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Operator: Good morning, everyone, and welcome to the Trulieve Cannabis Corporation Fourth Quarter and Full Year 2025 Financial Results Conference Call. My name is Alan, and I will be your conference operator today. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Christine Hersey, Chief Corporate Affairs and Strategy Officer for Trulieve. Christine, you may begin. Christine Hersey: Thank you. Good morning, and thank you for joining us. During today's call, Kim Rivers, Chief Executive Officer; and Jan Reese, Chief Financial Officer, will deliver prepared remarks on the financial performance and outlook for Trulieve. Following the prepared remarks, we will open the call to questions. This morning, we reported fourth quarter and full year 2025 results. A copy of our earnings press release and PowerPoint presentation may be found on the Investor Relations section of our website, www.trulieve.com. An archived version of today's conference call will be available on our website later today. As a reminder, statements made during this call that are not historical facts constitute forward-looking statements, and these statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from our historical results or from our forecast, including the risks and uncertainties described in the company's filings with the Securities and Exchange Commission, including Item 1A, Risk Factors of the company's most recent annual report on Form 10-K as well as our periodic quarterly filings. Although the company may voluntarily do so from time to time, it undertakes no commitment to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. During the call, management will also discuss certain financial measures that are not calculated in accordance with the United States generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial measures. These measures should not be considered in isolation or as a substitute for Trulieve's financial results prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is available in our earnings press release that is an exhibit to our current report on Form 8-K that we furnished to the SEC today and can be found in the Investor Relations section of our website. Lastly, at times during our prepared remarks or responses to your questions, we may offer metrics to provide greater insight into the dynamics of our business or our financial results. Please be advised that we may or may not continue to provide these additional details in the future. I'll now turn the call over to our CEO, Kim Rivers. Kimberly Rivers: Thank you, Christine. Good morning, everyone, and thank you for joining us today. We are thrilled to report outstanding financial results and meaningful progress on our strategic priorities. Congratulations to the entire team for delivering another year of stellar performance, highlighted by record units sold, industry-leading margins and robust cash generation. We finished the year with considerable momentum, underscored by a series of impressive accomplishments. In December, we won a conditional license in Texas and repositioned our debt, reducing balance sheet leverage and annual interest expense. On top of that, on December 18, President Trump signed an executive order to reschedule cannabis to Schedule III. I had the pleasure of attending this historic event where the President advanced the first major step in federal cannabis reform, acknowledging the medical value of cannabis. We applaud the President for fulfilling a campaign promise and expect the administration will follow through in short order. Importantly, rescheduling signals that long overdue common sense cannabis reform is achievable. Trulieve will continue to advocate for change to support cannabis consumers and the industry. Moving to our results. Full year revenue was $1.2 billion with traffic and units sold up 5% each. Fourth quarter revenue of $293 million increased 2% sequentially, in line with guidance. Full year and fourth quarter gross margin of 60% was driven by operational efficiencies, lower production costs and our disciplined approach to promotional activity. Record adjusted EBITDA of $427 million improved by 1% to 36% margin due to expense control in our core business. Full year operating cash flow of $273 million exceeded our target of $250 million. We exited the year with $256 million in cash after retiring over $380 million of debt in December. Overall, 2025 results were strong, leading to standout operational and financial performance despite volatility in consumer sentiment and macroeconomic conditions. Pressure on retail revenue from pricing compression and softer consumer behavior was offset by higher traffic and units sold. Throughout the year, our team was able to refine our product mix and promotional strategies to meet changing customer preferences while maintaining brand equity and margins. Low visibility, headline risk and mixed consumer sentiment have carried into 2026. Our team is ready to manage through business cycles, meeting customer needs when spending is pressured and when it rebounds. Wholesale revenue grew 23% in 2025, driven by strength in Maryland and Pennsylvania. In Ohio, our production partner continues to ramp sales of branded products, including Modern Flower and Roll One. We plan to grow our wholesale business this year as industry conditions permit. Following tremendous progress last year, we are concentrating efforts on 4 key areas. This year, our strategic priorities are: one, expanding access to cannabis; two, growing our loyal customer base; three, elevating our branded product portfolio; and four, investing in growth initiatives. Since inception, a core part of our mission has been expanding access to cannabis. Trulieve has been a leader in federal and state efforts to advance the industry, working tirelessly to educate key stakeholders about the many benefits of regulated cannabis. Rescheduling is a historic milestone with major practical and symbolic implications. First, rescheduling acknowledges the medical value of cannabis, affirming what patients and physicians have known for years. Second, rescheduling removes barriers to research while reducing the stigma for millions of Americans. Third, it removes the punitive tax burden of 280E, lifting pressure on state legal operators and allowing conversion from the illicit market to regulated channels. Finally, rescheduling sets the stage for much needed reform such as safer banking and eventual uplisting to U.S. exchanges. The vast majority of Americans favor common sense reform, and we look forward to supporting these efforts in the year ahead. While 40 states have adopted some form of medical and/or adult-use cannabis, access to state-tested products varies by state. We are pushing for expanded access as appropriate across our markets. In Florida, Trulieve continues to support the Smart and Safe Florida adult-use campaign. The campaign is fighting for ballot initiative inclusion this November. While the campaign submitted 1.7 million signatures prior to the February 1 deadline, state agencies reported a shortfall of validated petitions versus the required 880,000. The campaign has asked the Florida Supreme Court to address the invalidation of more than 90,000 signatures, which if allowed, would place the total over the required threshold. We anticipate the campaign will have greater clarity on valid inclusion for this year's midterms in the coming months as litigation unfolds. Turning to Pennsylvania. Governor Shapiro has again called for the legislature to pass adult-use legislation. We believe state legislators recognize the potential for adult-use to satisfy constituent demand for cannabis while generating revenue for the state. Several bills have been filed this session, and we remain optimistic that a compromise can eventually be reached. If adult-use is launched in Pennsylvania, Trulieve is well positioned given our established retail footprint, branded products and scaled production capabilities. In Texas, Trulieve was 1 of 9 operators awarded a conditional license for the medical marijuana program. We are honored to be among those chosen, and our team is working to finalize the license. Pending regulatory approval, we plan to quickly launch production and retail operations. Trulieve was first to market in several states, including Florida, Georgia and West Virginia. Our distinguished track record of working with patients, physicians and regulators to develop early-stage programs sets us apart. With over 135,000 patients today, telehealth consultations for patients and satellite pickup locations, the Texas Compassionate Use Program is poised for meaningful growth over the next few years. We look forward to contributing to the success of the program. In Georgia, new legislation has been filed that would expand the medical cannabis program. If passed into law starting in 2027, the program would include new qualifying conditions such as severe arthritis, severe insomnia, HIV, IBS and lupus and new form factors, including edibles and vapes would be allowed. While expanding access to cannabis is a core part of our company's mission, we remain passionate about growing our loyal customer base while providing best-in-class service, messaging and products. Training and team building to enhance customer service is ongoing. This month, we hosted our first National Retail General Manager Summit in Orlando. During this 4-day event, hundreds of leaders from across the country came together for training and to share ideas to improve retail operations and the customer experience. Attendees noted the event was a resounding success, setting the tone for our retail team to be energized and ready for the year ahead. Investments in personalized messaging, mobile app and rewards program allows more sophisticated interactions with customers. Over the past few months, we have moved beyond category-based segmentation, adding targeted messages to specific cohorts based on purchase behavior, browsing activity, engagement history and preferred communication channels. This year, we are investing in a major project that uses AI to automate segmentation, decisioning and execution to accelerate speed to market and real-time engagement. Internally, we are calling this multiyear endeavor Project Hyper as it will accelerate hyper-personalization of customer outreach. Deeper personalization enables more relevant messaging and promotions, improving the quality of interaction while driving desired results. In November, we launched a mobile app in Florida, providing customers one place for browsing, deals, reservations and rewards. Push notifications to learn about special promotions or when orders are ready for pickup, provide a seamless experience. In the first 90 days since the app launched, over 115,000 customers downloaded the app, leading to 3.5 million user sessions. Following the success in Florida, we are excited to launch the app in additional markets this year. Our rewards program grew 12% in the fourth quarter, reaching 915,000 members at year-end. Rewards members continue to spend on average 2.5x more than nonmembers, comprising 78% of fourth quarter transactions. We plan to introduce program tiers, enabling more robust rewards for customers who spend more, including exclusive offers, products and events. In combination, advanced messaging capabilities provide a competitive advantage while contributing to customer retention. Fourth quarter retention improved sequentially to 70% company-wide with 78% retention in medical-only markets, demonstrating the strength of our retail platform. High-quality branded products reinforce customer attraction and retention while building long-term equity. In 2025, we sold over 50 million branded product units. In-house brands, Modern Flower and Roll One continue to gain traction, representing almost half of the branded products sold. New and innovative branded product development is ongoing. Last year, our team introduced over 175 new SKUs, including the Roll One Clutch All In One, a discrete compact vape cart. In Florida, the Roll One Clutch launched in Q4 and it sold over 200,000 units. In the past month, we launched the Roll One Clutch in Arizona, Ohio and Pennsylvania, where initial customer feedback and sell-through rates have been positive. We plan to launch in additional markets in the coming months. As the industry continues to evolve, we are pursuing growth initiatives that align with our long-term objective to build a leading cannabis company. Investments include expansion of retail production and distribution in new and existing markets and technology and infrastructure. Exiting 2025, our scaled platform included 233 retail locations, supported by over 4 million square feet of production capacity. This year, we plan to add at least 5 new retail locations with the potential to further expand pending regulatory approval in Texas. Technology and infrastructure investments add flexibility and needed capabilities as our business grows. We are committed to making long-term investments to balance the need to remain competitive today while positioning Trulieve for the future as layer of prohibition are removed. Following tremendous results in 2025, we are carrying the momentum forward this year. Given our position as a leading voice for change, scaled operations and strong balance sheet, we are well situated to make substantial progress in the year ahead. With that, I'd like to turn the call over to our CFO, Jan Reese. Please go ahead. Jan Reese: Good morning, and thank you, Kim. We delivered full year 2025 revenue of $1.2 billion comparable to 2024. Continued pricing compression in retail offset -- was offset by growth in Ohio and wholesale. Contributors from new dispensaries, record units sold and full year adult-use in Ohio supported overall top line performance. Fourth quarter revenue was $293 million, declined 3% year-over-year, up 2% sequentially as new store openings, adult-use momentum in Ohio and wholesale growth were offset by ongoing pricing pressure and softer consumer wallet trends. Full year gross profit was $711 million, representing a 60% margin, consistent with the prior year. Gross margin strength reflected economies of scale, operational efficiencies across our platform and disciplined promotional management. Fourth quarter gross profit totaled $175 million, also at a 60% margin and up sequentially. We expect quarterly gross margin to vary based on product and market mix, inventory sell-through, promotional activities and idle capacity costs. For the full year 2025, SG&A expenses were $445 million or 38% of revenue compared to 43% in 2024. Driven by reduced operational expenses and lower campaign support, fourth quarter SG&A was $126 million or 43% of revenue. Adjusted SG&A declined to 30% of revenue from 31% last year, reflecting continued operational discipline and efficiency actions. Full year net loss was $160 million compared to a net loss of $155 million in 2024. Fourth quarter net loss was $43 million or $0.22 per share. Excluding nonrecurring items, fourth quarter net loss per share would have been $0.02. Full year adjusted EBITDA totaled $427 million compared with $420 million in 2024. Fourth quarter adjusted EBITDA was $105 million, representing a 36% margin and reflecting expense leverage across our core operations. Turning to our tax strategy. Beginning 2019, we filed amended returns challenging the applicability of Section 280E to our business. To date, we have received refunds totaling more than $114 million. While we remain confident in our position, final resolution may take time. We continue to accrue an uncertain tax position while benefiting from lower cash tax payments, excluding the impact of 280E in 2025 full year results would reflect positive net income. On balance sheet and cash flow, in December, we redeemed $368 million of senior notes and completed a $140 million private placement. We also repaid a $15.8 million mortgage in our West Virginia property. We ended the year with $256 million in cash and $232 million in debt and subsequent to the year-end, raised an additional $60 million through a second private placement. Full year operating cash flow was $273 million. Capital expenditure were $44 million and free cash flow totaled $229 million. Turning to the outlook. We expect first quarter revenue to decline sequentially by a low to mid-single-digit percentage, consistent with normal seasonality. Gross margin is expected to fluctuate quarter-to-quarter, but remain broadly in line with recent performance. Consumer trends will influence retail results and margin. For full year 2026, we anticipate operating cash flow of at least $250 million and capital expenditure up to $85 million. We will continue to invest in our retail production and distribution network, expand into new markets such as Texas and enhance technology and infrastructure capabilities. We plan to open at least 5 new stores, complete 5 relocations and refresh at least 45 stores this year. Pending regulatory approvals, we may accelerate investments in Texas. We may update our outlook as regulatory and market catalysts evolve. With that, I will return the call over to Kim. Kimberly Rivers: Thanks, Jan. Over the past 2 decades, cannabis reform has gained increasing momentum and growing mainstream acceptance. At last, the federal government is catching up to the American people with the first step towards reform. As President Trump's executive order states, decades of federal drug control policy have neglected medical marijuana uses while limiting the ability of scientists to complete necessary research. Rescheduling of cannabis to Schedule III acknowledges the medical value of cannabis and opens the door for additional research. It also sends a powerful signal that the government is willing to revisit antiquated policy that no longer serves the American people. We believe rescheduling is a precursor to additional reform, including safer banking and uplisting of U.S. cannabis companies to major exchanges. At the same time, state adoption of medical and adult-use programs continues, normalizing cannabis use and providing consumers greater choice. Trulieve remains firmly committed to cannabis reform and will continue to lead from the front, investing time and resources to drive change. With scaled operations in attractive markets, we are focused on driving profitable growth while maintaining flexibility to adapt as the industry evolves. Trulieve is defining the future of cannabis one customer at a time. Thank you for joining us, and as I always say, onwards. Christine Hersey: At this time, we'll be available to answer any questions. Operator, please open up the call for questions. Operator: [Operator Instructions] Our first question today comes from Luke Hannan from Canaccord. Luke Hannan: I wanted to follow-up on the CapEx outlook for 2026. So it is a step-up from 2025 and both Kim and Jan, you both outlined sort of the moving parts there. But I guess, specifically, I wanted to dive in a little bit on how much you plan on spending on Project Hyper. That will sort of be the first question, sort of what's embedded for 2026 there. And then secondly, on the refreshes, you've done a number of them so far, seeing good organic growth on the back of those. What's the runway look like for continued refreshes, not just for 2026, but if we think about the subsequent years as well? Kimberly Rivers: Luke, so we're very, very excited about Project Hyper. And really, I think that it's a testament to our investment strategy to date, given that we are able to build on investments previously made, including SAP, our consumer data platform and our insights that have allowed us to segment and really dive into this personalization concept. Project Hyper is building on the back of that and will allow us to lean into really utilizing all of this wonderful data that we have in a more robust way to really speak to an individual, including demographic information, past purchase history, along with other data such as purchasing time, preferred methods of communication, et cetera, to really accelerate again that personalized connectivity with the consumer. We are not going to separate out specific line items in the CapEx budget. And again, this will be a long project that likely will be a multiyear initiative with -- but we do intend to have milestones throughout this year with -- and we should start to see some returns on that investment in the back half. So we are very, very excited about that. Turning to your -- part of your question on store refreshes. We remain committed to making sure that we have an excellent retail experience for our customers and we'll continue to refresh stores as they kind of become due. We do have an audit process throughout the organization where we audit our stores very regularly and then they're added to a schedule for refresh depending on what the audit results are. And so, as you noted, last year, we did refresh a number of stores. This year, we're slated to refresh another slew of stores. I would anticipate that, that would continue in the future, again, but it is on an as-needed basis. Luke Hannan: That's great. And as a very quick follow-up, you did talk about the Texas opportunity a little bit. When do you expect to be granted, if you have any visibility on it, when do you expect to be granted that final license and then begin the build-out potentially after that? Kimberly Rivers: Sure. So we were granted a provisional license in Texas, which we're incredibly excited about. And the team has done an amazing job to get us to this point. We did receive actually this week a list of diligence follow-ups, which our understanding is it's the questionnaire that's going out to all of the provisional license holders, which we're in the process of completing. They do -- there is another round of licenses, 3 licenses that will be issued, I believe, in early April. So we're not sure if the state will choose to move on final issuances on round 1 before or after that next round is issued. So what I will tell you is that, in true Trulieve fashion, we will be absolutely ready to go to market. Again, I always say that Texas is a state that you go bigger, you go home. So we are very, very much looking forward to having a -- that will be a material market for us once we are awarded that final license. Operator: Our next question comes from Aaron Grey of Alliance Global Partners. Aaron Grey: I'd like to piggyback off that last question from Luke a little bit and dive a bit more into Texas in terms of that opportunity that you just kind of alluded to, Kim. How best to think about the potential for Texas and the ramping there? For you, do you see Florida transitioning out of the nursery program in 2016 as a good analog? And then how important do you think it is to have that first-mover advantage and really kind of dig into that CapEx investment to ensure you have, not only the capacity, but also the retail to get that initial market share that you can essentially potentially hold on to similar to what you've seen Trulieve do in Florida? Kimberly Rivers: Yes. I mean, look, I think that Texas is a tremendous opportunity. It's a market that we have been focused on for quite some time back to the days where we first announced our hub strategy as we talked about how we thought about M&A and organic growth. So Texas, we believe, is a key market for us. Again, we have a provisional license now. So timing will be dependent, of course, on regulatory approvals, and we look forward to working with the regulators to hopefully expedite that process as much as possible. But to your point, look, we believe that in Texas, with the -- not only the program setup as well as the population, we believe that it will be meaningful. Some key points in Texas there are 11 regions, and you are required to have a retail presence in those 11 regions prior to then being able to expand and add additional distribution capacity beyond those initial stores, which we're certainly prepared to do. To your point, we absolutely understand the importance of scale in the supply chain, and we'll be looking to make investments there as well because, again, we think that Texas is probably one of the most attractive market opportunities that we've seen since Florida. So we absolutely, to your point, we will be leaning in. We'll be using all of our knowledge from Florida and applying it to Texas because we believe very strongly that Texans deserve access to high-quality and a robust medical marijuana program and high-quality products. Aaron Grey: Okay. Great. Appreciate that color. Second question for me. Just in the case of Florida adult-use not occurring and think about incremental growth opportunities, I just wanted to know in terms of your outlook for potential M&A, what you're seeing in the marketplace? Have you seen potential valuations come down, especially in the private markets and any appealing assets that you're seeing? Kimberly Rivers: Sure. So, of course, as we mentioned, we are continuing to monitor the Florida potential for ballot inclusion. Just a quick update on that, I'm sure we'll be asked. The Supreme Court is hearing a jurisdictional -- basically jurisdictional motions on March 3, and then we'll make a decision as to whether or not they will hear the case as it relates to those 90,000 ballots that certainly we believe should be included in the final count. Florida, of course, is and would be a humongous market for us as it relates to adult-use. That being said, to your point, we are very excited, as I mentioned, about Texas from an organic growth standpoint. We also have and mentioned some law changes coming out of Georgia. We are also, right, continuing to push in Pennsylvania as well as doing some -- looking to do some expansion of existing footprint in other markets that we already are in. As it relates to M&A, I would say that we remain and will be inquisitive. We certainly have and are still committed to our strategy as we look for markets that are attractive and make sense for us given our hubs that we've established across the country. You know that we don't talk about markets specifically. But I will say that it does appear to me with valuations where they're at and where the market is as well as our cash position that we are in a good spot to be inquisitive in the future. Operator: Our next question comes from Russell Stanley of Beacon Securities. Russell Stanley: Maybe if I could first on Georgia. Great to hear about the efforts to expand that market. I'm wondering if you can talk about the pace of expansion -- market expansion to date against your expectations and talk to, I guess, your thoughts on the odds of that legislation passing. Any comments on the level of opposition you're seeing there? Kimberly Rivers: Sure. So Georgia has been an interesting program given some hiccups as it relates to where the legislature and how the legislature initially set up the program related to distribution versus where kind of we actually are. And so just as a level set, when the Georgia program was initiated, it was anticipated that pharmacies were going to be able to participate alongside of classic dispensaries in dispensation of medical cannabis. And then if you'll recall, there was -- were letters that were issued to those pharmacies and so -- by the DEA, and that put that entire distribution network on pause. And so one of the challenges in Georgia has been, one, kind of friction in terms of patients actually being able to get medical cards and how that system was set up through the Department of Health and the local offices as well as form factor and availability of products that folks needed, matching conditions and then the third is distribution. And so this legislation would get at, I'll call it, kind of the first 2. The state has been making gains to ease friction, allowing medical cards to be actually mailed now as opposed to having to physically go and pick them up. And then the second with this legislation would be around the form factors and availability of medical marijuana for expanded conditions, which, of course, is always a positive step forward. We are -- and actually, our team was in Georgia yesterday, lobbying on the Hill. I do think there's relatively strong support for those changes. But it's similar to kind of early days that we've seen in other medical states where expansion and those changes are going to take a little bit of time. So I think it's relatively in line with our expectations with the exception of the pharmacy piece and the distribution. I think what will be interesting and what's a little bit of an unknown at this point is what, if anything, does rescheduling or will rescheduling do as it relates to the impact on that pharmacy model. And would that potentially open the door to allow for those pharmacies to then be able to participate in distribution, which, of course, would accelerate adoption in that state from a patient perspective. So I think likely more to come as we kind of navigate through the realities of how that program sits within a new landscape once rescheduling happens. Russell Stanley: Great color. And maybe if I could follow-up on Texas. Obviously, there's been a number of ways in which end markets that market opportunity has been expanded over the last couple of years. And -- but it's still -- there are still some restrictions but a massive state. So I'm wondering how big you think this market could be under the current regulatory regime given the size against some lingering restrictions. Kimberly Rivers: Yes. I mean, I think that Texas has, like I said, the opportunity to be a very large market. Specifically, as mentioned on the call, there are fairly low friction points as it relates to patients being able to access physicians and initially get set up in the program, which in a number of markets, that really is and serves as a fairly high barrier to entry. And so with the availability of telemedicine in Texas and with the recent changes to the program there, we think that there's a lot of growth on the medical -- in the medical program that is yet to come. Some of that is a little bit of a chicken and an egg, we think, which certainly is our experience in other markets, meaning, right, you have to give someone a reason to go through the exercise of getting their medical card, meaning they have to have access to products, access to a store and be able to get those products before they're going to go through the process of getting a card. So we think that -- and expect that, that program will experience some pretty significant growth in the coming years as it relates to patient count. And again, the population there would indicate that there's significant -- it's teed up to be a pretty significant market. Operator: Our next question comes from Bill Kirk of ROTH Capital Partners. Nicholas Anderson: This is Nick on for Bill. First one for me, just on the gross margin improvement. Competitors are calling out competition and pressure. Just wondering if you could unpack that sequential improvement a little more. Was it more mix and pricing base versus cultivation cost improvements or vice versa? Just any color there would be helpful. Kimberly Rivers: Yes. Thanks, Bill (sic) [ Nick ]. So on the margin, I mean, look, that's something that we continue to be very, very proud of. And I think reflects our absolute high focus and high level of discipline. And it's really on a number of things, right? To your point, we are and continue to be very focused on efficiencies and our scale certainly helps there as we continue to produce very high-quality products at a scaled expense, if you will. So continuing to lower expenses while improving quality is always the name of the game. That being said, also how we approach our go-to-market strategy with respect to very strategic and focused promotional activity that is, again, taking our data and what we know about our customers and serving up right product, right price at the right location. We have a number of tools that enable us to be able to do that, including, of course, I mentioned investments moving to SAP, investments made in customer segmentation, our dynamic and variable pricing capabilities. So it really is understanding where the customer is, being able to read trends quickly and being able to respond to those trends in a disciplined way so that we are able to, again, have the right product mix at the right price while maintaining margin and profitability. Nicholas Anderson: Great. I appreciate that color. Second for me, just on the loyalty program. It was up again significantly sequentially. What percent of that growth came from Florida versus other markets? And what have been the primary drivers of success and adoption there? Just your thoughts on what's driven that growth over the past year would be helpful. Kimberly Rivers: Yes. I mean, I think that, again, kudos to the team, we were very, very focused on rolling out a best-in-class loyalty program. We began the rollout in Florida and then have been moving that to additional markets and candidly have gotten outstanding adoption in all the markets that we're currently -- our loyalty program currently is rolled out into. I would say that I think that there's a few things. I think, one, the ease of the program, really making it very easy for folks to sign up for the program and then, again, be able to communicate to them the results of participation, meaning you spend and you get, which is very much in line with loyalty programs across the country for big brands that we all know and love, which it was basically modeled after. So I think ease of use, I think the rewards and the ability to communicate the value of those rewards was also a key driver and has been a key driver. And we're very excited based on the feedbacks that we've gotten from customers. And again, we have a very engaged customer base. So there is a lot of back and forth with our customers, and that goes right into how we develop these things. We're very excited to, as I mentioned in prepared remarks, to be updating that loyalty program in response to customer feedback and offering tiers that we're going to be rolling out here in the near-term. And that will allow us to even further personalize and to engage our VIP or our top-tier customers with more specific and exclusive offerings and really based on their spend and how they're interacting with us. So really excited to continue to iterate and further develop the loyalty program as we move throughout the year. Operator: And our next question comes from Frederico Gomes from ATB Cormark Capital Markets. Frederico Yokota Gomes: Congrats on the great quarter. Just the first question, you're guiding for, I guess, substantial free cash flow again this year, and that's already obviously accounting for an increase in CapEx. So how are you thinking about that excess cash and specifically as it relates to potential stock buybacks given the current valuation level? And the second part of this question is, how do you think about that cash balance relative to, I guess, the growing UTP that you have in your balance sheet? Kimberly Rivers: Yes. So we are continuing to focus on generating cash because we believe that cash is the ultimate -- provides the ultimate optionality in the business. We've been talking a lot in the Q&A about opportunities that we have ahead. Obviously, we're not at a final point yet related to Florida and ballot inclusion. We also talked about Texas and what an exciting opportunity Texas is and potential growth in Georgia, kind of unsure yet around Pennsylvania and not adult-use flip. In addition to organic -- there's organic growth opportunities, though, we also mentioned that we're going to remain and maybe even accelerate a little bit our M&A optionality as well. And so I think that for us, it's important to have the cash available so that when these opportunities present themselves and when catalysts come into focus, we have the ability to act with immediacy and with a strong eye on maintaining right and improving shareholder value. And then as it relates to cash and the UTP, what I would say is that, again, the UTP is a reflection of a totality of a number. Management certainly does not believe that the company will ever pay that amount. It's an accounting rule that we, of course, want to make sure that we follow and that we're in compliance at all times. Upon rescheduling, we believe that, that accrual will stop. And we absolutely are in and we'll continue to update as the results of prior years and negotiations, conversations with the IRS continue to resolution. So again, not at all concerned as it relates to cash position via that UTP number and definitely focused to have that resolved within as quickly as possible once rescheduling comes to fruition. Frederico Yokota Gomes: Appreciate that. And just the second question would just be on international cannabis market. I'm just curious if you're looking at that or interested in any way in doing something there. Kimberly Rivers: Yes. So, I mean, again, I think we are constantly evaluating the opportunity set. I think that for us, Texas, as an example, is a significantly more exciting opportunity for us right now than other markets outside of the U.S. I continue to believe that we have plenty to do here in our backyard. That being said, I'm very much a believer of never say never. So continue to evaluate all opportunities, and we'll make decisions as those markets come into focus. Operator: This concludes our question-and-answer session. I would like to turn the call back over to Christine Hersey for closing remarks. Christine Hersey: Thanks, everyone, for your time today. We look forward to sharing additional updates during our next earnings call. Thanks again, and have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Hello, and welcome, everyone, joining today's Maravai LifeSciences Q4 2025 Results Earnings Call. [Operator Instructions]. Please note, this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to Deb Hart. Please go ahead. Debra Hart: Good afternoon, everyone. Thanks for joining us on our fourth quarter and year-end 2025 earnings call. The press release and slides accompany today's call are posted on our website and available at investors.maravai.com. As you can see from the agenda on Slide 2, our CEO, Bernd Brust, will provide a business update and our CFO, Raj Asarpota, will review our financial results. Dr. Chanfeng Zhao, our Chief Scientific Officer, will join us for our Q&A session. Turning to Slide 3. I'd like to note that we have renamed our 2 reportable segments from nucleic acid production and biologic safety testing to TriLink and Cygnus respectively. This change is to better align with our brands and internal operating terminology. There have been no changes to the composition of our reportable segments, the nature of the products and services offered or the manner in which we evaluate the company's operating performance or allocate resources. This change is nomenclature only and does not impact our segment composition, financial results or historical comparability. Throughout today's call, we will be referring to our 2 segments by this updated terminology. Management will make forward-looking statements and refer to GAAP and non-GAAP financial measures during today's call. It is possible that actual results could differ from expectations. We refer you to Slide 4 for details on forward-looking statements and our use of non-GAAP financial measures. The press release provides reconciliations to the most directly comparable GAAP measures, and we also post reconciling schedules to our Investor website. Please also refer to Maravai's SEC filings for additional information on the risks and uncertainties that may impact our operating results, performance and financial condition. Now I'll turn the call over to Bernd. Bernd Brust: Good afternoon, and thank you for joining us. After assuming the CEO role last June and implementing the restructuring actions we announced last August, the management team and I were clear on our priorities: simplify the business, improve operational execution, increase customer interaction and deliver better financial results. We are doing exactly that. Let's turn to our financial results on Slide 5. Today, we reported full year revenue of $185.7 million, exceeding guidance by about $700,000. Total Q4 revenue was $49.9 million excluding the $14.3 million comparison from high-volume CleanCap sales in Q4 2024, revenue grew 18%. Growth was driven by strong performance in GMP consumables and CDMO services at TriLink and by core customer demand for wholesale protein kits at Cygnus with all of our top 5 customers increasing their HCP kit purchases during the quarter. Raj will walk through the full year and fourth quarter results in more detail, but I would like to highlight a key milestone this quarter. We demonstrated the leverage of our new operating model by delivering positive adjusted EBITDA of just over $500,000 in Q4. This represents an improvement of approximately $11 million sequentially from Q3. This marks the company's first return to positive adjusted EBITDA in 4 quarters. We achieved this well ahead of our internal expectations. The improvement was driven by disciplined execution across the organization, including exceeding the $50 million in cost saving targets we set as part of the restructuring, coupled with stronger revenue and more favorable product mix. I want to thank our entire team for their efforts over the second half of 2025. Because of their work, we believe the company is now positioned to return to full year revenue growth, deliver positive adjusted EBITDA and positive cash flow in 2026. Let me briefly highlight what we are doing differently and how our operational changes are delivering improved results. First, our commercial execution. We have materially increased our direct engagement with customers at TriLink positioning CleanCap as the product of choice and as part of a broader portfolio that includes our enzymes, oligos and our newly released ModTail products. This reflects our strategy to expand TriLink beyond capping reagents and deepen our role across the full mRNA and gene-based therapeutic workflow from early discovery through clinical development and into commercialization. By engaging earlier and across more components of the workflow, we increased our opportunity per program and strengthen our position as a long-term strategic supplier. A good example is our upcoming launch of GMP enzymes next quarter. Based on the commercial team's improved customer engagement, we are already seeing strong demand with more than $1.2 million of GMP enzymes orders in hand for 2026. This illustrates the model. We support customers in discovery with research-grade consumables. And services and as their programs advance into clinical trials, we are positioned to transition with them to GMP-grade supply. In discovery, mRNAbuilder is enabling earlier, higher value engagement with our research customers. MRNAbuilder is TriLink's AI and computer-aided design and ordering platform that simplifies designing optimized mRNA. Customers upload their gene of interest and the platform guides them through the design of a high-performance mRNA construct. This platform is increasingly becoming embedded in customer workflows, as evidenced by direct customer feedback and repeat usage. And as these discovery programs advance, this naturally supports pull-through of our GMP portfolio. Few competitors can offer this continuity from discovery through commercialization and that continuity is a meaningful differentiator for us. Operationally, we have reduced fixed costs centralized operations and made the business far less sensitive to volume fluctuations. We now have clear ownership and accountability, remove functional silos and improve the speed of decision-making. We have implemented additional automation to improve efficiency and consistency across the organization. And our new automated EU site allows us to quickly supply screening for the European market. These are structural, sustainable and scalable improvements. Combined with our technical rigor, regulatory capability and reputation for high-quality supply, these changes further reinforce TriLink's position as a partner of choice. From an R&D perspective, we are prioritizing investments in the highest return opportunities across mRNA, cell and gene therapy and the biologic safety testing business. Products introduced in the second half of 2025 are already showing strong traction and our development road map is focused on areas where we can most clearly differentiate our capabilities and best serve our customers' needs. We have a robust pipeline of NPIs planned for 2026. Our recently launched ModTail technology continues to see strong early adoption, generating over $0.5 million in 2025, an unusually strong start for our newly introduced consumable in our market. We have already surpassed that level in 2026 year-to-date bookings with engagement across several large pharma companies. Importantly, early customer data and our own internal studies demonstrate improved protein expression and extended duration of expression both critical attributes for the next-generation RNA therapeutics. We are also investing in additional capabilities at Cygnus. During the quarter, we expanded our mass spec infrastructure to increase capacity and broaden our analytical service offerings. This positions us to offer services that provide drug developers with a full understanding of the host cell protein in drug substances, ultimately leading to increased patient safety and product stability. We view analytical services as a strategic growth lever for Cygnus, complementing our existing HCP and ELISA kit business. We also continue to invest in our MockV product line for viral clearance prediction. As we see quarter-on-quarter year-on-year growth driven by increased market penetration and encouraging regulatory feedback. Taken together, our commercial execution operational discipline and focused R&D enable faster decision-making, improved responsiveness and altogether, a strong foundation for long-term durable growth and profitability. In addition to our improved internal execution, let me share some of what frames my optimism for 2026 on Slide 8. The broader tools and biotech environment appear to be stabilizing. Biopharma funding is showing signs of recovery, particularly in the private markets. Large pharma remains active and well-funded biotechs are advancing programs, while smaller players remain cautious. While academic and government funding remains muted, we have low exposure to those markets. Overall, we're seeing strong order volume and increased visibility. We are also seeing continued expansion in the number of companies pursuing mRNA and guide RNA programs globally, which according to the Beacon RNA database is now 809 companies compared to 643 a year ago. That growth reflects sustained scientific and commercial interest in RNA-based approaches. As delivery technologies advance and pipelines broaden, both emerging biotech and established biopharma continues to invest in RNA platforms. At the same time, companies continue to prioritize capital and rationalize early-stage programs. Importantly, this has not resulted in a meaningful decline in overall clinical trial activity. Trial activity by phase remains stable, and we continue to see solid engagements across discovery, preclinical and clinical developments. TriLink currently works with about 250 to 300 companies on a regular basis or roughly 1/3 of the company's pursuing mRNA and guide RNA programs. We believe with our newly released ModTail technology, we have an opportunity to penetrate additional customers and programs regardless of capping method. Finally, customer feedback suggests the FDA remains constructive in areas such as cell and gene therapy, particularly in rare disease and oncology, where expedited pathways continue to be utilized. While infectious disease vaccine development may face a more measured approach in the current U.S. environment, our exposure in vaccines is low and therapeutic programs continue to progress. What I'd like to leave you with is how confident I am that the fundamentals of this business are solid. We have leading technologies. We have long-standing customer relationships where we continue to build greater transparency and intimacy. We have deep scientific credibility. Now all that coupled with the right team and appropriate sized operations to execute. Now I'll turn the call over to Raj for more details on the quarter and year-end results and our 2026 financial guidance. Rajesh Asarpota: Thank you, Bernd. Let's turn to the Q4 financial results on Slide 10. Revenue for the quarter was $49.9 million compared to $56.6 million in Q4 2024. As Bernd noted, excluding $14.3 million of high-volume COVID GMP CleanCap sales in the prior year quarter revenue increased 18% year-over-year. As Deb mentioned at the start of the call, we have renamed our 2 reportable segments from nucleic acid production and biologics safety testing to TriLink and Cygnus, respectively. TriLink generated $34.6 million of revenue, down 17% year-over-year. Excluding the $14.3 million COVID CleanCap comp in Q4 2024, TriLink base revenue grew 25% year-over-year, driven by GMP consumables and CDMO services. Cygnus revenue was $15.3 million, up 4% versus last year. I will discuss segment results and profitability a little later in the call. Revenues by customer type in Q4 were 31% biopharma; 29% life sciences and diagnostics; 4% academia; 11% CRO, CMO, CDMO; and 25% distributors. Revenue by geography in Q4 was 55% North America 15% EMEA; 21% Asia Pacific, excluding China; 8% in China and 1% Latin and Central America. Turning to Slide 11. Our GAAP net loss before noncontrolling interest was $63 million for the fourth quarter of 2025. This included a $25.8 million noncash intangible asset impairment charge related to TriLink and $12.1 million of noncash restructuring charges, including lease unwind costs. This compares to a GAAP net loss before noncontrolling interest of $46.1 million in Q4 2024. For the full year, GAAP net loss was $230.8 million compared to a loss of $259.6 million for 2024. Adjusted EBITDA, a non-GAAP measure, was positive $536,000 for Q4 above our expectations, driven by efficiency of initiating our cost restructuring actions and stronger revenue. This compares to negative $1.1 million in Q4 2024. For the full year, adjusted EBITDA was negative $31.2 million versus $35.9 million for 2024. Moving to Slide 12 and EPS. Basic and diluted loss per share in Q4 was $0.24 compared to a loss of $0.18 per share in Q4 2024. Adjusted EPS was a loss of $0.04 compared to a loss of $0.06 last year. For the year, basic and diluted loss per share was $0.90 versus a loss of $1.05 in 2024. Adjusted fully diluted EPS, a non-GAAP measure, was a loss of $0.29 per share versus a loss of $0.10 in the prior year. Advancing to the balance sheet, cash flow and other financial metrics on Slide 13. We ended the year with $216.9 million in cash and $294.2 million in long-term debt. Cash used in operations in Q4 was $22.8 million, including $3.6 million related to restructuring. Depreciation and amortization was $12.4 million Net interest expense was $4.2 million. Stock-based compensation, a noncash charge was $3.9 million for the quarter. During Q1 2026, we made a voluntary $50 million debt repayment using cash on hand. As a result, both cash and total debt reduced by $50 million from these year-end numbers. We believe this was a prudent step to reduce ongoing interest expense. Next to Slide 14 and the discussion of segment performance. TriLink revenue was $34.6 million in Q4, representing 69% of total revenue. Excluding the $14.3 million COVID CleanCap comp in the prior year quarter base revenue grew 25%, driven by GMP consumables and CDMO services. TriLink generated $936,000 of adjusted EBITDA in Q4 returning to positive adjusted EBITDA for the first time since Q4 2024. For the full year, TriLink revenue was $119.8 million or 64% of total revenue with adjusted EBITDA of negative $23.1 million. Excluding high-volume CleanCap revenue, driving revenue declined 8% for the year. Cygnus revenue was $15.3 million in Q4, up 4% year-over-year and representing 31% of total revenue. Growth was driven by continued demand for HCP kits particularly from our core customers. Cygnus delivered $10.2 million of adjusted EBITDA in Q4 for a 66.7% margin. For the full year, Cygnus revenue increased 5% to $66 million with adjusted EBITDA of $44.2 million and a 67% margin. Corporate shared services expense impacting adjusted EBITDA was $10.6 million in Q4, down $2.8 million sequentially. These expenses include HR, finance, legal, IT and public company costs. Please turn to Slide 15. As Bernd mentioned, we are ahead of our previously announced target of greater than $50 million annualized reduction in expenses and are now estimating savings of greater than $65 million. We continue to identify additional opportunities to streamline operations and improve profitability. Now let's discuss our financial expectations for 2026 on Slide 16. We expect total revenue of $200 million to $210 million, representing growth of 8% to 13% over 2025. We expect TriLink to grow low double digits at the midpoint driven by double-digit growth in GMP consumables and stabilization in discovery. Cygnus is expected to grow low to mid-single digits year-over-year. We expect full year adjusted EBITDA of $18 million to $20 million, representing an improvement of $50 million to $52 million over 2025, primarily from improvements in our TriLink segment. We expect gross margin expansion of approximately 1,200 basis points year-over-year, driven by our restructuring actions, cost initiatives and product mix as we expect greater revenue contributions from TriLink GMP consumables. Total operating expenses are expected to decline approximately 13%. And G&A expenses are expected to decline approximately 18% and sales and marketing should decline approximately 13%. R&D is expected to be modestly up as we continue to fund new product innovation. To help you with your modeling, here are a few additional expectations behind the guide. Interest expense, net of interest income, $15 million to $17 million; depreciation and amortization of $50 million to $52 million; stock-based compensation of $26 million to $28 million as is fully converted share count of approximately 261 million shares net capital expenditures of $4 million to $6 million. Finally, I'd like to provide an update on internal controls and the securities class action litigation. As you'll see when we file our 10-K this week, we have completed the implementation of our remediation plan and enhanced the design and operation of our controls to address the previously identified material weaknesses. Those weaknesses related to controls over our revenue process as well as controls around key inputs and assumptions used in determining the fair value of our reporting units in the quantitative goodwill impairment assessment. To remediate these matters, we strengthened controls over period-end revenue recognition and pricing approvals, enhanced the review and documentation of key inputs and assumptions used in the goodwill impairment analysis and provided additional training to control owners. In addition, I'm pleased to report that the United States District Court for the Southern District of California dismissed in full the securities class action lawsuits against Maravai and certain of our former executives. I want to thank the team for their focused work in resolving these matters. In closing, our fourth quarter reflects the benefits of the actions we have taken, sequential revenue growth positive adjusted EBITDA and continued cost discipline. We are entering 2026 with a leaner cost structure, improved operating leverage and clear priorities. We remain focused on execution driving revenue and continued margin expansion. I'll now turn the call back to the operator for Q&A. Operator: [Operator Instructions]. We'll take our first question from Matt Stanton with Jefferies. Matthew Stanton: Maybe on the commentary on visibility improving in the color on Slide 8, you talked about strong order volume. Is it fair to say orders are tracking kind of ahead of what you're guiding on revenues for '26 on year-on-year growth. So maybe just derisking a bit or leaving a bit of upside. Is there any more color you can give in terms of order and funnel growth type of a strong order volume? And if yes, maybe pipe out some of the opportunity where you see the most areas of upside as you move through '26 here? Bernd Brust: Thanks, Matt. This is Bernd. We shared in our last earnings call that there's a little lumpiness of course, in this business, right, in a business that's a couple of hundred million bucks in revenue and our average order volume is fairly high, average order cycle is about 6 months. So it's hard to get a true outlook on what happens for the full year. And so we're certainly I think trying to be somewhat conservative as to how we set ourselves up for the future here. But specific to your question, order volumes are materially higher so far than they were last year at this period of time. So that's a good sign, obviously. What we see specifically is in the TriLink world in our GMP consumables as well as our larger order sizes in discovery. When we look at our business in discovery, there are sort of 2 categories: orders under average 15 [indiscernible], where we assume those salespeople are involved in orders over 15 that does require usually some kind of sales involvement where we're seeing material growth in is in these larger orders in discovery alongside with GMP. But order volumes are great, and we feel very, very confident about where we are with our forecast for the year. Matthew Stanton: And maybe just on the GMP consumables, you talked about the strength in 4Q, the strength in orders. Can you talk a little bit more about it? Is that tied to a few programs moving further through the clinic? Is it selling more products into the GMP consumable ecosystem? Just talk about maybe some of the underlying demand factors underpinning the GMP consumable strength you've seen? Bernd Brust: Yes. It's really a broad set of customers. There's really not one customer that stands out that says this is where we're seeing all of our growth. So I think that's the beauty actually about the business at the moment where certainly in the COVID years great revenues, but from a very small number of programs, the number of programs is quite significant at the moment. And so yes, we feel good about the depth of our customers that we are currently interacting with. Operator: We'll take our next question from Subbu Nambi with Guggenheim. Subhalaxmi Nambi: First one is on the gross margin expansion of 1,200 bps from restructuring cost initiatives and product mix. Can you break out each of these buckets, if possible? Rajesh Asarpota: Yes, sure. We can -- I can give you the details on the cost savings that we've outlined before. So we talked about the $55 million that we previously mentioned. And now the actual gross margin expansion is going to be coming from the $65 million annualized savings. And again, I'd like to remind you that we captured about $3 million of that in Q3 and another $8 million in Q4. So the $65 million in annualized cost savings basically resets the fixed cost base to create that margin lift on gross margin, which is independent of volume growth. And then there's additional expansion on gross margin that's going to come from mix, made from GMP consumables contribution and the operating leverage as we continue to expand revenue. Subhalaxmi Nambi: And then one high-level. AI role in drug discovery, development and manufacturing is the investor focus of late. How is Maravai using AI either at the sender side in R&D or otherwise to generate efficiency? Bernd Brust: I'm sure the question was how is AI driving efficiencies in the business? Subhalaxmi Nambi: Yes. Bernd Brust: Yes. I think we're implementing this in various areas of the organization. And you heard us talk about mRNAbuilder that we went live with, I think it was the third quarter of last year. It's really an automated platform that we acquired through the efficient acquisition early last year that allows customers without really any human intervention to upload their DNA construct and then create an optimized RNA construct from there. I think so far, since we have been live, something like 70-or-so orders have been going through that system. It's gradually picking up. But that's probably the biggest involvement of AI that we have at the moment. I can't speak to whether we use that in the CDMO world, I don't believe so. Operator: We'll take our next question from Matt Larew with William Blair. Matthew Larew: Congrats on the update. It seems like you've turned a corner here. I wanted to ask about the guide for the year. Just given Q3 and Q4 you had some lumpiness with some of the CDMO builds. And so a number of larger peers have characterized perhaps a softer first quarter, though they're optimistic about the build for the year. So just curious if there's anything you would call out either from a prior year comp or an expected order conversion that might affect casing in the first quarter in particular? Bernd Brust: Listen, we're optimistic on Q1. As we shared, we're optimistic on the year as well. On the top line, it's really not any serious negative comps. So obviously, we comped out all of the COVID hits that we comped against '24 and '25, but when you look at the orders that we are currently seeing in the business, it's really quite a diverse set of customers across the portfolio of TriLink. And obviously, Cygnus continues to run at the sort of mid-single-digit revenue levels as well. So we really don't look at it as a negative or positive comp in Q1. I think if you look at this year, probably Q3 last year was pretty tough on the GMP world. So we'll see what that means this year on Q3. But certainly, as we look at the first half of the year here, we shared with I think the group here in September that we were expecting somewhere between $10 million and $20 million worth of COVID caps in 2026, specifically in the first half. We still expect that to happen in the first half. So that is the one positive comp that you'll see in the first half. But other than that, I think it's true strength of customer spending. Rajesh Asarpota: I think we spoke about this on the previous call in terms of our commercial engagement and how that's giving us better visibility into the GMP consumables world. So that continues to happen. So on the strength of that, we've seen Q1 coming in relatively strong, and we -- and that's going to kind of continue through the balance of the year. Matthew Larew: Okay. And then cost reduction program came in ahead of schedule. And I think the way you guided OpEx is good to see in terms of R&D getting dollars but finding efficiencies at our places. Prior to COVID, Maravai operated with EBITDA margins above 40%, though that was maybe largely as a private company, and I understand it's maybe not a perfect comp. But if you think about the midpoint of the guide this year, EBITDA margins being roughly 9% and where you expect to be in the future, obviously, now you have a services portfolio, you've adding new products, which we don't fully know the margins of. But where do you think margins can go long term? And understanding that long term is maybe undefinable in terms of time line at this point, but just terms of the structure of the business and get the kind of products and services you're offering, but where do you think you can get over time? Bernd Brust: I think you're going to get your margins up truly through higher product sales, right? When you look at the organization today, you have a fairly complex GMP operating model here that you did, God knows how much volume during COVID that sits in the same infrastructure we still have. So we can absorb a large number of other GMP orders without really increasing our cost structure with the exception of raw materials and maybe a little bit of labor. So the natural margin increases, I think, are going to come purely from revenue growth over the outlying years here. Operator: We'll take our next question from Matt Hewitt with Craig-Hallum. Matthew Hewitt: Maybe first up, regarding the restructuring, you got through that earlier than expected. So should we anticipate that the expense lines kind of have reset at this point, maybe a little bit below the Q4 numbers for sales in general and all that and kind of show some normalized growth -- CA growth, if you will, over the course of the year or is there still yet one more step down after Q1? Rajesh Asarpota: So again, going back to the macro level, the $65 million in expense reductions that we've outlined those expense categories haven't changed. Some have moved a little bit towards being more favorable. Our labor expense profile is going to remain the same. Our facilities is going to essentially remain the same. Our controllables expense is going to be down a lot more than we anticipated. And then just by the account types. If you look at our COGS profile, that's going to materially essentially remain the same. But on the OpEx side, we're going to get a lot more out of G&A. And like we said we're going to invest a little bit on R&D and then sales and marketing is going to essentially remain the same. There will be another modest drop in Q1 though I think to get your question directly. Matthew Hewitt: Got it. And then maybe a separate question. The FDA recently provided some new draft guidance regarding some of your markets. And I'm just curious what your thoughts were on that draft guidance? And more importantly, when do you think that you could maybe start to see some benefit from that? Bernd Brust: Yes. I don't think we have internally looked at that very closely. We don't have a ton of exposure on where that dialogue sits at the moment. And so I don't think we have a clear view on that at this... Operator: Our next question comes from Catherine Schulte with Baird. Unknown Analyst: This is Josh on for Catherine. You mentioned that you're working with around 250 to 300 customers within the mRNA ecosystem. I was just wondering where kind of market shares show out between clinical and preclinical customers and how you kind of characterize the recent market share dynamics there? And then just lastly, how do you kind of feel about current mRNA pipeline trends heading into 2026? Bernd Brust: Yes. I think we assume about 1/3 market share, right, of mRNA customers out there. It's not always that easy to talk about programs because we don't always know how many programs a customer is running at a given point in time. But I think if you look at our GMP revenues, which Raj, which are this year forecasted at what number, do you remember? Rajesh Asarpota: GMP consumables. Bernd Brust: It's somewhere around $44 million, $45 million, right, something like that. And so that suggests that your discovery business is still larger than our GMP business. So I would say that today, the GMP world, I know it's 1/3 of our revenue, something like that. And we're seeing the fastest growth happening there. So that certainly to us indicates that you're going to continue to see either more programs coming into the GMP world or programs progressing in higher volumes. Unknown Analyst: Great. And then throughout 2025, we saw a lot of policy headwinds around areas like mRNA, cell gene therapy and MFN. You're heading into 2026, how are you feeling about the broader policy backdrop here? How does this inform the improved visibility that you're seeing across the business? Bernd Brust: Yes. I think a lot of the policy has been driven around vaccines, right? And so we really don't have a ton of exposure in that area any longer now that we've washed through the COVID comps from 2024. But when you look at just customer behavior, we're a consumables provider and we're directly dependent, of course, on customers doing either mRNA research or trials. We're starting to see more and more traction coming from our broader customer base, not just in GMP, but also in the discovery world. And that tends to be the best sign, of course, in that you have to assume when you have larger discovery orders coming in that some of those will move into a GMP clinical trial world at some point. So the fact that, again, discovery orders and larger size are becoming more and more, I think, prominent at the moment is a very good sign where we think the GMP world will lead into. Operator: We'll go next to Justin Bowers with Deutsche Bank. Justin Bowers: So sticking with GMP, can you give us a sense of what that -- how much revenue that generated in 2025? And then as we think about 2026, excluding the COVID revenue, is there any seasonality that we should take into consideration for TriLink? Bernd Brust: I don't know there's seasonality necessarily. That's kind of the interesting part about this business. The lumpiness exists based on these order sizes and really until you get some of these programs becoming commercial you have changes from certainly discovery into GMP, you have certainly movement from Phase I to II to III. Some programs don't make it out of certain trial levels. And so the lumpiness that we see in the business is really not seasonal, it's purely tied to really how successful these clinical trials are. But yes, the nature of our business is such that because these orders are fairly large, as they shift between programs they will likely shift between time as well. Justin Bowers: Understood. And just a quick follow-up. What was GMP consumables in 2025? And then part 2 of that would be, I think last year, you talked about maybe some maybe sharing space or thinking about some alternative revenue generation activities in Flanders and just curious if there's an update on those initiatives? Bernd Brust: Well, on the facility front, we have -- one of our Flanders sites is our CDMO business, and that's fully occupied by that. And the other Flanders site, currently, we don't occupy. We have closed that facility. If we find somebody to take that over, we will deal with that at that point, but we're not looking for incremental revenues necessarily coming from that piece. And so that has been all addressed, I think, in our accounting world as well. We don't take those into our EBITDA lines any longer. On the question around GMP consumables, maybe Raj, do you have those numbers? Rajesh Asarpota: Yes. We kind of don't break that out completely. But if you look at the GMP and CDMO business combined, that's in the mid-30s last year. Bernd Brust: And by the way, for clarification, the $43 million I mentioned a minute ago for GMP consumables that excludes CDMO. Operator: Our next question comes from Doug Schenkel with Wolfe Research. Douglas Schenkel: The first on APAC, the second on MockV. So starting on APAC. As a percentage of revenue, APAC increased pretty meaningfully in the fourth quarter compared to the third quarter. I think you said China was stable. So it does seem to imply that there was a pretty big pickup in Asia, ex China. Am I thinking about that right? And if so, what drove that change? And is this a trend that you expect to continue into 2026? And then on MockV, you called out demand as a driver of growth in the quarter. How has that been trending? And how do you expect that to contribute in 2026? And I'm just wondering if over time, that could be a contributor to driving overall Cygnus growth above the mid-single-digit construct? Rajesh Asarpota: I'll take the -- I'll start with the GMP and like in Asia Pacific in Q4 was driven by 2 large GMP orders, but they were kind of tied to our ongoing programs and partnerships and not kind of the onetime events. And then -- so we view this as a sustainable kind of event and reflective of the ongoing improving program momentum we have, and it's not a one-off event. So that was what drove the APAC growth. And then what was your second question again, I'm sorry? Yes, we did see MockV growth, and we think that product has shown tremendous kind of runway from last year to this year and in -- sorry, from '24 to '25 and we see continued kind of growth on that product line within Cygnus. Chanfeng Zhao: If I also may add MockV. So Cygnus has supported several customers with the including MockV data in customers' clinical trial application. So the initial approach has been positively received by a regulatory agency. So the idea of MockV could potentially replace expensive lengthy viral clearance study, which can really broaden our potential customer base. Bernd Brust: And we think MockV has great potential runway here, and I think it's a good indication of that. I would also say, don't expect that to happen in 3 months. It's a longer-cycle business. Ad short-term growth, I think the question was, how do we potentially look at Cygnus growing faster than sort of mid-single digits? I think certainly, long-term MockV could be a player there. We've invested some more in services. We bought another mass spec into the organization. So I think you'll see some opportunity coming from there. And I think you're right, Asia does have some opportunities. that are potentially there for us to capitalize on. Operator: We'll take our last question from Matthew Parisi with KeyBanc Capital Markets. Matthew Parisi: This is Matthew Parisi on for Paul Knight at KeyBanc Capital Markets. Congrats on the great quarter. So a quick question about the CleanCap revenue. You mentioned $10 million to $20 million will come in the first half. Can we assume that there will be additional COVID CleanCap revenue in the second half? Bernd Brust: No. I think we shared with all of you in Q4 that we expect $10 million to $20 million will be the total number for 2026. So we kind of look at that as the ongoing run rate in the following years as well. And you should keep that number as a guidance for the business. We expect this year that all to come in the first half of the year. Matthew Parisi: All right. And then next would be kind of -- you talked to the significant traction you're seeing in ModTail. I was wondering if you could talk to the traction you're seeing in the new IVT kits. And then you previously mentioned that you intend to launch new kits in '26? And when could we potentially expect to see the launch of those kits? Bernd Brust: Chan, do you want to answer that or would you like me to? Chanfeng Zhao: Yes. Yes. So we've -- the ModTail we launched nRNA service and catalog mRNA. And so the data coming back from customers that they are very positive. And so they are starting asking -- as Bernd mentioned, that we have large pharma companies using this technology. And as the positive data coming back, they are asking sort of GMP-related question. Obviously, we'll be ready for GMP to meet the customer demand. And for the IVT kits, as you know, [indiscernible] has been doing mRNA for many years. So we have deep knowledge IVT CleanCaps. So the kit is really well received in the field. We have over 100 kits ordered first few weeks -- first 4 weeks, and we see sequential growth from Q3 to Q4, and we also see more adoption in the field. We also converted one major customer from a competitor to use our kit. So it's all good, and we are going to launch more kits and a different version of kit to meet customer demand this year. Bernd Brust: So ModTail is an interesting product. I mean it's still early days, obviously, but the fact that we officially launched this in September through the commercial organization, well over $1 million in orders already. And that's through Chanfeng's comments, service and some catalog mRNA feedback that's come back from customers have been quite impressive. And so we have a lot of confidence of this product becoming a big driver of revenue growth for our business in the years to come. Operator: At this time, there are no further questions in queue. I will now turn the meeting back to our presenters for any additional or closing remarks. Bernd Brust: Thank you. Thanks again, everybody, for dialing in, sticking with us. We know that we're still new in this organization. I think we are bringing it around very quickly. We are highly confident about the progress that we're making. You look at TriLink, certainly that's been stabilizing and positioned for growth in 2026. The fact that Cygnus now has hit its positive growth quarter, 3 in a row, is a great story, and we are confident that's going to have a great 2026 as well. Our cost savings are materially higher than we had initially planned really without impacting the business, I think, is an incredible sign for the organization. We're going to see EBITDA growth. We're going to see cash positive direction in 2026, again. We're leaner, we move faster, great interaction with our customers and highly confident that we're going to have a great 2026 here. So thanks, again, for your time and interest in the company, and we'll speak to you again in about a quarter. Thanks. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Gerardo Lapati: Good morning, everyone, and thank you for joining Alsea's Fourth Quarter and Full Year 2025 Earnings Video Conference. Today, you will hear from Christian Gurría, our Chief Financial Officer; and Federico Rodríguez, our Chief Financial Officer. Christian will walk us through our operating performance and strategic progress, while Federico will provide a detailed review of our financial results and capital allocation. Before we begin, I would like to remind you that some of our comments today contain forward-looking statements based on our current expectations. Actual results may differ materially. Today's discussion should be considered alongside the disclaimers included in our earnings release and our most recent filings with the Bolsa Mexicana de Valores. The company undertakes no obligation to update these statements. Unless otherwise specified, all figures discussed today are presented on a pre-IFRS 16 basis. With that, I will now turn the call over to Christian for his opening remarks. Christian Gurría: Thank you, everyone, and good morning, and thank you very much for joining us today. I will begin with an overview of our performance for the fourth quarter and full year 2025, highlighting key operating trends across regions and brands as well as our progress in digital transformation, expansion and ESG initiatives. Federico will then walk you through the financial results in more detail. Before going into the quarterly figures, I would like to briefly step back and reflect on how our strategic priorities throughout 2025 are shaping our business today. Despite a challenging start of the year, we responded with targeted operational and portfolio initiatives that led to a gradual improvement in performance as the year progressed. Throughout 2025, we focused on strengthening traffic and innovation to keep our brands remaining relevant and top of mind for our consumers. At the same time, we adopted a more selective and disciplined approach to growth, directing capital towards formats and initiatives with consistently strong returns. This included strengthening our portfolio through the incorporation of brands such as Chipotle and Raising Canes into the Alsea family, fully aligned with our long-term objectives, the right brands in the right geographies and the right stores, prioritizing quality over quantity. In parallel, we simplify our portfolio through the divestment of noncore assets in South America and Europe. This is part of our core strategy going forward as we will continue with this simplification as we are aiming to have a healthier and more profitable portfolio. The aforementioned is enabling us to concentrate resources on markets and brands with a stronger growth potential, translating into meaningful improvements in efficiency and profitability. Finally, we sharpened our approach to capital allocation and cash generation, optimizing CapEx and reinforcing our financial structure. With that context, let me now turn to our fourth quarter performance. In the fourth quarter, total sales increased by 0.5% year-over-year. reaching MXN 21.7 billion or 12%, excluding foreign exchange effects. Same-store sales grew 3.3% during the quarter, reflecting improving trends across several markets. EBITDA increased 2.9% year-over-year to MXN 3.7 billion with a margin of 16.8%, representing a 40 basis point expansion versus last year. Same-store sales grew 3.3% during the quarter, reflecting improving trends across several markets. The results reflected disciplined execution, improving operating leverage and the benefits of portfolio optimization efforts. Turning on brand performance. At Starbucks Alsea, same-store sales increased 2.9% in the quarter. In Mexico, same-store sales grew 2.6% with prior quarters and reflecting a stable demand and consistent performance. In Europe, same-store sales declined 0.3%, primarily due to continued pressure in France, partially offset by solid performance in Spain. In South America, same-store sales increased 8.8%, driven by Argentina. Excluding Argentina, same-store sales grew 1.1%, supported by strength in Colombia and gradual recovery in Chile. Domino's Pizza Alsea delivered a 5.2% increase in same-store sales. In Mexico, same-store sales grew 6.3%, supported by innovation such as 'croissant' Pizza, driving value and innovation. Also, we launched and expanded delivery capabilities through a strategic aggregator in Mexico. In Spain, same-store sales increased 3.3%, reflecting effective promotional execution. And in Colombia, same-store sales rose 9.6%, demonstrating a strong and consistent performance through the year. At Burger King, same-store sales, excluding Argentina declined 3.9%. In Mexico, same-store sales decreased 4.8%, reflecting continued pressure on the brand despite gradual operational improvements during the year. The full-service restaurant segment delivered same-store sales growth of 3% in the quarter. In Mexico, same-store sales increased by 3.8% supported by value propositions such as Menu del Dia, Tres Para Mi in Chili's and Paradiso Italiano in Italiannis. In Spain, same-store sales grew 1.9% alongside the continued portfolio optimization, including the sale of TGI Fridays. In South America, same-store sales increased 2.8% alongside the sale of Chili's and P.F. Chang's restaurants in Chile. Our expansion strategy continues to be guided by a clear focus on quality, returns and capital efficiency. During the fourth quarter, we opened 55 new stores, bringing total openings in 2025 to 169 units, 127 of them being corporate and 42 franchises, below our initial expectations. This reflects a deliberate shift towards fewer higher-quality investments, prioritizing locations and formats with a stronger return profiles. Remodeling and the renovation of our existing portfolio remain as a key priority across regions as store refreshes continue to deliver attractive returns through improved customer experience, higher productivity and faster payback periods. Overall, our expansion approach in 2025 reflects disciplined capital allocation and a clear focus on long-term value creation. Our digital platforms remain a key growth driver for Alsea. By the end of the quarter, loyalty sales increased 13.4% to MXN 8.2 billion, representing 30.6% of total sales and 36.6 million orders. We surpassed 8.2 million loyalty active customers and users across our brands, confirming the strength of our digital engagement. In addition, during the quarter, Domino's implemented full service through an agreement with a known aggregator. This initiative significantly expanded delivery coverage by more than doubling the number of available drivers per store, improving service levels during peak hours without incremental costs. During the quarter, we continue advancing on our ESG agenda as a core pillar of our long-term strategy, fully aligned with capital allocation and risk management. In Europe, we completed our first round of sustainable financing for EUR 273 million, linked to targets for emission reductions, strengthening supplier assessment base on ESG criteria and improving food waste management. This progress enabled a second ESG-linked financing tranche up to MXN 550 million through 2029. Additionally, in Mexico, we further aligned our strategy by securing a sustainability-linked loan of MXN 10.5 billion tied to KPIs focused on emissions intensity and waste reduction. In Mexico, during the months of October and November, [Indiscernible] movement raised more than MXN 50 million as part of its annual fundraising initiative. These efforts were reflected in our continued inclusion in the Dow Jones Sustainability Index in 2025, scoring 18 percentage points above the global sector average and ranking within the top 10% of the industry. For Alsea, ESG is embedded in how we allocate capital, manage risk and create long-term value. With that, I will now turn the call to Federico to review our financial performance. Thank you. Federico Rodríguez Rovira: Thank you, Christian. Good morning, everyone. In the fourth quarter, sales increased 0.5% year-over-year, supported by sustained consumer preference for our brands and effective commercial strategies. Excluding foreign exchange effects, sales increased 12%. In Mexico, the sales increased 7.9% to MXN 12.5 billion. In Europe, sales declined 1.2% in peso terms, while increasing 5% in euros and in South America, the sales declined largely due to currency effects. The EBITDA increased 2.9% year-over-year with a 40 basis points margin expansion, driven by stable food cost, disciplined execution and improved labor efficiencies. In Mexico, the adjusted EBITDA increased 17.1% year-over-year, primarily due to an increase in same-store sales of 3.1%, following a strong recovery in November and December, while the portfolio optimization and improved labor efficiencies helped offset higher wage cost. In Europe, adjusted EBITDA was 18.7% higher year-over-year, driven by a 1.7% increase in same-store sales, lower food cost and disciplined labor cost management. In South America, the adjusted EBITDA declined by 22.9%, largely due to the depreciation of the Argentine peso relative to the Mexican peso. This impact was partially mitigated by robust consumer demand in Colombia and stable market conditions in Chile, although Argentina continued to experience a more challenging operating environment. The net income for the quarter increased 32% year-over-year to MXN 812 million, reflecting a continued though less pronounced positive noncash foreign exchange effect related to U.S. dollar-denominated debt. As we have mentioned previous quarters, this impact is nonrecurring. Following the refinancing of the obligations, we have now achieved a natural hedge, and this revaluation will no longer affect the P&L going forward. CapEx for the full year totaled MXN 5.1 billion. Of this amount, 75% was allocated to store development, including the opening of 127 new corporate units, remodelings and equipment replacement, while 25% was directed to strategic projects, including the Guadalajara distribution center, technology upgrades and process improvements. As of December 31, 2025, the pre-IFRS 16 gross debt increased by MXN 0.9 billion year-over-year, reaching MXN 34 billion. The company's net debt, not counting the impact of IFRS 16 was MXN 28.3 billion, which is MXN 1.7 billion more than it was at the same time last year. The bank loans are allocated towards selling the minority stake in the European operations as well as addressing short-term debt requirements for working capital and capital expenditure needs. Consolidated net debt reached MXN 45.2 billion, including lease liabilities. At the end of the quarter, 58% of the debt was long term with 77% denominated in Mexican pesos and 22% in euros. We remain focused on maintaining a healthy capital structure supported by prudent financial management. At the end of the quarter, the cash position stood at MXN 5.7 billion. Turning to financial ratios. The total debt to post-IFRS 16 EBITDA ratio closed the quarter at 2.8x and the net debt-to-EBITDA ratio stood at 2.5x. Our full year results were broadly in line with the guidance we provided and subsequently updated during 2025. Same-store sales revenue growth, EBITDA and leverage all finished within expected ranges. We will provide more detail regarding the guidance for 2026 during Alsea Day on March 18 in New York City. This will be a great opportunity to invite everyone to our event and connect with you. With that, we will now open the call for questions. Please, operator. Operator: [Operator Instructions] The first question is from Mr. Thiago Bortoluci from Goldman Sachs. Thiago Bortoluci: I have 2 questions somehow related to free cash flow, right? When I try to see what you delivered in 2025 versus what is implied in your managerial guidance, right, what I see was that your EBITDA grew at the high end of your low single-digit expectations. CapEx came below the $6 billion you were initially expecting, but your pre-IFRS leverage was a touch ahead of the 2.8x that you were guiding, right, which makes me think that somehow your free cash flow generation was a little bit softer than initially expected. If this is true, I just like to understand where the mess is coming from? And what is the plan to attack this going forward? I guess the refinancing is part of the story, but also want to hear on the operating level, right? And then the second part of the question that is related to CapEx. I appreciate the focus, and I'm pretty sure everyone in this call appreciate your focus on portfolio and a more rational growth going forward. It would be great if you could share how you're seeing the incremental ROIC of the new cohort of stores under this new balance between growth and profitability on the capital allocation. Federico Rodríguez Rovira: Well, I will start with the first question regarding the cash burn. Yes, it's correct what you just said, Thiago. The main driver for the cash burn was worse working capital than expected at the beginning of 2025, mainly driven by a reduction in the expected EBITDA. As you know, we had to change the initial guidance we announced at March. But that was offset with a diminished CapEx. In 2026, the story will be completely different. You will have the expectations in the Alsea Day by mid-March. But the management is totally focused on the free cash flow generation with some initiatives you have just mentioned one, the refinancing, you know what is going to be the annual savings regarding this in the line of $25 million and additionally, the operating leverage from same-store sales. As you know, we will have a low to mid-single digit regarding same-store sales guidance for each one of the brands and will be to the consolidated figures and a more rationalized CapEx. This is one of the key drivers, Thiago. Obviously, we knew that we were failing at free cash flow generation. We have heard around the pushback you have launched to the management, to the administration during the last years. So we are totally focused there. So we'll rationalize the CapEx with less openings. Obviously, we had one one-off because of the distribution center of Guadalajara, but we do not have any kind of pressure to open more stores. As I have said a lot of times in the past, 95% of Alsea is in the same-store sales in the comparable stores. So that is the place where we have to put all the efforts because it is more relevant to have 1% increase in the traffic in the different brands because that is the key part where you have all the operating leverage. And in some of the cases, maybe have a reduction of around 30 new stores from the initial guidance, that does not make any kind of hurt. And it is not only for this year, but maybe for the future. We do not want to conquer the world regarding openings. We want to have a more rationalized CapEx for the future. And this is aligned with what you have just asked regarding free cash flow generation. I don't know, Christian, if you want to deep dive regarding the openings and the closure that we had in 2025? Christian Gurría: Yes. As Federico mentioned and we have mentioned in previous calls, our strategy is more about quality than quantity. As Federico mentioned, really our focus right now is on capitalizing on our existing assets. We have almost 5,000 stores in our portfolio between franchisee and company-owned stores. And we have a clear strategy on how we can improve the profitability of those stores. There are 3 levers that we are working on. The first is the remodeling and investing on our existing portfolio, which has the best returns and the customer responds in a very positive way to that and keeps our brands at the right level to deliver the right experience. And the second one is to make sure we have the best operators in the market. So we are -- we have always focused in Alsea in having the best operators, but we are having now a very intentional drive into elevating our operators in the stores. And the third level is, I would say, innovation. Innovation is clearly driving our -- the traffic to our stores. We have a very good example is what we are doing with 'croissant' Pizza, in Domino's Pizza in Mexico. This was originally born in Spain with extraordinary results. We brought it to Mexico and more than double the expectations that we had, and that's why you see a very strong quarter in 2025, particularly with Domino's. So these are the levers that we are moving. Of course, we will continue with our commitment to open the right stores. But it's important to mention the right stores in the right geographies and with the right brands which, as I always say, sometimes we have to close stores to have a healthier portfolio as we have done. Nevertheless, most of the stores that we closed, either in this number, you can see divestments as we did with TGI Friday's and Chili's and P.F. Chang's in Chile. But likewise, most of the stores that we closed were -- had an aging of average 15 years. So the market has changed, the neighborhoods, the trade areas have changed. So it's part of this healthier portfolio optimization. Operator: Our next question is from Mr. Antonio Hernandez from Actinver. Antonio Hernandez: Congrats on your results. Just a quick one regarding South America. I mean you already mentioned Argentina is struggling a little bit there and different countries overall. Just wanted to get a sense on how you're seeing performance so far this year and expectations for the year. Christian Gurría: Well, we are seeing very similar trends to November and December. with a positive trend on same-store sales. And one of the best news is the tailwinds we are having in terms of our dollarized raw materials. We have seen FX is helping us with the dollarized raw materials. And we have also positive news in terms of the price of beef and the price of chicken, which is having a positive trend to what we were seeing in the previous year. And also another positive effect is that we expect a reduction of coffee prices in the second half of 2026. So on wine side, we are seeing a very similar trend to the last months of the year, which we see a shift on what we were seeing in previous months. And on the other hand, different strategies around raw materials on one side, the FX and on the other side, some of the different synergies we have worked on the previous months are paying off now. So in these terms, we should see better margins in the following -- across the year and a steady recovery on same-store sales. Federico Rodríguez Rovira: And I would say, Antonio, if I may add a little bit more color on -- particularly, I would say on the 3 big markets of South America. We've been doing a great job in Colombia. It's been kind of consistent. That's something that continues, I would say, towards the beginning of the year. The same, I would say, it's happening with Argentina and Chile. If I would say, '25 was a tough year for those 2 markets for 2 particular, let's say, reasons and different reasons, both. I think we are seeing also at the end of last year, a bit of a recovery. And that is, I would say, also transitioning towards the beginning of the year. So I would say we're more kind of cautiously optimistic. And I would say, together to what Christian mentioned about kind of some of the tailwinds should be a better year for this market. Operator: Our next question is from Ms. Renata Cabral from Citi. Renata Fonseca Cabral Sturani: My first one is regarding Starbucks in Mexico. So what is the current approach for same-store sales improvement during the year? We are seeing a very good improvement over the operations of in Mexico, it seems more towards Dominos so far and it's understandable considering the economic situation. But it seems there's an opportunity also for improvement in the. So if you can shed some light in the strategies for the year ahead, it would be really helpful. The second one is a follow-up regarding margins and a more long-term perspective. Of course, you have mentioned about the rationalization of the portfolio. And my question is related also if you see other important levers that can improve margins in the regions for instance, supply chain or optimization of, let's say, it would be really helpful to know a little bit more about that. Christian Gurría: Thank you, Renata. Regarding Starbucks in Mexico, we had -- in 2025, we struggle at the beginning of the year as with many other brands. But starting the second half of the year, we were able to read and what was going on with the market and the different trends from -- and what the customer was looking forward. So we adjusted our strategies to -- first of all, we've clearly seen that Starbucks in Mexico is a loved brand. And clearly, innovation is driving a lot of traffic to our stores, both innovation in terms of product, but also innovation in terms of market. of merchandising. During Q4, we launched -- we brought to Mexico the Barista, the Crystal Barista, which was, as you may be aware, extraordinary success in Asia, then in the U.S. And then it came to Mexico and it was really driving a lot of transactions. So we also -- in this case, we also shifted the way we manage our promotional approach to the brand making sure we could elevate the customer -- the experience of the customer. So to give you a more concrete answer, we are focusing on renewing our stores in a very intentional way. Just to give you some data in 2026 in Mexico, we're going to have more store renovations than openings in the case of Starbucks. So we really understand what the customer is looking forward. And the second part is innovation in terms of product and understanding that we are a love brand in Mexico and people are looking forward. We just recently launched in '26 a bear that hugs the cup. And it's really -- they flew out of the shelves. So we have more and more surprises that I cannot share coming particularly for the World Cup. And also in terms of experience, we are introducing a strategy around elevating the experience in the stores by implementing wooden trays and stainless steel cutlery for here [serve ware]. Again, creating the right environment and the right and the best experience for the customer. And in terms of operational impact, as I mentioned before, we are very much focused on our -- on having the best operators and making sure they can impact positively their business during -- as we move forward. But this is more or less regarding the strategy that we are focusing. Federico Rodríguez Rovira: And regarding the second question around margins for the future, is too soon. Obviously, we are seeing positive impact. But I would say that we're expecting a positive trend regarding EBITDA margin expansion for 2026 as long as we are facing, as Christian has just mentioned, and you know it, some macro tailwinds like a stronger peso. Remember that each peso appreciation or devaluation is around 30 basis points in the total EBITDA margin. And additionally, this is supporting the raw materials, the gross margin. We can move the mix in a positive way in the different business units. But remember, we want to attract more traffic to our stores. We are not in the rush to increase on an artificial way the margin. We want to have a strong customer base into the same-store sales. And obviously, we have a lot of levers. You were asking around this. Obviously, the stronger peso is some macro reason, but we have some internal indulgent reasons such as the optimization of the portfolio. We have not finished. You know that we are analyzing some of the units, mainly in Americas to see what we are doing with them. We cannot disclose any more facts around this. I know there are a lot of news into the press, but that's all that we can say. We need to respect and being really disciplined around that we have a bunch of collaborators into the different business units that we are analyzing. And we are doing this in an everyday basis because obviously, while we are selling some of the business units, such as the 2 casual dining brands that we sold in Chile in the third quarter, we are looking for new Tier 1 brands such as Raising Canes and Chipotle. That would be one of the first lever. The second one, we have a bunch of opportunities regarding productivity, I would say, in America, not only in Mexico, but in South America, too, especially because not this year, but in the future, we are facing a journey reduction of 8 towers in 4 years in Mexico. So we need to move forward and be in advance of the rest of the competitors. And I think that with 5,000 stores all around the world with a stronger environment such as the European one, we have a lot of ideas to increase productivity and have expansion margins into the total EBITDA while we offset these impacts. And additionally, we have ideas regarding simplifying the support center in Europe, in Mexico, in Colombia. I think that we need to consolidate a lot of things that we have not executed in the last 10 years, and we'll be doing that during 2026. But as I always say, it is more relevant to have a strong same-store sales because in the bottom, you can have a lot of savings. It's a bunch of money. But in the long term, we are more worried around comparable stores, around new openings instead of only executing saving costs in the bottom. Renata Fonseca Cabral Sturani: And if I may, a follow-up maybe for Christian about potential impacts from the situation we are seeing happening in Jalisco since Sunday. It would be great to have some color. Christian Gurría: Of course. Renata, as a precautionary measure, we had to close some of our stores in the region during Monday -- Sunday and Monday, obviously, prioritizing the safety and security of our partners, our collaborators, our team members and also our customers. But by Tuesday morning, 100% of our stores were reopened. We are back to business as usual. Obviously, we are seeing in particular cities kind of a steady return of consumption, people being confident to get out there and going back to their lives. And delivery was clearly one of the channels highly and positively impacted by this as people were staying home. But we are clearly seeing across the week, people going back to their routines and our business recovering in a steady way. It's also important to mention that we have -- none of our stores were damaged -- none of our stores in the region were damaged or targeted and our supply chain was never disrupted. We have some blockades, but our supply chain was fully operational and never disrupted. Operator: Our next question is from Mr. Ulises Argote from Santander. Ulises Argote Bolio: So the question that I had was kind of a follow-up on those earlier comments that you were making on the quality over quantity approach to the portfolio. You mentioned there in the remarks, and I think this has been kind of an ongoing discussion of focusing on store remodelings across regions as a part of the strategy. So I was wondering maybe if you could provide there some color on how this will be broken down in 2026 across the regions? Maybe if we can get some color on format. But I think more importantly, if you could comment on the sales lift and the improvements you are seeing from the remodel locations. And then I have another one, but I'll do it afterwards. Christian Gurría: Thank you for your question. Let me start by answering we have -- in the case of the foodservice restaurant segment or casual dining or in the case of Starbucks, what we've seen is that you have -- when we remodel the stores, our same-store sales in the case of Starbucks grow from 6% to 13%. This is where we are -- what we've seen and experienced in a very consistent way. And in the case of the casual dining segment, clearly because the customer spends more time in our stores, in our restaurants, the uplift we've seen in same-store sales can go from 10% even we have cases where we are around 25% to 30% increase in same-store sales. This is driven, first of all, not only because of the look and feel of the store improves, but in many cases, as we know how the store and the customer uses the store, these renovations normally are adapted to the reality of how our customers use the store. So -- and in any other cases, we add additional seating or we add a terrace or we do some optimization in terms of the type of the mix of furniture we have in the stores. So the reality is that that's why we are prioritizing these remodelings. Also, it's important that when we choose to remodel a store, there are different reasons, either because the store has the look and feel of the store and the conditions of the store are not up to the expectations, our expectations and the guest expectations or different strategies around market penetration, in some case, the competitive landscape. So there are different reasons why we go and decide which stores to remodel. And to your first part of the question on if we have -- what is the breakdown? In the case -- the information I can share with you is, for example, in casual dining is 3:1, 1 opening, 3 remodelings Starbucks is around 1.4. And in Domino's Pizza, the impact is less important when you remodel a store due to the way the business model works. But when the stores that we have an important dine-in traffic, those are the stores where we put the resources, just to give you some examples. Federico Rodríguez Rovira: Yes. And additionally, to Christian's answer, when we are performing a remodeling in the full service or the Starbucks stores. Usually, we tend to see an incremental traffic of around 5% to 10%. Obviously, this depends in some of the cases of casual dining, you have to increase the terrace, for example, to have more capacity. But each time you are changing the look and feel of the store, you are increasing the traffic, and that is completely linked to the same-store sales increase that we are highlighting as a target, not only for this year, but in the long term. And regarding the... Christian Gurría: If I may also one important component is how our team members feel. Honestly, every time we remodel the store, they are always super proud. They are happy to see the store being in the best shape, and I'm proud to be part of that store. Federico Rodríguez Rovira: And for the long-term CapEx allocation regarding the 3 main pillars that we have into the portfolio, I would say that 60% is completely linked to Starbucks Coffee, 20% to Domino's Pizza and 20% to the full-service restaurants units, Ulises. Ulises Argote Bolio: Perfect. Very clear. So if I understood correctly, these initiatives are a bit more focused on Mexico, but also kind of cross region more selective. Is that a correct assumption to make? Christian Gurría: It's across all our geographies, Ulises. Same is happening and going on in Spain, in South America, Portugal, France, et cetera. Everywhere. Ulises Argote Bolio: Okay. Super clear. And the other question that I had was maybe if we could get some thoughts there or some -- or you share some insights of how you're positioning, let's say, to capitalize from the World Cup? Maybe any type of initiatives that you're taking? Any color that we could get there, that would be very much appreciated. Federico Rodríguez Rovira: For sure. We have no doubt that the 3 brands that will be most benefited by the World Cup incremental traffic are Domino's Pizza, Starbucks and Chili's. As you know, Chili's has been the preferred concept and brand for people to go and watch sports, all types of sports for many, many years. So in the case of Chili's, we are doing very important investments in technology in terms of screens, sound and also a very, very fun campaign. As you know, there will be 3 stadiums in Mexico, Monterrey, Guadalajara and Mexico City. And we are having a campaign Chili's is your -- is the fourth stadium. So we are already out there with the campaign. We have -- we have a strong partnership with some strategic partners as Heineken, and we are doing a lot of things together with them. So we have important expectations of what -- how Chili's is going to be benefited by this. As you know, only you can fit all 85,000 to 100,000 people in the stadium, the rest, well, Chili's for sure is an extraordinary option to watch the games and with a great happening. In the case of Starbucks, obviously, the traffic, the incremental traffic that we're going to have in different airports in hotels, and we have a very good market share of stores and penetration in Mexico and Guadalajara and Monterrey and some adjacent cities and airports that are going to be activated for the World Cup, so for sure. And we have fun initiatives coming also for the customers to drive this traffic. And obviously, Domino's Pizza watching games at home. It's going to be super powerful and Domino's Pizza and the games and the World Cup have always been linked and be together as football. So those for sure are going to be the 3 brands that are most benefit. We have a lot of surprises. We are already planning additional initiatives that we are reviewing as we speak. So for sure, we are going to be able to capitalize this very special event. Christian Gurría: But remember, Ulises, this is a one-off. Operator: Our next question is from Mr. Froy Mendez from JPMorgan. Fernando Froylan Mendez Solther: Can you hear me well? Christian Gurría: Yes, we can. Fernando Froylan Mendez Solther: Federico, if we were to assume that the FX didn't move from current levels, would your comments regarding the better margins into 2026 would still hold? And in that sense, what is your expectation? I know you'll have your guidance in the Alsea Day, but how much of the margin expansion that you're seeing depends on having better pricing or, let's say, less promotional activity in the key brands? And I will have a second question, if I may. Federico Rodríguez Rovira: Sorry for being so repetitive. But obviously, this is a tailwind. Each peso should be around 30 basis points. Remember, that maybe that implies that around 60 basis points during the first quarter year-over-year. In the remaining months, the weight and the comparison is not that much. But as I said before, obviously, we have closed January, I have the figures. They are positive. We are expanding margins. But I want to be cautious because, obviously, the events from Guadalajara, even while we only shut down 300 stores during 1 day, obviously, I'm not having the total performance regarding traffic in those stores. So as all the years, we have some different events, positive negatives, and I want to be really cautious at this point, with January completed, we have expanded the margin. But I don't know what is happening in the rest of the year. Obviously, we have positive events such as the World Cup. We'll tell you the expansion of margins that we're thinking. But again, we want to increase the traffic in each one of the stores, each one of the brands. That is the main objective. I prefer to sacrifice some of the margin if I'm increasing -- I'm going to make stories, but 3 points in same-store sales in Chili's, Domino's Pizza, that is more money, and that is a more strong customer base for the future. Sorry for the ambiguous answer, Froy, but I don't want to take in advance with only 1 month closed at this point. Fernando Froylan Mendez Solther: Excellent. And my second question, maybe more for Christian. We hear about this CapEx rationalization, the effort to diverse some of the probably nonperforming brands. But at the same time, we see new brands coming into the portfolio, Cane's, Chipotle with obviously not needle-moving CapEx, but I'm sure it will take time away from management. I'm not sure also how much synergies there are in their supply chain and their sourcing of raw materials with the rest of the brands. So how should we think about when we see a lot of the long-term CapEx that you mentioned focused on Starbucks, Domino's and full service with also these like small opportunities that you still are trying to tap? And isn't that a little bit distracted at some point for management? Christian Gurría: Thank you, Froy. Several answers to different views, different points. First of all, fortunately, as you know, in Alsea, 36 years around, we are able to really develop our team members and to have a lot of internal talent that allows us to really being able to bring these brands and do not distract the rest of the organization. As you know, we -- the way we are organized now is via -- before we have these country managers, which were managing the different brands that we had in each region. And then in the past months, we have moved into a brand manager that manages -- we have a brand manager for Domino's Pizza or a Managing Director, a Managing Director for Starbucks Alsea for Domino's Pizza Alsea for BK Alsea, a Managing Director for Food Service in Mexico and a Managing Director for Food Service in Europe. That allows us to really focus first of all, make sure all best practices, learnings, one single direction and strategy to keep the brand directors or managing directors focusing on their own brands. And likewise, we have created a new brand division, let's call it like that, where we have a team solely and fully and only dedicated to these 2 new brands. So there is really no distraction of the management. We were able to have a very strong Managing Director, which was part of our C-suite team for many, many years, Pablo de Brito, which now he is running -- he was the Commercial Director for Alsea and now he's the Head of with a very clear and independent structure for both brands. In terms of synergies, obviously, there are synergies. We clearly have synergies. We have been working in the past 6 months to make sure we have -- we are ready to -- around all the product sourcing, protein produce. There are things that are proprietary to the brands that we will import as we do with the rest of our brands coming from the U.S. But the reality is that there are a lot of synergies. It's -- our Alsea muscle allows us to do this kind of plug-and-play approach when we bring these new brands. So clearly, there are important synergies in these terms. So in the case of supply chain and management, really, there is no -- actually, it adds on to what we already have. Then another point you made is about the CapEx. The reality is that the way we -- the obligations we have with both brands intensive non-CapEx-intensive approach. We are going to open 2 new -- 2 Raising Cane's stores this year at the end of the fourth quarter and 3 to 4 Chipotle stores also during 2020 -- in the second half of 2026. So -- and once we see how we do, which we are very, very optimistic and positive of how these brands are going to add value and being accretive to the Alsea portfolio, we will sit down and define -- we know more or less what's the white space or the market holding capacity for both brands. We're going to share a little bit more about that during our Alsea Day. But the reality is that we are very optimistic that by first divesting and at the same time, bringing the right brands and the brands of the future in the portfolio, we have a very strong portfolio of brands in the future. Operator: Our next question is from Mr. Bob Ford from Bank of America. Robert Ford: I'm inspired by your Raising Cane's cups, so I'll bite. Can you guys discuss the magnitude of the opportunity you see for the brand in Mexico? And how do you think about replicating the authenticity of the celebrity and influencer engagement that Cane's enjoys in the U.S.? And when you think about the unit economics, how would you compare that with your best practice or properties in Mexico? Christian Gurría: As you can see, we are excited to bringing Raising Cane's into the family. In Mexico, we see a huge opportunity in Mexico for Raising Cane's. And let me tell you why. First of all, chicken is the #1 protein consumed and the fastest-growing protein in Mexico. This is clearly a fact. The second one is for decades, there has been only one player in the chicken market in Mexico in the organized segment for decades. So the white space and what we are seeing is huge. It's super important. The other -- the roasted chicken industry is hold by the moms and pops. And then you have this organized chain that has been there for decades. So the reality is that we see a lot of white space. And also Raising Cane's is not only an amazing and Tier 1 brand, it also aligns to our full Alsea strategy. So on that -- and we will give you more light in terms of the market holding capacity that we see and our development plan during the Alsea Day in March 18. The second question you answered, which I love this question because I truly believe that the way Raising Cane's communicates and resonates between the community for us, clearly, community is going to be a key success factor for the success of the brand and bringing this you know exactly what I'm talking about when I mentioned local teams, but at the same time, important celebrities, but at the same time, the college basketball team or the community schools team. We are already working with Raising Cane's to bring this same effect to Mexico. We are planning to have even the same agency. So the reality is that we are working very close together holding hands. Of course, we are going to take advantage of these assets in terms of influencers, celebrities that they have, but also the local influencers, the local community, the local celebrities are going to play a very important role for us to be successful. So I believe I have answered your 2 questions. Robert Ford: And the last one was about unit economics. Federico Rodríguez Rovira: Regarding the economics, I can take that question, Bob. Obviously, we cannot disclose the terms of the agreement we have signed with Raising Cane's. But the EBITDA margins at a 4-wall level are pretty similar with Starbucks or Domino's Pizza and the same for the royalty fee and opening fee that we will be paying. It is relevant to consider that even while we are really excited about the opening of Raising Cane's and Chipotle for 2026, we will be opening, as we have commented in the past, only 5 stores. We do not want to have a terrific contribution. We need to open the first store, and let's see what is happening if we are achieving the EBITDA margins, the profitability that we model in the months before. Robert Ford: Great. And then just one other question, and that is France. I mean it's -- what are the next steps for you in France? And do you see any opportunities to either reduce some of the expenses or drive revenue? Christian Gurría: Of course. Well, France, we have not seen the expected recovery that we had. There has been some recovery. We are at 85% of our sales, pre-boycott sales in October 2023. There was additional pressure, a slight pressure in the summer. So our objective remains to fully restore the transactions that we had pre-boycott. We have a very strong strategy around how to turn this around in terms of resources, in terms of store renovations, additional things that are part of this plan that we are working on. To your point around efficiencies, yes, we have done already the restructuring that we needed to do in terms of management, in terms of synergies with our operations in Europe. So we will see, for sure, better margins and better EBITDA as we move through the year. But our priority and our focus is to recover this 15% of traffic that we have not recovered yet. So we have a clear strong focus on this, and it's one of our priorities for 2026. Operator: Our next question is from Mr. Pedro Perrone from UPS Unknown Analyst: We have a quick question from our side based on same-store sales trends in the first quarter, especially for Mexico and for Europe. If you could give us some color about these trends and especially connecting to top line, that would be very helpful. Federico Rodríguez Rovira: I would say, to be clear, Mexico, Europe and South America, the trend is pretty similar to the one we have in the months of December and November. So no news, good news. As I said before, it is in the target that we have set for 2026 from low to mid-single digit depending on the maturity of the brand and the region. So that's the answer, Pedro. Operator: Our next question is from Mr. Ben Theurer from Barclays. Rahi Parikh: This is Rahi on for Ben. Just the first one, I know Bob mentioned a bit on -- with the EU. But is there any other challenges we should be aware of for the EU that would impede recovery? And then another one I thought would be interesting is to look at GLP-1. Have you seen any impact on consumption from GLP-1 in Europe? And when do you think you would see some impact in Mexico, if any? And have you have any formulation changes in the EU in regards to GLP-1? That's it for us. Christian Gurría: Let me get your second question first, we have not -- really, we have not seen any particular effect on GLP-1. Nevertheless, as you have seen in previous months, protein is becoming a very important element in the market. So in the case of Starbucks, we are fully in the game with different protein being an important priority in terms of beverage and our food program is moving towards that. And so what I would answer to that, we are observing. We are observing it. We are acting around that. We are trying to be ahead of the curve. But we don't see -- it's too early. I would say it's too early. But so far, we have not seen anything relevant. Obviously, the U.S. is the one kind of driving this trend. And we are watching, we are talking with our franchisors, what are they seeing -- but the reality is that we were already ahead of the curve with protein drinks in Starbucks and our food program is moving in a way towards that, not fully, but it's part of the strategy. So more or less that. And the rest of the brands, really not really. We are watching, but -- and that's it. We are observing what's going on. Rahi Parikh: I just want to follow up for that answer. It was for the EU as well, right? So no impact as well. Christian Gurría: Exactly. Neither in the European Union or in Mexico or Latin America, we are seeing these types of effects. What we -- I can tell you to add a little bit of color to that is that it's more now protein, it's more like trendy and innovation more than linked to GLP-1 or any of its effects, I would say, positive or negative. Federico Rodríguez Rovira: Yes. I'm complementing the answer. France is less than 2% of the total revenues contribution for Alsea. In Europe, we are present in Iberia, Spain and Portugal. I would say that is the most relevant contribution for Europe. The trend is positive. We are expanding margin, increasing the same-store sales coming from traffic in the main brands such as Domino's, Starbucks and the full-service formats that we hold in there. And even while in France, we're still at around 85% of the traffic that we had in 2023 is less relevant, but we still see the opportunity in there to open more stores. We will be struggling during 2026 to see if in 2027, we can return to the path of growth. Operator: That was the last question. I will now hand over to Mr. Christian Gurría for final comments. Christian Gurría: First of all, thank you all very much for your questions and for your interest in Alsea. And really thank you very much. 2025 reinforced the resilience of our business and the strength of our portfolio. We entered 2026 with a clear focus, a stronger financial position and a disciplined approach to profitable growth. We look forward to continue the dialogue with you in the coming months. But most of all, we're really looking forward to see you all in New York. We are preparing a very -- the team is doing an amazing job to prepare a very good event there, and we are really looking forward to see you there. And thank you again. Operator: Alsea would like to thank you for participating in today's video conference. You may now disconnect.
Operator: Now I will hand the conference over to the speakers, CEO, Martin Welschof; and CFO, Stefan Ericsson. Please go ahead. Martin Welschof: Thank you, and welcome, everybody, to our year-end report. Today is February 26, 2026. And as usual, I will start with the summary. So we had a couple of key events in the fourth quarter. First of all, the 2 ASH data sets. So with BI-1808, our lead candidate targeting TNF receptor 2, we saw very strong data in T-cell lymphoma, and we presented that at ASH 2025, and I'll come back to the data a little bit more in detail later. And then we had another ASH presentation about BI-1206, which is our lead targeting FcgammaRIIb in combination with rituximab and Calquence in non-Hodgkin's lymphoma. And that was also presented at ASH 2025 and also a very, very strong data set. I should mention that BI-1808 that was monotherapy, single-agent therapy. Then, we also started our Phase IIa trial evaluating BI-1206 in combination with pembrolizumab in treatment-naive advanced or metastatic non-small cell lung cancer and uveal melanoma. So this is really the first-line setting. And this is, as I will explain later, based on data that we have seen in end-of-the-line patients, and that data actually convinced Merck to go together with us into first line under a supply and collaboration agreement. And then last but not least, we also got orphan drug designation from EMA for BI-1808, another very important milestone, for the treatment of cutaneous T-cell lymphoma, CTCL. And then we had another -- a couple of events after the end of the period. Number one, obviously, a very promising data set in our ongoing Phase IIa study for BI-1808 with KEYTRUDA for the treatment of recurrent ovarian cancer. And we published that ahead of JPMorgan, and I will also discuss that data set a little bit more in detail. And then we had here in the report and maybe not everybody is aware about this, but I will highlight it, updated clinical data sets for 1808 and pembro in combination in ovarian cancer as well as the BI-1206 study for the treatment of non-Hodgkin lymphoma. So we have additional patients there, and I will mention it again when we discuss specifically those 2 data sets. And then also very happy that we could nominate 2 new Board members. Of course, they still need to be confirmed and elected on the Annual General Meeting. Number one, Kate Hermans, a very experienced and seasoned business person in the pharma and biotech industry. And then Scott Zinober, who was for roughly 20 years, the portfolio manager at Viking. So both 2 very, very strong U.S. profiles, and we're very happy to welcome them to our Board. Then, before I go into a little bit more in detail, just to have a quick look at our clinical pipeline. As usual, I always emphasize here, so we have multiple value drivers. So as you know, in August, we focused on the 2 more mature programs, 1808 and 1206. And 1808 is currently running with -- in combination with pembrolizumab in recurrent ovarian cancer. And there, we have this very nice data set that is actually continuing to generate good data. And then we have planned, so this has not been started yet, a combination with 1808, pembrolizumab and paclitaxel based on the very interesting data that Merck published at ESMO. And this is actually quite exciting because it could lead to a very interesting development in recurrent ovarian cancer. Then, obviously, as you already know, CTCL single agent, I'll go briefly over the data that we presented at ASH. And then we are currently running this also in combination with pembrolizumab, although we already have very strong single-agent data in CTCL of 1808. We still want to see how it looks in combination with pembro. And then 1206, the triplet targeting non-Hodgkin lymphoma, specifically follicular lymphoma, mantle cell lymphoma and marginal zone lymphoma. And there, we also have an update. So the data set is maturing further and basically confirming the trend as we see also the 1808 data set in ovarian cancer in combination with pembrolizumab. So that is really very, very encouraging. And then as already mentioned on the previous slide, so we kicked off first-line combination -- in combination with pembrolizumab 1206 in non-small cell lung cancer and uveal melanoma. And there, we will see the first readout already during the second half of this year. But I will come back to the milestones this year and also an outlook into 2027 later at the end of the presentation. Here, I just want to mention that we see basically complete and partial responses in all clinical programs, which is really, really confirming the 2 single agent having activity in liquid as well as in solid cancer, which I think is very -- giving a lot of comfort, and that's what you want to see at this stage. Then going a little bit more into detail. So first, our anti-TNF receptor 2 program, 1808 in solid tumors and then the same in T-cell lymphoma. So we have, as already mentioned, very promising efficacy in ovarian cancer, and that is kind of building on the single-agent activity that we have seen in ovarian cancer. But obviously, if you want to treat something like recurring ovarian cancer, you have to go into combination. And since we knew preclinically already that we have strong single-agent activity, but also very good synergy with pembrolizumab, it was a no-brainer, and that's why we did this. And in addition to the data that we have shown ahead of JPMorgan, we have one additional partial response. So one stable disease has turned now into a partial response and one additional stable disease that corresponds to 24% ORR and disease control rate of 57%. So basically, the data set that we have shown ahead of JPMorgan is kind of confirmed and is maturing further into the right direction. So again, 24% overall response, 57% disease control and available -- 21 available ovarian cancer patients, which I think is very encouraging and showing the right trend. And also when we look on the next slide, at the spider plot, you can also see how immunotherapy is working, and we have a firm belief that 1808 could be potentially the next KEYTRUDA. And you see here 2 dotted lines. So a pink one, which is basically if you're above this is progressive disease. If you're below this is stable disease. And then you have a yellow line, PR, which is basically if you then go beyond this or below this, then you have a partial response. And you can see how immunotherapy is working. So you have patients at stable disease and then there for a while, the immune system works and then it gets pushed down into partial response. And this is actually very, very interesting because also when you look at KEYTRUDA alone, it's about 80% ORR in combination with our drug, it's 24%. I think this is actually a very interesting and strong data set and of course, further maturing. Then switching to CTCL and PTCL, our T-cell lymphoma data that we presented at ASH 2025. And there, we have shown 46% ORR, 92% disease control in 13 evaluable CTCL patients, a very strong data set. And I should mention here also at this place, both data sets, so the one in ovarian cancer as well as the one in T-cell lymphoma has also a very excellent safety profile. So it's very, very well tolerated, which is important, especially when you think about the combination in ovarian cancer with pembrolizumab because if you -- you are only able to do this in case you have a good safety profile, which we have. But going back to T-cell lymphoma here on this slide. So what is important besides the good safety profile is that we see immune activation early on with depletion of regulatory T cells and the influx of CD8 positive T cells into the skin. So we have a clear skin component. And very briefly on the spider plots, here, you can also see nice duration already. In this case, the black line is basically below that is stable disease. And then you see the dotted line is below is partial response. And you can see that we already have a complete response now in Sézary Syndrome, which is really continuing for more than a year. So also, you can see that duration is coming into play here, as you could see also for the more early ovarian cancer data set. So it really looks very promising. Then switching to our other program, our anti-FcgammaRIIB program, 1206 in non-Hodgkin's lymphoma as well as in solid tumors, starting with the non-Hodgkin's lymphoma. So this is the combination with rituximab and acalabrutinib. So it's a triplet. And this is a little bit different slide that we have shown so far. So we have this splitting up now into follicular lymphoma, marginal zone lymphoma and mantle cell lymphoma. We see good responses in both. Dark green is complete, light green is partial. And we have actually compared to the data set that we have shown at the end of last year, 4 additional partial responses and 1 additional stable disease, keeping basically the very good 80% ORR and the disease control rate of 100%, which is, I think, excellent. And you can see activity in all 3 subsets. We are focusing more on follicular lymphoma because this is also more interesting for our supply and collaboration partner, AstraZeneca, because they don't have follicular lymphoma on the label of acalabrutinib. Then, again, spider plot here as well. Everything that is below the dotted line is good because that means it's either a partial response or complete response. And then you see also quite a number of stable diseases. And you see here also that the data matures, that means you see first a stable disease, then it goes into partial response and then eventually into complete response. And we also have here very, very good duration. And we have some idea about the duration from our doublet study that we did before that was just 1206 in combination with rituximab. And of course, the patient population that we're focusing on is our patients that do not respond anymore to any CD20-based therapy. And there, we have now a couple of patients that actually are in complete response for several years after the end of the study. So then on the solid cancer side for 1206, this is a data set that is from the dose escalation where we were targeting patients, end-of-the-line patients that do not respond anymore to either anti-PD-1 or anti-PD-L1, where we also had some very interesting signals. So we had very interesting complete and partial responses. And based on that, we went back to Merck, our partner here for the supply and collaboration on combination with KEYTRUDA. And we agreed that we should go into a Phase IIa first-line non-small cell lung cancer and uveal melanoma with 1206 and pembrolizumab, and this is now ongoing. And as I said, so the first readout will be during the second half of this year, which is pretty soon anyway. Then, I will hand over to Stefan. Stefan Ericsson: Thank you, Martin. I will present the financial overview for Q4 and the 12-month period, January to December. All amounts are in SEK million unless otherwise mentioned. Net sales were SEK 3 million in Q4 2025 compared to SEK 21.4 million in Q4 2024. That's SEK 18 million lower in Q4 2025. That decrease is related to the production of antibodies for customers was lower in 2025. And net sales for January to December 2025 were SEK 226 million. For the same period in 2024, net sales were SEK 45 million. That's an increase of SEK 182 million. The increase is mainly related to the SEK 20 million payment we received when XOMA Royalty acquired future royalty and milestone interest for mezagitamab. And before that, we got a SEK 1 million milestone in that collaboration. Production of antibodies for customers was SEK 19 million lower in 2025. Operating costs decreased from SEK 147 million in Q4 2024 to SEK 132 million in Q4 2025. That's a decrease of SEK 15 million. We had quite higher cost in BI-1808 and quite lower cost in BI-1607 and lower cost in BI-1206 and BI-1910. And we had somewhat higher personnel costs in Q4 2025. From January to December, the increase of operating costs was SEK 62 million from SEK 516 million in 2024 to SEK 578 million in 2025. We had quite higher cost in BI-1808 and BI-1206 and quite lower cost in BI-1607, and lower cost for production of antibodies for customers. And personnel costs in 2025 were quite higher compared to 2024. And the result for Q4 2025 was minus SEK 125.8 million and result for January to December 2025 was SEK 332.9 million. Liquid funds and current investments end of December 2025 amounted to a total of SEK 593 million. And finally, based on ongoing studies, BioInvent is assessed to be financed for the coming 12-month period. Over to you, Martin. Martin Welschof: Thank you, Stefan. So at the end of the presentation, I want to go over the key catalysts for the remaining part of this year as well as give you an outlook for 2027. And as you will see, this is actually a quite dense picture here. So we have a lot of interesting news this and next year. So starting with 1808 in T-cell lymphoma. So already by mid this year, we'll have first Phase IIa data in combination with pembro, but also additional monotherapy data since we do dose optimization at the moment. Then, for 1808 in solid tumors, second half of this year, we should have further Phase IIa data in combination with pembro. And as you could see already here, so the data is maturing to the right direction. So that should be also a very interesting milestone to looking forward to. Then switching to 1206, our FcgammaRIIB platform, we'll have midyear already the additional Phase IIa data with -- in combination with rituximab and acalabrutinib. And then last but not least, 1206 in solid tumors, first-line non-small cell lung cancer and uveal melanoma, we'll have the first readout of that data during the second half of this year. Then looking into 2027, again, starting from the top, first, our TNF receptor 2 platform, 1808 in T-cell lymphoma. During the first half, we'll complete the Phase IIa dose optimization. That is the monotherapy. And then during the second half, we could potentially start the pivotal study. Then, 1808 in solid tumors. During the second half of next year, we would have potentially the first Phase IIa data, the triplet in combination with pembro and paclitaxel. And this is actually quite interesting because in case we really see a nice uplift there, and maybe we can later discuss it during the Q&A in more detail, this could also then lead immediately, of course, data-driven to a pivotal study. So a very, very interesting program to follow. Then, FcgammaRIIB, 1206 in non-Hodgkin lymphoma. So during the first half of 2027, we potentially could start the pivotal triplet study and then in the solid cancer, first-line non-small cell lung cancer and uveal melanoma. During the first half of 2027, we complete the Phase IIa data and could potentially start during the second half, Phase IIb BI-1206 plus pembro in non-small cell lung cancer. So as I mentioned, a very dense news flow, very interesting milestones and that should be something really looking forward to. And I think I will end here my presentation and happy to take questions. Thank you. Operator: [Operator Instructions] The next question comes from Richard Ramanius from Redeye. Richard Ramanius: Why not start off on the last slide? And when do you think it would make sense to take in a partner to conduct any of these studies? I guess, it would be some of the studies in 2027. Martin Welschof: Yes. So basically, what I can say to that, we are in interesting discussions, as you know. So we have a very active approach in business development partnering anyway, and we are in discussions with some company for some time. Obviously, we have AstraZeneca and Merck already at the table in a way through those supply and collaboration agreements, and they follow the programs very closely. And I think we might already see some activity around partnering -- potential partnering, deal making, during the second half of this year. And of course, you can never promise. It's always then depend on the data, on what the market environment is, et cetera, et cetera. But we will be keen to partner one or the other with hopefully, large pharma companies such as Merck and AstraZeneca. Richard Ramanius: Right. Could you just clarify more in detail exactly what more do you need to accomplish with BI-1206 in NHL to make the triplet ready for a pivotal trial? Martin Welschof: Yes. So basically, we will have, as I already mentioned, the 30 patients in the current ongoing study. That's enough. And then we can discuss with the regulators and start preparing for potential pivotal study. That's why I think that will take the rest of the year once we have the data by mid this year and then could start that potentially next year. But also to mention it here, our main focus currently from a strategic perspective is more on the solid cancer side because that is a much stronger value driver. But we are committed to get the TCL as well as the NHL that you are talking about ready for potential pivotal study. Richard Ramanius: Last question. What funding options do you have for 2027? Martin Welschof: Yes. So obviously, we will look at everything all the time. Number one, we're looking at partnering. And number two, of course, there's always a financing option because I think if you have good data as we have, you have always both possibilities, but we have a strong focus on partnering. Operator: The next question comes from Sebastiaan van der Schoot from Kempen. Chiara Montironi: I'm Chiara Montironi on behalf of Sebastiaan. So a couple from me, if I may, again, regarding potential partnering discussion. Could you go over whether BI-1206 or BI-1808 is one of the more logical options to out-license? And the second question will be around uveal melanoma and first-line non-small cell lung cancer data set for BI-1206. Can you provide some insight into what magnitude of efficacy would give you enough comfort to continue forward with the program? Martin Welschof: Yes. Thank you very much for those questions and very nice to meet you. So regarding partnering, we are currently discussing both 1808 and 1206. So we have discussions around both programs, and that's also what you should do as a biotech company because you can't be picky. You have to see what opportunity turns up and then you go from there. My dream scenario would be, though, that we keep 1808 a little bit longer and partner 1206 first. But as I said, so we have discussions around both at the moment. Then regarding the data set of 1206 in first-line non-small cell lung cancer, I think what we would like to see as a target is 60% ORR, and I think then we will be in good shape. Operator: The next question comes from Arvid Necander from DNB Carnegie. Arvid Necander: I came a bit late here, so sorry if the questions have already been answered. But the first one on 1206. So really good to see the breakdown of responses by subtype in NHL. So on the back of this analysis, I just wanted to ask if follicular lymphoma is the indication that makes most sense to pursue in a registration-directed trial? And then I guess, secondly, on the non-small cell lung cancer data targeted for second half of the year which will provide an important new signal, how should we think about expectations here? What would mark a strong outcome in your view? Martin Welschof: Thank you for your questions. Maybe I'll start with the last one first because there was a little bit of an overlap regarding that already. So what we hope to see, our expectation is that we see an ORR, so that's about BI-1206 in combination with pembrolizumab in first-line non-small cell lung cancer of 60%. I think if you see that, that will be a strong signal. And in that sense, also, it's a very good clinical trial because we really put it to the test. And if you see this kind of response, I think we are very happy. And I think that would be also something that is super interesting for Merck or should be super interesting for Merck. Then regarding 1206 in non-Hodgkin lymphoma, yes, I think the activity is in all 3, and we had a stronger focus on follicular lymphoma. And I think I mentioned it during the presentation, maybe you didn't hear this. This is a little bit driven by our supply and collaboration partner, AstraZeneca, because acalabrutinib doesn't have follicular lymphoma on the label. And since we think that might be a potential partnering possibility, we were focusing on follicular lymphoma a little bit more than on the other 2. And what we were trying to do is have a focus on follicular lymphoma at the same time point also showing that it works for marginal zone as well as mantle cell lymphoma, which I think we clearly did. And of course, also for the audience here, when you look at non-Hodgkin lymphoma, the largest -- by far largest population is follicular lymphoma, I think also from a commercial perspective, it makes a lot of sense. Operator: The next question comes from Dan Akschuti from Pareto Securities. Dan Akschuti: Congrats on the progress now with potentially 2 pivotal programs next year. And I think there's been a lot of discussion about partnering. And yes, both drugs work in multiple settings. So I'm thinking a bit like how are you going into these negotiations, if you can share a bit more because follicular lymphoma, for instance, as with any approved immuno-oncology drug, they never stay approved in only one indication. So it's kind of a mechanism proof of concept that you have. Are you marketing this specifically? Or do you see interest from that from the pharma side to basically not just do a deal on the indication, but more broader on the drug or on the mechanism? And how you approach that for both drugs, 1808 and 206? And if you have gotten this kind of interest from pharma or has it been very indication specific? Martin Welschof: Yes. Thank you, Dan. So I think, in general, you can say -- and that's -- you see it also here on this slide. So 1808 is our TNF receptor 2 platform and 1206 is our FcgammaRIIB platform because both mechanism, as you say, are broad. And of course, what you do in early clinical development, you try to find a signal that you can follow in order to generate some more comprehensive data sets, and that's what we're doing. And especially as a small company, you have to be very prudent because you can't go too broad at the beginning. But just to go through maybe step by step. So when you look at 1808 first, maybe, then you can clearly see that we already have established a very broad efficacy range. So remember, probably, the single-agent activity in GIST in ovarian cancer, but also in lung cancer. And now the strong data set in combination with pembrolizumab. At the same time point, we also see strong single-agent activity in T-cell lymphoma. So they already can go and see the broad potential application range that we have for that compound. And talking about 1808 first, maybe. So yes, the discussions that we have, of course, initially indication-driven because wherever you have the first more comprehensive data set, that's what drives it. And of course, that we had with TCL. But now since we have the ovarian cancer data set since early this year, we also have interesting discussions around ovarian cancer, obviously. So absolutely broad. And the same is true for 1206. So we have this in non-Hodgkin lymphoma. And of course, the study that we run is very targeted towards AstraZeneca in a way. So we'll see how that works out, and we will know that probably already quite soon. But then you have the solid tumor side, where we work in combination with pembrolizumab, and especially 1206 is quite interesting because there we have a supply and collaboration agreement with AstraZeneca regarding acalabrutinib for non-Hodgkin lymphoma and of course, then the same -- not the same, but also supply and collaboration agreement with Merck for the solid cancer side. And on the solid cancer side, for both compounds, I also would say, starting again with 1808, if we -- if you see -- if we continue to see what we see, then it will not be only interesting for ovarian cancer. It will be also interesting for other cancers like maybe triple-negative breast cancer, for example, and maybe other solid cancers. So I think very broad application potential, but we go one step at a time. So current focus clearly on ovarian cancer, which is already a quite interesting market. And the same is true for 1206 in solid tumors if it should work as we hope. So around 60% ORR in first-line non-small cell lung cancer. Then it's -- there's no reason why it should not work with other solid cancer indications in combination with pembrolizumab first line. So both have a platform. It's a platform potential and platform application. And that's how also our discussions are driven. So obviously, they start with the first data sets. And once you have then the other data sets, that continues to grow. And of course, what we are trying to do is to see that we also reach that stage. So with 1808, we have that now with the ovarian cancer data, and there will be further ovarian cancer data already during the second half of this year. And then for 1206 with the second half of this year, the first readout for the combination with pembro in first-line non-small cell lung cancer, also will initiate this type of discussions. Dan Akschuti: Great. Just a follow-up, if I may, and maybe you cannot answer it. But you can share if you see a willingness from pharma to value the assets broadly. And like is there interest in broader patterns beyond composition of matter or like broader preclinical data that you have? Do you see signs that are really indicating that they're interested really in the platform or maybe you cannot share that with us? But if... Martin Welschof: Well, I can talk about it in, of course, general ways, and I can refer a little bit to the discussions that we had during JPMorgan. We had one discussion, which was really interesting where exactly what you were describing was the case. They obviously were super intrigued by the T-cell lymphoma data, but then also say you have this very beautiful ovarian cancer data. Plus also, I think interesting for the audience, we just uploaded also a publication that is really describing in detail how it works. And I think a lot of partners or potential partners really value the depth that we have regarding the science. So we can really and have described in this publication how 1808 works in detail. And I think the clinical data in hand with the preclinical data and science data and mechanistic data basically is important to drive good and fruitful partnering discussions, and we have that. Operator: The next question comes from Oscar Haffen Lamm from Stifel. Oscar Haffen Lamm: My first one will be on 1808 in CTCL. I mean with data expected in combo with pembro in mid-2026 and potential start of a pivotal trial by next year, I was just wondering what will basically decide whether to use the monotherapy or the combo with pembro in the pivotal trial. I mean, will it be purely based on efficacy? Will it be safety as well? Just curious to hear your thoughts on that. Martin Welschof: Yes. So basically, just as a background also to the audience. So currently -- and coming back to the milestone that you were just referring to. So it will not be only the pembro data. There will be also additional pembro combination data, but also additional mono data. So because what we're currently doing is we run -- it's in combination with pembro, but we also do already dose optimization in mono or with the single agent basically. And a driver, of course, will be that you have to see a significant better ORR. And of course, at the end, also, it's a little bit early for that, but duration, of course, is also important. And then, of course, also safety, yes. So we did some analysis with some external help. And the expectation would really, if you combine it with pembro that you see an uptick in efficacy. And of course, you don't want to have safety problems because at the moment, safety is really, really good. And I think that is also a very important aspect of our monotherapy data that we have so far because since we have such a good safety, we could also go into earlier lines of the disease since we have no toxicity. And I think that is also quite important. And of course, would make also the patient population that you might be possible to treat would widen this up basically. So we really want to see an uptick. And the reason why we do it is basically just to see whether we can have a better efficacy. I think the efficacy that we already have as a monotherapy is good, is exceptional, especially in combination with the safety that we see. Oscar Haffen Lamm: Just a follow-up on that. How many patients do you target to have in CTCL before the end of Phase II meeting with the FDA? Martin Welschof: Yes. So it will be the full data set. I don't have that at the moment in front of me. I think what we have shown so far was 15-plus patients. So it will be kind of roughly the double amount. And I think for the -- now I'm talking about the monotherapy data. And then for the pembro data, it's something around 15 patients, right, in combination with pembro. Oscar Haffen Lamm: Okay. And just one last question for me, still on 1808, but this time in ovarian cancer. Is the decision to add paclitaxel to the combo of 1808 and KEYTRUDA done on the back of some conversations with Merck? I mean maybe they've hinted to what they want to see in the data. And then maybe as a follow-up on that, how many patients will you recruit for that arm? Martin Welschof: Yes. So basically, that was triggered -- that thought was triggered much, much earlier, and it was already part of our protocol when we started the doublet. We first just wanted to see how it works in combination with pembro. And this we got to know now. So it's 18% -- 8% ORR compared to 24% in the combination. And since we were following the field quite closely, we had already in the protocol that we could go with a triplet, and we also have done already some preclinical work. And we know 1808 works also very well with paclitaxel. So once we saw the ESMO data published by Merck and then the only thing that was missing -- we were actually already quite convinced by that, but the only thing that we're missing then for us to really plan this more seriously was then the approval of pembro and paclitaxel. And we expect a super cool safety profile, that is no other safety issues compared to KEYTRUDA combined with paclitaxel, plus, of course, a very nice uptick in overall response rate. And here again, I don't have the patient numbers in front of me, but I think it was around 30 patients that we want to do in the triplet, maybe a little bit more, at least the amount of patients that will be needed in order to have as a next step potential pivotal study. Operator: [Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Martin Welschof: Yes. Thanks, everybody, for participating in our call, plus also the very good questions. I think that discussion around those questions helped a lot to really demonstrate and show that we are at a very important and interesting time of the company. The slide of the key expected clinical milestones is still up on this presentation. So I think with that, you can clearly see a very dense news flow, as I already mentioned, and each of those programs can drive very interesting value development for the company. So stay tuned. And already by mid this year, there should be more, and then we will see where we land. But I'm very optimistic for the company. And I think for me, from my perspective, the most important thing is the data. And the data is good, and we knew that already, but also it's maturing in the right direction. So I think that gives me a lot of hope and confidence. Thank you very much.
Operator: Ladies and gentlemen, good morning, and welcome to the TriMas Corporation Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, TriMas Corporation's VP, Investor Relations, Sherry Lauderback. Please go ahead. Sherry Lauderback: Thank you, and welcome to TriMas Corporation's Fourth Quarter and Full Year 2025 Earnings Call. Joining me today are Thomas Snyder, TriMas' President and CEO; and Paul Swart, our Chief Financial Officer. We'll begin with prepared remarks covering our fourth quarter and full year results, followed by our expectations for 2026 and the future of TriMas, after which we will open the call for questions from our analysts. To help you follow along with today's discussion, both the press release and our presentation are available on our website at trimas.com under the Investors section. A replay of this call will also be available later today by dialing (877) 660-6853 and using the meeting ID of 1375-8505. Before we begin, I'd like to remind everyone that today's comments may include forward-looking statements, which are inherently subject to various risks and uncertainties. Please refer to our most recent Form 10-K and 10-Q filings for a discussion of the factors that could cause our results to differ from those anticipated in any forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, except as required by law. We also encourage you to visit our website where more information is available. In addition, please refer to the appendix of our press release or presentation for reconciliations of GAAP to non-GAAP financial measures. Throughout today's call, our discussion of financial results will be on an adjusted basis, excluding the impact of special items. At this point, I'll turn the call over to Tom. Tom? Thomas Snyder: Thank you, Sherry. Good morning, everyone, and thank you for joining us today. Before we discuss our quarterly and year-end results, I want to take a moment to reflect on 2025, a truly transitional year for TriMas. This is not the same company you saw a year ago. Over the past 8 months since I've joined TriMas, we have sharpened our strategic focus, strengthened our leadership team and begun rebuilding the foundation necessary to deliver stronger and more consistent performance going forward. I'd also like to formally introduce our new CFO, Paul Swart, who joined us in mid-December. Paul brings more than 25 years of financial and operational leadership experience, including 2 decades here at TriMas across corporate and operational finance, accounting and business planning. His deep familiarity with our business and his recent experiences leading transformation efforts make him a tremendous addition to our leadership team and an exceptional partner as we enter this next phase. We are excited to have him back. Welcome back, Paul. Over the past few months, we've refreshed our management approach, clarified roles and accountability and elevated decision-making speed and execution. This has enabled us to focus our energy on the areas that matter most, serving our customers, improving operations and developing our people and driving performance. We've made meaningful progress in elevating operational excellence and strengthening our commercial execution. In the latter part of 2025, we completed approximately 100 customer interviews across 10 countries as part of our voice of the customer initiative, giving us clear insights into customer expectations and where we must raise the bar to win with our customers. These insights are driving changes in how we organize and engage with customers so that we are more aligned with their needs and more connected in our day-to-day interactions. We also launched a structured global operational excellence program, a company-wide operating system rooted in Lean Six Sigma principles. This program is designed to drive continuous improvement, enhance efficiency and increase standardization across our footprint with a focus on safety, quality, delivery and cost. We are encouraged by the initial launch within our packaging business at 2 larger locations and look forward to rolling out the program to more sites in 2026. These operational and cultural changes are creating more unified practices across the organization, strengthening the foundation of data-driven management and elevating accountability among our teams. Building upon this increased accountability and better visibility into our KPIs, we also restructured our 2026 incentive program to reinforce a disciplined pay-for-performance culture that rewards results and aligns the entire organization on its true north. As I've traveled to our locations over the past several months, I've seen firsthand the impact of these efforts as we are a company with strong capabilities powered by talented people who are deeply committed to delivering value for our customers and shareholders. At the same time, those visits have highlighted clear opportunities for continuous improvement, areas where we can evolve, innovate and further strengthen our foundation for the future. Taken together, these actions underscore a simple point, TriMas today is becoming more focused, more agile and better positioned to deliver. With that foundation in place, let's turn to Slide 4 to review several key actions underway that will further transform TriMas and drive the next phase of improvement across the organization. First, we continue to make solid progress toward completing the divestiture of TriMas Aerospace, which we announced in early December. The transaction remains on track to close in mid- to late March. As previously communicated, the purchase price is approximately $1.45 billion in cash, which we expect will generate approximately $1.2 billion in net after-tax proceeds. As a result of the pending sale, TriMas Aerospace is now reported as discontinued operations beginning with these quarterly results. You'll also notice that we provided additional disclosure to help you interpret the results. We've included both total company performance and the breakout between continuing and discontinued operations where practicable. And to ensure comparability, we have recast certain historical periods to reflect the planned sale of TriMas Aerospace. That recast information will be available in the Form 8-K we are filing today. Following the close, TriMas will operate with 2 reporting segments: our Packaging segment and our Specialty Products segment. The divestiture positions TriMas as a more focused company and the significant proceeds provide us with meaningful flexibility as we execute our capital deployment priorities, including share repurchases, investing in organic growth initiatives, pursuing targeted acquisitions and maintaining our balance sheet. Let me now cover how we are approaching capital deployment as we move into the next chapter. Our priorities remain consistent, reinvesting in the business, pursuing selective acquisitions, particularly in the Packaging and Life Science space and returning capital to shareholders as appropriate. To support a more disciplined and strategic approach to M&A, we have established a strategic investment committee that brings sharper focus and rigor to evaluating opportunities aligned with our long-term vision. Since announcing the divestiture, we have repurchased more than 3 million shares for approximately $100 million. And as announced earlier today, we increased our remaining share repurchase authorization back to $150 million. The Board will continue to assess potential increases to the company's existing share repurchase authorization as we move forward. As we deploy capital, we expect to repurchase additional shares while also planning to pay down the revolver borrowings associated with the prior buybacks. In parallel with these strategic actions and a smaller, more focused organization, we have also reshaped our structure to operate more efficiently and better serve our customers. At the end of January, we implemented a company-wide realignment to streamline operations, including integrating certain corporate and business functions to simplify the structure, eliminate duplication and improve execution. Savings from the initiatives we have completed are expected to ramp up throughout the year, generating over $10 million of cost reductions in 2026 and more than $15 million on an annualized basis. In addition, within TriMas Packaging, we are restructuring the commercial and operational model to break down silos, accelerate decision-making and to strengthen customer engagement and responsiveness. This transformation is supported by several initiatives, including brand unification, expanded operational excellence programs, upgraded systems and continued optimization of our manufacturing footprint. Collectively, these actions are strengthening TriMas' operation model, enhancing customer satisfaction and positioning the company for sustainable long-term value creation. As we advance this work, I'm also drawing on several decades of personal experience operating in highly competitive environments where 2 principles ultimately determined who won, relentless cost discipline and unwavering focus on the customer. Those disciplines are more important today than ever as we compete to win in the marketplace. As I look at the transformation underway, I feel strongly that this is where I can help us create real value by instilling a sharper cost mindset across the organization and elevating our focus on serving customers better than our competitors. Shifting gears, let's turn to our full year and fourth quarter performance. Despite all the transition and change throughout 2025, we delivered full year and fourth quarter results in line with our expectations. Total company adjusted earnings per share for the year was $2.09, towards the upper end of our provided guidance range of $2.02 to $2.12, which had already been raised earlier in the year. I'm very proud of how our teams executed during this period of significant transformation. And with that, I'll now turn the call over to Paul, who can walk us through the financial results in more detail. Paul? Paul Swart: Thank you, Tom, and good morning, everyone. I'm so excited to be back at TriMas and help lead the company and our great group of employees in the next chapter of our history. Let's continue where Tom left off with a review of the financials on Slide 5, which shows our fourth quarter and full year results. This slide shows our total company results before consideration of the reclassification of Aerospace to discontinued operations to evaluate results consistent with how we provided our most recent outlook. Starting with the fourth quarter, TriMas total company net sales were $256 million, 12.5% higher than the prior year. Organic increases in each of our segments totaled just over 9% and were augmented by the contribution from TriMas Aerospace's 2025 acquisition in Germany and modest favorable currency exchange. These items were partially offset by the impact of the Arrow Engine divestiture, which was a part of TriMas for all of 2024, but only 1 month in 2025. From a profitability standpoint, fourth quarter segment operating profit increased more than 21% to $33 million, with margins expanding by 90 basis points, driven by the higher sales levels and continued operational execution. Q4 adjusted EPS declined by $0.03 year-over-year as the higher business operating performance was more than offset by the timing and higher levels of both incentive compensation and foreign currency exchange in '25 versus '24. Looking at the full year, total company net sales were just over $1 billion, up 12.7% year-over-year, driven by organic sales increases in each segment, most notably in Aerospace. Sales from our February Aerospace acquisition in Germany contributed $23 million, more than offsetting the impact of $18 million from the divestiture of Arrow Engine. Adjusted segment operating profit grew by more than 30% to $149 million, a 200 basis point increase year-over-year, driven by higher sales levels and continued operational improvements throughout the year. In addition, as Tom mentioned, adjusted EPS increased by $0.44 year-over-year or 27% to $2.09 toward the upper end of our guidance range of $2.02 to $2.12. Overall, we're pleased with the growth and margin expansion achieved during 2025, which meaningfully outpaced our original expectations with the Aerospace-specific growth significantly enhancing its financial profile and allowing for the monetization of the value our team has created when the deal closes in the coming weeks. Turning to Slide 6, I'll cover our cash flow and our balance sheet. We delivered strong cash performance during 2025, generating fourth quarter and full year 2025 free cash flow of $43 million and $87 million, respectively, with both figures more than double the prior year period. This improvement reflects stronger operating performance and disciplined working capital management throughout the year. This strong cash flow allowed us to fund the $38 million purchase price for the acquisition within Aerospace and repurchased over $100 million of stock during 2025, among other items, while only increasing our net debt by $64 million to $439 million. Following the Aerospace divestiture announcement, we repurchased more than 3 million shares for just over $100 million, reducing our year-end outstanding share count to 37.6 million. We approach these repurchases thoughtfully, taking on a measured amount of net leverage a few months in advance of having certainty while capitalizing on what we viewed as an attractive opportunity to buy shares at levels that did not reflect the company's underlying value. The newly announced share repurchase authorization today, back to $150 million, provides us with incremental flexibility going forward, particularly post deal close. At year-end, our total debt was comprised of $400 million of [ 4.5% ] bonds due in 2029 as well as approximately $70 million of revolving borrowings. While our net leverage remained flat with the prior year-end at 2.6x, it increased from 2.2x in the third quarter due to financing most of the share repurchases on the revolver. Finally, we expect to receive approximately $1.2 billion in net after-tax proceeds from the sale of TriMas Aerospace, which upon receipt, we would plan to pay down any amounts outstanding on the revolver. We plan to invest the remaining approximately $1.1 billion in high-quality interest-bearing accounts while awaiting redeployment. Assuming the deal closes in late March, we estimate this balance could generate up to $30 million in cash interest over the last 3 quarters of the year, subject to the timing and amount of cash redeployed and actual interest rate earned. Shifting gears now to business performance. Let's turn to Slide 7 to discuss Packaging. As expected, the fourth quarter was a mixed quarter, directionally consistent with what we've been managing all year. Sales were up 5% year-over-year, with organic sales up 2.4%, driven by strength in products serving the industrial and life sciences markets, partially offset by softer demand in food and beverage applications, particularly flexibles and closures. Operating profit of $15 million was down about 5% year-over-year, with margins at 11.6%, below prior year as well as the margins achieved in the first 9 months of '25, reflecting a less favorable mix as well as the typical Q4 seasonal pattern. For the full year, Packaging delivered 4% organic growth and held margins nearly flat with full year operating profit of $71 million and a 13.3% margin, which we view as a solid outcome given the persistent macro headwinds, tariffs and demand uncertainty across several end markets. Looking ahead, we expect 2026 to show continued momentum with 3% to 6% sales growth and margin improvement to 14% to 15% as cost-out actions already implemented ramp up and flow through. We expect sales and profit growth in Q1 will land at the lower end of these full year ranges and we'll continue sharpening operational and commercial execution, focusing on ways to improve profitability, efficiency and customer satisfaction. Overall, the business exited the year with a solid foundation and clear drivers of profit improvement as we move into 2026. Turning now to Slide 8. I'll review our Specialty Products segment. It was a solid year for Norris Cylinder, the remaining business in this segment, although its results are less visible due to the sale of Arrow Engine, which closed in January 2025. In Q4, Norris delivered nearly 14% year-over-year sales growth, although total segment sales were down 1.4% as the Arrow Engine divestiture more than offset that growth. Profitability, however, meaningfully improved. While there is still further improvement expected, operating profit and margin doubled year-over-year, with margins expanding to 6.5%, driven by Norris Cylinder's prior cost restructuring actions. For the full year, Norris Cylinder delivered 9.5% sales growth and nearly doubled operating profit, contributing to $5.4 million in operating profit and a 4.9% margin. While this improved performance helped, it's only partially offset -- it only partially offset the lost profit from Arrow as it was part of Specialty Products for all of 2024, but only 1 month in 2025. Looking ahead, we expect continued improvement with 3% to 6% sales growth in 2026 and operating profit margins in the 8% to 10% range. Q1 is expected to track toward the upper end of the sales range with margins growing from 2025 levels into the 8% to 10% range, supported by stronger intake, our made in the U.S.A. positioning and further leveraging the prior cost restructuring actions. Overall, despite the headwind from the Arrow Engine divestiture, Specialty Products enters 2026 with stronger profitability fundamentals and clear opportunities for further improvement. Now moving to our final segment, Aerospace, which is now reported as discontinued operations and assets held for sale on Slide 9. This was an exceptional year for the business, delivering record results and a key reason why we were able to secure a strong valuation in the pending sale. Fourth quarter sales increased 29% year-over-year, driven by improved output, commercial actions and nearly 10% growth from acquisitions. Operating profit grew more than 50% with margins expanding 240 basis points, supported by strong sales leverage and continued operational excellence. For the full year, sales grew nearly 35% with more than a 600 basis point improvement in operating margin, reflecting consistent execution across the organization. The team has done an excellent job in 2025 of creating value for TriMas and its shareholders. A big thanks to the team for their contributions in 2025. Given that the transaction is expected to close yet in first quarter and that Aerospace's financial results are included in discontinued operations, we are not providing forward expectations for this segment. To wrap up the financial review, despite a dynamic year of transition and macroeconomic challenges, our results met our expectations overall, providing a solid foundation from which to elevate the position and position the new, more focused TriMas going forward. Now that we reviewed the total company results, we thought it very important to level set you on remaining TriMas post the Aerospace sale on Slide 10, which shows the continuing business segments and consolidated metrics in 2025 as well as providing initial thoughts on 2026 and beyond. Net sales were $645 million in 2025 with operating profit of $34 million, adjusted EBITDA of $79 million and EPS of $0.55. As Tom has mentioned previously, remaining TriMas is an entity with several levers in our control to streamline, integrate and optimize costs as well as to simplify and strengthen commercial strategies. We have already implemented actions during the back half of 2025 and thus far in 2026, which we expect to significantly improve our financial results this year and which can be leveraged over future periods. And there is more that we will be evaluating as new IT systems and processes allow for further enhancements. In addition, the corporate office oversight functions and costs necessary for a $1-plus billion company are much different than for a focused business with 2 segments, and changes have already been made to centralize and integrate functions and positions with the business to simplify and reduce costs. And there are other opportunities over time, such as once the Aerospace transition support is completed that will further enable cost efficiencies. In 2025, TriMas operated at a 12% adjusted EBITDA margin, which we believe is 600 to 800 basis points lower than where this current set of businesses can and should operate on a long-term basis, even before reinvesting any aerospace proceeds to further strengthen the portfolio. As Tom will note in a moment, 2026 is expected to be a strong first step in a multiyear program to continuously improve toward those goals, and we plan to update you on our progress along the way. With that, I'll now turn the call back to Tom to provide further details on our outlook and our future. Tom? Thomas Snyder: Thanks, Paul. I would like to take a few minutes to talk about what the future looks like for TriMas as a more focused company, beginning with our 2026 outlook on page -- Slide #12. With the TriMas Aerospace sale expected to close in mid- to late March, my comments today focus on our continuing operation and the key assumptions behind our expectations for 2026. For the full year, we expect sales growth of 3% to 6% from our 2025 baseline of approximately $646 million. We also expect more than 300 basis points of adjusted operating margin improvement, driven by continued operational execution in both Packaging and Specialty Products, along with the full year benefit of the cost out and organizational realignment initiatives already underway, which include an expected reduction in corporate cash expenses of at least $10 million in 2026 versus 2025. Given the scale of the cost-out actions and the timing to reach their full run rate, we do not -- we do expect the first quarter of 2026 to be our lowest quarter for margins and earnings per share. While we anticipate 3% to 6% sales growth in Q1, we expect adjusted operating margin to improve by just over 100 basis points versus Q1 2025, although sequentially, it would represent more than a 400 basis point improvement versus Q4 of 2025. We've also provided a few additional Q1 assumptions given the significant changes taking place across the company. Across the first quarter and the balance of the year, we expect year-over-year improvements in sales, earnings and earnings per share in each quarter as savings build and operational performance continues to strengthen. And importantly, today's expectations do not include any redeployment of the TriMas Aerospace sale proceeds. Finally, given the pending sale of TriMas Aerospace, we plan to provide full year earnings per share guidance on our Q1 2026 earnings call in April once the transaction has closed. Before we move into Q&A, I want to step back and describe why we're so excited about the future of TriMas and the company we are becoming on Slide 13. With the Aerospace divestiture nearing completion, TriMas is emerging as a more focused and more agile organization built around businesses that have strong market positions and substantial opportunities for value creation. And importantly, we now have a foundation that we can continue to build upon in ways that further transform the company. Who we are -- who we currently are is clear. We are a global provider of high-value dispensing, closure and life science solutions supported by deep technical expertise, long-standing customer partnerships and a flexible global manufacturing footprint. Our end market exposure is well diversified, and our teams embrace a culture of innovation and operational excellence that drives innovative, sustainable and high-quality solutions. And just as important is what will set us apart, a customer-first approach with a unified sales team and integrated solutions. We've reshaped the organization to be simpler, faster and more responsive. Our innovation pipeline is increasingly aligned with customer needs, and we are leveraging technology and operational excellence to enhance quality, reduce cost and increase speed to market. Our strategy is centered on accelerating growth in higher-value, higher-margin applications, particularly in Life Sciences and areas of our packaging business where our capabilities and customer access give us meaningful opportunities to expand. And finally, as you know, we will also have financial flexibility to continue investing in our future. The aerospace sale proceeds will enable us to fund growth, pursue strategic acquisitions, maintain our solid balance sheet and return capital to shareholders. Taken together, the new TriMas is a focused portfolio with different capabilities, a stronger foundation and significant opportunities ahead. Turning to Slide 14. As we look forward, TriMas has multiple levers to drive growth across sales, earnings and long-term value creation. With a stronger operating base and meaningful capital to deploy, we are well positioned to accelerate our strategy, deepen customer partnerships and invest in the highest value opportunities across our markets. Our teams are energized, and I couldn't be more excited about the future of TriMas. Thank you. And with that, I'll turn it back to Sherry. Sherry Lauderback: Thanks, Tom. At this point, we would like to open the call to questions from our analysts. Operator: [Operator Instructions] We take the first question from the line of Ken Newman from KeyBanc Capital Markets. Kenneth Newman: Paul, it's great to hear from you again. Congrats on coming back. So maybe to my first one, I know there's a lot of moving pieces, so first, thanks for all the increased transparency around all that. I think it helps to get an apples-to-apples look. I'm curious if, first, could you just help us how to think about the cadence of margin improvement as we move beyond the first quarter? Are there things that are easier to kind of get done in the second and third quarters? Is there any seasonality we should kind of think about? Or is this really more of a linear progression up as we move through the year? Paul Swart: Sure. So I'll take that, Ken. So yes, as we think forward, there is an increased ramping savings related to our $10 million of cost savings actions as well as other initiatives that will be happening throughout the year. And as a reminder, Q2 and Q3 tend to be our highest sales quarters of the year, so we would expect an increase from Q1 to Q2 and then increased margin from Q2 to Q3. Q2 or Q3 could be the sales -- highest sales quarter as they've changed over the years, but they're the highest 2. And then Q4 typically has a step down from a sales perspective. We would also likely expect that margin declines Q4 versus Q3, but it would be still significantly higher than Q1. Kenneth Newman: Okay. That's very helpful. I appreciate that. And then within Packaging, obviously, you're forecasting or guiding to margin improvement there. I know there was a mix headwind this quarter that was a little higher than I was expecting on my apples-to-apples model. Is there a way to bridge how you think about the margin improvement within Packaging that's being driven by either cost-out efficiencies versus better mix or market demand? Thomas Snyder: Yes. I'll try and then, Paul, you can fill in where I've missed. Just strategically, in packaging, so we do have -- we have a lot of improvement going on there. And so some of it is the -- as we talked about consolidating organizational efforts, and so we had a kind of a fragmented approach around certain functional areas in the company. That's being consolidated, some of that was part of our January initiative. And then -- and we have operational improvements as well that are coming in through the year that are going to continue to deliver. Now the Q4 was -- had some headwinds and had some mix differences that kind of contributed to Q4, not all bad from my perspective, and so on the sales side in Q4, we had a lot more tooling sales in the quarter than -- let's say, than was normal. But that -- and that usually converts a little bit less than the products themselves. But the good news is that, that's laying the groundwork for key initiatives and projects that we're working on that are coming to market in 2026, and so I'm excited about that stuff. So not all bad from my perspective. Paul Swart: Yes. And from a balancing perspective, I think it's probably pretty well weighted between the 2 of them in terms of how much read-through is from cost savings actions versus how much is just going back to a normal product sales versus tooling sales as we move into first quarter, so I mean, I think it's pretty balanced between the 2. It's not that we're expecting a tremendous difference other than the tooling sales that we have visibility to in Q4, not repeating at the same level. Kenneth Newman: Got it. Okay. Maybe I could just squeeze one more in. It was good to see another increase in the share repurchase authorization today. Tom, you also talked about this new investment community to analyze potential deals. First, I guess, how aggressive can you get on the repurchase authorization in the coming quarters? And second, as it relates to potential acquisitions, is there a way to help us think about what the pipeline looks like today and how quickly you think you could go after a deal within some of those higher mix, call it, life science type of targets? Thomas Snyder: Yes. I mean we're spending a lot of time learning, studying, looking at opportunities, understanding opportunities that are actionable. But we need to get through where we are right now. We need to get the transaction behind us. We need to get it closed. And then we'll be more specific about what the outlook is in our Q1 call. We'll also have probably a little bit more clarity around capital redeployment. So it's hard to really give you any more specifics at this point. But we are looking at markets that are -- we do like our Life Science business. We do like the opportunities that we see in that space to continue to grow and bolt-on growth in that area as well as other opportunities that are higher value-added areas of our business. So I wish I could give you more, but that's pretty much where we are at the moment. Well, the share buyback, too, I mean, I think that's what I was saying, we'll give more clarity around that as we get through the -- between now and the first quarter. So we are reauthorizing, as you saw, another $150 million in total, and we continue to look at and evaluate what we should do beyond that. It's all part of our overall strategy, and we'll, again, provide more clarity on that down the road. Operator: The next question comes from the line of Hamed Khorsand from BWS Financial. Hamed Khorsand: So first off, anything that could derail the closing of the deal to Q2? What is it -- is there a specific event that you're looking for, for it to go through the closing process? Paul Swart: So there are regulatory processes, which obviously we don't control that are still underway based on everything we're aware of at this point. They're going through their normal course. And that's why we're projecting that if they are through when we expect them to be through based on typical days, that's why we're comfortable talking about the back half of March as the expected close date. So nothing we're aware of that would change that outcome today. Hamed Khorsand: Okay. And then in the Packaging segment, is there any particular end market or geography that you're expecting to outperform this year compared to what your guidance is? Thomas Snyder: Well, we're optimistic about several markets. We do have an expansive footprint. We're in different markets and different geographies that position us well for these opportunities as they come. We like -- we do have some growth in the life sciences area that we think is going to contribute well going down the road. We see growth in our industrials business as a result of regulations that are changing, and we have a leadership position in some of those markets. The beauty and personal care for us is a good market as well. It's got good growth across the globe and the markets that we compete in are performing well, so we continue to be optimistic in that area. We do expect food and beverage too, to have some recovery this year versus last year. Last year, as we've talked about, wasn't a very good year. So we're looking at, say, low -- at least low to mid-digit recoveries in that market. And we do have some leading expertise in technologies, especially in Europe around beverage products that are going to be mandated to change technology over the course of the next 18 months. And so we're -- we feel that we have a really good position there, too. So broadly, those are the big markets for us and kind of what we see coming down the road. Hamed Khorsand: Okay. And is any of that outlook that you just described because of the benefits of the cost cutting and the integration of the brands? Paul Swart: No. No. I mean what you're talking about is product specific. So it's really not as a result of the cost cutting or realignment, although I do think that inherent in that guidance is what Tom talked about related to our sales structure and our commercial strategy. Thomas Snyder: So I thought you there's more coming in your question, that's why I paused there. So the way that we're going to market, I think we're going to be more successful in being able to achieve growth in these particular areas. And my expectation is that we should be able to beat the market. I mean that's when I talked about earlier winning in the marketplace and beating the competition. The intent here is that we're going to be a low-cost, nimble organization that has quicker response times and with innovative products that meet the needs in the market. And we have a sales approach now that used to be a bit cumbersome. And so it was a duplication of sales across different product lines. What we heard through our voice of the customer survey is that we want a team, a person, a lead to talk to us about opportunities in our particular markets before we were tripping over ourselves. And so I think that's just another example of how we can bring efficiency to the commercial process. And if we can execute against everything that I've just said, we're going to be able to be more efficient, and we should be able to beat the market numbers from what I just talked about, so that's one of the areas that has me really excited. Operator: Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to the management for their closing comments. Sherry Lauderback: Once again, we'd like to thank you for joining us today and for your continued interest in TriMas. We appreciate your ongoing support, and we look forward to updating you on our progress next quarter. Thank you. Thomas Snyder: Thank you. Operator: Thank you. Ladies and gentlemen, the conference of TriMas Corporation has now concluded. Thank you for your participation. You may now disconnect your lines.
Operator: Welcome to the Northland Power conference call to discuss the fourth quarter and year-end 2025 results. As a reminder, this conference is being recorded on Thursday, February 26, 2026, at 10:00 a.m. Eastern. Present for this call are Christine Healy, President and CEO; Jeff Hart, Chief Financial Officer; and Adam Beaumont, Senior Vice President of Capital Markets. Before we begin, Northland's management has asked me to remind listeners that all figures presented during today's call are in Canadian dollars and to caution that certain information presented and responses to questions may contain forward-looking statements that include assumptions and are subject to various risks. Actual results may differ materially from management's expected or forecasted results. Please read the forward-looking statements section in yesterday's news release announcing Northland Power's results and be guided by its contents when making investment decisions or recommendations. The release is available at www.northlandpower.com. I will now turn the call over to Ms. Christine Healy. Please go ahead. Christine Healy: Good morning, everyone. Thank you for joining us. I'll begin with an overview of our strategic priorities and an update on our 2 large construction projects. Jeff will then provide a review of our fourth quarter and full year financial results as well as our 2026 guidance. Following our prepared remarks, we will open the line for your questions. In 2025, we made progress across our operational, financial, and organizational priorities. We expanded and reinforced our leadership team with the addition of new executive members. We introduced a new global strategy outlining our growth priorities, a 5-year funding plan and how we will create long-term value for shareholders. We advanced our construction projects, completing key milestones at our 2 offshore wind projects, Hai Long in Taiwan and Baltic Power in Poland. And following the successful completion of Oneida last year, we are advancing our second battery storage project in Alberta, Canada, called Jurassic BESS. Executing these projects is our primary focus through 2026. And together, they will add 2.2 gigawatts of capacity by 2027. And we delivered on our financial commitments, achieving our adjusted EBITDA guidance and outperforming on free cash flow per share. Our performance in the fourth quarter was supported by 96% operating availability and record high generation from our German offshore wind assets. Before we move into the strategy, I want to take a moment and emphasize that our performance is underpinned by our commitment to our people. As I've talked about before, health and safety are core values for Northland. In 2025, we reinforced this commitment with the launch of our 12 Golden safety rules. These rules are nonnegotiable and ensure that our standards are consistently understood, respected, and applied across all work environments. A safe workplace is the prerequisite for the work we do. Building on that foundation, we are advancing a strategy focused on disciplined growth and long-term value creation. We're at an inflection point in electricity markets. After decades of flat electricity demand, we're entering a period of rising demand that some call a power super cycle. It's driven by electrification, industrial growth, population growth, urbanization, and a rise in AI demand. As power generators, our strategy plans to capture this momentum and double our gross operating capacity to 7 gigawatts by 2030. This is not just about scale, it's about focus and finding the right high-quality projects that add real value to our business. Our focus on achieving specific free cash flow targets by 2030 is more than a goal. It is the lens through which we evaluate every capital allocation decision we make. To strengthen our 2030 goals, we're focused on 3 pillars: Deliver, strengthen, and grow. The deliver pillar of our strategy is focused on operational performance and successfully bringing 2.2 gigawatts of projects under construction into operation. Our track record of executing and delivering large-scale projects is one of the things that sets Northland apart. The strengthen pillar is about building a foundation for scale, including our target of $50 million in annual cost savings by 2028. To support this, we have already transitioned to a regionally focused operating model, split into the Americas and international business units, designed to build scalable platforms in our core markets and capture operational leverage by clustering assets in those core markets. This structure streamlines how we operate, enhances local accountability, and maintains global standards. At the same time, we have centralized all of our development activities into one global organization. This ensures that every project, regardless of technology or geography, competes for capital on a consistent basis, so only the most value-accretive projects move forward. Finally, under the grow pillar, we continue to high-grade our pipeline, advancing new capacity to supplement our current construction. An example of this is the 2 recently acquired late-stage battery storage projects in Poland. This acquisition alongside Baltic Power demonstrates our strategy of clustering high-value assets in a core European market. Our approach is technology agnostic, focusing on our core markets where fundamentals are strongest. Our plans for Europe are driven by an ongoing and increasing need for energy security. I recently attended the North Sea Summit, which took place in January, where 9 European governments reaffirmed their commitment to expand offshore wind in the North Sea through a coordinated regional approach, including up to 100 gigawatts of projects by 2050 with an interim target of 20 gigawatts for the 2030s. This North Sea Summit outturn is a consistent theme we see across Europe, a commitment to build-out of renewables for decades to come, offshore, onshore, and battery storage. For developers like Northland, this provides important long-term demand visibility. Greater policy alignment and infrastructure coordination should help reduce development friction, improve permitting timelines, support enhancements to the supply chain, and ultimately enhance capital efficiency. Europe continues to show conviction that offshore wind will play a critical role in meeting the region's energy demand and advancing the clean energy transition, strengthening energy security, improving affordability, and supporting industrial competitiveness. And in Canada, electrification and industrial growth are accelerating the need for new supply. Canada continues to be a growth market for us with every province forecasting power demand growth. We see opportunities in several of our technologies, including gas-fired generation and battery storage. To capitalize on this opportunity, our 5-year growth and funding plan has been set with the right foundation, supported by an investment-grade balance sheet. We've increased our project return thresholds to a minimum of 12%, demonstrating that we will invest only in the most value-accretive opportunities. We are focused on advancing the opportunities where we can apply our global expertise to local execution. I'll turn now to more specific details on construction progress. At Hai Long, we've reached several major milestones, including the installation of all 73 foundations, all 4 export cables, and both offshore substations. To date, we have successfully installed 37 turbines, 20 of those turbines are now actively generating power. The project team has been working hard over the winter to optimize our schedule and have had a crew on standby to continue commissioning when weather permits. As we've discussed in previous calls, offshore Taiwan, we work with a weather window, so full in-water activities will resume in earnest later in April when that weather window reopens. The project is on track for commercial operation in 2027. At the Baltic Power offshore wind project in Poland, we achieved 2 key milestones this quarter with the completion of all monopile foundations and the completion of grid interconnection works by the local utility. We also completed the installation of both offshore substations, 2 of 4 export cables, and 30 of the project's 76 wind turbines. The project is on track for commercial operation in the second half of 2026. We're also making strides in our battery storage portfolio. At Jurassic BESS in Alberta, foundations have been installed and the battery packs have arrived in Canada. The project is on track for commercial operation in 2026. Looking ahead, our priorities are clear: Deliver our construction projects, optimize the value of our operating portfolio, and advance and high-grade our development pipeline. The recent acquisition of 2 late-stage battery storage projects in Poland adds scale to our European platform. We continue to advance both projects, having signed their battery supply agreements, and we're currently finalizing other procurement activities ahead of financing and the start of construction expected later this year. Building on our expertise and experience from the Oneida project in Ontario, we continue to see opportunities to expand our battery storage portfolio, and we are actively evaluating several projects. In November, we completed the required performance test for a 23-megawatt capacity upgrade at our Thorold natural gas-fired facility in Ontario and officially secured a 5-year contract extension through 2035. These are all examples which underscore the progress underway across Northland. Our disciplined approach to capital deployment, project execution, and excellence in operations delivers energy for our markets and value for our shareholders. I'll now turn it over to Jeff to walk us through the financial results. Jeffrey Hart: Thank you, and good morning, everyone. As Christine noted, we achieved our 2025 adjusted EBITDA guidance and exceeded free cash flow guidance. Strong winds at our offshore assets in Q4 and lower curtailment from grid outages resulted in higher-than-budgeted production and a 21% overage from the same quarter of last year. Our high operating availability of 96% allowed us to capture that benefit. The quarter also benefited from contributions from the Oneida energy storage facility, that commenced operations in May of last year as well as increased market demand for dispatchable power at our natural gas facilities as a result of cold weather and third-party facility outages in Ontario. Adjusted EBITDA in the quarter was $390 million, a 25% increase compared to the fourth quarter of 2024. This increase was primarily due to higher production from offshore wind, contributions from Oneida, and increased market demand at our natural gas facilities. Net income for the quarter was $290 million compared to $150 million in 2024. And free cash flow per share for the fourth quarter was $0.46 compared with $0.31 in 2024. Turning to the full year. Adjusted EBITDA for the full year was $1.25 billion, in line with 2024 as lower offshore wind resource in the first half of this year offset contributions from Oneida and strong performance at our Americas onshore wind assets. Free cash flow per share for the full year decreased to $1.46 from $1.53 in 2024. The year-over-year decrease was mainly due to higher scheduled debt repayments, lower offshore wind resource, and the nonrecurrence of certain onetime items, partially offset by contributions from new assets and lower current taxes. For the full year, Northland recorded a net loss of $108 million compared to net income of $371 million for the full year of 2024. This reduction is primarily due to a noncash impairment for Nordsee One recorded in the third quarter of 2025. And we continue to advance our major construction projects. As at December 31, Hai Long and Baltic Power have less than $4 billion of capital expenditures remaining to be incurred. Overall, both construction projects are continuing on track for commercial operations with overall costs aligned with original expectations. As reported last quarter, Hai Long turbine commissioning has been slower than expected, and it could impact pre-completion revenues and equity injections in the amount of $150 million to $200 million Northland share. The shortfall in pre-completion revenues outlined above can be funded by several sources, including liquidity, corporate liquidity. However, we and our project partners are actively looking at optimizations at the project level to provide funding, and we'll provide an update on this by midyear. Turning to our 2026 financial guidance. We expect 2026 adjusted EBITDA to be in the range of $1.45 billion to $1.65 billion, an increase of approximately 25% from the $1.25 billion delivered in 2025. The key drivers of this increase will be contributions from Hai Long and Baltic Power as well as full year contributions from Oneida and the commencement of operations at the Jurassic BESS project in Alberta. These increases will be partially offset by lower contributions from Nordsee One following a scheduled step down in the feed-in tariff mechanism. We expect 2026 free cash flow to be in the range of $1.05 to $1.25 per share compared to the $1.46 per share in 2025. The year-over-year decrease is due to several onetime items totaling $0.22, which benefited 2025, including a German tax refund, deferral of Spanish debt repayments, and other items. This decrease is also attributable to ongoing foreign exchange hedging costs, higher debt service for the natural gas assets, and the cessation of capitalized interest on our hybrid debt as we enter operations in Baltic Power. Partially offsetting this decrease is the additional contribution from Baltic Power, representing approximately $0.20 per share. For 2026, we assume development expenditures of approximately $50 million, and this will be focused on selective opportunities in our core markets of Europe and Canada. Now turning to our balance sheet. With more than $900 million of available liquidity and our investment-grade credit rating, we are well positioned to execute on a disciplined capital allocation plan. With that, I'll hand it back to Christine. Christine Healy: Thank you, Jeff. We are focused on delivering the strategy we set out in the fall and advancing the new projects that will add value and double our capacity by 2030, and we look forward to updating you on our progress. That concludes our prepared remarks. So operator, can you please open the line for questions? Operator: [Operator Instructions] And our first question comes from Baltej Sidhu of National Bank of Canada. Baltej Sidhu: So your 2026 guidance is comfortably above consensus. And just reflecting on last year's weak wind resource in the first half, acknowledging the incremental diversification from projects like Hai Long and Baltic. Could you shed any light on the downside protection that's embedded in your outlook and how you approach risk in your assumptions to the P50 production forecast? Jeffrey Hart: Yes. So I can take that and then Christine can add on. I think, look, we've been consistent with how we outlook on the wind resource. It's consistent with long-term averages. And so we continue to forecast based on that off of our operated -- our current operated facilities. And so I think you can see this year is Q1 and Q4, as we've always talked about, are always the heavy wind periods. And so we did have lower wind in 2025 in the first half and particularly kind of through Q1 and we captured much -- a good chunk of that back in Q4 with record pace. I think -- look, I think where we look at this is the long-term average in the P50 is the right spot to be. We'll have some variability and volatility in that, but we continue to not deviate from that, and I think we're comfortable with where we sit on that. And then the other piece when you look at on guidance is, obviously, there's a big piece on execution on the construction projects and the EBITDA contribution between Hai Long and Baltic. And I think, for us, as you can see and where we've been in Hai Long, we did have the weather window here. And as we talked about, I think, at Investor Day in the quarter, we had a cut last quarter, only about 2 turbines running at the start of that weather window. We felt it wasn't prudent to assume that we could get out there depending on weather, and we're currently in and around 20, which I think is better than what we expected coming out of the weather window. But we're still managing. And you can see with the assumption around our equity injection or potential equity injection, we're evaluating things at the project level. I think we're being prudent on our cash resources to make sure we've got funding mechanisms for it. And then as far as Baltic Power goes is I think we've seen good execution, but we -- I never say comfortable. The big thing I want to leave with you is execution on these construction projects, and that's the biggest thing that we've got to be on top of this year. The wind will blow on the operating assets, and we'll leave it at a P50. Christine Healy: I guess, I can add a bit more color to that, and thanks for your question, Baltej. I think maybe not showing up so much in the numbers is the fact that this winter has actually been a very tough weather window at Hai Long and getting offshore has been challenging. So I think we were right to be conservative in our approach to that. The weather window should reopen in April, and we're ready to go with that. But then we still have a lot to go in the project. So I think it's wise to be prudent in how we approach what we expect to happen through the rest of the year. At Baltic Power, we've seen that there's actually been very good in-weather performance in the last -- in water performance in the last few weeks. But probably not everybody is staying up to date on weather trends in the Baltic Sea, but it's also been very, very cold, which does affect the operational tempo. So I think we've been prudent in our approach this year to understand what could happen with the projects and our guidance reflects that. Baltej Sidhu: Thanks. That's great color. And just to leverage some of the elements that you both alluded to, you have a bit more than half of the turbines you initially had expected to be energized at Hai Long. And there's been a good amount of progress since the Capital Markets Day, as you alluded to in your prepared remarks. Could you provide any details on how the recovery plan is progressing from here? And what feedback or visibility are you receiving from Siemens regarding execution and full path to completion? Christine Healy: So obviously, it's very much on our minds, and we're extremely focused on it, both at the project level and also here at Northland. I'm in regular contact with Siemens, and so we have a regular dialogue sort of zippered up in both organizations. I think all of this is, Siemens is very committed to getting the work done and getting the work done as efficiently and effectively as possible. And so now it's all about preparation because we -- with the weather window currently closed, it actually gives us a bit of time to make sure that the planning is right and that we've got the people and the expertise and the vessels to be able to launch when the weather window reopens. So very high focus on that. And I would say the dialogue continues on a pretty regular basis with Siemens. Baltej Sidhu: Excellent. And just switching gears to the Polish BESS. As these projects are already contracted, what key milestones or execution risks need to be mitigated to get these across the line to reach FID? Christine Healy: So there's a few things going on right now, Baltej, and that's, we have local teams on the ground in Poland. So while the projects are in -- we're really happy with the projects. We've -- as I mentioned in my comments, we've secured the supply for the batteries. At the same time, we do have to make sure that we have all the local permits that the local authorities are getting -- that we have a good relationship there, that they know what we're doing, that there's clear understanding of that. Normal, I would say, regulatory process, which the team is working through. So the intent would be that that would come forward internally for our final investment decision midyear. And so then execute on that project and to sound like a Newfoundlander, get her done. Jeffrey Hart: Yes. So and just further, like as Christine talked to, is we secured, obviously, battery supply. And the big thing outside of the permitting and those pieces in the midyear is obviously working through the funding arrangement and project financing levers, and we're working that. And I think we'll be progressed and there's no roadblocks right now, and we'd expect to be through that by kind of around midyear, as Christine talked about. So those are the avenues that we're working. Operator: And our next question comes from Mark Jarvi of CIBC. Mark Jarvi: I just wanted to follow-up on a few things on Hai Long. One would be, can you continue to commission energized turbines before the weather window opens? Like can you get past the 20 that are currently selling into the grid now? Christine Healy: So basically, Mark, the way it works right now is we do the look-ahead forecast. And if there's a window of a couple of days that we can get people out there safely to do the work, then we do it. So there is a team on standby all the time, and we make the plan based on the weather forecast, and that's updated daily. Well, certainly, the main update is weekly, but we also then adjust that daily. So if there is an opportunity to get out there, then the teams get out there. Mark Jarvi: Got it. And then, Jeff, you mentioned that getting to 20 at this point is a little bit ahead of expectations, yet you still have the foregone PCRs at $150 million to $200 million. What has to happen for you to guys to hit the $150 million to $200 million now? Like are you tracking below that at this point? Jeffrey Hart: Well, I think there's a number of factors embedded in here. So if you don't mind, I'll kind of go through broadly the whole pre-completion revenue and then corresponding funding requirements because I think there's a bunch of factors in there. It's not only revenue generation, it's cash collection and then how that times with our construction progress. So you're absolutely right. Like obviously, and you asked the question on the weather window here for the next month or so. Look, we don't really plan that we'll get a big amount of work because the weather will be what it will be, but we did get 20 done or 18 done from the 2 to 20, and that number will vary a little bit as we work through the issues with the turbines. So that was good performance. I think where we look to longer term to hit where we need to be is we need materially on the next weather window in early October, effectively all the turbines spinning at that point in time. And that's where, as we've always talked about, Q1 and Q4 pretty much is the heavy weather window. And so that's where you see a significant amount of generation. And I'll say generation because that's obviously more at the back end of the year and there's cash collection time frame, let's call it, 60 days or so or whatever it is, that would put the cash collection more into the cash receipt more into the new year that we would have generated. And the reason that's important is when we look at this is, obviously, when we come out of the weather window on construction, we'll be heavy into execution here on the actual project itself again. And so clearly, when you look at the back-end weighted nature of the PCR generation, the execution being more, I'll call it, front-end loaded or kind of through Q2 and Q3, we have some funding requirements because that revenue will come in after and be collected more into the new year. And so we're still looking at is, is making -- we'd have to potentially fund with the change in shape here, a potential equity injection of that kind of $150 million to $200 million that we've talked about. But as I said, we're looking for different avenues to maybe fund that within the project with partners and look at different avenues with that. And I'd expect an update by midyear on that number. Mark Jarvi: Okay. So just to get that clear, PCR is kind of more like cash flows that you're just not catching up because there's a bit of a lag in payment versus the EBITDA. Yes. Jeffrey Hart: A 100%. So there's 2 things. The EBITDA is more back-end weighted, #1. #2, that back-end weighted EBITDA, there is -- in any business, there's always a lag between revenue generated and cash collection and payment terms. And so we have to work through that. And so because it's back-end weighted and you've got -- you have collection thereafter in normal course, we have execution here before Q4. And so there is some construction pieces that we do have to fund. And then we're looking at different avenues in that funding. Is there something we can do at the project level. So we maybe don't have to equity inject corporately here around midyear. And that's one of the big pieces we're working through. But think of it this way, back-ended earnings in generation and then you've got time frame on collection. Mark Jarvi: Got it. And then, Christine, you brought up the North Sea Summit and there's the investment pack that's come out of that. Outside of Poland, are there any other areas you guys are increasingly focused on in Europe and the North Sea? Is there anything in terms of partnerships that are starting to sort of pick up steam? Christine Healy: Thanks for the question, Mark. And I would say, to be clear, Poland is not -- they're in the Baltic as opposed to the North Sea. So we see both areas as being of interest. Poland continues to be of high interest for us. We're really -- I mean, we're happy with our partnership with ORLEN. We're happy with the Baltic Power project. And so we continue to have a high interest in doing more in Poland. In the North Sea, we've been there for quite a long time. So I would consider it a very -- sort of it's a home for Northland in many ways that with our work that's been ongoing for more than a decade in Germany and the Netherlands. We do have a project in -- we have a project in development in the U.K. We're having lots of dialogue with other companies and with governments about opportunities. And we see an opportunity-rich environment for Northland. But now it's a question of making sure that we're disciplined and we pick only the very best opportunities that we want to deploy our people on to. So that I would say we're pretty selective, but we see some good opportunities in front of us there. Mark Jarvi: And have those -- the range of opportunities, the quality opportunities improved or changed in the last couple of months? Christine Healy: I think we've seen now that some of the recent -- the recent auctions that have happened, we see better economics for projects. And so as a result, that makes for a better environment for us. For me, I do think it's a good reflection of capital discipline across the sector that we need to make sure that the projects that we do in the future deliver the rates of return that are going to lead to success for investors as well as success for the host markets. Operator: And our next question comes from Nelson Ng of RBC Capital Markets. Nelson Ng: My first question just relates to the Polish battery storage project. So regarding the 17-year capacity contract, roughly how much of your total expected revenue does that cover? Jeffrey Hart: Yes. No, and I think we'll provide further details as we go in with the economics here and when we come to final investment decision or financial close, however you want to word it. But what I would say is it's going to be a mix of merchant and capacity. And look, I'm not getting into specific percentage at this point, but it's not going to be disproportionate capacity. It will be far more balanced and between the merchant exposure and ancillary services and potential capacity payments, which is inflation indexed. Christine Healy: And Nelson, if it's helpful to you, it's a similar model to what we see applied in Oneida. Jeffrey Hart: What I would say is... Christine Healy: The percentages will be slightly different as they are jurisdiction to jurisdiction, but the sort of structure of it is similar to Oneida. Nelson Ng: Okay. Got it. And then, Jeff, a question for you. So for your 3 European offshore wind projects, you refinance those -- refinanced the debt or reduced the credit spread relatively quickly in terms of like when you're nearing construction completion. I presume discussions have started with Baltic Power and Hai Long with lenders? Or can you just comment on whether there's been discussions that have started in terms of whether it's refinancing or, yes, refinancing or having kind of discussions about the credit spread now that you see construction risk declining? I know you talked about looking at other options in terms of the capital injection for Hai Long, but can you just give a bit more color on the overall process? Jeffrey Hart: Yes. No, 100%. So you're right. And typically, as we're approaching COD and you could look maybe 2 is when is the right time, is it right at or a little bit after, but that's something that's on our mind, and it's on the deliverables for the team to look at how we drive optimization. So #1 with Hai Long, I think there's just some market factors there, we see that we can potentially get earlier than COD on some potential mechanisms, but we'll look at that, and I'll provide an update mid-year on it. And Baltic Power, yes, we're looking at different options and avenues as we approach COD, but we'll be a little bit flexible on that. It will be market dependent. And you're right, it will typically coincide as we get to COD, but we may see windows before or a little bit after that depending on the market. But it is something that we are looking at for sure. Nelson Ng: Got it. And then just one last question. So the Polish battery project that's EUR 200 million. I think that's roughly CAD 320 million. But if I do the math on Jurassic BESS versus the Polish project, I think Jurassic is about like 750,000 per megawatt hour. The Polish project is about 270,000 per megawatt hour. So that's roughly like over 60% lower cost. But like obviously, there's scale and there's probably geography in terms of labor. But can you just talk about the large price -- the cost difference between the Polish project versus the Alberta project? Christine Healy: Thanks, Nelson. I think it's a great question because it really shines a light on what happens when we're early in the curve on a technology. So for grid-scale battery storage like these BESS projects, we have seen a real shift in battery pricing, which is one of the big deltas on the overall cost of these projects. So you're right that probably that's the biggest moving piece is the cost of the batteries, which is coming -- continues to come down, and we've seen a drop in that over time. The other piece, though, I would be remiss if I didn't highlight is the permitting approach. So the permitting approach that we see applying in Poland is a quicker process than we see in most jurisdictions in Canada. So when we do our project planning, we build that in based on what the permitting process is going to be jurisdiction to jurisdiction. So as you've maybe heard me say too many times, the time it takes to get things permitted really matters. Time is money in projects. Operator: And our next question comes from Sean Steuart of TD Cowen. Sean Steuart: First question for Jeff. The 2026 free cash flow per share bridge, it shows Baltic and others contributing $0.20 year-over-year. I guess what is the other component of that? And I know Baltic is scheduled for second half COD, but any specifics on the exact contribution start point for Baltic in that number? Jeffrey Hart: Yes. No, there's not, I'd say, anything significantly within there, and we'll have the team follow-up with you on the details on it just because there's nothing that I'd say is particularly of interest, but I'll have the team follow-up with you on them -- on that. Sean Steuart: The majority is Baltic. Jeffrey Hart: Yes. Sean Steuart: Okay. Fair enough. And then just a follow-up question on the earlier-stage development focus. Christine, you touched on optimism around Baltic expansion. In terms of the development dollars you're putting to work in 2026, earlier-stage opportunities, can you give us a sense of between Canadian gas or renewables, other projects in Europe, where you see a more clear line of sight on advancing some earlier-stage opportunities? Christine Healy: Sure. Thanks for that, Sean. And it's a very timely question because it's something that we have been talking about sort of almost weekly, I would say, since the start of the year as we look at the different opportunities. So in terms of chase and looking at new opportunities, I would say we're sort of -- you've exactly identified we see some great opportunities for offshore wind in Europe, and we see some great opportunities for gas in Canada. And then we also have a number of projects that are in the queue that we are -- that we look at how much do we spend to mature them and at what time frame do we mature those projects. And I'll also just add to that, Sean, we also, as we talked about at Investor Day, have some, what we call value enhancement projects in the portfolio that have to compete for capital against these external new opportunities. And we have our existing opportunities in the funnel that we also want to mature. So all those things go into the mix. That's the entire concept about having a centralized development organization. So right now, I think we see that the development dollars, I'd say, would be the biggest chunks of them are oriented towards offshore -- finding the right next offshore wind project in Europe and finding or choosing the best next gas opportunity in Canada. Operator: And our next question comes from Benjamin Pham of BMO. Benjamin Pham: I just wanted to go to your 6% free cash flow per share CAGR guidance through the decade that you have a range that you put out there. How should you reframe the starting point of that calculation because it's a bit wonky using $1.45, also a bit wonky using $1.15 as a base? Like how do you frame that now? Jeffrey Hart: Well, I think -- thanks for the question. I think you stand back is we obviously exceeded our free cash flow guidance in 2025, and you start to stand back and obviously, there was a bunch of onetime items in there. I think to the tune of, I'll call it, $0.20 to $0.25, whether it was -- we had that German tax benefit and a few other items. And so I think that's something that factors in. And it's also on my mind, too, is how do we continually get better on making sure we call out onetime items and we can kind of clarify this for folks. But I think that's a critical piece for us because you take all those onetime items, they're about $0.20 a share, and that makes a substantive difference to the ongoing run rate of the business. Benjamin Pham: Okay. So you use $1.45 less, let's say, $0.25, use that as a starting point, you get to that 6% you've highlighted previously? Jeffrey Hart: Yes. And I don't have the numbers here in front of me, right? But I mean, I think you look at it and you say, okay, well, what happened in the back-end quarter. Clearly, we had higher wind and that was -- put us over guidance. But if you look at the full year, that $0.20 to $0.25 was one of the big factors in driving us to the $1.46. And so I don't have the CAGR in front of me, but that's something that we have to make sure that we're clear on is these onetime items or kind of nonrecurring items have to factor in. And so that you have to take that away, right? Benjamin Pham: Okay. I understand. And maybe switching to the early comments on the super cycle and volume demand being quite robust in all your key markets. Do you think your position -- I mean, you're clearly positioned well where you are now, but do you think you need to go elsewhere to position better or differently to benefit from this super cycle going forward? Christine Healy: So thanks for the question. We had a really deep dive on this as we were preparing for our strategy for the upcoming 5 years. And we see that we have opportunity -- it's an opportunity-rich environment for us in Canada and in Europe. And these are both very large markets. So I think we have ample space for us as a company to fill in and to deliver on what we've committed for the 5-year horizon in those markets. So we're very focused on deepening where we are instead of spreading out into new locations. Operator: And our next question comes from Heidi Hauch of BNP Paribas. Heidi Hauch: I just want to start with, in your annual report, it had mentioned deprioritizing the floating portion of the Scotland offshore wind project. So can you talk about what drove that decision and what that might mean for the types of projects or technologies you're more likely to pursue within the growth pipeline? Christine Healy: Super. Thanks for the question, Heidi. I appreciate it. So because we see so many fixed bottom opportunities for offshore wind, then we really had to look at do we need to move to floating right now. And I think the answer that we came to as we looked at the opportunity set is that we don't need to. And right now, we think that there are good existing technologies for offshore wind. I think that we're differentiated in our ability to deliver that and to deliver those projects well. And so maybe back to the previous question about deepening in geographies, it's also deepening in the things that we know. So we're very good at that. And so we're going to keep doing that, and we see an opportunity-rich environment for us right now. So yes, you're exactly right that we're deprioritizing the floating, and we're more focused on the fixed bottom offshore wind. Heidi Hauch: Great. Thank you. And then can you update us on the potential to contract the remaining portion of Nordsee One. We saw that positive update on contracting 1/3. But are you still kind of in conversations to contract the remaining part? Christine Healy: Thanks, Heidi. We keep a careful eye on that. So the 1/3 contracting leaves us -- we're happy with that in terms of having a stable cash flow from the asset as we look across the upcoming 5, 6 years. So that's very helpful. And then we see -- as you probably know, the spot price has been actually pretty robust recently. So when we see that robust spot price, how much of that are we willing to contract away in order in favor of stability. So right now, the 1/3, 2/3 split is okay for us. We continue to watch the market and look for different opportunities. And so then it gives us, in fact, optionality on that, which I really value in the portfolio, especially when you look at the new highly contracted generation coming in, it gives us a bit more room that we're not exposed to a huge amount of variability with that, and we can absorb that within the portfolio approach. Operator: Thank you. I'm showing no further questions at this time. I'd like to turn it back to Christine Healy for closing remarks. Christine Healy: I'll be brief and just say thank you, everyone, for joining us today, and thank you for your continued support. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Thank you for standing by, and welcome to the iQIYI Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Ms. Chang You, IR Director of the company. Please go ahead. Chang Yu: Thank you, operator. Hello, everyone, and thank you for joining iQIYI's Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. The company's results were released earlier today and are available on the company's Investor Relations website at ir.iqiyi.com. On the call today are Mr. Yu Gong, our Founder, Director and CEO; Ms. Ying Zeng, our Interim CFO; Mr. Xiaohui Wang, our Chief Content Officer; Mr. Youqiao Duan, Senior Vice President of our Membership Business; Mr. Xianghua Yang, Senior Vice President of International and Online Game Business; and Mr. Gang Wu, Senior Vice President of Brand Advertising Business. Mr. Wong will give a brief overview of the company's business operations and highlights, followed by Ying, who will go through the financials. After the prepared remarks, the management team will participate in the Q&A session. Before we proceed, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our public filings with the SEC. iQIYI does not undertake any obligation to update any forward-looking statements, except as required under applicable law. I will now pass on to Mr. Gong. Please go ahead. Tim Yu: Hello, everyone, and thank you for joining us today. In 2025, we focused on strengthening our core business to renew growth while achieving advancements in emerging businesses. These efforts drove a solid year-end performance with total revenue in Q4 returned to growth both annually and sequentially. Notably, our long-form dramas secured #1 in viewership market share on Enlightent data annual rankings with 5 titles exceeding 10,000 for the iQIYI popularity score. More importantly, we made remarkable breakthroughs in IP franchise development, moving beyond making individual hit titles to building evergreen IPs that drive growth across diverse formats. Strange Tales of Tang Dynasty stand as a stellar example as a flagship IP with 4 consecutive blockbuster seasons. It's influence has expanded from long to short and micro dramas as well as off-line experience. Our advertising businesses continue to demonstrate strong growth potential. Our overseas business has evolved into a sustainable and scalable second growth engine powered by accelerated organic momentum. In 2025, membership services revenue increased by over 30% year-over-year with growth accelerating to 40% in the second half of the year. The subscriber base reached an all-time high. At the same time, our experience business has entered a critical stage of development. For IP-based consumer products, we have built a dedicated in-house team and upgraded from a listening-only approach to a dual-track model, combining self-operated mechanism merchandise with licensing. This strategic shift strengthened our control our IP operation and amplifies monetization efficiency. On the offline experience front, we launched our first iQIYI LAND in Yangzhou on February 8, 2026, receiving positive initial reception. Two additional parks scheduled to open later this year. 2026 marks a key step towards scaled development as we build the experience business into a new engine for long-term value creation. Now let's dive into the details of our business performance in Q4. Starting with content, the cornerstone of our business. For long-form dramas, we secured the #1 viewership market share for Enlightent data driven by a robust slate of premium content and breakthroughs in serialized IPs that boost engagement and commercial results. Strange Tales of Tang Dynasty 3: To Changan marked our first title with 2 seasons exceeding a popularity score of 10,000. Among 2025 new releases, it ranked #1 in ad revenue and #2 in membership revenue. Following this momentum, the crime drama, The Punishment 2 further became the first title of 2026 to surpass 10,000 for the popularity score. It is also our second franchise with 2 seasons achieving this milestone. Shifting to movies, we maintained a diverse lineup with broad demographic appeal. For iQIYI originals, the summer's theatrical hit, The Shadow's Edge Bufeng Zhui Ying extended its offline success to the online demand. It not only topped all Q4 film releases by peak iQIYI Popularity Index score, but also became the highest rated domestic action crime film of the past decade on Douban. Additionally, our original online film, The Sixth Robber Yun Chao Da Jie An set a new all-time high for the popularity score within its category. For movies broadcasted on our platform, we retained the #1 viewership market share for 16 consecutive quarters. In Q4, we rolled out diversified titles, including The Warm Seat, That Two Lives [Foreign Language], The Animated Feature, Nobody, Lang Lang Shan Xiao Yao Guai; The Fantasy comedy, The Adventure [Foreign Language] and the female-oriented feature Flew Away [Foreign Language]. Furthermore, our innovative revenue sharing model designed to optimize returns for films with limited theatrical box office performance gained further traction. The Return of the Lame Hero, Bi Zhengming de Zhengming generated RMB 36 million in revenue -- in shared revenue, ranking first among all titles under this model. Turning to variety show, our dual focus on long-running franchise and fresh innovative IPs show market-leading performance in 2025. According to Enlightent data, 3 of our multi-season titles ranked in the top 10 most watched multi-season variety shows and 2 new releases ranked in the top 3 most watched new shows. Our originals continue to set benchmark. The Rap of China ranked its ninth season this year, cementing its position as China's longest running online variety IP. Additionally, Hi! Young Farmers 3, a spin of the developed beloved Become a Farmer franchise, featuring the boy group, reached an all-time high in its popularity score this season. Among brand-new originals, Wander Together Yuzhou shanshuo qing zhuyi exceeded 8,300 for popularity score. We also expanded IP values through merchandise partnerships with brands for Hi! Young Farmers 3, The Blooming Journey 2, Yilu Fanhua and Wander Together unlocking new revenue potential. Turning to micro dramas. We have expanded free content to over 70% of our 20,000 title library to broaden engagement. Our original portfolio is scaling to over 150 titles today, fueling record high membership and distribution revenues in Q4 from these offerings. Spin-off from Strange Tales of Tang Dynasty, The Chinese Detective [Foreign Language] and The Light On library [Foreign Language] both hit new highs for popularity school. Notably, over 70% of their debut viewers also watched the long-form serials, helping to extend the IP's life span. These releases not only boosted membership views, but also attracted top-tier brand partnership, moving well beyond the conventional performance ad model. Building on the momentum of the premium micro dramas, we are working into micro animations and business model centered on free content with a pipeline of over 10,000 titles in place, micro animation viewership and the time spent are growing rapidly. Beyond content, we further amplified our IP value from flagship marketing events. In December 2025, we hosted the annual iQIYI Scream Night, alongside a 2 days iQIYI Scream Carnival in Macau to honor the year's standout productions and talents. The event drew over 200 million on-site attendees and live stream viewers and brought together around 300 celebrities and industry partners. Next, let's dive into our 2026 content strategy and the exciting Q1 lineup. Starting with dramas, our Q1 slate includes between Love Between Lines, Da Xi, Swords into Plowshares, Tai Ping Nian, Born to Be Alive, Sheng Ming Shu, How Dare You, Cheng He Ti Tong, The Devil Between Us, Chu E, Our Dazzling Days, Sui Yue You Qing Shi, Pursuit of Jade, Zhu Yu and Love After You Yang, Zhong Qi Chu Nai For movies, we will meet audience demand with a diverse slate spanning top theatrical releases off and online movies. Q1 lineup features original online movies such as Northeastern Brother Season 3, Dong Bei Yong Ge and The Sing City [Foreign Language] alongside licensed titles such as [Foreign Language]. For variety shows, we are enhancing the long-term operation of multi-season IPs while exploring fresh and innovative new IPs. Key Q1 releases include Five Hearts Season 6, Wu Xi; Hit Song Season 2, You Ge; as well as new IPs such as Wonders Gather and Tonight Comedy Show, Jin Ye Xi You Xiu. For micro dramas, we will focus on creating original content with quality and innovation while enhancing operations, commercialization and deepening integration of AI. Q1 key titles include Return to a Better Tomorrow, Xin Yingxiong Bense; The Address of a False Noble Woman [Foreign Language] and The Amber hour [Foreign Language]. For animations, we will meaningfully expand our lineup of original Chinese animation compared with previous years. In Q1, our slate features original long-running series such as The Great Ruler, Da Zhuzai and Against the Gods Nitian Xieshen as well as popular IP, including How Dare You Season 2 and Ways of Crisis [Foreign Language]. For children's content, we will secure top-tier SSIPs, scale and original production and expand our AI-driven portfolio. In Q1, key offerings include a brand-new original title, Detective Baboo [Foreign Language] alongside licensed show such as PAW Patrol Season 11 Wangwang dui li dagong and the latest season of Pleasant Goat and Big Big Wolf Xi Yangyang Yu Hui Tailang. Moving on to the membership services. Over the past few quarters, our membership services revenue has shown consistent year-over-year recovery driven by diverse premium offerings. In Q4, members enjoyed the popular titles such as Strange Tales of Tang Dynasty 3: To Changan; Silent Honor, Chen Mo De Rong Yao; Fated Hearts, Yixiao Suige; Legend of the Magnate, Da Sheng Yi Ren, and Sword and Beloved, Tian di Jian Xin. We will revitalized our membership business through a range of operational initiatives. For example, we boosted new subscriptions and upgrades to the S-Diamond plan by offering inclusive products such as free Express package, which provided early access to families at no extra cost. In 2025, Express package were available for over 40 dramas. Additionally, we are strengthening member retention by emphasizing annual memberships during holiday promotions, e-commerce festivals and bundled partnership offers. To further increase the value of memberships, we introduced additional exclusive benefits, including 5 VIP events in the first quarter, featuring participation in offline show recordings, advanced screenings and the exciting iQIYI Scream Night. In particular, iQIYI Scream Night event was highly praised for exclusive perks like red carpet viewing privilege and live feed featuring their favorite celebrities. Moving on to advertising business. In Q4, brand advertising revenue growth both annually and sequentially, ad revenues from variety shows and our dramas both delivered double-digit annual growth, while core ad verticals such as food and beverage, Internet services and e-commerce and telecom services all recorded double-digit annual growth. Beyond long-form videos, our micro dramas and micro variety shows are gaining considerable attention from brand advertisers. For micro dramas, we have successfully engaged several renowned brands in 2025 through tailored content bundled sales that integrates product placements with theater branding and a string of collaborations. Likewise, our micro variety shows have received a strong market recognition, fostering long-term partnerships with multiple clients and driving impressive revenue growth. For commercial ads, we regained sequential revenue growth in Q4, driven by a healthier and more balanced advertiser portfolio. Revenue from small and midsized advertisers grew both annually and sequentially. By vertical, Internet services, e-commerce and financial services led growth. Additionally, we have deployed a proprietary large AI model for scaled ad delivery, leveraging deep thematic understanding that has boosted commercial rates. Moving on to technology. We introduced Nado Pro, our proprietary AI agent platform designed to revolutionize professional content creation by integrating leading global large models with iQIYI deep expertise in professional content production. Nado Pro efficient -- effectively streamlines the production pipeline from script evaluation to final generation. Currently in its close beta phase, Nado Pro is empowering our internal teams and select partners in a wide variety of professional content such as feature films, dramas, animation. In addition, Taodou World, our pioneering AI agent-based NPC platform continues to redefine entertainment experience. Users can now engage with over 1,700 NPC agents from our popular titles Song, Dialogue, Fan Fiction and Virtual Social Interaction. The platform creates powerful synergies with key content, delivers immersive emotion, connection with fans and extends the long-term value of our IP. Strong user adoption is translating into commercial success and revenue from Total War raising sharply year-over-year in 2025. In addition to pushing the boundaries of AI applications, we are leading the industry with cutting-edge virtual production technology. Our in-house developed IQ Stage system has meaningfully enhanced the efficiency of vehicle scene shots for the theatrical hit Pegasus 3, featuring Shen Teng. This achievement delivered unparalleled results with zero frame drops and zero aliasing representing the highest standard for virtual production in car scenes in China. At iQIYI innovation is at the core of everything we do with a portfolio of over 12,000 patent applications. We are proud to rank #72 among the top 100 Chinese enterprises for valid invention patents. In 2025 alone, we filed nearly 1,000 new patent applications, most of them driving achievements in AI across content development, production, broadcasting and offline experiences. Moving on to the business performance in regions outside of Mainland China. In Q4, we continue to deliver robust growth with membership revenue increasing by 40% annually. Markets such as Brazil, Mexico and Indonesia showed exceptional performance with membership revenue surging by over 80% annually. Our strong performance is driven by the growing popularity of our C-dramas, which have shown substantial annual revenue growth. Notably, Speed and Love, Shuang Gui was a standout hit in 2025, emerging as the best-performing the C-drama during the peak viewing period and toping popularity chart in 14 markets on our international platform. It performed exceptionally well in key regions like Thailand, Malaysia and Singapore, where it leads its category on Google Trends. Its success extended further with the spin-off variety, which became one of the most popular Chinese variety shows on our overseas platform this year. We are also ramping up production of local original content with strong user reception. The original Oops! I'm in Jail stood out as the top Taiwanese drama on our platform in 2025. Moreover, our Thai original variety show Running Man Thailand launched in February 2026 has secured exceptional brand advertising partnerships. Apart from long-form content, micro dramas captivated increased engagement among overseas audiences in Q4. Membership revenue from micro drama hit a new high, driven by originals such as Spring in the Palace and Wild Scene and licensed hits from China like Midsummer's Vendela. Our efforts in creating local original micro dramas have also started to show results with 5 titles premiered in December 2025, featuring local content for South Korea, Thailand, the U.K. and Indonesia. Among these, the Korean micro drama, Darling, Is It All Coincidence and the Thai micro drama, Catch Me If You Love Me have outperformed gaining notable popularity across and beyond our platform. In addition to content in Q4, we held 4 major offline marketing events in Thailand, Indonesia, Malaysia and Singapore featuring Chinese celebrities. This event amplifies the influence of our content and the commercial value of our platform, forged stronger partnerships and propelled the global reach of Chinese content. Moving on to Enterprise business -- moving on to experience business. While we are focusing on 2 core areas, IP-based consumer products and iQIYI LAND by leveraging our extensive IP assets, we aim to build a new engine for sustainable long-term growth. For IP-based consumer products, our self-operated merchandise demonstrated solid progress, highlighted by top-selling collectible cards from premium dramas like The Journey of Legend. For IP licensing, Strange Tales of Tang Dynasty 3: To Changan secured strong partnerships across food and beverage, beauty and outdoors. And Sword and Beloved set new sales records during its broadcast period. Looking ahead to 2026, we plan to grow our IP licensing business and expand our self-operated merchandise beyond collective cards to more categories. For iQIYI LAND, we adopt a light asset model by combining AI and XR technology with IPs. We create immersive experiences that are more efficient, flexible and require less space and investment than traditional theme park. Our first iQIYI LAND was successfully opened in Ganzhou on February 8. Our Kaifeng and Beijing locations are set to open later this year each incorporating unique local elements to deliver tailored experiences. Revenue will primarily come from ticket sales and on-site spending. Looking ahead, we aim to position iQIYI Land as a key sales channel for IP-based consumer products and a vital platform for maximizing the long-term value of our IP portfolio. In summary, in 2026, we will focus on 3 key strategic goals. First, we will strengthen our domestic core by enhancing the quality of original content, strengthening membership and advertising businesses. Second, we will aim to sustain strong growth in our overseas and experience business, building more robust engines for long-term expansion. Third, over the past several months, rapid advancements in AI large models worldwide has revealed a clear insight. The content production industry will be revolutionized within the next 1, 2, 3 years. This transformation will significantly cut production costs, lower barriers to professional content creation and boost both the quality and the quality content. This exciting changes will greatly benefit media platform, especially iQIYI. To seize this opportunity, we are dedicated to building a dynamic AIGC ecosystem and transitioning our platform from a centralized to a decentralized model. We look forward to sharing detailed initiatives at our upcoming iQIYI World Conference on April. Now let me hand it over to Ying Zeng for the financials. Ying Zeng: Thanks, Mr. Gong, and hello, everyone. Let me walk you through the key numbers for Q4. Total revenues for Q4 were RMB 6.8 billion, up 2% sequentially. Membership services revenue reached RMB 4.1 billion, down 3% sequentially due to seasonality. Online advertising revenue was RMB 1.4 billion, up 9% sequentially, primarily driven by the streaming content and e-commerce Double 11 campaign. Content distribution revenue reached RMB 787.7 million, up 22% sequentially, primarily driven by the increase in cash transactions. Other revenues were RMB 547.9 million, down 6% sequentially. Moving on to cost and expenses. Content cost was RMB 3.8 billion, down 5% sequentially as we adopt a more curated content acquisition strategy centered on quality. Total operating expenses were RMB 1.4 billion, up 2% sequentially. Turning to profit and cash balance. Non-GAAP operating income was RMB 143.5 million. Non-GAAP operating income margin was 2%. As of the end of Q4, we had cash, cash equivalents, restricted cash, short-term investments and long-term restricted cash included in prepayments and other assets at a total of RMB 4.7 billion. At quarter end, the company had a loan of USD 636.6 million to PAG recorded under the line item of prepayments and other assets. For detailed financial data, please refer to our press release on our IR website. Now I will open the floor for Q&A. Operator: Your first question comes from Xueqing Zhang with CICC. Xueqing Zhang: [Foreign Language] With recent upgrades in AI video generation models like Seedance, which are approaching production level quality. Could management share your view on how these advancements may impact iQIYI's business, particularly in content production and cost structure. What's your plan on leveraging AI video generation models? Tim Yu: [Foreign Language] Chang Yu: Our CEO, Mr. Gong is taking this question. Video generation models will substantially reduce the cost of producing long-form videos, shorter production time and lower the barrier to creation. This potentially will attract more new creators to this business and ultimately lead to more creations for the long-form video production. And this is very much beneficial to long-form video platforms like iQIYI, which means this will lead to increase in both the quantity and quality of long-form video content. Tim Yu: [Foreign Language] Chang Yu: Let me just discuss the impact of AI generation content for each content genres. For example, the micro animation is actually an AI-native content created entirely by AI. And for children's animation and also micro dramas, it has been demonstrated that large models can produce this content and reducing the production cost to 1/10 or less compared to traditional methods. For online films, animation and documentary, et cetera, these are rapidly permitted by AI-led production approaches as well. Among all these long-form video content, the most difficult ones to produce are the live-action content, for example, the theatrical films, drama series and variety shows. And in fact, these content have in part adopted AI in their production process and which the results have proven that these have significantly reduced the content cost -- content production cost. And based on our projections and estimations that we think the AI-led commercial film probably will emerge within the next 2 to 3 years. Tim Yu: [Foreign Language] Chang Yu: For iQIYI, we are actually placing our focuses on 2 areas to embrace these AI initiatives. On one hand, we have developed a Nado Pro an industry-specific AI agent for video content production. And on the other hand, we are working to build a new AIGC content ecosystem through various operation methods. Hopefully, that we can attract more creative talent under this new AI era. Operator: Your next question comes from Maggie Ye with CLSA. Yifan Ye: [Foreign Language] Can management walk us through company's content strategy for 2026 in more details? For example, how are we thinking about the key priorities across different genres, including drama, variety shows, film and micro drama, et cetera? And how are you thinking about the mix of self-produced content versus licensed one? Chang Yu: Thank you, Maggie. We will invite our Chief Content Officer, Mr. Xiaohui, to take this question. Xiaohui Wang: [Foreign Language] Chang Yu: Given the current volume of in production dramas, we will slightly reduce the number of dramas to be produced in 2026 and place greater emphasis on top-tier titles in terms of their quality. Xiaohui Wang: [Foreign Language] Chang Yu: In terms of the realistic and suspense and crime genres and these content categories have been iQIYI's strength in fact. And in these areas, we'll continue to maintain our innovation to create new content and more creative content and then maintain our advantage in these areas. Xiaohui Wang: [Foreign Language] Chang Yu: Starting in 2025, we have increased the supply of female-oriented content. For example, starting from the end of 2025, we started to roll out a new variety show called Winter Together. This is targeting for the new female users and also that the beginning of 2026, we also launched a female-oriented -- a young female-oriented drama called How Dare You. Xiaohui Wang: [Foreign Language] Chang Yu: For young male users, we have released multiple original animations this year, including the long-running series The Great Ruler, How Dare You Season 2 and a Way of choices. Xiaohui Wang: [Foreign Language] Chang Yu: With the support of new regulatory policies, we will step up exploration of innovative content, for example, the short-form drama series. Xiaohui Wang: [Foreign Language] Chang Yu: We recently introduced a unified revenue sharing policy across 8 major content categories, including dramas and films. And under this new framework, production partners return actually will be more directly linked to each title's revenue contribution and allowing outstanding work to earn higher returns. Xiaohui Wang: [Foreign Language] Chang Yu: Apart from the content category, for example, like theatrical films and drama series, like Mr. Gong mentioned earlier, we are actually gradually adopting and actually very proactively adopting AI-led production for categories such as micro animation, animation and micro dramas, while we're applying AI across other content categories to cut cost and also accelerate time line. Operator: Your next question comes from Lincoln Kong with Goldman Sachs. Lincoln Kong: [Foreign Language] My question is about the overseas business. How is our plan and strategy for 2026? Chang Yu: Thank you, Lincoln. We'll invite our Senior Vice President of International Business, Mr. Xianghua Yang to take this question. Please go ahead. Xianghua Yang: [Foreign Language] Chang Yu: In 2025, membership revenue grew by over 30%, with annual growth rate actually accelerating to 40% in the second half of the year. 2025 marked our highest growth rate year since the overseas business entered a stable operating phase. Xianghua Yang: [Foreign Language] Chang Yu: For 2026, our strategy is to sustain high revenue growth rate or even accelerate our growth rate. Xianghua Yang: [Foreign Language] Chang Yu: In terms of the content strategy, our market tailored content mixes actually have proven effective and continue to attract users. For C-dramas, they continue to expand their influence overseas. And the C-dramas will remain at the core of our overseas content portfolio, especially genres with strong cross-over appeal such as ancient costume, romance and contemporary romance. Xianghua Yang: [Foreign Language] Chang Yu: I am sorry, one more thing. Yes, go ahead. Xianghua Yang: [Foreign Language] Chang Yu: For content, we actually ramp up original production and local content licensing in Thailand, Malaysia and Indonesia. And in terms of operations, AI-powered translation and dubbing actually have significantly improved efficiency, reduced cost and accelerated the content release schedule. And going forward, we will fully leverage social media channels and use AI to generate promotional efforts, enabling low-cost, high-efficiency content distribution and user reach. Meanwhile, we will continue online and offline advertising to further amplifying the influence of C-drama. And last but not least, we will continue to promote content and strengthen our brand presence in international markets through initiatives such as celebrity sign-ups and also offline events. Operator: Your next question comes from Rebecca Xu with Morgan Stanley. Rebecca Xu: [Foreign Language] My question is about iQIYI LAND. Could management share the operating performance of iQIYI LAND, Yangzhou since its opening. Also, can you please share the 2026 plan for this business? Chang Yu: Thank you, Rebecca. I will invite our CEO, Mr. Gong to take this question. Tim Yu: [Foreign Language] Chang Yu: Our very first iQIYI LAND actually opened in Yangzhou on February 8 and offers 7 core immersive experiences, including stage performances, multisensory theaters, interactive light and shadow spaces. Tim Yu: [Foreign Language] Chang Yu: The first iQIYI LAND opened about 20 days since its opening and during which also we experienced the Chinese New Year holidays. And actually, the performance and the feedback actually are meeting expectations, which can be reflected in the ratings on major OTA platforms. And the average points are 4.8 out of 5. And actually recently, the latest rating exceeded -- reached 4.9 for certain platforms. Tim Yu: [Foreign Language] Chang Yu: From the opening until now, the visitor numbers have continued to grow. And based on the actual operations, we observed that this experience really offered fun for all ages. We see participants ranging from children as young as 4 to 5 years old to seniors in their 60s and 70s. Tim Yu: [Foreign Language] Chang Yu: We are looking at the potential for a 1 to 2x increase in peak single day revenue during the following peak period. For Yangzhou location actually has its special areas and for the spring season, especially March and April is a peak travel season for Yangzhou. And also upcoming, we have the Labor holiday in May, the summer months of July and August and also the National Day holiday in October and all these key holidays and periods could potentially boost the revenue performance compared to the first 20 days. Tim Yu: [Foreign Language] Chang Yu: And the expected growth will come probably from 2 major areas from a more deeper operations to a more finer detailed operation for the entire iQIYI LAND and also the increased efficiency for iQIYI LAND as well. Tim Yu: [Foreign Language] Chang Yu: Currently, the average transaction value for consumer products at iQIYI LAND is about RMB 100. We think there's potential for growth in the future. We will try to load more products in the future and also to extend to other content categories as we do a more refined consumer product team operation. Tim Yu: [Foreign Language] Chang Yu: And for this year, we will focus more on the self-operated IP consumer products and the operations will be strengthened this year, and this will lead to a revenue potential growth of 100% this year. Operator: Your next question comes from [indiscernible] with Guangfa. Unknown Analyst: [Foreign Language] Chang Yu: We'll invite our international business leader to take this question. Xianghua Yang: [Foreign Language] Chang Yu: In terms of our content, our brand or our slogan is beloved Asian content. So we focus not only Chinese content, but also the Asian content as well. Of course, Chinese content, which we call people or C-drama is our foundation because all the content has been already produced for our domestic business. So we only have to incur some of the dubbing and also translation, which is the cost with AI is much more efficient and controllable. But in addition to C-drama and also Chinese content, we also have, for example, Japanese animation, also Korean dramas and also the local content, for example, for the Thai region, Malaysia and also Indonesia. So this is how we set apart from many of the Western players in overseas. And for example, the Netflix and other houses, they host a lot of the Western content, whereas for us, we are the home of the beloved Asian content. Xianghua Yang: [Foreign Language] Chang Yu: Also, I want to add real quickly in terms of another content channel called micro drama. We actually -- this is something we rolled out end of last year. And in terms of the content viewing time contribution, micro drama already ranked us #2 content categories of the overseas platform and has been growing quickly and also very recently for the Chinese New Year, we have experienced rapid growth as well and reached a new high. So this is something else also that set us apart from the Western players in overseas market. Xianghua Yang: [Foreign Language] Chang Yu: And in terms of your question regarding ARPU and also membership performance. For ARPU actually for each region, it's actually different. Overall speaking, we think we're at the midrange of the price tier. For each different region, we expect a different price point. For areas more developed similar to the Western spending powers, the ARPU is a bit higher from the China domestic region. And for regions for the developing regions, for example, like the Southeast Asia, the average ARPU is a bit lower than the China domestic region. But overall speaking, I would say that the overseas ARPU will be greater or more than the China domestic ARPU. Xianghua Yang: [Foreign Language] Chang Yu: And in terms of the membership retention, in overseas business, we adopt the premium model, which is the free plus paid content model. And in areas such as more developed regions, I will say that this is very much similar to their spending habit and viewing habit, the retention is actually a bit better than domestic areas. But in some of the areas such as the developing regions, the retention performance is a bit lower. But overall speaking, the overall membership retention is similar to domestic level. Xianghua Yang: [Foreign Language] Chang Yu: In terms of we're adding the performance for the financial aspect. Overall speaking, the free cash flow now is positive. But in terms of the P&L performance for operating income because there is some financial accounting treatment that we still have to sort out. Now we haven't disclosed the exact numbers, but we will share more insights as we have more clarity. Operator: There are no further questions at this time. I'll now hand back to management for closing remarks. Chang Yu: Thank you, everyone, for joining the call today. And if you have any further questions, please do not hesitate to contact us. Thank you. Tim Yu: Thank you. Bye-bye. Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Hello, everyone. Thank you for attending today's International Seaways, Inc. Fourth Quarter 2025 Earnings Conference Call. My name is William, and I will be your moderator today. [Operator Instructions] At this time, I would now like to pass the conference over to our host, James Small, General Counsel with International Seaways. James, you may go ahead. James Small: Thank you, and good morning, everyone. Welcome to International Seaways Earnings Call for the Fourth Quarter and Full Year 2025. Before we begin, I would like to start off by advising everyone with us today of the following. During this call and in the accompanying presentation, management may make forward-looking statements regarding the company or the industry in which it operates, which may address, without limitation, the following topics: outlooks for the crude tanker and product tanker markets; changing trading patterns, forecasts of world and regional economic activity; forecasts covering the production of and demand for oil and petroleum products; the effects of ongoing and threatened conflicts around the world, the company's strategy and business prospects, expectations about revenues and expenses, including vessel, charter hire and G&A expenses; estimated future bookings. TCE rates and capital expenditures, projected dry dock and off-hire days, newbuild vessel construction, vessel sales and purchases, anticipated financing transactions and plans to issue dividends, economic, regulatory and political developments in the United States and globally. The company's ability to achieve its financing and other objectives and its consideration of strategic alternatives and the company's relationships with its stakeholders. Forward-looking statements take into account assumptions made by management based on various factors, including management's experience and perception of historical trends, current conditions, expected and future developments and other factors that management believes are appropriate to consider in the circumstances. Forward-looking statements are subject to risks, uncertainties and assumptions, many of which are beyond the company's control that could cause actual results to differ materially from those implied or expressed by the statements. Factors, risks and uncertainties that could cause the company's actual results to differ from expectations include those described in our annual report on Form 10-K for 2025 as well as in other filings that we have made or in the future may make with the U.S. Securities and Exchange Commission. Now let me turn the call over to Lois Zabrocky, our President and Chief Executive Officer. Lois? Lois Zabrocky: Thank you very much, James. Good morning, everyone. Thank you for joining International Seaways earnings call for the fourth quarter and full year of 2025. On Slide 4 of the presentation, which you can find in the Investor Relations section of our website, net income for the fourth quarter was $128 million or $2.56 per diluted share. Excluding special items, adjusted net income for the fourth quarter was $122 million or $2.45 per diluted share, and adjusted EBITDA was $175 million. Today, we also announced the declaration of our largest ever quarterly dividend, which is a combined $2.15 per share to be paid in March. After this payment, Seaways will have paid over $1 billion in returns to our shareholders since 2020, a milestone that we are very proud of. As you can see in the upper right section of the slide, the dividend represents a payout ratio of 87% of our fourth quarter adjusted net income and is our sixth consecutive quarter with a payout ratio of at least 75%. We continue to believe in building on our track record of returning to shareholders as part of our consistent and balanced capital allocation strategy. We also have our $50 million share repurchase program in place until the end of 2026 as share repurchases remain an option for Seaways as an addendum to our payout ratio. On the lower part of the page, we are consolidating Tankers International, the leading VLCC pool by acquiring the remaining 50% interest and expanding Tankers International with a Suezmax platform. We took delivery of the Seaways Gibbs Hill and she delivered into Tankers International at the end of December. We paid $119 million for this high-spec scrubber-fitted VLCC after disposing of 10 older vessels with an average age of 18 years for proceeds of $131 million. So far in 2026, we've continued this trend by selling another 7 older vessels for proceeds of $216 million. Our remaining 4 LR1s will deliver in 2026, completing our newbuild program, which is fully financed. These 2 fundamental reasons are why we were able to extend our dividend beyond our 70% payout ratio. With only $30 million of Seaways cash needed to take delivery of the LR1s as well as the impeccable state of our balance sheet, which you can see on the lower right hand of the page, we believe this dividend provided great returns for our shareholders. We review our capital allocation strategy quarterly with our Board, and we remain steadfast in our commitment to shareholders. We have $724 million in total liquidity, which includes nearly $170 million in cash and $560 million in undrawn revolver capacity. During the fourth quarter, we repaid our leases, as previously announced, of about $258 million. This was then followed by the third quarter's bond issuance for $250 million, which unencumbered 6 VLCCs and lowered our cost of debt. Our net loan-to-value is below 13% and our spot cash breakeven rate is less than $15,000 per day. Turning to Slide 5. We've updated our standard set of bullets on Tanker Demand Drivers with subtle green up arrows next to the bullet representing positive influences for tankers, the black dash representing a neutral impact and red down arrows, meaning the topic is not positive for tanker demand. Without reading these bullets individually, we believe demand fundamentals are solid and continue to support a constructive outlook for seaborne tanker transportation. Oil demand growth remains healthy at more than 1 million barrels per day of growth projected for both 2026 and 2027. OPEC+ is supplementing the 1 million barrels per day of non-OPEC production increases by unwinding their own previous cuts. In the lower left-hand chart, both the EIA and the IEA are forecasting supply to exceed demand in 2026. We experienced some of this during the fourth quarter, where there was a substantial amount of oil on the water, much of which we understand to have done sanctioned barrels. However, as we look ahead, the market has not reacted to this projected oversupply. You would expect a contangoed structure market or at least a drop in the absolute price of oil. However, as you can see in the middle bottom chart, the market structure remains backwardated and absolute prices remain elevated. We believe China to be stocking up as they have built substantial storage capacity as seen in the lower right-hand chart. Another element driving the oil market dynamics is the geopolitical environment. The U.S., Iran tensions remain elevated. The Russia-Ukraine conflict has not been resolved. The United States started the year with upheaval of the Venezuelan government and their oil production. The geopolitical intensity on tankers remains strong, and we continue to work through a multitude of scenarios that constantly impact our business. On the supply side, on Slide 6 of the presentation, we're starting to see the enforcement of sanctions that are affecting our business, which provides support for the compliant fleet. When we take into consideration sanctioned vessels, the order book remains well below replacement of the fleet. On the bottom right-hand chart, we reflect vessels turning 18 or older by the end of 2029 when a majority of the order book will have delivered. We also layered in currently sanctioned vessels into the dark bars on the chart. These removal candidates to the compliant trade remain a multiple of those vessels that are on order, as noted in the chart as the light bar. This remains one of the most compelling cases for tanker shipping and the bottom line is that even with 15% of the fleet on order, there is simply not enough tankers to cover removal candidates for the compliant trade. We believe these fundamentals should translate into a continued up cycle over the next few years, and Seaways remains well positioned to capitalize on these market conditions. We will continue to execute our balanced capital allocation strategy to renew our fleet as well as to adapt to industry conditions with a strong balance sheet while returning to shareholders. I will now turn it over to our CFO, Jeff Pribor, to provide the financial review. Jeff? Jeffrey Pribor: Thanks, Lois, and good morning, everyone. On Slide 8, net income for the fourth quarter was approximately $128 million or $2.56 per diluted share. Excluding special items, our net income was $122 million or $2.45 per diluted share. On the upper right chart, adjusted EBITDA for the fourth quarter was $175 million. In the appendix, we provided a reconciliation from reported earnings to adjusted earnings. On the lower left chart, I would point out that our TCE Revenues from crude and product have been evenly balanced over the past year, but the crude segment outperformed products in Q4 with the return of VLCCs as the leader in tanker earnings. While our revenue and expenses were largely within expectations for the year, fourth quarter vessel expenses were higher than our guidance due to timing of stores and spares at year-end. Lightering business in the fourth quarter had around $7 million in revenue and expenses. Turning to our cash bridge on Slide 9. We began the quarter with total liquidity of $985 million, composed of $413 million in cash and $572 million in undrawn revolving capacity. Following along the chart from left to right on the cash bridge, we had $175 million in adjusted EBITDA for the fourth quarter, plus $19 million in debt service and another $23 million of dry dock and capital expenditures. We therefore achieved our definition of free cash flow of about $135 million for the fourth quarter. We received $36 million in proceeds from the sale of vessels in Q4, which offsets the remaining expense of $107 million for the purchase of the Seaways Gibbs Hill, a 2020-built VLCC which delivered in the fourth quarter. We also paid about $6 million in LR1 newbuilding installments net of financing. As previously announced, we repaid the sale leasebacks on 6 VLCCs for $258 million, deploying the proceeds from last quarter's bond issuance. The remaining $42 million represents our $0.86 per share dividend that we paid in December. The latter few bars reflect our balanced capital allocation approach where we utilize all the pillars, fleet renewal, balance sheet optimization and returns to shareholders. In summary, the result of our activity this quarter yields a net decrease in cash of $261 million. This equates to ending cash of $167 million with $557 million in undrawn revolvers for total liquidity of nearly $724 million. Moving to Slide 10. We have a strong financial position detailed by the balance sheet on the left-hand side of the page. Our liquidity remains strong at $724 million. We have invested about $2 billion in vessels at cost on the books, which are currently valued at about $3 billion. And with under $400 million of net debt at the end of the fourth quarter, our net loan-to-value is approximately 13%. In the lower right-hand table of the page, we have included a summary of our debt profile. Gross debt at the end of 2025 was $578 million. Mandatory debt repayments through the end of 2026 are about $30 million. Our debt is 100% fixed or hedged, which contributes to our cost of debt being below 6%. We continue to enhance our balance sheet to maintain the financial flexibility necessary to facilitate growth as well as returns to shareholders. Our nearest maturity in the portfolio is in until next decade. We have 31 unencumbered vessels, and we have ample undrawn RCF Capacity. We continue to explore ways to lower our breakeven cost even more to share in the upside with substantial returns to shareholders. On the last slide that I'll cover, Slide 11 reflects our forward-looking guidance and book-to-date TCE aligned with our spot cash breakeven rate. Starting with TCE fixtures for the first quarter of 2026, I'll remind you that actual TCE during our next earnings call may be different. But in the first quarter so far, we are continuing to see the impacts of the elevated rate environment we began to see in the second half of 2025. We currently have a blended average spot TCE of about $50,900 per day on 71% of our first quarter expected revenue. On the right-hand side, our expected 2026 breakeven rate is about $14,800 per day. Based on our spot TCE Booked to-Date and our spot breakevens, it looks like Seaways can continue to generate significant free cash flows during the first quarter and build on our track record of returning cash to shareholders. On the bottom left-hand chart, we provide some updated guidance for our expenses in 2026. You'll notice that we've added a few million dollars per quarter to our projected G&A. These increases represent the impact of consolidating Tankers International into INSW's financials. I would also like to note that we've added guidance for what we are referring to as other revenues, which are TI commissions that offset this increase. We also included in the appendix our quarterly expected off-hire and CapEx. I don't plan to read each item line by line, but encourage you to use these for modeling purposes. That concludes my remarks. I'd like to now turn the call back to Lois for her closing comments. Lois Zabrocky: Thank you so much, Jeff. On Slide 12, we have provided you with Seaways investment highlights, which we encourage you to read in its entirety, and I will summarize here briefly. Over the last 10 years, International Seaways has built a strong track record of returning cash to shareholders, maintaining a healthy balance sheet and growing the company. Our total shareholder returns represent over 25% compounded annual return. We continue to renew our fleet so that our average age is about 10 years old in what we see as a sweet spot for tanker investments and returns. We've invested in a range of asset classes to cast a wide net for growth opportunities and to supplement our scale in each class we operate in larger pools. We aim to keep our balance sheet fortified for any downturn in the cycle. We have over $550 million in undrawn credit capacity to support our growth. Our net debt is under 13% of the fleet's current value, and we have 31 vessels that are unencumbered. And lastly, our spot ships only need to earn collectively under $15,000 per day to breakeven in 2026. At this point in the cycle, we expect to continue generating cash that we will put to work to create value for the company and for our shareholders. Thank you very much. And with that said, operator, we would now like to open up the lines for questions. Operator: [Operator Instructions] Our first question comes from the line of Liam Burke with B. Riley. Liam Burke: Lois, I had a question on your MR partial fixtures for the first quarter '26. Your prepared comments, you mentioned that the refinery margins are at 5-year averages, but it doesn't seem that compelling to warrant the type of TCE rates that you've got fixed for first quarter. Is there anything out there in the macro that's driving up those rates? Lois Zabrocky: Well, geopolitically, of course, now EU is not going to import refined Russian product. And that had previously been allowed from India. And so there's definitely a period of adjustment here that benefits the MRs versus the bigger clean LRs that normally would do that move, right? So that helps us logistically. And then Derek Solon, our Chief Commercial Officer. Derek, maybe talk about diesel spikes or the winter? Derek Solon: Thanks, both. I guess I would say, firstly, your main geopolitical point seems to be one of the big drivers of the MR rates being as strong as they are. Like you said, it's less refined product coming in from India that came from Russian crude. So that was previously coming in on bigger product carriers. So that's the benefit of the MRs. And also when you see less refined products coming from Turkey, which was previously refined from Russian crude, that's all coming from Atlantic -- a lot of that's coming from Atlantic Basin. So that's U.S. Gulf exports back to Europe, which is really helping the MRs. And of course, we've had a pretty challenging winter here in the Northeast as many of the listeners will know. And so when you get these weather delays, you get a lot of ships being disutilized or stuck in ports. So that sort of exacerbated the supply issue, which has helped us. Liam Burke: Great. And then Lois, you have been pretty nimble moving from spot to time charters. It looks like that you're pretty comfortable that rates -- spot rates are going to be healthy for the foreseeable future. Lois Zabrocky: Yes, absolutely. The spot market is just going from strength to strength. This is not to say that we wouldn't layer in some time charters as we just see these outsized numbers, but we're going to be judicious. We -- I mean, part of what we hope to value add is to remain open to -- when you see the high utilization and then the geopolitical laid on top of it, even though we can't control that, to remain open to the possibilities of this market, which has just continued to impress us. Operator: Our next question comes from the line of Sherif Elmaghrabi with BTIG. Sherif Elmaghrabi: At this point, the VLCC fleet is looking pretty modern and you guys have refreshed a good chunk of your MRs. Just looking across your diversified fleet, there's still some older vessels maybe on the Suezmax side. Can we think about that as the next up on your renewal campaign? Or maybe more broadly, where are you seeing the most attractive opportunities right now? Lois Zabrocky: Yes. I'll flip it over to you, Derek, in a second. But we would definitely say, of course, you see us taking the remaining 4 of our 6 LR1s. The first 2 are already operating in the fleet, and that was just incredibly well timed on that renewal, really critical sector for us. And you saw us bring in a modern VLCC right before the market went crazy here. We still like the lineup of the big ships. And while recognizing that right now, the market, as I said, is going from strength to strength. I don't know if you want to add anything to that, Derek, or if that cuts it. Derek Solon: No, Lois. Thank you. That's the same answer, I get. Sherif Elmaghrabi: And then one for Jeff. You guys took the opportunity to exercise some repurchase options and that's all good stuff that lowers your cost of debt. Can you remind us just if there are any other repurchase options coming up on your remaining sale-leaseback vessels? Jeffrey Pribor: We've got flexibility on all of the remaining debt that we have that's structured as leases. So we have complete flexibility. But a real theme of 2025 was that we put our balance sheet in a place where we want to be. So I don't see us exercising those options, which is essentially additional deleveraging beyond where we are today because we like where we are, and that allows us maximum flexibility to do things like we did, which was increase our dividend. Operator: Our next question comes from the line of Omar Nokta with Clarksons Securities. Omar Nokta: Just a couple of questions on the company specifically. Obviously, seeing as low as you were just talking about, we're seeing rates go from strength to strength. And typically, when VLCCs hit this $200,000 level, it's almost like the culmination of some short squeeze, but it feels like this is a bit stickier. Just wanted to ask in terms of the your current VLCC footprint. You have the 3 VLCCs on contract to Shell that are -- that do have a profit share element. Can you just remind us how that profit split works on those ships? Lois Zabrocky: Absolutely. Derek, why don't you describe how that's rewarding INSW right now? Derek Solon: Okay, Omar. The profit shares that we have on the Shell VLCCs, we have a base rate that we've had since the beginning of the time charter. And then there's a market element that is added to that based on the spot market and the Baltic graph. And then from there, we split the profits above that base rate, 50-50 with our charterer. So in a market like this, it will be quite beneficial. Omar Nokta: Okay. So there's no full upside, there's no cap at the top in terms of where the spot rate. There's no color, for instance, on that. Derek Solon: Great question, Omar. Thanks. But no, there's no cap on top. Omar Nokta: Okay. And then maybe I know this is obviously a Board decision. You stepped up the dividend here to that 87% threshold. The past maybe 4 or 5 quarters, you were around that 75% level. Is this a new range for us to expect going forward, especially just given the earnings power and the liquidity and the overall leverage or low leverage you have? Is 87% something we should kind of think about as a new base level going forward? Lois Zabrocky: Omar, I'll start on that one and let Jeff -- that's where he lives. But we're super excited. This is our highest dividend return to shareholders, and this follows 6 quarters of at least 75%. And that's a lot of that's testament to the balance sheet. And Jeff, do you want to add to that? Jeffrey Pribor: Sure. Thanks, Lois. Yes, Omar, the definition of a high-quality problem is how to keep dividend providing a really good yield when your stock price is going up steadily. So I'm -- we're super pleased to have this dividend, as we noted, the one that puts us over the top over $1 billion in dividends in total. That's number one. Again, we -- I think you know because we've talked about it a lot, we really focus on free cash flow, right? And what we looked at was, hey, as we said, the balance sheet is in good shape. We don't need to allocate more cash to deleveraging. We had the $30 million of LR1 payments that Lois mentioned in her remarks was what we needed for fleet renewal this quarter. So we were able to direct all the rest of the free cash flow to a dividend. And that sort of worked out to be 215 or 87%. Again, we focus first on cash, but we know we're always going to lean into increasing the dividend, and we know people want to know how that is as a payout ratio. So yes, it's the highest yet. It represents a over 12% yield on an annualized basis. We will -- it's part of the pattern. As I said, we'll lean into always being able to share as much as we can with the shareholders. Operator: [Operator Instructions] Our next question comes from the line of Chris Robertson with Deutsche Bank. Christopher Robertson: Just in terms of the current market strength, what is your assessment around the impact that Sinokor Maritime has had on the VLCC segment in particular? And do you think that this impact is enduring or fleeting? Lois Zabrocky: Yes. So we only like to opine about ourselves. But without a doubt, the -- I would call it a restructuring of the ownership base where always tanker owners are highly, highly fragmented. So the fact that you now have a major player consolidating legitimate VLCC tonnage is a true strength in our market. And that indeed, as we've combined Suezmax's now into Tankers International, that is -- offers owners also a footprint to keep that commercial exposure. And come into a position of strength. So we really are excited about what we're seeing there. It is a fundamental shift in the ownership base and again, in a highly, highly fragmented market. Right now, you've got over 150 VLCCs on the OFAC sanctions list, players that are not maintaining the ships that are trading rogue barrels and the fact that in that market that this owner has recognized, now is the time to gather legitimate unsanctioned tonnage and really take advantage of the marketplace. It's that staying power, and it's very, very strong leadership and exciting to all the VLCC owners. Christopher Robertson: Yes. Interesting, Lois. Just kind of building on that, given the impact that it has had and owners are seeing the impact, what are your thoughts around further consolidation in the industry, either on the crude side or the refined product side? Do you think we'll see more of it now that these benefits are pretty clear? Lois Zabrocky: I think so. And I also would say that our customer base recognizes this. These are -- you see a shift from the charters, the customers into recognizing and making sure that they have access to tonnage. So this just provides more drive and demand for owners where I think when the market looks like it doesn't have as high a utilization, customers can be more relaxed. So you're seeing customers saying, "Hey, I need to make sure that I have access to vessels" And all of that structurally is super positive for tanker owners. Operator: Thank you. At this time, I would now like to pass the conference back over to Lois for any closing remarks. Lois Zabrocky: We just want to thank everyone for joining us, International Seaways for our Q4 and full year 2025, and we look forward to talking to you next quarter with strong tanker markets. Thank you. Operator: Thank you. That will conclude today's conference call. Thank you for your participation. You may now disconnect your lines.
Eivind Roald: My name is Eivind Roald, and I'm the new CEO of Norse Atlantic Airways from December last year. I'm here to present the Q4 results together with our CFO, Anders Jomaas. Before I start, I will give a quick introduction to my background, and I'll also share some reflections on why I took the position as the new CEO. I have more than 30 years of experience from various executive positions in Scandinavian companies. I've been leading the turnaround in Hewlett Packard as Managing Director for many, many years. I was the Executive Vice President and Chief Commercial Officer in Scandinavian Airlines for many years, and I've also been leading European software companies and worked for several PE companies as well. When I accepted the position for this job, I was discussing and looking into Norse. And I see that this company has a very good foundation for actually becoming a very profitable company in the future. First of all, they have a very attractive leases agreement that goes for many years from now. They have a very competitive product that reach the market, and we see that with all the high load factor we have during the whole -- all the quarters as well. The balanced model with more than 50% of the aircraft now outsourced to Air IndiGo is also giving us an unforeseen revenue stream and indirectly also hedging the fuel that is an important part of the cost focus these days and an industry-leading ancillary sales -- ancillary sales that gives us a good foundation for actually increasing the revenue as we go in the future as well. We do also see some need for improvements when I look into the company. I think we need an even more clear business idea what we should focus on. We need to optimize the network to make sure that we reach the right destination and also the utilization of our aircraft. We need to accelerate the commercial initiatives, and we also need to ensure that we have flexible crew agreements to make sure that we can meet the different needs in the market. The needs for a more simplified organization and also taking more cost out is also an important part of what we needed to work on. And we have seen during the last months that we are struggling a little bit on the way we communicate towards our customers, and that's needed to be a focus as well. Cost will be an important part of the focus going forward. And basically, that was also the foundation for why I thought this was a very interesting opportunity to sign on. So let's look at some of the figures for Q4. I will try to focus on actually what's an important part of the Q4. The Q4, as such, is a big -- is a quarter with 2 months where we struggle a little bit on October, November, and then we saw the turning point came in, in December. The decision that the company took in 2025, where they decided on the ACMI agreement with Air IndiGo, where they decided also new network to focus on more to Asia with Thailand and as the most important part has now started giving good results. And that the turning point that came actually in December. December was a profitable month for Norse. And we also -- even though that we saw some irregularities during that month and have some extra cost that is a onetime cost, that month came out as a positive month. But the Q4 as such was a significant better revenue from $123 million to $156 million in revenue. The EBITDAR came in on a minus $3.1 million and an EBIT on minus $22 million. The load factor is still high during the whole month, whole quarter. And if we take a look at the 2025 figures, we see that it's a significant improvement from 2024 now with an EBITDAR on plus $56 million and an EBIT on minus $20 million, significant improvement from almost minus $100 million in 2024. We also have a huge impressive growth on the passenger side from $1.4 million to $1.8 million, and the load factor is still quite high. So the turning point we're talking about in December is an important part for investors to look into. And to give you some few more data points to have in mind, we had in December specifically a passenger growth of 22% with a production of plus 14%. And the TRASK growth was for that month, 6%. And we communicated in our traffic report for January that the TRASK increased by 20%. And later in the presentation, I will come back to say something about what that number is in February and also in March. The turning point came after the decision that the company took in 2025. They said they took strategic measures, they have now implemented the measures, and we now see the results. And that should be the main focus for investors going forward, not to look too much into Q4 as such, but more looking into the turning point in December and look forward. And if you look at December on the TRASK side, we see that November came in on plus 7% year-over-year, December 6% and then January, 20%. And as I said, I will come back to indicate a little bit more about February and March later in the presentation. On the ACMI side, we have completed now the delivery of the sixth aircraft to Air IndiGo. And as we have communicated earlier, we have a minimum revenue of 350 block hours per month. And as you see on the graph here, we are way above that for every month. And that gives us a more focus and more safe revenue side from Air IndiGo the coming year as well, an important part of having a better understanding of how the year will really come out. So with that, I will give the word to our CFO, Anders Jomaas, that will take us through some of the numbers in more detail. Anders Jomaas: Thank you, Eivind, and hello, everybody. I will give you some more insight into the Q4 numbers and the '25 per se. So if we start now looking at Q4 '25 and looking at the passenger numbers, we see that we fly a lot more, we have record high load factors. We are seeing 96%. Passenger numbers also increasing. We see that we go from 339,000 passengers Q4 '24 to more than 400,000 this quarter. Revenues keep coming up. Although EBITDAR and EBIT are lagging somewhat, we would like to see those higher. But if we look at the quarter -- sorry, the full year of 2025, we see the same trends. We see increasing number of flights. We see load factor increasing. We see passenger numbers increasing. Revenues are significantly up. And for the full year, we also see the improvement on EBITDAR and EBIT, where we have EBIT of $56 million -- sorry, EBITDAR of $56.5 million for the full year compared to $0 for '24. So this is the trajectory we're on of gradually increasing, and Eivind will also come back to our outlook for this year. Some key terms to note when we talk -- Eivind, you talked about TRASK, which is total revenue per available seat kilometer. This is important unit metric when we do our reporting. Similarly, CASK is cost per available seat kilometer. And it's basically the difference between the 2 that is important for us. So we see in this quarter that we improve TRASK by 3% -- sorry, for this year, we see that we improve TRASK by 3%. We reduce CASK by 10%, and we do that in an environment where we fly 20% more. So these are the important drivers for what's ahead for Norse. Looking at the quarter itself, we are -- we now see that we are able to also increase passenger revenue. The revenue per passenger is up 10% year-on-year from $343 in average per passenger to $379 this quarter. We also have a big belly on this aircraft and volumes have been relatively stable, a little bit lower, but we see higher prices also on the cargo side, which is an important contribution to the overall profitability of our company and our industry. I even mentioned that we fly a lot more to Thailand, Southeast Asia. These routes have been particularly strong in terms of cargo. We transport salmon going east, and we have a lot of e-commerce, especially around November, December season going back. Looking at Q4 in particular and focusing first on the mid-section of this graph, where we say that here you will see that we fly a lot more. ASK is available seat kilometer, basically how much production we deliver. So we produced 44% more seat kilometer this quarter compared to same quarter last year. The composition last year was 80-20 in terms of network and ACMI. Now it is shifting 62:38. And going forward, you can increase -- you can expect this to balance and be even more like 50-50-ish. So we produce a lot more, but we also produce more ACMI. Why this is important is that the cost base on ACMI is lower, meaning we do not pay for the cabin crew. We do not pay for the fuel. So this is, in fact, an implicit fuel hedge. And when we have 6 aircraft delivered to IndiGo, we actually have fuel hedged for 6 out of 12 aircraft. And we also do not pay for the airport charge and the handling. So the lower cost base also means that we -- the revenue is in U.S. dollars lower, but the margin is very healthy on the ACMI business. So if you look at the CASK, it has actually reduced from 4.5 to 3.6. The revenue TRASK is also down, but the important margin is increasing from 0.3 to 0.5. So actually a 70% increase in margins due to this shift we're seeing. We are continuously working on reducing CASK. Eivind mentioned there are several cost initiatives going on in the company. This will continue to go through the year and the coming years, continuous focus. But we are happy to see that we are reducing by 19% quarter-over-quarter, partly driven by the shift to ACMI, but also we see that we are able to reduce costs on certain important areas. If we look at the numbers, Eivind mentioned a few, I'll go a little bit more in detail on some of them. Revenue for Q4 was $156 million, up from $123 million same quarter last year. Personnel expenses, $43 million, which is driven by higher production, some general wage increases, some special one-offs, but also worth noting that FX has gone against us somewhat in the quarter, so approximately $2 million of the personnel expense increase is related to FX only. Fuel is a derivative of how much we fly. We have flown 11% more in the quarter, but also fuel prices have been higher, 7% higher in Q4 '25 than in Q4 '24. Other OpEx is mainly technical maintenance and again, a clear derivative of how much we fly. There is a one-off expense in there related to the engine incident in Q3 last year of $4.5 million, which will not be there in the coming quarters. SG&A, also a focus, glad to see that coming down, but there's further potential for further reductions also there. EBITDAR for the quarter, negative $3 million, EBIT negative $22 million and bottom line, $33 million loss for the quarter. Looking very quickly at the full year '25, revenues of $734 million and a positive EBITDAR of $56.5 million, leading to a loss of -- sorry, $61 million for the year. In terms of cash flow, we see that there is a negative cash flow from operations in Q4. Many reasons for that. We have talked about the cost base. We talked about the one-offs. We talked about the FX, continuous focus area. Working capital is reducing, and that is reflecting also the transition to ACMI and Charter. Financing cash flows of $7.5 million is related to a large extent to the equity raise we did in October, relatively small equity raise with net proceeds of $11 million, but that is in that number. Free cash end of the quarter, $18 million. Looking at the balance sheet. And for those of you who have followed us for a long time, you know that one to watch is the credit card receivables, which is $72 million. So it actually means that the acquirers as they call, or the credit card companies, they are sitting on $72 million of our funds. We are working on streamlining the whole payment flow in our company and to gradually reduce that. You'll see that it has come down, but we will continue to work on good solutions to make sure that we collect funds even earlier as we move forward. Equity for the company is negative $260 million, but keep in mind that as much as $175 million of that is noncash lease effects. So that was a lot of numbers. Eivind, I think I'll give the word back to you. Eivind Roald: Thank you, Anders. When I started, I was given a clear mandate from the Board that was to accelerate the already decided changes. And therefore, together with my management team, we have launched a product called Falcon. The Falcon project is focusing on a number of measures to secure that we now deliver a company that is profitable and where the investors can have trust in us in the future. Here is just some few examples on what kind of areas we are focusing on. And several of these have already also been decided and are under execution. We need, for example, to look into a much more flexible way of looking at where we can have much more profitable business. We have a lot of interest for ad hoc charter, for example, football in U.S. this summer is just one example. We also have a very good relationship with P&O Cruises and that has also asked for even more capacity for winter in '26 and '27. We look into all these kinds of interesting areas to put our aircrafts. To be more flexible also to find new destination is one of the things we also will look more into too. We will have a more focus on our premium products, so we will be able to increase the yield on that. And we will also need to look into the agreements with our crews to be sure that we have a more flexible model for where we can put our capacity. Reduction of SG&A goes without saying, it needs to go down, and we work on several initiatives within that area as well. That means we also will look into what should we keep internally and what we potentially can outsource. Every stone will be turned around and we looked into because we think we are now in a good position to deliver a company that will be profitable in the coming months. We started in January with the traffic report to be a little bit more open on our data points. And we would like to continue that to make sure that investors have a better platform to evaluate our performance. In this graph, you will see that we now give you an indication about how both Q1 and Q2 looks on a -- from a TRASK perspective. In Q1, we are selling our seat price an average of 40% higher price versus the same period in 2025. And for Q2, we are still 10% above. And we're still holding back selling seats to make sure that we can give up in the coming months. That means for TRASK in February, month-to-date, we see a clear indication of 20% year-over-year growth. And we already now see a year-over-year growth for March in the range of 20% to 30% for the March. In total, this says something about that the turnaround that started back in December accelerated in January, now continue. On the revenue side, we are quite confident. And with that as a backdrop, we also indicated to the market this today that we see a full year EBITDAR in the range of USD 130 million to USD 150 million and an EBIT in a range of USD 20 million to USD 40 million for the year. We have a lot of things to do, and we have a management team that is dedicated to deliver a profitable company in the coming months. And we look forward to have you on board as investors and that you can follow us also in the next quarter to come. With that, I will open up for Q&A. Operator: All right. We have a few questions here. We have room for a couple. The first one is you reduced the fleet through redeliveries and shifted half into ACMI. Is Norse becoming more of a capacity provider than a branded airline? Eivind Roald: The question was that we have delivered 3 aircraft back and that we have now an agreement with Air IndiGo for 50%, and we will move toward a more capacity provider than a pure airline. What I will say is that we will focus on where we can get the most margin out of it, where we can have most profit. If that means that we, for some period, will increase on having more outsourced to either if that is Air IndiGo or is it P&O Cruises or if it's others, that will depend on where we can get the highest margin. Margin will be the focus for the company. We just need to make that this company to be profitable. So that will be the focus. Operator: Are you seeing a booking spike on the FIFA World Cup in the U.S. this summer? And can Norse monetize on that opportunity? Eivind Roald: The question is if we can see a booking spike for the FIFA World Cup this summer. We see that it's still a huge interest for the FIFA World Cup. And we see specifically on ad hoc charters, we have tons of requests on ad hoc charters, and we are evaluating that now day by day, and we'll conclude if we should take some of our aircraft and deliver as an ad hoc charters for the FIFA World Cup. Operator: Good. Last question. with 2026 outlook, what gives you confidence this is finally the year Norse becomes sustainable profitable? Eivind Roald: So the question is what -- what we feel confident on the profitability for this year. First of all, the turning point started in December, and we have a great momentum. We see that on the trust, both for December, January, February and March. We have taken important decisions like outsourcing of 6 aircrafts that also indirectly, as Anders has said, is a hedging of the fuel that is a huge, huge cost for the company. We have put in place several actions for driving cost down, and we are underway to actually launch more cost initiatives as well. As far as we can see into the future, and of course, it's difficult to see the 9 to 12 months from now, but we have a super interesting product that the response in the market is very, very high, and we are confident that we will deliver these numbers for 2026. Thank you so much for listening in.
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: Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the BioLife Solutions, Inc. Q4 2025 Shareholder and Analyst Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. I would now like to turn the call over to Troy Wichterman, Chief Financial Officer of BioLife Solutions, Inc. Please go ahead. Troy Wichterman: Thank you, operator. Good afternoon, everyone, and thank you for joining the BioLife Solutions, Inc. 2025 Fourth Quarter Earnings Conference Call. On this call, we will cover business highlights, financial performance for the fourth quarter and full year 2025, and provide 2026 financial guidance. Earlier today, we issued a press release announcing our financial results and operational highlights for the fourth quarter and full year of 2025 and provided 2026 financial guidance, which is available at biolifesolutions.com. As a reminder, during this call, we will make forward-looking statements. These statements are subject to risks and uncertainties that can be found in our SEC filings. These statements speak only as of the date given and we undertake no obligation to update them. Unless otherwise noted, all financial measures discussed reflect non-GAAP or adjusted results. Reconciliations of GAAP to non-GAAP or adjusted financial metrics are included in a press release we issued this afternoon. Now I would like to turn the call over to Roderick de Greef, Chairman and CEO of BioLife Solutions, Inc. Roderick de Greef: Thanks, Troy. Good afternoon, and thank you for joining us for BioLife Solutions, Inc.'s fourth quarter and full year 2025 conference call. 2025 was another strong year for BioLife Solutions, Inc., delivering double-digit revenue growth, operating margin expansion, and improved profitability. Throughout the year, we executed consistently against our key strategic priorities, advanced our efforts to reposition the portfolio, and strengthened the foundation to scale the business for years ahead. We exit the year simpler, more focused, and structurally stronger. With the divestiture of our EVO product line behind us, we enter 2026 with a strong balance sheet and a fully optimized portfolio that plays to our strengths and positions BioLife Solutions, Inc. to drive sustainable, profitable growth and shareholder value. Compared to 2024, our 2025 results from continuing operations demonstrate our increasingly attractive financial profile, which is driven by the culmination of our multiyear strategic transformation, a streamlined portfolio centered on market-leading consumables, and sustained growth from our commercial CGT customers, which reinforces our positioning to benefit from the continued growth and maturity of our end market. On the top line, total revenue grew 29% to $96 million, landing at the high end of our guidance, which was raised twice in the second half of the year. While gross margin experienced a decline year over year, primarily reflecting product mix and lower bag yields in the second half, operating leverage more than offset this impact and contributed to an increase in adjusted EBITDA of $25 million, or 26% of revenue, up from $13 million, or 18% in 2024. In the fourth quarter, total revenue reached $24.8 million, increasing 20% year over year, driven primarily by continued strength in our biopreservation media, or BPM, franchise with broad-based growth across our entire cell processing tools portfolio. Turning to Q4 revenue composition, our BPM product line accounted for approximately 85% of total revenue, with our top 20 BPM customers continuing to account for roughly 80% of BPM revenue. This concentration provides enhanced visibility into demand across the core part of our business. These metrics remain consistent with prior quarters and reinforce the stability of our recurring revenue base. Staying with our BPM products, direct customers continue to represent the majority of our mix versus distribution, and commercial BPM customers accounted for nearly 50% of revenue, up from the low-40s range in 2024. Both of these metrics reflect the ongoing shift toward later-stage and approved therapies that support both near-term and long-term growth. Stepping back from the quarter, our position within the broader CGT landscape remains strong. Our BPM products are embedded in 16 approved therapies and utilized in more than 250 relevant commercially sponsored CGT trials in the U.S., representing over 70% share. This includes more than 30 phase 3 trials in which our share is approaching 80%, underscoring BioLife Solutions, Inc.'s position as the partner of choice for later-stage clinical programs where success rates are higher and the path to commercial revenue is more clearly defined. Longer term, a key driver of CGT market growth remains the pace of FDA approvals, including unique therapy approvals, expanded indications, geographic expansion, and movement into earlier lines of treatment. While 2025 saw fewer approvals relative to 2024, we anticipate up to five unique therapy approvals over the next twelve months along with one new indication and at least one geographic expansion. We believe that the unique approval funnel is beginning to regain some momentum. This evolving regulatory backdrop supports our ability to capture additional value, especially within the late-stage programs we are already embedded in. Building on our BPM market leadership, we are working to expand our role within these clinical and commercial programs beyond biopreservation media. Our sales and marketing team is actively driving adoption of our broader cell processing tools across our marquee BPM customer base. As we have discussed previously, this cross-sell opportunity has the potential to increase our revenue per patient dose by two to three times relative to our BPM products alone, as customers incorporate additional components of our offering into their workflows. We have numerous product evaluations underway, including several with our largest commercial customers. While adoption cycles are lengthy, engagement remains strong and we expect to demonstrate some traction in 2026. Complementing our cross-sell strategy, we are also evaluating portfolio adjacencies that build on our scientific and commercial capabilities. In 2025, we assessed opportunities aligned with our product profile requirements that could broaden our product offering and bring additional value to our customers. One attractive strategic adjacency we identified is cytokines, which represent a natural complement to our emerging HPL product line. Earlier this month, we entered into a strategic distribution and product development agreement with UK-based Qkine Limited. The agreement provides us with exclusive distribution rights for certain cytokine products and nonexclusive rights for others within the CGT market. In addition, our product development teams will work together to package and store certain cytokine products in our CellSeal vial line. Our acquisition of Panthera and the investment in Pluristics last year, together with this new partnership, reflect our strategy to expand the platform through targeted M&A, minority investments, and strategic collaboration. These actions broaden our offering and increase our participation in the evolving cell therapy ecosystem. Turning to our outlook for 2026, we issued guidance this afternoon which included revenue between $112 million and $115 million, representing growth of 17% to 20%. As in prior years, our initial guidance reflects the visibility we have today based on the demand forecast from our key BPM customers. In addition, we see continued operating and adjusted EBITDA margin expansion and expect the company to generate full-year GAAP net income for the first time in many years. Before handing it over, I would like to comment on some recent developments in the cell therapy space, including encouraging clinical data in larger indications, continued advances in automation and manufacturing scalability, and renewed strategic investment by large pharma through multibillion-dollar acquisitions and next-generation facility buildouts, all of which reinforce our confidence in the long-term trajectory of the field and the attractiveness of the CGT market. BioLife Solutions, Inc. is well positioned as a market leader to benefit as these dynamics translate into durable demand over the long term. With that, I will hand the call over to Troy, who will provide an overview of our full Q4 and 2025 results and more details of 2026 guidance. Troy? Troy Wichterman: Thank you, Rod. Today, we will be reviewing current and prior period financials from continuing operations for Q4 and full year 2025 and providing 2026 financial guidance. Unless otherwise noted, all financial measures discussed reflect adjusted non-GAAP measures. Before we start with the financials, I am pleased to report we implemented our ERP manufacturing modules in February with no disruption to operations. This module allows for greater automated processes and controls in our manufacturing, quality, and accounting functions. This, in turn, provides a systematic foundation and automated processes to leverage into our planned growth. As shared in our press release today, we reported total Q4 revenue of $24.8 million, representing an increase of 20% over the prior year, and full-year revenue of $96.2 million, representing an increase of 29% over the prior year. The year-over-year increase in both periods primarily related to increased demand for biopreservation media from our customers with commercially approved therapies. For the full year 2025, we had growth across all product lines except our HPL media business, which was flat year over year due to certain import restrictions in China, which have since been abated. Adjusted gross margin for Q4 2025 was $15.8 million, or 64%, compared with $14.0 million, or 67%, in the prior year. Full-year adjusted gross margin was $63.2 million, or 66%, compared with $51.4 million, or 69%, in the prior year. The decrease in adjusted gross margin as a percentage of revenue in both periods was due to a continuing product mix shift toward bags, which carry lower gross margins than bottles, and we had lower-than-anticipated bag yields in the second half of the year. Improving bag yields is a clear operational priority as we enter 2026. Adjusted operating expenses for Q4 2025 totaled $14.7 million compared with $13.8 million in the prior year, and for the full year were $59.3 million compared to $52.9 million in the prior year. Adjusted operating income for Q4 2025 was $0.9 million compared with adjusted operating loss of $0.2 million in Q4 2024. Full-year adjusted operating income was $2.9 million compared to adjusted operating loss of $2.6 million in the prior year. Adjusted net income was $1.9 million in Q4 compared to adjusted net loss of $0.1 million in Q4 of the prior year. Adjusted net income for the full year was $6.3 million compared to adjusted net loss of $2.9 million in the prior year. The increase in adjusted operating income and adjusted net income was primarily driven by an increase in revenues year over year, in addition to a decrease in our sales tax accrual of $1.3 million. This was partially offset by increases in R&D expenses from increased headcount and investment in key projects. Adjusted EBITDA for Q4 2025 was $6.9 million, or 28% of revenue, compared with $3.7 million, or 18% of revenue, in Q4 of the prior year. Adjusted EBITDA for the full year was $25.0 million, or 26% of revenue, compared with $13.3 million, or 18% of revenue, in the prior year. Our adjusted EBITDA increased primarily due to higher revenue. In addition, we had a $1.3 million gain on a sales tax true-up recorded in Q4, which had approximately a 500 basis point impact on our adjusted EBITDA margin in Q4 and a 100 basis point impact for the full year. Turning to our balance sheet, our cash and marketable securities balance at 12/31/2025 was $120.2 million, compared with $98.4 million at 09/30/2025 and $105.4 million at 12/31/2024. Taking into consideration our adjusted EBITDA of $6.9 million, our increase in cash during Q4 2025 was primarily related to the $23.5 million in cash proceeds from the divestiture of SAVSU, partially offset by CapEx spend of $4.4 million, working capital usage of $2.2 million, and debt payments of $2.5 million. Our remaining SGD debt balance at 12/31/2025 was $5.0 million, all of which is short term. We expect to pay off the entirety of the loan by June 2026, in addition to a $1.2 million loan maturity balloon payment due at the time of maturity. Turning to 2026 financial guidance, total revenue is expected to be $112.5 million to $115.0 million, reflecting overall growth of 17% to 20%. The increase is primarily due to expected demand from our BPM customers with commercially approved therapies as well as increased demand for our other tools. We expect GAAP and adjusted gross margin for the full year to be in the mid-60s. We expect gross margins generally to be in line with 2025 due to favorable higher average selling prices, partially offset by product mix, primarily due to higher growth rates from our other cell processing tools. As Rod stated, we expect to achieve full-year positive GAAP net income and further expansion of adjusted EBITDA margins compared to 2025. The expected improvement in net income and adjusted EBITDA margins from 2025 is primarily driven by expected increased revenue, partially offset by expected increases in R&D and sales and marketing expenses to support our longer-term growth plans. Finally, in terms of our share count, as of 02/19/2026, we had 48.3 million shares issued and outstanding and 50.2 million shares on a fully diluted basis. Now, I will turn the call back to the operator to open up for questions. Thank you. Operator: We will now open for questions. The first question comes from Matthew Stanton with Jefferies. Please go ahead. Matthew Stanton: Maybe just to kick off for the guide, any more color you can provide in terms of assumptions between commercial and clinical? Rod, I think you said commercial went from low-40s to the mix to about 50. Can we see a similar magnitude of uptick in 2026 on the commercial side? And then just on the clinical side, are you starting to see some of the positive biotech funding data show up in activity levels or orders from customers? Just a little more flavor on what you are starting to see on the clinical side would be helpful as well. Thanks. And then just on the bag yield impact, is there any way to quantify what that was as a headwind in terms of margins in 2025? And then, Rod, I think you talked about it as a clear priority for 2026. Can you just talk a little bit more about timing and logistics in terms of resolving the bag yield headwind you saw in the back half of the year here? Thanks. Roderick de Greef: Sure. So we had a strong increase in our commercial customer revenue as a portion of total revenue. As we mentioned, it is about 20 points—actually, sorry, a little less than 10 points. But I think it is going to be not quite that much, and I would expect our commercial customers to be somewhere between 50%–55% in 2026. With respect to the second half of your question, we are not really seeing any significant uptick. And I think the reason for that is these customers are small, Matt. And so to the extent that they are either constrained or not constrained, the amount of product they buy from us is pretty small in their early stages. So we are really not seeing any major effect of that. As for bag yields, I think it is about a 2% or three-point headwind on gross margin in the second half of the year. I believe that we have found a solution to the issue. It is a solution that requires a 90-day customer notification. So we have that piece that is, by definition, built in from a timing perspective. And then in addition to that, we have to sell through the higher-cost inventory that we have, in terms of finished product that is in bags sitting in our warehouse, before we will start to see the impact of the higher-yield bags come through, which we expect would be right around Q4 of this year. Operator: The next question comes from Anna Snopkowski with KeyBanc Capital Markets. Please go ahead. Anna Snopkowski: Hi. This is Anna on for Paul. Thanks for taking my question and congrats on a great quarter. My first question is just around the CAR-T market. It seems like we are getting better patient access with the REMS removal. I was just wondering if you have seen this impact your top line at all or just customers' outlook at all? And then could you just remind us your exposure to CAR-Ts at this point? And then, just quickly following up on your outlook for 2026, how much would you say is rooted in commercial growth versus dependent on improving macro conditions in clinical trials? Or would you say most of your outlook is towards the commercial side? Thank you. Roderick de Greef: Yes. In terms of our commercial exposure, I would say it is at least over 80% with respect to CAR-Ts at this point, if not a little bit higher. It is really hard, Anna, to try to parse out the impact of REMS first. It just happened right within the last six months or so, and I think it is going to take a while for that to flow through to an increased number of patients being treated. So while we think it is an excellent move in the right direction—because I think patient access is probably the single largest constraint to the overall adoption—I have read where 20% of people who are eligible for CAR-T are actually receiving CAR-Ts. So I think patient access is a key factor in future growth, but it is hard to try to parse it out to the point of saying we have seen anything or not seen anything. And on 2026, I think it is fair to say that the primary driver for growth this year is going to be continued growth from the commercial customers that we have. Operator: The next question comes from Brendan Smith with TD Cowen. Please go ahead. Brendan Smith: Great. Thanks for taking the question, guys. I actually wanted to follow up on your commentary regarding the cross-selling there. Just a little bit more. Can you maybe expound a bit on really what ultimate success kind of looks like within that initiative? And sorry if I missed it, but can you just confirm if any contribution through that is included in some of your 2026 guidance assumptions? Or should we think of that more as upside? Roderick de Greef: Well, we have a base assumption around how much of the growth of our other tools—non-biopreservation media tools—that growth, how much of that is fundamentally related to therapies with respect to, for example, on the CellSeal vial side, versus new business that we are assuming to have come in. So we are pretty clear about that split, although we will not get that granular on this call. I think the ultimate measurement or metric at this time, at least for most of this year until we get a little bit more rigorous in our own data analysis, is the growth rate related to the non-BPM tools versus BPM. And we do expect, as a basket, that the non-BPM tools will grow at a faster percentage rate than BPM, in part because it is a smaller base that we are starting from. But as we put more focus on this and our systems get up to speed, we should be able to start speaking to the number of customers that are using one of our products, two of our products, three or more of our products. And that is definitely a goal internally to pull those metrics together and then figure out a way to report that externally. Operator: The next question comes from Steven Etoch with Stephens. Please go ahead. Steven Etoch: Hey, good afternoon and thank you for taking my questions. Maybe one on the partnership agreement you signed earlier this year. It is a pretty interesting deal, maybe a little outside of your normal deal structure, but what can you share with us just in terms of maybe the adoption potential of that product with your CellSeal vials and all that? And secondly, what could the margins look like for that type of business? Roderick de Greef: Yes. So I am not going to speak specifically to the margins, Mac, just from a competitive perspective. But we certainly have a margin profile that reflects the volume that we anticipate to move. With respect to the combination of their cytokines and our CellSeal vials, that is probably a six- to nine-month development project right there. So we would not expect to see much in the way of that revenue, in terms of pull-through on the CellSeal vial side of things, until the end of this year, early next. But this is a long-term strategic move for us. It is not about generating X amount of revenue in 2026, although we will drive some revenue. But really it is a longer-term market segment, product category that we want to be in, and feel we can win there, and that is why we are there. Steven Etoch: Appreciate that. And then maybe you touched on the bags being an issue in the second half of last year. But as it relates to CryoCase, do you see that as a potential opportunity to maybe reduce scrap and improve margins long term as CryoCase is adopted? Roderick de Greef: Yes. So it is important to keep in mind that the CryoCase, as it is configured today, is designed for the final product going from the developer’s factory to the patient. The rigid container—what we call the RCC—is designed and being designed to take 100 mL of our product from our factory to our customer, which is where we have the bag problem. Right? So currently, we are shipping most of our commercial product in bags from our facility to the developer’s facility, and then they drain that and they use it in their workflow. The idea would be to replace that bag on the front end, if you will, with the RCC. And we are probably 18 to 24 months away from doing that. So the remediation that I talked about is really process-oriented on our end, and I think that is going to alleviate the higher-than-average scrap that we have realized over the last six months. Operator: The next question comes from Matthew Hewitt with Craig-Hallum Capital Group. Please go ahead. Matthew Hewitt: Good afternoon. Thanks for taking the questions. Maybe first up, just so I heard you correctly, gross margins are still going to be weighed on a little bit here, first half of the year in particular. So we should be thinking somewhat similar in Q1 versus Q4? And then, you know, obviously, the Qkine partnership is unique—an opportunity to get into some new areas. Are you looking or exploring for more of those types of partnerships? Or are you still kicking the tires on potentially adding via acquisition? Thank you. Troy Wichterman: Yes, that is correct, and actually throughout the remainder of the year. As Rod mentioned, we do have inventory on hand, and it is going to take time to implement our strategies and our customers to adopt the new product format. So if you look at the full year, I would still expect in line with our guidance, as what we said. Roderick de Greef: Yes. I think it is all three of the things that I mentioned, which would be, you know, an outright targeted acquisition, a minority investment strategy, and/or a strategic collaboration like we have done with Qkine. And that is not to say that what we have done with Qkine is the final end step with them. As this relationship evolves into the future, as we understand how to sell that product better, it could very well be that things develop down the road with that particular company. Operator: The next question comes from Carl Byrnes with Northland Capital Markets. Please go ahead. Carl Byrnes: Yes, thanks for taking my question. Actually, most of my questions have been answered. I am just wondering if you are seeing any potential acquisitions that would be in the biopreservation area where the valuations have kind of come back to what would be more normalized attractive levels to pull the trigger? Thanks. Roderick de Greef: So, Carl, other than the Panthera acquisition, we keep a pretty close eye on what we consider to be potentially competitive technology in biopreservation. And while we are pretty rigorous in evaluating what is out there, nothing has come to our attention that would provide us with any sort of competitive advantage or value proposition that we do not already provide. That is why Panthera was unique, and that is why we made the move with it that we did. Carl Byrnes: Got it. Thanks. Congratulations again. Roderick de Greef: Thank you, Carl. Operator: The next question comes from Michael Okunewitch with Maxim Group. Please go ahead. Michael Okunewitch: Hey, guys. Thank you for taking my questions today. I guess I would like to ask a little about the Qkine collaboration. In particular, how comprehensive is this, and are there other commonly used cytokines and growth factors for cell and gene therapy manufacturing that might be the subject of future agreements or M&A activity? And then just to follow up on that, as you are saying that there is exclusivity on a limited number of cytokines, but is that exclusivity going both ways as in terms of who else can use CellSeal for those particular cytokines, potential distribution agreements that you may enter or any acquisition, trying to see if the exclusivity is just for you or for them to you as well. Roderick de Greef: Yes. I think the short answer is yes. The deal as it stands now is specific, from an exclusivity perspective, to certain of their cytokines that we believe are geared toward the types that are used by our key customers, as well as the pipelines that they have. So that is why it is a fairly narrow exclusivity. And we do have access to a much broader number of products on a nonexclusive basis. So, again, I would reiterate that this is the first step. We spent quite some time developing the relationship, primarily through our VP of Sales who is also located in the UK and has a history with these folks. And so I would say it is step one of a number of different ways the relationship could continue to move forward. Well, right now, it is one way for us relative to their cytokines. We have a sort of loose intent between the two parties around CellSeal, so we have to pay for that still. But I anticipate, based on discussions that we have had, that it is in their interest and our interest to widely have their products sold through with the CellSeal packaging to wherever it needs to go, or wherever they would like it to go, because that benefits us and it benefits them. And it is unique to them. We do not anticipate at this point in time entering into any agreements with other cytokine manufacturers to utilize the CellSeal vial. Michael Okunewitch: Alright. Thank you very much. I appreciate the additional color. Roderick de Greef: You bet. Operator: This concludes the question and answer session. I would like to turn the conference back over to Roderick de Greef for any closing remarks. Please go ahead. Roderick de Greef: Thank you, operator. In closing, we expect 2026 to be another strong year of revenue growth, operating margin expansion, and increased profitability. As the broader macro environment continues to evolve favorably, we remain focused on supporting our core BPM customer base, increasing adoption of our non-BPM products, and driving operational excellence across the organization. We are confident that our market leadership and business model position BioLife Solutions, Inc. to benefit from the secular trends developing across our growing yet still early-stage end markets, enabling us to deliver sustainable revenue growth, expanding profitability, and long-term shareholder value creation. Thank you for your time today. I look forward to seeing some of you at upcoming investor conferences. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Eivind Roald: My name is Eivind Roald, and I'm the new CEO of Norse Atlantic Airways from December last year. I'm here to present the Q4 results together with our CFO, Anders Jomaas. Before I start, I will give a quick introduction to my background, and I'll also share some reflections on why I took the position as the new CEO. I have more than 30 years of experience from various executive positions in Scandinavian companies. I've been leading the turnaround in Hewlett Packard as Managing Director for many, many years. I was the Executive Vice President and Chief Commercial Officer in Scandinavian Airlines for many years, and I've also been leading European software companies and worked for several PE companies as well. When I accepted the position for this job, I was discussing and looking into Norse. And I see that this company has a very good foundation for actually becoming a very profitable company in the future. First of all, they have a very attractive leases agreement that goes for many years from now. They have a very competitive product that reach the market, and we see that with all the high load factor we have during the whole -- all the quarters as well. The balanced model with more than 50% of the aircraft now outsourced to Air IndiGo is also giving us an unforeseen revenue stream and indirectly also hedging the fuel that is an important part of the cost focus these days and an industry-leading ancillary sales -- ancillary sales that gives us a good foundation for actually increasing the revenue as we go in the future as well. We do also see some need for improvements when I look into the company. I think we need an even more clear business idea what we should focus on. We need to optimize the network to make sure that we reach the right destination and also the utilization of our aircraft. We need to accelerate the commercial initiatives, and we also need to ensure that we have flexible crew agreements to make sure that we can meet the different needs in the market. The needs for a more simplified organization and also taking more cost out is also an important part of what we needed to work on. And we have seen during the last months that we are struggling a little bit on the way we communicate towards our customers, and that's needed to be a focus as well. Cost will be an important part of the focus going forward. And basically, that was also the foundation for why I thought this was a very interesting opportunity to sign on. So let's look at some of the figures for Q4. I will try to focus on actually what's an important part of the Q4. The Q4, as such, is a big -- is a quarter with 2 months where we struggle a little bit on October, November, and then we saw the turning point came in, in December. The decision that the company took in 2025, where they decided on the ACMI agreement with Air IndiGo, where they decided also new network to focus on more to Asia with Thailand and as the most important part has now started giving good results. And that the turning point that came actually in December. December was a profitable month for Norse. And we also -- even though that we saw some irregularities during that month and have some extra cost that is a onetime cost, that month came out as a positive month. But the Q4 as such was a significant better revenue from $123 million to $156 million in revenue. The EBITDAR came in on a minus $3.1 million and an EBIT on minus $22 million. The load factor is still high during the whole month, whole quarter. And if we take a look at the 2025 figures, we see that it's a significant improvement from 2024 now with an EBITDAR on plus $56 million and an EBIT on minus $20 million, significant improvement from almost minus $100 million in 2024. We also have a huge impressive growth on the passenger side from $1.4 million to $1.8 million, and the load factor is still quite high. So the turning point we're talking about in December is an important part for investors to look into. And to give you some few more data points to have in mind, we had in December specifically a passenger growth of 22% with a production of plus 14%. And the TRASK growth was for that month, 6%. And we communicated in our traffic report for January that the TRASK increased by 20%. And later in the presentation, I will come back to say something about what that number is in February and also in March. The turning point came after the decision that the company took in 2025. They said they took strategic measures, they have now implemented the measures, and we now see the results. And that should be the main focus for investors going forward, not to look too much into Q4 as such, but more looking into the turning point in December and look forward. And if you look at December on the TRASK side, we see that November came in on plus 7% year-over-year, December 6% and then January, 20%. And as I said, I will come back to indicate a little bit more about February and March later in the presentation. On the ACMI side, we have completed now the delivery of the sixth aircraft to Air IndiGo. And as we have communicated earlier, we have a minimum revenue of 350 block hours per month. And as you see on the graph here, we are way above that for every month. And that gives us a more focus and more safe revenue side from Air IndiGo the coming year as well, an important part of having a better understanding of how the year will really come out. So with that, I will give the word to our CFO, Anders Jomaas, that will take us through some of the numbers in more detail. Anders Jomaas: Thank you, Eivind, and hello, everybody. I will give you some more insight into the Q4 numbers and the '25 per se. So if we start now looking at Q4 '25 and looking at the passenger numbers, we see that we fly a lot more, we have record high load factors. We are seeing 96%. Passenger numbers also increasing. We see that we go from 339,000 passengers Q4 '24 to more than 400,000 this quarter. Revenues keep coming up. Although EBITDAR and EBIT are lagging somewhat, we would like to see those higher. But if we look at the quarter -- sorry, the full year of 2025, we see the same trends. We see increasing number of flights. We see load factor increasing. We see passenger numbers increasing. Revenues are significantly up. And for the full year, we also see the improvement on EBITDAR and EBIT, where we have EBIT of $56 million -- sorry, EBITDAR of $56.5 million for the full year compared to $0 for '24. So this is the trajectory we're on of gradually increasing, and Eivind will also come back to our outlook for this year. Some key terms to note when we talk -- Eivind, you talked about TRASK, which is total revenue per available seat kilometer. This is important unit metric when we do our reporting. Similarly, CASK is cost per available seat kilometer. And it's basically the difference between the 2 that is important for us. So we see in this quarter that we improve TRASK by 3% -- sorry, for this year, we see that we improve TRASK by 3%. We reduce CASK by 10%, and we do that in an environment where we fly 20% more. So these are the important drivers for what's ahead for Norse. Looking at the quarter itself, we are -- we now see that we are able to also increase passenger revenue. The revenue per passenger is up 10% year-on-year from $343 in average per passenger to $379 this quarter. We also have a big belly on this aircraft and volumes have been relatively stable, a little bit lower, but we see higher prices also on the cargo side, which is an important contribution to the overall profitability of our company and our industry. I even mentioned that we fly a lot more to Thailand, Southeast Asia. These routes have been particularly strong in terms of cargo. We transport salmon going east, and we have a lot of e-commerce, especially around November, December season going back. Looking at Q4 in particular and focusing first on the mid-section of this graph, where we say that here you will see that we fly a lot more. ASK is available seat kilometer, basically how much production we deliver. So we produced 44% more seat kilometer this quarter compared to same quarter last year. The composition last year was 80-20 in terms of network and ACMI. Now it is shifting 62:38. And going forward, you can increase -- you can expect this to balance and be even more like 50-50-ish. So we produce a lot more, but we also produce more ACMI. Why this is important is that the cost base on ACMI is lower, meaning we do not pay for the cabin crew. We do not pay for the fuel. So this is, in fact, an implicit fuel hedge. And when we have 6 aircraft delivered to IndiGo, we actually have fuel hedged for 6 out of 12 aircraft. And we also do not pay for the airport charge and the handling. So the lower cost base also means that we -- the revenue is in U.S. dollars lower, but the margin is very healthy on the ACMI business. So if you look at the CASK, it has actually reduced from 4.5 to 3.6. The revenue TRASK is also down, but the important margin is increasing from 0.3 to 0.5. So actually a 70% increase in margins due to this shift we're seeing. We are continuously working on reducing CASK. Eivind mentioned there are several cost initiatives going on in the company. This will continue to go through the year and the coming years, continuous focus. But we are happy to see that we are reducing by 19% quarter-over-quarter, partly driven by the shift to ACMI, but also we see that we are able to reduce costs on certain important areas. If we look at the numbers, Eivind mentioned a few, I'll go a little bit more in detail on some of them. Revenue for Q4 was $156 million, up from $123 million same quarter last year. Personnel expenses, $43 million, which is driven by higher production, some general wage increases, some special one-offs, but also worth noting that FX has gone against us somewhat in the quarter, so approximately $2 million of the personnel expense increase is related to FX only. Fuel is a derivative of how much we fly. We have flown 11% more in the quarter, but also fuel prices have been higher, 7% higher in Q4 '25 than in Q4 '24. Other OpEx is mainly technical maintenance and again, a clear derivative of how much we fly. There is a one-off expense in there related to the engine incident in Q3 last year of $4.5 million, which will not be there in the coming quarters. SG&A, also a focus, glad to see that coming down, but there's further potential for further reductions also there. EBITDAR for the quarter, negative $3 million, EBIT negative $22 million and bottom line, $33 million loss for the quarter. Looking very quickly at the full year '25, revenues of $734 million and a positive EBITDAR of $56.5 million, leading to a loss of -- sorry, $61 million for the year. In terms of cash flow, we see that there is a negative cash flow from operations in Q4. Many reasons for that. We have talked about the cost base. We talked about the one-offs. We talked about the FX, continuous focus area. Working capital is reducing, and that is reflecting also the transition to ACMI and Charter. Financing cash flows of $7.5 million is related to a large extent to the equity raise we did in October, relatively small equity raise with net proceeds of $11 million, but that is in that number. Free cash end of the quarter, $18 million. Looking at the balance sheet. And for those of you who have followed us for a long time, you know that one to watch is the credit card receivables, which is $72 million. So it actually means that the acquirers as they call, or the credit card companies, they are sitting on $72 million of our funds. We are working on streamlining the whole payment flow in our company and to gradually reduce that. You'll see that it has come down, but we will continue to work on good solutions to make sure that we collect funds even earlier as we move forward. Equity for the company is negative $260 million, but keep in mind that as much as $175 million of that is noncash lease effects. So that was a lot of numbers. Eivind, I think I'll give the word back to you. Eivind Roald: Thank you, Anders. When I started, I was given a clear mandate from the Board that was to accelerate the already decided changes. And therefore, together with my management team, we have launched a product called Falcon. The Falcon project is focusing on a number of measures to secure that we now deliver a company that is profitable and where the investors can have trust in us in the future. Here is just some few examples on what kind of areas we are focusing on. And several of these have already also been decided and are under execution. We need, for example, to look into a much more flexible way of looking at where we can have much more profitable business. We have a lot of interest for ad hoc charter, for example, football in U.S. this summer is just one example. We also have a very good relationship with P&O Cruises and that has also asked for even more capacity for winter in '26 and '27. We look into all these kinds of interesting areas to put our aircrafts. To be more flexible also to find new destination is one of the things we also will look more into too. We will have a more focus on our premium products, so we will be able to increase the yield on that. And we will also need to look into the agreements with our crews to be sure that we have a more flexible model for where we can put our capacity. Reduction of SG&A goes without saying, it needs to go down, and we work on several initiatives within that area as well. That means we also will look into what should we keep internally and what we potentially can outsource. Every stone will be turned around and we looked into because we think we are now in a good position to deliver a company that will be profitable in the coming months. We started in January with the traffic report to be a little bit more open on our data points. And we would like to continue that to make sure that investors have a better platform to evaluate our performance. In this graph, you will see that we now give you an indication about how both Q1 and Q2 looks on a -- from a TRASK perspective. In Q1, we are selling our seat price an average of 40% higher price versus the same period in 2025. And for Q2, we are still 10% above. And we're still holding back selling seats to make sure that we can give up in the coming months. That means for TRASK in February, month-to-date, we see a clear indication of 20% year-over-year growth. And we already now see a year-over-year growth for March in the range of 20% to 30% for the March. In total, this says something about that the turnaround that started back in December accelerated in January, now continue. On the revenue side, we are quite confident. And with that as a backdrop, we also indicated to the market this today that we see a full year EBITDAR in the range of USD 130 million to USD 150 million and an EBIT in a range of USD 20 million to USD 40 million for the year. We have a lot of things to do, and we have a management team that is dedicated to deliver a profitable company in the coming months. And we look forward to have you on board as investors and that you can follow us also in the next quarter to come. With that, I will open up for Q&A. Operator: All right. We have a few questions here. We have room for a couple. The first one is you reduced the fleet through redeliveries and shifted half into ACMI. Is Norse becoming more of a capacity provider than a branded airline? Eivind Roald: The question was that we have delivered 3 aircraft back and that we have now an agreement with Air IndiGo for 50%, and we will move toward a more capacity provider than a pure airline. What I will say is that we will focus on where we can get the most margin out of it, where we can have most profit. If that means that we, for some period, will increase on having more outsourced to either if that is Air IndiGo or is it P&O Cruises or if it's others, that will depend on where we can get the highest margin. Margin will be the focus for the company. We just need to make that this company to be profitable. So that will be the focus. Operator: Are you seeing a booking spike on the FIFA World Cup in the U.S. this summer? And can Norse monetize on that opportunity? Eivind Roald: The question is if we can see a booking spike for the FIFA World Cup this summer. We see that it's still a huge interest for the FIFA World Cup. And we see specifically on ad hoc charters, we have tons of requests on ad hoc charters, and we are evaluating that now day by day, and we'll conclude if we should take some of our aircraft and deliver as an ad hoc charters for the FIFA World Cup. Operator: Good. Last question. with 2026 outlook, what gives you confidence this is finally the year Norse becomes sustainable profitable? Eivind Roald: So the question is what -- what we feel confident on the profitability for this year. First of all, the turning point started in December, and we have a great momentum. We see that on the trust, both for December, January, February and March. We have taken important decisions like outsourcing of 6 aircrafts that also indirectly, as Anders has said, is a hedging of the fuel that is a huge, huge cost for the company. We have put in place several actions for driving cost down, and we are underway to actually launch more cost initiatives as well. As far as we can see into the future, and of course, it's difficult to see the 9 to 12 months from now, but we have a super interesting product that the response in the market is very, very high, and we are confident that we will deliver these numbers for 2026. Thank you so much for listening in.
Operator: Good morning, and welcome to the Wave Life Sciences Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded and webcast. I'll now turn the call over to Kate Rausch, Vice President of Corporate Affairs and Investor Relations. Please go ahead. Kate Rausch: Thank you, Sophie, and good morning to everyone on the call. Earlier this morning, we issued a press release outlining our fourth quarter and full year 2025 earnings update. Joining me today with prepared remarks are Dr. Paul Bolno, President and Chief Executive Officer; Dr. Chris Wright, Chief Medical Officer; and Kyle Moran, Chief Financial Officer. Dr. Eric Ingelsson, Chief Scientific Officer, will be available for questions after the call. The press release issued this morning is available on the Investors section of our website, www.wavelifesciences.com. Before we begin, I would like to remind you that discussions during this conference call will include forward-looking statements. These statements are subject to several risks and uncertainties that could cause our actual results to differ materially from those described in these forward-looking statements. The factors that could cause actual results to differ are discussed in the press release issued today and in our SEC filings. We undertake no obligation to update or revise any forward-looking statement for any reason. I'd now like to turn the call over to Paul. Paul Bolno: Thanks, Kate, and good morning to everyone joining us on today's call. 2025 was a tremendous year for Wave, marked by positive clinical data sets in obesity and AATD that further demonstrated the broad potential of our unique differentiated RNAi and RNA editing capabilities. Entering 2026, we are building on the strong momentum with a focus across two priorities: accelerating development of our WVE-007 and INHBE GalNAc siRNA program for obesity and rapidly advancing our RNA editing portfolio led by WVE-006 for AATD, followed closely by WVE-008 for PNPLA3 I148M liver disease. Today, I will start with WVE-007, which is designed to address the substantial need for better next-generation treatment options for individuals living with obesity. While GLP-1s have clearly defined the market and raised awareness of the disease, they require frequent dosing, carry tolerability challenges, induce muscle loss and result in high discontinuation rates as well as weight cycling with patients coming on and off therapy. INHBE silencing with WVE-007 aims to lower serum activin E levels and improve body composition by reducing fat while preserving muscle. Compelling human genetic data support our confidence in this mechanism of action. Activin E is a liver-derived hepatokine that signals adipocytes to slow or put the brakes on lipolysis. By removing these brakes, 007 aims to unleash fat burning without calorie restriction and without concurrent muscle loss. The current obesity treatment paradigm is focused on total body weight loss, which is not the best way to improve overall health and longevity. An ideal obesity treatment should primarily focus on improvements in body composition, meaning decreasing metabolically harmful fat tissue and preserving healthy functional muscle tissue. Next-generation obesity therapeutic strategies must first and foremost, reduce harmful visceral fat and also be able to decrease subcutaneous and liver fat while preserving muscle. This profile is exactly what 007 aims to achieve. Visceral fat is strongly linked to multiple metabolic disorders, including type 2 diabetes, cardiovascular disease, NASH and others. It is well documented that lowering the mass of visceral fat by more than 5% is associated with reduced risk of developing many metabolic diseases. Additionally, total fat loss has been shown to improve glucose tolerance, insulin sensitivity and overall lipid profile, while simultaneously attenuating adipose inflammatory state and decreasing hepatosteatosis, which is the first step in the development of NASH. Preservation of skeletal muscle is not just about strength. Rather, muscle plays a central role in maintaining basal metabolic rate through higher glucose disposal, better insulin sensitivity and improved overall energy balance. All of these benefits can be delivered by silencing of INHBE. We chose to target the activin E ligand through INHBE silencing over its receptor ALK7 for several reasons. Turning off protein production in hepatocytes, the upstream source with a GalNAc siRNA is the most efficient and durable way to impact this pathway. Suppressing Activin E rather than disabling a receptor that transduces signals via multiple ligands across different tissues is a more selective approach with lower risk of unintended consequences. This selectivity is especially important for us as we think about long-term safety as well as clinical and commercial translation. 007's unique ability to durably suppress INHBE is driven by our proprietary chemistry and SpiNA siRNA design. While RNAi is a clinically and commercially proven mechanism, there are extensive human genetic data supporting INHBE as a target. We believe our proprietary SpiNA designs distinguish us from others attempting a similar approach. With SpiNA designs, we've demonstrated an unprecedented tenfold improvement in Ago2 loading and several fold increase in exposure versus industry benchmarks. Together, these improvements drove substantial increases in potency and duration of activity. WVE-007 is our first SpiNA design and our preclinical data for WVE-007 remains differentiated from any other competitor. Most importantly, we are now seeing our preclinical data translate in the clinic. In December, we shared interim data from INLIGHT study. In our lowest therapeutic dose cohort just three months after a single dose of 007, we observed fat loss similar to semaglutide without the associated muscle loss. These improvements in body composition included substantial reductions in fat, including reductions in both total body fat and visceral fat and importantly, muscle preservation. I want to remind you, this is a Phase I study in otherwise healthy individuals with overweight or obesity and average BMI of these participants was 32, meaning this population has less visceral fat and subcutaneous fat than typical obesity studies. The trial also didn't include any diet or exercise modification. Already at our single lowest therapeutic dose, we observed that 007 demonstrated robust and durable suppression of activin E, supporting once or twice a year dosing, and we shared a clean safety profile through our 600-milligram cohort. The INLIGHT study is fully dosed through the 600-milligram cohort, and we are on track to announce six-month follow-up data from the 240-milligram single-dose cohort as well as three-month follow-up data from the 400-milligram single-dose cohort later this quarter. With continued fat loss and with stabilization of muscle or lean mass, we are looking to see continued improvements in body composition and fat loss beginning to drive weight loss. As mentioned earlier, the INLIGHT population has lower fat to begin with, versus typical obesity studies, and thus, a better comparison will be made of individuals with higher BMI who have greater fat mass, both visceral and subcutaneous, which is exactly what we will be looking at in the Phase IIa multi-dose portion of INLIGHT. This MAD portion will enroll patients with higher BMI and comorbidities and is on track to initiate in the first half of this year. Chris will speak more on that later. We are also excited about the potential for this molecule as both an add-on to incretins as well as for maintenance post as an incretin offering. We have generated a compelling body of preclinical evidence supporting these use cases, and we remain on track to initiate new clinical trials evaluating 007 in these settings in 2026. There is widespread recognition of the need for novel obesity mechanisms and therapeutics beyond ingredients. A once to twice a year treatment, which can reduce fat and preserve muscle with a favorable safety and tolerability profile has the potential to shift the obesity landscape. In RNA editing, we continue to lead the field with WVE-006, our GalNAc RNA editing oligonucleotide for alpha-1 antitrypsin deficiency. AATD is a uniquely compelling disease for RNA editing because it is a single gene disorder where correcting the mutant RNA transcript in the liver directly addresses the root cause of both the lung and liver manifestations of the disease. There are approximately 200,000 individuals in U.S. and Europe living with homozygous ZZ AATD with high risk of disease. AATD is a debilitating disease that impacts multiple aspects of daily life from their ability to work and play with their children to even just walking to the mailbox. These individuals living with alpha-1 have been underserved and remain in urgent need of an effective therapeutic option. Current treatment options are limited to IV augmentation therapy that aims to address the lung with nothing currently approved for AATD liver disease. With our highly specific and efficient GalNAc AIMer design for RNA editing, we do not modify DNA, and we do not require delivery with lipid nanoparticles or LNPs that may be associated with systemic and liver inflammation, potentially inducing hepatocellular stress and activating a hepatic acute phase response. We also avoid the irreversible collateral bystander edits and indels, which are associated with DNA editing. With 006, we have shown that RNA editing can restore endogenous M-AAT protein to therapeutically meaningful levels, reduce mutant Z-AAT and reestablish the body's normal physiologic response to inflammatory stress, something that is not possible with the current standard of care. Remember, AAT protein plays a protective role during inflammation or acute phase responses when it's rapidly consumed. A patient on IV augmentation risk lung injury if AAT protein levels fall too low during an event. In contrast, RNA editing is designed to restore an MZ-like acute phase response where AAT production rises to meet the demand. With our data demonstrating already over 11 micromolar protein greater than 50% editing and acute phase response at our lowest dose, we're advancing our regulatory engagement with full control of the program. We expect to receive regulatory feedback on a potential accelerated approval pathway in mid-2026. Additionally, we are on track to report data from the 400-milligram multi-dose cohort of the ongoing RestorAATion-2 clinical trial this quarter and report single and multi-dose data from the 600-milligram cohort in 2026. Building on our clinical success in RNA editing, we are advancing our second RNA editing clinical candidate, WVE-008, a GalNAc-conjugated AIMer for homozygous PNPLA3 I148M liver disease, and we are on track for CTA submission in 2026. In DMD, we remain on track to submit an NDA in 2026 for accelerated approval of N531 with a monthly dosing regimen. In addition, our research collaboration with GSK continues to progress, and GSK has now selected a fourth program to advance the development candidate following achievement of target validation, which carries an associated milestone payment that was received in the first quarter. Under the collaboration, GSK can advance up to eight programs leveraging our PRISM platform with target validation work ongoing across multiple therapeutic areas. Wave is eligible for up to $2.8 billion in initiation, development, launch and commercialization milestones as well as tiered royalties, and we expect to continue to receive milestone payments in 2026 and beyond. With that, I'd like to turn the call over to Chris to review our clinical progress with 007 and our RNA editing programs. Christopher Wright: Thanks, Paul. Starting with our INLIGHT clinical trial of WVE-007. The ongoing portion of INLIGHT is a Phase I randomized placebo-controlled single-dose study in otherwise healthy individuals living with overweight or obesity. The study is active at multiple clinical trial sites, including in the U.S. and is fully enrolled through four dose levels. Our three therapeutic dose cohorts are fully expanded with 32 participants in each cohort. Individuals received a single dose of WVE-007 and are then followed for up to 12 months with key assessments, including safety, tolerability, PK, activin E, body composition as measured by DEXA, biomarkers and body weight. The average BMI in the study is low compared to what is observed in typical obesity studies, and there are no diet or exercise modifications. With this backdrop, we are particularly excited with the positive interim data we shared last year. At three months in the lowest therapeutic cohort, a single 240-milligram dose of 007 led to an improvement in body composition, characterized by a placebo-adjusted 4% reduction in total fat, 9.2% reduction in visceral fat and preservation of muscle as evidenced by a 0.9% increase in lean mass. Notably, 007's placebo-adjusted reduction in total fat mass was on par with semaglutide at 12 weeks, while simultaneously preserving lean mass and driving greater reductions of visceral fat. The safety profile was favorable and there were durable reductions in serum activin E, supporting potentially once or twice yearly dosing. Overall, these data demonstrate that a single dose of 007 can shift body composition towards less visceral and total fat while preserving muscle consistent with our preclinical findings and with the underlying human genetics. We look forward to evaluating the impact of this mechanism at a higher dose and over a longer duration later this quarter. With this data, we anticipate that the continued fat loss and stabilization of muscle mass will drive further improvements in body composition and weight loss. We are preparing to initiate the Phase IIa multi-dose portion of INLIGHT in which we expect to enroll individuals with higher BMI and comorbidities. Assessments in this multi-dose portion are expected to be like those in the single-dose portion with additional inclusion of body composition measured by MRI and liver fat content as measured by MRI-PDFF. We're excited to evaluate not only body composition to demonstrate fat loss with lean mass preservation in the study, but also better understand the impact on liver fat, which could read positively for a NASH indication. Finally, we remain on track to initiate new clinical trials evaluating 007 as an incretin add-on and as a post-incretin maintenance therapy in 2026. Now turning to our ongoing RestorAATion-2 clinical trial of 006 for AATD. Our goal is to achieve three criteria: one, keeping basal protein levels at or above 11 micromolar. Two, driving circulating M-AAT protein above the 50% heterozygous MZ threshold with corresponding decreases in the mutant Z-AAT protein and most importantly, three, restoring the physiologic response of serum AAT protein to acute inflammatory events. Last September, we delivered data from our RestorAATion-2 trial, demonstrating that we have achieved these goals with 006. Most notably, we were able to restore a ZZ participant's ability to respond to an acute inflammatory event with a total AAT levels of greater than 20 micromolar, just two weeks after a single dose of 006. We are accelerating our regulatory engagement time lines now that we have full control of the program. We anticipate receiving feedback mid-2026, which will guide our path towards an accelerated approval. Now turning to our second RNA editing clinical candidate. We are advancing WVE-008 for homozygous PNPLA3 I148M liver disease. This PNPLA3 variant is a well-established driver of NASH pathology, yet there are no approved medicines that directly address this biology. There are an estimated 9 million homozygous PNPLA3 I148M carriers with liver disease across the U.S. and Europe who are at a ninefold higher risk of dying from their liver disease compared to noncarriers. With 008, we aim to correct the I148M variant using our leading RNA editing capability, which is expected to restore PNPLA3 activity and lipid mobilization, reversing steatosis and fibrosis and improving liver health. In our upcoming first-in-human study of 008, we plan to leverage previously genotype populations to efficiently identify homozygous I-148M carriers, evaluate target engagement of circulating biomarkers and assess early signs of efficacy using noninvasive imaging. We remain on track for a CTA submission in 2026. With that, I'll turn the call over to Kyle to provide an update on our financials. Kyle? Kyle Moran: Thanks, Chris. Our revenue for the fourth quarter was $17.2 million compared to $83.7 million in the prior year quarter. For the full year 2025, revenue was $42.7 million as compared to $108.3 million in the prior year. The quarter-over-quarter and year-over-year decreases were attributable to revenue recognized upon the termination of the Takeda collaboration in October 2024. These decreases were partially offset by increases in revenue recognized under our collaboration agreement with GSK. Research and development expenses were $52.8 million in the fourth quarter of 2025 as compared to $44.6 million for the same period in 2024. Research and development expenses for the full year of 2025 were $182.8 million as compared to $159.7 million in 2024. These increases were primarily driven by our rapidly advancing INHBE program and RNA editing programs as well as compensation-related expenses, including share-based compensation. Our G&A expenses were $20.9 million in the fourth quarter of 2025 as compared to $16.1 million in the prior year quarter, and $75.3 million for the full year of 2025 as compared to $59 million in 2024. These increases were primarily related to compensation-related expenses, including share-based compensation. Our net loss was $53.2 million for the fourth quarter of 2025 as compared to net income of $29.3 million in the prior year quarter. Net loss for the full year of 2025 was $204.4 million as compared to net loss of $97 million in 2024. We ended the year with $602.1 million in cash and cash equivalents, which we expect will be sufficient to fund the operations into the third quarter of 2028. It's important to note that potential future milestone and other payments to us under the GSK collaboration are not included in our cash runway. I'll now turn the call back over to Paul for closing remarks. Paul Bolno: Thank you, Kyle. 2026 will be a year of strategic focus aimed at accelerating development of 007 for obesity and rapidly advancing our RNA editing portfolio. We are excited to build on our positive momentum and are energized now more than ever to unlock the full potential of our RNA medicines pipeline to transform human health. Looking ahead, we expect our next update to be data from our INLIGHT clinical trial of WVE-007 for obesity and additionally, expect this to be followed by data from our RestorAATion-2 clinical trial of WVE-006 in ATD. We look forward to keeping you updated on our progress. And with that, I'll turn it over to the operator for Q&A. Operator? Operator: [Operator Instructions] We'll take our first question from Joseph Schwartz with Leerink Partners. Jenny Leigh Gonzalez-Armenta: This is Jenny on for Joe. I guess just one on AATD. One of your major competitors recently aligned with the FDA on their biomarker-based accelerated approval framework. How closely does your regulatory strategy mirror what they've laid out for their biomarker-driven path? And are there any key differences? And have you had comparable alignment discussions with the FDA? Paul Bolno: No. Thank you, Jenny. And I think what we all heard in the feedback from one of our recent peer companies from the agency is very much aligned with our thought process in AATD in the beginning and frankly, fairly well aligned with the existing therapies that have been developed for AATD, which is a biomarker approach in a disease where the protein is the measurement therapeutically active substrate. And so we wouldn't anticipate a distinct or different conversation. I think for us, recognizing that the only protein we're making is the M-AAT protein, and we don't have to deal with bystander edited proteins and the functionality of that, I think we're in very good shape for a discussion on active protein and meeting the requirements that we see as the therapeutic threshold. So we are engaging with them. Obviously, we don't comment on individual conversations with the agency, but we do fully anticipate feedback by mid-2026 on a registrational pathway. I think it was also highly encouraging recently, and I'm sure many of you heard on the plausible mechanism pathway, comments made by the head of the FDA as well as CEDR on using those pathways specifically for ATV. So I think it's a very good time for us to be approaching regulators on a pathway for alpha-1. Operator: Our next question comes from Salim Syed with Mizuho Securities. Salim Syed: Maybe just one for us on just the second quarter data. I think at JPMorgan, you guys mentioned that we should be expecting the 400-milligram multi and 600-milligram single in the second quarter of this year for INHBE. It doesn't seem like it's listed in the slide or the press release. Has there been a change? Are we going to get that data? Or what caused you to remove it from the catalyst slide? Paul Bolno: Yes. No, the data is on track. I mean, as we always say, the beauty of a single-dose study with exquisite durability is all the patients are dosed. So data just continues to accrete. So we'll focus on the upcoming data, looking at the impact of time on 240 and the 400. And there's opportunities again for data cadence over the course of the year. We're not guiding to each individual update. But as you said, all these data time lines are all on track given that all the patients in the study have been dosed. I mean we have now over 100 patients on the study across multiple dose cohorts. So it does create a unique opportunity over the course of this year. Salim Syed: Okay. So we'll still get that data then, Paul, or something that we -- you're still sort of... Paul Bolno: Data included by the next update in Q1, and then we'll provide subsequent updates on Catalysts at each time we provide the update. So the next update on INHBE is this quarter. Operator: Our next question comes from Steve Seedhouse with Cantor Fitzgerald. Steven Seedhouse: I wanted to actually expand on the alpha-1 antitrypsin deficiency expectations. So assuming you get alignment on an accelerated approval pathway and some AAT marker either M or total. What are you hoping that the confirmatory trial requirement will be there? Or what are you expecting? Do you already have sort of clarity on what the post-marketing requirements would be for full approval eventually? Paul Bolno: It's a great question, Steve. I think that's the conversation that we want to have with the agency and align on. I think there's a number of ways of thinking about that, that can be efficient, particularly in the design of a subsequent studies that could roll into addressing some of those opportunities. And I think there's really two sets of development pathways. One is obviously respiratory. The other important feature of RNA editing, remember, is we see dramatic decreases in Z-AAT protein, which open up the opportunity for liver indications as well. So I think our goal is make sure that we focus on an accelerated approval pathway for AATD patients. These patients aren't liver and lung patients. These are AATD patients and then ultimately establish the right pathway as it relates for both labeling for lung and liver, and we'll align with the agency on those. Operator: Our next question comes from Joon Lee with Truist Securities. Joon Lee: Do you have an internal weight loss bogey for the forthcoming six-month data for the 240 milligrams and three-month data for the 400 milligrams to feel confident on achieving the 5% weight loss bogey at 12 months? And what sorts of outcomes data are you planning to generate to minimize potential payer pushbacks? Paul Bolno: Yes. Thanks for the question, Joon. I mean I think if we ultimately think about the pathway for a greater than 5% weight loss, remember, that threshold is after 12 months in patients that would be presumed to have an average BMI of 37 on an optimized treatment regimen. So in the low BMI Phase I otherwise healthy patient population at the doses we're in now, I think we'd like to see continued trajectory down on the weight loss curve. I mean we had about 0.9% decrease in body weight with increase in lean mass preservation and decrease -- substantial increase in fat. So with the expectation that total fat should continue to decline, we expect lean mass to stabilize, we would expect to see that change in total body mass. And that would just be a great indicator for us. And again, we continue to follow that, all of which would signal incredibly favorably that in the study, and as we mentioned on the call, I think this half of the year, getting that Phase IIa portion of the study in the MAD in patients with allowing for comorbidities, which means the expectation for higher BMIs that more aligned with other obesity studies would put us in a wonderful position to be able to have a regulatory pathway on weight loss. I think the broader conversation that we all need to kind of be ready for, and I think this is what we're hearing too from our strategic partners as well, is that this addressing body composition piece is critically important. I mean what we hear time and time again, both from the clinicians, patient advocacy community and obesity, again, and strategic partners is scale weight versus body mass. And this notion that weight on a scale equating to actually healthy phenotype and actually what's driving obesity improvements in health outcomes is driven from fat reduction, lean mass preservation and ultimately seeing that forward. So I think it's important that we look at the benchmarking for weight loss to be, can we cross those criteria for an approval in obesity? And we do believe that we will use that pathway. But I think what's more important than that in terms of ultimately the therapeutic potential for INHBE in the obesity landscape is really driving this improvement of an overall body composition, and that's how you get healthy outcomes. Operator: Our next question comes from Alec Stranahan with Bank of America Securities. Alec Stranahan: Good to see the progress. Maybe one on obesity. It was interesting to hear your thoughts on the various activin E strategies out there. Are there any specific AEs or other metrics you think we should pay attention to for, say, ALK7 or direct active modulators that you may be avoiding here with targeting INHBE? And I guess, longer term, given the better tolerability you're seeing so far, how does the duration of mass benefit that you could potentially achieve with 007 fit into your picture for addressing some of the comorbid conditions that these patients face. Paul Bolno: No. Thank you. And I'll break the question into the first piece. I mean, as we think about, as you mentioned, some of the myostatin and other activin pathways. I think as we're looking at our safety profile versus safety profiles of other medicines in that space, I think they've been distinct. So I do think what we're seeing in terms of not just driving fat loss, and we'll talk about that in the context of your what's ultimately going to improve the outcome for patients in that status. I think we see a very differentiated safety profile and efficacy profile as it relates to fat loss. As it relates to the -- as you pointed out, some of the potential risks and future looking at ALK7, I think we need to continue to watch those programs over time. I mean that's something that has to be evaluated is what is the downstream impact of this kind of multifaceted ligand strategy and what happens. And I think we'll be -- data will be accreting there and people will be able to observe what the impact of that is. I think it gets back to the very important point of why we selected INHBE, which is specificity. I think this has all learned over a long time in obesity that specificity and understanding pathways is important. And I think the INHBE access with ALK7 in terms of driving improvements in outcome is established both in genetics, following patients over time, so in clinical genetics and ultimately, as we're seeing translate in our human studies. As you point out, and I think this is an incredible opportunity in thinking about areas for INHBE reduction and particularly active reduction. I do think this opportunity is it's very well established that a 5% or more change in visceral fat does change outcomes, cardiovascular outcomes, diabetic outcomes. And so when we do think long-term about what's actually driving the benefits of when people say weight loss, ultimately, what's driving those benefits is this reduction in visceral fat, which we've surpassed with now nearly 10% reduction in visceral fat at our lowest therapeutic dose at the earliest time point and reduction in total body fat. So I think with all of that, coupled with preservation of muscle, which ultimately as an endocrine organ is critical for sustaining, the profile of what's ultimately going to drive health outcomes is that benefit. And those outcomes are well established in the literature. I think when people step back and say, what overall is important in medicine, I think those two things are really important. One, we have the health outcomes and for those who try to think about what's going to happen with that preservation. I don't think people raise their hand and say, I want a medicine that I'm going to lose 40% to 50% of my lean body mass at the expense of losing fat. And so I think ultimately, as an obesity therapy on health outcomes and other measurements, a reduction in substantial fat, particularly visceral fat and preservation of lean mass over time creates an optimal therapy in the space and with durability of once to twice a year as we think about the commercial prospects. You really can change the landscape in the current setting. So as we think about maintenance and the opportunity for once twice a year and the ease of administrating that. But we also think about the global 1 billion patients worldwide living with obesity and how they get access to therapies. And when you change that dynamic where patients aren't having to go in for a weekly or monthly injection of a protein or stay on a daily oral pill that has to be coincidental with eating and has all of the other tolerability challenges. We think it opens up the global obesity landscape, too. Operator: Our next question comes from Madison El-Saadi with B. Riley Securities. Madison Wynne El-Saadi: It's nice to see you're adding MRI-PDFF to your planned Phase II obesity trial. Just wondering what is the treatment delta you are expecting to get there, just recognizing that monotherapy semaglutide gets around 30% to 40%. So curious where you think you may land on that scale from, say, GLP-1 to the FGF21 mechanism. Paul Bolno: Yes. I mean without at this point, running -- I mean, it was interesting in looking at comparator data, peer data on combinations where they were seeing nearly a 78% reduction in liver fat. I think there is a substantial opportunity, as Chris pointed out on the call, for MASH as a potential indication as a monotherapy. So I think by enrolling a study where we have patients that allow for comorbidities, I think there is going to be a substantial opportunity for us on imaging to look at monotherapy data by itself in recognizing that there really is a powerful signal that's been seen with INHBE reduction in weight loss. And I think it steps back into again, the overarching opportunity for an INHBE pathway and really thinking about the substantial active knee reduction and driving outcomes, both for MASH and reduction of liver fat. And as we were talking about the last call, as we think about just lipid levels in general, you should see with this reduction in these patients with comorbidity. And this is really, I think, again, speaking about long-term outcomes and benefits to patients in cardiovascular disease, reductions in lipid profile, meaning reductions in cholesterol, LDL, hemoglobin A1c and triglycerides. Operator: Our next question comes from Catherine Novack with Jones Trading. Catherine Novack: Just one for me on the dose response and relationship between activin E and fat loss. So clinically, you are seeing similar fat loss to a competitor with lower activin E knockdown. Is there anything we're missing or is it just small numbers? And then similarly, do you have preclinical modeling data that shows that going from 75% to 85% knockdown is going to lead to better fat loss? Paul Bolno: Yes. I mean I think one of the things that we've seen, and as you pointed out, our study versus other studies that have come out is we actually have larger cohorts. So I think the dynamic effect that we're seeing with longer-term measurements of activin E, I think we feel really confident that both -- and we'll talk about the dose response second, that we do see really highly durable suppressed activin E levels over time. And I think that's the most important feature of speaking to activin E reduction is not just do you knock it down, it's keeping it chronically suppressed. And so we have the long-term data that, again, to your point, differentiates this from other programs in the space. Secondly, going back to our preclinical data, yes, we have shared that we see a dose response on activin E reduction driving, again, with suppression, driving further weight loss. Remember, that was the measurements we were using in our preclinical experiments were reduction in weight loss and that weight loss driven by fat loss. So again, gives us continued support between the 240. And we've been consistent in saying the bookends that we think around the therapeutic activin E, we believe, are modeled into the 240 versus 400 as being opportunities to look at that dynamic range on weight loss as we saw preclinically and translate that into fat loss in the clinic. So yes, we would expect to see the impact of both time but also dose on fat reduction. Operator: Our next question comes from Cheng Li with Oppenheimer. Cheng Li: Congrats on the quarter. Just wondering for the upcoming INLIGHT update, are you planning to share some additional like biomarker data for those like related to inflammation or maybe fibrosis? And also, are you planning to present the data at maybe a medical conference this year? Paul Bolno: Yes. We haven't guided to where we're presenting. It will be this quarter. So I think that's the most important update for consistency. In terms of data, we'll present the data the expectation should be similar to last time in terms of looking at the key metrics of measurements. I think what's important and really where the opportunity sits, to Chris' point on the call for the IIa portion of the study is since these are otherwise healthy individuals, and that's really why the BMIs are in this range of around 32 is because we've cut out patients that have a lot of the other features that you're measuring because those wouldn't be considered otherwise healthy individuals, and they don't meet that criteria. And so therefore, being able to look at some of the other markers that one can see in the study does present more of a challenge because they're otherwise healthy. I think the opportunity as we get into the Phase IIa, where we allow patients with comorbidities being higher hemoglobin A1c, other lipid characteristics will give us more opportunity to be able to discern some of these other changes that are seen with INHBE in a clinical context, but that will be in the subsequent IIa portion of the study. Operator: Our next question comes from Whitney Ijem with Canaccord Genuity. Angela Qian: This is Angela on for Whitney. Can you just maybe help us set expectations into the upcoming obesity and AATD readout? So for 007, how should we all be thinking about what is good in terms of body count or fat reduction from the 240-milligram cohort at six months and then 400 at three months? And then similarly for 006 in terms of what AAT levels would you want to see from 400 MAD? Thank you. Paul Bolno: I mean I think the key criteria for us is we're already on that curve with the 240, where we're seeing fat loss similar to GLP-1s increased visceral fat, higher fat visceral fat reduction than GLP-1s and lean mass preservation versus remember, at that three-month time point, there was nearly a 50% reduction in lean mass on the GLP-1. So I think continue to see the profile of an improvement in body composition with, I think, continue to see the impact of that fat reduction. So that should happen over time and lean mass should be stabilizing over time, which should be driving that lean -- the total body mass curve down, so weight down. I think that will be the opportunity of looking at the impact of time at 240. And then it was brought up by one of the other questions, which I think is an important one is we're going to be able to look at the establishment of this dose response context. So what's the impact of time on that curve and what's the impact of dose on that curve? And so the 400 will be equally as important looking at that early time point. So that will be at the three-month time point because, again, we can compare it to the GLP-1s on the dose response at that early time point with a higher dose and suppression of activin E and potential decreasing in fat and be able to set the stage for what does that look like modeled over time based on the 240 six months. So I think we've got an opportunity really to continue to watch those kinetics play out. And if we go back to our preclinical data, that was really the slope of that weight loss curve was driven by exactly what we believe we're seeing in humans, which is mice have substantial reductions in total body fat. They had a slight increase in lean mass. And overall, the mice lost weight similar to GLP-1s and their curve was continuing. So I think the opportunity is to actually be able to model between our preclinical data and clinical data based on the human evidence coming forward in obesity. For 006 in AATD, I mean, I think it's important to remember that the arms race for more and more protein isn't necessarily what the requirement is if you're not doing IV protein replacement therapy. So I think the idea in editing has been to establish do you have the therapeutic threshold to say that these patients are corrected to an MZ phenotype so that ultimately -- and it is really important when we talk about editing to step back and say, it's a chronic disease of acute exacerbations. And therefore, the whole premise of this is how do you prepare a patient so that when they have that exacerbation, they can rise to meet that need. And as we saw, 20 micromolar, the lowest single dose meant that those patients actually in the event are protected at levels that we're talking about for IV protein replacement to hopefully prevent that where that nadir could actually be lower in the IV protein replacement space. So I think we've already seen that we're at that threshold. I think the question going forward is going to be both durability, time, so opportunity to continue to see as liver gets healthier, are we producing potential for more M protein over time, which we think based on our preclinical experience should be seen, so you can continue to see that protein get released to see increases in, but ultimately continue to sustain the portfolio. I mean, the pattern of increased editing efficiency. So I think that's the notion. We're going to be able to look at that at the 400 and see again, duration. So is this -- this will be monthly? Do we think about the opportunity to think about a medicine that could be quarterly or less frequently. Being able to model that is going to be important ultimately as we think about a therapy. And so I think we're set up to be able to distinguish this as delivering on the profile that we believe is going to be requisite for the regulatory interactions for a potential accelerated registrational pathway. Operator: Our next question comes from Ben Burnett with Wells Fargo. Craig McLean: This is Craig on for Ben. I appreciate the opportunity to ask you all a question today. So appreciating the fact that 007 is a liver-directed agent, I guess, based on your understanding of the biodistribution of that agent, would you expect any of it to find itself to muscles? And maybe just a quick second one here. Given that now you're exploring the benefit of 007 on liver fat, how do you see that coexisting with 008 over longer periods of time? Paul Bolno: Yes. I mean I think to address the first one very simply, it's a GalNAc conjugated siRNA. So it's an active receptor-mediated uptake in the liver. So that is the target organ for delivery. And based on our preclinical data, that's where the drug is distributed and exerts its impact on a simple basis. And the second question was -- sorry, if you want to... Craig McLean: 008. Paul Bolno: 008. So, how do these work? Yes. I mean I think what we have to think about in 008, and it's important to kind of step back separately from just thinking about 007 and the impact on liver fat and 008 in the constituency, MASH is one indication for 008. If we step back and think about the PNPLA3 indication, these patients are at risk of all told liver disease. So the best way to think about PNPLA3. And maybe, Erik, you can share and we should double-click back on the indication because I think it is important to really think about this as a genetic mutation for the liver disease in general and all to liver disease, not just NASH and where the ability to identify the mutations found in 23andMe, it's a genetic mutation that can drive a whole variety of diseases, of which NASH is one. But Erik, I don't know if you want to... Erik Ingelsson: Yes. Just to build on that, I think this is the first approach that is directly -- or rather, there are no approved drugs that are directly addressing the pathology in these carriers. So it's kind of -- it really corrects back the disease driving variant in these carriers. And to Paul's point, it's not only MASH, it's across a whole set of different liver diseases. So it addresses directly the causal variant. So therefore, it's kind of a unique approach, we think. Paul Bolno: We think about this as having kind of and we shared some more on this. So it's a good opportunity for us to go back to Research Day. There's this concept on lipid trafficking and when we think about MASH and where that application is, but there's also an inflammatory component in these PNPLA3 patients, which is why their response to injury drives this fibrosis and liver injury in general. And so the real opportunity in correcting this, and this is again why you want to correct it and not silence it is restoring the functionality of this enzyme so that what you're able to do now for these cells is actually repair them. So not thinking about kind of symptomatic treatments that improve kind of one aspect of the disease, but actually fix the underlying pathology that allows these patients to go forward, not just focus on liver fat, but actually prevent fibrosis and downstream sequelae, where these patients who are homozygous are at very high increased risk of really progressing to cirrhosis and ultimately new transplantation. So I think the opportunity we really have in fixing this disease at the source. This is separate from thinking about how do we think about the opportunities beyond treating body composition as it relates to obesity therapies with 007. So if we think about 007, there are a whole host of things we can think about as we think about visceral fat reduction and what the impact long-term is on visceral fat reduction, improving outcomes to patients, not just thinking about obesity in general, but thinking about visceral fat reduction downstream, thinking about MASH as another indication because of the increased impact on reduction in liver fat. And so I think these medicines are very different in how they approach things. INHBE really focused on a pathway around fat reduction and the ability of 008 to focus on a pathology that's very uniquely driven off of a genetic mutation. Operator: Our next question comes from Roger Song with Jefferies. Cha Cha Yang: This is Cha Cha Yang on for Roger. I had two questions. One is, can you speak more to what you expect to see for 007's kinetics based on some preclinical PK data? And what we should expect to see for the rate of fat loss, weight loss and lean muscle mass change over the next six to nine months? And then just second question really quickly. Can you just remind us what trials and programs your 2028 cash runway will include? Paul Bolno: Yes. I mean I think what we see on the curves, if you look at the animal modeling data, so you can follow where the GLP-1 curve on weight loss is, where that's heavily predominantly driven on lean mass loss at the beginning and then continued fat reduction kind of gives you this that increased slope and plateauing and then where you see INHBE, where you see this acceleration kind of into that curve. And so I think we're right on that tracking with the rate. We're all learning about the pathology -- say we're all learning about the rates of that curve together. I think it is tracking actually very nicely to our preclinical experience. I would say mouse kinetics to human, there's always a separation. So we just have to continue to watch that play out. But I think we have a very good benchmark in looking at the GLP-1 versus INHBE, and they're tracking as to be expected. So again, high degree of conviction that with more time, you see more fat reduction. With higher doses, you'll continue to see more fat reduction. And then as you point out, we'll have these periods at six months, nine months and out to the patient study allows for a follow-up out to a year. We're going to get the opportunity to really follow that in this lower BMI setting. I think what's going to be exciting about bringing on earlier now this higher BMI setting is going to be that we're going to be able to look at these things in tandem, right, be able to track these together and be able to see, again, in that higher setting, which is more akin to the animal model, does that happen faster? And so we'll be able to look at that and track that. But again, very good correlation between the DIO mouse and what we're already seeing in the clinic. So again, drive that conviction, remembering that we did see weight loss in the preclinical models. Your other point within this 2028 envelope is exactly, as we point out, delivering on our four strategic priorities. We're going to deliver the 006 data. We'll have our regulatory interactions in the middle of this year. It was and why we said last year, it was important for us to accelerate INHBE. It funds the Phase IIa studies so that we can continue to deliver the study in patients with a higher BMI. And it's inclusive of accelerating, as we said this year, the study on both add-on and maintenance. And what's been interesting in some of our strategic conversations is we are getting -- there are good conversations happening with the ability to access various incretin and various designs and studies. And so that isn't incorporated into those savings in those studies, but there's opportunities that exist as we think about those collaborations ways of thinking about retaining the asset, but ultimately continuing to drive clinical data sets off of that. So again, delivering in our runway, as we said at the beginning of this year, the core strategic principles of 007 in obesity, 006 for alpha-1 antitrypsin deficiency and bringing also forward the CTA submission and the clinical trial for 008. So that's in the envelope. Operator: The next question comes from Michael King with [indiscernible]. Unknown Analyst: I just want to maybe reflect more on 007. We're talking in very scientific terms. But if you think about the trajectory of the obesity space, I look at it as kind of a war of one upmanship that started between Lilly and Novo and then it's going to be, I think, joined by the likes of Pfizer and others just trying to focus on body mass index or loss of body weight. You see the consumerism aspect of it with Serena Williams and Charles Barkley losing 30-plus pounds or 50-plus pounds, respectively, of weight. So how does one communicate maybe -- and this may not be your problem to solve. It may be your strategic partner, but how does one communicate the benefit of loss of visceral fat and preservation of muscle apart from body weight when so much of the light in the obesity ecosystem is focused on body weight loss. Paul Bolno: No, it's where we spend a lot of time, and it's frankly why we're extraordinarily excited about where INHBE fits into this because I think athletes is not aside, call it you're a normal person, right, who is going and wants to your point, there's a need or requirement in their minds, they're saying, I need to lose weight, right? They're worried about either being obese or overweight and they want to take a therapy. And if you look at this, I don't know anybody who is going to raise their hand and say, you know what, I wouldn't mind losing 30%, 40%, 50% of my lean body mass because I'm going to look at a scale and it's going to go down. When you could look -- and actually, I'm reminded this because I was actually talking to a KOL yesterday. And what she was reminding me of is we need patients who are leaner, not lighter. And the notion that she has patients to come into the office and she remind them, she's like, don't look at your scale. But if I told you, they're coming in because they're saying, look, I want to lose like 40 pounds. I want to lose this. And then she puts up a picture actually like Michael Phelps. And she's like, if I told you could be 200 pounds and look like that versus 150 pounds but have no lean mass, what would you -- and inevitably, when people think about it in real-world context, what they're really saying is they want to be leaner. They want to have high lean body mass low subcutaneous and visceral fat, but they don't want to do it at the expense of muscle, and they're thinking about it. Unknown Analyst: They can get their back. Paul Bolno: It's just as important. And now -- but it doesn't mean -- so like -- and I don't want to take us into the swirly of, it doesn't mean you're not going to lose weight. If you lose subcutaneous fat and you preserve muscle, you will lose weight. So this notion that all of that has to not coexist with the regulatory pathway, I think, is a false pretense. So you can completely exist within the regulatory paradigm. But if I actually see where regulators are going as well, they're indexing this, right? The guidance last year was on body composition, bring us weight loss, but bring us body composition. Don't come where this race. You pointed out, the race that's happening in this other kind of or call it on the incretins. It's just like incremental loss of -- it's at the expense of muscle. There's tolerability, there's weight cycling. There's this notion of a whole generation of people who are on a therapy and it's switching from saying, well, we should think about this like hypertension, keep people on it for a long time. 70% of people can't stay on the incretins for a full year, right, with all of the other complications to it. So I think the notion of really reminding ourselves why are we doing this? A once to twice a year medicine that can drive substantial fat reduction, preserve lean mass. So you get that opportunity on both, as you said, the perception side, what do I look like kind of question. But most importantly, what's going to drive health outcomes benefit is the profile of what INHBE and activin E reduction brings, but does so at a scale where, again, safety, tolerability, I think, is highly differentiated from the growing incretin class. I think maintenance will be a really fundamental opportunity here, the idea of what does the off-ramp for a chronic therapy look like where somebody now has to look at the potential lifetime of sustaining themselves on an incretin therapy. It's why we're excited this year to get the maintenance study, which is give patients an off-ramp. You can have the sustained reduction in fat, you can prevent continued sustained loss of muscle. You can have a once to twice a year maintenance therapy. And so I think there's an enormous opportunity on the maintenance setting. And I think we're hearing this echoed by all of the strategics that we're talking about that truly recognize that this INHBE body composition, maintenance is crucial. And not to be lost to realize that when we do talk about this as an obesity therapy, there are a substantial number of people who can achieve goal on the incretin therapy. They can't tolerate staying on. They can't tolerate being titrated up on it. And so we really do think about the therapeutic paradox. We have one strategic say, what would be really interesting is INHBE is the basal state and then titrate the incretins around it so that you can preserve better tolerability and safety. So I think this really does fit within this paradox. But as you point out, I think it really is important for people to remember in the real-world consequence, this really is delivering the profile that patients are looking for, reduction in fat, preservation of muscle, ultimately allowing patients to be leaner, not lighter. Operator: We'll take our last question from Cassie Yuan with RBC Capital Markets. Cassie Yuan: On INHBE here, I appreciate that you're amongst the most advanced in clinic today for this target, but it also seems like some of your competitors are speeding up by following signals in comorbidities and subpopulations earlier in their studies. Could you maybe comment on how important is it to be the first pivotal data for INHBE? And ultimately, do you see activin E space accommodating multiple players? And what do you think is going to be the differentiating factors amongst the players here for activin E lowering therapies? Any color there on these dynamics is much appreciated. Paul Bolno: Yes. I think, look, I mean, as you point out, obesity is a very large space, so it can accommodate multiple therapeutic companies. But as we've also seen in the space, it's helpful to be a leader. And I think within the INHBE access, I think Wave is well poised to be the leader for INHBE silencing. I think our chemistry is highly differentiated. We saw that from driving single-dose weight loss in our preclinical studies, which is the only preclinical data to date that's shown dramatic decreases in sustained activin E reduction tied to weight loss. So our chemistry translated to differentiated preclinical data, which ultimately, as we've seen, translate into the clinic in a highly differentiated way. I think what we're seeing across the INHBE space with competitors are programs that look very similar across all of the peer companies. I mean if you look at all the posters that were sitting there on other INHBE programs at Obesity Week, they all looked remarkably similar. So I think there will be a separation between here's what Wave is bringing to the table in a highly differentiated way to look at INHBE with a once to twice a year therapy that drives a dramatic difference. And then there'll be everybody else. So I think it creates a very unique opportunity for us really to define the space and then sustain our leadership within that space. And I think it is important because I think we tend to think about siRNA as a commoditized space across indications. And I think we're hearing this from those who are experts in the field recognizing that what the team has done in driving new chemistries forward has created a very unique space for us here. Now we need to sustain that leadership, really, as you pointed out, defining what success is going to look like. And so it's wonderful that we could see already this differentiation. Everybody is comparing us to GLP-1s at three months, other INHBE programs at these time points, that we're a little bit later. But we're doing this in a way where our BMI setting, to your point, we're looking at patients who are nondiabetics, right, who are low BMI, and we're already seeing these differences. We're excited to go into the higher BMI setting because I think that's going to give us the opportunity to see even greater weight loss and fat loss and then ultimately changes in other outcomes measurements. So I think we're really poised to not have to say we need to get into these settings to be able to see the efficacy. We can see it in this low setting and then only build on that from here, time, higher doses and also in patients with higher BMI and comorbidity. So the data should continue to mature as these studies move forward, both in the existing INLIGHT study, but also in the Phase III study. Operator: Thank you. There are no further questions at this time. I will now hand the call back over to Paul Bolno for closing remarks. Paul Bolno: Thank you for joining our call this morning. We appreciate your continued support, and have a great day.
Operator: Good day, and thank you for standing by. Welcome to The Pennant Group Fourth Quarter Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would like to turn the call over now to Kirk Cheney. Please go ahead. Kirk Cheney: Thank you, Lisa. Welcome, everyone, and thank you for joining us today. Here with me today, I have Brent Guerisoli, our CEO; John Gochnour, our President and COO; and Lynette Walbom, our CFO. Before we begin, I have a few housekeeping matters. We filed our earnings press release and 10-K this morning. These are available on the Investor Relations section of our website at www.pennantgroup.com. A replay of this call will also be available on our website until 5:00 p.m. Mountain Time on February 26, 2027. We want to remind anyone who may be listening to a replay of this call that all statements are made as of today, February 26, 2026, and these statements will not be updated after today's call. Any forward-looking statements made today are based on management's current expectations, assumptions and beliefs about our business and the environment in which we operate. These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call. Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results. Except as required by federal securities laws, Pennant and its affiliates do not undertake to publicly update or revise any forward-looking statements where changes arise from new information, future events or any other reason. In addition, The Pennant Group, Inc. is a holding company with no direct operating assets, employees or revenues. Certain of our independent subsidiaries, collectively referred to as the service center, provide administrative and other services to the operating subsidiaries through contractual relationships with those subsidiaries. The words Pennant, company, we, our and us refer to The Pennant Group, Inc. and its consolidated subsidiaries. All of our operating subsidiaries and the service center are operated by separate independent companies that have their own management, employees and assets. References herein to the consolidated company and its assets and activities as well as the use of the terms we, us, our and similar terms do not imply that The Pennant Group, Inc. has direct operating assets, employees or revenue or that any of the subsidiaries are operated by The Pennant Group. We supplement our GAAP reporting with non-GAAP metrics. When viewed together with our GAAP results, we believe that these measures can provide a more complete understanding of our business, but they should not be relied upon to the exclusion of GAAP reports. A GAAP to non-GAAP reconciliation is available in yesterday's press release and in our 10-K. With that, I'll turn the call over to Brent Guerisoli, our CEO. Brent? Brent Guerisoli: Thanks, Kirk, and good morning, everyone. Before I say anything about our results, I want to take a moment to recognize the local leaders and teams across our organization whose commitment to our patients and residents makes everything we're going to share this morning possible. We are deeply grateful for the daily actions you take in support of our honorable mission to provide life-changing service to the people in your communities. It is your dedication that defines who we are as a company. 2025 was an exceptional year for Pennant. Our fourth quarter adjusted earnings per share of $0.34 contributed to full year 2025 adjusted earnings per share of $1.18, exceeding the midpoint of our updated annual guidance of $1.16. Our full year consolidated results include revenue of $947.7 million, an increase of $252.5 million or 36.3%, adjusted EBITDA of $72.5 million, an increase of $19.2 million or 36% and adjusted EBITDA prior to NCI of $76.7 million, an improvement of $21.6 million or 39.2% each over the prior year. In short, we met or exceeded the midpoint of our updated guidance across the board. From day 1, 2025 was a year of growth. On January 1, we completed our acquisition of Signature Healthcare at Home in the Pacific Northwest and quickly integrated them into our unique operating model, dramatically improving their performance throughout the year. In October, we expanded eastward with the largest acquisition in our history, the purchase of over 50 locations from UnitedHealth and Amedisys, adding meaningful reach in the Southeast. We also opportunistically acquired operations and real estate assets in our Senior Living segment. During this time of rapid growth, we drove progress in our same-store operations in both segments and added key leaders in the field and the service center who accelerated our results in 2025 and have positioned us for future success. Our 5 key focus areas remain the guiding principles that informed our efforts: leadership development, clinical excellence, employee experience, margin improvement and growth. We continue to make progress across each of these areas in 2025. On the leadership front, we added more than 100 leaders to our CEO and training program this year. Talented individuals whose skills and entrepreneurial energy will help us unlock additional value in our new and maturing operations. In addition, we elevated another 39 leaders to C-level status within their local operations. We have consistently said that great results begin with great people. As we invest in the right leaders and give them the tools to succeed, we become the employer and provider of choice in our communities, and the results we're reporting today are proof. Now following a year of tremendous growth, while we remain open to selective and opportunistic acquisitions, we are intensely focused on optimizing performance and driving operational excellence. We must and we will deliver exceptional integrations of our newly acquired operations. The transition of former Amedisys and UnitedHealth agencies in Tennessee, Georgia and Alabama is well underway, and we see enormous potential in these locations. Even as we integrate these new assets, we intend to drive growth and improvement in the mature operations across our portfolio as we have year after year. That focus on operational excellence includes not only top line growth, but corresponding bottom line improvement and clinical outperformance. Every one of our local teams is committed to delivering more value in 2026 while maintaining exceptional outcomes for patients and employees. We also intend to continue the upward trajectory of our senior living business. Since the pandemic, we have seen occupancy, revenue and adjusted EBITDA climb consistently and significantly. There is still substantial opportunity to unlock in our senior living portfolio. And as we continue to add operations and accelerate our flywheel of operational excellence, the growth potential ahead is compelling. Turning to 2026 guidance. As announced in our press release yesterday, we are providing full year guidance of revenue in the range of $1.13 billion to $1.17 billion, a 22.4% increase at the midpoint; adjusted EBITDA of $88.5 million to $94.1 million, a 26% increase at the midpoint; adjusted EBITDA prior to NCI of $94.2 million to $100 million, a 26.7% increase at the midpoint and adjusted earnings per share in the range of $1.26 to $1.36 with a midpoint of $1.31. Our guidance reflects the readiness of our local leaders, the strength in both of our segments and the significant upside we expect to continue to unlock in our existing operations, both in the mature portfolio and the newly acquired locations. This guidance is annual, not quarterly. And like prior years, it reflects an anticipated ramp throughout the year, particularly as we transition a significant number of recently acquired operations in the first half. With that, I'll turn the call over to John to provide more detail on our fourth quarter operational results. John? John Gochnour: Thank you, Brent, and good morning, everyone. Q4 was a strong finish to an exceptional year, and I'm excited to take you through the key operational metrics, highlighting our progress across both segments. In our Home Health And Hospice segment, revenue for the quarter of $233.3 million increased $91.3 million or 64.3%, while adjusted EBITDA of $33.7 million increased $12.4 million or 58.2% each over the prior year quarter. On the home health side, we saw our growth flywheel turn rapidly as we mix strong organic growth with our newly acquired agencies throughout the Southeast. Fourth quarter admissions surged 81.3% and Medicare admissions grew 87.5% each over the prior year quarter. While quarter-over-quarter admission growth is impacted by our acquisition of the United and Amedisys assets, I would highlight the quality of the underlying organic growth. Same-store Medicare admissions grew 8.2%, along with a 3.7% increase in Medicare revenue per episode each over the prior year quarter. This strong organic improvement is attributable to our clinical excellence and the entrepreneurial ownership our local leaders bring to their operations each day. Our average CMS star rating rose to 4.2 and compares favorably to the national average of 3.0, and that quality advantage is driving real results. Under CMS' home health value-based purchasing program, the vast majority of the agencies that we owned in the 2023 measurement period received positive revenue adjustments in 2025. The combination of admission strength, same-store growth and clinical quality gives us high confidence in the underlying trajectory of our business even in a reimbursement environment that continues to present headwinds. Our local leaders know how to pull the right levers. On the hospice side, we saw steady and consistent growth. Our CMS reported hospice quality composite score of 97.5% helped drive all-time highs in average daily census, which grew to 5,060, a 46.9% increase over the prior year quarter. As in home health, our acquisition growth was complemented by exceptionally strong growth in our same-store results, where average daily census increased 8.4%, admissions increased 6.6% and hospice Medicare revenue per day increased 5.9% each over the prior year quarter. The continued progress of our senior living business also should not be overlooked. With a stable and driven group of experienced leaders in that segment, we have seen substantially all metrics moving in the right direction, rate, same-store occupancy, revenue, margin and adjusted EBITDA. Full year Senior Living segment revenue improved to $215 million, an increase of $39.2 million or 22.3% over the prior year. Fourth quarter revenue of $56.1 million increased $9.2 million or 19.6% over the prior year. Fourth quarter Senior Living segment adjusted EBITDA improved to $6.1 million, an increase of $1.9 million or 46% over the prior year quarter. All store occupancy rose 200 basis points to 80.6%, even as revenue per occupied room increased 5.6% each over the prior year quarter. Same-store occupancy, which more accurately reflects the underlying operational improvement, grew 250 basis points compared to the prior year period, ending the year at 82.1%. The health of our senior living operations is enabling us to take advantage of a favorable growth environment. Turning to our integration efforts. As Brent noted, we are diligently engaged in the transition and integration of the former Amedisys and UnitedHealth operations we acquired in October 2025. We are transitioning the locations in waves and expect to complete all waves by October 2026. As we've noted before, any transition of this scale will have initial choppiness in early results, which our guidance anticipates. As we complete the system and branding transitions and fully implement our operating model, we expect to achieve operational efficiencies and strong clinical outcomes, similar to the prompt improvement we experienced in our recent Signature acquisition. What I would tell you is that the transition is progressing well. The reception we've had in the Southeast has been encouraging. We inherited and have already attracted additional talented leaders in the field and in our new Nashville service center, and these teams are genuinely eager to harness Pennant's locally driven model. These new operations have joined clusters with seasoned and successful Pennant operations. And so the building blocks of peer accountability that make our model work are in place. We remain very bullish on the long-term potential of these operations and the regional expansion they will enable. On the growth front, we continue to see strong deal flow. We are always disciplined in our approach, but we will be even more selective on the home health and hospice front in the first half of 2026 as we focus on ensuring our recently acquired operations are on firm footing. On the senior living side, our reputation as a high-quality operator and our working relationships with REITs and sellers continue to generate compelling opportunities, often through triple net leases with minimal capital outlay. We will remain disciplined and opportunistic as we screen for attractive deals in areas of strength where we have leaders prepared to step in. We expect a steady pipeline of such opportunities throughout 2026. In Q4, we completed 2 senior living acquisitions. On November 1, Pennant acquired the operations and real property of a 55-bed assisted living community in Lewiston, Idaho, now known as Twin Rivers Senior Living. This community reinforces our strategic commitment to expanding high-quality senior care across Idaho. Lewiston has long been a high-performing market for Pennant's home health and hospice operations, and we're excited to strengthen the continuum of care in that market. On November 4, we completed the acquisition of the real estate related to Honey Creek Heights Senior Living in West Dallas, Wisconsin, following our earlier operational acquisition on January 1, 2025. This community adds 135 assisted living beds to our growing Midwest portfolio and demonstrates the value we can create through real estate ownership as we acquire and improve underperforming operations. With that, I'll hand it over to Lynette for a review of the financials. Lynette? Lynette Walbom: Thank you, John, and good morning, everyone. Detailed financial results for the full year ended December 31, 2025, are contained in our 10-K and press release. We reported total GAAP revenue of $947.7 million, adjusted EBITDA of $72.5 million and adjusted diluted earnings per share of $1.18. In each case, we met or exceeded the midpoint of our guidance, which we raised in November. As a note, the full year adjusted EBITDA of $72.5 million reflects both organic improvements across our mature portfolio and the contribution of acquired operations, including the October close of the UnitedHealth transaction. Our balance sheet remains strong. In Q4, we expanded our credit facility with the addition of a $100 million term loan, bringing our total facility to $350 million. We invested $147.2 million in the UnitedHealth acquisition in October, and we now have a net debt to adjusted EBITDA ratio of 1.7x, well under our covenant limit of 3.25x. We are in a comfortable leverage position with ample capacity for additional investments when we are prepared to make them. Our cash flows continue to be robust. In Q4, we generated $21 million of cash flows from operations, bringing our year-to-date total to $48.3 million. We had $17 million of cash on hand at year-end. We expect cash flow from operations in 2026 to reflect organic revenue growth and continued bottom line improvement. With robust earnings and effective cash collections, we expect to fund future growth and pay down outstanding debt from prior acquisitions throughout the year. Turning to 2026 guidance. As announced in our press release yesterday, we are providing full year guidance of revenue of $1.13 billion to $1.17 billion, adjusted EBITDA of $88.5 million to $94.1 million, adjusted EBITDA prior to NCI of $94.2 million to $100 million and adjusted earnings per share of $1.26 to $1.36. It incorporates current operations and organic growth, diluted weighted average shares outstanding of approximately 37 million and a 26% effective tax rate. The guidance also anticipates EPS growth quarter-over-quarter, reflecting the ramp Brent described. It is based on ongoing integration efforts across over 50 recently acquired locations and expected ramp in home health and hospice ADC, continued occupancy and rate increases in senior living and the anticipated hospice reimbursement rate adjustments. It excludes unannounced acquisitions and start-up operations, share-based compensation, acquisition-related costs, certain transition service agreement costs and onetime implementation and unusual items. And with that, I'll hand it back to Brent. Brent Guerisoli: Thanks, Lynette. It's my pleasure to spotlight a few leaders in our organization who have set a standard of excellence in 2025. Their results are not an accident. They are the direct product of strong local leadership, peer accountability and a relentless commitment to serving their patients and residents. This is what our model looks like in practice. Future Chief Executive Officer, [ Eric Wise ]; and Chief Clinical Officer, [ Tracy Repco ], have built something remarkable at Columbia River Home Health in Kennewick, Washington. It begins, as it always does, with people. [ Eric, Tracy ] and their team have created a genuinely great place to work, evidenced by a nearly 90% employee favorability score and clinical turnover under 10%. Engaged teams deliver strong clinical results, and Columbia River is no exception. They have earned a real-time CMS star rating of 4.5 and potentially preventable hospitalizations of 6.2% compared to a national average of 10.8%. And the financial results have followed. Columbia River's revenue grew 43% and EBITDA grew 60% year-over-year. Columbia River's clinical and financial excellence demonstrates the power of our model to create industry-leading clinical outcomes while also generating strong financial returns. At Table Rock Senior Living at Paramount in Meridian, Idaho, future CEO, [ Heath Braberman ]; and future CCO, [ Lindsay Zawatsky ], have created a community defined by an exceptional team and the genuine care they provide each day to their residents. Acquired by Pennant in May 2024, Table Rock at Paramount is the kind of opportunity our model was built to unlock an underperforming operation in an area of organizational strength with prepared leaders in a community that needed what we have to offer. In just 1.5 years, the community has grown from a starting occupancy of 76% to now well over 90%. Employee engagement scores have increased by 15% and clinical metrics have seen dramatic improvements across the board. This has led to material financial improvement. Revenue increased by 27%, revenue per occupied room increased 12% and EBITDA improved 236% each over the prior year quarter. In part due to the success of Table Rock, our Idaho leaders continue to build an impressive collection of exemplary operations, and they are actively pursuing additional growth in the region. With that, we'll open it up for questions. Lisa, can you please instruct the audience on the Q&A procedure? Operator: [Operator Instructions] The first question will be coming from the line of Brian Tanquilut of Jefferies. Brian Tanquilut: Maybe I'll start first with the guidance. Lynette, as I think about the guidance here, it looks pretty conservative. So am I right in just thinking that given the different moving pieces with the AMAD-LHCG integration that you've taken a much more conservative approach to guidance set. Is that the right way to think through this? Lynette Walbom: Yes, that's definitely the right way to think about this. When we look at it, when -- we will have some initial noise as we're transitioning those operations from United and Amedisys, and that transition will occur over the first 3 quarters. And so there will be a time that as we're transitioning both our operating systems, so HCHB and also doing the name changes, all those pieces will cause some noise there. We also have operations that are supporting them from across the country. So while we continue those operations to still have strong growth, there will be some additional support that's being provided there. And so I think that's another factor that we wanted to continue to build into this guidance, and we can update as needed as we go throughout the year. Brian Tanquilut: Okay. That makes sense. And then one of the things that we've noticed with the acquired assets is the joint venture strategy that's embedded there. I guess it's legacy LHCG and one of the examples is the University of Tennessee JV. How do I think about, number one, the performance of the JVs relative to non-JV agencies? And then the other side of it is, how do you think about the strategy or strategizing around joint ventures going forward, given what you're learning from that asset? John Gochnour: Yes, Brian, this is John. That's a great question. I think as we look at our joint venture operations, and we have several of these opportunities across the country, we treat them like any Pennant business, which means that we have exceptionally local leaders who collaborate directly with their health system partners to deliver exceptional clinical outcomes and great financial outcomes to that community. And so what is -- what was really exciting and part of the reason why we were so excited about this deal was the UT JV. It's an exceptional health system that services communities across Northeastern Tennessee. And I think as we've gotten in there, that's exactly what we found. We found a great health system partner who wants to ensure great clinical outcomes for their patients, who wants us to take our great clinical outcomes and service a broader community, bringing patients into a continuum of care. And that's what's special about these partnerships. It gives us an opportunity with a premier acute partner to collaborate, to share data, to share information to ensure the seamless processing of transitions of care to make sure that the patient experience is top notch. And that's what we're experiencing in California in our joint ventures. It's what we're experiencing in Tennessee. And so I think on a go-forward basis, working with acute care partners is part of our strategy. It won't displace our core strategy, which is to create -- our mission is to create life-changing opportunities for local leaders, and that will include both joint venture opportunities where we'll work with acute system partners, but also opportunities to acquire independent agencies and continue the strategy that we've operated under for the last 10 years. Operator: Our next question is coming from the line of Ben Hendrix of RBC Capital Markets. Benjamin Hendrix: Just wanted to ask a question on the Amedisys/UNH asset ramp-up. Just wanted to see if you could help us compare and contrast a little bit kind of what you saw with Signature versus kind of what you're seeing in this Tennessee portfolio. What might work better, what might lag a little bit versus Signature and kind of what lessons learned you can apply that's given you confidence in the time line there? Brent Guerisoli: Yes. There are a lot of similarities. First and foremost, there's a lot of great leaders in operations there. Certainly, there's a mix of really strong operations and some that need to turn. But in general, we've been really pleased with the leaders that are there and the teams that have been in place as well. Also other similarities, they've been on Homecare Homebase. And so even though there is noise in the transition from different instances, that does help to facilitate the transition a little bit better. I also think we've learned a lot from our time last year and the end of 2024 transitioning Signature. There was a lot of learning. And that's why we had a ton of confidence going into this deal. The other thing I would say, and you probably remember from our conversations last year around this time when we talked about transitioning Signature that we likely wouldn't be doing any major acquisitions in 2025 as a result of the integration. And what we found was as our leaders jumped in, as we helped to develop and elevate the leader -- the local leaders that were already in place and then add additional leaders from our CIT pipeline that -- those transitions went a lot more quickly than we initially anticipated. And so we look at that, and therefore, we put ourselves in a position at the end of 2025 to be able to do this larger acquisition with the Amedisys and United operations. And so we're approaching 2026 in the same way with conservatism, recognizing that this is still larger in terms of size, in terms of operations. And there are multiple waves that go into place there. There's also the transition services agreement that is a unique element of this particular deal. And then we're also transitioning other support services as well. And so there are nuances that are different, but we feel confident in our local leaders. We feel confident in the teams that are already in place. We feel confident in the bench of CITs and other leaders that we brought in and the support across the entire organization to be able to transition well. So we remain optimistic. The other thing I would just end with is 2026 is going to be a year of transition, but we wholeheartedly believe that we should be pretty well optimized by the end of the year and going into 2027. And so our normal sort of rate of return and expectations around performance, we anticipate in the coming years. So overall, we're really excited about the progress that's already been made, but really knee-deep in all of the implementation and integration that's taking place right now. Benjamin Hendrix: Great. And just one quick question, if I may. Was the Columbia River discussion that Brent offered, was that part of the Signature group of assets that came over? John Gochnour: So yes, thank you, Ben. It was not part of those assets. We've actually operated that operation for, I think, 7 years. It's been a great operation. We acquired it from a health system, and we have been operating in that Tri-City community that it's a great story because it shows the efficacy of our model. Those local leaders have expanded relationships in that community. They've grown revenue tremendously. They've grown bottom line tremendously. And that's not a 1-year story. That's a 7-year story from taking it over as a very small agency that was purchased from a bankrupt health system to being a true asset to the community. They've just year-over-year grown consistently. And so we were excited to honor them today. Brent Guerisoli: I would also just add a key point here. [ Eric and Tracy ] and that team have, however, been involved in the transition of the Signature operations, its cluster partners and its market partners. And so it shows that even in the midst of support outside of their agencies, they're able to perform well in their local operations. And so that's just another takeaway from that experience. That's the way that we operate. Our local teams go and support each other. And there are -- sometimes what happens is there's learning that happens in existing operations that kind of motivate change and to do things differently. And that's something that we experienced at Columbia River as well. So it helps to give us additional confidence as we're transitioning in the Southeast. Operator: Our next question is coming from the line of Stephen Baxter of Wells Fargo. Stephen Baxter: I just wanted to follow up on the guidance. Obviously, you've given us the expected contribution from the deal assets, which is very helpful so we can think about the year-over-year and kind of what that adds. As we kind of think about the rest of the home health and hospice, maybe on a framing of like a same-store basis, could you give us a sense of what kind of same-store revenue growth you're embedding in the model or in the guidance for 2026? And then as we think about your ability to grow same-store EBITDA or EBITDAR given the rate conditions you'll have in home health for 2026, would love just more insight into kind of how you're thinking about the ability to kind of grow the same-store earnings base with that rate in place. Lynette Walbom: Yes. Thanks, Stephen. So when we're talking about same-store home health and hospice growth for 2026, we've built into the model about a 7% increase in home health and hospice revenue in the 2026 model. And then when we're talking about EBITDA expansion, yes, we do have the impacts of the home health rule, which will make softness in the revenue side. But as we discussed last year, we put together plans last year to really make sure that while we might have a rate decrease at that point, was looking at 6.5% essentially, what were the things that we could do to still have margin expansion or to maintain margin at that higher 6.5%. And so those initiatives are still pushing forward the ones that make sense for us to do at a 1.3% rate decrease. So as we look at that, we expect to still have margin expansion a few basis points to get us to, again, having some margin expansion in 2026. Stephen Baxter: Got it. That's great. And then I would love to just hear a little bit kind of continuing on the guidance theme, just how you guys are thinking about the margin opportunity in senior living. And then just as we kind of look at the corporate line, like obviously, the corporate lines kind of had a decent amount of growth as you've done acquisitions in the past couple of years. I would love just a sense of how to think about modeling growth in corporate expenses maybe over the next year or 2. Lynette Walbom: Yes. As we're looking at G&A, we've modeled in roughly a 3.4% -- or sorry, it's not 3.4%, 6.4% to 6.5% of revenue for G&A for 2026. And then on the senior living front, we're looking at, again, revenue when we look at the revenue components. So an occupancy rate -- or an occupancy increase of about 100 basis points over the year. And then on the rate side, roughly having RevPOR increases similar to this past year at about 6%. Operator: And our next question is coming from the line of David MacDonald of Truist Securities. David MacDonald: Guys, more of a strategic question. If we look back a couple of years, your scaled competitors were -- are now basically captives. So I'm just curious, can you spend a minute on just what you think the incremental opportunity you're afforded now given what the competitive dynamic looks like across some of the home health and hospice competitors? John Gochnour: Yes, Dave, it's a really fair question. And I think one of the things that we -- I would highlight is the acquisition of some of our peers by payers, in particular, reflects the value that home health care, in particular and hospice care in addition reflects in the continuum of care. And so I think one of the key things to highlight is we are adding tremendous value. The efforts by our home health partners and hospice partners, they keep people out of the hospital. They allow people to receive care in their homes, which is the lowest cost setting. And so when you look at the competitive dynamics, they've certainly changed, but it hasn't changed our modus operandi. Our focus is our belief that health care is a local business. It's a belief that there's going to be nuanced needs from -- for patients, employees and referral partners in every community that we serve. And so our focus is really on how do we develop a local leadership team that can respond to those needs in the most effective way that can be most responsive to community partners that can deliver the best clinical outcomes for our patients. And I think that's why you continue to see such strong organic growth quarter after quarter and year-over-year. And so when you look at the dynamics of potentially some of our largest competitors being part of a specific health care payer, that gives us an opportunity to position ourselves as the premier independent provider of these services. And we feel like that argument is compelling. It gives us an opportunity to negotiate with payers across the board, letting them make the decision based on exceptional clinical outcome and not the fact that we may be affiliated with a different payer. And so we think there's opportunity from a contract negotiation place. We feel like our clinical outcomes set us apart at the local level, at the national level. And then I think that is what drives the sustainable financial results and outperformance from a growth perspective that you're seeing right now. So we're excited about the future. Obviously, we feel like these services add tremendous value. It gives us an opportunity to work with our industry partners from a regulatory perspective to really push on the narrative around that value and make sure it's reflected in Medicare reimbursement and really accelerate our business as we go forward. David MacDonald: And then, guys, just one other quick follow-up just in terms of potential share gain. I mean when we look at the captives, all of those companies had a very heavy footprint east of the Mississippi. And now that you guys -- as your footprint kind of further expands, a, can you talk about share gain opportunity, especially in some of your new markets? And then b, I know that you've talked about a little bit of a pause as you integrate in terms of M&A, but with a high-profile transaction like the United-AMED deal, can you just talk about incomings and what you've seen in terms of a potential uptick in the pipeline even if you're going to wait a bit to execute on some of that? Brent Guerisoli: Yes. Dave, one thing I would say, part of the strategy or the rationale for going into Tennessee, in particular, was just the talent base that's there and the ability to build a service center and a location in the Southeast to be able to expand. So that was part of the calculus. Obviously, we need to integrate the operations, but we anticipate that the Southeast will become an area of strength for us and that we can grow significantly there. And we've seen it already as we've incorporated these operations. We've had a significant number of folks that we've been able to add to the team, others that have reached out to us. And there's ample opportunity for us to grow. And so we're excited about the potential that allows us to have. And certainly, as we look forward right now, we've put a little bit of a pause on the large growth. We'll do tuck-in acquisition opportunities. It actually doesn't change our approach on the senior living side. And we've got -- there's always opportunities in the pipeline there. But on the home health and hospice side, there has been plenty of outreach as well. There's much more recognition. I think as you expand into different geographies, certainly, it opens up the door for more opportunities to expand as well. And so assuming that we transition the way that we expect to, that we're looking forward to really doing the integration, but then seeking significant expansion opportunities going forward as well. John Gochnour: And David, on the market share question, we do think that the Southeast is different than where we operate in the West in part because there has been so much consolidation. And we believe that gives us a unique opportunity to set ourselves apart because of our local operating model. And so where there's -- all of the competitors are national in scope and scale, we think that gives us a competitive advantage because of our unique locally driven focus. And so that there is an opportunity to gain market share over where this business was when we acquired it. And that's part of the compelling growth opportunity that we see just in these assets, but also as we expand in the Southeast. So thanks for the question. Operator: And the next question is coming from the line of Raj Kumar of Stephens. Raj Kumar: Maybe just following up on the kind of senior living kind of 100 bps occupancy improvement and mid-single-digit kind of RevPOR baked into '26 guide. I guess what's the kind of underlying cost assumption as we kind of parse out kind of incremental margin improvement in the kind of Senior Living segment? And then historically, I believe you kind of called out a kind of operating income margin in the kind of mid-teens for this segment. And now you're kind of in the double-digit range. So as we kind of think about that opportunity, what does that kind of look like from an occupancy standpoint as we kind of think about the long-term trajectory of the senior living business? Lynette Walbom: Yes. Thanks, Raj. When we're talking about the 1% increase in occupancy over the year, what that will allow us to do, again, is those operations where we've kind of achieved that breakeven of where we're able to drop more to the bottom line from a rent -- we've covered our rent hurdle. We look at that as being about 30% of that can flow down through the bottom line to get us to higher and more adjusted EBITDA. So that would be the math on that one. Brent Guerisoli: Yes. I mean just to provide a little more color, Raj, we've -- that 100 bps increase really calculates at our current incremental operational -- operating margin just a little under $1 million in value for every 100 basis point increase. And so obviously, there is expansion in that. So if that margin increases a little bit, then that opportunity increases a little bit as well. But hopefully, that gives you a little bit more just clarity on the kind of incremental increase on the occupancy front. Raj Kumar: Got it. And then maybe just a couple of quick ones from a modeling perspective. Just kind of any kind of goalposts around operating cash flow. And then as we think about kind of CapEx from the kind of deal integration, any framing around that would be helpful. Lynette Walbom: Yes. From an operating cash flow perspective for the year, we're looking at between $45 million and $55 million. I think we will have some noise that comes in there from cash collections as we're starting to transition those operations and working under a TSA that we've built into that number. And then from a CapEx perspective, we are forecasting roughly $15 million in CapEx spend in 2026. Some of that increase is due to some of the buildings that we've acquired that needed a little more CapEx spend to get them to where we want them to be from a property standpoint. Operator: And our next question is coming from the line of Jared Haase of William Blair & Company. Jared Haase: Maybe I'll ask another one about 2026 and try and take a slightly different angle. But when you think about the moving parts this year with the transition and some of the incremental costs that are sort of absorbed in 2026 and kind of having this mindset of targeting, having most of the optimization efforts completed by year-end, I'm wondering if there's sort of a way to frame what the exit run rate for EBITDA could look like by year-end relative to what you're actually guiding to. Obviously, not to get too far ahead of things, but just think it might be helpful to sort of frame what the jumping off point could look like for 2027. Brent Guerisoli: Yes. Well, I will just jump in. I mean our goal, we talk about -- I mean, our current rate is between 15% and 16%. And so that would sort of be kind of a target natural place to get to is to sort of where we currently are running. And then our optimal level is around 18% is what we've talked about. And so that might be aggressive to get there by the end of the year. However, we're going to push toward that number. But that kind of gives you an idea of the potential upside there if we can drive to kind of our current operational levels. Jared Haase: Got it. That's helpful. And then as my follow-up, I would like to drill into the hospice segment. I'm curious what the competitive backdrop is like these days. Obviously, you guys continue to put up really strong organic growth, strong ADC growth on a same agency basis. It seems like others in the market are experiencing strong organic growth trends as well. So just kind of curious to hear your perspective on the competitive dynamics in that business. John Gochnour: I think you've seen a normalization, right? We went through an acceleration at the beginning of the pandemic. We went through a deceleration after the pandemic ended because of the sort of pull forward that happened because we lost so many lives that would have otherwise received more extended hospice care during the pandemic. And so I think you've now sort of -- you're starting to see the beginning of what for years has been sort of called the silver wave, where that generation of Americans are average -- the average age of our hospice patient is 83 years old. So you go back 83 years and what was happening, it was 1944 and the war was ending and you start to see the beginning of that baby boomer generation. And so it's -- there is in part -- I think people were anticipating the silver wave beginning. But during the war, there was a downturn in birth. And so now we're getting to the other side of that. And you look at and say, okay, going forward, we've got some real opportunity to care for people at this most important stage of their life when they need medical help and they need an interdisciplinary team that can provide everything from psychosocial to medical director care. And that, I think, is why we feel so blessed to be in the hospice business and have the opportunity to serve and care for these patients. But I think that is part of the backdrop. I think you also see not everyone is doing -- is seeing that kind of growth. I think what you're seeing is folks who have an ability to meet the needs of their local communities, those are the folks who are doing well. And I think that is highlighted by our over 8% quarter-over-quarter same-store growth, highlighted by our 7.5% year-over-year same-store growth that just shows that across our platform, our teams are doing a great job of meeting the needs of their communities, and that's giving them an opportunity to care for this silver wave of aging patients that desperately need this care to improve their quality of life during that last stage of life. Operator: And this does conclude today's Q&A session. I would now like to turn the call back over to Brent Guerisoli, CEO, for closing remarks. Please go ahead. Brent Guerisoli: Thank you, Lisa, and thank you, everyone, for joining us today. Have a great day. Operator: This concludes today's program for today. You may all disconnect.
Operator: Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the Seadrill Fourth Quarter 2025 Earnings Call. [Operator Instructions] I will now turn the call over to Kevin Smith, Vice President of Corporate Finance and Investor Relations. Please go ahead. Kevin Smith: Welcome to Seadrill's Fourth Quarter 2025 Earnings Call. I'm Kevin Smith, Vice President of Corporate Finance and Investor Relations; and I'm joined today by Simon Johnson, President and Chief Executive Officer; Samir Ali, Executive Vice President and Chief Commercial Officer; and Grant Creed, Executive Vice President and Chief Financial Officer. Our call will include forward-looking statements that involve risks and uncertainty. Actual results may differ materially. No one should assume these forward-looking statements remain valid later in the quarter or year, and we assume no obligation to update them, except as required by securities laws. Our filings with the U.S. Securities and Exchange Commission provide a more detailed discussion of our forward-looking statements and the risk factors affecting our business. During the call, we will also reference non-GAAP measures. Our earnings release furnished to the SEC and available on our website includes reconciliations with the nearest corresponding GAAP measures. Our use of the term EBITDA on today's call corresponds with the term adjusted EBITDA as defined in our earnings release. I'll now turn the call over to Simon. Simon Johnson: Thanks, Kevin. Hello, and thank you for joining us for today's call. I'll begin by recapping our 2025 achievements before moving to the broader market outlook. Following my remarks, Samir will discuss recent contracting successes and our commercial outlook. Grant will then review fourth quarter and full year 2025 financial results before providing guidance for 2026. For full year 2025, we delivered EBITDA of $353 million, exceeding the midpoint of the original guidance range in what proved to be a very challenging market. Safety is the foundation of everything we do. And in 2025, Seadrill raised the bar again. We achieved the best safety performance in our history as measured by total recordable incident rate, delivering 50% better than the IADC offshore industry benchmark. That kind of margin is not accidental. It's the product of rigorous standards, elite crews and uncompromising operational discipline. That operational discipline does not stop at safety. It translates directly into performance. In 2025, we did not simply perform well, we separated ourselves from the pack. The West Neptune reinforced its best-in-class reputation by delivering a record-breaking 6 zone completion for LLOG in the U.S. Gulf, completing the program in 11 days and exceeding the prior benchmark by an impressive 60%. That level of execution is why the rig is now entering its second decade under continuous contract. Following Harbour Energy's acquisition of LLOG, we look forward to extending what has already been an exceptional long-term partnership built on performance. Additionally, West Polaris and West Neptune delivered highly complex NPD programs using state-of-the-art integrated riser joint technology, which translated into more than 12 hours saved during rig up and rig down per well and meaningful economic value for our customers. With over 100 MPD wells drilled, our crews operate further up the learning curve than most in the industry. The West Elara and ConocoPhillips Supplier of the Year Award for their focus on execution, recognition that reflects not just performance metrics, but the consistency and reliability that sophisticated operators demand. Meanwhile, the West Tellus reached an outstanding milestone, 400 consecutive days of BOP subsea deployment while delivering 5 wells offshore Brazil. This marks the second longest deployment in our fleet history, demonstrating the durability of both our equipment and our crews in a demanding deepwater environment. This superior performance has already extended into 2026. In January, the Sevan Louisiana successfully executed 2 well interventions using Trendsetter's innovative Trident system, its first deployment in the U.S. Gulf. This advanced technology is broadening the rig's market potential, attracting attention from customers who appreciate its operational flexibility and its proven effectiveness in both shallow and deepwater environments. Our strategic partnership with Trendsetter has resulted in a truly differentiated offering that will continue to deliver advantages for both companies well into the future. None of this performance is coincidental. Throughout 2025, we invested deliberately in our people through ongoing professional development opportunities. We expanded course offerings at the Seadrill Academy in Dubai, operational discipline and technical services workshops around the world and launched our first safety leadership assessment program. We conducted training in simulated environments that replicate our equipment and procedures, resulting in a cycle of self-improvement and advancement in our operational practice. Our customers consistently reference the quality of our crews, their can-do attitude and their focus on well site performance over centralized bureaucracy. This is what operating at the top of the performance curve looks like, technical capability matched by disciplined execution. Commercially, in a competitive market, we maximize utilization across our high-specification fleet. Our backlog profile provides strong revenue visibility into 2026, growing coverage into 2027 and substantial contracting leverage in an improving market. The West Capella's return to operations in the second quarter of 2026 represents a significant enhancement to Seadrill's forward earnings trajectory. The 14-month award from long-standing customer, PTTEP, reflects confidence in the rig's consistent performance throughout its many years in service and reinforces our competitive position in a region experiencing growing energy consumption and offshore activity. Turning to the broader market. The current macro environment is the most favorable in recent memory. After a subdued 2025, the ultra-deepwater market entered 2026 with renewed strength. Tightening supply and increasing visibility point towards an even more robust 2027 as day rates, utilization and contract durations gain positive momentum. The International Energy Agency's annual World Energy outlook now projects that oil and gas demand will grow through 2050, a notable reversal from prior expectations of a near-term peak. Declining production from existing fields and rising consumption is forecast to quickly absorb any near-term oversupply. In fact, the market will require roughly 25 million barrels per day of new production by 2035 just to remain in balance. Growing oil demand, operators pivoting back towards deepwater and mounting confidence in the next exploration wave all indicate the beginning of an upcycle. For several quarters, we have consistently highlighted that operators have prioritized shareholder returns over reserve replacement. The impact of underinvestment is becoming increasingly evident and that narrative is beginning to flip. Amid projections of growing oil and gas demand and the lagging energy transition, the longevity of reserves is becoming a focal point for oil majors and the sell side. The Financial Times last week reported that oil and gas super majors are undergoing increasing pressure to spell out their growth plans after years focused on shareholder returns and capital discipline. They are now facing growing calls to explain the visibility of future production and where the new barrels will come from. It seems that concerns about short-term supply imbalances have receded in the wake of a far bigger problem. Momentum behind the strategic pivot to deepwater continues to build. Just last week, Eni announced significant new discoveries in Namibia and Cote d'Ivoire, underscoring the growing scale of opportunity in frontier offshore basins. Importantly, this trend extends beyond the majors. The government of India, for instance, has outlined plans to drill 150 wells over the next 7 years, activity that could necessitate up to 5 additional floaters. We've highlighted growing deepwater exploration from the majors and activity has accelerated as they intensify efforts to secure future growth. Shell recently acknowledged the need to rebuild its exploration pipeline after reserves fell to the lowest level since 2013. We can already see this in action with Shell signing a joint study agreement for exploration blocks in Indonesia, marking the return following the 2023 exit. Chevron plans to increase annual exploration spending by roughly 50% over coming years with 10 to 15 exploration wells in the U.S. Gulf and 20 exploration wells in West Africa during the next 3 to 5 years. Chevron also signed an agreement for offshore exploration in Syria and acquired 4 blocks offshore Greece earlier this month. Petrobras is returning to Namibia after acquiring an interest in the block in the Luderitz Basin and Libya recently awarded blocks under its first lease sale in 17 years. The need for new reserves and sustained production growth is increasingly urgent. Exploration is back and it's scaling. And with that, I'll turn the call over to Samir. Samir Ali: Thanks, Simon, and good day to everyone. I'll walk through our recent contracting activity before sharing our thoughts on the commercial landscape for the year ahead. Despite a competitive environment in 2025, the value of contracts we secured has grown every quarter over the last 12 months. Our disciplined approach to fleet management, minimizing idle time and securing contracts that maximize our assets' technical capabilities has established a solid foundation as the balance between global offshore rig supply and customer demand becomes increasingly constrained. Since our last earnings update, we've added $0.5 billion to our contracted backlog, which currently stands at approximately $2.5 billion. In the U.S. Gulf, Seadrill continues to be a preferred contractor. Our skilled teams consistently deliver high performance, earning repeat work and recognition. In December, the West Neptune secured a 4-month extension with LLOG, securing the rig schedule into September and adding $48 million to contracted backlog. As Simon mentioned earlier, we look forward to deepening our partnership with LLOG under its new ownership, building on over a decade of productive collaboration and shared success. Staying in the region, the Sevan Louisiana has been awarded a well intervention program with 2 different customers. We are pleased to report on the successful deployment of the Trendsetter Trident well intervention system on our campaign with Walter Oil and Gas. After completing the work with Walter, we are eager to demonstrate the Sevan's continued versatility through upcoming work with a large IOC. Outside the U.S. Gulf, Seadrill has been actively securing several contracts over the last 3 months. In Angola, TotalEnergies exercised a priced option to commit to Sonangol Quenguela for an additional 10 months into February 2027. In Norway, Equinor awarded the West Talara a 450-day accommodation contract after we reached a mutual agreement with ConocoPhillips to make the rig available. In Brazil, the West Carina extended its current contract with Petrobras through April 2026. Also in Brazil, Equinor exercised a priced option on the West Saturn, keeping the rig working through October 2027. Lastly, the West Capella was successful in a competitive tender with PTTEP in Malaysia. The program is anticipated to commence in the second quarter of 2026, contributing $152 million to contracted backlog over an estimated period of 440 days. More importantly, the reactivation of the West Capella strengthens Seadrill's earnings potential in 2026 and 2027, reaffirming our presence in Southeast Asia, one of the most exciting geographies for deepwater demand. This award reflects our disciplined approach to reactivations, deploying capital selectively, where we see strong customer commitments and attractive return potential. Turning to our outlook. We maintain our confidence in deepwater demand in '26 with even more optimism looking into 2027. The offshore drilling industry operates on a simple principle, utilization drives day rates. With committed drillship utilization currently at 88% and sideline capacity unlikely to enter the market, supply constraints are likely to intensify as demand continues to rise. Although some market softness may persist in certain geographies during parts of the year, the sheer number of opportunities and the durations of programs are increasing, particularly in high-growth regions such as Africa and Southeast Asia. Seadrill is well positioned to capitalize on that opportunity set. At present, 90% of the midpoint of our 2026 revenue range is covered by firm backlog and we are having ongoing conversations regarding the rigs that have near-term availability. In the U.S. Gulf, recent day rates have remained stable in the low 400s. And despite some near-term softness, we anticipate rates will remain in this range. 7 drillships, including the West Neptune and the West Vela are set to become available in 2026. Importantly, for our rigs, both are contracted in the first half of the year, allowing us time to secure work in the second half of the year. With several long-term opportunities in undersupplied geographies, we expect some rigs will be bid outside of the region and may leave the U.S. Gulf. Nevertheless, short lead times in the U.S. Gulf means demand can recover swiftly. Our assets in the region demonstrate outstanding technical performance. As Simon pointed out, the West Neptune has consistently set new records. The West Vela has a reputation for completing projects ahead of schedule and under budget and the Sevan Louisiana is drawing increasing interest from clients who appreciate its unique capabilities and strong results in niche applications. All 3 rigs are at the top of the performance curve and are very well placed to fill their schedules in 2026 and 2027 in the U.S. Gulf or in other regions. Moving to Brazil. IOCs have begun to consume rig capacity. Recent awards from Shell and BP and an ongoing tender with Equinor are positive developments that help mitigate current uncertainty around NOC plans. The West Carina, our seventh generation drillship equipped with MPD and dual BOV capabilities is set to finish its current contract at the end of April. We continue to actively market the rig for opportunities with customers in Brazil and outside the country for a wide range of projects starting in the second half of '26 and early '27. In West Africa, our final rig with availability in 2026 is the West Gemini, which is currently operating under the Sonadrill joint venture. As noted in the previous quarters, recent contracting awards for all 3 rigs within the JV reinforced its stability and our market-leading position in Angola. The West Gemini has promising prospects to secure additional work through the joint venture, both in Angola and across Africa beginning in late '26 and early 2027. The outlook for global deepwater demand is becoming clearer and leading indicators support this perspective. Market research by Westwood shows the number of subsea tree installations has increased for 5 consecutive quarters. They also forecast that floater utilization rates will recover, reaching 91% in 2026 and 96% in 2027. Additionally, there are 44 years' worth of outsetting floater requirements with commencements across Africa and Asia alone. Ongoing industry consolidation continues to support a more rational supply environment, reinforcing on the sustainable pricing improvements. And as ever, market research does not capture opportunities resulting from direct negotiations. The foundation for 2026 has been laid. In particular, the benefit of repricing legacy contracts for the West Jupiter, West Tellus and West Saturn will be felt in the second half of the year and even more so in 2027. This should set the stage for a meaningful increase in earnings and free cash flow. For Seadrill's fleet, we are not just predicting increasing day rates, we are already securing them. And with that, I'll hand it over to Grant. Grant Creed: Thanks, Samir. I'll now walk through our fourth quarter and full year 2025 performance before providing our outlook for 2026. For the fourth quarter of 2025, total operating revenues were $362 million compared to $363 million in the prior quarter. Contract drilling revenues were $273 million, a sequential decrease of $7 million, driven by fewer operating days for the West Vela, which commenced a new contract in mid-November. This impact was partially offset by additional operating days for the Sevan Louisiana. Reimbursable revenues, which increased $5 million during the fourth quarter to $16 million, partially offset the decrease in contract drilling revenues. Total operating expenses for the fourth quarter were $344 million, a sequential increase of $7 million, mostly due to a rise in depreciation and amortization costs associated with the capitalization of recently completed SBS and capital projects. SG&A was flat quarter-on-quarter at $27 million. Resulting fourth quarter EBITDA was $88 million, bringing full year 2025 EBITDA to $353 million, exceeding the midpoint of the guidance range previously provided. Turning to the balance sheet. We ended the year with a total cash balance of $365 million, which includes $26 million in restricted cash. The $63 million use of cash during the fourth quarter was primarily related to 3 items; a $43 million payment for the unfavorable legal judgment related to the Sonadrill joint venture as previously disclosed in 2025; accelerated capital and long-term maintenance expenditure, which was $69 million in the fourth quarter as we brought forward spend relating to contract preparations for the West Jupiter and West Tellus and a new contract for the West Capella. And finally, the timing of accounts payable disbursements. Overall, we continue to maintain a robust balance sheet with total liquidity of $524 million. And at the end of the fourth quarter, gross principal debt was $625 million with maturities extending through 2030. Moving on to our outlook for the year ahead. For full year 2026, we anticipate total operating revenues of $1.4 billion to $1.45 billion and that excludes $50 million of reimbursable revenues, and EBITDA of $350 million to $400 million. And that EBITDA guidance includes a noncash expense of $26 million related to amortization and mobilization costs and revenues. In terms of timing of this EBITDA generation, we expect Q1 to be lower than subsequent quarters as the West Jupiter, West Tellus and West Capella undergo new contract preparations. We then expect a step-up in Q2 following the commencement of these contracts. As a reminder, both the West Jupiter and West Tellus are repricing to 3-year contracts at day rates roughly $200,000 per day higher than before, amplifying the benefit of the West Capella resuming operations. Full year capital expenditure and long-term maintenance guidance range is $200 million to $240 million, a significant step down from the previous 2 years. We expect an inflection to strong cash flow generation in the middle of this year after the West Jupiter, West Tellus and West Capella commenced contracts and the associated CapEx for contract readiness and working capital investments are behind us. In summary, Seadrill has built a solid foundation and is now well positioned for future earnings and cash flow expansion. The combination of an expanded working fleet, the repricing of legacy day rates, which are already embedded in backlog and declining capital expenditures significantly enhances the earnings and cash flow potential of the company in the second half of 2026 and into 2027. Improving market conditions as widely predicted by industry participants are a catalyst for further earnings growth. And with that, I'll hand the call back to Simon for his closing remarks. Simon Johnson: Thank you, Grant. We delivered against our EBITDA target in 2025 while achieving record safety performance, setting operational records and investing in our people to widen that gap. We see a clear path to meaningful earnings and free cash flow expansion in the second half of 2026 and growing into 2027. Our commercial execution and backlog visibility provide a solid foundation, while our substantial contracting leverage and improving market conditions positions us to capture rate upside as the cycle accelerates. We have long maintained that consolidation is healthy for our industry and view the recently announced combination of 2 of our peers as further evidence of an increasingly durable market structure. Our clients agree on the need for resilient, well-funded drilling companies that consistently perform at the highest level through time. Following the latest industry consolidation, Seadrill will be the third largest deepwater driller in the world and we see a gap between our fleet and the smaller drillers behind us. Against this backdrop, we believe Seadrill continues to represent a compelling value opportunity. Our share price has appreciated more than 50% over the last 3 months, yet continues to trade at a meaningful discount to the U.S. listed offshore driller peer group on both forward earnings multiples and implied steel values. To close, I would like to thank our valued customers, partners and shareholders for your continued confidence. To our dedicated employees, particularly our offshore crews, thank you for your enormous efforts over the past year. Every success we achieved happened because of your teamwork and commitment to operational discipline, following procedures, using our tools and doing every job the right way every time. We delivered in a challenging market. We are setting the standard in deepwater drilling and we are positioned to lead as the cycle strengthens. I'll now hand the call over for questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of Eddie Kim with Barclays. Eddie Kim: Simon, you highlighted a more robust 2027 in your prepared remarks with day rates, utilization and contract durations gaining positive momentum. Leading-edge day rates for top-tier drillships right now are in the low $400s range. Do you expect that as the market begins to tighten, we could see day rates on contract announcements sometime next year returning back to that sort of mid-$400s level? Or do you think that's looking more like a 2028 event? Simon Johnson: Look, Eddie, I think you're going to see some rate movement now based on the data that we're seeing in the market, both the number of tenders, the capacity that's already been booked up with contracts starting in '27. I would expect our rates in excess of those levels, to be perfectly honest. You may see that in '26, in fact. That's not to say it's going to be a smooth path. I think as those people who have existing white space seek to fill the front ends or the back ends of their projects they committed to, you may see a broader range of fixtures. But I think based on the data we're seeing, and Samir can go into some greater detail, I think the rates will be at higher rates than the ones you talked about. Samir Ali: So we're seeing demand increase and supply is inelastic. So as utilization continues to improve, we should see day rates continue to climb. But I think it will be dependent on the geography. You'll see certain geographies move before others. But directionally, it feels like utilization is going to improve as we enter into '27 and definitely into 2028. Eddie Kim: Got it. That's great to hear. My follow-up is on the Petrobras blend and extends. I'm a bit surprised we haven't seen the conclusion of these negotiations from either yourself or your peers. When do you expect these negotiations are going to conclude? And is the likely result of these blend and extend negotiations currently reflected in the full year guidance you've provided? Or would that represent an incremental impact? Simon Johnson: Well, look, Eddie, we continue to have really positive discussions with Petrobras, but we don't control the timing there. So the way I would describe it is that I think it's working through the system I wouldn't see anything untoward. I don't want to make any predictions about when that will come to pass. But our focus down there in Brazil has been to identify those rigs that are best matched to the requirements of Petrobras in the longer term. And that's what we focused on in terms of blend and extend. But Grant, I'll pass to you for the second one. Grant Creed: Yes. On the guidance, when we put our forecast together, Eddie, we use, of course, a number of assumptions, but we use the best information available to us at the time when putting that together. Operator: Your next question comes from the line of Fredrik Stene with Clarksons Securities. Fredrik Stene: So I was hoping that you could maybe give a bit more color on how you're thinking about your fleet. As you walked through this in your prepared remarks, the near-term availability is mostly concentrated in the U.S. Gulf. And it seems like there are possible changes and movement of some of those rigs potentially going to other regions. You mentioned Africa, Southeast Asia as regions to where rigs could potentially go, either yours or somebody else's. So I was wondering, are you able to give a bit more color on how you're kind of strategically positioning these vessels in terms of chasing short-term versus long-term work? Are there any vessels that you would prefer to stay in the Gulf, et cetera? And as like a sideline question to that, but within the same theme of potential rig movements, you have great exposure to Brazil. Are you considering proactively moving or bidding some of those rigs ending in '27, '28 into other regions just to lower your exposure there? Or are you kind of happy with that? Sorry, that actually turned out to be 2 separate questions, but hopefully [indiscernible]. Samir Ali: So Fredrik, I'd say, look, with the U.S. Gulf fleet, we are obviously looking at opportunities both in the U.S. Gulf and outside the U.S. Gulf. They are some of the highest spec rigs out there in the world and some of the best performing rigs in the world. So for us, it will be -- it's an economic choice. If we can find work in the U.S. Gulf, we'll keep them here, but they are mobile assets. And if we find an economic alternative outside of the country, outside of the U.S. we'd happily move them. So for us, it really does come down to where do we generate the highest cash flow off of those assets. And we're not married to one geography over the other. But moving rigs is expensive. So look, we'll keep them here. But if we can't find work that makes sense, we will absolutely move them. I'd say the same thing applies to our fleet in Brazil, right? I mean, we are happy to move rigs around. It is not cheap, but if it makes sense, we will do it. We do have a lot of exposure to Brazil. So I wouldn't see us sending more rigs down there. Could we move an asset or 2? Potentially. But that's kind of how I classify how we view the market is we'll move them where it makes the most sense. Fredrik Stene: All right. That's fair. Then I guess this is my follow-up. But on the stacked fleet, Aquaria, Phoenix, Eclipse, do you have any updates on any of those assets since last time? Simon Johnson: There's nothing really to share at this time. I mean, the West Eclipse has been long-term stacked down in Namibia. Of the 3 rigs that you mentioned, that's probably the one that's least likelihood of reactivation. That's a low-spec asset, requires material capital investment to reactivate it and it's not terribly competitive in terms of its overall specification. However, I think the situation is a little bit different for the Phoenix and the Aquarius. They are also burdened with high reactivation costs. We want to be good stewards of our precious capital. And we're just waiting for the right market dynamic. And most importantly, whereby that large capital investment can be defrayed by a material contribution by the underlying customer. That's a necessary prerequisite to bringing them back to life. But the harsh environment, in particular, has improved dramatically over the last 12, 18 months. It's been one of the best performing sectors of the rig market. And I think we're still watching and waiting. We just need the right term of work and the right customer with a checkbook to fund the bringing the rig back to work. Samir Ali: The only thing I'd add to that is we're actively marketing those rigs, but it's finding that right opportunity that, to Simon's point, justifies the investment. But we announced a contract for the Elara. So we are in Norway for the foreseeable future. So for us, we have a shore base and we'd like to add more capacity to kind of cluster more rigs in that region. Operator: Your next question comes from the line of Greg Lewis with BTIG. Gregory Lewis: Simon, everybody, you mentioned the consolidation in the space. I'm kind of curious, I know in the past, you've talked about really a viable company in the offshore space kind of to be a real competitor and have a global presence needing, I think in the past, you've talked about 15 rigs. I guess my question is around, yes, I mean, hey, your stock has had a tremendous run. It is still at a discount versus maybe some of your peers. Maybe that's scale, maybe that's other reasons. We could debate that all day long. But I guess my question is, just given the price appreciation and now it looks like you're -- it looks like you are the third largest driller left standing, how do you think about using your equity capital to potentially expand your fleet? And I know we've seen this in other industries, not necessarily in the offshore drilling industry, but kind of the use for shares for rigs. Just kind of curious, just given that, hey, it is definitely a pyramid structure in the offshore drilling industry where there are a few players at the top and then there are more than a few companies that have 1 or 2, just a few rigs with a small presence, just kind of curious how you're thinking about just given the run-up in the stock, potentially using your equity capital to expand your fleet and what looks like a very attractive time to be expanding the fleet at this point in the cycle? Simon Johnson: Yes. Look, we see the cycle as very constructive. And as I mentioned to an earlier question, we think there's going to be day rate development in the months, years ahead. So that's obviously very attractive. We're also mindful that we've done a lot of hard work over the last couple of years in terms of rightsizing the fleet and putting effort into optimizing the running of the organization. So obviously, there's been a lot of speculation about what the future might hold following recent [ RigVell ] transaction. The customers and vendors have out consolidated the drillers in recent years. Despite the capital-intensive nature of our segment, the drillers remain fragmented. So there's definitely work to be done. And there's a sense of inevitability about further consolidation. I would say that there's a long tail of subscale competitors, but any opportunities for Seadrill will need to be strategically compelling and competitive within our overall capital allocation framework. So we're constantly surveilling the market, but I think you can really expect us to be disciplined. Our shareholders have been very patient. And as our average daily rate has been improving in '27 and the revenue profile that we expect to benefit from in that year starts to come into focus, we want to make sure that we're careful with the capital that we've got. We're careful with the equity currency. I think you can anticipate they'll be very disciplined as we look at any opportunities that might appear. Anything to add to that, Grant? Grant Creed: I think that covers it. Gregory Lewis: Okay. Great. And then I was hoping you could talk -- I'm curious on your thoughts around the recent ONGC tender. I know there's a couple of rigs in country. I believe they contracted a drillship earlier this month. But really, I mean, you were one of the last international contract drillers there with the Polaris, which I guess, when that rig kind of left, that was kind of the start of the current weakness that we've been seeing in the market. Just kind of curious, any thoughts around the timing of those tenders? Is that -- I believe it's 3 drillships and 2 semis. Is that firm? Just kind of when do you -- and more importantly, when do we actually think we could actually see some progress from ONGC in awarding those tenders, i.e., when are bids potentially due for that to give them time to digest those and come back with awards? Simon Johnson: Yes. Great question, Greg. Let me start off and then Samir can jump into the granularity. But I think the Indian market has been very quiet in recent years. So this was a surprise news to us. I think it's really positive. I think it's an example of work programs that hadn't been previously anticipated coming to the fore. It's not the only place where we're seeing activity pop up that was not expected. But certainly, the sheer number of rigs that they're talking about across ONGC and Oil India is obviously of tremendous interest. We like operating in India. There's a great cost structure there. And we think that the local energy demand picture is compelling, frankly. So we intend to participate. But Samir can talk a little bit about the specific opportunities. Samir Ali: Yes. So look, we were one of the first to come out saying Southeast Asia, I'll include India, and that was a market -- growth market. And I think the ONGC tender's more just emblematic of the demand we're seeing out there, right? There is an upswell of demand coming from not just ONGC, but there's other operators that we're expecting will launch here shortly or have launched. So it's more of a broad-based demand. And I think that's the key for us is ONGC will absorb 3 ships potentially and 2 semis. In terms of timing, it could be late this year, early next year, but we'll figure that out as we go through the process. But more, I think that the key is it is an upswelling of demand and it's not in one particular country. It's not just India. It's not just Indonesia. You are seeing demand across the board in that part of the world. Operator: Your next question comes from the line of Keith Beckmann with Pickering Energy Partners. Keith Beckmann: Similar to kind of what we've been hearing here, we've seen some large tenders show up recently as well as some increased contracting over the last month here, which has been positive to see within the space. I just wanted to get an idea of if in customer conversations, are you starting to see operators get a little bit more aggressive on locking up capacity in '27 and beyond over the last months here? Samir Ali: It's still early days. I think some of them are starting to come around to that. Some of them are still holding out hope. But I think that shift is coming and the tone in the conversations is moving towards looking at capacity in '27, '28, '29 even. So you do have clients going further and further out and that to us and the terms is increasing as well, right? People are going longer term, which usually means that there is a growing concern that there might not be the supply available that they want. Simon Johnson: I think the broader picture, too, is that we see exploration improving in every area, whether it's about new leasing rounds, whether it's about people shooting seismic. Some of the near-term indicators, FIDs are up year-on-year, subsea tree awards are up year-on-year. There's a whole picture of improvement here that's supportive and exciting. Keith Beckmann: Awesome. That's great to hear. And then my second question, well, hit on a little bit already. I just wanted to get an idea on for the second half '26 here, what's -- I think you guys said 90% contracted at the midpoint of revenues. What's kind of the maybe outlook between the Vela and Neptune and Carina, the ones that are rolling off here and then maybe even throw in Louisiana as well since it keeps finding ways to win work? Samir Ali: Yes. So look, we have active dialogue on all of those rigs. And I think that's the important part. So for us, we've got to turn those conversations into contracts. And we've made some reasonable assumptions on what we can do there. But I think for us, it was a, let's see what we can do, but we have active dialogue on all 4 of the assets, some in the U.S. Gulf, some outside of the U.S. Gulf, just given most of those rigs sit here in the U.S. Operator: Your next question comes from the line of Hamed Khorsand with BWS Financial. Hamed Khorsand: So the first question is just on your outlook. Obviously, there's been a lot more activity there. But that was also the case in the prior years at the starting point that you would see some sort of pickup by the end of '26, early '27. Is there certainty that these tenders would close in time that you could foster some sort of revenue and EBITDA improvement as the year closes? Or is this more just tentative industry talk right now? Samir Ali: Yes. So I'd say the difference here is the real tenders that are in market. Some of them candidly may fall away, but there's also the direct negotiations that we're having with particular clients and I'm sure my peers are having with their clients. So when you take all that into balance, it seems like it is different this time around. And the other thing is we're not reliant on one country or one region. It is broad-based across the world. You're seeing demand in parts of Asia, in West Africa, East Africa. So it is -- we're not relying on one country. We're not relying on one client. So it does feel like if you take the tenders that we know of right now, plus direct conversations we're having and even if some of them fall away, you still should expect utilization to increase, which will drive day rates. Hamed Khorsand: And then given this backdrop, what's the conversation here about redeploying your capital to share buybacks? Grant Creed: Yes, Hamed, look, of course, I can't comment with specifics here, but just point back to the capital allocation, which Simon referenced earlier, our framework that we are out there publicly. It talks about having a minimum level of cash of $250 million, net leverage of 1x and then returning no less than 50% of our free cash flow during the year. And so after we have paid for maintenance CapEx, the remaining cash that we have generated, we look at what's going to generate the highest returns for us, whether that's buying discrete assets or buying our own stock and/or returning capital to shareholders via dividends. We'll review all those and we continuously review all those. I think it's fair to say that with this inflection that I was referring to in my prepared remarks, inflection middle of this year as we move off legacy day rates, we have the Capella resuming operations. We have the Jupiter and Tellus reacceptance projects behind us and the working capital investments behind us, we will be inflecting to cash flow-positive in quite some significant way. And so that question will become certainly more relevant as we go forward. Operator: Your last and final question comes from the line of Noel Parks with Tuohy Brothers. Noel Parks: I've been thinking about -- it has been a long 18 months here and seeing the stock rebound has been great, rewarding the patience that you observed has definitely been good for investors. And I guess I'm just trying to get a sense on maybe the trajectory on pricing. And thinking as an example, if you have a customer that is -- needs to talk about a contract renewal or extension where it's pretty obvious that they're going to hang on to the rig, just wondering what the discussion is like there? Are they totally open to realities of pricing upside? Are they open to pricing, but looking for longer term? I just wonder what's sort of that -- those stable relationships, how those guys are coming to the table these days? Samir Ali: I'd say each one of them is unique and kind of has their own dance that we have to go through. Some of them are always willing to give you a bit more term for a better day rate. Some are, look, I've got a 1-, 2-, 3-well program, and this is the rate I'm willing to pay and they'll pay a bit of a premium for the flexibility. So unfortunately, there's not a one-size-fits-all for our client base. But I think overall, we're having those conversations of, look, this is the new reality. Utilization is starting to improve. We do have a few other alternatives. So we're able to kind of push rates where we can. But I'd be cautious to say also that it really depends on what part of the market you're in, in terms of geography and what the utilization is of kind of assets in that geography. Simon Johnson: I think it's also worth adding, Noel, that if you go back to where we were 12, 18 months ago in the similar sort of day rate paradigm, broadly speaking, you didn't have any problem getting access to a rig if you needed one. You contrast that with the situation that we see developing, emerging at the moment and it's quite different. There's a reduced field of competition for the tenders that we're participating in, certainly starting at the end of the year. And I think that's what's driving our confidence. We just think there's a fundamentally different lead time that the customers are having to observe. And I think your point is well made that it's probably going to drive better conversations with existing clients looking to extend rather than to seek to place capacity outside of existing contracts. Noel Parks: Right. Interesting. I was listening to a producer recently talk about the service environment. And it seemed they were, I wouldn't say unconcerned about their ability to secure a rig if they have some exploratory success. But they also didn't sound like they really were considering the possibility, as you said, of reduced response to tender, which I think of as people beginning to all rush to crowding through the same door at the same time. Do you have anything under negotiation that you think will attract some real attention when contract terms get announced either near-term or longer-term? Samir Ali: So we're not going to go into specific contracting right now, but we are starting to see more tenders come, especially for second half of this year, really into '27, where the demand is increasing. I think you'll see some movement of rigs potentially from the U.S. Gulf into those markets, into those regions. So overall, we are seeing movement of rigs from one region to another. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may disconnect.
Operator: Good morning, and welcome to Crescent Capital BDC, Inc.'s Fourth Quarter and Year Ended December 31, 2025 Earnings Conference Call. Please note that Crescent Capital BDC, Inc. may be referred to as CCAP, Crescent BDC or the company throughout the call. I'll start with some important reminders. Comments made over the course of this conference call and webcast may contain forward-looking statements and are subject to risks and uncertainties. The company's actual results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in its SEC filings. The company assumes no obligation to update any such forward-looking statements. Please also note that past performance or market information is not guarantee of future results. I'll now turn the call over to Dan McMahon. Daniel McMahon: Thank you. Yesterday, after the market closed, the company issued its earnings press release for the fourth quarter and year ended December 31, 2025, and posted a presentation to the IR section of its website at www.crescentbdc.com. The presentation should be reviewed in conjunction with the company's Form 10-K filed yesterday with the SEC. As a reminder, this call is being recorded for replay purposes. Speaking on today's call will be CCAP's Chief Executive Officer, Jason Breaux; President, Henry Chung; and Chief Financial Officer, Gerhard Lombard. With that, I'd now like to turn it over to Jason. Jason Breaux: Thank you, Dan. Hello, everyone, and thank you all for joining us. I'll start today's call by summarizing our results and outlook and follow that with some commentary on the current market environment. In terms of fourth quarter earnings, we reported net investment income of $0.45 per share as compared to $0.46 for the prior quarter. Once again, our earnings over-earned the quarterly dividend. Consistent with our dividend policy and fourth quarter earnings, our Board declared a quarterly cash dividend of $0.42 per share for the first quarter of 2026, payable on April 15, 2026, to stockholders of record as of March 31, 2026. Net asset value was $19.10 per share as of December 31, compared to $19.28 per share as of September 30. This decline reflects unrealized losses stemming from certain portfolio companies. While NAV per share has declined over the past several quarters, reflecting market volatility and certain credit-specific marks during 2025, we believe it is important to view our performance over a longer horizon. The broader portfolio remains fundamentally healthy with stable credit metrics, strong sponsor support and performance in line with our underwriting expectations. Since inception, CCAP has maintained one of the more stable NAV profiles across the public BDC sector, supported by our disciplined underwriting, diversified positioning and a focus on senior secured sponsor-backed companies, which we have maintained throughout our history. Capital preservation remains core to our strategy, and we are actively managing the portfolio to maintain consistent long-term NAV stability. I'd now like to touch on our outlook for CCAP's earnings power and dividend sustainability. First, while lower base rates have impacted yields across the space, CCAP remains well positioned today. For the fourth quarter, net investment income covered our base dividend by 107%. We ended the year with net debt-to-equity of 1.20x, below the 1.30x upper end of our target range, preserving flexibility to prudently grow the portfolio and deploy capital through Crescent's origination platform. Crescent's private credit platform has been active with over $6.5 billion of capital committed in 2025, including over $1.7 billion during the fourth quarter. Our existing portfolio remains one of our most active origination channels with add-ons representing over half of our transactions over the same period. We are also encouraged by the recent increase in transaction activity in Q4 and early 2026. As origination and refinancing volumes normalize, structuring fees and accelerated amortization income can serve as incremental contributors to earnings. In addition, our spillover income of approximately $1.16 per share, which is nearly 3x our base dividend continues to provide meaningful support as we navigate the current rate transition. All of that said, we fully recognize the earnings headwinds facing the entire BDC space related to forward base rate expectations. As such, we and our Board are actively reviewing a range of options to ensure CCAP is positioned to deliver durable earnings and attractive returns across market cycles, and we expect to provide a more fulsome update on our plans and any actions stemming from that review in May when we report next quarter's results. We look forward to updating you further next quarter. Let me now shift gears and discuss what we are seeing in our market. We are operating in an increasingly competitive private credit market. Capital formation across direct lending strategies has remained strong with a growing number of lenders competing for high-quality sponsor-backed transactions. This has resulted in tighter spreads and evolving deal structures, particularly in the broadly syndicated and upper end of the middle market. This environment, maintaining underwriting discipline and strong structural protections remains essential. Within private equity, the past 3 years have been characterized by subdued exit activity with sponsors favoring recapitalizations and dividend transactions over traditional M&A to generate liquidity in a muted market. This has created a backlog of portfolio companies awaiting monetization. As rate pressures ease and financing markets stabilize, we are seeing sponsors selectively reengage in the M&A market to deliver liquidity to their limited partners. At the same time, elevated redemption activity in the perpetual nontraded BDC space may potentially contribute to a more balanced supply-demand dynamic. Overall, we continue to view the long-term outlook for private credit favorably. Disciplined underwriting, thoughtful selectivity and active portfolio management remain essential to driving strong performance. With that, I'll turn it over to Henry to provide additional detail on our portfolio and recent investment activity. Henry? Henry Chung: Thanks, Jason. Please turn to Slides 13 and 14. We ended the year with approximately $1.6 billion of investments at fair value across a highly diversified portfolio of 184 companies with an average investment size of approximately 0.6% of the total portfolio. We believe disciplined position sizing is one of the most effective tools for managing idiosyncratic credit risk. Broad diversification across industries, end markets, sponsors and issuers help limit concentration risk and support durable performance across market cycles. Since inception, our portfolio has consisted primarily of first lien loans representing 91% of the portfolio at fair value at year-end. Our investments are supported by well-capitalized experienced private equity sponsors with 99% of our debt portfolio in sponsor-backed companies as of year-end. At origination, the weighted average loan-to-value of the portfolio is approximately 40%, underscoring the meaningful equity buffer beneath us. We believe conservatively capitalizing the portfolio companies is a key driver of downside protection and recovery potential across cycles. It is also worth noting that 71% of our portfolio includes covenants, far higher than in the upper middle market or broadly syndicated loan market. We view covenants as an important risk management tool, providing earlier visibility into potential issues and a structured framework to engage early with sponsors if performance softens. In terms of software and services, we have been investing in the sector for over 15 years, applying a consistent underwriting approach throughout. Our focus has always been on durable cash flow generating businesses that deliver mission-critical enterprise embedded software with high switching costs, where the cost of failure or disruption is prohibitively high for customers. This long-standing discipline has guided how we underwrite technology risk across multiple innovation cycles, and we believe our approach is inherently defensive against AI-driven disintermediation risk. Today, software and services represent approximately 20% of our portfolio, and we continue to apply the same cash flow-based underwriting principles that have guided us for decades. Consistent with this approach, we do not invest in any annual recurring revenue or ARR loans. Please turn to Slide 15, where we highlight our recent activity. Gross deployment in the fourth quarter totaled $71 million, as you can see on the left-hand side of the page. During the quarter, we closed 5 new platform investments totaling $29 million. Even as spreads have tightened, our focus remains on high-quality companies with strong credit profiles. These new investments were loans to private equity-backed companies with a weighted average spread of approximately 490 basis points, with Crescent serving as lead or agent on all the new platform investments. The remaining $42 million came from incremental investments in our existing portfolio companies. The $71 million in gross deployment compares to approximately $78 million in aggregate exits, sales and repayments, resulting in net realization of approximately $7 million for the fourth quarter. Turning back to the broader portfolio, please flip to Slide 16. The weighted average yield on our income-producing securities at cost decreased 40 basis points quarter-over-quarter, ending the year at 10%. This decline was primarily driven by lower base rates following the recent rate cuts. Importantly, we remain disciplined in our deployment approach, prioritizing credit quality, structural protections and long-term risk-adjusted returns over maximizing headline yield. The weighted average interest coverage of the companies in our investment portfolio at year-end improved to 2.2x, demonstrating durability and strength within the earnings and our underlying portfolio companies. As a reminder, this calculation is based on the latest annualized base rates each quarter. Please flip to Slide 17, which shows the trends in internal performance ratings. Overall, we have seen stability in the fundamental performance of our portfolio, resulting in consistency in our risk ratings and a weighted average portfolio risk rating of 2.1. On the right-hand side of the slide, you'll see that 1 and 2 rated investments, representing names that are performing at or above our underwriting expectations, decreased from 87% to 86% quarter-over-quarter, continuing to represent the lion's share of our portfolio at fair value. As a percentage of debt investments at cost and fair value, nonaccruals increased from 3.3% and 1.6% as of September 30 to 4.1% and 2% as of December 31, driven by the addition of 2 new nonaccrual investments during the fourth quarter. It is worth noting that in January, one nonaccrual investment restructured and another was fully realized via a sale, which decreased pro forma nonaccruals to 1.4% and 3.2% of debt investments at fair value at cost. Given our highly diversified portfolio and acquired assets, we continue to have a nonaccrual rate that is higher than our long-term average. We are actively managing these portfolio investments and note that these are driven by idiosyncratic company-specific issues. The broader portfolio remains healthy, and we continue to observe demonstrable growth across the majority of our portfolio companies. With that, I will now turn it over to Gerhard. Gerhard Lombard: Thanks, Henry, and hello, everyone. For the fourth quarter ending December 31, 2025, we reported net investment income of $0.45 per share as compared to $0.46 for the prior quarter. This decrease was largely driven by lower interest income due to lower reference rates. Turning to the balance sheet. As of December 31, 2025, our investment portfolio at fair value totaled $1.6 billion, consistent with the prior quarter. Total net assets were $706 million and NAV per share was $19.10, a decrease from $19.28 at the end of the third quarter due primarily to net unrealized depreciation in the portfolio. Let's shift to our capitalization and liquidity on Slide 19. As a reminder, in October, we proactively priced $185 million of senior unsecured notes structured across 3 tranches with a delayed draw feature. We intentionally incorporated the delayed funding feature to align proceeds with our 2026 maturity schedule, allowing us to efficiently address our unsecured maturities while minimizing negative carry. The first 2 tranches totaling $135 million closed on February 17. The final $50 million tranche will fund in May in advance of additional 2026 maturities. Pro forma for this activity, over 90% of our committed debt now matures in 2028 or later, meaningfully extending our maturity profile and enhancing balance sheet flexibility. We remain in active dialogue with our underwriting partners regarding additional unsecured issuance as we continue to thoughtfully manage our maturity ladder and optimize our capital structure over time. The weighted average stated interest rate on our total borrowings was 5.83% as of year-end, down from 5.99% quarter-over-quarter due to lower base rates. Our quarter end debt-to-equity ratio was 1.25x or 1.2x net of balance sheet cash, up from the prior quarter, but within our stated target range of 1.1x to 1.3x. With $242 million of undrawn capacity subject to leverage, borrowing base and other restrictions and over $30 million of cash and cash equivalents as of year-end, we have sufficient liquidity to selectively further fund investment activity while maintaining a debt-to-equity ratio inside our target range. As Jason noted, for the first quarter of 2026, our Board has declared our regular dividend of $0.42 per share. And with that, I'd like to turn it back to Jason for closing remarks. Jason Breaux: Thank you, Gerhard. In closing, while 2025 presented a more dynamic environment across both rates and credit markets, we believe CCAP enters 2026 from a position of strength. Our portfolio remains highly diversified and predominantly first lien, supported by experienced sponsors and meaningful equity cushions. We have maintained prudent leverage, enhanced the duration of our liabilities and preserved liquidity to navigate a range of market conditions. At the same time, our Board and management team are thoughtfully evaluating additional steps to further strengthen our earnings profile and long-term return framework in alignment with shareholder interest. Private credit continues to offer compelling opportunities for disciplined lenders with scale and selectivity. Crescent has been investing in private credit and delivering consistent returns to our investors across multiple cycles over the past 30 years. CCAP's focus remains clear: protect capital, enhance sustainable earnings power and deliver attractive risk-adjusted returns for shareholders over the long term. We appreciate your continued support and look forward to updating you next quarter. Operator, please open the line for questions. Operator: [Operator Instructions] Your first question comes from the line of Robert Dodd with Raymond James. Robert Dodd: On -- I know you don't really want to talk about this because you said you give us more information next quarter, but you opened the door to questions about exactly what you'll be reviewing with the Board and long-term position, et cetera. I mean, is this -- are you talking about like a discussion of like dividend structure? Because it's obviously in context of long-term dividend or more strategic kind of initiatives as you also mentioned in context of like an -- so I know you will next time, but can you give us like a skeleton to hang some thoughts on at least about what kind of things you mean when you made that comment? Jason Breaux: Go ahead, Henry. Henry Chung: Robert, this is Henry. Just -- I think I could start off by providing that our review here is really focused on long-term earnings durability and creating a proper alignment with shareholders. What that includes with respect to your question about a skeleton here is it includes an evaluation of our fee structure as well as our base dividend level relative to forward earnings expectations. As we alluded to, we'll plan to have more detailed commentary on both going forward in the following quarter here. But what I will say is that we believe that we're positioned well currently for near-term stability. We're operating from a position of strength today by over-earning the dividend. And what we really want to do here is proactively adapt to what we are potentially expecting to be a lower rate environment, which obviously has implications for us as a predominantly floating rate asset base. And as a result, in terms of kind of the key focus areas, those are the 2 that I would point you to as we just think about this broader review. Robert Dodd: Got it. Very helpful. On the -- one other quick one and then another [ one ]. On -- in January, you said there was another [ call ] exit and one was sold. Was it sold at the mark or repaid at par? Or can you give us -- I mean, we'll see it eventually, but -- and that obviously lowered nonaccruals fairly significantly, I think. Henry Chung: Yes. The investment was realized at close to the mark. Robert Dodd: Got it. One second. On the -- so then talking about like the kind of the future earnings of the business. I mean, yes, base rates coming down. It sounded like you might be a little bit optimistic that maybe spreads will widen depending on fund flows and other things. Can you give us more thoughts there? I mean, if spreads do widen, how optimistic are you that the activity levels stay robust? Because they've started to pick up a little bit, but partly that's because spreads have been tight. I mean, can you kind of reconcile that thought for us? Henry Chung: Yes. I'd say on the latter point, so we -- the spreads, and you could see this in terms of where we've been originating new investments, have largely been consistent within that 475 basis points to 500 basis points over SOFR context for new first lien and new tranche investments, I'd say for the better part of the last 3 to 4 quarters. And in conjunction with that stability here, we've certainly seen, despite that we're still at historical lows in terms of LBO activity, that activity really start to creep up towards the end of last quarter and also at the beginning of this year. We certainly think that as deal activity continues, there is potential for opportunity to capture -- potentially capture excess spread here in certain pockets where we're seeing a little bit more, I would say, price discovery. But more broadly, I would say that in the near term, the expectation here is, it does look like spreads have stabilized for high-quality assets that are first lien in that kind of 475 basis points to 500 basis points over SOFR context. In terms of just broader LBO activity as a whole, the year did start off quite active, and we were pleased with how we were seeing deployment to the beginning of the year. I think just given more broadly what's going on, we're watching closely how the financing markets react here as well as the broader LBO markets react. But I would say that we certainly had an optimistic start in terms of the pipeline to the year. Operator: Your next question comes from the line of Mickey Schleien with Clear Street. Mickey Schleien: Yes. Just a couple of questions from me. Could you give us a little bit more color on the main drivers of the realized gain during the quarter and the unrealized losses? Henry Chung: Mickey, thanks for the question. The main driver of realized gain was an investment that was sold during the quarter. We had an investment that was previously on nonaccrual several years ago, MTS that we ended up realizing above our cost basis. So that transaction closed during the fourth quarter. In terms of the unrealized losses, the largest driver this quarter were related to our 2 investments that we placed on nonaccrual this quarter [ Generate ] and Transportation Insight. The former relates to an investment that the outlook for the business has fundamentally -- or has certainly degraded. And as a result, we market accordingly. And then Transportation Insight is an investment that we've spoken about the sector in the past, but is indexed to the third-party logistics sector, and we continue to see challenges in that space. So that's been the other large driver on a quarter-to-quarter basis. Mickey Schleien: I understand. And if you could just repeat the pro forma nonaccruals as of the activity in January? I didn't get a chance to write it down quickly enough. Henry Chung: Yes. It's approximately 100 basis points on cost of nonaccruals that we are expecting to come out of the portfolio. So it's on a pro forma basis, 1.4% of fair value and 3.2% of cost. Mickey Schleien: Terrific. And lastly, at a high level, can you give us some background on the rationale for rotating proceeds from portfolio repayments into new investments instead of taking advantage of deep discount to NAV that the stock is offering? Henry Chung: Yes. I think I want to remind you that the current buyback program does remain in place, and we have been buying back shares in the market. When we announced our repurchase program last year, one of the key considerations with respect to our buyback program is weighing the buybacks in relation to what we're seeing in the investment pipeline. As stated at that time, our goal here with CCAP is to make investments in private credit investments that provide durable long-term income for shareholders. And how we think about deploying excess capital here as we get reinvestments is weighing that against our pipeline and determining the relative attractiveness of new deals that we have on our investment pipeline relative to just simply creating or simply providing incremental ROE vis-a-vis share repurchases. And I think what we've seen with just the quality of the investments in the pipeline today is that there's still a lot of benefit in terms of being able to provide that durable income by reinvesting proceeds. So as a result, we're taking a balanced approach here where we're still continuing to execute on our buyback plan that we initially announced here, but we are maintaining the overall asset base and continuing to invest in new investments as they come through the pipeline. Mickey Schleien: Okay. I understand. And lastly, you've noted that you may be examining the dividend policy down the road. But as we sit today, is the supplemental dividend policy still in place? Henry Chung: Yes, that's correct. The supplemental dividend is still in place. As a reminder, we do have a measurement test that is put in place with respect to the supplemental dividend. And as a result of that measurement test this quarter, there will not be a supplemental dividend that is paid related to Q4 earnings, but that construct remains in place. Mickey Schleien: And the constraint is probably related to declines in NAV. Is that correct? Henry Chung: That's correct. It's a 2-quarter look back with respect to NAV on the supplemental measurement test. Operator: Next question comes from the line of Christopher Nolan with Ladenburg Thalmann. Christopher Nolan: Henry, in your comments, you indicated that software and services is 20% of the portfolio. On Page 14, it says 15%. Did you just misspeak? Or was there a change in exposure there? Henry Chung: The software and services as a total of our portfolio just based on the industry breakdown is -- it's 20%. Is there -- was there a specific -- or sorry, which page are you referring to, Chris? Christopher Nolan: I believe Page 14 of the deck. I'm looking at the... Henry Chung: I believe that's... Christopher Nolan: I might be looking upper right-hand. [ Don't know ]. It could be -- there's another section that has a similar color. So it could be my mistake. Henry Chung: Yes. I'm looking at our stats here, and it's 20% on Page 14. Christopher Nolan: Okay. No problem. On this... Henry Chung: 15% is commercial and professional services. Christopher Nolan: Got it. They're shaded sort of similarly. Okay. On the topic of software and services, is the plan -- is -- does the firm still intend for any of those maturing investments to reinvest into software or to lower the exposure going forward? Henry Chung: Yes. It's a good question. With respect to software -- there's a couple of comments that I ought to make just with respect to, first, the performance of our software investments. And then second to your -- more directly to your question, the underwriting approach and the outlook. What we've seen within our software portfolio to date is that the performance has been quite strong. We're seeing both revenue and EBITDA growth across our portfolio within software as well as demonstrable deleveraging that has coincided with strong fundamental performance there. As you think about how we underwrite software, and we made this comment earlier, but this is a sector that we've been investing alongside our sponsors for over 15 years. Disintermediation has been a critical component of our underwriting thesis from the very beginning of investing in this space. And what we really do look for here is software that demonstrates mission-critical system rules, deep workflow integration, demonstrating a system of record type value proposition as well as software that operates in highly regulated end markets where there is just a high cost of failure. We also really do focus here on the actual value proposition that's being provided to customers, not so much whether or not it's just difficult for the software to be replaced, but do the customers actually like the product they're using? And are we seeing supporting trends in those software investments via -- vis-a-vis the retention stats? Our experience has demonstrated that these attributes tend to provide durable cash flows in these investments. And as a result, to the extent that we do see new software investments that exhibit these characteristics, we will continue to find a home for these in our portfolio. And we think that they certainly provide good credits to add to our portfolio today. A couple of other notes I'll make here with respect to software is when you think about our software investments, we are in a first lien position, and we are not the equity. And why that's important is we have an equity cushion beneath us that's supported by cash contributions from our private equity sponsors. And the other piece that I note here is -- and I think this is particularly of importance to us just in the market that we're in today is we do not do any ARR loans. We don't do structured loans as PIK DDTLs. So we're not just focused on the enterprise value of the underlying software companies. We're also focused on the current cash flows, what's available to service our debt and in situations that may require and what's available to delever our capital structure and reduce our risk. So we continue to think that there is attractive opportunities here. And with the shakeout that's happening in the broader marketplace, there will continue to be so. But we want to really articulate here that the focus and what's allowed us to have success investing in the space historically, we will continue to maintain that discipline. And it's one that served us well historically and one that we think will continue to serve us well going forward. Operator: There are no further questions at this time. I will turn the call back over to Jason Breaux for closing remarks. Jason Breaux: Okay. Operator, thank you. Once again, everyone, we appreciate your time today and your interest in CCAP, and we look forward to providing you with another update for our first quarter earnings in May. Thanks all. Operator: That concludes today's call. Thank you all for joining, and you may now disconnect.
Operator: Good morning, everyone. My name is Bo, and I will be your conference operator today. I would like to welcome you to the First Advantage Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. Hosting the call today from First Advantage is Ms. Stephanie Gorman, Vice President of Investor Relations. [Operator Instructions] Please note today's event is being recorded. It is now my pleasure to turn the meeting over to Ms. Stephanie Gorman. Please go ahead, ma'am. Stephanie Gorman: Thank you, Bo. Good morning, everyone, and welcome to First Advantage's Fourth Quarter and Full Year 2025 Earnings Conference Call. In the Investors section of our website, you will find the earnings press release and slide presentation to accompany today's discussion. This webcast is being recorded and will be available for replay on our Investor Relations website. Before we begin our prepared remarks, I would like to remind everyone that our discussion today will include forward-looking statements. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those expressed or implied in the forward-looking statements due to a variety of factors. These factors are discussed in more detail in our filings with the SEC, including our 2024 Form 10-K and our 2025 Form 10-K to be filed with the SEC. Such factors may be updated from time to time in our periodic filings with the SEC, and we do not undertake any obligation to update forward-looking statements. Throughout this conference call, we will also present and discuss non-GAAP financial measures. Reconciliations of our non-GAAP financial measures to their most directly comparable GAAP financial measures to the extent available without unreasonable effort appear in today's earnings press release and presentation, which are available on our Investor Relations website. To facilitate comparability, we will also discuss pro forma combined company results, consisting of First Advantage and Sterling Check Corp's historical results and certain pro forma adjustments as if the acquisition of Sterling had occurred on January 1, 2023. The pro forma information does not constitute Article 11 pro forma information. I'm joined on our call today by Scott Staples, our Chief Executive Officer; and Steven Marks, our Chief Financial Officer. After our prepared remarks, we will take your questions. I will now hand the call over to Scott. Scott Staples: Thank you, Stephanie, and good morning, everyone. Thank you for joining our call. Today, we have 5 key messages. First, we delivered what we believe was our best quarter ever with exceptional Q4 results capping off an impressive 2025. We exceeded our previously updated expectations on all guidance metrics with particularly notable adjusted diluted EPS growth of 67% in the fourth quarter. We continue to be a category leader, supported by our go-to-market success with a robust 17% growth contribution from new logo and upsell, cross-sell, resulting in 12% overall pro forma revenue growth in the quarter. When combined with our diverse vertical mix, consistently high customer retention and focus on cost discipline, it is clear that we are driving outstanding results amid this dynamic macroeconomic environment. Second, we are pleased to share that we have completed our core integration activities for the Sterling acquisition, and we are seeing the strategic and financial benefits as promised. While we continue to action additional synergies, looking forward, we are turning the page from primarily an integration focus to one of innovation and are committed to accelerating our growth through our scaled strengthened business, which brings me to our third point. We are executing and in fact, accelerating our FA 5.0 growth strategy. Through our best-of-breed product and platform approach, we are winning with our enhanced customer value proposition and expanded offerings and are poised to capture meaningful opportunities in growth areas such as digital identity, our differentiating co-selling relationship with Workday, ongoing new product releases and international account expansion. Building upon our success in 2025, we are allocating additional resources in 2026 to further accelerate our go-to-market and product capabilities. We expect these actions will drive incremental organic revenue growth and sustainable long-term value creation. Fourth, today, we are announcing 2 strategic capital allocation actions, both of which are supported by the success of our business, our strong cash flow generation and our confidence in our continued growth. First, in February, we are voluntary prepaying $25 million of debt, maintaining our consistent trend and commitment to reducing net leverage. Second, we are announcing a new $100 million share repurchase authorization. Our strong position today gives us the ability to both pay down our debt and simultaneously buy back our shares, which we believe do not currently reflect the value of our business. And finally, we are introducing our full year 2026 guidance. We saw more stabilization across market conditions in the fourth quarter, and we are seeing our positive top line momentum carrying into 2026. This strong performance is reflected in our bottom line earnings as well with our 2-year compound annual adjusted diluted EPS growth rate from 2024 to the 2026 guidance midpoint expected to be approximately 20%. While we are maintaining a modestly cautious outlook on base performance, expecting it to remain slightly negative for the year, we are bullish on 2026 given our go-to-market and recent pipeline success. We remain confident in our positioning to create long-term shareholder value and deliver consistent progress toward our 2028 long-term targets. Turning to Slide 5 and an updated view of First Advantage at the end of 2025. We continue to be a category leader in our industry. Our customer value proposition offers differentiated technology platforms, proprietary data and a broad collection of innovative solutions across a comprehensive and diversified range of verticals. In 2025, we delivered impressive full year revenues, which grew from $1.57 billion with $441 million of adjusted EBITDA. Our pro forma adjusted EBITDA growth of 11% with pro forma adjusted EBITDA margin expansion of 170 basis points and adjusted diluted EPS growth of 27% were enabled by the completion of the core integration activities for the Sterling acquisition, successfully delivering on our synergy plan and the execution of our FA 5.0 growth strategy. We completed over 200 million screens across more than 200 countries and territories on behalf of our 80,000-plus customers with the average tenure of our top 100 customers increasing to 13-plus years. Our diverse customer base includes approximately 2/3 of Fortune 100 companies and more than 1/2 of Fortune 500 companies. Our gross retention remains high at approximately 96% for the year, having risen to 97% in the second half of the year. We have over 100 integrations with applicant tracking systems and human capital management partners, including our market differentiating global co-selling relationship with Workday, giving us a unique competitive advantage in several of our key verticals. And speaking of competitive differentiation, this year, we crossed the milestone of accumulating over 1 billion records in our 2 proprietary databases, a 10%-plus increase year-over-year, providing our customers with a more comprehensive, powerful data foundation that enables the speed and efficiency we are known for. Our national criminal record file database now contains well over 900 million U.S. criminal history records and our verified database contains approximately 135 million work history and education records. Our verticalized go-to-market approach remains a differentiator and a key driver of our growth strategy. We offer deep subject matter expertise in our industry segments, and we use industry-specific data to advise our customers on topics such as leading practices and product optimization. Our enterprise customers' diverse vertical mix, global reach, mix of hourly and salary focused customers and diligent focus on controlling the controllables make our business resilient and able to perform well through macroeconomic cycles. On this slide, we have provided an updated view of our vertical mix for 2025. We continue to feel confident in our strategic focus on health care, transportation and retail and e-commerce, which represent our 3 largest verticals, all with near- and long-term growth levers. We believe that each offers substantial runway for new upsell and cross-sell expansion supported by favorable underlying market trends. Now turning to Slide 6 and a closer look at our outstanding performance in the fourth quarter. We generated meaningful revenue, adjusted EBITDA, adjusted EBITDA margin and adjusted diluted EPS growth with results exceeding our updated expectations. Impressively, in Q4, our combined upsell, cross-sell and new logo growth rate was 17%, significantly outperforming our long-term growth algorithm target. This was enabled by our robust go-to-market momentum, including material contribution for a number of key 2025 wins and gives us momentum for stable yet elevated 2026 growth. Retention remained high at 97%. Base revenue performance again improved sequentially, remaining just below neutral and spot on with our expectations. Our go-to-market teams continue to deliver as further demonstrated by our 17 enterprise bookings in the fourth quarter, which brings us to a robust 66 for 2025. Each deal with $500,000 or more of expected annual contract value. These wins are some of the many reasons we have confidence in our ability to continue generating new logo and upsell, cross-sell revenue and help support our outlook for expected strong growth in 2026. Additionally, we are encouraged by the continued strength and increase in our late-stage pipeline, measuring at near record highs, including a meaningful volume that are incorporating our digital identity product. Looking at our verticals in the fourth quarter, our balanced and resilient vertical strategy supported our standout performance despite how headline economic data portrayed the higher environment. We saw strength in retail and e-commerce, driven by new, upsell and cross-sell along with a stable base with the seasonal peak hiring duration and volumes improving compared to last year and more in line with historical trends. Health care showed nice year-over-year growth driven by new logos, upsell and cross-sell despite notable base weakness in certain health care-related subverticals. Transportation and logistics saw growth in Q4, driven by positive base demand with strong traction during the peak season. General staffing, manufacturing and industrials and technology also showed positive year-over-year growth in Q4, partially powered by the success in our new logo and upsell cross-sell programs. Business and professional services, gig economy and financial services verticals experienced some pressure in the fourth quarter, but did not meaningfully inhibit our overall fourth quarter performance. January and initial February order volumes reflect trends generally consistent with what we saw in Q4. Our international business for Q4 continued to sustain strong year-over-year revenue growth in all regions, giving us confidence in our prospects for further international expansion. Although macro uncertainty persists in the fourth quarter, we saw many of our customers shifting to a more encouraging tone, and we are seeing this continue into 2026, regardless of the headlines you may be reading. We continue to remain confident that our diversified mix of verticals, customer segments and geographies provides a meaningful degree of resiliency to AI impacts and will allow us to capitalize on future growth opportunities. Additionally, we recently completed our annual trends report based on insights from thousands of enterprise-focused HR leaders and job seekers worldwide. The report will be published in the coming weeks. The data highlights strong demand for expanded screening services, risk mitigation as the #1 new top priority and rising identity-related challenges. as the biggest trend. These trends reinforce our growth expectations and positioning as an identity provider. Now turning to Slide 7 and a summary of our key accomplishments in 2025 and focus areas for 2026. Our 2025 organizational performance exceeded our expectations. We closed on the transformational acquisition of Sterling in October 2024, and we are incredibly pleased with the results, particularly in regard to customer retention, which has actually improved over the past 2 quarters. Synergy capture and realization, cultural alignment and our best-of-breed approach to technology and products, which has really resonated with our customers. In 2025, we executed and completed the core elements of our integration process while delivering a seamless customer experience throughout as evidenced by our high retention levels of 96% to 97% during the year, the favorable feedback we received from customers. We also significantly advanced our synergy realization efforts, reaching $55 million in run rate synergies actions and made progress on deleveraging our balance sheet. We had a number of impressive new logo wins in 2025, providing us momentum as we exited the year and substantial revenues already booked as we enter 2026. One win in particular, has the potential to be a top 5 customer and has already been driving significant growth. Adding to our success, we are seeing a very nice trend of winning back some customers who tried the competition and decided to return due to our outstanding platform, proprietary data, speed and service quality. As we have discussed before, we continue to take a proactive and strategic approach to AI. To be clear, we see AI as an enabler of our strategy, not a disruptor of our business model. We are executing from a foundation of long-standing technology leadership and deep tech experience across our management team. We have been building and deploying AI data and machine learning solutions since 2021, including Gen AI rollout since 2024. Some of these solutions are behind the scenes, helping us operate more efficiently and some are customer-facing, such as our Agentic AI and chatbots. We are also accelerating adoption of AI-powered development tools across the organization with hundreds of engineers leveraging AI capabilities to optimize our platform faster than we have ever been able to do. With our progress, scale and strategy, we believe we are well positioned in our industry to be a winner with regard to of where we have deployed AI solutions across our products, technology and operations include the following: AI is fully embedded in our next-gen Profile Advantage applicant portal, increasing efficiency, improving the user experience and reducing call center contact rates by approximately 50%. AI is also an essential element of our SmartHub AI intelligent router, which is now available for all U.S. customers for use within the verification process. as well as our digital identity solutions supporting our competitive advantage. We also began deploying AI-enabled capabilities in our criminal records processing workflows to help streamline operational steps, manage volumes and identify items for additional review while maintaining a human-in-the-loop process for all record matching, adjudication and reportability determinations. Internally, we have also leveraged AI to enhance the productivity of our engineering staff, automate tasks, enhance our product capabilities and help our go-to-market teams with customer acquisition activities. AI governance is also critical in our industry as we operate in a highly regulated high-stakes environment where accuracy, auditability and compliance are nonnegotiable. Our customers rely on our solutions to make informed employment decisions that carry legal, regulatory and human consequences. Trust is foundational to our brand. Our screens and verifications must be explainable, auditable and compliant across jurisdictions and geographies and seamlessly integrated into customers' HCM and ATS workflows. What we offer is not simply a software problem or a data search exercise. What we offer requires deep domain expertise, regulatory infrastructure and a consultative service model that is tailored to the specific regulatory and operational needs of the industries we serve. It also requires knowledge about the complexities of compliance with federal, state and regional laws like the FCRA in the U.S. and GDPR in Europe, along with many subject matter specific regulations like DOT and BIPA, which makes operational scale well beyond software and data, all that more important. We operate in a fragmented global landscape that often extends beyond the digital world. The data we use is not simply consumed off the Internet. Our platform is supported by thousands of direct relationships for criminal records access, both digitally and many jurisdictions physically, a proprietary third-party network of over 20,000 brick-and-mortar locations for drug testing and health screening and a proprietary network of over 1,000 in-person physical fingerprinting collection kiosks that enable a number of our solutions. The combination of proprietary data assets with more than 1 billion proprietary records, large-scale proprietary physical fulfillment networks, long-standing compliance capabilities, consultative expertise and deep system integration is difficult to replicate and positions us to continue to responsibly deploy AI, enhance efficiency and create durable long-term shareholder value in a rapidly evolving technology landscape. Looking at 2026, we have multiple other initiatives in flight, focusing on scaling in ways that continue to improve speed, consistency and efficiency. Our focus is on redesigning key workflows with AI at the center. This includes expanding our use of AI agents, enhancing document classification and extraction capabilities and applying AI-enabled automation in verification and fulfillment processes. all while maintaining disciplined governance to support and ensure responsible and compliance use of AI. We believe our focused innovative approach to leveraging AI positions First Advantage to create long-term value. Also in 2025 and into 2026, we continue to see strong and growing customer interest in our market differentiating digital identity products, which enable our customers to address the increasing concerns of identity fraud. Customers are seeing the benefits of our cohesive offering, and it is helping us win in the market, creating opportunities that were not there before. Digital identity is a key selling point for customers despite being a small component of overall contract value. In several recent large wins, we actually started with digital identity as the focus of an RFP, then we were able to significantly expand our scope when our customers recognize the benefits of our integrated solution, driving pipeline momentum. During 2025, a number of Fortune 500 companies went live with our digital identity product, and we expect to see this momentum continue. We are building on the early successes of these products, and we expect penetration to accelerate meaningfully in 2026 as customers increasingly recognize the need for the benefits of our highly sophisticated fully integrated solutions. As we progress through 2026, we are well positioned to maximize the benefits of our strengthened business to continue to win in the market, drive synergy realization and further accelerate our performance. Building upon the great success we have seen to date with our FA 5.0 growth strategy, in 2026, we are enhancing our product, sales and marketing capabilities to continue to deliver meaningful, sustained value for our customers and stakeholders. These efforts include further leveraging AI across our product portfolio, increasing our identity fraud-related product penetration, creating brand-new products and expanding our international business. We will keep you updated on our progress in the coming quarters. With that, I will now turn the call over to Steven. Steven Marks: Thank you, Scott, and good morning, everyone. I'll start with fourth quarter results on Slide 9. As Scott mentioned, we believe Q4 was the best quarter in First Advantage's history. Our fourth quarter revenues were up 12% versus last year on a pro forma basis, coming in at $420 million, with our year-over-year revenue growth rate meaningfully increasing from Q3. Our go-to-market success significantly exceeded our long-term growth algorithm as the combined contribution of new logo, upsell and cross-sell revenues delivered exceptional growth of 17% in the quarter, our highest in recent history. Part of the uptick in Q4 new logo upsell and cross-sell relates to order volume in Q4 from our new wins, part of which would have otherwise been recognized in the third quarter as certain new customers deferred their screening until they were live on our platform. Into 2026, as these customers ramp, we expect quarterly revenue to normalize and translate into steady, sustainable growth going forward. Our retention remained extremely high at 97%. We saw more consistent customer demand during the peak hiring season than last year and closer to being in line with historical norms. The trends in our base performance continued to improve on par with how we had forecast the fourth quarter with base remaining slightly negative. Adjusted EBITDA for the fourth quarter was $117 million, up an impressive 17% versus last year on a pro forma basis. Our adjusted EBITDA margin of 27.8% exceeded our expectations, representing an improvement of 110 basis points versus the prior year on a pro forma basis, despite being slightly lower sequentially from Q3 due to mix. This mix shift was driven by the sizable incremental upsell, cross-sell and new logo revenue from our go-to-market wins in 2025, which had a larger mix of products with higher relative third-party data pass-through costs. Overall, our robust revenues were enabled by our continued focus on accelerating synergies, our disciplined approach to cost management and the scalable nature of our business. Adjusted diluted EPS was $0.30, a 67% increase year-over-year and also ahead of our expectations. The benefits of our greater scale, expense and capital management and lower interest expense as a result of our debt repricing and voluntary debt repayments to date have supported our per share earnings growth. Turning to full year results on Slide 10. Not only do we believe Q4 was our best quarter ever, but we believe 2025 was our best year ever. Our full year 2025 performance exceeded our most recent guidance ranges for revenues, adjusted EBITDA, adjusted net income and adjusted diluted EPS. This is further evidence that we continue to be diligent and successful at controlling what can be controlled within our business and the resiliency of our diversified business model and our industry leadership position enable us to navigate the uncertain macro environment. On Slide 11, you can see how we are continuing to make great progress on our synergy program. As of quarter end, we had actioned $55 million in acquisition synergies, moving closer to our total synergy goal. We realized $8 million of incremental synergies in the fourth quarter, bringing our total 2025 incremental realization to $38 million or $42 million realized over the transaction lifetime. Now turning to cash flow, net leverage and capital allocation on Slide 12. We are incredibly pleased that for the year, we generated adjusted operating cash flows of $232 million, a substantial increase of $67 million or 41% on a year-over-year basis. This impressive performance was driven by the larger scale of our business, the benefit of the OBBBA tax law, which reduced our required cash tax payments and our overall focus on cash flow. Our cash balance at December 31, 2025, was $240 million. Our synergized adjusted EBITDA net leverage ratio at year-end was 4x and represents a decrease of 0.4x from a year ago when we had closed the Sterling acquisition. Additionally, as Scott mentioned, today, we are announcing 2 key capital allocation actions. First, continuing our commitment to consistently paying down debt. And subsequent to the end of quarter, this week, we are making an additional voluntary prepayment of $25 million, bringing our total debt repayment since closing to $95.5 million. Second, today, we have announced a new $100 million share repurchase authorization, which we will opportunistically execute over the coming quarters. The success of our business strategy and the strength of our balance sheet and cash flow profile have allowed us to make the strategic decision to allocate a portion of our capital towards share repurchases. The reality of our recent repurchases a strategic use of capital that maximizes shareholder value creation and is an opportunistic method to deploy capital in an environment where we believe the market is not reflecting the long-term prospects of our company. Said simply, at our current valuation, this is just prudent corporate finance. Enabled by the strength of our financial position, we are able to pursue a balanced capital allocation strategy that includes both voluntary debt repayment and opportunistic share repurchases while maintaining our focus on deleveraging, liquidity and long-term value creation. As we strategically balance our capital allocation priorities, our near-term deleveraging time line may change modestly. However, our long-term leverage objectives remain unchanged, and we expect to continue to reduce leverage towards our long-term target of 2 to 3x. Moving to Slide 13 and our 2026 guidance. We expect 2026 total revenues in the range of $1.625 billion to $1.7 billion, adjusted EBITDA of $460 million to $485 million and adjusted diluted EPS to $1.25 per share. For revenue, this represents approximately 6% year-over-year growth at the midpoint, with upside potential driven by the success of our go-to-market initiatives. We expect to expand full year adjusted EBITDA margin by approximately 40 basis points at the midpoint as we continue to leverage synergies and scale our growth. On top of this, we expect impressive adjusted diluted at the midpoint. When compared to our 2024 adjusted diluted EPS following the Sterling acquisition, this represents a robust 20% 2-year CAGR. Our 2026 guidance builds off the success we had in 2025, including our outstanding go-to-market wins as we maximize the benefits of our stronger business and enhance our competitive strength. Our guidance includes assumptions for synergies, go-to-market strength, investment in organic growth, shifting product mix and our current view of the macro environment. Specifically, it assumes action synergies within our full year target range of $65 million to $80 million by the end of the year. We expect our exceptional go-to-market productivity to continue with robust upsell, cross-sell and new logo growth during the year coming in at the high end, if not slightly above our long-term growth algorithm. As we have mentioned, in 2026, we expect order volumes from our newer win [Audio Gap] course of the year. We expect momentum in the first half of the year, continuing what we saw in Q3 and Q4, driven by the large deals that went live in 2025. We also expect customer retention to remain in line with our strong historical performance of around 96% to 97% Factored into our 2026 guidance are the impacts of our strategic investments in organic growth, including enhancing our product, sales and marketing capabilities as well as expanding our international business opportunities. While also -- while we anticipate the near-term revenue and margin contributions to be more limited during -- more limited due to the offsetting effects of the investments themselves, we will establish a solid foundation for additional future growth. We expect growth to accelerate in the second half and meaningfully by year-end, propelling revenue performance and margin expansion in the mid and long term. In addition to these factors, we also expect the more recent impacts of higher out-of-pocket pass-through fees in our current product mix to continue as the newer deals mentioned before roll over into 2026, providing a modest headwind to margin percentages, although dollar profitability of these deals is very attractive. As it relates to the macro environment, the labor market we broadly serve looks to be more stable entering into 2026, continuing the trend of a relatively flat hiring environment we saw in 2025. With this in mind, for 2026, we expect that base growth will remain modestly negative between 0 and negative 2% for the year. Looking at quarterly phasing in 2026, with a more stable macro backdrop, strong rollover from upsell, cross-sell and new logo and our go-to-market growth initiatives driving second half growth, we expect all 4 quarters to have revenue growth rates in the mid- to high single digits. We do expect base growth to be slightly higher in Q3 and then lower in Q4 as revenue smooths out to a more normalized quarterly distribution, which includes the impacts of the 2025 wins I just mentioned. We expect Q1 adjusted EBITDA margins to be around 26%. While we have some incremental benefit from the more recent synergies, the impact of revenue mix and initial growth investments impact early year margin appreciation. As revenue scales up seasonally, we expect margins to improve meaningfully in Q2 towards 28% before reaching the 29% range in the second half of the year. Similarly, for adjusted diluted EPS, we expect meaningful year-on-year expansion in all 4 quarters, with Q1 expected to be at or just above $0.20 per share with a ramp to the high $0.20 range in Q2 and improving to the mid- to upper $0.30 range in both Q3 and Q4. We anticipate free cash flow for the year in the range of $160 million to $190 million. This notable year-over-year increase reflects our ability to generate incremental cash flow from better working capital management and a significant decline in integration-related costs while also investing in accelerating our growth. We have provided additional assumptions in the appendix of our presentation. Overall, we enter 2026 in a position of strength with opportunity to continue to build on our success through our FA 5.0 growth strategy. With that, let me turn it back to Scott for closing remarks before we open the line for questions. Scott Staples: Thank you, Steven. In closing, we delivered outstanding results in 2025 and are carrying our strong execution momentum into 2026. Looking ahead, as a clear leader in our space, we remain focused on consistently winning by delivering best-in-class solutions for our customers. We remain confident in our ability to achieve consistently strong results and are progressing well toward the 4-year financial targets we established during our Investor Day in May 2025. I would like to thank the First Advantage team for your continued dedication to supporting our customers. With that, we will open the line for questions. Operator: [Operator Instructions] We'll go first this morning to Shlomo Rosenbaum of Stifel. Shlomo Rosenbaum: Really a strong quarter and the commentary seems like things are improving and getting better. The question I have is to start out with is what are your clients telling you about their own hiring plans? And in particular, how are they taking the AI evolution into consideration? And are you concerned at all that their plans might change on a dime because all of a sudden, they feel that they may not need the amount of people that they were thinking of doing -- having before? Because the business is subject to short-term changes and with the visibility not necessarily as great for when things all of a sudden change on a dime. Scott Staples: Yes, Shlomo, I think I'll start by how customer-focused we are. And I think you know we spend a lot of time with our customers. We are talking to them daily, weekly, monthly, quarterly. We are actively involved in their hiring process and in their planning. So we have pretty good visibility and a lot of what I would call sample data to basically base our 2026 plans off of. So what you're seeing in the media doesn't match what our customers are saying. And keep in mind, we primarily have an enterprise focus. So we're talking to the larger customers. I'd say if you look at the media, you'll hear a neutral to negative tone. But when you talk to our customers, we're hearing a neutral to positive tone. I don't recall a single customer conversation that I've had going into 2026, where a customer has mentioned a decline in hiring. We are only hearing flat to positive. And we're actually also hearing that in certain verticals, which are surprising where you feel like there may be AI disruption. We are not hearing that at all. We are hearing that they're actually hiring more people or planning to hire more people in 2026. So we're hearing a neutral to positive tone from our customers, and that's encouraging. Shlomo Rosenbaum: Okay. And then there was a comment about there was a certain amount of delayed volumes in 3Q that ended up in 4Q because of the timing, I guess, of full implementation. Are you able to quantify what the impact of that was or at least estimate what that was in terms of the revenue growth, they contribute to the revenue growth in the fourth quarter? Scott Staples: Yes, Shlomo, it actually wasn't a delay. What ended up happening is that a couple of customers were waiting to go on board with us and held screening volume back from their previous provider. So it's not really a delay. It's more of a kind of a reflection of the value proposition we bring. And that's why I kind of mentioned in the prepared remarks that there'll be a small flip in base growth between Q3 and Q4 if you're just doing your quarterly pacing because when that normalizes out, we'll just have a shift. And it's not huge, but it's a couple of percentage points probably that shift between the 2 quarters. Operator: We'll go next now to Ashish Sabadra of RBC Capital Markets. Ashish Sabadra: Thanks for providing those detailed insights in the prepared remarks around the more around AI, the AI integration, implementation plans and efficiency. I was just wondering if it's possible to quantify or provide anecdotal example of the benefits from the AI adoption. Maybe if you could provide any insights into like software development, product rollout, customer service? And also if you've started to see any benefit from your AI adoption in terms of new wins and upsell, cross-sell. So any kind of benefits, both internal or external from AI? Scott Staples: Yes, Ashish, I will -- I'll give you a broad answer to that question because it's extremely hard to quantify because it's literally everywhere. And it's embedded in all of our products and in a lot of our new wins. So as I mentioned in the in the prepared script that we've got AI all throughout our product platform, whether it's our SmartHub technology, which has a very large impact on verifications. We actually have a number of wins in 2025 where they have specifically told us that they came to us because of our SmartHub verification product. So it's starting to catch on. AI is embedded in our digital identity products. And we have a lot of wins in 2025 where a digital identity has been the tip of the spear. It's amazing, I will call it an absolute epidemic right now that customers are experiencing with identity fraud. And our products are really resonating with our customers. So yes, there's been cost savings from AI, whether it's in our customer care center where we don't need as many agents because we're doing things through chatbots. There's been wins because of AI and because of technology. But it's just so hard to quantify because I just think this is the new first advantage. This is -- all of what you're asking is embedded in everything we're talking about from a sales standpoint to an operational standpoint. So very hard to carve out, but I would say the impact is phenomenal. Ashish Sabadra: That's great color. And obviously, it's reflected in the results as well. I also wanted on the solid cross-sell, upsell momentum of 12% in the quarter. quarter. I understand a lot of it is driven by this new win momentum. But I was wondering if you could provide incremental color around what's driving that cross-sell? Are we adding more business units, geographic expansion? And where are you winning these businesses from? So any more color on those fronts will be very helpful. Scott Staples: Yes. Again, keeping in mind that our focus is more on the enterprise side. So a lot of these deals are with the larger companies. But I'll make a couple of high-level comments. First of all, in general, our sales engine is humming. I mean this is the best I've ever seen it. The pipeline is the highest it's ever been. And if you look at our total enterprise new business across new logos, upsell and cross-sell, it's actually up 24% year-over-year. That's a massive increase. And what we're also seeing is our average deal size is increasing. So not only are we winning deals, we're winning larger deals. And I would say these larger deals are more bundled and they're more complex. And average deal double digits. So there's a lot of good momentum on the sales side. So in general, what's driving it is package density. Package density is booming, I would tell you that right now. So I mentioned in the script that we -- again, we talk about how we're talking to customers every day. But I also mentioned in the script how we launched our annual trend survey just recently. And we talked to literally well over 2,000 HR professionals and very interesting what we're hearing from them. 89% of employers plan to add additional screening products in the next 1-year to 2 years. And a lot of that is driven by the challenging and even at sometimes dangerous world that we live in. And our customers are looking for more risk protection. So what was also mentioned in the script was risk is now the #1, by far, top priority for our customers. If you ask me that question 3, 4, 5 years ago, it was always speed and then it was cost. Now it's risk, speed and then cost. And that's a dramatic shift. A lot of this has been driven by, again, the epidemic that we're seeing in identity fraud. Again, going back to that survey, which we will release over the next couple of weeks, 76% have experienced falified employment details and 45% have experienced candy identity misrepresentation. These are huge openings for us, as I mentioned, digital identity as the tip of the spear. But what's beautiful about our product offerings is that we can integrate all of this for the customer. Just think about where we touch. We touch everywhere from recruiting through the background screening through onboarding all the way to I-9 and their first day of work and even beyond through monitoring. So customers are really liking our product suite because it's not a point solution. It's an embedded workflow that touches all the things that they're worrying about. Operator: We go next now to Andrew Steinerman of JPMorgan. Alexander EM Hess: This is Alex Hess on for Andrew Steinerman. I wanted to just ask a quick question about the margin guide for 2026. Can you walk us through some of the puts and takes there, how to think about the degree to which you're reinvesting and sort of the why now behind reinvesting so much of the -- what seems to be the cost synergy benefit as well as can you highlight any of the mix headwinds from newer logos? Maybe unpack that a little more. Steven Marks: Yes, Alex, good question and obviously, kind of a core theme of the guidance that we talked about. So a few factors that are headwinds and tailwinds in terms of just margin percentages. But overall, really feel good about the net dollar productivity at a margin. So I think we've talked about margin mix for the last couple of quarters and especially with some of these newer deals and the verticals that they're in and the product suites that were sold, there is just a relatively higher mix of those out-of-pocket fees, which are all pass-throughs to the customer, but that do dilute you on a margin percentage basis. So that's certainly a factor in there. And we -- you saw that a little bit in Q4. And obviously, as that rolls over through Q1, 2 and 3 next year, that will normalize out a little bit. obviously, spending some work, the initiatives Scott talked about automation and some of our data products to try and offset some of that, but that's certainly a factor. On the headwind or the tailwind side, we'll have some of the rollover from synergies and incremental synergies. But as you called out, we are prioritizing some incremental investment. And I think the rationale there is really we see ourselves creating some really strong competitive differentiation. If you look at some of the HCM and ATS partner success that Scott highlighted in the prepared remarks, some of the product success and really just using the success of the integration, the stability in the customer base and looking at how we're positioned in the market right now. It's just an opportunistic time to invigorate incremental growth by putting some dollars towards product, sales, marketing, which are areas that we've invested in the past and always seen really strong returns out of. Scott Staples: And Alex, I'll just add on why now. As I mentioned, we're talking to our customers every day, and they're sending us really good buying signals. So it's -- why now has really become an easy decision for us. We've got actual pipeline that will -- that is backing up a lot of these investments that we're making. So we're not making these investments in a build it and they will come model. We're actually making these investments with already defined pipeline where our customers are saying, if you build this, we'll buy it. So these decisions actually became pretty easy, but that gives you a little more color on why now. Alexander EM Hess: Got it. That's super helpful. And then as we think about those -- that pipeline of defined investments, can you walk us through internally how you think about the payback period that's required to make incremental investments back into the business? Is this something where in -- we see the momentum on the top line continue into '27 because of these investments? Or is this a '28, '29, 2030 type of payoff? Scott Staples: No, yes, you'll see impact in the second half of this year. There'll be some in-year impact because of these investments. And they certainly will carry into '27 and '28. And the good news about a lot of these investments is we don't think we need to actually do them again in '27 and '28. So that would -- that's going to help EBITDA in the future as well. But Steven, you might add a little more color. Steven Marks: Exactly right, Scott. I think, obviously, you invest early in the year. We expect good returns in the second half of the year. Like a lot of our go-to-market success, when you have that back half of the year success, you get the rollover impact into the future periods. And like Scott said, these aren't -- a lot of these aren't permanent additions. These are either onetime development exercises or rebranding and some other stuff like that of making sure that we can accelerate over the short term and then create long-term value. Operator: We'll go next now to Andrew Nicholas of William Blair. Daniel Maxwell: This is Daniel Maxwell on for Andrew today. I was wondering if you can give a little more detail on how you're thinking about the ROI from each of your capital allocation priorities heading into the new year. Definitely sounds like repurchases are incrementally attractive at this price. But is there a willingness to sacrifice some free cash flow that would go to deleveraging in favor of repurchases? Or are those truly not mutually exclusive? Steven Marks: No. As you heard in my prepared remarks, it's an and equation, not an or. I think we're very fortunate. We've got a -- you heard our free cash flow guide of $160 million to $190 million, finished the 2025 with $240 million of cash on the balance sheet. We generated $70 million of net cash flow last year in 2025. So we're able to -- as you heard us announce, pay down $25 million of debt this quarter and able to also announce $100 million of buyback authorization. With the buybacks, we'll obviously be a little bit opportunistic there at the current valuation levels. It's very accretive from an EPS and just any kind of corporate finance math you run, it makes sense to do share repurchases at this valuation, especially with our numbers and P/E ratios and things like that. But we have the ability and flexibility of generating good cash flow the success of the integration, we talked about this on the prepared remarks, but to finish the integration with 96% to 97% customer retention, curtailing a lot of the onetime expenses and now having strong free cash flow into the future, it was an opportunistic time to look back and say, we don't think we're being valued correctly. And if the market doesn't correct, we'll happily buy back some of those shares. But it's not to the sacrifice of debt prepayment. We'll do both at the same time. Daniel Maxwell: Great. That's helpful. And then as my follow-up, you guys had some good commentary on which verticals were doing well and which are still kind of lagging moving into the new year. I was curious if there's -- there were anything in the quarterly results that kind of came as a surprise, particularly on base growth front or if there was especially strong momentum in any given area on the sales front? Scott Staples: Yes. I mean just a couple of things there. One, what we were happily surprised about was the quarter resembled what our normal peak season would look like. So if you recall, we had back-to-back years of a sluggish peak. We had a great peak. It started when we thought it would start. It lasted well into -- well past Thanksgiving into December. We had a great December as well. So peak was very encouraging, and that's great for retail, e-commerce, transportation. They're all kind of aligned there. I don't think we had any surprises either negative or positive across any of the verticals. They all kind of came in line with what we thought. And I think geographically as well, as we mentioned, our international business was firing on all cylinders across all regions, not singling out a single one as a star performer or a laggard. They were all firing on all cylinders, which was great. So I think the signaling to us that the peak season was back was great. It obviously made for our best quarter ever in Q4. It's just -- I think what's interesting maybe is it sort of goes against what you read in the media or you're seeing and hearing because this is not what our customers are feeling. Operator: We'll go next now to Manav Patnaik at Barclays. Ronan Kennedy: This is Ronan Kennedy on for Manav. Can you please talk at a high level to the puts and takes that would take you to the respective low and high end of the guided revenue range, whether it be the macro and your base or cross-sell new or other components, please? Steven Marks: Yes. Ronan, and you kind of hit on the 2 main ones. So certainly, as we talked about 6% growth at the midpoint, kind of assumes that flat hiring environment, as I shared, embedded in the range at the upper and lower end is we think base is still between 0 and negative 2%. It's that continuing flat environment. Obviously, there's still all the policy uncertainty that comes out of Washington these days that could always move that towards that upper or lower end. But as Scott just mentioned, we're hearing very positive tones and very consistent tones across the enterprise customer portfolio. And then certainly, we've got good rollover momentum going into 2026. So we feel good about delivering higher end of our algorithm on the new logo and upsell, cross-sell front. But as we have our deals that are already in pipeline, how those ramp plus the investments we're making and the incremental growth that we can get there, that's what pushes us probably from that midpoint towards the upper parts of the guidance range would be the success of those as well. So -- those are really the 2 main factors. We are very pleased with the consistency and stability within retention. And that part of the algorithm, we don't take it for granted, but it's such a core part of what we do here and our focus on our customers that, that 96% or 97% retention number can be modeled in very consistently. Ronan Kennedy: Got it. And then on the synergies, can I confirm, I think you've actioned $55 million run rate as of '25, targeting the $65 million to $80 million. Can you reconfirm reported synergy benefit realized in '25 4Q and what the guide assumes for synergy realization benefit? Steven Marks: Yes. So you're right, Ronan. So as of the end of the year, we had actioned $55 million of the $65 million to $80 million target. $8 million was incrementally realized in Q4 of 2025. If you recall, when we closed the deal on October 31, '24, we did some day 1 synergies and realized $4 million in 2024. So that $8 million is incremental to that. So for the year, the incremental synergy realization was $38 million. Daniel Maxwell: Okay. And what's assumed for the realization for '26? Steven Marks: Yes. I mean, obviously, we have some rollover from what we've already actioned. Our first priority for the year is growth. The synergies, we said we'll get to the targets by year-end. It's probably more second half of the year when we action those synergies just because as we've talked about on some of the last few questions, we're using 2026 and the momentum we have going into the year to help propel incremental growth. We've got a great action plan on getting those synergies, which are primarily in cost of sales and optimizing data acquisition costs and things like that. But we know we'll get it. We'll just be a little later in the year. That's just kind of the balance of growth versus synergies. Operator: We'll go next now to Jeff Silber of BMO Capital Markets. Jeffrey Silber: I know it's late. I'll just ask one. You alluded a few times in your prepared remarks to the digital identity practice. Is it possible to quantify that for us either as a percentage of revenues or growth? And what's embedded in guidance for 2026? Scott Staples: Yes. I think it's becoming harder and harder to quantify because it's embedded in a bundled solution. We will try to give you some sort of quantification of the impact of Digital ID probably in another 6 months. We just let this pan out a little further. But there's really 2 aspects to it. There's one where it can be quantified as a stand-alone operation and two, where it's embedded in -- with a number of other products a little harder to quantify. But I can tell you anecdotally that it's having a tremendous impact on the pipeline and our -- and a number of go-lives in Q4 with very large customers. So one, we're going to get a quantification of a revenue lift Two, we believe it also brings a lot of stickiness with it. So it should even help retention because now you're really embedded with a customer when you're handling their Digital ID all through their background check and onboarding. So we will give -- try to give you a little more quantification flavor of that in about another 6 months, but I can anecdotally tell you it's having a really nice impact. Operator: We'll go next now to Scott Wurtzel of Wolfe Research. Scott Wurtzel: I'll just ask one as well and actually on Identity too. Just in the context of like mix impact on margins, what sort of -- I guess, what sort of impact does identity have on margins, I guess, relative to some of the other products that you have? Scott Staples: Yes, go ahead, Steven. Yes. Steven Marks: No, it's certainly a higher-margin product because you don't have to go out and acquire court data or driver record data or drug screening costs, things like that. So it is a higher-margin product. It's really a core tech service in its heart. But as Scott mentioned, it's getting harder and harder to break apart the discrete impact of it because it's either embedded and bundled into other services. And to Scott's other point, it's driving and it's the reason a lot of customers are looking at and/or choosing First Advantage. So you could argue it's tremendously benefit from a margin standpoint because you're winning opportunity, it's almost a marketing mechanism at this point. Operator: We'll go next now to Kyle Peterson with Needham. Kyle Peterson: Nice results I'll just ask one as well. I wanted to ask a little bit on upsell, cross-sell, particularly package density. That's been a really nice tailwind for you guys for quite a while here. I guess if you guys had to guess what inning would you say that we're in here? Like is there still a lot of progress? Is this going to continue to support pretty sustained growth over the next couple of years? Or a lot of the packages kind of fully densified? Just any color as to where we are would be really helpful. Scott Staples: Yes. Staying with the sports analogy, Scott. I would say that actually, the game has started all over again. So where we were probably a year ago is maybe halfway through the game. But I'd say the game has completely started over. So it's first inning of the next generation of package density with digital identity being at the center. It's also -- I hate to say this, but turn your TV on it night and the world is very challenging right now. And as I mentioned with our trends report, risk and risk mitigation has leapfrogged to our customers, our buyers' #1 concern. And what that then means is package density because they're just looking for more and more protection. They want to protect their employees. They want to protect their brand. They want to protect their offices, their physical infrastructure. They want to protect their shareholder value. So any time we can come up with more data searches, better data searches, we can come up with new offerings, new product lines, new ways of doing verifications, new ways of doing identity, we seem to be catching a very welcoming ear at our customers because their C-suite and their boards are continuously asking them what else can we be doing. So I'd say the game has started over with digital identity being the cleanup hitter in your metaphor, where it's really an epidemic right now and First Advantage is really in a good position. Operator: And ladies and gentlemen, that is all the questions we have today. So that will bring us to the conclusion of today's conference call. We'd like to thank you all so much for joining the First Advantage Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. At this time, you may disconnect your line, and have a wonderful day. Goodbye.
Operator: Now I will hand the conference over to the speakers, CEO, Martin Welschof; and CFO, Stefan Ericsson. Please go ahead. Martin Welschof: Thank you, and welcome, everybody, to our year-end report. Today is February 26, 2026. And as usual, I will start with the summary. So we had a couple of key events in the fourth quarter. First of all, the 2 ASH data sets. So with BI-1808, our lead candidate targeting TNF receptor 2, we saw very strong data in T-cell lymphoma, and we presented that at ASH 2025, and I'll come back to the data a little bit more in detail later. And then we had another ASH presentation about BI-1206, which is our lead targeting FcgammaRIIb in combination with rituximab and Calquence in non-Hodgkin's lymphoma. And that was also presented at ASH 2025 and also a very, very strong data set. I should mention that BI-1808 that was monotherapy, single-agent therapy. Then, we also started our Phase IIa trial evaluating BI-1206 in combination with pembrolizumab in treatment-naive advanced or metastatic non-small cell lung cancer and uveal melanoma. So this is really the first-line setting. And this is, as I will explain later, based on data that we have seen in end-of-the-line patients, and that data actually convinced Merck to go together with us into first line under a supply and collaboration agreement. And then last but not least, we also got orphan drug designation from EMA for BI-1808, another very important milestone, for the treatment of cutaneous T-cell lymphoma, CTCL. And then we had another -- a couple of events after the end of the period. Number one, obviously, a very promising data set in our ongoing Phase IIa study for BI-1808 with KEYTRUDA for the treatment of recurrent ovarian cancer. And we published that ahead of JPMorgan, and I will also discuss that data set a little bit more in detail. And then we had here in the report and maybe not everybody is aware about this, but I will highlight it, updated clinical data sets for 1808 and pembro in combination in ovarian cancer as well as the BI-1206 study for the treatment of non-Hodgkin lymphoma. So we have additional patients there, and I will mention it again when we discuss specifically those 2 data sets. And then also very happy that we could nominate 2 new Board members. Of course, they still need to be confirmed and elected on the Annual General Meeting. Number one, Kate Hermans, a very experienced and seasoned business person in the pharma and biotech industry. And then Scott Zinober, who was for roughly 20 years, the portfolio manager at Viking. So both 2 very, very strong U.S. profiles, and we're very happy to welcome them to our Board. Then, before I go into a little bit more in detail, just to have a quick look at our clinical pipeline. As usual, I always emphasize here, so we have multiple value drivers. So as you know, in August, we focused on the 2 more mature programs, 1808 and 1206. And 1808 is currently running with -- in combination with pembrolizumab in recurrent ovarian cancer. And there, we have this very nice data set that is actually continuing to generate good data. And then we have planned, so this has not been started yet, a combination with 1808, pembrolizumab and paclitaxel based on the very interesting data that Merck published at ESMO. And this is actually quite exciting because it could lead to a very interesting development in recurrent ovarian cancer. Then, obviously, as you already know, CTCL single agent, I'll go briefly over the data that we presented at ASH. And then we are currently running this also in combination with pembrolizumab, although we already have very strong single-agent data in CTCL of 1808. We still want to see how it looks in combination with pembro. And then 1206, the triplet targeting non-Hodgkin lymphoma, specifically follicular lymphoma, mantle cell lymphoma and marginal zone lymphoma. And there, we also have an update. So the data set is maturing further and basically confirming the trend as we see also the 1808 data set in ovarian cancer in combination with pembrolizumab. So that is really very, very encouraging. And then as already mentioned on the previous slide, so we kicked off first-line combination -- in combination with pembrolizumab 1206 in non-small cell lung cancer and uveal melanoma. And there, we will see the first readout already during the second half of this year. But I will come back to the milestones this year and also an outlook into 2027 later at the end of the presentation. Here, I just want to mention that we see basically complete and partial responses in all clinical programs, which is really, really confirming the 2 single agent having activity in liquid as well as in solid cancer, which I think is very -- giving a lot of comfort, and that's what you want to see at this stage. Then going a little bit more into detail. So first, our anti-TNF receptor 2 program, 1808 in solid tumors and then the same in T-cell lymphoma. So we have, as already mentioned, very promising efficacy in ovarian cancer, and that is kind of building on the single-agent activity that we have seen in ovarian cancer. But obviously, if you want to treat something like recurring ovarian cancer, you have to go into combination. And since we knew preclinically already that we have strong single-agent activity, but also very good synergy with pembrolizumab, it was a no-brainer, and that's why we did this. And in addition to the data that we have shown ahead of JPMorgan, we have one additional partial response. So one stable disease has turned now into a partial response and one additional stable disease that corresponds to 24% ORR and disease control rate of 57%. So basically, the data set that we have shown ahead of JPMorgan is kind of confirmed and is maturing further into the right direction. So again, 24% overall response, 57% disease control and available -- 21 available ovarian cancer patients, which I think is very encouraging and showing the right trend. And also when we look on the next slide, at the spider plot, you can also see how immunotherapy is working, and we have a firm belief that 1808 could be potentially the next KEYTRUDA. And you see here 2 dotted lines. So a pink one, which is basically if you're above this is progressive disease. If you're below this is stable disease. And then you have a yellow line, PR, which is basically if you then go beyond this or below this, then you have a partial response. And you can see how immunotherapy is working. So you have patients at stable disease and then there for a while, the immune system works and then it gets pushed down into partial response. And this is actually very, very interesting because also when you look at KEYTRUDA alone, it's about 80% ORR in combination with our drug, it's 24%. I think this is actually a very interesting and strong data set and of course, further maturing. Then switching to CTCL and PTCL, our T-cell lymphoma data that we presented at ASH 2025. And there, we have shown 46% ORR, 92% disease control in 13 evaluable CTCL patients, a very strong data set. And I should mention here also at this place, both data sets, so the one in ovarian cancer as well as the one in T-cell lymphoma has also a very excellent safety profile. So it's very, very well tolerated, which is important, especially when you think about the combination in ovarian cancer with pembrolizumab because if you -- you are only able to do this in case you have a good safety profile, which we have. But going back to T-cell lymphoma here on this slide. So what is important besides the good safety profile is that we see immune activation early on with depletion of regulatory T cells and the influx of CD8 positive T cells into the skin. So we have a clear skin component. And very briefly on the spider plots, here, you can also see nice duration already. In this case, the black line is basically below that is stable disease. And then you see the dotted line is below is partial response. And you can see that we already have a complete response now in Sézary Syndrome, which is really continuing for more than a year. So also, you can see that duration is coming into play here, as you could see also for the more early ovarian cancer data set. So it really looks very promising. Then switching to our other program, our anti-FcgammaRIIB program, 1206 in non-Hodgkin's lymphoma as well as in solid tumors, starting with the non-Hodgkin's lymphoma. So this is the combination with rituximab and acalabrutinib. So it's a triplet. And this is a little bit different slide that we have shown so far. So we have this splitting up now into follicular lymphoma, marginal zone lymphoma and mantle cell lymphoma. We see good responses in both. Dark green is complete, light green is partial. And we have actually compared to the data set that we have shown at the end of last year, 4 additional partial responses and 1 additional stable disease, keeping basically the very good 80% ORR and the disease control rate of 100%, which is, I think, excellent. And you can see activity in all 3 subsets. We are focusing more on follicular lymphoma because this is also more interesting for our supply and collaboration partner, AstraZeneca, because they don't have follicular lymphoma on the label of acalabrutinib. Then, again, spider plot here as well. Everything that is below the dotted line is good because that means it's either a partial response or complete response. And then you see also quite a number of stable diseases. And you see here also that the data matures, that means you see first a stable disease, then it goes into partial response and then eventually into complete response. And we also have here very, very good duration. And we have some idea about the duration from our doublet study that we did before that was just 1206 in combination with rituximab. And of course, the patient population that we're focusing on is our patients that do not respond anymore to any CD20-based therapy. And there, we have now a couple of patients that actually are in complete response for several years after the end of the study. So then on the solid cancer side for 1206, this is a data set that is from the dose escalation where we were targeting patients, end-of-the-line patients that do not respond anymore to either anti-PD-1 or anti-PD-L1, where we also had some very interesting signals. So we had very interesting complete and partial responses. And based on that, we went back to Merck, our partner here for the supply and collaboration on combination with KEYTRUDA. And we agreed that we should go into a Phase IIa first-line non-small cell lung cancer and uveal melanoma with 1206 and pembrolizumab, and this is now ongoing. And as I said, so the first readout will be during the second half of this year, which is pretty soon anyway. Then, I will hand over to Stefan. Stefan Ericsson: Thank you, Martin. I will present the financial overview for Q4 and the 12-month period, January to December. All amounts are in SEK million unless otherwise mentioned. Net sales were SEK 3 million in Q4 2025 compared to SEK 21.4 million in Q4 2024. That's SEK 18 million lower in Q4 2025. That decrease is related to the production of antibodies for customers was lower in 2025. And net sales for January to December 2025 were SEK 226 million. For the same period in 2024, net sales were SEK 45 million. That's an increase of SEK 182 million. The increase is mainly related to the SEK 20 million payment we received when XOMA Royalty acquired future royalty and milestone interest for mezagitamab. And before that, we got a SEK 1 million milestone in that collaboration. Production of antibodies for customers was SEK 19 million lower in 2025. Operating costs decreased from SEK 147 million in Q4 2024 to SEK 132 million in Q4 2025. That's a decrease of SEK 15 million. We had quite higher cost in BI-1808 and quite lower cost in BI-1607 and lower cost in BI-1206 and BI-1910. And we had somewhat higher personnel costs in Q4 2025. From January to December, the increase of operating costs was SEK 62 million from SEK 516 million in 2024 to SEK 578 million in 2025. We had quite higher cost in BI-1808 and BI-1206 and quite lower cost in BI-1607, and lower cost for production of antibodies for customers. And personnel costs in 2025 were quite higher compared to 2024. And the result for Q4 2025 was minus SEK 125.8 million and result for January to December 2025 was SEK 332.9 million. Liquid funds and current investments end of December 2025 amounted to a total of SEK 593 million. And finally, based on ongoing studies, BioInvent is assessed to be financed for the coming 12-month period. Over to you, Martin. Martin Welschof: Thank you, Stefan. So at the end of the presentation, I want to go over the key catalysts for the remaining part of this year as well as give you an outlook for 2027. And as you will see, this is actually a quite dense picture here. So we have a lot of interesting news this and next year. So starting with 1808 in T-cell lymphoma. So already by mid this year, we'll have first Phase IIa data in combination with pembro, but also additional monotherapy data since we do dose optimization at the moment. Then, for 1808 in solid tumors, second half of this year, we should have further Phase IIa data in combination with pembro. And as you could see already here, so the data is maturing to the right direction. So that should be also a very interesting milestone to looking forward to. Then switching to 1206, our FcgammaRIIB platform, we'll have midyear already the additional Phase IIa data with -- in combination with rituximab and acalabrutinib. And then last but not least, 1206 in solid tumors, first-line non-small cell lung cancer and uveal melanoma, we'll have the first readout of that data during the second half of this year. Then looking into 2027, again, starting from the top, first, our TNF receptor 2 platform, 1808 in T-cell lymphoma. During the first half, we'll complete the Phase IIa dose optimization. That is the monotherapy. And then during the second half, we could potentially start the pivotal study. Then, 1808 in solid tumors. During the second half of next year, we would have potentially the first Phase IIa data, the triplet in combination with pembro and paclitaxel. And this is actually quite interesting because in case we really see a nice uplift there, and maybe we can later discuss it during the Q&A in more detail, this could also then lead immediately, of course, data-driven to a pivotal study. So a very, very interesting program to follow. Then, FcgammaRIIB, 1206 in non-Hodgkin lymphoma. So during the first half of 2027, we potentially could start the pivotal triplet study and then in the solid cancer, first-line non-small cell lung cancer and uveal melanoma. During the first half of 2027, we complete the Phase IIa data and could potentially start during the second half, Phase IIb BI-1206 plus pembro in non-small cell lung cancer. So as I mentioned, a very dense news flow, very interesting milestones and that should be something really looking forward to. And I think I will end here my presentation and happy to take questions. Thank you. Operator: [Operator Instructions] The next question comes from Richard Ramanius from Redeye. Richard Ramanius: Why not start off on the last slide? And when do you think it would make sense to take in a partner to conduct any of these studies? I guess, it would be some of the studies in 2027. Martin Welschof: Yes. So basically, what I can say to that, we are in interesting discussions, as you know. So we have a very active approach in business development partnering anyway, and we are in discussions with some company for some time. Obviously, we have AstraZeneca and Merck already at the table in a way through those supply and collaboration agreements, and they follow the programs very closely. And I think we might already see some activity around partnering -- potential partnering, deal making, during the second half of this year. And of course, you can never promise. It's always then depend on the data, on what the market environment is, et cetera, et cetera. But we will be keen to partner one or the other with hopefully, large pharma companies such as Merck and AstraZeneca. Richard Ramanius: Right. Could you just clarify more in detail exactly what more do you need to accomplish with BI-1206 in NHL to make the triplet ready for a pivotal trial? Martin Welschof: Yes. So basically, we will have, as I already mentioned, the 30 patients in the current ongoing study. That's enough. And then we can discuss with the regulators and start preparing for potential pivotal study. That's why I think that will take the rest of the year once we have the data by mid this year and then could start that potentially next year. But also to mention it here, our main focus currently from a strategic perspective is more on the solid cancer side because that is a much stronger value driver. But we are committed to get the TCL as well as the NHL that you are talking about ready for potential pivotal study. Richard Ramanius: Last question. What funding options do you have for 2027? Martin Welschof: Yes. So obviously, we will look at everything all the time. Number one, we're looking at partnering. And number two, of course, there's always a financing option because I think if you have good data as we have, you have always both possibilities, but we have a strong focus on partnering. Operator: The next question comes from Sebastiaan van der Schoot from Kempen. Chiara Montironi: I'm Chiara Montironi on behalf of Sebastiaan. So a couple from me, if I may, again, regarding potential partnering discussion. Could you go over whether BI-1206 or BI-1808 is one of the more logical options to out-license? And the second question will be around uveal melanoma and first-line non-small cell lung cancer data set for BI-1206. Can you provide some insight into what magnitude of efficacy would give you enough comfort to continue forward with the program? Martin Welschof: Yes. Thank you very much for those questions and very nice to meet you. So regarding partnering, we are currently discussing both 1808 and 1206. So we have discussions around both programs, and that's also what you should do as a biotech company because you can't be picky. You have to see what opportunity turns up and then you go from there. My dream scenario would be, though, that we keep 1808 a little bit longer and partner 1206 first. But as I said, so we have discussions around both at the moment. Then regarding the data set of 1206 in first-line non-small cell lung cancer, I think what we would like to see as a target is 60% ORR, and I think then we will be in good shape. Operator: The next question comes from Arvid Necander from DNB Carnegie. Arvid Necander: I came a bit late here, so sorry if the questions have already been answered. But the first one on 1206. So really good to see the breakdown of responses by subtype in NHL. So on the back of this analysis, I just wanted to ask if follicular lymphoma is the indication that makes most sense to pursue in a registration-directed trial? And then I guess, secondly, on the non-small cell lung cancer data targeted for second half of the year which will provide an important new signal, how should we think about expectations here? What would mark a strong outcome in your view? Martin Welschof: Thank you for your questions. Maybe I'll start with the last one first because there was a little bit of an overlap regarding that already. So what we hope to see, our expectation is that we see an ORR, so that's about BI-1206 in combination with pembrolizumab in first-line non-small cell lung cancer of 60%. I think if you see that, that will be a strong signal. And in that sense, also, it's a very good clinical trial because we really put it to the test. And if you see this kind of response, I think we are very happy. And I think that would be also something that is super interesting for Merck or should be super interesting for Merck. Then regarding 1206 in non-Hodgkin lymphoma, yes, I think the activity is in all 3, and we had a stronger focus on follicular lymphoma. And I think I mentioned it during the presentation, maybe you didn't hear this. This is a little bit driven by our supply and collaboration partner, AstraZeneca, because acalabrutinib doesn't have follicular lymphoma on the label. And since we think that might be a potential partnering possibility, we were focusing on follicular lymphoma a little bit more than on the other 2. And what we were trying to do is have a focus on follicular lymphoma at the same time point also showing that it works for marginal zone as well as mantle cell lymphoma, which I think we clearly did. And of course, also for the audience here, when you look at non-Hodgkin lymphoma, the largest -- by far largest population is follicular lymphoma, I think also from a commercial perspective, it makes a lot of sense. Operator: The next question comes from Dan Akschuti from Pareto Securities. Dan Akschuti: Congrats on the progress now with potentially 2 pivotal programs next year. And I think there's been a lot of discussion about partnering. And yes, both drugs work in multiple settings. So I'm thinking a bit like how are you going into these negotiations, if you can share a bit more because follicular lymphoma, for instance, as with any approved immuno-oncology drug, they never stay approved in only one indication. So it's kind of a mechanism proof of concept that you have. Are you marketing this specifically? Or do you see interest from that from the pharma side to basically not just do a deal on the indication, but more broader on the drug or on the mechanism? And how you approach that for both drugs, 1808 and 206? And if you have gotten this kind of interest from pharma or has it been very indication specific? Martin Welschof: Yes. Thank you, Dan. So I think, in general, you can say -- and that's -- you see it also here on this slide. So 1808 is our TNF receptor 2 platform and 1206 is our FcgammaRIIB platform because both mechanism, as you say, are broad. And of course, what you do in early clinical development, you try to find a signal that you can follow in order to generate some more comprehensive data sets, and that's what we're doing. And especially as a small company, you have to be very prudent because you can't go too broad at the beginning. But just to go through maybe step by step. So when you look at 1808 first, maybe, then you can clearly see that we already have established a very broad efficacy range. So remember, probably, the single-agent activity in GIST in ovarian cancer, but also in lung cancer. And now the strong data set in combination with pembrolizumab. At the same time point, we also see strong single-agent activity in T-cell lymphoma. So they already can go and see the broad potential application range that we have for that compound. And talking about 1808 first, maybe. So yes, the discussions that we have, of course, initially indication-driven because wherever you have the first more comprehensive data set, that's what drives it. And of course, that we had with TCL. But now since we have the ovarian cancer data set since early this year, we also have interesting discussions around ovarian cancer, obviously. So absolutely broad. And the same is true for 1206. So we have this in non-Hodgkin lymphoma. And of course, the study that we run is very targeted towards AstraZeneca in a way. So we'll see how that works out, and we will know that probably already quite soon. But then you have the solid tumor side, where we work in combination with pembrolizumab, and especially 1206 is quite interesting because there we have a supply and collaboration agreement with AstraZeneca regarding acalabrutinib for non-Hodgkin lymphoma and of course, then the same -- not the same, but also supply and collaboration agreement with Merck for the solid cancer side. And on the solid cancer side, for both compounds, I also would say, starting again with 1808, if we -- if you see -- if we continue to see what we see, then it will not be only interesting for ovarian cancer. It will be also interesting for other cancers like maybe triple-negative breast cancer, for example, and maybe other solid cancers. So I think very broad application potential, but we go one step at a time. So current focus clearly on ovarian cancer, which is already a quite interesting market. And the same is true for 1206 in solid tumors if it should work as we hope. So around 60% ORR in first-line non-small cell lung cancer. Then it's -- there's no reason why it should not work with other solid cancer indications in combination with pembrolizumab first line. So both have a platform. It's a platform potential and platform application. And that's how also our discussions are driven. So obviously, they start with the first data sets. And once you have then the other data sets, that continues to grow. And of course, what we are trying to do is to see that we also reach that stage. So with 1808, we have that now with the ovarian cancer data, and there will be further ovarian cancer data already during the second half of this year. And then for 1206 with the second half of this year, the first readout for the combination with pembro in first-line non-small cell lung cancer, also will initiate this type of discussions. Dan Akschuti: Great. Just a follow-up, if I may, and maybe you cannot answer it. But you can share if you see a willingness from pharma to value the assets broadly. And like is there interest in broader patterns beyond composition of matter or like broader preclinical data that you have? Do you see signs that are really indicating that they're interested really in the platform or maybe you cannot share that with us? But if... Martin Welschof: Well, I can talk about it in, of course, general ways, and I can refer a little bit to the discussions that we had during JPMorgan. We had one discussion, which was really interesting where exactly what you were describing was the case. They obviously were super intrigued by the T-cell lymphoma data, but then also say you have this very beautiful ovarian cancer data. Plus also, I think interesting for the audience, we just uploaded also a publication that is really describing in detail how it works. And I think a lot of partners or potential partners really value the depth that we have regarding the science. So we can really and have described in this publication how 1808 works in detail. And I think the clinical data in hand with the preclinical data and science data and mechanistic data basically is important to drive good and fruitful partnering discussions, and we have that. Operator: The next question comes from Oscar Haffen Lamm from Stifel. Oscar Haffen Lamm: My first one will be on 1808 in CTCL. I mean with data expected in combo with pembro in mid-2026 and potential start of a pivotal trial by next year, I was just wondering what will basically decide whether to use the monotherapy or the combo with pembro in the pivotal trial. I mean, will it be purely based on efficacy? Will it be safety as well? Just curious to hear your thoughts on that. Martin Welschof: Yes. So basically, just as a background also to the audience. So currently -- and coming back to the milestone that you were just referring to. So it will not be only the pembro data. There will be also additional pembro combination data, but also additional mono data. So because what we're currently doing is we run -- it's in combination with pembro, but we also do already dose optimization in mono or with the single agent basically. And a driver, of course, will be that you have to see a significant better ORR. And of course, at the end, also, it's a little bit early for that, but duration, of course, is also important. And then, of course, also safety, yes. So we did some analysis with some external help. And the expectation would really, if you combine it with pembro that you see an uptick in efficacy. And of course, you don't want to have safety problems because at the moment, safety is really, really good. And I think that is also a very important aspect of our monotherapy data that we have so far because since we have such a good safety, we could also go into earlier lines of the disease since we have no toxicity. And I think that is also quite important. And of course, would make also the patient population that you might be possible to treat would widen this up basically. So we really want to see an uptick. And the reason why we do it is basically just to see whether we can have a better efficacy. I think the efficacy that we already have as a monotherapy is good, is exceptional, especially in combination with the safety that we see. Oscar Haffen Lamm: Just a follow-up on that. How many patients do you target to have in CTCL before the end of Phase II meeting with the FDA? Martin Welschof: Yes. So it will be the full data set. I don't have that at the moment in front of me. I think what we have shown so far was 15-plus patients. So it will be kind of roughly the double amount. And I think for the -- now I'm talking about the monotherapy data. And then for the pembro data, it's something around 15 patients, right, in combination with pembro. Oscar Haffen Lamm: Okay. And just one last question for me, still on 1808, but this time in ovarian cancer. Is the decision to add paclitaxel to the combo of 1808 and KEYTRUDA done on the back of some conversations with Merck? I mean maybe they've hinted to what they want to see in the data. And then maybe as a follow-up on that, how many patients will you recruit for that arm? Martin Welschof: Yes. So basically, that was triggered -- that thought was triggered much, much earlier, and it was already part of our protocol when we started the doublet. We first just wanted to see how it works in combination with pembro. And this we got to know now. So it's 18% -- 8% ORR compared to 24% in the combination. And since we were following the field quite closely, we had already in the protocol that we could go with a triplet, and we also have done already some preclinical work. And we know 1808 works also very well with paclitaxel. So once we saw the ESMO data published by Merck and then the only thing that was missing -- we were actually already quite convinced by that, but the only thing that we're missing then for us to really plan this more seriously was then the approval of pembro and paclitaxel. And we expect a super cool safety profile, that is no other safety issues compared to KEYTRUDA combined with paclitaxel, plus, of course, a very nice uptick in overall response rate. And here again, I don't have the patient numbers in front of me, but I think it was around 30 patients that we want to do in the triplet, maybe a little bit more, at least the amount of patients that will be needed in order to have as a next step potential pivotal study. Operator: [Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments. Martin Welschof: Yes. Thanks, everybody, for participating in our call, plus also the very good questions. I think that discussion around those questions helped a lot to really demonstrate and show that we are at a very important and interesting time of the company. The slide of the key expected clinical milestones is still up on this presentation. So I think with that, you can clearly see a very dense news flow, as I already mentioned, and each of those programs can drive very interesting value development for the company. So stay tuned. And already by mid this year, there should be more, and then we will see where we land. But I'm very optimistic for the company. And I think for me, from my perspective, the most important thing is the data. And the data is good, and we knew that already, but also it's maturing in the right direction. So I think that gives me a lot of hope and confidence. Thank you very much.
Operator: Good morning, everyone, and welcome to the Trulieve Cannabis Corporation Fourth Quarter and Full Year 2025 Financial Results Conference Call. My name is Alan, and I will be your conference operator today. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Christine Hersey, Chief Corporate Affairs and Strategy Officer for Trulieve. Christine, you may begin. Christine Hersey: Thank you. Good morning, and thank you for joining us. During today's call, Kim Rivers, Chief Executive Officer; and Jan Reese, Chief Financial Officer, will deliver prepared remarks on the financial performance and outlook for Trulieve. Following the prepared remarks, we will open the call to questions. This morning, we reported fourth quarter and full year 2025 results. A copy of our earnings press release and PowerPoint presentation may be found on the Investor Relations section of our website, www.trulieve.com. An archived version of today's conference call will be available on our website later today. As a reminder, statements made during this call that are not historical facts constitute forward-looking statements, and these statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from our historical results or from our forecast, including the risks and uncertainties described in the company's filings with the Securities and Exchange Commission, including Item 1A, Risk Factors of the company's most recent annual report on Form 10-K as well as our periodic quarterly filings. Although the company may voluntarily do so from time to time, it undertakes no commitment to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. During the call, management will also discuss certain financial measures that are not calculated in accordance with the United States generally accepted accounting principles or GAAP. We generally refer to these as non-GAAP financial measures. These measures should not be considered in isolation or as a substitute for Trulieve's financial results prepared in accordance with GAAP. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measures is available in our earnings press release that is an exhibit to our current report on Form 8-K that we furnished to the SEC today and can be found in the Investor Relations section of our website. Lastly, at times during our prepared remarks or responses to your questions, we may offer metrics to provide greater insight into the dynamics of our business or our financial results. Please be advised that we may or may not continue to provide these additional details in the future. I'll now turn the call over to our CEO, Kim Rivers. Kimberly Rivers: Thank you, Christine. Good morning, everyone, and thank you for joining us today. We are thrilled to report outstanding financial results and meaningful progress on our strategic priorities. Congratulations to the entire team for delivering another year of stellar performance, highlighted by record units sold, industry-leading margins and robust cash generation. We finished the year with considerable momentum, underscored by a series of impressive accomplishments. In December, we won a conditional license in Texas and repositioned our debt, reducing balance sheet leverage and annual interest expense. On top of that, on December 18, President Trump signed an executive order to reschedule cannabis to Schedule III. I had the pleasure of attending this historic event where the President advanced the first major step in federal cannabis reform, acknowledging the medical value of cannabis. We applaud the President for fulfilling a campaign promise and expect the administration will follow through in short order. Importantly, rescheduling signals that long overdue common sense cannabis reform is achievable. Trulieve will continue to advocate for change to support cannabis consumers and the industry. Moving to our results. Full year revenue was $1.2 billion with traffic and units sold up 5% each. Fourth quarter revenue of $293 million increased 2% sequentially, in line with guidance. Full year and fourth quarter gross margin of 60% was driven by operational efficiencies, lower production costs and our disciplined approach to promotional activity. Record adjusted EBITDA of $427 million improved by 1% to 36% margin due to expense control in our core business. Full year operating cash flow of $273 million exceeded our target of $250 million. We exited the year with $256 million in cash after retiring over $380 million of debt in December. Overall, 2025 results were strong, leading to standout operational and financial performance despite volatility in consumer sentiment and macroeconomic conditions. Pressure on retail revenue from pricing compression and softer consumer behavior was offset by higher traffic and units sold. Throughout the year, our team was able to refine our product mix and promotional strategies to meet changing customer preferences while maintaining brand equity and margins. Low visibility, headline risk and mixed consumer sentiment have carried into 2026. Our team is ready to manage through business cycles, meeting customer needs when spending is pressured and when it rebounds. Wholesale revenue grew 23% in 2025, driven by strength in Maryland and Pennsylvania. In Ohio, our production partner continues to ramp sales of branded products, including Modern Flower and Roll One. We plan to grow our wholesale business this year as industry conditions permit. Following tremendous progress last year, we are concentrating efforts on 4 key areas. This year, our strategic priorities are: one, expanding access to cannabis; two, growing our loyal customer base; three, elevating our branded product portfolio; and four, investing in growth initiatives. Since inception, a core part of our mission has been expanding access to cannabis. Trulieve has been a leader in federal and state efforts to advance the industry, working tirelessly to educate key stakeholders about the many benefits of regulated cannabis. Rescheduling is a historic milestone with major practical and symbolic implications. First, rescheduling acknowledges the medical value of cannabis, affirming what patients and physicians have known for years. Second, rescheduling removes barriers to research while reducing the stigma for millions of Americans. Third, it removes the punitive tax burden of 280E, lifting pressure on state legal operators and allowing conversion from the illicit market to regulated channels. Finally, rescheduling sets the stage for much needed reform such as safer banking and eventual uplisting to U.S. exchanges. The vast majority of Americans favor common sense reform, and we look forward to supporting these efforts in the year ahead. While 40 states have adopted some form of medical and/or adult-use cannabis, access to state-tested products varies by state. We are pushing for expanded access as appropriate across our markets. In Florida, Trulieve continues to support the Smart and Safe Florida adult-use campaign. The campaign is fighting for ballot initiative inclusion this November. While the campaign submitted 1.7 million signatures prior to the February 1 deadline, state agencies reported a shortfall of validated petitions versus the required 880,000. The campaign has asked the Florida Supreme Court to address the invalidation of more than 90,000 signatures, which if allowed, would place the total over the required threshold. We anticipate the campaign will have greater clarity on valid inclusion for this year's midterms in the coming months as litigation unfolds. Turning to Pennsylvania. Governor Shapiro has again called for the legislature to pass adult-use legislation. We believe state legislators recognize the potential for adult-use to satisfy constituent demand for cannabis while generating revenue for the state. Several bills have been filed this session, and we remain optimistic that a compromise can eventually be reached. If adult-use is launched in Pennsylvania, Trulieve is well positioned given our established retail footprint, branded products and scaled production capabilities. In Texas, Trulieve was 1 of 9 operators awarded a conditional license for the medical marijuana program. We are honored to be among those chosen, and our team is working to finalize the license. Pending regulatory approval, we plan to quickly launch production and retail operations. Trulieve was first to market in several states, including Florida, Georgia and West Virginia. Our distinguished track record of working with patients, physicians and regulators to develop early-stage programs sets us apart. With over 135,000 patients today, telehealth consultations for patients and satellite pickup locations, the Texas Compassionate Use Program is poised for meaningful growth over the next few years. We look forward to contributing to the success of the program. In Georgia, new legislation has been filed that would expand the medical cannabis program. If passed into law starting in 2027, the program would include new qualifying conditions such as severe arthritis, severe insomnia, HIV, IBS and lupus and new form factors, including edibles and vapes would be allowed. While expanding access to cannabis is a core part of our company's mission, we remain passionate about growing our loyal customer base while providing best-in-class service, messaging and products. Training and team building to enhance customer service is ongoing. This month, we hosted our first National Retail General Manager Summit in Orlando. During this 4-day event, hundreds of leaders from across the country came together for training and to share ideas to improve retail operations and the customer experience. Attendees noted the event was a resounding success, setting the tone for our retail team to be energized and ready for the year ahead. Investments in personalized messaging, mobile app and rewards program allows more sophisticated interactions with customers. Over the past few months, we have moved beyond category-based segmentation, adding targeted messages to specific cohorts based on purchase behavior, browsing activity, engagement history and preferred communication channels. This year, we are investing in a major project that uses AI to automate segmentation, decisioning and execution to accelerate speed to market and real-time engagement. Internally, we are calling this multiyear endeavor Project Hyper as it will accelerate hyper-personalization of customer outreach. Deeper personalization enables more relevant messaging and promotions, improving the quality of interaction while driving desired results. In November, we launched a mobile app in Florida, providing customers one place for browsing, deals, reservations and rewards. Push notifications to learn about special promotions or when orders are ready for pickup, provide a seamless experience. In the first 90 days since the app launched, over 115,000 customers downloaded the app, leading to 3.5 million user sessions. Following the success in Florida, we are excited to launch the app in additional markets this year. Our rewards program grew 12% in the fourth quarter, reaching 915,000 members at year-end. Rewards members continue to spend on average 2.5x more than nonmembers, comprising 78% of fourth quarter transactions. We plan to introduce program tiers, enabling more robust rewards for customers who spend more, including exclusive offers, products and events. In combination, advanced messaging capabilities provide a competitive advantage while contributing to customer retention. Fourth quarter retention improved sequentially to 70% company-wide with 78% retention in medical-only markets, demonstrating the strength of our retail platform. High-quality branded products reinforce customer attraction and retention while building long-term equity. In 2025, we sold over 50 million branded product units. In-house brands, Modern Flower and Roll One continue to gain traction, representing almost half of the branded products sold. New and innovative branded product development is ongoing. Last year, our team introduced over 175 new SKUs, including the Roll One Clutch All In One, a discrete compact vape cart. In Florida, the Roll One Clutch launched in Q4 and it sold over 200,000 units. In the past month, we launched the Roll One Clutch in Arizona, Ohio and Pennsylvania, where initial customer feedback and sell-through rates have been positive. We plan to launch in additional markets in the coming months. As the industry continues to evolve, we are pursuing growth initiatives that align with our long-term objective to build a leading cannabis company. Investments include expansion of retail production and distribution in new and existing markets and technology and infrastructure. Exiting 2025, our scaled platform included 233 retail locations, supported by over 4 million square feet of production capacity. This year, we plan to add at least 5 new retail locations with the potential to further expand pending regulatory approval in Texas. Technology and infrastructure investments add flexibility and needed capabilities as our business grows. We are committed to making long-term investments to balance the need to remain competitive today while positioning Trulieve for the future as layer of prohibition are removed. Following tremendous results in 2025, we are carrying the momentum forward this year. Given our position as a leading voice for change, scaled operations and strong balance sheet, we are well situated to make substantial progress in the year ahead. With that, I'd like to turn the call over to our CFO, Jan Reese. Please go ahead. Jan Reese: Good morning, and thank you, Kim. We delivered full year 2025 revenue of $1.2 billion comparable to 2024. Continued pricing compression in retail offset -- was offset by growth in Ohio and wholesale. Contributors from new dispensaries, record units sold and full year adult-use in Ohio supported overall top line performance. Fourth quarter revenue was $293 million, declined 3% year-over-year, up 2% sequentially as new store openings, adult-use momentum in Ohio and wholesale growth were offset by ongoing pricing pressure and softer consumer wallet trends. Full year gross profit was $711 million, representing a 60% margin, consistent with the prior year. Gross margin strength reflected economies of scale, operational efficiencies across our platform and disciplined promotional management. Fourth quarter gross profit totaled $175 million, also at a 60% margin and up sequentially. We expect quarterly gross margin to vary based on product and market mix, inventory sell-through, promotional activities and idle capacity costs. For the full year 2025, SG&A expenses were $445 million or 38% of revenue compared to 43% in 2024. Driven by reduced operational expenses and lower campaign support, fourth quarter SG&A was $126 million or 43% of revenue. Adjusted SG&A declined to 30% of revenue from 31% last year, reflecting continued operational discipline and efficiency actions. Full year net loss was $160 million compared to a net loss of $155 million in 2024. Fourth quarter net loss was $43 million or $0.22 per share. Excluding nonrecurring items, fourth quarter net loss per share would have been $0.02. Full year adjusted EBITDA totaled $427 million compared with $420 million in 2024. Fourth quarter adjusted EBITDA was $105 million, representing a 36% margin and reflecting expense leverage across our core operations. Turning to our tax strategy. Beginning 2019, we filed amended returns challenging the applicability of Section 280E to our business. To date, we have received refunds totaling more than $114 million. While we remain confident in our position, final resolution may take time. We continue to accrue an uncertain tax position while benefiting from lower cash tax payments, excluding the impact of 280E in 2025 full year results would reflect positive net income. On balance sheet and cash flow, in December, we redeemed $368 million of senior notes and completed a $140 million private placement. We also repaid a $15.8 million mortgage in our West Virginia property. We ended the year with $256 million in cash and $232 million in debt and subsequent to the year-end, raised an additional $60 million through a second private placement. Full year operating cash flow was $273 million. Capital expenditure were $44 million and free cash flow totaled $229 million. Turning to the outlook. We expect first quarter revenue to decline sequentially by a low to mid-single-digit percentage, consistent with normal seasonality. Gross margin is expected to fluctuate quarter-to-quarter, but remain broadly in line with recent performance. Consumer trends will influence retail results and margin. For full year 2026, we anticipate operating cash flow of at least $250 million and capital expenditure up to $85 million. We will continue to invest in our retail production and distribution network, expand into new markets such as Texas and enhance technology and infrastructure capabilities. We plan to open at least 5 new stores, complete 5 relocations and refresh at least 45 stores this year. Pending regulatory approvals, we may accelerate investments in Texas. We may update our outlook as regulatory and market catalysts evolve. With that, I will return the call over to Kim. Kimberly Rivers: Thanks, Jan. Over the past 2 decades, cannabis reform has gained increasing momentum and growing mainstream acceptance. At last, the federal government is catching up to the American people with the first step towards reform. As President Trump's executive order states, decades of federal drug control policy have neglected medical marijuana uses while limiting the ability of scientists to complete necessary research. Rescheduling of cannabis to Schedule III acknowledges the medical value of cannabis and opens the door for additional research. It also sends a powerful signal that the government is willing to revisit antiquated policy that no longer serves the American people. We believe rescheduling is a precursor to additional reform, including safer banking and uplisting of U.S. cannabis companies to major exchanges. At the same time, state adoption of medical and adult-use programs continues, normalizing cannabis use and providing consumers greater choice. Trulieve remains firmly committed to cannabis reform and will continue to lead from the front, investing time and resources to drive change. With scaled operations in attractive markets, we are focused on driving profitable growth while maintaining flexibility to adapt as the industry evolves. Trulieve is defining the future of cannabis one customer at a time. Thank you for joining us, and as I always say, onwards. Christine Hersey: At this time, we'll be available to answer any questions. Operator, please open up the call for questions. Operator: [Operator Instructions] Our first question today comes from Luke Hannan from Canaccord. Luke Hannan: I wanted to follow-up on the CapEx outlook for 2026. So it is a step-up from 2025 and both Kim and Jan, you both outlined sort of the moving parts there. But I guess, specifically, I wanted to dive in a little bit on how much you plan on spending on Project Hyper. That will sort of be the first question, sort of what's embedded for 2026 there. And then secondly, on the refreshes, you've done a number of them so far, seeing good organic growth on the back of those. What's the runway look like for continued refreshes, not just for 2026, but if we think about the subsequent years as well? Kimberly Rivers: Luke, so we're very, very excited about Project Hyper. And really, I think that it's a testament to our investment strategy to date, given that we are able to build on investments previously made, including SAP, our consumer data platform and our insights that have allowed us to segment and really dive into this personalization concept. Project Hyper is building on the back of that and will allow us to lean into really utilizing all of this wonderful data that we have in a more robust way to really speak to an individual, including demographic information, past purchase history, along with other data such as purchasing time, preferred methods of communication, et cetera, to really accelerate again that personalized connectivity with the consumer. We are not going to separate out specific line items in the CapEx budget. And again, this will be a long project that likely will be a multiyear initiative with -- but we do intend to have milestones throughout this year with -- and we should start to see some returns on that investment in the back half. So we are very, very excited about that. Turning to your -- part of your question on store refreshes. We remain committed to making sure that we have an excellent retail experience for our customers and we'll continue to refresh stores as they kind of become due. We do have an audit process throughout the organization where we audit our stores very regularly and then they're added to a schedule for refresh depending on what the audit results are. And so, as you noted, last year, we did refresh a number of stores. This year, we're slated to refresh another slew of stores. I would anticipate that, that would continue in the future, again, but it is on an as-needed basis. Luke Hannan: That's great. And as a very quick follow-up, you did talk about the Texas opportunity a little bit. When do you expect to be granted, if you have any visibility on it, when do you expect to be granted that final license and then begin the build-out potentially after that? Kimberly Rivers: Sure. So we were granted a provisional license in Texas, which we're incredibly excited about. And the team has done an amazing job to get us to this point. We did receive actually this week a list of diligence follow-ups, which our understanding is it's the questionnaire that's going out to all of the provisional license holders, which we're in the process of completing. They do -- there is another round of licenses, 3 licenses that will be issued, I believe, in early April. So we're not sure if the state will choose to move on final issuances on round 1 before or after that next round is issued. So what I will tell you is that, in true Trulieve fashion, we will be absolutely ready to go to market. Again, I always say that Texas is a state that you go bigger, you go home. So we are very, very much looking forward to having a -- that will be a material market for us once we are awarded that final license. Operator: Our next question comes from Aaron Grey of Alliance Global Partners. Aaron Grey: I'd like to piggyback off that last question from Luke a little bit and dive a bit more into Texas in terms of that opportunity that you just kind of alluded to, Kim. How best to think about the potential for Texas and the ramping there? For you, do you see Florida transitioning out of the nursery program in 2016 as a good analog? And then how important do you think it is to have that first-mover advantage and really kind of dig into that CapEx investment to ensure you have, not only the capacity, but also the retail to get that initial market share that you can essentially potentially hold on to similar to what you've seen Trulieve do in Florida? Kimberly Rivers: Yes. I mean, look, I think that Texas is a tremendous opportunity. It's a market that we have been focused on for quite some time back to the days where we first announced our hub strategy as we talked about how we thought about M&A and organic growth. So Texas, we believe, is a key market for us. Again, we have a provisional license now. So timing will be dependent, of course, on regulatory approvals, and we look forward to working with the regulators to hopefully expedite that process as much as possible. But to your point, look, we believe that in Texas, with the -- not only the program setup as well as the population, we believe that it will be meaningful. Some key points in Texas there are 11 regions, and you are required to have a retail presence in those 11 regions prior to then being able to expand and add additional distribution capacity beyond those initial stores, which we're certainly prepared to do. To your point, we absolutely understand the importance of scale in the supply chain, and we'll be looking to make investments there as well because, again, we think that Texas is probably one of the most attractive market opportunities that we've seen since Florida. So we absolutely, to your point, we will be leaning in. We'll be using all of our knowledge from Florida and applying it to Texas because we believe very strongly that Texans deserve access to high-quality and a robust medical marijuana program and high-quality products. Aaron Grey: Okay. Great. Appreciate that color. Second question for me. Just in the case of Florida adult-use not occurring and think about incremental growth opportunities, I just wanted to know in terms of your outlook for potential M&A, what you're seeing in the marketplace? Have you seen potential valuations come down, especially in the private markets and any appealing assets that you're seeing? Kimberly Rivers: Sure. So, of course, as we mentioned, we are continuing to monitor the Florida potential for ballot inclusion. Just a quick update on that, I'm sure we'll be asked. The Supreme Court is hearing a jurisdictional -- basically jurisdictional motions on March 3, and then we'll make a decision as to whether or not they will hear the case as it relates to those 90,000 ballots that certainly we believe should be included in the final count. Florida, of course, is and would be a humongous market for us as it relates to adult-use. That being said, to your point, we are very excited, as I mentioned, about Texas from an organic growth standpoint. We also have and mentioned some law changes coming out of Georgia. We are also, right, continuing to push in Pennsylvania as well as doing some -- looking to do some expansion of existing footprint in other markets that we already are in. As it relates to M&A, I would say that we remain and will be inquisitive. We certainly have and are still committed to our strategy as we look for markets that are attractive and make sense for us given our hubs that we've established across the country. You know that we don't talk about markets specifically. But I will say that it does appear to me with valuations where they're at and where the market is as well as our cash position that we are in a good spot to be inquisitive in the future. Operator: Our next question comes from Russell Stanley of Beacon Securities. Russell Stanley: Maybe if I could first on Georgia. Great to hear about the efforts to expand that market. I'm wondering if you can talk about the pace of expansion -- market expansion to date against your expectations and talk to, I guess, your thoughts on the odds of that legislation passing. Any comments on the level of opposition you're seeing there? Kimberly Rivers: Sure. So Georgia has been an interesting program given some hiccups as it relates to where the legislature and how the legislature initially set up the program related to distribution versus where kind of we actually are. And so just as a level set, when the Georgia program was initiated, it was anticipated that pharmacies were going to be able to participate alongside of classic dispensaries in dispensation of medical cannabis. And then if you'll recall, there was -- were letters that were issued to those pharmacies and so -- by the DEA, and that put that entire distribution network on pause. And so one of the challenges in Georgia has been, one, kind of friction in terms of patients actually being able to get medical cards and how that system was set up through the Department of Health and the local offices as well as form factor and availability of products that folks needed, matching conditions and then the third is distribution. And so this legislation would get at, I'll call it, kind of the first 2. The state has been making gains to ease friction, allowing medical cards to be actually mailed now as opposed to having to physically go and pick them up. And then the second with this legislation would be around the form factors and availability of medical marijuana for expanded conditions, which, of course, is always a positive step forward. We are -- and actually, our team was in Georgia yesterday, lobbying on the Hill. I do think there's relatively strong support for those changes. But it's similar to kind of early days that we've seen in other medical states where expansion and those changes are going to take a little bit of time. So I think it's relatively in line with our expectations with the exception of the pharmacy piece and the distribution. I think what will be interesting and what's a little bit of an unknown at this point is what, if anything, does rescheduling or will rescheduling do as it relates to the impact on that pharmacy model. And would that potentially open the door to allow for those pharmacies to then be able to participate in distribution, which, of course, would accelerate adoption in that state from a patient perspective. So I think likely more to come as we kind of navigate through the realities of how that program sits within a new landscape once rescheduling happens. Russell Stanley: Great color. And maybe if I could follow-up on Texas. Obviously, there's been a number of ways in which end markets that market opportunity has been expanded over the last couple of years. And -- but it's still -- there are still some restrictions but a massive state. So I'm wondering how big you think this market could be under the current regulatory regime given the size against some lingering restrictions. Kimberly Rivers: Yes. I mean, I think that Texas has, like I said, the opportunity to be a very large market. Specifically, as mentioned on the call, there are fairly low friction points as it relates to patients being able to access physicians and initially get set up in the program, which in a number of markets, that really is and serves as a fairly high barrier to entry. And so with the availability of telemedicine in Texas and with the recent changes to the program there, we think that there's a lot of growth on the medical -- in the medical program that is yet to come. Some of that is a little bit of a chicken and an egg, we think, which certainly is our experience in other markets, meaning, right, you have to give someone a reason to go through the exercise of getting their medical card, meaning they have to have access to products, access to a store and be able to get those products before they're going to go through the process of getting a card. So we think that -- and expect that, that program will experience some pretty significant growth in the coming years as it relates to patient count. And again, the population there would indicate that there's significant -- it's teed up to be a pretty significant market. Operator: Our next question comes from Bill Kirk of ROTH Capital Partners. Nicholas Anderson: This is Nick on for Bill. First one for me, just on the gross margin improvement. Competitors are calling out competition and pressure. Just wondering if you could unpack that sequential improvement a little more. Was it more mix and pricing base versus cultivation cost improvements or vice versa? Just any color there would be helpful. Kimberly Rivers: Yes. Thanks, Bill (sic) [ Nick ]. So on the margin, I mean, look, that's something that we continue to be very, very proud of. And I think reflects our absolute high focus and high level of discipline. And it's really on a number of things, right? To your point, we are and continue to be very focused on efficiencies and our scale certainly helps there as we continue to produce very high-quality products at a scaled expense, if you will. So continuing to lower expenses while improving quality is always the name of the game. That being said, also how we approach our go-to-market strategy with respect to very strategic and focused promotional activity that is, again, taking our data and what we know about our customers and serving up right product, right price at the right location. We have a number of tools that enable us to be able to do that, including, of course, I mentioned investments moving to SAP, investments made in customer segmentation, our dynamic and variable pricing capabilities. So it really is understanding where the customer is, being able to read trends quickly and being able to respond to those trends in a disciplined way so that we are able to, again, have the right product mix at the right price while maintaining margin and profitability. Nicholas Anderson: Great. I appreciate that color. Second for me, just on the loyalty program. It was up again significantly sequentially. What percent of that growth came from Florida versus other markets? And what have been the primary drivers of success and adoption there? Just your thoughts on what's driven that growth over the past year would be helpful. Kimberly Rivers: Yes. I mean, I think that, again, kudos to the team, we were very, very focused on rolling out a best-in-class loyalty program. We began the rollout in Florida and then have been moving that to additional markets and candidly have gotten outstanding adoption in all the markets that we're currently -- our loyalty program currently is rolled out into. I would say that I think that there's a few things. I think, one, the ease of the program, really making it very easy for folks to sign up for the program and then, again, be able to communicate to them the results of participation, meaning you spend and you get, which is very much in line with loyalty programs across the country for big brands that we all know and love, which it was basically modeled after. So I think ease of use, I think the rewards and the ability to communicate the value of those rewards was also a key driver and has been a key driver. And we're very excited based on the feedbacks that we've gotten from customers. And again, we have a very engaged customer base. So there is a lot of back and forth with our customers, and that goes right into how we develop these things. We're very excited to, as I mentioned in prepared remarks, to be updating that loyalty program in response to customer feedback and offering tiers that we're going to be rolling out here in the near-term. And that will allow us to even further personalize and to engage our VIP or our top-tier customers with more specific and exclusive offerings and really based on their spend and how they're interacting with us. So really excited to continue to iterate and further develop the loyalty program as we move throughout the year. Operator: And our next question comes from Frederico Gomes from ATB Cormark Capital Markets. Frederico Yokota Gomes: Congrats on the great quarter. Just the first question, you're guiding for, I guess, substantial free cash flow again this year, and that's already obviously accounting for an increase in CapEx. So how are you thinking about that excess cash and specifically as it relates to potential stock buybacks given the current valuation level? And the second part of this question is, how do you think about that cash balance relative to, I guess, the growing UTP that you have in your balance sheet? Kimberly Rivers: Yes. So we are continuing to focus on generating cash because we believe that cash is the ultimate -- provides the ultimate optionality in the business. We've been talking a lot in the Q&A about opportunities that we have ahead. Obviously, we're not at a final point yet related to Florida and ballot inclusion. We also talked about Texas and what an exciting opportunity Texas is and potential growth in Georgia, kind of unsure yet around Pennsylvania and not adult-use flip. In addition to organic -- there's organic growth opportunities, though, we also mentioned that we're going to remain and maybe even accelerate a little bit our M&A optionality as well. And so I think that for us, it's important to have the cash available so that when these opportunities present themselves and when catalysts come into focus, we have the ability to act with immediacy and with a strong eye on maintaining right and improving shareholder value. And then as it relates to cash and the UTP, what I would say is that, again, the UTP is a reflection of a totality of a number. Management certainly does not believe that the company will ever pay that amount. It's an accounting rule that we, of course, want to make sure that we follow and that we're in compliance at all times. Upon rescheduling, we believe that, that accrual will stop. And we absolutely are in and we'll continue to update as the results of prior years and negotiations, conversations with the IRS continue to resolution. So again, not at all concerned as it relates to cash position via that UTP number and definitely focused to have that resolved within as quickly as possible once rescheduling comes to fruition. Frederico Yokota Gomes: Appreciate that. And just the second question would just be on international cannabis market. I'm just curious if you're looking at that or interested in any way in doing something there. Kimberly Rivers: Yes. So, I mean, again, I think we are constantly evaluating the opportunity set. I think that for us, Texas, as an example, is a significantly more exciting opportunity for us right now than other markets outside of the U.S. I continue to believe that we have plenty to do here in our backyard. That being said, I'm very much a believer of never say never. So continue to evaluate all opportunities, and we'll make decisions as those markets come into focus. Operator: This concludes our question-and-answer session. I would like to turn the call back over to Christine Hersey for closing remarks. Christine Hersey: Thanks, everyone, for your time today. We look forward to sharing additional updates during our next earnings call. Thanks again, and have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Gerardo Lapati: Good morning, everyone, and thank you for joining Alsea's Fourth Quarter and Full Year 2025 Earnings Video Conference. Today, you will hear from Christian Gurría, our Chief Financial Officer; and Federico Rodríguez, our Chief Financial Officer. Christian will walk us through our operating performance and strategic progress, while Federico will provide a detailed review of our financial results and capital allocation. Before we begin, I would like to remind you that some of our comments today contain forward-looking statements based on our current expectations. Actual results may differ materially. Today's discussion should be considered alongside the disclaimers included in our earnings release and our most recent filings with the Bolsa Mexicana de Valores. The company undertakes no obligation to update these statements. Unless otherwise specified, all figures discussed today are presented on a pre-IFRS 16 basis. With that, I will now turn the call over to Christian for his opening remarks. Christian Gurría: Thank you, everyone, and good morning, and thank you very much for joining us today. I will begin with an overview of our performance for the fourth quarter and full year 2025, highlighting key operating trends across regions and brands as well as our progress in digital transformation, expansion and ESG initiatives. Federico will then walk you through the financial results in more detail. Before going into the quarterly figures, I would like to briefly step back and reflect on how our strategic priorities throughout 2025 are shaping our business today. Despite a challenging start of the year, we responded with targeted operational and portfolio initiatives that led to a gradual improvement in performance as the year progressed. Throughout 2025, we focused on strengthening traffic and innovation to keep our brands remaining relevant and top of mind for our consumers. At the same time, we adopted a more selective and disciplined approach to growth, directing capital towards formats and initiatives with consistently strong returns. This included strengthening our portfolio through the incorporation of brands such as Chipotle and Raising Canes into the Alsea family, fully aligned with our long-term objectives, the right brands in the right geographies and the right stores, prioritizing quality over quantity. In parallel, we simplify our portfolio through the divestment of noncore assets in South America and Europe. This is part of our core strategy going forward as we will continue with this simplification as we are aiming to have a healthier and more profitable portfolio. The aforementioned is enabling us to concentrate resources on markets and brands with a stronger growth potential, translating into meaningful improvements in efficiency and profitability. Finally, we sharpened our approach to capital allocation and cash generation, optimizing CapEx and reinforcing our financial structure. With that context, let me now turn to our fourth quarter performance. In the fourth quarter, total sales increased by 0.5% year-over-year. reaching MXN 21.7 billion or 12%, excluding foreign exchange effects. Same-store sales grew 3.3% during the quarter, reflecting improving trends across several markets. EBITDA increased 2.9% year-over-year to MXN 3.7 billion with a margin of 16.8%, representing a 40 basis point expansion versus last year. Same-store sales grew 3.3% during the quarter, reflecting improving trends across several markets. The results reflected disciplined execution, improving operating leverage and the benefits of portfolio optimization efforts. Turning on brand performance. At Starbucks Alsea, same-store sales increased 2.9% in the quarter. In Mexico, same-store sales grew 2.6% with prior quarters and reflecting a stable demand and consistent performance. In Europe, same-store sales declined 0.3%, primarily due to continued pressure in France, partially offset by solid performance in Spain. In South America, same-store sales increased 8.8%, driven by Argentina. Excluding Argentina, same-store sales grew 1.1%, supported by strength in Colombia and gradual recovery in Chile. Domino's Pizza Alsea delivered a 5.2% increase in same-store sales. In Mexico, same-store sales grew 6.3%, supported by innovation such as 'croissant' Pizza, driving value and innovation. Also, we launched and expanded delivery capabilities through a strategic aggregator in Mexico. In Spain, same-store sales increased 3.3%, reflecting effective promotional execution. And in Colombia, same-store sales rose 9.6%, demonstrating a strong and consistent performance through the year. At Burger King, same-store sales, excluding Argentina declined 3.9%. In Mexico, same-store sales decreased 4.8%, reflecting continued pressure on the brand despite gradual operational improvements during the year. The full-service restaurant segment delivered same-store sales growth of 3% in the quarter. In Mexico, same-store sales increased by 3.8% supported by value propositions such as Menu del Dia, Tres Para Mi in Chili's and Paradiso Italiano in Italiannis. In Spain, same-store sales grew 1.9% alongside the continued portfolio optimization, including the sale of TGI Fridays. In South America, same-store sales increased 2.8% alongside the sale of Chili's and P.F. Chang's restaurants in Chile. Our expansion strategy continues to be guided by a clear focus on quality, returns and capital efficiency. During the fourth quarter, we opened 55 new stores, bringing total openings in 2025 to 169 units, 127 of them being corporate and 42 franchises, below our initial expectations. This reflects a deliberate shift towards fewer higher-quality investments, prioritizing locations and formats with a stronger return profiles. Remodeling and the renovation of our existing portfolio remain as a key priority across regions as store refreshes continue to deliver attractive returns through improved customer experience, higher productivity and faster payback periods. Overall, our expansion approach in 2025 reflects disciplined capital allocation and a clear focus on long-term value creation. Our digital platforms remain a key growth driver for Alsea. By the end of the quarter, loyalty sales increased 13.4% to MXN 8.2 billion, representing 30.6% of total sales and 36.6 million orders. We surpassed 8.2 million loyalty active customers and users across our brands, confirming the strength of our digital engagement. In addition, during the quarter, Domino's implemented full service through an agreement with a known aggregator. This initiative significantly expanded delivery coverage by more than doubling the number of available drivers per store, improving service levels during peak hours without incremental costs. During the quarter, we continue advancing on our ESG agenda as a core pillar of our long-term strategy, fully aligned with capital allocation and risk management. In Europe, we completed our first round of sustainable financing for EUR 273 million, linked to targets for emission reductions, strengthening supplier assessment base on ESG criteria and improving food waste management. This progress enabled a second ESG-linked financing tranche up to MXN 550 million through 2029. Additionally, in Mexico, we further aligned our strategy by securing a sustainability-linked loan of MXN 10.5 billion tied to KPIs focused on emissions intensity and waste reduction. In Mexico, during the months of October and November, [Indiscernible] movement raised more than MXN 50 million as part of its annual fundraising initiative. These efforts were reflected in our continued inclusion in the Dow Jones Sustainability Index in 2025, scoring 18 percentage points above the global sector average and ranking within the top 10% of the industry. For Alsea, ESG is embedded in how we allocate capital, manage risk and create long-term value. With that, I will now turn the call to Federico to review our financial performance. Thank you. Federico Rodríguez Rovira: Thank you, Christian. Good morning, everyone. In the fourth quarter, sales increased 0.5% year-over-year, supported by sustained consumer preference for our brands and effective commercial strategies. Excluding foreign exchange effects, sales increased 12%. In Mexico, the sales increased 7.9% to MXN 12.5 billion. In Europe, sales declined 1.2% in peso terms, while increasing 5% in euros and in South America, the sales declined largely due to currency effects. The EBITDA increased 2.9% year-over-year with a 40 basis points margin expansion, driven by stable food cost, disciplined execution and improved labor efficiencies. In Mexico, the adjusted EBITDA increased 17.1% year-over-year, primarily due to an increase in same-store sales of 3.1%, following a strong recovery in November and December, while the portfolio optimization and improved labor efficiencies helped offset higher wage cost. In Europe, adjusted EBITDA was 18.7% higher year-over-year, driven by a 1.7% increase in same-store sales, lower food cost and disciplined labor cost management. In South America, the adjusted EBITDA declined by 22.9%, largely due to the depreciation of the Argentine peso relative to the Mexican peso. This impact was partially mitigated by robust consumer demand in Colombia and stable market conditions in Chile, although Argentina continued to experience a more challenging operating environment. The net income for the quarter increased 32% year-over-year to MXN 812 million, reflecting a continued though less pronounced positive noncash foreign exchange effect related to U.S. dollar-denominated debt. As we have mentioned previous quarters, this impact is nonrecurring. Following the refinancing of the obligations, we have now achieved a natural hedge, and this revaluation will no longer affect the P&L going forward. CapEx for the full year totaled MXN 5.1 billion. Of this amount, 75% was allocated to store development, including the opening of 127 new corporate units, remodelings and equipment replacement, while 25% was directed to strategic projects, including the Guadalajara distribution center, technology upgrades and process improvements. As of December 31, 2025, the pre-IFRS 16 gross debt increased by MXN 0.9 billion year-over-year, reaching MXN 34 billion. The company's net debt, not counting the impact of IFRS 16 was MXN 28.3 billion, which is MXN 1.7 billion more than it was at the same time last year. The bank loans are allocated towards selling the minority stake in the European operations as well as addressing short-term debt requirements for working capital and capital expenditure needs. Consolidated net debt reached MXN 45.2 billion, including lease liabilities. At the end of the quarter, 58% of the debt was long term with 77% denominated in Mexican pesos and 22% in euros. We remain focused on maintaining a healthy capital structure supported by prudent financial management. At the end of the quarter, the cash position stood at MXN 5.7 billion. Turning to financial ratios. The total debt to post-IFRS 16 EBITDA ratio closed the quarter at 2.8x and the net debt-to-EBITDA ratio stood at 2.5x. Our full year results were broadly in line with the guidance we provided and subsequently updated during 2025. Same-store sales revenue growth, EBITDA and leverage all finished within expected ranges. We will provide more detail regarding the guidance for 2026 during Alsea Day on March 18 in New York City. This will be a great opportunity to invite everyone to our event and connect with you. With that, we will now open the call for questions. Please, operator. Operator: [Operator Instructions] The first question is from Mr. Thiago Bortoluci from Goldman Sachs. Thiago Bortoluci: I have 2 questions somehow related to free cash flow, right? When I try to see what you delivered in 2025 versus what is implied in your managerial guidance, right, what I see was that your EBITDA grew at the high end of your low single-digit expectations. CapEx came below the $6 billion you were initially expecting, but your pre-IFRS leverage was a touch ahead of the 2.8x that you were guiding, right, which makes me think that somehow your free cash flow generation was a little bit softer than initially expected. If this is true, I just like to understand where the mess is coming from? And what is the plan to attack this going forward? I guess the refinancing is part of the story, but also want to hear on the operating level, right? And then the second part of the question that is related to CapEx. I appreciate the focus, and I'm pretty sure everyone in this call appreciate your focus on portfolio and a more rational growth going forward. It would be great if you could share how you're seeing the incremental ROIC of the new cohort of stores under this new balance between growth and profitability on the capital allocation. Federico Rodríguez Rovira: Well, I will start with the first question regarding the cash burn. Yes, it's correct what you just said, Thiago. The main driver for the cash burn was worse working capital than expected at the beginning of 2025, mainly driven by a reduction in the expected EBITDA. As you know, we had to change the initial guidance we announced at March. But that was offset with a diminished CapEx. In 2026, the story will be completely different. You will have the expectations in the Alsea Day by mid-March. But the management is totally focused on the free cash flow generation with some initiatives you have just mentioned one, the refinancing, you know what is going to be the annual savings regarding this in the line of $25 million and additionally, the operating leverage from same-store sales. As you know, we will have a low to mid-single digit regarding same-store sales guidance for each one of the brands and will be to the consolidated figures and a more rationalized CapEx. This is one of the key drivers, Thiago. Obviously, we knew that we were failing at free cash flow generation. We have heard around the pushback you have launched to the management, to the administration during the last years. So we are totally focused there. So we'll rationalize the CapEx with less openings. Obviously, we had one one-off because of the distribution center of Guadalajara, but we do not have any kind of pressure to open more stores. As I have said a lot of times in the past, 95% of Alsea is in the same-store sales in the comparable stores. So that is the place where we have to put all the efforts because it is more relevant to have 1% increase in the traffic in the different brands because that is the key part where you have all the operating leverage. And in some of the cases, maybe have a reduction of around 30 new stores from the initial guidance, that does not make any kind of hurt. And it is not only for this year, but maybe for the future. We do not want to conquer the world regarding openings. We want to have a more rationalized CapEx for the future. And this is aligned with what you have just asked regarding free cash flow generation. I don't know, Christian, if you want to deep dive regarding the openings and the closure that we had in 2025? Christian Gurría: Yes. As Federico mentioned and we have mentioned in previous calls, our strategy is more about quality than quantity. As Federico mentioned, really our focus right now is on capitalizing on our existing assets. We have almost 5,000 stores in our portfolio between franchisee and company-owned stores. And we have a clear strategy on how we can improve the profitability of those stores. There are 3 levers that we are working on. The first is the remodeling and investing on our existing portfolio, which has the best returns and the customer responds in a very positive way to that and keeps our brands at the right level to deliver the right experience. And the second one is to make sure we have the best operators in the market. So we are -- we have always focused in Alsea in having the best operators, but we are having now a very intentional drive into elevating our operators in the stores. And the third level is, I would say, innovation. Innovation is clearly driving our -- the traffic to our stores. We have a very good example is what we are doing with 'croissant' Pizza, in Domino's Pizza in Mexico. This was originally born in Spain with extraordinary results. We brought it to Mexico and more than double the expectations that we had, and that's why you see a very strong quarter in 2025, particularly with Domino's. So these are the levers that we are moving. Of course, we will continue with our commitment to open the right stores. But it's important to mention the right stores in the right geographies and with the right brands which, as I always say, sometimes we have to close stores to have a healthier portfolio as we have done. Nevertheless, most of the stores that we closed, either in this number, you can see divestments as we did with TGI Friday's and Chili's and P.F. Chang's in Chile. But likewise, most of the stores that we closed were -- had an aging of average 15 years. So the market has changed, the neighborhoods, the trade areas have changed. So it's part of this healthier portfolio optimization. Operator: Our next question is from Mr. Antonio Hernandez from Actinver. Antonio Hernandez: Congrats on your results. Just a quick one regarding South America. I mean you already mentioned Argentina is struggling a little bit there and different countries overall. Just wanted to get a sense on how you're seeing performance so far this year and expectations for the year. Christian Gurría: Well, we are seeing very similar trends to November and December. with a positive trend on same-store sales. And one of the best news is the tailwinds we are having in terms of our dollarized raw materials. We have seen FX is helping us with the dollarized raw materials. And we have also positive news in terms of the price of beef and the price of chicken, which is having a positive trend to what we were seeing in the previous year. And also another positive effect is that we expect a reduction of coffee prices in the second half of 2026. So on wine side, we are seeing a very similar trend to the last months of the year, which we see a shift on what we were seeing in previous months. And on the other hand, different strategies around raw materials on one side, the FX and on the other side, some of the different synergies we have worked on the previous months are paying off now. So in these terms, we should see better margins in the following -- across the year and a steady recovery on same-store sales. Federico Rodríguez Rovira: And I would say, Antonio, if I may add a little bit more color on -- particularly, I would say on the 3 big markets of South America. We've been doing a great job in Colombia. It's been kind of consistent. That's something that continues, I would say, towards the beginning of the year. The same, I would say, it's happening with Argentina and Chile. If I would say, '25 was a tough year for those 2 markets for 2 particular, let's say, reasons and different reasons, both. I think we are seeing also at the end of last year, a bit of a recovery. And that is, I would say, also transitioning towards the beginning of the year. So I would say we're more kind of cautiously optimistic. And I would say, together to what Christian mentioned about kind of some of the tailwinds should be a better year for this market. Operator: Our next question is from Ms. Renata Cabral from Citi. Renata Fonseca Cabral Sturani: My first one is regarding Starbucks in Mexico. So what is the current approach for same-store sales improvement during the year? We are seeing a very good improvement over the operations of in Mexico, it seems more towards Dominos so far and it's understandable considering the economic situation. But it seems there's an opportunity also for improvement in the. So if you can shed some light in the strategies for the year ahead, it would be really helpful. The second one is a follow-up regarding margins and a more long-term perspective. Of course, you have mentioned about the rationalization of the portfolio. And my question is related also if you see other important levers that can improve margins in the regions for instance, supply chain or optimization of, let's say, it would be really helpful to know a little bit more about that. Christian Gurría: Thank you, Renata. Regarding Starbucks in Mexico, we had -- in 2025, we struggle at the beginning of the year as with many other brands. But starting the second half of the year, we were able to read and what was going on with the market and the different trends from -- and what the customer was looking forward. So we adjusted our strategies to -- first of all, we've clearly seen that Starbucks in Mexico is a loved brand. And clearly, innovation is driving a lot of traffic to our stores, both innovation in terms of product, but also innovation in terms of market. of merchandising. During Q4, we launched -- we brought to Mexico the Barista, the Crystal Barista, which was, as you may be aware, extraordinary success in Asia, then in the U.S. And then it came to Mexico and it was really driving a lot of transactions. So we also -- in this case, we also shifted the way we manage our promotional approach to the brand making sure we could elevate the customer -- the experience of the customer. So to give you a more concrete answer, we are focusing on renewing our stores in a very intentional way. Just to give you some data in 2026 in Mexico, we're going to have more store renovations than openings in the case of Starbucks. So we really understand what the customer is looking forward. And the second part is innovation in terms of product and understanding that we are a love brand in Mexico and people are looking forward. We just recently launched in '26 a bear that hugs the cup. And it's really -- they flew out of the shelves. So we have more and more surprises that I cannot share coming particularly for the World Cup. And also in terms of experience, we are introducing a strategy around elevating the experience in the stores by implementing wooden trays and stainless steel cutlery for here [serve ware]. Again, creating the right environment and the right and the best experience for the customer. And in terms of operational impact, as I mentioned before, we are very much focused on our -- on having the best operators and making sure they can impact positively their business during -- as we move forward. But this is more or less regarding the strategy that we are focusing. Federico Rodríguez Rovira: And regarding the second question around margins for the future, is too soon. Obviously, we are seeing positive impact. But I would say that we're expecting a positive trend regarding EBITDA margin expansion for 2026 as long as we are facing, as Christian has just mentioned, and you know it, some macro tailwinds like a stronger peso. Remember that each peso appreciation or devaluation is around 30 basis points in the total EBITDA margin. And additionally, this is supporting the raw materials, the gross margin. We can move the mix in a positive way in the different business units. But remember, we want to attract more traffic to our stores. We are not in the rush to increase on an artificial way the margin. We want to have a strong customer base into the same-store sales. And obviously, we have a lot of levers. You were asking around this. Obviously, the stronger peso is some macro reason, but we have some internal indulgent reasons such as the optimization of the portfolio. We have not finished. You know that we are analyzing some of the units, mainly in Americas to see what we are doing with them. We cannot disclose any more facts around this. I know there are a lot of news into the press, but that's all that we can say. We need to respect and being really disciplined around that we have a bunch of collaborators into the different business units that we are analyzing. And we are doing this in an everyday basis because obviously, while we are selling some of the business units, such as the 2 casual dining brands that we sold in Chile in the third quarter, we are looking for new Tier 1 brands such as Raising Canes and Chipotle. That would be one of the first lever. The second one, we have a bunch of opportunities regarding productivity, I would say, in America, not only in Mexico, but in South America, too, especially because not this year, but in the future, we are facing a journey reduction of 8 towers in 4 years in Mexico. So we need to move forward and be in advance of the rest of the competitors. And I think that with 5,000 stores all around the world with a stronger environment such as the European one, we have a lot of ideas to increase productivity and have expansion margins into the total EBITDA while we offset these impacts. And additionally, we have ideas regarding simplifying the support center in Europe, in Mexico, in Colombia. I think that we need to consolidate a lot of things that we have not executed in the last 10 years, and we'll be doing that during 2026. But as I always say, it is more relevant to have a strong same-store sales because in the bottom, you can have a lot of savings. It's a bunch of money. But in the long term, we are more worried around comparable stores, around new openings instead of only executing saving costs in the bottom. Renata Fonseca Cabral Sturani: And if I may, a follow-up maybe for Christian about potential impacts from the situation we are seeing happening in Jalisco since Sunday. It would be great to have some color. Christian Gurría: Of course. Renata, as a precautionary measure, we had to close some of our stores in the region during Monday -- Sunday and Monday, obviously, prioritizing the safety and security of our partners, our collaborators, our team members and also our customers. But by Tuesday morning, 100% of our stores were reopened. We are back to business as usual. Obviously, we are seeing in particular cities kind of a steady return of consumption, people being confident to get out there and going back to their lives. And delivery was clearly one of the channels highly and positively impacted by this as people were staying home. But we are clearly seeing across the week, people going back to their routines and our business recovering in a steady way. It's also important to mention that we have -- none of our stores were damaged -- none of our stores in the region were damaged or targeted and our supply chain was never disrupted. We have some blockades, but our supply chain was fully operational and never disrupted. Operator: Our next question is from Mr. Ulises Argote from Santander. Ulises Argote Bolio: So the question that I had was kind of a follow-up on those earlier comments that you were making on the quality over quantity approach to the portfolio. You mentioned there in the remarks, and I think this has been kind of an ongoing discussion of focusing on store remodelings across regions as a part of the strategy. So I was wondering maybe if you could provide there some color on how this will be broken down in 2026 across the regions? Maybe if we can get some color on format. But I think more importantly, if you could comment on the sales lift and the improvements you are seeing from the remodel locations. And then I have another one, but I'll do it afterwards. Christian Gurría: Thank you for your question. Let me start by answering we have -- in the case of the foodservice restaurant segment or casual dining or in the case of Starbucks, what we've seen is that you have -- when we remodel the stores, our same-store sales in the case of Starbucks grow from 6% to 13%. This is where we are -- what we've seen and experienced in a very consistent way. And in the case of the casual dining segment, clearly because the customer spends more time in our stores, in our restaurants, the uplift we've seen in same-store sales can go from 10% even we have cases where we are around 25% to 30% increase in same-store sales. This is driven, first of all, not only because of the look and feel of the store improves, but in many cases, as we know how the store and the customer uses the store, these renovations normally are adapted to the reality of how our customers use the store. So -- and in any other cases, we add additional seating or we add a terrace or we do some optimization in terms of the type of the mix of furniture we have in the stores. So the reality is that that's why we are prioritizing these remodelings. Also, it's important that when we choose to remodel a store, there are different reasons, either because the store has the look and feel of the store and the conditions of the store are not up to the expectations, our expectations and the guest expectations or different strategies around market penetration, in some case, the competitive landscape. So there are different reasons why we go and decide which stores to remodel. And to your first part of the question on if we have -- what is the breakdown? In the case -- the information I can share with you is, for example, in casual dining is 3:1, 1 opening, 3 remodelings Starbucks is around 1.4. And in Domino's Pizza, the impact is less important when you remodel a store due to the way the business model works. But when the stores that we have an important dine-in traffic, those are the stores where we put the resources, just to give you some examples. Federico Rodríguez Rovira: Yes. And additionally, to Christian's answer, when we are performing a remodeling in the full service or the Starbucks stores. Usually, we tend to see an incremental traffic of around 5% to 10%. Obviously, this depends in some of the cases of casual dining, you have to increase the terrace, for example, to have more capacity. But each time you are changing the look and feel of the store, you are increasing the traffic, and that is completely linked to the same-store sales increase that we are highlighting as a target, not only for this year, but in the long term. And regarding the... Christian Gurría: If I may also one important component is how our team members feel. Honestly, every time we remodel the store, they are always super proud. They are happy to see the store being in the best shape, and I'm proud to be part of that store. Federico Rodríguez Rovira: And for the long-term CapEx allocation regarding the 3 main pillars that we have into the portfolio, I would say that 60% is completely linked to Starbucks Coffee, 20% to Domino's Pizza and 20% to the full-service restaurants units, Ulises. Ulises Argote Bolio: Perfect. Very clear. So if I understood correctly, these initiatives are a bit more focused on Mexico, but also kind of cross region more selective. Is that a correct assumption to make? Christian Gurría: It's across all our geographies, Ulises. Same is happening and going on in Spain, in South America, Portugal, France, et cetera. Everywhere. Ulises Argote Bolio: Okay. Super clear. And the other question that I had was maybe if we could get some thoughts there or some -- or you share some insights of how you're positioning, let's say, to capitalize from the World Cup? Maybe any type of initiatives that you're taking? Any color that we could get there, that would be very much appreciated. Federico Rodríguez Rovira: For sure. We have no doubt that the 3 brands that will be most benefited by the World Cup incremental traffic are Domino's Pizza, Starbucks and Chili's. As you know, Chili's has been the preferred concept and brand for people to go and watch sports, all types of sports for many, many years. So in the case of Chili's, we are doing very important investments in technology in terms of screens, sound and also a very, very fun campaign. As you know, there will be 3 stadiums in Mexico, Monterrey, Guadalajara and Mexico City. And we are having a campaign Chili's is your -- is the fourth stadium. So we are already out there with the campaign. We have -- we have a strong partnership with some strategic partners as Heineken, and we are doing a lot of things together with them. So we have important expectations of what -- how Chili's is going to be benefited by this. As you know, only you can fit all 85,000 to 100,000 people in the stadium, the rest, well, Chili's for sure is an extraordinary option to watch the games and with a great happening. In the case of Starbucks, obviously, the traffic, the incremental traffic that we're going to have in different airports in hotels, and we have a very good market share of stores and penetration in Mexico and Guadalajara and Monterrey and some adjacent cities and airports that are going to be activated for the World Cup, so for sure. And we have fun initiatives coming also for the customers to drive this traffic. And obviously, Domino's Pizza watching games at home. It's going to be super powerful and Domino's Pizza and the games and the World Cup have always been linked and be together as football. So those for sure are going to be the 3 brands that are most benefit. We have a lot of surprises. We are already planning additional initiatives that we are reviewing as we speak. So for sure, we are going to be able to capitalize this very special event. Christian Gurría: But remember, Ulises, this is a one-off. Operator: Our next question is from Mr. Froy Mendez from JPMorgan. Fernando Froylan Mendez Solther: Can you hear me well? Christian Gurría: Yes, we can. Fernando Froylan Mendez Solther: Federico, if we were to assume that the FX didn't move from current levels, would your comments regarding the better margins into 2026 would still hold? And in that sense, what is your expectation? I know you'll have your guidance in the Alsea Day, but how much of the margin expansion that you're seeing depends on having better pricing or, let's say, less promotional activity in the key brands? And I will have a second question, if I may. Federico Rodríguez Rovira: Sorry for being so repetitive. But obviously, this is a tailwind. Each peso should be around 30 basis points. Remember, that maybe that implies that around 60 basis points during the first quarter year-over-year. In the remaining months, the weight and the comparison is not that much. But as I said before, obviously, we have closed January, I have the figures. They are positive. We are expanding margins. But I want to be cautious because, obviously, the events from Guadalajara, even while we only shut down 300 stores during 1 day, obviously, I'm not having the total performance regarding traffic in those stores. So as all the years, we have some different events, positive negatives, and I want to be really cautious at this point, with January completed, we have expanded the margin. But I don't know what is happening in the rest of the year. Obviously, we have positive events such as the World Cup. We'll tell you the expansion of margins that we're thinking. But again, we want to increase the traffic in each one of the stores, each one of the brands. That is the main objective. I prefer to sacrifice some of the margin if I'm increasing -- I'm going to make stories, but 3 points in same-store sales in Chili's, Domino's Pizza, that is more money, and that is a more strong customer base for the future. Sorry for the ambiguous answer, Froy, but I don't want to take in advance with only 1 month closed at this point. Fernando Froylan Mendez Solther: Excellent. And my second question, maybe more for Christian. We hear about this CapEx rationalization, the effort to diverse some of the probably nonperforming brands. But at the same time, we see new brands coming into the portfolio, Cane's, Chipotle with obviously not needle-moving CapEx, but I'm sure it will take time away from management. I'm not sure also how much synergies there are in their supply chain and their sourcing of raw materials with the rest of the brands. So how should we think about when we see a lot of the long-term CapEx that you mentioned focused on Starbucks, Domino's and full service with also these like small opportunities that you still are trying to tap? And isn't that a little bit distracted at some point for management? Christian Gurría: Thank you, Froy. Several answers to different views, different points. First of all, fortunately, as you know, in Alsea, 36 years around, we are able to really develop our team members and to have a lot of internal talent that allows us to really being able to bring these brands and do not distract the rest of the organization. As you know, we -- the way we are organized now is via -- before we have these country managers, which were managing the different brands that we had in each region. And then in the past months, we have moved into a brand manager that manages -- we have a brand manager for Domino's Pizza or a Managing Director, a Managing Director for Starbucks Alsea for Domino's Pizza Alsea for BK Alsea, a Managing Director for Food Service in Mexico and a Managing Director for Food Service in Europe. That allows us to really focus first of all, make sure all best practices, learnings, one single direction and strategy to keep the brand directors or managing directors focusing on their own brands. And likewise, we have created a new brand division, let's call it like that, where we have a team solely and fully and only dedicated to these 2 new brands. So there is really no distraction of the management. We were able to have a very strong Managing Director, which was part of our C-suite team for many, many years, Pablo de Brito, which now he is running -- he was the Commercial Director for Alsea and now he's the Head of with a very clear and independent structure for both brands. In terms of synergies, obviously, there are synergies. We clearly have synergies. We have been working in the past 6 months to make sure we have -- we are ready to -- around all the product sourcing, protein produce. There are things that are proprietary to the brands that we will import as we do with the rest of our brands coming from the U.S. But the reality is that there are a lot of synergies. It's -- our Alsea muscle allows us to do this kind of plug-and-play approach when we bring these new brands. So clearly, there are important synergies in these terms. So in the case of supply chain and management, really, there is no -- actually, it adds on to what we already have. Then another point you made is about the CapEx. The reality is that the way we -- the obligations we have with both brands intensive non-CapEx-intensive approach. We are going to open 2 new -- 2 Raising Cane's stores this year at the end of the fourth quarter and 3 to 4 Chipotle stores also during 2020 -- in the second half of 2026. So -- and once we see how we do, which we are very, very optimistic and positive of how these brands are going to add value and being accretive to the Alsea portfolio, we will sit down and define -- we know more or less what's the white space or the market holding capacity for both brands. We're going to share a little bit more about that during our Alsea Day. But the reality is that we are very optimistic that by first divesting and at the same time, bringing the right brands and the brands of the future in the portfolio, we have a very strong portfolio of brands in the future. Operator: Our next question is from Mr. Bob Ford from Bank of America. Robert Ford: I'm inspired by your Raising Cane's cups, so I'll bite. Can you guys discuss the magnitude of the opportunity you see for the brand in Mexico? And how do you think about replicating the authenticity of the celebrity and influencer engagement that Cane's enjoys in the U.S.? And when you think about the unit economics, how would you compare that with your best practice or properties in Mexico? Christian Gurría: As you can see, we are excited to bringing Raising Cane's into the family. In Mexico, we see a huge opportunity in Mexico for Raising Cane's. And let me tell you why. First of all, chicken is the #1 protein consumed and the fastest-growing protein in Mexico. This is clearly a fact. The second one is for decades, there has been only one player in the chicken market in Mexico in the organized segment for decades. So the white space and what we are seeing is huge. It's super important. The other -- the roasted chicken industry is hold by the moms and pops. And then you have this organized chain that has been there for decades. So the reality is that we see a lot of white space. And also Raising Cane's is not only an amazing and Tier 1 brand, it also aligns to our full Alsea strategy. So on that -- and we will give you more light in terms of the market holding capacity that we see and our development plan during the Alsea Day in March 18. The second question you answered, which I love this question because I truly believe that the way Raising Cane's communicates and resonates between the community for us, clearly, community is going to be a key success factor for the success of the brand and bringing this you know exactly what I'm talking about when I mentioned local teams, but at the same time, important celebrities, but at the same time, the college basketball team or the community schools team. We are already working with Raising Cane's to bring this same effect to Mexico. We are planning to have even the same agency. So the reality is that we are working very close together holding hands. Of course, we are going to take advantage of these assets in terms of influencers, celebrities that they have, but also the local influencers, the local community, the local celebrities are going to play a very important role for us to be successful. So I believe I have answered your 2 questions. Robert Ford: And the last one was about unit economics. Federico Rodríguez Rovira: Regarding the economics, I can take that question, Bob. Obviously, we cannot disclose the terms of the agreement we have signed with Raising Cane's. But the EBITDA margins at a 4-wall level are pretty similar with Starbucks or Domino's Pizza and the same for the royalty fee and opening fee that we will be paying. It is relevant to consider that even while we are really excited about the opening of Raising Cane's and Chipotle for 2026, we will be opening, as we have commented in the past, only 5 stores. We do not want to have a terrific contribution. We need to open the first store, and let's see what is happening if we are achieving the EBITDA margins, the profitability that we model in the months before. Robert Ford: Great. And then just one other question, and that is France. I mean it's -- what are the next steps for you in France? And do you see any opportunities to either reduce some of the expenses or drive revenue? Christian Gurría: Of course. Well, France, we have not seen the expected recovery that we had. There has been some recovery. We are at 85% of our sales, pre-boycott sales in October 2023. There was additional pressure, a slight pressure in the summer. So our objective remains to fully restore the transactions that we had pre-boycott. We have a very strong strategy around how to turn this around in terms of resources, in terms of store renovations, additional things that are part of this plan that we are working on. To your point around efficiencies, yes, we have done already the restructuring that we needed to do in terms of management, in terms of synergies with our operations in Europe. So we will see, for sure, better margins and better EBITDA as we move through the year. But our priority and our focus is to recover this 15% of traffic that we have not recovered yet. So we have a clear strong focus on this, and it's one of our priorities for 2026. Operator: Our next question is from Mr. Pedro Perrone from UPS Unknown Analyst: We have a quick question from our side based on same-store sales trends in the first quarter, especially for Mexico and for Europe. If you could give us some color about these trends and especially connecting to top line, that would be very helpful. Federico Rodríguez Rovira: I would say, to be clear, Mexico, Europe and South America, the trend is pretty similar to the one we have in the months of December and November. So no news, good news. As I said before, it is in the target that we have set for 2026 from low to mid-single digit depending on the maturity of the brand and the region. So that's the answer, Pedro. Operator: Our next question is from Mr. Ben Theurer from Barclays. Rahi Parikh: This is Rahi on for Ben. Just the first one, I know Bob mentioned a bit on -- with the EU. But is there any other challenges we should be aware of for the EU that would impede recovery? And then another one I thought would be interesting is to look at GLP-1. Have you seen any impact on consumption from GLP-1 in Europe? And when do you think you would see some impact in Mexico, if any? And have you have any formulation changes in the EU in regards to GLP-1? That's it for us. Christian Gurría: Let me get your second question first, we have not -- really, we have not seen any particular effect on GLP-1. Nevertheless, as you have seen in previous months, protein is becoming a very important element in the market. So in the case of Starbucks, we are fully in the game with different protein being an important priority in terms of beverage and our food program is moving towards that. And so what I would answer to that, we are observing. We are observing it. We are acting around that. We are trying to be ahead of the curve. But we don't see -- it's too early. I would say it's too early. But so far, we have not seen anything relevant. Obviously, the U.S. is the one kind of driving this trend. And we are watching, we are talking with our franchisors, what are they seeing -- but the reality is that we were already ahead of the curve with protein drinks in Starbucks and our food program is moving in a way towards that, not fully, but it's part of the strategy. So more or less that. And the rest of the brands, really not really. We are watching, but -- and that's it. We are observing what's going on. Rahi Parikh: I just want to follow up for that answer. It was for the EU as well, right? So no impact as well. Christian Gurría: Exactly. Neither in the European Union or in Mexico or Latin America, we are seeing these types of effects. What we -- I can tell you to add a little bit of color to that is that it's more now protein, it's more like trendy and innovation more than linked to GLP-1 or any of its effects, I would say, positive or negative. Federico Rodríguez Rovira: Yes. I'm complementing the answer. France is less than 2% of the total revenues contribution for Alsea. In Europe, we are present in Iberia, Spain and Portugal. I would say that is the most relevant contribution for Europe. The trend is positive. We are expanding margin, increasing the same-store sales coming from traffic in the main brands such as Domino's, Starbucks and the full-service formats that we hold in there. And even while in France, we're still at around 85% of the traffic that we had in 2023 is less relevant, but we still see the opportunity in there to open more stores. We will be struggling during 2026 to see if in 2027, we can return to the path of growth. Operator: That was the last question. I will now hand over to Mr. Christian Gurría for final comments. Christian Gurría: First of all, thank you all very much for your questions and for your interest in Alsea. And really thank you very much. 2025 reinforced the resilience of our business and the strength of our portfolio. We entered 2026 with a clear focus, a stronger financial position and a disciplined approach to profitable growth. We look forward to continue the dialogue with you in the coming months. But most of all, we're really looking forward to see you all in New York. We are preparing a very -- the team is doing an amazing job to prepare a very good event there, and we are really looking forward to see you there. And thank you again. Operator: Alsea would like to thank you for participating in today's video conference. You may now disconnect.