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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.
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: Hello, and welcome to Liberty Media Corporation's 2025 Year-end Earnings Call. [Operator Instructions] As a reminder, this conference will be recorded February 26. I would now like to turn the call over to Hooper Stevens, Senior Vice President, Investor Relations. Please go ahead. Hooper Stevens: Thank you, Kevin. Thanks, everyone, for joining us today on Liberty Media's Fourth Quarter and Year-end 2025 Earnings Call. This call today includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Form 10-K followed by Liberty Media with the SEC. These forward-looking statements speak only as of the date of this call and Liberty Media expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. On today's call, we will discuss certain non-GAAP financial measures for Liberty Media, including adjusted OIBDA, constant currency for MotoGP, the required definitions and reconciliations for Liberty Media can be found on Schedule 1 and MotoGP or Schedule 2 at the end of the earnings press release issued today, which is available on Liberty Media's IR website. Speaking on today's call, we have Liberty Media's President and CEO, Derek Chang; Liberty's Chief Accounting and Principal Financial Officer, Brian Wendling; Formula One's President and CEO, Stefano Domenicali; MotoGP CEO, Carmelo Ezpeleta and other members of management will be available for Q&A. With that, I'll hand the call over to Derek. Derek Chang: Morning. Thank you, Hooper. And before I start, I just want to welcome Hooper to our team. This is his first earnings call for Liberty. Many of you know, Hooper already, he has obviously been part in and around the Liberty Complex, but we are very, very happy to have him with us here. It has been an exceptionally productive and successful year for Liberty. We are energized by the slower progress we've built across our businesses and are focused on accelerating our momentum this year. We have delivered against each of the priorities we articulated last year, namely one to continue F1's growth trajectory; two, to augment our portfolio with the acquisition of MotoGP; and three, to execute the Liberty Live split-off. Following the split-off last December, we are now a premier global sports investment vehicle anchored by 2 world-class motor sport leagues and operating in an industry supported by strong secular growth tailwinds. Looking ahead to this year, operational excellence at MotoGP and F1, while remaining disciplined and opportunistic with our capital to drive value for our shareholders and across our portfolio. Turning now to our operating businesses. At MotoGP, we see tremendous upside over time and are in the early stages of unlocking that potential. We don't expect to see these investments bear fruit immediately, but are laying the necessary groundwork to drive this sport forward. Since closing the acquisition last July, we've continued building on our commercial functions. We hired key personnel across sales, public relations, social media strategy with more additions to come. We're focused on driving knowledge sharing between MotoGP and F1 and believe this can support long-term value over time. I just recently returned from our Partner Summit in Barcelona, where we clearly articulated our strategy to teams, promoters and partners across the ecosystem. The enthusiastic response was a very positive sign as we build share momentum with a strong collective commitment to the future of our sport. For Moto, our 3 key priorities are: first, we remain focused on strengthening MotoGP's foundation and expanding its global footprint. We recently announced we are moving our Australia race to Adelaide, marking our first modern era circuit in a city center and we are excited to return to Brazil this year after a 20-year hiatus and look forward to adding Buenos Aires to the calendar next year, strengthening our presence in major international cities. Second, we remain focused on elevating the Grand Prix experience into a must intend event at every circuit. We continue to further enhance our hospitality offerings and improve the on-site fan experience. Finally, this work underpins our efforts to unlock our brand value to scale the sponsorship roster. We remain disciplined in our approach to sponsorship and are prioritizing brand alignment with high-quality partners over near-term wins. Now turning to F1. F1 once again delivered an exceptional year with the sport firing on all cylinders across growth, engagement and commercial momentum. We renewed with multiple long-term existing partners, we signed several new marketing partners, including Standard Chartered, our official wealth management and banking sponsor. As you saw earlier this morning, we just announced our broadcast extension with beIN in the Pan Asia region. And earlier this week, we announced the extension of our ESPN partnership in Latin America. Our third year of the Las Vegas Grand Prix was a resounding success and our relationship with the Las Vegas community has never been stronger. Importantly, we finalized the new Concorde Agreement to cover the 5 years from 2026 which provides us with durable financial economics in all F1 constituencies and constituents a stable base to invest into the sport and drive long-term value creation and an even healthier ecosystem. And 2026 should be an exciting season on track with Cadillac and Audi joining the grid. The new brands, cars and engines should lead to an incredibly competitive racing season ahead. Stefano and Carmelo will both provide more updates on their businesses later in the call. We look forward to continuing to support their strategic vision. Now I'll turn it over to Brian for more on Liberty's financial results. Brian Wendling: Thank you, Derek, and good morning, everyone. At year-end, Liberty Media had cash and liquid investments of $1.1 billion, which includes $539 million of cash at F1 and $197 million of cash at MotoGP. Total Liberty Media principal amount of debt was $5 billion at year-end, which includes $3.4 billion of debt at F1, and $1.2 billion of debt at MotoGP, leaving $499 million at the corporate level. F1's $500 million revolver in MotoGP's EUR 100 million revolver are both undrawn. At year-end, F1 OpCo net leverage was 2.8x. This is down from 3.3 that we gave at 6/30 pro forma for the MotoGP acquisition. And MotoGP's net leverage was 4.7x at year-end, down from 5.6x at 9/30. We expect to continue delevering at MotoGP this year. Liberty Media's overall net leverage was 3.6x. Turning to the F1 business. I'll make some brief comments about the fourth quarter but focus on full year comparisons primarily. A reminder that every quarter in 2025 had incomparable race count and mix. 2026 will also have incomparable race count and mix except for the fourth quarter. Majority of the variability in Q4 year-over-year results is due to one more race being held in fourth quarter compared to the prior year period. Q4 '25 had 7 races compared to 6 races in Q4 '24, with Singapore being included in the current year period but not the prior year period. Note that we operated the same number of Paddock Clubs during the fourth quarter, given that the Singapore Paddock Club is operated by the local promoter. For the full year, the business performed exceptionally well. Revenue grew 14% and adjusted OIBDA grew 20%, driven by growth across all revenue streams. Sponsorship revenue continues to increase from new partners and underlying growth and contractual increases. Media Rights revenue grew due to underlying growth in contracts, continued growth in F1 TV and the onetime benefit of the F1 movie revenue that was recognized in the second quarter. Race promotion revenue increased due to underlying growth in contracts. Other revenue grew primarily driven by higher hospitality and growth in licensing and freight income. Higher hospitality revenue includes revenue from the Las Vegas Grand Prix, and also revenue generated at Grand Prix Plaza from its growing private events business and the various new activations we opened in May of last year. Touching briefly on the Las Vegas Grand Prix. As Derek mentioned, our third year operating the race was a success, and we saw improved financial performance year-over-year. We continue to see a material benefit accruing from LVGP to the broader F1 ecosystem across various revenue streams, especially sponsorship, hospitality and licensing. Vegas continues to serve as a very successful test bed for product expansion and is integral to the continued growth of our sport in the U.S. Adjusted OIBDA increased during the year, driven by the strong revenue growth discussed above, outpacing increased operating and SG&A expenses. Higher operating expenses included higher team payments, and increased expenses associated with servicing our revenue streams. The increase in SG&A and -- the SG&A expenses was due to higher personnel and marketing costs. Team payments as a percent of pre-team share adjusted OIBDA were 59.7% for the full year 2025, representing 185 basis points of leverage against 2024. Over the past 4 years, we've seen an average of roughly 200 basis points improvement in leverage each year, and we expect 2026 to be approximately in line with this average. After 2026, for the remainder of the term of the new Concorde Agreement out to 2030, we expect the payout percentage to remain relatively stable. A reminder that team payments are best analyzed on a full year basis due to quarterly fluctuations in team payments as a percent of adjusted OIBDA. Looking quickly at MotoGP's results. As a reminder here, we closed the MotoGP acquisition on July 3. Our financial results are presented on a pro forma basis as though the transaction occurred on January 1, 2024, and the trending schedule will be posted to our website after the 10-K is filed including results in U.S. GAAP for the full year '24 on a pro forma basis. The majority of MotoGP's revenue costs are euro denominated and as such, are subject to translational impacts from foreign exchange fluctuations. In the following discussion, I'll focus primarily on constant currency results. Similar to F1, I'll make a few comments about the fourth quarter, but we'll primarily focus on the full year. Year-over-year comparisons are impacted by the mix of races, and generally, MotoGP flyaway races carry higher costs, which includes freight, travel and higher earth fees. MotoGP held 5 races in the fourth quarter of both this year and the prior year. Revenue increased at MotoGP during the fourth quarter as increased race promotion fees due to the race mix and contractual uplifts were offset primarily by lower proportionate recognition of season-based income with revenue from 5 out of 22 races being recognized this year versus by about 20 races recognized last year. For the full year, MotoGP had 22 races compared to 20 and 2024. Revenue grew across all primary revenue streams, primarily due to the 2 additional races held and contractual fee increases. Media Rights revenue also increased due to growth in VideoPass subscription revenue and other revenue benefited from increased hospitality revenue, which saw 2 additional races and increased attendance, partially offset by a decrease in fees related to MotoE. Adjusted OIBDA grew for the year driven by the higher revenue, offset by growth in operating expenses. SG&A expenses were lower, primarily driven by recognizing less bad debt expense in 2025 compared to the prior year. Note that bad debt expense in '24 was primarily related to race cancellations from years prior to 2024. Looking briefly at Corporate and Other results for the year, revenue was $414 million. This includes Quint results up until the split off on December 15 and approximately $33 million of rental income related to Grand Prix Plaza. Corporate and other adjusted OIBDA was $5 million and includes Quint results up until split off, Grand Prix Plaza rental income and corporate expenses. As a reminder, Quint business is seasonal with the largest and most profitable events taking place in Q2 and Q4. Note that Quint intergroup revenue from MotoGP is eliminated in our consolidated results through the spin date. Going forward, Quint will no longer be reported in our operating results. F1 and MotoGP are in compliance with their debt covenants at quarter end. And with that, I will turn the call over to Stefano to discuss Formula One. Stefano Domenicali: Thanks, Brian. 2025 was a thrilling season as we celebrated the 75th anniversary of Formula One with standout performances across the grid. 9 drivers across 7 different teams reached the podium, including phenomenal performance from rookies like Isack Hadjar. Congratulations to Lando Norris for winning the Driver Championship and McLaren for winning the Constructors' Championship. 2026 is set up to be another captivating season as it represents the next generation in F1 incredible history with new cars, engine and regulations. All signs point to an exciting kickoff in Melbourne next week, which we know will sell after intensive precision testing in Spain and Bahrain. We look forward to welcoming Cadillac and Audi to the grid and for the return of Ford with Red Bull and Honda with Aston Martin. In December, we also successfully completed the signing of various elements of the new Concorde Agreement with all teams and the FIA. Engagement across our fan base continues to grow. We welcomed 6.75 million attendances last season, our largest combined attendance in history, up 4% relative to 2024. Australia, Silverstone, Mexico and Austin, each, respectively, welcome over 400,000 fans over races weekend, and we had 19 events sellout with 11 setting new attendances records. The Paddock Club serve 65,000 race day guests, up 10% on the prior year. Last season, many of our Paddock Clubs sold out, and we increased revenue 20% per race on average. Robust demand continues for 2026 with record preseason sales and in partnership with our promoters, we are increasing capacity at certain races while looking to keep enhancing our guest experience. For example, at our Austin Grand Prix, the promoter is currently constructing the new facility at Turn 1, which will host a new Paddock Club space to accommodate more guests. Our promoters also have plans to upgrade the Paddock Club space in Mexico and introduce a new Gordon Ramsay experience in the Paddock in Shanghai, just to name a few developments. We continue to see strong engagement and reach across viewership and our digital and social platforms. Cumulative viewership is up across our broadcast and digital platforms. Global Live TV viewership across all session was up plus 21% year-over-year, showing increased appeal for our core product. F1 race weekends continue to broaden, with practice sessions showing strong increases in viewership. Screen popularity continues to increase with Sprint session viewership up to 10% year-over-year, and qualifying delivered the largest growth across all sessions with audiences up 23% year-over-year. For the Sprint races, we are currently in active discussions to expand the Sprint format up to 12 races in 2027 due to the high demand for promoters and fans. The Sprint format has also demonstrated the impressive performance across fan engagement. Our YouTube content generated 1.65 billion views, up 48% relative to 2024 and with YouTube highlights view, increasing 21% year-over-year. Passenger Princess reached 7.6 million total views, including 1.5 million views within the first week of release, highlights from the first 3 days of the preseason test in Bahrain reached over 8 million views on YouTube, which represents an increase of plus 64% compared with the Bahrain preseason testing session in 2025. And highlights from our first ever Barcelona shakedown reached nearly 17 million views on YouTube. We hope you will be tuning in for season 8 of Drive to Survive. For the fifth consecutive years, F1 continues to be the fastest growing sport on social media. We ended the year with 150 million social media followers, up nearly 20% year-over-year. Commercially, we had another strong year of renewals and new partnership. We have an active year of media rights negotiations, signing or renewing with broadcast partners across multiple territories, including the United States, Pan-Asia, Canada, Brazil, Latin America, Mexico, New Zealand, Japan and India. Apple is now our U.S. Media right partner, and we are excited by their vision, innovation and unmatched ability to reach and engage wider audiences through their platform and marketing scale. This was clearly demonstrated by the success of the full-time Oscar-nominated F1 movie last summer. Apple will be a key driver of our U.S. growth strategy, and we are excited to work with them to drive our next phase of growth in the years ahead. We see major brand alignment between Apple and F1 as this partnership brings together 2 global brands with a shared passion for innovation, excellence and entertainment. We also renew our extended contracts with 9 of our race promoters, including most recently with our promoter in Barcelona. The race will now be officially called the F1 Barcelona-Catalunya Grand Prix, and we rotate with our Belgium race year-by-year throughout 2032. And we will host a Grand Prix in 2028, 2030 and 2032, in addition to the race scheduled for this year. We are also excited to welcome back Portugal to the calendar under a 2-year deals starting in 2027. The third year of the Las Vegas Grand Prix was an outstanding success. Congratulations to the Vegas leadership team for delivering an exceptional race weekend that showcase the very best of Formula One. We sold out the weekend and welcome over 300,000 fans to Las Vegas, while setting up a number of new event sponsors. Content related to our race generated 1.8 billion impression over the weekend, and we are gearing up for another phenomenal race this year. Picking up on sponsorship, we closed out another strong year of growth and continue rising the momentum into 2026, having built out a good pipeline of discussions. We recently signed Standard Chartered as our official banking and wealth management partner in a new multiyear deal. Equally impressive is growth across our other revenue streams, including licensing and hospitality. Our legal partnership delivered great results in its first full year, generating over 27.5 billion impression across marketing activation. Pottery Barn Kids and Pottery Barn Teen continued sales momentum following the launch late last year. Our collaboration with KitKat is also thriving with the new F1 KitKat bars available in stores, driving enhanced retail visibility, and we are excited to roll out a new dimension of our partnership with Disney later this year. Following the successful launch of House44, our premium Paddock Club hospitality partnership with Lewis Hamilton and Soho House, it will expand from 5 to 9 races this year. Visitors to Grand Prix Plaza enjoyed 90,000 track rides at F1 drive last year, and we are excited to reopen Grand Prix Plaza to the public at the end of the January. We are also encouraged by the growth of F1 exhibition, which has sold 1.3 million tickets across all its exhibition and F1 Arcade, which recently opened in Atlanta and has 3 more new locations planned to open later this year. Track side retail sales grew over 30% last year, and F1 hub pop-up merchandise experience operating in Austin, Miami and Las Vegas. This hub saw strong foot traffic and retail sales, and it is planned to open hubs in more locations this year, monetizing untapped merchandising opportunity in key locations. 2026 brings continued focus on inspiring the next generation of F1 fans through our creative activation, partnership and collection appealing to all audiences across our fan bases. We are seeing incredible momentum across all phases of our business. Our sport has delivered exceptional growth, and we see significant upside ahead. The strategy work we are doing now will deliver lasting benefit to our partners, shareholders and our fans. In only a few years, we have achieved so much as a sport and as a business. But we have only begun to scratch the surface of what is possible and the potential for F1 is not being underestimated as we enter another exciting new chapter in our history. Avanti tutta, full speed ahead. And now I will turn the call to Carmelo to discuss MotoGP. Thank you. Carmelo Ezpeleta: Good morning, and thank you, Stefano. Liberty Media commitment and support of our strategic vision has been a strong ride out of the gate. We are encouraged by the collaborative approach and early progress we are seeing and we are working together to build a strong foundation to drive our sport forward. The 2025 seasons delivered the very best of our sport, through racing and dramatic story lines. We saw a standout performance across the grid with 13 riders on the podium across 10 teams. Congratulations to Marc Marquez on extraordinary come back and winning his seventh MotoGP World Championship. We welcomed a record 3.6 million attendees last season up 21% year-over-year and set attendance record at 9 different circuits. First-time attendees, representing 27% of our total attendance for season, up from 18% in 2024. The 2026 season is gearing up to be another thrilling season. We held our second season launch event in Kuala Lumpur with global attendance and video viewership year-over-year. Fans enjoy musical acts by global artists, including The Script, DJ PAWSA and DOLLA. The 2-day event culminated in a live launch show featuring show runs from teams and riders. We look forward to kicking off the season in Thailand this weekend. Our global fan base now measures 632 million fans, up to 12% from last year, and we continue to strengthen our brand. We recently launched our first event season marketing campaign. Why that's different? Which bring our evolved brand positioning to life and create brand consistency and amplification across all fan channels and touch points. We continue to invest in our fan insight platform to track brand awareness and engagement. This will support the long-term scaling of our commercial functions and enable more targeted and localized content initiatives. We added over 3 million social media followers in 2025 and ended the year with nearly 61 million followers across our own platform, including 4.5 million followers on TikTok, social engagement increases plus 61% and video views across our digital platform, excluding VideoPass, increased 20%. Fans consuming 1 million minutes on our YouTube content last season. Average household tuning into our broadcast grew 9% year-over-year. Satellite sprint races ratios continued to close the gap to Sunday's race coverage with average audience viewerships growing over 26% year-over-year for the Sprint. Subscribers to VideoPass, our direct-to-consumer video service, grew 5% from 2024. We recently extended our Sky Italia broadcast rights deal, and we have also renewed our Moto partnership through 2030. We also had an active year promotor of renewals, including the recent renewal of the Thai Grand Prix through 2031. We are excited to return to Brazil this year after 20 years, and welcome to the grid Brazilian MotoGP rookie, Diogo Moreira. Initial capacity in Brazil has already sold out, underscoring strong demand, alongside coverage from ESPN 41 will be the free-to-air broadcaster of the Brazilian Grand Prix Estrella Galicia 0,0 as title sponsor. Finally, last week, we announced the move of the Australian Grand Prix into Adelaide beginning 2027 under a new 6-year agreement. The landmark race will be the first MotoGP race to be held in a city center, and we are able to do so without compromising our safety standards. Adelaide is an ideal location, bringing MotoGP closer to its fans, and we are excited to put on a fantastic 3-day fan experience. We look forward to continuing to update the investor community on our progress. Now I will turn the call back over to Derek. Derek Chang: Thank you, Brian, Stefano and Carmelo. We appreciate your continued interest in Liberty Media. And with that, we'll open the call up for Q&A. Operator? Operator: [Operator Instructions] Our first question today is coming from Stephen Laszczyk from Goldman Sachs. Stephen Laszczyk: Maybe 2 on margin at F1, if I could. Brian, I appreciate the commentary on team payment in 2026. It sounds like the expectation for team payment operating leverage is for it to be in and around 200 basis points in 2026. So 59.7 going to 57.7 in 2026. Just wanted to confirm that thinking and then see if there were any upside or downside factors that you think investors should be mindful of as we track performance on that throughout the year? Brian Wendling: Yes. I'd point you to, we said that we added the word generally or primarily or approximately around the 200 basis points. So I wouldn't lock it in stone. As you know, we talked about before, there are different things that can impact the team payment percentage depending on where the profitability is coming from. But generally speaking, we would expect to see about 200 basis points of leverage related to the team payment piece in 2026. Stephen Laszczyk: Great. And then maybe just beyond the team payment operating leverage point this year and thinking longer term opportunities to grow margins at F1 over the next 3 to 5 years. What factors are still available to you to grow margins maybe outside of the team payment line item that could expand margins for the foreseeable future? Brian Wendling: Yes. Certainly, as we grow primary revenue streams, you would expect to see some leverage around those revenues. But we continue to invest in the business. And when you look at some of our other revenue streams, they certainly have costs associated with them. We've looked at growth in other costs of F1 revenue in the past. And you can certainly see partner servicing costs there as we grow our sponsorship revenue base, there's incremental Paddock Club obligations that are associated with that. So there is certainly costs associated with growing those revenues. But as we grow the primary revenue streams, we would hope to see some leverage there, but we're also going to balance that with continuing to invest in the business and try new things and try to grow the overall pie. Stefano Domenicali: Yes. And Brian, if I may say -- add something on that to complete the answer that Brian said, is that all the costs related are connected to the growth of the marginality because, of course, the more we are getting stronger, the more we need to serve what is important to activate. Therefore, that's our philosophy. And in all the revenue stream that we are bringing home, that's the approach. And if I may, also when we are talking about a deal that we have with promoters in the long term, we have the leverage to increase the possibility of investing through them to acquire more possibility to invest with other experience with Paddock Club extensions. This is one example, for example. But that's the philosophy is cost. It's always associated to an increase of marginality related to increase of our revenues. Operator: Our next question today is coming from Kutgun Maral from Evercore ISI. Kutgun Maral: Maybe following up and expanding on the margin discussion. I had a high-level question on the durability of your EBITDA growth, which was very strong in '25 and looks positioned to be healthy again in '26. Maybe taking a step back for a second. Since Liberty took over the growth algorithm has been fairly consistent and straightforward. You had rising popularity of the sport and brand combined with strong execution, monetizing revenue streams with a lot of untapped runway. In other words, there was comfort that regardless of the quarter or even year, there would be a lot of room to grow over the upcoming 3 to 5 years, and that vision has clearly played out. As you look out over the next 3 to 5 years now, though, how should we think about what sustains that attractive EBITDA growth profile as some areas either face tough comps or see new dynamics, whether it's lapping very strong sponsorship growth, managing the strategic balance and media rights, a race calendar that's already largely contracted or the new team payout structure? And finally, are there any underappreciated drivers or levers you'd point to that helps support growth from here? Derek Chang: Stefano, why don't you take this because you've obviously got the thoughts around the growth of the business more holistically. So I think that's a good place to start. Stefano Domenicali: Absolutely. Thanks, Kutgun. I mean let me start on one thing that I take the opportunity to thank, first of all, our shareholders, our team, the FIA, the teams and all the relevant stakeholders because we have left an incredible moment of our sport. I remember all the earnings calls since I was involved in that, every time was what's next, what's next, what's next. That's a mindset, it's not a guidance. So we have always proven to invest in our future because we do believe in the growth of our sport. And we do believe that in the future, there are so many new opportunities to keep running this rhythm because this is exactly what we are doing together. And the more is strong the ecosystem, the more we are able to catch new opportunities and all the driving force of our revenue streams. And that's why you see what has happened so far in the last couple of years not only in terms of turnover, but also in terms of EBITDA. And this will continue because we see, as we said so many opportunities to keep growing. And the fact we are stabilizing in certain ways, certain promoters deal will allow us to leverage, as I said before, other investments that will bring us other opportunity to return. We are able -- we were able to explore the possibility of engaging with new categories of our partners and largely, for example, if you look at the financial services, we were able to contract with other -- with multiple partners because we are identifying different categories. We are opening up the opportunity of digitalization so new opportunity. We are having licensing that is just starting a great momentum with the big deals that we have just even today announced for the bigger relationship with business and so on. So there is a lot of things that we're going to bring and to keep growing the sport business at all level. That's I definitely confirm. That's our mindset, our approach, we wake up in the morning with these things. We are in a competitive world, not only on the track that remains our focus for sure, but that's the aim of all of us doing this job to increase the return of our investors for sure. Derek Chang: Yes, I think that's right, Stefano. And look, I think what's -- what people need to appreciate also is just the strength of Stefano's team and the creativity there and sort of what they've been able to accomplish over the last several years in terms of revenue streams and categories that may not have been fully sort of appreciated in terms of what they could be. And if you look out now, what they've done, for instance, in the U.S., where can you take -- what other geographic markets are still out there that are large significant and potentially untapped. So we are constantly looking for those opportunities and ways to drive the business. I think the heart of it is what Stefano keeps pounding at, which is to help the sport, the engagement that the sport creates and all that sort of stuff is really the fundamental basis for this. Operator: Our next question today is coming from David Karnovsky from JPMorgan. David Karnovsky: Maybe just zeroing in on the prior question, but for sponsorship, really strong results this year, though arguably, that sets up a tough comp this year. So wanted to get your view on '26 growth? And how we should think about the follow through, not only from deals executed last year, but maybe kind of what's in the pipeline? Stefano Domenicali: I can answer on that, David, stay tuned. As we always shown, we are not -- and also, as Derek says, we are quite creative in finding new opportunities. You're going to see already this year some deals have lifted with new opportunity that we can offer new quality and new things that we want to offer. We don't have to forget one thing at the end of the day. Of course, now that the quantity is really, in a way, great, we need to focus on the quality of what we're bringing in. And this is really the thing that we are focusing because of course, we have a trajectory of new projects in the pipeline, but our focus is to keep the quality of the partner that now are trusting and following Formula One. Therefore, it's a trajectory that will continue. It's a trajectory that will enable us also in a competitive landscape to make some decision. And as we have in the field of promoters, we have the quality problem to have more often than -- more demand than offer. We are in the same spot also on the sponsorship side. So as I said, all the partners are happy. Our point is to create quality content for them, qualitative experience, qualitative value of what they're investing in Formula One. And that has been so far the case and will continue because, of course, the more we are able to succeed on it, we are able to attract even new ones approaching from other disciplines that is happening already, as you have seen, new partners to us. David Karnovsky: Okay. And then maybe just following up here. The press release had called out contribution from digital advertising. I think that's the first. Can you just clarify, is that inventory on the website apps or F1 TV? And what's the opportunity here? Stefano Domenicali: Well, the opportunity is quite important because now we are not only in the world of physical advertising, we have the digitalization that will enable us to use in all the different channel possibilities to put to the advertising but we have different platforms. We have the Podcast, we have YouTube. We have other social media opportunity, we will monetize in the future even stronger. Operator: Our next question today is coming from Bryan Kraft from Deutsche Bank. Bryan Kraft: I guess I'll ask the Vegas question. It seems like Vegas didn't generate really incremental revenue versus last year, but it did generate significant incremental EBITDA due to the cost side. So I just -- I guess I wanted to ask, is that a fair assessment? And what do you think the opportunity is in 2026 to grow Vegas, both in terms of top line and bottom line? Are there any key changes in how you'll approach the event or go to market with tickets this year versus in 2025? Derek Chang: Stefano, do you want to just talk about Vegas broadly? And then Brian and I can you talk about some of the more specifics? Stefano Domenicali: Sure. Sure, Derek. I mean, first of all, in a synthesis, or trying to be set at that point, it has been an incredible strong progress in what will deliver in the short term, even a big cash flow aim in that investment. I think that the key turning point of that has been our ticketing proposition. The fact that we have also a new different way of proposing the partner, the experience and the sales to them. But the most important one that will have a factor in the next couple of years is the new dynamic that we are creating with the community. And with the new things that we will announce in the due time, this will enable us to have an impact also on the P&L of this that is incredible, positive. And you will see soon that we want to make sure that this Grand Prix will keep being something incredible to be a sort of a spotlight of the year because the focus is to keeping that as a unique experience. And of course, you reduce the cost that is associated to the building up of this event in a new city like Vegas. And so therefore, the huge potential is definitely there. We have been very happy about the outcome of this year, and we're definitely going to be even more happy in the projects that we're going to do together in the next couple of years in front of us. Brian Wendling: Yes. And then specifically on the -- on Vegas results for 2026, we did see revenue growth. It's a little bit difficult with our various categories within Vegas because it doesn't all show up in race promotion. Where we really saw growth was we saw increased sponsorship revenues. We saw increased hospitality revenue associated with Vegas. And then also 2026 was a year of trying to achieve some greater cost savings. So we definitely saw some cost savings there. So pretty significant incremental profitability. It just doesn't show up in the race promotion line. It shows up in other spots. Bryan Kraft: If I could just ask, I mean, it sounds like based on Stefano's comments that you do see the opportunity to continue to grow Vegas from here though. Just to make sure I'm interpreting that correctly? Stefano Domenicali: Yes. Absolutely, yes. Sorry, I can't show the different numbers, yes. Derek Chang: Yes, very happy and excited about it. Operator: Next question today is coming from Peter Supino from Wolfe Research. Peter Supino: A question on capital allocation and your communication and then another one on media rights. So I actually start with the media rights. We were excited about your deal with Apple because we've long believed that the movement of important sports rights to streamers was a growth opportunity for the intellectual property owner. In your case, we've had investors go as far as to call your deal with Apple "a disaster" because of their perception that Apple means less distribution for F1 in an important growth market, the U.S. And so I wonder if you could comment on why in your prepared remarks today, you expressed so much confidence that Apple can expand awareness and engagement of F1? And then on the communications side, and I guess this ties to capital allocation, your stock in the last 6 months has become, at least from our perspective, mired in sort of a myopic discussion about team payments, margins and operating leverage, and it's ironic because Formula One is a growth company. And so I wondered if you could talk at all about ways in which your communications might help investors appreciate the duration and magnitude of your growth opportunities going forward? Derek Chang: Stefano, why don't you start on Apple? Stefano Domenicali: Yes. Thank you, Peter. I mean, first of all, I think that we are very, very happy about the deal with Apple for many reasons. And I think that it's important that the one that in our opinion, not so many, but anyway we respect that, of course, they don't understand the deal is because beyond that, there is a huge opportunity to increase the reach. There is an incredible opportunity for Apple to use all their channels, all their platform to promote our sport in a way that has never been done before. There will be the opportunity for the younger generation to be connected with the tool that is more logical for them to use in living the sport and our business. So I do believe that this will represent a big step opportunity to increase also our revenue streams, not only in terms of direct one, but also in terms of awareness in the American market that will enable us to convince also the one that are not believing on that, that is the right move. But on that, we are not even a single doubt. It's a great move. It's great things that will happen that will give a big boost to our performance in the American market. And that our community has not even a single doubt. Derek Chang: Yes. And I would add on that. I mean, look, everyone understands that the landscape has been changing for many years now. And the former sort of terminology around reach and things like that are a bit antiquated. And we see from an Apple standpoint is complete 100% dedication to F1. I saw Tim Cook and Eddy Cue at Super Bowl, and they've got the full weight of the organization behind it. And in that respect, it's not just sort of Apple TV, it's Apple music, Apple news, the Apple stores. So from a reach standpoint, there's many different ways that we will be able to reach and engage with our fans. I think the other thing that's interesting about Apple here, and we saw the news with the broadcasting races and IMAX theaters, right? And this sort of draws on my prior life in the pay television industry, like you wouldn't be able to do something like that necessarily with the traditional broadcaster because of a lot of restrictions that get put into traditional media deals, right? So Apple in that sense, and I think you'll see here in the near future, other announcements along those lines that will sort of bring more life into that. But I think there is that sort of ability to create new ground here, which we will do with Apple, are committed to do. I think the other thing that will be something to watch closely over the next 5 years is sort of what happens with the actual product. As we know, Apple is at its heart a tech company. We are a tech company. The broadcast is sort of very technical in nature, what you can actually do with that as a collective force will be interesting to watch over the next several years. I think on the second question, which was capital allocation. What we talked about at our investor conference was familiar themes, which clearly, we're in a deleveraging phase right now. Everyone understands that will sort of hit a point that we feel comfortable with respect to making additional investments. We've been pretty clear about our discipline in this respect and our desire to invest around sort of into the actual businesses themselves in and around those businesses, certainly, and then in similar sorts of asset classes where we've got great IP, low capital intensity and the ability for us to actually bring value either through insights we have, relationships we have, capital structures that we have, things like that, that will continue to allow us to have ourselves be a growth vehicle. Operator: Certainly. Our next question is coming from Joe Stauff from Susquehanna. Joseph Stauff: I wanted to ask, just following up on the number of changes in F1 this year, engine, regulatory and how that affects certainly competition in parity. I'm sure that's naturally the goal over the long term sort of drives interest in the sport. But just wondering the best way to think about how maybe some of this higher competition could affect the P&L in the near term, call it, 2026 versus next year? What are the near-term sort of impacts of how we think about the financial implications of that? Derek Chang: Stefano, why don't you talk about the changes and what you're seeing and all that sort of stuff and then we can get into what the implications are? Stefano Domenicali: Yes. Well, first of all, the implication -- let me start from one thing. The F1 has the duty to be always an innovator league sport, has been always -- that has been always the duty of our sport because by innovative, we can attract new investors. And the immediate effect of this regulation has attracted new manufacturers back into the sport. We have Audi, we have Ford, we have Honda, we have Cadillac that did come in because of this regulation. And if I may, before, of course, that has taken the second part of the financial, this would be an immediate effect on the financial because they will invest in our sport. They will invest in our initiatives. They will invest in all the ecosystem that would generate for them a sort of a platform to invest to let the brand be known by the customer. So that's a direct effect. On the other side, of course, there is a great interest, a great opportunity to showcase that the level of technology is always relevant to what is needed in the technological world. We have sustainable too. We have hybrid engine, and we've been always the first to believe on that. And we create excitement because the nature of the regulation will allow all the teams to develop this year car race the race. You're going to see a season where every race will be different, that will be, for sure, at the beginning bigger gaps that will be restricted because of the nature of the regulation. And therefore, as always, F1 understand when there is the need to move forward faster than the others, and that has been always our philosophy. And that will attract the interest not only of the one that I said to you before, but the new fans that through the new content that we are generating will connect to us and of course, by enable to be connected directly with them, we can even leverage the fact that we will offer something new to them. They're going to be a big push on the merchandising side of it. It's going to be big push also to our partner Quint to create new packages to promote to them. So this is the reason why we change the things for multiple reasons. Derek Chang: Yes. I mean just to follow on that. I don't think we sat here and said we're building a kind of incremental into the '26 business plan because of these changes. But that being said, as Stefano hit on quite clearly, these changes are going to drive continued interest and engagement in the sport. And hopefully, as he says bring in new participants, new fans and all the sort of accrued benefit that comes with that, that ultimately results in monetization. I think the other thing in parallel here that is happening this year, as you know, there are some big names that have come into the sport between Audi and Cadillac and Ford, Honda coming back. It's pretty significant in terms of someone like Cadillac spending on a Super Bowl ad and what they're doing to promote their team on the track. So this is all part of the evolution of what F1 is and Stefano and his team have done a fantastic job of cultivating relationships, cultivating these partnerships, building the sport into something that we do look at on a multiyear basis, not sort of how this is going to drive something in the next week or next month. And that's constantly what we're trying to do is built for the long term. Joseph Stauff: Understood. Maybe one just quick follow-up. Could you maybe just give us an update on the changes of the commercial team at Moto? And any other obviously changes that you're making, obviously, now that you own it for about 6 or 7 months and how to think about that? Derek Chang: Sure. This is Derek. I mean, as we stated, or Carmelo stated, we're in the process of sort of putting out our brand and executing behind it, really. And I think that part of that is what's happening at the track in the hospitality, and we're going to see some pretty dramatic improvements, I believe, over the course of this year, where we're putting these tracks -- our races, excuse me, as we're getting them closer to cities where we can benefit from all the infrastructure and the attendance and all of that sort of stuff, including, as we mentioned, in Adelaide, it's going to be right in the city center. And then how we go about sort of ultimately monetizing, commercializing that, we need the right team in place. And that's probably an area where we haven't had the sufficient sort of personnel there and we are building that. It's obviously not a heavy lift to sit there and hire folks up. So that's what we're in the process of doing. As we have stated previously, this will take some time in terms of the ultimate commercialization. We'll see some areas pick up sooner rather than later. But over -- if you look at F1 as a parallel, we're in our 10th year and you're still seeing some of these new revenue streams sort of being activated. So we continue to be even more sort of bullish on Moto even if the results don't necessarily show in the short term, it's clearly a long-term proposition for us, which is -- which -- and we like to invest in for that long term. So we're very excited. Operator: Our next question is coming from Ryan Gravett from UBS. Ryan Gravett: Just to follow up on the media rights topic. Now that you're through the latest round of renewals, not just in the U.S. but some markets in Latin America and Asia as well. Just curious what your key learnings were and how you think you're positioned for the next round of renewals in Europe over the coming years? Do you expect similar interest for digital players in those markets as well? Derek Chang: Stefano, do you want to start? Stefano Domenicali: Yes. Thank you. I mean, I think that our position with the media renewal, as you see, is quite dynamic. And I don't want to anticipate anything, but stay tuned in the next days, you will see something else coming up. The real point on that is the interest is very strong. The numbers are very strong. And the key focus on what we need to make sure we keep doing is understanding if we keep going because we are a worldwide market in the so-called traditional way of the delivering our sport to our credit broadcaster or in certain markets, there is an opportunity. As we did in U.S. to move into the streaming platform because each country is different. We have the incredible opportunity to be so strong worldwide, that we cannot have one single way of delivering our content in the same way and there are different time lines that we need to consider. So it's a bigger ecosystem. And I think that we have proven so far to make appropriate analysis before taking the final decision. So for sure, we want to be active and proactive in this world because the media right is not totally media right on the sports, the media rights are following other things in this moment. Therefore, I think that the reason why you see so many good news coming in is because we want to be proactive, and we feel that we are able to understand the evolution of the market, considering the difference that we have from area to area. But stay tuned because already next week going to be something new happening. Operator: Our final question today is coming from Ian Moore from Bernstein. Ian Moore: When we look at trailing motor results, I think everyone sees an opportunity to drive monetization, particularly sponsorship to where F1 kind of is today. But F1 itself seems to continue to overdeliver on sponsorship. So I guess, more generally, what do you guys kind of see as the right mature mix directionally of media rights, race promo, sponsorship for these businesses? And then, I guess, for motorsport businesses more broadly? Derek Chang: Yes. I think -- look, it's early, but I think along the same lines is probably not a bad place to end up. And it's going to be over time that some of this stuff happened. But I think you've already seen that we're announcing new races next year, which will lead to some uptick there. And -- but then the sponsorship side of things probably lags a little bit as we build the brand and reengage with the potential partners. But I do think that the ability for us to draft off of what F1 has done there and the Liberty name being able to sort of have credibility around what we're going to deliver with respect to Moto is something that we are excited about. Again, it will take some time, but we feel comfortable that that's going to happen. I'll just end by saying there's good receptivity in the market. This -- we had a partner someone, as I mentioned in Barcelona last week, a lot of good enthusiasm, a lot of good energy there. There's a lot of good enthusiasm in the investor base around teams. I can't tell you how many people have reached out expressing interest. So I think people see it. The other thing about Moto in comparison to maybe other sports right now of its size, which tend to be more emerging sports, Moto has a long, long history to draw on and many stories to tell as a result and an established fan base and established brand recognition. So we're starting from a place that's much different, and hopefully, it's something that we can accelerate here over time. Hooper Stevens: Thanks, everybody, for your participation in today's call. Apologies if we didn't get to your questions, we'll look forward to speaking with more of you offline. Thank you. Operator: Thank you. That does conclude today's teleconference webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Operator: Greetings, and welcome to the Where Food Comes From 2025 Year-End Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jay Pfeiffer, Investor Relations. Thank you. You may begin. Jay Pfeiffer: Good morning, and welcome to the Where Food Comes From 2025 Fourth Quarter and Full Year Earnings Call. Joining me on the call today are CEO, John Saunders; President, Leann Saunders; and Chief Financial Officer, Dannette Henning. During this call, we'll make forward-looking statements based on current expectations, estimates and projections that are subject to risk. Statements about financial performance, growth strategy, customers, business opportunities, market acceptance of our products and services and potential acquisitions are forward-looking statements. Listeners should not place undue reliance on these statements as there are many factors that could cause actual results to differ materially from our forward-looking statements. We encourage you to review our publicly filed documents as well as our news releases and website for more information. I'll now turn the call over to John Saunders. John Saunders: Hello, and thank you for joining the call today. This morning, we announced 2025 financial results that included total revenue of $24.9 million and net income of $1.5 million or $0.30 per share. Once again, the steady growth we're achieving in new customer wins and non-beef-related revenue streams was offset by the impact smaller herd sizes and tariffs are having on our beef-related verification activity. Fourth quarter revenue was particularly impacted by the unexpected closing of a packing plant that has been an important contributor to our NHTC Natural and EU export certification programs. That closing had a significant impact on our prior internal projections management and the Board used to formulate discretionary bonuses for the year. Accordingly, executive management determined to return their bonus compensation to the company. As a result, the income statement in our first quarter 10-Q will benefit from a reduction to compensation expense in the selling, general and administrative category. As we've been discussing on our earnings call over the past couple of years, herd sizes have been steadily shrinking due to drought, increasing production costs and other factors. And today, the U.S. cattle supply is at a 70-year low. The shrinking supply in turn, has led to record beef high prices. And in this environment, some ranchers have opted to reduce their investment in certain verifications that we provide, and this is impacting both our verification and tag sales. There are indications that the herd contradiction phase of the cattle cycle is at or near a bottom and the industry should begin rebuilding the cattle supply over the next couple of years. In preparation for this recovery, we have been expanding our services portfolio with new certifications and working on other protein programs that we believe will position us for accelerated growth as the recovery gains momentum. I want to highlight a few of these initiatives to give you an idea of why we remain confident in the future of Where Food Comes From as both a growth company and as the food verification industry leader. Last month, we announced the launch of RaiseWell Certified, an innovative new standard for animal care verified natural raising practices and transparent fully traceable supply chains. The program is designed for brands, high-end retailers and food service operators that want to differentiate their products on integrity, quality and certified production practices. RaiseWell requires animals to be responsibly raised at every stage of life with rigorous animal care requirements, no antibiotics or added hormones and verified as a source of origin, all with the aim of creating traceability throughout supply chains that retailers and consumers can trust. We are rolling out RaiseWell in stages beginning with beef and expanding over time to poultry, eggs, dairy and pork. We followed up that news last week with an announcement that Whole Foods Market became the first major retailer to adopt the RaiseWell program. Whole Foods is widely recognized as a pioneer in advancing farm animal welfare, so its adoption of RaiseWell is an important endorsement for the program that we believe will lead to adoption by other leading retailers as time goes on. RaiseWell Certified seamlessly integrates with our CARE Certified standard, giving producers and retailers the option to bundle claims and create a unified audit-ready package that can include pasture raised, outdoor access, grass-fed and other verified livestock raising attributes. Another promising initiative on the beef side of things is a new collaboration with global automotive leather supplier, Pangea. In concert with Walmart and Prime Pursuits to introduce CARE Certified's sustainable leather to U.S. automotive brands, this first-of-its-kind program entitled Transparency in Motion leverages data-driven verifiable practices to confirm exactly how its materials are raised, cared for and processed, making Pangea the first leather provider in North America to achieve traceability at this level. By becoming CARE Certified, ranchers can not only enhance the value of their herds, but also connect with consumers who increasingly prioritize sustainable practices and ethical sourcing. I want to touch on one other beef-centric initiative that we continue to advance slowly but surely, and that involves animal disease traceability. I'll remind you that the United States is the only major cattle-producing country that does not have a mandatory traceability program, so that is essential to managing and containing an animal disease outbreak. We have invested significant time and resources over the years to position ourselves as an integral player in what we believe is the inevitable adoption of a formal ADT program in the U.S. Our IMI Global unit is far and away the most experienced player in this space, having the technology, systems and procedures already in place and in practice that can quickly be brought to bear in a comprehensive national animal disease traceability program. We are now working closely with U.S. CattleTrace, a producer-led private industry database to strengthen cattle traceability and support a secure U.S. beef supply. Unlike traditional point-to-point traceability systems, U.S. CattleTrace enables contact tracing, allowing animal health officials to identify animals and locations that may have been exposed during disease event. This capability is critical for responding to highly contagious diseases such as foot and mouth disease. IMI Global serves as the administrator for U.S. CattleTrace. We provide the technical infrastructure and operational expertise needed to manage traceability securely while ensuring producers retain control, governance remains producer-driven and data privacy is protected. Together, we are engaging with U.S. government representatives and entities to explore ways to advance and formalize an ADT solution. The cattle industry is going through a period of disruption unlike any other in our lifetime. As discussed, this has presented challenges so far that we are navigating successfully. But at the same time, it is creating opportunities for us to leverage our positioning and know-how to play a lead role in reshaping the industry as it begins the rebuilding process. Hopefully, some of this will give you a feel for why we're so optimistic on the long-term prospects for our beef-related business. In the meantime, for our non-beef-related business lines continue to grow and prosper. For the past 10 years, we've been building out a highly diverse and dynamic solutions portfolio, adding new customers for new services, generating new revenue streams and reducing our reliance on the beef industry. Verifications for pork, dairy and egg operations all increased year-over-year, and our CARE Certified program continued to attract new customers in a variety of proteins. Similarly, certification activity for organic, non-GMO, gluten-free and upcycled all show gains. In addition, we continue to benefit from a unique ability to bundle services, a competitive advantage that saves our customers' time and money, contributes to revenue growth and at the same time, helps us strengthen our margins. Given the growth of our solutions portfolio and customer base and our optimism about our business overall prospects, we believe our shares remain an excellent value at these levels, and we expect to continue repurchasing stock in 2026. In 2025, we repurchased 183,016 shares, raising total share buybacks and private purchases since planned inception to 1,374,652 shares, totaling $15.2 million in value returned to shareholders. And with that, thank you again for joining the call today, and I'll open up the call to questions. Operator? Operator: [Operator Instructions] And it appears that there are no questions at this time. Therefore, I would like to turn the floor back to CEO, John Saunders, for closing remarks. John Saunders: Thank you all again for the time today, and we'll talk to you again in 3 months. Operator: And this concludes today's conference, and you may disconnect your lines at this time. Thank you, and have a great day.
Operator: Good day, and thank you for standing by. Welcome to the Q4 2025 Universal Health Services Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Darren Lehrich, Vice President of Investor Relations. Please go ahead. Darren Lehrich: Good morning, and welcome to Universal Health Services Fourth Quarter 2025 Earnings Conference Call. I'm Darren Lehrich, Vice President of Investor Relations. With me this morning are our President and CEO, Marc Miller; and our Chief Financial Officer, Steve Filton. Marc and Steve will provide some prepared remarks, and then we'll open it up to Q&A. During today's conference call, we will be using words such as believes, expects, anticipates, estimates and similar words that represent forecasts, projections and forward-looking statements. For anyone not familiar with the risks and uncertainties inherent in these forward-looking statements, we recommend a careful reading of the section on risk factors and forward-looking statements and risk factors in our Form 10-K for the year ended December 31, 2025. In addition, we may reference during today's call measures such as EBITDA, adjusted EBITDA, adjusted EBITDA net of NCI and adjusted net income attributable to UHS, which are non-GAAP financial measures. Information and reconciliations of these non-GAAP financial measures to net income attributable to UHS can be found in today's press release. With that, let me now turn it over to Marc Miller for some introductory remarks. Marc Miller: Thank you, Darren. Good morning, everybody, joining our call. Thank you for your interest in UHS. We closed out 2025 with strong results. Revenue growth for the fourth quarter was 9%. Adjusted EBITDA net of NCI increased 10% and adjusted EPS increased 20% as compared to the fourth quarter of 2024. For the full year 2025, revenue growth was 10%, adjusted EBITDA net of NCI increased 15% and adjusted EPS increased 31%. Our fourth quarter and full year performance were highlighted, in particular, by continued strong expense management in acute care, sequential volume improvements in behavioral health, solid pricing across both segments and significant share repurchase activity. Looking back on 2025, I am very proud of the progress we've made across the organization in several critical areas. We strengthened our growth agenda with the addition of new inpatient capacity while also intensifying our focus in the outpatient arena through the addition of new service locations across both segments. We demonstrated financial discipline by managing expenses well in the face of a dynamic operating environment. And we accelerated the pace of technology adoption to improve clinical outcomes and drive greater operating efficiency. Speaking first to our growth agenda. Over the past 2 years, we've opened 2 new acute care hospitals and laid the groundwork for significant new acute care capacity to come online during 2026 with 3 inpatient expansions totaling 178 licensed beds in Florida, California and Nevada and a state-of-the-art 156-bed de novo hospital in Palm Beach Gardens, Florida that will open in the second quarter. In our Behavioral segment, we've taken a disciplined approach to new bed capacity during 2025 as we devoted more resources to accelerate our outpatient behavioral strategy. For 2026, we have 2 behavioral de novo projects totaling 264 beds, including a joint venture project with the Jefferson Health System in Pennsylvania. On the outpatient side, we operate 119 outpatient behavioral locations, including 10 new freestanding centers opened under our 1,000 branches Wellness brand during 2025. We are on track to open at least 10 more branches locations during 2026 and our team continues to pursue opportunities to accelerate our outpatient behavioral growth rate and diversify our segment, payer mix and service offerings to sustain our leadership position as a provider of choice. In terms of expense management, our acute care margins improved in 2025 due to reduced contract labor costs and strong supply chain management performance. Labor productivity also improved through a 2% reduction in same-facility acute care length of stay, and this remains an area of opportunity for us in 2026. In our Behavioral segment, margins were stable in 2025 as compared to 2024, even as we made investments in staffing capacity to relieve some of our labor constraints that have held back our volume growth in certain markets. These investments position us more strongly for volume improvements during 2026. Finally, from a technology perspective, we've deployed AI and advanced technologies in two primary domains within our business, in our operations to impact quality and patient experience and in our administrative operations to increase efficiency. We have a strong team in place with demonstrated success in evaluating and deploying technology at scale across both acute care and behavioral health divisions. On the operational side, we fully rolled out Agentic AI to improve post-discharge care and reduce readmissions. In 2026, we are focused on rolling out new patient safety technologies in behavioral health. And in acute care, we are deploying AI across several departments and functions [Technical Difficulty] and outcomes. On the administrative side, we enhanced our acute care revenue cycle operations by deploying AI-based solutions to improve documentation and streamline our claims appeals process. Over the next several quarters, we will be rolling out process improvements and new technologies in our behavioral health revenue cycle operations. In behavioral health, we are also leveraging AI features in an existing digital tool to streamline the referral and intake process to improve response times to new referrals and improve volumes. In closing, we are optimistic about the future because we continue to invest in our people, our facilities and in technology that will improve quality, patient experience and operating efficiency. With that, I'll now turn the call over to Steve Filton for more details on the quarter and our financial outlook for 2026. Steve Filton: Thanks, Marc. I will highlight a few financial and operational trends and outline our 2026 financial guidance before opening the call up to questions. The company reported net income attributable to UHS per diluted share of $7.06 for the fourth quarter of 2025. After adjusting for the impact of the items reflected on the supplemental schedule, as included with the press release, our adjusted net income attributable to UHS per diluted share was $5.88 for the quarter ended December 31, 2025. During the fourth quarter of 2025, on a same-facility basis, adjusted admissions at our acute care hospitals were flat as compared to the fourth quarter of the prior year. Acute care volumes were impacted in part by softness in the Las Vegas market due to factors that we consider somewhat transitory in nature, including lower respiratory case levels on a year-over-year basis. Excluding the Las Vegas market, our facility acute care volumes would have increased by 1% during the fourth quarter. Same-facility net revenues in our Acute Care Hospital segment increased by 6.9% during the fourth quarter of 2025 on a reported basis as compared to last year's fourth quarter and increased 5.2% after excluding the impact of our insurance subsidiary. Acute care same-facility revenue per adjusted admission increased by 5.4% during the fourth quarter of 2025. Operating expenses continue to be well managed across labor, supplies and other expense categories. Excluding the impact of our insurance subsidiary, same-facility acute care salaries, wages and benefits increased 4.4% and supply expense increased 1.8% over last year's fourth quarter. Same facility contract labor was 2.4% of Acute Care segment revenue or 20 basis points lower year-over-year. For the fourth quarter of 2025, our solid acute care performance resulted in 10.4% growth in Same Facility segment EBITDA and a 50 basis point improvement in Same Facility segment EBITDA margin to 14.8%. For the full year, Same Facility segment EBITDA margin improved 150 basis points to 15.8%. Turning to our Behavioral Health segment results. During the fourth quarter of 2025, same-facility net revenues increased 7.2%, supported by a 5.6% increase in same-facility revenue per adjusted patient day and a 1.5% increase in same-facility adjusted patient days as compared to the fourth quarter of 2024. Expenses in our Behavioral Health segment increased at a slightly higher pace than revenue due to growth in headcount in certain markets where volumes have been impacted by staffing constraints. For the fourth quarter of 2025, Behavioral segment headcount growth was 3.1%. Total same-facility labor expense growth, including the increase in headcount, was 7.3% per adjusted day in the U.S. Overall, we believe expenses were well managed during 2025, leading to total Behavioral Health segment EBITDA growth of 6.9% in the fourth quarter and 7.8% for the full year 2025. Cash generated from operating activities was $1.9 billion for the 12 months ended December 31, 2025, as compared to $2.1 billion during 2024. Cash flows during 2025 were impacted by $50 million related to an increase in receivables at our two most recent de novo hospitals and $145 million related to the timing of payments for certain Medicaid supplemental programs. During 2025, we spent $1 billion on capital expenditures, approximately 35% of which related to the de novo hospital in Florida and major expansions in Florida and California. During 2025, we also acquired 4.65 million of our shares at a total cost of $899 million, including 1.46 million shares purchased during the fourth quarter of 2025. At December 31, 2025, we had $1.425 billion of repurchase authorization available pursuant to our stock buyback program and we had approximately $900 million in aggregate available borrowing capacity pursuant to our $1.3 billion revolving credit facility. Turning to our outlook for 2026. We expect revenue to range between $18.4 billion and $18.8 billion, representing growth of 6% to 8%. We expect adjusted EBITDA net of NCI to range between $2.64 billion and $2.79 billion, representing growth of 2% to 8%. We expect adjusted net income attributable to UHS per diluted share to range between $22.64 and $24.52, representing growth of 4% to 13%. Our guidance assumes same-facility volume growth to be in a range of 2% to 3% for both segments for the full year 2026, although it's likely we'll be below this range during the first quarter due primarily to the winter storms, which we are currently assessing in our Behavioral Health segment and the Washington, D.C. operations of our Acute Care segment. We expect capital expenditures in 2026 to range between $950 million and $1.1 billion, reflecting the culmination of spending for several large inpatient projects that will come online during the first half of 2026. Our guidance includes several assumptions unique to the 2026 operating environment as follows: we assume an adverse pretax earnings impact of approximately $75 million related to reductions in the health insurance exchanges. We assume that exchange volumes will decline by 25% to 30% and approximately 10% to 20% of this volume will shift to other forms of coverage with the vast majority shifting to self-pay or uninsured. The exchange headwind is concentrated in our Acute Care segment based on historical utilization patterns. For the full year 2025, exchanges represented approximately 6% of Acute Care segment adjusted admissions and slightly less than 5% of the segment's revenue. We expect a negative pretax earnings impact of approximately $35 million in our Behavioral segment associated with the recently enacted California inpatient psychiatric hospital staffing regulations that will go into effect on June 1, 2026. The regulation is expected to increase labor costs due to the need to adjust the mix of licensed nursing staff at our facility. Our 2026 estimate includes a higher burden of recruiting and training costs and some short-term census disruption as our California operations ramp up to comply with the regulations. Beyond 2026, the ongoing costs are expected to be approximately $30 million after considering a full year of higher labor costs. Our 2026 outlook assumes a total net benefit from Medicaid supplemental payments of $1.36 billion and includes a new Nevada supplemental program that was approved this month, but does not include any other new programs pending approval. As compared to 2025, we expect the net benefit from Medicaid supplemental payments to increase by approximately $23 million. Our 2026 outlook assumes approximately $50 million of favorability related to improvements at Cedar Hill. We assume that incremental improvements we expect to make at Cedar Hill beyond the breakeven level will be offset by start-up costs associated with our de novo hospital in Palm Beach Gardens. Finally, we expect a favorable pretax earnings impact of approximately $50 million comprised of 3 smaller and discrete items, including a onetime legal settlement recognized in 2025 that we do not expect to reoccur, operational improvements in our Nevada health plan with revenue growth at similar levels as in 2025 and modest contributions from Behavioral segment M&A completed in 2025, primarily in the U.K. In conclusion, we're pleased to share our positive growth outlook for 2026, which assumes core growth from our consolidated operations of approximately 5%, underpinned by the strength of our markets, continued expense management and ongoing efficiency opportunities. Operator, that concludes our prepared remarks, and we're pleased to answer questions at this time. Operator: [Operator Instructions] The first question for today will be coming from the line of A.J. Rice of UBS. Albert Rice: Yes. Two things. First of all, just to drill down a little bit more on the guidance for '26. I know you mentioned 2% to 3% volume growth across both the segments. Give us any flavor on what's embedded in pricing? Is it more of the same what you saw this year across the 2 segments? Are you assuming any change in managed care rates or whatever? Steve Filton: Sure. So A.J., I mean, I think on the acute side, our guidance implies a 3% to 4% pricing increase. That's in line. If you look at sort of the 10-year average of pricing increase in Acute Care, I think it's averaged right around 4%. And I think that continues to be -- or that pricing is supported by a steady increase in acuity over that period that we expect will continue. On the Behavioral side, we're expecting pricing in the sort of 2% to 3% range. And we acknowledge that, somewhat lower than we've been running for the last several years. As you know, we've been expecting that price -- really strong pricing over the last several years to begin to moderate at some point as these increased contract prices have begun to anniversary, et cetera. And I think we're starting to see that evidence. So slightly lower pricing expected in behavioral compared to the last several years, but I think also, again, in line with historical rates. Albert Rice: Okay. And I appreciate all the comments that Marc offered on the AI applications, and it does seem like hospitals and health systems are AI-rich environment for opportunities. The question I get asked is not an easy one, but how do you think about how that translates into operating performance in terms of financial impact of those applications? And over what time frame might we start to see that have an impact on revenues or margins, those type of things that you're calling out? Steve Filton: Yes. So I think as Marc described in his comments, A.J., we have focused and I certainly believe we, like most are in the early innings of this AI game. I think our initial efforts have really focused on administrative sort of efforts like within our revenue cycle management. I think Marc alluded to claims appeals and coding. And we've used that, I think, to great effectiveness. I think really, what we're doing and otherwise, I think you also referred to post-discharge activity. So historically, a nurse would make a post-discharge follow-up phone call with a patient to ensure they're being compliant with their medications and their diet and follow-up appointment or physicians. And now we're using an AI agent to make those calls in many cases. And so in both cases, I think we're driving efficiencies. It allows us to reduce headcount. It improves the outcomes as measured by revenue cycle metrics or reduction in readmissions, which I think Marc alluded to. So again, I think it's impossible to precisely quantify -- even precisely quantify what we've been able to achieve, but certainly precisely difficult to precisely quantify what the opportunities may be, but we think they're significant. Operator: And our next question coming from the line of Ann Hynes of Mizuho Securities. Ann Hynes: Within your Acute Care volumes of 2% to 3%, can you let us know what you're assuming surgical volume versus medical volume? And then with the Nevada market, how does that market do in 2025? And how do you expect it to grow in 2026? Steve Filton: Yes. And so I think surgical volume in 2025 lagged our overall by a slight amount. It was positive. Our surgical volume growth in Q4 was positive over last year's fourth quarter. So we're encouraged by that. I think that our expectations for next year are somewhat similar that surgical volumes probably don't grow quite as fast as our overall volumes, but I think sync up pretty closely. As far as Nevada goes, I think Nevada in 2025 has grown in line with the rest of the acute division. I think historically, that market has tended to grow faster. It was a little bit challenged in 2025. There's been much reporting of tourist volumes and tourist activity in Las Vegas being down in 2025. And that's impacted us, I think, to a small degree. We don't get a lot of patient activity directly from the tourist population, but obviously, it has a cascading effect. We're encouraged by the fact, however, that employment trends have remained quite stable in Las Vegas. And that historically has been the leading indicator of sort of how we're going to do and how the economy is going to do there. And so -- and the casino or gaming industry reports, I think, pretty bullish prospects for their 2026 convention and conference bookings. So we're assuming that the Vegas market experiences a bit of an uptick in 2026. Operator: And our next question is coming from the line of Justin Lake of Wolfe Research. Unknown Analyst: This is Anna on for Justin. Can you share what you're seeing on exchange volumes so far given there are a significant number of members that haven't paid their premiums yet? And I know that in Feb and March, the plans don't have to pay the provider on members that don't pay premiums. Are you able to see this information from plans? And what's your level of visibility on the potential bad debt here? Steve Filton: Yes, Anna. So as I said in our prepared remarks, we're assuming a 25% to 30% decline in exchange volumes. That's largely based on CBO and other sort of public projections. We've seen -- we've already seen a decline in exchange volumes in the first couple of months of the year. I don't think quite to that extent. But I think as your question alludes to, we believe that some of the early reporting on how much exchange volume has been lost is understated because the insurance companies won't report exchange volumes down until people start to miss premiums, et cetera. So yes, I mean, that's a challenge for us because we are in the position sometimes of verifying a patient's insurance with the payer and the payer verifying their insurance. And then when we bill the payer, the payer comes back to us and says the premiums haven't been paid and they don't pay -- they won't reimburse the charges at that point. That has always been a risk for us. Obviously, it will be an increased risk in this period where there's a dramatic decline in exchange volumes. But we believe that we've accounted for that in our assumptions. But I think one of the things we -- all of us, meaning all the hospital companies have made estimates about what's going to happen with the exchanges, et cetera. But the truth is we're going to need a few more months to really see how this sorts out what the real loss in volume is, how many of these people who lose their exchange coverage can get other coverage, et cetera. So we've made our best estimates. We feel comfortable with the estimates we've made. But I think we're all going to become -- be able to be more precise over the next few months as we get more and more accurate data. Operator: And the next question will be coming from the line of Andrew Mok of Barclays. Andrew Mok: Steve, you mentioned a $35 million headwind from the new California behavioral staffing requirement for 2026, but also noted a $30 million annual ongoing impact. Can you give us a bit more detail on the nature of the headwind and help us understand why the headwind from the midyear implementation wouldn't annualize into a larger run rate headwind? Steve Filton: Sure. So Andrew, the task before us is that the new California staffing requirements don't necessarily require us to increase our headcount overall. I think actually, we have in excess of the headcount that they're requiring. But it is a different mix of staff and is more heavily skewed to licensed professionals, particularly RNs. So we're going to have to change our staffing models in a number of our facilities. We will hire more RNs. We think that there is some sort of upfront investment in doing that, potentially start-up costs, increased recruiting costs, et cetera. There might be, I think, as I indicated in my prepared remarks, in the first couple of months, we may not have all the slots filled, and therefore, we're anticipating potential short-term volume disruption. But once we are fully staffed, which we think we will be at some point in 2026, then I think the ongoing costs are reduced, and we won't have those start-up and sort of, I'll call, investment and infrastructure investment costs duplicated in 2027 and beyond, which is why the annual impact in 2027 and beyond or the expected annual impact is actually a little bit less than what we're expecting for a partial year of the regulations in 2026. Operator: The next question will be coming from the line of Ben Hendrix of RBC Capital Markets. Benjamin Hendrix: We've heard carriers talk a lot about accelerated behavioral trend for a while now, and it sounds like your outpatient development is addressing that. Can you talk a little bit more about where the demand is on the outpatient behavioral side in terms of the types of services and the types of services that are being offered in the development you completed in 2025 and what you expect for 2026? And then how should we think about the optimal behavioral business mix over the long term between the inpatient and outpatient? Marc Miller: Yes, Ben, let me answer that. This is Marc. So our outpatient strategy continues to progress. Right now, outpatient services represent about 10% of our Behavioral segment revenue. We expect that to continue to grow. As I said in the prepared remarks, we already operate close to 120 outpatient locations where we offer either step-down services or step-in services. So for the step-down location, we have transitional services such as partial hospitalization, intensive outpatient, following an acute care, an acute psychiatric stay. And we typically operate these locations and their satellite clinics under our local brand of our inpatient facilities, and they're often close to those facility campuses. The step-in services are for patients entering behavioral system on an outpatient basis. So people that we've not even had yet as inpatient. The payers continue to look for in-network providers with scale to offer these types of step-in services as an alternative to inpatient care. So we think our step-in model offers comprehensive outpatient services, which would include things like IOP, counseling, virtual care. And we think the demand for that is going to only continue to grow in 2026. In a number of markets, we've now branded this under what we're calling 1,000 branches wellness. Thus far, we're in development and we expect to open at least 10 of these branches locations in '26. So I think that we have a good ramp-up already planned, and we expect that there's going to be many more opportunities to expand in all of these areas going forward. Operator: Our next question is coming from the line of Stephen Baxter of Wells Fargo. Stephen Baxter: Just wanted to follow up on California for a couple of points there. I guess as you're kind of building up to that long-term $30 million run rate impact, does that really just reflect the kind of the changes directly on the incremental staffing side? Are you thinking that there could be any spillover impact to your base wage structure potentially related to maybe your consumer or your competitors trying to maybe hire in the same way that you are? And then as you think about potential reimbursement in California, I know California budgets are not exactly flush at the moment, but is there any prospect for potentially seeing any offset on the reimbursement side anywhere in the near future? Steve Filton: Yes. So Stephen, I think our, again, assumptions were the cost of replacing current staff with staff with a higher license. And we acknowledge certainly as we went through this exercise that all acute behavioral facilities in California would have to be going through the same exercise. So we did our best to project what wage inflation might be and what might be required in terms of recruitment incentives and that sort of thing. Obviously, this is new to all of us. And so we're making certain guesses and estimates. But we think we've been reasonably conservative in our approach. Again, acknowledging that others will be going through the same process as us. As far as reimbursement goes, your point is well taken. We will certainly make every effort to work with all of our payers, whether they be government payers, the Medi-Cal program in California or our private commercial payers to get them to acknowledge this increased cost on our part. How that will sort out ultimately, I don't know. We certainly have not forecast or budgeted anything for that, but we will certainly focus our efforts on that. Operator: The next question is coming from the line of Jason Cassorla of Guggenheim Partners. Jason Cassorla: Maybe just stepping back for behavioral. You're expecting accelerating volumes, but a bit of deceleration in pricing growth. I guess if you look at that 2% to 3% volume and 2% to 3% rate growth as the go-forward status quo, would you still expect that to translate into organic margin expansion? Or has that equation changed in terms of how you think about margin expansion for that business? Steve Filton: Yes. So obviously, those assumptions, 2% to 3% patient day or adjusted patient day growth, 2% to 3% pricing growth result in a 4% to 6% revenue growth projection. We think generally that, that revenue growth level will exceed the level of the increase in operating costs. I mean we made the point in our operating -- excuse me, in our prepared remarks that in 2025, our operating costs were a little bit elevated by kind of an investment in headcount and hiring and filling vacant positions in markets where that has been a headwind or an obstacle to reaching our targeted volume growth. I think that headcount increase will clearly moderate in 2026 and leave us at a point where I think wage inflation and other operating cost inflation should not necessarily exceed the growth in revenue, which will allow for margin expansion. And then I would just also add, following on to Marc's comments about the growth in outpatient, generally, outpatient margins are better than inpatient margins. So to the degree that we're successful in growing the outpatient business faster than inpatient, that should also help margin expansion in behavioral. Jason Cassorla: Great. And if I could follow up just quickly, I wanted to ask about the acute length of stay opportunity. You flagged it a little bit in the prepared remarks. It looks like length of stay has been coming down a little bit, still slightly above pre-pandemic levels. Case mix has been rising, that probably offsets a little bit. But maybe can you just help a little bit more unpack in terms of AI, technology or other efficiencies that could bring that stat lower and drive better throughput? Just anything more on the length of stay would be helpful. Steve Filton: Yes. So a couple of observations, Jason. I mean one is, I think on an acuity-adjusted basis, and I think that's the appropriate way to look at length of stay because the thicker a patient is, the longer they're going to have to be in the hospital. But on an acuity-adjusted basis, LOS is actually below pre-pandemic levels, and I think reflects improvements that we've made. And you make the point. I mean, there's all kinds of, I think, reporting opportunities, there are technology opportunities, better communication with our physicians. But honestly, I think probably the single biggest obstacle we faced in not reducing length of stay further is the supply of subacute capacity, whether that's in skilled nursing facilities, nursing homes, long-term rehab facilities, et cetera. There's been, I think, a lack or dearth of capacity in many markets in those areas. And sometimes we're just holding patients waiting for an available bed or an available spot. We think that will improve over time and will continue to improve. So along with our own internal initiatives, we think the marketplace for subacute capacity will also expand. Operator: The next question is coming from the line of Matthew Gillmor of KeyBanc. Matthew Gillmor: I wanted to ask about the Medicaid supplementals. We appreciate the transparency you all provide. For the programs that are not yet approved like Florida and I think maybe California, do you have any sense for where those approval processes stand with CMS? And we were also curious if you had any visibility on the rural health transformation funding and what that opportunity could be? Steve Filton: Sure, Matthew. So our commentary on the Florida program has been pretty consistent, and I think it's been pretty consistent because the commentary from the state of Florida has been pretty consistent. They submitted a program or kind of a program refinement. They're expecting it to be approved. I think it would be fair to say that it's taken longer to get approved than they expected or maybe than we expected. But they've not changed their view that ultimately the approval will be forthcoming. We've quantified the benefit to us as best as we could to be in that sort of $45 million to $50 million range once approval is obtained. And we haven't recognized it. We haven't included in our guidance but would do so once that approval is forthcoming. As far as California is concerned, we've been also reasonably consistent in our comments there. We think that the California program faces more hurdles is not nearly as certain and its likelihood to be approved. It may need to be modified in significant ways. And as a consequence, while we think if it is ultimately approved, it could be measurably beneficial to us, we've in no way tried to quantify that or predict how successful California will be in working with CMS to get their program modified in a way that ultimately would lend itself to CMS approval. As far as the rural program goes, we've lobbied hard and worked hard and the structure of this program is largely up to the states, and we have worked with the states in which we operate. We think that there could be a potential benefit to us. We acknowledge that it's a relatively small percentage of our facilities carry either the rural or rural referral center designation. So we don't think that the benefit ultimately would be material. But obviously, to the degree that we could obtain any additional reimbursement, it would be positive, but not expecting it to be materially positive. Operator: Our next question is coming from the line of Pito Chickering of Deutsche Bank. Pito Chickering: Excluding the cash received during COVID, your leverage ratio is the lowest that I've seen for well over a decade. Is there any leverage ratio where you say enough is enough and you maintain the leverage and put the rest into repo? Or do we end the year with leverage down another 0.10x or more? Steve Filton: So Pito, I mean, I think our ideal leverage is in the 2x to 3x range. And to your point, we've been at the low end of that for a while. We've done so with the idea that we wanted to keep ourselves sort of maximum flexibility to respond to any opportunities that might arise. We still think that's kind of a prudent position. We've been, as you know, a pretty active acquirer of our own shares and we'll continue, I think, to be so. We think that investing in the repurchase of our own shares is a pretty compelling investment in the current environment. But don't necessarily expect to lever up dramatically in the absence of real compelling M&A opportunities. Don't expect our leverage to go any lower either. I would certainly make that point. Pito Chickering: Okay. Fair enough. If I sort of stay on that point, leverage keeps sort of coming down, except for sort of one large behavioral asset out there, you guys can buy almost anything out there in the marketplace without needing to keep leverage low. I guess, sort of follow-up on the question, I guess, why keep it this low unless there's some large deals that you're looking at? Steve Filton: Yes. I mean part of the issue in terms of being prepared or having the capacity to do M&A is you don't know when those opportunities are going to arise. You don't know how big they're going to be, et cetera. So I'm not suggesting to you that we're keeping our leverage at a current level because of a one specific anticipated potential deal. But I think there are a lot of interesting assets in the marketplace. And as we think about how those assets could fit into our strategy, again, we'd like to keep that flexibility available to us. Pito Chickering: Great. And then sort of a follow-up here on just AI. Look, this has been a huge focus for investors, obviously, in the last 90 days. A lot of people talk about rev cycle management and you talked about streamlining your flow process. Can you give us like real examples about actual efficiencies in terms of timing in cash collections and efficiencies from cost savings that this stuff can actually achieve for you guys? Marc Miller: Let me jump in here. I mean I think it's hard to pinpoint exact numbers for you on this. I would tell you that over the past several years, we've done a lot to accelerate our pace of technology adoption. We were an early investor with Hippocratic AI. And we think that they are doing some terrific things in this space. We're one of the primary health systems that they're working with. And so what we get is we get a look at everything they're rolling out. We get an opportunity to pilot different things and give feedback for those different things [Technical Difficulty] will start to pay off in the coming quarters and years. Some examples, Steve already talked about post-discharge calls and the need ultimately for less staff to do some of these things. And that's certainly already paying off in decreased expenses for us. But I think that as they roll out their various AI solutions, we're going to have a front seat to a lot of those things. And we've just been very impressed with where they're going and what they're doing. But other things that we're looking at right now, I mean, our entire rounding process that we -- is so important to improving quality, maintaining quality, maintaining safety. We're looking to revamp that with different types of technology that we're testing right now. That could have a significant impact on us going into the future, not just on cost savings, but on our increases in quality. Hopefully, honestly, we would be able to impact positively our issues with malpractice and some things like that. So patient safety technology is a big part of what we're looking at. And then just other things like post-discharge, bringing people into the facilities versus with our intake process, especially in the behavioral division, so we think a lot of these things have great promise. It's just hard to pinpoint exact dollars at this point. Operator: And our next question is coming from the line of Craig Hettenbach of Morgan Stanley. Craig Hettenbach: Going back to the Behavioral business, as pricing starts to normalize, I know you've done a lot of work on the hiring front, as you've outlined, can you just talk about the confidence in terms of getting back into more of a steady cadence on the volume side of things? Steve Filton: Sure, Craig. So I mean, I think if you look at the cadence in 2025, we find it encouraging. We've seen sequential incremental improvement in behavioral patient or adjusted patient day volume growth in each quarter of 2025. We exit 2025 within what we consider to be shouting distance of this 2% to 3% target growth range that we've set for ourselves for quite some time and have struggled to get there. But feeling confident, particularly when combined with the investments in staff and headcount that we've made in 2025, and I alluded to earlier, I think that's what gives us the confidence that, that 2% to 3% target in 2026 is definitely achievable. Craig Hettenbach: Got it. And then just as a follow-up, from a capital investment perspective, any key highlights or areas for this year? Steve Filton: Yes. I don't think it's anything extraordinary or extraordinarily different, I guess I should say, in the sense that as we said in our prepared remarks, we've got several big new projects opening this year, a brand-new de novo hospital in -- on the East Coast of Florida, a big tower on one of our Florida West Coast hospitals, a replacement facility in Southern California that will open in the next couple of months, a couple of new behavioral joint venture hospitals opening during the year. And then I think otherwise, we're invested, I think, as Marc indicated in his remarks, in building our outpatient footprint in both businesses, but also expanding the things that are very core and central to our acute inpatient business, which is emergency room capacity, surgical capacity, surgical equipment. None of that, I think, is terribly new or different, but it just continues to be a focus of ours. Operator: Our next question is coming from the line of Scott Fidel of Goldman Sachs. Samuel Becker: This is Sam on for Scott. Just curious, could you give us an update on your overall assessment of the health care policy risk, including the Medicaid work requirements and funding cuts, just your latest overall view. Steve Filton: Yes, Sam, I don't think any of the hospital companies have made an effort to -- I shouldn't say they haven't made an effort, but they haven't produced any estimates on what the impact of the Medicaid work requirements will be beginning in 2027 because I think it's difficult to do. We don't exactly know what the specific work requirements are going to wind up in every state. We have a sense that it's likely that the people who are eliminated from the Medicaid roles as a consequence of those requirements are likely to be less heavy utilizers of the system. But all those variables, I think, kind of remain unsolved at this point. My guess is as the year goes on, the picture will get clarified and we'll all be able to make a better estimate. But at this point, I think it's not an accident that none of the hospital companies have really attempted to quantify with any precision what the impact of the Medicaid work requirements will be. Operator: Our next question is coming from the line of Benjamin Rossi of JPMorgan. Benjamin Rossi: Just following up on your 2026 outlook. How are you thinking about cash flow from operations this year? I know you mentioned some of the drag last year from the increase in AR related to the Medicaid supplemental payment programs. Is that just largely timing related with new programs? Or is this baseline simply becoming larger as you're receiving more from these programs? I guess just curious if there's anything more discrete we should be considering regarding cash flow generation this year? Steve Filton: Yes, Ben, I mean, I think that if you go back and take a historic approach to this, historically, our cash flow from operations is equal to about 75% to 80% of our operating income less NCI. That, I think, would be our view for 2026. I don't think -- again, there are always sort of timing issues with receivable collection, et cetera. But I think using that measure consistent with the historical outcomes, I think, is a safe way to look at it. Benjamin Rossi: Great. And just as a follow-up on supply trends. You have a nice percentage across supply spend as a percentage of revenue during 4Q. How would you characterize your current supply dynamics during the quarter? And then for 2026, I know you have a sizable degree of that supply spend under multiyear fixed contracts, but do you see any additional room this year for any cost offsets across supply spend? Steve Filton: Yes. I mean I think as we indicated in our prepared remarks, supply costs were probably the most effectively controlled of all the expense categories in 2025. We're not necessarily anticipating significant pressure points. I think it turned out that tariffs, which were a concern potentially maybe a year ago have not really impacted our industry in a measurable way, and I don't think we anticipate that they will. There's always opportunities for us to continue to be more efficient there. Most of those opportunities, I would describe as opportunities to work with our clinicians in their supply preference, particularly for the high-cost items. And so we remain focused in the area. But certainly, as we think about any potential areas of cost exposure in 2026, supplies are not high on that list. Operator: And the next question will be coming from the line of Michael Ha of Baird. Hua Ha: On behavioral health, over the past couple of years, you've been very vocal about the benefit of DPPs, how they've made Medicaid volumes and behavioral health much more profitable. And because of that, there's been a strong emphasis on driving more of these volumes. We've seen it materialize through your stellar behavioral health pricing performance. I know today, you mentioned expectations of that to slightly normalize in '26. But that said, these DPP tailwinds are still here. They don't come down until starting '28. So no immediate shift. So looking forward as we enter '28, can you talk about your thoughts on the durability of long-term pricing? Should we think about '28 as sort of that starting year of more incremental changes lower? Also, how might you plan to potentially shift your Medicaid volume strategy over that time? Could that impact your long-term 2 to 3 volume target? And would any of those declines maybe be met with and offset by your outpatient business, maybe more commercial mix through that end? Sorry, a lot of questions. Overall, how are you thinking about all these different pieces? Steve Filton: Yes. So it's a very comprehensive question, Michael. And I think in some respects, you answered some of the questions you asked. I will say, as you noted, that while DPP reimbursement is scheduled to begin to be reduced in 2028, we still have several -- a couple of years ahead of us where the reimbursement remains intact. And as you know, those who follow our disclosures know, it's actually been increasing over the last couple of years as either new programs are being approved or existing programs are expanding or Medicaid utilization is expanding. And so we intend to largely try and take advantage of that benefit while it's out there, while at the same time, thinking about and planning for a scenario in which that Medicaid business is not as profitable as it might be today. And as you suggested, one of the major ways we will do that is on the outpatient side. I mentioned earlier in response to a different question that outpatient margins tend to be better than inpatient margins. And one of the reasons for that is the outpatient payer mix tends to be much more weighted to commercial than it is to Medicaid. So yes, as we continue to grow and focus on our outpatient initiatives, which both Marc and I have spent some time on describing, I think that will be a natural hedge to some degree against the DPP reduction risk that faces us in a few years. Operator: And our last question will be coming from the line of Ryan Langston of TD Cowen. Ryan Langston: Behavioral FTEs grew, I believe, 3.5% to 4% in 2025. You talked in the past about particular job classes being more difficult to fill. I guess how should we think about that 3.5% to 4% growth in some of those more difficult categories of the growth rate and how that translates into the 2% to 3% outlook for behavioral health growth? Steve Filton: Yes. We've made the point in the past, Ryan, that the behavioral staffing challenges are really different in every market. And in some markets, we're challenged with hiring sufficient nurses. In other markets, it could be therapists. And in other markets, it could be the non-licensed professionals, the people that we call mental health technicians. It really varies. And frankly, in many markets, we're fully staffed and don't face those challenges. So I don't necessarily have a breakdown in front of me at the moment in terms of the headcount increase in 2025, exactly which staffing categories that involved. My guess is it's sort of across the board because we hired where we needed to in each individual market. But I think the important thing from our perspective is we made a conscious decision in 2025 to really ramp up the hiring in those markets where staffing vacancies were an obstacle to further volume growth. And now having hired and filled not all, but many of those positions, I think it gives us greater confidence in meeting that 2% to 3% patient day volume growth target in 2026. Operator: Thank you. And I would like to turn the call back over to Darren for closing remarks. Please go ahead. Darren Lehrich: Thanks, Lisa. Thank you, everyone, for participating in today's call and for your interest in UHS. Have a great rest of your day. Operator: This does conclude today's conference call. Thank you so much for joining. You may now disconnect.
Operator: Good day, ladies and gentlemen, and welcome to the Third Quarter 2026 Results Conference Call. [Operator Instructions] As a reminder, this call may be recorded. I would now like to turn the call over to Ryan Hanley. You may begin. Ryan Hanley: Thank you. Good morning, everyone. As mentioned, we'd like to welcome you to Major Drilling's Conference Call for the Third Quarter of Fiscal 2026. With me on the call today are Denis Larocque, President and CEO; and Ian Ross, CFO. Our results were released last night and can be found on our website at www.majordrilling.com. We also invite you to visit our website for further information. Before we get started, we'd like to caution you that during this conference call, we will be making forward-looking statements about future events or the future financial performance of the company. These statements are forward-looking in nature, and actual events or results may differ materially from those currently anticipated in such statements. I'll now turn the presentation over to Denis Larocque, President and CEO. Denis Larocque: Thank you, Ryan, and good morning, everyone, and thank you for joining us today to discuss our third quarter results. While the third quarter is typically the weakest of our fiscal year as customers pause operations for the holiday period, we began aggressively preparing for what is shaping up to be a very busy year. Over the last several weeks, many of our senior mining customers have released their exploration budgets with some pointing to increases of 30-plus percent, while others look to almost double their budgets when compared to last year. Meanwhile, the juniors remain well supported, having raised substantial capital for exploration in the second half of 2025 and continuing into 2026. In preparation for a much busier year, we leveraged our industry-leading balance sheet to ensure that we are as ready as possible, completing additional maintenance above and beyond what we would normally look to do in the quarter to maximize the availability of rigs and support equipment. We also proactively ordered additional supply to reduce the potential impact of any future supplier delays as demand for these items increases. Lastly, we retained and hired additional crews despite the slowdown in activity during the holiday season as the industry is already beginning to experience labor challenges in some regions. With larger exploration budgets and record high commodity prices, we experienced a busier start to the year with a much busier January when compared to last year. While the associated start-up and mobilization costs also had a negative impact on margins, our revenue increased by 15% compared to the same quarter last year, driven mostly by much higher activity levels in Canada and the U.S. With activity levels expected to continue to ramp up over the coming months as a result of significantly higher exploration budgets and a healthy financing market for juniors, we remain very optimistic heading into 2026. I'll discuss more of the outlook once Ian has taken us through the financials. Ian? Ian Ross: Thanks, Denis. Revenue for the third quarter was $184.6 million, up 14.9% from the same period last year, driven primarily by Canada and the U.S. and to a lesser extent, by further growth in Peru. This was partially offset by Australasia and the African region, which continued to be impacted by a slowdown of drilling operations with the company's largest customer in Indonesia, as discussed last quarter. The unfavorable foreign exchange translation impact on revenue when compared to the effective rates for the same period last year was approximately $1 million, while the impact on net earnings was minimal as expenditures in foreign jurisdictions tend to be in the same currency as revenue. The overall adjusted gross margin percentage, excluding depreciation, was 14.3% for the quarter compared to 19.5% for the same period last year. The decrease in margins was attributable to strategic steps taken to prepare for what is expected to be a much busier year, increased start-up and mobilization costs resulting from a busier January and the termination of underperforming contracts in South America to better position the region for improved profitability going forward. G&A costs of $21.6 million were flat when compared to the prior year period as annual wage adjustments were offset by reduced Explomin integration costs, which impacted results last year. The company generated EBITDA of $5.1 million in the quarter compared to $7.8 million in the prior year period, with a net loss of $10.8 million or $0.13 per share compared to a net loss of $9.1 million or $0.11 per share for the prior year period. Despite the seasonally slow quarter and additional preparation costs, the company increased its net cash position by over $25 million to $39.6 million at quarter end, while total available liquidity increased to $177.1 million. CapEx in the quarter totaled $10.3 million compared to $12.6 million in the same period last year, with the addition of 3 new drill rigs and support equipment. The company also ramped up its fleet optimization and modernization efforts in preparation for a busier year, which resulted in the disposal of 13 older, less efficient rigs, bringing the total rig count to 697 rigs at quarter end. The breakdown of our fleet utilization in the quarter is as follows: 306 specialized drills at 49% utilization, 158 conventional drills at 53% utilization, 233 underground drills at 55% utilization for a total of 697 drills at 52% utilization. As we previously noted, we define specialized work not necessarily by the use of a specialized drill, but by work requiring a higher degree of technical expertise, access to remote locations, stringent safety standards and other operational complexities. In the third quarter, specialized work accounted for 59% of our total revenue. We continue to see high levels of demand for our specialized services and expect this trend to continue as deposits become increasingly more challenging to find with discoveries continuing to be made in remote locations. Conventional drilling declined to 12% of revenue for the quarter, while underground drilling contributed 29% of total revenue, providing a stable base of work largely in operating mines. We continue to see the bulk of our revenue driven by seniors intermediates, representing 90% of revenue this quarter as they continue their elevated efforts to address depleting reserves. With financing activity beginning to increase, juniors group represent 10% of revenue in the quarter, an increase from the 8% recorded in the prior quarter and 6% in the same period last year. In terms of commodities, gold represented 39% of revenue in the quarter, while copper accounted for 32%. Iron ore continues to make meaningful contribution at 8%, aided by our Australian operations and demonstrating the diversity in the commodities for which we drill for around the world. Also of note in the third quarter was silver, which continued to represent 6% of revenue. With that overview of our financial results, I'll now turn the presentation back to Denis to discuss the outlook. Denis Larocque: Thanks, Ian. Looking ahead, having now completed a significant amount of prep work, we entered the fourth quarter of our fiscal year with a strong foundation in place to support many of our clients around the world with their larger exploration budgets and resource expansion goals. Aside from our well-maintained fleet of nearly 700 rigs, our optimal levels of inventory and our experienced crews, we also remain well supported by our industry-leading balance sheet as despite the additional preparation work, which was completed in the quarter, we still increased our net cash position by over $25 million. As activity levels ramp up through our fiscal fourth quarter and into fiscal 2027, we expect to gradually deploy additional rigs at incrementally higher pricing, driving steady revenue growth. While labor availability is expected to remain a near-term challenge and will continue to pressure margins, we anticipate that improving pricing will progressively offset these costs. As a result, margins are expected to improve over time, but at a slower pace than revenue growth. Overall, we remain very optimistic heading into 2026, given our level of preparedness combined with record high commodity prices, leading to significant increases in exploration budgets as well as significant increases in the amount of capital raised by junior mining companies. In closing, I'd like to invite any customers or investors that will be attending the PDAC conference in Toronto next week to visit our booth. With record high commodity prices and a strong mining market, we're looking forward to a busy and very productive conference. With that, we can open the call to questions. Operator? Operator: [Operator Instructions] And our first question comes from Gordon Lawson of Paradigm Capital. Gordon Lawson: Can you elaborate on some of the strategic initiatives you mentioned being implemented in North America? Just want some color on that. Denis Larocque: Yes. Well, I mean, basically, it's just on the hiring and the retention of people. Typically, the way it works in our industry when you get to Christmas, you don't know what's coming around after Christmas and you let people go home and then you call them back when you get to January. And this time around, we didn't run that chance. We held on to people during the Christmas break. And also, we also ramped up ahead of -- even as we entered the third quarter in November, we ramped up our efforts on training because we were anticipating 2026 to be busier. So therefore, we ramped up our recruitment, our training to make sure that we would be able to increase our labor force and be able to put more rigs to work in 2026. So -- and then on top of that, we spent -- we took more rigs out of the yard to basically get ready again, to make sure that we were ready for an uptick in activity. Gordon Lawson: Okay. That's great. Looking at South America, are you able to comment on revenue synergies from Explomin as well as your expectations on cost cutting in the region, specifically Peru? Denis Larocque: Yes. Explomin has been a great addition. But as a reminder, when we made this acquisition, we specifically pointed to the fact that it's a slightly different business model. It's more a volume play because it has more underground than our typical operation. So therefore, slightly lower margins by definition, but also lower CapEx or -- so therefore, the return on capital is similar to the rest of our operation, but just the mix or the revenue margin mix is a bit different. So it's been good for us. Now the region in general, we -- as we mentioned, we repositioned. We had a few contracts, not just in Peru, but in other areas as well where we terminated underperforming contracts and moved on rigs, and that had an impact on the performance of the region. So yes. Operator: And our next question comes from Donangelo Volpe of Beacon Securities. Donangelo Volpe: Just regarding the termination of the underperforming contracts in South America, just curious if new work has been sourced for these rigs or if some of these rigs were included in the disposal of those 13 older rigs you guys discussed? Denis Larocque: Yes. No, it didn't have any connection to disposal of rigs. That's basically globally. We -- when we do -- in the third quarter, typically, that's where we bring rigs back in the shop, and that's where we make decisions on if we should repair or basically dispose. So -- but on the contracts, basically, we did replace some of those contracts with better contracts. And so we expect to the performance of the region to improve in 2026. Donangelo Volpe: Okay. And then just moving over to CapEx. CapEx is currently trending a little bit below guidance. Just wondering if we should be expecting an uptick in CapEx for Q4? Ian Ross: Yes. There is some timing related to the lower CapEx in Q3, and we will see an uptick on the run rate we've had here going into Q4, but we will be below the $70 million guidance we had for fiscal '26. And then we're just entering the budget season right now internally, and we'll be giving guidance on our fiscal '27 CapEx amounts next quarter. Donangelo Volpe: Okay. And then final one for me. Just wanted to see if I can kind of quantify Canada, U.S. because it was phenomenal growth year-over-year. So just wondering how much of the year-over-year growth was due to kind of the extension of programs through January, making it a strong year-over-year comparison versus actually taking on new work? Denis Larocque: The extension was not too dissimilar to last year or in terms of -- really, we had contracts that started earlier in. And this is typical when we are in this environment where commodity prices are good and where mining companies are eager to get out in the field. In years where things are slow, they usually -- we're usually calling to get a start date and then things get pushed to February and then things drag. And this year, it was the opposite. It was customers calling saying, "Well, can you get there by this date?" And we want to get going because we got -- they've got a budget and they want to make sure that they're going to be able to get through all the work that they have to do. So there was -- it was more related to the January start-ups -- earlier start-ups really. Operator: [Operator Instructions] And our next question comes from Brett Kearney of American Rebirth Opportunity Partners. Brett Kearney: You guys have continued to stay ahead of the curve in terms of preparing for the industry upturn. Your actions this most recent quarter consistent with that. I guess any color you can provide based on your experience in past cycles in terms of what you're seeing in overall tightness in the industry, both rigs available to customers from the rig owners such as yourselves as well as your ability to procure additional rigs and support equipment in terms of lead times from your suppliers? Denis Larocque: Yes. It's already starting to get pretty tight on rigs. In fact, and this is particularly in Canada and U.S. When you talk to industry players, they're seeing it. In terms of the availability of rigs, it is I would say, probably taking a little bit longer, but still not necessarily a lot because there was still capacity. So it's not a rig issue. It's a people issue. And when I say things are getting tight, it's more on crews than rigs. We know competitors that basically are struggling even just to put additional rigs just because they don't have any crews. So it's more going to be a labor issue than a rig issue. So that's why I'm saying the orders of rig is not necessarily -- we're not seeing a lot more delays than usual on the rig side. But I'll tell you, though, having said that, the place where there's going to be bottlenecks will be the supplies. That's the raws and the supplies and consumables because what happens is that with more rigs going out in the field, everybody is ordering at the same time because most companies have been basically running on just in time and just having enough supplies to have the rigs running. So when you have a whole bunch of rigs going out, you have all these orders. And that's why we placed orders and we kept inventory higher because we've seen before in previous cycles where you have real bottlenecks because suppliers, basically, they don't have enough on the shelf to supply all these -- all that demand that comes in all at once. Brett Kearney: Very helpful. And Denis, with the incremental actions you've been taking, do you feel like labor is in okay-ish position now to meet the activity ramp-up you guys are expecting this year? Denis Larocque: Yes. No, we feel pretty good. It's still -- our teams are still working hard and it's still not easy, but we are in good shape at this point. Operator: And our next question comes from James Vail of Arcadia Advisors. James Vail: Just a very quick question. You suggest that margins were hurt by the incremental costs for future activity plus the cost to terminate the underperforming contracts. And can you put a number on those 2 so we can get an idea of what the real margin experience was in the quarter? Denis Larocque: I mean, when you look at last year, really, the margins -- if those things hadn't been in place, the margins would probably be similar to last year. Really, the difference in the margins between years are attributable to these items. James Vail: Okay. Thank you. We'll looking forward to what's next. Denis Larocque: Well, you've seen this in the previous cycle, right? So... James Vail: But it's been a long time coming. Denis Larocque: I agree. Operator: Thank you. I'm showing no further questions at this time. I'd like to turn it back to Denis Larocque for closing remarks. Denis Larocque: Well, thank you. And as I said, for those of you in town in Toronto next week, please stop by our booth. Our teams are going to be around and looking to an exciting week and an exciting year for sure with everything that's happening in the mining world. We thank you for attending today. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Good day, welcome to the Daqo New Energy Corp. Fourth Quarter 2025 Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by 0. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press Star, then 1 on a touch-tone phone. To withdraw your question, please press Star then 2. Please note, this event is being recorded. I would now like to turn the conference over to Jessie Zhao, Investor Relations Director. Please go ahead. Jessie Zhao: Hello, everyone, I am Jessie Zhao, the Investor Relations Director of Daqo New Energy Corp. Thank you for joining our conference call today. Daqo New Energy Corp. just issued its financial results for the fourth quarter of 2025, which can be found on our website at dqsolar.com. Today, attending the conference call, we have our Deputy CEO, Ms. Anita Xu, our CFO, Mr. Ming Yang, and myself. Our Chairman and CEO, Mr. Jiang Xu, is on a business trip now, so Ms. Anita Xu will deliver our management remarks on behalf of Mr. Xu. Today's call will begin with an update from Ms. Xu on market conditions and company operations, and then Mr. Yang will discuss the company's financial performance for the quarter. After that, we will open the floor to Q&A from the audience. Before we begin the formal remarks, I would like to remind you that certain statements on today's call, including expected future operational and financial performance and industry growth, are forward-looking statements that are made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statements. Further information regarding these and other risks is included in the reports or documents we have filed with or furnished to the Securities and Exchange Commission. These statements only reflect our current and preliminary review as of today and may be subject to change. Our ability to achieve these projections is subject to risks and uncertainties. All information provided in today's call is as of today, and we undertake no duty to update such information except as required under applicable law. During the call, we will occasionally reference monetary amounts in U.S. dollar terms. Please keep in mind that our functional currency is the Chinese RMB. We offer this translation into U.S. dollars solely for the convenience of the audience. I will now turn the call to our Deputy CEO, Ms. Anita Xu. Ms. Xu, please go ahead. Anita Xu: Hello, everyone. This is Anita. Happy Year of the Horse, and I will now deliver the remarks on behalf of our chairman, Mr. Xu. In 2025, China's NT Revolution Initiative supported the solar PV industry's gradual emergence from a cyclical downturn. As a result, solar products market prices rebounded from the third quarter onward, with the polysilicon sector posting the most notable gains. Following this trend, our utilization rate increased from 33% in Q1 to 55% in Q4, bringing our annual production volumes to 123,652 metric tons, in line with our guidance of 121,000-124,000 metric tons, representing a 39.7% year-over-year decrease from 205,068 metric tons in 2024. Furthermore, our 2025 sales volume reached 126,707 metric tons, exceeding production volume and reducing year-end inventory to a reasonable level. In the second half of 2025, we strategically ramped up sales efforts to capitalize on favorable pricing dynamics. The strong market response highlighted growing customer confidence in our product quality and their continued preference for our brand in this new pricing environment. Polysilicon ASPs decreased 7.2% from $5.66 per kilogram in 2024 to $5.25 per kilogram in 2025. This lower pricing, combined with reduced sales volume, resulted in revenue of $665 million in 2025, compared to $1 billion in 2024. Despite the decline in our top line, we significantly narrowed our losses during the year as compared to 2024. In particular, EBITDA swung to a positive $1.7 million in 2025, compared to a negative $337.4 million in 2024. While net loss attributable to Daqo New Energy Corp. shareholders narrowed to $170.5 million from $345.2 million in 2024. Moreover, we generated $66.1 million in positive operating cash flow in 2025, marking a notable turnaround from the $435 million outflow recorded in 2024. We continue to maintain a strong balance sheet and ample cash reserves. At the end of 2025, we had a cash balance of $980 million, short-term investments of $114 million, bank notes receivable of $136 million, and a fixed-term bank deposit balance of $1 billion. In total, these highly liquid assets stood at $2.27 billion, representing an increase of $57 million compared to the end of the previous quarter. This solid financial foundation provides us with confidence and strategic flexibility to navigate the ongoing market recovery and capitalize on long-term opportunities. Operationally, we continued to implement proactive measures in the fourth quarter to mitigate market oversupply, including operating at a nameplate capacity utilization rate of 55%. Total polysilicon production for the fourth quarter was 42,181 metric tons, in line with our guidance range of 39,500-42,500 metric tons. Our sales volume for the quarter reached 38,167 metric tons. In addition, we comprehensively reduced our production costs through process improvements, manufacturing efficiency gains, and raw material cost optimization. Extending our ongoing cost reduction initiatives, total production costs declined by 9% to $5.83 per kilogram in Q4 2025, from $6.38 per kilogram in Q3 2025. Total idle facility-related costs, which consist primarily of non-cash depreciation expenses, alongside approximately $0.10 per kilogram in cash costs for maintenance, also fell to $0.74 per kilogram in Q4 from $1.18 per kilogram in Q3, driven by higher production levels. Notably, cash costs decreased by 2% from $4.54 per kilogram in Q3 to a new record low of $4.46 per kilogram in Q4. In light of current market conditions, we expect our total polysilicon production volume in the first quarter of 2026 to be approximately 35,000-40,000 metric tons, and our full year 2026 production volume to be in the range of 140,000-170,000 metric tons. Chinese authorities demonstrated strong resolve in tackling irrational competition and industry overcapacity, formally designating anti-involution as a national priority within China's fifteenth Five-Year Plan, and the solar PV industry was a key focus of these efforts. These initiatives have driven a structural shift from price-based competition to value-driven differentiation. To advance industry governance, authorities deployed targeted measures, including standards, guidance, quality supervision, price enforcement, and promotion of technological progress. Specifically, this involved updating legislative frameworks such as the revised Anti-Unfair Competition Law and the Draft Amendment to the Pricing Law, which mandate that sales shall not be below cost. Furthermore, a new mandatory national standard was drafted to set strict energy consumption limits for polysilicon production on a per-unit basis. Led by the China Photovoltaic Industry Association, major polysilicon manufacturers have proactively responded to these initiatives, enforcing self-discipline and exploring innovative market-oriented approaches to combat excess capacity and pricing violations. These coordinated efforts have yielded measurable results in curbing overcapacity. The overall production volume fell by 28.4% to 1.32 million metric tons in 2025, and market prices surged more than 50% from the mid-2025 lows to RMB 50-56 per kilogram by year-end. Looking ahead, we expect anti-involution initiatives will remain a central theme for the solar PV industry, supporting a more balanced supply and demand dynamic and driving higher quality growth through 2026. More broadly, the solar PV industry continues to exhibit compelling long-term growth prospects. In 2025, China's newly installed solar PV capacity grew 14% year-over-year to 317 gigawatts, setting yet another record high and proving that market potential continues to exceed expectations. As the global AI industry scales rapidly, space-based solar power is increasingly viewed as a vital solution to the immense and expanding energy demands of AI data centers, creating a significant new growth engine for the sector. Looking ahead, as one of the world's lowest-cost producers of the highest-quality N-type polysilicon, with a strong balance sheet and no debt, we remain optimistic about the sector and believe we are ideally positioned to capitalize on the market recovery and these long-term growth opportunities. We will continue to strengthen our competitive edge through advancements in high-efficiency N-type technology and cost optimization via digital transformation and AI adoption. As the world accelerates its transition to clean energy, we are confident in our ability to play a leading role in powering the future. I will now turn the call over to our CFO, Mr. Ming Yang, who will discuss the company's financial performance for the quarter. Ming, please go ahead. Ming Yang: Thank you, Anita. Hello, everyone. This is Ming Yang, CFO of Daqo New Energy Corp. We appreciate you joining our earnings conference call today. I will now go over the company's fourth quarter 2025 financial performance. Revenues were $221.7 million, compared to $244.6 million in the third quarter of 2025, and $195.4 million in the fourth quarter of 2024. The decrease in revenue compared to the third quarter of 2025 was primarily due to a decrease in sales volume. Gross profit was $15.4 million, compared to $9.7 million in the third quarter of 2025, and gross loss of $65.3 million in the fourth quarter of 2024. Gross margin was 7%, compared to 3.9% in the third quarter of 2025 and -33% in the fourth quarter of 2024. The increase in gross margin compared to the third quarter of 2025 was primarily due to the decrease in production costs. Selling, General and Administrative expenses were $18.7 million, compared to $32.3 million in the third quarter of 2025 and $29.4 million in the fourth quarter of 2024. The decrease was primarily due to the reduction in non-cash share-based compensation costs related to the company's share incentive plan, which was $0 for the fourth quarter and $18.6 million in the third quarter of 2025. The company recognized $19.3 million non-cash expense related to allowance for credit loss in the fourth quarter, mainly due to the uncertainty regarding the recoverability of long-outstanding other receivables. Let me give a little more color on this. During the early development stage of the company's Inner Mongolia polysilicon project, funds were lent to a local government-affiliated industrial park development entity for supporting the infrastructure building and development of our Inner Mongolia polysilicon site. The local government-affiliated entity will repay these funds later. However, due to the industry downturn that resulted in insufficient local tax revenue, the repayment has been delayed. As a result, we recorded an allowance for credit loss due to the delayed repayment of these funds. All amounts due have been reserved, and we do not expect any future related allowance for credit loss. R&D expenses were $0.7 million, compared to $0.6 million in the third quarter of 2025 and $0.4 million in the fourth quarter of 2024. R&D expenses converted from period to period reflect R&D activities that take place during the quarter. As a result, the foregoing loss from operations was $20.9 million, compared to $20.3 million in the third quarter of 2025 and $300 million in the fourth quarter of 2024. Operating margin was negative 9.4%, compared to negative 8.3% in the third quarter of 2025 and negative 154% in the fourth quarter of 2024. Net loss attributable to Daqo New Energy Corp. shareholders was $7.3 million, compared to $14.9 million in the third quarter of 2025 and $180 million in the fourth quarter of 2024. Loss per basic ADS was $0.11, compared to $0.22 in the third quarter of 2025 and $2.71 in the fourth quarter of 2024. Adjusted net loss attributable to Daqo New Energy Corp. shareholders, excluding non-cash share-based compensation costs, was $7.3 million, compared to adjusted net income attributable to Daqo New Energy Corp. shareholders of $3.7 million in the third quarter of 2025, and adjusted net loss attributable to Daqo New Energy Corp. shareholders of $170.6 million in the fourth quarter of 2024. Adjusted loss per basic ADS was $0.11, compared to adjusted earnings per basic ADS of $0.05 in the third quarter of 2025, and adjusted loss per basic ADS of $2.56 in the fourth quarter of 2024. EBITDA was $52 million, compared to $45.8 million in the third quarter of 2025 and negative $235 million in the fourth quarter of 2024. EBITDA margin was 23.7%, compared to 18.7% in the third quarter of 2025, and negative 120% in the fourth quarter of 2024. I will go over the company's full year 2025 financial results. Revenues were $665 million, compared to $1.03 billion in 2024. The decrease was primarily due to lower sales volume, as well as lower polysilicon average selling prices. Gross loss was $137.9 million, compared to $212.9 million in 2024. Gross margin was negative 20.7%, compared to negative 20.7% in 2024. The decrease in gross loss was primarily due to lower revenue. SG&A expenses were $118.2 million, compared to $143 million in 2024. The decrease was primarily due to the reduction in non-cash share-based compensation costs related to the company's share incentive plan, which was $55.8 million and $72.4 million in 2025 and 2024, respectively. R&D expenses were $2.6 million, compared to $4.6 million in 2024. R&D expenses reflect R&D activities that take place during the period. As a result, the foregoing loss from operations was $270 million compared to $564 million in 2024. Operating margin was negative 40.6%, compared to negative 54.8% in 2024. Net interest income was $9 million, compared to $30.2 million in 2024. The decrease in interest income was due to lower cash bank balance, as well as lower bank interest rate. In addition to the interest income, the company did record $24.1 million in gain on short-term investments for 2025, related to the purchase of bank short-term investment products. Net loss attributable to Daqo New Energy Corp. shareholders was $170.5 million, compared to $345 million in 2024. Loss per basic ADS was $2.53, compared to $5.22 in 2024. Adjusted net loss to Daqo New Energy Corp. shareholders was $114.7 million, compared to $272 million in 2024. Adjusted loss per basic ADS was $0.70, compared to $4.12 in 2024. EBITDA was $1.7 million, compared to negative $337 million in 2024. EBITDA margin was 0.3%, compared to negative 32.8% in 2024. On the company's financial condition, as of December 31, 2025, the company had $980 million in cash equivalents and restricted cash, compared to $551.6 million as of September 30, 2025, and $1.04 billion as of December 31, 2024. As of December 31, 2025, short-term investment was $114 million, compared to $431 million as of September 30, 2025, and $9.6 million as of December 31, 2024. As of December 31, 2025, note receivable balance was $135.5 million, compared to $157 million as of September 30, 2025, and $55.2 million as of December 31, 2024. Note receivables represent bank notes with maturity within six months. As of December 31, 2025, a balance of fixed-term deposit within one year was $972.4 million, compared to $1.03 billion as of September 30, 2025, and $1.08 billion as of December 31, 2024. On the company's cash flows, for the 12 months ended December 31, 2025, net cash provided by operating activities was $56.1 million, compared to net cash used in operating activities of $435 million in the same period of 2024. For the 12 months ended December 31, 2025, net cash used in investing activities was $140.7 million, compared to $1.48 billion in the same period of 2024. The net cash used in investing activities in 2025 includes $179.5 million for the purchase of property, plant and equipment, primarily related to the remaining capital expenditures of the company's Inner Mongolia polysilicon project. For the year 2026, the company currently expects approximately $100 million-$150 million of capital expenditures for the year, primarily related to the remaining payments for the Inner Mongolia project, as well as maintenance CapEx. For the 12 months ended December 31, 2025, net cash used in financing activities was $0.9 million, compared to $47.4 million in the same period of 2024. The net cash used in financing activities in 2025 was related to $0.9 million in stock repurchases made by the company's subsidiary, Xinjiang Daqo, to its minority shareholders. That concludes our prepared remarks. We will now open the call to Q&A from the audience. Operator, please begin. Operator: We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question today comes from Alan Han with JP Morgan. Please go ahead. Alan Han: Thank you, management, for taking my questions, and it is great to see a recovery for the company. I have the first question regarding a potential buyback, because it is great to see we are finally generating positive operating cash flow for the full year last year. In this sort of environment, how should we think about a buyback strategy? Anita Xu: Thank you, Alan, for raising the question. First, I would say that share repurchase is absolutely a topic that we have been monitoring closely as part of our capital allocation strategy. We are taking a more prudent and informed approach, especially given the evolving landscape around China's anti-involution policies in the solar sector. While we definitely see tremendous value and intrinsic value in our shares, especially amid the current market dynamics, we believe it is essential to wait for more clarity on the policy implementation and the outcomes before proceeding. We believe that this wait-and-see stance would allow us to optimize the timing and the impact of the repurchase program better. Alan Han: Thank you. My next question is on the policy outlook. We are aware that a consolidation platform was formed in December, soon after followed by antitrust questions by some of the regulators. Can you give us color on how the industry consolidation would happen? Should we discount the consolidation for the moment, or how should we think about that? Also, I noticed one of your peers has just conducted M&A on buying out some of the small traders. Is that part of your strategy as well? Anita Xu: Thank you, Alan. Maybe I will answer the question of the recent acquisition by our peers first and then move on to the anti-involution dynamics. I would say that we see this as the individual player's strategic decision, reflecting their confidence in the sector's future and their determination to further strengthen their competitive positioning. For us, I would say we are completely open-minded toward opportunities that could create value for the industry and for our shareholders. We view such transactions as constructive and ones that would drive the market consolidation the national anti-involution policy is designed to achieve. Direct acquisition or consolidation via the SPV that you mentioned are both forms toward achieving the same goal, essentially shifting toward a more rational and more efficient industry structure, something that we strongly support. That being said, I want to reiterate that anti-involution is designated as a national priority within China's next Five-Year Plan. As one of the major players in the industry, we are determined to address the overcapacity challenge, which we believe would optimally become a value-driven game by innovations and technological progresses, instead of the current price-based competition, and lead to a healthier and more sustainable industry. Indeed, the SPV for consolidation that many of you might be aware of was successfully established by the end of 2025 in December, which marks the first step and signals our resolve to collaboratively tackle the overcapacity issue. Of course, it is not an easy task, with lots of back and forth within the participants and with the government entities. I want to say that discussions are actively ongoing, with a strong emphasis on maintaining a more market-oriented approach to ensure that we meet fair competition and that we are abiding by the regulatory guidelines. To provide more color, we will approach this in well-defined phases, potentially with initial investment injections anticipated in the near term, which would lay the foundation of financial stability. From there, we will gradually move towards consolidation, allowing for more efficient resource allocation and enhanced operational synergies across the value chain. We believe that this structured progression will not only align with the current regulatory guidelines, but also position our company and the industry at large for longer-term resilience and profitability. We are quite optimistic about these developments. Alan Han: Okay, thank you for your answer. With that, I will pass it on. Anita Xu: Thank you, Alan. Operator: The next question comes from Phil Shen with ROTH Capital Partners. Please go ahead. Phil Shen: Hey, guys. Thanks for taking my questions. As a follow-up to that last question from Alan, I was wondering if you might be able to share what are some of the key milestones that we should be looking for in the coming quarters that show progress on the mandatory national standard? There is a draft, but when does that become implemented, for example? With the Anti-Unfair Competition Law and the Draft Amendment to the Pricing Law, what are the milestones that we should be following so that we can see the progress in the industry structure, as well as the competition or the industry consolidating? Thank you. Anita Xu: Thank you, Phil. I would say because there is not much information, and there is a lack of clarity and transparency in the current dynamics, it is difficult for us to say exactly what we might be monitoring because not a lot of details are released until the policies land. Prices, we definitely see a pricing recovery, and as part of the price laws, sales should not be below the industry-level cost, so that is a positive side. I would say we would have to be a bit more patient with the policies, as the conversations are still ongoing. Phil Shen: Okay, got it. Thank you. Then— Ming Yang: This is Ming. Phil Shen: Go ahead, Ming. Ming Yang: Let me just quickly follow up. I think there is a very high-level government meeting coming up that will discuss the next Five-Year Plan. As part of that, I think there is a presentation by a key government agency on the progress of anti-involution. I think after the top-level central government meeting, more policies will come forward. That is something to monitor. Phil Shen: Okay, great. Thanks, Ming. Shifting over to the price outlook, I know there is not as much clarity on the milestones for policy, but what is your assumption for poly prices in Q1 and Q2? If you have a view for the rest of the year, that would be great. Thanks. Anita Xu: As I just said, as part of the Pricing Law, sales should not be below the industry-level cost. I would say the lower bound will be at least RMB 53-54 per kilogram, and we would remain around that level for the coming quarters. It is hard for us to say where prices would go in the coming quarters, because that would essentially depend on how the SPV would evolve and the pace of consolidation. Phil Shen: Okay, got it. For the things that you can control, costs were down and hit a record low in Q4. How much do you think you can lower your cash costs by the end of 2026? Thanks. Ming Yang: Hi, Phil, this is Ming. I think we continue to make progress on both production costs and cash costs. This quarter we benefited from lower energy price or cost, as well as manufacturing efficiencies. I think we should continue to benefit. I think for Q1 and Q2, we are likely to see similar cash costs to the Q4 level, and then further reduction in the second half. Phil Shen: Great. Okay. All right, Ming, Anita, thank you very much. I will pass it on. Ming Yang: Great. Thank you. Anita Xu: Thank you, Phil. Operator: The next question comes from Emmett Lau with Jefferies. Please go ahead. Emmett Lau: Thanks for taking my question. It is a follow-up on the previous question. Basically, it is intertwined. If the price you mentioned should be above RMB 60, the question here is: if the price is not allowed to push up to above RMB 60, then what is the incentive for acquiring others' capacities like the plan before? I do not know what was the thinking behind or if the acquisition will happen like what your peers are doing. Basically, are companies acting on a standalone basis, or how is the whole coordination versus the price coordinated? Anita Xu: Sorry, Lau, can you repeat the question again? I do not think I caught all the question. Emmett Lau: Yes. Previously, the incentive, to my understanding, is that the remaining players can push prices above RMB 60. I think there was some window guidance from the regulator saying that you cannot control prices. If the industry or the larger players are still going to acquire the smaller players, and you cannot push up the prices, what is the point of acquiring small players? How do you expect the price outlook going forward? If you could not make money, why would you acquire anyone? Anita Xu: As I said, I think it would have to be done in phases. First step is that you are not allowed to sell below cost, then gradually you would move on to consolidation and phasing out the excess and outdated capacities. It is hard for us to say how high prices can go, because we want to focus on a more market-oriented approach to achieving this. Emmett Lau: Do you mean the acquisition will happen in phases which probably last for a longer time? Anita Xu: Yes, I would say it would have to be done over a couple of years. It will not be done all at once. Emmett Lau: I see. I have noticed that prices actually have gone down a little bit recently from around RMB 60 to the 50-ish. I think futures price is below 50 already. What do you expect the pricing in the first quarter and second quarter? Anita Xu: Phil also touched upon the pricing outlook for the first half of 2026. I would say it would be at least around RMB 53-54, given that is roughly the industry-level cost currently. Moving forward, it will really depend on the pace of consolidation. That will determine. Emmett Lau: Understood. In Q4 results, if I simply divide the revenue by the sales volume, apparently the ASP seems to be lower than the spot prices. I wonder if there is some delay recognition that might be delayed to first quarter and support the prices in first quarter's result? Why was the revenue in Q4 slightly lower than the spot prices? Ming Yang: Do you mean that the ASP in Q4 was below spot price? Emmett Lau: Yes. Ming Yang: Okay. I think in Q4 the mix is such that because we were ramping up additional volume—production—and the initial batch of production from that initial ramp-up, it is consistent with our past experience that the qualities were not that great. Those actually had a market discount. Maybe in December, we kind of normalized in terms of product quality. It is that factor that led to a slightly lower overall ASP. Emmett Lau: I see. Could investors understand this as a factor that would be normalized in first quarter, meaning that even if the spot market prices are marginally lower, the ASP of the company will probably be more flattish than the decline in spot prices? Ming Yang: Yes, we would expect that. Yes. Emmett Lau: Thank you. My last question is on the broader perspective from the industry. Would you consider any acquisition? I noticed that Anita Xu mentioned you are open-minded, but are you liaising with any other specific player already, or it is still not on the schedule yet? Anita Xu: Thank you, Lau. As I mentioned at the beginning, we are open-minded toward different opportunities, either via acquisition or consolidation. As part of the SPVs, we are quite confident that we will see something in formation in the near term or in the coming quarters. That would be our primary focus for now. However, in the worst case, of course, acquiring directly would also be something that we could consider. Emmett Lau: I see. Thanks. I will pass on. Thank you. Ming Yang: Great. Thanks, Lau. Operator: The next question comes from Man Win with Goldman Sachs. Please go ahead. Man Win: Hello. Thanks, management, for taking my question. I have two follow-up questions. First is regarding our M&A target. I heard, Anita, you say you are open-minded for the acquisition opportunities. Could you elaborate from here? Is there any more keener target for us, like from 10-plus to further higher in the future? What kind of capacity do we prefer more in terms of acquisition on our own? That is my first question. Anita Xu: Thank you, Man. First, I would say that we are comfortable with where we are right now, given the current market dynamics, because essentially none of the players is operating at full utilization rates. Of course, in the future, like our peers, if we want to further strengthen our positioning by grasping more market share, we do not have a specific number in mind as to where we want to be. I would say, if it is aligned with the national anti-involution initiative, it is something that we will consider to do in the future. Man Win: Thank you. That follows my second question. Can you help us to understand a bit more, based on our conversation with government and with the leading industry players, how we should define the success of the anti-involution in the poly sector from here? Because in the past, we saw the poly price increase to above our operating cost, and then that could conclude the success of the anti-involution. It seems poly price continues increasing and is a bit bumpy. Also, there are some ongoing acquisitions. What shall we look forward to in terms of the future anti-involution progress? When can we call it a successful, complete anti-involution in our poly sector? Thank you. Anita Xu: First, I think that for the anti-involution initiative, it would extend over a number of years, given that this round the excess problem is very deep-rooted. The nameplate capacity, including everything, is more than 3 million metric tons, which is more than double the demand now. I would say until the more outdated and smaller players exit, and prices restore to a healthier level so that the industry as a whole becomes profitable to support the overall renewable energy goal. That is when we would say the anti-involution is completed. Man Win: Thank you, Anita. Can we understand in this way: the key target for the anti-involution is to sustain the poly price at over current level at least, to help facilitate outdated capacity exit, and that will take longer time than expected. Ultimately, the key target going forward is to take the smaller players offline. Is that correct? Anita Xu: Yes, I would say that is the aim. Man Win: Sure. The total outdated capacity too, right? Anita Xu: Yes, that is about the number. Man Win: Sure. Thank you so much. That is all from me. Ming Yang: Thank you, Man. Operator: The next question comes from Gordon Johnson with GLJ Research. Please go ahead. Gordon Johnson: Hey, guys. Thanks for taking the question. Really appreciate it. Piggybacking off a question that was touched on earlier, it seems like in the spot market, polysilicon prices had surged and now they have come off. Specifically, when I talk about the spot market, I am talking about the futures market. It also seems like, due to the policy changes in China, demand has been somewhat subdued. Can you give us an outlook on what your expectations are with the puts and takes around anti-involution? What is your outlook on polysilicon prices in the first quarter and maybe the second quarter? I have a follow-up. Thank you. Anita Xu: Thank you, Gordon. You are asking about the futures market and the pricing outlook for the first and second quarter? Gordon Johnson: Yes, please. Anita Xu: For the pricing outlook question, I can repeat it again. For the first and second quarter for pricing, as mandated by the Pricing Law, sales should not be below the industry-level cost. I would say it should be at least RMB 53-54 per kilogram in the coming quarters. For the futures market, I would say it is an area with the potential for risk management and pricing stability in our industry. We see participation in the futures market as an extension of the current sales strategy, offering the chance to hedge against volatility and to secure profitable margins. Similar to our approach on share repurchases, we are prioritizing policy clarity around the anti-involution dynamics in China before diving into the futures market. We will employ a more disciplined strategy in the future, gathering more insights as the policy unfolds, to ensure that our involvement is strategic and value creative. Gordon Johnson: That is helpful. Looking at the futures price, RMB 46.315 right now, and looking at the recent comments from the government on anti-involution, is there any potential that prices could come in in the first half below the RMB 53-54 range you are targeting? Is that something that you are pretty certain of? Anita Xu: I think that is the industry-level cost at the moment. Given that we are not supposed to be selling below that cost due to the Pricing Law, I would say it should be somewhat sustained at that level. Gordon Johnson: Helpful. The last question is, you made significant improvement on your free cash flow—congratulations—in 2025. Do you have any thoughts on how you expect free cash flow to trend this year? Thanks for the questions. Ming Yang: Hi, Gordon. Let me answer that. This is Ming. Thanks for your question. I think free cash flow will turn positive, especially in the second half of 2025. Given our expectation for both volume and average selling price to be held more steady, as well as costs to remain stable to lower, we do believe that. Based on the Q4 level, free cash flow should—without giving specific numbers—improve further from the Q4 level going forward for 2026. Gordon Johnson: Thanks again for the question. Ming Yang: Great. Thank you so much. Operator: This concludes our question and answer session. I would like to turn the conference back over for any closing remarks. Jessie Zhao: Thank you everyone again for participating in today's conference call. Should you have any further questions, please do not hesitate to contact us. Thank you and have an awesome day. Goodbye. Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
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.
Ana Fuentes: Good evening, and thank you very much for taking the time to attend Gestamp 2025 Full Year Results Presentation on what I know is a super busy for many of you. I'm Ana Fuentes, M&A and IR Director. Before we begin, let me refer you to the disclaimer on Slide #2 of this presentation, which has been posted on our website and that set out the legal framework, under which this presentation must be considered. The conference call will be led by our Executive Chairman, Mr. Francisco Riberas; and our CFO, Mr. Ignacio Mosquera. As usual, at the end of this conference call, we'll open the floor for Q&A session. Now please let me hand the call over to our Executive Chairman. Francisco Jose Riberas de Mera: So good afternoon, and thanks for attending this call with us in this busy day. So moving forward, overall, 2025 has been a good year for Gestamp by year, which has been marked by a complex context with the global tariff war that is still alive with many regulatory changes in different geographies, but mainly in U.S. and Europe. A year also with the major OEMs realigning their strategies to slower EV adoption and also with a limited growth in terms of volumes everywhere, but in China or India. In this context, Gestamp has focused on delivering a strong set of results in 2025, taking action in order to align our exposure to EV programs in line with our customers and enhancing our balance sheet profile with more -- adding more flexibility and more optionality for us in the future and of course, also delivering in our commitment for North America in the frame of the Phoenix Plan. In terms of the market, in terms of global manufacturing of light vehicles in our footprint has had limited volumes, again, another year, but probably volumes which were better -- which have been better than initially forecasted. In fact, by February 2025, we were expecting volumes in 2025 to be very much in line with 2024. Then when the tariff war started in April, the forecast was reduced. But at the end of the year, final volume has been around 85.5 million. So that meaning around a 4% increase. So a growth, clear growth, but only driven by Asia. In fact, between China mainly and India, the growth has been around 3.5 million units comparing with 2024 and it's been again a decrease in Europe and also in this case, in this year in North America. So moving to Slide 6. And as mentioned, Gestamp has met all the 2025 upgraded targets. In terms of revenues, we have been below the market growth with Gescrap also performing below 2024 due to the lower prices of the scrap. But in this environment, we have been able to increase our auto margin profitability by 78 basis points, generating a very sound free cash flow of EUR 228 million more than guided. and reducing our leverage ratio to 1.4x EBITDA, which is the lowest since the IPO. So basically, a quite solid year, reinforcing our fundamentals. So that means focusing in increasing profitability and increasing our balance sheet strength. With more focus on revenues, some revenues at FX constant have underperformed the market. In fact, the light vehicle manufacturing in our footprint has increased by 4.1% while at the same time, Gestamp sales at FX constant has been reduced by 1.2%. So that means a 5.2% underperformance, only 0.6% underperformance if we exclude in this analysis, the China impact. By regions, in Europe, the overperformance in East Europe has been cash compensated some slight underperformance in Western Europe. Basically, in North America, we are in line with the market. We had some underperforming in Mercosur due to some specific problems of some of our relevant customers in that area. And in Asia, we have a clear underperformance in China, but in the rest of the Asian countries, including India, we have more than a 15% overperformance. In our revenues in a reported basis, we are below 2024 figures by 5.4% from EUR 12 billion reported revenues in 2024, we have this year EUR 11.350 billion in 2025. There is a decrease, which is mainly coming from FX impact versus euro in most of the geographies, but also due to some lower activity and also to some lower scrap prices. If we go to the Slide #9, during 2025, Gestamp has entered into different agreements with certain customers impacting our profit and loss accounts, mainly in the fourth quarter 2025 and around EUR 34 million positive accounting impact at the EBITDA level with an asset write-down totaling EUR 52 million regarding these programs. So overall, these both items generating a net EUR 19 million negative impact at EBIT level. So these are effects, which are linked to the realignment strategies announced by several of our customers, largely driven by a slowdown in their EV rollout plan. And of course, these settlements fall within the framework of Gestamp's ongoing constructive negotiations with customers and always preserving our long-term relationship with them. So moving to Slide #10. So basically, 2025 has been another year of increasing profitability without growth. Our EBITDA margin for the auto business has increased from 11.1% in 2024 to 11.9% in 2025. Even without taking into consideration the extraordinary impact explained before, this increase has been to 11.6%. So again, a very solid recovery of profitability in our auto business activities. And we have been able to increase this profitability because we have a very clear focus in different actions like cost reduction initiatives, trying to introduce all kind of flexibility measures, of course, this constructive customers negotiations and with a clear focus in delivering on the Phoenix Plan. Moving to the Slide 11 about the Phoenix Plan. For the second year of the Phoenix Plan, we have been able clearly to match the target. And in this case, the target was to achieve more than 8% EBITDA margin. And we have done it in a market, which has been much weaker than expected when the Phoenix Plan was launched. At that time, we were forecasting a manufacturing level in North America of around 14.9 million units of light vehicles, but the real figures in 2025 have been EUR 14 million. So that means almost 6% decrease in terms of volumes, in terms of car manufacturing in North America. In this context, in the full year with sales of EUR 2,241 million, we have been able to generate EUR 182 million EBITDA. So that means 8.1%, which means a clear improvement comparing with the 7% EBITDA margin we had in 2024. And that we have been able also to do it with a very solid result in the fourth quarter with more than 11% EBITDA margin. So -- and we have been able to do it with extraordinary Phoenix cost below the plan with EUR 16 million in terms of profit and loss account and EUR 30 million in terms of CapEx cost. And in terms of Gescrap, we had a year which has been the performance of Gescrap has been clearly impacted by the scrap prices evolution. The scrap prices have been going down month after month in Europe with a total decrease of 12% in the scrap prices in Europe, more than 20% decrease in China and a little bit more stable in U.S. So that means that our revenues in terms of sales have been decreasing by 6.8%, even though in terms of tons, we have been able to preserve a very good level of activity. But this continued decrease of the price of the scrap has forced our company to reduce the profitability in terms of EBIT from EUR 42 million EBIT in 2024 to EUR 28.3 million. So -- but we are expecting for 2025 the scrap of the prices to be stabilizing and even growing. So that means that the profitability of the scrap for the future should be able to recover. Apart of that, we have also made an important acquisition. In this case, the company Industrias López Soriano. With this acquisition in scrap basically in the Iberian Peninsula, we have been able to get ourselves introduced in a different sector, the sector of the Shredding and also in the sector that now we are an active player in the recycling of waste of electrical and electronic equipment. Okay. So now with this, now I hand it over to Ignacio Mosquera. Ignacio Vazquez: Thank you very much, Paco, and good evening to everyone. Moving to Slide #14. Let's have a closer look to our financial performance in 2025. We have reached revenues of EUR 11.349 billion, which entails a 5.4% decrease when compared to the EUR 12.01 billion from 2024. As we have seen before, revenue has been strongly impacted by ForEx in most of our geographies. In the auto business, at FX constant, revenues have declined by 1.2% year-on-year. In terms of EBITDA, we have generated EUR 1.307 billion in 2025, meaning an 11.5% margin and a 1% increase year-on-year. Excluding the Phoenix impact, EBITDA in absolute terms would amount to EUR 1.323 billion, therefore, an EBITDA margin of 11.7%. As a result of the one-off impacts mentioned before by Paco and higher amortizations, reported EBIT decreased by 6.2% year-on-year to EUR 546 million with an EBIT margin of 4.8% or 5% excluding Phoenix impact. Phoenix Plan aimed at restructuring our NAFTA operations, has had a EUR 16 million impact in P&L and a EUR 13 million impact in CapEx for the entire year. Net income in the year has been EUR 152 million that compares to the EUR 188 million reported in 2024, mainly due to an increase of depreciation and amortization levels and a higher interest expense due to increased exchange impacts in 2025. Net debt has closed the year at EUR 1.821 billion, therefore, a decrease of EUR 276 million on a reported basis. As for free cash flow, we have reached EUR 278 million in 2025, excluding the extraordinary impact of the Phoenix Plan or EUR 249 million as reported. To sum up, we continue to demonstrate our ability to perform strongly and strengthen our balance sheet in a challenging market environment together with a negative ForEx evolution. If we now move to Slide #15, we can see the performance by region on a year-on-year basis. Looking at each region in detail, revenues in Western Europe have decreased by 4.2% year-on-year in 2025 to around EUR 4 billion. Performance in the region has been strongly affected mainly by volume pressure in the period and to a lesser extent, the fall in raw material prices. In terms of EBITDA, it reached almost EUR 453 million, and EBITDA margin stood at 11.2% in the period, down from the 11.4% reported in 2024. Profitability in the period has been impacted mainly by volume drop with still limited operating leverage despite the flexibility measures, which have been taken. As we mentioned in our previous call, results of these measures will take some time with limited tangible results in the short term. In Eastern Europe, the performance in 2025 has been very solid, proving again our strong market positioning in the region. On a reported basis, during 2025, revenues have grown year-on-year by 1.2%, up to levels of EUR 1.925 billion, and EBITDA levels have increased by 15.4% to EUR 293 million. Eastern Europe region has been strongly impacted by ForEx this year. EBITDA margin of 15.2% is above the 13.3% reported last year. The reported -- the profitability improvement is mainly attributed to a better project mix, highlighting the strong project ramp-up in Turkey and the good evolution of the business in the remaining countries. In Europe, overall, considering both regions as a whole, we have managed to improve our profitability, partly due to the shift in the mix to Eastern Europe. In NAFTA, Phoenix Plan continues to show signs of improvement in the underlying operations with a very good EBITDA margin evolution in 2025 despite the underlying end market conditions and FX impact. Our revenues have decreased by 6.7% year-on-year, while EBITDA has increased by 7.8% if we exclude Phoenix impact of EUR 16 million in full year 2025. This higher EBITDA in absolute terms leads to an EBITDA margin of 8.1%, improving last year's profitability and also slightly surpassing the target we had set of 8% for 2025. As you all know, turning around the operations in NAFTA to improve our market positioning and profitability is at the top of our priorities, and these show results and the profitability achieved in Q4 sets the way to achieve the target of a 10% margin in 2026. In Mercosur, 2025 has been marked by the ForEx evolution in Brazil and Argentina, leading to lower revenues in the period decreasing by 15.7%. Despite the revenue decrease, EBITDA has increased by 4.9% year-on-year, leading to an 11.8% EBITDA margin versus 9.4% last year. We have been able to improve our profitability in 240 basis points, thanks to the flexibility measures and the turnaround of our business in Argentina, where last year, we did some restructuring. In Asia, reported revenues have decreased by 7.7% year-on-year in 2025 to EUR 1.823 billion within a complex and very competitive market environment. Our negative revenue evolution in the period is partially explained by the ForEx evolution in China. However, our performance continues to evolve very positively. Despite negative revenues evolution in the period, we have managed to maintain similar levels of profitability with an EBITDA margin of 14.5% for 2025, which places Asia as the second most profitable region for the group. Our approach continues to be focused on premium products in the region. We keep on working to gain positioning in this region, maintaining strong levels of profitability. Asian region remains a great opportunity for us, not only China, where we continue to develop these high value-added products, but also India, where we have undertaken new projects with a strong performance. Finally, Gescrap has seen revenues decreasing by 6.8% year-on-year to EUR 534 million as a result of the sustained decline in scrap prices, as mentioned before. As a consequence, EBITDA in absolute terms has decreased by 23.5% year-on-year, reaching EUR 39 million in the period. Overall, we have seen that our unique business model and geographic diversification has supported and driven our performance in a year marked by volumes volatility and lack of growth. Turning to Slide 16. We see that we ended 2024 with a net debt of EUR 1.821 billion, which is EUR 276 billion below the EUR 2.97 billion reported in December 2024. This EUR 276 million decrease includes dividend payments of EUR 111 million and cash in of EUR 220 million of minorities acquisitions, so M&A and equity contributions, mainly due to the transaction executed with Banco Santander earlier in the year. During the year, the company has generated a positive free cash flow of EUR 278 million, excluding extraordinary Phoenix costs, surpassing significantly the updated guidance for 2025, partly due to one-off compensations mentioned earlier by Paco, which came in, in Q4. Moving to Slide #17. We ended December 2024 with a net financial debt of EUR 1.821 billion, which implies a net debt-to-EBITDA ratio of 1.4x, driven by free cash flow generation as well as cash inflow from the partial real estate asset sale of EUR 246 million. This is the lowest debt level since the IPO of the company, both on net level and on leverage ratios and complying with our commitment to be between 1 to 1.5x net debt-to-EBITDA target. As we have mentioned, our priority is to preserve our financial strength, and we remain disciplined over leverage in absolute and relative terms. Looking at Slide #18, we are proud to share the actions carried out during 2025 and that have been key to provide a strong balance sheet. Firstly, and as a reminder, in September, we closed our partial real estate sale and leaseback agreement of our assets located in Spain, strengthening our balance sheet. Secondly, in October, we closed the new senior secured bonds issuance that contributed to extend our debt maturity structure at a very attractive cost. As a reminder, Gestamp's new EUR 500 million senior secured bonds represent the tightest price callable bond by an auto parts issuer since September 2021 with a coupon of 4%, 375%, which underpins the debt investor support to the group. Further to that, in January, we executed an amendment to our syndicated facility agreement and our revolving credit facility, extending the maturity from 2027 and 2028 to 2030 and 2031. These 2 transactions have allowed us to increase pro forma average debt life from 2.6 to 4.3 years. We continue actively managing our balance sheet structure to strengthen it and flexibilize our financial profile. Finally, on Slide #19, we present the return on capital employed. We have managed to reach 15.8% return on capital employed in 2025, improving by 80 bps between 2024 and 2025 and by 180 bps since 2022 when we first released our new return on capital employed KPI. As we have made clear, Gestamp aims at remaining disciplined on CapEx investments and improving profitability. Our long-term strategy is focused on generating value for our shareholders. Thank you all. And now I hand over the presentation to Paco for the outlook and closing remarks. Francisco Jose Riberas de Mera: Thank you, Ignacio. So moving to the Slide 21. I would say that in terms of the market, nowadays, we are not expecting any growth for the market in 2026 versus 2025. And for the following years up to 2029 or 2030, we're assuming a limited growth of around 0.9% CAGR. In 2026, even though we are assuming a flat market, we are considering that the volumes in Europe will be stable with some decrease in Western Europe that could be more or less compensated by some increase in Eastern Europe. We see some increase in terms of volumes in areas like Mercosur and India. And probably we are now expecting a slight decrease for the first time in many years in China. In terms of the -- what we can expect for Gestamp in 2026, so basically very similar to what we have in 2025. So we see a market context in 2026, which means with a limited volume growth in our key geographies with, of course, still regulatory changes, especially in Europe, but also in NAFTA to happen with cost pressure expected coming from customers and also coming from the environment. And of course, some slower EV adoption, but probably with a little bit less volatility. So in this context, we will remain executing the same way we have done it in 2025, trying to base ourselves in kind of this execution of this solid backlog, trying also to focus ourselves in increasing profitability, even though we are not expecting any kind of volume increase. The idea is that we need to keep on improving the strength of our balance sheet and also increasing the flexibility of our balance sheet and of course, trying to focus in meeting the guidance for 2026. In terms of the backlog, at the end of 2025, we had EUR 47.5 billion backlog, which is covering more than 85% of the revenues expected by the group in the next 5 years. Solid backlog, but less backlog than we had 1 year ago because this has been impacted in terms of euros due to the negative ForEx and also it has been impacted by the rethinking of some of our customers of some of their EV programs. So basically, now what we have is a kind of a change in the backlog that we have because we have more content of programs, which are carryover with a less capital-intensive profile. And of course, we are using our CapEx in the future in a kind of conservative approach, trying to ensure the profitability and to be able to mitigate risk, but also to preserve some CapEx in order to be able to support the new customers and to support also footprint diversification with the new area. So again, I think, again, the message is the same. We are going to keep on in 2026 being very focused in working on profitability with a clear road map. The idea is to reinforce all kind of actions in order to have a very good control of all levels of cost, whether it's corporate division level or in the plant level trying to increase flexibility, trying to implement all kind of rightsizing of our operation whenever is required and trying to be more flexible and try to do our CapEx more in a steady basis. Of course, trying to be able to keep on moving with constructive negotiation with our customers and all the different regions and of course, also trying to be able to remain very focused in the third year of the Phoenix Plan, which is a very important milestone as I stated 2 years ago and which is going to provide our group to be able to get the profitability levels in NAFTA region equivalent to the rest of the group. In terms of the financial profile, and as Ignacio has already explained in the previous slide, by the end of 2025, we have been able to achieve a very, very solid financial profile, with a leverage of 1.4x net debt to EBITDA, which is the lowest since the IPO and mainly thanks to a very positive free cash flow generation during the last 6 years of more than EUR 1.4 billion. So taking all into account for 2026 in terms of the guidance, what's clear, the focus of the group is going to be to be another year of reinforcing our financial positioning. We are assuming a scenario in terms of market which is going to remain very flat. And in this environment of a flat market, we are guiding in terms of profitability, to be able to increase our EBITDA margin as a reported basis of more than 11.7% EBITDA margin in 2026. That means that we are guiding for an increase of the profitability in our auto market to be above 11.9% and in terms of Gescrap to increase also the profitability of more than 7.4% that we had in 2025. And in terms of our balance sheet, we are, again, looking for a less capital-intensive business profile. And what we are guiding is to have a good group operating cash flow conversion in the range of 35%. So that means that the operating cash flow defined as reported EBITDA minus the net cash CapEx. So again, clear focus in increasing profitability, a commitment to increase profitability in both auto business and Gescrap and improving our financial position by limiting our cash CapEx to the EBITDA that we are going to generate in this year. Moving to Slide 27. In the Phoenix Plan, the last year of the Phoenix Plan, the third year of the Phoenix Plan, we are expecting to complete the plant with a CapEx impact expectation of EUR 21 million and EUR 90 million impact in terms of profit and loss account, so a total of EUR 40 million. And in the total amount if we include the 3 years in the plan of EUR 100 million as guided 3 years ago or 2 years ago. And for 2026, we stress again our commitment to generate an EBITDA of more than 10% in 2026. And of course, a target that is right now very achievable in what we see and of course, a first stage in order to be able to increase the profitability of our North American operations to the level -- average levels of the rest of the group. So that's all with us. So message that full year 2025, we have been able to achieve very solid results in a difficult environment. For 2026, we are not expecting the market to recover, but we commit ourselves to increase our profitability and to increase also our financial profile. And of course, third year of the Phoenix plan, absolutely committed to be able to deliver. So that's all from my side and now open to your questions. Operator: [Operator Instructions]. And our first question came from the line of Francisco Ruiz from BNP Paribas. Francisco Ruiz: I have 3 questions, if I may. The first one is on your guidance for top line. I mean you commented that you do not expect any growth in this year, mainly also with deceleration in Asia. But mainly I still remember the old stamp when we talk about the -- I mean, the increase on growth above the market due to the increase of outsourcing. I mean, what is this driver? I mean it's already over. And on the other hand, I mean, could we think that the flat growth that the market expected and you are also assuming is because you are projecting nonprofitable projects that in the past you used to assume? The second question is a more modeling question. And if you could give us what's the split of the EUR 34 million extraordinaries in the different divisions -- and if this is something what we could expect also in the future or there are more contracts like this to be accounted in 2026 or '27? And last but not least is on the leverage. I mean, you are reaching a level, which is well below, I mean all-time low. What are you going to do with the cash, I mean, from here? Francisco Jose Riberas de Mera: Okay. Thank you very much for your questions. In terms of the revenues, in terms of the top line, it's true that we are not giving a clear guidance for that. It's true also that the market has not been growing in the last years. And also, we have been reporting in Europe, we have been quite impacted by the FX. In fact, we have made the analysis. And if we were to have the revenues in the kind of currency levels that we had in 2022, we are losing more than EUR 1.5 billion just because of FX because we are reporting in euros. For this year, we don't see a growth. As mentioned, the market is not assuming any growth. And of course, we are always planning that we will do our best, but we consider that it is better for us now to assume that we need to focus in profitability and rather just to be waiting for volumes to come back. So we are doing our job. We are assuming that the bad news are going to be there, and we are putting a lot of stress in the operations. As you know well, because you know us for years, we have been growing for many years. We have a very good position in the market. We have this kind of position with the traditional customers and also with the new customers. And that's why I feel very comfortable that our positioning and our market share remains quite intact. In terms of the leverage that you mentioned, I think it is true that we have reached this 1.4x, which is below all the different levels. I think for us, right now, the focus is in the cash flow generation. I think it's very clear for us. And what to do in the future with that is something that is not now our first priority. Of course, as we have already commented, the market that will have some opportunities. There will be some consolidation. There will be opportunities to increase the remuneration to shareholders. But today, it's very early. Today, I think the clear focus for us is to really focus on profitability and focus and generate a very sound free cash flow. You had another question around the claims. I don't -- I prefer not to provide you with data around what kind of customers or programs or regions. But I think I am quite positive surprised that even though customers are suffering, the kind of negotiations that we are having with them are very positive and I think are fair, not easy, but are fair. And I think the kind of this impact at the end of the day is no more than a compensation of the different expenses that we had in these programs and now these programs are canceled and the customers are doing a clear recognition of what we have been doing for them because they also want to preserve our long-term relationship. So I would prefer not to give you much more details, but probably there will be more -- a little bit more in the -- during 2026. Operator: [Operator Instructions]. And our next question comes from the line of Robert Jackson from Banco Santander. Robert Jackson: First question is related to your comments, Francisco, on the footprint diversification. Could you elaborate more on this comment, give us a bit more detail what the thoughts are on this outlook? That was my first question. Francisco Jose Riberas de Mera: Okay. So if I understand well around our footprint diversification, so that means that we are trying to, of course, to try to invest whenever the markets are growing. Even though, of course, we are trying to preserve our strength in terms of balance sheet. Probably in terms of the more clear bets in terms of growth is India. And India is a place that we are growing. We are investing. We are investing in opening new plants over there and also, which is something which was a kind of surprise to me, increasing in some specific high-tech technologies for that market. And we are growing a lot in areas like specific chassis solutions and also a lot in new hot forming lines. So India is a market that we see growth, and we are investing in that growth. Of course, in terms of growth, there could be other opportunities. There are other markets that we have a very good position like Brazil that we see still some room to grow, areas like, for instance, in Morocco that we are growing. But this is what we are expecting to do that. In terms of where we need to reduce in some extent our position, I think clearly, we are doing year after year some kind of downsizing of our operations in Western Europe. Robert Jackson: Okay. Second question is related to the NAFTA improvements. We saw a significant improvement in the rise in the EBITDA margin from the third to the fourth quarter. Is there -- what are the main drivers behind these relevant increases? Or is it just a general improvement? Ignacio Vazquez: Well, Robert, just to confirm, you're asking because we cannot hear you very well. You're asking about EBITDA margin drivers in fourth quarter? Robert Jackson: Yes. Yes. EBITDA margin in NAFTA, more specifically the improvement in NAFTA, in NAFTA, yes. Why is the NAFTA EBITDA margin increased so significantly. Just to get a better understanding looking forward into the next few -- into 2026? Francisco Jose Riberas de Mera: Yes. Well, I think, Robert, as you know, we usually have some kind of increase in the EBITDA margin in the fourth quarter compared with the -- that happened also in 2024. So it's in line with the trend that we have every year because we have -- and we have also this year some kind of agreements by the end of the year, for instance, when we are trying to be paid by the different agreements with customers around tooling and programs. So basically, it's a kind of trend that we have that we try to do this settlement and accounting of these agreements and negotiations with customers by the end of the year. So that's why basically we have this EBITDA margin in the fourth quarter more than the average EBITDA margin of the previous quarter, but this was very similar to the kind of evolution we had in 2024. Robert Jackson: Okay. I was just wondering whether there was any specific changes on an operational level, but you've answered my question. Operator: There are no further questions from the conference call at this time. So I will hand back to the management team. Thank you. Ana Fuentes: Well, thank you for your time today. We hope the call has been useful. And as always, the IR team remains at your disposal for any further questions you may have. Wishing you all a very [ good evening ]. Francisco Jose Riberas de Mera: Okay. Thank you. Ignacio Vazquez: Thank you very much.
Operator: 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: Good morning, ladies and gentlemen. We're starting our earnings call for 2025 and the new strategy plan for the period 2026 -2029. We welcome to all attendance via telephone and our web page. With us are Beatriz Corredor, Chair of the Board of Directors; Roberto Garcia Merino, Chief Executive Officer; and Emilio Cerezo, Chief Financial Officer. I now give the floor to our Chairwoman, Beatriz Corredor. Beatriz Sierra: Thank you very much, and good morning, everyone. First, I will start by highlighting the most notable events of 2025, and then our CEO, Roberto, will go deeper into the year's figures and discuss the close of the financial year. I will later refer to the environment in which the Board of Redeia brings this strategy plan. And once more, Roberto will go into deeper detail on it. And as usual, we will conclude with a question-and-answer period to address any of your queries or concerns. So. as I said, let's get started with the 2025 highlights. From an operational viewpoint, we can say we've made great progress with a record of investments in TSO, exceeding EUR 1.5 billion or 40% more than in 2024, a record figure in our 41-year history. And it's almost a fourfold increase in the investment rate in nearly 4 years. This effort includes the EUR 1.4 billion invested in the transmission network with 486 extra kilometers of circuit and 217 new positions to strengthen the network and facilitate the country's industrial and productive development. Moreover, the availability index of the national transmission network operated by Red Electrica sits at 98.39%, exceeding 98.06% achieved during 2024. It is therefore clear that 2025 was a key year also from the regulatory point of view as the CNMC published the remuneration letters for the new regulatory period going from 2026 to 2031. Also, the regulator approved the remuneration for the system operator for the '26, '28 period. This -- or with this, this financial year 2026 is expected to be better than the previous year as the current methodology takes the actual costs for 2024 and foresees a regularization based on actual data from 2025, which already has an impact on the 2026 bottom line. As for the transmission network, we believe it should be adequately remunerated during a time when the relevant role played by its reinforcement and its maintenance account for. Certainly, we were expecting further signals considering the effort being made in our infrastructure and we'll have to continue, as you will see during the presentation. In the field of income and revenues in parallel, we've made progress on high-impact corporate milestones, including the completion of the Hispasat sale with a payment of EUR 725 million for 89.68% stake that we had in the satellite company. As we have said before, this strengthens our financial position to continue enabling the energy transition in Spain. The European Investment Bank has become a key partner in this regard as they support us in funding strategic projects like the pumping station in Santa de Chira and the interconnection with France. In addition, we signed an extra EUR 1.1 billion in loans with several entities, including a EUR 300 million contract with the ICO and issued a EUR 0.5 billion green bond. But if there is a relevant event in 2025, we're talking about the big blackout on April 24, an unprecedented, unpredictable multi-factoral incident as acknowledged by all official reports, both from the European experts panel and from the Government Analysis Committee. These technical analyses confirm the sequence of events as described in the systems operators' report. All reports agree that it was a serious unforeseen event, oscillations, generation disconnections in some cases through shared evacuation structures with healthy voltages within the limits of the transmission grid and inadequate voltage control service. All this led the incident to an unprecedented, as I said, incident, both at a national and international level. This comes from the technical rigorous analysis of data. There is no guesswork here and no generalization. For this reason, Red Electrica confirms that it operated the system correctly in strict compliance with the regulations before, during and the blackout on April 28 because if there is a highly regulated industry in our country, that is the electricity sector, meaning that both the system operator and other parties involved must comply with the present regulation, which is obviously not approved by Red Electrica, but by the executive, legislative or regulatory authorities after due procedure, guaranteeing that all parties concerned are heard. And this is the case for the new control operating procedure, 7.4 on voltage control, which was requested in 2020 by Red Electrica and approved in June '25 now in the process of implementation or the measures proposed by the systems operator for a sudden voltage variations control or the new functions recently assigned to the operator, which we take on with huge responsibility as a sign of recognition to the work and professionalism of our team. I will now give the floor to Roberto García Merino, our CEO, who will give you more detail on the financial results for financial year 2025. Roberto GarcÃa Merino: And this has grown 4.2%, launched mainly by the increase of EUR 71 million of this regulated in Spain. This is due to the new financial contribution that was approved by the CNMC and the new types of help that has been given have been adjusted by the lower maintenance units that we need to spend. And internationally speaking, we have gone down a little bit because of businesses in Chile and because of the exchange rate between the dollar and the euro that was compensated in other countries like Peru and Brazil. So, the fiber optic business and the positive effect of the inflation of CPI-linked contracts is offset by the renegotiation of some contracts in our context of market concentration. With regards to operating expenses and without considering those that are offset by other operating incomes, including Salto de Chira, we see that the expenses grew 5.6% in an environment of increased activity and operational demand in line with the business growth and the network requirements. Personnel expenses went up due to a larger average workforce, which was necessary to be able to meet the challenges arising from the strong growth of the group's regulated assets and also higher salary costs. Other operating expenses grew basically due to higher maintenance costs in Spain, which have contributed to have a high availability rate for the transmission network. The EBITDA grew 4%, driven mainly by higher contribution from the TSO. Also, it's noteworthy that there is an improvement in international business, aided by lower operating expenses as well as the strong performance of fiber optic business, which combines higher revenues with more contained costs. The profit has reached EUR 506 million, which is 37.2% higher than 2024 due to the impairment recorded in 2024 following the agreement to sell Hispasat, while profit from continuing operations grew by 1.6%. We should say that the financial result worsened by EUR 20 million due to lower financial income in 2025 compared to 2024, mainly due to the lower placement of cash surpluses. Corporate income tax increased with an effect rate above 25% due to the fiscal impact and dividends that we received from group companies that are not part of the tax base. From the financial perspective, the net group's debt is EUR 5.4 billion at the end of the year, which represents an increase of EUR 100 million compared to December 2024. The cash generation, together with the EUR 725 million received from the sale of Hispasat and dividends from the group, especially from Brazil, have helped us to contain the growth of that debt and continue to have solid financial structure with an EBITDA rate of 4.4x and an FFO of net debt of 18.9%. With the results of 2025 and what we've already seen from the period of '21, '24, we can say that we have exceeded all the objectives set out in our strategic plan for the period of 2021, 2025, placing the company in a very solid position to tackle the challenges of the new strategic plan. The TSO investments have reached EUR 4.4 billion, exceeding the initial target of EUR 3.3 billion, ending with a historic figure, as was said before, of more than EUR 1.5 billion of TSO in 2025. The EBITDA margin stood at a solid 75.8%, which also has complied with what was foreseen. We have a balanced financial structure with a net debt-EBITDA rate of 4.4% and an FFO over debt of 18.9%, and we have preserved an A- credit rating with both Fitch and Standard & Poor's. Finally, we have ensured a stable shareholder return throughout the whole period, and we've improved even the initial dividend distribution target. In short, we're closing this plan in 2025 with an excellent level of execution and a very solid position in order to face the next stage. Now I'd like to give the floor back to our Chairwoman. Beatriz Sierra: In truth, it great to hear how we met our strategy plan exceeding expectations. So, allow me to congratulate the whole team for it. In recent years, the energy industry has undergone a radical transformation. We're witnessing a new scenario driven by 3 large dynamics: the acceleration of electrification, the growing demand for network infrastructures to connect a more dispersed and fragmented generation structure and the need to ensure a secure, sustainable and competitive supply always. Electrification moves on at an unstoppable pace and the demand for electricity grows faster than global energy consumption. This change is driven by new needs, starting with the expansion of electric vehicles and data centers, and continuing to the electrification of industry, the installation of electrolyzers, heat pumps and battery factories. All these elements are redefining consumption patterns and demand more robust, smarter and more resilient networks. Spain specifically faces an enormous opportunity. The growth of electricity demand associated to new industrial and digital consumption places our country in a strategic position within Europe. This scenario is not safe from significant challenges as it offers enormous potential to lead the energy transition and consolidate a cleaner, more efficient model in which Spain will take a leading position due to its high and secure penetration of renewable energies, reaching nearly 57% of our energy mix, including 8 gigawatts of photovoltaic self-consumption. In this context, electricity networks are the strategic enabler of the transformation. Without well-dimensioned robust grids, no transition is possible. Therefore, this is a strategic priority for upcoming years. Globally, and according to the World Energy Outlook 2025, global investment in networks will strongly grow until 2035, driven by the electrification of end consumption. For an electricity transmission operator such as Redeia, this scenario is a sustained opportunity for growth backed by a stable regulatory framework, increasing investment requirements, a clear road map for expanding and modernizing the grid and with agile administrative and environmental processing of projects, which is one of the major areas for improvement at present. Moreover, the decisive push also comes from European institutions to make decarbonization into the real driver for growth, security and energy autonomy, which are vital for the continent. In this regard, tools such as the networks package recently presented by the European Commission seeks to boost investment in electricity infrastructure, speed up permits and improve the coordination of network planning at the European Union level. And the same can be said of the Energy Highways project, identifying up to 8 large bottlenecks in Europe that need to be resolved urgently to complete the Energy Union. These include 2 new trans-Pyrenees interconnections, which are absolutely a must to meet EU targets and enable the degree of interconnection required by the Iberian Peninsula, which, as I usually say, is more of an electricity island than Ireland itself. This institutional commitment is fund much more complex environment. not only due to the massive integration of renewables, but also because of the emergence of new consumption modes and technologies. The electricity system is evolving towards a more dispersed structure with decentralized energy resources and increasingly active consumers. This requires new tools, new services and a much more dynamic operation of the system. To this end, digitalization will play a key role, smart grids, sensors, real-time control systems and technology platforms that will allow us to anticipate and manage events in a much more variable environment. In this context, storage will also play a fundamental role in maintaining system stability. And to face all these challenges, Redeia as system operator will have to develop new capabilities, ensuring the resilience of the system and guaranteeing the quality and security of supply at all times. In summary, we face a more demanding situation filled with opportunities to move towards a more efficient, secure and fully decarbonized system. Thus, the national integrated plan for our country sets a clear path to advance in decarbonization and electrification of the country, setting up very ambitious targets. Amongst these, reducing emissions by 55%, increasing energy efficiency, cutting in half our dependence from the outside and achieving more than 80% savings in renewable generation in the electricity mix. Of course, the vision requires infrastructure to support it, and this is where electricity planning comes into play for the period 25-30. This process mobilizes over EUR 13 billion in investment in the transmission grid to integrate new renewable generation, facilitate electricity consumption and strengthen security and supply. There is a '25 to '30 plan currently in the phase of analysis for the comments submitted by public consultation launched by the ministry is structured around 2 main principles. On the one hand, maximizing the use of the existing grid to make it more flexible and resilient and on the other side, deploying new infrastructures wherever necessary to integrate renewable generation, meet new consumption needs and reinforce the security and stability of supply. It also integrates new fundamental elements such as international interconnections and the connection between island and Peninsula systems. Beyond moving ahead on these projects from the new plant, I would also like to stop here for a moment to discuss the present state of the transmission network, which can be by no means be described as collapsed. The current grid enables the circulation of electricity produced by generation facilities for a total installed capacity of 150 gigawatts, a record for the national electricity system. 70% of this installed capacity comes from renewable sources, and it's much more dispersed and fragmented into smaller plants throughout the country. But not only that, with the current network built and planned, permits have already been granted for access and connection in projects totaling another 164 gigawatts, out of which 129 belong to wind and PV facilities, 16 gigawatts for storage facilities and 19 gigawatts for demand facilities. Out of the latter, 19 gigawatts, nearly 12 gigawatts of capacity granted since 2022, which is when the present plan was launched. And those 12 gigawatts are not in service yet, not connected to the grid and therefore, not generating demand because the developers have a minimum of 5 years to develop their projects and then connect to the grid. And even in those conditions, 25% of Red Electrica's nodes still have available capacity for new applications. Therefore, we cannot talk about lack of anticipation, considering another piece of the context. The present planning '21 to '26 contemplated proposals to deal with 2 gigawatts of new demand and 12 were granted. When these 12 gigawatts come into service, they will entail an increase of 25% of the present demand in the Spanish system. The capacity of the transmission network that distribution operators plan to reserve for facilities connected to their own networks also doubles the historical peak of the system, which is 45 gigawatts. Even so, we need to further reinforce our networks, both distribution and transmission. The energy transition is a historic opportunity for competitiveness, industrialization and the strategic sovereignty of Europe and the Iberian Peninsula and of course, specifically for Spain. The main projects for the future plan '25 to '30 includes major access running across the Peninsula, reinforcement of rings around large cities and new links between Islands and with the Peninsula, which will enable quick deployment of renewables and new electricity consumption connected to the electrification of our economy. We will continue to work on interconnections with France, Portugal and in the near future with Morocco to increase the security of our system. In addition to all this, we're implementing storage projects such as Salto de Chira in the Canary Islands or the Balearic Islands. And we're also integrating new voltage control elements in the Peninsula and new synchronous compensators are being installed to reinforce the voltage regulation capacity and will guarantee operational stability in scenarios with high renewable penetration and lower system inertia. In sum, it's a full nation program based on projects that structure and connect the entire national territory and will drive a visible transformation in each and every region, as you can see on this image, which is by no means exhaustive as it reflects only the scope throughout the country. Investment in infrastructure is necessary, but it is also necessary in technology, digitalization and new capabilities in a complex system where the priority remains secure supply. To achieve this, we have the best possible organizational framework, the TSO model created in Spain precisely with Red Electrica 41 years ago and then adopted by all European countries as it is the most effective system in terms of management, the safest in terms of operation and the most efficient in investment terms. Therefore, the new plan sets out an unprecedented level of investment and this plan will be translated into new infrastructure. Between the years '25 and '30, we estimate that we will commission EUR 8.4 billion, which actually might reach EUR 9 billion if the processing procedures are streamlined as proposed by the EU and the Spanish government. Looking ahead into 2031, virtually all the plan will have been implemented or underway with a potential of up to EUR 11 billion in commissioning and execution. In sum, we're going from ambitious planning to solid execution capacity with enough room to accelerate even further if the regulatory framework allows it. Going on to the international context, Brazil, Chile and Peru are 3 of the most attractive electricity transmission markets in Latin America, not only because they offer stable and predictable regulation framework, which is fundamental to guarantee legal certainty and long-term visibility for investments, but also because these countries have consolidated transmission models with centralized planning and transparent awarding processes, creating a favorable context for us to develop our transmission activity. As for telecommunications in Spain, which is the third fundamental pillar for Redeia, the industry has been undergoing a deep transformation process for years now. The consolidation of large operators and local operators continues in a context in which efficiency and scale play key roles in competitiveness. And certainly, cybersecurity has become an absolute priority. Networks require increasingly advanced measures to protect critical infrastructures and safeguard user data, a trend that will continue to intensify in the coming years. Another fundamental element is the rise of AI and automation, enabling networks in real time and significantly improving customer service, thus opening the door to new operating models. At the same time, the industry advances towards more sustainable networks with clear focus on energy efficiency and the reduction of carbon footprint, which is particularly relevant for operators with vast infrastructures over the territory. There's also a strong pains maintained in infrastructure development and sharing, which promotes efficiency and accelerates the offers significant opportunities for Rentel, the leading provider for dark fiber in the country from data centers and submarine cables to hyperscalers and the growing cloud ecosystem. The drive for technological innovation and digitalization will also be the focus of the group's technology platform, ELEWIT, which will emphasize on operational efficiency, security and the maximization in the use of assets. And to round up the framework that will surround the company in the coming years, it is it is important to convey the meaning behind this whole strategy plan, which determines each of our actions. I'm talking about our unshakable commitment for 2029. This commitment is a direct response to our context, a clear road map to drive energy transition based on neutrality, technical rigor and innovation, a transition always guided by a deep sense of public service to add value to individuals, territories, nature and biodiversity. This is a responsibility we take on to lead this change with vision, but also with facts and data. Our new sustainability plan that we're presenting to you today defines 2 major ambitions organized into 7 strategy vectors and supported by 5 management levers that guide our actions. The framework will guide not only our decisions, it will also make sure that each project, investment and step forward will contribute to a more sustainable energy model and generate a positive impact on the environment. In short, we are presenting today the way to turn our commitment into results and the way networks will become the true engine of sustainable transformation. For this purpose, we have set ambitious measurable goals that cover the entire group from promoting electrification and significantly reducing our emissions to ensuring a positive impact on nature and promoting regional development, including extending sustainability criteria to our entire supply chain. We're also reinforcing innovation and digitalization, consolidating our ethical governance model and moving towards increasingly sustainable funding. Together, these objectives enable us to tackle the energy transition with rigor, responsibility and clear foresight to ensure our growth that will always be accompanied by social and environmental value. For this purpose, we have our comprehensive impact strategy and a new social innovation plan. At Redeia, we understand the importance of dialogue and sustainable positioning as a key driver for management. And that's how we understand this dialogue, not just as a mere matter of transparency, but also as a strategic tool to build trust, anticipate expectations and position ourselves as a benchmark in sustainability, both nationally and internationally. And this is proven by our bottom line that shows our continued engagement because each of the assessments we go through from Standard & Poor's Global to MSCI measures not only our environmental, social and governance performance, but also allows us to benchmark our practices against the best standards in the industry. And thanks to this active listening approach to our stakeholders, and thanks to our alignment with international best practices and our commitment to sustainability, Redeia is now ranked at the top 1% of the world's most sustainable companies according to S&P and has once again obtained top ratings in key indicators such as the CDP's A list, among others. In sum, these results are not an end in themselves, but the natural consequence of a model based on transparency, rigor and the conviction that sustainability is central to our value proposition. We will continue to reinforce this position through open, constructive and constant dialogue with all of our shareholders so that we can continue to move forward in credibility and leadership. I will now give the floor back to Roberto Garcia Merino, our CEO, for a deeper explanation on our strategy for the period. Roberto GarcÃa Merino: Thank you very much. Now that we've analyzed this economic and sectorial context, I'm going to talk to you now about the new strategic plan for Redeia to the period 2029. This plan seeks to promote the energy model and connectivity of the future, generating a positive impact on climate change, nature, territory and people. The strategy '26-'29 that we're showing you here is a decisive step to consolidate our leadership and make sure that we have a robust electric system that is prepared for decarbonization, reinforcing the essential role that energy transmission plays in the energy transition as well as offering a reliable and technically advanced fiber optic network that will contribute to bridge the digital divide. In this regard, the plan focuses on a strong development of regulated activity in Spain. And therefore, it is our fundamental commitment for our company that more than 90% of our investments are allocated to transport and operation. This reflects our top priority for developing electricity planning, optimizing system operation and ensuring supply quality in a rapidly changing environment. At the same time, Redeia will continue to consolidate its international and telecommunications activities, which provides stability and long-term value. The strategy also focuses on operational efficiency, innovation, digitalization. These are key elements for a more demanding and decarbonized system. Similarly, attracting and retaining diverse talent becomes an essential pillar for successfully addressing the challenges facing the electric sector. Overall, this plan reinforces Redeia's mission to promote a sustainable and reliable and future-proof electricity system, providing shared value to society. Today, we present an ambitious investment horizon totaled EUR 6.5 billion, of which EUR 6 billion will be allocated to domestic transport activity. This brings us to a historic level of investment of TSO with an average annual investment of EUR 1.5 billion, which is 70% higher than the average annual investment from the previous strategic plans from '21-'25. If we consider the EUR 6 billion an investment that will be executed in the period '26, '29 as well the investment that took place in the year '25 and what will be taking place after this plan throughout the years of 2030 and 2031, the total amount of investment will reach levels close to those considered in the draft from '25 to 2030. Likewise, our firm alignment with the European Union's climate and sustainability objectives also reflects the fact that 100% of the TSO investments are eligible under European taxonomy. Therefore, we expect the transport part of Spain should interconnection in the Bay of Biscay as well as the deployment of another 400 kilowatts that will connect different regions or various regions along with installation of synchronous compensators in the Peninsula, Balearic and Canary Island systems as well as the Salto de Chira project. Together, these actions will enable the company's RAP to be EUR 12 billion in 2029, and it should grow more than 35% throughout this period, reaching EUR 14.4 billion if we bear or take into account the more than EUR 2 billion of work in process that will put up to service in the subsequent years. From another perspective, it's clear that we are facing the challenge of developing the necessary infrastructure to be able to achieve decarbonization in a highly competitive and saturated market environment. It is therefore essential to ensure the availability of the supplies and services that are needed to address the development of the TSO at a reasonable cost. However, the visibility that we have on investments for the upcoming years allows us to anticipate and take measures that significantly reduce the execution risks. Actions such as conducting comprehensive risk assessment, which has enabled us to design new purchasing strategies adapted to a more demanding industrial context and also entering into medium- and long-term framework agreements, which provides stability in prices, terms and volumes as well as executing commodity hedges to stabilize the cost of the more sensitive equipments are becoming fundamental to our business. Thanks to all of this, we already have more than 70% of our strategic supplies guaranteed up to 2029. All of this -- however, all of this investment would not make any sense unless we had a stable regulation behind it. And we believe that we now have good visibility and stability for the company in the next 6 years. I think they are already well known, the new methodology guarantees a return of investment of 6.58%. In addition, unit values have been updated both for CapEx with an average increase of 6.4% as well as operation and maintenance. In this case, an adjustment of 13.4% for maintenance income compared to the previous period. It is worthy to note that we've taken our first steps towards recognizing work in progress for unique facilities with amounts invested prior to the year and the commissions being recognized and capitalized for up to 5 years at the cost of debt, and that includes the calculation of the financial remuneration rate. In our continuous effort to generate value for our shareholders, we can say that the pursuit of operational efficiency and managing leverage and financial costs will enable us to achieve a return on equity of at least 9%. Although our activity will be focused on the transport business in Spain in 2026, we will also -- '26 to '29, we will also maintain an investment plan of EUR 150 million internationally focused on strengthening and expanding transport networks in Brazil, Chile and Peru. In this way, we consolidate our presence in these regions and increase our future options. We will also continue to invest in our dark fiber business, a market in which we are a leader, thanks to having a stable, predictable model and a long-term focus. Throughout the period '26, '29, we will invest about EUR 110 million, mainly aimed at strengthening our network, expanding capacities and meeting the demanding growth for high-quality connectivity. Our objectives for this period are focused on 4 main areas: maintaining our position as a leading provider, strengthening relationships with strategic customers, capturing new business opportunities and develop emerging business associated to the cloud and the high-performance computing. Also, we will continue to explore alliances with strategic partners that will allow us to expand our reach and reinforce our role as an essential part of the country's digital infrastructure. Another significant aspect is the technical innovation and digitalization, which are essential for driving the group's efficiency, especially in TSO. From at ELEWIT, we are developing solutions that optimize processes, strengthen security of supply and increase the use of our assets. Between '26 and 2029, we will allocate EUR 40 million to projects that support the investment plan and prepare our networks for the energy transition. For us, innovation is a key lever to ensure a safer, more efficient and future-proof system. Now let's focus on the evolution of our economic indicators looking ahead up to 2029. These are the direct reflection of a company that is prepared to face an unprecedented investment cycle, capable of maintaining sustained growth with a greater focus on might, which is above 5% per annum. And as far as the net benefit is concerned, that growth will be about 3%. The significant growth of the net debt is directly linked to the investment rollout that is contemplated in the plan, even so we continue to have a robust financial profile with ratios that will allow us to preserve a solid credit rating and continue to access financing in a competitive form and terms. As far as shareholder remuneration, we've established a dividend policy that assumes an annual growth of 2% until it reaches EUR 0.87 per share in 2029, ensuring sustainable and consistent growth in a context of historical investments for the group. The regulated business continues to be one of our most important cornerstones of results. 90% of the group's EBITDA comes from this activity, which gives us stability, predictability and a solid foundation for our future growth. The weight of the TSO will increase in the next coming years, driving the EBITDA growth, which will grow at a rate above 5% per annum throughout that period, reflecting our capacity to execute strategic investment, maintain operational efficiency and advance in the energy transition of the electric system. And now that we have presented the fundamental plans of our strategic plan, we will take a closer look at our financial objectives and the road map to be able to achieve them. So now I'd like to give the floor to Emilio Cerezo. Thank you. Emilio Cerezo Díez: Thank you, Roberto. As we all understand, in coming years, we will see a decisive boost in the development of electricity transmission network with an average annual investment of EUR 1.5 billion in the TSO. In other words, about EUR 6 billion over the entire period. This investment will mean that by the end of 2029, the RAB plus work in progress will be located at EUR 14.4 billion or a 30% increase compared to the end of 2025. At the end of 2025, the TSO RAB will exceed EUR 12 billion. EUR 11.4 billion from transport and EUR 600 million from Salto de Chira or an increase of EUR 3.1 billion compared to 2025. Focusing on the transmission grid, those EUR 11.4 billion in RAB will represent an average annual increase of 6.4%. Likewise, at the end of '29, Red Electrica will have a significant volume of work in progress for projects that will be commissioned in subsequent years. On the left-hand side of this slide, we break down the evolution of the transmission RAB from EUR 8.9 billion at the end of '25 to EUR 11.4 billion at the end of '29. The transmission network RAB will grow by EUR 2.5 billion as a result of the significant volume of commissioning of EUR 4.4 billion already net of subsidies, partially offset by the amortization of EUR 1.6 billion of RAB derived from the operation of the remuneration model. And on the right side of the slide, we show the evolution of work in progress expected to grow by EUR 600 million as transport investments will exceed the aforementioned commissioning operations of EUR 4.4 billion. To run this plan with maximum solvency, we've designed a solid diversified financial structure, allowing us to run the investment plan without increasing capital. Over the course of the next few years in our strategy plan, we will have funding requirements of approximately EUR 9.4 billion, mostly derived from the significant volume of investments that we've been mentioning along with the payout of dividends to our shareholders. As you can observe on the left-hand side of the slide, the EUR 9.4 billion will be funded through the FFO we will generate, the collection of subsidies and new financial debt contracts. First of all, there is the solid generation of operating cash flow, which continues to be one of the group's trademarks. Likewise, the collection of subsidies in connection with strategy projects will account for 14%, 14% of the sources of financing. The amount to be received will be approximately EUR 1.3 billion, and most of it will be collected between 2026 and 2027. Finally, using our solid credit rating, we will finance over EUR 3.8 billion via debt, which represent 41% of these EUR 9.4 billion in funding requirements. New financial debt will be raised by diversified and competitive access to financing markets. In this context, and during the term of the strategic plan, we plan to issue EUR 1.5 billion in hybrid bonds or 16% of our new sources of financing. Our financing structure evolves towards an even more diversified competitive model with greater weight of hybrid instruments, which at the end of the strategy plan will amount to EUR 2 billion. In 2029, the average maturity of debt will be 4 years, and the cost of debt will be 3%. Our competitive average cost of funding during the term of the strategic plan, which we estimate to be around 2.8%, along with the group's leverage capacity are vectors for creating value for our shareholders in the future. Moreover, we have a strong liquidity position at the end of 2025, reaching EUR 3.3 billion. As for currencies, we will continue to maintain a very significant weight of our funding in euros. At the same time, we would like to stress that we're taking decisive steps towards reaching 100% sustainable financing by 2030, thereby reinforcing our commitment to the energy transition and best practices in the market. The financial ratios we have set as targets for the period ensure a financial profile compatible with robust credit rating. These ratio commitments are head and shoulders above some of our European peers. FFO to net debt will be above 14%. Net debt to EBITDA will remain below 5.5x and net debt to RAB will remain below 60%. Together, these ratios confirm the sustainability of our growth and our financial discipline. I will now give the floor to our Chief Executive Officer to continue with the main conclusions. Roberto GarcÃa Merino: Thank you very much, Emilio. And to conclude this presentation, I'd like to summarize the key messages that define our strategic plan 2026, 2029 and the path for growth that we have built for the upcoming years. In this period, 2025, 2029, Redeia is undertaking the most ambitious investment cycle in its history with a total of EUR 6.5 billion, which is a figure that reflects our firm commitment to energy transition. A large part of these investments are aimed at expanding and modernizing the transmission network to meet the growing needs of electricity system, the massive integration of renewable energies, electrification of the economy and structural improvement and resilience of our infrastructure. All of this results in a significant increase of RAB of 35%, reflecting the expansion of the network and new commissioning reaching EUR 12 billion at the end of 2029, rising to EUR 14.5 billion if we consider estimated work in progress at the end of the plan. This investment effort is accompanied by a solid and responsible financial policy, highlighting that this plan will be financed using international financing alternatives without the need to increase capital, thus preserving stability for our shareholders and reinforcing the financial discipline that characterizes us. In addition, we maintain a policy of increasing sustainable dividends with an annual growth of 2% throughout the year, which will take it to EUR 0.87 per share in 2029. This reflects an appropriate balance between investment, financial strength and attractive shareholder results. And last but not least, I would like to highlight that the growth of our regulated assets will be the cornerstone of the group's value creation, reflecting an increase of EBITDA and the group profit for that period of time. Furthermore, we look beyond this period covering our strategic plan, we will consolidate the growth initiated this investment in this period as the RAB will exceed EUR 15 billion at the end of 2031, and we will also have work in progress worth around EUR 2 billion in projects that will become on stream in the future, which we'll be able to confirm once the new planning has been approved. We are on a solid growth trajectory, which ensures long-term visibility, representing a quantum leap for Redeia in terms of RAB with greater remuneration capacity and a structural contribution to the development of the Spanish electricity system. Thank you very much for your attention. And now we have questions and answers. Operator: [Operator Instructions] First question from Flora Trindade from CaixaBank. Flora Trindade: I have 2 of those. I imagine there will be many questions, so I don't want to take up much of your time. I wanted to understand the CapEx you have reserved for the plan because in '25, you had a CapEx of EUR 1.55 billion and then the average drops throughout the rest of the plan. I wanted to understand why this average goes down and whether you see any upside in these investment levels beyond 2026? That's the first question. The second one, in terms of your funding, you're not including any type of asset turnover or rotation. Is this part of the plan if things don't go exactly according to plan, what you intend to do and which countries might become a priority for you, if that's the case? Unknown Executive: Well, thank you very much, Flora, for your questions. First of all, I believe we have a very clear investment horizon for the -- for oncoming years, at least within the scope of our strategic plan. This year, we finished 2025 with a record number of approximately EUR 1.5 billion, which is the order of magnitude we expect as an average for the whole period of the future plan. Our engagement is EUR 6 billion during the period '26 to '29. That's 4 years. Therefore, our expectations, and we're pretty certain of those is that execution capability in terms of investment will remain around those EUR 1.5 billion per year during the length of the plan. And I believe we're making a significant effort to that endeavor. If we compare our present plan to the last one, that's an increase of 70%, 70, and the level of certainty in our investment is very high, even under strict standards since we have already secured practically all the critical supplies to run the plan and most plants are in a well-advanced stage of permits or commissioning. So that's a very solid calculation. About your question about assets. Well, fortunately, our starting point in financial terms is very robust despite the level of investments we're contemplating. We assume we can fund this strategy plan with our own capital without going to the market. Well, obviously, we will have to increase our hybrid debt. And certainly, we also have European funding and other types of subsidies. And our investment horizon will probably, after a rating review will remain robust in terms of financial solvency. So, we will not -- we will not need any disinvestments as we did in our '21 to '25 plan. Certainly, this yields for opportunities. In case the investment pace were to be accelerated, we have additional drivers like deconsolidation or the partial disinvestment of some non-TSO-related assets. But according to the initial plan, that will not be necessary, and we can finance our operations without any capital increases and just use the regular channels for funding in our plan. Operator: Next question comes from Javier Suarez from Mediobanca. Javier Suarez Hernandez: I had 3 questions. The first one has to do with the blackout that you mentioned recently throughout your presentation, like the origins and causes and effects of the blackout. So, I wanted to ask you, from your point of view, what -- actually, like what should we learn in Spain and the rest of Europe? What should we have learned from this blackout? And what measures have been included in your business plan to make sure that this situation does not happen again? And in that sense, I also wanted to ask about the documents that we'll be waiting for about the responsibilities that are connected to the blackout and what documents are these? And I understand there's one from the Spanish regulator. And is there any other type of fine? Or should we assume that the attitude of the management of not having money ready for this, would that change if we have some kind of fine because of the blackout? That's the first question. Second one has to do with the extending the business plan up to 2029. So why has the company not extended it beyond 2029? That really has to do with the new plan and the infrastructure plan has not been approved. But I do believe that there's a lot more visibility after 2029 and perhaps bearing in mind that the company will have new services above and beyond the last date of the business plan you've showed us perhaps the growth of the company has not been valued properly, valued too low, infra valued because of this. So, I would like to try and understand why have you decided to have a cutoff time for 2029 and not a date further on? Third question, financing for the plan. Have you included getting to the end of the plan? You decided to get there with EUR 2 billion with hybrid debt. And we're talking about the EPS now because that should discount the financial cost that is connected to this hybrid debt. So, it's fair to say that, that EPS growth will be lower than the -- what you've been pointing out? And to what extent could that be lower? Beatriz Sierra: Well, very well. How about if we divide up these questions? With regards to the blackout on the 28th of April and the reports that are pending, I think the most relevant one have already been printed, and we got one from the government committee and an article had to do with national security. Another was the report that the operating sister made, and they were obliged to do this because of the norms that we have, the laws that we have when something like this happens in Spain. And then also the -- we named -- the European Union named an expert panel for this, and that's the third one. So chronologically explains everything without any doubt of the data and the rigor, what were the various or different incidents that happened throughout this whole process, starting by what happened at 2 in the morning or at 12:03, rather. So very well. So, the transmission network never failed. We had more than 7,000 maneuvers without having any kind of failure. So, the maintenance of the part that has to do with Red Electrica was actually complied with at all times. And we'll see this in these reports and in forms. But we see that some of the laws were not complied with -- this is by the transport company. And in our annual accounts, we have not included this because we don't believe that we're going to be responsible for any matter, bearing in mind that we complied with the laws in a very strict manner. What we cannot ensure is that all of the agents of the sector actually did the same. Now in the strategic plan, there is -- well, it reflects many things, although it's not totally concrete, but it's the planning for 2025, 2030 that has not yet been approved. We hope it will be approved at the end of this year. But as we said before, here, we gather like a whole series of infrastructures that so far were not operative in Spain, such as synchronous compensations and also through changes in the planning in 2024 and especially in 2025, we have included tools for start comes and fast and other matters. So, our plan, Salto de has decided to make all of this infrastructure that will give us an operating system that is resilient and safe with greater guarantees so long as that we can always guarantee that the other agents of the sector comply. And as our CEO just said, we have taken some decisions to be able to have material and special material, especially the more critical ones to be able to be in the right condition to deploy this infrastructure as soon as possible because actually, the laws that we have now does not let us change this infrastructure at this point until such time that the planning has been approved completely. So, we have 70% of all of this material for this plan 2026, 2029. Therefore, we're in the right conditions to incorporate all of these new tools that the planning establishes for this electric network. With regards to the reports that are pending, we foresee that the main report at the end of March should be ready with the measures and recommendations will be incorporated into that report. And with regards to the regulator, as far as we know, files have been open and research is being done. They've asked information from the sector. And as it was recognized by the ministry from 67 companies that were asked for information, we have been the only one that has been totally transparent with the data and the origins, we at Red Electrica. And therefore, so that's a question that the regulator should answer. Like what is the period that this file is going to be ready? And what step will be taken once we know its content. Your turn. Roberto GarcÃa Merino: Thank you, Javier. Thank you for your questions. With regards to the plan and the period and how long it lasts, we've decided -- well, it has to do with the visibility that we have and the commitments that we have to assume with the market. As we were saying before, we are very clear and we are certain that our period of 2026, '29 is very clear. And we do have a certain sort of visibility or -- but not so much commitment for executing between 2030 and 2031 because as you said, that investment that will be taking place between 2030 and 2031, it depends also on the final approval of the new planning. But what is true is that we have moved forward with significant projects that will be up and running around about 2029. And right now, we don't know if it's going to be in 2030 or if it might be delayed until 2031. That's why we have not wanted to have a firm commitment with the market beyond 2029. What is true is that the visibility that we have of putting in service or the up and running that we can get by the end of 2031 is quite clear actually. Once we have reflected the level of the RAB of EUR 15 billion is also an objective that is something that we can attain. But of course, we have assumed this financial commitments is more complicated to do it in such long term. So, we wanted to give a reliable information and things that we know that we'll be able to comply for right now and then wait until we have proper approval of the necessary matters to be able to commit to things after 2031 for like 2030 and 2031. But what is true is that the visibility that we have now, and we're talking about the years '30, '31, we're talking about volumes that are above EUR 4 billion in those 2 years. So, we'll have to wait to see that we do have a proper plan to be able to be much more concrete on this matter. But in any case, the visibility that we're giving now as far as the evolution of the RAB is truthful, and we wanted to assume financial commitments up to 2029, where we have greater certitude. Emilio, would you like to answer the next question? Emilio Cerezo Díez: Thank you, Javier. With regards to what you said about hybrid debt, we want to have EUR 2 billion of hybrid bonds at the end of our plan, which bring us close to the maximum capacity that we have for that instrument so that we will be able to be qualified as equity content as far as our rating agencies are concerned. And it's true that the accounting treatment that we're giving to the hybrid, as you know, is to consider within our equity, the EUR 2 billion and payment for the interest is also registered within all of our equity and the profit and loss. And also, the increase of -- well, the interest rates of the hybrids, if we were to account for them within our results, the average result that we would have is would be less than 1% of these emissions throughout the next few years. Operator: Next question comes from Ignacio Domenech from JD Capital. Ignacio Doménech: Mine is about your rating. In 2029, you're setting up a guideline for a net debt exceeding 14%. And I understand that unless the S&P rating changes, that would not be compatible with maintaining BBB+. So, considering your talks with the rating agencies, do you expect them to soften these targets, this guidance or perhaps it's not a priority for you to hold on to that BBB+? Unknown Executive: Well, thank you for that question, Ignacio. About financial solvency, well, historically, and obviously, as part of this plan, Redeia's priority is maintaining a solid credit rating without committing to a different rating. Certainly, our investment volume will bring us close to financial ratios that might maintain the company in BBB+ just as will happen to other peers in the same field. Based on the analysis we have conducted on financial ratios, we're confident that we will remain there without making a firm commitment to any rating whatsoever. Our priority is remaining financially solid to tackle our strategic plan and maybe future developments, too. But consistently with other recent reviews from other agencies, we do expect to maintain that BBB+ credit solvency. That's what we expect from the outcome of rating agencies reports. They will have to assess a different Redeia without Hispasat in the group, and with a vision -- a different vision on the April 28 incident that differs from the view when the incident had just happened. So, in financial terms and in terms of debt, I am convinced that we will still have a good credit rating, and we expect a revision that will keep us at BBB+. Operator: Next question from Gonzalo Sanchez from UBS. Gonzalo Sánchez-Bordona: So, I have a couple of questions. The first one has to do -- well, first of all, I'd like to understand the possible leveraging that we have because of the risk of these figures going up and down that you presented today. Regarding investments and let me explain myself. If there is an additional delay from, we're waiting as far as like the approval of the investment plans, then I assume this could generate 2 situations and one would be that the investments are more expensive than what we foresee due to inflation. And then in the second place, the part that's not insured, that 30% that is not insured would be open to these fluctuations. So, I'd like to understand how are you considering this with regards to possible risks to going up or going down because as far as I understand, according to new regulation, there is a certain pass-through. But still, I wonder how would you consider this at a mathematical -- from a mathematical standpoint. So that's it going up, going down, but especially if it's going down. But as far as going up is concerned, you have given a delivery throughout 2026, very interesting as far as the EBITDA margin, which is much higher than what was considered in the plan. So now I understand that you're taking a much more conservative point of view as far as the increase of these margins. So, I'd like to understand what type of leverage the company has to be able to improve that result. And then generally speaking, any kind of upside or downside in this sense would be interesting. And then the second question has to do with what was mentioned about the rating. Due to the conversations, we had before, I understand that, that 14% would be within the ranges of BBB+, of 2 of these rating agencies. So, I'd like to understand what is the type of conversation that's happening with this on that subject matter, are you expecting a change? And if there is going to be a change, what kind of impact could that have in the plan with greater flexibility? I mean, what would the impact be in the plan? Unknown Executive: Thank you very much, Gonzalo. Very well. With regards to the commitment for investment, '26 to '31, this is actually quite -- you're right in what you say. There is a potential for delay in the planning. And if it were significant, it could affect it a bit. But I want to remind you that there is a volume for investment, which is a volume that is really quite important. These monies, they come from the planning that we have now and then we're putting it in the other plan that is being analyzed. So '26, '27 and all the way to part of '29 corresponds to that monies that we have at least for the next 3.5 years. And it's real and true. And of course, there will be something pending for the approval, for the planning, but we have this intuition and due to the interest, that is needed for the deployment of these infrastructures that it can be a quick approval in this very year. And we also have mechanisms that might be taking place throughout the strategic plan period in order to accelerate these periods and to be able to compensate a potential delay. So as far as investment is concerned, I think it's really quite -- the certitude level is quite high. So, we haven't wanted to commit beyond 2029 because then between 2030, 2031 will need to be approved later on. But as far as the plan period, these objectives are really quite firm. With regards to possible price evolution, I don't think we are -- we're in the situation we lived through 2 or 3 years ago. We do see that most of the supplies and the equipment have stabilized the prices. And in those critical supplies with a greater demand, we have acted or jumped the gun as it were, and that is much more concrete. And so, we don't see any difficulties or potential changes. And also, Gonzalo, the new framework that we have for regulations and distributions also gives us -- well, it permits us to assume various deviations as far as the cost of this is concerned. So, we're really quite comfortable in our objectives and the evolution of investments. With regards to what we can add to operating profit from a strategic plan and the ups and downs, the company has to have enough means to be able to face this growth, and it is a process that we have already started, and that will continue throughout this year and part of 2027. And that, in fact, does affect the rates of the EBITDA and its efficiency. And remember that we're starting with a volume that was quite relevant at the end of 2029. And of course, those ratios are going to affect -- have an effect. And of course, will be much more efficient in the future. But we have decided to be conservative as far as exploitation expenses are concerned to be able to maintain the growth that we're talking about. And just another thing, let's talk a little bit more about that the efficiencies that we see as far as financial structure is concerned for the cost of the equity and also some thoughts about the rating, but I also want to tell you what I was saying before with regards to the rating agencies and the [indiscernible] that Redeia has to them. As we said before, the context of the company has changed radically from the last few revisions, reviews and the focus on regulated activity is much clearer. And really, what we expect to see is a treatment similar to other companies within Europe that have these same types of ratios that are going to be better than what have been applied to us in other years and in Spain and in other years. But I believe that the relationship we have with these agencies is quite close. We do believe that this horizon of BBB+ is the horizon that we think that we can reach. However, in a hypothetic case that there's much more investment or a much more restrictive position from the agencies. I'd like to remind you that we still have leveraging or hedging within the company to be able to reinforce this financial structure of the group if it is needed. Thank you. And continuing with what you said, first of all, talking about ratios. I think it's really important to highlight that these ratios of our credit ratios are very solid. In fact, much better than many others within Europe. And it's important to highlight that. Quite sincerely, we think they are clearly compatible with a BBB+ as far as our agencies are concerned and even a AAA+. And we think that, that will be the qualification that we will achieve from now on a AAA+. And we're looking at a solid investment grade. But in any case, this is a decision that has to be taken by both agencies according to what they want to do and Standard & Poor's and the others. And as far as upsides are concerned and adding something and some aspects that Roberto was saying, I also think it's important to say that from a financial point of view, we see upsides quite clearly by improving our cost of the debt compared to what we have in the pretax 658. And in any case, we're going to have average financial cost that's going to be better than what we've already shown. So also, what improves this 46%. Bearing in mind how solid we are in our balance sheet and our projections and all of these things, we believe that we're going to have higher leverage than 46%, keeping that solid investment grade. And by combining these 2 factors, better hedging and better cost of our debt, which is highly competitive, will permit us to create value. And as you heard not too long ago, to be able to get a return on investment above 9% and one of the important leverages that we have to have that ROI that is so attractive to create value for our shareholders has to do with our capacity for hedging and to be able to get into debt at a very competitive cost. Operator: Next question from Fernando Garcia from RBC Capital Markets. Fernando Garcia: I only have one question after everything you've said, and it's about the incentives you're using for your net guidance for 2029. Emilio, you just talked about financial performance. So, are you also considering operational outperformance and are you using any of that for your 2029 guideline? Or are you considering any incentives to generate some upside for your 2029 guidance? Emilio Cerezo Díez: Excellent. Thank you very much, Fernando, for your question. Well, about the level of incentives we have integrated into the plan. As you know, our approach is usually very conservative. So, we prefer not to include any kind of incentives into the base case scenario we presented today. There might be an upside, but we don't want to make any comments on that. At an operational level, we're also being conservative in the hypothesis we have included into the plan. Certainly, by integrating new asset management policies and new elements related to innovation, we might -- just might achieve some operational efficiencies within the model. Unknown Executive: Perhaps just to give you a flavor on it, well, there is a remuneration for works in progress, and that affects the investment portfolio we have planned within the plan. Another part of the portfolio is not affected, but the way it is conceived it might represent a loss of return in terms of the financial remuneration rate. But that deficit generated by not applying work in progress to the whole asset base can be offset. And as Emilio was saying, by financial management with medium and final cost of debt under the regulation threshold established in the FRR, we can generate value above that 9% return on equity we're considering. Operator: There are no further questions in Spanish. We will now take questions. [Operator Instructions] Our first question comes from Arturo Murua of Jefferies. We are not receiving any audio questions from line. [Operator Instructions] Unknown Executive: Well, it doesn't seem like there were any further questions. So, we go on to the questions we have received online. Most of them have already been answered. Daniel Rodriguez asks us the estimated cost of hybrid bonds and whether or not it is contemplated into the 3.3% contemplated in the estimated cost of debt. And Mafalda Pombeiro has 2 quick questions. The EUR 6 billion CapEx target, is it gross or net of subsidies as year-on-year? Or does it follow a growing progression? Well, thank you. The cost of the hybrid instruments we're contemplating is approximately 4% to 5%. Certainly, as you know, the market is looking very attractive now. And if we were to invest, we would come very close to that 4%. That 3.3% we set up as average financial cost for 2029 does not integrate hybrid instruments, but it does integrate the cost of funding of our telecom business and our international business, which are funded mostly in U.S. dollars. As I said before during the presentation, our average funding cost in the plan is 2.8%. If we were to integrate 50% of the cost of hybrids, that would take us to 3%. And if we consider the entire cost of hybrids, that would bring us to approximately 3.2%. And perhaps to answer Mafalda, just to clarify the numbers, those EUR 6 billion in investment are a gross number. We can consider an average annual investment of EUR 1.5 billion, going slightly up or down 1 year or the next, but we consider EUR 1.5 billion as an annual average. It is important to remember. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Ladies and gentlemen, thank you for standing by. My name is Desiree and I will be your conference operator today. At this time, I would like to welcome everyone to the United Parks Q4 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Matthew Stroud, Head of Investor Relations. You may begin. Matthew Stroud: Thank you and good morning, everyone. Welcome to United Parks & Resorts Fourth Quarter and Fiscal 2025 Earnings Conference Call. Today's call is being webcast and recorded. A press release was issued this morning and is available on our Investor Relations website at www.unitedparksinvestors.com. Replay information for this call can be found in the press release and will be available on our website following the call. Joining me this morning are Marc Swanson and Jim Forrester. This morning we will review our fourth quarter and fiscal 2025 financial results and then we will open the call for your questions. Before we begin, I would like to remind everyone that our comments today will contain forward-looking statements within the meaning of federal securities laws. These statements are subject to a number of risks and uncertainties that could cause actual results to be materially different from those forward-looking statements, including those identified in the Risk Factors section of our annual report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission. These risk factors may be updated from time to time and will be included in our filings with the SEC that are available on our website. We undertake no obligation to update any forward-looking statements. In addition, on the call we may reference non-GAAP financial measures and other financial metrics such as adjusted EBITDA and free cash flow. More information regarding our forward-looking statements and reconciliations of non-GAAP measures to the most comparable GAAP measure is included in our earnings release available on our website and can also be found in our filings with the SEC. Now I would like to turn the call over to our Chief Executive Officer, Marc Swanson. Marc? Marc Swanson: Thank you, Matthew. Good morning, everyone, and thank you for joining us. Before we turn to the quarterly and annual results, I want to point out that we uploaded a presentation to our Investor Relations site that includes some supplemental information that covers certain topics and other important points that we want to get across. I will refer to those slides later in my remarks. With that, let me get into our results. Our fiscal 2025 results did not meet our expectations. While the consumer environment was uneven and our results were impacted by negative international tourism trends and volatile weather during certain peak visitation periods, we should have delivered better results, particularly on the cost side of the income statement. We have moved decisively to address our less than optimal cost management and have updated and focused our plans and investments for 2026 designed to drive attendance and guest spending across our parks. These include a compelling lineup of new rides, shows, attractions, an updated events calendar, an expanded concert lineup, new and upgraded food and retail locations, a revamped and enhanced marketing plan and strategy as well as other investments that we expect will drive demand and spending across our parks. Combined with disciplined operational execution and an additional heightened focus on cost management and efficiency, we are confident these initiatives position us to deliver strong performance in 2026. Our fourth quarter performance was impacted by lower international visitation and fewer operating days compared to the fourth quarter of 2024. The net impact of weather was essentially flat compared to last year as the recovery from hurricanes in the prior year was offset by unfavorable weather during certain peak visitation periods, particularly in San Diego and Williamsburg as well as Florida in the peak last few days of the year. Excluding the impacts of international visitation and operating days, underlying attendance trends would have been approximately flat for the quarter. Importantly, we reported record in-park per capita spending in the quarter underscoring that guests continue to respond positively to our offerings and spend when they visit our parks. In 2025 and through February 24, 2026, we repurchased 6.7 million shares representing approximately 12% of the shares outstanding underscoring our strong cash flow generation, long-standing commitment to returning excess cash to our shareholders and deep conviction in the exceptional value of our shares. Looking ahead to 2026, Discovery Cove advanced booking revenue is up high single digits and company-wide group booking revenue is pacing up over 50%. We also continue to see meaningful upside in our sponsorship business and view it as a $30 million-plus revenue opportunity in the coming years. Our priorities remain clear: deliver memorable differentiated guest experiences that drive attendance and guest spending, operate with discipline and efficiency and build long-term value for shareholders. I want to thank our ambassadors for their hard work and dedication as we move through 2026. In 2025, we received numerous industry accolades, including SeaWorld Orlando being voted as the #3 Nation's Best Amusement Park by USA TODAY Readers and it was also recognized as a Golden Ticket Awards Legend for its 17-year streak of being voted the Best Marine Life/Wildlife Park. Aquatica Orlando was voted at #3 for the Nation's Best Outdoor Water Park by USA Today Readers. Discovery Cove was awarded the 2025 Best Family Travel Award by Good Housekeeping and Newsweek Readers' Choice Awards voted it the #1 Best Animal Encounter in Florida. In addition, Discovery Cove received USA Today 10 Best Readers' Choice Awards. Its Wind-Away River was named the Best Lazy River in America. The park was also previously ranked as the #1 Theme Park in Orlando by the same publication. Busch Gardens Williamsburg was named the World's Most Beautiful Theme Park for the 35th consecutive year by the National Amusement Park Historical Association and reclaimed the title of Most Beautiful Park at the 2025 Golden Ticket Awards. For 2026, company has an outstanding lineup of new rides and attractions, popular events and new and improved in-park venues and offerings across its parks. Company's new rides and attractions include the following. At SeaWorld Orlando, we have SEAQuest: Legends of the Deep. Guests will embark on a vibrant submersible adventure through dazzling undersea ecosystems where they'll encounter extraordinary lifeforms, breathtaking environments, and inspiring stories of the sea. This groundbreaking attraction plunges explorers into an environment of awe and mystery guided by the SeaWorld Adventure Team. At SeaWorld San Diego, we will debut a re-imagined and immersive version of the Shark Encounter this spring as part of the Fin Shui project. Guests will encounter mesmerizing new shark species alongside a vibrant array of marine life, including additional sharks and colorful fish as the expanded exhibit transforms into a dynamic underwater adventure. At SeaWorld San Antonio, we will introduce Barracuda Strike, Texas' first inverted family coaster. The one-of-a-kind attraction invites guests of all ages to dive into the deep and experience the ocean's most agile predator like never before. With every twist, drop and tight turn; Barracuda Strike will deliver a rush of excitement that's bold enough for thrill-seekers yet built for the whole family. At Busch Gardens Tampa Bay, we will soon open the all-new Lion & Hyena Ridge, an extraordinary new addition to the park's award-winning animal care portfolio and the most ambitious new habitat in more than a decade. This reimagined area of the park expands the existing space to more than double its previous size, creating nearly 35,000 square feet of dynamic savanna terrain where 2 of Africa's most iconic species will thrive, a pride of 5 young male lions and a pair of playful hyenas. And finally, at Busch Gardens Williamsburg, we'll have Verbolten - Forbidden Turn, a re-imagined indoor/outdoor multi-launch roller coaster opening this spring with new immersive storytelling and special effects. This family roller coaster delivers surprises at every turn as it transports visitors through the Black Forest soon discovering all is not what it seems. Our balance sheet continues to be strong. On December 31, 2025, net total leverage ratio is 3.4x and we had approximately $789 million of total available liquidity and approximately $100 million of cash on hand. This strong balance sheet gives us flexibility to continue to invest in and grow our business and to opportunistically allocate capital with the goal to maximize long-term value for shareholders. So as we mentioned, we posted some slides on our Investor Relations website. So I'll be turning our attention to those slides now. This presentation addresses certain topics that we have heard from shareholders that they'd like to be covered and some important points that we would like to get across. Beginning with capital spending on Page 5. We spent just under $220 million on CapEx in 2025, which is generally consistent with what we expect to spend on an annual basis going forward to support our business and growth initiatives. On Page 6, we lay out our very exciting lineup of new attractions, events and shows for 2026. I won't go through all of what's on the page in detail, but I encourage you to review the page to see what we have in store for our various parks this year and to see what we are so excited about this lineup. As you can see, we have a number of things still to be announced in key markets like Orlando that we are excited about. On Page 7, we lay out our current key strategic initiatives. On hotels, we continue to have discussions with potential partners and are working deliberately to bring the best option forward. We will continue to update you as we make progress. On real estate, as we have discussed before, we have extremely valuable and strategic real estate holdings. We are actively evaluating various monetization opportunities, which we can discuss in a bit more detail in a few pages. On sponsorships, we have made good progress and have a nice pipeline for 2026, $15 million and growing, and we see significant upside in the coming years. On international and IP partnerships, we are in multiple active discussions and we'll have more to share in the coming quarters. On marketing, we have a new and enhanced marketing strategy that we expect will lead to more optimized media spend, better creative execution and a more integrated approach to communicating with and attracting guests. On costs, we are really focused here with a new set of processes and plans that we can discuss in more detail in a few pages. On technology, we are pursuing various initiatives, including embracing automation, robotics and AI to help us deliver more revenue, reduce costs and improve guest experience. We also continue to work on our CRM initiative and various park enhancements. On Page 8, we provide a bit more detail on our real estate. We have over 2,000 acres of owned real estate, including over 400 acres of undeveloped land. We estimate the replacement cost of our parks to be over $10 billion or about 2.5x our current enterprise value. In other words, our current enterprise value is less than half the replacement cost of our assets. While the public markets may not be appropriately recognizing the value of our assets, others are. We have received multiple sale-leaseback proposals that we are currently evaluating and have active discussions with various partners on hotel development, timeshare development, residential development and other commercial development on our owned property. We have nothing more to share on this today and we will update you when we do have more to share. On Page 9, we provide a brief update on Orlando. Epic Universe is a great addition to the Orlando market and we believe has benefited the entire market. We are pleased with our attendance results in Orlando in 2025 and our 2026 forward booking numbers at Discovery Cove and our group booking numbers are both up. We are excited about the investments we are making in Orlando this year and we expect strong performance across our Orlando parks in 2026. Page 10 outlines how we think about driving future attendance growth. We obviously have been disappointed by our attendance over the past few years. Our attendance has been impacted by various factors, including a combination of post-COVID consumer behavior volatility, a difficult run of extreme weather, international headwinds driven by geopolitical and other factors and a less than optimal execution at times. We are confident the drivers on this page will lead us to grow attendance in the near and long term. The next page outlines drivers of future per cap growth split between admission and in-park per cap. We expect to grow our per caps in excess of inflation over time. We have done a decent job of growing in-park per cap consistently over the last several years and have seen admission per cap declines over the last number of quarters. Admission per cap has been impacted by various factors recently, including more promotional activity. While our primary focus is to grow total revenue, we expect to grow admissions per cap over time driven by the drivers outlined on this page. We have significant headroom for pricing in many of our markets, including in Orlando. We are a really good value for our guest. The next page outlines our current cost initiatives, which total $50 million of gross cost reductions across labor, OpEx, SG&A and cost of goods sold. As already stated, we have a renewed focus on costs and are not pleased with how we managed this part of our business at times in 2026. We expect to deliver better outcomes in 2026. One quick correction as far as how we manage this business -- how we manage our costs in 2025 not 2026. Obviously we expect to deliver better outcomes in 2026. The next page lays out an illustration of where our EBITDA would be if we achieved our 2019 or 2008 attendance levels and grew our total revenue per cap as outlined on prior slides and achieved our cost savings goals. As a reminder, this is not meant to be guidance. It's just meant as a simple illustration to show what we believe the earnings power of this business would be at the 2019 attendance levels and if we return to the 2008 historical peak attendance levels while growing our total revenue per capita along with the cost-saving opportunities and strategic initiative opportunities we have noted. As you can see in this illustration, we would have $900 million to $1 billion of EBITDA. Just a reminder, this is not guidance, but rather a simple illustration. The next page outlines our current market valuation. This page underscores why we believe our shares are such an exceptional value at current prices. We are currently trading at 5 to 6 multiple points lower than the pre-COVID peer group multiple. We are currently trading at 5.5x to 6.5x levered free cash flow. The Board and company strongly believe our shares continue to be materially undervalued. We have confidence in our business, our growth prospects and the value of our assets. In any reasonable way you look at it, we feel there is significant upside opportunity in our current share price. Yet as we outline on the next page, we have outperformed all peers over a long time period. On the following page, we show illustratively where our stock price would be if we achieve our recent 2024 EBITDA and traded at various discounts to the long-term pre-COVID multiple for the peer group and where our stock price would be if we achieve the $900 million of illustrative EBITDA shown on Page 13 and bring the return to 2019 attendance column. As you can see, our stock price is currently trading at a substantial discount to all numbers on this page. Lastly, we outlined the key takeaways on Page 17. We have a clear strategy for 2026. We will spend capital with discipline. We have meaningful upside from our key strategic initiatives. We have significant asset value with various avenues to monetize and we are trading at a fraction of our replacement value. We are well positioned in a growing Orlando market. We have clear opportunities to grow attendance per caps, revenue and EBITDA and we are extremely undervalued just about any way you look at it. I'm excited about the significant investments we are making and the many key initiatives we have underway across our business that we expect will improve the guest experience, allow us to generate more revenue and make us a more efficient and more profitable enterprise. We are building an even stronger and more resilient business that we are confident over time will deliver improved operational and financial results and meaningful increases in value for all stakeholders. With that, Jim will discuss our financial results in more detail. Jim? James Forrester: Thank you, Marc, and good morning. During the fourth quarter, we generated total revenue of $373.5 million, a decrease of $10.8 million or 2.8% when compared to the fourth quarter of 2024. The decrease in total revenue was primarily a result of decreases in attendance and admissions per capita partially offset by an increase in in-park per capita spending. Attendance for the fourth quarter of 2025 decreased by approximately 126,000 guests or 2.6% when compared to the prior year quarter. The decrease in attendance was primarily due to a decrease in international visitation compared to the prior year quarter. In the fourth quarter of 2025, total revenue per capita decreased 0.2%. Admission per capita decreased 2.2% and in-park per capita spending increased 2.1%. Total revenue per capita decreased due to decreases in admissions per capita partially offset by increases in in-park per capita spending. Operating expenses decreased $1.8 million or 1.0% when compared to the fourth quarter of 2024. Selling, general and administrative expenses increased to $8.7 million or 17.4% compared to the fourth quarter of 2024. We reported net income of $15.1 million for the fourth quarter compared to net income of $27.9 million in the fourth quarter of 2024. We generated adjusted EBITDA of $115.2 million in the quarter. Looking at our results for fiscal 2025 compared to fiscal 2024. Total revenue was $1.66 billion, a decrease of $62.7 million or 3.6%. Total attendance was 21.2 million guests, a decrease of approximately 378,000 guests or 1.8%. Net income for the year was $168.4 million and adjusted EBITDA was $605.1 million. Now turning to our balance sheet. Our December 31, 2025, net total leverage ratio was 3.4x and we had approximately $789 million of total available liquidity, including approximately $100 million of cash on the balance sheet. The strong balance sheet gives us flexibility to continue to invest in and grow our business and to opportunistically allocate capital with a goal to maximize long-term value for shareholders. Our deferred revenue balance as of the end of December was $143.3 million, a decrease of 4.7% when compared to the prior year normalized for noncash write-off of bad debt expense. This balance greatly improved to being down 1.4% as of the end of January. Through December 2025, our pass base, including all pass products, was down approximately 4% compared to December 2024. Our 2026 pass program includes our best-ever Best Benefits and we are pleased with the momentum we are seeing in sales as we head into our peak selling season in the next few weeks. Finally, as of December 31, 2025, we invested $217.5 million in CapEx, of which approximately $182.4 million was on core CapEx and approximately $35.1 million was on expansion or ROI projects. As outlined by Marc in the presentation, for 2026 we expect to spend approximately $175 million on core CapEx and approximately $50 million on CapEx for growth in ROI projects. Now let me turn the call back over to Marc, who will share some final thoughts. Marc? Marc Swanson: Thank you, Jim. Before we open the call to your questions, I have some closing comments. In the fourth quarter of 2025, we came to the aid of 178 animals in need. Over our history, we have helped over 42,000 animals, including Bottlenose dolphins, manatees, sea lions, seals, sea turtles, sharks, birds and more. I'm really proud of the team's hard work and their continued dedication to these important rescue efforts. We're excited about our ongoing and upcoming events this quarter, including Mardi Gras at all SeaWorld and Busch Gardens Parks, Seven Seas Food Festival at all SeaWorld Parks and the Food and Wine Festival at Busch Gardens Tampa Bay. We are also excited about the ongoing and upcoming concerts we have planned for our SeaWorld and Busch Gardens Parks this year. I want to thank our ambassadors for their efforts during our recent holiday season and the preparation for our current and upcoming events this spring. I'm excited about the opportunity set in front of us both in the near term where we see clear paths to driving meaningful progress and over the medium term where the growth potential is even greater. We are focused, well positioned and confident in the investments we are making, the operational efficiencies we expect to realize and the value we can build for stakeholders. With that, we can now take your questions. Operator: [Operator Instructions] And our first question comes from the line of Steve Wieczynski with Stifel. Steven Wieczynski: So Marc, if we think about 2026 and look, obviously you guys don't have a ton of visibility into your day-to-day operations. But you did note Discovery Cove and group bookings are both up nicely at this point. Wondering though how you guys are thinking about attendance growth for this year outside of Discovery Cove and group bookings. Obviously, you still have kind of these headwinds from the international side of the business. But do you think it's possible at this point to grow attendance with some of those headwinds still in play here? Marc Swanson: Steve, it's Marc. I can take your question. What I'm excited about is what we talked about, the new attraction and event lineup that we're investing in and we do believe will lead to attendance growth. So great lineup in Orlando. Some of the things we've announced, some of them are still to come. And then as I mentioned in my prepared remarks, there's attractions across the parks. So you've got something just about everywhere. And so I really think the lifeblood of giving people a reason to visit is having new attractions and events and shows and things like that. So feel good about the lineup we have. We know international, as you mentioned, was still a headwind here to start the year. We expect that will normalize as we begin to lap some of the factors that drove that down last year. So assuming that normalizes for those reasons and we start to lap some of those things from last year, that gives me some confidence that at least we can hopefully stop kind of the decline in international. And then as we always talk about, we know there's weather impacts throughout the year. If we get a year of normalized weather, that certainly would be a factor in continuing to be able to add attendance in some of our parks. So that's kind of how we're thinking about it. It's really anchored by the attraction lineup and the event lineup and the new shows and things like that. Steven Wieczynski: Okay. Got you. And then second question maybe just turning to capital deployment and maybe how you guys are thinking about leverage. I guess what I'm trying to understand here is if we look at the end of the year, I think your cash balance was, I don't know, somewhere around $100 million. It seems like you guys have already kind of bought back, let's call it, $90 million of stock this year. So cash balance is probably a little bit tighter at this point. So obviously it probably seems like you did take on a little bit of leverage to buy some of this stock back. I guess what I'm trying to figure out is where you guys feel comfortable from a leverage standpoint at this point and moving forward? Marc Swanson: Sure, Steve. I can help you with that. I mean obviously we don't have a target leverage ratio or anything like that. We're comfortable where we are now at the end of the year and not to say we won't be comfortable with something higher than that or lower than that. So really the way we think about it is we work with the Board when there's opportunities to return cash to shareholders and we take that into account, our leverage ratio into account when we're doing that. Obviously as you know in this business, we're kind of this time of year at kind of the trough of the cash generation, right, and then it will start to pick up as we get into the spring and into the summer. So that's one factor to keep in mind. But I would say we're comfortable with the leverage ratio at the end of the year not to say that we wouldn't go higher or anything like that. We don't have a target. We just really work closely with the Board on deploying that cash accordingly. Operator: Our next question comes from the line of James Hardiman with Citi. James Hardiman: So maybe an offshoot of Steve's question, but the language around 2026, I think strong financial performance is how you termed it. I think the previous few years you had talked about record revenues and EBITDA and sometimes attendance. And so this seems like a departure from that given the consistency of those projections in previous years. I don't know if that's more a function of sort of increased conservatism as you look back given that that growth has been elusive or is there something as we think about 2026 where there's some increased uncertainty? Just trying to understand the philosophy of, I don't know, guidance if you want to call it that. Marc Swanson: Yes. James, I mean we're not giving any sort of guidance obviously. I think it's really just a function of we're excited about 2026, the lineup we have. As I mentioned to Steve, the lineup of attractions and events and everything we have going on, some of the macro trends hopefully improve. Hopefully, we get some better weather as well and then obviously there's things we can better manage ourselves. So I'm not guiding you anything. I don't know where that will lead us. But obviously we believe we're going to grow the business in 2026 with everything we have going on. James Hardiman: Got it. And then you've talked a couple of times about how maybe the cost performance is not where you would have liked it to be in 2025. Maybe let's just do -- if we could maybe do a postmortem there. I mean coming into the year, I think you guys had targeted $50 million to $75 million of gross savings. Maybe sort of how did you do against those goals? It looks like total expenses were actually up about $25 million. And so maybe it's just that the gross to net, are there any callouts there I guess is the question? And then as we roll that forward to 2026, right, there's another $50 million of gross cost savings. As we think about the coming year, how should we think about that gross to net walk? Labor is obviously a big one, but how should we think about your ability to flow some, most, all of that to the bottom line? Marc Swanson: Yes. James, let me start and then Jim can add whatever he would like. But look, as you know, we've worked at cost for quite a while at this company is something we've prided ourselves on and we hold ourselves to a really high standard and it's reflected in our margins that we've grown since 2019. Nonetheless, we believe we can do a better job and there was times in '26 that we weren't optimal on managing costs and reacting to things as quickly as we could and those are things that we're going to try to correct here in 2026. So we have a lot of focus on this. We hold ourselves to a pretty high standard. Even with all that, if you look at like the cost growth in EBITDA cost, kind of the cost between revenue and adjusted EBITDA, it was I think just about 3% in 2025, which again it's low single digits, but we manage and have high expectations to do better than that. And so that's our goal for 2026. And there's some initiatives that we laid out on the slide that we think can help us get there and so that's what we're aiming for. But Jim, anything you want to add? James Forrester: Yes. I would just say again to echo Marc, there are a number of headwinds that we've got going on; contractually or legislatively required minimum wages, the presence of hurricanes in some of our parks that happened in 2024 that we're recovering on and adding labor back for things that had to be closed and those type things. As Marc said, under our response to business conditions, we have to take those into account much more aggressively and dynamically match our volume for the guests and the labor that we're spending against that. And we need to use technology and a wide variety of resources at our disposal to be more nimble when it comes to that. We've also got property tax and insurance that we are actively engaged on and trying to react to those. Again lots of headwinds over there both from a taxing authority trying to get more taxes. And then our marketing spend is something that we have tried to do some test and adjust with and sometimes that hasn't resulted in the attendance we hoped for. And so we're going to dial that in more aggressively to make sure that those decisions to spend are targeted. James Hardiman: Got it. And just to clarify, the wage headwinds that you called out, that was a '25 event. Do we expect similar pressure in '26 or has that subsided? How do we think about that? James Forrester: The bulk of that would come from minimum wages. So Florida has legislatively constitutional required minimum wage increases as well as San Diego as well publicized have a very substantial minimum wage increase in 2026. So we're planning for those actively, how we're reacting to those so that we can take business conditions into account, our pricing for both in-park and our admissions to cover those costs and then to be again more aggressive in our match of the volume we're experiencing as well as use of technology and other tools to minimize those labor costs. Operator: Next question comes from the line of Arpine Kocharyan with UBS. Arpine Kocharyan: So you mentioned cost improvement many times in prepared remarks and also in the release. But I was wondering regardless of where demand shakes up for 2026, what would that in aggregate add to your EBITDA for this year versus last? And to go back to the question on $50 million of cost you mentioned in the slides, what part of that is incremental today versus what you were targeting before and what was in the base already, if you could clarify? Marc Swanson: This is Marc. Let me start and Jim can add anything. But I think the point on cost is we could have done better in 2025. We've got new discipline around some of the processes there, some new procedures around that. We've got a number of initiatives that I laid out in the slide. So we're very focused on that. I don't want to guide you to any specific numbers or anything like that. But I can tell you we're highly focused on this. Jim mentioned some of the activity we have going on to offset some of the kind of anticipated headwinds and then we have to do a better job of reacting to and proactively addressing things that maybe we don't know right now. So that's how we're approaching it. I think a more heightened attention to how we manage it and really focusing on it every day. We hold ourselves to a high standard, as I said, on cost. James Forrester: The only thing I would add, Marc, is what we're planning is not so much to rely on the revenue or the attendance to cover some of these. We are aggressively trying to anticipate those headwinds that we know are on the horizon for taxes or these labor costs that we've talked about or in continued health care costs and try to address those on the expense line to try to at least flatten the year-over-year growth if not decrease it and that's our plan. In fact we've got some -- in our budget, we have plans to reduce costs on that basis. But again I don't want to guide to that, but that is our goal. Arpine Kocharyan: Okay. And then on early demand indicators, you mentioned momentum for 2026 pass product. Could you maybe give a little bit more detail in terms of volume and price? It sounds like you're seeing good improvement versus down 4% that you saw in 2025, but obviously it's early. What early demand indicators you're looking at and a little bit more detail on the pass product would be helpful. Marc Swanson: Yes. We called out 2 of the things that we do have visibility into, which is Discovery Cove reservations and then kind of group bookings as well. Those are some of the indicators we have. We don't have as many as maybe others in the industry not having hotels and things like that. But the 2 we did call out, Discovery Cove and group, again look promising for 2026. I can tell you there are some other things that are maybe a little bit smaller, but nonetheless, things that we do look at like our VIP tour bookings are trending well. Some of our in-park products we feel good about. So there's a myriad of things that look promising. These aren't again the lion's share of our revenue or anything like that, but they are the things that we have visibility into, right? On the pass, what I would tell you there is it's very early in the kind of cycle of pass sales. We do sell passes year-round, but really we start to see that ramp up here as we enter like spring into early summer depending on the park location. So we know we have a good product. We know there's reasons for people to visit with our rides, attractions, events. We expanded our concert lineup this year to include all the SeaWorld and Busch Gardens Parks and we're really excited about that. It gives people another reason I guess to buy a pass. So we'll see where pass sales ultimately end up. The key period is still ahead of us there. Arpine Kocharyan: Okay. That's helpful. Just on Discovery Cove, it seems like booking came down from more than 20% that you had previously given to now high single digits. I know probably most of the time you start at a higher number and then that comes down a little bit, right, as you enter the year. Is it just that or is there something else going on there? Because you had disclosed I think a more than 20% number for that for 2026 previously if I'm not wrong. James Forrester: Yes. Here's what I'd say. I think we're pleased to see the high single digits. It's a great park and we're confident that that's going to have another solid year in 2026. It had a record attendance year in 2025. So we're building off of that. Operator: Next question comes from the line of Thomas Yeh with Morgan Stanley. Thomas Yeh: Just 1 on the macro level. You've talked about the consumer environment as being uneven I think for 2 quarters now. Can you maybe just expand a little bit on that? You grew in-park spend clearly in a relatively healthy way, but admissions per caps down. Is there maybe just any evidence you see within the portfolio performance of a K-shape where, say, Discovery Cove at the higher end is performing, but you might be seeing lower-end consumers fall off? And then just for 1Q in terms of the pacing, can you just talk about how core attendance has been shaping up so far? And I think you had some Easter timing shift headwinds last year. Any update on that and how we should think about that for '26? I think it's a little bit earlier this year, but still in April. Marc Swanson: Let me start with your first comment. I mean obviously pacing on Q1, I'm sure everybody is well aware of the weather across a good part of the country especially in Florida in January and February has been a challenge for us and I'm sure many others in the theme park industry. So that is what it is. The good news is January and February are relatively small months and the quarter is really driven in large part by how we do in March. So we still have that ahead of us. Your question on kind of timing of Easter, Easter is earlier this year, it's on April 5. So kind of the start of what we would call Easter week backs up a few days into March. We do have though some other kind of negative calendar impacts in Q1. So my guess is those will kind of offset each other. We have 1 less Saturday in March this year than last year, but we again have a little bit few more Easter days in the month of March than last year. So they probably even out, but that's kind of how we're thinking about it. On your question on per caps, as I said, I look at in-park per cap spend to kind of gauge how people are doing and we've done a good job of growing that pretty consistently now for a few years. And so I think people find compelling reasons to come to spend money in our parks or whatever that may be on whatever product that is. And I think we can continue to tailor that to all income levels and we have to do a better job of that. We know there's people who clearly have been impacted over the last year I'm sure with some of the economic conditions over the last couple of years and there's people that are maybe not as impacted as those. So we have to tailor our products to make sure we're capturing opportunities from all demographic and income levels and we'll continue to do that and that's a big part of our strategy obviously going forward is to continue to grow in-park. James Forrester: The one thing I might add, Marc, is that we talked about the K-shape economy. We do do demographic surveys of our guests and I looked at that in preparation for this call seeing that we actually don't show significant changes in our income levels of our guests as we segregate them. We're not seeing that the large shift at least in our business when we compare to the prior year. Thomas Yeh: Okay. That's very interesting. And then just a quick follow-up on the land monetization initiatives. I think you spoke in particular a little bit more about sale-leaseback interest. Can you just talk about how you weigh that in terms of how compelling that potential opportunity is? And it doesn't seem like it could be mutually exclusive necessarily with developing the land in other ways either. So maybe kind of just double tap on that. Marc Swanson: Sure. The point we've been making now for several quarters and I think we leaned into it even more today is we have significant opportunities with our real estate and it could be a variety of -- it could be a sale leaseback, it could be developing that land into shopping, housing, entertainment, whatever it may be, hotels. So the point is there's a lot of valuable real estate and there's multiple ways to monetize that. We'll work obviously with our Board. I think you're very familiar with the makeup of our Board. We're obviously more than 50% owned by a private equity firm and we get a lot of obviously guidance and counsel obviously from them and the rest of the Board on how to use cash. So I'm confident working together with the Board, we'll come to the right conclusions on how best to monetize our assets. I think the exciting thing is that people recognize the value, maybe not everybody because it's not, I don't think, fully appreciated by the public markets. But the people that we talk to or talk to our Board, they see that value, and that's what we were trying to point out in some of the slides. Operator: And our last question comes from the line of Lizzie Dove with Goldman Sachs. Elizabeth Dove: I wanted to ask about Orlando and I guess kind of Epic specifically. I know you've kind of called out in the past Orlando has been pretty solid or was pretty solid in 2025 at least from an attendance perspective. I'm not sure you've given detail about per caps or kind of costs. But as we get the kind of full annual impacts of Epic this year, it sounds like they're trying to kind of ramp that up even more. Just how you think about that in terms of the impact to your Orlando trends? Marc Swanson: Yes, it's still a great opportunity. As we've consistently said, we think Epic in the market brings more people to Orlando and we have again the opportunity to share in that growth like we have for the last 50-some years that we've been in Orlando. So I would point to the things we're adding in our park, SeaWorld Orlando for example, the new rides attractions. Some of this hasn't been announced, but I can tell you it's some exciting stuff and these are differentiated than what you're going to get at Epic and I think that's a key part of what sets us apart. You're coming here for a different experience. It's a great thing. SeaWorld is a great park in itself. It's a differentiated experience with what we can offer with the animals and some of the rides that are blended in with animal components to them. So we like that setup obviously. And then I haven't even mentioned Discovery Cove, which is a really good park as well and then we have Aquatica, which is a great water park. So we like that we're investing in a market that continues to attract high quality investments from other people as well. We think that benefits everyone. And we'll continue to do our part to drive people to our parks while they're here. I would point out, as I've said in the past, I also believe we have a value proposition that's really strong for guests that are in the market and want to experience again a differentiated product. I think we can do that at a good value as well. Elizabeth Dove: Got it. That makes sense. And then I wanted to ask about sponsorship given you kind of called that out as a big opportunity. I think a couple of quarters ago, you said you were expecting for 2025 at least maybe mid-single digits EBITDA. Curious if you realized that in 2025. And then when you talk about this $15 million-plus pipeline and kind of going to $30 million over time, like how much visibility you kind of have into that? Marc Swanson: Yes. What I'm excited about is what I mentioned on the go forward is the 2026 pipeline is exciting. We mentioned $15 million plus and growing. We think the opportunity over kind of the coming years or long term, however you want to think about it, can be $30 million plus. So we like the pipeline. We like what we see now and the potential for this over the coming years. James Forrester: The only thing I might add, Marc, is sometimes these relationships take a while to develop or review and over time they will bear fruit. And I think the company is comfortable, as Marc said, that pipeline that we have some concrete plans coming up in the future we'll be able to share. Operator: That concludes the question-and-answer session. I would like to turn the call back over to Marc Swanson for closing remarks. Marc Swanson: Thank you, Desiree. On behalf of Jim and the rest of the management team at United Parks & Resorts, I want to thank you for joining us this morning. As you heard today, we are confident in our long-term strategy, which we believe will drive improved operating and financial results and long-term value for stakeholders. Thank you. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect.
Operator: Greetings, and welcome to the NOG Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to introduce you to your host, Evelyn Infurna, Vice President, Investor Relations. Thank you. You may begin. Evelyn Infurna: Good morning. Welcome to NOG's Fourth Quarter and Year-end 2025 Earnings Conference Call. Yesterday after the close, we released our financial results. You can access our earnings release and presentation in the Investor Relations section of the website at noginc.com. We will be filing our 2025 10-K with the SEC within the next few days. I'm joined this morning by our Chief Executive Officer, Nick O'Grady; our President, Adam Dirlam; our Chief Financial Officer, Chad Allen; and our Chief Technical Officer, Jim Evans. Our agenda for today's call is as follows: Nick will provide introductory remarks, followed by Adam, who will share an overview of NOG's operations and business development activities, and Chad will review our financial results. After our prepared remarks, the team, including Jim, will be available to answer any questions. Before we begin, let me remind you of our safe harbor language. Please be advised that our remarks today, including the answers to your questions, may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause the actual results to be materially different from expectations contemplated by our forward-looking statements. Those risks include, among others, matters that we have described in our earnings release as well as in our filings with the SEC, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. We disclaim any obligation to update these forward-looking statements. During today's call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA, adjusted net income and free cash flow. Reconciliations of these measures to the closest GAAP measures can be found in our earnings release. With that, I'll turn the call over to Nick. Nicholas O'Grady: Thank you, Evelyn. Welcome, and good morning, everyone, and thank you for your interest in our company. I'd like to take the time to reflect upon 2025, discuss our plans for 2026 and also share my views in regard to the macro oil and gas environment and how it may affect our company and strategy. While our equity total return was down in 2025, our adjusted EBITDA was actually up 1%, and this was with oil prices down some 14% on average. Our share count was 2% lower year-over-year, our net debt was down modestly year-over-year, all of this despite closing over $340 million of acquisitions, including Ground Game. Our financial results are a testament to our consistent hedging and the decisions we made regardless of market perceptions in the short term, which are manifested in multiple compressions. We were judicious and strategic on how we deployed and allocated capital in 2025. Our natural gas spending increased dramatically and our oil spending declined. NOG is now seeing record natural gas volumes aligned with some of the highest seasonal prices seen in many years, and we and our operating partners have tried to deploy the bare minimum on the oil front to preserve our precious barrels for a better day. Our 2025 ground game focused more on long-term development versus drill bit projects given the fluxing pricing environment. It is our intent to capitalize on attractive land pricing while still maximizing our long-term return on capital as we anticipate incredible return development opportunities on these lands over time. As a result, we grew our footprint organically by over 12,000 acres last year, extremely cost effectively with advantageous and low-risk long-term leases. Our land assembly effort may have made us look less capital efficient in the short term, but it's the exact type of capital allocation tactics companies should take in times such as these, and we believe our decisions will pay dividends in the years to come as commodity pricing improves. In the first quarter of this year, we've already grown that land position substantially once again. And while the market likely treated our equity based on a deceleration of growth estimates in the short term and the continued decline of forward prices, we also took great pains in extending our maturity wall and increasing our liquidity to bridge to the next cycle. In fact, even after closing our joint Utica acquisition with Infinity and using our revolver to finance that transaction in its entirety, we will still have more liquidity than we started with in 2025. These are all purposeful moves to allow us to navigate a cyclical business while also creating value during a downturn. As oil declined into the 50s later in the fourth quarter and into this year, we saw a notable change in operator behavior with a significant slowdown in new activity and a deferral of existing activity. While in the short term, this can affect us, it helps solidify our belief that 2026 will mark the trough of the oil cycle. This also may lead to a slowdown in capital spending, offset in part or in whole from ground game opportunities as one would expect during weaker periods. In our view, there are 2 potential outcomes for oil: one of continued middling prices for the bulk of the year, which ultimately leads to an increase of pricing within a year or 2, or conversely, a sharper short-term decrease in pricing, which leads in the end to the same outcome, higher prices. In either scenario, NOG will come out stronger. We are well hedged and our spending decisions over the last 12 months have proven wise as we have pushed and preserved high-value development for a higher price environment. Geopolitical noise in the short term has a lot of people guessing, but fundamentals are set to improve. We've heard investor rumors that somehow our dividend could be in question. I'd like to address that directly as we think this chatter is totally unfounded. While nothing in life is ever completely certain, our dividend is built for an even significantly weaker environment than we face today, where we would ultimately be at a cash flow breakeven level during the trough of the cycle post dividend. And we believe that our dividend can be sustained for many years, even though we don't believe that oil cycles work in a way that we will be in a breakeven scenario for an extended period. We built our dividend to last and ultimately to grow through cycles. So while we, of course, must manage risk, we are dedicated to sustaining and growing our dividend over the long term, and we believe the attractive yield it provides today is a great opportunity, particularly at the trough of the energy cycle. Our macro view and the belief oil's trough is coming will pivot the execution of our ground game in 2026 from leasing, in some cases, to drill-ready projects. Organic activity, as always, will be dependent on short-term commodity prices, but our ground game capital deployment will be targeted on investments that will create the coiled spring growth effect our investors saw in 2021. What we're seeing in real time is that drill-ready projects, something we saw as mostly unattractive in 2025, are slowly becoming a much better place to be. While leasing remains active as we focus on the long term, the ground game will definitively evolve in 2026. I'll let Chad and Adam cover this further, but our guidance is reflective of the marketplace. In our low activity scenario, we do see some reduction in oil volumes, but a much more dramatic reduction in spending. In that low activity scenario, we'll generate substantially larger amounts of free cash flow at today's strip while deferring and pushing our high-value development for a better environment. In the higher case scenario, we'll see some acceleration of activity, a reduction in the curtailments we've carried for some time and a higher TIL count. While free cash flow would be lower at today's prices, it certainly would also drive higher future production. And of course, in this environment, it's quite possible that the overall pricing environment would wind up being much higher. Our ground game can play a major role in the in between of these scenarios regardless of the environment, where opportunities may arise for us to deploy ad hoc capital throughout the year, and we expect and hope to do so, especially in a tougher environment. On the M&A front, we continue to evaluate assets as they come to market. With that said, however, we are satisfied with the portfolio strategic positioning, and moreover, we believe that quality assets that meet our criteria, particularly on the oil front, possibly will only come to market if we see a healthier market price point. So we'll focus our discretionary capital on the ground. In the past several years, we've seen some aggressive new entrants to the smaller deal side of the market, and much of that capital has become sidelined as these parties' prior investments are proving to have been poor capital allocation decisions. This should now provide NOG with a clear competitive advantage in the current environment. On the development side, it's important to understand the inherent alignment built into our business model. Our operators are rational and the activity we have seen curtailed and deferred will be activated into a healthier environment. Consequently, NOG should see disproportional benefits as the market improves. But what that means is that as the cycle recovers, we create far more convexity to the upside exactly when you're supposed to have it, when prices are stronger. I recognize that our business model may make our journey a bit lumpier when comparing us to a typical operator, but it also has the potential to enhance long-term returns significantly versus a production targeting mindset. NOG has pioneered the large non-op at scale, moving to a broad-based multi-basin, multi-commodity platform over the last 8 years. We effectively created the large co-purchase partnership and reinvented to some degree the joint development agreement. We're not done innovating and evolving. We are reevaluating how we operate, how we allocate capital and even how we source capital. Over time, the initiatives we are evaluating have the potential to enhance our value creation capabilities, our returns and our business model. So stay tuned for these developments. It's going to be a great year. NOG has a differentiated coil spring-like exposure to the cycle. It could take much of 2026 for the oil markets to fully recover. But as any good investor knows, the market will be well ahead of that. I can't say in my investment career I have seen a period where energy equity saw multiple compression at the same time that oil prices were declining. Cyclical stocks should never be valued at peaks or troughs but at a mid-cycle marginal cost of production. This leads to multiple compression during high prices and expansion during low prices. We saw such a period during the trough of gas prices in 2024, but that has not happened for oil stocks and certainly not specifically in our case. For our investors and prospective investors, this phenomenon presents a clear opportunity in NOG's shares, especially because NOG has true right way risk. Our volumes and activity from operators will rise with pricing. I'm extremely excited about how we're positioned and for what lies ahead. Now I'll turn it over to Adam. Adam Dirlam: Thank you, Nick. I'll start by reviewing the operational details for Q4, what we're observing in the current environment and how we're thinking about 2026 activity levels, followed by our business development efforts and the broader M&A landscape. As a whole, Q4 came in line with expectations as we saw activity ramp exiting the year. During the quarter, we added 24.2 net wells to production even as a number of our operators deferred completions due to commodity pricing. Deferrals notwithstanding, recent results have topped expectations with Appalachia, the top-performing basin relative to forecast, and the Uinta and Williston fast following. Given the accelerated completion activity in the fourth quarter, we saw our wells in process draw down 7.8 net wells, finishing the year with a total of 45.6 net wells. The Permian currently makes up over 1/3 of the wells in process, while Appalachia makes up just less than 1/4 and the Williston and Uinta make up the rest. In addition to our wells in process, we have 13 net wells that have been elected to but not yet spud, with the Permian making up roughly 2/3 of the total. Lateral lengths remain elevated as operators continue to drive normalized cost down and bolster returns in an effort to counter current commodity prices. As we exited the year, both our wells in process and our elected AFEs were averaging around 13,000 feet with normalized well costs down nearly 5% quarter-over-quarter. In addition, our operators have been high-grading locations, and we elected to over 95% of our well proposals during the quarter with expected returns significantly higher than our hurdle rate. 2025 marks the year where we've seen an acceleration in activity across Appalachia, and we are poised to significantly increase activity levels as we scale and further diversify our asset base after closing our Utica acquisition in late February. Pro forma for the transaction, NOG will have increased its Appalachian footprint by 45%, now totaling approximately 90,000 net acres, including over 100 identified gross locations on the Antero asset alone. The scale and diversity of NOG's asset base will provide us with a unique optionality as we head into 2026 regardless of the price environment. We will adapt to market dynamics and deploy capital according to what we are seeing on a real-time basis. As such, we have provided guidance reflecting a range of outcomes. As it stands right now, with our current wells in process and based on the conversations that we have had with our operators, we expect activity levels for 2026 to be roughly split with the Permian at 40%, 25% to Appalachia, 25% to the Williston and 10% to the Uinta. As far as timing is concerned, this year's well activity will be relatively evenly weighted between the front and the back half of the year, while we forecast spending to be a bit more front-end loaded with a 60-40 split. And while we don't provide quarterly guidance, we expect the usual downtick in Q1 driven by elevated Q4 activity levels along with weather and commodity-related curtailments, and from there, moving higher in Q2 with a relatively flat cadence thereafter. The mix and pace of our activities could shift based on how commodities perform during the year. If organic activity slows in a particular basin, we'll consider reallocating capital to another more constructive area of the business. Additionally, we may focus more on the ground game to seize countercyclical opportunities that arise. Turning to the M&A landscape and our business development efforts. NOG has remained more engaged than we ever have been. As mentioned earlier, our integrated upstream and midstream Utican transaction is now closed, and we are excited to get to work on our fifth major joint acquisition with our partners at Infinity. Our assets' resilient inventory with average breakevens below $2 will be a significant focus as we prosecute development plans and grow volumes beyond 2030. In addition to the 100-plus locations already identified, there is potential for incremental value creation from both the undeveloped upstream footprint as well as the midstream fee potential. Looking ahead, there are several large assets in the market right now, something to the tune of $6 billion in total. That said, it pays to be patient as many of those assets are not the right fit for NOG. However, we are expecting a number of potential opportunities coming down the pike that could be of greater interest. All else being equal, we expect the ground game to continue to take center stage as we leverage our proprietary infrastructure and further enhance our portfolio through smaller acquisitions while screening a number of different joint development opportunities. In this environment and, in particular, the fourth quarter, the team did a phenomenal job taking advantage of the disconnect in the market as operators and the competition exhausted their budgets for the year. In the fourth quarter alone, we were able to pick up over 6,000 net acres and 1.2 net wells across 33 transactions, a quarterly record. The acreage alone represented over 50% of the ground game acreage picked up in 2025, and we finished the year with 12.8 net wells and over 12,300 acres while evaluating over 700 opportunities. We don't see our progress slowing down in the first quarter either as a number of committed transactions are slated to close in the first part of the year. However, most encouraging are the results from our recently acquired acreage that is already getting converted into development. From our acreage acquisitions in Ohio alone, we've seen 14 well proposals with some of the strongest economics across our portfolio. We'll continue to navigate this environment as we have every other down cycle by staying nimble, allocating resources to the most capital-efficient projects and creating long-dated and durable value for our stakeholders. With that, I'll turn it over to Chad. Chad Allen: Thanks, Adam. Our fourth quarter financial results and production cadence were down the fairway with no major disruptions. And despite the persistent macro headwinds faced by the industry, NOG's diversified and scaled platform continues to deliver, outperforming internal estimates on production and EBITDA for both the quarter and the year. Fourth quarter total average daily production was 140,000 BOE per day, up 7% from Q3 2025 and up 6% versus Q4 2024. For the year, total average daily production was 135,000 BOE per day, topping the high end of our guidance, up 9% as compared to the full year 2024. The outperformance was driven primarily by a continued ramp in our gas assets. Fourth quarter oil production increased 3% to 75,000 barrels of oil per day sequentially, but was 5% lower year-over-year as some of our Q4 wells were deferred as price sensitivity among our operators became more acute. The ramping of our Appalachian JV drove gas production to record levels for the third consecutive quarter with 392 MMcf per day, up 11% sequentially and up 24% from Q4 2024. For the full year 2025, NOG's oil production was 75,646 barrels per day with gas production coming in at 356 MMcf per day. Moving on to our financial results. Adjusted EBITDA in the quarter was $367 million and free cash flow was $43 million. For the year, adjusted EBITDA was $1.63 billion with free cash flow of $424 million. Adjusted net income in the fourth quarter was $82 million or $0.83 per diluted share, excluding the impact of the $270 million non-cash impairment charge we took in the fourth quarter. For the year, adjusted net income was $453 million or $4.57 per diluted share. GAAP net income was impacted by $703 million in non-cash impairment taken over the course of 2025. As a reminder, NOG accounts for its assets under the full cost method as opposed to the successful efforts method, which does not perform historical price-based asset tests. Driven by lower average oil prices, we recorded a series of non-cash impairment charges beginning in Q2 under the ceiling test of our full cost pool of oil and gas assets. These impairment charges are not indicative of the quality of our assets. They are merely dictated by weaker oil prices year-over-year. As the cycle recovers, we do not get to write up the same assets that we impaired on the way down. We are one of the only companies among our peers that utilize the full cost method. We are evaluating in making a change in our accounting method to successful efforts as it's more aligned with our peers, providing a better basis for comparability. Moving on to pricing. Oil differentials in Q4 averaged $5.05 per barrel as compared to $3.89 in Q3 as we saw widening seasonal differentials in the Williston, offset by improvement in the Permian. For the year, oil differentials were $5.53 per barrel, in line with our expectations. Natural gas realizations in the fourth quarter were 58% of benchmark prices, reflecting ongoing Waha market weakness as well as lower absolute NGL prices and a lower NGL to natural gas ratio. For the year, natural gas realizations were 79% as compared to 93% in 2024. Lease operating cost per BOE in Q4 were $9.30, improved by 5% as compared to the third quarter and by 3% as compared to the fourth quarter of 2024. For the year, LOE per BOE was $9.61, up 2% from 2024. Despite higher volumes, we continue to see higher workover and maintenance-related costs. CapEx in the quarter, excluding non-budgeted acquisitions and other, was $270 million, reflecting another record quarter for ground game, as discussed by Adam. The $270 million of capital was allocated with 44% to the Permian, 26% to the Williston, 8% to the Uinta and 22% to the Appalachian Basin. Approximately $193 million of total spend in the quarter was allocated to organic development capital. Total CapEx for the year, excluding non-budgeted acquisitions and other, was $1 billion, inclusive of $174 million of ground game investment in 2025. The fourth quarter and, frankly -- and the first quarter of 2026 have been busy as we took a number of actions to enhance liquidity in our maturity wall. Starting with our revolver. In November, we extended the maturity date from June 2027 to November 2030, keeping the borrowing base and the elected commitment the same. The revolver was further amended just this week. We upsized the borrowing base to $1.975 billion and increased the elected commitment by $200 million to $1.8 billion, reflecting the addition of our joint Utica acquisition to our asset base. In October, we issued $725 million of notes with a 7.875% coupon and retired nearly all of our 2028 notes with an 8.125% coupon. Just last week, we gave notice to the holders of the remaining $20 million of our 2028 notes, and we will be redeeming those notes at par on March 4. After closing our joint Utica acquisition earlier this week, we have over $1 billion of liquidity available to us. Moving on to guidance. As Nick discussed earlier, given the lack of visibility with commodity pricing in this environment, we are providing 2 ranges that capture potential production, operating expenses and CapEx in a low activity environment and a high activity environment. For details concerning each scenario, please refer to the 2026 guidance page in our earnings presentation on Page 15. That concludes our prepared remarks. Operator, please open up the line for Q&A. Operator: [Operator Instructions] Your first question comes from the line of Neal Dingmann of William Blair. Neal Dingmann: Nice details again today. Nick, my question, you -- I think it was last night you talked about and mentioned that you have notably more than the typical amount of wells that have been spud -- that have not been spud, but have been consented. I'm just wondering what -- maybe you or Adam, what's your guess as to when these wells are finally drilled and completed? Is it just a matter of when, not if? Or maybe talk about why we're seeing that today. Nicholas O'Grady: That's right, Neal. As Adam also noted in his comments, we have a large D&C with -- and about 13 net wells we've consented to that still haven't been spud. We sometimes have given kind of specific TIL timing guidance throughout the year, and we chose not to do that this year. The range is obviously anywhere from 70 to almost 90 wells this year, which is really wide. And we think it would be a disservice to try to predict the behavior, because it's been moving around substantially in real time. As an example, a lot of these proposals were delivered to us in November and early December, and then we've seen significant changes as pricing weakened late in the year and early into this year. The recent geopolitical spike in oil thus far hasn't shown a reversal in that behavior. But I think particularly from our private operators, which is meaningful to us -- but what I can say is if you look at this in history, especially as an accrual accounting shop, we have seen periods of time where we have had to bring forward accruals. We've had -- ironically, we're talking about not spending enough money, but we've had periods where our CapEx has been accelerated, and we've seen those things move really quickly. So that can happen again. I think it's really going to just be dictated a little bit, as I talked about, by right way risk with commodity pricing and specifically oil. And what I would tell you is that we look a little bit different. If you're a -- when you compare us to, say, an operator and you're comparing -- look, I recognize estimates and all these things and changes to estimates. I spend a lot of time on that side of the table. But our optical capital efficiency -- whereas an operator targets a maintenance level of production and then tries to spend as little as possible to achieve that, they may look more capital efficient as things go down. We actually may look the opposite in the sense that we have committed capital, we have accrued capital in many cases, but we're managing significant curtailments or significant deferments. And so we -- and you don't have to believe what I'm saying. You can look back to 2020. If you look in 2020, we looked far less capital efficient on the way down than other companies. And in 2021, we looked far more capital efficient because all of that capital that's in the ground and it's been determined -- that's been committed comes to fruition. So I don't know if that's too much or too little. Or you want to add to that, Adam? Adam Dirlam: Yes. I guess the only other additional color that I'd add, I think we alluded to it in the prepared remarks, which you've got about 2/3 of those 13 wells in the Permian. And if you're looking at kind of half cycle expected returns, you're looking at something well north of 40%, 45%. You've got 235 gross wells in total as well. So you've got a handful of diversity. And so I think it's really going to boil down to just what the gross level activity levels look like. Nicholas O'Grady: Yes. And that's the point, is that I don't think this is a function of economics in the sense that -- all of the activity that we have seen deferred or pushed has been largely economic in this environment. Especially, when you get to our private operators, it's not a question of whether they can make money on it. It's a question of whether they should, right? They'd rather defer those to a better day. I recognize in the shorter term that can have an effect on numbers, but in the long run, you're going to make a -- this is an ROI game and you're going to make a lot more money. You can't eat IRR, as they say. Neal Dingmann: Yes, great details. And then, Nick, maybe take the M&A question in a different direction again. You guys certainly have been active in -- I just -- it doesn't seem like looking at the stock price that you're getting rewarded for just how much bigger inventory position you have today than, let's say, even a few years ago. And so my question is, on the other side, just given how great right now the seller's market is, especially given what ABS players are paid for mature, would you consider divesting maybe not a lot, but some to -- if the market continues to reward for this? Nicholas O'Grady: Yes. I mean, look, we are for sale every day. Our assets are for sale every day. We'll always look at what makes the most economic sense for the company. I alluded to this in my prepared remarks -- prepared comments, excuse me, that we have been evaluating a lot of different outcomes. And without being too forward, I would just say -- we're pretty creative people, right? And I think that's been demonstrated over time. And we've got some creative ideas that could effectively bridge some of the things you're discussing over time. Operator: Your next question comes from the line of Charles Meade of Johnson Rice. Charles Meade: Nick, this is I guess maybe a basic question, but worth -- I want to take a shot at trying to illuminate how you're going to -- how are you going to know and how are we going to know whether you're tracking the low end -- or the low activity scenario or the high activity scenario? I mean there's an obvious -- yes, go ahead. Nicholas O'Grady: Yes. No, I recognize it's not a basic question and it's not one that is unexpected because it's obviously an extremely wide set of outcomes. And we are dealing with the fog of war. And like I said, people watch the price of oil and expect behavior to change accordingly. And it does, but it takes a little bit more time, right? You need duration. So when things go down, behavior changes. When things go back up, it takes a while before that behavior changes. And so what I would tell you is, one, the onus is on us. We will communicate throughout the year. And I think, two, there's a complicating factor between the low kind of activity and the high activity, which is that obviously we have an active ground game which can fill that gap. The other thing I'd point out is we are carrying substantial amounts of volume shut in, which is very different than the average operator. A lot of our privates have curtailed volumes. Some of it has been due to pricing. Some of it has been due to Waha issues and just the inability. And some of the deferral of activity has actually been driven by some of the gas issues you're seeing in New Mexico. But what I'd tell you there is that we will continuously try to tighten that band throughout the year and we will try to communicate. And I think -- again, we've tried to take a pretty -- one of the things that I would point out in the high case, which is that what we have done in that case is we've made the assumption, "Okay, a more normal activity," but we're not turning it on, say, today. We're really pushing a lot of that out till later in the year, which is why the oil volumes might optically look a little bit different. But obviously, it would change the actual -- and I don't want to say the exit trajectory because the timing could be very wonky depending on when that stuff comes on, but it could potentially mean that. So -- but I will give some comfort, which is that either one of these scenarios aren't going to affect our maintenance capital levels for the level of volumes you're talking about. So my point being that to the extent we spend more through that ground and we bridge that gap, even if we do see the low scenario, those dollars right now are kind of in between where we're going to be at any -- so as you look towards the following year, stable to growing activity. Adam Dirlam: The only other piece that I'd add to the deferments is we had about 4 net DUCs get pushed in Q4, and that's something that can get turned on at any time as well. So it's the combination of not only the curtailments, but the DUCs that have near-term catalysts depending on what kind of near-term pricing we're seeing. Nicholas O'Grady: Yes. And the one -- I'll just leave one thing because I think optically, we have sort of indicated that we would front half weight some of the capital, even though the capital in total is -- or excuse me, the development in total in both scenarios is considered to be relatively evenly weighted. That front half is 100% driven by ground game activity because we've had atypical success early in the year. Charles Meade: Interesting. That's good detail. Second question, you've drill down on Appalachia. So that was a -- it was a strong 4Q for you. You guys have already closed this Utica deal here in 1Q. Can you give us a sense -- I mean, to the extent you were surprised, or I think, Adam, you said your -- Appalachia was the most ahead of plan of all your geographies in 4Q. Is that carrying over into 1Q? And is the -- and can you give us any -- I know it's early, but anything incremental what you're seeing with the joint Infinity assets? Adam Dirlam: Yes. So I'll give a brief overview and then let the smarter people in the room finish the conversation. But I just say this, that -- timing plays a role in that and performance, right? So performance has been really, really strong on both our legacy Appalachian assets and on our joint development agreement and obviously, as we perceive, on the forward case in Antero. In case of the Antero assets, I would say you can see it in the purchase price adjustment that we've obviously had a strong -- it performed strongly prior to us taking possession of it. So that's -- or that means we get a reduction in that purchase price. I think as it pertains to the legacy assets, they've continued to surprise us month after month, year after year. They just are incredible. It explains why gas has been depressed for so long because they're so good. And on our joint development JV over the last year, we've seen both timing and performance improvements. But I will tell you that like, for example, it's not a totally linear in the sense that I believe most of the completions that we're expecting are actually in April. So in Q1, in general, it's not going to be some huge thing. However, performance relative to plan versus linear performance are different things. I don't know if you guys want to add to that. Nicholas O'Grady: No. I think you nailed it. Adam Dirlam: Yes. And Charles, I'll just finish with just saying that I think we -- when we look at these assets, right, we have historically always underwritten things based on the prior operator, right? But that doesn't mean that necessarily is what we think we can do with those assets when we take possession. So we have great hopes for the Antero asset that we'll be able to see performance and cost improvements over time. Operator: Your next question comes from the line of Scott Hanold of RBC. Scott Hanold: Nick, thinking about the -- I guess, the high case, low case on the budget, can you give us a sense of where some of the uncertainty is more? Is it more on the private operators versus the public? And has any of that started to show itself? Like are you getting a better read right now? So my question comes down to, is there a point in time where you're going to commit to, say, one case or the other? Or do you think that having kind of 2 cases is a reasonable sort of way to look at moving forward? Nicholas O'Grady: Yes. I mean I think at this point in time, it's definitely still reasonable, Scott. I think there's going to be a time where it has to meld into one, right? And I think that's what we'll try to do. And obviously, we want to do -- look, we -- we have incredible insight to what we do over a 12- and 24-month period. However, the timing of it, as you've always known in our business model, it's harder to do quarter-to-quarter, right? And so -- and sometimes in a period like this, it becomes -- I mean, if you go back to 2020, we just had to flat out withdraw guidance because we couldn't predict the timing of that. But in the end, it actually wound up -- for example, those decisions -- we saw half of our -- I don't mean to get off topic. But we saw half of our Williston volumes shut in for the better half of 2020. Well, when we went backwards and tested that versus everyone else who tried to keep their production flat, we made an additional $100-plus million in profit by turning those wells back on later on. So what I say is we have good alignment with our operators, but it is going to take some time to get some clarity in terms of some of these things. I can just tell you what -- so you asked about public versus private. On the private side, this is something -- a trend that we saw really in the beginning or really early, probably the middle of last year, where we've seen a slow slowdown, a deferral, curtailments, et cetera, et cetera, et cetera. And that has stayed on. What I'd tell you from a public operator perspective is -- obviously, I'm not -- I am watching all the public companies report, and I would just say that what publicly stated guidance and activity levels look like versus what we are seeing don't necessarily foot, which tells us that that's part of the reason we have 2 sets of guidance in some ways because a lot of what they're saying versus what they would indicate would suggest there's going to be a change in behavior throughout the year. Scott Hanold: Got it. And then when you take some of the enhanced governance you've put in place and some of these larger transactions you've done, when you think about 2026 -- I don't know, pick whichever case you want to do or just sort of give an average, like how much of your '26 activity do you think is underpinned by -- this guidance is underpinned by enhanced governance, where you've got some reasonably good predictability? Nicholas O'Grady: I'm not sure I have that number off the top of my head, Scott, but we can get back to you on that. Jim is saying he thinks it's around half. Jim Evans: Yes. Scott Hanold: Okay. Okay. Nicholas O'Grady: Yes. But what I'd say is this, like, look, we have commodity price triggers in almost all of our large joint development agreements. We haven't hit those price triggers. So it wouldn't necessarily change an activity. But I'll use an example. In one of the cases, we went to the operator and said we would really prefer to defer this activity because there's a better time. So it's not just them. Sometimes we ourselves would rather push that activity to a future day where it makes more economic sense. Operator: [Operator Instructions] Your next question comes from the line of Noah Hungness of Bank of America. Noah Hungness: To start off here, Nick, I was hoping, could you help us quantify maybe what the EBITDA or free cash flow upside would be from the coiled spring that you've spoken about here. I'd assume, let's say, like $65 of WTI? Nicholas O'Grady: Yes, I mean, I -- look, I think there's probably -- it's a bit interesting because right -- I think every $5 a barrel is something like $100... Adam Dirlam: No, it's about $100 -- between the low and the high, is that what you asked? Nicholas O'Grady: Yes. Adam Dirlam: Yes, it's probably about $100 million to $150 million. Nicholas O'Grady: But if you factor in, call it, $5 a barrel, right, you're talking -- that's another $150 million. So that's why in my prepared comments I talked about that. Yes, sort of a low case maintenance capital, which obviously generates more cash at today's strip, and a high case, which actually would generate less, albeit that's an averaging effect because when you look at the annual numbers versus obviously where we're expecting sort of that stuff to come in gradually, you may kind of on a terminal basis look a lot different. But you make the assumption that in the $65 world, which is about $5 delta on the strip today, that's $130 million to $150 million a year of extra cash for us alone. And so where I would go with that is that -- that change means that your free cash flow may be the same or even superior in the high case just because you're -- that's happening in a slightly better environment. Noah Hungness: That's helpful. And then for my second question is, in the low versus high activity scenarios, could you maybe talk about how much of the CapEx is related to ground game spend versus your just standard D&C? Chad Allen: Yes. Give me one second. So you're looking at about $150 million to $200 million between the 2. Operator: [Operator Instructions] Mr. O'Grady, there are no more questions in the queue. Do you have any closing remarks? Nicholas O'Grady: Yes, please. Thanks. Thanks for joining us today. NOG is well positioned to navigate through the current market volatility. Our assets are performing well. Our liquidity is abundant, and our investment opportunity set remains strong. We're grateful for being aligned with strong and capable operators, and look forward to keeping you informed on our activities and achievements in the coming weeks. Thanks again. Operator: This concludes today's conference call. You may now disconnect.
Operator: Hello, and welcome to Phathom Pharmaceuticals Fourth Quarter and Full Year 2025 Earnings Results Call. [Operator Instructions] Please be advised that today's call is being recorded. With that, I would like to turn the call over to Eric Sciorilli, Phathom's Head of Investor Relations. Please go ahead. Eric Sciorilli: Thank you, operator. Hello, everyone, and thank you for joining us this morning to discuss Phathom's fourth quarter and full year 2025 results. This morning's presentation will include remarks from Steve Basta, our President and CEO; and Sanjeev Narula, our Chief Financial and Business Officer. A couple of notes before we get started. Earlier this morning, we issued a press release detailing the results we'll be discussing during the call. A copy of that press release can be found under the News Releases section of our corporate website. Further, the recording of today's webcast and the slides we'll be reviewing can also be found on our corporate website under the Events and Presentations section. Before we begin, let me remind you that we'll be making a number of forward-looking statements throughout today's presentation. These forward-looking statements involve risks and uncertainties, many of which are beyond Phathom's control. Actual results may materially differ from the forward-looking statements, and any such risks may materially adversely affect our business and results of operations and the trading prices for Phathom's common stock. A discussion of these statements and risk factors is available on the current safe harbor slide as well as in the Risk Factors section of our most recent Form 10-K and subsequent SEC filings. All forward-looking statements made on this call are based on the beliefs of Phathom as of this date, and Phathom disclaims any obligation to update these statements. Later in the call, we will be commenting on both GAAP and non-GAAP financial measures. Specifically in the scope of this discussion, when we refer to cash operating expenses, please note we are referring to the non-GAAP form of this measure, which excludes noncash stock-based compensation. As always, detailed reconciliations between our non-GAAP results and the most directly comparable GAAP measures are included in this morning's press release. With that, I will now turn the call over to Steve Basta, Phathom's President and CEO, to kick us off. Steve? Steven Basta: Thank you, Eric, and thank you to our investors and analysts for joining our call this morning. Thank you even more to the Phathom colleagues for your diligence and dedication throughout 2025. It was a transformational year for the company, and we're now set to execute our growth and profitability plan. Let me start by summarizing the key points Sanjeev and I will be discussing today. We had a successful Q4. We delivered on expectations for both revenue and cash operating expense levels, coming in at the better end of our guided ranges. We've taken key steps in the recent 2 months to enhance our capital structure, reduce our interest expense and modify our outstanding term loan obligations. As a result, we believe our cash on hand, along with anticipated future cash generated from operations will be sufficient to satisfy all obligations under both our term debt and our revenue interest financing agreements. We're on track in guiding to operating profitability beginning in Q3 of this year and for full year 2026. Our $320 million to $345 million revenue guidance for 2026 reflects our operating expectation of continued solid growth from our GI-focused strategy and includes an accounting-related classification change, which Sanjeev will cover in more detail. Our sales organization is positioned to deliver, and we're seeing clear signs that our GI strategy is working. I'm very proud of what our team accomplished in 2025. We believe we've set ourselves up for success, both financially and operationally. Beginning the update today with our financial highlights for Q4 and full year 2025, our results are in line with our preannounced estimates from January and incrementally a bit better on expenses and on cash usage. We've delivered on the plan we set forth on our May earnings call and reiterated in our earnings calls in August and in October. Net revenues were $175.1 million for the full year 2025, representing 217% year-over-year growth. Q4 sequential quarterly growth was solid during a period of sales force alignment as we had discussed in our October call. In August, we guided to $165 million to $175 million for 2025 revenue. We updated that in October to $170 million to $175 million, narrowing it to the top half of the range. And ultimately, we delivered at the high end of that range. Our Q4 revenue was $57.6 million, in line with our pre-released January estimate of $57 million to $58 million. Cash operating expenses, excluding stock-based compensation, were $50.3 million for Q4, better than both the less than $55 million target we guided to and to our preannounced range of $51 million to $53 million. We delivered solid growth through the last 3 quarters of 2025 while cutting quarterly cash operating expenses by nearly 50%. Our net cash usage for Q4 of 2025 was approximately $5 million. That's 64% lower than Q3 and consistent with our expectations of reaching operating profitability beginning in Q3 2026 and cash flow positivity in 2027. We've taken significant steps to enhance our capital structure. Our goals were: one, to reduce any financing overhang or potential risks stemming from repayment obligations or cash covenants; and two, to reduce our interest expenses. In 2025, we got the fundamentals of our business in order, growing revenue and reducing expenses. That improved financial profile, enabled us to complete a successful equity offering in January and to renegotiate our debt terms as we announced today. We have modified our term loan agreement to extend the maturity date, which had previously been December of 2027, we've extended it to February 2029. And we've reduced our interest expense obligation and reduced the total outstanding principal amount. As a result of these capital structure enhancements, we believe our current cash plus the cash that we expect to generate from operations in the coming years will be sufficient to meet all obligations under both our term loan and our revenue interest financing agreements. Sanjeev will provide further details on these items and take you through our 2026 guidance. I'm very proud of our operating and financial progress these last 12 months. The entire Phathom team is dedicated to our objectives of growing revenue while being disciplined on expenses. We're exhibiting strong momentum, which we expect to carry forward throughout 2026. A few quick notes on our commercial progress. I said before how fortunate we are to be able to positively impact the lives of so many patients. Through February 13, over 1.1 million VOQUEZNA total prescriptions have been filled to more than 230,000 patients. We believe we're just starting to penetrate an enormous market. About 65 million patients have gastroesophageal reflux, of which 40% experienced inadequate symptom relief from PPIs. About 273,000 prescriptions were filled in Q4 alone. 174,000 of these were covered prescriptions growing 21% quarter-over-quarter and representing approximately 64% of the total prescriptions filled in Q4, while 99,000 were filled as cash pay prescriptions. Covered prescription volume drives our revenues while cash pay prescription volume improves physician perception of access and makes it easier for physicians to prescribe VOQUEZNA with confidence that their patients will be able to get the drug. Most importantly, both paths enable us to help patients in need of VOQUEZNA. Additionally, in November, we turned on a GoodRx offering, providing an alternative payment option for patients filling VOQUEZNA prescriptions sent to retail pharmacies. Looking forward, we have confidence in 2026 growth. We just completed our national sales meeting and the sentiment from the field is terrific. We start March with more than 285 of our 300 sales positions currently filled, a nearly full-strength sales organization. Our strategy to drive depth and frequency of calls to gastroenterologists is solid, and we believe it will ramp utilization and writing frequency among GIs treating GERD. 2026 will be an important year for us as we drive sales growth and transition to profitability. Overall, we continue to deliver as we guided on each of our previous earnings calls. Our 2025 results ended at the better end of our revenue and cash operating expense guidance ranges we communicated, and we believe we're on track to transition operating profitability beginning in Q3 of this year and to reach cash flow positivity in 2027. We've taken important steps to enhance our capital structure and mitigate any covenant or repayment concerns. The sales force is nearly full strength and energized following our national sales meeting. We're well positioned to execute and deliver on our strategy in 2026. I'll now turn the call over to Sanjeev to take you through our detailed financial updates. Sanjeev Narula: Thank you, Steve, and hello, everyone. I'm pleased to report our Q4 and full year 2025 results today. I'm encouraged by the changes we've made throughout 2025 and excited about what's on the horizon for '26 and beyond. We have a lot of important updates on the financial front, so let me get right into it. Steve provided some top-level highlights for the quarter, and I'll provide additional color commentary. Our revenues for Q4 of $57.6 million were consistent with pre-release and demonstrated 16% sequential quarterly growth. Aligned with the full year, the quarter also came in at the very top end of our guidance. As always, covered script volume primarily drive our revenue, while contribution from cash scripts and inventory dynamics remain minimal and consistent. Our gross to net for Q4 came in at the high end of 55% to 60% range we provided last quarter as a result of shifting rebating mix. Our full year gross to net was within our expectations. Our gross margin remained consistent in Q4 and full year at approximately 87%. After accounting for quarterly cash expenses, we reported a loss from operations, excluding stock-based compensation of approximately $320,000, a 95% improvement compared to Q3. As you can see, this is a meaningful change in the operating profile of our company. As always, please refer to this morning's press release for a reconciliation between non-GAAP measures and their most directly comparable GAAP measures. Q4 cash operating expenses were about $50 million, notably favorable than the less than $55 million guidance we set forth earlier last year due to continued expense discipline. Similarly, our full year cash operating expenses of approximately $284 million came in at the low end of the range we provided on our Q3 call. We ended the year with about $130 million in cash and cash equivalents, which roughly reflects a $5 million cash usage in Q4 and signals a very clear path to operating profitability this year. Now let me turn to the enhancement in our capital structure. In January, we improved our capital structure via an oversubscribed equity offering. And today, we're announcing a modification of our term debt. As a result of these deliberate steps, we believe we now have a cost-effective and sustainable capital structure to meet our business needs and all of our debt obligations. The offering raised $130 million in gross proceeds, which brought our cash balance just north of $250 million at the start of the year. I'm pleased to announce today that we have successfully modified the terms of our outstanding term facility, which we believe will greatly benefit the company going forward. We reduced the remaining principal to $175 million outstanding and paid certain end of term fees and accrued paid-in-kind amounts from the original agreement. In total, we used approximately $56 million of our cash balance to streamline the facility. Additionally, we were successful in lowering the interest rate from 12% to 9.85%. Lastly, we extended the loan maturity date from December 2027 to February 2029. Partial monthly repayments will begin in 2028, which are anticipated to reduce the outstanding principal as well as our interest expenses. We expect we will be generating positive operating cash flow beginning in 2027 in advance of these repayment obligations. Overall, these modified terms reduce our interest expense, remove near-term payment hurdles and provide greater financial flexibility. Following our capital structure enhancement, we believe our cash on hand, along with anticipated future cash flow from operations will be sufficient to invest in our operations as needed and to satisfy all liquidity covenants and repayment obligations. For complete clarity on our covenant, we expect our highest cash flow requirement between now and September 30, 2027, will be approximately $130 million. The cash flow requirement is derived from our covenant in our revenue interest financing agreement, which becomes effective for the first time on October 1, 2026. All cash flow requirements relating to our term debt are substantially lower than those from our revenue interest financing agreement. Beginning October 1, 2027, we expect revenue interest financing agreement covenants will require that we temporarily hold a modestly higher cash balance, which will decline thereafter as revenues increase and we make additional royalty payments. To be clear, the cash flow covenants between the term debt and revenue interest financing agreements are not additive. We manage our liquidity to whichever covenant is the highest at any given point in time. Rest assured, for all these periods, we believe our cash on hand of approximately $190 million following our term debt modification and our anticipated cash generated from operations beginning in 2027 will be sufficient to satisfy all covenants at all time. We refer you to our 10-K filed earlier this morning for more information. While on the topic of our 10-K, I'd like to flag that in this year's document, we updated the business section and risk factors to reflect the company's transition to a primarily commercial entity. While the comparison against prior years will show significant tax changes, I want to be clear that we believe important updates are being covered during this earnings call and in this morning's press release. Now I'd like to move to our 2026 guidance. With our GI-focused strategy taking hold and our financial position enhanced, we're ready to deliver in 2026. Today, we are issuing guidance on several financial metrics, which reflect that sentiment. Before I get into the numbers, I'd like to provide clarity on the accounting-related explanatory note you saw in this morning's press release. Beginning January 1, certain third-party charges will be included in cost of goods sold instead of gross to net adjustments. All things equal, net revenue will be higher as a result of costs moving from gross to net adjustments to cost of goods sold, leading to a mostly net neutral effect on our gross profit line in our P&L. Importantly, this change is simply a different classification of these costs and does not impact the underlying operations of our business. We are estimating an approximately $17 million to $20 million shift in 2026 between 2 line items, which is reflected in following guidance. We anticipate 2026 net revenue will be $320 million to $345 million, including the estimated effect of the classification change I just described. As for gross to net, we believe the discount will be between 55% to 59%. We anticipate gross margin will be approximately 80%. As for spend, we are anticipating cash operating expenses, excluding stock-based compensation of $235 million to $255 million, which at midpoint reflects a 14% decrease compared to 2025 results. Now a few comments about the cadence of these items over the course of 2026. We believe revenue will exhibit a similar pattern to last year with approximately 40% being achieved in first half and approximately 60% being achieved in second half, with quarter 1 being the soft quarter due to typical seasonality. We expect expenses will be relatively stable on a quarterly basis, but will reflect a modest step-up from where we exited Q4 2025, accounting for nearly full strength sales team, new marketing initiative and full year cost of our EoE Phase II trial. Based on anticipated revenue, gross profit and cash operating expenses, we anticipate achieving operational profitability, excluding stock-based compensation by Q3 and in total for full year 2026. And finally, we believe we will achieve cash flow positivity in 2027. In summary, our financial profile has transitioned meaningfully, and I'm excited for this next phase. This quarter results were strong, coming in at the better end of our guidance we previously provided. Our operational momentum is solid, which gives me confidence in our 2026 revenue trajectory. I feel confident in our financial position and believe we have the resources we need to execute the plan and deliver on the guidance ranges we set forth today. With that, I'll now turn the call back to Steve for his closing remarks. Steve? Steven Basta: Thank you, Sanjeev, for the detailed financial review. I would like to extend my thanks to everyone at Phathom for their extraordinary efforts throughout 2025. I was able to meet many of our sales team members during our recent national sales meeting, and I'm heartened by their dedication and exceptional talent. Our transition to focus on gastroenterologists and to reach operating profitability is well underway. Thank you also to our shareholders for your support and confidence. We're dedicated to delivering value to reward your investment. Operator, please open the line for questions. Operator: [Operator Instructions] Our first question or comment comes from the line of Kristen Kluska from Cantor Fitzgerald. Kristen Kluska: Congrats on a really strong end of the year and the work you were able to do around the interest, definitely very favorable here. So the question I have for you this morning is just recognizing it's still very much early days. What can you tell us about the early signals that you're seeing from this strengthened sales force and strategy, especially coming out of that meeting? Are you seeing that more of the GIs that were new to your strategy are converting? And are you also seeing some early signals of growth within those current GIs where you added more touch points? Steven Basta: Kristen, thanks so much for the kind thoughts and for bringing us to what I think is the most important topic actually, which is the core focus on our GI call point is the fundamental element of our growth strategy, and we are seeing consistent signs of momentum. It's interesting as you characterize the 2 different paths of sort of converting new writers versus growing existing writers. Virtually all gastroenterologists, not quite all, but a very high percentage of gastroenterologists have already written a script for VOQUEZNA. So we've got broad penetration within the gastroenterology community, both among physicians and among APPs with high conversion success already. What we focus on all of our sales force messaging in the context of our national sales meeting, in the context of the conversations that the regional managers are having with the territory sales representatives is all about how to grow writing frequency. We have what we refer to as an adoption ladder where physicians try the product and then we are trying to improve their consistency of writing and they become consistent writers and then we try to improve their consistency of writing and then they become adopters and so on. And as we grow in terms of the frequency of the physician writing an NRx for VOQUEZNA. And what we are seeing is very clear trends on those adoption letters associated with physicians moving up in category. So a tried physician will only have written 2 NRxs in the last quarter, a consistent physician will have written 6 or more weeks in the last quarter, et cetera. And we are seeing physicians move from one category to the next consistently, where on one of the metrics, we'd only had 400 or 500 physicians last summer that were in the upper categories. Now we've got well north of 2,000 physicians in the upper categories. So we're seeing that adoption rate among not just the highest frequency writers, but very broadly within the GI community increasing. And that's the focus of all of our sales force conversations. That was the focus of our national sales meeting is how do we take physicians through that adoption ladder. It's the focus of each of our coaching conversations, and we're seeing clear evidence of it in our writing pattern. One of the metrics that I find to be helpful as we think about the long-term opportunity for this product is what is the rate of adoption we've achieved among the top few hundred writers. And there, we're already seeing that we're now passing on average 20% penetration in terms of their PPI volume being converted to VOQUEZNA. And when we get to 20% conversion across the broader GI community, that's where we're approaching $1 billion of revenue potentially in GI. And that's clearly where we're headed over the next few years. Operator: Our next question or comment comes from the line of Annabel Samimy from Stifel. Annabel Samimy: And just following on from that comment. In the territories that you already have been pretty well aligned as far as the focus on GIs, do you have any sense yet of the dynamic of patients transitioning back to primary care, if you're starting to see pull-through in some of those more mature accounts? Just curious to see if that dynamic or if you've seen any pickup in the primary care area organically from that effort. And when everything -- everyone is on board and humming, do you expect an inflection? Or is this just a steady growth throughout the year? Steven Basta: So Annabel, that's a really important component of the long-term growth path is building beyond just GI to capture the return of patients to primary care and the growth there. Just candidly, we've not looked at it, at least I've not looked at it. I know our sales team is doing much more granular work on a physician-by-physician basis at the specific referral patterns for specific gastroenterologists to see their referring physicians and how they've adopted. I've looked at it much more broadly for the entire universe of primary care physicians, and we are seeing an uplift in primary care prescribing volume on a broad basis. The granularity that you're describing is very much an analysis that over time, we will do much more frequently. The near-term focus is on that core gastroenterology conversion point. And the expectation exactly to your point, is over the next 6, 12, 18 months, we're going to see those patients returning to primary care and see those growing, and we'll be looking at that metric more precisely. But what we are seeing on a broad basis when we look at the total prescribing in GI and the total prescribing and primary care is an uplift in both. Even though the majority of our sales force time is going to GI, that uplift broadly in primary care prescribing volume would suggest that we are seeing exactly that effect. So was there a second half of your question? Or did that capture it? Annabel Samimy: Expectation for any inflections once everyone is on board... Steven Basta: The inflection point question. Yes. So we don't map out -- we don't model out a specific inflection point. It's very hard to predict when does the slope change. What we are driving toward is consistent growth month-over-month, quarter-over-quarter because we're not trying to do a sea change kind of strategy at this point going forward. 2025 was very much a year of fundamentally shifting the strategy. We were changing call points. We realigned sales territories. We went through some pretty significant change. 2026 is just going to be a year of heads down execution. It is making sure that we are doing all of the right things. We're getting into the right offices. We're calling on gastroenterologists with the right frequency. We are delivering really good messages every time we call in gastroenterologists. We're helping them with all of their access needs. We are working through the process of enabling them to write VOQUEZNA scripts more frequently. And that drives our growth. So we don't need to inflect at any one point to a specifically different strategy. What we need to do is just execute this playbook and execute it well quarter-over-quarter. It's hard for me to predict exactly what the slope looks like on a quarter-by-quarter basis. I do expect that we're going to get steady growth, might accelerate at some point in time. It's really hard to predict that. What we're seeing is all the right signs of incrementally significant adoption among physicians and incremental success that our sales reps are having in each of these offices. Operator: Our next question or comment comes from the line of Dennis Ding from Jefferies. Anthea Li: This is Anthea on for Dennis. Congrats on the quarter. First on Q1, do you expect sequential quarterly growth given the deployment of the expanded sales force? Or are you seeing that seasonality plus the winter storms will still be headwinds here? And is there a plan to seek broader Medicare coverage for VUQUEZZA this year and if that's baked into guidance? Steven Basta: So Anthea, let me -- I'll briefly address the first part, and then I'll offer Sanjeev the opportunity if he wants to add more color on the seasonality in this process. We're clearly seeing the typical seasonality that occurs and the winter storms are clearly having some effect as well. We've seen slow weeks whenever the entire country is shut down because of an ice storm that has an impact. The -- it's -- we don't guide to revenue on a quarter-by-quarter basis with that granularity. So while we clearly acknowledge that Q1 is the weakest of the 4 quarters during the year, whether it's flat or up or down, we just -- we don't provide that quarterly guidance. What we've provided is full year guidance, but the underlying metrics that we're seeing in terms of our sales call activity the prescribing behavior of physicians, the growth patterns that we've been describing, all give us confidence in terms of where we're going to be on a full year basis. And so Sanjeev, if you want to chime in at all on seasonality? Sanjeev Narula: Yes. I think you pointed out, Steve, that we don't provide quarterly guidance. But I think what I said this time, if you look at in our kind of prepared remarks that we said earlier, if you look at the cadence of our business on a full year basis, we'll be roughly kind of same trajectory as we experienced in 2025. 40% of our top line revenue will be in the first half of the year, approximately 60% in the second half. And I said Q1 is going to be the slowest quarter because of typical seasonality. So I think that's kind of what we see, what the exact number is going to be. Obviously, you will hear that in the first quarter call that we talk about it. But clearly, it is the slowest to softest months because the typical seasonality. Steven Basta: And then the second half of your question, Anthea, I think, was related to Medicare. So we're not anticipating a fundamental change in broad Medicare coverage where we get coverage for all Medicare patients. What we are seeing is incremental Medicare prescriptions being covered either through medical appeals processes or through specific Medicare Part D plans. So as different Medicare Part D plans become more familiar with seeing VOQUEZNA prescriptions being submitted, they are beginning to cover those more frequently. And so we may see over time some increase in the number of Medicare scripts that are actually being processed and being covered, but it's not a broad coverage decision nor do we anticipate that there's going to be any broad fundamental change in a broad coverage decision on a system-wide basis for the entire population of Medicare patients. Operator: Our next question or comment comes from the line of Joseph Stringer from Needham & Company. Joseph Stringer: Just wanted to follow up on the previous question. Looking at the IQVIA prescription data and the impact of seasonality, is the magnitude of the seasonality effect this cycle in line with your expectations, I guess, all things considered? And maybe another way of asking is, are there any nuances about the launch now with the refocused effort that would make it more or less sensitive to seasonality? Steven Basta: So thank you for the question. It's really hard to characterize magnitude of seasonality one year versus another. What we're seeing is very similar to the pattern that we saw last year in terms of January being particularly light and then February is also light. And then by March last year, it started to pick up. So we would hope that, that same pattern -- not just hope, we actually expect that, that same pattern is going to come to fruition because you get several uplifts in March. We're coming off of the national sales meeting. Everybody is energized. We're going to have a full strength sales organization and physicians have had time to work through their plans. Patients who have switched plans now have time to figure out how they're going to get the drug covered. So all of those things that create noise in January as everybody is switching to a new health plan gets worked out in the first month or 2. So that effect just is there every year for a branded product, and we -- the specific magnitude of it varies by product. So we're starting to see what that pattern looks like for us. We're not seeing anything that's unusual in that regard. One thing that we have observed is the IQVIA reported numbers seem to be somewhat greater underreporting versus our internal numbers than historic norms. We think we've identified the cause of that, and that that's going to work itself out. But there may be a little bit of extra softness or delta in the IQVIA reported numbers versus what we're actually seeing. But the softness is real in January and February, and we think it starts to improve meaningfully in March. The other phenomenon that you cite is a real phenomenon as Anthea's question also had suggested that winter storms clearly not just had an effect on us, had an effect on a whole bunch of companies in the context of the slowdown for a week in January and slowdown for a week in February on the Northeast. So I don't want to overstate those -- that is I think the dominant effect is just the annual seasonality that we would expect to see every year. Operator: Our next question or comment comes from the line of Paul Choi from Goldman Sachs. Unknown Analyst: This is Daniel on for Paul. So we're curious about like if you could provide color on the proportions of prescriptions that are now filled to BlinkRx versus the new GoodRx that came online? And how is the economy of the channels versus the more traditional dispensary? Steven Basta: So there are several different parts to that. So let me take GoodRx first. GoodRx, we just turned on in November. And what that is, is -- I mean, already GoodRx had coupons on it for our co-pay support program. So if someone is at a pharmacy with a retail script and they need to get co-pay support because their insurance co-pay is high, they can go to GoodRx, they can get our co-pay card and in many cases, bring down the co-pay amounts significantly and in some cases, down to $25, which is our target co-pay where possible. The other thing that we turned on with GoodRx is the opportunity to do a cash pay purchase through GoodRx, which actually still would get reported into the IQVIA script numbers because it would be dispensed from a retail pharmacy, but there's a $199 option for a patient to purchase that. That's intended really for a patient who either can't access the co-pay card because they're on a government plan or for whom the co-pay would still be too high or would still be above $199 that it gives another alternative to a patient. Those numbers are still relatively small. It's a very small percentage of the overall number. It just got turned on in November. We'll give you a sense in future quarters. If that grows to be a meaningful number, we'll give some color on that. But at this point, it's a really small number. It's not a driver of anything, but don't want anybody to be surprised that, that option now exists. So we're trying to provide multiple ways for a patient in different reimbursement circumstances and different access environments to be able to know that they're going to be able to get access to the product as reasonably priced as possible. The percentage of scripts that are going through Blink, and I want to be sort of clear to distinguish between 2 things in this process. More than half of our prescriptions now in total are going through the Blink network to then be routed either as covered scripts to a pharmacy or as cash pay scripts to be dispensed directly through the Blink network. If -- when a physician sends a prescription -- designates a prescription to go to Blink, Blink will first adjudicate whether or not the script is going to get covered. If it gets covered, it shows up in the IQVIA numbers. It doesn't show up in our Blink cash numbers, even though Blink is an intermediary facilitated that process. So about half of our scripts in total go to Blink. They get routed. If they get covered, they show up in the IQVIA numbers. If they don't, they show up in our cash numbers. And as we described, something on the order of 36% of our prescriptions now are Blink dispensed cash scripts. So that's where the 2 different numbers are. That delta is scripts that are getting covered after they originally got sent to Blink. Matthew, does that address your question? Or was there a second part of that? Operator: Our next question or comment comes from the line of Chase Knickerbocker from Craig-Hallum. Chase Knickerbocker: Just a quick one. Steve, what inning do you think we are in as far as kind of getting reps to full productivity or kind of where you expect them to be after kind of shifting the focus in the fall, but also kind of changing the lines of like some of the geographical lines of a lot of these territories in the fall as well? Where do you think we are as far as the inning there? Steven Basta: Just to clarify, Chase, what inning of sales force transition? Chase Knickerbocker: Full productivity, Steve, as far as full productivity kind of with that transition in the fall. Steven Basta: Yes. So I think full productivity for a sales rep comes several months after the sales rep is on board because there is a training process, there's a learning process. It takes a month or 2 to get to know the accounts in your territory and to have scheduled all of the launch events. So we had a number of sales training classes that came in January and then our national sales meeting in February. By March, April, all of those folks are hitting the ground. I mean they're hitting the ground immediately after their training program. But within a month or 2, they've met most of the accounts in their territory, and they've got their launches scheduled and they've got momentum within each of those accounts and you start to see the real impact. So I would think we are to use the baseball analogy at the seventh or eighth inning of that 9-inning process of sort of the sequence of events where the sales force gets to be fully effective. Chase Knickerbocker: And sort of since that shift to focus in GI, have you seen kind of the increase in productivity that having more kind of condensed patient base at these prescribers would indicate? Or do you think there's kind of additional efficiency that we'll continue to kind of harvest over the course of this year? Steven Basta: Well, it's interesting. Even if the sales force is fully effective, you don't see the effect that day or that week or even that month in terms of sales because the majority of our prescriptions come from prior patients who have been prescribed the product who are getting refills, physicians who have previously already adopted the product who are prescribing it to an incremental physician. So what we are really doing is just moving the incremental adoption rate. So if you've sort of got a base 70%, 80% volume that's happening, you're really only impacting that 20%. Now if you become 30% more effective, that 20% goes to 26%, but it's 26% on top of a base 80% that already exists there. So when you see it, you don't see -- when you see greater effectiveness in our sales activities, you don't see an immediate change in revenue in a month. What you see is incremental effectiveness, but that incremental effectiveness is cumulative over time because the increased conversions of patients in that month aren't just scripts that month. They are refill in the next month and refill the next month and refill the next month and the incremental scripts in the next month, refill every month thereafter. So you see a cumulative growing effect. You don't have a sales force's activity turn into a sea change in revenue in that next month of revenue. If that makes sense as to sort of how these consistent use products end up building over time. Operator: Our next question or comment comes from the line of Min Lee from Guggenheim Partners. Min Lee: Congrats on the data. One quick question for me. What is the company's long-term vision beyond VOQUEZNA? I mean given that you guys have established this GI network, do you guys plan to utilize this network to consider maybe future partnership with companies that have already commercially ready GI assets? Or do you guys plan to maybe pursue any other indications beyond EoE? Steven Basta: So Min, thank you for the question. So at this point, the only new indication that we're pursuing actively is EoE for VOQUEZNA. There are other indications and other populations that are of interest that we're evaluating. We've made no decisions. For example, we did a Phase II trial for as-needed use, haven't made a decision yet about whether or not we wish to pursue that in a Phase III program, but there are other populations that also could be of interest. Our long-term growth plan, as we have indicated, is to build a GI company that will bring in additional assets. This year is very much a year of consolidating our execution plan building deep relationships at every gastroenterology office. The 300-person field force is going to have those deep relationships and is going to be fostering them and build a leverageable base that we could bring a second product into. We are also starting BD activities to explore what other products would make sense either to bring in a commercial product potentially or very possibly a Phase II or Phase III clinical stage product that could launch in a 2030, '31, '32 time frame before we get to our LOE date so that we're launching not just probably a product, but 2 or 3 products over the course of the next 4 or 5 years that would build out a GI pipeline. So we're starting those conversations. We have had people bring us several ideas that are interesting. I don't feel any urgency that we need to distract our sales force to the second product right now. We just need to grow VOQUEZNA. We need to just execute on our core activity set, but we are actively thinking about what products would make sense to bring in to launch over the next 2- to 5-year period of time, and that could mean products at various stages from commercial down to Phase II stage. But it has to be launchable within the next 2 to 5 years, so that's launched before our LOE date in 2033 or '34. Operator: Our next question or comment comes from the line of Martin Auster from Raymond James. Martin Auster: Congratulations on the successful 2025 and in particular, the recent steps you guys have taken to strengthen the balance sheet. I'm going to maybe follow up on one of the earlier questions on -- I appreciate your comments you guys made on Q1 seasonality. I guess I was curious if the plan resets and other factors that kind of contribute to seasonality, does that drive an uptick in the rate of cash pay patients you'd expect to see in the quarter? And then also on the gross to net guidance that Sanjeev provided, curious if there's any trends that are assumed within that 55% to 59% range or if that metric is expected to be pretty steady overall throughout the year? Steven Basta: So thanks, Martin. Appreciate the kind thoughts on the questions. I'll take the first half, which is around cash pay and the second half, I'll give to Sanjeev in terms of GTN and sort of expectations. We would expect that we'll see some uptick in the amount of cash pay patients. I don't have any guidance on how much that is. I don't think it's going to be too significant in that process. But you'll see some patients who have a high deductible plan where they will be able to get access to the product on a cash basis from Blink. And then as they work through their deductibles, they would then be able to get it covered at some later period. And so you may see some movement in cash pay percentage in the early months of each year. That's not just this year, that would just be in general as a pattern in this process. We don't provide guidance on what that mix is going to be on a quarter-to-quarter basis, but that would be a typical feature of the seasonality patterns that one might expect. Separately, in terms of GTN and patterns and trends on GTN. Sanjeev, do you want to take that? Sanjeev Narula: Yes. Yes, I'll take that, Steve. Thank you. So Martin, as you saw like in 2025, so we kind of narrowed the guidance, if you recall, in our Q3 call to 55%, 60%. And right through the last year, we were kind of operating within that range. Quarter-to-quarter, there are variations because your planned business may change from one quarter to the other. But overall, it was very consistent and stable. And that's kind of what I expect in the guidance that we gave early this morning, 55% to 59%. Overall, for the full year, we'll be within that guidance. Quarter-to-quarter, there could be changes depending on how the plan flows and the business flows from that perspective. Operator: [Operator Instructions] Our next question or comment comes from the line of Matthew Caufield from H.C. Wainwright. Matthew Caufield: We had one question on the landscape that came up from investors. There's a separate private company with later-stage clinical development in non-erosive reflux disease and erosive esophagitis based on the P-CAB formulation. And just curious on your longer-term thoughts on any prospective entrants into the P-CAB space later into the future and maintaining VOQUEZNA's positioning. Steven Basta: Matthew, thanks so much for the question. I apologize I muted for a second to cough. I just had a little bit of cold. But -- the -- I think you're likely referring to Sebela, which is a company that has tegoprazan in development. There is actually an additional P-CAB that's in development that's many years out. So we clearly track competitive developments, all of the P-CABs. And tegoprazan is a good product. We expect that it will go through the NDA process, and they filed their NDA in January, reasonable to expect they may be approved by early 2027, but it's not really for us to predict exactly what that time frame is or what questions might arise. One of the things that we think about is how does this market evolve as a second entrant in the P-CAB space comes in. And it's interesting there's one framework where sort of a question can arise are 2 P-CABs going to compete against each other. There's a different question, which is we're competing in a space of 110 million PPI prescriptions per year. And we've only done 1.1 million prescriptions overall since launch. So we're tracking now at a run rate that's running about 1 million prescriptions a year. So we're at 1% of the PPI market. If a second entrant comes in, they're not going to be trying to take prescriptions. We're both going to be growing the P-CAB awareness in the context of the market where patients are on PPIs and are significantly in pain on PPIs. The entry of a second product in a new category actually does have a tendency to change the mindset of physicians where it's no longer do I need to pay attention to this product if you're the first entrant, but it's -- do I need to pay attention to this category. And that increase in category awareness, I actually think will accrue to our benefit that the majority of prescriptions tend to go to the first entrant that has more history with which physicians are more comfortable that already has broad access. So the second entry tends to grow the category broadly and tends to grow revenue for both parties in that process. So we're actually thinking that it has a net positive effect on the P-CAB adoption broadly to have a second sales force out talking about P-CABs and how much value they can bring to a patient who is still in pain on a PPI. So we're looking forward to that broadening and that shift in mindset of physicians that you really do need to adopt PPIs. We think we've got great product. We think that physicians have been -- we know physicians have been really pleased with the effect that this has to their patients and patients who take this product love it. All of that is going to reinforce the fact that the lead product in the category gets the biggest uptick. Matthew Caufield: Congrats again on VOQUEZNA's trajectory. It's great to see. Operator: I'm showing no additional questions in the queue at this time. Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.
P. Williams: Well, good morning, everyone, and welcome to Derwent London's 2025 Full Year Results Presentation. And before moving on to the results, you will see another news this morning and a strong set of a building in Whitfield Street, more to follow. Now the order of today's presentation is slightly different. As well as, you'll be hearing from Emily and Damian. While Nigel is not on the stage, he is, of course, here for some Q&A. Now turning to Slide 2. The group's business model and portfolio provide strong foundations on which to build on an exciting and successful future. Our portfolio is strategically positioned with 75% in the West End and 81% within a 10-minute walk of Elizabeth line station. These are London's best performing areas. It is high quality with significant embedded reversion potential, a diverse tenant base and robust vault. Flexibility has always been fundamental to our approach, and we look to continually adapt our portfolio to evolving market conditions to ensure that we are well positioned for future market evolution. We have an exciting West End focused development pipeline in some of the strongest submarkets, presenting a real opportunity to drive rents and, therefore, returns. Our schemes are designed to meet the full spectrum of occupier demand from the London commands, headquarter space, which serves our core customer base as well as furniture flex product, all delivered to our exacting standards and complemented with high-quality amenity. We also have good visibility on income growth. Our reversionary potential of GBP 70.9 million will come through into earnings as we continue to lease up and deliver the best phase of next phase of schemes. but we're not standing still. There is substantial opportunity ahead to create further value. Now turning over. 2025 was a solid year of execution. We completed asset management transactions with rental income of nearly GBP 60 million, a record year. And in the context of a low vacancy rate, we agreed over GBP 11 million of new lettings at rents 10% above ERV. In terms of disposals, we sold GBP 216 million in 2025 and 2026, we're off to a good start. Since the start of the year, we've exchanged contracts of GBP 140 million, including Whitfield Street announced today with a further GBP 140 million under offer, broadly in line with December book values. Proceeds will be redeployed into higher return opportunities, including selective developments, acquisitions and other accretive alternatives. Emily will provide more detail in this shortly. 2026 has started with strong momentum with GBP 1.5 million of new leases completed, and we're under offer with a further GBP 14.4 million, including all of the offices and network. In addition, there is GBP 4.4 million in negotiations. Slide 4. This momentum provides a momentum -- a springboard for growth. Our market outlook informs our immediate action plan, which is focused on accelerating returns through active portfolio management and disciplined capital allocation. We are now past the inflection point with the outlook characterized by 3 powerful drivers. Firstly, London, which is our market, we have an unrivaled expertise in demonstrating its enduring dominance as a European and -- on the European and global stage. Once again, it is proving its resilience and agility in adapting to change, reinforcing its position as Europe's undisputed business capital. Secondly, the ongoing strength of the occupational market, supported by high demand and very limited supply. You will hear more on this from Emily in due course, who'll provide further context on this. Finally, improved liquidity in the investment market driven by a return of capital flows both into London and into offices. Turnover is up with larger lot sizes now transaction. The combination of our proactive execution and positive market dynamic gives us the confidence to increase our 2026 ERV guidance for our portfolio to plus 4% to plus 7%. I will now hand over to Emily and Damian, who will take you through our immediate strategy and provide more detail on the financial outlook. Thank you. Emily Prideaux: Thank you, Paul. Looking now at our immediate priorities. Our near-term strategy is clear, firmly focused on returns, position the portfolio to capture the strongest rental growth and capital appreciation opportunities through active portfolio management and disciplined capital allocation with a clear focus on execution and total return on capital. Recycling will accelerate. We plan to dispose of up to GBP 1 billion over the next 3 years and at a faster pace than our historic run rate of GBP 200 million per annum. These disposals will be focused primarily on mature assets where the business plans have been delivered or where prospective returns are lower than alternative opportunities available to us. Capital redeployment will be disciplined and returns driven. We will systematically assess the relative merits of all options open to us at any one point in time. The foundations of our capital allocation framework will be built on maintaining a strong balance sheet and a net debt-to-EBITDA below 9.5x. Within that framework, we will consider share buybacks alongside selective development where we have confidence in strong returns and strategic acquisitions that support a pipeline for the next decade and contribute to long-term value creation. Overall, our focus is to proactively manage the portfolio to ensure an appropriate risk return profile that delivers both earnings growth and attractive total accounting returns. Damian will cover this in more detail shortly. So what does this look like in practice? HQ offices will remain our core business, where we continue to have strong conviction. We will also continue to deliver flex and do so at proportionate levels aligned to market demand and in a way that ensures sensible cost ratios and a simplified operational model that is portfolio rather than asset by asset led. As such, our overall flex offering will likely grow to circa 10% to 15% of the portfolio from the current circa 8%. Both our HQ and flex workspace are supported and enhanced by our DL member platform. Whether we're buying, selling or investing, we will do so within a disciplined risk return framework that balances income resilience and earnings growth with value creation. This may well involve the acquisition of core plus assets in the future as well as the development projects we are well known for. We will selectively develop those office schemes where we have confidence in the medium- to long-term returns. These include Holden House and Middlesex, where we are already on site as well as Greencoat & Gordon and 50 Baker Street, both due to start later this year. In addition, we will seek to drive value via strategic unlocking and alternative uses on sites, working alongside relevant partners to maximize returns. These include Blue Star House, Old Street Quarter and 230 Blackfriars Road, and we'll touch more on these later. Finally, we have an established brand and platform, and we believe there's opportunity to leverage this more effectively. This could take the form of development management fees, promotes, partnership structures or other arrangements that are returns accretive. I'll now hand over to Damian, who will provide more detail on the balance sheet as well as the outlook for earnings and total accounting return. Damian Wisniewski: Thank you, Em, and good morning, everyone. So taking a look at our returns outlook and earnings first. The 2 large recent projects at Network and 25 Baker Street are now essentially complete. Baker Street provides annualized rent on a net effective basis of about GBP 18 million a year or GBP 22 million headline. Based off ERV at the year-end, Network's annualized rent will be about GBP 11 million or GBP 13.7 million headline, and we expect rental income here to commence around the middle of the year. Our debt refinancing is complete for now. Our average interest rate increased in June '25, but is now expected to be largely stable through to 2031. Admin expenses were reduced in 2025, and we're targeting further cost savings to come. So with rental values growing and cost inflation easing, we now expect to see another period of earnings growth over the medium term. This feeds into our total accounting return outlook, too, also expected to benefit from improving development surpluses on our carefully chosen schemes and accelerated capital recycling. We will not lose our well-established financial discipline. That is based on low leverage, a focus on balancing value creation against interest cover and earnings and our 18th consecutive year of increased ordinary dividends. Now looking at the earnings outlook in more detail. We currently expect 2026 rental income from 25 Baker Street and Network to be about GBP 18 million higher than it was in '25. This will be supported by rent reviews and other new lettings across the portfolio. We've allowed for disposals of about GBP 400 million this year, but the earnings impact is small as the average IFRS rental yield is close to our marginal interest rate. West End projects, including Holden House and the refurbishment of Middlesex House, will, however, reduce earnings in the short term. There are also additional voids at Page Street, which is being marketed for sale and 50 Baker Street. We're targeting further cuts in admin costs this year. And after disposals and CapEx, we forecast our average debt to fall. However, the refinancing of the convertible bonds in June last year increased our weighted average interest rate by about 50 basis points. We're also expecting about GBP 6 million less interest to be capitalized in 2026 than in '25. Putting this all together, we therefore expect 2026 earnings to be about 42p to 44p a share in the first half, followed by 52p in the second half. That is 10% ahead of H2 '25. So overall, about 3% to 5% lower than in '25, but rising significantly in H2. 2027 should then see EPRA earnings step up. We estimate that about 5% to 10% growth from the 2025 level or about 15% above '26 levels. And this is as growing rents are captured and we capitalize more interest. And then by 2030, we see earnings rising very substantially. Our models indicate at least 25% to 30% of uplift as rental reversion is captured and income flows from completed projects at Holden House, 50 Baker Street and elsewhere. Now considering the total accounting return. The 3 main building blocks are shown on this chart: earnings, capital growth and development returns. These are now supplemented by a fourth, a renewed focus on accelerated disposals to provide further options to boost our returns. Earnings first and assuming investment yields in our sector remain stable, 3% or a little more based on NTA is a realistic level. As the NTA grows, so will earnings. Next, capital growth, where we believe 3% to 5% of NAV is a reasonable outlook, allowing for the rental growth we're now seeing, backed by stable investment yields and allowing for a typical 1% or so adjustment for CapEx and voids. The third aspect is the increasingly attractive development returns, now growing again after being squeezed over recent years. IRRs up to expected letting are now regularly hitting 10% or more for our current and future projects, but rental growth could push these further. Our analysis shows a positive development contribution every year since our first major scheme in 2010. The final element is to free up capital from the higher disposals mentioned earlier into an improving investment market. This could be for future value creation schemes as well as potential share buybacks should that be more attractive at the time. We've set a GBP 1 billion sales target over the next 3 years, which could provide up to about GBP 250 million of excess capital. That's after allowing for planned schemes and the acquisition of Old Street Quarter in late '27. So now moving back to our 2025 results and the financial highlights. We show a solid performance for 2025, the net tangible assets up to 3,225p per share and a 5% total accounting return. Gross and net rental income was slightly higher than 2024, but EPRA earnings were affected by lower surrender premiums and higher finance costs after the midyear refinancing. Note also that our trading profits are excluded from the definition of EPRA earnings. Our debt metrics were all very sound, helped by the disposals totaling GBP 216 million and a busy year of refinancing. Finally, the dividend, which has been increased again by 1.2% and remains well covered by EPRA earnings. Next, the 2.4% uplift in EPRA NTA over the year. After dividends, the group retained 25p per share from earnings, including 8p from disposal profits and other items. The trading profits all came from our 25 Baker Street scheme, the majority from the sale of 24 out of the 41 residential units at George Street. The revaluation surplus in 2025 was equivalent to 51p per share. Of this, 20p or about 40% came from development surpluses. These figures are after slightly higher-than-normal deductions for additional CapEx and voids in 2025, together about 40p per share. Now the next slide, some additional valuation data. As in 2024, our ERVs grew at about 4% with the West End outperforming. Valuation yields remained stable, helped by the rental growth outlook and moderating central bank rates and inflation. Our topped-up initial yield on an EPRA basis at the year-end was 5.1% and the true equivalent yield was 5.71%. The portfolio remains good value with average topped-up rents around GBP 65 per square foot. Now EPRA earnings. These are set out here with the 3 main categories: property, admin and finance. Gross rents were up by GBP 3.5 million. And after property costs and impairment, net rental income was slightly higher than 2024 too. However, surrender premiums were GBP 2.5 million lower this year. So overall, net property and other income was GBP 1.7 million down on 2024. As mentioned earlier, we focused on cost efficiencies again in '25 and admin expenses were down by GBP 2.4 million on an EPRA basis despite inflationary cost pressures. Net finance costs were up significantly in the second half of the year. This is mainly due to the GBP 175 million of convertible bonds, which had an IFRS rate of 2.3%, being refinanced in June with new 7-year bonds at 5.25%. This took our weighted average interest rate up by about 50 basis points over the year. Average debt was also GBP 110 million higher than in '24, though this was partly offset by GBP 2 million -- GBP 2.9 million more capitalized interest. The higher finance costs took EPRA profits down to 98.4p per share. But if we add back the trading profits, which are excluded from EPRA EPS, adjusted EPS was 102.1p. The next slide shows movements in gross rents. After a delayed completion date, 25 Baker Street contributed GBP 5.4 million in 2025 and the retail units at Soho Place, another GBP 0.9 million. Other lettings and asset management transactions added GBP 7.6 million. GBP 10.2 million of income was lost due to space taken back or becoming vacant. Like-for-like gross rents were up 2.4%, impacted by our EPRA vacancy rate increasing from 3.1% to 4.1% through the year. We incurred GBP 182 million of CapEx in 2025, almost half of which was at Network and 25 Baker Street. The ungeared IRR up to PC at Baker Street was 11.3%, with network expected to deliver between 8% and 9% and we'll update these figures later in the year. These both represent good returns after significant yield expansion through the life of each project, helped by disciplined cost control and rents almost 20% above original appraisal levels. CapEx in 2026 is expected to be 22% lower at about GBP 142 million. 50 Baker Street is not yet committed, but we do expect it to move ahead in the summer and are particularly optimistic about return prospects here. Emily will take you through these later. Next, the ERV bridge, which we're now showing on a net effective rent basis to help make earnings forecasting easier. The previous headline rent basis is also shown at the bottom of the chart. Total rental income reversion is now GBP 70.9 million after incentives allowed at 20% and with GBP 216 million of future CapEx. Note that the pure reversion on the right-hand side from reviews and expiries remains at GBP 15.9 million, but this figure is after reclassifying GBP 3.8 million of reversion into the major projects category. Now refinancing. And as noted earlier, we were busy in June, issuing new unsecured 7-year bonds and redeeming the convertibles. As noted, this caused our weighted average interest rate to rise, giving an average through the year in 2025 of 3.8%, up from 3.3% for the whole of 2024. We expect our spot rates to fall in March 2026 when we repay the 6.5% LMS bonds. This should keep the average for 2026 at around 3.8%, but we believe lower in the second half than in the first. Redeeming those LMS bonds will also mean that by the end of Q1, all of our debt will be unsecured. At the moment, we're not expecting to issue any more fixed rate debt in 2026, any funding needed most likely coming from bank facilities. However, it's good to know that other debt capital markets remain both liquid and competitive with margins looking increasingly attractive. Our debt position is summarized on the last slide with all debt ratios and covenants comfortable. Cash and undrawn facilities rising over the year to GBP 627 million. Fitch retained our A- senior unsecured rating last year since when our gearing has fallen. Our borrowings had a weighted average unexpired term of 4.2 years at year-end and net debt to EBITDA was reduced to 9x. We anticipate it falling further through 2026. Thank you. And now back to Emily. Emily Prideaux: Before moving to our operational activity, let me set the scene with an overview of the London office market, where we have good reason to be optimistic as we look ahead. Firstly, London itself, where we have the highest concentration of top universities worldwide, providing an unmatched talent base. It is Europe's unicorn capital and #1 VC investment as well as Europe's leading financial center. It also ranks third globally for AI venture capital investment behind only the Bay Area in New York in the U.S. and is Europe's biggest hub for generative AI. We recognize the ongoing debate on this topic, and it will, of course, change how people work. Overall, we do not believe AI will remove the need for high-quality offices, and we believe London is one of the global cities best positioned to benefit given its depth of talent, innovation and global connectivity. As with any fast-moving driver of change, we will stay close to these developments and be ready to adapt as the opportunity evolves. London's strength is also reflected in sector diverse office demand, underpinned by a broad knowledge-based economy and finance, technology and creative industries all in growth. This global city attracts both blue-chip corporates and high-growth occupiers, and its diversity makes it significantly more resilient through the cycles. London is where global businesses want to be. And the office occupier market fundamentals are strong. 2025 saw robust activity, 11.4 million square feet of take-up with over 3.5 million square foot under offer. Importantly, 80% of deals over 20,000 square foot were expansionary, signaling genuine business growth. Vacancy remains low and prime vacancy sub-2%. Looking ahead, we expect a significant supply punch, rental growth and lease events working in landlords saver with occupier renewals extending income and rent reviews now delivering good reversion. The occupational market is inflecting positively, and we're well positioned to benefit. And what are occupiers looking for? Real estate quality matters more than ever, buildings with a rival impact, rich amenity, flexibility and quality, be that retrofit or new build. Location and connectivity, very important, proximity to crossrail, transport more generally, talent and amenity. But critically, all that London has to offer is what makes it a city, which attracts domestic and European businesses and HQs. The scale and depth of industry and skill is unmatched in Europe. We understand these drivers. Our portfolio is built around them, and our forward-look strategy is designed to capture the value they create. Finally, turning to the investment market. Liquidity is now improving. Investment volumes in 2025 totaled GBP 7.1 billion, a 40% increase on the year previous. Yields have stabilized. The market has inflected and investor confidence is improving, driven by a strong occupier market and supply crunch, as we heard earlier. 2025 also saw the return of the large lot size transactions with double the numbers seen in the year before. This is a trend we're expecting to continue in 2026 as debt costs reduce, boosting overall levered returns. GBP 23.5 billion of equity is now targeting London, an 18% increase on 2024, and Knight Frank reported in a recent survey that offices are the most targeted sector by investors in 2026. Geopolitical events elsewhere are enhancing London's appeal and its position as global safe haven. All this means that we are expecting a further increase in turnover in 2026 to over GBP 10 billion, and this will contribute positively to our plans for disposals. Now to our own portfolio activity. We completed GBP 216 million of disposals in 2025, and we exchanged contracts for disposals totaling GBP 145 million in 2026 so far. In addition, we have GBP 135 million under offer and are in discussions on GBP 100 million. These sales support our target of GBP 1 billion of capital recycling into an improving investment market where proceeds can be more effectively redeployed elsewhere into higher return opportunities. In addition, we will continue to selectively hunt for value-creative opportunities to acquire, be that to support medium, long-term value through development or to support income in the nearer term. Turning to leasing performance. 2025 was a resilient year with GBP 11.3 million of new leases signed, around 10% ahead of ERV. As the chart shows, leasing activity across the standing portfolio has been broadly consistent with long-term averages for a number of years. Excluding pre-let, this highlights the strength of underlying demand for our space. And we've started '26 with strong momentum, GBP 14.4 million under offer, including all of the space at Network as well as the GBP 1.5 million transacted and a further GBP 4.4 million in negotiations. These figures support a strong year ahead for leasing activity. Turning to Slide 29 and asset management. '25 was a record year for asset management with transactions completed across GBP 59 million of income, almost 30% above our previous peak. More importantly, though, was the quality of what we achieved. Our focus was on capturing reversion, extending income and aligning lease profiles with our longer-term asset strategies. Through early and proactive engagement with occupiers, we were able to structure transactions that balance flexibility with greater income visibility while mitigating void risk and future capital expenditure. Rent reviews of GBP 37.4 million secured over 7% above previous rents, reflecting the strong rental growth across submarkets and renewals and regears with long-standing occupiers, extended lease lengths and deepened relationships. Transactions such as Adobe at White Collar Factory and Burberry at Horseferry House demonstrate the strength of our occupier partnerships and reflect the positives for us of occupiers taking the stay put option, while major rent reviews at Brunel and 80 Charlotte Street enabled us to capture good reversion. Overall, this was a year where active management translated directly into stronger income security and enhanced reversionary potential. And this will be an important part of business activity as we look ahead in this market. Moving to developments. At 25 Baker Street, which completed in August 2025, offices were 100% pre-let at 16.5% above appraisal ERV, generating headline rent of GBP 21.7 million and an ungeared IRR of 11.3%. And at Network W1, the offices are now fully under offer. Practical completion of the building is expected within the next week. Full details of the financials on this will be confirmed once transacted in coming weeks. We've maintained good returns on these schemes in spite of significant outward yield shift. Looking ahead, we have a focused and disciplined development pipeline, which remains a core part of our business model and driver of future returns. We're making good progress on site at Holden House and strip-out works have commenced at Greencoat & Gordon. Both of these schemes are in well-connected locations in submarkets with strong demand and limited supply with completions targeted in 2027 and 2028, respectively. We're also on site now with the comprehensive refurbishment of Middlesex House, where we're giving new life to this tactful 1930s Art Deco warehouse building in the heart of Fitzrovia. Together, these schemes, 2 of which are traditional refurbishments, represents a substantial value opportunity for the group with double-digit attractive expected returns. And importantly, this growth potential is already within the portfolio, driven by projects under our control, providing clear visibility over future earnings and value creation. At 50 Baker Street, we're due to commence an exciting new build development later this year. This is a scheme positioned in a submarket with very limited supply, great connectivity and strong growth prospects, which deliver all those things on the occupier wish list, amazing arrival and amenity, large floor plates, flexibility and quality design and architecture, of course. Our base appraisal shows strong returns with rental growth expected to enhance them further given the strength of the Marylebone occupier market as well as the product to be delivered. Alongside our near-term development pipeline, we also have over 1 million square foot where we are actively exploring alternative primarily living-led uses and strategic partnerships to maximize long-term value creation. At Blue Star House working with an operating partner, planning consent is in place for apart-hotel development scheme. At Old Street Quarter, we are working with related Ardent in a development management capacity for the time being to progress a mixed-use living-led campus. Importantly, the structure of this allows flexibility over delivery, including joint ventures, forward funding or indeed plot sales, allowing us to deploy capital selectively and efficiently. And at 230 Blackfriars Friday Road, early feasibility work indicates significant residential-led potential with scope to materially increase floor area. Together, these assets provide meaningful optionality to partner, develop directly or realize value through sales. So in summary, operationally, 2025 has been a strong year, accelerating capital recycling as liquidity improves, resilient leasing activity, record asset management activity, successful delivery and pre-letting of major developments and a disciplined pipeline with attractive expected returns. Now over to Paul, who will wrap up. P. Williams: Thank you very much indeed, Emily. Now to outlook on Page 35. As you heard, there is significant activity across the business. We are busy. GBP 140 million of disposals signed since the start of the year with a similar amount under offer and a further GBP 100 million in negotiations. The stage is set for 2026 to be a strong year for leasing. And we're on site of 3 really exciting projects, which we have forecast will deliver an average IRR in excess of 10%. We have a clear plan for the accretive redeployment of disposal proceeds as we seek to balance near-term income with value creation in the medium term. This includes potential share buybacks. London feels different. The fundamentals are good. The office cycle has really turned a corner. Rents are growing strongly. Investment liquidity has improved markedly with London offices being the most demand sector. There has been a notable pickup in activity. We're seeing more inquiries from potential occupiers and increasingly broad range of investors are knocking on our door. And this is the foundation of our ERV increase for 2026 to plus 4% to plus 7% and our confident financial outlook. Now a personal reflection. As you know, I've made a decision to retire after 38 years at Derwent. I've been with the business man and boy, and I'm proud of what we have achieved over that time. I'm excited for 2026 and beyond and that the business is well placed with a great team. Thank you. We're now going to take questions from the room and then from those who are joined remotely. P. Williams: Questions, please. Thomas Musson: It's Tom Musson at Berenberg. A question first on the perceived AI risk to tenants. The market is beginning to price some of this in recent share price moves. Interestingly, a lot more in the U.S. Would you expect property valuers to react here, perhaps assuming greater tenant covenant risk or changing assumptions around lease renewal probabilities? Just would be interested if any of this has been part of conversations you've had with them. Emily Prideaux: Yes. I think, firstly, one of the benefits we obviously have is how close we are to our occupiers and indeed other occupiers in the market. So any area of change like this will always stay close to. I think in terms of the property sector more specifically in the valuation point you read, there's 2 strands to the AI debate at the moment. One is the direct demand versus the indirect impact, if you like. To date, we're not seeing that reflected negatively by any means in the valuation piece. I think the covenant point is as with any of the other big tech booms we've seen over the cycles. There will obviously be winners and losers in that. And from our perspective, we always take that covenant risk piece very seriously. But on a more general piece in terms of the AI story, I think we feel, as I mentioned, that globally, I think London is somewhere that should really position themselves well for that. But it's something we're going to stay very close to as things evolve. Thomas Musson: Second one, you mentioned potential share buybacks in the event of being in a surplus capital position. At what point would you consider yourselves to be in a surplus capital position? Do we wait until you've cleared this year's CapEx requirement, for example, or some of next year's too? Just interested how you think about that. P. Williams: Look, we have a plan to sell something over GBP 1 billion over the next 3 years. We started off really well this year. We have got some investment going into the portfolio for really accretive developments. But as we build up those resources, I think we should have a good look at that and be open-minded. Damian, do you want to add a bit to that? Damian Wisniewski: Yes. Tom, it's a good question. I think let's get some disposals out of the way. We've made a good start to the year. Personally, I think we need to get sort of 200 plus under our belt before we can seriously look at what we do. We do have Old Street quarter coming up in probably late 2027. So we need to look at that in our forward funding plans as well. So I think the GBP 400 million this year is a good start. We've mentioned there could be up to GBP 250 million of excess capital over the 3 years. That doesn't mean to say we have to wait for 3 years. So I think we will look at this as we go, and we will see how things progress. I don't want to commit to a particular number today, but I hope you can see how we're thinking about this. Thomas Musson: That's helpful. Maybe if I could ask one last one, just on the residential sales at 25 Baker Street. I think at the half year, you'd exchanged on 23 of the 41 units today. I think you say you sold 24, so one more. What's the demand like right now for those? And are you having to meaningfully adjust price there to generate interest at this point? And should we address our trading profit expectations for the rest of the units? P. Williams: I think we started off really well with prices well above our underwrite and there's some very strong prices, particularly for the bigger units, GBP 3,700 a square foot. We've got a little one that's left. They will take a little bit longer time, but they're great flats in great location, but it will take a little bit longer. Damian, do you want to add to that? Damian Wisniewski: Yes. Just one other point to make is that the 2025 result included the cost of all the affordable housing. So from here on, it's essentially profit. Now the market has definitely got slower, and I'm pretty sure we'll see pricing coming off a bit. But we've got quite good headroom here. So confident that at some point, we will see a pickup. A lot of beds for sale. So if anyone is interested, please let us know. Adam Shapton: Adam Shapton at Green Street. I had to put my hand down then when Damian bed didn't want to look I was volunteering. Firstly, congratulations, Paul and Nigel, on retirement, let me say that. Before I get into questions. Just a clarification on the GBP 1 billion of disposals number. Is that in addition to what's already exchanged and under offer or... Damian Wisniewski: No, GBP 1 billion includes the figures that we've done this year. So GBP 1 billion over -- we would have done GBP 280 million, I think, as the deals get done. So that's a good start. So we're hoping that we're going to get something close to GBP 400 million this year. So that's the plan. Adam Shapton: And just in that context, if I may say 3 years sounds quite conservative to do another GBP 750 million. What's the limiting factor there? I mean you talked about improving market. You quoted Knight Frank on all the equity... Emily Prideaux: Don't view the GBP 1 billion as a cap. I think what we're looking to do is proactively dispose here mature assets where the business plan is delivered and where we think we can deploy other more accretive opportunities. So it's not a fixed number per se. And depending on the market and where we're at in terms of other opportunities that may move. Adam Shapton: So both the number and the time scale might conservative. Is that fair? P. Williams: We're seeing liquidity improving because obviously big assets are GBP 100-odd million today. Last year, I think they doubled GBP 100 million the year before we difficult. So I think as we see liquidity go up, and if we can get a strong price for those assets, we're going to be realistic and sensible. But I think we want to make sure when we do sell, we sell well and we sell at the right price with the balance sheet in good place. I want to make sure that we do it strategically. Richard and his team are well set up to do that. And I'd say we will accelerate disposals and we see a strong price for something and we can use the money more accretively, we would certainly do that. Adam Shapton: Great. Just 2 more. On the flex growth, Emily, you mentioned going from 8% to 10% to 15%. I think I'm right in saying the 8% is a mixture of F&F and third-party operators. Emily Prideaux: Yes. Adam Shapton: So what's the shape of that? Emily Prideaux: The growth from 8% to 15% is more around our portfolio and what expires within that time frame of a size and location where we think will naturally move to flex. So it's not proposing that we're going out shopping per se for an extra 7% of that stuff. It's more that we're looking at where the sub 10,000 square foot units coming back in the right submarkets and they will likely convert. Adam Shapton: Okay. But we should expect to be more your in-house as it were rather than leasing? P. Williams: We've got a number of refurbishments at the moment, which I think we're ideally placed for that sort of thing. Adam Shapton: Okay. And maybe somewhat related to that, on admin costs, you made some good progress. How should we think about a floor of where that could get to in today's money? Given your strategic ambitions, you want to sweat the platform more, where could the... Damian Wisniewski: I think our target for this year is another couple of million. I think at that stage, that feels like it's quite lean. There would have to be quite structural changes before we can go much lower than that. But that's a reasonable target for now. Callum Marley: Callum Marley from Kolytics. A couple of questions. Outlined the new strategy today with disposals and buybacks. But the stock has obviously been trading at a material discount now for a few years, and you've had a while to act on it. Why are you committing to this now? Emily Prideaux: I think in terms of the strategy, in terms of -- we're looking at all optionality here. So we're disposing, but then obviously focusing on the balance sheet. You've seen track record of development and investment where we're committed and where we want to commit. Obviously, looking at the dividend and as Damian touched on, which you can pick up on the share buybacks come as and when we reach that surplus. So it's looking at the whole picture and that optionality around that, keeping open-minded to that. Damian Wisniewski: I think also the key really is how the investment market is now opening up. we have had 2 years where it's been quite challenging to sell large lot sizes. And as a result, the leverage has crept up a bit. The balance sheet is still strong, but maintaining a strong balance sheet has always been one of our foremost requirements. we now have more options coming open to us as well. So -- and the other thing, of course, is maintaining earnings. And you've got the situation now where the IFRS yield on most of the things we're looking to sell is probably very close to our marginal interest rate. So the earnings impact of disposals is much less than it was, say, 3 or 4 years ago. So I hope that gives you some idea as to how... P. Williams: I think that's the point with the market opening up more liquidity, give more opportunity to sell and consider what we do with that money. So I think that the market equity has improved a lot. Callum Marley: Got it. And then the 25% earnings growth target, is that built on sustained rental growth? And if so, what's the number? Damian Wisniewski: The rental growth to 2030, essentially, what we're doing is we're building into our models some growing reversion from rental growth of around about 4% per annum. We've also got, I think, expecting increasingly attractive returns from projects like 50 Baker Street and Holden, where the gearing impact as well, it improves those returns still further. You factor that in, about half of the rental growth comes from those 2 projects and about half of it comes from the rest of the portfolio. Callum Marley: So 4% is the... Damian Wisniewski: So roughly 4% per annum is what we're putting in our models going forward, yes. Callum Marley: And if I could just ask on Page 22, just looking at the prime office rents, seem to be flat from 2015 to 2019. What makes you think that '25 to 2030 that is going to be 4% a year going forward? P. Williams: I think -- firstly, I think there's a pretty tight supply crunch and that demand is pretty good. People are growing. 80% of the deals last year with 20,000 square foot people were growing. Rents do need to increase in order to -- a small proportion of people's outgoing. So I think if people want to be in good locations, they need to pay the right rent for the right location. So I think it is time for landlord to earn a bit more money. So I think we feel pretty positive about it. Last few years, despite the difficult macroeconomics, we've been consistently letting at 10% above ERV. We have strong visibility about inspections and viewings and tenant demand. So I think we feel pretty positive about. London is a place to be. People want to be in town. Emi, do you want to add to that? Emily Prideaux: Yes. I think the 4%, if you look at the sort of big houses prospects over the next 5 years, that's probably pretty conservative. I think the supply crunch is a big driver at the moment. London has got a supply shortage that we haven't seen before. Part of our repositioning is making sure we're in the right place for that. But I think the 4%, we're pretty comfortable with from a market perspective. And this year, we're in a place where every submarket in London is now projecting growth, whereas before it has been much more spiky following COVID. So you're really seeing that evening out now in terms of a more lateral growth across the city. Damian Wisniewski: Rents have fallen behind other costs quite substantially over the last 5 years. They're now beginning to catch up, and we're seeing our rents growing now at a slightly faster rate than overall cost. But really, that's been squeezed quite a bit over the last 5 years. If you go back to the last big rental cycle, which was sort of 2012 onwards to 2015, our earnings pretty much doubled in that period. And I'm not forecasting a doubling, that would be nice. We'll come back next year, hopefully. But I think our 30% increase feels very realistic given that we are seeing really quite a shift in the dynamics and overdue, I think. Zachary Gauge: It's Zachary Gauge from UBS. A couple of questions from me. One is on the ERV growth conversion into capital growth during '25. Obviously, 4% ERV growth. I think at the portfolio level, you're only 0.8% on capital growth. Can you touch on why the value was -- aren't giving you the uplift when yields were effectively stable and why you're confident that going forward, that will convert into the 3% to 5% capital growth that you've guided to? And then the second one, sort of again, picking up on the share buyback point and capital allocation. I noticed that the net debt-to-EBITDA target seems to have shifted slightly from getting it below 9 at the end of this year to now sort of 9.5 going forward. Bearing that in mind and the capacity that gives you, should we sort of see the GBP 250 million of excess capital from the GBP 1 billion of disposals as the high watermark for buybacks? And would that then be sort of flexible depending on where you sit on the net debt-to-EBITDA ratio and obviously doing potentially more disposals than GBP 1 billion. P. Williams: So Damian, do you want to start with... Damian Wisniewski: I'll start with the second question. So the 9.5 isn't a target. We've currently got it down to 9, I'd prefer it to be lower than that. We're expecting it to be lower by the end of this year. So 9.5 is really where I think we see the upper limit over the next few years. Could there be a bit more available? Yes. I think we need to see how we go on this. We'll update you as we go. But the 9.5 is very much an target. On the valuation point, I think I mentioned earlier, we've got about 40p a share of additional CapEx and discounting for voids and the time effect of rental growth coming through. That did impact us in 2025. We've looked over the last 10, 15 years. And the average amount by which we see valuations impacted by CapEx and voids is roughly 1% per annum. Last year, it was more like 2%, 2.5%. We have been looking at a number of new schemes to try and grow rents. And I think that was one of the reasons you've seen a bit of a step-up in 2025. But we don't think that is a normal level, and we think it will come back down closer to its 1%. The only other point to make is that our 3% to 5% is on NTA -- and the -- obviously, the rental growth is on the gross asset value. So there's an impact there as well, which helps. Zachary Gauge: Sorry, on the GBP 250 million being the top end of buybacks and dependent on additional disposals? Damian Wisniewski: Not a top end at this stage. I mean let's wait and see. I think -- I don't think it's all going to come in one go either. I think we need to get the disposals underway, look at the capital allocation at the time, and we'll take it from there. But -- so 3 years isn't forever either. So let's see where we go. Emily Prideaux: I think it's going back to the plan we've talked about, Zach, in terms of looking at all of those -- the options available to us alongside one another. P. Williams: Paul, I think you had your hand up. Yes. Paul May: It's Paul May from Barclays. Just 3 questions, I think, for me. You regularly provide the ERV target, but I think through the presentation, I've noticed sort of welcomed increased focus on earnings and cash flow moving forward. Do you think you'll consider providing a like-for-like rental growth target per annum moving forward? I appreciate you said the 4%, but just sort of give some color there in terms of converting ERV growth into actual cash flow would be sort of welcome. Regarding the disposal of Whitfield Street, obviously, I understand Lone Star is a pretty high cost of capital enterprise. Do you have any indication as to what they're expecting on that site and why they can hit their sort of 20% plus IRR targets versus what you would have expected to achieve on that site? And then just on the 2030 targets, is it reasonable to assume that that's relatively back-end loaded. There will be a little bit of bumpiness between '27 and '29. And then as those schemes complete, that should come through into 2030? P. Williams: Well, just touching on Wakefield Street first. I mean, obviously, they will have a fairly -- probably a bit more aggressive view on rental growth. We're very happy with the price. I think a net initial of the price of 5%. [indiscernible] on the 5% is good. bit of vacancy coming up. It's a 20-year-old building. I can't really speak for them as to where they think their returns could be. They're probably reflecting the same thing we are as much as the West End is very tight, rents are growing and a very good location. So they're probably targeting pretty aggressive rental growth. But for us, we think recycling support and getting some more money into the portfolio, we can secure a strong price, which we did, and we're investing elsewhere. So I think it's all about their view about where rents might grow. We're not renowned for being overly aggressive on where we see rents growth. So I say we're delighted with the start of the year, how much sales we've done, how much we've got under offer. We wish them well with the purchase. I'm sure they'll be delighted with it some time. As I say, we've done -- we've made our money there. It's a 20-year-old building, and we've got plenty of other opportunities to spend the money. Do you want to talk about… Damian Wisniewski: Yes. First of all, on the like-for-like rent, it's an interesting idea. I think we'll certainly consider it. I mean the point to make here is that the rental growth grows the reversion and it takes time for that to be captured into earnings. And so you tend to get this cycle where initially, the like-for-like rents lag behind ERV growth. But at the end of the cycle, they can often outpace it. So we found -- in that period, we mentioned earlier that 5 years when rental growth was very low. For the first 2 or 3 years of that, our like-for-like rents were still growing nicely because they were based on previous reversion. So you get this slightly different timing impact coming on. We'll think about how we might guide to that going forward. In relation to the earnings, you are right. A lot of the uplift comes from 50 Baker Street and Holden House and others coming through probably in late '29, early '30. So it is quite a step-up in '30. We do think though that there will be some nice solid earnings growth in '28, '29, but it's really then a step up in '30. Paul May: Perfect. Sorry, last couple. One, coming back to the initial question on AI. Do you think your portfolio or your tenant base of smaller -- generally smaller tenants, smaller floor rates actually offer some protection in that AI world given it's probably larger entities that are cutting back on some of the graduate recruitment. P. Williams: Well, short answer, yes. I think very big banks, et cetera, who knows. I think one of London's great benefits is to buy a diverse space. Average -- I think average size of our lettings across our portfolio, about 15,000 square foot. I think that gives quite a lot of resilience with such a range of different occupiers. Emily, do you want to add to that? Emily Prideaux: I think that covers it most other than to say, obviously, the way we look at our portfolio generally and AI falls into this is to make sure we've got everything to meet that match demand. So the high growth at the lower end, probably in the fitted space growing up to the 50 Baker Street. So I think like any other, I think we'll make sure it's balanced in that way. Paul May: I am sorry, just final one linked to that. The 10% to 15% on flex, given that 15,000 square foot sort of average tenant mix, and that's probably skewed by a few large ones and then quite a few even smaller ones. Could flex become a significantly larger part of your portfolio than the 10% to 15%? Emily Prideaux: At the moment, we think the 15% is probably where it still makes sense from maintaining everything that we have to look at in terms of cost ratios, operational efficiencies and overall net-net returns in terms of extra CapEx and everything else that goes into it. So at the moment, that's where we think we will always continue to kind of mirror the market and make sure we're delivering what we believe the market is. Over the years of flex and all the headlines it's grabbed, it's never really moved much from the sort of 4% to 7% of the total market activity. So it feels -- we're looking at that on all the financial metrics, but also where we think the market is. So -- of course, it could change in the future and we'll adapt as we need to, but that's where we feel it's right at the moment. P. Williams: I think that's a good point as a percentage of the market. It's relatively small. We got a lower headlines and it's done well. But we also like our headquarters, nice long leases, helps our valuations. Thank you, Paul. Any other questions we've got from the room more? Do we have anyone online on telephone? Operator: First question from the phone comes from the line of Marc Mozzi from Bank of America. Marc Louis Mozzi: My first question is around how is the Board weighting M&A optionality as a way to boost shareholder returns and addressing the gaps that have been created by the recent senior departures. Emily Prideaux: I think it's a question around how -- was the question just bear with me that the -- how do we think about perspective of addressing succession matters. P. Williams: I mean, obviously, we're very focused on our business at the moment. And obviously, I've made a decision that I'm going to retire and there is a process going ahead with finding a successor. So the focus is on the business. There's nothing to report to say about M&A, particularly. Unless we misunderstood your question, Marc, it wasn't a great line. Marc Louis Mozzi: It was a question. My second question is around effectively given AI-driven derating of New York office stock prices, do you still view share buybacks as the right call in that environment? And the next one related to that is how confident are you in the long-term earnings and total return specifically target that you've provided through 2030? P. Williams: Well, I think firstly, it's always got to be a balance between buybacks and investment and all the rest of it. And obviously, it's got to be seen as an opportunity at the moment. Damian, do you want to add anything to that? Damian Wisniewski: Yes. I mean the principal things we're trying to do, we're trying to accelerate disposals to give us more options. The first thing we do is maintain a strong balance sheet. The second thing is we invest in our accretive returns for our schemes. After that, we have options. And the AI is one of the many factors we take into account in looking at investment decisions. And we're all trying to work out what it means short term, medium term and long term. For now, though, I think hopefully, our capital allocation outlook is clear, and we will keep our eyes and ears open to see how things move forward. But I'm not sure we can say much more at this stage. Marc Louis Mozzi: I just wanted to have your thought. And the final question for me is, how much disposals are you assuming in your 2030 target? Damian Wisniewski: 2030. So we're assuming about EUR 1 billion in the next 3 years and I think a couple of hundred million a year per annum after that. Is that right, Jennifer? Unknown Executive: Yes. Damian Wisniewski: Jennifer does all the modeling, so she knows. Marc Louis Mozzi: GBP 1.2 billion, GBP 1.3 billion? Damian Wisniewski: About GBP 1.3 billion, GBP 1.4 billion over the 5 years. P. Williams: We got one more. Operator: The next question comes from the line of Alex Kolsteren from Van Lanschot Kempen. Alex Kolsteren: Two questions on this presentation. So you mentioned EUR 2 million of cost savings target in 2026. What's the reasonable amount to assume for 2027 on top of that? Damian Wisniewski: Yes. So we took about GBP 2.4 million came off our EPRA cost in 2025. We're anticipating a similar level in 2026. I think our models assume inflation after that, but we will be looking to make this business as efficient as we possibly can. So anything we can do after that to reduce costs will be done. There isn't a specific cost target, I think, in the 2027 model at this stage, but that doesn't mean to say we won't look at further efficiencies. Alex Kolsteren: And then one more on the capitalized interest. On Slide 9, you say that the capitalized interest in 2027 is about GBP 8 million higher than in 2026. On Slide 51, where you break down your CapEx pipeline, the 2026 number is GBP 6 million and 2027 number is GBP 8 million. So where does the remaining GBP 6 million increase come from? Damian Wisniewski: Yes. I mean these figures in the back here are for essentially the committed schemes. If you look at the top half of the report. There is -- in the bottom, it says consented 50 Baker Street. That is not yet in the top half of the project because it's not been committed. When it does get committed, and we're assuming it will do, then it will go into the top half, and we'll show you the capitalized interest. So that figure in the outlook includes capitalized interest for 50 Baker Street, the appendix doesn't. Unknown Executive: There are 2 questions on the webcast. The first says, while you've mentioned the possibility of share buybacks, are you taking any other active steps to reduce the gap between the current share price and the net asset value? P. Williams: Well, we're hoping this presentation will help. I mean we're selling, we're letting. We think the market is improving. The fundamentals are good. So actively, we're looking at other options of whether buybacks or something similar. Emily? Emily Prideaux: That's exactly that. The plan you've heard today is laser-focused on shareholder returns and what we get and where our focus is in that regard. Unknown Executive: And then the last question is, within the 2030 guidance, does it take account of a potential share buyback? Damian Wisniewski: No. P. Williams: That's an easy answer. Thank you, everyone, for today. We're all around if anyone wants to have a chat afterwards, pick up the phone or obviously on tour as well. So thank you for your attending today. I know it's a busy week for everyone, and have a good day. Thank you very much.
Operator: Good day, and thank you for standing by. Welcome to Q4 '25 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, Katie keita, IR Lead. Please go ahead. Katie Keita: Thank you, operator, and welcome, everyone, to Kneat's earnings conference call for the fourth quarter of 2025 and the full year. Today's call will be hosted by Eddie Ryan, Kneat's CEO, and Dave O'Reilly, Kneat's CFO. Note that the safe harbor statement on Slide 2 and the forward-looking statements disclosure at the end of the earnings release inform you that some comments made on today's call may contain forward-looking information. This information by its nature is subject to risks and uncertainties, so actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult our relevant filings, which can be found on SEDAR and on our website. Also during the call, we may refer to certain supplementary financial measures as key performance indicators. We use both IFRS and supplementary financial measures as key performance indicators when planning, monitoring and evaluating our performance. Management believes that these non-IFRS measures provide additional insight into the company's financial results, and certain investors may use this information to evaluate our performance from period to period. With that, I will now pass the call to Eddie Ryan, CEO of Kneat. Edmund Ryan: Good morning, everyone, and thank you for joining the call today. In order to leave more time for your questions, we will keep our prepared remarks brief. As I laid out in my letter to shareholders, 2025 was a year that proved the strength of Kneat's resilience. In a period of macro uncertainty, elongated buying cycles and new considerations presented by AI, we continue to gain share with software revenue up 33% for the full year, and we welcomed a record number of new customers. These new customers were added to exceptionally stable base of existing large customers. Our net revenue retention was 115%, reflecting continued expansion with that base. Customers come to Kneat today because we are a trusted domain expert in a field where confidence in the product is paramount. There is our highly regulated mission-critical environments where validation data needs to be attributable, traceable and auditable, all things for which needed has been purpose-built. With this in mind, Kneat's advantage in leveraging AI to deliver business value for companies is clear. Over the last while, we have been building AI into our platform to accelerate the advantages Kneat already brings to validation. We introduced AI-powered features designed specifically for environments adhering to good manufacturing practices. These include content review agents, a natural language process analysis expert, a user support expert and an instant language translation function. Building in AI to improve the platform extends our competitive advantage, which was already considerable. With these tailwinds, we are excited about where we are heading in 2026. Our platform is second to none. Our pipeline is strong and our land and expand model, which contains significant expansion potential and brings more with each new customer we add is proving to scale, putting cash flow profitability within line of sight. This is a necessary milestone as we plan for the long game in pursuit of our mission that any regulated company can be confident they are developing, manufacturing and delivering their products to the highest safety standard. I will now turn it over to Dave, who will take you through the numbers. Dave O'Reilly: Good morning. As you have the numbers and commentary in our materials that went out last night, I won't go through them in detail again. However, before we turn it over to you for your questions, I do want to first highlight a few numbers on what drove them. First, ARR growth in the quarter year-over-year was 24%, solid, but not as high as we were expecting. While changes to FX rates since Q3 added $1.1 million headwind, some of the delta came from expansions being pushed to a future period. This means we expect these same deals to materialize in 2026, if not in Q1, then in the subsequent quarter. Incremental ARR is historically back-end loaded, and we also expect 2026 to be no different. Second, operating expenses in the fourth quarter came down from Q3 and for the full year were up 33%. After 2024 in which we held headcount steady, we invest in key talent in 2025 to drive the platform forward, expand our presence within our growing number of customers and amplify our voice in the life sciences space. Finally, on our financial position and outlook, we ended the year with $48.7 million of cash on the balance sheet. This, together with a fortified team sets us up for a pivotal year. As Eddie mentioned, we are targeting for 2026 to be cash flow breakeven. Meeting this target is contingent upon meeting our own top line growth expectations for the year. With that, I'll turn it over to you for your questions. Edmund Ryan: I do show we have a first question in queue coming from the line of Doug Taylor from Canaccord Genuity, please go ahead. Doug Taylor: Hi, thank you. Hopefully, you can hear me. Edmund Ryan: Yes, we do. Can you, Doug? Doug Taylor: Okay. Thanks, Eddie and Dave. I'll start with an AI question seems unavoidable these days. I appreciate all the commentary you provided on AI in your letter overnight in your prepared remarks. You framed this as additive versus competitive to your platform. I guess I'd like to ask what -- if you could provide anything you've heard, like what your customers are saying on the subject? Are they building things with AI that sit on top of your data and your infrastructure? Is there evidence of that? I'm just looking for some anecdotes to wrap around the subject. Edmund Ryan: Yes. Good question, Doug. Yes. So we're not seeing anybody sitting on top, right, doing anything like that. And look, we're dealing with the biggest pharmaceuticals in the world, as you know, and we've been dealing with them for for over 10 years, 15 years. And one of the things that is really critical to them is data integrity and compliance. And Kneat is a system of record for that data integrity and compliance. And when I talk about data integrity in the compliance world, I'm not talking about data in the database being managed and protected there and secure. I'm talking about the interaction with that data and the audit trail on that data and who put that data there, when they put it there, when they changed it, no matter how small that data is. So everything is attributable, it's auditable and it's traceable. So this is the kind of data integrity that this industry requires, right? And -- so we see that as a real moat from our perspective. We accept, yes, that there has to be additional AI to support that, and we would see AI from our perspective is doing the heavy lifting as part of the workflow processes and that type of thing for the customer and bringing value to that way. And over time, where it may go to the next level. So just back to your point, Doug, on the customers today, we have very intimate relations with these customers, and we would be sharing our road map and we'll be sharing what we have in AI already with them. And they're aligned with us, very much aligned with us in what use cases they want AI to support them in and what part of the workflow they want it to be present in and how they don't want it to be -- it's a human aid at this point in time. So -- does that answer your question, Doug? Doug Taylor: Yes. I mean it does. And so taking the AI as being additive and not in any way competitive with your solution as if we set that aside, the ARR growth in this last year was slower than in prior years, partly because you're lapping some larger numbers, but also you've referred to these deferred expansion plans for a few quarters now. And I think some of that was attributed to the uncertainty as it relates to global trade and things like that. And that's no less confusing today than it was maybe last quarter. So I guess I'd like to refresh our understanding of the duration of those deferrals. When do you see those start picking up again and perhaps returning your NRR to some of the levels that we've seen Kneat enjoy earlier in 2026 and beyond. Edmund Ryan: Yes, we definitely expect it to go up. And what I would say is it's only when you look back on the year, you can see how the year panned out fully, right? And we are back end of the year type where we do a lot of our ARR addition traditionally. And what I would say is quarter 2, we began to see the macro environment, Doug, as you know, and the uncertainty and what we will have seen that follow through to the year -- the full year. Our budgets were deprioritized in certain areas where they were cut and frozen temporarily. So that's what we've seen. All of those, what we call deferred expansions, they're all still in our pipeline, as Dave said in his earlier notes, and they're all being worked on and the engagement is ongoing on all of those. So I expect them to come through for us as well through 2026. Do I know exactly what the year ahead is like from a macro perspective? There's still uncertainty from last year, but I think it's beginning to stabilize more in that perspective. Other things are coming into play like AI and stuff like that. Doug Taylor: So the message there being you'd expect ARR to rebound from the 2025 level -- sorry, NRR, I should say, based on what you said? Edmund Ryan: Absolutely. Doug Taylor: Okay. And then I guess, a similar comment or question about what was definitely clear last year was a very strong pace of new customer additions, new logo wins. Is the setup in the pipeline this year for you to extend that streak? Edmund Ryan: Yes. We added, I think, net new -- there was a bit of churn in there as well. But net new, we had 20-odd percent new customers in '25. And as you know, in recent years, we focus more on strategic and enterprise. So very, very happy with that delivery from our sales team. And we're seeing these deals being more and more matured and for that reason, going through more diligence and more competitors involved and more RFPs, and we're winning the majority of these RFPs. So very excited about that. And that puts in a great platform for the future, as you know. And I would say the marketing team has done a great job of building the pipeline, and we see a similar and better pipeline for the year ahead and beyond. Doug Taylor: Okay. One last question for me and perhaps this one for Dave. You've stuck to the cash breakeven bogey for this year, and we're in this year now. So I do want to give that a little more attention. To start with, just to confirm, once again, you're talking about free cash flow or operating cash flow breakeven as being the target you expect to eclipse this year given the capitalized R&D. And if so, I mean, in any event, it's a big lift from where you were over this past year. So I just want to maybe walk through some of the assumptions, not necessarily the revenue, but the margin assumptions and spending and budget for OpEx that would get us to that objective. Dave O'Reilly: Thanks, Doug. Yes, it's still very much our objective for 2026 is to be cash flow breakeven. To your point, we can get into some of that detail. But what I would say is that the messaging that we've given before, certainly in Q3 about the adjusted EBITDA margins, I still expect that to hold true for the next 12 months. I expect our capitalized R&D, I would expect that to be relatively static year-over-year. I still expect a little bit of growth on our OpEx, and I expect improvement on our gross margin lines. Doug Taylor: And so just to be clear then, to be cash flow, you would have adjusted EBITDA that would surpass your capitalized R&D, I mean, that would be necessary for free cash flow breakeven. And just maybe sharpen my understanding there. Dave O'Reilly: To an extent, yes, Doug. It should cover the vast majority. There's a couple of other levers on the balance sheet that will help us hit that number in '26, such as our R&D tax credits. And so it's not just the adjusted EBITDA that will get us there. As I mentioned, there's another couple of levers on our balance sheet that will help us in the pursuit of cash flow breakeven. Doug Taylor: All right. I appreciate the answers to my questions. I'll pass the line. Edmund Ryan: Thank you. And I show our next question in the queue comes from the line of Gavin Fairweather from ATB Cormark. Gavin Fairweather: Hey, thanks for taking my questions. Eddie, in your letter, you called for an expansion of incremental ARR in 2026 versus 2025. I think that's the first time you've kind of provided that type of guidance. So maybe you could just flush out what you're seeing in the macro and the pipeline that kind of gives you that confidence to hang that out there in your letter. Edmund Ryan: Yes. So I'm trying to remember that statement. But, yes, so for -- we -- as I said, we put in a lot of strong customers over the last couple of years into the pipe -- sorry, into our customer portfolio. So as you know, Gavin, we focused on enterprise and strategic a couple of years ago, and they are beginning to show fruit now, the ability for them to expand into the future. They take a year, maybe 2 years to get going, and we're seeing that playing in as well. We're also having these great conversations with our customers around new potential areas that we will bring value for them. So outside of validation, adjacencies areas, and we expect to be delivering to some of these areas as well in '26. Gavin Fairweather: Yes, that kind of flows into my next question. I mean, I was looking for a bit more detail on how conversations are going in the base around CSA and adjacencies and how you're thinking about potential adoption in 2026? Like how many customers would be speaking to you about moving into some of these new areas? Edmund Ryan: Yes. We would say that we are already deploying in some of these areas with some of our customers. We have some really engaging opportunities under discussion with some customers. And we see us being able to capitalize on that further. And these are couple of the biggest customers in the world, right, who are talking about looking at these new adjacencies. So we're really upbeat about that. And we will hope to announce them in due course, Gavin. But I would say, just to give you a flavor, they're more deeper in the manufacturing space adjacent to validation, where we've already earned the right to be there. We've proven our ability to be great at data integrity in a validation environment. And now we can take that same capability to adjacent areas. And the one thing I would say is that I think our ability to be great at data is going to enable more processes in the future because of the -- if you've got this great data integrity underpinning your AI, then you'd be more inclined to put processes in there that can give you that quality. And I think great AI is going to be great data integrity. And as I said, it's not just data and databases, data is managed and [ police], and that's what I think will be great as well. Gavin Fairweather: Appreciate that. And then maybe a couple for Dave. The gross margins seem to be increasing faster than your mix would kind of imply. So maybe you can just discuss where you're getting some leverage on the COGS line, whether it's still coming through in SaaS or also if you're starting to make a bit of money on the services line? Dave O'Reilly: Yes. So in Q4, there's a couple of credits that we booked to our P&L in Q4 related to year-end accrual releases. So there's probably 0.5% on our gross margin because of that in Q4. But to your point, sales mix is still beneficial to us. We are eking out a little bit more margin on RPS. I think historically, that's been running at around 15%. I expect that to increase over the next 12 months. SaaS is continuing to be an 80% kind of level. And that will flow into '26. Gavin Fairweather: Great. And then just lastly, on debt. If I remember correctly, I think some of that debt on the balance sheet, the penalties for prepayments start to roll off over the course of 2026. So just on capital allocation, maybe you can discuss your plans. Obviously, you have more cash on the balance sheet than you have debt. So should we be thinking about some of that debt starting to move off the balance sheet there? Dave O'Reilly: You're exactly right. '26, there are -- there's a couple of tranches that will roll out of penalty zones if we were to clear those tranches. But it's certainly not in our short-term projection. We're talking about cash flow neutrality in the year. If we do make that call, we'll certainly amend it. But right now, we're just probably going to let them continue to pay. If we see the opportunity to clear them down sooner, we absolutely will. Gavin Fairweather: Thanks a lot, I'll pass the line. Edmund Ryan: Thank you. And I show our next question comes from the line of Justin Keywood from Stifel. Please go ahead. Justin Keywood: Hi. Thanks for taking my call. Just circling back on the outlook and the expectation for incremental ARR in 2026 over 2025. Doing the math, does that imply there's an expectation for $15 million in additional ARR this year? Edmund Ryan: So yes. So we don't put a number on it, Justin. But when we look at the add-ons and for this year, they will include the delayed expansions from '25, and we see also outside of that cohort, we see expansions from the other cohort of customers we have. And today, we service over 130 customers. And we also see that the new customers kicking in, they would be the ones outside that cohort of the deferred expansion. So yes, we see those definitely in the number increase on '25. Justin Keywood: Okay. Good to hear. That's helpful. And then just circling back to the AI discussion. I'm wondering if there's an opportunity to deploy some of the AI tools that are out there, particularly around coding within Kneat's own business, the R&D expense continues to appear to be increasing at a decent rate. And is there an opportunity to perhaps replace some of those functions with AI? Edmund Ryan: Absolutely. And our team has been doing automated enhancements for quite a while. I would say, Justin, at the beginning -- like in the last 6 months, they really begin to see tools that can really add value. And I think we are hearing about in the news, and it's true. And we are acknowledging it. Our team is acknowledging it quite well. So we have dedicated AI teams in place now looking to enhance everything. And we're seeing some really good improvements in productivity in certain areas, right? I mean, we're still building features into a big platform and coding is one part of it, understanding what you're doing from your domain experience is a huge part of this, articulating those requirements to any tool, whether it's an agent or whether it's a human that actually codes it is a good part of the work. And we're getting -- I would say the tools helping us across the board, not just in the coding itself. There's value there. There's good stuff happening there. There's ability to reverse engineered pieces of code and reengineer them again and a lot of good things happening. So I expect we will be focused -- we are focused on that, Justin, and I expect we will, over time, start bringing that down. The goal now is to get more out of the team we have. And any of those hires that are going in this year are primarily related to that AI for the product, for our Kneat GX platform, but also AI to improve our productivity in the organization. Justin Keywood: Very interesting. So would it be fair to assume the R&D or additions to intangible assets to be leveling off at this level? And perhaps that's where to Dave's outlook on breakeven free cash flow. Is that where the operating leverage is going to show up with that R&D level normalizing? Edmund Ryan: Do you want to take that, Dave? Dave O'Reilly: Yes. Just there will still be some growth in the R&D function. To Eddie's point, it's probably going to be around the AI team and helping accelerate the development. But we're also going to see that shift. I mentioned this one in the prior quarter that we're going to probably see a little bit more R&D expense to the income statement as we capitalize less. And I would imagine that what we will see being capitalized year-over-year being very static. Justin Keywood: Very helpful. Thanks for taking my questions. Edmund Ryan: No problem. Thank you. And I show our next question comes from the line of David Kwan from TD Cowen. Please go ahead. David Kwan: Hey, everyone. Dave, maybe I just wanted to clarify the comments on the gross margin. So I think you said there was about 50 bps of year-end accruals. So maybe the normalized gross margins were in the 77% range. So could 2026 gross margins be at this level or maybe even better than that? Dave O'Reilly: I would assume that they should be at a similar level, David, yes. It does depend on the mix when we get there. Obviously, our PS revenue is running at -- historically has been around 15%. I expect that to be 20% and above. And that depends on where we finish up from a PS revenue in '26. But I do expect the gross margin to be up around the 77% range. David Kwan: Sounds great. That's helpful. And just digging into the NRR, the decline there. Obviously, you talked about some expansion projects getting pushed out there and some churn. Could you -- you mentioned, I guess, that there weren't any customer or customers that were switching to competitors. But I was just wondering if you had any color on what the churn was related to like did those customers go bankrupt? Or was there something else? Edmund Ryan: Yes, David, thanks for that. So I would say that there are 3 aspects of the churn, there's the deferred expansions, there's the FX going against us and then there is the churn element. And I would say, yes, most -- all of those customers actually, in fact, have had some degree of financial difficulty to some extent. And yes, there's 1 or 2 of those customers actually closed down. But for those customers that discontinued using Kneat, we're not aware of any of them going to a competitor at all, and that's very clear to us. So some of the -- when we look back and again, talking about the -- how we focus on enterprise and strategic customers over the last couple of years. Prior to that, we would have sold to a lot of different types of customers. And maybe the product market fit may not have been or the product company fit may not have been 100%. So we're seeing some of those bubbing up a little bit as well over the last year. David Kwan: Well, thanks for that color Eddie. And can you say like how much of ARR it represented? I'm guessing it's relatively small, but if you could quantify it. Edmund Ryan: Yes. It's smallish, I would say that if you were looking at where we wanted to be on our overall growth versus where we were, it's probably divided into 3 things, maybe 40%, 50%, Dave, you might be able to correct me here is related to the deals that were pushed out and the other 50% is between China and FX. David Kwan: Great. And just one last question. I expect it's maybe a bit early here, but just obviously, with the Supreme Court's tariff ruling, is that -- do you expect that to probably lead to continued hesitation from your customers just as it relates to the uncertainties on their expansion plans? Edmund Ryan: Yes. I haven't consumed that fully, David, I would say, right? What I am seeing is more stability in the customers, more clear on what they were doing. Maybe this adds another bit of volatility to the situation. But I had a feeling that things were improving, and it's a bit early for me to comment on that. David Kwan: That's great. Thanks guys. Edmund Ryan: Thank you. And I show our last question in the queue comes from the line of Erin Kyle from CIBC. Please go ahead. Erin Kyle: Hi, good morning. Thanks for taking my questions. I apologize if any of this has been asked already. I just kicked off the call a little bit earlier here, but I want to go back to some of the comments in the shareholder letter around retention. And you called out that you're not aware of any churn to competitors, which is good to hear. But I wanted to expand there and maybe ask if you're seeing any pricing pressure from increased competition in the space or anything to call out there? Edmund Ryan: Yes. So I said earlier on, Erin, that of all the new deals last year, we are winning the majority of them by far. And I would say that there's definitely more competition in valuations and that competition was entering to 2025 and having the ability to maybe slow down the sales process a little bit. But also, there's also the macros that we were slowing down the sales process. So I would say that definitely, there's not a huge amount of pricing pressure. We're not pushing our prices down in any way. We're winning the deals. We're holding our prices. I would say a little bit here and there, maybe we can be a bit innovative around the contracts and stuff like that and the multiyears and that type of thing. But no significant impact on our pricing. And that's -- but we put a lot of effort into making sure our customers understand how great our product is before we get to the pricing stage, and I think that helps a lot. Erin Kyle: Okay. That's helpful. Thank you. And then maybe can you just remind us the percentage of your customer base that's on the enterprise-wide licenses? And maybe just discuss whether you've been making a more dedicated push towards enterprise-wide. I believe you have. And then can you let us know if customers have been receptive to this model? Or what's the reaction to maybe moving to more enterprise-wide licenses? Edmund Ryan: Yes, that's an ongoing thing. As customers step up in volume, they go to more enterprise, and we have done quite a bit of that over the last, I'd say, 14 months or so, 16 months, and we continue to do it. And it's a very win-win situation, and we do very well from that. Percentage-wise I find it hard to tell you exactly right now. Dave might have a number on it, but we don't track that number. But I would say that if we were to take our strategic maybe top 30 customers, I would say we have 30% on some form of strategic longer-term deal. That's kind of an order of magnitude now, Erin. So I can't -- I have to come back to you with that number if you want to follow up on this. Erin Kyle: Sure. Maybe I'll follow up offline. Thank you. Dave O'Reilly: Thank you. That concludes our Q&A session for today. I would now like to turn the conference back to Eddie Ryan, CEO, for closing remarks. Please go ahead. Edmund Ryan: Thank you. We are excited about what we are setting out to accomplish in 2026. We are in a great spot to keep our momentum going as the go-to validation platform for the world's biggest life sciences companies. We continue to deploy AI to help our customers work faster and smarter while keeping their data 100% compliant in a way that they can see, understand and trust. And with an experienced and energized team, we are confident in our ability to sign up even more new business this year than last. Thank you for your support and for believing in what we are doing. Dave O'Reilly: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Greetings. Welcome to National Storage Affiliates Fourth Quarter 2025 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, George Hoglund, Vice President of Investor Relations for National Storage Affiliates. Thank you, Mr. Hoglund, you may begin. George Hoglund: We'd like to thank you for joining us today for the Fourth Quarter 2025 Earnings Conference Call of National Storage Affiliates Trust. On the line with me here today are NSA's President and CEO, Dave Cramer; and CFO, Brandon Togashi. Following prepared remarks, management will accept questions from registered financial analysts. Please limit your questions to one question and one follow-up and then return to the queue if you have more questions. In addition to the press release distributed yesterday afternoon, we furnished our supplemental package with additional detail on our results, which may be found in the Investor Relations section on our website at nsastorage.com. On today's call, management's prepared remarks and answers to your questions may contain forward-looking statements that are subject to risks and uncertainties and represent management's estimates as of today, February 26, 2026. The company assumes no obligation to revise or update any forward-looking statement because of changing market conditions or other circumstances after the date of this conference call. The company cautions that actual results may differ materially from those projected in any forward-looking statement. For additional details concerning our forward-looking statements, please refer to our public filings with the SEC. We also encourage listeners to review the definitions and reconciliations of non-GAAP financial measures such as FFO, core FFO and net operating income contained in the supplemental information package available in the Investor Relations section on our website and in our SEC filings. I'll now turn the call over to Dave. David Cramer: Thanks, George, and thanks, everyone, for joining our call today. The fourth quarter provided further confirmation that our portfolio performance has inflected in a positive direction. We are benefiting from the significant operational efforts executed by our team over the past few years to position NSA for outsized growth. We produced solid results for the quarter and delivered wins in several areas, including all but 1 of our 21 reported MSAs saw improvement in same-store revenue growth versus what we reported in Q3. Same-store revenue growth was down 70 basis points in the fourth quarter compared to down 260 basis points in the third quarter, a substantial improvement. We experienced sequential improvement each month of the quarter. Year-over-year occupancy also continued to improve, finishing the year down 70 basis points. Remember, we were down 140 basis points at the end of the third quarter. Our core FFO per share results came in at the top end of our guidance range, beating consensus. Looking at the full year, we delivered a handful of notable accomplishments, including we consolidated another brand, reducing the number of remaining brands to 6 and an additional growth driver with the formation of our preferred equity investments platform, we continue to execute on our portfolio optimization program by exiting 5 states and selling 15 properties totaling $97 million. We also acquired 10 properties totaling $75 million across our joint ventures and on balance sheet. And most importantly, we exited the year on solid footing with positive momentum that has carried into 2026 as January end-of-month occupancy was up 20 basis points year-over-year. We've clearly turned the corner. The tremendous efforts undertaken by our team to internalize the PRO structure, dispose of noncore assets, upgrade and centralize our marketing, revenue management and operations platforms, along with the consolidation of brands and the move to one web domain are paying off. Looking at 2026 and beyond, the backdrop for self-storage is improving. First, new supply is currently stable and is projected to decline over the next few years to levels well below long-term historical averages, with the impact becoming more meaningful in 2027. Second, there is momentum in the current administration to address home affordability, which could provide a boost to the housing transaction market and self-storage demand. Lastly, increased stability in self-storage pricing practices could lead to rising street rates, providing a near-term lift to revenue growth. Now let me comment on our relative position within the sector. Our portfolio fundamentals have inflected positively, and we have the most to gain from a recovery in the level of housing turnover. Our enthusiasm is supported by the fact that we're starting the year with strong rental volume, an inflection from negative to positive year-over-year occupancy and an encouraging trajectory of same-store revenue growth, while we remain focused on disciplined expense controls. As we enter the spring leasing season, we will continue to focus on driving internal growth with increased marketing spend, competitive position in terms of rate and promotion, solid execution from the sales process and remaining assertive with our ECRI strategies. Meanwhile, we continue to improve our portfolio through capital recycling and reinvesting in our properties while also growing our portfolio through expansions and acquisitions. I'll now turn the call over to Brandon to discuss our financial results. Brandon Togashi: Thank you, Dave. Yesterday afternoon, we reported core FFO per share of $0.57 for the fourth quarter and $2.23 for the full year, at the high end of our guidance range as our focus on operational improvements is starting to be reflected in our results, with same-store revenue and NOI coming in for the high end of the full year guidance ranges. For the quarter, same-store revenues declined 70 basis points, driven by lower average occupancy of 120 basis points, partially offset by year-over-year growth in average revenue per square foot of 100 basis points. This is meaningful improvement from the 2.6% revenue decline in the third quarter, with 9 of our reported 21 markets delivering positive revenue growth. For the full year, same-store revenues declined 2.3%. Expenses declined 80 basis points in the fourth quarter while growing 3.1% for the year, slightly below the low end of our full year guidance range, benefiting from our meaningful expense control efforts. Most notable savings came from payroll costs that were down 4.1% in the quarter and 2.8% for the year as we continue to find efficiencies with hours of operations and staffing. Meanwhile, marketing was up 37% for the quarter and 31% for the year as we continue to invest in customer acquisition spend in markets where we clearly see the benefits. Outside of same-store operations, the lighter tropical storm season led to favorable results within our insurance captive, where we retain a portion of the property casualty coverage for our stores. This resulted in lower expense in the other line item within operating expenses compared to the run rate from the first 3 quarters. Moving to the transaction environment. We completed the sale of 3 assets during the quarter for $24 million. And subsequent to quarter end, we sold 3 additional properties for $21 million and acquired 1 wholly owned property for $10 million. Our portfolio optimization program will remain active in 2026 as we prioritize scaling in markets while generating proceeds for deleveraging and funding attractive investments through our JV and preferred equity programs. Our on-balance sheet investments will largely be to fulfill 1031 requirements. Now speaking to the balance sheet. We have ample liquidity and maintain healthy access to various sources of capital. We have $375 million of maturities this year, consisting of a $275 million term loan that is due in July and $100 million of unsecured notes due in May and October. We have optionality and we'll most likely address these maturities with a new term loan. Our current revolver balance is approximately $400 million, giving us $550 million of availability. Our leverage continues to come down with net debt to EBITDA of 6.6x at quarter end, just slightly above our 5.5 to 6.5x target range. Now moving to 2026 guidance, which we introduced yesterday and the full details of which are in our earnings release. The midpoints of key items of our guidance are as follows: Same-store revenue growth of 90 basis points, same-store operating expense growth of 3%, flat same-store NOI growth and core FFO per share of $2.19. We have also guided to acquisition and disposition ranges of $50 million to $150 million. In both cases, these amounts represent NSA's share. With regard to same-store revenue, we foresee the year-over-year growth steadily improving as we progress through these next couple of quarters. As Dave mentioned, our occupancy is slightly positive year-over-year at the end of January, and that spread has continued into February. At the midpoint of our guidance range, the $0.04 decline in core FFO per share is due to growth in G&A of approximately $0.02. This growth primarily comes from assuming target level cash incentive comp as the same expense in 2025 for our corporate team was below target levels given company performance. The remaining $0.02 is attributable to a combination of headwinds from debt refinancings and the tough comp for our insurance captive based on my earlier comments regarding the favorable results in the fourth quarter of 2025. Thanks again for joining our call today. Let's now turn it back to the operator to take your questions. Operator? Operator: [Operator Instructions] Our first question is from Samir Khanal with Bank of America. Samir Khanal: I guess, Dave, when I look at your guidance, you're calling for a healthy improvement here in revenue growth. down about 70 basis points in 4Q, getting to about 1% at the midpoint. I think this sort of puts you even above the peers here. So maybe help us kind of walk through kind of how you get there. Talk about the breakdown, let's call it, occupancy through the year, rate growth, move-in rate growth and even ECRIs, how are you thinking about all that? David Cramer: Yes, Samir, thanks for joining. Thanks for the question. I'll start off and then I'll have Brandon walk us a little bit of the cadence. I think where I would start is what's different today versus where we were a year ago when we were giving guidance is, our transitioning is done. Our platform is working very, very well. Our synergies and our strategies are working very, very well. All the work we put into our people, process and platforms is complete. And so there's no distraction or no moving pieces right now. So as we sit here in '26 versus where we were a year ago, we just came off of PRO internalization and had a lot of moving pieces. Right now, we're no longer chasing occupancy. Here to say that occupancy in January was 20 basis points up year-over-year. That's something we haven't seen for a couple of years. And so that gives us a high level of confidence that we'll continue to work on that occupancy gains throughout the year. The rate environment is stable. We have seen good contract rate growth through the back half of 2025. We expect to have solid contract rate growth through the year of 2026. And that comes from also the strength in the ECRI program. We're now more assertive than we have been historically. And that's because we have a high confidence level in our marketing program and our customer acquisition platforms. We're seeing very, very high levels of rental volume. We finished on a square footage basis about 11% up year-over-year in the fourth quarter. Keep in mind, that was muted because we were down about 10% in October because of a hurricane comp. And thus far in January and February, those numbers are even stronger. So we're just very, very pleased with the rental output we're getting at the top -- through the top of the funnel all the way to the rentals themselves. And so I think for us, looking at all the things we're thinking about, RevPath is positive, occupancy is positive, contract rate is going in the right direction, and our platforms are really working. I think for us, where we're coming from, where we've been, we feel very, very confident on how 2026 will play out. And I'll let Brandon kind of walk you through the cadence of the year. Brandon Togashi: Yes. I think the main thing I would add, Samir, and you touched on it in your question, the negative 70 basis points that we delivered in the fourth quarter, Dave remarked in the opening about how that improved. So it was more negative to start the fourth quarter, and it got less negative trending towards flattish as we got to the end of the fourth quarter. And then based on the data points that we've given for end of month January occupancy, in my remarks about how that's continued into February, we just feel comfortable that we're starting the year within the negative 30 to positive 210 revenue range, whereas a year ago, we were delivering a quarter and starting the year that was, frankly, well below the low end. So it required much more of an improvement than what's required now. Samir Khanal: And I guess just as a follow-up, maybe as we're talking about the guidance, maybe you can hit on expense growth here, right? I mean you have about 3% for this year. Maybe talk kind of the components to kind of get there as we think about '26. Brandon Togashi: Yes. Samir, I'll go -- most significant line item is property taxes, so we'll start there. We're assuming a range of 3% to 5%. That's consistent with kind of multiyear averages for our portfolio. Personnel, you saw the good success that we had in that line item, both in the fourth quarter as well as for the full year '25. We're expecting similar successes. I expect that line item to be flattish in 2026 over '25. And then outside of those 2 line items, I would say the largest percentage increase is going to continue to be marketing expense, not to the tune of the 30-plus percent that we saw this year, but still probably in the teens on a year-over-year growth rate. And after that, a lot of the other line items fall generally in that low to mid-single-digit range that we have for the total OpEx guide, the one exception being insurance. we do believe we're in a better market. Our renewal was in April 1. And so we are forecasting that line item to be a year-over-year decrease in the cost. Operator: Our next question is from Michael Goldsmith with UBS. Michael Goldsmith: First question is on the January occupancy being up 20 basis points. Can you talk a little bit about what's driving that? I think you talked a little bit about strong rental volumes. It seems like marketing spend is up, but can you walk through some of the moving pieces? Are you cutting rate to drive that occupancy higher during the slower season? Just trying to understand the moving pieces and context around the occupancy improvement. David Cramer: Yes. Sure, Michael. Thanks for the question. Thanks for being here. I think it's a combination of all those things. Clearly, we committed to a higher marketing spend really through the back half of 2025, and that was based upon our conviction that we were seeing the activity at the top of the funnel and our ability to convert those into rentals. And so we've done a really good job looking at the sales process all the way through the funnel and our conversion rates. And so that would include how you use discounting, where you're priced in the markets, the amount of marketing spend and when you're spending that money. This is where AI and some of the AI technologies and the modeling we have are really starting to pay off and the fact that the teams are doing a really, really good job as we model our marketing spend and model our dynamic pricing and use of discounts to really work on that closure within that funnel. And so we've seen a significant improvement in our ability to really work the conversion rates through that funnel. So I would tell you, from a pricing standpoint, we're keeping the same competitive position we've kept through the back half of the year. We did a good job holding occupancy and not having the seasonal trough that you normally would have, and that's a function of marketing spend pricing, discounting and then use of call center and staffing hours and those things. So I think all those things in place. We're not undercutting markets. We're not trying to go out and try to move markets one way or the other. We're just staying within the appropriate competitor set to get the results we want. Michael Goldsmith: Dave, and as a follow-up, like where do you see yourself to the point of actually having pricing power, right? Occupancy is improving, you're improving operationally, you're talking about strong rental and volume. So is there a certain level of occupancy where you think you would have pricing power? David Cramer: It's a really good question, and it really varies by market and by store. So we do have markets that are having some good success, like a couple of the ones that jumped off the page, Wichita, Colorado Springs, even Portland, if you look at Portland, where supply and demand are in check and those markets are responding well to not only street rate or market pricing, but the ECRI programs and what you're able to drive through the ECRI programs are working very effectively. And that's really, I think, as you look at our portfolio, we do have a lot of stable markets where they are benefiting very much from all of the changes we've made within the company and all of the adaption that we've done within the company is helping those markets. The other markets, Michael, like Phoenix and Atlanta and Gulf Coast of Florida and stuff, it's really a supply issue where until you really get that balance and get a better demand profile to get these stores filled up, it's going to be harder to get pricing power. The one thing I would add into that, too, is it's also -- we've noticed you got to get granular down to the unit size. It's one thing to scrape overall properties and look at overall occupancies and overall pricing power, but there are subsets of unit types that are seeing pricing power within some of our markets because supply and demand is in check on that particular demand for that unit. Operator: Our next question is from Juan Sanabria with BMO Capital Markets. Juan Sanabria: Congrats on the successes on the post PRO internalization. Just hoping for a little bit more color on kind of the move-in rate trends throughout the fourth quarter and into January as well as kind of how the quantum and or cadence of ECRIs has changed maybe year-over-year or however you could help us contextualize that? David Cramer: Sure. I'll start, and then Brandon wants to jump in here. I think what you have seen and you will see from us is our move-in rates as they went through the fourth quarter narrowed on a year-over-year spread. And that's because if you think about 2 years ago in '24 when we were internalizing the PROs, we reset street rates pretty hard in the back -- really the fourth quarter of 2024 and left them elevated outside of the competition range probably until April or May of 2025. And so our comps on a year-over-year basis are tougher the first 5, 6 months of this year, just on the move-in rents. Now for us, we're getting the rental volume we want. We're effectively priced where we want to be priced in the markets. But I think you guys will see us go negative on move-in rates probably the first 4 or 5 months of the year and then get back to more of a neutral to positive position from June, July on. But we are seeing significant rental volume. Again, I'll reiterate, we're not undercutting the market. We just adjusted our competitive position to really work on customer count and do it as smart as we can to get to a better revenue output. The back half of that question was -- I'm sorry, I'm done a blank now. Juan Sanabria: ECRIs and how that's changed the quantum or cadence. David Cramer: Yes. Thanks, Juan. Sorry about that. The cadence hasn't changed. So we're still hitting the ECRIs around the same timing that we have been hitting them. I do know our magnitude of rate increases has increased on a year-over-year basis. All of the testing and the things that we're doing and our confidence in the ability to attract new customers and drive additional rental volumes is allowing us to be more assertive on the rate increases through all of the steps, whether it be first, second, third, fourth across the board. And so that's also helpful as we look at our revenue projections this year. Juan Sanabria: Great. And then I was just hoping you could comment on when you're leasing units if the size or the number of square feet that is being taken up has changed. I know at one point, I think it was last year that has gone down for a bit. But curious on kind of the latest thoughts around how many square feet people are actually leasing today and how that's trending. David Cramer: Yes. Good question and good memory. We certainly -- this time last year, we were facing probably about a 5 to 6 square foot per rental square footage roll down. We've since closed that back up. We're back up to where most of our rentals are either at the same level or a little bit bigger in square footage. And so that's also very much helping in stabilizing occupancy and making sure we're attracting the customers for the units that we're vacating. So feeling good about that progress we made. That really flipped for us really in the -- probably starting September of last year, and we've been able to hold it all the way through February thus far. Operator: Our next question is from Todd Thomas with KeyBanc Capital Markets. Todd Thomas: I appreciate the detail on January and some February data with regards to occupancy and move-in rents. It seems you've recovered a lot of ground. You described '25 as sort of a tale of 2 halves, first half being a little weaker, followed by an improvement in trends in the second half. Is 2026 from sort of a revenue growth standpoint also expected to be sort of a tale of 2 halves? Or do you think you can continue to recover in the back half of the year when some of your comps begin to normalize? Brandon Togashi: Yes, Todd, this is Brandon. I do think that we'll have the benefit of some easier comps in the first half of the year and partway through the third quarter as well. The fourth quarter will be the tougher comp. We see the year-over-year same-store revenue growth steadily increasing as we go throughout the year until maybe we plateau a little bit because of what you touched on, it does get a little bit tougher of a comp starting in the back half of the third quarter and then really for the entirety of the fourth quarter. Todd Thomas: Okay. And then Brandon, Dave, too, I think you both touched on reducing leverage as a priority. And I just wanted to ask whether the guidance includes any sort of deleveraging initiatives really primarily, I guess, outside of organic EBITDA growth? And do you have a leverage target for year-end '26? Brandon Togashi: Yes. So our 5.5 to 6.5x range remains kind of the long-term target for us just outside the top end of that at the end of 2025. Based on the midpoint of the same-store NOI guide, Todd, as you know, flat on that metric and FFO being relatively flat, it's really calling for leverage to stay fairly neutral, a little bit of seasonality depending on which quarter you go through, because the metric is calculated on an annualization of the given quarter, as you know. But outside of that, I would say by the end of '26, it's going to be fairly similar to the end of '25. Capital deployment will affect that. You saw the guide on acquisitions and dispositions at the midpoint of each, we're saying that, that would be neutral. Obviously, changes month by month based on the deals that we're seeing, the success we're having on some of the disposition initiatives, any of the particular deals in front of us that we're underwriting for acquisition largely through the joint ventures, as we said earlier. So the timing and the success on those fronts could drive it and move it a little bit. But generally, at the midpoint, you're seeing it stay pretty constant. Operator: Our next question is from Salil Mehta with Green Street Advisors. Salil Mehta: Just a quick one here to start off. Sorry if I missed this before. I know you guys mentioned January and February occupancy, but did you guys provide any color on where move-in rates are thus far in 1Q? David Cramer: Yes. Thanks for joining, it's Dave. What we talked about is our move-in rates will inflect negative for the first probably 4 or 5 months of the year, and it's due to a little tougher comp from 2025 and where we're positioned in our markets to make sure that we're maximizing flow through the funnel and conversions and customer count, working towards our revenue goal because that's what we're trying to work towards. But I think you will see some negative move-in rates for the next -- probably until about June, and then we think they'll inflect back to a more neutral positive for the back half of the year. Salil Mehta: Thanks for that insight. And given the roughly, I guess, 1% move-in rate growth and overall rental rate growth in the quarter, how are you guys balancing the trade-off between occupancy and rate growth going forward? Is one going to be a bigger priority than the other? You guys kind of mentioned that you guys aren't chasing occupancy. Does that mean that you guys are happy with where occupancy levels are at currently? David Cramer: Yes. I think you're touching on it. It's a balancing point of marketing spend and the use of price and discount to get better conversion and really occupancy can lead to revenue. And so for us, we think we are at a point where we can use those levers effectively and drive some more customer count, which will increase our occupancy. And so the fact that we're starting the year coming out of January on a positive note on a year-over-year basis, as we look at our year, we think we'll be able to continue to work on the occupancy side of the house effectively with that -- and that's a nice revenue output for us. So that is, as you think about our year, we think we'll be more occupied at the end of 2026 than we were in 2025. Operator: Our next question is from Michael Griffin with Evercore ISI. Michael Griffin: Dave, I'm curious if you can touch a little bit on sort of organic customer demand. Obviously, I think it's a positive seeing the same-store revenue growth inflect into next year, but it feels like that's more an enhancement of marketing initiatives and capturing more of the top-of-funnel demand as opposed to the pie maybe expanding a bit. So can you talk a little bit about organic customer trends? How are new customers versus renewals? And really is the inflection driven by, I guess, capturing more of the pie of customers out there rather than expectations for more customers to come back to the market? David Cramer: Yes. Good question. Thanks for being here. I would agree with your premise. And I think we're approaching 2026 with a mind frame that the competitive environment will be very similar to what we face in 2025. Nationally, we know that new deliveries are coming down. But that number takes a while to be absorbed. And so I think as you think about our stores that are facing competitors in a 3- and 5-mile ring, we don't see a material change in the number of stores facing that competitor set in 2026. So we're going to be very focused on just executing and trying to take more of the pie. And certainly, every month, you go deeper into absorbing new supply, it helps, but we did not, in our guidance at our midpoint, really model in any catalysts or anything that's really materially different in the way we're thinking about how the competition is going to look for 2026. Michael Griffin: That's certainly some helpful context. And then maybe just on the external growth opportunities. It seems that particularly the acquisitions component of that might be more in kind of the JV structures that you've laid out. But can you give us a sense of what kind of product type you're targeting with those whether it's going in cap rates, your yield requirements? Just maybe give us a sense of kind of external growth priorities and the investment pipeline for the year ahead. David Cramer: Yes, a really great question. First of all, we're targeting markets where we can densify our portfolio, get better synergies, get better operational efficiencies. And that's been part of our portfolio optimization program now for a couple of years. And so the markets we are targeting are really around where we think we can have good efficiencies and good success in buying properties. We're probably a little less attracted to the markets that are really struggling right now because we'll want those markets to improve before we want to step into them. But we have a number of markets where we have had good success. We've seen the inflection points. We're seeing things go in a positive direction, and we're very actively working in those markets to come up with acquisitions. The best cost of capital right now for us is our JVs and the new structure, the preferred equity structure, we'll lean into that this year as well. And then we will buy on balance sheet, if needed, primarily used probably to fulfill 1031s as we come across those through the dispositions. But we're willing and able to want to buy, but we're just being very diligent with our money right now because it's -- certainly, there's -- you got to be very smart and you got to be very diligent on how you put your money out and deploy it. Operator: Our next question is from Ravi Vaidya with Mizuho Securities. Ravi Vaidya: I wanted to ask about the rent per occupied square foot. You've seen strong improvement there on both a year-over-year basis and a quarter-on-quarter basis. Do you -- how do you see this metric trending in 1Q '26 and throughout the balance of '26 as well? Do you think it's going to be stable, accelerating or decelerating? David Cramer: Good question. Thanks for joining. We approach 2026 with continued improvement in the achieved rate. It becomes more challenging when you have bigger roll-downs like we're facing today. So our rent roll-downs are in the low to mid-30s at this point. And so the strength of our ECRI program and the improvements we've made around how we implement the ECRI program will help offset that rent roll down. But we did throughout the year, show modest improvement in the achieved rate as we went through the year. Ravi Vaidya: And I wanted to ask another question about the guide. I know that you mentioned that we don't have any housing-related catalysts or any other demand catalyst for achieving the same-store revenue guide. But what are some of the potential levers of maybe upside or elements of conservatism that might be baked in given that the broader operating environment remains a bit choppy. David Cramer: Yes. Good question. I'll start and then Brandon, if you want to jump in. Certainly, things that can move the guide around. And one of the primary things is asking rents. If we see good improvement in asking rents, and we see a good spring leasing season. And that's the hard part about sitting here today, it's February. And if we were sitting here in May, I think we'd have a lot more light on how active the spring leasing season was. If we have good rate, we're able to drive the street rate asking rents up as historically this industry does. And so that's the one thing that we don't know, and that could push the guide up or it may push you to the low end if street rates don't cooperate and you get more volatile competitive environment as far as the revenue side of the house goes. And that would affect occupancy and it would affect, obviously, what you're driving home for the achieved rate if you're any movement on that street rate. Anything else? Brandon Togashi: Ravi, I mean, one thing I might add is just that's outside of our control, obviously, is just the regulatory environment and any state of emergency declarations due to severe weather or other events, our portfolio is not currently subject to significant restrictions there. But obviously, that could play a factor. There's always some elements of that in the portfolio as you go throughout the year. In the state of Oklahoma, we had some restrictions in 2025 that impacted our OKC and fulsome markets. So that's just one variable. But we try to, as much as you can, incorporate some element of that as we think about kind of the normal course revenue management program. Operator: Our next question is from Ron Kamdem with Morgan Stanley. Ronald Kamdem: Just 2 quick ones. Just can you just contextualize your dividend payout ratio for this year? And sort of -- I think you talked about sort of an inflection. Is it sort of a '27 or ' 28, like when do you sort of anticipate getting that back to sort of even as this inflection sort of plays out? David Cramer: Ron, thanks. It's Dave. Thanks for the question. Yes, certainly, we -- the guidance would imply we're not covering the dividend this year. We will be light on covering the total payout. Certainly, as we think about it, we are at an inflection point. We are seeing fundamentals turn positive. We're seeing our organic growth turn positive. And there are moving pieces, investment activity and things like that, that can move FFO around. We did come off of covering the dividend in third quarter and fourth quarter of last year. And so I think we have very good discussions with our Board. Our Board is very in tune to what the outlook of the company is. And right now, I think to your point, as we finish the end of the year, we probably will be back to where we're covering 100% of the dividend towards the back half, really the fourth quarter of the year and then into 2027, if the fundamentals keep improving, we'll certainly be in a much better position. But we're certainly aware of where the payout ratio is, and we're working very hard to accomplish that to be lower. Ronald Kamdem: Great. That's helpful. And then my second question, I think the release sort of noted that all but one market saw sort of sequential improvement, which I thought was interesting. I mean, could you just double-click on whether the heavy supply markets versus maybe the lower supply, how those are sort of performing and what your expectations are in terms of that -- the strength of the inflection? David Cramer: Yes. Good question. I'll start and if Brandon wants to come in here. But you're touching on it. The markets where we are still facing a tremendous amount of competition that needs to be absorbed are the ones that are really not inflecting positive are going to take time. And really, it's just time. And in some markets like Phoenix, they need to stop building because they're still building in Phoenix. And so you make 2 steps forward and then you have to take 3 steps back as somebody adds some more product to the market. The markets that don't have that, and I mentioned a couple of them earlier, Colorado Springs, Wichita, Portland, we're seeing nice solid sequential growth in rate and occupancies have been steady, and we're seeing some pricing power in those markets, and we're having good success. And so fortunately, we do have a diversified portfolio. We have a lot of our markets that are going in the right direction. And so that makes us feel very good as we think we've hit that positive inflection point. And even a market like Atlanta, which is improving, it's still very much negative, but we are seeing some consistency and some stability in some of these markets, which is encouraging to us. Operator: Our next question is from Eric Wolfe with Citigroup. Eric Wolfe: You mentioned the positive trends on occupancy year-to-date. I was just wondering if it was possible for you to update us on where RevPath has been trending. Just to understand how average realized rents have been moving through the early part of the year, especially given your comment around seeing more success on ECRIs. David Cramer: Thanks for joining and good question. RevPath is following the similar trends. We are seeing improvement in RevPath that would be consistent with nice solid ECRI gains and obviously, the improvement in -- or stabilization in occupancy and slight improvement in occupancy. But the RevPath is growing, yes. Eric Wolfe: And it looks like your other property-related income or revenue was a 40 bps drag on your same-store revenue growth this quarter. Can you just talk about what's embedded in your guidance for that line item and where you see it trending throughout 2026? Brandon Togashi: Yes, Eric, it's Brandon. That line item will continue to be a little bit of a drag. That includes our -- the tenant insurance dollars that are retained at the store. We've always had some amount of tenant insurance dollars reported within the store level NOI dating back to the PRO structure. So that's just remained. And as we talk about all the things that Dave has hit on here, the jocking between street rates, marketing spend, our discounting and promotion initiatives, the -- at the time of rental upsell and tenant insurance, we have altered that over the past couple of quarters in order to prioritize getting that rental. And so that's created a little bit of a drag in that line item. And so we expect that to continue in '26, although it does -- that comp gets easier as we get to the middle part of the year. Operator: Our next question is from Omotayo Okusanya with Deutsche Bank. Omotayo Okusanya: First question I had was, again, while guidance does not really contemplate any real change in the housing market. Just curious how you guys are thinking about, again, some of these affordability initiatives that President Trump is trying to make happen. I mean just kind of take a look at all of that. I mean, do you kind of feel like the housing market could get better, so this could potentially be a positive catalyst? Or do you kind of look at it and kind of say it's more you'll see a whole bunch of refinancing activity because mortgage rates are now down at 6%, but it's still not low enough to really stimulate housing demand? David Cramer: Yes. This is Dave. Thanks for joining the question. That's a hard one. I mean, we are encouraged with the fact that at least everybody is talking about it, and they're trying to find a solution or some solutions to get progress there. Our -- we did not look at 2026 of any type of cracker catalyst in that piece of it. We just approached '26, and that would probably remain the same. Any improvement of that would be much welcome. We would be positioned for outsized impact should they crack any of that and open up the resale market or things like that. But I think we see the same data that you do. There's a lot of listings, there's a lot of stuff going on out there, but we've just not seen any significant improvement yet. Omotayo Okusanya: And then second question, the preferred equity platform. Could you just talk a little bit -- it sounds like everything is not kind of in place. Can you just talk a little bit about kind of how deployment is going to work there and how quickly you think you can kind of put out capital? David Cramer: Yes, sure. It's a 2-year program that we'd set up that we wanted to get the capital out in 2 years. Certainly, we are working very, very hard. We do have 3 properties under contract today, totaling a little over $50 million. So we're pleased that we've got that stood up and we've got properties under contract. We'd like to get that out as quick as possible if we can find the right deals. So it's hard to handicap those. Those transactions are lumpy and timing is -- cannot be particularly seen, but we are happy that we're off and running, and we're certainly looking at a lot of properties and there are a lot of opportunities. Operator: Our next question is from Wes Golladay with Baird. Wesley Golladay: I just have a quick question on the portfolio optimization. When you get through this year's dispositions, will you be largely done with the program? David Cramer: Wes, it's Dave. Yes, I think so. We've done the majority of the heavy lifting and the larger work. This year, we'll wrap up a lot of that. And then after that, it will just be as things materialize and stuff. But yes, most of the heavy lifting is done. Operator: Our next question is from Annabelle Ayer with Barclays. Annabelle Ayer: Can you remind us of your strategy for payroll and how you think about the trade-off between like lowering payroll costs versus potentially losing sales? David Cramer: Yes. Annabelle, thanks for joining. We've been working for a number of years on how to model payroll. And I can tell you with the data we have today and much better tools that we have today, we certainly want to meet the customer when they want to meet us and how they want to shop with us. And so there's no singular answer to perfect staffing levels. We have markets where we have to have more staffing with more hours and markets where it's less. But what I do know is we have a much better line of sight. What we've been working on is hours of operation. And that would be, can we be open later? Can we be closed earlier? Do we need to be open 8 hours, 10 hours, 12 hours a day? Do we need to be open 6 hours a day? We've certainly put a lot of emphasis around our customer care center and our call center teams are doing amazing things, plus we've implemented AI there. So we have a lot of automation built in there where we do not have to be around. We've put obviously the bar codes on the window. We have an app stood up. But for us, it's pretty fluid in markets and pretty fluid in stores, but we have seen payroll savings. And we do think there are more additional payroll savings for us as we go forward. But we will not try to do that at the expense of the customer. But I do believe, clearly, the customer expectation and when they want us around and how they want us has changed. There's definitely that digital transformation is real, and it allows us to just be a little more flexible when we're at the store. Annabelle Ayer: And then one more. You guys have invested a lot in your website and platform over the last year or two. How much more of a benefit do you see coming from improved search rankings and higher conversion rates? David Cramer: Another good question. We've certainly put a lot of effort there, and we've seen a lot of success. If you look at our visibility scores and our outranking scores, and it's a true testament to the rental volumes. When we talk about rental volumes being up 20% and 30%, that's all of these things coming together and working very, very well. So we're extremely happy. Obviously, you're never done. You're always working and trying to find another penny here and another rental there. And so the teams are working very hard with their modeling and how we're evolving our AI modeling. And there's a lot of progress around what we're doing with Google and around our -- how we're looking at our search and how we're looking at our paid search and our effectiveness around all of the channels that are available to us. And so I'm very pleased with the progress, but still more to come there. Operator: Our final question is from Michael Goldsmith with UBS. Michael Goldsmith: Back for a couple of follow-ups. First, I think you mentioned some restrictions in Oklahoma, like including Tulsa. Can you kind of clarify what you're referring to there? David Cramer: Yes. I'll jump in a little bit, Michael. What we had last year is they had high wind and fire, major restrictions around counties because it was so dry. And so what we faced for a number of months was a restriction on how much we could increase rates at a certain particular time. And so we set a little calmer on Oklahoma through probably 5 or 6 months of that year. And then we had a pretty good lift in January around working back through the portfolio in Oklahoma and catching folks back up to where we wanted them to be. Like Brandon said, a lot of these state of emergencies, they're generally pretty short in nature, and they're not as widespread. I mean it will be by county or by city sometimes. And that one just happened to be a wildfire one that hung on because they had such dry conditions for such a long period of time. Michael Goldsmith: And then, Brandon, a follow-up just on the refinancing. Can you walk through what's untapped for this year and just how you're thinking about it? Brandon Togashi: Yes. The -- No, the $375 million that we have coming due this year concentrated $275 million on that term loan and then $100 million on the private placement notes. As you can see on Schedule 4 in the supplemental, the blended rate on that $375 million is about 4.25%, and so if we, as I said earlier, executed a refinancing of all of that through the term loan market, again, depending on whether we take some of that floating or fix it all for the tenor, you're probably in the mid- to high 4s. And so that's -- let's just say that's 0.5% of rate reset on that notional. And so that kind of -- it's a partial year impact in 2026, Michael. So that kind of gets to some of that interest expense headwind that I mentioned earlier. That's just kind of the plan A. There's obviously the private placement market or the secured market. So we feel comfortable with being able to address the maturities. That will be the main focus for our finance team. And then I was also referring to in my comments earlier, and you see it footnoted in our guidance table, one of our joint ventures has about $360 million of debt that comes due in October. And so currently, the plan there would be to refinance that. And so that's a 3.5% in-place interest rate. So there would be a rate reset at the JV level, and then we would pick up our 25% share of that. So that's all incorporated into the guide. Operator: There are no further questions at this time. I would like to turn the call back over to Mr. Hoglund for closing comments. George Hoglund: Thank you all for joining us today, and we appreciate your continued interest in NSA. And we look forward to seeing many of you investors next week at the conference of Florida. Thank you. Operator: Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.
Operator: Welcome to Stantec's Fourth Quarter and Full Year 2025 Results Webcast and Conference Call. Leading the call today are Gord Johnston, President and Chief Executive Officer; and Vito Culmone. Executive Vice President and Chief Financial Officer. Stantec invites those dialing in to view the slide presentation, which is available in the Investors section at stantec.com. Today's call is being webcast. Please be advised that if you have dialed in, while also viewing the webcast, you should mute your computer, as there is a delay between the call and the webcast. All information provided during this conference call is subject to the forward-looking statement qualification set out on Slide 2, detailed in Stantec's management discussion and analysis and incorporated in full for the purpose of today's call. Unless otherwise noted, dollar amounts discussed in today's call are expressed in Canadian dollars and are generally rounded. With that, I'll turn the call over to Mr. Gord Johnston. Gordon Johnston: Good morning, everyone, and thank you for joining us today. 2025 marked another record year for Stantec. We delivered solid mid-single-digit organic growth and completed three acquisitions despite a year of ongoing geopolitical uncertainty. Global trends across the water, mission-critical, transportation and energy transition sectors continue to underpin strong demand for our services, and our diversified portfolio across sectors and geographies continues to enhance the resilience of our operations. As a result, we grew our net revenue almost 11% compared to 2024 to $6.5 billion, driven by 5% organic and 3.9% acquisition growth. Organic growth was achieved in all of our regional and business operating units with our Water business achieving almost 11% organic growth. Adjusted EBITDA increased close to 17% year-over-year and continued strong project execution drove our adjusted EBITDA margin to 17.6%, achieving our 2024 to 2026 strategic plan target range of 17% to 18%, 1 full year earlier than originally anticipated. We also delivered adjusted EPS growth of almost 20% compared to 2024. Looking at our results in each of our geographies. In the fourth quarter, U.S. net revenue increased 13.5%, driven primarily by 11.5% acquisition and just over 2% organic growth. On a full year basis, net revenue grew by almost 11%, supported by just over 5% acquisition and 3.4% organic growth. In our Buildings business, net revenue increased over 30% in the year, primarily due to our acquisition of Page, but also from solid organic growth. Public and private sector investments in data centers and other mission-critical facilities, science and technology and civic continue to drive organic growth in this division. Organic growth in Water was driven by large wastewater treatment projects, and growth in Environmental Services was primarily driven by the energy transition, mining and infrastructure sectors as well as continued work for a large utility provider. In Canada, fourth quarter net revenue grew 5.5% in the quarter, driven completely by organic growth. For the full year, net revenue grew over 8% compared to 2024, primarily through organic growth. We're pleased that our Water and Energy & Resources businesses continued to deliver strong double-digit growth. Momentum on major wastewater projects contributed to over 20% organic growth in water, and consistent progress on major industrial process projects drove 15% organic growth in Energy & Resources. Solid growth in Infrastructure was primarily supported by land development projects in Alberta, airport sector projects in Quebec, and bridge sector work in Eastern Canada. Public sector investment continued to drive growth in buildings, primarily in our civic and health care markets. Lastly, in the fourth quarter, our Global business delivered net revenue growth of 11%, achieving over 6% organic and 2.5% acquisition growth and to a lesser extent, positive foreign exchange impact. For the full year, the Global business grew net revenue by almost 13%, underpinned by almost 6% organic and over 4% acquisition growth. Our industry-leading Water business continued to deliver consecutive double-digit organic growth through long-term framework agreements and public sector investment in water infrastructure across the U.K., Australia and New Zealand. The ramp-up of new projects in Chile and Peru drove strong organic growth in Energy & Resources as the growing need for energy transition solutions continues to drive demand in mining for copper. We also achieved double-digit organic growth in our German Infrastructure business due to continued momentum on a major public sector electrical transmission project, and increased volume on transit and rail projects. I'll now turn the call over to Vito to review our fourth quarter and full year 2025 financial results as well as to provide an update on our backlog and financial targets for 2026. Vito Culmone: Thank you, Gord, and good morning, everyone. 2025 truly was another exceptional year for Stantec, and we are very pleased with our fourth quarter and our full year 2025 results. Sustained demand across our diverse multi-sector platform, underpinned by favorable global trends continues to support our strong results. In the fourth quarter, we achieved gross revenue of $2.1 billion and net revenue of $1.6 billion, an increase of 10.9% compared to Q4 of 2024. This growth was driven by 3.9% organic growth and 6.5% acquisition growth. As a percentage of our net revenue, project margins once again remained in line with our expectations at 54.5%. We achieved an adjusted EBITDA margin of 17.3% in the quarter, that's a 60 basis point increase compared to Q4 of 2024. The increase in margin primarily reflects lower admin and marketing expenses as a percentage of our net revenue, mainly due to higher utilization and our continued discipline in the management of our operations. And our adjusted EPS in the fourth quarter increased 12.6% to $1.25. Looking at the full year, as Gordon mentioned, 2025 was another record year for Stantec. Our gross revenue reached $8.1 billion, and we grew net revenue to $6.5 billion, up 10.7% when compared to our performance in 2024. This was achieved through 5% organic and 3.9% acquisition growth. And as a percentage of our net revenue, project margins came in at 54.3%, once again, in line with our expectations. On a full year basis, we achieved a very strong adjusted EBITDA margin of 17.9%, a 90 basis point increase year-over-year. This record margin was driven by strong project execution and cost management across our entire business. And finally, our adjusted EPS for the year reached $5.30, an increase of 19.9% when compared to 2024. Turning to our cash flow, liquidity and capital resources. During 2025, our operating cash flow increased 43.1% compared to 2024 and growing from $603 million to $863 million, reflecting continued strong cash flow generation through our revenue growth, operational performance and strong working capital management. Our free cash flow to net income conversion was 1.3x, above our target of 1.0x. DSO at the end of the fourth quarter was 69 days, a substantive improvement of 8 days compared to Q4 of 2024 due to excellence in working capital management. We finished the year with a net debt to adjusted EBITDA ratio at 1.3x within our internal range -- target range of 1 to 2x. As a result of our continued strong performance, the Board has approved an 8.9% dividend increase, with this, our annualized dividend will increase to $0.98 per share. It's important to note that our strong balance sheet leaves us very well positioned for future acquisition growth in 2026. Now turning to our backlog. At the end of 2025, our contract backlog reached a new all-time high of $8.6 billion, a 9.5% increase year-over-year, representing approximately 13 months of work. Acquisitions completed in 2025 contributed to backlog growth of over 8%, primarily within our Buildings business. Year-over-year organic growth was 3.6%. We achieved organic growth in all of our regions, most notably in Global, which delivered double-digit growth of 14.2%. We also saw strong backlog growth in Water and strength in our Buildings business was supported by health care, data centers and other mission-critical facilities. Let's now turn to our 2026 financial targets, and we expect another strong year. Net revenue growth is expected to be in the range of 8.5% to 11.5% achieved through organic net revenue and acquisition growth, primarily due to the Page acquisition. We anticipate our adjusted EBITDA margin will continue to expand, and that's driven by solid project execution, enhanced strategies in the management of admin and marketing, continued expansion of our high-value centers and optimization of our digital strategies. As such, we expect to deliver an adjusted EBITDA margin between 17.6% to 18.2%. And we expect to deliver 15% to 18% growth in adjusted EPS compared to 2025. These targets, of course, do not include any assumptions related to additional acquisitions, given the unpredictable nature of the timing and size of such transactions. With that, let me turn the call back to Gord to highlight the business drivers supporting our targets for 2026. Gordon Johnston: Thank you. As Vito mentioned, we expect strong net revenue for 2026, primarily driven by improved organic net revenue growth across the business. Each of our geographies is expected to be in the mid- to high single-digit range. Macro trends, including aging infrastructure, defense spending, water security, advanced manufacturing, the growing demand for mission-critical facilities and the energy transition, all continue to create meaningful opportunities for Stantec. Over the past couple of months, we've started to see an increase in activity in the U.S., and we expect this trend to continue throughout the year. We're securing our fair share of wins across all five of our business operating units. Growth in the U.S. will be underpinned by the continued strength of our Buildings business as we continue to capture synergies from the Page acquisition. Our Buildings team continues to see strong activity in data centers. As an example, Stantec was just selected by an artificial intelligence firm to design the initial 300- to 350-megawatt phase of a large data center campus, which has the potential to scale up to 1 gigawatt. In Environmental Services, work is picking up related to the U.S. Navy CLEAN Program and activity within the U.S. Department of Defense continues to accelerate. In the energy sector, particularly LNG, strong demand is expected to generate meaningful project activity and cross-selling opportunities for both our Environmental Services and Energy & Resources businesses. U.S. Infrastructure remains a significant growth driver for us. With roughly half of IIJA funding still to be allocated, we continue to see strong momentum across our Infrastructure business, including major roads and bridge projects in the Southeast and large transit and rail programs in the West. In Canada, organic growth will be driven by public and private sector spending plans. We continue to see strong growth in our Water business through major wastewater and biosolid treatment facilities. We expect strong growth in Environmental Services and Energy & Resources, with large private investments in energy infrastructure. And we're seeing strong growth coming from enhanced defense spending in both our Buildings and Infrastructure businesses. We're involved in a number of projects in the Arctic, where we bring specialized expertise in extreme climate conditions to support defense work. These include projects like Grays Bay Road, which leads to the proposed deepwater port that will have the ability to handle Navy vessels and large cargo ships. We're also involved in facilities to support the North American Aerospace Defense Command, and we're doing work for the Canadian Department of National Defense to deliver facility upgrades for the Canadian Armed Forces. And we also just secured a major design build contract for Defence Construction Canada's Multi-Mission Aircraft hangar. Finally, in our Global region, organic growth is expected to be driven by continued high levels of activity in our Water business under the ongoing AMP8 program. We're involved in over 20 AMP8 frameworks and we continue to be an industry leader in U.K. water by a significant margin. Stantec U.K. water team was recently named as a preferred bidder for the multibillion pound Scottish water enterprise, which is set to transform Scotland's water and wastewater networks. This program, which can extend out 13 years, is the largest program of investment in Scottish water's history. Combined with other frameworks in Australia and New Zealand, we expect strong growth in our Global Water segment. In addition, we continue to see strong demand in our Global Energy & Resources business and in Transportation, particularly in Germany. Outside of organic growth, M&A remains a fundamental driver for Stantec. However, we will not pursue acquisitions solely for the sake of growth or to meet a certain target. Acquisitions must be value accretive. Stantec has a long and proven track record of successful M&A with last year's addition of Page marking our 150th completed transaction. We're very well positioned to continue to build on this track record in 2026 and beyond, and we continue to see ample opportunities in the market. As we enter the final year of our 2024 to 2026 strategic plan, we're making meaningful progress towards the plan's targets. The momentum we've built, combined with favorable long-term market trends, position Stantec to drive sustained growth and shareholder value for many years to come. Before concluding today's prepared remarks, I'd like to touch on AI and how we're thinking about it at Stantec. As engineers, architects and designated professionals, we're trusted advisers. Our clients hire us to use our qualified judgment to solve problems and develop solutions using a variety of tools. AI helps manage scale, consistency and document-heavy work, so our teams can stay focused on the design intent, risk trade-offs and client accountability. To do this work, clients are continually asking for faster delivery, fewer surprises and clearer defensibility. For us, AI enables earlier option evaluation, reduces late-stage conflicts and improves quality control. The opportunity isn't the technology itself. It's the ability to make better decisions earlier and deliver stronger outcomes across the asset life cycle. From a financial standpoint, AI does not automatically translate to lower fees. In fixed fee work, it improves margins by reducing rework and execution risk. In time and materials work, it increases throughput and delivery confidence, allowing teams to manage more work in parallel. Our pricing remains anchored in value and risk reduction, not simply in hours. Strategically, we take a partner-agnostic approach. Our advantage isn't tied to a single technology. It's our ability to operationalize AI without compromising that trust governance or professional standards. We've moved beyond isolated AI pilots, and we're now enabling AI directly into our delivery workflows while maintaining professional accountability. AI also provides multiple revenue opportunities. For example, related to data center development, our teams are already working on 5 separate hyperscalers to develop approximately 2.5 gigawatt of capacity. Combined, these facilities are worth almost $35 billion. In addition, we're working on well over 100 other mission-critical facilities. This work crosses several of our verticals, given the need for planning, design, energy, cooling and resilience. We also see opportunities from advanced analytics and predictive advisory services for our clients, and for digital and data-enhanced deliverables. Clients trust us to securely manage and govern large volumes of project data, which enables us to provide predictive and structured analytical solutions. And these are just a couple of examples of how AI is an opportunity amplifier, enabling new work, new service lines and deeper client relationships. Clients who are building AI-enabled infrastructure and operations need trusted partners like Stantec who understand both engineering and data. In short, AI strengthens our professional model enhancing predictability, allowing for better delivery, creating new opportunities, and supporting margin enhancement. And with that, let me turn the call over to the operator for questions. Operator? Operator: [Operator Instructions] Our first question comes from the line of Ian Gillies from Stifel. Ian Gillies: As you think about AI, and I had asked this question on previous conference call, how do you think this ends up translating into revenue per employee, employee utilization and the like? Because those have always been pretty key drivers in improving margin and improving top line. Gordon Johnston: Yes, absolutely. I think in all of those, Ian, it's favorable for us. I see this -- and I think we've talked before, like I see AI is just the latest tool in a series of sort of technological enhancements that have come through the engineering space. Each time these tools have come, they've made us more efficient and they've driven higher net revenue per employee. So we're thinking of things like the transition from when I graduated from calculators to computers to AutoCAD to 3D and now AI is just that latest tool that I believe will allow us to drive more revenue per full-time employee. Ian Gillies: Understood. And Gord, you've been pretty vocal about wanting to execute M&A over the last, call it, 18 to 24 months and rightfully so. But with the reset in valuation metrics for public equities, I guess, over the course of your career and as you follow the M&A market, how long does it typically take for by the companies to reset their valuation markers because there's probably a bit of a disconnect right now given the rapidity or how rapid it's been and how quickly things have moved over the last few months? Gordon Johnston: Yes. I mean -- it's interesting because as you can imagine, we're having these very same conversations. And the sort of the decline in the multiples in the public sector -- in the public markets is a pretty new phenomenon, for us, it's been a couple of weeks or a month. So we haven't really seen a lot of transactions that have closed in this period of time. So there is a bit of a -- probably an expectation adjustment that will take a while to flow through. The question is too is, is this sort of where all of us and our competitors are now, is this just a transient downward blip? Or is this going to be sustained for a period of time. And I think that will play into how we see what happens in the M&A market. Ian Gillies: A very quick follow-on. So would it be fair to presume that it may take a little longer than we would have thought maybe 6 months ago, just given everything that's happened. Gordon Johnston: Take a little longer for... Ian Gillies: Sorry, to execute on M&A. Gordon Johnston: Oh, we're very, very active still. Absolutely. And you always have a number of conversations in the works. And these are good firms that we see have good long-term bones and good synergies with Stantec. So certainly, the pricing conversation is ongoing, but that's only one conversation out of multiple to make sure that the fit is there, the synergies are there, the cultural piece is there. And now we're just talking about the financial piece. Vito Culmone: No, ultimately, we fundamentally believe in the long-term value creation opportunities for our sector, notwithstanding the recent downturn that you're alluding to. So clearly, valuation is one component, as Gord noted, of any conversation when it comes to targets. But the primary focus, it really is about how these potential acquisitions fit into our strategic portfolio, what it enables us to do for our clients. And so from that perspective, we don't see any timing-related issues. Operator: And our next question comes from the line of Sabahat Khan from RBC Capital Markets. Sabahat Khan: Great. Maybe just one on AI, and I promise to switch over to something else after. But I guess, in your sort of use of AI to date, where are you finding in terms of end markets or just these efficiency tools, digital tools, where do you see more application for such tools and capabilities today? And where do you think that sort of evolves over time? Is this something that can sort of make its way across all end markets providing efficiency. Just curious what you're seeing in the early days versus where you see this going? Gordon Johnston: Yes. Thanks, Sabahat. A couple of things we're focusing on both what we can do internally to make ourselves more efficient. And so those are back-office tools and things that we're working through. But then we're also on the front foot, how can our engineers and architects and professional services people use AI tools, again, to be more efficient, but also to refine work products. So some of the examples of things where we're using it, we're using a tool called Stable Diffusion in our Buildings group right now. And that's -- it's more of a visual and more of a graphical AI tool. So you can be working with the client, you can sketch something up and feed it into the AI tool, and it turns it into drawings and things much more efficiently. We have -- as you can imagine, when our engineers and architects around the world are working, we have to select a specific specification for a type of project that we're working on or a type of material or equipment. And so we have these very, very large specification libraries. So we're using AI tools to help us quickly narrow down what's the right spec to use. When we submit a big package, for example, to a client, we call it a design submittal. And there's a number of things that you have to check off to make sure that you -- from a regulatory perspective to get a permit or for client reviews that you've accomplished these things. We're using AI to help us in QA. And so a lot of these things will be used across all of our geographies and across all of our business lines. And so I think we're still in early days. But we and actually our design teams are pretty excited about where this can take us. Sabahat Khan: Okay. Great. And then just in terms of the sort of the setup into 2026, just looking at your guide, maybe just if you could dig into the U.S. segment a bit more. One of your peers noted a bit more predictability and stability in that market this year. Can you give, from your vantage point, what are you seeing across either the infrastructure side, water side, just kind of your larger end markets, in the U.S. market today and sort of where the funding mechanisms are for the year ahead? Gordon Johnston: Yes. Great. So a couple of things. One of the things there is we've mentioned in the prepared remarks that we've seen a little bit of increased activity in the U.S. over the last several months. And if you look at our U.S. backlog Q4 over Q3 is up about 3% just in the quarter. So that increase in activity that we're seeing is translating into backlog, and we do see that continuing forward. Incredible amount of work right now in the data center work that we're doing for the hyperscalers. We mentioned the 5 projects, $35 plus or minus billion worth of work there. So that continues to go a lot of environmental services work. We talked about the U.S. Navy Clean Water -- sorry, U.S. Navy CLEAN Program and D&D work. So there's a lot of opportunity we're seeing really across the majority of our sectors in the U.S., energy transition type work, grid strengthening in the south. So we're actually feeling pretty good broad-based support across the U.S. for us as we move into 2026. Operator: And our next question comes from the line of Frederic Bastien from Raymond James. Frederic Bastien: It feels like an engineering firm's ability to seamlessly embed AI with proprietary data will be a major competitive advantage going forward. And I think those who invest accordingly will obviously be awarded. Do you believe that will benefit larger firms like you over the smaller ones and potentially lead to more consolidation acquisition opportunities? Gordon Johnston: That is exactly our thesis as well, Frederic, that as we've talked over the past, some of the firms that have joined us, these 1,000-, 2,000-person firms, even before AI, they've got to this level, and then they need to professionalize IT and cybersecurity and finances and HR and such. And they don't have the resources either in terms of skills or finances to support that. They just want to focus on the work. And now we see AI is even driving that more, that just the additional investment in resources, both people and financially to get there, plus the data probably isn't in common formats and all those things. I do believe that this will -- as we move forward, that AI and some of the things that we see there will continue to drive more firms in that space towards the consolidators. Frederic Bastien: That's a good answer. You also -- in your prepared remarks, you mentioned some good developments on the defense side in Canada. Would you mind just expanding on that and potentially indicate whether all the momentum that we're hearing about is actually translating into projects and bids? Gordon Johnston: Yes. It absolutely is. We're seeing certainly a renewed focus from the Canadian federal governments related to defense, related to the Arctic as well as other governments around the world. But we did talk about the Defence Construction Canada's Multi-Mission Aircraft hangar, and I believe that's in Nova Scotia that we're working on. A facility upgrades for the Armed Forces sort of across the region. So there's a lot of work coming there. Interestingly, we started working on that Grays Bay Road project a year ago or more. But now I think everyone can see, well, that used to be and everyone say, well, that's like a road to nowhere, but it's not. It's a road to what will be a deepwater port that will hold both Navy vessels, cargo ships and the like. And so a lot of this work is coming to fruition, and I think you'll see a lot more coming in the short term. Vito Culmone: And Gord, we're particularly well positioned north of the 60th with our capabilities, right? Gordon Johnston: Absolutely. With our capabilities in Yellowknife, in Whitehorse and a number of other locations out there as well as significant presence in Alaska, uniquely positions Stantec for this north of 60 work. Operator: And our next question comes from the line of Chris Murray from ATB Capital Markets. Chris Murray: Good to hear that you might still have T-square sticking around. I guess the first question is just on margins. And when I look at the guidance, you're sort of either guiding to flat to up margins. So I was just wondering if you could talk a little bit about some of the puts and takes around where you think the margin profile evolves over the next little while. It looks like there's a some good opportunities in some of the back-office stuff you guys have been doing and certainly some of the AI tools. But just any color you can provide on how to think about evolution over the next year would be great. Vito Culmone: Yes. Chris, maybe I'll take that one. First off, we're incredibly pleased with the progress to date. So when you look at our 90 basis point improvement year-to-date, that's basically come 50% or half of it from, I'll say, the business itself, operations, whether that's project margin improvement across certain sectors, utilization improvement. And then the balance of it, I'll call it, more back office and driving efficiency and just operational scale. And frankly, as I think as we move forward, it's really more of the same. I don't think there's going to be any magic bullets that contribute to what it is. It's really just continuing to lean in our continued use of our global delivery centers, the excitement around what's happening there and the capabilities of our folks offshore, which are just incredible, both from a professional development -- a professional service perspective, but also from a back office, and we see significant continued momentum there. And so we definitely don't expect to be flat. Clearly, the low end of our range is 17.6%, which is where we landed the year, but we continue to see continued improvement. So just really more of the same. Labor at the end of the day is the biggest component of it, driven either by efficiency and/or utilization and then just continued focus on discretionary spend, I would say. But it all starts with, of course, really continued excellence in project management and project execution. That's where the fundamental point is, and just a shout out to our team of 34,000-plus across our organization who day in, day out, do well by our customers, our clients and obviously, the bottom line. So I really appreciate it. Chris Murray: Okay. Great. And then I know there's been a lot of focus on AI and infrastructure. But one of the other areas that we're seeing more evolution is resources. I know historically, that's been something that you guys have had a lot of exposure to. Just wondering if you're seeing any, call it, green shoots or new developments in the resource business, be that either new pipelines or sort of pre-feasibility work or around other kind of resource work that might drag in maybe the Water business or something like that? Gordon Johnston: Yes. So a couple of things there. We think it is in our MD&A, isn't it, Vito, that we did pick up environmental work and permitting work related to a 125-mile long natural gas pipeline in Tennessee. So we are seeing those projects absolutely coming to bear. And then also, in addition to that, from a resources perspective, incredibly strong performance this year in South America, in our Chile and Peru operations, a lot of work coming back from the copper mining perspective. I went down and visited our offices in both locations and the amount of investment in either mine expansions and new mines coming down there is truly phenomenal. Copper prices are still pretty robust and certainly required if we want to continue with this energy transition grid hardening, grid strengthening and such. So yes, we're seeing that electrical piece continues to grow for us, which in us is in our Energy & Resources business. We're seeing the resources required to support that. The copper mining and such continues to grow. And then as you -- as we talked about the this 125-mile long natural gas pipeline in Tennessee. So we are seeing more work in most of those phases in our Energy & Resources business. Vito Culmone: And you would have seen that through our 2025 results, Chris, the early shoots of it, we had a very strong year on organic growth, high single digits on the Energy & Resources, and we continue to expect that momentum organically to continue into 2026. Operator: And our next question comes from the line of Michael Tupholme from TD Cowen. Michael Tupholme: I just wanted to go over the organic growth outlook from a BOU perspective. I know overall, mid- to high single digits, the guidance. In 2025, you saw quite a bit of variance in terms of organic growth across the different BOUs. How do you see that looking in 2026, do you see sort of more consistent performance? Or should we still expect some of these higher growth areas to really be the drivers? Vito Culmone: Yes. Maybe I'll start there. As Gord, I think, indicated in his prepared remarks, we expect organic growth across all of our BOUs next year. So that's a great place to start. I mean water has been -- Water is now 22% of our business overall. We saw continued strength. I think it's 4 years of consecutive double-digit growth in Water, if not more than that. And we definitely continue to see that and expect that going forward. Infrastructure was a little maybe more muted in 2025 in the low single digits. I think that was a temporary drop from our more mid-single-digit range. So we expect continued strength there, a rebound there. Buildings, 4.4% organic growth in 2025, really a lot of strength. The Page acquisition, in particular, and what the team has brought to the table there, we're really coming off some very, very strong years and expect to rebound there. So really strength across all of them. Gord, any other commentary you might want to add? Gordon Johnston: No, I completely agree. Vito Culmone: Yes. Yes. So I think we'll -- Water will continue to lead the way, perhaps, but strength across the board. Michael Tupholme: I appreciate that. And sorry, not to belabor the point, but just Environmental Services, I guess, that was probably the weakest last year and in the fourth quarter was kind of flattish. How do you think about that one for 2026? Gordon Johnston: Yes. We do see with all of these projects coming along, whether they're in the north -- the Canadian North or these big pipeline projects that we talked about, the first group in the door is Environmental Services. So we do see that kind of leads up, provides us some support. So we're looking for stronger organic growth in Environmental Services this year than we saw in -- certainly in 2025. And then the last group perhaps is our Energy & Resources business that put up 8.7%, almost 9% last year, but we look for continued growth in that segment as well, really strong in mining, particularly in South America, the energy transition, the transmission and distribution work we're doing there. And so we're looking for pretty good strength across the board from all of our business operating units. Michael Tupholme: Okay. Perfect. And then maybe just one further question. You talked a little bit about M&A earlier in the call. As it relates to accelerating adoption and use of AI in the industry, is this in any way affecting how you're thinking about M&A, the kinds of targets you would be interested in? And are there certain targets that maybe we traditionally would have been interested in, but that's sort of evolving and changing and others that maybe now become of greater interest? Just curious as to how this is affecting your thinking on M&A? Gordon Johnston: Yes. I think from the core business that we're working on, our 5 core verticals and our geographies. AI, again, we think while it will enable us and make us more efficient, the firms that we're talking to are viewing it really from the same perspective. So it doesn't really change our thought process there. I don't think we're, at this point, looking to go out and buy an AI firm. We see them -- a lot of them are pretty highly valued, and with little revenue or certainly a little even less profit in many cases. So we're not looking to do that. We're developing those skills in-house, partnering with firms as required. So it really isn't looking to change our M&A strategy at this point. Vito Culmone: Yes. I would add, Gord, certain targets have more developed digital capabilities than others do. And so where we have some targets that really are a bit advanced and/or interested in have capabilities there. I think that gets our attention a little bit. And as far as how -- what value add they might bring to us. But as Gordon mentioned, no overall change in strategy as it affects our M&A. Operator: And our next question comes from the line of Maxim Sytchev from NBCM. Maxim Sytchev: I just wanted to start a bit with a broader question around thoughts on outcome-based pricing as there are some discussions around how much of a cost plus evolution we could see in the space right now? And I guess how AI and your expertise sort of ties in? Because I mean, I presume this is something that actually you would welcome as the penetration of some of these pricing models could evolve. So I'm just curious what are your thoughts at the moment? And are we seeing any evolution from that perspective? Gordon Johnston: Yes, great question. And what we're finding in a lot of this sort of fixed fee outcome-based pricing percentage of construction. A lot of it depends on the client and the type of work that you're doing. So a lot of the -- of course, the big design build or P3 projects that we do are all virtually all fixed fee or deliverables-based, milestone-based. And so there certainly, as we've been doing for the last 5 or 10 years, the increased use of technology, whether it's AI or other tools can help optimize your margin. A lot of buildings projects are similar, land development projects similar. But the government clients, in particular, we haven't seen -- as we work with the municipal clients really around the world, the city of X, Y or Z, they don't really move towards the -- or we haven't seen movement towards outcome-based pricing, fixed fee value based. They still seem to be more time and materials to an upset limit. Now through ACEC and through other of these sort of professional associations, we're absolutely having these discussions and seeing is there a way that we could move more towards it from a certainty perspective. But I think that would be not as much a Stantec initiative or an initiative of any of our competitors. It really would have to be an overall industry initiative, and that's where we're working with those industry associations to see what we can do to get ourselves there. But it's difficult. The other reason, Max, that I think a number of government agencies go with the time and materials is that if you want to go with an outcome-based price with a fixed fee, you have to have the scope incredibly well defined, so that the engineer can come in and say, the scope of what you're asking for, I'm going to do for $1 million fee just as an example. But if the scope is moving and there's going to be change orders and such, that really complicates the whole commercial terms. So it's -- there's a lot of work to be done, I think, before we can get municipal and government clients, in particular, off of time and materials type work. But the industry overall is working on it. Maxim Sytchev: Yes. No, that's great color. And maybe just one quick one for Vito, if I may. I mean the margin guidance is certainly stronger than we were modeling. And I'm just curious, if you don't mind talking about the ability to get to maybe that 18.2% at the high end of the range. What needs to happen from your perspective, Vito, to potentially hit that number? Vito Culmone: Yes. I think the higher we are on the revenue range, the more probability that we'll be on the higher end of the EBITDA margin. So that's just really operational leverage. I would say. Otherwise, from an initiative perspective, really, really pleased with everything we're doing and having the works. And we're working towards, obviously, our next 3-year plan, and we expect to have a date out to the community sometime soon, late in the year, probably more December, January as far as when we're rolling out our 3-year plan. And I'm very excited about the work and the modeling we're doing about what's the next 3 years look like from a margin perspective. So we'll wait and see where 2026 lands, but highly encouraged by the progress and the momentum to date. Operator: And our next question comes from the line of Benoit Poirier from Desjardins. Benoit Poirier: Yes, congrats for the strong achievement in 2025. If we look at Canada, organic growth came in very solid at 7.7% for the whole year. However, when we look at Q1 2025, you reported a very strong performance at 12.2%. So would it be fair to assume potentially a bit of a softer performance to start the year given the tough comparison, even though the outlook remains very strong. Vito Culmone: Yes, that might be appropriate, Benoit. I mean, again, we think about these things not necessarily from a quarter-over-quarter. You're absolutely right. By the way, last year was at 12.2% for Canada in organic growth in Q1. We ended the year at full year 7.8%. So I think Q1 might be a little bit softer relative to where we feel the full year will land for Canada. But as we've been noting in the commentary, when we look at the full year in all of our regions and all of our BOUs continued sort of -- we feel very nice sort of balance throughout the entire year. But that is our single biggest quarter for any region on an organic growth. And so you've pinpointed something that is a legitimate question for sure. But nothing that I'm overly concerned about or need to signal with related to Q1. Benoit Poirier: Okay. That's great. And obviously, a lot of talk about M&A bidding pipeline remains extremely solid. However, given the pullback in share price, I was wondering if you could provide more details. My understanding, there's a big preference on M&A. But given the strength of your balance sheet, do you see any opportunity to step in, in terms of buyback in the short to medium term? Vito Culmone: Yes, that's interesting. I mean, I think we will be renewing our NCIB. So first of all, as it relates to dry powder on the balance sheet, you saw our leverage 1.3 at the end of the year. That enables us to do sizable M&A on balance sheet. It's specific, obviously, to targets and whatnot, we will continue to prioritize our investment grade, obviously, and whatnot, that's important to us. But there's a lot of room there for us to do on balance sheet meaningful acquisition. So that's a wonderful privilege for us as we sit here, and that's important for us. So we'll just take that. And sorry, Benoit, I forgot the second component of the question. Benoit Poirier: Just wondering if you would be open to consider more closely the NCIB given the pullback in share price and probably given the fact that we haven't seen the seller expectation coming down yet? Vito Culmone: Yes. Short answer is yes. We would be more actively looking at buybacks with respect to where we're valued. First priority, of course, continues to be M&A for us. But we do have price ranges that we think when we look at our overall perspective of our organization and the value creation opportunities that we'll continue to look at it a little bit more closely than perhaps we have in the past. Operator: And our next question comes from the line of Jonathan Goldman from Scotiabank. Jonathan Goldman: Most of them have already been asked, but I guess I just have one high-level one, the anniversary of the IIJA this year, how do you see that playing out? And is there a potential for renewal or maybe a reshaping of that infrastructure bill and maybe some other form of disbursements there? Gordon Johnston: Yes. Great question. And so we've -- early on, 2 or 3 years ago, there was a lot of talk about an IIJA 2.0 and what it could look like. We haven't really heard as much of that over the last little bit. So we are seeing increasing activity, bidding activity and such as folks are beginning to look to how can they place their -- get some funding in place before IIJA current terms out in -- or has to be allocated by, I believe, it's September of this year. But recall, too, that once that is allocated, it doesn't have to be spent. So I think that the current funds from IIJA will continue to drive really solid performance in the -- not just for us, but for the overall industry in the transportation space primarily for the next 3 to 5 years. So there is some discussion about -- currently about renewing the Surface Transportation Act and such, and that will -- I don't think there'll be any concerns that, that would not be renewed. But yes, I haven't heard a lot of conversation about an IIJA 2.0 right now. But the industry, I think, will continue to be busy in the transportation space in the U.S., in particular, for the last -- next several years to come. Operator: And our next question comes from the line of Krista Friesen from CIBC. Krista Friesen: Maybe just a follow-up on the M&A topic. You've previously talked about how you expect a handful of larger firms to come to market this year. Is that still what you're seeing in the pipeline? And it sounds like that's still something you'd be interested in given your balance sheet capacity at this moment. Gordon Johnston: Absolutely. Yes. Some of the ones that we have been talking about, you've likely read that came and went in the latter part of last year. But there still are others that are either in process now or that we understand will be coming to the market here in the next couple of quarters. So still a good opportunity there, good optionality, in terms of geographies and type of work that these firms are engaged in. And absolutely, as you heard, Vito say the balance sheet is in good shape. So we absolutely will continue to look at those. And of course, paying particular attention to the pricing piece. Krista Friesen: For sure. And are you able to share maybe some of these larger firms, what areas they're operating in? Is power still a big focus for you? Gordon Johnston: Certainly, we do see some firms of the power focus that will be coming to market, but others as well in different lines of business that Stantec currently is in. And some of them are in the U.S. and some of them are -- we'd see Europe, Australia and such. So good geographic spread with these as well. Operator: This does conclude the question-and-answer session of today's program. I'd like to hand the program back to management for any further remarks. Gordon Johnston: Great. Well, thanks, everyone, for joining us this morning. We feel really good about 2025 and where we're going in 2026. So if you have any follow-up questions, please reach out to Jess Nieukerk, and we'll line things up and take it from there. So thanks again, everyone. Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Operator: Greetings, and welcome to the Redwire Corporation Full Year and Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Alex Curatolo, Senior Director of Investor Relations. Thank you. You may begin. Alex Curatolo: Thank you, Diego. Welcome to Redwire's Full Year and Fourth Quarter 2025 Earnings Call. We hope that you have seen our earnings release, which we issued yesterday afternoon. It has also been posted in the Investor Relations section of our website at rdw.com. Let me remind everyone that during the call, Redwire management may make forward-looking statements that reflect our beliefs, expectations, intentions, or predictions of the future. Our forward-looking statements are subject to risks and uncertainties that are described in more detail on Slides 2 and 3. Additionally, to the extent we discuss non-GAAP measures during the call, please see Slide 3 in the appendix, our earnings release, or the investor presentation on our website for the calculation of these measures and their reconciliation to US GAAP measures. I am Alex Curatolo, Redwire's Senior Director of Investor Relations. Joining me on today's call are Peter Cannito, Redwire's Chairman and Chief Executive Officer, and Chris Edmunds, Redwire's Chief Financial Officer. With that, I would like to turn the call over to Pete. Pete? Peter Cannito: Thank you, Alex. During today's call, I will outline our key accomplishments during the full year and fourth quarter of 2025, after which Chris will present the financial highlights for the same period and discuss our 2026 outlook. We will then open the call for Q&A. Please turn to Slide 6. In 2025, Redwire transformed from a pure-play Space provider to an agile, scaled multi-domain Space and Defense Tech company. We closed our transformational acquisition of Edge Autonomy in June 2025 and have been successfully executing on our integration plan to include the full assumption of Edge Autonomy into the Redwire brand. During 2025, Redwire moved up the value chain with 5 spacecraft platforms and multiple prime contracts in the US and Europe, and 2 mature, combat-proven airborne platforms. We expanded our customer base to more than 170 civil, national security, and commercial Space and Defense Tech customers, emphasizing our breadth and diversity. We added approximately 660 employees for an ending headcount of approximately 1,410 employees around the globe. We ended 2025 with a record contracted backlog of $411.2 million, supported by strong bookings and a 1.52 book-to-bill in the fourth quarter, providing confidence as we move into 2026. And finally, as Chris will talk about in additional detail, we strengthened our balance sheet and simplified our capital structure, ending with record year-end total liquidity of $130.2 million. Please turn to Slide 7. The result of this major transformation in 2025 is a more balanced portfolio of differentiated products that positions Redwire for considerable scaling in 2026 and beyond. At the core of this transformation is the maturation of our product portfolio from predominantly new development programs to a balanced portfolio that includes mature programs that are scaling into production. As you can see on the chart on Slide 7, in 2021, when Redwire first went public, the vast majority of our products, almost 75% in fact, were in the development phase with just a few products moving to limited production in small quantities. During this early phase of our growth, we were primarily focused on penetrating the Space market with new development programs, which we often refer to as planting seeds or gaining toeholds. This was deliberate as we were establishing ourselves in a nascent Space market that required new solutions and capabilities that hadn't been invented yet. At this point in our evolution, this new development often emphasized market share over gross margin and larger exposure to development risk. Moving forward in time to the present, however, through a number of organic and inorganic strategic investments, we have now matured our product mix to a balanced portfolio of development and production programs. The impact of this transformation to our future growth is often underappreciated and cannot be overstated. At the end of 2025, we now estimate that over 2/3 of our revenue is moving into production, with a large portion of our UAS portfolio entering higher-margin full-rate production. This is a very different Redwire than 5 years ago. As we look forward to 2026, our portfolio is evolving to a more balanced risk, balanced mix of risk with opportunities for gross margin improvement. Make no mistake, we still plan to invest heavily in advancing critical technologies with high-growth potential, such as VLEO, refuelable GEO, Quantum satellites, and our Stalker Block 40 UAS, but these growth investments are now supported by a broader portfolio and a proven framework for maturing our capabilities into production. Please turn to Slide 8. As part of this ongoing transformation, in January, we announced that going forward, Redwire will be organized into 2 business segments: Space and Defense Tech. These segments map to the 5 primary value drivers I described on our last earnings call, representing the product areas where Redwire has differentiated intellectual property, first-mover advantage and recognized thought leadership in rapidly growing domains with sizable total addressable markets. Our Space segment encompasses the next-generation spacecraft, large Space infrastructure and microgravity development value drivers and focuses on delivering for civil, national security and commercial Space customers. Our Defense Tech segment encompasses the combat-proven UAS and Sensors & Payloads value drivers and focuses on systems, Sensors & Payloads that provide intelligence, surveillance and reconnaissance capabilities for US and allied warfighters across multiple domains. Notably, this segment not only includes the operations from our acquisition of Edge Autonomy, but also Space -based Sensors & Payloads such as avionics, cameras and RF systems. We believe this new structure will enable us to maintain strong positioning and continue our growth trajectory across both established and rapidly emerging domains as well as provide greater visibility into our unique positioning in Space and Defense. Next, I would like to briefly touch on a highlight or 2 from the fourth quarter for each of our 5 value drivers. Please turn to slide 9. Starting with NextGen Spacecraft. During the fourth quarter, Redwire was awarded a $44 million Phase 2 award to advance DARPA's Otter Program. Otter leverages the design of Redwire's SabreSat platform, and this Phase 2 contract provides us funding to complete manufacturing and deliver the spacecraft to launch. Through our work with DARPA, we are strengthening our leadership in this critical domain and accelerating the development of cutting-edge capabilities that will define the future of VLEO. Please turn to slide 10. During the fourth quarter, Redwire successfully completed integration of 10 payloads for the European Space Agency's ΣYNDEO-3 satellite mission, marking a major milestone as it readies for launch in Q4 2026. The spacecraft is built with our highly versatile Hammerhead LEO spacecraft platform, which has logged 50 years of on-orbit performance. This mission aims to accelerate the development of new technologies and stimulate the European Space ecosystem. As the prime contractor, Redwire is proud to lead these efforts. Please turn to slide 11. Turning to Large Space Infrastructure, today, I am proud to introduce our Extensible Low-Profile Solar Array or ELSA. Building on the experience, technical expertise and success of our flight-proven ROSA product, ELSA is an innovative, high-performance, low mass power solution that leverages the flexible substrate technology of ROSA in a smaller form factor. Whereas ROSA is our leading flexible array solution for large spacecraft or space stations such as Blue Ring and the ISS, ELSA is our equivalent for high-quantity constellations of small satellites and provides 50% more power by volume than our traditional solar arrays of equivalent size. ELSA is engineered for volume production and offers a step change improvement in modular, scalable design and rapid turnarounds to drive down costs and improve delivery times. We look forward to announcing key ELSA contract awards in the near future as the industry recognizes the benefits and performance of this new product line. Please turn to slide 12. Also under our large Space infrastructure value driver, during the fourth quarter, Redwire was awarded an 8-figure contract by the Exploration Company to provide 2 International Berthing and Docking Mechanisms (IBDMs), developed in Belgium for their flagship spacecraft, Nyx. This agreement marks a significant step in supporting Europe's burgeoning commercial Space sector and follows an IBDM award from Thales Alenia Space we announced earlier in the year. This is an exciting example of how our investment in Berthing and Docking product development is now expanding into new opportunities for production. Please turn to slide 13. Turning to our Microgravity Development value driver, during the quarter, Redwire was selected for a second contract supporting Aspera Biomedicines' research into a cancer "Kill Switch". Aspera is revolutionizing oncology and regenerative medicine, and Redwire was proud to have once again been selected as a trusted implementation partner. Under this follow-on contract, Aspera's second set of on-orbit experiments will use Redwire's PIL-BOX hardware to further understand the crystal structure of ADAR1-p150 with the goal of creating better cancer drugs that improve patient outcomes here on earth. Please turn to slide 14. Let's turn now to our COMBAT-PROVEN UAS value driver, which falls within our Defense Tech segment. During the quarter, US Army soldiers began training with Redwire's Stalker UAS, representing the first time in years that a new Group 2 UAS was used in support of a US Army course at Fort Rucker in Alabama. As a mature combat-proven commercial technology that is built using a modular open systems approach, Stalker allows for easy integration with third-party technologies and this flexibility drew attention during the training demos. This further reinforces that Stalker is seen by the US Army as a critical part of their force design for long-range reconnaissance training and operations. Please turn to slide 15. In addition, during the fourth quarter, we announced the grand opening of our new 85,000 square foot facility in Ann Arbor, Michigan to increase production of fuel cells. Our fuel cells are a key differentiator for our Stalker aircraft, allowing for extended range and endurance, silent operations and easily sourced fuel. This is another great example of our shift from predominantly development to full production capacity in our portfolio. This new facility provides us the ability to scale production as the US Department of War executes on its drone dominance strategy. Please turn to slide 16. Lastly, moving to our Sensors & Payloads value driver. During the fourth quarter, Redwire received an award for Penguin VTOL aircraft and Octopus Gimbals camera payloads for the Croatian Border Patrol. Funded under the European Border and Coast Guard Agency, or Frontex, this award builds on successful border deployments around the world, and Redwire is proud to have been chosen again to provide these key technologies that are especially effective for border security and European Defense initiatives. Please turn to slide 17. With that, I'd now like to turn the call over to Chris Edmunds, Redwire's Chief Financial Officer, to discuss the financial results for the fourth quarter of 2025. Chris? Chris Edmunds: Thank you, Peter. Before turning to Slide 18, I want to highlight the image on this page, which is a photo taken by a Redwire camera during the Artemis 1 mission, the first in a series of increasingly complex missions to explore the moon and build towards the first crude mission to Mars. Artemis 2 is anticipated to launch in the coming months, and Redwire cameras will once again be on board to capture energy from the mission. Please turn to slide 18. Now diving into our results. Despite delays in the US government budget process impacting both Space and Defense Tech, revenue for 2025 increased by 10.3% year-over-year to $335.4 million, coming in towards the top end of our provided range of $320 million to $340 million. Please turn to slide 19. Next, I'd like to take a moment to provide some additional details around fourth quarter revenue and profitability. As included in our earnings release yesterday afternoon and in our Form 10-K to follow, we have, for the first time, provided financial details for our Space and Defense Tech segments. As Peter discussed at the beginning of today's presentation, our Space segment includes next-generation spacecraft, large Space infrastructure, and microgravity development. And our Defense Tech segment includes combat-proven UAS platforms, Sensors & Payloads, both airborne and space-based. Starting with revenue. As shown on the right-hand chart, during the fourth quarter, we reported total revenue of $108.8 million, representing a 56.4% increase on a quarterly year-over-year basis. During the quarter, our revenue was balanced between our 2 segments, with our Space segment recording revenue of $54.5 million and our Defense Tech segment recording revenue of $54.3 million. I would note that the contributions from the acquisition of Edge Autonomy were the primary driver behind the significant increase for Defense Tech on a quarterly year-over-year basis. Turning to profitability. While our fourth quarter 2025 gross margin of 9.6% is an improvement on a quarterly year-over-year basis, gross margin improvement is a key focus area as we move into 2026 and drive more programs from development to production. Leaving aside the net unfavorable impacts from EACs of $17.8 million, our gross margin would have been in the mid-20% range, closer to what we believe is representative of the potential of our business going forward, given our mix across the maturation framework Peter spoke about earlier. Our fourth quarter 2025 net loss was $85.5 million, which was impacted by more than $40 million in nonrecurring activity, including a $34.7 million goodwill impairment, $7.4 million impact from the equity incentive units assumed through the Edge Autonomy acquisition and $1 million related to the early debt extinguishment, which I will talk about a little more in a moment. In addition, Redwire significantly increased in future technology during the quarter spent on Research & Development from $1.4 million in 2024 to $9.5 million in 2025. Because of our confidence in signals we see with our customers and market, we see this investment contributing to the acceleration of our programs along the maturation framework. We ended 2025 with fourth quarter adjusted EBITDA of negative $18.1 million, a decrease on a year-over-year basis. Our negative fourth quarter 2025 adjusted EBITDA results was largely due to unfavorable impacts from EACs of $17.8 million. Please turn to slide 20. Finally, turning to a discussion of liquidity and capital structure. We have significantly strengthened our balance sheet and simplified our capital structure. We ended 2025 with record year-end total liquidity of $130.2 million, comprised of $94.5 million in cash, $35 million in undrawn revolver capacity, and approximately $1 million in restricted cash, a significant year-over-year improvement in total liquidity. During the year, we significantly de-levered, repaying a net $125.5 million of debt, including repayment of $105.5 million of outstanding principal during the fourth quarter through proceeds from an efficient At-The-Market or ATM program. Our repayment during 2025 will result in an estimated annual interest savings of more than $14 million. During 2025, Redwire also saw a 57% reduction in Convertible Preferred Stock outstanding through share repurchase and voluntary conversion and an 83% reduction in outstanding warrants through exercise. We note that Redwire's remaining outstanding warrants will expire during the third quarter of 2026. Finally, in February 2026, the company amended its remaining credit agreement, extending the maturity to May 2029 and lowered their interest spread from SOFR plus 700 to SOFR plus 3.75, resulting in an annualized interest savings of approximately $3 million. Taken together, we estimate total annualized interest savings to be more than $17 million from our de-levering and re-financing activities. Please turn to Slide 21. Although the delays from the US government shutdown impacted award timing in 2025, we continue to see a positive trend in contracts awarded as we move through the fourth quarter when compared with the first half of 2025. Our bookings during the fourth quarter of 2025 increased substantially, both year-over-year and sequentially to $164.9 million with the fourth quarter of 2025 book-to-bill ratio of 1.52, bringing our 2025 full year book-to-bill ratio to 1.32 and improving backlog to a record $411.2 million. Looking at key performance indicators by segment. During the fourth quarter of 2025, Space bookings were $110.9 million, driven by the Otter and Mix awards previously discussed. And Defense Tech bookings were $54 million, driven by demand for our Stalker and Penguin aircraft. Turning to backlog by segment. As of December 31, 2025, Space backlog was $299.8 million and Defense Tech backlog was $111.4 million. As a reminder, the majority of Defense Tech revenue is recognized at a point in time, whereas our Space segment, the majority of revenue is recognized over time, driving different backlog profiles. Although the US government shutdown delayed the timing of awards that had been expected in 2025, with key wins during the fourth quarter and line of sight in 2026, we are pleased with the continued positive change in our trend line for contracts awarded and believe our pipeline of new opportunities remains strong, giving us confidence in continued growth through 2026. Please turn to Slide 22 for a brief discussion of the outlook for 2026. With continued acceleration in our contracts awarded during the fourth quarter and confidence provided by our record backlog of $411.2 million, we are forecasting full year 2026 revenue to be in the range of $450 million to $500 million, which represents a 41.6% year-over-year growth rate at the midpoint. I would note that given lingering timing impacts of the government shutdown, we expect our revenue to build as we move through 2026. With that, please turn to Slide 23, and I'll now turn the call back over to Pete. Peter Cannito: Thank you, Chris. As discussed earlier in the brief, Redwire's transformation in 2025 positions us to enter 2026 with great momentum as an integrated multi-domain Space and we entered 2026 with confidence provided by our record $411.2 million backlog despite budget headwinds during 2025 and into early 2026. In addition, we are bolstered by a strengthened balance sheet, simplified capital structure and record end of year liquidity of $130.2 million. With that, I want to thank the Redwire team for their achievements during 2025. We will now open the floor for questions. Operator: [Operator Instructions] Your first question comes from Brian Kinstlinger with Alliance Global Partners. Brian Kinstlinger: Congrats on the improving capital structure. My question is, how is management adjusting its pricing model in response to the abnormally low gross margin throughout 2025? Have you contemplated higher fixed price quoting in Space, a more safer contracting vehicles such as cost-plus or time and materials, especially for new products like ELSA. Peter Cannito: Thanks, Brian. Appreciate your question. So, there's a couple of dynamic things there. So, I'll address two parts of this question. Starting with the easiest and the last part first. We basically have to, like all Defense contractors, we have to take our, meet our customer where they are in terms of the kind of contracting that they do. The Department of War has very openly discussed that they are moving away from cost-plus and time and materials and looking for contractors that are willing to take on firm fixed price development. And it's for that reason that we really took the time and effort at the beginning of this call to understand the portfolio effect that if you want to get market share in this market, you have to be willing to do some investment, whether it be through IRAD, if you want to bear the full cost or through additional development risk if you're willing to take on risk. But take on payments from customers at the same time. You have to be willing to do that in order to get through the development phase to get to production, which leads me to the first part of your question, where in terms of the pricing model, it's not so much trying to pad our pricing and ultimately losing when we're bidding against more aggressive competitors on the development phase of contract, but it's actually having that balanced portfolio I talked about where you may be taking on a more balanced set of development contracts with higher ADC risks, maybe lower margins as you buy yourself into the baseline in pursuit of a production tail. But now Redwire is in this position where we're taking on less of that as a percentage of the total portfolio. Now less of it doesn't mean we're bidding less we're still aggressively going after those development programs in order to increase our market share and penetrate the, particularly on the Space side of the market where the winners haven't really been determined yet. But with the transformational acquisition of Edge Autonomy, our portfolio, as you can see from that Slide 7, is now much more balanced. We have a production level of programs that are supporting that. And it's because of that production tail as the Defense Tech side of the business starts to scale as we anticipate it will in 2026, we expect to see the gross margin improvements that you're looking for. Operator: Your next question comes from Griffin Boss with B. Riley Securities. Griffin Boss: I will ask about Edge. So, the 100-plus aircraft to 7 countries post close, that's good to see. But do you have any insight on how many aircraft stand-alone Edge did in 2024? And then along these same lines, you mentioned that included in that 100-plus number or deliveries to the US Army via LRR. Does that mean you've received production orders at this stage? Or is that referring to the software deliveries for the training purposes? Peter Cannito: Griffin, thanks for your question. Chris, do you want to take the count one? Chris Edmunds: Yes. So, 100 aircraft since we closed the acquisition, they delivered about 200 aircraft this year, which is relatively consistent to where they were in the past year. We really leaned forward even Edge prior to the acquisition to build capacity to be able to handle the demand curve as the demand curve comes online. So, for the production here in the second half of the year at about 100 aircraft, that is right in the middle of their production curve. But with scaled capacity, as we see the growth continue to come in with the order book, as we talked about earlier, we'll have the ability to produce those aircraft as we go into '26 and beyond. Peter Cannito: Good example of that is the investment we made in the 85,000 square foot for our fuel cell production in Ann Arbor that we'll be able to see increased aircraft full rate production in '26. Griffin Boss: Got it. Okay. And then just the second part of that was regarding LRR and whether those are production orders or referring to the testing. Chris Edmunds: Yes. That was part of the testing. So, we're still anticipating the full production order here to come later this year. Peter Cannito: Yes. One of the things that we're excited about in terms of our ability to accelerate growth in Q4 was, as a reminder, that was still without a fully passed budget. So, some of the things that we talked about in our last earnings call that we were expecting to come online, one of them being orders for the LRR program was not included in that 1.52 book-to-bill. So that's still upside we anticipate in 2026. Operator: And your next question comes from Scott Buck with H.C. Wainwright. Scott Buck: Apologies if I missed this during the prepared remarks, but how much of the backlog is expected to be executed on over the next 12 months or should I say, calendar year 2026? And then are there any large concentrations within that backlog that would drive a materially outsized revenue results in any given quarter or potentially risks slipping into 2027? Chris Edmunds: Yes. I appreciate it, Scott. So, from a backlog standpoint, we've got about 50% or so of the guide in backlog. And as we look at the risk profile across that backlog, there are no single orders that are binary that would meaningfully move our view one way or the other, pretty balanced across the order book, both with geography diversification across the US and Europe as well as across our various value drivers. So about 50% or so of backlog for the guide. Peter Cannito: Yes. One thing I'll add to that is the, although we don't have anything necessarily in our forecast that we're looking at as a big material size value driver in our pipeline, not necessarily backlog; we do have, especially on the Space ties, we do continue to have opportunities like constellation size orders that could materially change our profile. We're just discounting those things in order to make sure that we are focusing on achieving our growth through what's already on the books. Operator: Your next question comes from Greg Konrad with Jefferies. Unknown Analyst: This is Sara on for Greg. So I guess sticking with backlog, what are you seeing in the broader order environment given some pickup in the 3 months, the 1.52 book-to-bill in Q4? How different are the order cycles between Space and Defense Tech? And what are the expectations for book-to-bill in 2026 supporting growth there? Peter Cannito: Yes. So thank you for your question. And so in terms of in the backlog, in that $1.52 billion, what it shows is as we start to close, so last year, we talked about a lot about moving up the value chain. And as we start to close bigger orders like Otter, which was the $44 million opportunity that I mentioned, full VLEO spacecraft order, you can see that the size of our orders are growing over time as part of that moving up the value chain strategy that we executed. In addition to that, you see another element with the 8-figure IBDM order that contributed to that $1.52 backlog that we closed in the fourth quarter, where we actually got 2 IBDM orders as we start to move into more of a production phase, low rate, but still a production phase for the IBDM. So that was really the characteristic of the fourth quarter backlog build. And those are long programs, year-long or more programs that will be, that gives us confidence in our revenue build over 2026. In terms of the order cycles between Space and Defense Tech, that's a very interesting question. The order cycles, and this is why it's not really apples-to-apples when you look at backlog between Defense Tech and Space. Space will have a really stronger backlog because it will be a multiyear backlog in many cases, where the conversion cycle for Defense Tech is really fast, especially on orders where we have some level of inventory already on the balance sheet. So an existing customer that already has a fleet of Stalker or Penguin aircraft can decide that they want to scale their fleet very quickly submit a purchase order. And if we have that available in inventory or even if we have aircraft coming off the production line, we can fill that order quickly. And so the conversion for Defense Tech is a lot faster than on Space. Chris, do you want to add anything to that? Chris Edmunds: Well, I was just going to point out, from a book-to-bill standpoint in the fourth quarter, we were just over 2x on the Space side, as Pete talked about, and just at a 1 on the Defense Tech, which just highlights that point. Operator: Your next question comes from Suji Desilva with ROTH Capital Partners. Sujeeva De Silva: Pete, Chris, congratulations on the bookings improvement. So just quick questions on the mix of Space versus Defense. Just some clarification on Defense. Is there a material part of Defense that's not the Edge Autonomy acquisition? And what is the growth expectation in '26 roughly across Space versus Defense? Peter Cannito: So let me address the first part. So yes, the Defense Tech not only includes the legacy Edge Autonomy capability, but it also includes our portfolio of Space optics other payloads and our Space RF systems. The reason for that is because when you go back and you look at part of our early discussion about the synergies that we expected by being multi-domain in Space, a lot of the things like optics or antennas or RF payloads are very similar across both UASs and satellites or spacecraft. So by putting them in the Defense Tech segment, we're able to achieve those synergies and truly be a multi-domain in the way we go to market in those technologies. So yes, a material portion of Defense Tech is part of the, came from part of the legacy Redwire Space part. Chris, did you want to talk about the latter part of the question? Chris Edmunds: Yes. I mean, so Suji, we're pretty balanced across the segment in our fourth quarter. We do see the fintech probably driving a little more contribution as we go through '26. Just line of sight on where they are, the growth rate on the DT side probably outperforms the Space side, maybe closer to 20% for line of sight. But as Pete said, on the Space side, what's in the order book is what we're managing to. But there are some really big and interesting opportunities in the pipeline that could really accelerate the growth on the Space side. But again, what we're looking at right now, pretty balanced currently, and we do expect the DT side to start to take a little larger share as we get in the back part of '26. Operator: And we have reached the end of the question-and-answer session. So I'll now hand the floor to Peter Cannito for closing remarks. Peter Cannito: Great. Well, thank you all for the excellent questions. With that, we appreciate everyone taking the time to listen today and go Redwire. Operator: Thank you. This concludes today's conference. All parties may disconnect.