opportunity, and we recorded some one-off expenses, I would say, below the normalized line. What primarily we did was on the cost side, there were some adjustments that we did on VES and some transaction-related costs with the Ethniki trade, valuation adjustments that was done on the equity and the NPA line. And of course, on loans, we're all aware of the Swiss franc legislative actions that happened throughout the quarter. And as a result, there was an additional adjustment there. Given the nature of these adjustments, I would not say that these are to be repeated in the future. We will not have, again, one-offs of that kind going forward. Overall, the guidance and the profitability communication that we will be giving and we have given in the past regarding '25 is on the reported side. So our objective is always to be meeting that, both on a returns ratio perspective and on a nominal perspective. This is what we did. So kind of nothing to write home about there that produces the future. Christos Megalou: Robert, also on the loan growth, as we were going into the fourth quarter, we were well above our target of EUR 3.5 billion by some margin. And therefore, there was no real urgency on pushing forward. So naturally, we have been slowing down a little bit in the fourth quarter so that we will be in a position to have a very strong Q1. So nothing to think about the Q4 credit expansion, especially on the CIB other than that the trend is very strong. We have a very strong pipeline. And as we will come up with a new guidance on the 5th of March on our Capital Markets Day, you will see this coming through. Operator: The next question is from the line of Kemeny, Gabor with Autonomous Research. Gabor Kemeny: I have a question on your capital distribution. If you could comment on how you think about the mix of cash dividends and buybacks going forward in light of the strong performance of the shares recently? That's the first one. And the second question on the net interest margin. Do you see the NIM stabilizing going forward? Is this -- is Q4 a good run rate for the coming quarters? Or do you see any additional headwinds coming through? Christos Megalou: Gabor, I mean, on capital distribution, the way we are right now, we think cash. So that's what we were planning for, for '26, and this is how we strategically look to conduct ourselves in the future. Theodore Gnardellis: And on the NIM, Gabor, indeed, I think we're reaching a point given the interest rate status and what we're seeing on spreads where NIM is finding its lows. There are some tailwinds actually on the ratio that we'll be discussing next week. But I'll refer you to the 5th of March for those. Gabor Kemeny: Right. Just a quick -- another quick one on your capital ratio. I think you had a valid case for increasing your payout, the CET1 ratio, slightly dropped below 13%. How would you think about steering your capital going forward? Are you looking to built it up to 13% or above? Or is there now a possibility that you stay maybe a little bit below that? Christos Megalou: Gabor, look, I think this is a franchise that generates earnings. It's a high-yielding one, high distribution one and generates capital as well. We have been talking about our strategic direction and philosophy on distributions and rewarding our shareholders. In the future, as we generate more capital, we will be following the same strategic direction. We will come with specific guidance on the Capital Markets Day. But our philosophy is this is capital accretive franchise, and we have to be delivering back capital to our shareholders. Operator: The next question is from the line of Nellis, Simon with Citibank. Simon Nellis: First question would be on the losses from participations or impairments. Can you just elaborate on what the nature of those one-offs are? Second question would be on the increase in bancassurance fees. I guess that's with existing insurance partners. How do you see that transition from existing insurance partners to Ethniki occurring and the impact it might have on that line? Those will be my 2 questions. Theodore Gnardellis: Simon, yes, the one-off part of the adjustments on associates had to do with one of a particular case that exists in our book. We saw some market intrinsic, some market information that led us to do a one-off valuation adjustment on the particular exposure. As I said, this is a very one-off situation. This does not prelude to any further such one-offs. It was something that we found an opportunity to do now so that we can have a kind of clean horizon ahead with no kind of gray areas or question marks. Simon Nellis: And how much was that, if I could ask? Theodore Gnardellis: EUR 35 million was the one-off adjustment that we have done on the equity side. You can find it on Page, I believe, 52. So on the banca fees, yes, it was a strong quarter. I mean, generally, banca as a franchise, we know that Piraeus is running the strongest banca sales. Quarter 4 was particularly strong. It is with the existing partners that we've got. The arrangements that we've got with the 2 bancassurance partners are, of course, active, and it's a testament of how the network continues to produce insurance regardless of other things that might be happening on the side. The particular line, I think, we will see it next week in conjunction with a lot of other things that are affecting the future overall of the group when it comes to insurance sales and insurance revenue. So let's just hold on for another week. Operator: The next question is from the line of Novosselsky, Ilija with Bank of America. Ilija Novosselsky: So one question on your interest expense paid on deposits. So I can see that it's constant in the quarter. So as far as I know, that relates to both the actual expenses on deposits and also the hedge impact, and both of them seem to be constant. I would kind of expect both of them to have a positive impact. So maybe if you can tell us how we should see interest expenses on customer deposits developing from here, maybe split between the 2 impacts? And then again, if I stay on the hedges, if I look into the Excel data set on the NII section, I see big changes in the non-maturing deposit hedging cost, which is kind of offset by a similar change in the IRS liability side. So maybe if you can tell us what has caused that because the change is around EUR 90 million in each of the lines. And maybe finally, one more on the hedges. So you started with EUR 10 billion. You have about EUR 9 billion now. So how can we expect the portfolio to develop throughout this year? Theodore Gnardellis: Ilija, overall, the deposit cost, as you saw, we have netted out and well pointed out with the NMDs. It's on 29 basis points right now. It is a flat situation. There's multiple, I would say, minor movements there. But for the future -- I know we're trying to keep the line, but you guys keep coming back on guidance for the future. But for the future right now, what we can tell you is that it's a stable outlook. So if you want to make an assumption, I think that's a fair one. My answer to your hedging question from a strategy perspective, it depends a little bit on our outlook on interest rates. So we will be discussing that next week. I've said many times when one believes that when one believes that you have reached a terminal level of interest rates and those positions stop having value or you can -- you're free to kind of materialize and monetize the value that these carry. But again, let's discuss this more next week. Operator: The next question is from the line of Souvleros, Andreas with Eurobank Equities. Andreas Souvleros: And congratulations for the results. I have 1 quick question, which is regarding the calendar provisioning that is around EUR 300 million, if I'm not wrong. And you mentioned a meaningful drag on the common equity Tier 1 ratio. So could you please clarify under what timeline or condition this is expected to be reversed? Theodore Gnardellis: Andreas, thank you for the question. Indeed, it is, of course, part of the capital reduction that you use for -- following the calendar provisioning guidance. It will reduce over time. The expectation is that -- I would say with growth rapidly, probably around the 50% mark over the next 5 years. Part of the recovery strategy, that's the way calendar works, you front load, and then, eventually, as recovery, hopefully, you release. Operator: The next question is from Gil Santivanes, Fernando with Intesa Sanpaolo. Fernando Gil Santivanes: This is a very general one regarding the latest Supreme Court ruling the last period of February on interest payments. Can you give us some color or some views on the balances the bank has? What potential impact might we see? And if this ruling is to be adhered by banks or not? Any color would be very helpful. Christos Megalou: Let me start on the Katseli Law by saying that the Katseli Law served its purpose, I would say, when it was legislated in 2010. If you look at the exposures that we have in our book right now and feel we will follow up with the numbers. All the Katseli Law exposures that we have in our balance sheet are Stage 1 paying loans and performing, which means that there was some good work done out of this law. And we are monitoring this decision. And also, we have to wait, I'm afraid, for the final script because details matter, but we can give you an outlook of what we have in our books and what that could potentially mean. So, Theo? Theodore Gnardellis: So Fernando, the overall book that we've got right now on the balance sheet of such loans is about EUR 50 million. Obviously, depending on how the decision will be scripted, there might have to be adjustments there, which is a percentage of that. We have hypothesis, obviously, which is being budgeted within 2026. That will be included in any guidance -- in the guidance we give out next week, but you understand it's a percentage of EUR 50 million, so actually excluding the margin of error of any cost of risk estimation for the future. Operator: [Operator Instructions] The next question is from Potgieter, Stephan with UBS. Stephan Potgieter: You've answered most of my questions. So just on follow-up on the Katseli loans, the ruling there. Obviously, you're outlining your own exposure, but do you have any views of what this could mean for the industry? I suppose most of these loans are sitting in the securitization structures, the regular scheme, if you have any views on that? Theodore Gnardellis: Stephan, again, we need to wait for the actual detailing because the impact might range a lot, obviously. It's a cash recovery question of the securitizations. It doesn't concern Piraeus Bank or the banks overall given the fact that these loans are derecognized. But in terms of the overall recovery, the outlook of HAPS and what that means, this is to be seen as we see the details. Overall, the outfits are producing cash reserves. We've -- the overall recoveries that come out of these loans are a percentage. I would say a small percentage of the expected recoveries. We'll see that -- what that means for this phase for the future. But overall, I think, for the bank's balance sheet, no effect. Operator: Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Megalou for any closing comments. Christos Megalou: Thank you all for participating in our full year 2025 results conference call. We now want to welcome you to our Piraeus Capital Markets Day, which will be held in London on Thursday, the 5th of March, where we will be presenting our strategic plan from 2026 to 2030. As already communicated, before the strategic presentation, we will hold an analyst-only session to discuss any questions and any technical aspects of the new business plan. We look forward to seeing you all next week in London. Thank you. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.
Operator: Good morning, ladies and gentlemen, and welcome to the Sterling Infrastructure Fourth Quarter and Full Year Webcast and Conference Call. [Operator Instructions]. As a reminder, this call is being recorded on Thursday, February 26, 2026. I would now like to turn the call over to Noelle Dilts, Vice President, Investor Relations and Corporate Strategy. Please go ahead. Noelle Dilts: Good morning to everyone joining us, and welcome to Sterling Infrastructure's Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. I'm pleased to be here today to discuss our results with Joseph Cutillo, Sterling's Chief Executive Officer; and Nick Grindstaff, Sterling's Chief Financial Officer. Joe will open the call with an overview of the company and its performance in the quarter. Nick will then discuss our financial results and 2026 guidance, after which Joe will provide some additional commentary on our markets and outlook. We will then open the call up for questions. As a reminder, there are accompanying slides on the Investor Relations section of our website. These slides include details on our full year 2026 financial guidance. Before turning the call over to Joe, I'll read the safe harbor statement. The discussion today may include forward-looking statements. Actual results could differ materially from the statements made today. Please refer to Sterling's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these projections and assumptions. The company assumes no obligations to update forward-looking statements as a result of new information, future events or otherwise. Please also note that management may reference EBITDA, adjusted EBITDA, adjusted net income or adjusted earnings per share on this call, which are all financial measures not recognized under U.S. GAAP. As required by SEC rules and regulations, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our earnings release issued yesterday afternoon. Our discussion of all results today, including revenue and backlog, refer to figures that adjust prior period results to conform to the current accounting of our RHB JV, unless otherwise noted. I'll now turn the call over to our CEO, Joe Cutillo. Joseph Cutillo: Thanks, Noelle. Good morning, everyone, and thank you for joining Sterling's Fourth Quarter and Full Year 2025 Earnings Call. I'd like to start by thanking our team for delivering another outstanding year in 2025. We achieved strong revenue growth of over 32% and adjusted diluted EPS growth of over 53%. This is the fifth consecutive year we have achieved adjusted EPS growth of over 35%. Full year gross margins reached 23% and adjusted EBITDA margins exceeded 20% for the first time in our history. The strength of our margins reflect our continued focus on pursuing opportunities that offer the most attractive returns. Additionally, our operating cash generation remained strong at $440 million. We are pleased to discuss these results with you today, but even more excited about the opportunities ahead of us. The Sterling Way, which is our commitment to take care of our people, our environment, our investors and our communities, while we work to build America's infrastructure remains our guiding principle as we execute our strategy and grow the company. Moving to the fourth quarter results. Revenue grew 69%, fueled by 123% growth in E-Infrastructure Solutions and 24% growth in our Transportation Solutions. Organic growth in the quarter was 36%. We grew adjusted earnings per share by 78% to $3.08 and adjusted EBITDA by 70% to $142 million. Additionally, operating cash flow generation in the quarter was again very strong at $186 million. Our backlog position and strong visibility drive our confidence in the future. Signed backlog at the end of the quarter totaled $3 billion, a 78% increase from year-end 2024. On a same-store basis, backlog increased approximately 50%. When you layer in our unsigned awards of $301 million, and pipeline of future phase opportunities, which now exceeds $1 billion, we have visibility into a pool of work approaching $4.5 billion for Sterling. Now I'd like to discuss our segment results for the full year and fourth quarter in more detail. In E-Infrastructure, full year revenue grew 59% including 40% organic growth and adjusted operating income grew 67%. Adjusted operating margins reached nearly 25% and an increase of more than 120 basis points. This was driven by our shift towards large mission-critical projects where our superior project management and ability to finish jobs on or ahead of schedule is extremely valuable to our customers. In the fourth quarter, revenue grew 123%, including 67% organic growth. The data center market, again, was the primary growth driver in the quarter. Additionally, our geographic expansion efforts are really paying off. Our Rocky Mountain site development operation, which is solely focused on mission-critical work, grew more than 150% from the prior year period. Adjusted E-Infrastructure operating income grew 91%. Operating margin for the legacy E-Infrastructure site development business were flat with prior year levels. Margins continue to benefit from our focus on large mission-critical projects and strong execution. The CEC acquisition is performing very well. In the quarter, CEC revenue increased 21% from its prior year fourth quarter, and margins were in line with our expectations. The Texas market, in particular, is very strong, and we continue to see tremendous opportunities ahead for both electrical and site development. Our multiyear visibility and the E-Infrastructure business remains excellent. The aggregate of our E-Infrastructure signed backlog, unsigned electrical awards and future phased site development opportunities totaled more than $3 billion. Mission-critical work, including data centers, large manufacturing projects and semiconductor represented 84% of E-Infrastructure signed backlog at the end of the year. Future phase work is predominantly related to mission-critical projects. Moving to Transportation Solutions. For the full year, revenue grew 17% and adjusted operating profit grew 66%, driven by strong market demand and the benefit of mix towards higher margin services. Fourth quarter revenue grew 24% and adjusted operating profit grew over 100%. We ended the quarter with Transportation Solutions backlog at $1.1 billion, and 81% year-over-year increase, driven by strong award activity and the conversion of unsigned backlog to sign backlog. Shifting to Building Solutions, full year revenue declined 6%, and adjusted operating profit declined 23%. In the fourth quarter, segment revenue declined 9% and adjusted operating margins were 10%. Overall demand for homes has been impacted as potential buyers struggle with affordability challenges. Even with the headwinds in Building Solutions, the strength of Sterling's diversified portfolio and strategy to focus on growth in high-margin end markets enabled us to deliver another fantastic year. With that, I'd like to turn it over to Nick to give you more details on some of our financial metrics and the 2026 guidance. Nick? Nicholas Grindstaff: Thanks, Joe, and good morning. I'll begin with our consolidated backlog metrics. Our year-end backlog totaled $3 billion, a 78% increase from year-end 2024 or 49%, excluding CEC. Combined backlog of $3.3 billion increased 81% from prior year-end or 42%, excluding CEC. Fourth quarter 2025 book-to-burn ratios were 1.64x for backlog and 0.81x for combined backlog. Moving to our cash flow metrics. Cash flow from operating activities for 2025 was a strong $440 million. We expect continued strength in operating cash flow in 2026 in both the legacy and recently acquired businesses. Cash flow used in investing activities for 2025 included $77 million of CapEx and $482 million for acquisitions, including CEC. For 2026, we are forecasting CapEx in the range of $100 million to $110 million, with the increase driven by investments to support growth and productivity. Cash flow from financing activities was $162 million outflow, primarily driven by share repurchases of $74 million at an average price of $168.72 per share. In the quarter, we deployed $26 million into share repurchases at an average price of $310.09 per share. Remaining availability under the existing repurchase authorization is $374 million. We will remain opportunistic in our approach to share repurchases. We are in great shape from a balance sheet perspective. We ended the quarter with $391 million of cash and debt of $291 million for a cash net of debt balance of $100 million. Additionally, our $150 million revolving credit facility remained undrawn during the period. Given our strong liquidity, we are in an excellent position to continue to take advantage of both organic and inorganic growth opportunities in the years ahead. Now I'd like to discuss our guidance. Our current backlog, visibility and strong market tailwinds position us well for another great year ahead. We are initiating the following guidance ranges for 2026. Revenue of $3.05 billion to $3.2 billion; diluted EPS of $11.65 to $12.25. Adjusted diluted EPS of $13.45 to $14.05, EBITDA of $587 million to $620 million. Adjusted EBITDA of $626 million to $659 million. The midpoints of these ranges reflect strong year-over-year growth of 25% or higher for each of these metrics. Now I will turn the call back to Joe. Joseph Cutillo: Thanks, Nick. As we look to the future, we remain very bullish on the multiyear opportunity in each of our markets. Our strong backlog, future phase opportunities and conversations with our core customers on the size and number of future projects contribute to our confidence. In E-Infrastructure, site development, we anticipate that the current strength in data center demand will continue for the foreseeable future. We have discussed for some time that we're in conversations with our customers regarding how we can best support their strong multiyear capital deployment programs. As part of this, we are getting pulled more rapidly into new geographies, including Texas and the Pacific Northwest. Additionally, our projects are getting larger and are spanning longer time periods. In the semiconductor and manufacturing markets, there remains a very big pool of mega projects on the horizon for the later part of the decade. This would include planned semiconductor fabrication facilities. We believe that some of these projects are close to shore and will be awarded in 2026. In E-Commerce distribution, award strengthened significantly in 2025 as large customers restarted their investment programs following the post-COVID build-out and correction. We believe that, that momentum will continue into 2026 as these programs accelerate. Together, these dynamics across our end markets support strong growth opportunities over a multiyear period. We have very good momentum in our Electrical business for 2026. Customer demand is very strong, particularly in the Texas data center market. We have a high degree of confidence in our ability to leverage the combination of our site development and electrical services to drive growth and margin expansion across the platform. For 2026, we expect to deliver E-Infrastructure revenue growth of 40% or higher. This includes 20% growth or higher in the legacy business. Adjusted operating profit margins for the E-infrastructure are expected to be in the 23% to 24% range. In Transportation Solutions, we're in the final year of the current federal funding cycle, which concludes in September of 2026. We have built over 2 years of backlog and continue to see good levels of bid activity. For 2026, we anticipate continued growth in our core Rocky Mountain market. The downsizing of our low bid heavy highway business in Texas is progressing according to plan, resulting in some moderation of Transportation Solutions top line and backlog which should continue to drive margin improvement as we move through the year. We expect Transportation Solutions revenue growth in the low to mid-single digits in 2026 and continued margin expansion. In Building Solutions, we believe the business is well positioned for growth over a multiyear period. Our key geographies of Dallas Fort Worth, Houston and Phoenix are all expected to see population growth, driving new home demand. Additionally, there is an opportunity for share gain coming out of a down cycle. In the near term, we believe the current soft market conditions will continue. We anticipate that Building Solutions revenue will decline in the high single to low double digits in 2026 and that adjusted operating margins will remain in the low double digits. As a reminder, from a seasonality perspective, our fourth quarter and first quarter tend to be slower than our second and third quarter, with the first quarter typically our lowest of the year. On the acquisition front, we are continuing to look for acquisitions that are the right strategic fit to enhance our service offering and geographic footprint. We are seeing more high-quality acquisition targets in the market today than we did a year ago. Moving to our full year 2026 guidance. The midpoint of our guidance range would represent 25% revenue growth, 26% adjusted EPS growth and 28% adjusted EBITDA growth. With that, I'd like to turn it over for questions. Operator: [Operator Instructions] And your first question comes from Brian Brophy from Stifel. Brian Brophy: I guess I just wanted to ask about transportation awards and backlog. It seems like it was a lot stronger than folks were expecting. Anything notable to call out there? Were there any large awards worth highlighting? Joseph Cutillo: Yes. Thanks, Brian. Nothing in particular. There wasn't one big giant project or anything. I think what people tend to get confused with is even though we're coming to the end of a funding cycle, only about 50% to 60% of the total funding has been spent. So we will continue to see good bid activity through that September time frame as projects are continuing to be let, which will obviously be built for a time period after that. So we feel very good of where we're positioned, and we like the bid activity. Nothing major, just kind of good singles, doubles and maybe a little triple now and then as we go forward. But I also want to just remind you and everybody that at the end of the funding cycle, the world doesn't stop. This isn't a toggle switch. Generally, what happens if they don't have the next funding bill in place is they will do an extension of the existing funding bill. They have generally historically adjusted that for inflation. And as a result, bids will continue to come up. Brian Brophy: Yes, that's helpful. And then I guess just as a follow-up, you touched on this a bit in your opening comments, but hoping you could expand a little bit more. But just an update on some of the progress entering in Texas on the site prep side? And how is progress going kind of marrying that with some of the joint awards at CEC? Joseph Cutillo: Yes. We're really excited about the Texas market, one from the CEC side on what we're seeing for data center expansion, electrical. But two, we're getting pulled very rapidly on the site development side. And I think in the first half of this year, we're going to be able to talk about some very nice awards that take place in Texas. And we have been, I will tell you what I believe, ahead of schedule and more optimistic about the strength of putting these 2 together and the responses that we're receiving from customers. So we're very pleased on the thesis is coming true. And I think we'll see some very good activity in the first half of this year that will make everybody happy. Operator: And your next question comes from Brent Thielman from Davidson. Brent Thielman: Great quarter, guys. Joe, maybe just to tack on to Brian's question, to get out a little bit more about how the pipeline has evolved at CEC since you've acquired it? Are the award opportunities getting a lot bigger? And maybe if you could comment on kind of what you're doing or seeing already that might support a higher threshold for margins for that business going forward? Joseph Cutillo: Yes. We are -- the jobs are getting a lot bigger. These data centers in Texas, we were joking at our recent leadership meeting our team said, remember when we were so excited, we got the first 100-acre data center. And this is just a few years ago. And we said, yes, we thought it was the biggest project and all that kind of stuff. And they said, yes, we just started one in Texas and the parking lot is 100 acres, right, kind of put it in perspective. These things keep getting larger and larger, are having more and more -- these aren't data centers anymore, they're data campuses. I think people get confused about that, and we'll have multiple buildings on them. CEC has got great traction and combined, the site development CEC are getting great traction. We see margin improvements in a couple of areas. Obviously, as CEC moves more of their mix shift towards data center, that margin is historically better than the smaller kind of industrial commercial jobs. But also as we're combining the exterior electric with the site development. We have already seen significant margin improvements with the small dry utility business we bought in Georgia last year. And the exact same thing will happen with CEC over a period of time. So we're in the early phases of getting into those projects. That's where I say, I think we'll see some great progress in the first half of this year, and we'll start seeing some of that impact as we get to the second half of this year. Brent Thielman: Okay. All right. And then maybe just on the legacy site development margins, as you mentioned, sort of flat here, obviously, at great levels. Maybe, Joe, you could just comment on why we shouldn't think they peaked at this point? Joseph Cutillo: Sorry, Brent, I misheard you. You're asking about site margin -- site development margins in the quarter. We don't see them going negative. That's for sure, especially as we're seeing larger and larger jobs come out. We're also seeing some opportunities in the Northeast for some larger jobs that will help their margins improve significantly. One of the things we'll begin talking about more and more -- as we said in the script, our Rocky Mountain site development business grew 150% year-over-year. We're really excited about that. But one of the things we have that hurts our margins out in that area is we tend to have a little bit smaller and different equipment suite than we use on the East Coast. So we're going to be investing in some capital and doing some different capital planning that we think we can drive their margins up a fair amount as well, just by duplicating exactly what we do in the Southeast and the East Coast. And then strategically, we'll continue to look at more vertical integration. There's some leverage and productivity we can get out of vertical integration. As we move to a new geography, that's not where we start. We kind of get our feet wet, get into the site development, execute that gives us time to evaluate some of those players around the vertical integration, pick the best ones. And you'll see over the next 12 to 18 months, us tucking in some of those around the U.S. I do want to add one more comment, though, on your CEC question on how rapid they're growing and everything else. I would tell you if I had another 1,000 electricians in Texas, and I have a much bigger number. I think we could put them to work in 30 days or less. But when we bought CEC -- they had a small modular build facility. We just are in the progress -- the process of signing a lease that triple the size of that. That will also help their margins so we can start prebuilding more in a factory condition and ship those to the field. Operator: And your next question comes from Manish Somaiya from Cantor. Manish Somaiya: Congrats on the quarter. A couple of questions for me. Maybe beginning with Joe, you talked about $1 billion of high probability future phase work. Can you give us a sense if that's tied to existing customers or programs? Or is it completely new? And how should we think about the expected conversion window? Joseph Cutillo: Well, first, that $1 billion-plus is tied to projects we're actively working on today. So that's real work. That's what it's going to take in a minimum to finish out those projects. If you remember, as they continue to design, they release that work in a package. We did that next phase of work and then we execute it. So it's very solid. We can't technically call it backlog, but internally for capacity planning and everything else, it's a backlog for us. It's tied to existing customers, but we're always getting a new customer here and there. So we're not just fixated on 1 or 2. But the lion's share of that are with the big name hyperscalers that everybody knows that have all announced their budgets, plans and future forecasts, which are all up significantly. I will tell you, as we look ahead in the next 3 to 5 years, and work with them on their planning. We don't see anything slowing down. If anything, we continue to see it accelerate. Manish Somaiya: And then a question for Nick. As you guys scale up the [ E-Infrastructure ] business, how should we think about investments in working capital and free cash flow conversion? Nicholas Grindstaff: Yes. So we expect to continue to have strong free cash flow conversion. I mean, conservatively, we're seeing free cash flow version in the -- to EBITDA in the 80% range or so and that's a conservative number. And we expect that to continue as we move further into the E-Infrastructure space throughout the year. Manish Somaiya: Okay. And then back to Joe. As we think about capital allocation, Joe, you mentioned obviously, you have an active share buyback program, $400 million initiated back in November of last year. You talked about M&A. You're talking about good assets coming on the market, which is interesting because I haven't heard that in a while. Obviously, multiples are high. But maybe if you can just give us your sense of your priorities. Is that a fourth leg that we should be thinking about to the Sterling business? So how do you sort of think about allocation -- capital allocation, M&A, fourth leg and why this whole abundance of good acquisitions because we've heard that on a couple of calls, and it's been a little bit surprising. But if you can please help us understand that. Joseph Cutillo: Yes, our focus won't be necessarily on a fourth leg. It's really around when we step back and we look at data centers, semiconductors, pharmas coming some other manufacturing that we see along with longer-term projects. Right now, for the next 5 to 7 years, the best returns for us are going to be how do we grow, expand good services and geographic footprint within the infrastructure. Now that's not to say we won't -- if the right fourth leg came along, we wouldn't aggressively go after it. But right now, the opportunities that are ahead of us and what our core customers are asking us for in asking locations that go to services to provide for the next 3 to 5 years, really has us focused on continuing to look for that geographic expansion of site development and then also incremental electrical footprint and services and skills, and we will be looking at mechanical along the way as well as kind of a natural progression. So that's where we're focusing. Why do I think there's more quality businesses on the market. I think 2 things, multiples are certainly up some on the businesses. But two, I think a lot of these owners see this tremendous opportunity ahead of them, and they're not able to capitally fund the growth and they feel like they're going to miss the opportunity. And frankly, if they don't team up with somebody big, they're going to be on the outside looking into this and they're going to ultimately lose that work. So they've been around this world a long time, and this is something that none of us have seen in our career from a standpoint of the -- it's not billions. I think it will get the trillions of dollars of infrastructure spend that's coming in front of us that whether it's our yellow iron or our electrical skills or some of our other things that write into. Operator: And your next question comes from Alex Rygiel from Texas Capital. Alexander Rygiel: When you talk about manufacturing and high-tech and fab plants, can you just sort of help us to maybe understand how big that market opportunity could be sort of in the coming years? Joseph Cutillo: Well, when you -- let's start -- we can start with the semiconductor stuff. And I'm a believer that we are -- we're at the early innings of semiconductor. I don't think we're going to see a major phase of semiconductor come on until 2030 or so just with the length of time of the announced capital spend that it takes to get a project ready to break ground. But in the meantime, there are a few projects that are going to be hitting here in the near future. Put it in perspective, a data center job for us is kind of a 3-year average, I would say. A semiconductor plant that are coming out will be closer to 7- to 10-year projects instead of hundreds of millions of dollars, the total scope of those projects could approach $1 billion. So that's pretty sizable for us. The pharma plants have announced multiple facilities around the country. Again, don't get confused when they announce it from the time they announce to the time anything happens, it's going to be 3 to 5 years. It's just the cycle by the time you get the land, you permit it, you get utilities run. They have to purchase equipment. Usually, that's specialty equipment and it's not a quick turnaround. So there's anywhere from 2 to 5 years of lead times depending on the parts and components of the industry. So we see all of that coming. And in parallel, I would tell you, our data center customers over that same time horizon are not slowing down. They're talking about bigger builds, more builds and working with us to try to commit capacity and capabilities. But also when you see our geographic expansion taking place over the next 12 to 18 months, it's not necessarily because there's something there today. It's because we know something is coming in the future, and we're working with our customers to be prepared for that. And the Texas market is on fire to say the least. It is unbelievable what is happening in Texas. And we're attacking that from the East, and we're attacking from the West. And then we've got our CEC business right in the middle of Dallas. We feel very, very good about what Texas will add to our company over the next 3 to 5 years. Operator: And your next question comes from Louie DiPalma from William Blair. Louie Dipalma: Joe, you previously on past calls, you've discussed Sterling's entry into West Texas. Are you able to further expand into Texas to cover some other key markets? I know you said that you're attacking it from the East and attacking it from the West. Have you already won jobs on the East side of Texas and in other markets across the state? Joseph Cutillo: Yes. When we -- let me talk about the attacking from the East, attacking from the West and then the market, okay, just to make sure I don't create more confusion. So West Texas is growing very rapidly. And I would tell you, we're actively working and winning jobs in West Texas that we'll be able to announce in the first quarter. What we consider East is kind of Dallas, Houston, that corridor, not East Texas is the piny forest. There's not a lot going on there yet. Maybe there will be. But when I say we're attacking it from the East and attacking it from the West, we're using our plateau business to come and start hitting what we call East Texas. So that Dallas market, there's stuff going on up in Oklahoma in the near future that's coming out. And then believe it or not, what most people don't realize is it's almost the same distance from Houston to West Texas as it is from Salt Lake City to West Texas. That's how big the state is. We're attacking the West using our Rocky Mountain resources and assets. And we'll be looking for strategic acquisitions obviously, within Texas or closer proximity to continue to add assets and resources and capability and capacity. Does that help? Louie Dipalma: Yes. That was great, Joe. And so should investors view 2026 as a year for -- in which you're focused in terms of your geographic expansion, you're focused mostly on Texas? Or are there other data center and mission-critical geographies outside of the Southeast and outside of Texas that you can potentially expand into for 2026? Joseph Cutillo: Yes. I think in 2026, the lion's share of the data center growth will come in those areas. But there's some good activity taking place now in the Northeast. It's early. We're excited about some projects up there. We will -- the 2 other markets that are out there in one, I think, in 2026, you'll see us start moving more assets and resources to the Pacific Northwest. And again, there are several projects that will probably be released in '27 up there that could be very exciting for us. . The market we haven't figured out how to get into yet is kind of the Ohio, Indiana market. That's always a potential for us. I won't tell you we're on the 10-yard line of getting in there or anything else but that's another fairly sizable market. But when I step back and I just look at the Southeast, a few of the projects up in the Northeast and Texas, and you got the lion's share of the new stuff coming out, at least with our core customers and the size of those projects really fit our profile versus when you get into mid-Atlantic there's a lot of number of data centers, but they're small and just don't necessarily fit our profile. Louie Dipalma: And one final one related to this discussion for your entry into new markets. Is it reasonable to assume that the profitability in terms of the operating margins will be lower than like the profitability for your core E-Infrastructure mission-critical business such that as investors and the sell-side as we're modeling should there be any negative impact from expanding into Texas and expanding into the Northwest? Or how should we consider that? Joseph Cutillo: Yes. I think depending on if we move equipment suite as an example from the Southeast to Texas, we're going to see the exact same margins. We've seen a little lower margins, the same pricing, same kind of process, a little bit lower margins in our Rocky Mountain, not because of the market just because we're ramping up that equipment profile. Remember, we kind of converted highway assets plus some large assets to get them underway as we continue to build that out, those margins will grow. Where we would see -- where I think we will see when we look at acquisitions, as an example, most acquisitions, margins are a little bit lower than ours, right? But we believe that after we get those acquisitions in our footprint, introduce our processes, our procedures, our technology and do those sort of things, we can continue to grow those margins up to where we are. And yes, just the other thing to keep in mind, Louie is our margins -- I'm sorry, our projects remember, the multiphase is anywhere 3, 5 7. They always start out at a lower margin and those margins improved based on productivity and what we're able to do staging earlier phases to help productivity on the future basis. Operator: Your next question comes from Adam Thalhimer from Thomson Davidson (sic) [Davis]. Adam Thalhimer: Nice quarter. Joe, can you talk more about the CEC modular expansion? Curious what that will take you to on a square footage basis? And what exactly are you doing modularly versus in the field? Joseph Cutillo: Yes. So our simple take on that is we're not the only ones doing modular, but anything we can take out of the field in prefab to move into the field reduces the number of electricians we need on that site, right? But it also improves productivity and cost. So the new facility is over 300,000 square feet. I will tell you that we're looking at does it or does it make sense to have multiple facilities throughout the U.S. that can make these components. So we're doing everything from the exterior piping and conduit around the duct banks to the actual cabinets that go into these centers. And we're looking at how do we continue to expand that capability and growth. It's pretty exciting because it really -- when you run the numbers, it's significant on what it frees up for capacity and how it positively impacts your margins. Adam Thalhimer: Future of construction. Joseph Cutillo: What's that? . Adam Thalhimer: I guess the future of construction. Joseph Cutillo: Yes, I think we will see, regardless of us or our space or other spaces, you're going to continue to see modular activities grow, is the labor pool just gets tighter and tighter. It's the most logical thing to do. Adam Thalhimer: And then just lastly, I wanted to see where your head was at on the residential bid. And does it make sense to do an acquisition there when multiples might be more depressed? Or does it just make sense to let that play out? Joseph Cutillo: Yes. And we don't -- I'd like to tell you there is light on the horizon. I think it's going to be tough, certainly first half of 2026. Things are just -- there's nothing positive that's happening to spark or drive the residential business to turn around and I'll also warn everybody that once it does turn around, there's 3 or 4 months of inventory on the ground that these builders are going to sell before we start seeing new builds start, right? I think that's just a fact. But you're not far off. I will tell you, if the right acquisition came along in residential and multiples are down. And by the way, their earnings are down we feel optimistic long term because the last time when we went back and looked at Tealstone coming out of the last downturn, they picked up significant market share on the back half of this, and we think we'll pick up market share coming out of this, especially in the Houston and Arizona markets. So if we found the right acquisitions, we would shy away from them, but we get them at a huge discount. And we look really smart 18 months from now. Operator: And your last question comes from Julio Romero from Sidoti & Company. Julio Romero: I wanted to stay on the topic of these projects getting bigger. As you said, Joe, they're not even data centers anymore. They're data center campuses. As these mission-critical projects get bigger, more complex, is the mix of above-ground work versus underground infrastructure changing at all? And if so, is that mix shift margin accretive? Joseph Cutillo: Yes. We -- I wouldn't say we've seen any significant shift on above ground versus below ground. I think what we will see kind of the next generation of these projects are going to have self-power generation on them. That will create more development opportunities on these because if you have a power plant, you got all the underground, whether it's water utilities, you got the electrical coming in, all that stuff. So we think that the size and scope of these projects, not only in physical size will get bigger, but the amount of stuff that we will touch will continue to grow. Those projects really won't start getting until '27 or '28. We may see one this year, but that's the lion's share. But it also opens up opportunities to look at other goods and services that we can add to those projects. Julio Romero: Got it. And does that change at all if the mix within mission-critical begins -- does skew over time to semiconductor and advanced manufacturing? Joseph Cutillo: Yes. No, there's not -- there's not a tremendous difference. Obviously, you got duct banks in the data centers, but there's all -- what people don't realize is any of these facilities, literally has thousands of miles of underground pipe and wire and everything else. It's an underground city. So for us, we're not concerned if the mix shifts more towards semiconductors and away from data centers or more towards manufacturing. We've historically seen -- we've got more data on the site development side, obviously, but we've seen comparable margins. That's the beauty of the model we have. And now with electrical and as we continue to expand the footprint of electrical and capabilities, our stuff is fungible. We really -- we -- big projects, obviously, are much better for us, but we don't really care if it's a data center or a chip plant or a large automotive facility or a battery plan. Julio Romero: Very helpful. And I wanted to ask how Sterling is positioned amongst other specialty contractors with regards to AI-driven tools as these tools kind of become more adopted across the industry. Joe, how are you thinking about staying ahead of competitors? I'm sure some of those competitors would say they're probably using AI to narrow the gap of reliability or maybe scale versus Sterling. How do you see Sterling position in that context? And could you be using these tools to maybe widen your differentiation versus some of these peers? Joseph Cutillo: Yes. Well, I certainly would not be able to see. I don't know where our peers are. I can tell you where what we are. I think people would be shocked what we've done and what we're doing in and around AI and how we're tying that to not only the estimating and bid process, but the project execution. We did 3 pilots last year. To say the teams were excited when we first -- when we first started them, everybody said, how is AI applicable to what we do. Remember, we're running drones. We're running all kinds of analytics of our equipment. We're now tying all that into project management and making things happen faster. We picked up just in, remember, our capacity constraint in site development is project managers. And we picked up somewhere between 15% to 20% of incremental capacity on project managers just from our first AI project. We've got 6 AI projects underway right now. So I will tell you, it's when people talk about, well, is AI real and all that, I would say if guys like us are running very quickly at this and our guys, every time they touch it, they come up with 4 or 5 other things that we can incorporate which will improve the efficiency, the effectiveness, the quality, and just as importantly, there's some really cool things we're doing on the safety side with this that will help make our employees even safer than they are today. Operator: And there are no further questions at this time. Mr. Joe Cutillo, you may continue. Joseph Cutillo: Thank you. I want to thank everybody for joining today's call. If you have any follow-up questions, please contact Noelle Dilts. Her contact information is in the press release. I appreciate it, I appreciate what our team did. Another great quarter, and have a great day. Operator: Ladies and gentlemen, this does conclude your conference call for today. We thank you very much for your participation. You may now disconnect. Have a great day.
Operator: Thank you for standing by. My name is Bailey, and I will be your conference operator today. At this time, I would like to welcome everyone to the Burford Capital Fiscal Year 2025 and Fourth Quarter 2025 Financial Results Conference Call and Audio Webcast. [Operator Instructions] I would now like to turn the call over to Josh Wood, Head of Investor Relations. You may begin. Josh Wood: Thank you, Bailey. Good morning, everyone, and thank you for joining us to discuss Burford's fourth quarter and full year 2025 results. On the call, we have our Chief Executive Officer, Chris Bogart; our Chief Investment Officer, Jon Molot; and our Chief Financial Officer, Jordan Licht. Earlier this morning, we posted a detailed earnings presentation, which we'll refer to during the call, as well as our annual shareholder letter, and we also filed our Form 10-K for 2025. If you haven't already, you can find all of these materials on our Investor Relations website. Before we get started, just a reminder that today's call may contain forward-looking statements that involve certain risks, uncertainties, and other factors that could cause actual results to differ materially from those discussed during the call. For information regarding these risk factors, please refer to our earnings materials relating to this call posted on our website and our filings with the SEC. We will also be referring to certain non-GAAP financial measures during the call. Please refer to today's earnings materials and our filings with the SEC for additional information, including reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures. With that, I'll turn the call over to Chris. Christopher Bogart: Thanks, Josh, and thanks, everybody, for joining us today. I'm going to take you through some key messages, and I'm going to start on Slide 9 of the presentation deck. And what I'd really emphasize about what happened in 2025 is that we had a standout year when it came to new business, which is the thing that we really have the largest amount of control over in this business. So we saw -- as you can see here, we saw very significant numbers, taking us well on our way to meeting our longer-term goals of doubling the base portfolio by 2030. If we were to keep on, on this clip, we would significantly exceed that goal. So that was just a terrific performance across the board: new definitive commitments, deployments, we added a net of $700 million of additional modeled realizations to the overall portfolio, taking that number to north of $5 billion now. So we're very pleased with how the year went from that perspective. As all of you will be aware, our realization activity, while still robust, was not as strong as it was last year. And that, of course, was a disappointment to us. That's, of course, also something that we have less control over, and it's something that as longtime observers of this business know, it's something that can ebb and flow with the level of activity going on in the courts. And we've been describing to you over the past several years, a world where we have a significant volume of older cases in the portfolio, which are simply not moving through the court system, the court process, at quite the pace that we would wish. We think that's probably still a hangover from the portfolio. In our shareholder letter this year, which I'd encourage you all to go and have a look at, we refer to -- we try to refer to it as 4 lanes of highway traffic trying to merge into 2. But the good news there is that the portfolio still had a significant level of activity, a good level of cash generation, and a good level of realizations. And most importantly, we're not seeing degradation in portfolio quality. The loss rates are stable. Our returns are stable. So the issue from our perspective is much more an issue of throughput and timing than it is anything else. And we'll take you through some more detail about that. However, that obviously impacted our income, which was down somewhat, and we'll take you through -- and Jordan will take you through in more detail just exactly how all of the numbers looked. So I'm going to turn to Slide 10. And this really highlights what happened on the new business front. It really was just a terrific year. You saw there a 39% increase in new definitive commitments. And that was coming off a year that was already relatively robust. That enabled us to significantly increase our portfolio base. That's the metric that we're using to look at our goal of doubling the business by 2030. And you see there, we've not only had a multiyear significant level of growth, but just this past year, we were able to put up a 20% growth rate in that number. So that's really very exciting for us, and it positions the business very, very well for the years ahead. Slide 11 takes you through realizations. And what you see in realization activity here is on the right side of this slide, you see that the world is continuing to go pretty well. We hit a new high of rolling 3-year average realizations. And so we're pleased with the level of portfolio activity that we're seeing. And you can also see there that we saw a number of portfolio events, basically right on top of the number of portfolio events that we saw in the prior year. But what really did happen there that caused the numbers not to be as robust as they were in the prior year is we simply didn't have as many big chunky wins. And you see that if you look at the graphic on the very left side of the slide, you see there that even though we had a roughly similar number of large-ish outcomes, we didn't have those big, big outcomes that drove the 2024 performance. And so when that doesn't happen, when we're missing one of those big, big -- or 1 or 2 of those big, big outcomes, you just inevitably see a decline in the overall realizations that the portfolio is driving. So if you look across here, we saw lots of activity, 69 assets add realization activity in fiscal '25 compared to 71 in fiscal '24. So that's an insignificant difference. But the dollars per realization event were just lower. That doesn't reflect portfolio quality. It just reflects the fact that we didn't have one of those big cases that we've been waiting for to show up and conclude and generate cash. It doesn't affect our enthusiasm for the portfolio, as Jon is going to go through in some detail. And again, our loss rates have been stable, our returns have been stable, but it just reflects the fact that we didn't have the kind of throughput that we had. The good news is all that stuff is still out there waiting. So it's not as though these things are gone. It's simply that when you look at our larger cases, we didn't -- we simply didn't have as much activity in them as one might have wished on a single year basis. And if you turn to Slide 12, you really see this illustrated in a more graphical format. Interestingly, we even saw -- if you look at gains year-by-year, we even saw an overall higher level of gains in fiscal '25 against fiscal '24. That's those 2 green bars on the left, $508 million to $579 million. But at the same time as we saw those higher gains, we also saw a somewhat higher level of losses. Now what does that mean? That doesn't mean case losses. Case losses, when you look at realized losses, those numbers are still pretty low, and you see those numbers there over on the right-hand side. Those numbers are low, our loss rates are acceptably low, and consistent with historical practice. So what's going on there? What's going on there is we have some unrealized losses. And I'm going to take you through a few examples of what creates an unrealized loss in our book because the reality is that while bad case events can also cause unrealized losses, so too can a number of things that don't speak to the underlying merits of the cases, things like changes in duration, changes in cost, and other extrinsic factors. And so it's important when you look at these numbers and you go into the accounting numbers as opposed to the cash numbers, it's important to bear in mind that there's quite a lot going on in the accounting, which is why we've always said we like to look at the cash performance of the business instead of the accounting performance. But since we have these accounting numbers, we're going to unpack them a little bit for you so that you can really see some of the dynamics in play. And before I delve into this, I'd also just encourage everybody to go and read our Shareholder Letter. I'm not going to go through every theme orally that we hit in that letter, but we talk there in some detail about topics like AI and our technology initiatives. We talk about our continuing market expansion, including our launches in Madrid and in Seoul, South Korea. And we talk at the end about Burford's overall role in the justice system and how we've become a very significant part of that overall process. But turning now to some actual examples so that you can see what's actually going on there. Slide 13 talks about a collection of cases that we call the proteins cases. And these are U.S. antitrust cases involving allegations of price-fixing in the proteins foods cases. So the reality of these cases is that they're going pretty well. You can see 4 different proteins there, all seeing positive outcomes and forward momentum. And in fact, we just had a significant win in one of these cases in the Seventh Circuit Court of Appeals, where one of the major proteins players had been trying very hard to cling to a settlement that was, in their mind, done before we became actively involved in the cases. And the Seventh Circuit rejected that effort, basically signaling that the cases were worth more than the settlement had been done for at the time. But the reality of these cases is that this is complex litigation, and it's taking somewhat longer than one would have wished. And the way that our accounting works, and Jordan is happy to answer questions about this later or offline. The way that our accounting works is that if duration extends past our original expectations, that's going to cause a reduction in our fair value. And so we, in fact, took a $22 million charge to earnings from nothing more than the fact that these cases are taking longer and costing more, even though they are proceeding well, and we're quite optimistic about their ultimate outcomes. So there's that sort of interim action in the numbers there that the complexity of our accounting now is causing that. And it's important that when you look at these numbers, you separate the things that are these interim time-based, non-merits-based dynamics from what's actually going on in the underlying merits portfolio. Turning the page to Slide 14, which is still a little bit in the proteins world. This is another example of where our earnings can be depressed from things that don't actually go to the underlying merits of the cases. One of the counterparties that we financed here, a very large wholesale distributor, has gone into Chapter 11, into the operating bankruptcy regime of the U.S. And that means that we and other creditors of this business are jockeying for a position. Now it's obviously not great when your counterparties go into bankruptcy. But here, the underlying claims that are our collateral are proceeding well and actually are continuing to be settled and to pay cash. So even though we, for accounting purposes, have taken a significant charge to earnings because of the pendency of this Chapter 11 proceeding, the reality is that the underlying collateral is continuing to perform, and we have reason for optimism that we're going to not suffer the kind of loss that you would normally associate with being -- particularly a potentially unsecured creditor in bankruptcy. So again, this is divorced from the underlying merits of the case, and it's an issue where -- it's a place where we actually expect cash to flow to the business over time. And a third example on Slide 15 is a mining arbitration where we see the benefits of having cross-collateralized portfolios. And here, we have 2 cases in play. One of those cases has had an initial unfavorable outcome. But the other case has yet to be decided, and the first one is on appeal. And either one of those cases, if successful, is sufficient to make up our whole entitlement out of these cases. However, the accounting reality is -- and the market reality, we're not trying to walk away from the market reality, is that when you have 2 chances to win as opposed to 1 chance to win, the asset is probably somewhat more valuable. And so having had a negative impact on 1 of the 2 chances to win, that causes appropriately a decline in the accounting carrying value of that asset. But it doesn't mean that we don't necessarily have every opportunity to both win the second case and get our full entitlement out of that 2-case cross-collateralized portfolio. So the purpose in going through all of these is really just to show you that there's a fair bit going on under the covers. It's not as simple as us just saying, okay, well, here's the case, we either win it or we lose it, and money comes in. That's how we look at the business on a cash basis. And on that basis, the business is doing very nicely. I would have liked some more cash in 2025 than we generated. But overall, when you think about the strength of the new business that we were able to create, the progress that we're making towards achieving our long-term goals, and the fact that both our returns and our loss rates have remained steady, that all tells me that this cash basis is a waiting game. And what's important to me is not to have the accounting get too much in the way of understanding that basic cash principle about the business. So we're happy to take your questions on that. But before I turn you over to Jordan, I don't think any Burford presentation these days would be complete without talking briefly about YPF. So turning to Slide 16. This is a slide that you've all seen before. I'm not going to go through it in any great detail. I think just about every Burford shareholder is pretty familiar by now with YPF and what's going on with it. And that slide is really there just to remind you of the basics. We did, however, add a new slide, Slide 17. And on that slide, we tried to pull together the threads of everything that is going on right now because there is quite a lot happening. So the main -- the big issue is that we're awaiting a decision from the Second Circuit Court of Appeals on what we call the main appeal, so Argentina's appeal of the underlying $16-plus billion judgment that has been growing now with prejudgment interest and post-judgment interest added to it. That appeal was argued on the 29th of October, and we're waiting for a decision. That decision, if past practice is any guide, you would expect that decision during the course of this year, although there's no requirement for that to occur. And like everything else about litigation, nothing about that is certain, and some litigation risk always remains in these cases. But in addition to playing a waiting game for that decision, there's actually a fair bit going on elsewhere. The District Court, the trial court that gave us the judgment in the first place, has been actively enforcing the judgment, has had many hearings over the past months, has been actively engaged in the process, has now scheduled a further evidentiary hearing on a whole variety of topics, including contempts and sanctions and Argentina's gold reserves for late April. So that's upcoming. There are some other collateral appeals floating around in the system. One of them is around the order that Argentina turn over its YPF shares as partial satisfaction of the judgment. There are some discovery issues around the senior Argentine administration officials' use of off-channel communications like WhatsApp and Gmail, and there are some procedural appeals. Those are not entirely calendared yet. The way the process works is that the Second Circuit tries to respect lawyers' schedules, and so it sends out a preliminary idea of when it might like to try to hear the appeals, and it's done that, suggesting the week of April 13th. It's had feedback from the lawyers about their availability, and now we're all waiting to see if they will pick a date during that week, or if they will push it off to some other sitting of the court. And then we have enforcement proceedings going on in 8 different foreign jurisdictions in which there's probably -- in which there's likely, in fact, to be a reasonable amount of activity in 2026. So with that, let me bring my introduction to a close and hand you off to Jordan, just with the overarching theme, though, that while I know people will have been looking for some more cash and some more realizations, and, of course, we would have liked that, too, the simple reality is that there's not much we can do about the pace of the conveyor belt, but we're very happy with the state of the business and the amount of new business we were able to generate, which sets us up very nicely for the future. And we're happy with what's left in the portfolio, as you'll hear from Jon. Jordan Licht: Thanks, Chris. Good morning, everyone. I'm going to take us through our 2 segments. That's the total segment. That's what we also call Burford-only. It's what the shareholders own. I'm going to jump straight into the Principal Finance and focus on the portfolio to start. If you look at the snapshot of where we are on Page 22, and you can see the portfolio is now $3.9 billion. YPF represents slightly below $1.7 billion. And then we've got deployed cost of slightly over $1.7 billion, and then unrealized fair value above that of around just under $500 million, which is around 27%, 28% of the total deployed cost. It sets us up, obviously, very well when you think about what the potential future of gains can be relative to how much cost in portfolio is out there. If you think about that number relative to our historic 82%, 83% ROIC, or we'll talk more about our modeled realizations in a couple of slides. The portfolio is also very diverse. You've seen these 2 charts before, and it remains -- the diversity still remains very similar in terms of geography with just over 50% in North America and continuing to expand, as Chris highlighted briefly, and we talk more about in the shareholder letter, as we explore other opportunities internationally. Asset type is also extremely diverse with a number of different, what I'll call, 20% type slices. In terms of moving forward, though, on how this segment, this is our Principal Finance segment, how did the revenue capital provision income play forward. First and foremost, I think Chris spent a lot of time with that on Slide 12, historically looking at breaking down the capital provision income between its gains and losses and then also the net realized gains and losses for the period. I want to remind folks that when you look at the movement out of fair value, you also have what's the transfer from unrealized to realized, which makes sense. When you have an asset that's been positively marked and has some fair value associated with it, when that asset concludes positively, you're going to see a reduction in fair value, and that flips itself into net realized gains, which makes sense. That happens every period. I think the other place to focus is on how the balance sheet actually moved itself forward. Hopefully, by now, folks are familiar with the charts on the bottom of Page 23, but I'll walk through it quickly, which is we have our asset value as of the end of the year, continued deployments as we invest in the portfolio, where it's healthy this year at $457 million. You have a duration impact. This is just the passage of time. As we move forward with respect to getting closer to the ultimate resolution or expected resolution of these assets, you have a change in discount rate. Works the same as bond math. Rates go up, the asset value comes down, and vice versa. In this period, for the year for our portfolio, the discount rate had an approximate 80-ish basis points of improvement, and that's then represented in that change in discount rate, which brought value of $75 million. And then you have the milestones and other impacts. And that is going to coincide neatly with the case studies that Chris just described, both positive and negative, as well as some of the other changes in models when we change a duration or there's an expected value change that plays itself in, and you can see the impact on fair value there. And then, of course, obviously, the realizations when the assets themselves turn into a settlement -- excuse me, turn into a receivable or cash, I'm finally finishing up with a little bit of foreign exchange impact. So overall, that's the march forward from just under $3.6 billion to $3.9 billion. Before I hand to Jon, a little bit more on the new business. If you look at -- I mentioned the deployments on Page 24, and you can see the relationship of '25 to fiscal year '24 on the bottom of the page, but also the new business. We wrote a lot of new business in the year, 39% growth of our definitive commitments. This is where we not just have entered into a relationship with a counterparty, whether it's a law firm or a corporate client, but have identified the cases and have committed to spend over the duration of those cases our capital. You can see the growth in 2025. I want to highlight also, though, that the absolute growth didn't come from necessarily reaching for more risk. The absolute values of the -- we've started to show you the bands in which we look at analyzing our cases from the onset. And you can see that the absolute amount of higher-level risk was pretty much the same as 2024, and most of the growth came then obviously from other areas in the portfolio, the lower risk kind of middle tier and lower tier buckets. So we're happy -- extremely happy with the type of new business that we put on as we continue to grow the portfolio. And with that, I'm going to turn to Jon. Jonathan Molot: Thanks very much, Jordan, and thanks to you all for joining. So as Jordan and Chris have both said, it was a very strong year when it came to new business and increasing the potential of the portfolio. And I'm going to turn to that, but I do want to first turn to Slide 25 and have a word about the past. When you look at Slide 25, as Chris and Jordan both said, the realizations were not in '25 what they were in '24, a record year. But as Chris also pointed out, it wasn't a lack of activity in the portfolio that we had 69 assets contributing to realizations in '25 compared to 71 in '24, pretty comparable, just not as many big, chunky realizations. There was one matter that was a large deployment that was fairly short term. And in fact, when you look at the ROIC numbers, part of the reason that the ROIC number for '25 was lower is that matter happened quickly enough that we had a 40% IRR, but only a 25% ROIC. I'd do that deal any day when it comes along, but it's going to affect the numbers. Nonetheless, you see that our track record across the 2 years produced an ROIC of 81%, which is almost spot on with the historical track record over a longer period. And that's not really surprising. If you turn to Slide 26, you've seen this slide before. Basically, the nature of our business is there's 3 possible outcomes for any time we put money out. We can have an adjudication gain. We go to trial and win. We can have an adjudication loss, so we can have a settlement. The vast majority of our matters settle. They settle at an attractive IRRs and ROICs, but below our historical performance. The reason for that is the wins far outweigh the losses, and that makes for a very attractive model. As long as we're rigorous in our underwriting and rigorous in our case management, and we continue to invest in this asset class the way we have, I'm pretty bullish on putting new matters into the portfolio given that track record. And if you turn to Slide 27, you've seen this, too, instead of dividing it into 3 buckets, we actually break it down over every investment we've made, show graphically. Those red bars, those are triples, better than a triple, meaning you've got an ROIC in excess of 200%. That stuff far exceeds the black bars where we have losses, many of which are only partial losses, and then you have the singles and doubles in between. And that's really what -- that asymmetric profile, that asymmetric distribution of returns is what makes it attractive and why I continue to want to just put money out in good deals as we've been doing. If you turn to Slide 28, you've seen this, too. This is broken down by vintage, and you see the IRRs and ROICs may bounce around, but they blend to something quite attractive. And basically, the last 2 slides are a comparison of the black bars to the red bars by vintage, right? The black bars is the money that went out, the red bars is the money that's come in. It's a bigger number. That's great. That's what's produced the IRRs and the ROICs. But day to day, what I'm focused on is the gray bars, right? That's the investments we've put out and continue to put out in a big way in '25, and I'll turn to that in a moment, that we have put out that are there to deliver value in the future. And if the gray bars, if we just perform the way we've been performing, it's an attractive -- and we actually think there's great potential there. And if you turn to Slide 29, this kind of tells the story about what a successful year it was in terms of new commitments. The modeled realizations for the entire portfolio as of December 31, 2024, the prior year, was $4.5 billion. As of December 31, 2025, it's $5.2 billion, a big increase. Why was that increase? Where does it come from? Well, we have $1.4 billion worth of modeled realizations from those new 2025 definitive commitments. That's what's been, I think, the success story of this year. You reduce it by $0.5 billion for the actual realizations. Of course, when the cash comes in, you have to -- the modeled realizations for the future go down. And not surprisingly, the net change in the portfolio, given what Chris described in terms of as an accounting matter, as a GAAP matter, that there are things that reduced fair value on an unrealized basis, it's not surprising that the models would also show some reduction. But overall, we more than made up for that with the modeled realizations from the new definitive commitments. And I'm really pleased with what we've done this year in setting ourselves up for the future, and I'm really happy with the portfolio. And with that, I'll turn it back over to Jordan. Jordan Licht: Thank you, Jon. I'm going to switch to Page 30 and talk a little bit about how do you tie that $5.2 billion then and think about that with respect to the Principal Finance balance sheet. So this is obviously on the ex-YPF basis. And the first piece to understand is, well, what if all the cases won, went all the way to the very end and adjudicated win. That estimate, that's what we sometimes call the win node, and it's where all of our initial work starts from. When you start to think about a settlement, when you think about the different probabilities of what could happen in the case, it derives from, well, what could happen if you actually won, even though the overall majority of our cases, 70%, 80% of them ultimately settle, well, that win node would be $12.8 billion. What we then do is we establish a model in which there's a litigation risk premium and, of course, duration, the discounting back. And when you bring that down, that window then settles at $2.2 billion, and that can be broken into the fair value that I -- that's the fair value that we have on the balance sheet, and that's broken into the net unrealized gains as well as the deployed cost. That's the $2.2 billion and the $1.7 billion. Where will that book of business ultimately land? The modeled realizations, as Jon just described, is $5.2 billion. And then ultimately, we believe in a modeled ROIC of 110%. That, of course, is based on a future estimate of deployed cost. The cases still have some money to spend to get to their ultimate conclusion. And so that's estimated on this slide to be at $2.5 billion. So that gives you a little bit of framework to think about how our modeled realizations tie to the balance sheet. Since many, if not all, of these cases exist in some form on our balance sheet and then in partnership with our asset management business, as they produce for the balance sheet Principal Finance, there's an expectation that they would produce asset management cash receipts. And so the correlation there would be approximately $350 million of future asset management cash receipts based off of the models. That's a perfect segue to take us into the Asset Management segment, which is the next page. I'm jumping straight to Page 33, in which, first, let's start on the right-hand side, cash. Cash has stayed fairly steady. We had $32 million in '23, dipped a bit in '24, back to $32 million in '25 in terms of the cash receipts from asset management. Income of $36 million overall for the year. That's going to track somewhat consistently with some of the movements in fair value. Again, since the assets very much mimic what's also in our Principal Finance segment, movements in those assets are also going to play out in the recognition of potential future income from our profit-sharing agreement with respect to the BOF-C fund. The other piece, though, to highlight in 2025 is the Advantage Fund and starting to receive income off of the Advantage Fund, as that portfolio continues to perform. Overall, you'll see the fund sizes in the bottom right-hand corner. If you look at the funds, they're predominantly in runoff, and you can see that in the black bar. BOF-C continues the sovereign wealth fund partnership, continues to be a partner to us. While the investment period ended, they're continuing to invest in assets as they move forward, amendments to those assets. We enjoy a good relationship and are exploring opportunities to continue that. Page 34 gives you some more detail on some of the other funds, but I'm going to jump into the next segment and focus on liquidity and cash first. Our liquidity and cash started off the year around $500 million. We discussed the robust year of having $530 million, obviously down from 2024, but the fourth quarter saw us back up over the $100 million level with respect to the fourth quarter in terms of bringing in cash. In the bridge, you also see the debt that was raised in the summer, and I'm going to talk about debt twice here. First, this was to pay off the existing bonds that were coming -- that came due in the summer of 2025. And that's why you see a net number that results. We did a $500 million issuance at 7.5%, but that number obviously is much smaller in terms of proceeds to the balance sheet to be deployed because we used the proceeds of that to pay off a bond. And then you can see that the cash that come in clearly covers our operating expenses. Finished the year at $621 million of cash. Before I do more on the capital structure, though, we'll hit expenses real briefly on Page 37. Overall, operating expenses slightly up from 2024, and there's a couple of reasons I'll go into for that. First, total comp and benefits, almost flat, a little bit higher than last year. You see some growth in salaries and benefits as you see some inflation, but as well as our expansion and building of the team. The movement between annual incentive comp and long-term incentive comp, that's what we effectively call carry or our carry program. There's some movement in between those 2 items in relation to 2024. It's important, I always remind folks that while we accrue carry, we only pay it out when we actually receive the cash. On the share-based and deferral compensation, a reminder, I did talk about this a couple of quarters ago. There is an element of this, which is the mechanical vesting or acceleration of the expense for some tenure-based awards, but the vesting of that, the actual delivery of those shares will still occur on the original schedule. In G&A, we were up from last year, mainly due to professional fees. Some of that -- proud to announce the completion of our transition to KPMG fully from E&Y, also the resolution of our material weakness with publishing of this 10-K, and there's some other policy-related items in the professional fees associated with the second and third quarter. But to take a step back, looking at all these numbers -- oh, I should mention one more thing. On case-related expenses, really hard to compare to 2024. We have a revenue item in 2024, where we won an insurance settlement on our behalf, and so you're going to see a negative number there in 2024. But the trend of that has come down, so $1.1 million in the fourth quarter, and it's come down significantly from the $15 million that we had seen in case-related expenditures in 2023. But when I look at all these numbers, I look at the right-hand side and try and understand, okay, how do these operating expenses look across the portfolio. The 2.3% looks very favorable in terms of our expected expense ratio across the portfolio and fits favorably into the unit economics that we discussed at length during Investor Day and how this expense base allows us to continue to achieve the ROE long-term target of around 20%. One more slide, and then I promise we'll get to Q&A, is just to hit the debt outstanding. I mentioned what happened this past summer. Well, we did the same thing, rinse and repeat, in the first quarter of this year. And so we've pro forma'd the schedule for that. We took out the remaining bonds in the U.K. We thank our investors who participated in those over the years, but the 144A market has become much more practical and available to us in terms of raising capital and efficiently for our balance sheet. We went out and raised and then went and paid off the last of those bonds. That also changed the slide. You no longer see 2 different types of covenant levels because we no longer have the incurrence covenants associated with those U.K. bonds, and now we just have the maintenance covenants that you can see we have plenty of room within those levels. The final comment that I would make is when I look at the pro forma life of our debt relative to the assets. The weighted average life associated with assets that concludes is under 3 years, and the active capital on our balance sheet is just over 3 years. But the weighted average life of our debt is 5.7 years. And so that shows that we have a laddered maturity schedule that matches neatly with the duration of these assets. And with that, I'll give it to Chris for some closing remarks. Christopher Bogart: Thanks very much, Jordan. And I'm on Slide 39. And just to really come and sum up here. We have what we believe is a pretty fantastic core operating business, and Jon took you in some detail through why we believe that. We have showed a consistent ability to grow that business over time, growing to what is now a very substantial player in the legal industry. We deliver cash regularly. We don't always deliver as much cash as we would like as 2025 is a testament to. But that doesn't mean the cash isn't coming. It just means the cash is somewhat delayed. I've used for years with many of you the analogy of the litigation process being a conveyor belt, and that's exactly what it is. It moves forward. It moves forward inexorably, but it twists and turns and moves at unpredictable speeds. We can't control that. But in some ways, we're the beneficiary of it because that is what gives us our completely uncorrelated returns. So we have growth, we have cash, and we continue to believe that this business can produce a long-term ROE in the 20% range, as we've said before. On top of that, we've got the YPF assets, which we think continue to have very substantial value and option value for the business. And we are continuing to grow this business, not only in the core business, but as we continue to drive throughout the legal ecosystem. So we thank you all for your support. And with that, we're happy to take your questions. Operator: [Operator Instructions] Your first question will come from the line of Mark DeVries with Deutsche Bank. Mark DeVries: I appreciate this is not going to be an easy question. But just looking across all the different matters in your portfolio, where they are in the development, can you give us any sense for how the outlook for realizations looks for '26 relative to 2025? Christopher Bogart: So the short answer to that is no for 2 reasons. One is because as a matter of policy, we don't guide that way, just because we simply feel like we're unable to do so. And number two is I used my 2 lanes -- my 4 lanes merging into 2. And the problem with that is that we don't really know the pace of that merging. Like if you go back to Slide 28 that Jon talked about, that shows you a lot of stuff that is, to use a technical expression, jammed up in the 2015 and onward. And there's stuff there that just shouldn't have taken that long. Some stuff in litigation always takes a long time. And I always get people asking me when they look all the way back on this chart, they say, oh, look, you've still got active deployments from 2010. Are you kidding yourself? Are those ever going to come in? And the answer is yes to that. We write them off if they're not going to come in. But we actually got some money out of that 2010 band this year, and we're expecting to get more in this coming year. So no is the answer to that question. But the simple reality is those cases are going to move over time, and we just don't know exactly what that timing looks like. It would be lovely if we could take this on a quarter-by-quarter basis and give you a pretty reliable projection, but we just can't do that. And candidly, if we were able to do that, I think that more people would do this business and the returns would be lower. So the fact that it is unpredictable, while I realize is painful to many of our current shareholders, it, in fact, is also, to some extent, a moat in this business. Mark DeVries: Okay. Any other color you can give us on what's driving this dynamic of the 4 lanes merging into 2? Are we still dealing with like backlogs related to court closures from the pandemic or other factors worth calling out? Christopher Bogart: No, I think you really are. Like when you think about what happened there, you had court closures at a time when there was no lessening of new disputes. And so you had the same volume of new disputes. If you look at the filing levels, it's not like they collapsed during the pandemic. So you had a world where all of a sudden, courts don't have any physical ability to expand their operations. We already have vastly fewer judges in courtrooms than we do for the number of cases filed. And the reason for that is that the system expects, just as our portfolio shows, most cases to resolve by settlement. But to get a case settled needs a catalyst, right? If you're a defendant, you're not going to settle a case if you can simply sit on your hands and not spend the money to settle the case. So you need to feel some pressure. And the pressure usually is the case is moving through the process along the conveyor belt that I described, and it's putting you at trial risk. So if the court congestion is kicking the trial risk out, then you're realistically also kicking that settlement pressure out. And look, I think it's getting better, but it's a lot for the system to absorb, given that every single year, something like 12 million new civil cases are filed in the United States. Mark DeVries: And then I've got an accounting question for Jordan. Jordan, do you have room to get more conservative on the duration assumptions on your fair values such that you reduce the risk that you have these negative fair value marks when you don't have a negative development, it's just a change in assumption related to the duration of the case? Jordan Licht: Absolutely. And I think that we're constantly looking at our models with respect to how to initially establish duration and then how it impacts over time. So yes, to the extent that we see it up at the onset, that we should set a duration that's longer, we can, and we have that ability. Operator: Your next question comes from the line of Timothy D'Agostino with B. Riley Securities. Timothy D'Agostino: Regarding new definitive commitments, I was wondering if you could provide some color on the composition of those, understanding that '25 lacked some of those big case resolutions. So as we look at new commitments for this year, I guess, any color on the composition of maybe how many dollar amount or case-wise are these larger scale cases, that would be great. Christopher Bogart: Sure. So for those of you who are newer to Burford, let me just remind you that in addition to all of the gory detail that we provide in the slides and the 10-K and so on, we also publish on our website a detailed table that goes literally case by case and shows you for each new -- well, for each existing and for each new case that we put on, it shows you a bunch of demographic information. So it shows you the type of case, so whether it's, for example, a business court or an intellectual property case, or an antitrust case. It shows you the industry that's involved. It shows you the geography where the case is pending. And it shows you the size of the commitment that we've made, the amount of deployment against that case. And once we start to get returns, it shows you, again, on a granular line-by-line basis, what the returns are. And so you can pull that up, and you'll see that there are several dozen new cases in 2025 or new investments in 2025, and you can scan through them. And you'll see that there's quite a lot of diversification there. We typically span a significant number of industries, a number of case types, a number of geographies, and 2025 was no exception to that. And they also range in size from quite large commitments to significant matters to relatively small things that are single cases that nevertheless, we think have the potential to generate attractive future returns. So that's a useful source if you want to get granular about what's going on in the portfolio. Operator: And your next question comes from the line of Mike Piccolo with Wedbush. Michael Piccolo: I had 2 questions related to the negative fair value marks on the cases highlighted in the presentation. The first one with the Sysco proteins case, what are the potential gains for that? Christopher Bogart: The potential gains for the case? So we don't release individual case modeling expectation data for pretty obvious reasons that, that would feed very nicely into the litigation strategy of the other side. And so that's something that is not only something that we don't release, but something that we would regard as being protected by legal privilege. That being said, I think if you look at those cases, and there's quite a lot of public information about them, I think it's clear that the size of the claims in those cases is substantial. Michael Piccolo: And the next one with the bankruptcy case. Is the collateral separate from other claims? Christopher Bogart: Well, so we are entitled -- when we provide litigation finance to people, we're entitled to proceeds only from the claims that the companies have. So we're not a general creditor like a bank is where we're looking for repayment from any assets. Our claims are just for proceeds from the underlying claim outcomes. So the way that's going to play out is that as those claims pay, there's lots of things going on in that case. That was a multibillion-dollar distributor. So it's not as though the only cash flow sources are these litigation claims. So within the Chapter 11, there's cash flowing to the senior secured creditors and so on from the business operations and the business continues to function. But we have our handout for proceeds from the litigation claims, which continue to be strong and which continue to be resolving positively. So there is positive cash flow coming from those claims as well. Michael Piccolo: And just one last question. I don't think you guys give guidance, but in terms of your long-term ROE target, the 20%, when you say long-term, how do you bridge that gap from where ROE is sitting currently? Christopher Bogart: Well, we do it on a... Michael Piccolo: Like it's a matter of... Christopher Bogart: Yes, we do it on a rolling basis. We've certainly had individual years where our ROE was well in excess of that long-term target, and we've had years where it's well below it. Right now, as you can see from one of the early slides in the deck, our multiyear ROE is in the teens, but it's not up to our 20% target. And that's something that we believe, and Jordan walked through the unit economics associated with ROE at our Investor Day. And that's something that we still believe is achievable over a longer period of time. Josh Wood: Okay. Bailey, I think we'll jump in here with a quick question that's coming in through the webcast. We have a question. You mentioned before reluctance to buy back shares due to unpredictability of capital needs. If so, there seems to be no real justification to pay a dividend, especially with current share price. Why not turn off dividends and opportunistically buy shares instead? Christopher Bogart: Yes. So this is certainly a theme that we have heard from a number of investors, and it's something that we considered very carefully over the last few months, including with the Board and with our outside advisers. And the dynamic for us -- because I certainly understand the logic behind the concept. The logic for us works as follows. The dividend, we've had a constant level dividend for some years that pays at $0.125 a year. So in round numbers, think about that as being $25 million. So it's a pretty small amount. If we were to stop paying that dividend altogether, then we would turn a number of particularly U.K. income-focused fund investors into forced sellers whose funds would no longer permit them by their mandate to continue to hold Burford stock if we didn't pay a dividend at all. And so we basically weighed the value of a $25 million buyback, which we think is pretty low against the negative impact of turning a portion of our shareholder base, including some very long-term and loyal shareholders, turning those shareholders into forced sellers. And when we considered that balance, we ultimately came down on the side that the $25 million buyback wasn't enough to move the needle compared to the negative impact of the -- of losing those investors in the U.K. And so that's where we are. It's not -- it's a relatively fine call, I would say. And if the dividend had been dramatically larger, I'm not sure that I would have -- or the Board would have come out in the same place. But that -- just to give you transparency into our thinking, that was the underlying thinking behind it. And we also debated, well, do you do something in the middle. Do you reduce the dividend and take some of that and put it towards a buyback. And then we got into the point of saying, well, gee, at some point, we're dealing with such small numbers that it really doesn't make any difference for anybody. So that was the underlying logic. Josh Wood: Okay. One more from the webcast here. How is your underwriting changing to reflect potentially longer court times on new pieces of litigation? Christopher Bogart: Jon, do you want to... Jonathan Molot: Yes. I'm happy to take that. So we're constantly updating our modeling and underwriting based on our historical experience. And one way I think we've talked in the past that we've dealt with duration is to structure deals so the terms reward us for delay so that our returns go up as matters go longer. There's no doubt that we have paid increasing attention to that dynamic to make sure that we're compensated for the longer run times. So that's a little bit why also when Chris says that not having the realizations this year, of course, we would rather, but we feel good about the portfolio. The same case that resolved at this moment, if it resolves in another year, it may well be it resolves with a higher return for us, given the way we've structured things. And that's on top of the dynamic that often the question of whether it resolves now or later is going to be a product of the recovery level, both that whether it's going to be a settlement or an adjudication win, but also that settlements later on can end up being higher settlements. So we definitely take into account duration as part of our underwriting, and I like to think that we try to get better at it as time goes on and learn from experience. Josh Wood: All right. We'll do one more question from the webcast around debt structure. Why not obtain a revolver, delayed draw facility or securitization facility instead of discrete notes to better match capital unpredictability and allow for share buybacks? Jordan Licht: Sure. Yes. I was about to say Chris talked a lot about our thought process around share buybacks. How it relates to the capital structure, we're constantly looking for other ideas and exploring ways in which we can build the balance sheet. I do -- the asset itself is not as similar to some consumer or even commercial assets in terms of its predictability to fit neatly into a securitization facility or to obtain that in size relative to the balance sheet that we currently maintain. I understand the logic of that, and we're constantly in conversations. We haven't found the perfect match. And ultimately, the unsecured and covenant levels that we have, the cost of the capital, and the amount that we can put on has favored -- has become very favorable relative to some of the things that we've seen, especially the scale that we would need with respect to that. Christopher Bogart: Well, we have made it to the top of the hour. And with thanks, as usual, to all of you for your interest in Burford, quite frankly, for your patience as we wait for some cash and as we wait for some YPF news. We're looking forward to an exciting 2026, and we'll continue to keep you updated about where things are going. So thank you all very much. Operator: Thank you. This concludes today's conference call. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Q4 2025 Ducommun 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, Suman Mookerji, Senior Vice President and Chief Financial Officer. Please go ahead. Suman Mookerji: Thank you, and welcome to Ducommun's 2025 Fourth Quarter Conference Call. With me today is Steve Oswald, Chairman, President and Chief Executive Officer. I'm going to discuss certain limitations to any forward-looking statements regarding future events, projections or performance that we may make during the prepared remarks or the Q&A session that follows. Certain statements today that are not historical facts, including any statements as to future market and regulatory conditions, results of operations and financial projections, including those under our Vision 2027 game plan for investors, are forward-looking statements under the Private Securities Litigation Reform Act of 1995, and are, therefore, prospective. These forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from the future results expressed or implied by such forward-looking statements. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations will prove to have been correct. In addition, estimates of future operating results are based on the company's current business, which is subject to change. Particular risks facing Ducommun include, amongst others, the cyclicality of our end-use markets; the level of U.S. government defense spending; our customers may experience changes in production rates or delays in the launch and certification of new products; timing of orders from our customers, which are subject to cancellation, modification or rescheduling; our ability to obtain additional financing and service existing debt to fund capital expenditures and meet our working capital needs; legal and regulatory risks, including pending litigation matters generally and as well as any potential losses arising from third-party subrogation claims related to the Guaymas Performance Center fire that may become material; the cost of expansion, consolidation and acquisitions, competition, economic and geopolitical developments, including supply chain issues; our ability to successfully implement restructuring, realignment and cost reduction initiatives that could adversely impact our ability to achieve our strategic objectives; international trade restrictions and our ability to obtain necessary U.S. government approvals for proposed sales to certain foreign customers; the impact of tariffs and elevated interest rates, risks associated with a prolonged partial or total U.S. government shutdown; the ability to attract and retain key personnel and avoid labor disruptions; the ability to adequately protect and enforce intellectual property rights, pandemics, disasters, natural or otherwise and risk of cybersecurity attacks. Please refer to our annual report on Form 10-K, quarterly reports on Form 10-Q and other reports filed from time to time with the SEC as well as the press release issued today for a detailed discussion of the risks. Our forward-looking statements are subject to those risks. Statements made during this call are only as of the time made, and we do not intend to update any statements made in this presentation, except if and as required by regulatory authorities. This call also includes non-GAAP financial measures. Please refer to our filings with the SEC for a reconciliation of the GAAP to non-GAAP measures referenced on this call. We have filed our 2025 annual report on Form 10-K with the SEC. I would now like to turn the call over to Steve Oswald for a review of the operating results. Steve? Stephen Oswald: Okay. Thank you, Suman, and thanks, everyone, for joining us today for our fourth quarter conference call. Today, and as usual, I will give an update of the current situation of the company, after which Suman will review our financials in detail. Let me start off again on this quarterly call with Ducommun's Vision 2027 game plan for investors as we exit our third year of execution and enter the fourth on very strong footing. Strategy and vision were developed coming out of the COVID pandemic over the summer and fall of 2022, unanimously approved by the Ducommun Board in November 2022 and then presented the following month in New York to investors, where we got excellent feedback. Since that time, Ducommun's management has been executing the strategy by increasing the revenue percentage of engineered products and aftermarket content, which is at 23% this year, up from 15% in 2022, consolidating our rooftop footprint in contract manufacturing, continuing our focused acquisition program, executing the offloading strategy with defense primes in high-growth segments, driving value-added pricing and expanding content on key commercial aerospace platforms. All of us here as well as my fellow Board members continue to have a high level of conviction in the Vision 2027 strategy and financial goals and believe the market catalyst ahead presents a unique value creation opportunity for shareholders. The Q4 2025 results show again that strategy and initiatives are working with gross and adjusted EBITDA margins at record levels and tracking to meet and exceed our Vision 2027 goals with much more opportunities to come for DCO. I'm also very pleased to announce that our next investor conference will be held this September in New York on the 17th, and we will present the next 5-year vision for DCO as a follow-up to our current Vision 2027. I strongly believe Vision 2032 will be very compelling for shareholders, and I look forward to it. We will announce further details of the event in the spring. For Q4, I'm pleased to report that revenues reached a new quarterly record of $215.8 million or 9.4% over last year, beating our prior record of $212.6 million set last quarter and making this our 19th consecutive quarter with year-over-year growth in revenue. We achieved this with our fourth consecutive quarter of double-digit growth in DCO, military and space segment. Our commercial aerospace segment, which has been challenged all year due to destocking at BA and SPR, returned to growth in the quarter. I'm also happy to report that this quarter, the company's remaining performance obligation, RPOs grew to a new record level of $1.1 billion, increasing $75 million sequentially. The growth in RPO during the quarter was in our defense businesses and primarily in missiles, as you would expect. We closed on a number of opportunities and are well positioned for continuing revenue growth, and we expect the bookings momentum to continue in 2026. One of the highlights in the quarter was orders for the MIR program for DCO's Tulsa and Huntsville, Arkansas operations that totaled more than $80 million at good margins, a major win and one of the highest in DCO's history in terms of dollars and for just one program. Our book-to-bill overall was 1.3x in Q4, a great result for DCO after a very strong book-to-bill in Q3 as well. Gross margins also grew $13.4 million to 27.7% in Q4, a significant increase from 23.5% last year in Q4. While the quarter did benefit from a nontypical favorable product mix, which helped margins by approximately 100 basis points, the trend in gross margin still has been very positive throughout 2025 and positions us well to achieve our Vision 2027 margin targets. We continue to realize benefits from our growing Engineered Products portfolio with aftermarket, strategic value pricing initiatives, restructuring actions and productivity improvements. We have transitioned all programs from our closed facilities and are seeing meaningful cost savings in our P&L already with an expected run rate of $11 million to $13 million savings still on target by the end of 2026. For adjusted operating income margin in Q4, the team delivered an impressive 11.4%, well above the prior year of 8.2%. This was supported by growth in adjusted operating income margins in both the Structural Systems and Electronic Systems segment during the quarter. Adjusted EBITDA continues to improve towards our Vision 2027 goal of 18% in 2027 from 13% in 2022. DCO achieved 17.5% in the quarter or $37.9 million, up $10.6 million from Q4 2024. This includes about approximately 100 basis points of benefit from mix, which I mentioned earlier, but even without that represents tremendous progress in the past 3 years and a terrific job by the DCO team. GAAP EPS was $0.48 per diluted share in Q4 2025 versus $0.45 for Q4 2024. With the adjustments, diluted EPS was $1.05 a share in Q4 2025, $0.30 above adjusted diluted EPS of $0.75 in the prior year quarter. The higher GAAP and adjusted diluted EPS during the quarter was driven by improved operating income. Full year 2025 revenue grew 5% to a record $825 million. Our military and space business grew 14% in 2025, driven by strong performance across missiles, military rotorcraft, fixed wing platform and radar. Our commercial aerospace business declined as communicated early in 2025 by 7%, with destocking at BA and SPR headwind all year. Our noncore industrial businesses grew 3% year-over-year, providing nice volume and margin without interrupting our military and commercial aerospace focus. Full year 2025 adjusted EBITDA margins expanded 160 basis points to 16.4%, another year of record-breaking performance as we make steady progress towards our Vision 2027 target of 18% EBITDA margins. In 2025, we closed on over $915 million in bookings, a full year book-to-bill of 1.1, with continued positive news coming out of commercial aerospace and increased Department of War budgets, including the ramp-up in missile production, we have strong confidence in the momentum from both our primary end markets. We also announced in early Q4 that we entered into a binding settlement term sheet to resolve the Guaymas, Mexico fire litigation against us. The term sheet provided for, among other things, the final dismissal of the Guaymas fire litigation against Ducommun with prejudice and the release of claims against us in exchange for issuing a payment of $150 million, $56 million of that was funded by our insurance carriers. In addition, we also settled two ancillary subrogation claims of $1.35 million and $4 million, respectively. The Guaymas fire occurred in June of 2020. We recorded settlements to related costs of $7.6 million in Q4, and those charges are reflected in our GAAP earnings -- on our results. Except for the ancillary subrogation claim of $4 million, payment was made in November, and that is reflected in our Q4 cash flow used in operating activities. On the outlook for 2026, we expect to see continued strength in the defense business and a recovery in our commercial aerospace business during the second half once we get through destocking. We expect mid- to high single-digit revenue for the year of 2026, with growth ramping up throughout the year. Based on the current order book, we are expecting first half of 2026 to be in the low mid-single-digit range with growth ramping up in the second half of the year. In addition, tariffs have not been a material impact on results, and we expect that to continue, a good story for our investors. Now let me provide some additional color on our markets, products and programs. Beginning with our military and space sector, we saw revenues of $124 million compared to $109 million in Q4 2024. This represents a growth of 13%, was driven by strong performance in our military fixed wing and rotorcraft franchise as well as satellite-related business and continued growth in missile and radar. In addition, our facility consolidation and product line moves are now complete with Apache tail rotor blade now in production at its new location in Coxsackie, New York, the TOW missile case in production in Guaymas, Mexico and the Tomahawk in production at Joplin, Missouri. We have all heard the recent announcement from the Department of War to ramp up production capacity on key missile programs. Department of War has entered into long-term framework agreements with Raytheon, our largest customer, and Lockheed Martin to significantly increase production on key programs, including PAC-3, THAAD, AMRAAM, SM3, Tomahawk, amongst others. DCO is well positioned as an existing supplier with defense primes on all these programs and is in great shape with our capacity at our operations to fully benefit. These frameworks, agreements and DoD push to increase production should be another strong catalyst for growth in our military and space segment starting in 2027 and beyond. In 2025, DCO's missile business grew 20% compared to 2024, and we expect this trend to continue. During Q4, we booked in excess of $130 million in orders in our missile franchise with a book-to-bill exceeding 4x. We had significant wins on MIR, Tomahawk, AMRAAM, Standard Missiles and THAAD. With missile production expected to ramp up very meaningfully over the next few years, we expect this to be a big driver for growth. This is supported by demand to replenish stockpiles in the United States and also support FMS order activity. For context, Ducommun is a supplier on over a dozen key missile platforms, including AMRAAM, MIR, PAC-3, SM2, SM3, SM6, Tomahawk, Naval Strike and TOW amongst others, which is excellent news for the company and our shareholders. Within our commercial aerospace operations, fourth quarter revenue increased 1% year-over-year to $82 million as we continue to work through Boeing and Spirit destocking on the MAX. In the quarter, we had growth in both 787 and A320 as well as in-flight entertainment compared to Q4 of 2024. The outlook is promising as Boeing increases their 737 MAX build rates from 38 to 42 and then to 47 later this year and with the new production line in Everett going live this summer. Completion of the Spirit acquisition has also helped with improving operations. We expect destocking for our products on the MAX, particularly those flowing through the legacy Spirit operations to persist through the first half of 2026 and gradually ebb in the back half of the year. The steady progress by Boeing ramping up production rates will certainly help with this. Additionally, Boeing is building momentum on 787 builds and making big investments in the South Carolina facility to increase capacity and ramp up production to 10 by the end of this year, with a further rate ramp in 2027 and beyond. DCO has 150,000 per shipset content on this platform, so this will help us as well. We're also monitoring the production at Airbus as they work through their engine issues, but overall, we remain very optimistic about DCO's commercial aerospace business in 2026 with much more growth ahead in 2027 and beyond as we get past destocking and industry supply issues. Our balance of defense and commercial aerospace businesses helped drive growth for the company in 2025. We very much like the mix and balance it provides. The outlook going forward is very positive for both end markets, and that is exciting news for the company and its shareholders. With that, I'll have Suman review our financial results in detail. Suman? Suman Mookerji: Thank you, Steve. As a reminder, please see the company's 10-K and Q4 earnings release for a further description of information mentioned on today's call. As Steve discussed, our fourth quarter results reflect another record quarter of revenue with strong growth across most of our military end markets, including fixed wing aircraft, rotorcraft, missiles and radars. Gross margin and EBITDA margins both reached new record levels. And while favorable mix contributed about 100 basis points to our results, margins would have been very strong even without that benefit. We have completed our facility consolidation projects, and this will drive further synergies in 2026 as we ramp up production of the various product lines that were moved. These actions, along with our strategic pricing initiatives drove continued gross margin expansion in Q4 and keeps us on pace to achieve our Vision 2027 goal of 18% EBITDA margin. Now turning to our fourth quarter results. Revenue for the fourth quarter of 2025 was $215.8 million versus $197.3 million for the fourth quarter of 2024. The year-over-year increase of 9.4% reflects strong growth in military and space of 13%, driven by increases in fixed-wing aircraft, military rotorcraft, missiles and radars. Our commercial aerospace business returned to growth in the quarter with revenues up 1% year-over-year with growth in A320, 787 and Bell helicopters, offsetting lower sales on the 737 MAX. We posted total gross profit of $59.8 million or 27.7% of revenue for the quarter versus $46.4 million or 23.5% of revenue in the prior year period. We continue to provide adjusted gross margins as we had certain non-GAAP cost of revenue adjustment items in the prior year period relating to inventory step-up amortization from our acquisitions. On an adjusted basis, our gross margins were 27.7% in Q4 2025, up 370 basis points from 24% in Q4 2024. I also want to add that we did not see any material impact from tariffs in the fourth quarter. And as Steve mentioned, we do not anticipate any significant impact to our P&L at this time. We are a U.S. manufacturing business with U.S. employees and generate over 95% of revenue from our domestic facilities. Our revenues are also largely to domestic customers with U.S. revenues in excess of 85% in 2025. Revenues to China were 3% in 2025, mostly one customer for Airbus, and there has been no impact to those volumes or orders at this time due to the tariffs. Our supply chain is also largely domestic with less than 5% of our direct suppliers being foreign. Some of our domestic suppliers do source material from outside the United States, but even that is a very manageable spend with China being a low single-digit percentage. We expect to largely mitigate the impact of tariffs on our material spend through military duty-free exemptions, alternate sourcing of materials from domestic suppliers or by passing on the impact to our customers. Ducommun reported operating income for the fourth quarter of $14 million or 6.5% of revenue compared to operating income of $10.4 million or 5.3% of revenue in the prior year period. Adjusted operating income was $24.6 million or 11.4% of revenue this quarter compared to $16.1 million or 8.2% of revenue in the comparable period last year. The company reported net income for the fourth quarter of 2025 of $7.4 million or $0.48 per diluted share compared to $6.8 million or $0.45 per diluted share a year ago. On an adjusted basis, the company reported net income of $16.2 million or $1.05 per diluted share compared to adjusted net income of $11.4 million or $0.75 in Q4 2024. The GAAP net income and higher adjusted net income during the quarter was driven by the higher adjusted operating income after excluding litigation settlement and related costs. Now let me turn to our segment results. Our Structural Systems segment posted revenue of $96 million in the fourth quarter of 2025 versus $90 million last year. The year-over-year change reflected $5 million of higher revenue in our military and space business, driven by military rotorcraft and fixed wing aircraft platforms. Our commercial aerospace business grew 1% with growth on Airbus platforms and 787 offsetting weakness on the 737 MAX. Structural Systems operating income for the quarter was $14.6 million or 15.2% of revenue compared to $3.2 million or 3.6% of revenue for the prior year quarter. Excluding restructuring charges and other adjustments in both years, the segment operating margin was 17.8% in Q4 2025 versus 9.2% in Q4 2024. The increase in year-over-year margin was driven by savings from plant consolidation and favorable sales mix. Our Electronic Systems segment posted revenue of $120 million in the fourth quarter of 2025 versus $107 million in the prior year period. The year-over-year change reflected $9.4 million in higher revenues in military and space applications, driven by strong growth in fixed-wing aircraft, rotorcraft, missiles and radar. Our industrial business increased $3 million during Q4. Commercial aerospace in the quarter was flat to prior year with in-flight entertainment and other commercial aerospace offsetting lower revenues on the 737 MAX. Electronic Systems operating income for the fourth quarter was $22 million or 18.4% of revenue versus $19 million or 17.7% of revenue in the prior year period. Excluding restructuring charges and other adjustments in both years, the segment operating margin was 18.6% in Q4 2025 versus 17.7% in Q4 2024. The year-over-year increase was driven by higher manufacturing volume and favorable sales mix. Next, I would like to provide an update on our restructuring program. As a reminder and as discussed previously, we commenced a restructuring initiative back in 2022. These actions were taken to better position the company for stronger performance in the short and long term. This included the shutdown of our facilities in Monrovia, California and Berryville, Arkansas and the transfer of that work to our low-cost operation in Guaymas, Mexico and to other existing performance centers in the United States. I'm happy to report that we have closed out the restructuring program as of Q4 and have moved all transitioning programs into production at the receiving facilities. Production is now ongoing on rotor blades for the Apache helicopter at our Coxsackie, New York facility, 737 MAX spoilers and TOW missile cases in Guaymas, Mexico and Tomahawk components in our Joplin, Missouri facility. During Q4 2025, we recorded $0.6 million net in restructuring charges. We do not expect additional restructuring expenses in 2026 related to this program. As previously communicated, we expect to generate $11 million to $13 million in annual savings from our actions and have already seen meaningful realization of savings in 2024 and 2025. We expect the synergies to further ramp in 2026 as the receiving facilities move up the learning curve and move to full rate production. Turning to liquidity and capital resources. In Q4 2025, we used $74.7 million in cash from operating activities as we paid out the litigation settlement-related items. Excluding the $101.2 million in payments related to litigation settlement, non-GAAP adjusted cash provided by operating activities was $26.5 million during the quarter compared to $18.4 million in Q4 of last year. The improvement was due to higher adjusted operating income and lower cash taxes, partially offset by higher operating working capital. For the full year 2025, we used $33.4 million in cash flow from operating activities as we paid litigation settlement-related items of $103.2 million. Excluding these onetime litigation settlement-related payments, non-GAAP adjusted net cash provided by operating activities was $69.8 million, which is more than 2x the number from 2024 of $34.2 million. This strong improvement in operating cash flow is great news for the company. Also, in Q4, the company amended its credit agreement, which now includes a $200 million term loan and a $450 million revolver. This new $650 million facility lowers our cost of capital and gives us incremental capacity to execute on our acquisition strategy. As of the end of the fourth quarter, we had available liquidity of $390 million, comprising of the unutilized portion of our revolver and cash on hand. Interest expense in Q4 2025 was $3.5 million compared to $3.6 million in Q4 of 2024. The year-over-year improvement in interest cost was primarily due to lower interest rate costs, offset by a higher debt balance. In November 2021, we put in place an interest rate hedge that went into effect for a 7-year period starting January '24 and pegs the 1-month term SOFR at 170 basis points for $150 million of our debt. The hedge is still in place and will continue to drive significant interest cost savings in 2026 and beyond. To conclude the financial overview, I would like to say that the fourth quarter results demonstrate that our Vision 2027 strategy is working and that we are positioned well for 2026 and beyond. I'll now turn it back over to Steve for his closing remarks. Steve? Stephen Oswald: Okay. Thanks, Suman. In closing, look, 2025 was a great year and Q4 another success for DCO and its shareholders to continue to drive our Vision 2027 strategy. So I'm very pleased with that. We achieved another quarter of record revenue and gross margins and adjusted EBITDA margins were also at records of 27.7% and 17.5%, respectively. The company is also well positioned to meet and exceed our Vision 2027 target of 25% plus of engineered product revenues with full year 2025 at 23%. As everyone knows, driving this percentage as high as possible is our #1 strategic focus, and we're fully committed to realizing that as we go forward. Finally, with the continued strength in defense activity and commercial build rates heading higher, I'm also very optimistic about what lies ahead in 2026 and the next few years for our shareholders, employees and other stakeholders. Okay. So with that, let's go to questions. Thank you for listening. Operator: [Operator Instructions] Our first question comes from John Godyn from Citi. Unknown Analyst: This is Bradley Eyster on for John Godyn. So I just wanted to follow up on the commentary about the inventory destocking that you guys previously highlighted. And I also want to look at it in conjunction with the movements we saw in inventory working capital in the fourth quarter. So I know you outlined headwinds in the first half and -- and we're expecting an improvement in the back half of this year. But with the working capital in the fourth quarter being pretty favorable, how should we think about the magnitude of the headwinds you previously called out for the first half '26? Is there any change here? Are you seeing an acceleration of inventory draw higher than expected? I'm just curious how to look at this one. Suman Mookerji: I think we're -- our expectations are in line with previous comments on destocking. We expect there to be continued destocking, and there are two elements of destocking, right, destocking at our customer and destocking in our facility. Destocking in our facility does help reduce working capital tied up in the business. So we expect some of that to happen, as previously discussed in Q1 and Q2 and for the rest of the year. I think from an external destocking perspective, we see more of that happening in the first half and then ebbing as we get into the second half of 2026 as we see inventory getting burned down, mainly at Spirit -- the legacy Spirit or Boeing Wichita and also, to some extent, at Boeing Direct. Unknown Analyst: Got it. I also want to switch gears to the defense side. So with all the primes talking about increasing their investment in capacity. I was curious if you guys can talk a bit more about your potential medium-term opportunities here, like once this capacity begins to take effect, do you benefit proportionally of this capacity increase? Are there opportunities for you to grow faster than the market? Any color I could probably here would be appreciated. Stephen Oswald: Yes. Let me just jump in here. Well, first of all, I mean, this -- we really call it, at least for missiles that we call it a franchise within Ducommun because this has been one of our legacies is -- I mentioned in the script before the questions that we go across all the major missile programs. The good news is that these are all things we know how to make. These are things that are already in production. And the other thing that I mentioned is that we have a significant amount of capacity for most and where we might have a little less that we're putting CapEx into that. So that's all very positive. Now on the other side, we're not the OEM. So we have to work with the OEM and wait for the orders. But they need to get the orders from either the State Department through FMS or the Department of War. So we really see this major sort of move in 2027. We are in contact and Raytheon is having meetings and Lockheed as well. And so we couldn't be happier with all the agreements that are happening. It's just going to -- it's going to be a little bit of a lag just because these things take a little bit of time, unfortunately. Stay tuned. Operator: Our next question comes from Mike Crawford from B. Riley Securities. Michael Crawford: Maybe just to dig down into that a little bit more. I mean you've optimized your footprint, you're done with the restructuring. And could you characterize like how much room you have to grow in your new footprint without, let's say, growth CapEx? Stephen Oswald: I think we -- I mean, this would be a high-level number maybe, but it's at least we have 30% -- I mean I'm being conservative. We probably have 30% of room in our factories right now for this missile increase. So I'd say we're... Suman Mookerji: And the CapEx -- additional incremental CapEx required to expand that capacity is not significant. It is something that we can accommodate within our regular CapEx budget and can implement quickly. Defense electronics capacity increases for the products we make do not entail significant CapEx or take a lot of time to put in place. So we are actively evaluating all other capacity across each of our factories in the context of all this potential new business and making investments where needed to adjust capacity. But as Steve said, here in the near term over the next 12 months, given the at least 30% existing open capacity, there is no issue in meeting demand. Stephen Oswald: Yes. Mike, let me give you an example. We have a factory in Joplin, Missouri that that's where the Tomahawk is going to go. Joplin runs about $100 million a year in revenue. They do world-class cabling and other things and -- mostly defense, but some commercial, too. And we're putting the Tomahawk in a building that's already standing there that wasn't utilized. And so that's why we have that 30-plus percent. And we think that we could do $200 million in revenue in the next 3 or 4 years there with what we have. So that's very exciting to us for just one plant that's a big mover for DCO. Michael Crawford: Great. No, that's super helpful. And then just maybe one separate question for me. And just on -- you do call out that you're partnering with primes on hypersonics and counter-hypersonic programs. Is that more on the structural side as opposed to the electronics? Or what are you doing there? Suman Mookerji: More on the electronics side with interconnects, ruggedized interconnects that we have presence on hypersonics. Stephen Oswald: Yes, a lot of cables, Mike. Operator: Our next question comes from Ken Herbert from RBC. Kenneth Herbert: Steve and Suman, nice quarter. The exit rate on margins is pretty strong. How do we think about the puts and takes on margins in '26 and sort of what's implied in terms of margin expansion on the, call it, mid- to high single-digit top line outlook? Stephen Oswald: You want to take that? Suman Mookerji: Sure. Ken, excellent point and question. I would look at the exit rate not based off of Q4's EBITDA of 17.5%, but versus look at the blended EBITDA margin over the year and view that as an exit rate. As we noted, there was about 100 basis points of favorability driven by unusually or atypical product and business revenue mix in the quarter, which helped margins, but we are seeing ourselves exiting closer to the 16.5% on EBITDA as the baseline for 2026, with improvement opportunities, especially as we go into the back half as revenue scale as well as the production ramps up on the product lines that have been moved in 2025. Stephen Oswald: Yes. I think that's fair, Ken. I think that's probably right. I mean we had a little bit of extra benefit in Q4. Of course, we'll take it, but I think the other number is a better one to use. Kenneth Herbert: Okay. That's helpful. And increasingly, the 2027 targets look increasingly attainable. What -- maybe not today, but when do you think you'd be prepared to provide an update to those numbers, especially on the margin potential of the business? Stephen Oswald: Yes, that's a good question. Thank you for bringing that up. That will be in September. So when we announce our -- we have our investor meeting, the first part of it will be an update on the Vision 2027, and then we'll roll into the Vision 2032 and our plans for the company and investors. Kenneth Herbert: Perfect. And just one final question. Can you level set us on what missiles and munitions represent within the defense portfolio? Because it sounds like the growth opportunity in that business is clearly going to be much better than company average growth. Suman Mookerji: Absolutely, Ken. So missiles are about 1/4 of our defense business. And as you noted, the opportunity is significant for us going forward there. Stephen Oswald: Yes, Ken, that MIR order was a big deal for us. We don't see $80 million orders very often here. We love them, but we don't see them very often. So we were -- it's a long time coming, but that's a nice shot in the arm for the company. Operator: Our next question comes from Tony Bancroft from Gabelli Funds. George Bancroft: Great call, great quarter. Well done. Just you talked about a little bit before, but more in broader strokes, with this announcement of a potential $1.5 trillion budget, even if it goes over a longer period of time, it's still materially much larger than I think most people would even expect. How do you look at that as far as keeping up with the growth, assuming directionally that's where it's going? I know you said you have capacity, but I mean, quadrupling these numbers we've seen, are you able to do it? And then I guess, at some point, there is going to be a run rate and normalization? And how do you guys look at overcapacity? That might even be an issue right now for quite a while, but do you think about that? How do you look at that? And then maybe on top of that, a $1.5 trillion budget has got to be a lot of new opportunities. Would you guys be looking at adjacencies or even other areas to involve yourself in? Stephen Oswald: Yes. Thank you, Tony. Good to be with you. I think obviously, overall, it's a great opportunity for DCO. We're -- the nice thing is our relationships with defense primes are very strong. I mentioned RTX is our largest customer. So we're critical to their success, which is what we want, right? So we're -- and we're sole sourcing a lot of things. And so that's positive. If you can see, we've done a lot of good work with Northrop Grumman in the past. I've talked about that when I first came on and through the years about getting relationships with other primes other than just having this huge number of Raytheon. And we've done that and Lockheed as well and working on other things. So we think it's -- we read the headline and took our breath away a little bit, but we feel really good about it. And on the capacity side, again, we have really good footprints in the Midwest for these electronic systems. We have, again, I think, at least 30% in our back pocket. And that's just with, as Suman mentioned, regular CapEx feeding every year for the company. So nothing extraordinary you're going to hear from us, I'm sure, in the next few years. And lastly, we're continuing to work on building relationship with new warfare and building relationships with -- we already have a relationship with GA and other companies to take advantage of the CCA warfare program as well as others, hypersonics. So our defense business is strong. It's only going to get stronger. It's only going to get bigger. Operator: [Operator Instructions] Our next question comes from Sam Struhsaker from Truist Securities. Samuel Struhsaker: I guess, first and foremost, I'm a little bit curious just on the destocking on the MAX. I'm curious, is there any way you could maybe break out, I guess, kind of how much of what remains is internal versus external? Suman Mookerji: Yes. It is more external than internal. I wouldn't say that -- we haven't really broken that out publicly. But I would say that yes, it is more external versus internal on the MAX. And for context, let's also keep in mind that the large commercial platforms are about -- including both Boeing and Airbus are about 50% of our commercial aerospace revenues. So the impact of destocking as well as the recovery needs to be weighted in our commercial aerospace forecast accordingly. Stephen Oswald: Yes. And I also say this, we had 1% growth in Q4, which obviously is nice. But part of that, we had a big revenue bump up in in-flight entertainment versus Q4 2024. So that was one of the big reasons we got to the positive side in Q4. So yes, we don't break it out. We're -- the best news is that as we go forward here, we got all confidence that Kelly and Boeing are going to do their thing. And we're going to -- this is -- there's better days ahead, let's put it that way, okay, because the pull, the demand side is going to help a big time on this. Samuel Struhsaker: Got it. Absolutely. And I mean, I guess, kind of in turning to maybe the better days ahead, so to speak, are you guys saying that you're totally prepared once the destocking is out to switch production to whatever the rate increases are at Boeing and Airbus? Is it kind of move up throughout the year? Stephen Oswald: Yes, you kind of came in or come out, but I think what you asked is that are we ready for the build rate increases for both Airbus and BA? Samuel Struhsaker: Yes. Stephen Oswald: Yes, 100%. We can't wait. We're waiting for the year. Samuel Struhsaker: Awesome. And then if I could just sneak in one last one. All the production lines that just recently got moved in and out are now up and running with their new facilities. So they're not necessarily all quite at full run rate. But I was curious if you could put any kind of details around the cadence of those all getting to full run rate and if there will be any kind of margin benefit that you might associate with that once they are running at full rate. Suman Mookerji: So I think we expect that to get to full rate by the second half of this year. We had projected $11 million to $13 million in total synergies as of Q4 of 2025, I would say approximately half of that is in the P&L on a run rate basis with another $6 million to $7 million to go, and that will come into the P&L over the course of this year, getting to run rate by the end of this year. Stephen Oswald: Yes. The last one is the Tomahawk. We made 18 cables for it. And there's a lot has to happen on that missile. And that's the one we are still working on a few things. That will be second half for sure. Operator: Our next question comes from Connor Dessert from Goldman Sachs. Connor Dessert: You've got Connor Dessert on for Noah Poponak today. I appreciate the commentary that you guys had about upsizing the credit facility so that you could execute more on the acquisition strategy. I was curious if you guys could give us an update on what the M&A market is looking like from your perspective today. We've heard some other A&D suppliers comment that activity has picked up, and there are a lot more potential deals out there with more willing sellers. So I was curious if you guys are seeing a similar level of activity for the assets that are in your target range and how competitive some of the bidding processes are for those assets? Suman Mookerji: Yes, we are seeing increased activity. We are very much involved in any and all processes that involve assets with engineered products within our size range. It is competitive. There are -- and valuations are not cheap, but we'll remain disciplined. We continue to evaluate multiple opportunities. And we think that there are opportunities where we can create value at the current multiples at which these assets are trading. Stephen Oswald: Yes. We're seeing good things. More to come on that. Connor Dessert: Okay. That's helpful. And then just kind of a follow-up on that. As I look out through '26 and '27, I think Vision 2027, you guys have had a $75 million revenue contribution placeholder from M&A. It starts to look a little more possible that at least the bottom end of that range could be reached just organically from here. Is that kind of the right way to think about it given some of the pickup in momentum, especially in some of the defense areas of the business? Or in your guys' view, does that Vision 2027 still rely on that $75 million placeholder from M&A? Suman Mookerji: Yes. I would say, yes, it does getting to that -- within that range will definitely require the M&A piece, mainly driven by commercial aerospace recovery pace that we have seen versus what everyone would have naturally expected back in December of 2022 when we put that plan together. The production outlook at that point in time versus reality today is very different. Defense has been great, and we'll continue to see strong growth. We should continue to remain bullish but some of that will happen in 2027 and beyond in terms of production ramp-up on some of these missile platforms. So the longer-term outlook for the company and defense is very strong, but it's -- not all of it is going to come into 2026 and 2027. Stephen Oswald: But we're going to -- we're working on the $75 million. I mean, we purchased BLR in 2023. So that's part of the $75 million, which is helping, but we've got more work to do on the $75 million, and we're hard at it there, Connor. Operator: I am showing no further questions at this time. I would now like to hand it over to Steve Oswald for closing remarks. Stephen Oswald: Great. Thank you. And again, thanks for joining us. I very much appreciate your time this morning. Also all the excellent questions. We always appreciate the dialogue after our script -- reading our scripts. So I thought that was great. We are excited about the year. We're also looking forward, as I mentioned earlier, to our September meeting in New York, and we hope that everybody can either make it personally in-person or online. We think it will be an exciting, exciting day for not only to update on the Vision 2027 progress, which we're happy about, but also talk about our big future together. So with that, I'll leave it, and have a great and a safe day. Thank you. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. I'm Vassilios, your Chorus Call operator. Welcome, and thank you for joining the HELLENiQ ENERGY Holdings Conference Call and live webcast to present and discuss the fourth quarter and full year 2025 financial results. [Operator Instructions] The conference is being recorded. At this time, I would like to turn the conference over to HELLENiQ ENERGY Holdings management team. Gentlemen, you may now proceed. Andreas Shiamishis: Good afternoon. Thank you very much for the introduction, and welcome to the financial year '25 results presentation. We'll be going through the fourth quarter, but also through the full year numbers and key issues that we believe we need to communicate. So group financial highlights, Page 4, for a fourth year in a row, we've got very good performance. I won't go through the numbers in detail. They will be dealt with later on, but it's a clean EBITDA of EUR 1.1 billion, which effectively puts the company for a fourth year in a different league. And if I was to take a view on the future, I would probably say that this is something that is expected to continue. Now whether it's going to be 0.8, 0.9 or 1.2 or 1.3. I don't know because I don't know what the market is going to look like. But given that a lot of the new investments is actually more predictable as cash flows, I think we've managed to move up into a different league. On the net income base, we've bridged the EUR 0.5 billion, which is good news. And on that basis and given the balance sheet, which is very healthy, we are proposing a EUR 0.60 final dividend, which effectively means EUR 0.40 -- sorry, EUR 0.60 per share total dividend, which means EUR 0.40 per share as final dividend. That's EUR 0.15 up from last year, which covers partly the exceptional dividend that we -- distribution rather than dividend, which had to do with the sale of DEPA Commercial. Moving on to the next page on the key points. A relatively good market, especially towards the end of the year with respect to the refining environment. Europe has been benefiting from relatively low prices and low dollar compared to euro, which means that palm prices have been kept at a relatively lower level. That always helps the consumption and demand, which is still growing, not only because of the price levels, but also because we see the economic activity growing as well. On the electricity side and the nat gas, we've seen some normalization, which is beneficial for the consumption, but still, Europe is suffering from relatively high cost of energy compared to non-EU markets. As a company, we've had a good run. If one takes into consideration the fact that we had Elefsina down for 4 months in the year and that as probably was a refinery was at the end of its run before the shutdown. The achievement of a record high production is actually very good news. From a margin point of view, we had healthy international benchmarks. But on top of that, we managed to improve on that as a result of better supply chain management, procurement and of course, the fact that the Geneva team is now up and running, which helps increase the overperformance of the system. Moving into more controllable areas, which have to do with marketing. I'm very happy to say that both domestic and international businesses have done very well. We have the best performance from marketing for a number of years. And that's a result of a very holistic and diligent work done by all the teams, be it market shares, new products, NFR, network expansion, service delivery, all of these things have done very well, and we are pleased to see that actually being capitalized in the form of improved numbers. On the power, clearly, the inclusion of Enerwave in the system for the last part of the year for the half, July, December is reflected in the consolidation. We've tried to give you a view of the performance -- full year performance so that we get a better idea of the run rate. It's a business which we believe we can improve upon. The performance of the business was effectively held back by the process of acquisition from 1 of the 2 shareholders. But I think now it is in good hands. And combined with the renewables portfolio, it would be able to grow even more. On the financials, you can see the performance, and I've talked about the numbers. As key milestones, I would refer to probably a few things that are part of the operating review, but they are also the result of our strategy over the last few years. So starting from the most important thing for us, which is safety. The completion of the Elefsina turnaround earlier in '25 is something that we're very happy about because it was done safely within time and within budget. And that's always our #1 priority, and that goes for the Aspropyrgos refinery shutdown as well. We managed after a lot of back and forth and a lot of years to establish the trading platform in Geneva with a team that combines external expertise and talent with our own people who have relocated there or work from Athens in the refineries. And that is something that has already started demonstrating some tangible results with respect to how good we can do there. Marketing, as I said, has been doing very well. And as a result of that, we were able to maintain and extend the BP trademark use for another 10 years, probably one of the very few countries in Europe that BP has that sort of arrangement. And on the development point of view, right at the last day of the year, actually on the eve of -- on the 30th rather of December, we started pumping diesel from Thessaloniki-Skopje. So that is a process that we are very happy about because it took us almost 10 years to get this pipeline back in operation. On power, we've done a lot over the last 4 years. We have even more ambitions going forward. The plan is to develop a second pillar, and we are well on our way to doing that. So on top of the downstream capabilities, the power, which is effectively Enerwave Gas and Power and Renewables is expected, is planned to deliver up to EUR 0.3 billion of EBITDA by 2030. Clearly, totally different economics from the current downstream business. And even in between that, we have different economics between power generation, supply business, gas and renewables. Even within renewables, we have different profiles, but it's there. And the good thing is we have a very specific 1.5 gigawatt of portfolio, which means another gigawatt of projects that we fully control in terms of delivery. And the FID is entirely up to us based on specific returns and timing. We beefed up our delivery capacity through the acquisition of a small team in Greece. George will talk a little bit more about it going forward, but we feel more comfortable about that part of the business. On upstream, I don't think I need to tell you a lot of things because it's been well publicized. We've signed the agreement with Chevron for the exploration and the Farm-In agreement with ExxonMobil in Block 2 has already been signed and announced. Effectively there, what we are saying is we have been consistent and deliver on the strategy envisaged 5 years ago to convert the E&P business into a portfolio business, whereby we maintain a smaller stake, but a much more diversified stake into various assets. And in the meantime, we have our national champion head, if you will, agenda, which helps this process. Finally, positioning in businesses and running businesses requires good governance and operational excellence. And on that basis, the main drivers, which are effectively how we run our HR, how we run our systems, digitalization, procurement efforts are very high on the agenda. So a business is as good as you make it to be. And at the same time, we don't forget that we need to be part -- an active part of this community of the society we work in and proactively participate in CSR initiatives and at the same time, manage our ESG footprint. Even though the discussion has shifted a little bit on the ESG and especially on the CO2 agenda, it is not something that we take lightly. And in fact, the recent changes are more in line with our original Vision 2025 strategy of transitioning on a realistic path towards a better environmental footprint. With that, I'll pass you on to Kostas. Kostas Karachalios is our new Head of Supply and Trading. Kostas has been with us for a number of years in different positions in the past. His latest position was in International as Head of International. A lot of the achievements as he's doing, but even before that, he spent a lot of time in refineries and in business development. Kostas, welcome to the team in this role. You've been part of the team. And over to you for the industry environment. Kostas Karachalios: Thank you for the intro. Good afternoon to everybody. The industry environment was mixed during this year. The 2025 started off with declining crude prices, particularly sharp during Q2, and it also continued well into Q4, ending the year with an average of $64 per barrel, significantly lower than the start of the year. However, there was a robust demand for products and cracks remained relatively healthy, particularly in Q4, reaching near record levels for middle distillates, which provided a margin to the system of approximately $10 to the barrel on benchmark margins, double what it was in 2024. And as previously mentioned, record production during the last quarter with the margins boosted results significantly. Moving on to Slide 9. Natural gas prices were started off relatively high in the year and tailed off to 30. Similarly, with electricity prices ending the year overall at the same levels in 2025 on average that we had in 2024. Carbon emission credit, EUAs had a soft start to the year, but then rallied in Q3 and Q4, reaching at some point close to $100 per ton. They've eased off since those levels recently. In terms of fuel demand, the domestic market grew modestly in 2025, although Q4 was almost flat. There was a 2% increase overall. Aviation sales and bunkering sales -- aviation sales increased 6% during the year and bunkering sales 1% overall. With those key market developments, I hand over to Vasileios. Thank you. Vasilis Tsaitas: Thank you, Kostas. Good afternoon, and many thanks for attending our earnings call today. So moving on to discuss our numbers. As we mentioned before, both fourth quarter and the full year exhibited very strong refining production and volumes despite the turnaround at Thessaloniki refinery earlier in the year. Same with marketing, both domestic and international. In power gen, you have the addition of Enerwave during the second half that we started consolidating. In terms of EBITDA, more than EUR 1.1 billion of adjusted EBITDA, driven by a very strong fourth quarter. In refining, it's the second best quarterly performance ever recorded on the back of the strong refining margins that Kostas mentioned before, but also a very good profitability in marketing, both domestic and international, setting up a very -- a much higher baseline going forward. Finance costs lower, and we'll discuss a little bit further. And if you look at the reported results, those have been affected largely by the inventory losses on the back of 20% to 25% decline in euro terms, oil and commodity prices. Adjusted EBITDA just over EUR 0.5 billion, that enables a very good distribution that Andreas mentioned before. Now on Page 13, so a 10% increase in adjusted EBITDA. If you look at the Downstream business, this is mainly driven by the very good environment, strong refining margins in the second half, partially offset by the weaker dollar for most of the year and improved operations in both SNP refining and marketing despite the impact of the turnaround that we have seen now in the second quarter. On the Power business, you have the addition of Enerwave and the renewables investments at the end of '24 that's giving a good EUR 30 million for the second half. The annualized impact of that is double, which we'll see from '26 with the adverse impact of curtailments mostly and the lower load factors due to weather conditions for both PV and wind. Now moving on a bit on the cash flows on Page 14. 2025 was a year of record investments, if you look at the total. So we have the usual run rate of stay-in-business CapEx of EUR 250 million, which during '25 was augmented by the turnaround of Elefsina had a full turnaround in the second quarter as well as some long-term maintenance in tanks, jetties and pipelines. In Downstream, we invested into mainly some energy efficiency projects at Aspropyrgos refinery that will be tied in during the turnaround and will yield additional EBITDA benefits of around EUR 15 million from the second quarter on an annualized rate as well as targeted investments in our marketing business in Greece and internationally. The bulk of the expansion CapEx will goes to power. It includes the 50% of Enerwave acquisition as well as investments in renewables, mostly outside of Greece during 2025. So on a cash flow basis, we start from what we call normalized cash flow, which includes the EBITDA of the year that required, let's call it, same business CapEx of EUR 250 million and any other working capital movements, lease liabilities, so the operating stuff that you need to run your business. We take out the remuneration of our capital providers, and that yields more than EUR 300 million of cash flows. We've invested in Downstream and mostly in our Power business. That was funded partially by the acceleration of DEPA Commercial sale proceeds that we were able to collect during the year. And certainly, these investments are yielding additional EBITDA as we discussed before. And think that wouldn't move much the total net debt position. However, we had the Solidarity contribution that was paid in February '25, as you may recall, a net impact of just over EUR 170 million as well as the impact of the disruption on the Red Sea routes of the cargoes that are coming from Iraq. That is increasing the working capital temporarily. We don't know for how long, obviously, because this is very much geopolitics driven, but it's not something to be repeated in '26. So we're ending up with a net debt of -- for the group level of EUR 2.1 million, flat leverage levels versus last year. Moving on to Page 15, looking at the capital structure of our 2 businesses. So just under EUR 4 billion of capital employed in our Downstream business. We don't see significant movement in the gearing of this business. It oscillates anywhere -- the net debt oscillates anywhere between 35% to 45%, depending on the working capital needs of the year. It's well funded by committed facilities, termed out no maturity in '26. We're certainly going to continue working during the year -- during this year at improving this even further. If you look at our Power business now with the addition of Enerwave, it's just over EUR 1 billion of capital employed. 20% of that is development capital projects that are under construction, especially the 100-megawatt wind farm at Northeast Romania, which will complete in '26 and start operating in beginning of '27, with almost 50-50 funded between debt and equity. More than half of the debt is project finance, non-recourse project finance at the project level with maturities of around 15 years on average for the projects that are already operating. And you can see the maturity profile on the bottom right. Now looking at the capitalization, again, of our 2 businesses. So the leverage of Downstream is 1.5x. We're looking at an absolute net debt levels of around EUR 1.5 billion, a little bit higher, a little bit lower depending, as I mentioned before, on the working capital financing of the business. Those levels are lower than they used to be 10 or 15 years ago with EBITDA being 2.5x higher. And I think it's important to mention that around half of the EBITDA is coming from going to the markets from our commercial logistics business, which includes supply and trading as well as marketing, which have established a baseline on which we can further grow with the rest coming from refining. So a much more resilient and stable earnings and cash flow profile versus 10 or 8 years ago. And for Power business, despite the fact that it's a business that it carries a higher level of gearing because of higher upfront investment. Still at the end of '25, the credit metrics have improved a lot. And again, let me remind you that this is mostly non-recourse project finance at the project level without spillover to either the rest of the Power business or the group as a whole. The interest cost courtesy, both of rates reduction as well as spread improvement has reduced even further for the second year in a row to EUR 110 million. And important to look how the market perceives the credit. So if we're looking at our outstanding notes maturing in 3.5 years, more or less, it's more than 100 basis points of reduction. More than half of that is actually implied spreads that I think it's an important message. In terms of distributions, we -- I mean, we have -- over the last few years, we've been returning significant capital to shareholders, driven by the profitability of the business as well as one-off events that have to do with the sale of our DEPA participation back in '22 as well as in '24. This is totally in line with our dividend policy. And if you look at the normal recurring dividend, it's 20% higher than it used to be last year at EUR 0.60 per share. Again, very competitive both at the Greek Stock Exchange as well as the European peer group. Moving on to discuss the performance of our business, starting from Refining, Supply and Trading. As we mentioned before, one of the best performance or the best quarterly performance, both in terms of production and sales despite the fact that Aspropyrgos was at the end of run with the shutdown currently ongoing. We're halfway through this process, in line with the table, safely execution and aiming to complete by the end of the current quarter with overall EBITDA 12% higher year-on-year. In terms of operations, important to note the domestic market sales increasing with market share gains, if you look versus last year and very strong exports. It's the highest quarterly -- it's the highest fourth quarter performance in terms of both percentage and absolute export sales we've ever recorded. Very strong -- moving on to Page 22, very strong realized margins, $11 per barrel of benchmark margin with overperformance at almost at $10. We -- I mean, we had very good opportunities in the market during the fourth quarter, both on the crude supply side as well as export netbacks. And now our Geneva desk with the better market outreach as well as a much more solid risk framework that we've established was able to capitalize on those opportunities and take advantage and this is flowing well into the first quarter of this year. In Petrochemicals business, we're certainly in a downside. We had a lot of capacity additions globally over the last 3 years, which combined with the slow demand growth that we've seen, it's resulting at negative margins for most of the quarter. It's improving a bit in the first quarter, but certainly, we're not looking at getting back to what used to be normal anytime soon in petrochemicals. Still, however, it's important to note that the integration with refining provides a resilience for this business. And it's cyclical. It will certainly -- the current overcapacity will certainly prompt capacity rationalization. It is taking a bit more, but the business will find a way to rebalance itself. In marketing, we discussed before or even in previous quarters, the very strong performance, which is consistent and improving on the back of the strength of our EKO brand, structural market share gains in both diesel and gasoline mostly, high penetration of differentiated fuels, high-margin differentiated fuels as well as increasing NFR contribution and the best EBITDA performance for several years at EUR 71 million. Similarly, international marketing, another record-breaking year, similar story more or less with domestic in the sense that NFR contribution has increased notably. The positioning of the group in the regional markets has improved. We're able to take advantage of the geopolitical developments to a large extent. And from '26, we'll also have the additional contribution from the reopening of the start of the Thessaloniki-Skopje pipeline that will reduce the operating cost of transporting fuels to South Balkans as well as open up market opportunities. So we're expecting an additional EBITDA contribution of anywhere between EUR 5 million to EUR 10 million from '26 from this event. On this note, I'll pass you over to George Alexopoulos to discuss our Power business. George? Georgios Alexopoulos: Thank you, Vasileios. Good afternoon, everybody. This is the first quarter in which we have fully consolidated for the whole quarter Enerwave. On Page 29, you can see -- you can look at the entire business taking Enerwave on a pro-forma basis to give you a better picture of the unit, about 1.4 gigawatts of operating capacity, EUR 100 million EBITDA, 3.7 terawatt hours of generation and about EUR 1 billion of capital employed. If we turn to Page 30 and zooming to the renewables business, it was a quarter with unfavorable weather conditions in both wind and PV and also continuing curtailments. So the profitability was somewhat lower than last year. And the year is just about at the same level as last year. You can see the load factors. Of course, the load factors reflect curtailment as well as weather conditions and the generation and EBITDA mix. As you can see, the work-in-progress, the projects under development have increased as our growth plan is being rolled out. And that also has an effect -- a short-term effect on profitability as we haven't adjusted figures for these expenses. Going to Page 31. You can see what Andreas mentioned before. We have a secure path to getting to 1.5 gigawatts installed by 2027, starting from our current operating capacity of 0.5 gigawatt. We expect the 300 or so megawatts under construction to be delivered in the course of this year and possibly an additional 50 megawatts for our batteries towards the end of the year. Together with a number of RTB projects in Greece and Bulgaria and Romania, that makes up the composition of the mature pipeline, which can bring us to the 1.5 gigawatt. We have focused on delivery, and we have improved considerably our delivery capabilities through the acquisition of ABO Energy Hellas and the development and construction team. And we are diversifying both technologically and in terms of geography as well as gradually hybridizing our projects to adjust to the market conditions. If we go to Page 32. Enerwave, again, shown on a pro-forma basis, both for -- well, the quarter, it's really the same, whether it is pro-forma or not because we consolidated it fully, but the year is on a pro-forma basis. Improved performance as a result of the improved performance in supply following the acquisition of the company and the re-branding in November of last year and also better energy management account for a 27% increase of the adjusted EBITDA to EUR 54 million. In addition to the new identity, it's worth noting that since we took over the remaining 50% of Enerwave, we reviewed and redesigned the commercial policy and launched new products and solutions and improved customer experience, reducing also the customer churn and all that translated already and will translate in the following quarters into improved performance. Regarding energy management, we are running now as an integrated portfolio. Our conventional units, our renewables units, soon our battery portfolio and managing the significant store positions we have in retail and in our own consumption. So this is very much part of the strategy of our integrated power business, which includes renewables, but also conventional assets and energy management position. And I think with this, we've come to the end of the presentation. So we will turn it over for Q&A. Operator: [Operator Instructions] The first question comes from the line of Villari Giuseppe with Morgan Stanley. Giuseppe Villari: We have 2, if we may. The first one is regarding the one-off items you recorded for the fourth quarter. I think you mentioned during the presentation, but could you tell us -- we can see EUR 29 million in adjustments. Could you give us more color on that? And then secondly, your domestic performance in retail has been very strong. So you're clearly benefiting from the lift of the fuel retail caps in Greece. Could you quantify what the benefit is? Is performance driven by other factors as well? And also, thirdly, if you could like quickly run through sort of an outlook for 2026 in terms of volumes, especially for refining, that would be great, if possible. Andreas Shiamishis: Okay. I'll ask Vasileios to take the part on the financials, then I'll talk a little bit about the marketing. And on the volumes, maybe Kostas can give us an update on the '26 projection. Vasileios? Vasilis Tsaitas: Thank you, Giuseppe. I mean out of the EUR 25 million, you have, I mean, a number of small items. The main ones have to do one with the legal case at EKO, a very old, 30-year-old case that was finally resolved against the company which is EUR 12 million. And the other has to do with decontamination expenses at some products of the refinery at Aspropyrgos. The other are small items of around EUR 5 million here and there. Andreas Shiamishis: On domestic marketing, the performance is much better in the fourth quarter. Clearly, given the size of the numbers, it's not a totally different ball game, but it's a big improvement. A very small part of this improvement is due to the price cap lifting simply because we refrained from increasing prices. What did happen, however, is that the increase in profitability came from 4 main drivers. The first one has to do with the crackdown, which the Greek state has affected on petrol stations, which were operating not exactly within the boundaries of legislation and tax provisions. We've had a couple of campaigns, which led to closure of a number of petrol stations. And the change of practices that were destroying the market. That has boosted our quality and reliability message and has given us an advantage in terms of sales volumes. It also reduced the pressure on some areas where margin was depressed as a result of inappropriate behavior on the part of certain petrol stations. The second has to do with the continuous effort on premiumizing our products. So we've increased the penetration of premium products in our total sales portfolio, and that is something which is leading to improved margins. The third has to do with NFR, and that is something which is continuously improving. We have a long way to go, but it is something which is now beginning to show that we're doing very well. I'm just talking about the retail business now. I'm not talking about aviation and bunkering. And the final part has to do with the network configuration. So new petrol stations, locations and also the conversion of petrol stations into commercial stations, which effectively increases margins. So those are the key drivers of increased profitability on the petrol stations. Kostas, do you want to tell us a little bit about the '26 volume expectations given we have the shutdown of Aspropyrgos and Thessaloniki. Kostas Karachalios: Exactly. Thank you, Andreas. The volume expectations for 2026 in terms of refinery production would probably look slightly less than the 2025 numbers. There's the major shutdown of Aspropyrgos, which is expected to last less than last year's Elefsina shutdown, but there's also a maintenance schedule for Thessaloniki as well that would influence. Operator: The next question comes from the line of Grigoriou George with Wood & Co. George Grigoriou: I've got a couple of questions. Going back to what you just mentioned about the shutdowns. Can you give us a timetable when Aspropyrgos and Thessaloniki will be down for the year? That's my first question. Andreas Shiamishis: George, Aspropyrgos is already done for the fourth week now running. We expect it to be completed by the end of March, give or take, a few days. So, so far, so good, progressing well. Thessaloniki is expected to go into a maintenance shutdown sometime in Q3 this year. We have to run our full diagnostics and go through the process to define when exactly and for how long. George Grigoriou: Okay. If I can ask as well. You mentioned Vasileios, that there was -- if I got it right, there was a EUR 12 million hit to marketing in the fourth quarter from some legal arbitration that actually was settled in the fourth quarter, if I got it right. And Vasileios, you also mentioned some improvements in downstream that you expect to add some euro million to profitability in 2026, but I didn't catch the number you mentioned. Vasilis Tsaitas: Correct. Grigoriou, there are a couple of items here. So one has to do with the energy efficiency projects at Aspropyrgos and some debottlenecking at units that will be completed and tied in unit shut down. We expect a run rate of around EUR 10 million to EUR 15 million at refining at Aspropyrgos. And the reopening of the VARDAX pipeline, the Thessaloniki-Skopje pipeline will yield another EUR 5 million to EUR 10 million in '26 onwards annualized. George Grigoriou: Okay. And if I just -- one last question, sorry. I don't want to take up your time. Given that there's been talk now about the EU's CO2 emission allowances and what will happen to the EUAs and everything like that, you can see where the prices have gone for CO2 allowances. Can you quantify, for an example, if you can give us -- I don't want to mention any specific examples. But let's say that if you -- I think you've got still free allowances in 2025, you had free allowances. If that was to be sustained until, let's say, the end of this decade, what would be the benefit to your EBITDA? Vasilis Tsaitas: If there's no change in the free allowances from '25 at current rates, we would be looking at around EUR 25 million of EBITDA. Operator: [Operator Instructions] There are no further audio questions. I will now pass the floor to Mr. Katsenos to accommodate any written questions from the webcast participants. Mr. Katsenos, please proceed. Nikos Katsenos: Thank you, operator. We have 2 questions from PKO BP Securities and specifically from Adam Milewicz. The first question is whether we expect to pay special dividends also in 2026. And the second question relates to the current level of refining margins. Andreas Shiamishis: Okay. With the special dividends were linked to special transactions like the sale of DEPA, the sale of DEPA Infrastructure, sale of DEPA Commercial. We don't have something up for sale at this point in time. I have to say that. Never say never, but there is no projection for that. So any special dividend will be replaced by what I would call an exceptional performance dividend if we're blessed with decent refining margins. Sorry, current level of refining margin -- yes, sorry, I didn't see that. Kostas, do you want to comment on that? Kostas Karachalios: Yes. Thank you. The current levels of refining margin and benchmark margins have rebounded quite strongly. So from a weak start of the year, in the last week or so, they're between $9 and $11 to the barrel, which is very attractive numbers. Nikos Katsenos: Operator, we don't have any other questions from the webcast. Back to you. Operator: Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing statements. Thank you. Andreas Shiamishis: Okay. Thank you very much for your time. I hope that we've been able to convey the message for the performance of the group. It has been a good year. The performance -- the financial performance is one indicator of how well the company is doing, clearly affected by the environment. So it is clear that we have been blessed with the good environment in the last part of the year, and that added a little bit of profits to the bottom line. However, what we need to take away is the fact that this company over the last 5 or 6 years has transformed itself, we've managed to establish a baseline, which is EUR 1 billion, something that we've been talking about for a number of years. A lot of new businesses have come into play on the renewables part more than anything and the conversion of investments into cash flows. I've always maintained that investments should be converted into cash or cash flows. So we've converted the Enerwave, the ELPEDISON investment into cash flows by acquiring the additional 50% and we converted the DEPA investment into cash by divesting by selling the 35% that we had. So that actually brings about a much better governance and operability of that business. So we have been adding new businesses to the group, which are more predictable, maybe not as predictable as we would like on the renewables, but still they are not driven by refining margins. They are establishing a cash flow baseline, clearly, a totally different model from the refining baseline, but it is adding to the group stability. The Enerwave business is something which will provide additional profitability with a diversified profile, the gas and power and the utility profile is different to the refining profile. So I think we've been doing a good job at diversifying the portfolio and also making it more future compatible with a lower environmental footprint as a group. However, we should not ignore the improvements made on our up until now core business of downstream, which has to do with the refining, the supply and trading and the marketing. In fact, I probably feel more proud of the turnaround in the domestic marketing than the investment in growing our portfolio of renewables because that involves a lot of people, changing of cultures, being more aggressive in the market and fixing long-standing issues of management in the group. The expansion in markets outside of Greece, whether it's exports and whether it's trading through the new company or whether it's acquiring petrol stations or expanding into existing or new markets, again, it is something which has been done very, very successfully. And Kostas has handed over a portfolio, which is in a much better shape than the one he took responsibility for almost 7 or 8 years ago. That is a signal of strength for the group because I don't know when, but I have no doubt in my mind that refining margins will change again. Maybe they will go down, maybe they will go up. Chances are that from where we are, we will see lower margins in the next 3 or 4 years. But what provides comfort is the fact that the group has built some sustainability, some strength, some endurance to manage those volatile trends and we'll continue to deliver very healthy profitability. Over the next few weeks, we will be aiming to address the market with our new strategy. We have a number of events planned for the next 3 months, the opening up of the VARDAX pipeline ceremony, and things which have to do with other parts of the business. So I think we will have the opportunity to expand more on our strategy in the coming months. Up until then, you have to take away with you a very good performance, a more robust and sustainable performance going forward, a much improved operation and governance structure in the group, a healthy balance sheet even with EUR 0.5 billion of investment in renewables, which were funded entirely out of debt, project finance or our own reserves. And even after that, we are still at a very healthy leverage and credit metrics. So I believe that is good news for the group going forward. Thank you very much once again, and we'll renew this appointment in 3 months' time. Thank you. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.
Operator: Good morning. My name is Jamie, and I will be your conference operator today. At this time, I would like to welcome everyone to the EMCOR Group Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions]. At this time, I'd like to turn the floor over to Lucas Sullivan, Director, Financial Planning and Analysis. Mr. Sullivan, you may begin. Lucas Sullivan: Thanks, Jamie. Good morning, everyone, and welcome to EMCOR's fourth quarter and full year 2025 earnings conference call. For those of you joining us by webcast, we are at the beginning of our slide presentation that will accompany our remarks today. This presentation will be archived in the Investor Relations section of our website at emcorgroup.com. With me today are Tony Guzzi, our Chairman, President and Chief Executive Officer; Jason Nalbandian, Senior Vice President and EMCOR's Chief Financial Officer; and Maxine Mauricio, Executive Vice President, Chief Administrative Officer and General Counsel. For today's call, Tony will provide comments on our fourth quarter and full year and discuss our RPOs. Jason will then review the fourth quarter and full year numbers, then turn it back to Tony to discuss our guidance before we open it up for Q&A. Before we begin, a quick reminder that this presentation and discussion contains certain forward-looking statements and may contain certain non-GAAP financial information. Slide 2 of our presentation describes in detail these forward-looking statements and the non-GAAP financial information disclosures. I encourage everyone to review both the disclosures in conjunction with our discussion and accompanying slides. And finally, as a reminder, all financial information discussed during this morning's call is included in our consolidated financial statements within both our earnings press release issued this morning and in our Form 10-K filed with the Securities and Exchange Commission. And with that, let me turn the call over to Tony. Tony? Anthony Guzzi: Yes. Thanks, Lucas. Good morning, and welcome to our fourth quarter 2025 earnings call. I'm going to speak briefly to the fourth quarter in my opening comments, but we'll focus my introductory remarks on what drove our continued success in 2025. So I'm going to start on Pages 4 through 5 of our earnings presentation. We had an excellent close to the year with our fourth quarter results. In the fourth quarter, we generated revenues of $4.5 billion, which represents 19.7% growth. We earned adjusted earnings per share of $7.19 per diluted share, a 13.8% increase from 2024 and delivered adjusted operating income of $440 million, a 13.1% increase from 2024. We did this while achieving strong adjusted operating margins of 9.7%. Our adjusted results for the fourth quarter exclude the gain on the sale of our U.K. business and the transaction costs related to such sale. For the full year, our adjusted results include these items as well as the transaction costs incurred in the first quarter due to the acquisition of the Miller Electric company. By any measure, 2025 was a tremendous year for us. We had record revenues of nearly $17 billion and record adjusted full year operating margin of 9.4% and at the high end of our guidance range. We also had record adjusted diluted earnings per share of $25.87 per share, an increase of 20% from 2024. With operating cash flow of $1.3 billion, we continued our exceptional record of cash conversion. Our success once again demonstrates our ability to execute with discipline across our business as we drive innovation and efficiency to achieve exceptional outcomes for our customers. We have delivered sustained strong results despite the fact that we are working on the most technically sophisticated fast-paced and demanding projects in our history. We had a great year, and we enjoyed delivering for our customers and our shareholders. Notably, we earned full year mechanical and electrical construction operating margins of 12.8% and 12.1%, respectively, demonstrating excellent execution across a diverse range of projects by size, end market and geography. We did this while growing revenues of these segments by 10.1% and 51.8%, respectively. We achieved a 6% operating margin in our Building Services segment, driven by the underlying strength of our Mechanical Services business, which achieved high single-digit operating margins and 6% growth. Virtually all that growth was organic. Demand for this business remains strong with a primary focus on aftermarket projects and retrofits. HVAC service and repair, building automation and controls upgrades and services and indoor air quality and energy efficiency projects. We remain well positioned with our Industrial Services segment to serve a rebounding oil and gas industry. We divested our U.K. business to focus on our U.S. operations. We found EMCOR U.K. a great strategic home achieved a very strong result for our sale in the sale for our shareholders. We acquired Miller Electric, which is the largest acquisition in EMCOR history. The integration is on track, our leadership and values are aligned, and Miller will serve as a great platform for growth in the Southeast and Texas. In addition to Miller, we acquired 9 other companies across our Mechanical Construction and Building Services segments. Collectively, these platform-enhancing acquisitions will help us to better serve our customers. We repurchased almost $600 million in shares and increased our quarterly dividend to $0.40 per share. This return of cash to shareholders, coupled with our organic investment and acquisitions, affirms our successful balanced capital allocation strategy. We maintained our sterling balance sheet that allows for continued organic and acquisition growth. We maintained our industry-leading safety record in this demanding and complex environment with a TRIR under 1 for the second year in a row, we earned inclusion into the S&P 500, and we were recognized by Fortune as the #1 most admired company in the engineering and construction industry. And we built our RPOs to $13.25 billion from $10.1 billion despite our record revenues. That's quite a year, right? Congratulations to our team, and thank you for a great 2025. I'm now going to go to Page 6. These are RPOs, which I will now highlight, [Technical Difficulty] year-over-year and 17.6% organically. On a sequential basis, RPOs have increased 5.1% since September or 3.6% organically, driven by demand in our data center business, RPOs within the network and communications totaled a record $4.46 billion, at the end of December, an increase of $1.65 billion or normally nearly 60% year-over-year. We see no change in the momentum of the CapEx plans from our customers in this sector, and we have good visibility for the next 2 to 3 years as we work to support their build-out. Institutional RPOs have increased by just under $440 million or 40% to $1.55 billion, largely as we continue to see demand for our services within the education sector, including from a number of colleges and universities. Manufacturing and industrial RPOs have increased by $201 million or 23% to $1.1 billion. As I mentioned last quarter, in addition to project awards driven by customers onshoring or reshoring initiatives. Growth in this sector has also benefited from certain food processing projects within our Mechanical Construction segment as well as a renewable energy project in our Industrial Services segment. Led by our Mechanical Construction segment, water and wastewater RPOs have increased by $408.5 million or nearly 60% to $1.1 billion as we continue to win projects throughout Florida. And due to select project opportunities, RPOs within the hospitality and entertainment have more than doubled year-over-year. I'm now going to turn to Page 7 because I think it's important to look at some of the longer-term trends and what's really driving our growth over a sustained period of time and also to highlight our diversity of demand. So now go to Page 7, let's take a minute. I want you to focus your eyes on the middle of this page. And in this middle of this page, you'll see where we were on the left-hand bar at 12/31/19, right before COVID. We were about $4.036 billion in RPOs, and I want you to focus your eyes on that royal blue bar or dark blue bar, and that's our network and communications business. And I want you to look over at 12/31/25, those network and communications RPOs are about $4.4 billion today, which is greater than our total RPOs at the end of 12/31/19. But let me look at the total number of $13.254 billion. And realize that we have grown everything else by over $8.5 billion. And now I want you to come over to the left side of the page, and I want you to look at some of these long-term growth trends. I'm going to spend a little bit of time, and we've already done that with the near-term commentary. High-Tech Manufacturing on a compound annual growth rate that's an in and out of a major project. But from where we started in 12/31/19, which had some semiconductor work in it and pharma work in it, to where we are today has grown by a compound annual growth rate of 48%, and we remain very bullish on this market with the demand for semiconductor chips, the reshoring of pharma, the growth in GLP-1 drugs and what's going to happen there. And just in general, what has been reshored in High-Tech and what's going to continue to grow, 48% compound annual growth. Right above that is network and communications. We thought we had a great data center business in 2019. We went from having a very strong data center business to a terrific data center business. Now I'm not going to say we're the only ones that can do data center work at scale. We're the only ones that can operate in about 17 markets electrically. And we're doing about 7 markets now mechanically and we're one of the only ones that could cover the whole country on fire life safety projects in the data center business. Look at health care, 23%. That is a stable market for EMCOR. It's been one of our long-term markets, and it is complex to build a high-rise hospital as it is a data center, and that's why our electricians and our pipe fitters can move between those sectors so easily between high-tech manufacturing, network and communication and really industrial work, they can move between those, and we do that. Institutional is up 20%. That was actually a surprise to us. When we went back and looked at the compound annual growth rate in institutional across that sector. Water and wastewater is a great market for us, mainly in Florida, 24% compound annually driven by consent decrees from the EPA, driven by just growth in Florida and driven by updating technology in these large wastewater plants. Transportation, as you talk about mix management, we have decided to deemphasize the transportation market, especially the electrical roadway market. It takes a while to get out, but that will continue to drop unless a big airport or a project like that comes in, and that would be then balancing against these other markets. I love the bottom. And commercial was a GDP grower. It's pretty good considering the ins and outs that's happened over this period. But look at the short duration projects. To me, that's a sign of what's going on across all the markets, especially in the built space. And that contains some commercial work, that contains some institutional work, that contains some manufacturing work. And these are projects that are going to last less than 5 months and typically have a ticket size of somewhere between $50,000 and $500,000. And that's -- and then you put on top of that, the big service space we have in EMCOR across our fire-life safety projects across our mechanical service business and across even our day 2 electrical work. So what allows you to have that kind of compound annual growth across that sustained period of time. And these are in no particular order. First of all, you got to be where your customers are. You have to be able to meet them where they are. You have to have national reach. You have to have the geographic footprint, but that's not enough. You can have a geographic footprint that can execute. You have to have opportunistically travel. You don't just travel to travel. We're not going to be the contractor that uses a labor broker and places labor around the country. For the most part, when we travel, we're traveling in our construction business with very strong union journeymen and commercial wireman and others that can move around the country and check into the union and we draw from that. And we're an employer of choice. And that is driven by the strong field leadership we have at the local level. We've got the technical expertise. We have great prefabrication capability, VDC capability that we use to work across these sectors. And really, the VDC we use today in our data center business and the VDC we use today in our high-tech manufacturing was really honed in the health care sector over 20 years ago. We have a great reputation and safety record. It's really a hallmark of who we are and why we continue to attract the best trade labor. Our customers want us to do the work for them. One of the benefits of scale to us is we can train, we can share means and methods and we can share best practices across our country. And that allows us to have very strong acquisition pipelines over a sustained period of time. And allows us to make the right smart growth organic investments. I think this page is something that really is a hallmark of our company. And I think this page is really what we have built together with that, our capital allocation strategy, which is on Page 14, and coupled with what is on Page 7 is what we get paid for to do to build a company that has great diversity of demand to take advantage of the end markets, in many cases, and then build a sustainable compounding record of success. With that, Jason, I'll turn it over to you. Jason Nalbandian: Thank you, Tony, and good morning, everyone. Before we dive into our results for the fourth quarter, I thought it made sense to step back and take a look at how we performed for the full year, which is summarized on Slide 8. In 2025, we earned revenues of $16.99 billion, operating income of $1.71 billion and operating margin of 10.1% and diluted earnings per share of $28.19. When excluding the transaction costs incurred in connection with both the acquisition of Miller Electric and the sale of EMCOR U.K. as well as the gain on sale of EMCOR U.K., we are non-GAAP operating income of $1.59 billion, operating margin of 9.4% and diluted earnings per share of $25.87. All of which were records for EMCOR. We performed extremely well in 2025, benefiting from some of the best execution in our history and a favorable mix of work, both of which allowed us to deliver a full year operating margin at the high end of the guidance we previously provided and in excess of our expectations when we began the year. If we turn to Slide 9, I will now review the operating performance for each of our segments during the quarter, starting with revenues. $4.5 billion represents a quarterly record for EMCOR, with revenues increasing 19.7% or 9.5% organically. Revenues of U.S. Electrical Construction were a quarterly record of $1.36 billion, increasing 45.8% due to a combination of strong organic growth and the acquisition of Miller. Similar to recent quarters, the most significant growth in this segment was generated from our data center projects within the network and communications market sector, where revenues increased nearly 50% year-over-year. While this represents the greatest increase during the quarter, almost all other sectors experienced growth. Health care, institutional and hospitality and entertainment represent the next 3 largest increases in addition to greater small project volumes. I think the best way to summarize this segment's performance in the quarter is that half of its growth came from data centers and half of its growth came from strength in the underlying or more traditional business. Once again, this highlights our diversity of demand. Moving to U.S. Mechanical Construction, revenues of $1.94 billion increased 17%, establishing a new quarterly record for this segment. Similar to electrical due to greater demand for data center construction projects, this segment saw the largest increase from the network and communications market sector, where quarterly revenues grew nearly 80% year-over-year. Sticking with my earlier comment regarding broad-based demand, mechanical construction experienced quarterly revenue increases in 8 out of the 11 sectors that we track with the only meaningful decrease coming from high-tech manufacturing. Notably, manufacturing and industrial, including food processing, was up just over 50%. Institutional was up 55% and commercial increased 17% as we are starting to see resumption in warehousing demand. As we've discussed throughout the year, although we are still executing off a higher base, the decrease in high-tech manufacturing is a result of the completion of certain semiconductor projects. On a combined basis, our construction segments generated revenues of $3.3 billion, an increase of 27.4%. Looking next at U.S. Building Services, revenues of $772.5 million reflect a 2.2% increase, all of which was organic. This marks the third quarter of revenue growth since the loss of the site-based contracts that we've previously referenced and this performance was driven by our Mechanical Services division, which increased revenues by nearly 5% due to strength across each of their service lines, including projects and retrofits, repair service, service maintenance and building automation and controls. Turning to our Industrial Services segment. Revenues of $341.1 million have increased 9.1%. In the quarter, we experienced a more robust turnaround schedule, including the execution of certain projects that were delayed from Q3 to Q4, which led to increased revenues from both our field and shop services operations. In addition, this segment benefited from progress made on a large solar project, which is currently in process. And lastly, for the 2 months prior to the sale on December 1, U.K. Building Services generated fourth quarter revenues of $95.3 million. Let's turn to Slide 10 for operating income. For the fourth quarter, we generated operating income of $573.8 million or 12.7% of revenues. When adjusting for the transaction expenses and the gain on sale of EMCOR U.K., we are a non-GAAP operating income of $439.6 million, a quarterly record for EMCOR. This performance resulted in an exceptional 9.7% non-GAAP operating margin the highest we achieved in any quarter this year. Looking at each of our segments, Electrical Construction had operating income of $173.1 million, a 17% increase. As a result of its revenue growth, the segment experienced greater gross profit across the majority of the market sectors in which we operate, resulting in an increase in operating income to a record level. While down from the record 15.8% earned in last year's fourth quarter, this segment's operating margin of 12.7% remained well above its historical average and was in line with our expectations particularly when compared against a rolling 12- to 24-month average, which would imply a range of 12% to 12.6% for the segment. When adjusting for the impact of incremental intangible asset amortization, gross profit margin of the segment remained relatively consistent year-over-year, reflecting the overall strength of our execution and project portfolio. Contributing to the unfavorable comparison in operating margin was an unusually low SG&A margin in last year's fourth quarter due to the timing of recognition of certain expenses in the prior year. Operating income for U.S. mechanical construction increased by 13.6% to a quarterly record of $250.5 million, while slightly below that of the prior year's quarter, operating margin of 12.9% was equivalent to the third quarter of this year as we continue to execute well. From an end market standpoint, we saw greater gross profit across many of the sectors in which we operate with the largest increases generally tracking in line with the revenue fluctuations I previously mentioned. Together, our construction segments grew operating income by nearly 15% and earned a combined operating margin of 12.8%. U.S. Building Services generated operating income of $41.3 million, a modest increase over the prior year, and operating margin was a consistent 5.4%. Moving to Industrial Services. This segment's revenue growth coupled with 30 basis points of operating margin expansion due to better absorption resulted in a 21.1% increase in operating income. And lastly, U.K. Building Services delivered breakeven performance during the quarter as $3.7 million of underlying operating income was entirely offset by transaction-related costs, which were expensed within the U.K. Let's move to Slide 11, and I'll cover a few quarterly highlights that were not included on the previous pages. Gross profit of $891.2 million has increased by 17.7% and our gross profit margin for the quarter was an outstanding 19.7%. SG&A was $462.3 million or 10.2% of revenues. Included in SG&A for the quarter were $10.7 million of transaction expenses related to the sale of EMCOR U.K., which impacted SG&A margin by 20 basis points. Accounting for half of the remaining increase in SG&A was $35.2 million of incremental expenses from acquired companies and $6.2 million of additional amortization expense. Excluding these items, SG&A grew by $41.8 million, almost entirely due to employment costs, given both greater headcount to support our organic growth as well as increased incentive compensation expense in certain of our segments given the higher annual operating results. And finally, on this page, diluted earnings per share were $9.68 or $7.19 on an adjusted basis, which represents an increase of 13.8% year-over-year. If we quickly turn to Slide 12. With $1.1 billion of cash on hand, our balance sheet positions us well to continue to deliver on our philosophy of balanced capital allocation which includes organic investment, strategic acquisitions and returning cash to shareholders. Our commitment to this model is further demonstrated by the recent increase in our dividend of 60% and the incremental $500 million of authorization under our share repurchase program. During the quarter, we repurchased approximately $155 million worth of our shares bringing our year-to-date repurchases to roughly $580 million. And we executed against our M&A pipeline, utilizing over $1 billion on acquisitions during the year, including an additional $122 million in Q4. And finally, on this page, we had operating cash flow of $524.4 million during the quarter or $1.3 billion for the full year, representing conversion in excess of 80% of operating income when adjusting for the gain on sale of EMCOR U.K. With that, I'll turn the call back over to Tony. Anthony Guzzi: Thanks, Jason. And I'm going to close on Pages 13 and 14. As discussed, we are well positioned to continue to deliver excellent results in 2026. We expect to earn revenues of $17.75 billion to $18.5 billion and achieve diluted earnings per share from $27.25 to $29.25 with a full year operating margin between 9% and 9.4%. As we set guidance, and I have stated this many times over the years, we have always thought about it the following way. From the low end to the midpoint, we have a high degree of confidence that we will deliver that outcome absent a major economic event. From the midpoint to the high end of our range, we need to execute very well from a margin standpoint, and we need to book 40% to 45% of new work to allow us to hit the mid to high point of our revenue range. Easily said, the better our margins, the higher revenue, the more we move to the higher end of our range. As we look at the composition of our RPOs, we began the year with a strong mix of work, with estimated gross margins in line with those experienced over the last few years. We have a strong foundation across diverse geographies and sectors. At this time, we see no slowing of demand for most of our end markets and continue to see exceptional prospects in our data center markets. As we move into 2026, we need to keep leveraging our training, BDC, fabrication and project planning and delivery capabilities. We must not only continue to incrementally improve, but also innovate in our internal processes and delivery. We must also continue to protect ourselves through careful contract negotiation, execution and compliance. We deliver for our customers, and we will continue to do so, but we also strive to protect our rights as we deliver these complex projects. We will always face some macroeconomic challenge of some kind and some headwinds, but our team has excelled over these challenge -- overcoming these challenges over a very long period of time. I do believe that we are an employer of choice because of our excellence in field leadership. From our frontline foremen, superintendents, project managers and executives to our subsidiary and segment leadership. We will continue to execute a balanced capital allocation strategy, focused on organic investment, strategic acquisitions and returning cash to shareholders through share repurchases and dividends, which we show on Page 14. Our balanced capital allocation strategy has provided the foundation for our compounding record of success over the last 10 to 15 years. As I close, I want to thank my teammates. I appreciate all you do for EMCOR every day and for our customers and appreciate the safe and productive way you execute our work. With that, Jamie, I'll turn the call over to you for questions. Operator: [Operator Instructions]. And our first question today comes from Brent Thielman from D.A. Davidson. Brent Thielman: Tony or Jason, if you could comment just on some of the initiatives that compressed margins a bit last quarter, 3Q. I think you moved into some new territories that caused a little pressure there. Like what lingering impact that had in the fourth quarter, if any? And are you sort of beyond that at this stage here in 2026? Anthony Guzzi: You always have to be careful to say we're beyond that because we're starting projects all the time and we execute really well, and we write projects up. We write them down. But on balance, I think the headwinds we've experienced in that particular market are behind us now. And we had a little bit of that spillover into the fourth quarter. Some of it also is just mix of work. We didn't finish as much fixed price work in our Electrical segment as we did the year before. And we started some work that was more target price or GMP. And hopefully, we'll convert some of that to fixed price, but we don't know that. But the underlying margins in the business, which you can see from our gross margins is pretty strong. Jason Nalbandian: Yes. And I would echo what Tony said. The only thing I would add to that, right, is I tried to say this in my prepared remarks. If you look at the gross profit margin for electrical and you adjust for the amortization impact, it performed relatively consistent year-over-year. So any impacts that we did have from those project start-ups was offset by just execution within the segment. Anthony Guzzi: Yes. Brent, and you could see it in our numbers, right? Are we a little disappointed we coughed up 50 or 60 basis points this year in electrical operationally? Sure, we are. Some of the headwind was from amortization. That's not a cash expense. But when you look over a 12- to 24-month period, that's a pretty good snapshot of our margins. We expect to operate somewhere mid- to low 12s to 14-or-so percent electrically. And mid- to low 12s. So 13.5% or so mechanically, and it's going to bounce around there. But if we can operate this business between 12.5% and 13.5% on a sustained basis across our construction segments, I think we'd be pretty pleased with that. Brent Thielman: Tony, maybe just to follow up, I mean, an interesting chart there on Slide 7. So on the network communications, data center side, you talked about good visibility here for the next 2 to 3 years. I think it would be hard to dispute that. Maybe one of the questions that oftentimes comes up is just like your regional exposure. Do you see yourself having to move into different regions to get more of this work? Or maybe you could just talk about what's happening, where you're already at, where you -- where you're positioned today that is going to continue to spend... Anthony Guzzi: I don't have [indiscernible] markets electrically. But the way I look at it is we have a strong -- we have a solid position in the Midwest. We'd like to make that a little bit stronger in some of the markets. We think we can do that either through acquisition investment or organic growth. Arizona, we continue to build that out. We've just built a better position mechanically in Arizona that we look to take advantage of it. And electrically, we moved into that market 2 years ago, and we're starting to hit full ramp right now. Texas, we're pretty strong. Mechanically, we'll take some of our first significant jobs in Texas. And there's a mixed management decision, right? We had that capability there doing semiconductor work. We'll continue to do some of that. But quite frankly, we think some of the rural data center work is better for us to do and it allows us to sort of get more productivity in our prefab shops also by doing that. And we've invested ahead of that. The semiconductor work we did there in a lot of ways with the beachhead to participate more broadly in the market and especially in the data center market mechanically. Electrically, we have a very good position in the Dallas-Fort Worth area. We'll look to expand out of that. Atlanta, we have a very strong position mechanically and we have a secondary position electrically, and we'll look to continue to strengthen that. The Carolinas were pretty strong, both mechanically and electrically, more so mechanically, but still pretty strong electrically. Northern Virginia, quite frankly, were terrific, both mechanically and electrically. And then as you get to Oregon, we're very strong electrically, and Iowa very strong electrically. We will continue to round that capability. You can tell we're in more markets electrically than mechanically. Some of that is -- we found it advantageous to be able to take our electricians that were very skilled in our management teams and doing something that still don't work at one time, and they've proven to be very good data center builders also. And we've been able to take that scale from our -- some of our companies and move it to others. And it takes about 18 months to ramp them up to get to full production where they can hit the kind of margins, our traditional data center company mechanically. And there's no real reason that we haven't expanded as much. It's just the footprint of where we are and what it takes mechanically to build the capability because of the prefab and all the other things are a little more extensive. And in fire life safety, we can cover the entire market, and we do. Brent Thielman: Got it. I appreciate that, Tony. And just last one. I mean, your balance sheet, you sort of have a war chest here. How do you think about like total excess liquidity here, assuming you want to keep some level of cash on the balance sheet, also understand your revolvers untapped. Just thoughts there. It seems like you can do a lot. Anthony Guzzi: I'll hit a macro level on that, and then Jason will get into some specifics about what cash we'd probably like to have on hand. I think in general, we're never going to have a highly leveraged balance sheet on a sustained basis to think of who we're working for. One of our competitive differentiators, especially on this large project work is we're not a leverage company. And think about the hyperscalers, they're not looking to do business with leverage companies. And it's also when you look to the bonding line, it's a nice ability to be able to have a surety bond without question when you need it, and we've had that luxury. But we also would be willing to lever up for the right acquisitions or series of acquisitions to go to 1 to 1.5x, maybe 2x and then leverage back down to 1x. What I wouldn't do is borrow a bunch of money to buy back stock. We like to do the buyback through excess liquidity. And if we're going to borrow money, it's because we're building a -- we're buying into an asset that's going to return cash to us over an extended period of time. That sort of macro level, Jason, maybe get to the specifics. Jason Nalbandian: I would say if you go to that Slide 14 that Tony referenced earlier and you look at what we've done this year, last year and even over the last 10 years, I think that's what our playbook looks like going forward, right? It continues to be a balanced approach towards capital allocation. We think we have a strong M&A pipeline as we move into next year. We'll continue to return capital to shareholders, and you saw that in the repurchases this year, and you saw that in the increase in dividend. In terms of minimal cash balance for our balance sheet, it's probably somewhere in the neighborhood of $300 million to $400 million. So obviously, our balance sheet positions us to continue to deploy cash strategically as we move into 2026. Anthony Guzzi: Yes. I think if you ask any of our management team down through the segment level, we would love to replicate 2025 here in '26 and '27. However, you've heard me say many times, deals happen when they happen. And what we are going to do is maintain discipline. We're not going to -- I think people on the line know me well enough and know this management team well enough that we don't buy into hype and we don't buy into frenzy. We have to believe there's a long sustained business case for why we would do something and we have to believe that we can add value. And our acquisition record is pretty darn good. I always say I never give anybody an A, but that give us a strong B+ over an extended period of time. And we're going to continue to do that. We're not private equity guys. We're not averaging multiples down. We're looking to buy and build for the long term and build sustainable positions. And how we got from some of these places to serve 17 electrical data center markets is we bought companies who were in the business, we're able to strengthen it through peer learning, transferring people for short periods of time to help it and really doing a great job of taking our best practices and means and methods and sharing it across the company, especially as it comes to virtual design construct, VDC, BIM and prefabrication. Operator: Our next question comes from Adam Thalhimer from Thompson, Davis. Adam Thalhimer: Congrats on the strong quarter and the year. Tony, I wanted to ask you first about RPO. The 33% in network and communications, obviously, some others in your space are even higher than that. And I'm just curious if that was a conscious decision on your part to stay more diversified? Or if that reflects something else like geographic mix? Anthony Guzzi: It's funny. I'll go to the second thing. You said it's geographic and sector mix. We're not passing up great data center opportunities because we're doing the other work. However, we're not going to go away from our existing customers. We have very strong companies in markets that have limited and no data center exposure. We have one of the best electrical contractors in the country in San Diego that generates great returns, serves our customers well, does it through a mix of pharma and high-tech manufacturing work, some defense work and health care work. There's not a data center opportunity there for them to do, but they earn returns that are as good or better than our segment averages. And we have a chunk of our business that exists just like that in places like California, some of the Intermountain states, some of the Midwestern towns. And as you go to like something as specific as water and wastewater, we're not walking away from opportunities in Florida to do data centers, although the first ones are going to get built, and we will participate in that. But the teams that do that water and wastewater work are very specialized. Could they do chiller plant work and things like that? Sure. But they're very specialized on that customer base and in that product offering. So yes, some of it is intentional. It's been intentional, Adam, beyond the last 4 or 5 years. It's been intentional over a very long period of time to build diversity of demand. But that being said, I'll give you a great example. We had a very good industrial electrical contractor in the Midwest that are in middling returns for years, but very technically capable. When the opportunity presented itself in Northwest Indiana to do data center work, we were able to take some of our skill base on the supervision side and our estimating side, train the people there to do the work, estimate the work, and now they're one of the best data center builders we have. And so we have the ability to do that when the opportunity and we create the opportunity presents ourselves and our customers need us to do that. So I'd say, yes, part of it has been intentional as a long-term strategy. But are we shooting to say we're only going to do 33% data center work in RPOs, could be 40% for a part of a period of time, could be 45%, could go down to 30%. It's just the overall demand and the mix of work and margin we have out there. Jason Nalbandian: Yes. The only other thing I would add, too, is just remember that for us, what we show as RPOs are the funded phases of a contract. So we're working on a data center campus where there's multiple buildings and we have even a verbal for the Phase II. We're only showing that first phase in our RPO. So others may be doing it differently, which could skew percentages. But for us, this is funded, contracted work that we have in hand and 82% of this will burn over the next 12 months. Anthony Guzzi: Yes. Adam Thalhimer: Got it. Okay. So -- but you're saying if the outlook for data centers is strong, -- don't be surprised if it goes to 40%, 45%. Anthony Guzzi: Yes, it could. If you look at our Electrical segment, where we've been able to get into 17 markets, it's 40% to 50% on a -- I think it will stay there for a while. It may even go up a little bit because we have found that, that scale is the most -- we have the most ability to take that electrical skill and translate that into other markets from other work that they have done. Adam Thalhimer: Okay. Last one for me. I was curious on semiconductors when the next wave of awards might be in that space? Anthony Guzzi: We're seeing some of it now. They're just getting awarded in smaller chunks. We're very ingrained in for one of the customers, 2 of the customers in Arizona. And we're also there in Arizona and the Mountain States fire life safety. I don't know if -- because you're already on site, I'm not sure you'll see the magnitude of the awards that we saw initially because they can leave it out to us some pieces. And I think that's an important delineation with us. We have a pretty good idea of the work we're going to be doing there, which is some of that 40% to 45% we have to book a year. But Jason made a really important point, right? Everything we do goes back to GAAP, right? So our RPOs are funded contracts, signed purchase orders, non-cancelable portion of a service agreement. I mean that is different than some of our peers do things. I mean we know that we may be at a data center site for 2 or 3 years. We're pretty sure the buildings we're going to get. But a, the work isn't contracted to us yet. And so therefore, we'll plan for it. But we certainly -- and on a semiconductor site, we know that maybe 2 years ago, we might have got $150 million award and it's going to look like that $150 million award again, but they're letting it out to us to $30 million, $50 million at a time because they know that that's how their funding is going to work, and that's how they did the actual contract for that piece of the work. So we've been that way forever. It's a little different when you have these huge projects. And we just have chosen to stay very consistent and not guess on what the future holds and keep it to that kind of dimension. And I'd to say the same thing about our operating margin performance. The only thing to get added back here are hard things like transaction costs, like the sale of the U.K. or a significant impairment. We have restructuring going on in the business all the time where we're restructuring subsidiaries. We don't do that. We don't try to add back amortization. We figure our investors are smart enough to do that themselves. It's a noncash expense. We figure once we go down that rabbit hole, we become adjusted on adjusted, on adjusted, and we just chose to stay pure to the GAAP numbers, both for RPOs and operating income and revenue recognition, Jason. Jason Nalbandian: Agreed. Anthony Guzzi: Yes, I think it's just easier. Adam Thalhimer: The numbers are very clean. We appreciate that. Anthony Guzzi: Appreciate it sometimes because you salivate over other people that have 5%... Adam Thalhimer: I can't speak for everybody else. I appreciate it. Operator: Our next question comes from Brian Brophy from Stifel. Brian Brophy: So your data center work has been growing a bit faster on the mechanical side than on the electrical side for a few quarters now. Can you talk about what are the drivers behind that? And do you expect that to sustain itself in the next or this year? Anthony Guzzi: It could. It could because we -- first with the basis, right, in comparison to the segment. And so we've opened up a couple of new markets on the data center side. And also, I think one of the growth areas in that is it's a little different on the scope. We're benefiting more from the AI data center, even though we're building the AI data centers electrically, but the scope doesn't increase as much going from a 100-megawatt cloud storage data center to a 200-megawatt AI data center on the electrical side. But on the mechanical side, it can be a 1.5 to 2x multiplier on the mechanical systems that will go in. And what's interesting about that, that in either cases that usually include the major end equipment. Jason Nalbandian: Yes. I think Tony's point on the base is very important as well, right? Mechanical is up more on a percentage basis. But on a dollars basis Electrical grew $1 billion this year Mechanical grew $850 million. So Electrical is still growing more in terms of dollars. It's just off a larger base gives you a smaller perceptive. Anthony Guzzi: I think one way to look at it, too, electrically, we, about 2 years ago, established ourselves as more of a national player in data centers. Mechanically, I would still would say we're still a super regional player in data centers. So you may see that growth because of the base and how we're continuing to penetrate new markets mechanically. And it takes a little longer to penetrate mechanically, and we're starting to see some of the investments return to us now from what we made 2 or 3 years ago mechanically. Brian Brophy: That's helpful. And then related, I think you mentioned 17 electrical markets on the data center side, you're up to now 7 mechanical and it's grown nicely over time. Where can that go over time? Anthony Guzzi: I actually don't know. I think we'll stop counting soon because they're now becoming -- you start counting the state of Ohio versus the 4 submarkets in Ohio and things like that, do you take the state of Indiana versus the 2 or 3 submarkets. I think the way I think about it is we are now starting to build scale in some critical infrastructure places. So if you think about how this has happened and why it's happened, it's because it's been this quest for power, right, quest for stranded power. And that's how we -- that's how our great industrial electrical got into the data center business in Indiana because they went and chase the stranded power from the steel mills and auto plants that had been there before. And so you think about that over time, there's still stranded power out there, and that should keep -- that's why we say 2- to 3-year pretty good outlook because our customers are telling us that, and they may even be a little bit beyond that, they feel pretty good, maybe a little longer, but we're contractors, we always discount that back a little bit. And -- but I will say this, the markets are now dependent on where they can get power in place. My gut is there'll be a couple more markets added and then in the markets they're in, they're going to start to build even more density, just like they did in Northern Virginia right outside of Columbus, Ohio, what they've done in Chicago, what they've done in Arizona. They built in Atlanta, they're building density in those markets. And they do that for a reason in Dallas. They do that for a reason because they think there's a good view on power in the long term and also the connections there are really, really good. And the latency becomes important in some of those major metro areas for the knowledge workers long time. Now do I understand how the latency works everything? Not really, but that's how it all works when you put it all together. So it will go up, it's not going to grow like it did because now they're starting to build critical mass in those markets. Operator: Our next question comes from Justin Hauke from Baird. Justin Hauke: Yes. Great. I guess, first one, I mean, you've talked about the fire life safety projects being strong for a while. I think you made some comments here about kind of the uniqueness of what you're doing on the data center specifically. But can you just elaborate a little bit more on your capabilities there? And how you're different in that market? Anthony Guzzi: Yes. Are we different? Yes, because I think we have some of the best fire -- we have critical mass on design, and we have a very strong position with the road local in the UA for sprinkler fitters. So if you take the business first and you take a step back and those that have been with us for, I'll be patient for a second, as I answer this question, it's one of the few trades that we do, that the actual implementation of that part of the specification is a design build product. The way the specification is written, it says provide a fire-life safety system in accordance with the code at both the national standard and then their state and local standards. And our guys are experts at that. And what they do then is we design it. And then fire life safety has a fairly significant prefabrication component. And we have some pretty at-scale fabrication shops to support our fire life safety business. And then it's -- for union other than 16 closed locals, it's a road local that will travel. And so our people can travel across the country. And it also tends to get connected to think of in other word, like LEGOs or tinkers -- it's a connected system, and we prefab most of it in the shops. And then finally, it has a nice aftermarket component, and we have a nice aftermarket business. And that is one of the places where if we build it, we have a pretty good shot at getting the long-term service agreement post building. So it's a national business and scope. It's a design build business and scope on that specific trade. We have a great workforce, and we're at scale in that business and probably as good as anybody else in that business. I'll never say we're the only ones, but we're one of the few that can operate on a national basis. Justin Hauke: Okay. I appreciate more of the history lesson on that. I guess my second one is, I guess, for Jason here, and it's just more of a model question. But the Danforth acquisition, obviously much smaller than the Miller was, but I know it's going to have an intangible component with it as well. Now that it's closed, I think Miller, that was like $40 million for the year, that was kind of a drag. What's kind of the similar magnitude for Danforth, just so we can kind of think about what's running through? Jason Nalbandian: So I'll hit a couple of things on amortization first. So if we look just at Danforth, in 2025, round numbers, it's about $2.7 million of amortization. In 2026, it's going to be around $14.2 million. So you got about $11.5 million of incremental amortization from Danforth in '26. Just a refresher on Miller, we said in year 1, so 2025, it'd be about $40.5 million of amortization. In 2026, it's going to be about $33 million. So you should see about $7.5 million drop off. So if you just look across EMCOR, while we may have a little bit of amortization benefit in electrical, it's going to be offset in mechanical. So if you really net the 2, it's near neutral. Operator: And our next question comes from Avi Jaroslawicz from UBS. Avinatan Jaroslawicz: So you've noted in the past that how much more of your revenue has grown than your headcount. Is that something that you expect is going to be able to continue this year? Or are some of those productivity gains maybe slowing down and requiring some more headcount to support the revenue? Anthony Guzzi: I think we'll keep the trend going. Jason Nalbandian: Yes. I think over time, we've said revenue is growing 2 to 3x faster than the headcount. We saw that again for the full year of '25. Our revenue outpaced headcount by 2x, and I think that model holds for the future. Anthony Guzzi: Yes. And we'll continue to get the productivity gains, and we'll continue to do the means and method sharing across the country to allow even more productivity gains. Avinatan Jaroslawicz: Okay. That is helpful. And then just as we think about the margin guidance for this year, I appreciate that you give that color on the intangible amortization. But just without the U.K. business and with large projects continuing to grow and productivity continuing to grow, would have expected maybe a starting point of around flat for the year for operating margins. So maybe if you could just help us think through that... Anthony Guzzi: Yes, at the high end of our range, it is flat. And so then it becomes a revenue. If we do come in flat. So on the size business we have with 12,000 projects, we're giving you a 40 basis point range. It's pretty tight. And could we come in at the high end of that range? Sure. But if we don't hit the midpoint of the guidance, that allow us -- it's a revenue margin thing, and it's really contract mix is probably the biggest thing in there. We think we'll maybe pick up a little better on project write-downs year-over-year. And so all that comes together, that's how we get to the range. It's a pretty tight range. And I think the bottom is pretty safe. Could there be upside on the top? A lot of things would go right? Sure. But we gave you the 9.4%, we think we have a probability of hitting the 9.4%. Jason Nalbandian: Yes. The way I view the range is at the high end, we're essentially saying we could replicate the record margins that we achieved in 2024. That midpoint of that range somewhere around our rolling 12- to 24-month average, more or less, that is equivalent to that midpoint. And at the low end, we're saying, this is what margins could look like if we have a different mix. So we talked about the water and wastewater work that we have ahead of us. It's great work. We're not turning down data center work to do it. It's a different margin profile. We're acting as a prime contractor. There's more subcontract component. There's more material and equipment component, so lower margins. So what we're saying is as we do some of that work and potentially revenue skews upward, it could have an impact on margins, but we still think in a fairly high band and a band that is at record levels for EMCOR over the last 2 years. Operator: Our next question comes from Tim Mulrooney from William Blair. Timothy Mulrooney: I'm looking at the time here, I'm just going to ask one question. And I really just want to build on that last question, you guys because maybe though, Tony, from like a more -- a higher level, a more conceptual standpoint. So bear with me. Because as I step back and I think about the situation that we're in, like this really is a renaissance for blue collar trade labor, American unionized labor in this country. So as I look at your guide for '26, I wonder what is the fair value? What is a fair burden for the critical services that you provide? Is it 12% to 13% margin in the Construction business? Like why can't that go higher? Anthony Guzzi: I think it's a mixed question. And I think this whole thing is about risk and return for us, too, Tim. Clearly, where we make our most margin is where we take the most risk on a contracting basis, which is where we take fixed price risk. And the more our mix skews to that, especially on these large projects, and we do well, the more money we can make. However, there are certain operating conditions on the ground that doesn't allow us to do that. And a classic example would have been the job that happened last year, we went a new market. We felt pretty sure of ourselves on the fixed price. We reevaluate that now today. We probably should have went into that market on that project with that design and with the schedule they gave us. We probably should have pushed harder for a GMP contract, which would have maybe not taken some of the upside away from us. If we've executed the way we thought we could, but would have protected us on the downside. I think the other thing that -- I think you're right. But remember, part of that renaissance actually goes back to labor, too. I think they've been very good with us on labor increases. But the packages you put together on a job here puts pressure on the budgets of our end customers, and that's how you get into some of these target price GMP type projects because they're saying, okay, we're not exactly how you're going to put this labor force together in this remote market in this section of Iowa or this section of Texas. So there's some underlying things going on here. But generally, I agree with you. I don't think our customers pay us enough for what we do, and we're going to continue to ask us to pay more. I don't disagree. We have the best skilled labor in the country, I don't disagree with you. Operator: Our next question comes from Adam Bubes from Goldman Sachs. Adam Bubes: One more on the outlook, and sorry if I missed this, but can you help us break out the revenue growth outlook between organic and acquisition? I know there's a few moving pieces with divestitures, and the acquisitions you did last year? Jason Nalbandian: Yes. I guess my first comment there, right, is you have to remember, the U.K. basically gives us a 3% headwind on the revenue growth. So if you look at our guidance, and let's say, at the low end, it's 4.5% and at the high end, it's 9%. It's really equivalent to 7.5% and 12%. When you consider the 1 month of incremental contribution we have from Miller and the 10 months from Danforth, you put that together, it really offsets the U.K. impact, the lost revenues from the U.K. So if you look at it and you say, what's the guidance? How much of that is organic? How much of that is acquisition. I would say really all of it is organic because the lost revenue from the U.K. is just offset by the acquisitions. Adam Bubes: Got it. Understood. Helpful. And then can you update us on the M&A pipeline today? I know it's hard to predict timing of M&A. But can you talk about how active your M&A pipeline is maybe compared to this time last year? And any way to characterize the pipeline of opportunities in terms of size of businesses, region or technical exposure? Anthony Guzzi: Sure. First of all, we have as good or better pipeline sitting here today than we did at the end of 2020 -- because we knew we were already going to do Miller, right? We were in negotiation. So if you look at the pipeline beyond Miller, our pipeline today is broader and more diverse than it was at the end '24. And the universe of them is where we like to buy, right? Mechanical and Electrical segments, building service, focus on mechanical service and building controls companies. That's where we're going to buy for the most part. And there's some spattering around mill right work and maybe some of the handling work we do in our mechanical business to supplement what else we do there. But that's what we'll do. Deals happen when they happen. I know we're landing -- here's who are a landing site. We're landing site for someone that's selling their life's work or their family's life work. That's proven very good for us. There typically it might be a broker, but it's not a brokered sale. Very much like Miller, very much like Quebe, very much like Batchelor & Kimball, very much a years ago, these are sort of landmark businesses that we're going to hopefully get to a deal. In other places, ESOP, that was Danforth. We're a great place for ESOPs long term, and part of Miller was a ESOP. Why? Because we have an operational culture that's focused on the trades. And that's really how that ESOP started at one time when that family moved that business into an ESOP. What we don't do particularly well in is auctions against private equity. We're not -- I don't have enough on my team with the vest that can go in and rip a company apart and tell me what it's worth. So we're not as good there, and we're not playing the average multiple game down. We're actually buying companies for the long term. And our deal size could be everything from $2 million, where we by some HVAC technicians, and it augments a smaller branch we have, all the way up to Miller at $865 million. We'll do anything along those lines. Could we do a couple, $500 million acquisitions this year, $300 million to $500 million? Sure, we could. And we could do $400 million, $500 -- I mean, $100 million acquisitions. Just don't know sitting here today, but I feel as good about our pipeline today at this point in the year as I have at any time in the last 3 or 4 years. Operator: And with that, everyone, we will be ending today's question-and-answer session. I would like to turn the floor back over to Tony for any closing remarks. Anthony Guzzi: Thanks, Jamie. And thanks to all the analysts. I thought this was a great question-and-answer session today. I think you got to the heart of what we wrestle with every day. I want to thank my colleagues from EMCOR and my teammates for what was a great '25. Reality is most of us already forgot about '25. We're here in the third week of February. We've all been focused on '26 really since probably the fourth quarter of '25. We have a great outlook. We're in all the right sectors. We're playing with the right team, and we have a terrific capital allocation strategy. Thanks for your interest in EMCOR. And thank you to all my teammates. Operator: And with that, everyone, we'll be concluding today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.
Operator: Ladies and gentlemen, welcome to AIXTRON's Fourth Quarter and Full Year 2025 Results Conference Call. Please note that today's call is being recorded. Let me now hand you over to Mr. Christian Ludwig, Vice President, Investor Relations & Corporate Communications at AIXTRON for opening remarks and introductions. Christian Ludwig: Thank you very much, Anna. A warm welcome to AIXTRON's 2025 results call. My name is Christian Ludwig. I'm the Head of Investor Relations & Corporate Communications at AIXTRON. With me in the room today are our CEO, Dr. Felix Grawert; and our CFO, Dr. Christian Danninger, who will guide you through today's presentation and then take your questions. This call is being recorded by AIXTRON and is considered copyright material. As such, it cannot be recorded or rebroadcast without permission. Your participation in this call implies your consent to this recording. All documents referred to in this call can be accessed via our website in the Investor Relations section. Please take note of the disclaimer that you find on Slide 1 of the presentation document as it applies throughout the conference call. This call is not being immediately presented via webcast or any other medium. However, we intend to place a transcript on our website at some point after the call. I would now like to hand you over to our CEO for his opening remarks. Felix, the floor is yours. Felix Grawert: Thank you, Christian. Let me also welcome you all to our full year '25 results presentation. I will start with an overview of the highlights of the year and then hand over to Christian for more details on our financial figures. Finally, I will give you an update on the development of our business and our new guidance. Let me start by giving you an overview of the highlights of the year on Slide 2. The most important messages of the day from my viewpoint are: in 2025, we have performed well in a soft market environment by achieving revenues of EUR 557 million, a decline of 12% year-over-year. That translates into a CAGR of more than 13% since 2020. We delivered on our adjusted 2025 revenue guidance, meeting the upper end of our guidance given in October '25. Mainly due to the lower utilization in operations, due to one-off restructuring costs, and due to G10 ramp-up adjustments, our gross profit was down 15% to EUR 222 million, and EBIT was slightly down with minus 24% at EUR 100 million as a result of this. Similar to last year, we finished the year with a strong Q4 '25 performance. We achieved 31% EBIT margin, a level comparable to last year's extraordinary Q4. This marks a great achievement of our operations team as we managed to realize all shipments that customers had asked us to deliver in Q4. The highlight of the operating performance is our cash flow generation. Operating cash flow increased by more than EUR 180 million to EUR 208 million. And our free cash flow increased by more than EUR 250 million to EUR 182 million. With that, we concluded the year '25 with a cash level of EUR 225 million, a good step towards rebuilding our strong cash position that we always have desired. Thus, despite the weaker net profit, we have decided to propose a stable dividend of EUR 0.15 per share to our shareholders. Our outlook for the year 2026 is based on an expected continued weaker market environment. We expect revenues to come in at EUR 520 million in a range of plus/minus EUR 30 million with a gross margin between 41% and 42% and an EBIT margin between 16% and 19%. Breaking this down by segment, AI will be the key revenue driver in '26, fueling strong growth in optoelectronics and lasers through rising demand for optical interconnect. In contrast, SiC, silicon carbide power will face a weak year due to overcapacity and slowing EV momentum with LED and microLED and GaN power demand remaining broadly stable. This concludes the short highlights section. I will now hand over to our CFO, Christian Danninger. He will take you through the full year '25 financials. Christian? Christian Danninger: Thanks, Felix, and hello to everyone. Let me start with the highlights of our revenue development on Slide 4. As Felix mentioned, the revenues in 2025 were down 12% to EUR 557 million. Our strategy of serving various uncorrelated end markets with our equipment proved again successful in 2025. We saw strong growth in the optoelectronics area. This compensated to some extent, the weaker demand for equipment for LED and microLED as well as gallium nitride power electronics. The breakdown per application shows that 57% of equipment revenues comes from GaN and SiC power, 23% from optoelectronics, 15% from LED and a 5% contribution from R&D tools. The aftersales business contributed to total revenues with a growth of 1% to EUR 112 million. The aftersales share of revenues grew to 20%, up from 17% a year ago. Now let's take a closer look at the financial KPIs on the income statement on Slide 5. Gross margin decreased by 1 percentage point versus 2024 to 40%, which was primarily due to lower utilization operations, G10 ramp-up adjustment expenses and the one-off restructuring cost. Accordingly, gross profit was down by 15% year-over-year to EUR 222 million. As we had planned, our spending on R&D in the year 2025 decreased to a total of EUR 81 million due to a reduction in external contract work and lower consumables costs. This helped to drive our OpEx down 7% to EUR 122 million. Combined with the lower gross profit, this resulted in an EBIT of EUR 100 million, which is 24% lower year-over-year. Net profit was down 20% year-on-year at EUR 85 million. This results in an effective tax rate of 15% in fiscal year 2025, a clear positive were our Q4 2025 gross and EBIT margins at 46% and 31%, respectively. Despite the 18% lower revenues number at EUR 187 million, we were able to beat the very strong level of Q4 2024 on gross margin level and meet it on EBIT margin level. Orders in the quarter came in at EUR 170 million, an uptick of 8% versus last year's quarter. For the full year, order intake came in at EUR 544 million, slightly weaker than last year. And thus, our backlog at EUR 258 million is down by 11% year-over-year due to the above-mentioned softness in demand. Now to our balance sheet on Slide 6. We ended the year 2025 with a total cash balance, including other financial assets of EUR 225 million, which was well above the EUR 65 million last year. There are a number of factors driving this increase. Firstly, inventory levels at the end of 2025 came down by about EUR 85 million to EUR 284 million compared to EUR 360 million at the end of '24. This is the result of our adjusted supply chain strategy and corresponding measures after initially front-loading the supply chain in 2024 in expectation of stronger revenue growth. We target a further reduction of inventory levels through 2026. Second, we have seen a solid decrease in outstanding receivables compared to the last year and which generated some EUR 60 million in cash. As a result of putting on the brakes in our supply chain early on, the amount of payables have been stable during the course of the year. Advanced payments received from customers, on the other hand, were slightly down year-over-year at EUR 44 million due to the decline in order intake, combined with a shift in the regional customer base and partially impacted by some key date effects. At year-end, down payments represented about 17% of order backlog. As a consequence of all these factors, operating cash flow improved by more than EUR 180 million to EUR 208 million in the financial year 2025. As mentioned already in previous calls, CapEx decreased significantly in 2025 due to no additional investment requirements for the innovation center. As a result of the significantly lower CapEx, free cash flow improved by more than EUR 250 million year-over-year to EUR 182 million from negative EUR 72 million in 2024. We expect further solid free cash flow generation in 2026. Lastly, we are proposing a stable dividend of EUR 0.15 per share. Despite our lower net earnings, we want our shareholders to participate in the improved cash flow generation. Going forward, following an intensive investment phase in the years 2023 and 2024, CapEx alone for the innovation center was EUR 100 million. AIXTRON plans to use the cash flow in 2026 to further build a strong cash position. Also, I want to remind you that AIXTRON expressly does not pursue a fixed dividend policy, but rather adjust the payout ratio to reflect the respective business performance and capital allocation priorities. With that, let me hand you back over to Felix. Felix Grawert: Thank you, Christian. I will continue by giving you a brief summary of the key market trends we saw last year and before I move on to our expectations for '26. I will start with our currently weakest segment, the silicon carbide power business before moving on towards the strongest segment step-by-step. SiC. Throughout the past year, the global silicon carbide market has undergone a significant transition. In Western markets, we are seeing a temporary slowdown driven by weaker electric vehicle demand and substantial idle capacity at several customers. This has even resulted in reduced or scrapped 6-inch capacity in some cases. We expect the digestion period for silicon carbide epi tools to continue throughout 2026 in Western markets. China, by contrast, remained a strong pillar of demand in '25 for AIXTRON with solid order intake and robust shipments in the first half of the year. In the second half of '25, also in China, SiC demand has softened. And in '26, we expect the digestion to continue also in China. Despite this short-term softness, the midterm outlook for SiC beyond '26 remains highly attractive. Substrate prices have dropped significantly, making silicon carbide devices far more competitive versus silicon IGBTs and enabling broad market adoption, both in EVs and across industrial applications. Even more importantly, the technological transition is well underway. The industry is rapidly moving from 6-inch to 8-inch wafers, starting with Western customers, now also in China, with a full shift expected towards '27 and '28. At the same time, the introduction of superjunction silicon carbide MOSFETs, which require multiple thin epitaxial layers instead of a single thick layer will significantly increase epi tool demand. Our batch-based G10 SiC platform is ideally positioned for this new operating model and has already achieved major milestones with the shipment of our 100 system during 2025. In 2026, we expect very strong demand [Technical Difficulty] at the beginning of '25 and have been steadily recovering. AIXTRON maintains a clear market leadership position with more than 85% market share across GaN device classes, and we remain deeply engaged with customers expanding their GaN road map into [Technical Difficulty] coming years. Importantly, GaN is emerging as a central technology for AI-driven power architectures, particularly as hyperscale data centers plan the transition to high-efficiency 800-volt platforms. We expect additional volume from GaN from AI applications at some time in the 2027 and '28 time frame. The exact timing for when this happens is unknown, and we will keep you posted when signs of this are getting clearer. In parallel, we are working with a small set of customers on 300-millimeter GaN. These customers have existing 300-millimeter silicon fab, which they desire to repurpose for GaN. Our 300-millimeter GaN tool is fully operational with our own innovation center, as we call our 300-millimeter team room and collaborations with imec and leading power semiconductor manufacturers are ongoing. Now, let me come to the LED and microLED market. After a period of muted investment, now the market for red, orange and yellow LEDs, we call them ROY LEDs, is showing clear signs of recovery, driven primarily by development in China. This momentum from display makers who are pushing the boundaries of image quality. In fact, several major TV manufacturers are now transitioning to full RGB backlighting architectures, which further boosts demand for ROY LED as tool. This trend underscores a broader shift. Even traditional LED backlighting is being reinvented, establishing miniLEDs as preliminary storage stage towards microLED. Enhanced local dimming, full color backplanes and ultra-high brightness panels are now becoming standard in premium consumer displays. These innovations are breathing new life into an application space that many considered mature. At the same time, exploratory and qualification work of customers towards microLEDs continues with customers in Europe, U.S. and Asia. The focus of this work has shifted away from watch and television now strongly towards AR/VR glass applications. We expect this market is still some time out into the future until a larger revenue contribution. And given the fact that one wafer can serve hundreds of AR glasses, the expected demand will be much, much smaller than what we would have anticipated for television applications. Overall, we can say that for AIXTRON, ROY LEDs and microLEDs together translate into a solid revenue contribution of around 15% of group revenue for both '25 and '26. Now, let's finally come to our strongest segment in '26, the lasers for datacom. The global indium phosphide laser market has entered a new phase of growth. And from Q4 '25 onwards, we have seen an even stronger momentum in this segment. We have served this market for many years with our proven G3 and G4 platforms historically for telecom and datacom applications, supporting the further adoption of high-speed broadband communications. As far as cloud services with a market share we estimate well north of 90%. The demand we see today is linked to a structural up cycle linked to AI data center build-out and the development of data-hungry new generation of GPUs. And this structural shift creates the demand for indium phosphide-based lasers grown by MOCVD with a massive adoption of optical interconnect now also within the data center architecture. As bandwidth requirements move to 800 gig and data 1.6T, the laser content per data center is increasing multifold to enable the required bandwidth. Our customers are subsequently not only ramping their manufacturing, but also rolling out new product generations with higher bandwidth that are also more integrated like photonic integrated circuit, PIC, now in order to be always faster, more compact and more energy efficient. For the majority of our users, their road map now includes a shift away from 3 and 4-inch to 6-inch wafer size. That is an enormous step for a market that has been historically very conservative. It enables them to access the advanced manufacturing technologies for these new types of products. Our G10 ASP product has rapidly established itself as the tool of record, as we say, for this new generation of photonic devices, replacing customer legacy system, producing higher yield and cheaper 150-millimeter indium phosphide epi wafers. We are serving all of the top 10 suppliers to this market. And demand is coming from all regions of the world, from leading suppliers in the U.S., from the ones in Europe, but also from optoelectronic leaders in Japan, in Taiwan and in China. Looking at demand dynamics, we expect the optoelectronics business to more than double year-over-year from 2025 into 2026. With this, it makes up for a large part of the revenue that declined in silicon carbide that I illustrated earlier. Finally, let me now present our full year guidance for 2026 to you on Slide 19. This guidance takes into account all the factors that I just described previously. We expect revenues to come in at EUR 520 million in a range of plus/minus EUR 30 million. We expect a 2026 gross margin of 41% to 42% and an EBIT margin between 16% and 19%. The effects of a personnel reduction we have initiated in the beginning of '26 are already included in this forecast. Now, let me comment on the first quarter of '26. As usual, sales in the first quarter of the financial year will be lower than the annual average first quarters. In Q1 '26, we expect revenues of EUR 65 million in the range of plus/minus EUR 10 million. This is comparatively low figure, fully in line with expectations and with a seasonal pattern of the business. For completeness, we have adjusted our USD to euro budget exchange rate at which we record U.S. dollar-denominated orders and backlog to USD 1.20 per euro. With this outlook, I'll pass it back to Christian. Christian Ludwig: Thank you very much, Felix. Thank you, Christian. Anna, we will now be happy to take the questions. Operator: [Operator Instructions] So the first question is from Ruben Devos of Kepler Cheuvreux. Ruben Devos: I just have one on the guidance basically, pointing to EUR 520 million a year. Obviously, you started the year effects of the seasonality at EUR 65 million, which is about 12% of the total. So just curious about how you see the quarterly cadence at this stage. And what might give you maybe the confidence that orders of, I think you talked about EUR 280 million, whether that will materialize at the pace needed for a strong H2? Felix Grawert: Yes. Thank you very much. So we expect again in '26, the pattern that we have seen in previous years, where we have the year a pretty much back-end loaded towards Q3 and Q4. I think that's a seasonal pattern, which we have already seen in 2024 and 2025. If you recall in '24, in the fourth quarter, we even shipped over EUR 200 million. Now in the fourth quarter, it was around EUR 180 million. So it's not uncommon that we are backend or backwards loaded. I think it will not be as heavy in '26. But the Q1 is very weak. I think in Q2, Q3 onwards, we should be maybe around EUR 110 million, EUR 120 million, EUR 130 million, I don't know, something like this. So north of EUR 100 million, I would say. And then clearly, in the Q4, I think we will be peaking. So nothing to be -- don't expect the Q2 is again another EUR 65 million and I think we would be a little dry. But that's not going to happen. Does that answer your question? Ruben Devos: Yes, certainly. The second one is just around the G10, which is the tool of record at the leading laser customers. When a customer qualifies your tool and locks in, how long does that qualification typically last before it needs to be, let's say, recompeted? I'm just trying to understand a bit the stickiness of your opto business and whether your position today, which is very strong, obviously, whether that's a meaningful barrier already or whether there for each new product generation, that sort of, yes, reopens the door for competition? Felix Grawert: I think in the laser business, you have probably the most sticky and the most difficult to requalify from all the segments. So with many customers, qualification efforts have been going on since 1 or 2 years already. And the complexity comes in the qualification for a laser tool from the fact that it's not just one simple laser, or one simple layer like you have in silicon carbide. In SiC, this is our most simple tool, I would say. You have one single layer, a thick single layer and every customer is doing kind of almost the same. Now in contrast, in the laser domain, typically, each wafer gets not only put into the tool once for one layer, but the laser customers have very advanced structures. And in these modern architectures and high-speed devices that is currently now making up the market, many wafers of our customers see the tool 3, 4, 5 or even 6x from the inside, meaning the customer makes a layer, doing some other steps, the wafer is put into the tool again, makes another layer and so on and so forth. And you can imagine if something changes in the deposition and that is repeated 5 or 6 times, an error or a change is then repeated or taken to the power of 5 or taken to the power of 6 that depends on a very, very precise repeatability. And so with many of these customers, we've been working since multiple tools, multiple years. That's also the reason why the G10 ASP, which we launched already in '21, '22 is only now getting the strong momentum from the laser market because the qualification has taken such a long time. Ruben Devos: Okay. And just a final question is that you're launching the 300-millimeter Hyperion tool commercially in '26. Just curious how many customer qualifications are currently underway? And when would you expect sort of the first repeat orders to come in? Felix Grawert: We work with multiple customers. I think it's important to differentiate. Some customers are, I would say, in an exploratory and research stage. And there's many of these, I don't know, I think probably double-digit or so. However, I think from commercial relevance, 300-millimeter will, as I mentioned in my prepared remarks, only initially only for a relatively small number of customers. And that is those guys who have a very big 300-millimeter silicon fab, which they want to repurpose and convert an existing 300-millimeter silicon line to a 300-millimeter gallium nitride line. I think all the other stuff like microLED and so on is more like playing around, researching, exploring ways. But I think those market segments probably take another, I don't know, 2, 3, maybe 4 years until they really mature. We are engaged. We work on a lot. But I think in terms of revenue and really making numbers, that's still quite some time away. Operator: The next question is from Martin Marandon-Carlhian from ODDO BHF. Martin, unfortunately we cannot hear you anymore. [Operator Instructions] Christian Ludwig: Let us continue with the next question, please. We can take him later. Operator: The next question is from Rohan Bahl of Barclays. Rohan Bahl: I just wanted to touch on that 300-millimeter GaN tool. I mean your peers said overnight that have gotten several orders on 300-millimeter GaN already. So I just wanted to check your progress on getting Hyperion ready for production volume lines rather than sort of your R&D quality tool that you have at the [ minute ]. Felix Grawert: I think we are very well on track with respect to that. We have also multiple orders again from these few customers that I was mentioning. Rohan Bahl: Okay. And maybe just on the 800-volt AI data center opportunity for GaN, everyone is getting excited about this. So just curious on how things are progressing here? What have customers been saying to you and whether you're still sort of expecting orders to ramp up materially in the second half? I've noticed your backlog has been building for 2027. So I wonder if there's any 800-volt business in there? Felix Grawert: So the 800-volt is splitting essentially into multiple types along the architecture. You probably have seen the slides on the 800-volt architecture by NVIDIA and by major suppliers such as Infineon, right? So we are participating in multiple stages on that chain. The one part is coming from the overland line on the silicon carbide, which translates or transfers from over 10 kV down to 1,200 volts, 2 kV, 1 kV. This is the biggest part silicon carbide. Then gallium nitride comes into play at 650 volt at 100 volt and even at lower stages like 20 volts. So this is where we are participating. We are with multiple customers working on 650 and 100-volt devices for exactly this architecture. And to our understanding, the qualification efforts of our customers means either IDMs or foundries, again, with their customers, being the board makers and the power supply makers for these architectures is ongoing. To our understanding, there is no clear time line on when exactly the switch is taking place yet. And that is also the reason why I commented in my prepared remarks that we know that this is coming, and we are pretty sure that this is coming sometime in the time frame, I always say '27 and '28, but we don't know exactly when it is coming. So in the order backlog that you're referring to, I don't think there is still 800-volt orders in. I think this is other topics more like EV silicon carbide related. Of course, general tool for silicon carbide can be used for any segment. That's clear. But I think the button when exactly the 800-volt is getting pushed and the orders are coming in, the timing is still a bit uncertain. I would not be able to give you the point in time at this period of time. Operator: So Martin Marandon from ODDO BHF is back. Martin Marandon-Carlhian: My first one is on photonics and opto, et cetera. Considering that several of your customers are talking about very significant indium phosphide CapEx increase this year. And I understand that the big acceleration in terms of orders was really in Q4 last year. Do you think we are quite early in that CapEx cycle? Or do you think that '26 could be the peak? So how -- basically, how do you think about '27 at the moment? Felix Grawert: Thanks a lot. I think that's a very good question. Yes. Let me try to shine a little more light on it, how we see it. And again, we only have, again, a piece of the puzzle, but let me try to explain what we are aware of and what we believe. And so we see that the cycle really has kicked off towards the end of '25. So you have seen that in the fourth Q4 '25, our photonics orders have significantly increased. Q1 to Q3, they were still on a relatively low level. In Q4 '25, our photonics orders have increased. We still, already now in Q1, we see continued order momentum from our customers. Some orders have already received. Others are in discussion with customers. And we expect -- and this is also, by the way, the reason you may have seen that our coverage of revenues with orders, our backlog is lower than we have seen in many past years because we are at the very beginning of the cycle. I think that explains this topic, so on. However, we have indications from a number of customers like kind of their road map, their forecast, what they need throughout the year. This is baked in our guidance. So our guidance reflects that already. And we expect that the orders are coming in essentially throughout Q1 and continue to come in Q2 and covering then the revenues that we have forecasted for the year. And as you see, it's a quite significant increase. It's more than double year-over-year for the photonics side. And I mean, this is very helpful for us because I think we all are aware, silicon carbide is really dropping almost dead this year, meaning pulling a bit hole in our revenues. This hole is now just nicely getting filled up by the photonics. It's quite helpful. Now I think you've indicated how long this extends into '27. Of course, very difficult to predict the future. My guess is it's not only 1 year, but it's extending beyond that. However, to comment how much or to which extent it's the majority in '26 and is it even the same level in '27 or less in '27 and more in '27, that is too early. I have no indications to qualify that. Martin Marandon-Carlhian: Okay. And just another one for me on GaN adoption in data centers. I think in the past, you said you could expect orders in H2 this year or in '27 for '27 and '28 revenue. But how do you think about how the ramp will happen? What I mean by this is that, it looks like a big ramp. So how it usually happens with your customers? Do you have already some discussion with when and how much you need to be ready? Or do you really see that ramp once the orders start to come in basically? Felix Grawert: That is a very good question. I think both things come together at the same time. Typically, when a ramp for a new segment is happening, we see the first orders for that particular second or that particular application coming in from one customer or typically from 2 or 3 customers at the same period of time because normally then a segment is coming and also the guys who are using the chips are not only relying on one source, but typically on 2 or 3 sources. So typically, we then get the first orders, particularly for a given segment to come in. And along with the orders that are coming in, we sit together with our customers, they share forecast with us, and we jointly sit on the table making a ramping plan, because normally, it's not that the customer needs only 2 tools or only 10 tools, but rather the customer has a plan and say, look here, in the first year, I need 10 and the next year, I need 15 and the year thereafter, I need 15. How do we best do it? How do we best distribute it over time and so on and so forth. This is normally what's happening. And I expect when this 800-volt GaN ramp is really starting, we are not there yet, but then I expect to have these discussions with customers. Operator: The next question is from Oliver Wong of Bank of America. Oliver Wong: My first question is, again, back to 300-millimeter GaN. I understand that the -- we're not expecting huge revenues upfront. But I was wondering -- so my understanding is that whether it's with the 200-millimeter or the 300, usually customers kind of go with one major supplier, one tool of record, so to speak. I was wondering what kind of timing can we expect for the leading 300-mill GaN suppliers to kind of make a decision on that? Felix Grawert: I think Q4, Q3 or Q4 of '26. Oliver Wong: Got it. And my other question is regarding the lead times. I was wondering if we can get an update on currently where the lead times are for the major end markets and kind of where you expect that to trend? Felix Grawert: Excuse me, I didn't understand your question. Oliver Wong: The lead times between orders and revenues for kind of your major end market categories. Felix Grawert: I think we are probably around -- I think it depends by the market, somewhere between 7 and 10 months, I would say, or 6 and 10 months, something like this. But honestly, I don't have it broken down by end market. We are back to normal, right? If you recall, yes, in the post-COVID, our lead times were very long. We are now back to a normal lead time. Operator: Next question is from Madeleine Jenkins. Madeleine Jenkins: I just had one -- another one on GaN. You mentioned utilization rates are improving. Do you have a kind of a broad sense of where they are now? And then also on this data center opportunity, obviously, I know timing is uncertain. But sort of volume or demand-wise versus kind of the consumer business that made up GaN in the past. Do you think it's a similar size? Or do you see it being bigger? Any color on that would be great. Felix Grawert: Utilization rates, that's always very difficult to predict, because we get more like signs from our customers, qualitative signs like: we need new tools, we don't need new tools. I would guess across the market, probably utilization rates are maybe 60% to 80%, I would say. So on a decent level now, I mean, earlier, we were probably around 30% to 50% after the big GaN investment wave where the demand wasn't there yet. So I think it's still taking a little bit of time until the next investment wave is getting triggered. But as we said, somewhere around the '27 time frame, early in '27, end of '27 or maybe even end of this year, we will see some investment trigger. Now as for the size, and I think with GaN, it's important to note that GaN has been penetrating across all market segments. It started off, as you rightfully note, 4, 5 years ago, purely in the consumer market, chargers for smartphones, chargers for notebooks and those kind of applications where the form factor was the driving topic. By now, we have seen GaN penetrate kind of across all the market segments, which is addressed by silicon means motor drives for battery-driven applications. We've seen it in motor drives for things like air conditioners, more like high-power, high-voltage topics. We've seen it in 100-volt and 20-volt point of loads and servers to reduce the energy consumption of servers so kind of all market segments. So I think you cannot split GaN any longer into a consumer or non-consumer segment. I think GaN is really on a trajectory of getting a very widespread application. Madeleine Jenkins: Makes sense. And I know you -- in your release, you flagged that there's a decent chunk of orders for 2027 delivery. Could you just kind of provide some more color on that? Why is it? Kind of is it just lead times or -- is there kind of specific customer capacity additions going on? Felix Grawert: No, no. What we have said is, we expect as we see the utilization rates of the installed base now gradually increasing. And as we see further adoption of GaN, particularly in the 800-volt architecture for AI, we expect that at some point, whether it's the end of '26 or sometime in '27 or at the end of '27, we don't know the exact timing. We expect at some point, utilization rates to be at a level where it triggers new investments, new tool purchases by our customers, and where especially the 800-volt architecture is then switched to GaN. Today, a big part is still on silicon. And once that switch has happened away from silicon to the much more energy-efficient GaN, then this will trigger in our expectations, new tool orders by customers because they need to expand their capacities in order to serve this additional market segment. But when exactly it happening, whether this is end of '26 or early '27 or end of '27, we explicitly say we don't know the timing. Madeleine Jenkins: Sorry, I get it. So I was talking more kind of broad comment on your current backlog. I think over EUR 100 million is for delivery in '27. I just wondered why that was the case? Felix Grawert: Well, this is a mix of applications. It's a mix of applications. A big part is silicon carbide, where customers have ordered and as the market fell down and became slower, customers said, can we have it a little later? Yes, I think the biggest part -- I would guess the #1 application amongst those is silicon carbide. Operator: The next question is from Martin Jungfleisch of BNP. Martin Jungfleisch: First one is a bit of a follow-up on the guidance and the lead times. It looks like that you need around EUR 300 million in new orders in the first half to make the '26 guidance. Is that kind of the right way to think about it with lead times of 7 to 10 months? And then maybe if you can comment if you're on track to meet this kind of EUR 150 million order run rate in Q1 already? That's the first question. Felix Grawert: Yes. We see ourselves fully on track. We sleep very well. We feel very well in covering and securing that. Martin Jungfleisch: Okay. Then maybe another follow-on on the moving parts. I think if I understood you correctly, you mentioned that you expect photonics revenues to double this year. So then what are the moving parts? I think you said also GaN should be up moderately. So is it like the 3D sensing part or the LED part that should be down massively this year then? Felix Grawert: Sorry, I didn't get the last one. I didn't get the last part of your question. Martin Jungfleisch: Yes, I was just asking with photonics doubling, I think that's what you said this year. And what are the moving parts within that revenue guidance? I think you said GaN should also be up moderately, so is 3D sensing, LED, silicon carbide then down quite massively? Is that the right way to think about it? Felix Grawert: Yes, exactly. That's the right way to think about it. I would say LED/microLED roughly is flat. Silicon carbide massively down. This is a big hole that's in there. And this hole, to the largest part, is getting filled up by the doubling of the optoelectronics. And that's why overall, and if you sum it up, we come at those slightly down numbers from the whatever EUR 557 million we had in the past year in '25 and now to the EUR 520 million plus multiple. Martin Jungfleisch: Okay. And maybe if I can, just a small follow-up on the gross margins. Can you just break down the moving parts a bit on the gross margin guidance for this year? So what is kind of the headwind from lower revenues that you're seeing, what is the better product mix and so on? And maybe if you think about -- if we go back to EUR 600 million revenue next year, what would be the gross margins on a like-for-like basis when you assume all the benefits from the restructuring program, et cetera, should this be like 45% then? Felix Grawert: So great question, but I don't have all the numbers prepared. It sounds like almost I would need an Excel sheet next to me to answer your question. So on a joking note. No, let me try and best to help you explain as much as I can without having a computer next to me, yes? So you see we managed to keep the gross margins around stable compared to last year or improve even a little bit. And what you see here is already we did first a slight amount of headcount reductions early in '25, so last year already. So a part of that benefit already becomes effective in '26. We then, as you have seen, have been able to gain further efficiencies, and we do another slight headcount reduction now or have done in January already. It's completed. We did it very early in the year. And the cost for that is, of course, included in the guidance. And we've been working a bit on our efficiency in operations, streamlining processes and operation shop floor work and all that kind of stuff, right? And all that allows us to keep the gross margin stable. Now the question is, how should you think about it? Well, if you go into next year, into '27 -- again, I just do it on a like-for-like basis. I didn't do it the Excel spreadsheet for your hypothetical EUR 600 million. But you can then take out from the cost this what we said, mid-single-digit million restructuring cost. That's, of course, a onetime cost, and that's onetime in '26 and not again in '27, kind of. So that will help on the gross margins. And honestly, I haven't looked at the details of the product mix, which, of course, also plays a role. I haven't done that. But it will certainly help on the margin. And just to make sure -- maybe one more comment, just to make sure that you get that, as you now probably looking to get some numbers into your model. And if you look at the R&D cost, we had in '24 an R&D cost on the order of EUR 90 million, and we had in '25 an R&D cost on the order of EUR 80 million. In the current year '26, if you do your model, we'd rather put in EUR 90 million of R&D cost. You will come to that if you do the math anyways with gross margin and the EBIT margin, just to make sure that you get the right number so everybody gets the right numbers here because we have quite some new ideas for new products, and that always translates then for us into R&D because at some point, '27, '28, we expect the markets to pick up, and of course, our investors and you guys expect that we have then a fresh portfolio winning and securing our market position again. Now it's down. But when new markets are there, then it's a lot of fun. We want to be prepared and we want to be ready for that. Operator: Next question is from Jarad Abed of mwb research. Christian Ludwig: It doesn't seem to be there. Let's take the next question please, Anna. Operator: Maybe it should work now, Mr. Abed, can you hear us? Abed Jarad: Yes. Can you hear me? Operator: Yes, we can hear you now. Abed Jarad: Okay. Sorry. Yes, I just have a quick question regarding Q4 backlog movement. I mean there is notably an order cancellation of approximately EUR 11 million. Can you provide some color on this? Felix Grawert: Yes. I think that was 2 process modules. I think it was a customer from laser and gallium nitride, if I recall. Abed Jarad: Okay. And my second question, I'm trying to understand the overcapacity in silicon carbide. Is it like structural or cyclical? Felix Grawert: Cyclical. So we get from our customers literally the feedback that they say, look, gradually capacity is now starting to fill. I mean we looked 1 year ago probably at 30% utilization, but the adoption of silicon carbide continues in the market. A big element that helps is that the prices for substrates have dropped significantly. And due to that, the overall -- and substrates make in silicon carbide a major part of the overall cost, probably the #1 cost position is substrate. Those are getting cheaper. With that, and the silicon carbide power devices are getting more affordable. The cost is going down. And as cost is going down, silicon carbide MOSFETs gain relative in attractiveness compared to silicon power devices, silicon IGBTs. And with the gaining attractiveness that design-in is increasing, they're getting more widespread and the demand in terms of units is increasing. And as the units are increasing, the existing capacity gradually gets filled. And at some point -- again, we don't know the timing, but at some point, the overcapacity will be digested and then new orders will be triggered. And again, we expect this sometime in the '27 and '28 time frame. When exactly, we don't know. Abed Jarad: Okay. But you know that like -- I mean, it's -- you mentioned previously that you expect some orders once annual EV production with silicon carbide inverters surpassed 3 million units. Is it still the case? Felix Grawert: I didn't get your question with the numbers that you were just saying. Sorry, I couldn't understand. Abed Jarad: Yes, sure. You mentioned previously that you are expecting like silicon carbide acceleration once annual EV production with silicon carbide inverters surpassed 3 million units. Is it still the case? Felix Grawert: I think we've never given out a number of 3 million units for inverters. I think that's a very specific number, which is probably not from us. Christian Danninger: I think it is referring to a broad assessment of how many cars we would need on the street to see a pickup. That was -- that's where it came from. Christian Ludwig: As a proxy. Christian Danninger: As a proxy, exactly. Felix Grawert: Honestly, we cannot comment on that. Operator: Next question is from Craig McDowell of JPMorgan. Craig Mcdowell: My first one is on pricing. And certainly, on the device side of opto, we're sort of seeing, obviously, a tight market, and it seems like device makers -- laser device makers are able to take price and pretty significant price. I'm wondering whether that changes the value that you offer to your customers on the indium phosphide tool and whether you're able to see price increases and specifically whether that's included in your more than doubling comments for 2026? Felix Grawert: The main driver for the doubling is literally on the number of tools. So it's not a doubling by price, yes, that would be nice. It's literally doubling by the number of tools, by the number of shipments. But historically, optoelectronic tools are on the higher side of the pricing in our portfolio simply due to the fact that those laser tools are of a very high level of complexity. If you compare an LED tool going into China and you take a laser tool and you open them and look at them next to each other, you feel that one tool is filled with twice the number of technology inside than the other tool. And somehow that's, of course, reflected in the price. Craig Mcdowell: But given the tightness in the end market, you're not yet raising the prices of your own tools, to be clear? Felix Grawert: No. We don't. That's never a good idea towards customers. They don't like that. Craig Mcdowell: Understood. Okay. And then just on -- you mentioned that you're still in discussion with opto customers through Q1. Some of those orders might have been written, certainly discussions ongoing. Just wondering whether there's a change in tone with your opto customers, are you talking on a multiyear period now in terms of delivery? Or is it still very much sort of within the next sort of 6, 12 months that conversations are happening? Felix Grawert: It depends customer by customer. We have both types. We have some customers discussing kind of literally the next tool. I need something very, very fast. When can I have 5 tools? Please as fast as possible. I have others more engaged in a structural discussing throughout the year '26 and then others more looking around the multiyear road map. It really depends by customer purchase team or strategic planning team. We have all of it. Operator: The next question comes from Om Bakhda from Jefferies. Om Bakhda: I just had a question on your silicon carbide business. I guess when we look through the course of the year, is there -- I mean is there anything that you see today that could happen, that could mean that the guidance that you've given on SiC could prove to be conservative in the second half of this year? Felix Grawert: Well, that's a very good question with lots of buts and if. Let me think. Honestly, I think for the second half of '26, my gut feeling tells me it would be a bit too early, seriously for silicon carbide and talking about revenue, because I think there still is some capacity in the market, which still needs to be digested as we had discussed earlier. I think if we look into '27, purely the EV demand can be a nice driver, as discussed. We see now that silicon carbide devices more and more get designed into higher voltages. So not only 1 kV, 1,000 volt, 1 kilovolt, but also 2,000 volt, 3,000 volt, 10,000 volt, so 2, 3 10 kV, and notably in the space of grid applications for solid-state transformers and applications like that. But I think this is -- would be too early to expect a tool demand, equipment demand for that in '26. I think we are clearly looking towards '27 and '28 for these new applications and new trends. That's my gut feeling. Maybe I'm wrong. If we can ship more, we are happy to serve the market. We have capacity. We can serve the market, no problem. But I think realistically, and giving you the most realistic estimate, I would not expect an uptick in terms of revenues, maybe orders towards the end of the year, but I don't think there's a big uptick in shipments in '26. Om Bakhda: Got it. And then just a follow-up in terms of your sort of the order momentum you're expecting in the first half of this year. When you sort of look at the discussions you've had year-to-date, how should we think about the mix in your order book? Is it sort of largely opto based in H1? Or could we see some GaN tool orders coming and inflecting in H1 potentially for shipment in the second half of this year? How should we think about that mix in the order book? Felix Grawert: I would expect, if I look at ongoing customer discussions at this point in time, again, there can always be surprises, but I'm just extrapolating what kind of discussions are ongoing. And we know then the discussions take between, I don't know, 1 and 3 or 4 months to materialize, which kind of covers the H1 quite well. I would expect in H1 a significant optoelectronics/LED loaded order intake, whereas then in the second half, I would expect the power electronics gradually to come back. Operator: Moving on to the next question from Michael Kuhn of Deutsche Bank. Michael Kuhn: I'll stick with, let's say, order composition. Of the roughly EUR 260 million order book you currently have, I think you gave some indications already. But could you maybe give some deeper insight into how the composition is by category, power versus non-power and maybe even going into a little more detail? Felix Grawert: Yes. I think if we look at the order backlog of '25, I think opto is around 40%, SiC 30%, GaN 20%, LED 10%. Do you think so, Christian? Christian Danninger: Yes. That makes sense. Approximately. Felix Grawert: Approximately, right? Christian Danninger: Yes. Michael Kuhn: Understood. And then on GaN and let's say, the next upward cycle, you mentioned at some point in the presentation that you expect AI data center power to drive the tool demand by factor 3. What would be the comparison base for that factor 3, just to get a better idea on how big the market could grow? Felix Grawert: I think we look here at the comparison, the total market size is more like around '24, '25. And the factor of 3, which we've illustrated more like an upside scenario comparing '25 versus 2030 kind of a 5-year comparison, one point in time, '25 versus 2030. I think this is what we have looked at right now. Michael Kuhn: Okay. So this is -- '30, this is nothing like 4 in 2 years' time, at least from today's point of view? Felix Grawert: No, no, no, no. I think this is a gradual increase. As we have discussed in this call already, we believe at some point in '27, there could be the first momentum starting and then it's a design in. And as always, in our applications, our markets, it's a ramp. It's a new trend, which is then happening. It's getting designed in. So our customers, our IDMs have now made devices, which is in the qualification with their customers, board makers, GPU makers, rack makers and so on and so forth. The architecture has been set. Now the complete industry is working on it. Hopefully, it's going to be fast. We know the AI industry is a very fast-moving industry. So maybe it's faster than some of the other industries. But then at some point, it's being designed in and then the volume is starting and then gradually over time, it gets penetrating and the adoption rate goes from today 0% then whatever, 10%, 20% in the initial stage and at some point, 2030, 100% adoption rate after the adoption is completed, and then we look at that point in those numbers. So a gradual adoption. Again, still our assumption. You never know how the adoption goes. Sometimes things go very, very fast, would be nice, but that's the assumption which is under. Michael Kuhn: All right. Understood. And then one more question. Obviously, we are not yet there. But let's say, the -- say, cycled as well and you're ramping capacity big time. When would you reach, let's say, your current capacity towards 100%? And when would you consider, let's say, reactivating your Italian capacity that is currently mothballed and what would be the potential cost associated with that? Or is that not even a planning scenario as of now? Felix Grawert: Honestly, it's not relevant for the overall business or profitability. I would say capacity can always be scaled up in one way or another, which way we choose to take, we will decide when we are there. But I think it's nothing that affects the P&L in one way or another. It's not a constraint. It's not a limit to us. It's not a profitability limit or inhibitor or whatever it is, it's just operations. Operator: The next question is from Nigel van Putten from Morgan Stanley. Nigel van Putten: I just wanted to follow up on some of the customer behavior in the optoelectronics end market. I mean, some of them have said that they're currently ramping supply. They see demand ahead of supply, maybe even towards next year. But do you feel that comment is directed at you? When you speak to customers, do you have to disappoint them? Are you shipping to, let's say, 80%, 70% of demand? You've mentioned, as an example, a customer that comes in with a shipment for 5 tools as quickly as possible. Are you still able to serve those type of requests? Or do you have to sort of disappoint them and saying, well, that's going to be quite a bit longer than maybe the 6 to 10 lead time month lead time you've indicated before? Felix Grawert: Well, in this case, good for our optoelectronics customers. The silicon carbide customers are so nice to step to the side for them in this year, leaving a lot of unused capacity, both in our shop floor and within our suppliers. And as you know, we work on a -- how do you say, modular system with our Planetary systems. So all our products are closely related to each other as a family, you can say. That is now a capacity that is not being emptied or not used by silicon carbide customers because that market is currently sleeping. We can use the same supply chain for parts and of course, also the same kind of assembly tools on our own shop floor and the skill set of our people now to do the labor part. In other words, we have free capacity to literally serve all the demand, which is currently coming in. It might be a different game if the silicon carbide would be at the same time in the party now. But silicon carbide, as we have illustrated, is really leaving the gap, and this gap is currently just now being taken by the laser guys. It's good for them. Nigel van Putten: Got it. So when they say we can't ship, it kind of reflects your lead times, you think? Or especially when your customers... Felix Grawert: It should not be us who's the bottleneck. Yes, it should not be us who's the bottleneck. And my team, my operational team, my sales team is handling it. I expect if there would have been a bottleneck, I would know it. I'm not aware of any bottleneck across the entire industry. Nigel van Putten: Perfect. That was my question. But then maybe a broader question. You said larger wafer size and better yield. I think one customer said it's 6 inches is 4x the product of the 3-inch, which -- or yes, the current capacity. So maybe ballpark to give us an idea in terms of the capacity you're shipping this year relative to the installed base, what do you think the increase is you can serve with sort of your view on the revenue you're shipping into '26? Felix Grawert: Well, that's a very, very difficult question. I can only illustrate to you the various factors to that because the installed base is -- first of all, many, many tools, but many of them still on 3-inch and 4-inch wafer size, as you said, which is a much, much smaller capacity in terms of square centimeters or number of chips that you can get out of it in other ways. The other point is, that while the installed base counts many, many tools in the installed base, many times those old tools, they would be dedicated to one product and they would only be qualified for certain products, so with huge inefficiencies. So I think we are currently like the shift in new architecture towards photonic integrated circuits to the PIC on indium phosphide, also much bigger chips, much more functionality is really -- it's a world which is not comparable to the old world I would say. Because it's different chips, different products, a much larger wafer size, much higher productivity. So I think the industry is really seeing a massive momentum. But on the other hand, as illustrated, inside of the data centers, even inside of the racks, we go completely away from electric cables and go completely to optical data connects, which inside of the racks is really new to the industry. So the demand is massively increasing. Operator: The next question is from Adithya Metuku from HSBC. Adithya Metuku: Just firstly, just thinking about the capacity that's coming on board for indium phosphide lasers. From what I understand, the yields are something like 50% and that the continuous wave lasers used in CPOs are about 1/10 of the die size of EML lasers. So I just wanted to hear your thoughts on how you think about the yield improvement, especially if the die sizes go down. That combined with the die sizes going down with the existing capacity that's in place or you will have put in place by the end of 2026. I suppose the question is, it's been asked, but how much does the capacity go up? And will there be enough demand to drive further growth in your optoelectronics business in 2027 if yields go up, die sizes go down 10x because of continuous wave laser adoption. So any thoughts around that would be great. And I've got a follow-up. Felix Grawert: I think you asked the billion-dollar question, but I don't have the answer for you, unfortunately. I think the effect you're alluding to is a typical pattern across the whole semiconductor industry that in a new market segment, you start with a relatively low yield simply because the application is there, the application needs the capacity, the application needs a ramp. But then over time, new generations of products step-by-step come in, which come with a die size shrink and higher yields, means you get more capacity out of your installed base. Typically, such a process, so I cannot -- upfront, I cannot quantify this for you. This is -- I don't know. I think also our customers at this point in time don't know. Typically, this process that you are describing is happening over a 2.5, 3, 3.5, 3, 4-year time horizon because it takes one generation of chips and after the next generation and the next generation, typically, at least you need 1.5 to 2 years for one generation after the next, because your customers are simply not able to digest a faster succession of generations and also to increase the yield takes some time. So what it means is my personal guess, and again, it's only a speculation, but I can share the opinion I have with you is that this is not only a 2026 trend, but at least this trend in this market will extend into 2027, that I think is very, very clear. This does not happen within 1 year. Now to which extent and how large this will extend in '27 and '28? I think that's the billion-dollar question I cannot quantify for you. But I'm very convinced that we are not talking about 1 year, but at least about 2, and I would guess rather a 3- to 4-year time horizon. Adithya Metuku: Got it. So essentially, you are expecting growth in '27, but you don't know the magnitude of the growth at this stage. Would that be a fair way to characterize it? Felix Grawert: That's a fair way. Yes, exactly. That's a fair way. Adithya Metuku: Got it. And then just following up on an earlier question, you talked about the epitaxy machines not being the bottleneck. To my understanding, it's the indium phosphide substrates. Is that right? Or is there some other bottleneck in the system that's preventing your laser customers from ramping capacity and meeting the demand that they're seeing? Felix Grawert: I hear also that indium phosphide substrates is a bottleneck that's currently being addressed by the entire value chain. I know this both on the side of our customers who need the substrates in their factories, and I know it also from substrate manufacturers. And I'm aware that there is a large, very well coordinated and well-orchestrated initiatives by our customers and by the substrate makers together in place to address these bottlenecks. But yes, that's, I think, a topic which is currently being worked on in this value chain and in this industry. Adithya Metuku: Understood. And then maybe just one last clarification. Are you able to give any color on the divisional growth revenue expectations for the first quarter? Felix Grawert: Honestly, I don't have the numbers. Operator: And the last question for today from Malte Schaumann from Warburg Research. Malte Schaumann: My first one is on silicon carbide superjunction technology. So can you maybe share your view on how the time line until adoption might look like? And then associated to that, would your tools in the existing base require an upgrade to incorporate that? Felix Grawert: A very good question. So we are aware that all the leading device makers are currently working on superjunction technologies. To my understanding, the first devices will be launched at the end of '26 by suppliers, means in the second half of '26 or the first half of '27, volume ramps of devices happening in the market. And we think that superjunction technologies in silicon carbide will be strongly embraced by Western players because it's a major way for them to get more dies per wafer and hence, to reduce the cost per chip. So it's a massive trend, which is currently being strongly pushed across the entire industry. As for our tools, there's no further upgrade needed for our tools. They are able to run as is. And one point I would like to illustrate, nevertheless, is that the superjunction technology where essentially you don't take one thick layer, let's say, 10, 12, 14 microns of thickness, but you rather split this into 3 or 4 thinner layers and the wafer gets put into the tools multiple times. Most customers embrace a technology, which is called multi-EP, multi-implant, so you do an epi step to do an implant, you do another epi step, another implant. So the wafer gets several times into our tools, a little bit like what we saw in the indium phosphide just earlier in the discussion. And that means that for one wafer of superjunction devices, you need more epi time. You need more tool time in the epi, and we expect that this will be also one driver at some point, as illustrated in the '27, '28, '29 cycle, which will trigger additional demand from our customers for more tools because they need to expand their epi capacity in order to accommodate all the superjunction MOSFETs. So it's a market trend that we like a lot because it helps our business. Malte Schaumann: Okay. Understood. Secondly, on working capital. With the shift in the product mix away from power to opto this year, can you keep your inventory target? I think it was around EUR 200 million by the end of '26. And then secondly, with respect to the down payments, we have seen quite a significant decline over the past few years relative -- down payments relative to order intake. So what are your thoughts where these levels should normalize going forward? Felix Grawert: Yes, good question. So inventories, yes, we expect inventories to go further down. The shift in product mix, in fact, is an effect which is not helping. So we are still -- but we are still targeting EUR 200 million to EUR 220 million in terms of inventories. So maybe there's 20 more than we initially expected due to the shift of product mix, let's see. But still, we target a significant further reduction of inventories. It's gradually burning down, maybe a little bit slower as you're indicating, but still significant. Christian, maybe you can take the second part. Christian Danninger: On the down payment, it's a little bit more difficult because we don't have complete control on it. It really depends on end market mix, regional mix, customer mix and also cutoff date effect. I mean, the number at the end of the year was really low. We expect it to recover to some degree, but to predict this in detail is quite difficult. And it's also not the major negotiation point with customers, right? It's part of the deal, but not the major part. So it's a little bit difficult to predict. It should increase trend once again. Malte Schaumann: Okay. Okay. Lastly, a quick one on R&D. You indicated an increase in R&D spending this year. Would you expect another increase with the rising business volume generally over the next years and '27? Or would that volume be more or less sufficient to support your programs you have in mind? Felix Grawert: I think we discussed already earlier. So in '24, we had around EUR 90 million. In '25, we had around EUR 80 million. For '26, we expect again around EUR 90 million. Malte Schaumann: And then beyond '26, so the EUR 90 million is sufficient for the next few years... Felix Grawert: It look -- that always depends a little bit on individual cycles of products. At some point in the cycle, the products take a little more money. At some point in the cycle, they take a little less, it depends throughout where the portfolio stands. Honestly, I wouldn't want to predict beyond that. Operator: Thank you very much from my side. With that, there are no more questions in the queue. So I'm closing the Q&A session and handing the floor back over to Ludwig. Christian Ludwig: Well, thank very much. Thank you very much all for your questions. The IR team and part of the management team will be on the road in the next couple of weeks, so we'll see a lot of you, hopefully, in-person. And for those we do not see, we will have our next quarterly call scheduled for April 30, when we will report our Q1 figures. So if we don't see you until then, then have a happy Easter and talk to you end of April. Goodbye, and thank you. Felix Grawert: Bye-bye.
Operator: Good morning, and thank you for standing by. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the Catalyst Pharmaceuticals Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Mike Kalb, Chief Financial Officer. Michael Kalb: Thank you. Good morning, everyone, and thank you for joining our conference call to discuss Catalyst's fourth quarter and full year 2025 financial results and business highlights. Rich Daly, President and CEO, will lead the call today; and Jeff Del Carmen, our Chief Commercial Officer and I will also present. Additionally, other members of our management team will be available for the Q&A. Before we begin, I would like to remind you that in our remarks this morning and in the Q&A session, we will make statements about expected future results, which may be forward-looking statements for purposes of federal securities laws. These statements reflect our current expectations, estimates and projections and do not guarantee future performance. They involve risks, uncertainties and assumptions that are difficult to predict and may not prove to be accurate. Actual results may vary from the expectations stated in our forward-looking statements. These forward-looking statements should be considered only in conjunction with the detailed information contained in our SEC filings, including the risk factors described in our 2025 annual report on Form 10-K filed yesterday, February 25, 2026, with the SEC. At this time, I'll turn the call over to Rich. Rich? Richard John Daly: Thanks, Mike. Good morning, everyone, and thank you for joining us today. I'd like to begin with a review of 2025, which was another fantastic year for Catalyst before moving on to the plans we have set for 2026. 2025 was defined by notable growth as evidenced by another year of record revenues, execution of our strategy to maximize the value of our best-in-class commercial portfolio and at the center of all we do, personalized support for patients living with rare diseases. For the full year 2025, total revenues grew by 19.8% year-over-year to $589 million, exceeding our previous guidance, which was the upper end of our range of $565 million to $585 million and highlighting our ability to capitalize on market opportunities while maintaining operational excellence. Full year net product revenue for 2025 reached $588.8 million, an exceptional 20.3% increase over 2024. This is driven by a number of factors, most notably continued patient identification and market penetration. And as demonstrated by our 2026 guidance of total revenue between $615 million and $645 million, we are confident in the continued growth trajectory of our differentiated products. Let's begin with the 2026 forecast down by product, starting with our promoted products, FIRDAPSE and AGAMREE. FIRDAPSE guidance for 2026 is $435 million to $450 million, reflecting an increase of 21.4% to 25.6%. AGAMREE guidance of $140 million to $150 million, forecasting a 19.6% to 28.1% growth. And finally, FYCOMPA, $40 million to $45 million, which effective at the beginning of 2026 is no longer promoted as a result of generic competition that entered the market in 2025. Now let's take a closer look at our 2025 performance. Revenue for our flagship product, FIRDAPSE, was $358.4 million, an increase of 17% for the full year and 18% when comparing quarter 4 2025 to quarter 4 2024. FIRDAPSE remains the only evidence-based FDA-approved therapy for Lambert-Eaton myasthenic syndrome, or LEMS, a debilitating nerve muscle communication disorder that results in progressive weakness and fatigue. We are making significant headway in the 2 distinct markets for the product, idiopathic LEMS and cancer-associated LEMS, and we believe there is still significant opportunity for growth in both of these submarkets. Combined, we view the LEMS addressable market opportunity to be in excess of $1 billion. Jeff will cover the brand performance, driven by exciting initiatives that we believe will help our team deliver continued growth for FIRDAPSE. As you know, in 2025, we finalized settlement with 2 of the 3 first filers. One suit remains against Hetero USA, and a trial has been set to start on March 23, 2026, which is prior to the expiration of the automatic 30-month stay on May 26, 2026. We remain confident in our ability to protect our IP. Moving to AGAMREE. Our differentiated corticosteroid medication approved for use in the treatment of Duchenne Muscular Dystrophy, or DMD, a rare and life-threatening neuromuscular disorder. AGAMREE delivered 154.3% year-over-year growth with 2025 revenues of $117.1 million. Our launch strategy targeting centers of excellence penetration delivered outstanding results. With this success, we have now pivoted our efforts to going deeper in each of these core institutions. Our goal is to ensure the greatest possible use of AGAMREE an effective and differentiated steroid in what we believe has a greater than $1 billion addressable market. We plan to tap into the full potential of AGAMREE through our ongoing SUMMIT study, a 5-year follow-up study evaluating approximately 250 DMD patients once enrollment is completed. By increasing the full body of data that assesses the potential long-term benefit over current standard of care, we believe AGAMREE can be further differentiated, allowing us to build more awareness and drive further growth. With regard to maximizing the full value of AGAMREE, we are presently conducting a Phase I study to evaluate dose equivalence between AGAMREE and other steroids and potential immunosuppressive activity as well. We are also currently assessing potential indications beyond DMD, where AGAMREE may serve a broader array of patients with rare diseases. We look forward to updating you further on our expansion initiatives with AGAMREE as the year unfolds. Lastly, FYCOMPA. Despite its loss of exclusivity in May of 2025, the product delivered net revenue of $113.3 million in the year, outperforming our expectations. Due to generic competition, we are forecasting sales of FYCOMPA in 2026 of between $40 million and $45 million, which reflects our expectation that FYCOMPA will remain a solid revenue producer for us. Beyond our portfolio optimization initiatives, we are pursuing our evolved and focused business development strategy aimed at identifying the right opportunities to supplement our strong organic growth. Our business development engine conducted over 100 assessments in 2025. Notably, about 90% of those were inbound, underscoring our reputation in the industry as a proven leader that delivers value through launching, supporting and growing our promoted assets. With our industry-leading rare disease expertise, best-in-class commercial capabilities, established plug-and-play infrastructure and trusted status within the rare disease community, we are confident in our ability to drive continued long-term repeatable success through business development. As we assess the broader landscape and levers at our disposal to create value, we are focused on remaining nimble and acting opportunistically to ensure we are well-positioned to identify, assess and onboard rare disease products that will grow our portfolio and positively impact the rare disease community. To be clear, we will maintain the same guiding principles that have enabled our prior success, remaining disease and modality agnostic while prioritizing on-market and near-market differentiated rare disease products. In addition, as we reported during our JPMorgan presentation earlier this year, we have now expanded our search to include therapies in late-stage development with positive proof of concept, a differentiated profile and a well-characterized regulatory path. We will also continue to focus on assets with peak sales of up to $500 million, which is where we believe we can be most competitive and best suited to integrate with our existing infrastructure. With that, I'll turn the call over to Jeff, who will provide additional insights into our commercial performance. Jeff? Jeffrey Del Carmen: Thanks, Rich. We are very pleased with our exceptional performance in 2025, marked by full year combined total revenues of $589 million, surpassing the upper end of our updated guidance of $565 million to $585 million. This outstanding achievement was driven by FIRDAPSE reaching a record high of $358.4 million, the continued successful commercialization of AGAMREE and the strong contribution from FYCOMPA despite the entry of generic competition. Let's start by reviewing our advancements with FIRDAPSE, the only evidence-based FDA-approved treatment for Lambert-Eaton in myasthenic syndrome. In the fourth quarter of 2025, net revenues amounted to $97.6 million, showcasing a remarkable Q4 2025 versus Q4 2024 growth of 18.3%. Furthermore, FIRDAPSE's full year 2025 net revenues showed strong 17.1% growth year-over-year. FIRDAPSE's performance this year reflects deliberate disciplined commercial execution across the patient journey. First, by expanding and optimizing our lead-generating channels, we increased our data leads of identified LEMS patients in active diagnostic stages by 40% in the fourth quarter. These patients consistently represent approximately 50% of new starts each quarter, reinforcing the importance of our sustained investment in early patient identification. Second, we significantly improved our conversion efficiency through tighter coordination across field teams, commercial analytics and marketing, we increased the rate at which qualified leads transition to treatment. As a result, new patient enrollments for FIRDAPSE exceeded our 2025 forecast, demonstrating the impact of more focused execution. In the second half of 2025, we also saw increased VGCC testing by more than 1/3 versus the first half of 2025, reflecting targeted initiatives to accelerate diagnosis among LEMS patients. By shortening time to diagnosis, our awareness activities are expanding the treated population and improving the overall patient journey. Finally, in June, we launched a pharmacy outreach program designed to support newly enrolled patients in achieving their optimal therapeutic dose. This initiative contributed to a significant reduction in new patient discontinuations, strengthening early persistence and reinforcing long-term value. Overall, FIRDAPSE's performance underscores the effectiveness of our end-to-end commercial strategy, expanding the top of the funnel, improving conversion, accelerating diagnosis and enhancing patient retention to drive sustainable growth. Our next phase of growth for FIRDAPSE will come from both idiopathic LEMS and cancer-associated LEMS. We will continue to leverage the increased data leads to accelerate new patient acquisition while continuing to deploy initiatives to accelerate the diagnostic journey for LEMS patients. As for cancer-associated LEMS, our primary focus in the first half of 2026 is and will continue to be pursuing relationships with leading oncology networks to integrate the updated NCCN guidelines into their care pathways, which we believe will lead to more addressable patients in the second half of 2026. It's important to note that we have already seen significant uptake in the number of new positive VGCC tests ordered by oncologists in the second half of 2025. Turning to AGAMREE. AGAMREE continues to build strong commercial momentum as a differentiated therapy for the treatment of patients living with DMD. For full year 2025, the first full year of AGAMREE being on the market in the U.S., we delivered net product revenue of $117.1 million, representing 154.3% year-over-year growth. In the fourth quarter alone, net product revenue reached $35.3 million, up 67.5% compared to the fourth quarter of 2024, clear evidence of accelerating demand and effective execution. Adoption across top DMD centers of excellence continues to expand. To date, 100% of the top DMD centers of excellence, which represent about 80% of all DMD patients have enrolled at least 1 patient on AGAMREE and 270 unique health care providers have submitted enrollment forms. This reflects broad and deepening engagement across the treatment community as well as growing confidence in AGAMRE's differentiated clinical profile. Importantly, we saw a meaningful reduction in discontinuations and cancellations in the second half of 2025. This improvement was driven primarily by increased provider familiarity and experience with AGAMREE as well as fewer disruptions from DMD market events. We believe that this trend reinforces the durability of demand as the market matures. Since launch, approximately 45% of patients have transitioned from prednisone and 42% from EMFLAZA, underscoring AGAMREE's relevance across established treatment paradigms and its ability to compete effectively within multiple segments of care. In addition, the median age of new enrollees has dropped 1 year in the most recent quarters compared to when we launched in 2024. Reimbursement performance remains strong with success rates above 85%, consistent with our expectations. Our commercial organization continues to execute with precision, prioritizing targeted provider education, optimizing field force impact and deepening payer engagement to support sustained uptake and long-term market expansion. FYCOMPA delivered full year 2025 net product revenue of $113.3 million, exceeding the upper end of our guidance. As previously noted, we expect continued revenue erosion from increased generic competition to impact FYCOMPA performance moving forward. As of December 31, we discontinued personal promotion and assistance programs for FYCOMPA. However, we forecast that 2026 net product revenues from this product will continue to be meaningful. In closing, our commercial organization continues to operate with rigor and accountability, translating strategy into consistent portfolio performance while laying the groundwork for our next wave of growth for FIRDAPSE and AGAMREE. Our diversified portfolio, combined with differentiated commercial capabilities and disciplined execution gives us confidence that we will be able to achieve our 2026 revenue guidance. Our focus is unwavering, elevating commercial excellence across markets, expanding and accelerating patient access and unlocking the full value of our portfolio to drive durable growth and sustained shareholder returns. I want to recognize and thank our entire commercial team for their commitment to execution, performance and most importantly, the patients we serve. Their dedication is fundamental to our continued success. At this time, I would like to turn the call back over to Mike. Michael Kalb: Thank you, Jeff. Our fourth quarter and full year 2025 financial results demonstrated another strong year, driven by our solid financial performance, financial discipline and strong execution. Our total revenues for 2025 were $589.0 million, an approximate 19.8% increase when compared to total revenues of $491.7 million for 2024. 2024 included approximately $2.4 million of license and other revenue, which consisted principally of a milestone payment earned from our sublicensee in Japan, receiving regulatory approval to commercialize FIRDAPSE for the treatment of patients with LEMS in Japan compared to license and other revenue in 2025 of approximately $182,000. For the fourth quarter of 2025, total revenues were $152.6 million, representing a 7.6% year-over-year increase. FIRDAPSE's fourth quarter of 2025 net product revenue increased 18.3% over the fourth quarter of 2024 and 5.9% compared to Q3 2025. AGAMREE's fourth quarter 2025 product revenue net increased 67.5% over the fourth quarter of 2024 and approximately 9% over Q3 2025. For 2026, we are forecasting FIRDAPSE net product revenue to be between $435 million and $450 million, which takes into account an increase in gross to net driven by the IRA impact on our Medicare Part D net product revenue. We expect that the IRA impact will continue to increase annually. We are forecasting AGAMREE 2026 net product revenue to be between $140 million and $150 million. We are forecasting FYCOMPA 2026 net product revenue to still remain meaningful at between $40 million and $45 million. The expected decrease is a result of the entry of generic versions of FYCOMPA during 2025. Net income before income taxes for 2025 was $283.5 million, a 31.1% increase compared to $216.3 million for 2024. We reported GAAP net income for 2025 of $214.3 million or $1.68 per diluted share. GAAP net income increased by 30.8% compared to GAAP net income for 2024 of $163.9 million or $1.31 per diluted share. Non-GAAP net income for 2025 was $346.2 million or $2.72 per diluted share, which excludes from GAAP net income, amortization of intangible assets related to our acquisitions of FYCOMPA, AGAMRE and Ruzurgi of $37.5 million stock-based compensation expense of $24.8 million, income tax provision of $69.2 million and depreciation of $0.4 million. Non-GAAP net income for 2025 was $346.2 million or $2.72 per diluted share, which excludes from GAAP net income, amortization of intangible assets related to our acquisitions of FYCOMPA, AGAMRE and Ruzurgi of $37.4 million stock-based compensation expense of $22.8 million, income tax provision of $52.4 million and depreciation of $0.4 million. Our effective tax rate for 2025 was 24.4% compared to 24.2% for 2024. The effective tax rate is affected by many factors, including the number of stock options exercised in any given period which we expect will be relatively consistent for 2026, but will likely fluctuate from quarter-to-quarter. Cost of sales expense was approximately $87.3 million in 2025 compared to $68.8 million in 2024 and consisted principally of royalties. As a reminder, AGAMRE royalties paid to the ultimate product licensor equals 7% of net sales up to $250 million with additional increases as net sales increase. Additionally, through December 31, 2025, we were also required to pay 5% on net sales up to $100 million to our direct licensor. Further, we are also required to pay our direct licensor royalties of 7% of net sales in excess of $100 million and up to $200 million with additional increases as net sales increase. The company is also required to make a $12.5 million milestone payment when AGAMREE's net product revenue reached $100 million, which was achieved during the fourth quarter of 2025. This milestone payment obligation was capitalized during the fourth quarter of 2025 and is being amortized over the estimated remaining useful life of the asset. Further details of our royalty obligations for AGAMRE as well as FIRDAPSE and FYCOMPA are disclosed in our 2025 Form 10-K. Beginning in July 2026, as per our contractual arrangement with Eisai, we will be required to pay FYCOMPA royalties equal to 6% of net product revenue to the product licensor for FYCOMPA. Research and development expenses were $12.7 million in 2025 compared to $12.6 million in 2024. Our R&D spending during 2025 was comprised mainly of costs to support our ongoing AGAMRE studies. Relative to the normal course of business, absent another acquisition, we are forecasting research and development costs in 2026 to be between $17.5 million and $22.5 million. Selling, general and administrative or SG&A expenses for 2025 totaled $193.8 million as compared to $177.7 million for 2024, primarily attributable to an increase in employee compensation related to annual merit increases and an increase in headcount. Further, general and administrative expenses increased due to consulting fees related to multiple business initiatives, including business development activities, which were offset due to decreases in contributions to 501(c)(3) organizations supporting patient assistance programs. While we are no longer actively marketing FYCOMPA, we anticipate that 2026 SG&A expenses will increase slightly compared to 2025 due to the costs associated with our continued efforts focused on increasing the awareness of FIRDAPSE for the potential treatment of cancer-associated LEMS. As reported, we ended 2025 with cash and cash equivalents of $709.2 million compared to $517.6 million at December 31, 2024. The increase in cash of $191.6 million was largely driven by $208.7 million in cash generated from operating activities, partially offset by $17 million of cash used in financing activities, which includes the repurchase of $25.3 million of common stock during the fourth quarter of 2025. We believe that our life cycle management and our business development activities will not be adversely affected by our share repurchases under our share repurchase plan. We believe our current funds, along with our expected continued generation of cash from operations, continue to provide us the financial flexibility to fund our existing R&D programs, meet our potential contractual obligations and support our strategic initiatives, business development and portfolio expansion efforts, leading to long-term growth and value creation. More detailed information and analysis of our 2025 financial performance may be found in our annual report on Form 10-K, which was filed with the Securities and Exchange Commission yesterday, February 25, and can be found on the Investor Relations page of our website. At this time, I will turn the call back over to Rich. Rich? Richard John Daly: Thanks, Mike. As you heard on today's call, Catalyst is entering 2026 from a position of strength and with significant momentum. Our strategic priorities remain clear, and we are primed to drive continued growth. On FIRDAPSE we'll focus on executing our dual market expansion strategies, prioritizing patient identification efforts for idiopathic LEMS and ongoing education to promote the updated NCCN guidelines for cancer-associated LEMS. For AGAMRE, we plan to progress the multiple initiatives underway to maximize the potential of this differentiated asset, including facilitating earlier disease detection and deepening our market penetration to drive commercial expansion as well as advance the ongoing SUMMIT study and other life cycle management activities. Lastly, we will continue to pursue strategic and thoughtful business development with an eye toward exciting and low-risk opportunities where we believe we can unlock meaningful value. We are proud of our progress in 2025 and plan to deliver continued success in the year ahead. I want to end by thanking our employees, partners and shareholders for their support and dedication. I'll now turn the call back over to the operator for questions. Operator: [Operator Instructions] Our first question comes from the line of Samantha Semenkow with Citi. Unknown Analyst: This is Ben on for Sam. To start, can you speak to the drivers that underpin the growth implied within your 2026 guidance for FIRDAPSE and AGAMREE? Richard John Daly: Thanks for the question. I'll turn it over to Jeff to start the answer. Jeffrey Del Carmen: Absolutely. So, Ben, when we look at FIRDAPSE first, we are extremely excited about the opportunity that still remains. You look at both sides of FIRDAPSE that we've specified and that's idiopathic LEMS, where we feel we're only about 30% penetrated at this point. And then you have the cancer-associated LEMS where we're well under 10% penetrated. So again, significant opportunity there. As I mentioned on the call, we have a pool of patients there that we've stated 500 in the past and that we've seen significant growth from specifically our data leads in the fourth quarter. And so now that number is greater than 600. So based on those identified patients that are somewhere in their LEMS diagnostic journey, we believe that there's plenty of opportunity here in the short term to help those patients convert on to FIRDAPSE treatment. We've also identified some pharmacy intervention programs that have helped us reduce the discontinuations of patients in the first 4 months of treatment where we saw some higher-than-expected discontinuations. So based on those intervention programs, we've seen these patients able to reach their optimal therapeutic dose within the first 4 months. And at that point, we've seen a reduction in the discontinuation of those patients by 12%. So that's very significant, too. So, from the cancer associated side, we've seen a 21% increase in all VGCC testing year-over-year in '25 versus '24. With that, patient identification also is critical. So, we know that number will, in the long term, turn into patients' potential leads for us to help. And then we also expect that screening to take place in the first half of the year. But then in the second half of the year, we expect more arrangements with group practices that will help us convert those leads into patients on therapy. So that's FIRDAPSE. Richard John Daly: Jeff, just on the FIRDAPSE side, you talked about the number of leads that we have. Can you talk a little bit about the improvement in quality of those leads? Jeffrey Del Carmen: Absolutely. So, we've become much more efficient in helping these patients go from a diagnosis of LEMS on to treatment when appropriate. We use AI, we use machine learning, and we have 5 different data sources that we utilize to qualify the leads and ensure they are unique and identify which of these patient leads are the highest priority and have the most urgency to get on treatment. So, we point our sales force into that direction where to go. So, we score these leads for them. And that's been extremely helpful in helping these patients convert on to treatment sooner. For AGAMREE, we're very pleased with the performance last year. And based on the low side of our guidance, the 20% growth this year. We expect in at least a 20% growth in 2026. I mentioned broad adoption and across the top 45 or the top COEs that make up 80% of all DMD patients. So, we expect to not only continue that, but to deepen that penetration within those sites. We've seen many physicians now. The -- with the experience that they have, we've seen discontinuations and cancellations that have also decreased over the last 2 to 3 quarters. So that's also a positive sign of greater experience and strong adoption and acceptance of AGAMREE. Operator: Our next question comes from the line of Joon Lee with Truist Securities. Asim Rana: Congrats on the quarter. This is Asim on for Joon. So just kind of on the last one, I mean, your FIRDAPSE guide for '26 is above the historical 15% to 20% that we've typically seen. So, I just want to understand of all the factors that you mentioned in the answer to the previous question, what's the biggest driver of that increase? And is that how we should be thinking of FIRDAPSE growth beyond '26 in 2027? And then just on BD, I mean, would it be fair to assume we'll see a deal this year? Richard John Daly: Jeff, do you want to build on the previous answer to that? Jeffrey Del Carmen: Sure. Asim, the thing that really gives us the most confidence is really in the short term, the greater than 600 pool of patients, the patients that are somewhere in their diagnostic journey to LEMS, but we know they're LEMS patients not yet on treatment. So over 50% of our new enrollments comes from that pool of patients. So that gives us significant confidence. The other big reason for confidence is the 21% growth in VGCC test year-on-year. We're actually seeing a 9% growth quarter-on-quarter of VGCC test. So that volume, the velocity of new tests that are being done also will help us identify and help these patients sooner and shorten their diagnostic journey. So that's one of the big things. And our ability to be more efficient, like I mentioned, helping these patients that are diagnosed get on to treatment faster. And then on the second half of the year, that's when we talked about incremental patients coming from the cancer-associated LEMS opportunity. So that's when we truly expect both idiopathic and CA-LEMS patients to increase here in the second half of this year. Richard John Daly: Before I take the BD question, Asim, just to build on Jeff's answer, too, think about the timing of some of the things we put in place. So, this will be a full year of the dedicated sales forces. We changed that in April of last year. So we expect there to be some dedication provide some value. But also, Jeff, can you speak to the timing of the pharmacy program because that, again, was not a full year program either, and we're seeing the nice results there, too. Jeffrey Del Carmen: Thanks, Rich. We initiated the pharmacy intervention program in June of last year. And we saw a significant decrease in patients that were not able to get to the -- their optimal therapeutic dose. We saw a reduction in that. And like I mentioned, we saw a 12% decrease in discontinuations of those patients after we initiated that program. So again, like Rich mentioned, we only have basically half a year of that program in place. And we feel that in the long-term, that will help patients get to their optimal therapeutic dose and when appropriate, stay on treatment. Richard John Daly: I'll take question -- thanks for the questions here today. So we're going to continue along the line that we've pursued, which is a diligent and thoughtful approach to looking at opportunities and as I think we've talked about before, we really look at a couple of elements in this. We're obviously looking for a differentiated product profile rather and something that really can improve patient care. The second element for us is we have to be aligned on the vision with our potential partner or licensor on not only how the product will launch, but what might be life cycle management opportunities. So we think that's really important. And then, again, focusing on that near-term accretive opportunity is really important to us as well. Our BD team has done a phenomenal job of exercising these elements and looking for the ideal opportunity. The one other thing we have to take into account as we assess opportunity is especially as we go deeper into the pipeline, working our way back into post proof-of-concept opportunities with a relatively clear regulatory path is the regulatory environment today. And so we are, again, diligent and thoughtful in our approach. As to whether or not we can say we'll do a deal in the year, obviously, we want to improve the portfolio that we have to improve care for patients. And so we'll continue our diligent efforts here and bring in products that we believe we can add true value to and the products that will also add value to the lives of the patients we serve. Operator: Our next question comes from the line of Pavan Patel with Bank of America. Pavan Patel: Congrats on the commercial execution this quarter. I thought it was pretty strong. So I will focus on AGAMREE commercial. And my two questions. So the first is on the detail on the median age of new AGAMREE enrollees dropping by a year. I thought that was interesting. So maybe if you can speak to whether you're seeing a meaningful shift where physicians are using AGAMREE as a first-line steroid for newly diagnosed boys rather than just switching older patients who are already experiencing toxicities from either prednisone or EMFLAZA? And how does that capturing that younger demographic impact assumptions around longer-term patient durability? And then the second question is with regards to the reimbursement. I know you mentioned that it's tracking above 85%. So maybe if you can just speak to what's the pushback that you're seeing in the remaining 15%. Is that just largely a step edit requirement of try prednisone first? And do you expect that 85% rate to pick up as we move through the quarters in 2026? Jeffrey Del Carmen: Sure. Great questions, and I'll take the latter first. And when we think about the AGAMREE reimbursement landscape, we're very pleased with that greater than 85% approval rates. And to your point, yes, absolutely, there are some step edits. But over time, those steps, those patients are able to get on to treatment. What we do is we provide bridge treatment or free drug for patients while they're going through those steps. And until they're able to get approved, then we convert those patients under reimbursed patients over time. So we believe that's very, very strong. And in fact, we're closer to 90% as far as reimbursement rates go. When we look at the average age, the decrease by 1 year, so the average age in the last 6 months has come down to closer to 11-ish versus the 12 that was before. So that's very significant. And you had mentioned it, why it's significant is because younger patients, they have greater adherence to therapy. And really, they're more likely to experience the positive tangible benefits for longer. So it's a great thing for patients but we're seeing that play out. And you asked what does that mean that patients are coming over without doing a step or going to prednisone or generic EMFLAZA or EMFLAZA. And about 10% of our patients actually come directly without ever having experienced a steroid before. So it is the first steroid for the DMD treatment. So we are seeing that. Richard John Daly: Jeff, to build on Pavan's question, when we think about the change in age, obviously, the dosing is start at the top end of the dose and work down. So these patients are coming in, they're younger. One would anticipate maybe a different dose? Are we experiencing that? Jeffrey Del Carmen: No, actually, we're seeing the same dose. Richard John Daly: So I think it's really positive for longevity, persistency on the drug and then obviously, for the dosing for the patient to get the benefit. Jeffrey Del Carmen: Absolutely. Operator: Our next question comes from the line of Leland Gershell with Oppenheimer. Unknown Analyst: Congrats on the quarter. And this is Jason on here for Leland Gershell. Question on AGAMREE. One and how does the SUMMIT open-label expansion affect the forecast for AGAMREE going forward? And to what degree are the assumptions built into the 2026 guidance? And maybe one more point. How should we think about additional indications to support AGAMREE growth going forward? Richard John Daly: So before -- I have Will join in, I just want to touch on the fact that the focus here for SUMMIT is enrolling patients, getting the patients into the trial. And with that, I'll just turn it over to Will to talk about what some of the expectations are. Will? William Andrews: Yes. Thank you, Rich. Thank you, Jason, for the question. We are -- continue to be excited about the SUMMIT trial. We continue to bring in new sites and to enroll additional patients towards our goal of getting this to a trial where we have a significant enough patients where we can really pull out some robust data analysis from this trial. We're also excited about it because of Santhera's announcement from last November as well as their upcoming MDA conference poster presentations and abstract presentations on their Guardian trial as well as evaluation of other open-label data that they have that look at really the same -- many of the same parameters that we're looking at in SUMMIT, where they actually show some important positive top line data, including comparisons to large natural history data sets that show normal growth in the AGAMREE-treated patients compared to stunted growth in the corticosteroid treated population, a decreased rate of vertebral fractures, decreased rate of cataracts, no cases of glaucoma, and these are all important endpoints in our SUMMIT trial. We are also additionally looking at progression of cardiac effect, et cetera. So this is a trial that we are purposely driving to evaluate long-term potential benefit in these really important glucocorticoid side effects. And for, I think, the latter part of your question, Jason, I'll pass it back to Rich in regard to how we look at it as a potential impact on performance of the medication. Richard John Daly: Thanks, Will. This is a great question, Jason. So thank you. When we look at these data that we see for Santhera, again, it's very encouraging for SUMMIT. But we have to keep in mind that none of the endpoints that we see in the data from Santhera are in our label at this point in time. So presently, we don't have a great impact built in. I don't think we have any impact because we can't promote it. So -- but again, we're highly encouraged by these data. We're really excited to continue the SUMMIT trial to see if we can build on the data set. And obviously, physicians can use the product as they deem appropriate, but we need a robust data set, and the Santhera data is a great start for us. Operator: Our next question comes from the line of Luke Herrmann with Baird. Luke Herrmann: Looks like a nice FIRDAPSE guide. Can you just help provide any additional color on the extent to which you expect the growth for FIRDAPSE to be sort of backloaded? Or does the traction you're seeing with idiopathic sort of smooth things out in the first half? And I have a follow-up. Jeffrey Del Carmen: So yes, we do expect strong enrollments from the idiopathic LEMS here in the first half to help as we build the screening for cancer-associated LEMS. Like I mentioned, we do expect incremental patients for cancer-associated LEMS in the second half of the year. Richard John Daly: I think when you build on this, when you think about how this is -- the patients are diagnosed in the journey they go through, Jeff did a really nice job of explaining how we're accelerating that when it's appropriate. And we'll continue to see that. But there is a cadence to this that we've -- I think we've seen over the last 6 or 7 years. And on the cancer side, we're working to advance that, but we would expect there to be an incremental opportunity in the second half, especially when we see the VGCC tests increasing, I think that's a really good sign, but it does take time to get those patients into the treatment queue. Luke Herrmann: Great. And then just a follow-up on business development. I guess, in light of the favorable trajectory for XBI recently, do you think this could make BD activities more challenging? Or have you not seen much of a change to the breadth or quality of inbounds at this point? Richard John Daly: We're seeing no change to the quality of the inbounds. We like the opportunities we're currently evaluating. And it comes down to the 3 or 4 points I looked at before when we get into due diligence, making sure that we have good alignment opportunity to offer differentiated and improved care and then obviously return -- get a return as quickly as possible, as reasonably possible. Operator: Our next question comes from the line of Sudan Loganathan from Stephens Inc. Kesav Chandrasekhar: This is Kesav on for Sudan. Congrats on wrapping up 2025. So I understand that VGCC testing initiatives are primarily expected to materialize during the second half of this year. But could you all provide some color on the magnitude testing volume has possibly already had on FIRDAPSE sales? And then my second question is, could you talk about how the Phase 1a readout in this quarter on establishing translational dosing is expected to impact your plans for AGAMREE going forward? Richard John Daly: Jeff, why don't you take the first one and then Will shall take the second. Jeffrey Del Carmen: Like I had mentioned, there is significant growth year-on-year, 21% in the year-on-year for the VGCC test. So that's always a positive sign. We know it's tough to tease out what -- how much of that is the cancer-associated LEMS or test ordered by an oncologist versus a neurologist. So I would say primarily, a lot of that increase is still stemming from the idiopathic LEMS side. So there's plenty of opportunity still remaining to continue to increase the VGCC testing within oncologists. So that presents a significant opportunity still for us moving forward. Richard John Daly: Jeff, as you look at the VGCC testing and that is an indicator of conversion to therapy, where would that rank as an indicator of conversion? Jeffrey Del Carmen: It's of our patients coming in each month, it's about 50% to 60% of our new enrollments come from these new leads. Richard John Daly: So that's increasing? Jeffrey Del Carmen: Absolutely. Richard John Daly: Will, do you want to take the next question? And I'm sorry, could you just repeat the question so we have clarity on it? Sudan Loganathan: Yes, for sure. So like for the Phase 1a readout in this quarter, first quarter of 2026 on establishing that translational dose for AGRAMEE, -- could you kind of just provide some color on like how that readout might impact your plans going forward for AGRAMEE or if there was going to be any substantial impact? William Andrews: Yes. And happy to answer that question. Thank you for the question. One quick point of clarification is that we've announced that we will have analyses of that data within the first half of 2026, so not this quarter, just for that clarification. And effectively, what you're referring to is our evaluation in this study of biomarkers of inflammation as well as immunosuppressive biomarkers on multiple doses of AGAMREE. As to how that might impact business development or I should say, life cycle management opportunities for AGAMREE is essentially if we see, say, strong immunosuppressive effects, it might direct us towards certain life cycle management opportunities. And if we see minimal immunosuppressive effects, again, that might direct us to other life cycle management opportunities. The life cycle management evaluations broadly for AGAMREE are important for us and active, and we're excited about a number of the potential additional target indications that we're evaluating currently. Richard John Daly: And to build on that from a business impact, when Jeff mentioned on the call that we're seeing high retention rates, so there could be a potential business impact to getting the right patient on, but we are seeing a reduction in patients who are not staying on therapy, so a higher retention rate. And remember, about 45% of the patients switch from prednisone, 45% switch from an EMFLAZA, whether it's branded or generic. And so, the physicians are getting more and more comfortable over time. And this could just improve that with a little bit more direction should we be able to get it into the label, but that's yet to be seen. But just to build on that, we're happy with the progress we're making on retention as well. Operator: And at this time, we have no further questions. That concludes our question-and-answer session and today's conference call. We would like to thank you for your participation. You may now disconnect your lines. Have a pleasant day.
Operator: Good morning. My name is Julianne, and I will be your conference operator. At this time, I would like to welcome everyone to ADTRAN Holdings Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] Thank you. Mr. Peter Schuman, Vice President, Investor Relations, you may begin your conference. Peter Schuman: Thank you, Julianne. Welcome, and thank you for joining us today, and welcome to all those joining by webcast. During the conference call, ADTRAN representatives will make forward-looking statements that reflect management's best judgment based on factors currently known. However, these statements involve risks and uncertainties, including those detailed in our earnings release, our annual report on Form 10-K as amended and our other filings with the SEC. These risks and uncertainties could cause actual results to differ materially from those in our forward-looking statements, which may be made during the call. We undertake no obligation to update any statements to reflect events that occur after this call. During today's call, we will refer to certain non-GAAP financial measures. Reconciliations of GAAP to non-GAAP measures and certain additional information are also included in our investor presentation and our earnings release. We have not provided reconciliations of our first quarter 2026 outlook with regard to non-GAAP operating margin because we cannot predict and quantify without unreasonable effort, all of the adjustments that may occur during the period. The investor presentation has been updated and is available for download on the ADTRAN Investor Relations website. Turning to the agenda. Tom Stanton, ADTRAN Holdings' CEO and Chairman of the Board, will provide key highlights for the fourth quarter and full year 2025. Tim Santo, our Senior Vice President and CFO, will review the quarterly and full year financial performance in detail and provide our first quarter 2026 outlook, and then we will take questions that you may have. I would now like to turn the call over to Tom Stanton. Timothy Santo: Operator, we are receiving notification that the line is bad and that recipients are not hearing us correctly. Is there a way to improve the line before we proceed? Peter Schuman: Thank you very much. Thomas Stanton: Thank you Peter, and good morning, everyone. ADTRAN delivered a strong fourth quarter and finished 2025 with solid momentum. Our quarterly results reflected higher demand and strong execution with revenue above the high end of our original outlook, overcoming typical year-end seasonality. Operating leverage continued to improve and earnings came in above expectations, with all 3 business categories achieving sequential and year-over-year growth. In the fourth quarter, ADTRAN generated revenue of $291.6 million, reflecting a strong year-over-year growth of 20% and sequential growth of over 4%. This marks the sixth consecutive quarter of sequential growth and the fifth consecutive quarter of year-over-year improvement, reinforcing the strength of our company and our key markets. Our U.S. business led the quarterly growth, with revenue up 31% year-over-year and 14% sequentially. Non-U.S. revenue grew 12% year-over-year and declined 3% sequentially as expected and consistent with recent ordering patterns among some of our larger European customers. Optical Networking Solutions grew 33% year-over-year, driven by strong sales to cloud providers and enterprise customers. This increase also drove the contribution of enterprise and cloud providers to 25% of our revenue in Q4 and 21% for the full year of 2025. These results reinforce a trend we are seeing: cloud providers expanding data center capacity and large enterprises upgrading their optical networks. During the quarter, we continued to broaden our optical customer base. We saw solid activity across service providers, cloud providers, enterprises and public networks, reflecting the flexibility of our optical platforms across different use cases. Access & Aggregation revenue grew 9% year-over-year and 6% sequentially, supported by continued fiber access investment across U.S. and European operators. During the quarter, customer activity reflected a mix of expansion projects and network upgrades as operators advanced deployments. In Subscriber Solutions, revenue grew 17% year-over-year and 3% sequentially, driven by demand for our residential fiber CPE as customers continue to connect more subscribers. The revenue in this category continues to be generated by a diverse mix of residential, enterprise and wholesale service offerings. Today, our software solutions serve over 1,000 carrier customers across 3 of our product categories, automating everything from optical networks to in-home subscribers' experiences. These customers include nearly 500 service providers adopting our Mosaic One platform and more than 100 service providers deploying our recently introduced Intellifi cloud-managed Wi-Fi solutions. We are also advancing our Agentic AI platform with numerous Mosaic One Clarity customer trials underway before an official launch later this year. As demand for AI-driven automation grows, we see this application suite as an important addition to our software capabilities. Looking at the broader environment, we continue to see sustained fiber investment across our core markets, and the U.S. broadband programs and ongoing investments in data centers are supporting ongoing network expansion. In Europe, increased focus on network security and vendor diversification away from higher-risk suppliers is reinforcing upgrade activity across the region. These trends are supporting continued demand for upgrades across all 3 product categories. At the same time, network requirements continue to evolve. Across data centers, between the data center and out to the customer edge, capacity demands are increasing. Service providers, cloud providers and enterprises are pairing high-capacity fiber networks with automation and software to streamline operations. While this is still an emergency contributor to our revenue, it reinforces the market's longer-term direction towards more intelligence and more automation. With our broadband fiber network portfolio, software assets and regional strength, we are well positioned to support both the current infrastructure cycle and the longer-term evolution towards these more intelligent fiber networks. We delivered a strong Q4 with solid financial results and execution and healthy core -- and healthy cash flows. For the full year 2025, we delivered double-digit revenue growth, with each of our 3 revenue categories also growing at double-digit rates. We achieved this while expanding gross margins and returning to positive non-GAAP operating margin and EPS. Also during the year, we strengthened our balance sheet by issuing approximately $200 million of convertible notes at an interest rate meaningfully lower than our revolving credit facility. We were able to purchase $27.2 million of ADTRAN Networks shares during Q4 and $46.6 million worth of shares during the calendar 2025, reducing the minority interest to less than 30% as we closed the year. As we move into 2026, our priorities remain continued improvement in our leverage model, expanding operating margin, cash generation and converting the customer momentum that we have been seeing. We continue to operate in a dynamic cost environment, including variability in components such as memory. We are managing that variability through disciplined procurement and price mechanisms that are already embedded in our model. At this time, we are not seeing conditions that change our demand outlook or execution priorities. In summary, we entered 2026 with a positive outlook. Customer trends are favorable in the U.S. and Europe, customer acceptance of products has been strong, and our product offerings and competitive position has never been better. We have several multiyear tailwinds in our key market segments. With that, I'll turn the call over for Tim to review the financial results in more detail. Tim? Timothy Santo: Thank you, Tom, and thank you all for joining us this morning. We delivered strong results for the fourth quarter and full year 2025, driven by solid execution and healthy revenue growth. As scale improved, we delivered higher margins, and operating efficiency increased across the business. We remain focused on disciplined cost management as we continue to grow. Over the quarter, we continued to operate with tight financial processes and consistent execution. These remain embedded in how we run the business, improving visibility and planning rigors and supporting structured capital allocation. While the mix between gross margin and operating expenses can shift from quarter-to-quarter as revenue moves, our objective remains focused on steady margin expansion as the business scales. As we noted on our previous earnings call, the capital actions we took last year improved our financial flexibility and added optionality. Broadly, our focus remains on simplifying the capital structure and maintaining flexibility to support the business and create value. We will continue to deploy cash thoughtfully to reduce the minority interest over time while maintaining balance sheet strength and evaluating noncore asset monetization opportunities as appropriate. Turning to the financial results for the fourth quarter of 2025. Revenue was $291.6 million, up 20% year-over-year and 4% sequentially, above the high end of our original guidance. Year-over-year growth was driven by all 3 product categories with Optical Networking the largest and fastest contributor, with revenue increasing by $26.9 million or 33% from the prior year. Geographically, non-U.S. revenue accounted for 53% of total revenue, while U.S. revenue accounted for 47%. Non-GAAP gross margin increased to 42.5%, up 44 basis points sequentially and 122 basis points year-over-year, driven by scale efficiencies, product mix and cost discipline. We remain focused on sustaining gross margin in the 42% to 43% range over the long term. Non-GAAP operating profits rose to $18.8 million or 6.4% of revenue, exceeding the midpoint of our original outlook, and up 103 basis points sequentially and 406 basis points year-over-year. Non-GAAP tax expense in Q4 2025 was $3.8 million or an effective rate of 22.6%. Non-GAAP EPS was $0.16 compared to $0.05 in Q3 2025 and a loss of $0.02 a year ago. EPS benefited by $0.03 from the acquisition of shares from minority holders in the fourth quarter. We continued to strengthen our financial position during the year. Year-over-year, net working capital improved by $8.7 million due to meaningful inventory reductions, largely offset by increases in accounts receivable due to increased sales. During the year, inventory declined by almost $50 million, including $8 million during the fourth quarter. Days inventory outstanding improved by 47 days year-over-year and 10 days in the fourth quarter to 114. DSO increased to 66 days, down by 1 day year-over-year and up 7 days sequentially due to increased sales and the timing of Q4 invoicing. As revenue scales, our focus remains on improving working capital efficiency. Operating cash flow was $42.2 million for the quarter, and free cash flow was $22.5 million. For the full year, we generated $129.8 million in operating cash flow and $60.5 million in free cash flow, representing healthy increases of 25% and 58%, respectively, compared to 2024. We ended Q4 with $95.7 million in cash and cash equivalents after purchasing $27.2 million or 1.2 million shares of ADTRAN Networks stock. For calendar year 2025, we purchased $46.6 million or 2 million shares of ADTRAN Networks stock and now own just over 70% and meaningfully reduced the interest rate on our outstanding debt as a result of the convertible note offering. Turning to our operational performance for the year. We made meaningful progress across key financial metrics during 2025. Revenue increased 17.5% year-over-year, totaling $1.084 billion. We expanded full year non-GAAP gross margin by approximately 90 basis points to 42.1%, reflecting increased scale, higher efficiency and favorable product mix. Non-GAAP operating margin increased to 4.8% in 2025 from negative 0.3% in 2024. And non-GAAP diluted EPS returned to a positive $0.23 per share. We delivered a strong year of cash flow generation, with net cash provided by operating activities increasing by $26.2 million to $129.8 million. We remain disciplined on cost structure while positioning the company to convert revenue into sustained earnings growth. Looking ahead at our outlook for the first quarter of '26, we expect revenue to be between $275 million and $295 million and non-GAAP operating margin of 4% to 8%, reflecting traditional seasonality and current supply chain dynamics. I will now turn the call back over to Tom. Thomas Stanton: All right. Thanks very much, Tim. Julianne, I think at this point, we're ready to open it up for any questions people may have. Operator: [Operator Instructions] Our first question comes from Michael Genovese from Rosenblatt Securities. Michael Genovese: Great conference call, clearly upbeat messaging. Tom, can you just talk a little bit more, I guess, specifically about the demand picture in U.S. and Europe and sort of what you're seeing from your clients on the optical side and on the fiber-to-the-home side? And just talk a little bit more about the drivers of the revenue growth. And I guess related to that, like do you think -- obviously, you're not giving full year revenue guidance, but coming off a year where you grew 20%, do you think double-digit growth is -- top line growth is in the cards for '26? Thomas Stanton: Yes. So let me start on a little down, which is we don't give full year guidance for a reason, and that's because our outlook is -- typically are still our book-to-ship period is relatively small. So it's a little difficult. Let me speak a little bit more about the kind of the environment that we're in right now. I would say it's kind of the same tone and kind of building momentum that we saw throughout last year. And we expected that to continue on, and that's exactly what's happening. So we -- on the fiber-to-the-prem side, nothing has slowed down. Programs are still going well. We're still adding new customers to those product areas, and we're continuing to operationalize carriers in Europe. So all of that is just a continuation of the same type of activity we saw last year. On the fiber front, the dynamic is a little bit different because we were still at the very beginning of the year, kind of crawling out of the revenue inventory uptick that we had seen in our customer base. That cleared itself up last year. We started seeing that real progress in the second half of the year. We also -- as you may be aware that we had won some additional customers, both here in the U.S. with wider scale kind of Tier 2 deployments as well as in Europe, where we won some Tier 1s, and that momentum is just continuing on. I would say that is driven not just by the Huawei replacement which is going on in Europe, but just in general, I just think activity, we just saw customers starting to unleash capital, and they're trying to increase their bandwidth for obvious reasons. I mean, I think all of them are trying to figure out how they're going to play in a new AI-driven world. I think MoFi is a driver. We definitely -- I mentioned it on the call, we saw some real positive momentum on the enterprise side, which includes ICP carriers, right? So yes, it's just generally a good environment. Michael Genovese: Great. And then my second and last question will just be on pretty wide operating margin outlook of 4% to 8% for the quarter. So is that because of things like memory prices, that the range is that wide? Or is that kind of maybe more of a normal range and I'm just reading it as being wide? Thomas Stanton: To us, I don't think there's any difference in the range that we get than what we typically do. There is tightening supply, as everybody is aware of, on memory. There's some tightening supply in optics. But I would say that that's not overly impacting the guidance range. Our kind of operating model is still what we fully expect it to be, what we've communicated, which is operating expenses in the low 100 range and gross margins in the 42%, 43% range. I don't see we see a deviation from that. Tim, any comments? Timothy Santo: No, I would reiterate, as Tom said, the guidance range is about 4 points, which if you look historically is where we've been. And it's actually up a little bit from last quarter. But the leverage model would remain up from what we guided last quarter. Thomas Stanton: You mean midpoint, yes. Operator: Our next question comes from Ryan Koontz from Needham & Company. Ryan Koontz: I want to ask about optical, maybe if you can unpack a little bit. You talked about enterprise ICPs, I assume that's a big driver of optical. Do you have any ideas, like how much of that is really hyperscale and AI data center cloud-related versus what I would call like traditional SP and enterprise networking? Can you maybe help us understand some of those dynamics there within the optical strength? Thomas Stanton: Sure. So there was actually a good contribution on both of those fronts in the quarter. And I'm trying to think if it was -- I would say -- and this is not having the note in front of me -- that the mix on traditional enterprise, including the banking sector and all of the larger enterprise that we play into is a portion of that. And then ICP did come in stronger in the quarter than what we had historically seen, and we expect that momentum to continue on through this year. Ryan Koontz: Great. And I recall a conversation from OFC last year about this opportunity in MOFN where the hyperscalers are contracting with traditional SPs or maybe some of the Tier 2s like Colt, et cetera, to build for them. Are you seeing some benefit there as well? And would that show up in your SP business as opposed to your enterprise business if it was a MOFN-type deal? Thomas Stanton: No, that would show up in our carrier. We would consider that to be a carrier customer. And we're definitely seeing that. We talked about that in the last maybe couple of conference calls, how we were starting to see some of the carriers position themselves to be able to do MOFN. That's just a continuing ongoing kind of upgrade cyclical thing that's adding positive momentum to that business. So -- but that is separate and apart from the enterprise piece that we're talking about. Ryan Koontz: Great. And maybe just one last, if I could, on the fiber-to-the-home side. Relative to new footprint, it seems like the U.S. has been a little bit hit-and-miss where some segments do better than others. Any update there on how Q4 turned out in terms of new greenfield footprint and how you're thinking about '26 going forward for U.S. fiber-to-the-home greenfield builds? Thomas Stanton: Yes. I think it was -- I'd call it a solid quarter, kind of consistent with what we had seen in the year. I mentioned that the -- in general, the U.S. business was definitely stronger on a sequential and year-over-year basis. I think we're expecting good things this year. We finally -- I probably shouldn't say the word, but BEAD dollars are actually starting to flow. We got a customer in Louisiana that is expecting BEAD dollars hopefully next week. So -- and I don't want to over-rotate on that guide because the build-out is going to consistently be driven for most carriers by kind of fiber deployment for this year and then equipment next year. But the fact that, that's actually flowing is real positive. I think there's 6 other states that are -- expect money any day now. So the fact that those dollars are starting to flow, I think, is a positive thing. And it's just as positive, not just the BEAD dollars, but from a planning perspective and knowing that it's going to happen and giving carriers surety as to how they plan their capital budgets is very important. Ryan Koontz: Right. So the planning, engineering and maybe the fiber optic cable spending this year from BEAD sees an earlier uptick, you're saying than your equipment would see this year that would follow within quarter 2 behind... Thomas Stanton: Yes, you've got to be able to deploy that fiber. But I think the positive thing for us, which we don't know how that will impact, and it may just be just a kind of positive influence is the fact that you get surety in your budget planning cycle. But not just your BEAD funding, but your normal capital spend as well. And I think that, that's been missing for some time. Operator: Our next question comes from Christian Schwab from Craig-Hallum. Christian Schwab: Great execution in the quarter, guys. Tom, I know -- so we're sitting here at the end of February, noncore asset sales and potential building sales and leaseback activity. Would you be disappointed if we didn't have resolution on both by the end of calendar 2026? Thomas Stanton: Well, leaseback activity, more than likely, that is not going to happen with the North Tower -- excuse me, the East Tower. So let me be clear on where we are with that. I think we've been trying to talk about this now for a couple of quarters. We did get several lease offers on the building. Financially, it didn't make sense for us because of where we are with our cash position right now and what we use for the cash and what that lease would ultimately cost us. So we have put that on hold. We can always revisit that if we want to. Then on the North/South Tower, which is the thing that's up for sale, I'm going to let Tim jump in here and give you an update on that. Timothy Santo: A lot of activity in the Huntsville market. We're not currently under contract, but we have activity. So we continue to work that, and when the right deal comes along, we will close that. As we had hoped it would happen in 2025, we are very optimistic it will happen in 2026, but the market will dictate. Christian Schwab: Great. And then on the noncore asset side, Tom, do you think that can get resolved this year? Or is that a fluid situation? Thomas Stanton: Yes. So we -- let me try and do this in a proper way. We have taken a look at the noncore assets. We've gotten values on what we think the noncore assets that we think are not strategic, right, to our business. We have -- we are doing things right now that we think will increase the value of those assets, and we'll reevaluate that in the second half of this year. Christian Schwab: Perfect. And then my last question, as we go throughout calendar 2026, is there one area -- we spoke positively, obviously, about finally loosening up after many years of seeing some progress as speed is concerned. But as we look at equipment replacement in Europe, the strength in optical, geographical strength in Europe, et cetera, is there one thing more than another that you're most excited about as we go through 2026 that we can monitor? Thomas Stanton: Yes. So I think -- let me just hit on a couple. One is I think enterprise is doing really well. And as I mentioned earlier on the Q&A, there are multiple drivers for that. We expect that to be strong this year. And so that strength is above whatever the company is doing on a corporate average perspective. So that's really good to see. The other is there is some legislation going on. I don't know how much success it's going to have. It's good that it's going on, but in the EU right now to accelerate the Huawei replacement piece. It's not so much whether or not that actually happens, which there is a high likelihood it happens. But just the focus on that is positive for our business. And I'll remind people, we think that's a near $1 billion a year type opportunity that Huawei is selling into the European market that we think we have a very good chance of being able to capitalize on. So as that pressure continues on, and it is -- there was legislation that was sent out in the EU in early of last year that is positive, right? So that addresses this issue. So yes, so I think both of those things are real positive catalysts. Operator: Our next question comes from George Notter from Wolfe Research. George Notter: I guess I just want to keep going on the question of Huawei replacement in the EU. I think the regulatory stance currently basically has it not compulsory to replace Huawei, but I guess, suggested would be kind of the idea in terms of the current regulatory environment. And I know the stuff that's coming down the pike is going to mandate Huawei replacement, and it sounds like it could be a few years away until that legislation actually requires companies to -- or carriers to replace Huawei. But I guess I'm just curious, like what has the inflection happening right now? Is there something you're seeing with your customers that allows them to move more quickly? Is it funding? Is it more pressure from a political perspective? I guess I'm just trying to understand what's driving this. Thomas Stanton: Yes, sure. Yes, I agree. Well, let me just make one caveat to that. Although the EU's directive is more of a recommendation, the country-by-country and carrier-by-carrier requirements or legislative actions are different, right? So we do have some countries in the EU that have explicitly been stronger on that. And it's not so much that -- I think that legislation and the talk about legislation and the fact that we're even talking about it here is exactly the point, which is if you're a carrier and you're doing a new award, you're kind of crazy to be deploying Huawei at this point. Or if there's a new region, a new footprint that has to be built out, even if they're an approved vendor, you know you're going to have a problem. So what that's doing is putting on -- increasing the braking pressure on continuing to deploy them on an ongoing basis. I would agree that pulling them out is a different thing, and that will take years. And we've characterized that north of -- and it's an easy math, George, for you to do, right? It's a north of $10 billion opportunity for the pull out. But what we're talking about is just on the annual spend, where they're going in and filling in new [ cars ], building out new footprint. That kind of activity is going to continue to slow down. George Notter: If I look at that $1 billion annual spend, how well positioned do you think you are on that? I mean, obviously, that's across a number of product categories. It's across a large number of specific operators, maybe some you're in, some you're not. I mean, is there a way to kind of pin down that $1 billion in annual spend in terms of what's like reasonable for you? Thomas Stanton: Yes, please. Let me not be so sloppy on that number. The last time we looked at it -- and we do have another -- we have an outside firm trying to take a look at exactly what that number is at this point. But that number is derived from about an $800 million, I think it was $850 million or $860 million number for EMEA in our target product areas, and that was in '24. We think that, that number is going to continue to slow down. It was north of $1 billion not that long ago. So that number will continue to slow down as we actually pick up that market share. Now that's for products that are specifically in our product sweet spot, which is kind of mid-mile, regional network optical, access and aggregation. It is those products that we're actually talking about. So it's really what we believe the TAM is for our products. But like I'm trying to say, it's a rough number right now, and it's just based off of the earnings results of Huawei. Operator: Our last question comes from Dave Kang from B. Riley. Dave Kang: First, regarding European telcos, you talked about them being front-loaded. Just wondering if you can kind of quantify whether it's 55:45 or is it more exaggerated? Thomas Stanton: I'm sorry, your question broke up for me. Can you rephrase it or restate it? Dave Kang: Yes. Regarding your European telcos, Tier 1s. In the previous calls, you said they tend to be front-loaded. Just wondering if they're like 55:45 or more like 60:40. Any color? Thomas Stanton: As far as in the year, is that what you're talking about? Dave Kang: Yes. Thomas Stanton: I don't know if I've seen that actual breakout. I would say it's definitely -- last year, it was probably 60-ish, 40-ish, and this is just off the cuff. And this is predominantly in the access and agg product category. So you'll see that -- last year -- you could see that last year in our Access & Agg number. You actually saw that kind of big bump in the first half of the year, and then it kind of tailed down. It's not as prominent in the rest of the product areas. They kind of -- they're just not on the same cycle. Dave Kang: And are you kind of expecting similar dynamics this year or any changes from last year? Thomas Stanton: Really good question. I will tell you, we weren't happy with that bump because of what that does operationally. Bumpy is never as good as smooth. So we have been talking to them about that and trying to get that to be more even flowed this year. So I don't know how successful we've been with it at this point. So hopefully, you won't see that same type of kind of waterfall. Dave Kang: And my second question is regarding the same European telcos. Just where are we in terms of their broadband deployment cycle? Are we still early stages or mid or getting towards the late innings? Thomas Stanton: Good -- well, if you take Europe as a whole, there's no way to characterize it other than early. We've brought just recently, some new carriers on that haven't been deploying with us, and then they all kind of have this Huawei issue as well. If you take specific areas, there are countries that are farther along. The U.K. is, I would say, kind of more towards the middle. Germany is probably -- definitely within the first half. So it depends on the carrier. Some of them are -- haven't started yet. Dave Kang: Got it. Thank you. Thomas Stanton: Okay. At this point, I think we are -- no more questions in the queue. So I'd like to thank everybody for their participation today, and we look forward to talking to you next quarter. Operator: Ladies and gentlemen, that concludes today's call. Thank you for your participation. You may now log off.
Operator: Good day, and welcome to the BioCryst Fourth Quarter 2025 Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Nick Wilder with BioCryst. Please go ahead. Nick Wilder: Good morning, and welcome to BioCryst's Full Year 2025 Corporate Update and Financial Results Conference Call. Participating with me today are President and CEO, Charlie Gayer; Chief Financial Officer, Babar Ghias; and Chief Development Officer, Dr. Bill Sheridan. A press release and slide presentation about today's news are available on our Investor Relations website. Today's call may contain forward-looking statements, including statements regarding future results, unaudited and forward-looking financial information, as well as the company's future performance and/or achievements. These statements are subject to known and unknown risks and uncertainties, which may cause our actual results, performance, or achievements to be materially different from any future results or performance expressed or implied in this presentation. For additional information, including a detailed discussion of these risks, please refer to Slide 2 of the presentation. In addition, today's conference call includes non-GAAP financial measures. For a reconciliation of these non-GAAP financial measures against the most directly comparable GAAP financial measure, please refer to the earnings press release available on our Investor Relations website. I'd now like to turn the call over to Charlie. Charles Gayer: Thanks, Nick. This is my first earnings call as CEO of BioCryst, and I'm happy about where the company is today and even more excited about our future. We closed 2025 with strong momentum, delivering full-year ORLADEYO revenue of $601.8 million. That was up 38% for the year and 43% when you exclude our Europe business that we sold in October. We are also starting 2026 on a high note as we expanded our HAE portfolio with our acquisition of Astra Therapeutics last month. As I step into my new role, I want to be clear about BioCryst's strategy. We are and will remain a profitable rare disease company committed to meeting the unmet needs of patients through commercialization, innovation, and excellence that is backed by well-understood biology and disciplined clinical development. Where we will continue to evolve is how focused and explicit we are about capital allocation and accountability. We want to ensure that every dollar we deploy has a clear line of sight to driving long-term value creation. Coming back to our HAE portfolio, we see a tremendous opportunity to build value by meeting the needs of a growing number of HAE patients. We view HAE not as a winner-take-all efficacy race, but as a structurally segmented market, driven by biology, patient preference, and real-world experience. Rather than a market that resets with every new entrant, we see a market that segments based on the needs of individual patients. We now have a portfolio of differentiated products in ORLADEYO capsules for ages 12 and up, ORLADEYO pellets for younger kids, and a late-stage asset in Navenibart. Each of these therapies will allow us to achieve growth and durable revenue within specific segments of the market. ORLADEYO has grown strongly in part because of its differentiation as the oral option. But more importantly, there is a "super responder" population that can get injectable-like attack control. We saw in our pivotal trial that just over 50% of patients starting on ORLADEYO stayed on for 2 years and had a 91% reduction from baseline. In the real world, 60% of patients stay on therapy through 12 months, and nearly 50% of all patients who have tried ORLADEYO in the U.S. over the past 5 years are still on therapy. Most ORLADEYO super responders are unlikely to switch even if another oral option reaches the market because their needs are already met. And now we have a new member of the ORLADEYO family. We are excited to launch ORLADEYO pellets for kids ages 2 to under 12 at the Quad AI conference this weekend. The unmet need is significant because HAE and related attacks are underdiagnosed in younger kids, and prophylaxis usage is only half that of adults. Availability of a safe, effective, and targeted oral prophy has the potential to change how kids with HAE grow up, and ORLADEYO is likely to be the only oral option for several years to come. We think about Navenibart through that same lens of structural differentiation in HAE. Navenibart is not intended to replace ORLADEYO. It is intended to allow BioCryst to address patients' needs across the full spectrum of efficacy, dosing, and convenience preferences in HAE prophylaxis. There are approximately 5,000 U.S. patients who have great attack control by injecting anywhere from twice a week to every 4 weeks. Most of them are reluctant to take a chance on oral because they are well controlled already, and the injections themselves are not a barrier to treatment. Oral is not their need. But our research shows that many are very attracted to the idea of a simple, high-efficacy injectable dosed just 2 or 4 times per year. That is a leap patients dosing an injectable 12, 26, or even over 100 times per year are likely to make because it aligns with what they know and provides something better. Our objective is to keep the HAE prophylaxis treatment decisions within the BioCryst portfolio. That is another way we think about long-term durability, not as defending a single product, but as owning the prophy decision framework in HAE. We will offer three compelling options, all from a team that the HAE community knows and trusts. Before turning to Bill, I want to briefly touch on BCX17725, our early-stage program in Netherton syndrome. This is a classic rare disease story - a devastating genetic condition that is underdiagnosed because there are no good treatment options. We are encouraged by the results in healthy volunteers and the investigator's enthusiasm for this program. We're on a path to generate clinical data in patients by the end of the year, and we'll use that evidence plus feedback from patients and investigators to guide next steps. Looking ahead to 2026 and beyond, we see durable revenue growth anchored by a skilled, motivated and resilient commercialization team, meeting the needs of adults and kids who want oral HAE prophylaxis, a second molecule advancing well in late-stage development that has the potential to lead the injectable prophylaxis segment and additional rare disease optionality in our pipeline, positioning BioCryst for sustained value creation. With that, I'll turn it over to Bill to provide more color on our pipeline. William Sheridan: Thank you, Charlie. I'll cover our HAE programs to start with and then provide a brief update on our Netherton syndrome program. First, the Navenibart pivotal Phase III trial continues to recruit very well with strong enthusiasm for the study from investigators and potential trial patients. We expect to complete enrollment of the required 145 patients around the middle of 2026. The primary efficacy analysis of the alpha-Orbit pivotal trial will be the comparison between each navenibart dosing regimen and placebo with the time-normalized rate of investigator-confirmed HAE attacks through 6 months. The Phase II efficacy and safety profile that we are reporting at Quad AI this weekend from the ALPHA-SOLAR Trial is excellent, with no safety signals in 29 patients through up to 24 months of dosing and a reduction from baseline in mean attack rates of 92% for every 3 months of dosing and 90% for every 6 months of dosing. Overall, the mean attack rate decreased from 2.23 per month at baseline to 0.16 per month during navenibart treatment. For both dose regimens, the median attack rate reduction was 97%. These are outstanding results. These strong results illustrate the durability, consistency, and quality of treatment responses with navenibart and provide high confidence that the pivotal trial will be successful. We expect the pivotal trial results to confirm that navenibart every 3 months or every 6 months will set a new standard in the field and provide a very attractive choice for HAE patients seeking injectable prophylactic therapies. Second, we are thrilled that our application for ORLADEYO oral pellets for children aged 2 to less than 12 was approved by the FDA in December 2025. We're now continuing with marketing authorization applications in other major regions with the goal of transforming treatment choice for patients, parents, and children with HAE around the world. Third, our clinical development program for our KLK5 inhibitor, Fc fusion protein BCX17725, in Netherton syndrome, has now moved into patient-focused research. The healthy volunteer parts 1 and 2 of our Phase I trial with single and multiple ascending doses have been completed. BCX17725 was administered by subcutaneous and intravenous routes in these healthy volunteer cohorts. Our investigational drug was safe and well-tolerated. There were no discontinuations, no dose-related adverse findings, and no safety signals. The top dose administered was 12 milligrams per kilogram every 2 weeks for 3 doses. And as noted in our last call, we were pleased to see evidence of the drug being distributed to the epidermis. Drug exposure was approximately linear in proportion to dose, and the estimated half-life was about 12 to 19 days, supporting continued study of every 2-week administration schedules. Today, I'll provide a refresher on study design and an update on progress in the Netherton syndrome cohorts. The study design is outlined on Slide 18. The patient cohorts in the study are open-label and designed to evaluate potential effects of the drug on clinical signs and symptoms of Netherton syndrome, as well as safety and drug exposure. There are 2 patient cohorts, a short-term administration cohort in Part 3 with 4 weeks of dosing and a longer-term cohort in Part 4 with 12 weeks of dosing. Some sites were activated for Part 3 after short-term nonclinical safety studies were completed, and subsequently, were activated for Part 4, once we had longer-term nonclinical safety studies done. We are prioritizing recruitment into Part 4 as this will give us a longer dosing experience, and we anticipate that no more than 3 patients will be entered into Part 3. Our clinical investigators are excited about the potential for this drug in Netherton syndrome and have identified patients who could be eligible. So, we expect to recruit up to 12 patients in Part 4 and generate results by the end of this year. For efficacy, the primary efficacy endpoint is change from baseline in the Ichtheosis Area and Severity Index, otherwise known as the IASI score, and key secondary endpoints include the Investigator Global Assessment score and the worst itch numerical rating scale score. We will also evaluate quality of life metrics. We intend to select doses and endpoints for a pivotal trial based on what we see in this Phase I trial. I'll now turn the call to Babar for the financial review. Babar Ghias: Thanks, Bill. Last year was a defining year for our company. We delivered strong top-line growth, record profitability, and reinforced our strong balance sheet position. Those results weren't just numbers. They were proof that our strategy is working and our operating model is built for scale. Before I turn to financials, I want to highlight that we are providing more clarity in our financials to enable a better understanding of the strength of our core business. Please refer to today's press release for our GAAP financial metrics. In my remarks, I will be referring to non-GAAP figures, which are adjusted for the sale of the European ORLADEYO business, stock-based comp, workforce reduction costs, and transaction-related costs. We believe that non-GAAP figures provide a clearer view of the business on a forward-looking basis. Our non-GAAP 2025 total revenue increased 45% year-on-year. Since other revenues include contributions from Rapivab, which is non-core to our business, I would draw your attention to the non-GAAP ORLADEYO revenues, which increased by approximately $169 million or 43% year-on-year. This was a result of phenomenal day-to-day execution by our commercial team over the course of 2025. By leveraging our superior real-world evidence generation capabilities, we successfully drove higher patient volume and made significant progress on paid shipments. We have already started to see the impact of the European divestiture on our operating performance in Q4. Our non-GAAP operating profit jumped to $214 million, an increase of 198% year-on-year, the highest ever in BioCryst's history. R&D costs came down slightly in 2025 as we progress key programs while winding down some others and realigning the team structure. We anticipate that 2026 R&D costs will increase over 2025 as we complete the ongoing Phase III trial and BLA-enabling CMC activities for Novenibart. These activities, once complete, will naturally bring down development costs beyond 2026. We will remain razor-focused on maintaining R&D spending discipline and allocating capital to high ROI opportunities. In the same spirit, we will quickly terminate programs that do not have a compelling path forward. Our sales and marketing expenses for the year were $144 million on a non-GAAP basis, which were primarily up due to some reallocation methodology, prelaunch costs for pediatrics, and higher specialty distribution fees and incentive comps naturally owing to the strong top-line growth. More importantly, as you can calculate, for every dollar invested in our sales and marketing engine, we generated an approximately 4x return on ORLADEYO net sales. While we do anticipate some small incremental annual expense tied to top-line growth, the ROI on ORLADEYO will continue to expand as we drive the business toward its blockbuster potential. Looking further ahead to potential approval of Navenibart, the sales and marketing expense supporting our HAE franchise as a whole will be very stable, predictable, and carry an even greater ROI upside. We have built one of the best rare disease commercial organizations in the industry, a highly scalable infrastructure that will enable us to deliver multiple successful launches in the years to come in HAE and beyond, whether it's another candidate from our pipeline or something that we acquire in-license. Driven by our strong operational results, we finished the year with a formidable liquidity position of $337.5 million in cash and investments on hand. Concurrent with the closing of the Astria acquisition, we entered into a highly attractive $400 million financing facility with Blackstone Life Sciences, a financial partner that is aligned with our vision of growth. With the sustained momentum, coupled with the added benefit that now, for the next 2 years, we will be able to utilize our prior period tax NOLs, we will be in a very strong cash flow-generating position. This will afford us optionality to evaluate a wide array of capital allocation strategies that reinforce durable value creation, be it M&A, debt paydown, or buybacks. Moving on to guidance. We are maintaining expectations for full year 2026 ORLADEYO revenues to be between $625 million and $645 million, which at the midpoint represents approximately 13% growth over 2025 revenues adjusted for Europe. We expect full-year 2026 non-GAAP OpEx to be between $450 million and $470 million, which now includes expenses on Astria as previously guided. As Charlie emphasized, we remain very confident that ORLADEYO is on a solid footing to achieve blockbuster potential. We continue to see patient growth driven by the trends that we explained earlier, coupled with the recent pediatric approval, which will be an important component of the growth. After turning over this profitability card in 2025, we are very committed to staying profitable and continuing to drive cash flow generation going forward. To summarize, as we reflect on 2025, it is clear that the strength we delivered this past year is more than a financial milestone. It's a springboard for what comes next. We are entering 2026 with momentum, a sharpened competitive edge, and a discipline that ensures every investment we make is working towards value creation. Our goal is to keep advancing our pipeline through both organic innovation and selective, disciplined BD that can expand our capabilities and accelerate our impact in the rare disease space. We are very excited to keep building the next growth phase of BioCryst, a company that not only performs quarter-to-quarter, but compounds value over the long term as we execute on that vision. Operator, we are now ready for your questions. Operator: [Operator Instructions] Our first question comes from Laura Chico with Wedbush Securities. Laura Chico: I guess I wanted to start off on Navenibart. Could you talk a little bit more about the timing for the regulatory submission by year-end '27? Does that assume Phase III data still arriving by early '27? And I guess I just wanted to understand the steps that have to occur between top-line data and submission. And then, related to that, you mentioned the Quad AI late breaker. How should we think about this, I guess, in relation to ALPHA-STAR? It seems quite consistent in terms of the attack rate reductions. I'm wondering if there's incremental learning here, around maybe an attack-free period. Charles Gayer: Thanks, Laura. Yes, we're clearly super excited about Navenibart. And yes, everything is on track for filing, such that we would be on track for filing by the end of next year. And so on track for approval by late 2028. Bill, do you want to answer the question just about the regulatory process? William Sheridan: Sure. Like for other prophylactic therapies in HAE, 12 months is a chronic condition. You need 12 months of safety that will be delivered in mid-'27. And that's really what's driving the timing of the BLA submission. And what was the final question? Charles Gayer: And then the final question, just the data, yes, we're really excited about the data, the 92% reduction mean reduction for the 3-month dose, the 90% for the 6-month dose, just shows incredible consistency. I think what's also really important is the mean attack rate of 0.16 across the population from their baseline. That's fewer than two attacks per year for patients plus the severity of the attacks went down as well. So, for most of the year, patients are functionally attack-free, and that's what patients are looking for. Operator: Our next question comes from Brian Abrahams with RBC Capital Markets. Brian Abrahams: Congrats on the continued strong progress. You talked a little bit about the ORLADEYO super responders staying on with good persistence for long periods of time. I guess, do you have any sense of how to predict who would be a super responder? And then just maybe along those lines, I'm curious how you envision positioning Navenibart in that context in terms of whether you push patients to switch to ORLADEYO? And then if they don't respond, Navenibart could be an option for them? Or would you be primarily positioning Navenibart for those 5,000 patients doing well on injectables who could use something that's less frequently dosed? Then, just maybe remind us of some of the aspects of the profile for Navenibart in terms of the number of injections, anti-drug antibodies, refrigeration requirements, just anything else that needs to be done with regards to formulation ahead of commercialization. Charles Gayer: Great. Thanks, Brian. I'll start, and then I'll have Bill answer some of those questions as well. As far as the predictability of the super responders in ORLADEYO, there really is no way to predict other than for patients to try. So, first of all, patients have to want to be on an oral, and we know that the majority of patients actually would prefer an oral. But as we've looked at all of our clinical data, all the different factors, age, sex, prior prophy history, weight, everything else, there is nothing that can predict who is going to respond. As we know, HAE attacks are often driven by stress and other life factors. And so, I think our strategy is to try to get patients who are interested in oral to try. Most of them do great. We want them to do a 3- to 6-month trial to really figure out if it's the right drug for them. And as we see, by a year, about 60% of them realize that it is the right drug for them. As far as the Navenibart positioning versus ORLADEYO, we see the primary opportunity for Navenibart to be those 5,000 patients on injectables. Like I said in my remarks, those patients are on injectables because they're doing well, but some of them are injecting 100-plus times a year. And so, to be able to do just 2 to 4 injections, we think, is going to be really compelling, and that's what we see in our patient research. So ORLADEYO then is going to be for patients who want to start prophy on oral, it's going to be the known, the trusted option with many years of data and experience. So ORLADEYO is for anyone who wants oral. Navenibart is for people who want an even better injectable positioning. And then for those patients who try ORLADEYO and it's not the drug for them, that also is an opportunity for Navenibart, all within the same BioCryst portfolio. For Navenibart, the number of injections is really going to be very simple. So, it's going to be launched with an auto-injector and the 3-month dose after a 600-milligram loading dose, which will be 2 injections, 2 milliliter injections. The 3-month dose is then 1 injection. The 6-month dose is 2 injections. So very simple. And then, Bill, there was also a question just around ADAs and other things. William Sheridan: Yes. Before I get into that, with regard to predictability, I'll just reinforce what Charlie said. You have to try ORLADEYO to find out whether you're going to be a super responder. And so, it benefits people in every category with HAE. So, in addition to age, sex, race, weight, prophy exposure, you can also add to that whether you have a high attack rate or a low attack rate, whether it's less or more predictable, whether you have type 1 or type 2 HAE or C1 inhibitor normal HAE, all of those categories benefit. And we've shown that very definitively from both our clinical trials and our real-world evidence studies. So, you also asked about the maturity of the formulation development program for Navenibart. It's all done. It's very mature. CMC is in a great spot. Brian Abrahams: And then just a question about ADA? William Sheridan: With regard to ADA, there's no evidence of ADA impacting efficacy in the Phase II experience. And of course, with every biologic, it's part of the development program that you develop assays and look for ADAs; you always find them. What matters is whether people continue to benefit from the drug. And so far, that is exactly the case. There's no evidence of ADA impacting either safety or efficacy. Charles Gayer: And just to remind folks, the data being presented this weekend, these are patients on Navenibart who out to as far as 24 months with a mean of about 12 months. William Sheridan: So, one last thing about the injections, they don't hurt. Operator: The next question comes from Steve Seedhouse with Cantor Fitzgerald. Unknown Analyst: This is Timurvaniov on for Steve. For Neethererton, we just wanted to clarify, are you guys going to be releasing Part 3 and 4 data at the same time? And then also, could you talk about disease severity, the variability at baseline? Do you anticipate how difficult it would be to enroll more uniform patients? And then what background treatments are allowed, and how patients proceed based on their disease phenotype? Charles Gayer: Okay. I'll start with just the Part 3 and 4, and then Bill can talk about the disease severity and the patient types. Our plan is to release all the data together. We're only going to have maybe 2 or 3 patients in Part 3. And as Bill said, we're now prepared across our sites to go into Part 4, and that 3-month dosing is what we think is really going to be meaningful. So we don't plan to do one patient at a time. We want to release a complete data set. And then Bill, just talk about the patients. William Sheridan: With regard to the spectrum of severity, there is one for sure, in Netherton syndrome. What we're finding from our research on the prevalence of disease, for example, is that, as Charlie said, it's underdiagnosed, and that's mostly because there are no approved treatments, but also because of the differences in severity from one patient to the next. The patients we've met with this illness have obvious, really obvious disease, and they have adapted coping strategies. And that their lives have been dramatically impacted. That part of it, I'm not worried about in terms of recruiting subjects. So the investigators that we have that are lining up their subjects are more worried about getting spots for their subjects in the trial rather than not having enough patients to put in the trial. With regard to the eligibility, yes, we need to have evidence of illness so that we can identify whether there's a benefit from the drug. So we're doing that. We're selecting patients who have an obvious illness. And I think it will be fine. I'm not worried about that. Operator: The next question comes from Maury Raycroft with Jeffries. Unknown Analyst: This is Amy on for Maury. Congratulations on the quarter. Just a follow-up on a previous question. Can you provide more specifics on how you would provide updates and disclosure around the Navenibart program? And can you talk about your strategy to potentially get the FDA to accelerate the timelines? Charles Gayer: Sure. So for Navenibart, as Bill mentioned, the enrollment is going well. And so we would probably update once we have the pivotal study fully enrolled. And then, sorry, what was the second part? William Sheridan: The second part is about doing our best to pull that forward as this program matures; that's obviously something we'll be focused on. So, for example, elements of the BLA that we can start writing, we'll start to write. We won't have a crystal clear understanding of the timing of the BLA until two things happen. And one is the last patient's first visit, so that we can predict when the last visit is for 12 months later, obviously. The next step is getting clarity with the division at a pre-BLA meeting on the total content of the BLA. And obviously, that comes later. So I think we'll be able to provide more clarity in due course. Operator: The next question comes from Jon Wolleben with Citizens. Unknown Analyst: This is Catherine on for Jon. I just have a quick question about whether you guys are seeing any impact from the recent new entrants, including the oral acute therapies, and whether any patients are switching to ORLADEYO? Are you seeing differences in the reasons for patients switching? I know there's not really been much of an impact on revenues, but if you expect any impact or if you're starting to see it at all? Any color on that? Charles Gayer: Sure, Catherine. As we've said, particularly a lot last year leading up to new entrants coming in, we did not expect there to be an impact on ORLADEYO from new prophy entrants because there's a real difference between patients who want oral prophy and then patients who are more comfortable with injectables. So we expected the injectables to be competing more with existing injectables, and that's what we're seeing. So it's not changing ORLADEYO prescribing patterns or patient patterns in general. As far as oral on-demand, oral acute therapy, that's something we're certainly not seeing affect ORLADEYO negatively in any way. We think over time, there is a potential for a tailwind of just patients who want to be in an all oral combination, so one pill once a day to prevent attacks and then for the occasional breakthrough attacks, treat with another oral, that's a great opportunity for many patients. But it's too early to say whether that tailwind is going to occur. Operator: The next question comes from Serge Belanger with Needham & Company. John Todaro: This is John on for Serge today. First, just on ORLADEYO. You guys took a 9% price increase in January. Beyond that, curious which levers you'll be looking at most closely in '26, whether it be maintaining trends of new patient adds or making slight improvements on paid prescription rates, either in Medicare or commercial channels. And then on the pellet formulation for pediatrics, curious how we should think about the pacing of patient identification and conversion throughout '26. And does your current guidance assume any material contribution from this segment this year? Charles Gayer: Great. Thanks, John. Yes, we did take up a 9% price increase in early January, which is higher than we've done in the past. We'll net about half of that, so about 4.5%. So that is something more because ORLADEYO was a lot lower priced than most of the other products in the market. And so this was just a little bit of a catch-up, but not something that we need that kind of pricing going forward to get to our long-term peak of $1 billion. For this year, the KPI that is most important to us is net patient growth. And as we've said, and it's in our slides today, what we need is 150 patients net patient growth average per year for this year and 3 more years to hit $1 billion in 2029. So we are very much within sight of getting to that $1 billion. And so that's the #1 thing. Of course, we're always working to improve the paid rate incrementally. We made a big jump in the last year. And now it's just about making incremental improvements, and we're using our real-world evidence. So, for example, in patients with normal C1 inhibitor, we're starting to see more plans adopt favorable coverage policies for this based on the real-world evidence that we're providing. So that's a constant process. Then, for the pellets, one of the things I mentioned in my remarks is that HAE is underdiagnosed in kids. We found about 500 patients in claims data for kids under age 12. But statistically, based on the epidemiology, there should be 1,200. And one of the reasons is parents are sometimes reluctant to get their kids tested because they're frankly hoping their kids don't have HAE. But the availability of an oral therapy, we think, and we've seen this in the early days of the HAE market, having a therapy encourages diagnosis. So there's a market growth opportunity. And then kids are only treated with prophy at about a 40% rate, which is half that of adults. And so there's a potential to up to double the number of kids diagnosed and up to double the treatment rate. And we think that an oral prophy is the thing to do. Then, as far as guidance, yes, the peads launch is in our guidance for this year, but it's a really small part. We are very bullish long-term on what this indication is going to mean for kids and for revenue. But what we don't know is how quickly that transformation is going to happen. And so we've been conservative in our thinking for this year. And then we'll see how it goes. But if it goes faster than we expect, it could be a tailwind. Operator: [Operator Instructions] Our next question comes from Stacy Ku with TD Cowen. Vishwesh Shah: This is Vish on for Stacy. Congratulations on a great year, and I really appreciate your comments on the competitive dynamics. We have a couple. So first, for ORLADEYO, expectations for Q1. Can you give us an idea of how the reauthorization process is progressing this year? We know you made some improvements in the process last year, which resulted in faster-than-expected reauthorizations. So just walk us through what you're seeing and what we, and investors, should expect for Q1? Then, second and final for us, given the EU business sale, are you willing to split your 2026 guidance for U.S. and ex-U.S. contributions? How should we be thinking about that? Charles Gayer: Great. Thanks, Vish. I'll take the first question and pass it over to Babar for the second question. Every Q1 is the big reauthorization season. It's a ton of work. Our team prepares for it. They're right in the midst of that process, and our team has gotten really good at it. What you should expect for Q1, because this year, we don't have any huge tailwind like we did last year with the Medicare patients and the IRA, making it more affordable for patients. The Medicare patients are in great shape. So we won't have that tailwind. So this year, you should expect revenue probably to be slightly down versus Q4 as we go through the reaff. We have to give away more free product. We have to pay a higher percentage of co-pays for the commercial patients. And so that drops revenue even as our patient base continues to grow. So down a bit in Q1 and then it pops up again in Q2. And Babar, do you want to just talk about the U.S. versus global? Babar Ghias: With respect to your question on the costs and contributions from Europe, if you look at our press release in the financial tables, we actually attempted to break out all that European business. I think, as we have previously stated, that European business, while growing, was also loss-making. So you can actually see that our base business margins were incredibly strong compared to the U.S. The U.S. business margins are incredibly strong compared to Europe. So when you look at that profitability metric that I quoted, the $214 million, that strips out all of Europe. And from the exhibits, you can glean that the base business costs are $380 million for the U.S. in 2025. To give you a perspective on what it looks like in 2026, and this goes back to the same cost discipline, we shut off Europe, but we added a very, very highly derisked late-stage program in Navenibart. So our total costs are in the $450 million to $470 million range, of which the base business is actually not growing by much. The cost additions are primarily coming from adding Astria. So that's the discipline that I talked about that we will continue to make sure that our base business costs remain low, and we continue to drive growth. I hope that answers your question. Vishwesh Shah: Yes. My question was relating to the 2026 guidance, the $625 million to $645 million that we're expecting for this year. How should we think about the U.S. and ex-U.S. split there? Babar Ghias: Yes. So a majority of that is going to be from the U.S. We have retained some markets. And as you can see, after Europe, the split is now it's a little bit over 90%. So, while we're not breaking out, the majority of that is coming from the U.S. business. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Charlie Dyer for any closing remarks. Charles Gayer: Thanks very much. 2026, as we've been describing, is a really big year for BioCryst. We've got continued ORLADEYO patient growth. We're super excited about the launch of ORLADEYO for kids. A lot of important clinical trial execution for Novenibart and 17725 is going well. And I'd really like to thank all the hard-working owners at BioCryst for what they did to make 2025 a great year and what they're doing this year to deliver another year of great results. So thanks, everyone. Have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Welcome to the Opera Limited Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] Please be advised that today's call is being recorded. I would now like to turn the call over to your speaker today, Matt Wolfson, Head of Investor Relations. Please begin. Matthew Wolfson: Thank you for joining us. This morning, I am joined by our CEO, Song Lin; and our CFO, Frode Jacobsen. Before I hand over the call to Song Lin, I would like to remind you that some of the statements that we make today regarding our business, operations, and financial performance may be considered forward-looking. Such statements are based on current expectations and assumptions that are subject to a number of risks and uncertainties. Actual results could differ materially as a result of various factors, including those set forth in today's earnings press release and our most recent annual report on Form 20-F, filed with the SEC. We undertake no obligations to update any forward-looking statements. During this call, we will present both IFRS and non-IFRS financial measures. A reconciliation of IFRS to non-IFRS measures is included in today's earnings press release. The earnings press release and an accompanying investor presentation are available on our Investor Relations website at investor.opera.com. Our comments will be on year-over-year comparisons, unless we state otherwise. With that, let me turn the call over to our CEO, Song Lin, who will cover our fourth quarter operational highlights and strategy, and then Frode Jacobsen, who will discuss the details of our financials and expectations for the first quarter and full year. Song? Lin Song: Sure. Thank you, Matt, and good day, everyone. While we preannounced Q4 outperformance, we have been very much looking forward to today, and to tell you how great our actual results was, and even more importantly, how exciting our 2026 guidance is. Advertising revenue led by continued scaling of e-commerce came in with an unprecedented sequential increase of $19 million versus the third quarter, resulting in 25% year-over-year growth. Clearly, we are performing well for an increased number of advertiser partners, all running performance-based campaigns with us, and we have yet again shown our ability to leverage the seasonally strongest fourth quarter to cross a year of fast growth. In addition, our rapidly expanding monetization of user intent query revenue continued with 16% growth year-over-year. This was fueled by both healthy search revenue growth and a continuation of 200% plus year-over-year growth in non-search query revenue. The monetization of intent-based traffic beyond search is an exciting opportunity, contributing over $5 million of revenue in the quarter and will continue to be our fastest-growing revenue component in 2026. All in all, Q4 revenue growth was 22% against the toughest quarterly comparison of 2024, and 8% higher than the midpoint of guidance. Our resulting annual revenue growth was 28% in 2025, an acceleration from 21% growth in 2024. EBITDA also came in well above the high end of our guidance range and 7% higher than the midpoint. We continue to invest in both product marketing and the growth of advertiser relationships, while maintaining a healthy EBITDA margin and solid cash flow, which Frode will cover in more detail later. We have talked a lot about our positioning in the AI era over the past years, and the topic continues to deserve attention. Our job is to make the best browsers for demanding users. We are amazed at the quality of emerging AI services, as I'm sure many of you are too, and we do not consider these companies as our competitors, but rather current and potential future partners. Our focus is to create the best orchestration layer possible for end users to benefit from this rapidly expanding ecosystem. The best example is Google, which has delivered the world's best search experience for decades and is showcasing its technical abilities through the advancing Gemini models. Google has its own browser but has been our partner for 25 years as we deliver an integrated experience for the end user to benefit from these services in a feature-rich and advanced browser. And with the broadening ecosystem of services, the appeal of an independent browser only increases. And at the same time, the attention to the browser space results in more people contemplating which browser represents a better alternative. That sentiment should be shared by the new AI companies, which would prefer to reach their users via an independent Opera browser as opposed to a direct competitor's browser. That is a healthy basis for constructive relationships. Our strength is browser sophistication and a dedication to augment the web experience in ways the users will find familiar and useful. Most people don't want to change their browsing habits. Rather, they are looking to enhance it with a richer experience, enabled by AI and agentic capabilities of their choosing, but it all starts with browsing at its core. The browser itself is a gateway to your online journey, and it is a mistake to build a browser that is a little more than an AI terminal with browsing the web as an afterthought. This positioning is also what enables our financial profile. We do not need to put out massive capital into hardware nor enter a fierce competitive large language model arms race. Financially, this is a continuation of the profile we have consistently shown a healthy combination of growth, profitability and cash generation, and a relatively unique resulting ability to be both a growth company with no financial constraints to seize our potential, while also returning significant cash to our shareholders. While our performance and outlook are not fully reflected by the public market today, there is always a silver lining. And in this case, it is our ability to take advantage of this opportunity to create significant value for our shareholders by launching a major share buyback program. Frode will go into the specifics shortly. Moving on to operational highlights. 2025 was certainly another year of rapid innovation and built upon our modular technology and preference to tailor browsers to distinct audiences. We launched 2 new browsers, Opera Air; and the subscription-based Opera Neon, which became widely available in early December. While user demand for agentic browsers is not yet mainstream, Neon is a terrific product that solves multiple goals. It provides one of the most advanced browsers for AI demanding power users, potentially unlocking a new subscription-based revenue stream. And more importantly, it is a testing ground for new AI features that we can then introduce across our full suite of browsers. Our revamped flagship browser, Opera One entered 2025 in its second-generation R2, and most recently was refreshed to R3. In addition to greatly enhanced tab management and split screen views, R3 came with native integration of e-mail and calendar and our most advanced integrated AI assistant yet, Opera AI. Compared to earlier versions, Opera AI benefits from a 20% faster agentic-based engine and contextual responses that allow AI to understand the web page or an entire group of tabs. This enables it to give answers based on the browsing context while maintaining privacy and control in the hands of the user. As a result, the user benefits from more relevant, efficient persistency and direct task completion within the browsing experience, unlike a stand-alone chat. And on the back of expanding monetization opportunities, we are bringing Opera AI to all of our browsers. With business models evolving beyond subscription, Opera is exceptionally well positioned to benefit from these trends and take advantage of our successful history of query monetization. Opera GX, the browser for gamers, reached over 34 million MAUs in the fourth quarter, a 5% sequential increase and remains our highest ARPU product. As the official browser sponsor of the League of Legends World Championships, we saw our best weekend of user activations in the history of GX during the tournament. Our mobile browsers also contributed to healthy user base dynamics, with Europe continuing to stand out after iOS became a more level playing field, following the EU Digital Markets Act. All in all, we ended the year with 284 million MAUs, inclusive of 60 million users in Western markets that contribute the most to our strong ARPU trajectory. ARPU grew by 26% to $2.49 in the fourth quarter. This growth demonstrates our ability to gain users in key target markets despite new entrants from well-capitalized competitors. We continue to take advantage of our browser position to scale opportunities that are natural extensions. Opera Ads, the platform that initially optimized the relevance of ads to each individual Opera user has become a global player also on non-browser inventory as part of our audience extension. Learning from primary data signals, we more than doubled its pace of growth in 2025 versus 2024, with well-performing campaigns for our advertiser partners. Every second, we process 12 million ad queries, more than double the year ago period. We worked with over 300 advertisers in 2025, including 4 of the 5 largest e-commerce platforms. Within the top 50 advertisers, the average spend per advertiser grew by 56% in 2025. In terms of our total advertising reach, when taking into account the millions of users that access our content platform through OEM white-label solutions, and the reach of Opera Ads, it is over 0.5 billion MAUs and growing. This scale and growth positions Opera uniquely among the largest online platforms. Another native extension of our footprint is MiniPay, a stablecoin wallet that emerged as a feature inside our mini browser tailored to emerging market users and is now available as a dedicated app. Mini Pay continues to drive adoption in a stable core market with over 13 million activated wallets, an increase from 10 million in the third quarter. The accumulated number of transactions increased from 290 million last quarter to 390 million. MiniPay is the fastest-growing stablecoin wallet in Africa, appreciated for its technical ease and seamless integrations with a broad partner ecosystem, enabling simple and low to no-fee transactions. Most recently, we expanded support for USDT and Tether Gold, and are rolling out the MiniPay card to increase functionality and serve as an important offering, offering best-in-class FX rates. Building upon our success in Africa, our 2026 focus will be to invest in making MiniPay a more global platform. With that, I would like to turn the call over to our CFO, Frode Jacobsen, to discuss our financial results, guidance and capital allocation in greater detail. Frode? Frode Jacobsen: Thanks, Song. As Song Lin also opened, we have been looking forward to sharing our complete fourth quarter and full year results with growth well ahead of even recent expectations and above the guidance ranges on both revenue and adjusted EBITDA. While we always apply caution to guidance, exceeding the high end of our revenue range by over $12 million is a recent record. Relative to midpoint, revenue was 8% above guidance and adjusted EBITDA was 7% above guidance. We are also very pleased with the composition of our overperformance with healthy trajectories across both advertising and query revenue. Our e-commerce success translated into a record contribution from the holiday shopping season, and as importantly, demonstrated our ability to scale our partnerships further ahead of embarking on a new year. Our most mature revenue stream, search, is evolving and broadening with our ability to monetize users' intent as part of query revenue, whether it relates to reactive suggestions or advancing our intent-based traffic partnerships. In addition, AI unlocks query volume that was previously too complex for the search bar and represents a major improvement in the user experience, including well-tailored advertiser recommendations. Quarterly revenue totaled $177 million, 22% up year-over-year and well ahead of guidance. Looking at our quarterly cost components, we incurred about $1 million more cash compensation expense than expected, predominantly a result of increased bonus provisions and a weaker U.S. dollar. Cost of revenue items also scaled with the revenue overperformance, representing 37.4% of total revenue. Marketing costs and the sum of all other OpEx items pre-adjusted EBITDA came in according to expectations. In total, and largely as a function of revenue overperformance, costs were $11 million higher than implied in our midpoint guidance, though this was more than offset by the comparable $14 million increase in revenue, resulting in $3 million incremental adjusted EBITDA. Quarterly adjusted EBITDA came in at $42 million, a 23.6% margin and also outside the guidance range, as earlier stated. All in all, full year revenue came in at $615 million, growing 28%. Our initial guidance for 2025 was for growth of 17%, after which our steady cadence of overperformance added $52 million of revenue as the year progressed or 11 percentage points of growth. 2025 adjusted EBITDA came in at $143 million, a 23.2% margin. This too represented a solid increase of $7.5 million versus initial guidance, adding 7 percentage points to the expected growth rate for the year. With that, 2025 was our fifth consecutive year as a Rule of 40 company. A few words about gross margin. As we scale Opera Ads, which has a different gross margin profile compared to our all in all revenue streams, we see a greater cost of revenue component in our results. But the platform comes with no marketing cost and a limited OpEx base. As a result, our EBITDA margin was relatively stable even as we delivered 28% overall revenue growth. It's worth noting that the Opera Ads gross margin actually expanded in parallel with its scaling from 2024 to 2025, thanks to enhancements in our optimization algorithms, showing how both we and our advertisers benefit from our strong targeting capabilities. Operating cash flow was $40 million in the quarter or 96% of adjusted EBITDA, resulting in a full-year operating cash flow of $118 million or a relatively normalized 83% as expected. Free cash flow from operations, which also deducts capitalized equipment and development as well as payment of lease liabilities, was $35 million in the quarter and $98 million for the year, corresponding to 84% and 69% of adjusted EBITDA, respectively. As percentages of adjusted EBITDA, we believe these annual levels represent fair expectations for 2026 cash conversion as well, while we will continue to see quarterly fluctuations with seasonality, tax and bonus payments and other cyclical effects. Then turning to guidance. While we are very pleased with our performance last year, we are still early in our trajectory. As we embark on a new year, we are excited by both the quality and potential of our products, and our opportunities to continue growing our financial results. Starting with the current quarter, we guide Q1 revenue of $169 million to $172 million, representing 18% to 21% growth year-over-year. The guidance reflects the growth momentum experienced year-to-date, reducing the sequential effect following the seasonally strongest quarter. We are generating healthy margins and are guiding for adjusted EBITDA of $38 million to $40 million, a 22.9% margin at the midpoint, setting a solid foundation for the remainder of the year. For 2026 as a whole, we guide revenue of $720 million to $735 million, translating into growth of 17% to 20%. While we prefer to be prudent at such an early point in the year, we are humbled by how far we have come in these past few years and our opportunities ahead. We guide adjusted EBITDA of $167 million to $172 million, a 23.3% margin at the midpoint. We take pride in driving organic revenue growth at a healthy level of profitability. And while our guidance reflects an inclination to focus on building scale over expanding margins, it implies a slight tick up in profitability, with the 2025 margin level now representing the starting point of the range. In terms of costs, we then implicitly guide to a full year OpEx base pre-adjusted EBITDA of $558 million at the midpoint, of which $131.5 million in Q1. We expect cost of revenue items combined to represent about 38% of revenue for the year, starting somewhat below and ticking up as the year progresses. That represents a 2 percentage point gross margin headwind for the year, while Opera Ads in isolation is expected to continue its margin expansion. Economies of scale across the other OpEx items supports the combination of rapid growth combined with a cautious adjusted EBITDA margin expansion. Cash-based compensation expense is expected to grow with a percentage in the low teens with quarterly costs starting just below our Q4 2025 level and ticking up with annual salary adjustments as of April. Full year marketing cost is expected to grow by about 10% from the 2025 level with a relatively even distribution of the annual spend between the quarters. And all other OpEx items pre-adjusted EBITDA are expected to grow by about 15% for the year as a whole, starting just below the Q4 level and increasing quite linearly through the year. Finally, we are excited to launch our new buyback program today, which is of an unprecedented scale. In fact, the $300 million authorization exceeds all prior buybacks combined and represents over 25% of our market cap as of this morning. Our ability to do this on top of an already meaningful recurring dividend only highlights the attractiveness of our operating model and commitment to shareholder returns. Given our belief that our stock is trading at levels that do not reflect our continued success, we are taking advantage of our strong balance sheet and expanding cash generation to capture a compelling ROI opportunity for our shareholders. We will pace and structure the buyback program based on market conditions, and we will buy back shares from our majority shareholder at the same pace as we buy back shares in the public market, ensuring that our free float percentage remains unchanged while massively stepping up our return of cash to shareholders. All in all, we are very pleased and also proud of the results we have achieved, thanks to our highly driven team and our ability to expand monetization while enhancing the user experience. We look forward to keeping you posted as yet another year with much promise progresses. With that, I'll turn the call back to the operator for questions. Operator: [Operator Instructions] We'll take our first question from Ron Josey with Citi. Ronald Josey: I wanted to ask a little bit more about Western users, which grew about $2 million sequentially. And I think we had some positive commentary around greater competition in Europe. So just talk to us about the ability to continue to gain these users despite, call it, greater competition and everything else. So talk about Western users and the growth there as one. Then the next question is just on ads overall. With e-commerce growing 25% year-over-year, a lot of that from e-commerce specifically, you noted the top 50 advertisers grew 56%. Talk to us about the traction that you're seeing within e-commerce and how you position that going forward. Lin Song: Yes, I can answer this. No, I just saw that he mentioned you, Frode. But this is only -- I can try to answer, give a first step, and then Frode can also comment a bit afterwards. So yes, I mean, I think overall, we are quite happy with the user performance in Q4. I mean, actually, both for the total MAUs, I think it's a good number because, as we always mentioned in the past that where we are always like losing some feature phone users, but then we are always growing in where it counts: smartphone users and desktop users. And of course, a fair percentage of that is also Western users, which also showed up nicely in the Q4 stats. So very happy about it. I think -- essentially, I think it's an illustration of our focus, of our dedication, both for very attractive desktop offerings, but also -- maybe also to mention that we also see very nice growth on, say, mobile browsers, especially iOS browsers after the European Market Act. Then we also saw a lot of attraction, of course, a result of AI -- that as a result of AI, everybody actually see that it's actually possible to have a very good AI-powered browser experience also in iOS, and then that's why we also have a lot of interest with Opera for iOS, for instance. So overall, I think we saw a very good trend, and cautiously positive that the trend will continue, and then hopefully we will grow faster in the new year to come. So I think it's on that. Then, yes, like again, also maybe super quickly commenting on the ads, especially e-commerce. So yes, in general, e-commerce is our biggest category. It grows very nicely. That grows -- if you only look at e-commerce alone, it actually grow a lot faster than 25% apparently. And it's one of the strong powerhouse, I guess, to power the whole year-over-year growth. It's also very easy to calculate that despite of like nice growth on search and also others, the e-commerce, of course, overall grows faster. And that actually enabled us to have an overall yearly growth of 28%. So like again, very positive. But also maybe I like to mention that the whole e-commerce is a very big market. It's a very big TAM, right? Like the whole -- I would say it's -- in the world, it's probably likely to be $100 billion, depends on which number you use. And then even if just by a market share of where we should be, we still have at least $5 billion to $10 billion actually potential to grow. So we are very positive about it. I think it is also indicating the opportunity that brings us that in the past, most of those money probably go into, let's say, search engine because that's the only user intent, which people cares. But with the advancement of AI, people are now starting to see that there are actually many places that is possible to place user intent and browser is naturally also one of it. That's also why we have the chance to actually gain those, I would say, user intent revenues, both in what we call acquired revenue, but also in advertisements or performance based. And we feel that this have a very good opportunity to continue to power our growth in the next months or years to come. So very excited. Frode Jacobsen: Let me chime in briefly that the e-commerce, very successful part of the business. It continues growth rates and a 100% year-over-year rate, including in the key fourth quarter and scaled massively over the past couple of years. Then the Opera Ads platform, which is -- which also allows third-party publishers to take advantage of our targeting, saw an increase in the growth rate in 2025. The metric you mentioned about the biggest customers growing, I think that's a very good picture of the deepening of the relationship we have with them, as all our campaigns are performance-based. And when we do well, we get a bigger share of their marketing budgets. Operator: Our next question will come from Jim Callahan with Piper Sandler. James Callahan: Just a question on Neon. It's been a few months since being rolled out. Anything you can talk to on engagement or monetization there, so far? Lin Song: Yes. So again, it's Song Lin here. So I'll also try to comment a bit, right? So like again, as also mentioned in the scripts, very exciting about the launch of Neon. We just have it widely available in mid-December, so it's still quite early. But as also mentioned that I think what's been relevant is both the opening up of Neon as a potential community hub for AI power users. But also, I think the technology behind it, which actually allows us to use the most advanced orchestrations in ways and forms, which is not possible in the past. And then all of those features have also been able to allow us to move those into Opera AI, which are also launched across all the Opera products, which are very well received, which we believe is actually also part of the reason why we see the strong growth in Western market, because this is where this is mostly appealed to. But we also think that there's a good potential to have it to further grow in 2026. Then in terms of monetization, as I also mentioned a bit that it's, of course, partly already revealed by the nice growth in both query revenue, but also related advertisement revenue based on it. But even though it's not really showing up in Q4, because we only launched it in mid-December, there are potential, of course, of potential subscription revenue streams, which can help us move up further. James Callahan: Just follow-up on gross margin. So you're obviously, scaling the off-platform part of the business, but your incremental gross margin stepped up the past 2 quarters. Can you just talk about the sustainability of that trend, and like what steady-state gross margins look like if we keep scaling off-platform? Frode Jacobsen: I think the nice thing as we look into 2026, it's a good growth potential across the business. We are still guiding to Opera Ads platform, growing slightly faster than the totality and building in a bit of a couple of extra points on cost of revenue. But at the same time, given the P&L profile of running a platform, it's generating very healthy EBITDA contribution, which allows us to slightly tick up the EBITDA margin expectation for 2026. Operator: Our next question comes from Eric Sheridan with Goldman Sachs. Eric Sheridan: Maybe the first one, just following up on Jim's question about Neon. I want to understand how you view the landscape to potentially grow wider adoption? And what might be some of the key investments you need to make from either a branding perspective or a download perspective to sort of get more usage around Neon broadly as you look out over the next sort of 6 to 12 months? That would be the first one. Then in the slide deck or the investor presentation, you talked a little bit about the payments opportunity that sits in front of you. What do you see as some of the strategic investments that have to be made to capitalize on that payment opportunity? And how does it fit more broadly into your strategic imperatives? Lin Song: Yes, it's Song Lin. So I think I'll just try to make a stab, and then Frode can also comment a bit on growth, right? So again, very good question on Neon. So to us, I think it's about -- yes, it's actually a very interesting consideration. So I guess to us, at the end of the day, we are very unique in a position that because many other AI companies, they either have to rely on purely subscription. They don't really have a choice. And I think we are almost in a bit luxury situation that we are rather profitable on our free product, right, powered by advertisement and a few others. So for us, I think it's almost a bit of consideration and also balancing act that what features do we want to prioritize on get into Neon, which is a paid product, subscription base? Or do we think that makes more sense to have it in -- to make it generally available to everybody, right? Because that, in the end, of course, will also be able to allow or grow users faster and also help generating a very healthy advertisement revenues, which is, I guess, a bit challenge for some of the newer AI start-ups. So I would almost say that's almost a bit luxury situation, and that's also essentially why, for instance, at least in Q4, we have prioritized on also making sure that many of the functionalities moved into Opera AI because we can afford it, and it's also making more sense in that context. While I think our focus is more for those which are really for powerful users. For instance, Neon will allow very powerful orchestration of different AI models, you can choose Grok, you can choose OpenAI, you can choose many other models or even many Open Source ones. And then also will allow rather comprehensive task management to group all the tabs into different -- more like to group multiple tabs into a task, to be able to generate the context. And also, we actually also have very powerful Neon make tools, which are able to make many interesting utilities, mini apps or potentially even presentations. But naturally, those were always tailored to a very, I would say, a niche group of users to start with, among others, right? So we have a lot of thoughts. We have a lot of ideas. We have many functionalities. Some of them will go into Opera AI, which is more suitable perhaps for wider audience. But then some of it, I would almost say, at this point, we have some very exciting tools for utility or, let's say, efficiency tools, which we are aiming at Neon. And I think those will be very interesting for potential Neon users in the future, and those will be our target subscription base, while there's also many other browser-related utilities and functionalities that will focus more in Opera AI, which will more be freely available to general market. So it's a very big topic, very exciting times. And I think we only appreciate that we at least have many different choices to make, which is a very nice position to be in. Then super quickly on payments. So you might also recall that we actually have an investment of some other investments based on fiat currency, which is proven to be a very good success in the past. So I would almost say we have some experience of how to have very interesting payment infrastructure buildups on emerging markets, which we see opportunities. So I think MiniPay hereby is also a very good case that we believe by focusing on technology, in this case, Web3 and Stablecoin. And because of infrastructure, again, in this case, decentralized approach that noncustodial approach and decentralized that we are able to build up a technical infrastructure while utilizing our, I would say, orchestration both for partners across different countries and also end consumers, which as a consumer company, we are very good at to be able to link all those 3 different parts to have a very compelling value proposition and storage. So for now, I would say it has -- we have already proven in Africa. But this year, the focus is actually to move it to be a more platform play around the world, and also be able to link in those developed countries to developing countries as well. So I think those will be the area which we work. But again, we're actually working with closely with partners. For instance, we announced the cooperation with Tether earlier this year, which I think we in particularly called out that, that will also be focus not only in Africa, but also allow us to reach other parts of the world. And hopefully, we also have some other interesting announcements to come shortly, which continue to allow us to do more globally as a platform and technical infrastructure. So very exciting times. Operator: Our next question will come from Naved Khan with B. Riley Securities. Naved Khan: Two questions from me. One on the Opera GX user growth. What regions are you seeing this growth come from? And then also, I recall you launched Japan and Korea sometime early last year. How are those markets performing in terms of contributing to the user growth? So that's question one. Then secondly, can you just talk about maybe OPay and maybe potential IPO timing, if there is going to be one this year, what are your expectations there or your thoughts there? Lin Song: Yes. So like again, I think I'll try to talk about a bit on Opera GX, and then Frode can also talk a bit more on some other investments we have. Yes, so high level, I think Opera GX, so overall, I would almost say that at this stage, what we have already been proven is that gaming users itself are quite high up valuable users across the regions, right? So I think the nature of the fact that they are gaming users, typically on PC actually, and this is very nicely reflected in the different revenue and ARPU profiles as fairly high ARPU users regardless of the regions they are. So yes, consequentially, for us, its priority is actually to making sure that we serve all those users, both in one of the biggest market, for instance, U.S. is still the biggest market, but also in other markets like LatAm and a few other places, which we also see some very good interest. Then maybe also super quick comment that, yes, indeed, that we have also actually quite interesting developments in, I would say, East Asian market, which we previously have not spending time on. Like, for instance, League of Legends World Championship last year is actually in China, but also is also very influential in Korea and Japan. So the fact that our close relationships with Riot allow us actually to be able to do more in those markets. So we have actually some very exciting happenings, and also continuations in those markets in 2026 to come. Frode Jacobsen: I can comment on the OPay question. I think we're very excited about the performance of our -- OPay. In terms of an IPO, we see that they have hired very experienced public executives with the new CFO and CEO that the company recently announced. I think all signs point to the company -- a natural next step for the company being a public company, but nothing yet been confirmed on timing and specific expectations around it. Operator: [Operator Instructions] Our next question will come from Jonnathan Navarrete with TD Cowen. Jonnathan Navarrete: My questions are really on MiniPay. The first one is, could you walk us through the monetization path for MiniPay? And lastly, are there any read-throughs in terms of Stripe's potential acquisition of PayPal as it relates to MiniPay? Or are they just really two different platform assets? Frode Jacobsen: I can comment on the monetization first. So our priority with MiniPay is to build a scale and build a user base and create a product that has such low barriers to entry that stablecoins become sort of a viable accessible tool for people with the starting focus on emerging markets. Then as we've talked about, we're expanding sort of the functionality of it to include more payment opportunities, both domestically and internationally. And the way we monetize it for now is, broadly speaking, from the partner ecosystem, integrating partners into the product and promoting that, and sort of growing together with partners. Operator: Our next question will come from Mark Argento with Lake Street. Mark Argento: Congrats on the strong finish to the year. Just one quick one for me. Could you just remind us non-search query revenue was up almost 200%, small dollars, but what is that exactly? And how can you leverage that going forward? Frode Jacobsen: Yes, sure. I'll do that. It's starting to -- it's a very new revenue stream. So -- but it's becoming material. It exceeded $5 million in the quarter, up from $3 million in Q3 and growing very quickly. What it consists of is essentially when a user has an intent and we can address that intent by sending a search query to a search partner, but we can also provide direct references to partners, either as a part of the URL experience or in an AI test with Opera AI, for example, and promote partners directly that way, tailored to what the user is looking for. The reason we're excited about the revenue stream is that, sort of, as these types of potential dialogues expand so quickly, people use it more, we see a big step-up in our users taking advantage of Opera AI in the browsers. Being a native part of the browser and existing one level above websites has many advantages, including monetization potential, which we will then capture in, in query revenue. Operator: At this time, there are no further questions in the queue. So I'd like to turn the call back over to Song, for any additional or closing remarks. Lin Song: Sure. So yes, like again, thank you to everyone for joining us today. 2025 was an amazing year. We were able to ship new browsers and bring exciting features to our existing suite of browsers, and at the same time, deliver impressive financial results that exceeded our rising expectations throughout the year. So while we, of course, still have a lot of work ahead of us, I'm confident we can make 2026 even more successful. Have a good day, everyone. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.