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Operator: Good morning, and good evening. First of all, thank you all for joining this conference. And now we will begin the conference of the fiscal year 2025 fourth quarter earnings resulted by KEPCO. This conference will start with a presentation followed by a divisional Q&A session. [Operator Instructions] Now we shall commence the presentation on the fiscal year 2025 fourth quarter earnings resulted by KEPCO. Si-young Yang: [Interpreted] Good afternoon. This is Siyung Yang, Head of Finance Department of KEPCO. I'd like to thank you all for participating in today's conference call for the business results of the fourth quarter of 2025 despite your busy schedule. Today's call will be conducted in both Korean and English. We will begin with a brief presentation of the earnings results, which will be followed by a Q&A session. Please note that the financial information to be disclosed today is preliminary consolidated IFRS figures and all comparison is on a year-over-year basis unless stated otherwise. Also, business plans, targets, financial estimates and other forward-looking statements mentioned today are based on our current targets and forecasts. Please be noted that such statements may involve investment risks and uncertainties. Now we will begin with an overview of the earnings results for the fourth quarter of 2025 in Korean, which will be then consecutively translated into English. [Interpreted] I will first go over the operating items. The consolidated operating income in 2025 stood at KRW 13,524.8 billion. Revenue increased by 4.3% to KRW 97,434.5 billion. Power sales increased by 4.6% to KRW [indiscernible] billion. Overseas business and other revenue decreased by 1.8% to KRW 4,429.9 billion. Cost of goods sold and SG&A decreased by 1.3% to KRW 83,909.7 billion. Fuel costs decreased by 13.8% to KRW 19,036.4 billion and purchase power costs decreased by 1.8% to KRW 34,052.7 billion. Depreciation expense increased by 2.3% to KRW 11,667.8 billion. Next, I will go over the nonoperating items. Interest expense decreased by KRW 325.6 billion Y-o-Y to KRW 4,339.5 billion. As a result of the foregoing, the 2025 consolidated annual operating income stood at KRW 13,524.8 billion, and net income was KRW 8,007.2 billion. Taeseop Eom: [Interpreted] Good afternoon. I am Taeseop Eom, Head of IR team. Now I will go over the matters of interest. First, I will talk about the performance of power sales and its outlook for the remainder of the year. Annual power sales volume due to economic downturn and as a result of that, given the industrial demand has decreased. The total sales volume was 549.4 terawatt hour, which is a 0.1% decrease Y-o-Y. In 2026, the economic growth rate and number of operating days increase should lead to a slight increase in the total sales volume. [Interpreted] Next, I will go over the fuel price by fuel source and S&P trends. In 2025, if you look at the annual trend of the fuel prices for bituminous coal Australia, the price was around $105.7 per ton. For LNG, JKM was KRW 980,000 per ton and the S&P was around KRW 112.7 per kilowatt hour. [Interpreted] Next, I will go over the [indiscernible] company. If you look at the annual 2025 generation mix, the capacity factor of nuclear power increased and thus, its contribution to the mix increased as well. For coal, the capacity factor increased and thus, the contribution in the generation mix increased. For LNG, the installed capacity decreased. And due to the increase of baseload power generation, the contribution to the mix decreased. For 2026 on annual basis, we expect the contribution of nuclear power to increase, coal to decrease and LNG should largely remain flat. In 2026, the capacity factor for each fuel source should be as follows: nuclear power around mid- to high 80%, coal around mid-40% and LNG should be around early to mid-20%. [Interpreted] Next, I will go over the RPS cost. In 2025, annual RPS expense on a consolidated basis was KRW 3,989.7 billion. And on a stand-alone basis, it was KRW 4,818.8 billion. Last, I will go over the funding situation. As of 2025 Q4, consolidated total borrowings was KRW 129.8 trillion. And on a stand-alone basis, it was KRW 84.9 billion. [Interpreted] Now we will move on to the Q&A session. Since we will be conducting the Q&A session in both Korean and English, please make your questions and answers clear and brief. Operator: [Interpreted] [Operator Instructions] The first question will be given by Jong Hwa Sung from Securities. Jong Hwa Sung: [Interpreted] I am from LS Securities and my name is Jong Hwa Sung. Please understand my sore throat today. I have 2 questions. Number one, it's about the contribution of the nuclear power generation in the generation mix. So I think largely fuel cost and power purchase cost was in line with expectations. But nevertheless, the operating income was underperforming expectations by around KRW 1 trillion. I think this is largely because of other costs. I think other cost was around KRW 1.2 trillion higher than what we expected. I believe this is mainly coming from the recovery of nuclear power generation sites and costs associated to carbon and greenhouse gases. it seems that these cost items were concentrated in Q4 in 2025. However, if you look at other years, sometimes it's booked in Q2, sometimes it's booked in Q4. And so the seasonality is not stable. So on an annual basis, how much do you expect these other cost items to be generated or incurred every year? And then second is about the contribution of the nuclear power generation. So in Q4 2025, on a Y-o-Y basis, I think the nuclear power generation contribution went down by around 6%, which is unusual given that for the first 3 quarters of 2025, nuclear power generation contribution was higher than that. So when you say -- or you said in your keynote that the contribution of nuclear power will probably increase in 2026. Is it compared to Q4 2025? Or is it compared to the first 3 quarters of 2025? In other words, in Q4 2026, will nuclear power generation contribution be slightly higher or significantly higher than 2025 Q4? Unknown Executive: [Interpreted] Yes. So I will first address your first question regarding the other cost. So the provisions related to greenhouse gas emissions went up by around KRW 120.6 billion to KRW 340.6 billion. As for the provisions regarding the nuclear -- provisions regarding the recovery of the nuclear power generation sites, it went up by KRW 411.2 billion, resulting in a negative KRW 4.6 billion. So there was actually write-backs. As to the exact timing of when we book these type of provisions and costs, I think we will discuss internally, and I'll get back to you later on. Unknown Executive: [Interpreted] Yes. Regarding your second question, we mentioned that the capacity factor for nuclear power should be around mid- high 80% on an annual basis. So maybe towards the end or early part of the year, the capacity factor may seem lower than that. But on an annual basis, I believe that it will be higher, especially given that we have nuclear power plants who are going through and completing its preventive maintenance process, which should come back online. And also the addition of new power plants should add to the higher capacity factor of nuclear power in 2026. Operator: [Interpreted] The following question is by Kyeong Won Moon from Meritz Securities. Kyung-Won Moon: [Interpreted] My name is Kyeong Won Moon from Meritz Securities, and I have 3 questions today. One, if you compare the consolidated operating income of Q3 and Q4 and the stand-alone operating of the 2 quarters, I believe that the stand-alone operating income is relatively higher numbers or relatively better -- showed better performance. I believe this is largely driven by the adjustment coefficient. So is that the main reason? What is the main reason behind this? And what would be your expected adjustment coefficient for Q1 2026? My second question is regarding the before tax profit. So compared to the operating income, the before tax profit seemed to have performed quite strongly, both for consolidated and stand-alone numbers. What would be the reason behind this? Were there any one-off P&L items in other categories like the finance and other businesses? My third question is related to the dividends. So I believe that -- so the dividend was just announced. And if you look at the dividend payout on the stand-alone net income basis, it seems that it actually decreased compared to last year. So how did you come to this DPS number? What is the logic behind that? And what would be your expectation or outlook for the dividend payout of 2026? Do you think it will be higher than 2024 and 2025? Unknown Executive: [Interpreted] Yes. So regarding your first question, it may seem that the stand-alone profits are stronger than the consolidated numbers because there are some costs associated with our subsidiaries, which is booked under consolidated financial statements, but not on our stand-alone numbers. [Interpreted] Regarding the adjustment coefficient, in Q4 last year, the numbers were slightly higher than previous average quarters. [Interpreted] And the coefficient for 2026, we expect to be slightly higher than 2025. Unknown Executive: [Interpreted] And regarding your question comparing the operating income and the before tax income. So for our subsidiaries, there were some lease liabilities that could not be hedged due to the decrease in the FX rates. And so because of the FX -- in the process of the FX conversion, there were some valuation losses and gains that needed to be booked that impacted the numbers. Unknown Executive: [Interpreted] And regarding your question on dividends. So last year, the payout was 16.5%. And this year, it was 13.65%. So like you mentioned, it did decrease. However, I'd like to note that the size of the net income on a stand-alone basis increased significantly. So the absolute amount of dividends that were paid out will increase. And DPS also increased to around KRW 1,541 per share. As for 2026, as you know, we are subject -- we are a public corporation and subject to the relevant legislations, we need to discuss the dividend strategy with government departments. So at this point, unfortunately, we are not able to comment on the direction of 2026 dividends. Operator: [Interpreted] The following question is by Jaeseon Yoo from Hana Securities. Jaeseon Yoo: [Interpreted] I am Jaeseon Yoo from Hana Securities, and I have 4 questions. My first question is provisional liabilities related to used fuel -- used nuclear fuel. So in January, I read news that the unit price has gone up. And so maybe can you give us a little bit more color on this topic? And my second question is also related to this as well. What was the total amount of the used nuclear fuel-related provisional liabilities booked by KHNP in Q4 2025? And third, there was a 15% decrease -- price decrease that was subject to a grace period, and that grace period is coming to an end. I believe, therefore, the bituminous coal price can go up. So what would be the associated cost that you are expecting in regards to the end of the grace period? And fourth is related to the bond issuance limit. So what would be the outstanding amount of bonds issued? And how much room do you have in comparison to the cap? Unknown Executive: [Interpreted] I'll try to address your first 2 questions at once. So the provisional liabilities that were booked for the recovery of nuclear power sites was KRW 904.5 billion -- increased by KRW 904.5 billion to KRW 24,769 billion. As for the used nuclear fuel, it decreased by KRW 178.4 billion to KRW 2,745.3 billion. And as for the mid- and low level nuclear waste associated provisions and liabilities, it went up by KRW 10.2 billion to KRW 1,077.2 billion. Unknown Executive: [Interpreted] As for your third question regarding the grace period of the individual consumption tax coming to an end and how that would impact our cost. So we do have an internal estimate, but unfortunately, we are not able to disclose those numbers to the public in the market. So we ask for your understanding. Unknown Executive: [Interpreted] Yes. And regarding your final question on the bond issuance cap. So that can -- the final exact number can be calculated after the dividend is finalized at the Board and shareholders' meeting. But we believe that it will be something around just over 3x once all of those dividend-related activities are finalized. Operator: [Interpreted] Currently, there are no participants with questions. [Operator Instructions] The following question is by Jong Hwa Sung from LS Securities. Jong Hwa Sung: [Interpreted] I have 2 questions. First is regarding the nuclear power generation export strategy. So I believe that there is a process currently ongoing to streamline the Korean nuclear power generation export strategy. So maybe can you elaborate a little bit on how that is moving forward? And second, I believe that there is some court case in the international mediation courts by KHNP regarding the additional KRW 1.4 trillion construction cost that was incurred during the BNPP construction project. Has that been already reflected in the financial statement? And if so, if KHNP is able to recover the cost from the UAE government, will that have impact on the financial statements? Unknown Executive: [Interpreted] Yes. I will address your first question regarding the export of nuclear power plants of Korea. And so we are -- I believe that the research project has been outsourced by the Ministry of Industry, and they are currently waiting for the results. KEPCO, of course, will be closely cooperating with the government to ensure that high-quality nuclear power plant export strategy can be developed to maximize and satisfy the global customers. Unknown Executive: [Interpreted] Yes. And your second question regarding the dispute between KEPCO and KHNP. So we are currently in conversation and negotiation with them. And I think both parties are making utmost effort to resolve this conflict in a stable manner. However, please understand that we are not able to disclose any specific numbers. Operator: [Interpreted] The following question is by Yoon Cho from UBS. Yoon Cho: [Interpreted] I have 3 questions. One is regarding the tariff. So the press recently has reported that there may be some differentiated price scheme applied to industrial power. And currently, you are thinking of, for example, different pricing per time or offering weekend discounts for the industrial use. There are also talks about regional pricing schemes for the industrial power. And these elements have been mentioned by the Minister of Climate, Energy and Environment. So can you elaborate or give us a little bit more color on these schemes? How do you think it will impact the average unit price of power, overall? And when do you think that these new schemes can be introduced? My second question is regarding to your comments earlier today. You mentioned that in Q4, there were some cost associated subsidiaries that were booked. Were there any unusual one-offs that we should be aware of? And my third question is about the SG&A cost. What was the exact amount consolidated basis for Q4? Unknown Executive: [Interpreted] Regarding your first question, with the increase of the solar PV power generation, the overall load patterns are changing. And to reflect this change, we are currently developing seasonal and -- seasonal pricing schemes and also different pricing schemes for time period. We are also considering the balanced growth of the overall national economy and regions and also working to distribute or disperse the power demand nationwide. And these are the reasons why we are also developing a new pricing scheme that can better reflect the regional situations and regional demand. We are working closely with the central government to develop a reasonable and rationable new pricing scheme, reflecting all of these elements. However, as to its impact on unit price and the exact time line, I believe it's a little bit early. We are also listening to the opinion of the corporates and overall business and industry community as well. So once we have a better idea on the specifics of this matter, then I think we can disclose some other information. But currently, we are under close negotiation and discussion with the government. [Interpreted] And regarding your second question, I think all we can say at this point about the cost booked by subsidiary is that it is related to overseas businesses. Unknown Executive: And as for your final question regarding consolidated SG&A cost. So currently, we are in the process of closing the books. And so we do not have the final exact numbers right now. But once the audit report is released, the number will be included in the financial statements. Operator: [Interpreted] The following question is by [indiscernible] from JPMorgan. Unknown Analyst: [Interpreted] I only have one question. I believe that in the past, there were some discussions on reflecting the individual elements in the fuel cost of the ASP. So have you continued those discussions? Do you have any updates that you can share with us? Unknown Executive: [Interpreted] Can you please elaborate on that question, please? Unknown Analyst: [Interpreted] Yes, I believe currently, when the tariffs are determined, KEPCO would make a proposal to the government, maybe around plus/minus 51. And ultimately, the government would make the decision. However, I believe that there were some discussions on finding the legal mechanism to ensure that the cost pass-through system can work like other utility companies outside of Korea. And so if the fuel cost would go up, this would naturally be reflected in the tariffs through the cost pass-through mechanism. So I was wondering if there were any progress in those discussions with the government. Unknown Executive: [Interpreted] Yes. So currently, we have implemented -- we have in place the cost pass-through system. So on a quarterly basis, the fuel prices are reflected in the tariffs. But we are also working to improve how it is being implemented. We are discussing with the government and listening to the voices of the related parties and industries to find ways to further improve the cost pass-through system going forward. Operator: [Interpreted] Currently, there are no participants with questions. [Operator Instructions] [Interpreted] As there are no further questions, we will now end the Q&A session. If you have any questions -- additional inquiries, please contact our IR department. This concludes the fiscal year 2025 fourth quarter earnings resulted by KEPCO. Thanks for the participation. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Good afternoon, everyone, and welcome to the ACADIA Pharmaceuticals Inc. Red Robin Gourmet Burgers, Inc. Fourth Quarter 2025 Earnings Call. This conference is being recorded. During management's presentation and in response to your questions, they will be making forward-looking statements about the company's business outlook and expectations. These forward-looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today and therefore, are subject to risks and uncertainties as described in the company's SEC filings. Management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles but are intended to illustrate alternative measures of the company's operating performance that may be useful. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings release. The company has posted its fourth quarter 2025 earnings release on its website at ir.redrobin.com. Now I would like to turn the call over to Red Robin's President and Chief Executive Officer, Dave Pace. David Pace: Good afternoon, everyone, and thank you for your interest in Red Robin. As we close out 2025, our fourth quarter results reflect the steady momentum we're building as we execute against our First Choice plan. We introduced this plan in the second quarter of 2025 to focus our priorities and outline how we intend to strengthen our competitive position and improve our overall performance. Today, I'll provide an update on our progress against its key pillars and how we intend to build on that progress in 2026. Before I get into the details, let me begin with some context around our full year and fourth quarter sales performance. For the full year, comp sales were down 0.3%, excluding the impact of deferred loyalty revenue. This included a 3.5% increase in average check, offset by a 3.8% decrease in traffic. Our traffic improved in the back half of the year as we rolled off 2024 pricing actions and saw traction with our Big Yummm value offering. For the fourth quarter, comp sales were down 3.3%, excluding deferred loyalty revenue. This included a 0.3% increase in average check and a 3.6% decline in traffic. Now like the broader industry, trends softened in October and November relative to where we exited the third quarter. In addition, we made the intentional decision to shift marketing spend into December to maximize reach during the holiday season. That strategy proved effective. increased support behind our Big Yummm value offering and our holiday promotions drove a notable inflection in December as we outpaced the Black Box Intelligence casual dining index in traffic for the first time since the third quarter of 2024. Encouragingly, momentum continued into January, where traffic was positive before weather events starting in late January with Winter Storm Fern have made results choppy in subsequent weeks. On profitability, we exceeded our expectations for both restaurant level margin and adjusted EBITDA in the fourth quarter. Full year adjusted EBITDA of $69.7 million represented a 53% growth over 2024, and RLOP margin grew by 190 basis points. Importantly, we achieved this result with only modest pricing in 2025. For perspective, in the fourth quarter, net pricing contributed just 1.6% to results, underscoring that our performance improvement is increasingly being driven by a stronger consumer proposition and improved operating efficiency. With that context, let me walk through our progress against each pillar of the First Choice plan and our strategic priorities for 2026. First, let's start with Hold Serve. Our Hold Serve pillar requires that we sustain the progress that we make each quarter and then extend that improvement even further as we move forward. During the fourth quarter, our labor efficiency initiatives contributed approximately 180 basis points to restaurant level margin. These gains were consistent throughout the year and were a primary driver of a 250 basis point reduction in total labor costs for 2025. Importantly, we achieved these efficiencies while maintaining our guest satisfaction scores, demonstrating that productivity and hospitality can coexist. These improvements also reflect the increased accountability and ownership embedded in our managing partner model, which rewards our partners for improvements that they drive in restaurant-level profitability. This leads me to our next pillar, which is our Drive Traffic initiative. As noted earlier, we saw industry outperformance in December. We believe this improvement is driven by 2 primary factors: one, the power of our Big Yummm burger offer; and two, our improvements in how we market and message to our guests. First, our $9.99 Big Yummm value offer continues to resonate. Within our dine-in channel, it delivered 10% guest mix in the fourth quarter, strengthening our relevance with value-seeking guests and supporting incremental traffic and trial. Building on this success, we expanded our platform with the January 26 launch of our new menu, integrating additional Big Yummm deals directly into our core offering. This expanded platform now features 6 meal options across a tiered price range of $9.99 to $16.99, extending beyond burgers into categories such as our hand-breaded classic crispy chicken sandwiches, Donatos Pizza and Whiskey River barbecue wraps. Importantly, each meal includes our signature bottomless sides and beverages, reinforcing value while preserving the full Red Robin experience. The new menu also broadens our premium offerings, creating a deliberate barbell approach that balances compelling value with higher-priced indulgent options to expand guest choice across dayparts and occasions. Early results indicate that the menu is performing as expected and that average check has increased and remains healthy as guests engage across the menu. The second key driver of our fourth quarter traffic improvement was the deployment of incremental investment behind the data-driven First Choice marketing strategy we initially introduced in Q3. This strategy enables us to engage guests more personally and precisely than traditional broad-based campaigns. We've now mapped every restaurant across 6 to 8 competitive categories and clustered locations based on similar trade area dynamics and messaging needs. This analysis supports more focused and locally relevant messaging, allowing each restaurant to compete more effectively within its specific market. In short, we continue to transition from a broad one-size-fits-all approach to a marketing model that is more precise, more disciplined and more efficient by ensuring that the right message reaches the right guests at the right time, improving the overall return on our marketing spend. The third pillar of our First Choice strategy is Find Money. As discussed last quarter, our corporate efficiency actions have meaningfully reduced general and administrative expenses, and those savings will continue to benefit us in 2026. For perspective, excluding stock-based comp, we reduced G&A by over $4 million in 2025 and expect to have a similar step down in 2026, driven by the efficiency initiatives implemented in the middle of 2025. With respect to our work to strengthen our balance sheet and capital structure, we continue to progress on tactical refranchising as a key enabler to this initiative. As previously communicated, we plan to use proceeds from any completed transactions to reduce debt and further strengthen our balance sheet. We're encouraged by the interest level expressed and the progression of discussions to date. We remain confident that we will achieve our targeted capital structure objectives. Unrelated to our work to reduce debt, but that is further reflection of franchisee confidence in our system improvements, 3 of our current franchise groups have indicated that they are currently pursuing new unit development opportunities within their territories. With respect to overall refinancing efforts, our improved financial performance has strengthened our liquidity position and along with our progress on refranchising is expected to expand our options to improve our capital structure. We continue to work with our advisers to advance this process and expect to refinance our debt consistent with our previously outlined objectives. Additionally, as a result of improved business performance and further progress in our refranchising work, we no longer believe that we need to preserve the option to conduct an at-the-market equity offering, and so we have terminated the ATM program announced last November. No shares were issued under that program before it was terminated. Turning to our Fix Restaurants pillar. In 2025, we completed 20 light-touch refreshes to help our physical environment maintain competitive standards and reflects the quality of our food and service. Our 2026 capital plan allocates additional investment toward restaurant refreshes. We plan to resume refresh activity later in the first quarter, continuing a disciplined light touch approach designed to maximize guest impact. In addition to our facility refreshes, we begin to roll out replacement devices for our server handheld technology and we'll also introduce an upgraded version of our Ziosk tabletop devices. We believe that both of these actions will improve server efficiency, order accuracy and speed of service, returning the gift of time benefit that Red Robin has historically been known for. In the 10 months I've served as CEO, what stands out most for me is the growing sense of ownership and pride across our restaurants. Our team members are not simply executing initiatives. They are owning the challenge, putting guests at the front of everything we do and actively contributing ideas that have improved operations and enhanced the guest experience. It's also important that we continue to challenge the status quo and identify insights and potential competitive advantages that will enhance our ability to differentiate ourselves in the marketplace. With that in mind, in the fourth quarter, we launched an enterprise version of the ChatGPT AI platform. Since our launch, we're seeing expanding utilization across the organization with tangible results. We're now in the process of introducing it to our managing partners, along with custom GPT tools and are already seeing adoption and application that assist our managing partners in further optimizing labor costs, COGS and guest service. The overall impact of our investments in our teams is tangible. Hourly turnover is now at its lowest level since 2017, and engagement scores continue to improve. This translates directly into how we serve our guests and support one another. As we look ahead, we'll remain focused on creating an environment where great people can build meaningful and rewarding long-term careers. To our entire Red Robin team, thank you for your continued commitment to our guests and to each other. The foundation we're building together positions us well to be able to capture the opportunities ahead. With that, I'll turn the call over to Chris to review our fourth quarter results. Christopher Meyer: Thanks, Dave, and good afternoon, everyone. I would like to start by providing a recap of our financial performance for the fiscal fourth quarter of 2025. Total revenues in Q4 were $269 million, a decrease of $16.2 million from 2024. This change in revenue was primarily due to a decrease in comp sales and the impact of restaurant closures. Comp sales, excluding the impact of deferred loyalty revenue, were down 3.3% in Q4. Including deferred loyalty revenue, comp sales were down 3.1%. This result was in line with the expectations we discussed in our last earnings call. Q4 comp sales included a 0.3% increase in average check, offset by a 3.6% decline in traffic. As it relates to other aspects of our Q4 financial performance, restaurant level operating margin was 11.4%, a decrease of 10 basis points compared to the fourth quarter of 2024. The benefits of cost savings, restaurant closures and check average increases were offset by inflation and lower traffic. General and administrative costs were $14.9 million as compared to $18.4 million in the fourth quarter of 2024. The reduction is primarily due to reduced people costs from our corporate efficiency initiatives and lower stock-based compensation expense. Selling expenses were $8.8 million as compared to $5.7 million in the fourth quarter of 2024. Adjusted EBITDA was $11.8 million in the fourth quarter of 2025, a decrease of $2.6 million versus the fourth quarter of 2024. This result was ahead of expectations we discussed on our last earnings call. We finished 2025 with $69.7 million of adjusted EBITDA, which represented 53% growth over 2024. As it relates to our balance sheet and capital structure, we ended the fourth quarter with $19.9 million of cash and cash equivalents, $9.6 million of restricted cash and $37 million available borrowing capacity under our revolving line of credit. Our strong results in 2025 have improved our liquidity and position us well heading into 2026. Turning to our outlook. We will now provide the following guidance for 2026. First, we expect comparable restaurant revenues to be between 0.5% and 1.5%, excluding the impact of deferred loyalty revenue. Second, restaurant-level operating profit margin of approximately 13%. Third, we expect adjusted EBITDA of between $70 million and $73 million. And finally, we expect capital expenditures to be between $25 million and $30 million. Our financial guidance suggests that we expect to make progress in 2026 across all of our key financial metrics. In summary, we are pleased with our financial performance in 2025. We have made significant progress towards increasing restaurant level profitability, reducing debt and growing EBITDA. We will remain disciplined in executing against the First Choice plan in 2026 and continue strengthening the operational and financial foundation of the company. Dave, I will now turn the call back to you. David Pace: Thanks, Chris. As we look ahead to 2026, I'm confident that the progress we've made across each pillar of our First Choice plan positions us well for continued performance improvement. Our December results where we outpaced the Black Box casual dining traffic index reinforces that when we execute with precision, combining compelling value, targeted marketing and exceptional hospitality, we can compete effectively. Our menu enhancements launched in January and give our guests expanded options at both ends of the menu and across dayparts and occasions. And we have a robust new product pipeline that we will introduce throughout the year. Simultaneously, our ability to continually refine and focus our marketing messaging and spend means that we can confidently reach our guests where they are in the most efficient way possible. Our capital structure initiatives are progressing in line with our plan. We expect the combination of tactical refranchising and refinancing to strengthen our balance sheet and provide the flexibility needed to continue investing in our people, restaurants and technology. Further announcements will be made as we achieve significant milestones on that journey. While there's much work ahead, our team is focused and committed to building a Red Robin that guests choose first, team members are proud to work at and shareholders can rely on for sustainable returns. With that, we're happy to take your questions. So operator, please open the lines. Operator: [Operator Instructions] Our first question is from Todd Brooks with Benchmark StoneX. Todd Brooks: Congrats on the inflection of the business in the second half of last year, guys. Two quick questions. One, kind of a block and tackle. But within the 50-basis point to up 150 basis point same-store sales guidance for '26, thoughts on pricing. I think you said you were running about 1.6% price in Q4. What kind of pricing assumption is baked into that guidance for same-store sales? Christopher Meyer: Yes. Todd, it's Chris. So we took a 3.2% menu price increase when we rolled out our new menu at the end of January. We didn't have a whole lot of carryover from last year. So we're expecting that to carry through for the full year. So the full year pricing impact this year will probably be about 3.2% as well. Todd Brooks: Perfect. And then more of a strategic question, but it sounds like the micro-targeted marketing has been a real revelation for you all. Can you -- I know we're a couple of quarters into that, but can you walk us through how far through the process of really implementing that with kind of a full year plan behind it? And any thoughts -- I know selling expense was up in Q4 versus prior year. But for the full year, there was some efficiency around selling expense. So any color you can give on the selling expense plan needed in '26 to support the micro-targeted marketing efforts? David Pace: Yes. Thanks, Todd. It's a pretty holistic shift in the way we're approaching marketing. So not only is it a change in the absolute spend, but it's been a change in the efficiency of it and the allocation of working versus nonworking dollars. So we're able to put a lot more working dollars to work to just that point. I'd say we are probably -- I'm saying 2/3 of the way through the implementation of this. I mean the stuff that I referenced in the remarks around clustering, identifying competitive groups, understanding trade area dynamics and then allocating messaging priorities to each of those, we've got those in place. We're kind of putting them in action and trying to understand then what's the response. So as we see these responses, we'll continue to reallocate among those clusters. So if we see something that's not showing the elasticity that we think it should, we'll try it and move it to another cluster. So I'd say we're 2/3 into the implementation, but we still have a little bit to go. Christopher Meyer: Yes. And the only thing I would add as it relates to 2026 is if we continue to see success that we've seen, we have the agility to deploy more dollars against the full year thought. And I think right now, the expectation is that we will be up in selling expense in 2026 relative to 2025. And I think I can go so far as to say that we would expect to be up in each quarter, particularly given the success that we've seen here late in Q4 and early in Q1. Operator: Our next question is from Jeremy Hamblin with Craig-Hallum. Jeremy Hamblin: And I'll add my congratulations on the improved profitability last year. I wanted to start with thinking about the same-store sales guidance for the year. And Q1, by far, your toughest compare for the year. I wanted to get a sense for how you expect things to flow given what you saw in January. I don't know if in February, you've seen some bounce back post weather, although there's obviously been a couple of storms and impacting a wide swath of the country. But how do you expect kind of that cadence to play out during the year? I mean, are you thinking that Q1 is like a negative comp quarter and then improvement from there? David Pace: Yes. I think as we kind of map it out, I'll let Chris talk about this as well. But I think we see it kind of strengthening in the back half of the year more than the front for the points that you raised, given where we're lapping and then the introduction of Big Yummm and how that plays out. But I think your assumption is right, Jeremy. Christopher Meyer: Yes. And I'll just add a little color as it relates to Q1. We're not going to give a guide, obviously, for Q1, but we do have some perspective. So quarter-to-date comps are down in Q1 about 1%, but it's important to provide context around that because we talk about -- we took very limited pricing in 2025. We did take that 3.2% increase that I mentioned. But that pricing as well as some of the indulgent offerings that we added to the new menu, that we think is going to offset the negative mix associated with taking our Big Yummm burger deal and putting it on our core menu. So I think if you think about check average, it's probably going to be positive, marginally positive in Q1. In terms of traffic, before Winter Storm Fern hit, traffic was positive in January. And since that winter storm hit traffic trends have been negative, mostly due to weather, right? So we think we'll end up -- the weather impact will cost us maybe 50 basis points as it relates to Q1 in total comp. We lost about 179 operating days quarter-to-date. We even had some restaurants still closed as of yesterday, so from this most recent storm over the weekend. It's also important as you think about Q1 and the construct of Q1, we had less media weight in February versus what we expect in March or April. So there's a lot going on, but we feel really good about the underlying business and the progress we've made. And so that kind of sets up Q1. And then as you sort of shift towards the back half of the year, that price increase, we start to lap the Big Yummm burger deal in July of this year, and you'll start to see more of that pricing that we took start to flow through. So PPA is going to be higher in the second half than it was in the first half. And then I think in terms of traffic, just for the reasons I laid out, it's a little bit of the opposite. Traffic will probably be a little higher in Q1 and in Q2. Again, it's a product of lapping the Big Yummm burger deal. We're getting some traffic momentum. But given the media weight and the strong LTO calendar we have in 2026, we feel like it's going to be a better year overall in same-store sales with a stronger second half comp than first half. Jeremy Hamblin: Switching gears and looking on the expense side, we know that there's been some pressure from commodity cost, beef pricing, but wanted to get a sense for your expectation on that is basically flat year-over-year in '25 as a whole. But you did note on the November call that there had been a little bit of pressure. So I wanted to get an update on what you're seeing on that end? David Pace: Yes. I think, again, look, I think we're going to continue to see beef prices rise. We're factoring that in. We'll see some offsets, obviously, with that. I think Chris can give you more of the specifics as we -- in terms of percentage shift between the 2, but we are expecting those to continue. We'll still see some headwinds on the COGS side. Christopher Meyer: Yes, I think that's right. We were up roughly 4% in commodities in 2025. We're looking at basically the same number in 2026. Beef inflation is still expected to be high. But the other major categories are going to be kind of plus or minus 1% or 2%. Really beef is the outlier for 2026. Jeremy Hamblin: Got it. And then I wanted to ask about your refranchising efforts. It's something where my sense is that there's some engagement there and interest. You'd outlined 25 to 75 units. Any update you might be able to share on progress on that initiative? I noted, obviously, you must feel pretty good about where the balance sheet is. No need to raise capital in the near term. Given that you're going through kind of the debt refinancing process as well, I wanted to see if you could update us on refranchising. David Pace: Yes. I mean the truth is, Jeremy, I can't say a whole lot about where we are specifically, but your tone and your assumptions are accurate. We feel better about the overall liquidity of the business. We feel good about the process that we're in. We feel good about the interest that we saw in the franchising exercise, and we feel good about the progression of discussions that we've had. Beyond that, I can't say a whole lot right now, but your kind of underlying tone is accurate. Jeremy Hamblin: Great. Last one for me. You made remarkable progress in labor last year. And just to follow up on the other question. In terms of how much more you feel like you can squeeze there, you noted that your satisfaction scores remain strong. Clearly, you're seeing a little bit of a turn here in traffic. Do you look to drive additional labor savings through comp improvement? Or do you feel like there's a little bit more to squeeze out there? David Pace: I think it's going to be both. I think we think comp improvement certainly will give us some air cover. But I also think that there is room in the middle of the P&L in the labor spend. And I think our operators feel the same way. I've been extremely pleased with their bullishness on this. This is not just us pushing from the top. They're looking at it saying, yes, we have better tools than we've ever had to be able to understand where our opportunities are. We have better visibility into who our outliers are and how we have to work with them and coach them and kind of make progress there. And I don't want to underestimate it, and we're just in the very early stages of this, but we've introduced the AI tool and our ops team has grabbed that and run with it and created some custom GPTs that they've introduced at the restaurant level that give us the ability or give our managing partners the ability to understand labor spend on a daily basis, forecasting more effectively and then allocation. There's been a great adaptation or adoption of that tool at the restaurant level. So we think the combination of all of those things is going to give us room to kind of go even further than we have so far. Operator: Our next question is from Mark Smith with Lake Street Capital. Mark Smith: First, just wanted to ask a little bit about G&A outlook, Dave, you talked about in your commentary. I think that you said kind of similar decline in dollars year-over-year. Correct me if I'm wrong on that. And then maybe walk us through kind of what's driving some savings there? Christopher Meyer: Yes, I'll start with the numbers, and then I think Dave can add the color. So we finished -- if you exclude stock-based comp, we finished last year G&A at $71 million. I would say in 2026, we're looking at somewhere between $65 million and $67 million range for the year. So that would incorporate the $4 million that Dave talked about, and there's potentially opportunity for a little bit more than that. David Pace: Yes. I think just to build on that, we think this is, again, the combination of figuring out efficiencies. We're going to be looking at this every day, every month, every quarter to see how do we build efficiencies into the business further and get smarter about how we operate. So I don't think that's a one-and-done process. That's something that we will continue. Mark Smith: Perfect. And then I just want to ask kind of about the restaurant base. It sounds like some positive movement and thoughts from franchisees around maybe some expansion and opening new restaurants. Curious on the company-operated side, maybe what's built in as far as closures and then any appetite to begin opening some company-operated restaurants? David Pace: Yes. Look, I think in terms of the restaurant size, we're still trying to optimize the portfolio. Going back a ways, we found we've made improvements on about 20 restaurants that we had previously identified as potential problems for us or potential closures. We've moved them off the closure list to where we think we can operate them and are hopeful that we can get them back to a performance level that equals the rest of the system. I think there's still probably -- if you're thinking about it, Mark, I would assume $20 million for this year is the number that we're thinking about. So that's kind of what do we still have that's out there that we need to get to kind of work our way through the system. So we're trying to kind of clean up the portfolio, figure out a way. The significance of this is if you go back to when this was first brought up, I think we identified $6 million of headwind against the business from these potential closures. That number is now down to about a $1.5 million headwind and shrinking as leases expire and we roll off. So I think we've made huge progress on that and feel good about the state of the portfolio that's moving ahead. Operator: There are no further questions at this time. I'd like to hand the floor back over to Dave Pace for any closing remarks. David Pace: Okay. Just quickly, look, thanks. Really appreciate folks for dialing in and hearing our story. We feel good about the progress that we're making, and we look forward to talking to you again in May. So thanks for coming on, and we'll talk to you soon. Thank you. Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Hello, everyone, and welcome to Zoom's Q4 FY 2026 Earnings release webinar. I will now hand things over to Charles Eveslage, Head of Investor Relations. Charles, over to you. Charles Eveslage: Thank you, Catherine. Hello, everyone, and welcome to Zoom's earnings video webinar for the fourth quarter and full fiscal year 2026. I'm joined today by Zoom's Founder and CEO, Eric Yuan; and Zoom's CFO, Michelle Chang. Our earnings release was issued today after the market closed and may be downloaded from the Investor Relations page at investors.zoom.com. Also on this page, you'll be able to find a copy of today's prepared remarks and a slide deck with financial highlights that, along with our earnings release, include a reconciliation of GAAP to non-GAAP financial results. These measures should not be considered in isolation from or as a substitute for financial information prepared in accordance with GAAP. During this call, we will make forward-looking statements, including statements regarding our financial outlook for the first quarter and full fiscal year 2027, our expectations regarding financial and business trends, impacts from a macroeconomic environment, our market position, stock repurchase program, opportunities, go-to-market initiatives, growth strategy and business aspirations and product initiatives, including future product and feature releases and the expected benefits of such initiatives. These statements are only predictions that are based on what we believe today, and actual results may differ materially. These forward-looking statements are subject to risks and other factors that could affect our performance and financial results, which we discuss in detail in our filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q. Zoom assumes no obligation to update any forward-looking statements we may make on today's webinar. And with that, let me turn the discussion over to Eric, who's giving his prepared remarks by Zoom custom avatar. Eric Yuan: Thank you, Charles. FY '26 was a pivotal year for Zoom and for our industry. We grew Q4 revenue 5.3% and full year FY '26 revenue, 4.4% and an acceleration of 130 basis points over FY '25. These results reflect the increasing value of our platform with innovations like AI Companion 3.0 as our platform expands and evolves into an AI-powered system of action for modern work. The inflection in growth reflects a structural shift in the market. Organizations are moving beyond systems of record and engagement towards AI-driven systems of action that help customers and employees get real work done. Zoom is uniquely positioned to lead this transition. We bridge work both inside and outside the organization across collaboration, customer experience and employee experience using AI to take conversations all the way to completion. And this directly connects to the 3 priorities we outlined last quarter to bring this system of action to life. First, elevate the workplace with AI; second, drive growth of new AI products; and third, scale AI-first customer experience. Let me start by speaking about scaling AI first customer experience. Zoom's advantage in customer experience comes from embedding it within our broader system of action, not treating it as a stand-alone solution as many competitors do. our CX platform is differentiated because it is built on the same platform that powers collaboration inside the organization and extend seamlessly to customer engagement and other external workflows. By unifying internal and external workflows, we eliminate traditional silos and enable customer journeys to move continuously from conversation to completion. Within customer experience itself, Zoom delivers a cohesive set of intelligent capabilities that empower both human and virtual agents and turn live interactions into coordinated action across teams and systems to drive outcomes. Our AI innovation across AI-assisted human agents and virtual agents is translating into improved service outcomes and cost savings for our customers and incremental revenue for Zoom. You see this in ZCX ARR continuing to grow in high double digits, and in fact, accelerating in Q4 driven by AI monetization. More concretely, you see it in the story, our deal composition tells about why customers choose us. Every 1 of our top 10 deals this quarter included paid AI and 7 represented competitive displacements of leading CCaaS vendors. Let me bring this to life with some Q4 customer wins. We welcomed Aeroflow Health, a medical device company who chose Zoom Contact Center in a major Q4 deal spanning ZCC Elite and ZVA Voice plus Chat to replace a leading CCaaS vendor due to our bold AI vision for CX and ability to execute. We also saw many expansions. MLB and OPENLANE both began a Zoom Contact Center customers and in Q4, bought a combination of ZCC Elite and ZVA Voice to deliver reimagine AI-first human plus virtual agent customer service. In other cases, customers are adopting the full Zoom CX suite alongside Zoom Phone and Workplace to transform service operations end-to-end. For example, in Q4, a major insurance provider decided to replace an expensive contact center stitched to an AI point solution with our unified Zoom Phone, Contact Center and ZVA Voice to automate call triage, reduce agent workload, and increase overall efficiency. We also partnered with Surrey & Sussex Healthcare NHS Trust, who administers regional NHS services to modernize their manual fragmented inbound call operations through a single secure digital platform powered by Zoom Phone, Zoom Contact Center, and ZVA Voice plus Chat to enable AI-powered self-service improve wait times, reduce missed appointments and enhance overall patient outcomes and call operations efficiency. These wins also demonstrate the momentum behind Zoom virtual agent and the customer response to our voice AI within the CX suite. Only a few quarters in market ZVA Voice has already been included in 4 of our top 10 CX deals. We are also starting to see ZVA Voice bringing new customers and act as a beachhead for potential expansion into large organizations. In Q4, we signed a nearly 7-figure ARR deal with a leading U.S. retailer leveraging ZVA to handle inbound calls across more than 1,100 locations. ZVA 3.0 announced yesterday builds upon this growing momentum. It operates across voice and chat, taking action across systems, executing complex multistep workflows, learning continuously from how human agents resolve issues and seamlessly bringing people into the conversation with full context when needed. That's how we are helping enterprises close the loop on customer issues at scale. And it's a powerful example of how our CX platform can drive measurable efficiency, better experiences and real business value for our customers. Our second priority is to grow AI revenue streams beyond customer experience and to extend the system of action to new AI products across vertical and horizontal workflows. Zoom Revenue Accelerator, our revenue orchestration platform that uses the power of Zoom AI to drive prospecting, coaching, CRM automation and more is a great example of this vertical value. ZRA had a strong quarter. The number of customers purchasing it grew 50% year-over-year, and its largest Q4 transaction spanned HR services, real estate, technology and automotive sectors. Another great example of vertical workflows is BrightHire, which we were very excited to close in Q4 and bring similar conversational AI value to recruiting and hiring. BrightHire is early in its growth path. Together, we have a tremendous opportunity to combine BrightHire's domain-specific AI capabilities with Zoom's product breadth and distribution advantages to transform how organizations recruit, hire and retain talent. We are also making progress with Custom AI Companion, which brings horizontal value to workflows across Zoom Workplace and beyond. We're proud to welcome the following new customers showing the breadth of what this product can unlock. Harmonic, a leader in virtualized broadband and video streaming solutions added Custom AI Companion wall-to-wall to their Workplace deployment to integrate across multiple third-party tools and support knowledge retention, sales enablement and employee onboarding. Custom AI Companion also made headway in sectors like education, where AI literacy is of paramount importance for both students and administrators. In Q4, Grand Valley State University adopted it wall-to-wall alongside Zoom Workplace for education, supporting their efforts to streamline help desk and other student-facing processes by connecting administrators and community members more seamlessly with internal knowledge bases and workflows. At the same time, they added ZVA to their existing Zoom Contact Center to provide students with more responsive omnichannel support. Last, the foundation of our system of action sits within Zoom Workplace, spanning the full meetings and work life cycle where context is created and work moves forward. By evolving collaboration into an engine of action while preserving the flexibility of an open ecosystem, Zoom Workplace remains simple, reliable and deeply preferred by solopreneurs and Fortune 10 companies alike. Q4 marked a big step forward with the launch of AI Companion 3.0, advancing our system of action by turning meetings from one-off events into engines of ongoing work. As innovation accelerates adoption continues to grow and broaden. In Q4, AI Companion monthly active users more than tripled year-over-year. MAUs engaging AI through the side panel more than doubled quarter-over-quarter. And within Zoom Phone, MAUs using AI features increased 35% sequentially. This momentum reflects not only scale, but expanding depth of engagement across workflows. We also revitalized our core Zoom Workplace client simplifying the user experience with refreshed interfaces and streamlined navigation to make action even more intuitive. Our product mastery continues to translate into competitive wins and meaningful displacements across meetings, phone, chat and beyond. Zoom Phone had some great competitive wins and Phone ARR continues to grow in the mid-teens. Let me highlight some customer wins to bring this to life. In Q4, we landed a Fortune 10 customer on Zoom Phone in a large and competitive deal for 140,000 seats replacing Cisco calling. We also secured 2 major U.S. financial institutions on Zoom Workplace and Phone displacing Teams and Cisco calling. Additionally, we significantly expanded our footprint with a leading global bank, adding nearly 50,000 Zoom Phone seats in Q4 and bringing their total deployment to an incredible 150,000 seats. These financial sector wins highlight our ability to meet the complex, highly regulated needs of the industry. Our customer-centric approach to innovation, particularly around AI and security, enables institutions to ensure compliance, mitigate regulatory risk and modernize operations. The momentum is similar in healthcare, where we witnessed a growing number of Workplace and Phone wins that also added customer experience. They are choosing Zoom not only for sector-specific capabilities, but for the differentiation offered by our cohesive AI-first system of action, spanning patient engagement, care coordination and back-office collaboration. In the age of AI, Zoom becomes more essential. We are building the system of action that turns conversations into coordinated execution across work inside the organization and with the world outside including customer engagement, sales, recruiting and more. By connecting collaboration to action, Zoom drives measurable outcomes, and we're still early in what this system can unlock. Now let me turn it over to Michelle to take us through the financials. Michelle? Michelle Chang: Thank you, Eric, and hello, everyone. I'm excited to be with you today to share Zoom's Q4 and full FY '26 financial performance. In Q4, total revenue grew 5.3% year-over-year to $1.25 billion or 4.8% in constant currency. This result was $12 million above the high end of our guidance. Our Enterprise business continues to be strong with revenue growing 7.1% year-over-year, representing 61% of our total revenue, up 1 point year-over-year. And our Online business continues to show signs of stabilizing. In Q4, average monthly churn was 2.9% as compared to 2.8% in Q4 of FY '25. In our Enterprise business, we saw a 9% year-over-year growth in the number of customers contributing more than $100,000 in trailing 12-month revenue. These customers now make up 33% of our total revenue, up 2 points year-over-year. Our trailing 12-month net dollar expansion rate for enterprise customers in Q4 continues to hold steady at 98%. Pivoting to our growth internationally. Our Americas revenue grew 6% year-over-year. EMEA grew 5%, and APAC grew 3%. Moving to our non-GAAP results, which, as a reminder, exclude stock-based compensation expense and associated payroll taxes, net litigation settlements, acquisition-related expenses, impairments of assets, charitable donations of common stock, tax benefits from discrete activities net gains on strategic investments and all associated tax effects. Non-GAAP gross margin in Q4 was 79.8%, up 1 point from Q4 of last year, primarily due to continued cost optimization efforts, while we remain focused on investing in AI. Non-GAAP income from operations grew 4.6% year-over-year to $490 million, exceeding the high end of our guidance by $8 million. Non-GAAP operating margin for Q4 was 39.3% as compared to 39.5% in the prior year period. The slight margin decline was due to changes in our bonus structure and investments in AI. Non-GAAP diluted net income per share in Q4 increased by $0.03 year-over-year to $1.44 on approximately 303 million non-GAAP diluted weighted average shares outstanding. This result included a headwind of approximately $0.11 and from higher-than-expected taxes due in part to tax true-ups discrete to the quarter. Turning to the balance sheet. Deferred revenue at the end of Q4 grew 5% year-over-year to $1.42 billion, above the high end of our previously provided range. For Q1, we expect deferred revenue to be up 1% to 2% year-over-year, which takes into account the recent trend of larger and longer duration competitive takeouts in Phone and Contact Center that often include credits to defray transition costs. Looking at both our billed and unbilled contracts, our RPO increased over 10% year-over-year to approximately $4.2 billion. We expect to recognize 57% of the total RPO as revenue over the next 12 months, down 2 points year-over-year. In Q4, we had operating cash flow of $355 million as compared to $425 million in the prior year period. Free cash flow was $338 million, as compared to $416 million in the prior year period. Our Q4 operating cash flow and free cash flow margins were 28.4% and 27.1%, respectively. We ended the quarter with $7.8 billion in cash, cash equivalents and marketable securities, excluding restricted cash. Under the current $3.7 billion share buyback plan in Q4, we repurchased 3.8 million shares for approximately $324 million. That brought our total repurchase under the plan to 36.3 million shares for $2.7 billion at the end of Q4. Looking into FY '27 and beyond, we intend to leverage buybacks to, at a minimum, offset dilution on a yearly basis, reflecting management's confidence and long-term commitment to shareholder value creation. Pivoting from Q4, I'd like to highlight some of the major financial milestones for the full FY '26. Total revenue for FY '26 grew 4.4%, and our Enterprise revenue grew 6.5%, both accelerating 130 basis points year-over-year. Along with the top line progress, we also improved margins. We reached a non-GAAP gross margin of 79.7%, up 80 basis points from the prior year, and a non-GAAP operating margin of 40.4%, up 100 basis points from the prior year. Free cash flow grew 6.4% to $1.9 billion. And finally, we continue to be strong stewards of shareholder capital. We reduced stock-based compensation expense by 18% in FY '26. That, combined with the continued execution of our buyback allowed us to reduce our diluted weighted average shares outstanding by 2.5%. Turning to guidance. In Q1, we expect revenue to be in the range of $1.22 billion to $1.225 billion. This represents 4.1% year-over-year growth at the midpoint. We expect non-GAAP operating income to be in the range of $487 million to $492 million, representing an operating margin of 40% at the midpoint. Our outlook for non-GAAP earnings per share is $1.40 to $1.42 based on approximately 304 million shares outstanding. For FY '27, we expect revenue to cross the $5 billion milestone and land in the range of $5.065 billion to $5.075 billion, which at the midpoint represents 4.1% year-over-year growth. We expect our non-GAAP operating income to be in the range of $2.05 billion to $2.06 billion, representing an operating margin of 40.5% at the midpoint. This margin guidance includes a temporal tailwind of 180 basis points related to an accounting amortization change, offset by 70 basis points of pressure from the second era of our shift from SBC to cash bonus compensation. In addition, our outlook for non-GAAP earnings per share in FY '27 is $5.77 to $5.81 based on approximately 308 million shares outstanding. Included in this guidance is an interest income headwind of approximately $50 million in FY '27 due to lower yields in the declining rate environment. As a reminder, future share repurchases are not reflected in the share count and our EPS guidance. For FY '27, we expect free cash flow to be in the range of $1.7 billion to $1.74 billion. which includes approximately $75 million of incremental CapEx related to the post-pandemic refreshment cycle of assets across our U.S. data centers as well as similar interest income headwinds previously mentioned. As we end FY '26 and we move into FY '27, we're thrilled with our progress, and we're excited about our differentiated vision as an AI-first system of action. This success gives us confidence in our ability to grow durably beyond $5 billion in revenue across progress in meetings, continued growth in Phone, scaling our AI-first customer experience and in introducing new AI revenue streams. We're excited to do all of this and still maintain our focus on profitability, cash flow generation and shareholder returns. Thank you to our customers, investors and of course, the entire Zoom team for your trust and your support. With that, Catherine, please queue up the first question. Operator: [Operator Instructions] Our first question will come from Arjun Bhatia with William Blair. Arjun Bhatia: Eric, maybe one for you, we'll start. I'm just curious how you think about AI monetization progress in fiscal 2027? You called out a couple of examples of customers adopting Custom AI Companion and going wall-to-wall. How do you think that and your broader portfolio of sort of AI products evolves in terms of adoption and contribution to revenue next year? Eric Yuan: Yes, it's a great question. So we're very optimistic about our AI technology monetization in FY '27, driven by, first of all, and customized AI companion (sic) [ Custom AI Companion ] more and more the customers, they see the value and if we like and of course AI companion are built for free, but Custom AI Companion is different, we can monetize. That's one. And I expect, right, to drive the AI monetization. At the same time, we have very solid AI Companion 3.0 foundation and the team working so hard to innovate. We leverage that technology to empower other use cases like ZVA, Zoom Contact Center, Zoom Phone and ZRA almost every -- those -- the product lines for customer experience or sales experience even for webinar, right, we can leverage AI to empower those -- the vertical use cases. Also, we can monetize it. Again, take the CX, for example, right? Look at top 10 CX deals we closed in Q4, 4 of them already attached with Zoom Voice Agent, right? Zoom Voice Agent is built upon our AI technology. We see more and more opportunity like that. I cannot be more excited than before because of AI and because of our monetization strategy for AI. Operator: Our next question comes from Allan Verkhovski from BTIG. Allan M. Verkhovski: Can you hear me? Eric Yuan: Yes. Allan M. Verkhovski: Awesome. Congrats on the strong quarter here. Great to see the acceleration and Zoom customer experience. Michelle, I wanted to ask you, and I'll stick to a question here, but on the Q1 deferred revenue growth guidance of 1.5% at the midpoint, can you just quantify the impact from the larger competitive takeouts? And for the fiscal '27 revenue guidance, can you just give us some color like what you're assuming for Enterprise and Online revenue growth? Michelle Chang: Sure. No problem. Let me touch on the deferred revenue one, because I think this is one that's really important for investors to understand and maybe not read into it as you traditionally might. First of all, it's important to note this is a billing dynamic and not sort of a rev rec thing. What we saw was a recent trend that's actually great for Zoom's business. Wins in large and longer competitive platforms where we're providing a grace period to our customers to help them with that transition. This is good for Zoom. This is intentional. And I think maybe just one other piece for investors. You can see that, the fruits of that so much in Eric's script and you can see it in the long-term RPO that's up 15% relative to 3% in Q3. So a couple of thoughts on deferred revenue. In terms of the guide, at 4.1%. One other thing that I want to make sure we call out to investors is included in that guide is a 40 basis headwind of pressure from a single large competitor white labeling that churned at the end of FY '26. Setting that aside to your broader question, we expect Online to have slight growth sort of in the range of what they had this year. And really, it's going to be an enterprise that's the headline for the growth. And it's going to be the source of things that we talked about in this earnings and that, frankly, we've been talking about with investors which is progress in AI monetization, progress in product diversification and building out new routes to market, upmarket and with our channel. Allan M. Verkhovski: Awesome. Congrats on the strong quarter, guys. Operator: Our next question will come from Peter Levine from Evercore. Peter Levine: Eric, one for you. I think in a world where AI models or provider -- AI model providers are essentially they're controlling the intelligence layer and theoretically could build AI-native collaboration suites on top of their capabilities. So I guess, question like what's -- like in terms of technology or what structural barriers, I think, prevent them from disintermediating Zoom? Like what's the moat that you feel like will defend your market, data, the infrastructure, it's the enterprise relationships, brand equity. But like -- or is it something deeper? I guess is like how do you think about that risk? And then how would you debunk the concerns that like AI could ultimately replace you guys? Eric Yuan: Wonderful question. I think -- if you think about the mission-critical communication like Zoom, reliability is extremely important, right? It's got to work every time. You cannot say today's meeting may not work, tomorrow might work, no one is going to use that, right? And security also extremely important, right? You need all kind of security features also need to built-in plus ease of use. That's the reason why the customer choose to use Zoom. Back to the AI. I think I'm an engineer, right? I also now starting writing code as well with the AI coding tools, I think it's extremely hard to replicate what we built over the past many years because, first of all, a lot of code still C++ code, and you have to open out the video, audio, a lot of things, right? Today, you look at AI coding tools, it is so hard to build a very scalable and the leveraged, the native OS build all kind of code. It's not as straightforward. You can build it very easy system, using high-end tools. But it's more like toys, nobody going to use that because this is a collaboration. It's not a system of record or database or store information, even UI don't work. You know how to use that, right? It's fine. But when it comes to mission critical video collaboration tools like Zoom, it's really hard to leverage the AI coding tool to replicate what we achieved. I have very high confidence. And by the way, no matter what we do, we still need tools like Zoom, right, human to human connection, interaction is still very important. Peter Levine: Michelle, a follow-up on net retention, 98%. Can you maybe just help us bridge the gap, all the new products that you're having. You're seeing upsell Contact Center, Voice. When does that reflection -- when can we see that in the model? Michelle Chang: Yes. So great question on NDE. Look, we've said that it will rebound in the long term, we've not put guidance. And when it rebounds, it's going to be off of so many of the drivers that we're talking about here, progress in churn, phone in mid-teens, contact center in high double digits and obviously, the onset of AI monetization. Look, we're going to run the business sort of to revenue growth and you have our '27 guidance there. But a couple of notes maybe for investors about headwinds relative to NDE. First of all, I just want to go back to that white label churn that we talked about of competitive white label churn that will obviously put some pressure. And then the other thing that I'd call out for investors is actually good pressure, which is with Workvivo and Contact Center, we're seeing them bring in new customers to Zoom. And look, in the fullness of time, that will replicate through our net dollar expansion. But obviously, it will take a little bit more time. So just 2 more mechanical things to take into consideration. Operator: Our next question comes from Siti Panigrahi from Mizuho.. Charles Tevebaugh: Chad on here for Siti. I think the Americas revenue growth trend has been pretty clear and quite strong throughout this fiscal year. I was wondering if you could dive a little bit into the trends you're seeing internationally and sort of any key initiatives there for the up -- the current year to reaccelerate growth there? Michelle Chang: Eric, do you want to take that one? Or do you want me to? Eric Yuan: Yes, go ahead please. Michelle Chang: Yes. I mean, look, I would point to -- we're pleased. I think we give the constant currency growth rates, but they're up and growing across our international business. Maybe the thing that I would call out is, I think as we move into areas like Contact Center, and Phone as well as Workvivo, that's giving us, together with investments in channel, an opportunity really to break into international markets. So it is something that we're investing in. We've also done maybe more local investments like U.K. data center. But it's something that we're focused on and with our broader product expansion, AI monetization, as well as channel investments is something we think will grow in the future. Operator: Next up, we have a question from Alex Zukin with Wolfe Research. Aleksandr Zukin: I'll maybe make mine pretty quick. There's been a lot of questions around, I think, just your ownership structure of some of the larger foundation model companies. I know we haven't talked about it or asked about it, but given it's such a wide-ranging topic, maybe I'll let you address it to the extent that you want to specifically maybe on the Anthropic stake. And then Michelle, for you just any comments about how clearly the growth on Phone, Contact Center was really, really strong this year. As you look at the guide implicit, I know you don't give product level guidance, but as we think about the sustainability of mid-teens growth in Phone, the sustainability of whatever very high rates of growth are in Zoom Contact Center. How should we think about those particularly since you don't want us to pull any kind of forward looking dimension from the deferred? Michelle Chang: Perfect. So let me hit Anthropic first and then we will round Alex, with the product question. Look, in our results, you will see a total strategic investment. Zoom has a Zoom Ventures Fund that we use to strategically invest in tech that we feel like is important to Zoom. And you'll see the total balance of that $1.6 billion. And in Q4, you'll see a gain of $532 million pretax. This is due mainly, of course, to the change in the valuation of Anthropic after their last round. Look, we have a minority stake, but Anthropic is a critical partner. Zoom has long standing, talked about our federated approach to AI and Anthropic is key to our road map and a great partner in our federated approach. On the sort of durability, if I get your question right, Alex, on Phone. I really look at just we've seen continue -- I'm going to hit Phone and then I'll wrap with Contact Center. Phone, we've been seeing very durable mid-teens growth. Look, we haven't updated our penetration stats in Zoom. But in Zoomtopia, I think in '24, we said it was 19% of our meeting space. I think that just both speaks to progress and opportunity going forward. And then look, on the phone side, I just look at all the examples that Eric talked about, leading insurance, Cisco win and F10, Cisco win, major fast food chain, RingCentral win and really feel like a major U.S. bank of Microsoft, Cisco win. So we feel great about the share gains on phone. On contact center, what I would point to there is just multiple quarters, now 4 quarters at high double digit and actually Q4 accelerating off that. But really, and I think, Alex, you've been a great noter of this is to look at the makeup of contact center as reflective of where we will go. For many quarters, we've been talking about the majority of the top 10 deals being large displacements. We've been talking for quarters about the value really coming in AI, now 10, up 10. And to Eric's point, 4 of 10 in voice, which has been a new entrant for Zoom in the summer. We did a 2.0 refresh. And even yesterday, we announced 3.0. And really, maybe if I could wrap with one stat, which is how often times these things come together. And I think it's a great example of what Eric introduced in the system of action of both inside the organization and outside just what a powerful element that is. And 6 of our 10 largest contact center deals, as an example, pulled through Phone as well. Eric Yuan: So just quickly, Alex, it's such a great question to add on to what Michelle said. We talk about the top 10 Zoom Phone deals, Zoom Contact Center deals are doing very well. This is more like a lot of enterprise. I think this year, you look at SMB, also a huge opportunity. The reason why because of AI. Our AI is very affordable, federated AI approved, right? You look at the last December, I look at a human [ HRE ] test. Zoom ranked #1 for a while, right? So because those investments, because of the price and also the latency of the technology, I think we have a huge opportunity for all of those SMB customers as well because of AI. Michelle Chang: And especially true, just to mark Eric's comment because it's such a good one that is especially true in ZVA. So great to see the new product value, which will really open up new opportunities down the market. Operator: Up next, we have a question from Josh Baer with Morgan Stanley. Josh Baer: And congrats on a strong quarter. You obviously have the horizontal tools that every single knowledge worker in the world can use, but you're also building this portfolio of very departmental solutions, marketing, sales, HR, contact center. So a strategy question for you, Eric. How do you balance addressing additional departments and roles with new products versus going deep into these areas, rolling out more solutions in these departments that you're already in and balancing all of that with the horizontal play? Eric Yuan: Josh, wonderful questions. Speaking of vertical solution, a lot of my AI avatar, right? I use that for 3 quarters already. As you can see, the quality is getting better and better, right? This is kind of one of the vertical use case for marketing team. Having said that, I think given the AI evolution, AI coding tools, I think we have a foundational technology. Now we can do both. On horizontal front, right, we keep innovating and more features and services, right, and delivery happiness to our customers. You see the AI Companion 3.0 announced in the last December. And also in terms of innovation, a lot of things we're going to announce -- new innovations announced at Enterprise Connect, that's on the horizontal front. Look at each vertical use case, either departmental use case or vertical market use cases, I think because of AI, I think we can monetize. That's why we also want to double down on those use cases. Customer support, my example, ZRA, webinar, BrightHire, almost every vertical use. I think we can leverage AI to quickly penetrate into those markets we never thought about before. That's why we are very excited because of AI. Operator: We have a question from Tyler Radke with Citi. Tyler Radke: I wanted to ask you about the custom AI Companion. You noted some good wins, I think, in higher education and some other verticals in the quarter. But how are you thinking about that in terms of a driver for FY '27. And is this something where you're seeing list price sort of be realized in the field? Or is there still sort of heavy discounting? Just give us an understanding of sort of how that rolls out from a go-to-market perspective. Eric Yuan: Yes. So you look at customer AI Companion. Again, AI Companion is part of our offering. It's for free, it's become more and more powerful. But the way for us to monetize AI Companion is to go through the customer AI Companion, in particular for medium and large enterprise customers because with the third-party applications, connectors and also we build in a workflow and no-code workflow to build agent. And that's kind of our vision, right from a composition to completion. If you do not have a very flexible workflow builder, so how do you build an agent, how can you complete a task, right? So because it used to be zoom, just the collaboration. Now with the Zoom customer AI Companion with workflow connecting with all the third-party applications, more skills, more agent and then we can achieve from a composition to completion. And also not only workflow, but also customer companion also can give you the enterprise knowledge retrieval functionality, right? You can connect so many third-party applications, right? I do not need to log into different systems, within Zoom AI Companion interface, I can search for any information and help you write and document to achieve the task. Essentially AI Companion -- Custom AI Companion is a customized workflow builder and also the information search capabilities to connect with all kind of third-party enterprise applications is extremely powerful, and we can monetize for those -- to targeted enterprise customers. Tyler, go ahead. I think Tyler maybe have follow-up. Tyler Radke: Can you hear me? Eric Yuan: Yes, yes. Tyler Radke: Sorry, just any way to -- is that going to be a contributor to FY '27? Or is it still kind of early days in terms of that monetization of the premium AI Custom Companion? Eric Yuan: It already contributed, right, to our growth. So I've already closed the big customer AI Companion deals in the quarter in Q3 and Q4 with more innovation, for sure, it's going to help us more in FY '27. Operator: Up next, we have a question from Seth Gilbert with UBS. Seth Gilbert: Maybe just one, if I hold the online growth, online year-over-year growth at about 1.2% for fiscal '27 that would imply that the enterprise decelerates by about 1 point from the 4Q exit rate of 7%. So maybe a question for you, Michelle. Can you talk about some of the puts and takes here that could cause enterprise to outperform? Michelle Chang: Yes. Is your question on Q4? Or is it more on guidance going forward? Seth Gilbert: It's more on guiding going forward. So yes, sorry. Michelle Chang: Yes. Look, let me talk about online, and then I'll finish with enterprise. I think online, so pleased to see it return to growth. It was the first time we've had growth since fiscal '22. And look, that growth comes off of adding value in our portfolio of -- in a workplace portfolio as well as AI. And that's why we're able to realize on a price increase as well as keep record low churn. Our guide assumes an additional price increase on the annual SKU. So in line with monthly, it's really just intended to do the same thing as the prior but bring them into value. But look, Seth, to your more Meta question, Enterprise is going to be the durable driver for growth going forward. And I'll just continue to hit home the components. It's making progress, meeting churn. It's keeping Phone in that sort of mid-teens growth range. It's continuing with that better together story to pull along Contact Center and realize the AI value. That is by far where we are seeing the most immediate pulls of the incremental AI monetization in both agent-assisted AI as well as the ZVA that Eric and I talked about. And then look, there's so much coming on from an AI monetization perspective, both in product, Workvivo Phone. But additionally, beyond that in new SKUs, we've now opened up a note taker SKU to our free base as well as making continually products like ZRA even better. So we look out to the forward and we're excited about the progress that we made this year, 130 bps kind of up year-over-year, and we're equally excited, if not more, on the '27 go forward. Operator: Up next, we have a question from Tom Blakey with Cantor Fitzgerald. Thomas Blakey: Eric, or Michelle, I'd like to hear about maybe some quantifying of these credits that you called out, that was interesting. And even if it's -- you can't call it out numerically, just how they're trending. I think the numerical help would kind of understand, help us as a group understand what kind of headwinds we're talking about that as I know, Eric, you're managing this business for a multiyear basis here as they come -- you guys are innovating and taking share when they come off, like what that would look like? And I have a follow-up, if I may. Michelle Chang: Yes, I can take that. So look, it's in line with what I said earlier, which is -- again, I just want to continue to emphasize investors, don't read into this as normal. These are great competitive wins where we're providing a grace period, so that in exchange for a larger and longer-term competitive platform win. Think of this as helpful in sizing, Tom, is really the primary driver between the decel in Q4 relative to the guide in Q1. And if helpful on the other side, maybe what I'd point to is connecting you to that uptick in long-term RPO as [indiscernible] sizing. Thomas Blakey: Yes, that would be helpful. And then, Eric, just combining you and Michelle's comments here, Michelle is guiding us to grow online kind of relatively flat, but you seem awfully excited about the SMB's opportunity to maybe equally do as well. I know it's early days in terms of maybe tackling the successes that you've had on the enterprise side with CX and Phone, but is it safe to assume that, that's maybe not implied or imputed in that one kind of 1% guide for fiscal '27 online? Eric Yuan: Yes. So when I mentioned SMB customer is more like a high end. Thomas Blakey: Higher end? Eric Yuan: Yes. For the online buyers like SMB customers, right? It used to be -- let's say, they look at multiple solution now because of power for AI. And also, I think we have a huge opportunity to serve those SMB customers because we have a very rich product portfolio, great AI capabilities, yes. It's not about individual online buyers, yes. Thomas Blakey: Michelle, could you comment on BrightHire, anything on the top or bottom line impact into fiscal '27? And that's it for me. Michelle Chang: Yes. So it closed mid-Q4. So I think of the impact to Q4 is sort of de minimis. The guide reflects obviously BrightHire. And I would just say that it's a perfect example, I think, of what Eric laid out in the earlier question with regards to vertical and horizontal value. So this is a business where we share common customers, so there's sort of mutual benefits. And this is a product where we have similarities with really taking AI value to rethink the hiring kind of approach, more insights, efficiencies as well as then you have Workvivo on the other side of sort of thinking about the life cycle of kind of human talent. So it's something that they use Zoom and all of their interviews. And so we look at it and there's natural synergies and they're relatively small. This is a small acquisition. You can see the size of it, sub-100 [ to the total ]. Operator: Our next question comes from Samad Samana with Jefferies. Samad Samana: So I wanted to ask about pricing. You guys have continued to create a lot of value. You've obviously -- part of it is to drive better retention, which we've seen over the years. Some of it is to be expressed in kind of monetary terms. How are you thinking about that balance for fiscal '27, Michelle? And what are you assuming in the guidance, if anything, from a price increase perspective? And to the extent -- I'm sorry for the 11-part question. I'm learning from some of my peers. But if you have, can you give us a sense of like timing around that assumption as well? Michelle Chang: All right. Let me hit explicitly the online, and then I'll move and talk about our enterprise because I think the dynamics look a little bit different. So our online guide includes a price increase of 6% to go in effective mid-March to our annual SKU. So think of this as -- this is really the flip side of what we did last year. And I really encourage investors not to think about it as a price increase. Price increase is just one mechanism for realizing incremental value to customer. So price increase ongoing, if you will, is not something that Zoom is going to use. It's going to come with incremental value. In this case, it came with much more value across chat calendar meetings, whiteboard, et cetera, et cetera, in our workplace as well as AI value. So that's really what's behind that. So that's sort of how to think about the online side. And on the enterprise side as well, one, important to note that those prices then impacted the enterprise. But look, there, we're going to focus much more on total contract value, things like discounting and contact -- contract, sorry, duration. And those would be baked into our guide given. Operator: Our next question comes from Ryan MacWilliams with Wells Fargo. Christopher Brazeau: This is Chris on for Ryan. Eric, you've mentioned in the past a doubling down on the product side. And so we were curious if in the last few months, you've seen any product velocity improvements from agentic coding tools like you're mentioning. And if you're thinking about product investments any different this year compared to last year? Eric Yuan: Yes. So a while back, right, so we all adopt AI coding tools, it's getting more and more powerful. And especially for the new product development, right, or new service, right, certainly accelerated our pace of innovation. But at the same time, we also have a lot of the existing services, right, and a lot of code written by our engineers, right? I do think that the AI coding tools is powerful enough, right, to maintain all those millions of the length of the code yet, right? So having said that, you look at not only for engineers, but also the UI designers, product managers, almost everywhere, right, we can have AI coding tools to improve our productivity. Essentially, we drive the innovation, the speed. And you look at the product area we invest. Like ZVA, for sure, is really a great example. And we're kind of building a lot of new features. And it's probably in terms of speed, and better than any time in our company history, right? That's the reason why over the past few months, the customer feedback, wow, you had this feature, the other feature, a much better position. This is a great example because the AI coding tools, and also because of the way we embrace the AI. So again, not only for engineers, but entire the product development, the life cycle. Operator: Next question comes from Jackson Ader with KeyBanc. Jackson Ader: Great. The question I have is on is around the channel. And I think you guys have made a bunch of improvements and enhancements to the channel partner program, the last few quarters and last year. And so really, I'm curious, number one, any kind of continued enhancements that you definitely know are going to be implemented here that should help for growth in 2027? And then also, it seems like -- I understand there are some kind of headwinds, tailwinds to the margin for fiscal '27. And I'm just curious, is that due to the mix of the type of investments you're making, meaning channel versus direct? Or is it just the overall amount of investments that you're making? Michelle Chang: Yes. Let me go ahead and take that, and then Eric, you can pepper in as you see fit. Look, channel, if you think about sort of those durable elements of revenue growth is going to be essential to things like a Phone business and the Contact Center. And it's just how customers procure in that space. And also, it just speaks to beyond just the software, the consulting deployment, just how customers interact with partners. And look, we're very -- this is something we've been very intentional about, and I think you could see it in our revenue growth inflection. Look, in terms of quick couple of stats and things of why we feel great about our investments. You can see it in our large contact center wins, 9 of 10 in channel. Our channel base continues to grow. And frankly, the proportion of new customers coming from channel to me is especially exciting. The kinds of things that we're investing in to your question, look, it's around incentives. We made starting last year a lot of system capabilities and portals so that we really help enable especially to all of the product value that Eric mentioned, in things like ZVA coming out at incrementally past levels, we want to make sure that our ecosystem is ready there with us, and so we'll invest in that. And then maybe the last channel investment that I would mention is, we're bridging that into things like systems providers, which we think is going to be really important going forward. On your -- on the operating margin guide, let me make some comments because I want to make sure that people really understand the bigger picture here. So we guided to 40.5% at the midpoint. We want to, obviously, beyond the mechanics of reminding that we've used as a consistent forecast methodology. We really want to make sure the investors understand the 2 dynamics, which are not channel were up 180 basis points due to the amortization change that we referenced in the script. And then that's offset in part by the comp changes. We're in our second year of shifting from stock-based compensation to cash. So those are really the headlines to think about in terms of the op margin versus anything channel. Operator: Our next question comes from William Power with Baird. William Power: Eric, really encouraging to see continued progress on Zoom Phone and obviously the broader ARR growth trends. But I'm particularly interested in the Cisco displacements. I think historically, there's just been a lot of inertia with some of these legacy phone systems, especially the large enterprises have. So I'm just kind of curious, is this just a function of working through the sales cycle? Is it a function of enterprises just becoming that much more comfortable with Zoom Phone quality what's kind of putting you over top here? And maybe just help us kind of understand the sustainability of some of these large opportunities. Eric Yuan: Yes. That's a wonderful question. Believe it or not, actually look at the total Phone deployment. A lot of -- I think probably still more than 50%. I did not get the new number, still on-prem deployment, I mean, for large enterprise customer, right? And they deployed the on-prem phone system for a long time. And so yes, it's okay, not a great, and why they want to hurry to migrate to the cloud, right? This is kind of sort of a mentality before. Now with AI, that's a strong reason for those very large enterprise customer, they cannot lever the AI for the on-prem, right? So that's why I would say that will be acceleration for those large enterprise customers to migrate away from on-prem to cloud. Zoom is in much better position. We win quite a few very large, very competitive phone deployment for on-prem to the cloud. Again, AI is a driver and for those customers to migrate the AI first cloud phone system. And that's -- yes, that's a driver. Michelle Chang: And maybe just to add the numbers to what Eric said, it's about 130-plus million seats in the cloud and about 150-ish million on-prem. So Eric is spot on, on the rough 50-50. William Power: So lots of opportunity. Michelle Chang: Yes. Eric Yuan: Yes. Huge, because in order because the AI, it's hard to convince some, they say, it's okay. I use it for 20 years, it's okay. But now it's great opportunity ahead of us. Michelle Chang: Maybe the last thing that I'd mention is just increasingly how the deals reflect it's not just Phone alone as a workload. It's that sort of wanting that whole system of action. I think that's why you see so many Contact Center, Phone deals coming together. And so as we think about large competitive displacements, I think the inability to kind of have that full portfolio is one of the reasons. Operator: Our last question for today comes from Catharine Trebnick with Rosenblatt Securities. Catharine Trebnick: A quick question on the channel. So I get the fact that you go direct with the phone and the contact center, and you did mention systems. And you did talk this quarter that you had many more deals that were bundled. So are you seeing a different buying pattern from the enterprise and the SMBs that are forcing you or maybe being more -- or the system integrators are more attractive to you? Can you peel that back a bit for me? Michelle Chang: Your question, Catharine, is are we seeing, I mean I would... Catharine Trebnick: What are you seeing -- yes, it seems like you had more bundles this quarter than you have typically discussed. So how is that changing your go-to-market motion and you're working with the different partners? Because most of the partners typically just sell the phone or the contact center. So it seems to me if it's a more complex deal that you're going to need either a direct sales force or more of a system integrator. Michelle Chang: Yes. I mean I would say what we saw in Q4 was just an intensification of the pattern that we've seen previously, which is just what a natural sale it is for phone and contact center to come together. And then frequently, that also comes with a meetings portfolio. And look, in a lot of the deals, did they also include other great Zoom products? Yes. I think it speaks to sort of where the market is going, that system of action that we talked about, also stitching the AI value in. And then certainly, Catharine, investments that you've noted in your step about investments in the channel. Catharine Trebnick: Well, the other part is, are you seeing the enterprise want to move more towards a platform like they are in security and that you're feeling you have enough product pieces now to be part of that platform play? Michelle Chang: Yes. I mean I'll jump in and then, Eric, you should certainly jump in as well. I do think -- and you're seeing in a lot of those large deals, those platform things. I don't think it means all of them. I don't think like anything, there's a binary answer. But maybe just as a quick data point, like if you look at our top 10 deals and contact center, 6 of 10 included phones. So I think it's just an indicator that there is both those that really want that platform, that whole system of action stitch together with AI. And then there's others that are just going to have their own technology and come at it in different ways. But look, I think maybe just to the deferred revenue conversation, I see that as a great sign. It's these all-in with Zoom, large, longer-term deals. So I think there's some really great things on the future for our Contact Center business. Eric Yuan: Just quickly to add on to what Michelle said. So the Zoom workplace is our UCaaS platform. Contact Center is a CCaaS especially for those large enterprise customers, right? When they look at it from on-prem to cloud or maybe from the pre-AI solutions to AI solutions, if they can combine those 2, consolidate those 2 systems into one platform, one vendor, why not? This is a great ROI. That's the reason why quite often you see both UCaaS and CCaaS will [ bring in ] together. So that's the reason. Operator: Thank you. This concludes the Q&A portion of today's call. I'll now turn it back over to Eric for closing remarks. Eric Yuan: Thank you for Zoom employees, customers, partners and our investors for your greater support and we truly appreciate. We are very, very optimistic about FY '27. So see you next quarter. Thank you. Operator: This concludes today's earnings call. Thank you all for attending, and have a great rest of your day. Eric Yuan: Thank you all.
Operator: Good morning, and welcome to the conference call for Tate & Lyle's Q3 Trading Statement. Your speakers today are Nick Hampton, Chief Executive; and Sarah Kuijlaars, Chief Financial Officer. I will now hand you over to Nick Hampton for some opening remarks. Nick Hampton: Thank you, operator. Good morning, everyone, and thank you for joining this third-quarter conference call. I will start by making a few remarks on our performance and strategic progress, and then we'll open it up to Q&A. Trading in the third quarter was in line with our expectations and consistent with the first half. Our guidance for the full year remains unchanged. On a pro forma basis and in constant currency, revenue was 2% lower in the quarter, reflecting continued muted market demand with performance in all regions broadly in line with the first half. On a reported basis, which includes CP Kelco from the date of acquisition on the 15th of November 2024, group revenue was 15% higher. For the 9 months to the 31st of December 2025, on a pro forma basis, revenue in the Americas was 2% lower, with modestly higher pricing more than offset by lower volume. In Europe, Middle East, and Africa, lower pricing resulted in 5% lower revenue. While in Asia Pacific, revenue was up 1%, driven by higher volumes. Turning to the renewal of customer framework agreements for the 2026 calendar year, which is well advanced. With our #1 priority returning the business to top-line growth, we have selectively chosen to invest to drive volume and revenue growth. This is the right thing to do for the business, giving us a stronger platform for future growth, and we are pleased with the engagement from customers to our expanded offering. We are making good progress on the series of actions we set out at our interim results to drive top-line growth and improve performance. Let me give you 1 or 2 examples of progress. We continue to accelerate the rollout of our solutions chassis program with a focus on mouthfeel. We launched 2 new mouthfeel chassis in the quarter, one to improve the stability of portable salad dressings and another to support egg reduction. The level of customer engagement on our enlarged portfolio remains high, with the value of cross-selling opportunities in our new business pipeline increasing by more than 1/3 in the quarter. Revenue synergies from the CP Kelco combination are growing in line with our expectations, and we remain confident that run-rate cost synergies will exceed our target of $50 million by the end of the 2027 financial year. And finally, our 5-year $200 million productivity program continues to operate well, with further savings delivered in the quarter. Overall, then, I am pleased with the progress we are making. There is a real determination and focus across the business to deliver on the actions we are taking, and I am confident that in the near term, they will improve the top-line performance of the business. We will give you more detail of our progress when we announce our full-year results in May. At that time, as usual, we will also provide guidance for the 2027 financial year. To conclude, with our leading positions in sweetening, mouth and [indiscernible], we remain well placed to benefit from the global trends towards healthier and more nutritious food and drink. With the breadth of our portfolio, our formulation expertise, and the targeted investments we are making to accelerate customer wins in key growth areas, we are well-positioned to drive profitable revenue growth over time. With that, Sarah and I will be happy to take any questions. Operator: [Operator Instructions] We will now take our first question from Karel Zoete from Kepler Cheuvreux. Karel Zoete: I have 2 questions. The first one is in regards to the price investment you mentioned to sustain volume growth or to improve volume growth. Can you be a bit more specific which markets you decided to invest and what that might mean for pricing going forward? And the other question is around fiber. So I think more and more evidence or discussions in the public domain about fiber, fiber being the new protein, et cetera. What kind of engagement do you see with your customers on the fiber ingredients you sell? Nick Hampton: Okay. Karel, let me pick up on the fiber question first. I think it's an important one, and I'll let Sarah handle the selective view on pricing. But I mean, fiber clearly is a big global trend. In fact, there was an article yesterday in Bloomberg about fiber maxing. And we're seeing very encouraging progress with customers on our fiber portfolio, both products going into market, notably in the U.S. market, where in both beverages and dairy, we're seeing fiber fortification as a trend, and increasing the pipeline for fiber is growing. But it's a global trend as well, and we're seeing that trend across Europe and Asia, too. And I expect that to continue as we think about the continued desire to create more nutritious processed food, especially in a world where people have a significant shortfall of fiber in their diets, and all of the nutritional trends we're seeing point towards fiber addition as a strong growth opportunity for us going forward. Sarah Kuijlaars: Thanks, Nick. So when we think about our framework agreements, I think it's worth taking a step back, and we're all very aware that market demand remains muted. And as we stated, our #1 priority is to deliver the top-line growth. So that's volume and mix-driven top-line growth. So we've taken the decision to set our business up stronger for the future is that we're selectively investing to drive that volume momentum and the revenue growth. So we think about this is we're being very selective. So by product, by customer, by region, to ensure that we're setting ourselves up for that growth, given we now have the broader portfolio following the acquisition of [ Kelco ]. Operator: Our next question is from Ranulf Orr from Citi. Ranulf Orr: Just one for me. I mean you talked a bit in the past about the sort of 4Q improvement. Could you just provide a bit of an update on that? What's going well and where you have visibility on some of those sort of factors coming through? Nick Hampton: You mean in the fourth quarter? Ranulf Orr: Yes, yes. Nick Hampton: I just want to get clarity on the question. Look, so I mean, I think we're seeing encouraging signs of increased customer engagement on reformulation. It's very clear the sentiment in the market is our customers at least increasingly thinking about the need to put price back in to drive momentum. But we're not assuming any improvement in market outlook in the fourth quarter in our underlying guidance for this financial year. What we saw in the third quarter was consistent performance from the first half and very clearly in line with our expectations. And so far, as we've entered the fourth quarter, we'd say the same. Always as you go from Q3 to Q4 across the calendar year, you can get some kind of pluses and minuses between December and January from a phasing perspective. But we're seeing the kind of customer demand that we would be expecting, given the underlying guidance given for this year. Ranulf Orr: And just one more, if I may. On the price investments for the year ahead, can you give any kind of quantification or indication of the scale of those, maybe in relation to the current year? Nick Hampton: Look, I mean I think we haven't finished yet because we're still closing out the renewal agreements for this calendar year. And we'll give you a precise view on that when we get to our May results, as things have settled down. But I think it's fair to say that a little bit more this year than we did in this calendar year than we did in the last calendar year to ensure that we're really driving momentum with key customers. And you're obviously offsetting that with real focus on productivity and the benefits of the combination coming through in both cost synergies and the revenue synergies, of course, let's not forget, this is now the second year of the new business. And this is the first year we're entering as one combined business. Operator: We'll move to our next question from Joan Lim from BNP Paribas. Yuan Lim: Quite a few of my questions have been asked, but maybe just could you provide more color on trends by regions and category, like for example, which category has been doing well, or you're seeing more uptake with customers. So you mentioned a bit about fiber. Is that more driven by innovation in beverages, for example, and supported by GLP-1 users taking more fiber? My second question is, do you have any indication of how FX will be like for the next year? And lastly, maybe an update on CP Kelco's volume and margin recovery, please? Nick Hampton: Okay. So let me give you some headlines on the overall shape of what we're seeing in the market, and then maybe Sarah can pick up on the ForEx and the CPK question. I mean, overall, what we saw in the third quarter was quite consistent with the first half. In the Americas, we're seeing modestly higher pricing more than offset by lower volume. And that's very consistent with the Nielsen volume data that we saw in the first half, where you saw volume down and value driven by pricing, which was in part the pass-through of tariffs at the time, as you remember. And that's been pretty consistent. In Europe, volume pretty flattish volume mix with the pricing investment driving lower revenue. And then in Asia, encouragingly, some revenue growth driven by higher volumes, so some signs of momentum. I think underlying that, though, I think it's important to say what we're seeing with customers in terms of trends is some clear benefits of the combination flowing through. So in the quarter, the cross-selling pipeline was up over 1/3, having been strong at the first half. And we're seeing double-digit growth in our innovation pipeline to customers. And that's driven by some key themes. So as we've already talked on the call, we're clearly seeing a focus on fiber fortification across many categories. And I think it may well be driven by this need for nutritional density, driven by nutritional needs for processed food and the GLP-1 point you made. We're seeing that especially in beverages and dairy in the U.S. In EMEA, we're seeing dairy and beverages being more resilient, Baker and snacks a bit softer. And in Asia, actually, overall robust category performance. We talked about recovery in China at the half driven by CPK. Beyond fiber fortification, the other trends we're seeing is renovation for value. So cost efficiency and product renovation. We're also seeing continued focus on sugar reduction, and that linked to mouthfeel that we talked about at the half, where as you take sugar out, being able to control the texture mouthfeel of product is really important. And that's where the combination is really helping us build a stronger pipeline, which we expect to build as we go into next year. Sarah Kuijlaars: Thanks, Nick. And the next question is about ForEx. So indeed, we saw a headwind of -- given the U.S. in the first 9 months, which is approximately 2% to 3% of revenue, and that we expect to continue. That is partly offset by the strength in euro. Remember, with the acquisition of CPK, we have a broader footprint. So there's also some impact of the Danish krona, et cetera. But overall, you expect a headwind in the sort of the 2% to 3% on the top line. That's a slightly higher impact on EBITDA given the important contribution from the North American and the profitable North American business. Turning to CPK. So clearly, the integration continues to go well. cost synergies well in hand. And as Nick has spoken about now, obviously, the attention on the pipeline growth of those cross-sells. And it's been really powerful going into the conversations this year as a combined portfolio, punching up the combined commercial staff, really demonstrating the ability and the strengthening capability of the portfolio and the stronger [indiscernible]. Operator: Our next question is from [indiscernible] from Barclays. Unknown Analyst: So my question is on the selective investments. How should we think about the margin impact of these investments as we move into FY '27? Are you viewing this as a 1-year reset to drive volume recovery or a more structural change in pricing intensity? And my second question would be, regarding like to what extent can with the ongoing productivity program and CP Kelco cost and revenue synergies can offset the margin impact of these investments? Should we expect net margin pressure or stability as we bridge from FY '26 into FY '27? Nick Hampton: Okay. So I think let me start by saying we'll give very clear guidance on fiscal '27 when we get to full year results. So we need to complete our planning process for next year and see how trading evolves in quarter 1 of the calendar year. But the way I think about it is if you think about the building blocks going to next year, we're clearly because of the market demand remaining muted, putting some selective investments into price to drive the top line, both volume and revenue. Alongside that, we've got clear offsets from productivity delivery and accelerating the benefits of the CP Kelco combination. And different to last year, we've also got the benefits of the combination flowing through in terms of the pipeline and the cross-selling opportunities to support the framework agreement renewals. So we're confident that that builds a strong platform for growth. Where that leads us to on overall earnings delivery and margins, will be much clearer about when we get to our full year results. But the key here is the quality of the portfolio to build a growing pipeline of business with customers, as we see markets start to improve and the trends that are our friend from a positioning of the business perspective, we fully expect to drive growth going forward and into the medium term. And we'll give very clear guidance on the nearer term when we get to our results. Unknown Analyst: Just a follow-up on the fiber thing. Thanks for giving some color on that. So are you seeing a meaningful increase in customer briefs or RFP activity linked to high fiber formulations? And how does the current pipeline compare with the time last year? Nick Hampton: So if you think about our pipeline in the last quarter, it grew double-digit overall. And that is driven by a focus on things like fiber fortification. I think the question always is at what pace of those pipeline projects convert into innovation in the market. And as you know, we've probably seen -- we haven't really seen an increase in innovation pace yet, but we're anticipating that coming as these projects start to flow through. Sarah Kuijlaars: And Nick, maybe I'll just add, it's not simply just adding fiber to a product. With fiber, you really need the mouthfeel. And that's really where our sweet spot because you really need the appealing mouthfeel for the fortified product to be successful in the market. Operator: We'll now move to our next question from Samantha Lavishire from Goldman Sachs. Samantha Lavishire: I just kind of wanted to talk about some of the themes you're seeing in the market longer term. So we heard a lot of feedback at CAGNY last week about clean label reformulation, including away from artificial sweeteners like sucralose and several emulsifiers, some of which I think are in your portfolio. What proportion of products are being reformulated this way? And is the increased customer opportunity that you're seeing with CP Kelcos from fortification and protein and fiber, is that enough to offset this headwind? Are you still seeing structural growth in the way that customers are reformulating with your ingredients? Nick Hampton: So thanks for the question. I mean all of those trends that we talked about at CAGNY this month actually play to the reshaping of the portfolio. And I think it's important to say that sucralose clearly is an important part of our portfolio as an artificial sweetener of choice, but it's growing in demand. And we're selling every kilo sucralose that we can make because it's the best-tasting artificial sweetener out there. It is also important to say that if there was a shift away from artificial sweeteners, we've got lots of non-nutritive natural sweeteners in the portfolio, everything from stevia, we're the only company with an all-American supply chain for stevia, for example, through to monk fruit and allulose. So we're well placed for the reformulation to more natural and clean label. The emulsifiers actually are part of our portfolio. We do a lot of replacement of emulsifiers, and that's where the CP calc portfolio comes in as well. So one of the trends that we're seeing people talk about the trends we really believe the combination of our 3 core platforms can help customers win because that sugar replacement or artificial sweetener replacement that we talked about also comes with the need for modulation as Sarah just talked about. So the things that we heard from CAGNY are precisely the reason that we've repositioned the business the way we have done in the last 5 years. Operator: We'll now move to our next question from Matthew Abraham from Joh. Berenberg. Matthew Abraham: Just first one relates to the fiber fortification services you touched on. Just wondering if you can provide a sense of the margins from those services relative to the rest of the group. If fiber demand does accelerate meaningfully, could there be a broader impact on overall group margins? And then the second question just relates to the price investment commentary that you provided. Is that a reflection of a perception of improved demand elasticity? Or is it more a reflection that demand is such that it requires stimulation through price investment? Nick Hampton: So on your first question on fiber, our fiber portfolio generates very nice margins for us. And obviously, it depends on a customer-by-customer basis, how much fiber we're using, what other components we're putting in to help with that solution. But I think the key is the fiber fortification trend is driving a solutions model where typically that business is stickier business and good margin business. So it's certainly helpful in that regard. In terms of your question on price and price elasticity, we're clearly in a world where consumers are more challenged. Food is 20% to 30% more expensive than it was pre-pandemic because of all of the geopolitical challenges we've seen over the last 3 or 4 years. And there clearly is a requirement for some price stimulation to drive demand. But more importantly, for us, we're trying to balance the way we think about growing our business to make sure we're well-positioned for growth through the cycle. And in a cycle where demand is more muted, we want to make sure we're stimulating growth so that we're well positioned as markets start to grow. Operator: [Operator Instructions] The next question is from Lisa De Neve from Morgan Stanley. Lisa Hortense De Neve: I have 2. First, can we talk a little bit about what you're seeing in APAC? Various players in this reporting season have noted an improvement in China specifically. And I believe your sequential local currency growth is modestly better in APAC. So any color on that would be great. That's one. And secondly, can you provide us a little bit of color on how your raw materials are trending into this year on average? How should we think about the direction for cost input inflation or deflation? Nick Hampton: So maybe let me pick up the APAC question. Sarah can pick up the input cost one. Look, I mean, we're encouraged by the progress we're seeing in Asia. As you mentioned, we did see some improvement in China in the first half, and that continued through the third quarter. I mean it's difficult to talk about Asia as one region because it's such a vast area, but we're seeing good progress in China, solid demand in North Asia, across Japan and Korea. And that gives us some encouragement for the future. And if I look at APAC in the broader suite, we've grown that business significantly over the last 5 years. We're now a $500 million business revenue when we were around about $100 million 5 years ago. And it's a huge growth opportunity for us still because it's 60% of the world's population, and a lot of the trends we talked about on the call are true in Asia as well. So the opportunity there is very clear. And the fact that we're starting to see some stability and improvement is very encouraging as we go into the next 12 months. Sarah Kuijlaars: Thanks, Nick. And then Lisa, on the raw materials, I think it's worth reminding you that we've now got a much broader array of raw materials, CPK, it's not just corn, [indiscernible], et cetera. And broadly, it's a more benign environment. There's not a strong inflationary push coming through there. So it's more benign, and we're well diversified. Nick Hampton: I think it's fair to say we're seeing pretty flat year-on-year costs overall. I mean, with some ups and downs, but nothing significant. Operator: We have a follow-up question from Joan Lim from BNP Paribas. Yuan Lim: Sorry, just squeezing in one more question because everyone seems to be asking about margins. Nick, you've historically talked about how important it is to protect unit margins. Has this changed? Are you confident of maintaining unit margins this year? Nick Hampton: No, I think the focus on unit margins hasn't changed at all. I think in the near term, we're trying to balance all the levers we have to get the business back into top-line growth. And doing that in an environment where markets are more sluggish means we're having to make some choices about where we invest and what choices you make. But fundamentally, over time, we expect to focus on maintaining unit margins and using mix to improve margins to the quality of the portfolio. We're in a cycle at the moment where we're having to make some choices. Yuan Lim: It's reassuring to hear that you are confident of maintaining the margins. Operator: With this, I'd like to hand the call back over to Nick Hampton for any closing remarks. Nick Hampton: Thank you, operator, and thank you, everybody, for your questions. So just to summarize, trading in the third quarter was in line with our expectations and consistent with the first half. And importantly, our guidance for the full year remains unchanged. As we talked a lot about on the call, our #1 priority is returning the business to top-line growth. And we're clear on the actions we're going to take to improve top line performance of the business in the near term. We remain focused on top-line growth, execution, and delivering for our customers. So thank you for your time and questions, and I wish you all a very good day. Operator: Thank you. This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Alkami Technology Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] This call is being recorded on Wednesday, February 25, 2026. I'd like to turn the conference over to Steve Calk. Steve, go ahead. Steve Calk: Thank you, Natasha. With me on today's call are Alex Shootman, Chief Executive Officer; and Cassandra Hudson, Chief Financial Officer. During today's call, we may make forward-looking statements about guidance and other matters regarding our future performance. These statements are based on management's current views and expectations and are subject to various risks and uncertainties. Our actual results may be materially different. For a summary of risk factors associated with our forward-looking statements, please refer to today's press release and the sections in our latest 10-K entitled Risk Factors and Forward-Looking Statements. Statements made during the call are being made as of today, and we undertake no obligation to update or revise these statements. Also, unless otherwise stated, financial measures discussed in this call will be on a non-GAAP basis. We believe these measures are useful to investors in the understanding of our financial results. A reconciliation to the comparable GAAP financial measures can be found in our earnings press release and in our filings with the SEC. I'd now like to turn the call over to Alex. Alex Shootman: Good afternoon, and thank you all for joining us. I am pleased to announce a strong fourth quarter performance, which caps off a great year for Alkami. For both the fourth quarter and the year, Alkami exceeded consensus revenue and adjusted EBITDA estimates. In the fourth quarter, we grew revenue 35% and increased adjusted EBITDA to $19 million. And for the full year, we achieved revenue growth of 33% and adjusted EBITDA of over $59 million, which is more than double the adjusted EBITDA we delivered in 2024. The fourth quarter was a strong sales quarter with 16 new digital banking clients, including 6 banks and 33 new MANTL clients, including 18 credit unions. In 2025, we matched the best year in our history in terms of digital banking new logos with 39 new clients, and MANTL had the best new client booking year in its history. Our MANTL origination platform now has 161 clients live, of which 26 are digital banking clients, and we now have 436 clients live on one of our 2 strategic platforms. In addition to our overall performance, there are 3 areas of our business to call out: the performance of our MANTL acquisition, progress in the bank market, and our ability to integrate digital banking, deposit origination and data and marketing to improve our win rates. The performance of MANTL accelerated since we brought the 2 companies together. In addition to a full record full year new logo performance for MANTL, Q4 was a record revenue activation quarter. A competitive advantage of MANTL is the combination of digital and in-branch originations, and MANTL is now powering over 1,000 bank and credit union branches across the U.S. It was also exciting to see 2 loan origination clients go live and 13 new loan platform clients signed in Q4. We continue to make progress in the bank market, with Q4 being our 2nd best bank new logo quarter in our history. In 2025, we brought 16 banks live on our Digital Banking platform and now have 50 banks under contract with 37 logged on the Alkami platform. We released a new suite of treasury management features with a follow-on feature bundled planned for the second quarter, all of which are intended to improve win rates. We are also seeing more banks separating online banking from their core provider, creating a long growth horizon for Alkami, as 78% of banks on dominant bank cores use the legacy core provided online product versus 43% of credit unions on dominant CU cores who use the legacy online product. Part of the MANTL acquisition thesis was the creation of the Alkami Digital Sales and Service Platform, or DSSP. This is the integration of our Digital Banking, Account Origination and Data and Marketing platforms with the intent to provide a financial institution with capabilities rivaling Chase and Chime. In the second half of 2025, we demonstrated outcomes like the ability to bring on a new account holder and have them in Digital Banking with multiple products and services in less than 5 minutes. The Alkami DSSP had a positive impact on our second half performance. When we acquired MANTL, 11 clients -- 11 Alkami clients had all 3 DSSP products. At the end of 2025, we had 45 clients that have bought all 3 products. In the second half, 58% of new digital banking deals resulted in DSSP clients, and our win rates against all our competitors improved. In addition to improved win rates, we enjoy a 30% uplift in ARR when clients buy DSSP and increase the contract legs for origination and data and marketing, resulting in a total contract value uplift. The MANTL acquisition, progress in the bank market and initiation of our DSSP all contributed to a strong business performance in the second half of 2025. I'm often asked about the impact of AI on Alkami. I believe that AI's impact will be significant, but not uniform across enterprise SaaS companies, and AI will be a net positive for Alkami. Let me remind everyone about key aspects of the Alkami business model. Alkami primarily prices our products by the number of digital account holders at an institution, with secondary pricing tied to metrics like money movement usage or asset size. In addition, our clients typically sign 5- to 7-year contracts. Alkami employees have a deep understanding of the bank and credit union industry and technology. This expertise has been developed through thousands of customer engagements and is used in areas of our business like the system conversion process. These conversions last 9 to 12 months, of which only about 2 to 3 months is actual configuration time. Our clients are highly risk-averse and regulated by agencies such as FDIC, OCC, NCUA and CISA. Their Digital Banking, deposit and Loan Origination platforms embed thousands of regulatory requirements, including NFI's decisions on how they've implemented KYC, AML, OFAC, Reg E, D and Z, audit logging, examiner workflows, data retention and explainability requirements. Our platforms have to integrate into over 450 different financial technology systems, few of which have publicly available integration specifications and all of which have the potential for imposing legal liability. Customers use Alkami as a system of record to codify items like their fraud mitigation practices, money moving thresholds, business logic for products, funding and interest rates. They memorialize customer due diligence, enhanced due diligence and decision logic such as approvals, outcomes and supporting reasons. On top of Alkami's business model, AI creates revenue opportunities in the form of current and coming AI products. Segmint, the AI engine that powers our Data & Marketing platform, helps financial institutions deliver the right product to the right account holder at the right time based on behavior, transaction patterns and life events. This technology was attached to all but 2 of our new logos this year. One of the fraud products we sell uses AI to analyze how a user interacts with digital banking, identifying signals that distinguish legitimate account holders from fraud attacks even when log-ins appear valid. This technology was attached to 67% of our new logos this year. At our April Client Conference, we plan to show a new product called Alkami Code Studio. Today, clients use our SDK to extend the Alkami platform for their unique requirements. We built an AI-native closed-loop development agent optimized on over 6 million lines of SDK code from across our ecosystem. This agent will enable prop-driven deployment of our SDK, and what used to take clients months will now take days. AI models run on data. Our clients want to deploy AI, but they need a data set unique to their industry to feed their models. We spent the last 18 months building a data lake that ingests cleansed core data, digital banking data, usage patterns and other information that can be used for AI. We have the opportunity to turn this data into products that our clients can use to deploy through own AI models. Finally, AI will create leverage within Alkami. Over the last year, we've introduced Gen AI models and agents into our organization. And while we are not yet ready to change assumptions on our long-term financial models, early results are promising. We're using specialized AI agents in our development organization that in December alone changed over 1 million lines of code, leading to an 18% increase in developer productivity. We have proof of concepts underway in AI-driven test case generation, proactive anomaly detection to minimize downtime, and we are auto running agents to accelerate incident resolution. Within our customer support and implementation organization, we're also seeing results that are encouraging. Members of the implementation team are seeing on average, almost 2 hours a day, and we've been able to slow the growth of our support organization while still achieving a 9% increase in speed of ticket closures. In addition, questions routed to the engineering organization have been reduced by 29%, freeing up engineering capacity. The pace of AI disruption will be relentless. And for a specialized vertical software provider in a highly regulated industry like Alkami, it will create new opportunities. In closing, I'm energized as we start 2026. Within our ideal client profile, there are over 900 credit unions and 1,000 banks that are not using modern technology like Alkami. We continue to see steady demand for digital banking transformation. Our sales pipeline remains consistent with recent years, and Alkami has a superior position with differentiated products designed for scalability and populated with proprietary data. More than 1,200 Alkamists remain committed to our clients as our North Star and know that doing it right is as important as getting it done. Thank you, Alkamists, for who you are and for building the company where I get to work. I'll now hand the call to Cassandra to discuss our financial results. Cassandra Hudson: Thanks, Alex, and good afternoon, everyone. 2025 was a standout year for Alkami. We delivered robust revenue growth while meaningfully expanding profitability and cash flow, demonstrating the durability and leverage of our model. For the full year, total revenue reached $443.6 million, up 33% year-over-year. Subscription revenue grew 32% and represented 95% of our total revenue. Adjusted EBITDA more than doubled to $59.1 million compared to $26.9 million in 2024, and our adjusted EBITDA margin expanded 530 basis points to 13.3%. Our performance built throughout the year and positioned us to exit 2025 with significant momentum. In the fourth quarter, revenue was $120.8 million, up 35% year-over-year. Subscription revenue grew 34% and again represented 95% of total revenue. We increased ARR by 35% and exited the quarter at $480 million. Importantly, we have approximately $71 million of ARR in backlog pending implementation, which includes 42 new clients, representing roughly 1.6 million digital users. We expect the majority of this backlog to launch over the next 12 months. Our results are reported inclusive of MANTL. At this point, the businesses are functionally integrated and distinguishing between organic and acquired contributions is increasingly arbitrary. In fact, more than half of our new logos in the second half purchased Digital Banking, Origination and Data & Marketing together. That's a direct reflection of the success of our Digital Sales and Service Platform strategy. DSSP strengthens our competitive position, particularly with banks, and extends contract durations across our origination in Data & Marketing products. In the near term, we anticipate that a DSSP deployment may take longer than a stand-alone origination or Data & Marketing implementation, which would shift some revenue out by a few quarters. However, that short-term timing impact is more than offset by stronger long-term economics, including higher retention, longer contract duration and greater customer lifetime value. We believe this integrated platform strategy represents a structural competitive advantage. We exited the year with 301 clients and 22.4 million registered users, an increase of 2.4 million users or 12% year-over-year. Over the past 12 months, we implemented 35 clients, supporting 1.3 million digital users, and existing clients increased their digital adoption by 1.5 million users. Our contracts provide strong visibility into attrition, typically 3 to 4 quarters in advance. In 2025, we churned less than 1% of our Digital Banking ARR. For 2026, we currently expect to churn 4 Digital Banking clients, which again represents less than 1% of ARR. This speaks to the mission-critical nature of our platform and the strength of our long-term client relationships. Revenue per user increased to $21.44, up 20% year-over-year, driven primarily by MANTL's contribution, strong cross-sell execution and increased user adoption among existing clients. Remaining performance obligations were approximately $1.7 billion or 3.6x live ARR, up 26% year-over-year, providing strong visibility into long-term revenue. Fourth quarter non-GAAP gross margin was 63.4%, up 30 basis points year-over-year. Expansion in the quarter was more modest, primarily due to higher database technology costs. We view this as a temporary increase and expect these costs to decline by the end of 2026. Full year non-GAAP gross margin was 64.1%, expanding nearly 140 basis points and driven by continued optimization of hosting costs, platform modernization and operating leverage across post-sale functions. Fourth quarter operating expenses were $57.9 million or 48% of revenue, representing 420 basis points of year-over-year expansion, primarily within R&D and G&A as we scale efficiently. Adjusted EBITDA in Q4 was $19.1 million, above the high end of our expectations, with an adjusted EBITDA margin of 15.8%. We have largely completed the initial investment phase of our captive offshore capability in India and expect incremental margin expansion as this facility reaches operational maturity in late 2026. We ended the quarter with $99.1 million in cash and marketable securities. For 2025, operating cash flow was $42.9 million, up from $18.6 million in 2024. Free cash flow was $34.2 million, driven by our enhanced profitability in the year, and we repaid $45 million on our revolving credit facility. Now turning to guidance. For Q1 2026, we expect revenue of $124.7 million to $125.7 million, representing growth of 27.5% to 28.5%, and adjusted EBITDA of $21.1 million to $21.9 million or 17.2% margin at the midpoint. As a reminder, we closed the MANTL acquisition on March 17, 2025. This timing will contribute approximately 8 percentage points of year-over-year growth to Q1 2026. Growth rates will become fully comparable beginning in Q2. For full year 2026, we expect revenue of $525.5 million to $530.5 million, representing growth of 18.5% to 19.6%, and adjusted EBITDA of $93.5 million to $97.5 million or 18.1% margin at the midpoint. Our revenue outlook reflects several underlying assumptions. We expect continued cross-sell momentum across the platform and a consistent level of ARR launches throughout the year. We also expect high single-digit ARPU growth, which incorporates a slight moderation in user growth among existing Digital Banking clients. In addition to those core drivers, we expect a 75% decline in termination fee revenue, which will reduce reported growth by a few percentage points in 2026. This impact is partially offset by the timing of the MANTL acquisition, which contributes modestly to our full year growth as mentioned previously. Turning to profitability. We expect a full year non-GAAP gross margin of approximately 65%. In the back half of 2026, we expect adjusted EBITDA margin to be north of 19%, weighted toward the fourth quarter and in line with our typical seasonal patterns. Overall, our nearly 500 basis points of margin expansion reflects leverage in the model, efficiencies from our offshore operations and continued operational discipline. In addition, we expect stock-based compensation to be between 14% and 15% of revenue. As we look ahead, we wanted to provide insight into our long-term model. These represent what we believe are achievable targets based on our long-term contracts and the current structure of our business. We remain confident in our long-term trajectory and expect to achieve a Rule of 45 by 2030. The key drivers of which include revenue growth fueled by a gradual increase in new logo wins in the bank market driven by our DSSP offering and continued leadership in the credit union market, consistent performance from our add-on sales effort and volume growth from existing customers that moderates in line with market growth, both of which we expect to drive continued RPU expansion and dollar churn of roughly 2% to 3% per year. Our long-term outlook does not assume incremental M&A. From a profitability perspective, we expect non-GAAP gross margin approaching 70% as we improve execution on bank launches over time and become more efficient at supporting our clients. Average annual adjusted EBITDA margin expansion of approximately 300 basis points driven by efficiencies from our offshore efforts in India and operational improvements from achieving greater scale, particularly in R&D and G&A. Lastly, we expect stock-based compensation to decline to approximately 10% of revenue. In closing, 2025 demonstrated the strength of Alkami's platform, the leverage in our model and the durability of our growth. We delivered best-in-class revenue growth, expanded margins meaningfully, generated strong cash flow and positioned the company for long-term value creation. We believe our Digital Sales and Service Platform strategy uniquely positions Alkami at the center of digital transformation for financial institutions, and we remain confident in our ability to deliver durable growth and increasing profitability in the years ahead. With that, operator, please open the line for questions. Operator: [Operator Instructions] Your first question comes from Andrew Schmidt with KeyBanc Capital Markets. Andrew Schmidt: I just wanted to start off on the 2026 outlook. Cassandra, you mentioned a few of the moving parts. Maybe if you could just walk through those? I think term fees were mentioned, DSSP implementation time frames, perhaps we could take a finer point there? And if there's any other factors to consider in the outlook because it does seem like the underlying demand trends are really strong, as you outlined. So important to parse out the moving parts in '26. Cassandra Hudson: Sure. Thanks, Andrew. Thanks for the question. I think you're exactly right. I -- the underlying dynamics of our business are -- remain strong. And the items that we were commenting on regarding our 2026 guide are really timing related. The termination fees, in any given year, we have some amount of termination fees, and 2025 happened to be a bit of a higher year as it related to that. And I think 2026 is just a smaller amount of those fees, and it is impacting our growth by a few percentage points in the year. In addition to that, it's very early days for DSSP, but just given the fact that we're selling 3 products together, and our clients certainly have the optionality of how they will implement those on their side and what works best for them, we've been modeling slightly longer implementation cycles kind of closer to that 12-month period, which is more typical for digital banking. On a stand-alone basis, we would typically see our origination in Data & Marketing products be implementing -- implemented more around 6 months on average. So for those 2 products, in particular, when they're sold as part of a DSSP, we're modeling that revenue shifts out for 2 months as of now. Again, it's early days, and that may change over time, but felt that it was prudent to call out on the call. Andrew Schmidt: Got it. That's super helpful. And I guess just a couple of follow-ups. Any other considerations in terms of implementation timing shifts outside of DSSP? And then I guess, just the second one. It sounds like as these implementations come online, they sort of lap or you sort of move past the elevated term fees, the growth could step up potentially as we go into '27. Maybe talk about that a little bit. And then I guess, what's the right baseline for pro forma growth this year? Because I know there is a little bit of MANTL that's baked in. So just as kind of a jumping off part. I know I baked a lot in there, but any help there would be helpful. Cassandra Hudson: No worries. Yes, I would say those are the 2 big call-outs, along with what I think we've talked about over the past several calls and the trend that we've seen with the growth from our existing Digital Banking clients normalizing over time, right? So I think that is a factor as well for our revenue guidance that everyone should be aware of. Not ready to guide to 2027 at this point. But I think if you... Alex Shootman: That was a good try, though. Cassandra Hudson: If you isolate -- if you really isolate the term fees and the small impact from the timing of the MANTL acquisition, it should give you a good sense of where growth would be in 2026. Operator: Our next question comes from Jacob Stephan with Lake Street. Jacob Stephan: Nice quarter. I just kind of wanted to touch on some of the milestones you hit here in 2025 and maybe kind of what you're seeing as you look at 2026 in the early kind of the first half here. Maybe if you could just kind of start with the loan activation. I know you said 2 go-lives in Q4, 13 signings in the same quarter. But maybe what are you seeing in the first half here with regards to MANTL and maybe overall DSSP? Alex Shootman: Well, first of all, we've been really encouraged in terms of how DSSP helps with our win rate. We're -- what we're doing is creating a situation were instead of only focusing on a great user experience, which is really important. The integration of these 3 technologies actually creates a differentiated business outcome for the client. So the first integration that we're able to deliver increases the conversion rate of deposit originations, which is critical for these institutions. So what we're seeing on DSSP is our ability to connect to positive business outcomes is helping our win rate. So that's been super helpful. On the loan side, what we've talked about since the MANTL acquisition is that there is a project underway to build a loan capability. And that was driven by deposit origination clients who wanted to have an integrated front end, if you will, with both deposit origination and loan origination. The product build strategy has been to assemble a collection of lighthouse accounts, if you will, where those lighthouse accounts understand that they're participating in the build process and they're coming online as the product is becoming mature. So we're still not yet at the point where we've taken this product and are making it generally available for our entire sales force to sell. This is still something that is sold very carefully with the right type of account and knows the situation that they're getting into. And we'll be very public with you and the rest of the investment community when we consider that to be a full product in our portfolio. Jacob Stephan: Got it. And maybe just kind of touching on the full suite and bank clients specifically. We've obviously been talking about banks and their higher ARPU kind of nature to them. But now it feels like you're really starting to gain some traction with banks. Maybe you could kind of give us like a forward-looking, what's in the pipeline in terms of banks? And how do you see the mix evolving over the next 12 months? Alex Shootman: One of the things that I mentioned was that our pipeline is consistent with previous years. The big move in the pipeline probably occurred 18 months, 2 years ago when the pipeline used to be probably 70-30 credit union and bank and it moved to about 50-50 credit union and bank. And so you should just take from my comments that consistent pipeline means that it's about 50-50 credit union banks. The dynamic that I mentioned during the call is really important to our long-term growth if you look at the difference between a bank market being a suite buyer and a credit union market being a best-of-breed buyer. And what I mentioned on the call is 78% of the institutions that are on the dominant bank cores have a V1 legacy online banking application that is tied to the core. That's what we're seeing unwind. And we've got an assumption that's built into our model that, that unwinds at a relatively measured pace over the next couple of years. So upside to our assumptions could be if that unwinds faster than we're assuming, and that would -- given our current win rates, that would take up the number of bank wins that we're assuming in our long-term model. But generally, what's win behind us in the bank market is our treasury road map is improving. Our technical skills to do the bank conversions, especially the commercial data conversions, is improving. And our knowledge of the dominant bank cores is improving. And what that does all of those things together reduces risk for a client who's making the decision to unwind from their suite purchase that they've had in the past and move to a best-of-breed purchase. Operator: Your next question comes from Saket Kalia with Barclays. Saket Kalia: Cassandra, maybe just to start with you. We walked through some of the moving parts on the revenue guide. But we didn't talk much about ARR. And I'm just kind of curious, I know you wouldn't necessarily guide to ARR on an out-year basis. But I'm curious, how do you think about it kind of going into '26? How much growth do you think we get from users versus maybe ARPU as we think about the building blocks? Cassandra Hudson: Well, I guess I'm not prepared to kind of guide to ARR in that way. But if you think about the revenue guide, I think it translates pretty well to ARR. We expect high-digit growth in RPU. And I think we would see that flow through in the same way to ARR. And you can also see there's a pretty tight relationship in terms of the absolute dollar growth in revenue to ARR. So if you kind of look at that relationship, it should give you a good sense of how ARR will trend over time. Alex Shootman: And then Saket, this is Alex. We're trying to share in terms of how we think about our model. If you go back 3 years ago or something like that and you looked at our customers' organic growth, it was pretty far above the general market. But all the way back at that point in time, what we were signaling is as Alkami grows and Alkami takes share, you would expect that our customers' organic growth would begin to match that of the rest of the market. And so that's one of the main things that we're trying to communicate to our investors is that which we told you several years ago, now that we've got 20-plus million account holders on the platform, that is becoming true for our company is that the customer organic growth is beginning to match the market. Saket Kalia: That makes a lot of sense. It's a great flag and just shows how much market share you've taken over the years. So maybe that's a good segue into my follow-up for you, Alex. I mean, during your prepared remarks, you talked a little bit about customers that are still using some legacy tools, and you had some great stats on certain banks versus credit unions. But if I assume out a little bit, I guess, how do you think about the runway left maybe in terms of registered users, right, that could potentially modernize to a solution like Alkami over the coming years? Alex Shootman: Yes. Thanks, Saket. That's one of the things I was trying to communicate in my comments. We look -- we go from TAM to SAM to ICP, right? So our ideal client profile. When we're looking at an ideal client profile, this is somebody that fits the size of institution that is the sweet spot for Alkami, right? So we would show up, and they would say what you have fits our need. And we have the experience integrating into the core that they're using. And so those are some of the numbers that I was sharing. When we look forward, there's still 1,000 banks and 900 credit unions that are in our ICP that can move to a more modern platform. Now we're going to have to compete for that with other great companies that can move to a more modern platform, and we already have experience integrating into their core. And that's one of the things that gives us a view of the durability of our growth in the future is that kind of runway that we still have in front of us. Operator: Now have a question from Ella Smith with JPMorgan. Eleanor Smith: For my first one, I'm hoping to estimate organic ARR growth. If you assume that MANTL was about $40 million of ARR in the quarter, you get to about 24% organic ARR growth. Is that about right? Or does MANTL contribute more in ARR? Cassandra Hudson: I guess, as I said on the call, it's a bit tricky to really parse that out, right? So with DSSP now, we're selling the 3 products in a bundled transaction. So it's a little bit arbitrary to determine the true organic contribution of MANTL. Kind of the math you were just walking through directionally makes sense as you think about the size of the MANTL business and how fast it's growing. But as I said, it's getting tougher and tougher to really parse that out. Eleanor Smith: That makes a lot of sense. And maybe for a quick follow-up. Your 2030 financial framework seems to imply your team's confidence that mid- to high teens revenue growth is achievable. And in this moment, there's a lot of uncertainty surrounding multiyear growth for software companies. Is there anything about Alkami or the market you would highlight that would give investors greater confidence surrounding Alkami's top line growth? Cassandra Hudson: I mean, I think we've -- very consistent with what we were just talking about on 2026, we have a lot of great dynamics underpinning our business model. We have long-term contracts, a very sticky product, mission critical in a lot of ways. And so I think that is a really good setup for very durable growth in the next several years. Just to be clear on the long-term model framework, we're not guiding to specific revenue growth in those out years beyond -- not guiding to anything beyond 2026. We're really focused on achieving that Rule of 45 and expanding our adjusted EBITDA margin. Maybe a couple of things that might help you as you think about the model. In terms of how things will pace out over the years from margin expansion standpoint, we would expect that expansion to be more front-end loaded. So in the earlier is kind of consistent with the guidance I just gave for 2026 and the expansion we've seen over the past several years, we'll continue to see greater leverage from scaling our platform, having disciplined expense growth and seeing a continued mix shift towards our higher-margin revenue streams. As the model matures, the pace of margin expansion will naturally moderate. So I think that just might help give you some directional guidance on the overall picture. One thing to call out on the revenue growth. If you're modeling that towards 2030, I would think of a more linear progression, just given how our business works. We're not going to see any gradual -- or we don't expect to see any gradual step-downs as we scale or any sharp inflections from year to year. So kind of to summarize that, margin expansion skews earlier in the period. Revenue growth moderates in a steady and linear fashion toward that long-term framework that I gave on the call. Operator: Your next question comes from Cris Kennedy with William Blair. Cristopher Kennedy: I'd love to hear from you, Cassandra. What are the key things that you're focused on? And what do you see in the business that you're -- are your priorities now that you've got this role? Cassandra Hudson: Thanks, Cris. Thanks for the question. I think -- it's been -- I've learned a lot about the digital banking market over my first 90 days or so here. I think my priorities are really on supporting our growth, especially on the new customer side and making sure that we're activating customers and launching DSSP in particular. And then also just making sure that we are getting product out the door quickly, especially on the treasury management and loan origination side, which are clearly the newer areas that we've been investing in and will drive growth for us in -- over the longer term. So I'd say those are the biggest areas of focus for me as we think about the business, and also just everything AI related. I think that's a big topic and something that we are certainly putting a lot of energy into internally. Cristopher Kennedy: And thanks for the 2030 framework. As part of that, is there any way to think about free cash flow conversion as you think into 2030? Cassandra Hudson: Good question. I think you can see that we've been expanding free cash flow pretty steadily now, especially in 2025. And I think we'll see free cash flow conversion from adjusted EBITDA continue to improve. I think a target for us would be 90% cash -- free cash flow conversion in that 2030 time frame. Operator: Your next question comes from Adam Hotchkiss with Goldman Sachs. Adam Hotchkiss: Alex, I wanted to touch back on the 900 credit unions and your ICP. I think the 1,000 banks, very clear, there's the new DSSP offering, you're working on bringing that to market. And I'm sure there's going to be a sales effort around that. How do you think about the 900 credit unions? You've had a foothold in the credit union space for a long time now, catalysts for those folks moving on to more modern solutions that you think have been barriers over the last 3 to 5, even longer years? Alex Shootman: Well, there has not been a specific barrier. If you think about jump balls, there's a certain number of jump balls per year based upon contract expiration. So if you had a V1 product and you had a 7-year contract and you might have had some disappointment in that V1 product and you said, "Boy, I'd like to see some improvement to it," you might have decided to re-up for another 7 years on that product because you didn't want to do the conversion and you thought there was going to be some improvement to it. And then now you're coming towards the end of that product life of that contract and now you finally decided after 2 contract cycles in 14 years, I don't have the digital platform that I need. And so I'm going to go ahead and move to a new platform. So those are the dynamics that we're seeing. Once again, this is a replacement market. This is a market share gain market, and that's why we see steady growth. You never will see explosive growth from a bookings perspective one quarter over another because it is a replacement market and it depends upon people getting to the end of their contract life cycle and then making a decision to switch. Now one of the things that helps them make the decision is if there is a modern provider like an Alkami that has a track record of moving customers to a new platform. If you think about Alkami, we've -- in 3 years, we've probably moved as many customers to a new platform as we did in the prior 8 years. So now prospects are able to talk to a whole lot of clients that have gone through a conversion process. And those clients have said this conversion process is pretty good. You should take the risk, it's worth it. So if I wrap all of that together on the credit union side, there's still a lot of market share that can be gained. That market share gets gained when the contract cycles come up. The customer has to have confidence that the conversion will go well. And all of those things now exist in the market in terms of confidence it can go well, good product, happy customers. That's why we still think that we've got room to grow in the credit union space. Adam Hotchkiss: Okay. Alex, that's clear. And then Cassandra, just on the EBITDA margin side for '26. Appreciate all the expansion that the company has had over the last 3 years, though I think the guide came in just a little bit light of expectations on the margin side. So anything to call out there, either on operating expenses or gross margin? Or is that maybe a little bit of conservatism baked in? Cassandra Hudson: Thanks for the question. I think the one thing I tried to highlight on the call was the increased database technology costs that we started to incur in Q4. And those are pretty meaningful, a couple of million dollars that we've had to absorb. And so I think that's incremental to what we were expecting. And we do expect that cost increase to be temporary. And we will still expand our adjusted EBITDA margins by another 500 basis points in 2026 even with those incremental costs, but that would be the one thing that I would call out as a bit of an incremental or new thing that we're dealing with for this year. Alex Shootman: I'm going to be less kind than Cassandra. If you go back to beginning of 2023, one of the guides that we gave was that in 2026, we'd be at 20% adjusted EBITDA. And then when we made the MANTL acquisition, we said that, that would temper down to 19%. We've had a third-party vendor that we run their database who just doubled our license cost. And that is the exact difference that you see between the 19% that we told you and what Cassandra is guiding to right now. And so now we're going to convert off of that database because we're frustrated that we got hit with a 2x increase on the database cost, and that's why it's a short-term anomaly for us. Operator: Your next question comes from Jeff Van Rhee Craig-Hallum. Jeff Van Rhee: So Alex, just in terms of the mix of displacements when you're coming in and displacing legacy fabrics or frameworks, what are you displacing now versus, call it, 2 years ago and what's changed? Alex Shootman: Well, in the bank market, it's primarily the digital platform that's offered by the core vendor. In the credit union market, it is -- I mean, the good news for us is, you know all the players in the market. So there's probably 3 modern players in the market, one that's primarily credit union, one that's credit union and banks. We are not displacing any of those technologies, and they're not displacing Alkami. All of us are displacing legacy kind of V1. So the bank market is always a core -- Digital Banking application that's tied to core. In the credit union market, there have been some companies that in the past had very good technology, but maybe in the most recent past, say, the last 3 to 4 years, they haven't been investing in their technology. Those are the ones that we're replacing. Jeff Van Rhee: Okay. One brief question on the bank side. If I have it right, 10 bank wins, second half of the year versus 9 a year earlier. Just thoughts there, specifically with the go-to-market? I know you've been trying to through getting more integrations and other things that you think will improve the ability to go sell that. But I know it's been a focus. Just where are we in terms of figuring that out? And what has to happen for that really to start to accelerate for you? Alex Shootman: One of the big changes that we made from a go-to-market perspective is as we announced in the middle of the year that Nathaniel moved into the Chief Revenue Officer role, and through the back half of the year, he made a decision studying the market, studying the team, that from a new logo perspective, we would have a bank sales team and a credit union sales team on the online banking side. So that's a big change for us going into this year. We've always had a blended sales team prior to that. And now we have a concentrated sales team and a concentrated credit union team. In terms of the core integrations, we have experienced with the dominant cores that we need to do the integrations into for a client. As I may have mentioned in the third quarter call, we structured a commercial relationship that really has turned out to be a fantastic relationship with one of the core providers where we jointly do things like performance modeling with them. We've got direct support with them. And so that's helped us quite a bit in terms of allowing customers to be confident. Remember, the essential situation that we have with a bank client is they want a more modern platform. They have never existed with a best-of-breed strategy, and they need to overcome their perceived risk and get into that best-of-breed strategy. So when we can come to them, where we're working jointly with one of the core providers, we can help them see how that conversion is going to go. We can help them see what kind of support we're going to have. It really begins to derisk their decision. And Jeff, that's really what we have to do in the bank market is derisk a client's decision. Desire is to make a change, just whether or not they get comfortable with the risk. Jeff Van Rhee: Yes. Helpful. Maybe just last for me. Is there -- are you experiencing -- I don't know. It seems like a lack of urgency on the part of buyers that seem to have spiked maybe midyear last year. As I think about the progression of the guide through the year last year, as the year progressed, the year generally got more back-end loaded, and it was just that the go-lives were delayed. And going into midyear, I think you had 12-plus quarters, at least by my model, of mid-20s organic. And then in Q3, you dropped, call it, mid-teens and upper teens. And same for Q4, it looks like we're looking for the same in Q1. And I would have thought if a lot of those go-lives that were going to be in the second half of last year are pushing to this year, that should make up for some of these difficulties of a couple of points of termination and other things. So more like very high picture, is there some very high-level behavioral change of the buyers where there just isn't the urgency for some reason either to sign or maybe even more particularly just get these implementations live? Cassandra Hudson: No, I wouldn't say so. I mean, I think the underlying business fundamentals are there. But if they haven't changed and the demand environment remains strong -- but if you think about us implementing relatively consistent level of ARR between 2025 and 2026, I think that implies a certain level of growth. Alex Shootman: It becomes a math equation when one part is getting bigger. But we did our research. So just on the research is that 2024 had a slight decline in market jump balls, and then 2025 came back up. So, that would just be the one buyer behavior thing that we did see is a slight dip in 2024 on jump balls and pick back up in 2025. Jeff Van Rhee: Did you see a change -- I promise, the last one. Did you see a change in the add-on sales as a percent of bookings? I know you've been sharing that every quarter. I'm just wondering if there was any movement there this quarter? Cassandra Hudson: Roughly the same, Jeff. Operator: Your next question comes from [ Alex Newman ] with Stephens. Alex Newman: Just -- could you expand on some of the capabilities of the MANTL LOS, just in terms of the types of loans you can originate? Just specifically, I know there's some consumer capabilities, but if you're able to originate commercial loans? And if not, if that's on the road map? Alex Shootman: Yes. What our customers are asking for right now that we would target is retail and HELOC down. So that would be the focus. Once again, as I said, we -- these are very selective engagements with customers right now. We'll come and tell you all when this is generally available and we're off selling it to everybody. But for the near term, this is retail and HELOC down. And as we have success with that, then we'll have optionality to build other capabilities and move into commercial market or other types of products. Alex Newman: Great. And then can you just provide an update on the progress of cross-sell activity between MANTL and the digital banking client base and vice versa and how that's progressing? Alex Shootman: I think one of the things that I mentioned in my opening comments is there's 160 -- I'm doing this off the top of my head, I'm not looking at my notes -- there's 161 live clients on the deposit origination platform. And of that, there's 26 digital banking clients. I think the important one was when we put the 2 companies together, there were only 11 Alkami online banking clients that had all 3 products, that have our data marketing platform and had the origination platform. And at the end of the year, under contract are 45 clients that have all 3 products. So I think that speaks to the progress that we've made on creating demand for the integrated platform. Alex Newman: Okay. Awesome. And just -- if I could squeeze one more in here. Just any updates on capital allocation priorities as we head into '26? Cassandra Hudson: Sure. Alex Shootman: Well, you saw us pay down some things, that was a use of money. Cassandra Hudson: Yes. And I think you'll -- we'll continue to focus on paying down at least our revolving line of credit. From a capital allocation standpoint, I mean, we're assessing that all the time. For us, opportunistic M&A continues to be a longer-term priority that from a capital allocation perspective, that we're always assessing. And share buybacks would be something that we would continue to assess as well. So no changes today in our capital allocation approach, but something that we're constantly assessing. Operator: Thank you. And as there are no more questions, we will -- I will now say thank you for joining, and you may disconnect.
Marseille Nograles: Good afternoon, everyone, and thank you for joining us today. I'm Jinggay Nograles, Head of Investor Relations here at PLDT, and it's my pleasure to welcome you to our full year financial and operating results briefing. Joining us today to share insights into PLDT's performance and strategic direction, we have PLDT's CFO, Mr. Danny Yu; PLDT's Chief Operating Officer, Mr. Butch Jimenez; our Chief Legal Counsel, Attorney, Joan De Venecia-Fabul; our Corporate Secretary, Attorney, Marilyn Victorio-Aquino. We also have our business unit heads, our Head of Consumer Business Home, Mr. John Palanca; our Head of Enterprise, Mr. Blums Pineda; and our OICs for Smart Communications, Ms. Marjorie Garrovillo and Mr. Lloyd Manaloto. We also have online with us ePLDT and VITRO President, Viboy Genuino. [Operator Instructions] Right, to start, I'd like to invite our Chief Financial Officer, Mr. Danny Yu, to walk us through PLDT's financial performance. Danny Yu: Good afternoon, everyone, and thank you for joining us today. Please allow me to present PLDT's financial and operating highlights for the full year 2025. Our gross service revenues reached PHP 212.2 billion, up 2% or PHP 3.8 billion. Net service revenues reached PHP 196.2 billion, marking a record Cash OpEx subsidies and provisions came down to PHP 84.9 billion, down 1%, reflecting our focus on spending control even as we support the growth areas. EBITDA, excluding MRP costs, rose 3% to PHP 111.2 billion with margin steady at 52%. Telco core income was PHP 33.9 billion, down 3%, mainly due to higher financing costs and depreciation as we continue to invest in network upgrades. Core income improved to PHP 34.6 billion, up 1%, supported by Maya's swing to profitability. Overall, our fiscal year results show a stable top line, resilient EBITDA, improving contribution from our digital business and stronger cash as CapEx came down. Our consolidated service revenues reached PHP 196.2 billion, up 1% or PHP 1.5 billion year-on-year. If we exclude legacy services, revenue would have grown 3% or PHP 5.5 billion to PHP 176.9 billion. This now makes up about 90% of total service revenues versus 88% a year ago. For wireless, mobile data and fixed wireless reached PHP 77.2 billion, up 1%, making up 91% of wireless revenues versus 89% last year. Wireless consumer revenues were PHP 85 billion, steady year-on-year. For Home, fiber continues to lead the story. Fiber revenues grew 6% to PHP 59.4 billion, accounting for 98% of Home revenues versus 92% a year ago. As a result, Home revenues reached an all-time high of PHP 61 billion, up 3%. For Enterprise, corporate data and ICT grew 3% to PHP 36.3 billion, now 75% of Enterprise revenues versus 72% last year. ICT on its [indiscernible] 25% year-on-year. Overall, Enterprise revenues grew to a record PHP 48.4 billion. By and large, the continued shift towards fiber, wireless data and ICT is what is driving the growth, more than offsetting the decline in legacy services. To close the year, we ended fourth quarter stronger versus 3 quarter, Q3, building on the momentum that we saw last quarter. Consolidated service revenue in the fourth quarter were PHP 50.3 billion, up 3% quarter-on-quarter. Wireless consumer revenues were PHP 21.8 billion, up 4%, driven by mobile data and fixed wireless access. Enterprise revenues were PHP 12.7 billion, up 5%, led by corporate data and ICT. Home was flat quarter-on-quarter due to multiple major calamities in the fourth quarter, including 2 earthquakes and 4 super typhoons, which affected installation activity as resources were diverted to repair and restoration. Let's take a closer look at each of the business units. As mentioned earlier, Home delivered record revenues in 2025. On this slide, I will focus on the drivers behind the performance. Subscriber growth stayed strong and quality led. Fiber net adds reached 392,000 in 2025, up 98% year-on-year, bringing total fiber subs to 3.76 million. This was supported by faster installs, improved service reliability and more affordable fiber options that help broaden adoption. Customer economics stayed healthy, supported by our bundling strategy. ARPU was stable at PHP 1,447 for the full year. Churn remained very manageable at 1.82%. We continue to strengthen our content bundles with Cignal, Netflix and HBO Max. We also expanded beyond streaming into home services through Home Life, which offers starter kits for home security and everyday living. And through iGV Game Pass, we give subscriber access to over 200 PC games. Overall, we continue to grow Home in a disciplined way, turning CapEx into stronger revenues while keeping margins resilient. Wireless consumer revenues held steady in a highly competitive market. Here, I'll focus on key drivers of the business, particularly hyper personalization, 5G adoption and fixed wireless access. Worth noting is that the gains in the third quarter were carried on to the fourth quarter as we streamline offers and customer management while continuing to invest in network quality. We also saw sequential ARPU improvement with smart prepaid up 4% quarter-on-quarter and TNT up 3% quarter-on-quarter, supported by better targeting and more relevant offers. Usage continued to rise. Mobile data traffic grew 7% to 5,900 petabytes in 2025 and active data users reached 43.2 million as of end of December. 5G adoption also continues to expand, and this supports revenues as 5G users typically consume more data and take up bigger plans. 5G devices were up 35% to 11.2 million, while 5G data traffic rose 88%. 5G devices now make up 19% of the total base. As more traffic moves to 5G, it also helps decongest LTE, improving the experience across the network. Fixed wireless access remains a key [indiscernible]. Fixed wireless revenues were up 22% year-on-year, supported by the shift from 4G to 5G fixed wireless access, which improves service and help us use network capacity more efficiently. Lastly, our core modernization is now underway. This strengthens analytics and targeting, improves marketing efficiency and supports ARPUs. Enterprise delivered its highest revenues in 2025, and we ended the year stronger. In Q4, revenue rose 5% quarter-on-quarter, supported by ICT contract wins and better delivery momentum. The mix continues to shift beyond pure connectivity with more customers taking the solution-led services alongside core connectivity. ICT is the key growth driver. ICT revenues grew 25% for the full year, led by managed IT services, which jumped 211%; and data center colocation, which expanded by 15%. In Q4, ICT was up 19% year-on-year and 15% quarter-on-quarter, supported by contract wins and better delivery. We also strengthened our security stack with SmartSafe SilentAccess, a network-powered sign-in solution that moves beyond SMS OTPs and aligned with the BSP's push for stronger digital authentication. Lastly, SME also contributed to growth with revenues up 3% year-on-year, supported by fiber and mobile access and scalable ICT offers, including SME engagement series with government and partners. Overall, enterprise is back in growth mode anchored on ICT and digital infra. I'll zero in on VITRO and Pilipinas AI on the next slide. VITRO is now on its 25th year, and it remains the market leader with the widest data center footprint in the Philippines. That matters because enterprise, cloud, AI workloads all depend on the uptime, security and trust. In April 2025, we launched the country's first operational hyperscale facility through VITRO. VITRO Santa Rosa is designed for enterprise, hyperscalers and public sector workloads, with about 4,500 racks and up to 50,000 megawatts once fully energized. It now hosts live NVIDIA GPU servers powering ePLDT's AI stack solutions. Demand remains still with colocation up 36%, supported by a 19% increase in rack deployments. On top of the infra, we're also building the AI layer Pilipinas AI, the country's first sovereign AI solution stack. This tool allows enterprises and the PH government to adopt AI without heavy upfront build-out while keeping data and workload hosted locally. To make this tangible, we already have live AI use cases running in VITRO today. These include AI-powered contact center tools that automate routine steps, improve response quality and give agents better prompts and insights. We also run conversational AI or top course that can handle [ publish ] and multistep conversation for customer support and lead generation. Lastly, we also have AI assistance that improve productivity in collection and other workloads by guiding next best actions and reducing handling time. VITRO and Pilipinas AI strengthen PLDT's position in data center and AI and support our long-term plan to scale this business with discipline. As we continue to invest in the business, we are also keeping a tight grip on costs as operating expenses came in lower for the third consecutive year. For the full year 2025, total cash CapEx subsidies provisions came in at PHP 84.9 billion, down PHP 1.2 billion or 1% year-on-year. The biggest savings came from compensation and benefits, down 6%, reflecting continued workforce discipline and productivity efforts. We also spent less on selling and promotions, down 9%, supported by better targeting and spend efficiency. Provisions and subsidies were both lower year-on-year, reflecting more disciplined customer acquisition and tighter credit screening in device-led plans. Offsetting some of these, contract-specific services increased, tied to the ramp-up of key ICT projects. Repairs and maintenance was also higher, reflecting ongoing network rollout and uptick. All told, we are managing OpEx -- rather OpEx carefully while still funding the priorities that support growth and service quality. For the full year 2025, EBITDA reached PHP 111.2 billion, up 3% year-on-year with margin steady at 52%. This was driven by a PHP 1.5 billion increase in service revenues alongside a PHP 1.2 billion decline in operating costs. The EBITDA margin held firm at 52% for the year, reflecting our ability to defend profitability even in a competitive market. Telco core income was PHP 33.9 billion, down 3% year-on-year, mainly due to higher depreciation and financing costs as we continue to invest in network and infra. Core income improved to PHP 34.6 billion, up 1%, supported by Maya's milestone year. Our share in Maya's core income was PHP 0.7 billion, improving from PHP 1 billion loss last year or PHP 1.3 billion upswing. Reported income was PHP 30 billion, down 7% year-on-year. This mainly reflects the lower ForEx and derivative gains versus last year. Overall, core earnings held up, supported by the steady operation and Maya's improving contribution. Meanwhile, our modernization work position us for the next phase of growth. Let me now move to CapEx and free cash flow. First, we sustained positive free cash flow through end 2025, building on what we achieved last quarter. Full year 2025 CapEx was PHP 60.3 billion, down from PHP 78.2 billion last year. CapEx intensity improved to 28% from 38% a year ago, reflecting tighter discipline and better pricing and terms. For 2026, our CapEx guidance is in the mid PHP 50 billion range with the same focus on growth and quality. Our goal is to steadily bring CapEx and CapEx intensity down while sustaining positive free cash flow. Let me now move to our debt profile as of December 2025. I'll start with a key point. PLDT sustained positive free cash flow as of end of 2025, supporting our deleveraging path. Net debt was PHP 284.7 billion, while net debt-to-EBITDA was at 2.56x. Gross debt was PHP 296.9 billion, and our maturity profile remains long dated with 49% of our maturities are post 2031. This keeps our near-term refinancing needs manageable. Interest cover remains healthy at 3.3x. Average debt maturity is 6.5 years, with 33% fixed rate and 67% floating as we anticipate lower rates moving into 2026. Finally, our recent annual review, PLDT continues to be rated investment grade by S&P and Moody's with stable outlooks. Looking ahead, our focus is to maintain positive free cash flow in 2026 and works toward around 2.0x net debt to EBITDA, supported by our asset monetization plans. For 2025, total dividends amount to PHP 94 per share, reflecting a 16% regular dividend payout aligned with our policy. A final dividend of PHP 46 per share for 2025 was declared today. PLDT continues to focus on deleveraging to generate positive free cash flows. As of end of 2025, PLDT's 12-month trailing dividend yield stood at 8%, positioning us as one of the most attractive dividend plays in the market. On to Maya. Maya operates as an integrated digital financing platform covering payments, savings and lending. The platform serves both consumers and businesses with scale driving higher transactions, broader product usage and stronger network effects. These dynamics support Maya's leadership in digital financial services in the Philippines. Maya closed 2025 with robust growth and achieved full year profitability. As of December 2025, Maya remained as the leading digital bank and merchant acquirer in the Philippines. Deposit balances reached approximately PHP 68 billion, up 72% year-on-year. Total loans disbursed since 2022 reached PHP 256 billion. The Maya Group delivered PHP 1.7 billion in net income for 2025, marking its first full year of profitability. Performance was supported by Maya's proprietary technology platform and AI capabilities. On the funding side, deposit products continue to attract customers with competitive interest rates. In 2025, Maya accelerated credit expansion through the launch of the Maya Black credit card and continued scaling of easy credit and personal loans. Credit quality remains stable with a gross NPL ratio of 6.1% as portfolio continued to mature. Maya continues to expand access to formal banking across the country. Its customer base is predominantly young with majority located outside Metro Manila. So through digital banking and credit products, Maya enables consumers to save securely, spend flexibly and access credit responsibly. In 2025, Maya expanded partnership across the private and public sectors. Private sector collaboration included Cebuana Lhuillier for new-to-credit consumers and Pepsi-Cola Philippines and Ultra Mega to enable purchase financing for micro businesses. Maya also partnered with Philippine Airlines to integrate airline miles into Maya app and supported digital engagement and voting platforms such as Pinoy Big Brother and Miss Universe Philippines. In the public sector, partnership with agencies, including the Department of Education, the Philippine Sports Commission and the National Power Corporation help improve access to digital financial services. Based on the performance of its products and partnership, Maya continues to redefine digital finance in the Philippines. From PLDT's perspective as a shareholder, Maya's first full year of profitability reflects the strength of its platform-led model and the long-term growth potential. PLDT continues to make notable gains in sustainability. For the second straight year, PLDT was included in the S&P Global Sustainability Yearbook after posting the highest CSA score among the Philippine companies at 77. On 848 out of 9,200 companies assessed were included, further evidencing the improvement it has made in ESG. PLDT also earned a B rating from CDP for both climate and water, performing in line with global and industry averages on climate while exceeding averages on water. PLDT remained at the forefront of adopting global reporting framework on ESG to further improve transparency and communication of progress to its various stakeholders. During the quarter, the Board approved policies on water and energy management to support energy efficiency and greenhouse gas reduction objectives, energy audits and energy management trainings were conducted nationwide. In support of our advocacy of creating a safe online environment, we continued to block access to malicious domains and URLs. We also deployed in-house innovation using AI to enhance risk assessment for both the enterprise and our employees. A summary of our latest ESG ratings that manifest the progress that we have made can be found in the Sustainability section of the presentation. Now that concludes our prepared remarks for PLDT's full year 2025 results. We are now open for questions. Marseille Nograles: Thank you, Danny, for those valuable insights on our growth initiatives and key developments. As you've seen today, we remain confident in our market position, supported by our improving operational fundamentals, strategic investments in digital infrastructure and the promising growth trajectory of Maya. Before we open the floor to your questions, allow me to reintroduce our business leaders who are here with us, who can also help answer your queries. We have our Chairman and CEO, Mr. Manuel V. Pangilinan; of course, our CFO, Mr. Danny Yu; our COO, Mr. Butch Jimenez; our Corporate Secretary, Attorney, Marilyn Victorio-Aquino; our Chief Legal Counsel, Attorney, Joan De Venecia-Fabul. We have our business unit heads, our consumer -- our Head of Consumer Business Home, Mr. John Palanca; our Head of Enterprise Business, Mr. Blums Pineda; the OICs for Smart Communications, Ms. Marjorie Garrovillo and Mr. Lloyd Manaloto. We also have with us President and CEO of ePLDT and VITRO, Mr. Viboy Genuino. Now I'd like to open the floor to your questions. [Operator Instructions] And I've also received a number of questions here before the meeting started. I see we have a hand raised by John Te of UBS. John Te: Let me go over my questions one by one, if you don't mind. First is on Mobile. I just want to understand the 5% growth quarter-on-quarter, which was relatively consistent with what Globe reported. But the drivers differed. We saw ARPU growth for PLDT and subscriber growth for Globe. So do you mind explaining what you think drove that difference in this quarter? Marseille Nograles: Sorry, we didn't hear the beginning part of your question, but I suppose this is in regards to our wireless business and the growth of 5% had different drivers for Smart and PLDT. So I'll turn the question over to you... Lloyd Dennis Manaloto: So our drivers for growth for the quarter 4 were including our launch of high personalization offers, which allowed us to upsell and therefore, drive our ARPUs. Moreover, if you look at our subscriber base, if you break it down to the numbers, our gross activations actually increased by roughly about 10%, 15%, while our churn held firm. So that basically shows us also an increase in our subscriber base plus the fact that our ARPUs also increased. John Te: My second question is on broadband. It was flat quarter-on-quarter, and we saw some softness in ARPU, although offset by subscriber adds. So was this, I guess, driven mostly by prepaid acquisitions or anything that could have influenced ARPU? John Gregory Palanca: This is John from PLDT Home. The second half of 2025, as you know, was really one that was ridden with calamities. We had a few major calamities, including earthquakes and typhoons, including super typhoons, Tino and Uwan. These activities or these events actually caused us to balance our growth with customer trust. And we had to redeploy our resources to ensure that our existing customers were restored. We were impacted by these events and the redeployment of our resources, our repair resources to -- in our growth path. So our installation slightly went down, but it was a good balance of maintaining a growth trajectory as well as restoring those affected areas. The big difference, I believe, between the previous years was that while the previous calamities were driven by strong winds, today, they're driven by floods. And flooding means extra restoration work for us as we would have to go into the homes to replace the wires and the modems. Last year, 22 million were actually affected by the typhoons that began in July and ended in December plus the 3 earthquakes and 293,000 homes were actually affected from PLDT. Glad to say that we feel that the trust remained because we were able to keep 73% of those customers, and we continue to work with the remaining 68,000 to handhold them and make sure that we do everything we can to keep them on the network. On the second part of your question on the ARPU softening, as you know, we're operating in a more price-sensitive environment today. And the entry-level tiers are really our growth drivers. However, there is still a very stable demand in the pipeline for our mid- to high-tier postpaid plans. Moreover, our upsell activities from the entry-level tiers remain to be healthy. So the movement is not really any structural price erosion. Rather, it more reflects our portfolio and the mix optimization to balance growth with lifetime value. Prepaid does expand our overall market. It opens up another -- you asked about prepaid, let me reply. It is a growth driver. It opens up our market to an additional 12 million rooms, but we choose to participate selectively. We still have headroom in our existing facilities, which brings us more margins, but less capital intensity. So we will only participate where the returns are within our thresholds. Thank you. John Te: Okay. I'll just combine my third and fourth question. Maybe a quick update on a Konektadong Pinoy, what are your overall thoughts on what might happen? And the second question is just an update on the data center and the potential IPO for Maya, which we -- I guess, we've seen in the press the past few days. Joan De Venecia-Fabul: This is Joan. I will respond to the question on Konektadong Pinoy. So as you may know, the IRR, or the implementing rules of the KP Act were implemented last December and took effect. And the next steps would be the issuance of the eligibility criteria for data transmission industry participants, or DTIPs that has already been released. The performance standards are also forthcoming. And the guidelines on the big ones policy are also about to be issued. Now the crucial next step would be the issuance by the DICT, PCC and NTC of the initial access list. So as you may know, that should come out in March. However, we note that the TWG has not yet been formally constituted for that, and the industry has also not yet been invited to participate in the formulation of the draft access list. So that's where we are. The trigger for the issuance of the reference access offer of the DTIPs, including the incumbent telcos is, of course, the issuance of the initial access list. So prior to that issuance, there is no basis for us to move with a reference access offer because we don't know what products, infrastructure or services would be included in the initial access list. So we will continue to provide updates on this as the days and months pass. Thank you. Marseille Nograles: And allow me to answer your question on Maya's IPO. Apologies, John, but we're not able to comment on the news surrounding Maya's IPO at this time. I hope you understand. John Te: And just 2 quick follow-ups. The data center stake sale, what the update on that? And then just separately on Konektadong Pinoy, I think we didn't touch on the loss pertaining to spectrum. I think that was an equally important part of the bill. Danny Yu: Yes. On the -- we're seriously considering a REIT IPO for our data center, John. Unfortunately, we cannot discuss about the timing. But yes, an international bank is helping us on this one. Joan De Venecia-Fabul: On the spectrum management policy framework, which is required as well in the Konektadong Pinoy law, this is supposed to be released by the NTC by end of year 2026 or one more year after that. So we have no information as of now as to whether this has already been considered by the NTC because there are several deadlines that have to be met by them before this particular deadline on spectrum. So we can expect that the movement on spectrum discussions will happen in Q3, Q4, thereabouts. Yes. So in so far as PLDT Smart is concerned, we are utilizing our spectrum. And I think the management policy framework of the NTC will really tackle more the underutilized or unutilized spectrum and for possible recalls. So we have no issues with this actually. Marseille Nograles: Thank you, Attorney Joan and John. Allow me to move to some of the questions here in the Q&A box. This one is for our Home business from Paolo Manansala of COL. Just wanted to ask how broadband revenues are up 3%, but fiber is up 6%. What is the drag in growth for the Home broadband line? John Gregory Palanca: Paolo, yes, we actually grew our fiber business from PHP 56 billion to PHP 59.4 billion, up PHP 3.4 billion. However, we do have some drag from our legacy services. That includes our copper facilities that remain to be in the numerous buildings across the country. And there are a few voice-only lines that remain to be migrated into voice plus data over fiber. Our legacy services in 2024 used to amount to PHP 3.2 billion. We've reduced that in 2025 to PHP 1.5 billion. So therefore, the total home business grew by 3%, accounting for the reduced revenues that we enjoy from the legacy services by PHP 1.7 billion. Marseille Nograles: Thank you, John. All right. This next question is from Zhiwei Foo of Macquarie, and this is on Maya. There was a step-up in loans disbursed during the fourth quarter of 2025, yet there was a Q-on-Q decline in share of earnings. Could you help me understand what happened here? So regarding Maya on the decline in Q4 profits, I do want to say that the revenues remain highly diversified across payments, transactions and digital banking services, and that's for both the consumer side as well as the business side, right? And I do want to emphasize as well that for 2025, Maya posted positive net income, which was a turnaround from the losses last year. The quarter-on-quarter decline was primarily driven by nonoperating and onetime items. So that includes fair value adjustments and foreign exchange movements as well as some investments in new products such as credit cards, new capabilities, including AI. Now there was some impact from the delinking of the gaming applications during the quarter, but that is -- the impact of that is not as large as those onetime items, and that has fully washed through the fourth quarter results. All right. I have a raised hand here from [ Raymond Franco ]. Unknown Analyst: Can you hear me? Marseille Nograles: Yes. Unknown Analyst: Okay. My first 2 questions were answered just now. If you can -- but this is still on Maya. Can you share the numbers on total provisioning levels on the lending side of Maya? And how does that compare to 2024? And then the second question is, can you break out the loans extended in Q4 between credit cards and others? Marseille Nograles: I don't think we disclosed the breakdown in loans. But in regards to provisioning, the credit cards were launched Maya Black and Landers were launched within the last year, and there were some provisioning in relation to the launch of the credit cards. I think this was mentioned during our 9-month results. So just because of this new business line, there's that difference in provisions. You can think about it in that way. But I can't give exact figures on that. Right. We also have some questions here that came in before the meeting started. This question is on our data centers, and it's from [ Mackie Carunungan of FPF Securities ]. I'll direct this to Viboy or to Blums. Can you provide IRR or payback expectations for your AI-ready data center investments? How do returns compare versus traditional data centers and regular connectivity such as mobile and fiber infrastructure. There's a follow-up here on the data center REIT, but I'll ask that afterwards. So Blums or Viboy, would you like to take this question? Victor S. Genuino: Yes. It's a new product that we launched for our data center business. Traditionally, we just have colocation and connectivity, but now we have a new service called Pilipinas AI. We're very happy to launch the first sovereign AI stack in the Philippines, which is getting a lot of interest from both the private sector and the public sector. Now customers have an option. If you want to run POCs or use cases on AI, you now have a couple of choices, either you go to the public cloud or you build your own sovereign on-premise stack or you can co-locate to VITRO Santa Rosa, wherein the AI stack is now available. So now customers have an option. But if your data is very sensitive, then the choice for customers would be keeping your data on-prem, and this is what VITRO Santa Rosa offers. Thank you. Marseille Nograles: Thank you, Viboy. A follow-up question on the data center REIT, if it is pursued, is the objective -- and I think this question is for Danny. Is the objective to deleverage or unlock value multiples? Would a partial divestment dilute long-term earnings versus retaining full ownership? Are we going to be using the proceeds? Is the REIT IPO there deleverage? Danny Yu: Yes. The REIT IPO, the proceeds will be primarily used to pay off debt. That's the primary objective. Marseille Nograles: And do you believe that will this unlock valuation multiples for the data center? Danny Yu: Partly yes, but the REIT will only cover the 8 data centers and it does not include the VITRO Santa Rosa. So it's a partial unlocking of value. Marseille Nograles: All right. Next question here is from Gregg Ilag of BPI Securities. This is on interest expense. On interest expense, the growth seems to be faster than the rise in total debt. Would you provide some color on what's driving that? So the growth in interest expense is faster than the growth in total debt. What is driving that? Is that higher interest rates or higher debt level? Danny Yu: The increase in financing cost is a function of interest rate loan balance as well as the accretion on lease liabilities, right? So if you try to dissect the increase in financing charges in 2025, 35% of that was mainly due to interest rate, 40 to loan balances, about 25 to accretion of lease liabilities. On interest rate, we have started the negotiation with the local banks on a smaller spread as well as on reduced repricing period. And so far, we have been quite successful, and this will give us considerable savings. Now with respect to loan balances, we expect to pay -- we started -- we think that we can start paying off debt by the latter part of 2026. So we should be able to bring down our total debt in 2026 versus 2025. Marseille Nograles: Thank you, Danny. This other question is also from Gregg, and it's for our Mobile business. On Mobile, quarter-on-quarter growth was around 5% despite a very weak GDP print. Can you provide some color on what drives that demand? For March, I believe. Lloyd Dennis Manaloto: Can you -- the last... Marseille Nograles: Sorry, so Mobile grew faster than GDP. So what's driving that step-up in demand versus a slow economy overall? Lloyd Dennis Manaloto: So as mentioned earlier, with regards to Mobile, we were able to execute a few hyper-personalizations, which allowed us to upsell. The other item as well is we've actually improved our network in terms of resiliency, which actually helped us during the last quarter where we had to deal with some natural disasters, and we were able to recover quickly, thanks to our network teams for being able to do that. So that helped and actually set us up for the annual seasonality in terms of Mobile. That helped our numbers for Mobile in the past quarter. Marseille Nograles: Thank you, Lloyd. All right. It looks like Raymond, you have your hand raised for another question. Go ahead. Unknown Analyst: Yes. Just a quick follow-up on Maya. Can you share the recurring net income for 2025, if you take out all of the one-offs? Marseille Nograles: We're not able to provide that at this time. Let me go to some other questions here that were sent before the meeting started. This is also for Mobile. Mobile is showing some improvement in the second half versus the... Manuel Pangilinan: The profits of Maya for 2025 was about PHP 1.7 billion. In 2024, it was a loss of PHP 2.5 billion in '24. PHP 2.5 billion loss in '24 and a profit of PHP 1.7 billion for 2025. What's the other question? Danny Yu: The question is what's the recurring income. Manuel Pangilinan: So it's hard to distinguish in the case of Maya, there were some subsidies on the credit card that flowed into the P&L for 2025, which will flow again into the P&L in 2026, maybe even beyond. So I think you could take the PHP 1.7 million as more or less recurring income for [indiscernible]. Is there another part to your question? Marseille Nograles: Raymond? Unknown Analyst: No, that's all I have. Marseille Nograles: Thank you, MVP. All right. Let me move to a question on Mobile. I think this is partly connected to the first, but Mobile is showing some improvement in momentum in the second half versus the first half. Was there something done differently in the second half? And do you anticipate this momentum to carry on to 2026? Marjorie Garrovillo: So the Smart performances for the second half has actually been quite consistent. We'll see a quarter-on-quarter growth as a trend. This is largely driven by a consistent growth in our subscriber base, along with new activations. And that is also -- in the back of that is also our churn numbers have also not dramatically decreased and has been quite constant. When you pair this together with the hyper-targeting offers that we've been mentioning earlier, we've actually been able to add not just the subscribers, but to actually increase the ARPU levels per subscriber. And that put together has actually given us the increase in our revenues quarter-on-quarter. Marseille Nograles: Thank you, Marj. Right. This other question also came in. Could you comment on the earnings trends that you're seeing across the industry? And how do you compare against Globe's recent disclosure? Danny Yu: The Philippine telco industry was kind of anemic in 2025. But comparing the 2 entities in terms of net service revenues, our revenues grew by 1% this year compared to flat for Globe or in fact, it was slightly lower at PHP 200 million. So in terms of core income, PLDT was up by 1%, while the core income was 3% lower compared to the previous year. But if you strip off the fintech contribution and talk purely on telco core income, PLDT was slightly down only by 3%, while our nearest competitor was down by more than 10%. In fact, based on our estimate, it's kind of about 15% to 17%. But we are seeing also market repair in the second half of the year. In fact, it's quite more paramount in the fourth quarter of the year. So we could see improvement in the fourth quarter. And hopefully, both Globe, PLDT along with the industry players will do better in 2026. Marseille Nograles: Thank you, Danny. Looks like we have a question here from Arthur Pineda of Citi. Arthur Pineda: Can you hear me? Marseille Nograles: Yes. Arthur Pineda: Several questions. First, any growth guidance on revenue and EBITDA for 2026? In addition, are you able to give us any flavor on VITRO's capacity take-up? I'm just trying to figure out how it will contribute further into 2026 based on the pipeline that you have. Marseille Nograles: Viboy, would you like to take the question on capacity takeup for VITRO? Victor S. Genuino: Yes. Thank you, Arthur, for that question. So we have 9 data centers in total. Of the 8 of those data centers are our data centers spanning Clark in Metro Manila, in Pasig, in Cebu and in Davao. These are our older sites, if you may, and they have a total capacity utilization of close to 80% currently. The ninth data center that we have is called VITRO Santa Rosa, which we inaugurated April of last year. Out of the 36 megawatts of total capacity there, we have already sold 6 megawatts. So that is our total capacity take-up to date. We are anticipating additional workloads to hopefully come in once government passes a department order or an executive order on data sovereignty and data localization in the Philippines because, as you know, government is the single largest owner of data in the country. Thank you, Arthur. Danny Yu: Arthur, we can't really give guidance at the moment. I think it's just too early at this point. So -- but one thing for sure is our CapEx is going to be mid PHP 50 billion, so -- that's it. Arthur Pineda: Sorry, it went silent for a while after you said PHP 50 billion, was there any... Danny Yu: What I'm saying is that we could not give guidance at the moment. I think it's too early to tell. We're just in February. So what is certain though is our CapEx guidance is going to be in mid PHP 50 billion. So it's between PHP 53 billion and PHP 57 billion. Marseille Nograles: And Danny, this question is for you as well, and this is in regards to our positive free cash flows after the 2 quarters where we were positive. Can we expect this to be sustainable into 2026? And in terms of deleveraging, what can we expect? Danny Yu: I think the -- I think positive free cash flow is sustainable for as long as we rationalize and moderate our CapEx and pursue all the asset monetization programs. Marseille Nograles: Thank you, Danny. Okay, let me check the Q&A box. There are some questions here as well. Okay. This is from Zhiwei Foo of Macquarie on Mobile. You mentioned being able to drive higher ARPUs from hyper-personalization, which shows that consumers have room to spend more. How much more do you think the consumer can spend and lift ARPUs further? And what percentage of subs is using this hyper-personalization and raising ARPU? Lloyd Dennis Manaloto: So I'll answer the last question first. But roughly based on our CBM capabilities, we've got consent for roughly 40 million of our subscriber base to actually be targeted for these offers. So that's the first question. With regards to our guidance on the ARPU, we're looking at driving a further 2% of the ARPU to help improve our revenues. Marseille Nograles: Thank you, Lloyd. And this question is for Blums on Enterprise business. It looks like there's some momentum in the second half. Are these mostly from recurring businesses or onetime large deals? How sustainable is the run rate moving forward? Blums, are you there? Blums Pineda: Yes, sorry, can you repeat the back end of the question? Marseille Nograles: Basically, is the uptick in revenues due to recurring revenues we can expect to carry forward or large onetime deals? Blums Pineda: Yes. It's a mix of both actually. So obviously, we had some very big wins in particular, Q3 and Q4 last year. The emergency 911 national contract was a big one. We were beginning to see part of that in Q4. But those will deliver recurring revenues in 2026. So there's a mix of onetime one-off as well as things that really drive monthly recurring charges on both the connectivity side as well as some of the managed IT services side. So it's a combination. Marseille Nograles: Thank you, Blums. Arthur, I still see your hand raised. Is there another question from you? Arthur Pineda: No, sorry. Let me put it down. Marseille Nograles: I don't see any other questions in the queue. Let me just wait a couple of moments here, if there are any other questions from the live audience. If not, then perhaps I may invite our CEO, MVP, for some closing remarks. Manuel Pangilinan: Thank you. Well, first of all, thank you for joining us this afternoon. But maybe add a bit more color to what my colleagues -- not prepared, so let's take my neck out. In respect of the -- our ability to -- just addressing the cash flow issue, especially the free cash flow. If you assume that we're able to maintain our EBITDA in 2025 over to 2026, which I think we can, let's say, it was PHP 111 billion, right, for 2025. And if you assume what Danny indicated to you that our CapEx will land somewhere around PHP 55 billion. Our interest expense this year or 2025 was around PHP 17 billion. I think we're positive cash flow in the last quarter this year 2025. We could probably maintain interest expense at around PHP 17 billion and taxes at PHP 7 billion. When you do your sums, the free cash flow available for dividends is about PHP 32 billion. Our dividends will probably be around PHP 21 billion or thereabouts, PHP 22 billion next year or rather [ '26 ]. So we could probably be able to start reducing our debt to the tune of at least PHP 10 billion in the second half of 2026. So those are the broad numbers from a cash standpoint. We do anticipate some slight growth in profitability for 2026. For one, we think that Maya will likely improve its profit performance in 2026 compared to 2025. Now where we are in Maya in respect of IPO because I hope -- unfortunately, in Meralco interview with media briefing -- well, media briefing at Meralco. Anyway, yes, at the behest or at the initiative of KKR, KKR engaged 2 banks late last year to do a market scan, especially in the States of what -- whether an IPO would be possible in 2026 or 2027. And what that market scan, they have engaged us also in a discussion about the potential IPO for Maya. Currently, the potential terms of an IPO are being discussed with them, including the size of the offering, the timing and the like. So if anything moves, it will be probably in the second half, not in this first half. So it could spill over to 2027. So we don't know at this stage the exact timing. We know who the banks are. PLDT probably will have to engage with own financial adviser at some point in the year. So that's where we are. I think beyond that, we can't comment as to terms. Thank you. So thank you. Hope to see you guys after we announce our first quarter results. Marseille Nograles: Thank you, MVP, and thank you, everybody. For those -- Kervin, I see your hand raised, I can take your question offline, and I can pick that one. And thank you, everybody, for joining. That's about all the time we have today, and we will see you in May for our first quarter results for 2026. Have a good afternoon.
Operator: Good afternoon. Welcome to Array Technologies 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, Sarah Sheppard, Investor Relations at Array. Please go ahead. Sarah Sheppard: Thank you. I would like to welcome everyone to Array Technologies' fourth quarter and full year 2025 earnings conference call. I'm joined on this call by Kevin Hostetler, our CEO; Keith Jennings, our CFO; and Neil Manning, our President and COO. Today's call is being webcast via our Investor Relations site at ir.arraytechinc.com, where the related presentation and press release are also available. In addition, the press release and the presentation detailing our quarterly and full year results have been posted on the website. Today's discussion of financial results includes non-GAAP measures. A reconciliation of GAAP to non-GAAP financial measures can be found in the related presentation and on our website. We encourage you to visit our website at arraytechinc.com for the most current information on our company. As a reminder, the matters we are discussing today include forward-looking statements regarding market demand and supply, our expected results and other matters. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from statements made on this call. We refer you to the periodic reports we file with the SEC for a discussion of risks that may affect our future results. Although, we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements to conform these statements to actual results, except as required by law. I'll now turn the call over to Kevin. Kevin Hostetler: Thank you, Sarah. Good afternoon, everyone, and thank you for joining us. I'll begin by highlighting our key achievements from 2025 before transitioning to our strategic imperatives for 2026. Neil will provide additional detail on these objectives, and Keith will conclude with an in-depth review of our financial results and introduce our 2026 financial guidance. Then we'll open the line for your questions. I'll begin on Slide 4. 2025 marked a year of pivotal growth, commercial momentum and strategic execution for Array. We closed the year with nearly $1.3 billion in revenue, achieving an exceptional 40% year-over-year increase, supported by 35% tracker volume growth. This result underscores our team's unwavering dedication and resilience as we continue to outpace broader industry growth trends. Our profitability remains strong with adjusted gross margin, adjusted EBITDA and adjusted net income per share, all landing within our guidance range and adjusted net income delivering solid double-digit growth year-over-year. After the regulatory-related uncertainty throughout 2025, commercial activity built meaningfully as we exited the year, driving strong bookings momentum across our core markets and enhancing our visibility entering 2026. Importantly, we closed 2025 with a record $2.2 billion order book, reflecting both sustained customer demand and improved commercial execution across our portfolio. This performance was enabled by the commitment and discipline of our commercial teams as demonstrated by a 2x book-to-bill for both total Array and our recently acquired APA business. As committed last quarter, APA is now incorporated into our order book, contributing approximately $100 million. We remain highly confident in APA's growth trajectory, and APA, along with our recent new product introductions, now comprise close to half of our total order book value. Turning to Slide 5. I'd like to reflect on what has been a standout year for Array. Our progress and achievements are a direct testament to the strength, resilience and commitment of our employees. Together, we didn't just meet challenges, we transformed them into opportunities to engage, evolve and innovate, positioning Array for sustained growth. I'm especially proud of the successful completion of the APA acquisition, which brought over 200 talented new team members to our organization. Our teams are seamlessly integrating, and we are already unlocking meaningful value and expanding our share of wallet with customers. At APA, continuous innovation extends beyond engineered foundations to fixed tilt racking, where the business holds a market-leading position. The team has some exciting new fixed-tilt offerings slated to come out this year, and we look forward to sharing more details in the coming quarters. Complementing the progress made on our balance of system strategy, we continue to elevate the organization by investing in both our leadership team and our product portfolio, while at the same time, optimizing our capital structure. We strengthened our leadership bench by bringing in seasoned executives with deep industry knowledge and relationships, fresh perspectives and a proven execution capability, enhancing our ability to operate with discipline while accelerating growth. In parallel, driven by deep customer engagement, we broadened and upgraded our product portfolio to more effectively address the industry's most pressing challenges and better meet the evolving needs of our customers. Finally, by refinancing higher cost debt and proactively managing our debt maturity profile, we improved our financial flexibility to support our next phase of strategic growth. I'm now on Slide 6. Our results in 2025 demonstrate that the foundation we've built is working, anchored by a talented team, a stronger product portfolio, a more resilient supply chain and meaningful expansion through APA. Now our focus shifts to how we build on that momentum, capture emerging opportunities across the industry and create lasting impact. This brings us to our 2026 strategic imperatives. This year, we're sharpening execution around 3 imperatives that operate as an integrated framework: innovate our future, elevate our international business and advance our customer-first culture. Against the backdrop of organizational and portfolio advancement, our first strategic imperative for 2026 centers around innovation. At this stage in our company's evolution, innovation remains paramount. It is the core engine driving growth and bolstering our competitive positioning. We will continue to invest both organically and inorganically in differentiated technologies and solutions that enhance customer value and reinforce our role as a trusted technology partner. This does not just mean new product development, but also continually updating and improving our internal tools and processes. To this end, we've created a robust AI road map with plans to apply transformational technology in all areas of our business. I'm excited to share updates in the coming quarters of the enhancements we're making. Innovation is how we win, not only in product performance, but in customer experience, financial strength and with the deliberate and targeted market expansion. It's the unifying catalyst that connects every element of our strategy, which is why it stands first among our 2026 strategic imperatives. As we anchor our strategy in innovation, we are equally focused on our second imperative, elevating our international business. While recent macro conditions in key markets such as Brazil and Spain have presented challenges, the broader international landscape presents compelling opportunities for growth. Key international markets are maturing and demanding more feature-rich capabilities. This also brings further opportunity to refine and adjust our global supply chain for enhanced scale and efficiency and streamline research and development around a common leading platform. Our focus remains on disciplined execution, positioning the right products in the markets where our differentiation and value proposition resonates with our customers and where they are willing to pay for it. As we position our international business for enhanced performance, our third strategic imperative further strengthens our customer-first culture across the organization. At the end of the day, our growth depends on how we effectively satisfy our customers' needs. And to do this, we need to listen to, support, and partner with them. In 2025, we saw very clearly that when we focus on our customers' outcomes, strong business performance follows. We will continue to grow our order book and pipeline by engaging and thrilling our customers with our diverse offerings, quality level of service and our differentiated value proposition that delivers measurable impact to our customers' economics. Together, our 3 strategic imperatives for 2026 form a unified strategy that drives our market-leading performance, expands our opportunities and supports durable long-term value creation. With that, I'll now turn it over to Neil to provide a deeper look at our strategic imperatives and how we will evaluate our success. Neil? Neil Manning: Thank you, Kevin. Let's turn to Slide 7. Our first strategic imperative, innovate our future is about ensuring Array stays ahead of where the solar industry is going. The demands on solar installations are rising, tougher terrain, more extreme weather, higher energy generation expectations and tighter cost structures, our innovation pipeline is designed to meet those realities head on. We start by continuing to strengthen our core tracker technology. DuraTrack is a renowned platform in the industry, and we're continuing to expand its capabilities while broadening its reach to become our standard offering globally. This year, we'll incorporate improvements like our next-generation industry-leading terrain following capabilities for OmniTrack and launch a new U.S. tracker version to further address unique market needs. These are tangible upgrades that will improve energy yield, reduce operational risk and simplify installation for our customers. Second, we're executing on our balance of system strategy. With the APA integration well underway, we're on track to launch our optimized tracker plus foundation integrated solution in the second half of 2026. This offering reduces engineering and installation complexity, simplifies customer procurement and reinforces Array as a broader solution partner. We continue to assess other balance of system market leaders as potential additions to the Array portfolio. The last component of this initiative is further commercializing software and services, areas where customers want more support, more insight and more automation. We're continuing to invest in our SmartTrack platform and beyond new deployments, we see a meaningful opportunity to retrofit SmartTrack across our extensive installed base. SmartTrack adoption is growing rapidly and with more opportunity in our order book than cumulatively deployed to date. We've proven the value of our technology and now our transition to a subscription-based model reflects our customers' desire for greater flexibility, continuous innovation and scalable deployment as we drive real project return on investment, all while generating recurring revenue for Array. Our innovation agenda powers all facets of our strategy. Executing on these investments today reinforces Array's strategic advantage for the years ahead. Turning to Slide 8. As innovation continues to drive our competitive advantage, our next imperative focuses on enhancing our presence and performance throughout global markets. One of the most important steps we're taking to elevate our international business is the introduction of our DuraTrack technology globally. This is driven by direct customer feedback. They need higher energy production, simpler installation and stronger resilience in some of the toughest terrain and weather conditions found across EMEA and Latin America. DuraTrack has delivered exactly that for years in the United States, faster installation time, consistently maximizing power density with far fewer parts in the field, no scheduled O&M and delivering among the lowest LCOE in the industry. And its patented wind-stow technology provides up to a 4% increase in energy yield compared to active snow systems in high wind environments. Bringing these capabilities to our international customers gives them a proven, feature-rich platform that protects our investment and enhances project economics. At the same time, phasing out older non-SmartTrack compatible configurations of the H250 tracker allows us to ultimately align around one global platform, consolidate our supply chain and focus our R&D and operations on the products that drive the greatest value for customers. We took a onetime inventory valuation charge in Q4 as part of this transition, and now we're moving forward with a more differentiated and scalable product platform. With this broader expansion, we plan to launch a new international offering later this year, featuring the strongest of H250's capabilities with DuraTrack's patented technologies, combining the best of the Array portfolio on a single global tracker platform. Our international expansion remains selective, prioritizing markets where our differentiated technology and value resonates. We've made focused investments to bring our technical sales approach internationally and are already seeing clear signs of traction across key regions with increasing engagement and commercial momentum in select markets throughout EMEA and Latin America. This early success reinforces our confidence in the long-term opportunity and validates our disciplined returns-focused approach to international expansion. Our growing international pipeline reinforces the strength of our partnerships, our technical performance and our relevance in global utility scale markets. Core multinational customers are pulling us to new markets and opportunities, and we stand ready to serve them. Elevating our international business isn't just about expanding into new geographies. It's about bringing the full strength of Array's technology, reliability and customer partnerships to the fastest-growing global markets that value it. By doing so, we diversify our revenue base, strengthen our competitive position and capture a critical path for continued growth. Turning to Slide 9. Advancing a customer-first culture means we are elevating how we show up for and with our customers commercially, technically and operationally. We've already made solid progress strengthening customer engagement as evidenced by our record order book and critical commercial wins in 2025. We closed the year with our highest quarterly new bookings since 2023 and a book-to-bill ratio of over 2x. This level of commercial momentum is driven by our global commercial efforts, reflects our targeted investments in the front end of our business and our deeper engagement with developers, IPPs and utilities and a growing level of trust and the reliability and performance of our products. The APA success story is only getting started. Now with the bankability of Array behind APA, they've seen a significant increase in utility scale project interest. APA's 2x book-to-bill ratio in the quarter is a result of their expanded pipeline and accelerating bookings. The strong momentum has continued into the new year. In 2025, our domestic Array business experienced greater than 20% growth in early-stage domestic project bids, providing further evidence of robust customer pipelines and a clear move towards engaging Array early on as a strategic partner. As we continue to prioritize engaging with high-quality customers, we are securing more multi-project awards while increasing our average project size, which we expect to grow at a significant double-digit rate from 2025 to 2026. Our strengthened commercial organization with high-impact industry veterans, coupled with formalized technical sales function articulating our differentiated value validated by third-party engineering studies is driving a tighter alignment between what the market needs and what our product road map is delivering. It shortens feedback loops and ensures we're solving the right problems at the right time. Advancing a customer-first culture informs how we sell, how we serve, how we innovate and ultimately, how we win. As we move through 2026, this imperative ensures that every part of our organization is aligned around delivering exceptional customer outcomes, and that alignment will continue to translate into strong commercial momentum and order book growth. With that, I'll now turn it over to Keith to provide more details on our results. Keith? Keith Jennings: Thank you, Neil. Good evening, everyone. I will begin on Slide 11. In 2025, we took deliberate steps to align our capital structure with our operating strategy. After a very busy year in the capital markets, we are pleased with the resulting leverage, liquidity, debt maturity profile and the cash cost of our debt as we continue to execute. We ended the year with over $380 million of available liquidity and net debt leverage of 2.3x trailing 12-month adjusted EBITDA. On February 18, we upsized and extended our revolving credit facility to $370 million from $166 million, bringing our pro forma total available liquidity to nearly $600 million. This upsize not only rightsized our total available liquidity, but also strengthened and expanded our bank group with 3 new banking partners to help support our strategic imperatives and global commercial operations. With this stronger capital structure, we are well positioned to continue pursuing organic and inorganic opportunities in support of driving long-term shareholder value. Moving to Slide 12 and 13 for financial highlights for the full year 2025. We delivered strong financial results, exceeding the high end of our revenue guidance. Revenue in the fourth quarter was $226 million, including $33 million of revenue from APA. For the full year 2025, revenue was $1.3 billion, representing an impressive 40% growth over 2024. Of this, APA contributed $50 million. Sequentially and year-over-year, ASPs were higher in both our legacy Array and STI segments, aligned with the forecasted effect of rising commodity prices experienced throughout 2025. Our impressive revenue growth was supported by tracker volume increasing 35%, underscoring our market share gains throughout the year. For full year 2025, adjusted gross profit increased 11% year-over-year to $347 million, representing an adjusted gross margin of 27%. When compared to the prior year, adjusted gross margins declined primarily due to the falloff of prior year 45X amortization benefit recognized in 2024 that contributed approximately 550 basis points and tariff impacts combined with ASP pressure added an incremental drag of approximately 80 basis points on the year. As expected, APA had a slight dilutive impact on overall adjusted gross margin in 2025 and delivered an adjusted EBITDA margin a few hundred basis points ahead of the core business. Reflecting the significant front-end investments we made throughout the year, adjusted SG&A was $163 million, 12.7% of revenue, an improvement from 15.4% of revenue a year ago and moving toward our near-term target of 10% of revenue. Adjusted EBITDA was $188 million with an adjusted EBITDA margin of 15%. This represents 8% earnings growth when compared to adjusted EBITDA of $174 million and adjusted EBITDA margin of 19% in 2024. As with adjusted gross margin, the adjusted EBITDA margin change was driven by the incremental prior year 45X amortization recognized in 2024. GAAP net loss attributable to common shareholders was $112 million, driven primarily by $103 million non-cash goodwill impairment charge and a onetime inventory valuation charge of $30 million, both associated with the 2022 STI acquisition. This compared to a net loss of $296 million in 2024, which included a $236 million non-cash goodwill impairment charge and a $92 million non-cash long-lived intangible asset write-down also associated with the STI acquisition. Diluted loss per share was $0.73 compared to the diluted loss per share of $1.95 in the prior year. Adjusted net income was $103 million, 13% growth above the $91 million in 2024. Adjusted diluted net income per share was $0.67, growing 12% when compared to $0.60 in the prior year. For the full year, free cash flow was $80 million, which was lower than 2024, primarily due to timing of working capital and 45X rebates. Turning to Slide 14 for our full year 2026 guidance. We entered 2026 in a position of strength, supported by greater order book visibility, a broader product portfolio to support our customers, accelerated contracting momentum, improved capital access and flexibility. We expect revenue within the range of $1.4 billion to $1.5 billion with adjusted gross margin between 26% and 27%. Excluding the impact of prior year 45X amortization falloff, margins are roughly flat at the midpoint year-over-year, reinforcing our commitment to disciplined execution and cost management in an inflationary environment. Given the impact on contract signings from the regulatory uncertainty in 2025, revenue activity is trending toward an approximate 40-60 split between the first and second half of the year. Adjusted G&A is expected to continue to gain leverage at approximately 12% of revenue. This brings our expected adjusted EBITDA to a range of $200 million to $230 million with an adjusted diluted earnings per share between $0.65 and $0.75. Free cash flow conversion as a percentage of adjusted EBITDA is anticipated to be similar to 2025. In the first quarter of 2026, we expect revenue of approximately $200 million and as a result, adjusted EBITDA to be down slightly from Q4 2025. Looking ahead, we see multiple drivers of momentum across our global markets. Hardware, software, and services are all poised to grow. We will continue to opportunistically refine our capital structure to bolster liquidity, enhance strategic flexibility and fuel disciplined investments. Backed by our record $2.2 billion order book and powerful new capabilities, we are ready to capitalize on future opportunities, deliver industry-leading market growth and sustainable value creation for our shareholders. Thank you for your time today. Now back to Kevin for closing remarks. Kevin Hostetler: Thank you, Keith. Looking ahead to 2026, our focus is clear: continue innovating, deepen our global reach and elevate the customer experience across every touch point. The foundation we are building positions us to capture the opportunities ahead and deliver durable long-term value for our customers, employees and shareholders. Thank you all for your ongoing support and confidence in Array. With that, we'll open the line for questions. Operator? Operator: [Operator Instructions] Our first question comes from Mark Strouse with JPMorgan. Mark W. Strouse: Keith, thanks for all the color on the gross margin puts and takes. Just curious, when you're looking beyond 2026 in your backlog or how you're thinking about underwriting new [ business ], can you just talk about kind of how we should think about gross margins over the medium term? And then just quickly on APA. I think you guys were saying with that deal that it was kind of immediately accretive to EBITDA, but dilutive on the gross margin line. Can you talk about the impact of APA in your 2026 guide? Does that turn accretive at some point this year? And then I have a quick follow-up. Keith Jennings: Thank you, Mark. Good questions. So first, let's talk about our outlook for gross margins across the horizon. A few things to bear in mind. As we entered 2026, our core margins remain intact. Any volatility that we've shown over 2025 and 2026 have all been driven by primarily accounting and onetime charges. And also the amortization of 45X for prior year performances played some part in that volatility. So if you look at 2026 and you remove the prior year 45X amortization, we're down roughly 50 bps, which is -- which takes us to the midpoint of our guide. When you look across the medium term and outlook, we expect our gross margins to maintain at these core levels. So we are in a fairly competitive environment price-wise. We are in an environment of rising commodity costs. We are in an environment of changing dynamics as we try to expand into certain strategic markets internationally that have lower price points. So we are confident that our gross margins across the horizon can hold. When moving to your second question on APA. APA when we closed was, yes, in 2025, slightly dilutive on the gross margin level, but accretive immediately on the EBITDA level because of their low commercial costs or I should say, very, very streamlined commercial costs. When we look at 2026, we expect APA to be in line or slightly better than our core gross margins because we've now been able to file for 45X. 45X in the APA context when you're modeling, we need to remember that it only applies to the structural fasteners, so the A-Frame that is used in utility scale only. And so I recognize that some of the models out there have 45X across the entire APA platform, it does not apply that way. When we think about overall 2026, APA is now also more accretive at the EBITDA level because they continue to be streamlined in their operating costs Mark W. Strouse: Okay. And then a quick follow-up for Kevin. The past 2 or 3 quarters, you've talked about kind of the mix of your backlog that's coming from Tier 1 customers increasing. At least directionally, if you can't give us an exact number, can you just give us an update on that? Does that continue to trend higher? Is it flatlining? Any color would be great. Kevin Hostetler: Yes, it does. So first of all, let me just begin saying we're really comfortable with the quality of our order book at this point, record order book of $2.2 billion and the real positive book-to-bill on both Array and APA both being at 2x book-to-bill. So very, very significant for us and that acceleration. A couple of tidbits I'd give you relative to the order book. For me, one of the more interesting tidbits would be, for example, in 2025, we received 4 gigawatts of orders from customers that historically were not customers of Array, meaning they were customers of our competitors, or new customers in the space. So clear market share gain from just those 4 gigawatts already. I think relative to our order book the one other comment is, on our last call there was some confusion of whether our increasing order book even in that quarter was due to a changing definition. I want to take this opportunity with everyone on the call to reiterate that we have not made any changes to our order book and how we define that order book. And I'll reiterate that every chance I get that: one, we have to have a confirmation of a named project awarded to Array; Number two, we have to have a target start date; And number three, we look for there to be an existing PPA in place prior to putting that into our order book. Now what we have talked about with some of our international orders that have been awarded to Array, so meaning we have a named project, we have a target start date, we've been notified that we've won the project. We're still holding some on the sideline until we're more confident in international markets that they will proceed as planned. And we're doing that as we've talked historically to reduce any debookings and associated volatility. As we noted in our presentation now, 95% of the order book with that new methodology is now domestic, so much higher quality. In terms of -- we've also made in my prepared remarks that over 50% of our order book is now direct to what we call those Tier 1 customers. And to be clear, when I say direct, meaning that's the one directing the purchase, even if we get a purchase order from an EPC, we're saying that over 50% of the order book is being now directed by those Tier 1s. And that could be a Tier 1 developer who is -- who has given the award to Array, but we're executing that award through their chosen EPC, but over 50% of our order book is now direct to those Tier 1s. So between the high percentage of domestic order book, the new market share takeaway, the 2x book-to-bill, the over 50% direct to what we call Tier 1, we're really pleased with the shape of the order book as we move forward here. Operator: The next question comes from Julien Dumoulin-Smith with Jefferies. Kevin Hostetler: Julien, you may be on mute. We don't hear you yet. Julien Dumoulin-Smith: Sorry, you are right. I was double muted. I apologize about that. Look, let me kick this off here. First and foremost, you talked about nice momentum on backlog. Can you give us a little bit of a sense of market share momentum with key clients? Could we potentially see some multi-gigawatt orders here? How much of that is already reflected in what you all are disclosing here? And then separately and adjacently, how do you think about the commercial strategy abroad, right? You've got this reinvigorated effort internationally. How should we expect to see this and realize this in as much as disclosures in the coming quarter? And again, I get that you've offered some caveats about some of the legacy geographies. What would you expect in terms of formal disclosures or announcements with key partners? I'll leave it there. Kevin Hostetler: Yes. So let me take the first part. So a few additional hints on our order book. So we are now engaging in more multi-project deals, not all of those obviously reflected in the order book to date, but we are now looking at kind of multipacks of deals, 3, 4 and 5 deals at a time with a lot of our core partners as we move forward. So that's working really well for us. The second thing is the average size of a project is getting larger as well. So we expect both the size and quantity of deals to go up significantly this year, and that's what we're really seeing in our order book. I'll let Neil talk about the international and what we're specifically driving there in this regard. Neil Manning: Sure. So just to jump in. So we're optimistic overall internationally, but it's also really important to note that we're being intentionally selective. And so we look at that from the prism that the U.S. is the dominant profit center for solar tracking globally. So when we look at where we diversify in international markets, we're looking from that lens. So where we have the ability to differentiate based on train capability for weather and extreme weather events, along with installation and overall performance, we're being really targeted in countries where customers are willing to pay for that capability and not just get into a bake-off on price. So as we diversify, as the Spain and Brazil markets reset themselves, we're making some really good progress in Eastern Europe and also in Latin America based on the investments that we've made in, sales resources over the last several quarters. We've had some key wins with repeat customers, so customers from our legacy home markets that have brought us into new countries, and we have awarded projects and contracts now that we're executing against. So you're going to continue to see that, Julien, over the next quarters as we continue to talk about that and see that. And our early-stage pipeline outside of Spain and Brazil is also increasing quite well as well. So I think that you'll see this continue to flow through, and we're pleased with the progress so far, and we'll continue to see that in the coming quarters. Operator: The next question comes from the line of Joseph Osha with Guggenheim Securities. Joseph Osha: One of the things that has been turning up, and I heard this a lot at in the solar is that, yes, this year looks like it's going to be okay building legacy 45 and 48 projects. But there is some uncertainty out there in terms of the ability to secure financing, in particular, tax equity financing surrounding some of the remaining uncertainty on FEOC. So I'm wondering if you can comment on that at all and whether that's materializing in your conversations with your customers. Kevin Hostetler: Yes. So look, the Treasury guidance released last week, I mean, it clarifies a major source of the uncertainty, which was really the level at which we have to focus our supply chain and certify for material assistance. And that's really a product component supply, so not every nut and bolt. And that's one helpful. But there's still some uncertainties for the industry around ownership structure the Treasury needs to address in the forthcoming year. So we don't have full clarity to say that. So what's happening for us, the second part of your question relative to FEOC is, customers are proactively hedging and focusing on predominant U.S. supply or in some cases, we're seeing customers add some language to their contracts that allow them to shift late in the game to 100% U.S. content at predetermined price points. And that's how they're hedging and giving themselves great flexibility to avoid the FEOC. The fact that our customer base is getting larger and larger and more capitalized, so some of the larger developers, IPPs and utilities that are best capitalized, we are not yet seeing issues with financing projects for those customers. At least it's not coming up to my level that we're facing that. We review that on pipeline calls every other week, and we're still not seeing that show up as an issue in our business. So we'll continue to monitor it and report if we do. But as of now, we're not having that issue with our Tier 1 customers. Operator: The next question comes from Brian Lee with Goldman Sachs. Brian Lee: Maybe just on the seasonality here. You experienced some into year-end. And then also here, given some indication that Q1 seasonality. Maybe can you speak to what's driving some of that? And then how much visibility you have on the implied pickup into 2Q in the second half? Maybe how much backlog of the $2.2 billion is expected to ship here over the next few months? And is there a book-and-bill business here implied in the guide? Or is everything covered by backlog? And then maybe I'll just squeeze in a second question around just big picture thoughts around M&A going forward as part of the capital allocation strategy. I think there's been more news of some of your peers in the tracker space diversifying into other parts of the stack. So wondering where you fit in terms of looking at those opportunities and maybe providing more holistic solutions. Kevin Hostetler: Yes. So I think let me address the seasonality. I think it's consistent with what you're seeing from our peer companies that have already reported in terms of a deceleration in Q4 and Q1. You have 2 things that drive us that are -- for those businesses that are largely North American. And the first issue is that you do have a historical seasonality, the build season for North American-focused businesses is really Q2 and Q3. That's the construction business that then gets finished in Q4. Now for the last couple of years, when our STI business was running and gunning in Brazil, in particular. If you remember, we did well over $200 million annually in Brazil. You have the countercyclicality that we benefited from. So their construction season was Q4 and Q1, obviously, on the other side of the equator. And that was very helpful in mitigating Array's historical seasonality that we had from the North America construction. So without that, that has a dampening effect and creates that seasonality in Q4 and Q1. The second and likely the larger contributing factor this year was the holdback that we saw last year leading into the OBBB. So as you recall, the industry paused waiting for that to get figured out, which means they paused contracting, they paused orders. And then once that was figured out, as you all see in our results and our peer companies', you saw an acceleration of orders but then they have to go through the engineering, planning, development, construction process. And that's why you see the shape of the year. And it's consistent between us and our peers that have already reported. You'll see an acceleration in Q2, then a further acceleration in Q3 and a further acceleration in Q4. So that's really the nature of the cyclicality. There's nothing unique to Array in that cyclicality. Yes, that's really what you're seeing and experience playing out with that delay and pause in the market that we all experienced last year. Relative to M&A, look, we're going to continue our focus on building out our balance of system strategy, and we're going to do that in a way that we think definitely benefits our customers. I guess, if I could describe kind of our approach to it is, when we think of this building out of the balance of system strategy, there's kind of 2 approaches you can take. And one would be a pure commercial integration, and I kind of liken that to say, do you want fries with that shake? And that for us is weak over time. It gets disintermediated. Maybe you want the shake today and not the fries, but you're not -- you still want it at the bundled price. And it kind of flies in the face of a lot of our customers that are EPCs with the fact that the P in EPC stands for procurement. These are organizations that understand how to buy large-scale construction projects. As such, I don't think EPCs really care if they're buying from 3 vendors or 6 vendors. That's not meaningful. Our approach on M&A is going to be a little bit different in that we're really focused around technical integration in which we can bring products in, increase the value proposition through interoperable engineering with Array that makes compelling value proposition for our customers. So we're just approaching it a little bit differently than others and ensuring that anything we're looking at in our balance of system has to have a technical interoperability opportunity. And what you're seeing that play out is APA. So the APA integration of the foundation with tracker will be a phenomenal new product for us this year. So it not only does it eliminate a number of components, but allows us to have an engineered foundation at incredibly close to a standard foundation price point. And we think that will help accelerate adoption of engineered foundations in our portfolio. So that's a great example of how we're thinking about M&A in our business. So hopefully, I'm answering your question. If not, we'll take a follow-up if we're missing something. Operator: Our next question comes from Philip Shen with ROTH Capital. Philip Shen: Great job with the bookings. You gave a good sense of the quarterly revenue cadence. Can you help us with the quarterly gross margin cadence? Should we expect lower margins on the lower revenues in Q1? And then should we expect that to ramp sequentially as we get through the year? Keith Jennings: Phil, good evening. This is Keith. Yes, I think it is safe to say that the Q1 margins will look much like Q4 because of the level of the revenues that should scale up. So we're guiding to a 26% to 27% on the full year -- that's the full year average. We think that, that is where we are currently operating. And hopefully, that answers the question. Philip Shen: Okay. And then as it relates to bookings and backlog, Kevin gave a lot of great color there. You're doing well with a lot of Tier 1 customers. I was wondering if you can talk through the bookings in Q1 and Q2. What strength are you seeing now? And do you expect the strong kind of 2 to 1 kind of book-to-bill to continue. You can't keep that forever, but how much longer can we see that continue as we get through these quarters? Keith Jennings: I don't think we want to get into forecasting bookings. We've not done that historically, Phil, but I appreciate the question. I could say that we feel good about our underlying momentum in terms of the size of our pipeline increasing, the number of opportunities we're getting, the timing of those opportunities. So we're getting brought into bigger deals earlier than we have been historically so that we're kind of getting in and getting specified and doing some of the engineering work earlier that helps us with the win rate. So all those things, I think, are positive trends. But I'm not yet going to go out on a limb and predict bookings in Q1 and Q2. Let's just say that the momentum that we've seen in the last couple of quarters so far has been continuing for us. We're hopeful that, that continues. over the next couple of quarters and through the rest of the year, frankly. Kevin Hostetler: And I should say that momentum comment is valid for not only the legacy Array, but the momentum we're getting on APA is quite significant. Operator: The next question comes from Corinne Blanchard with Deutsche Bank. It looks like Corinne has dropped out of the queue. The next question is from Maheep Mandloi with Mizuho. Maheep Mandloi: Just in terms of like the large customers you have, could you just talk about like their average sizes and how to think about this move from small to large developers? How does that benefit your order book going forward? Kevin Hostetler: Yes. Maheep, one of the things we did, as you recall, almost -- well, it's almost 2 years ago now, but back in 2024 was that we looked and kind of did the survey of what we call quality of customer. And I personally went out and interviewed some of our customers that we weren't doing as much business with that actually didn't tend to push out, didn't delay. And what we found was that there was this group of developers and certainly even a group of EPCs that were stronger than others because of their -- they were well capitalized. They had plenty of equipment, meaning that they weren't delayed for lack of transformers, those kind of things that we ran into a lot over the last switchgear, transformers. So what we did was we kind of identified that quality of customers, and we put that quality of customer into our bid strategy, meaning we wanted to win more orders with higher-quality customers that demonstrated they didn't have pushouts and delays. They had the equipment. They stayed on track. They had good PPAs in place. And that was kind of how we transformed. So when we call that Tier 1 customers, that's a lot of what makes up our definition, if you will, of Tier 1 customers, which meant we wanted to do more direct to utilities that control their own destiny, control their own interconnect. We wanted to do more with those Tier 1 developers that were the best capitalized developers out there. And that's what you're seeing in kind of when we talk about the quality of our order book continually improving, you saw a great amount of market share takeaway in orders in 2024 of that kind of targeted group and then again in '25. So our -- what we called at the time, our low share of wallet Tier 1 customers that we wanted to win more of, that's really coming through in our order book at this point. So we're pretty pleased with it. Operator: The next question comes from Colin Rusch with Oppenheimer. Colin Rusch: The opportunity to accelerate deployment times in the field, either from footings perspective or from a module attachment perspective, it seems like there's -- that's maybe the 2 areas where there may be some competitive opportunities for you guys? Kevin Hostetler: Yes. We haven't seen -- so look, the challenge with us is the amount of labor required to accelerate and pull projects in artificially. We often are talking to customers about pulling into maybe a quarter. But in terms of pulling stuff that would be 3 and 4 quarters out earlier, we don't typically see this because, again, the size of our projects and the amount of labor you'd have to reschedule and get local to that new site tends to be pretty difficult. And frankly, the largest EPCs and the ones we're focused on are pretty well booked out because those are the same group of EPCs that those top-tier developers are utilizing. So I don't see a whole lot of what I would call artificial demand acceleration or pull forward into the year at this point. I think this year is fairly well baked. There may be spots in small projects and maybe more opportunity on the APA side in the DG channel and C&I channel. Sure. There's a lot of opportunity, I think there, but not so much on the utility scale. Colin Rusch: Yes. I'll take it offline. I think my question was more about actually shortening the time frames in the field once you're deploying -- not pulling projects forward. Kevin Hostetler: Are you saying construction time frame? Colin Rusch: Exactly. Kevin Hostetler: Yes. We've got a lot of products that we've been -- yes, we've been focusing on a lot of products that do that very quickly. And we can certainly offline give you a bunch of sense of what we've been doing to reduce installation time for our customers. We feel pretty well satisfied with the work we've been doing there. Operator: The next question comes from the line of Dylan Nassano with Wolfe Research. Dylan Nassano: I appreciate the earlier color on gross margins, and I just wanted to focus in on the EBITDA level a little bit. I mean it looks like historically, you've kind of trended closer to the high teens kind of EBITDA margin and mid-teens kind of suggested here in the guide. So just any more color on kind of a possible path back to those historical levels and hitting that as a run rate if you were to kind of stay at these gross margins that you're guiding to? Keith Jennings: Dylan, this is Keith. Great question. First, I think as I said earlier, I think we're in a very competitive environment. So I think our gross margins are probably going to be in the level where we are now. To your question of how does that drop through to improve our EBITDA margins, I think it's going to come from 2 places. One, scale as we continue to grow, then we're going to get some SG&A leverage. Right now, you can see us coming down over the time horizon from 2024, I think where we were closer to 15% to last year, we were closer to 13%. This year, we are forecasting to be at 12%, and we have a near-term target to leverage up to somewhere around 10%. The other component that we have to remember is that APA is a strong acquisition for us. It improves the opportunity for us to speak to our customers about a broad array of how we work and develop and bundle things. As those commercial synergies come online in 2027 going forward, we should see more EBITDA margin expansion as that business grows. And so right now, we're still forecasting to be at the 15%, but we think that there with leverage and scale that we should get back to the high mid-teens. Operator: Corinne Blanchard has rejoined the line with Deutsche Bank for a question. Corinne Blanchard: Sorry about that. I don't know what happened. I was there. I was talking. I mean most of my questions have been taken now, but maybe 2 parts and sorry if I missed it. But the first one, can you talk about the OpEx margin maybe throughout '26 and maybe expectation for the medium term, '27 and '28? And then the second question would be like your view on the U.S. versus international mix and how we should think about it for the rest of the year? Keith Jennings: So great question, much like the earlier question. We are not slowing our commercial investments in our SG&A. We have seen the benefits of that in terms of how it has improved the customer mix, quality, the size of orders that we're winning, the engagement with customers as we integrate APA and increase our ability to converse about the relevant development of sites and what's under the panel. And so what we have been focusing on is the leverage that, that brings, right? So if you look 2 years ago at our OpEx, it was running at a rate of about 15% of revenues. We have increased our spend, but we've also grown and leveraged ourselves now where that is approaching 12% of revenues. We have a near-term target to operate this business at about 10% of revenues, and we think that's in sight with scale and leverage and growth. And so we continue to expand the front end and change our application engineering team and also how we engage with the higher-quality customers. We think there's a fair bit of EBITDA margin expansion to be had when the commercial synergies from APA starts to kick in, in 2027. Right now, what we're seeing with APA is the gross margin synergies between 45X and procurement synergies. And so we are fairly confident that we are on the right path to back to high mid-teens EBITDA margins. Kevin Hostetler: I think to answer a little bit more on the international side as well. Look, we've proven the formula works. When we invest in the front end of our business, when we add new sales resources that bring in industry knowledge, relationships, we -- and in particular, when we add that technical capability in with that sales organization, we're seeing really a lot more traction and success than we had historically. So we've taken that same approach. And what Neil and the team have been doing internationally was taking that same pattern that has worked. And over the last 12 months, we've added a handful of resources in other countries in Latin America. We've added -- and also new sales leadership of the entire region. We've added new sales leadership in Europe, again, industry experts in both cases with relationships and then building out the team. We've added technical selling resources in each region as well as additional country -- direct country managers in those regions that we think we have an opportunity to win and where customers are willing to value our differentiation and frankly, pay for it. So we're not just bidding on price. So I would say the international is probably -- the international rate of recovery is about a year behind the domestic. You're seeing the results of that domestic recovery already in 2025. I think we'll begin seeing much more of that acceleration in 2026 for our international businesses. Operator: The next question comes from Ameet Thakkar with BMO Capital. Ameet Thakkar: Just one quick one for me. If we look back at your historical kind of free cash flow to EBITDA conversion ratios in 2023 and 2024, they were, I think, kind of between 70% and 80% and obviously a lot lower in 2025, same kind of levels expected in 2026. And can you just kind of walk us through kind of like is it kind of shifting more of your manufacturing to the U.S., selling more in the U.S. and changed some of your kind of payment terms or working capital needs relative to what it was before or any other kind of drivers for that? Keith Jennings: Thank you, Ameet. Great question. If you go back to 2025 and 2024, some of the things that we were experiencing were the quick collections of 45X. As in prior year, 45X was impacting the conversion ratio. And also, as you get into 2025, what we were going through is growth. When you grow your revenues by 40%, you're also going to grow your account receivables by that much as well. We also saw an expansion of our CapEx as we built a state-of-the-art facility in Albuquerque to bring the factory of the future into our setup and capture more of the 45X in-house. So those are the 2 things. I think that if you think about our business, and we converted roughly 43% of our EBITDA to free cash flow in 2025. We are forecasting to hold the same ratio. So if we are forecasting roughly 15% EBITDA expansion, then we should be growing free cash flow by just about the same percentage. So we're fairly confident that we'll be generating -- continue to generate free cash flow to add to our flexibility and our choices of deleveraging or continuing to invest diligently. Operator: The next question comes from the line of Chris Dendrinos with RBC Capital. Christopher Dendrinos: I wanted to dive back into the international strategy here. And I mean, maybe can you expand a little bit more on the supply chain strategy there? And are you positioned to go after, I guess, a broader set of markets here? Does there ultimately need to be some incremental investment to, I guess, call it, optimize the supply chain to be cost competitive? Neil Manning: Yes, Chris, it's Neil. I'll take that one. So on the international side, there's a couple of things in play that we've done and some things that you'll see in the coming quarters and into next year. So over the last, I would say, 8 quarters, we've built out a center of excellence in Asia to consolidate supply chain and purchasing for both our U.S. and for international footprints so that we can consolidate spend between Spain and Brazil and for areas that are domestic content required partially for the U.S. So that's in place. That's up and running and performing quite nicely. The other thing that you saw with our release today is that we're also moving to consolidate our international and introduce the DuraTrack platform into both the EMEA and Latin America regions. So that's going to give us scale and additional ability to drive efficiencies on a global basis on a global platform as we move forward. So at that point, then, you're also going to see a new product introduced later this year, which brings the best capabilities of both the H250 and DuraTrack platform together, which will then again bring supply chain and build material efficiencies on a global basis. So we're really looking forward to that. Kevin Hostetler: I mean I'll -- I know Neil is being a bit modest on the amount of work that the team has done. And I'll say, when I think about a couple of countries, Australia is a great example. Our ability to domesticate a supply chain and win orders in Australia, specifically because of our quick ability to fully domesticate supply chain in Australia has led to an outsized win rate in that region. So we feel really good about that. We've been able to replicate that in multiple other countries that as we began getting into, the countries came and said we want a higher proportion of domestic content. And we've kind of have the formula down of how we engage, what the project team looks like to do that. And in every case I could think of in my head, we've been able to hit our time lines to increase domestic content in these other regions, which has then allowed us to have a higher win rate as they put these new controls or limits on awards of orders in some of these emerging markets. So I think we've got a really good formula for that at this point, and the team has been executing really well. I can think of 3 particular regions in the last 18 months that we've been able to form teams and win specifically as a result of our ability to domesticate componentry, so really good work. Operator: The next question comes from Ben Kallo with Baird. Ben Kallo: I want to go back to the market share gains. Could you talk more about where you're seeing those gains come from? You don't have to name companies specifically, but -- and why you think that you guys are gaining share? And then I know there was a reference to customers that haven't used you before. Is this something where it's a customer that's also growing volume and so they're adding another partner or same volume and you're taking actual share from them, not just increasing your share overall, if that makes sense. Kevin Hostetler: Yes. So let me just start. If you just peel up the domestic business and start there, and you look at our volume growth last year of 35%, there's nobody that says this industry grew 35% last year. And anyone who does, is confused. So when you just look at the domestic ATI volume growth, we've taken back market share. We see that. We see that in our internal win rate. And our internal forward-looking win rate, that means the wins and losses that we see internally on bids continues to be better than what we're seeing when you're looking at the rearview mirror of revenues, right? So we continue to see strong traction and momentum in a positive forward basis. Relative to that 4 gigawatts we talked about, in some cases, that was market share takeaway where they were currently doing business with others, and we've been able to go in and win a fair share of that business from a technical selling basis. And in other cases, it was companies that were migrating up into utility scale who already had familiarity with Array at DG level, for example, but have not done utility scale and are going with Array on their larger program. So there's a blend of both. But suffice to say, if you just look at our volume growth, just look at our orders growth and trajectory, you'll see that we are once again significantly rebounding in market share. Operator: Our last question comes from Vikram Bagri with Citibank. Unknown Analyst: It's [ Ted ] on for [ Vik ]. I wanted to ask about wallet share. You mentioned further the share of the wallet. Where does the integrated tracker and foundation solution get you to in terms of wallet share, either on a percentage or dollar per watt basis? And then do you have a goal in mind for where you want that wallet share to ultimately be once you factor in the organic and inorganic growth? Kevin Hostetler: We can't give you the latter answer without you figuring out what pieces of inorganic that we have most interest in to be clear. So we're going to shy away from that. I would say, look, we've talked about the APA throughout the acquisition. And what you're doing is solving for foundations. So if you think about the $1 a watt or $1.08 a watt, whatever number you want to use, and the tracker being roughly $0.10 of that, the foundations range somewhere on the low end of $0.025, but typically up to almost $0.04 a watt. So that's what we pick up with APA. And as we do that integrated offering with APA, we pick that up at really nice margins. So that's our first focus was to be able to integrate a foundation with a tracker to increase that share of wallet. We are keenly focused at other areas of that, that we think provide the best opportunity for interoperability. Again, that's our laser focus on our platform expansion, the balance of system strategy we're deploying is ensuring that those items we buy, there is true technical integration capability that will not only save our customers' money as we technically integrate but allow outsized margin opportunity for Array. That's our focus. Operator: Ladies and gentlemen, this now concludes our question-and-answer session and does conclude today's conference as well. Please disconnect your lines, and have a wonderful day.
Operator: Hello, and welcome to the agilon health Fourth Quarter 2025 Earnings Conference Call. My name is Carla, and I will be coordinating your call today. [Operator Instructions] I will now hand you over to your host, Evan Smith, to begin. Please go ahead when you're ready. Evan Smith: Thank you, operator. Good afternoon, and welcome to the call. With me are Executive Chairman, Ron Williams; and our CFO, Jeff Schwaneke. Following our prepared remarks, we will conduct a Q&A session. Before we begin, I would like to remind you that our remarks and responses to questions may include forward-looking statements. Actual results may differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with our business. These risks and uncertainties are discussed in our SEC filings. Please note that we assume no obligation to update any forward-looking statements. Additionally, certain financial measures we will discuss in this call are non-GAAP financial measures. We believe that providing these measures helps investors gain a better and more complete understanding of our financial results, and it's consistent with how management views our financial results. A reconciliation of these non-GAAP financial measures to the most comparable GAAP measures is available in the earnings press release and the Form 8-K filed with the SEC. And with that, let me turn the call over to Ron. Ronald Williams: Thank you, Evan, and thank you all for joining us today. 2025 was a year for building the foundation of sustainable performance through intense focus on operational discipline. While we are navigating a comprehensive transformation, our mission remains unchanged, empowering physicians to lead the transformation of health care through our total care model. The fundamental resilience and effectiveness of our partnership model demonstrates a durable long-term growth runway through trusted relationships with community-based physicians. These individuals are leaders in their communities and have an average 10-year-plus relationship with their patients, creating deep community ties that are difficult to replicate. While we are not satisfied with our financial performance in 2025, we made tangible progress in the areas that matter most for a durable turnaround, which Jeff will provide more detail on in a moment. Our tangible progress includes the advancement of our clinical pathways and quality programs, our disciplined approach to payer relations and our continued focus on data-driven performance. All are driving greater clarity and sustainability across agilon's scalable operating model to support long-term value-based care success for our total care model. Our preparation for the future includes applying our continued discipline and focus across these critical areas as we navigate the potential of a lower-than-expected rate increase in 2027 following CMS's advanced rate. We believe the advanced rate notice does not sufficiently reflect the ongoing population-wide increase in cost and utilization due to growing chronic disease burden and aging of the Medicare population. In addition, our further review of the risk model revision and normalization outlined in the advance notice, we believe the potential impact will be generally in line with the national average. However, we believe that our clinically focused program remains a critical part of the long-term answer. Continued advancement of our burden of illness and clinical pathway initiatives with our partners will help to mitigate the impact of the risk model changes as they did for V28. In addition, given the focus of our model is the assessment of conditions at the point of care with diagnosis tied to documentation from a visit we believe we have minimal exposure to unlinked or audio-only coding. We believe our ability to differentiate on the management of medical cost and quality outcomes should continue to position us well with health plans and physicians with the expectation that the rate and cost spread will ultimately normalize over time. Throughout the year, we advanced several key transformation priorities, which are embedded in our expectation for material improvement in year-over-year medical margin and adjusted EBITDA. At the midpoint, we expect revenue of $5.5 billion, medical margin of $325 million and adjusted EBITDA at breakeven. Our 2026 outlook reflects the expected positive impacts from the team's execution on payer contracting, clinical and quality programs, cost initiatives as well as premium increases. We also anticipate benefiting from payer benefit design changes, including increases to deductibles and maximum out-of-pocket expenses as well as reductions in supplemental benefits. While this is expected to benefit cost trend, we are assuming that net cost trends will remain elevated in 2026 at approximately 7%. Let me now reinforce key areas we believe are supporting a stronger foundation for execution in 2026 and forward. First, we entered 2026 with an enhanced financial data pipeline and strengthened actuarial and analytical capabilities, improving financial discipline, clinical visibility and overall predictability. We are increasingly able to identify variants earlier and intervene faster. As we have previously stated, we now have greater visibility into detailed revenue and claims information with the ability to calculate member level risk scores, utilizing our enhanced data pipeline, a key difference versus prior years. In addition, we believe the pipeline, AI-assisted advances for high-risk member identification and diagnosis through our burden of illness program as well as execution on clinical pathways will deliver results over and above the final year of the V28 impact. Second, through a disciplined approach to better underwriting the risk we take by contracting, agilon intentionally prioritize economic sustainability over membership growth. This approach included a willingness to pause growth, walk away from unprofitable payer contracts and restructuring arrangements with certain payers in specific markets temporarily migrating to a care coordination fee model as opposed to full risk. As a result, we expect to benefit from incremental percentage of premium and enhanced quality incentives for the value we deliver. A reduction in Part D exposure to less than 15% of our membership as well as shorter average contract term lifts, which we expect will help us better navigate changing market dynamics, including exposure to at-most policy, utilization or payer behaviors. In addition, our disciplined and rigorous recontracting process led us to exit certain payer contracts in specific markets. These contracts did not meet our minimum threshold of profitability. We expect membership will be reduced to approximately 430,000 members in 2026, including approximately 25,000 members in no downside care coordination fee arrangements with upside performance-based fees. We believe care coordination fee arrangements provide a long-term risk-adjusted growth opportunity to potentially move these members when appropriate to a full risk arrangement. Third, we advanced clinical pathways, which are evidence-based data-enabled care models designed to help our partners proactively identify, diagnose and manage the care journey for patients with high-impact chronic conditions. We believe these pathways, including heart failure, dementia and COPD can materially affect utilization, quality and total cost of care. We concluded the year with active heart failure programs adopted in over 90% of our network. Congestive heart failure or CHF is the most mature and scaled pathway, serving as a blueprint for other conditions, including early identification, expanded support for guideline-directed medical therapy and appropriate end-of-life care guided by patient preference and goals. Palliative care is also a core extension of our total care model. It's designed to proactively support patients with advanced illness, often those with late-stage heart failure, COPD, cancer or significant multi-morbidity. While only representing a small subset of our population, we have increased the number of patients engaged with this program. Clinically, it improves quality of life and care coordination. Financially, it helps us reduce avoidable late-stage utilization, particularly inpatient admissions and emergency care. Most importantly, the patients and their families have a better experience and clearer goal of care discussions and more coordinated support. Fourth are our quality initiatives. Our quality programs continue to mature with stronger measuring discipline and improved care gap closures. Quality isn't just a scorecard for us, it's a lever for patient outcomes, member experience, cost and revenue. The strategy recognizes that primary care performance directly drives the majority of Star measures, making agilon's physician-centric model structurally advantaged and an area of increasing focus by payers. Our value-based care model enables exceptional quality performance by providing the necessary tools and support to help our network deliver the highest quality care. To drive additional performance in 2025, we strengthened our data access and analytic capabilities to further enhance our ability to identify care gaps. We also expanded our capabilities for providers to close care gaps in areas such as diabetic eye exams. Our network consistently delivers quality performance for measures we can influence and control ahead of benchmarks at 4.2 stars on a composite basis across the platform, maximizing quality bonus revenue while reinforcing physician alignment. In 2026, we believe we have the opportunity to more than double the incentive contribution. As we indicated last quarter, 2024 results were very strong in ACO REACH and an improvement over 2023 results. ACO REACH continues to demonstrate the value creation agilon can deliver and is shaping the way we are transforming our MA business. CMS recently announced the lead program long-term enhanced ACO design, intended to launch after the REACH model concludes at the end of 2026. LEAD is designed as a 10-year voluntary model with a longer planning horizon, benchmarking enhancements and an emphasis on better serving high needs patients. We see LEAD as a positive signal. It reinforces CMS commitment to value-based care with a longer-term structure that can support sustained investment and consistent operating execution. Lastly, we executed on initiatives to reduce operating costs and controls. We believe we made meaningful progress on forecasting, performance reporting and market level accountability in 2025. These are critical to improving decision speed and execution. We executed on $35 million in operating cost reductions above what we communicated at the end of the third quarter. This will enable greater operating leverage from the platform and support our business objectives. In summary, we are executing with urgency, while cost trends are expected to remain elevated, we believe our transformation actions will support improved operating performance. We plan to build on the progress made last year with a continued emphasis on disciplined execution, collaboration and measurable positive impact for patients. We expect 2026 to mark a strong improvement in medical margin and adjusted EBITDA supported by renegotiating with health insurers to better reflect the reality of today's environment, care costs and plan initiated decisions. A heightened focus on investments in quality performance as health plans continue to increase the incentives available for top quartile performance. Continued progress to improve patient outcomes and reduce total cost of care through proactive chronic disease management and ongoing development and expansion of clinical pathways, strengthening provider engagement and reducing variability in performance across markets and practices, optimizing our cost structure. Lastly, we will continue to advance initiatives, which we expect to support continued performance improvement in 2027. With that, I'll turn it over to Jeff to walk through the financial results. Jeffrey Schwaneke: Thank you, Ron, and good afternoon. As Ron stated, 2025 was a transformational year. We took significant actions focused on improving the profitability of the business, including a disciplined approach to contracting, improvements in our burden of illness program, enhancing our clinical and quality programs, meaningful cost reductions and continuing to advance strategic initiatives related to our data visibility, clinical and cost management programs. Through the execution and implementation of these initiatives, we expect to drive significant improvement in profitability in 2026 while continuing to invest in our platform and partners. As we discussed last quarter, this is supported by several underlying market and payer-related tailwinds, including the 2026 final rate notice by CMS, payer bids, which were focused on margin and our actions we took in 2025 centered on execution and profitability. For today's discussion, I will cover 3 key areas. First, I will walk through our fourth quarter and full year results and a bridge to our jumping off point for 2026. Second, I will walk through our 2026 guidance, including key assumptions, driving improved profitability. And finally, I will discuss the strength of our capital position and a more disciplined near-term growth outlook. Moving to our financial performance for the fourth quarter and full year 2025. Starting with membership. Medicare Advantage membership at the end of the quarter and fiscal year-end 2025 was 511,000 members. Our ACO REACH membership for the quarter and fiscal year-end 2025 was 114,000 members. As a reminder, membership continues to be affected by our decision to take a measured approach to growth, inclusive of previously announced market exits in a smaller 2025 class. Total revenue for the fourth quarter was $1.57 billion and $5.93 billion for full year 2025, respectively. Revenue in both reflect the impact of lower-than-expected risk adjustment revenue and previously disclosed market and payer contract exits. With respect to medical costs, we continue to see favorable development from the first half of 2025 with the respective cost trend now sitting in the mid-5% range. However, for the third quarter of 2025, we experienced elevated costs, primarily attributed to inpatient stays, including a few large discrete multimillion-dollar claims totaling $6.5 million. Based on this, we increased our medical cost trend for the third quarter of 2025 to 7.2%, up from the low 6% range we previously recorded. Given the elevated cost trend we experienced in the third quarter, along with minimal paid claims visibility at close of the fourth quarter, we took a prudent approach and recorded fourth quarter medical cost trends at 7.4%. This brings our full year 2025 cost trend to approximately 6.5%, which we believe provides a solid foundation heading into 2026. Medical margin for the fourth quarter was negative $74 million and negative $57 million for the full year. Both the fourth quarter and full year results are reflective of the elevated cost trend assumptions just discussed as well as the previously discussed risk adjustment impact. In addition, the full year results include negative $60 million from exited markets and negative $53 million from prior year development. Adjusted EBITDA was negative $142 million and negative $296 million for the fourth quarter and full year, respectively. The fourth quarter reflects the items I already highlighted, partially offset by lower geography entry costs and the benefit from continued operating cost discipline. ACO REACH was in line with our expectations. Adjusted EBITDA for the fourth quarter was negative $6 million and for the full year of 2025 was $41 million. As Ron mentioned previously, ACO REACH performance further supports our confidence in our approach, the total care model and value we bring to our partners and members. On the balance sheet, we ended the quarter with $285 million in cash and marketable securities and $91 million of off-balance sheet cash held by our ACO entities. Year-end cash was ahead of our expectations by approximately $66 million, including $34 million in permanent improvement and $32 million related to expense timing. Last, in tandem with our transformation initiatives, after the quarter, we extended our credit facility and term loan. Details were filed in an 8-K. Next, let me discuss our outlook for 2026. As I previously mentioned, we are optimistic about our ability to deliver significant growth and profitability in 2026, driven by our actions in 2025. We have provided our first quarter and full year 2026 guidance metrics in the press release and earnings presentation posted on our website for you today. We have also provided bridges in the earnings presentation that walk from our jumping off point to the full year 2026 guidance. For the full year 2026, we expect year-end membership on the agilon platform will be in a range of 525,000 to 540,000 members. This includes estimated Medicare Advantage membership of 430,000 and ACO model membership of approximately 103,000 at the midpoint. The estimated Medicare Advantage membership reflects the market exits we announced in 2025, a small amount of growth as well as the impact of our disciplined contracting. As we highlighted on our third quarter earnings call, our contracting efforts were focused on achieving positive adjusted EBITDA across all markets, which embeds our assumptions of medical cost trends, payer-specific bids, quality performance and market-specific cost structure for 2026. As a result of this disciplined profitability-focused approach, we exited several payer-specific contracts for 2026, which reduced overall Medicare Advantage membership by 50,000 members. Additionally, Medicare Advantage membership includes approximately 25,000 members in a care coordination fee structure with additional incentives tied to quality and cost performance. For the full year, we expect revenues in the range of approximately $5.41 billion to $5.58 billion. As highlighted in the slides we provided today, most of the year-over-year improvement is expected to be driven from known factors, including increased percentage of premium from our contracting efforts and payer bids, which were on average at or above the CMS benchmark rate. Combined, these are expected to create over $625 million in incremental value in medical margin in 2026. As mentioned earlier, in addition to exiting structurally unprofitable arrangements, we also reduced exposure to Medicare Part D costs to below 15% of our membership. We prioritize care coordination fee structures with performance-based incentives, more than doubling the quality incentive opportunity from 2025 for the value we deliver to our members and payers. With respect to our burden of illness program, we are confident that the enhanced data pipeline, which now includes over 85% of our members, AI advances for high-risk member identification and diagnosis in our BOI program and execution on clinical pathways are expected to deliver results over and above the final year of V28 implementation. We expect a net 40 basis point improvement year-over-year at the midpoint. As a reminder, over the last 2 years, we have more than offset the impact of the V28 implementation. Our enhanced data pipeline has shown a 99% plus correlation rate and is expected to improve the accuracy and forecasting of our risk-based revenue. With respect to cost trend, we are assuming a gross cost trend of 7.5% for 2026 as trends remain elevated and net 7% when considering the 50 basis points estimated benefit from payer bids. As we have stated previously, 2026 payer bids across our markets, on average, demonstrated payers bidding for improved profitability with benefit design changes, including increases in premiums, deductibles and maximum out-of-pocket expenses and a reduction in supplemental benefits. It's important to note that this 7.5% cost trend for 2026 comes on top of the higher cost baseline that we are now assuming for 2025, which we believe is an appropriate stance in this continued elevated cost environment. We expect medical margin to be in the range of $300 million to $350 million in 2026. This reflects the positive impact from our disciplined contracting efforts, a slight benefit from our BOI program and a more conservative cost trend assumption heading into 2026 due to the continuation of elevated medical expenses. We anticipate G&A expense of approximately $234 million, which is slightly lower than the full year 2025 and geo entry expenses of approximately $15 million. G&A expense for 2026 includes the benefit from the organizational realignment initiatives we implemented in the second half of 2025, which reduced operating expenses by $35 million, exceeding what we previously communicated. This was partially offset by employee merit and medical cost inflation and the reestablishment of incentive compensation expense, assuming a full target payout. We continue to focus on additional initiatives to optimize our cost structure and drive additional operating leverage heading into 2027. Last, adjusted EBITDA for the full year is expected to be in the range of negative $15 million to positive $15 million or breakeven at the midpoint. This includes the contribution from our ACO REACH programs, which is expected to be in the range of $20 million to $25 million. As a reminder, our ACO REACH outlook reflects announced changes to the ACO REACH program for the 2026 performance year, primarily related to a rebasing of the risk adjustment cap from 2022 to 2019. While we are confident these factors will drive improved performance, we are continuing to actively manage the business to further enhance execution across all initiatives, laying the foundation to drive improved performance beyond 2026. Finally, I will discuss our capital position, which will enable our teams to continue executing on our transformation and deliver our anticipated material year-over-year performance improvement. We expect to end 2026 with at least $125 million of cash on hand, including our ACO REACH entities. This is driven by our better-than-expected year-end cash position, combined with our current 2026 outlook. Additionally, we have extended our credit facility with our existing lenders by 2 years and currently plan to pursue a reverse stock split as indicated in our proxy filing. We believe the extension reflects the strength of our operating performance outlook and continued lender confidence in our business. Finally, I would like to address the advanced rate notice released by CMS. To reiterate, we are disappointed and believe the proposal does not adequately address the high cost and utilization trends experienced over the last several years. As Ron mentioned, after further analysis of the details provided with the advanced notice, we believe our BOI and clinical pathway initiatives will help mitigate the impact of the risk model revision and normalization factor outlined in the advanced notice. In addition, our initial analysis of the sources of diagnosis indicates we should experience minimal impact as the strength of our model is our primary care partners' physical interaction with their patients. This would set our expected baseline closer to the published effective growth rate. We will continue to analyze and monitor this release and remain hopeful that a more comprehensive and appropriate approach will be taken when final rates are released in April. In summary, we recognize that we are operating in a dynamic macro environment, including industry headwinds and regulatory changes. We have executed on a significant business transformation plan, combined with our physician-centric model and scale, we believe, positions agilon health to deliver sustainable value for patients, partners and shareholders. With that, operator, let's move to the Q&A portion of the call. Operator: [Operator Instructions] Our first question comes from Jack Slevin with Jefferies. Jack Slevin: I just want to kick off on some of the trend discussion because I think I caught all of it, Jeff, but I want to make sure we've got sort of the right understanding in terms of what's baked in for 2025. So I guess I just want to clarify, it sounds like 3Q has stepped up. You sort of roughly match that or maybe step it up slightly. Just a little color or clarification there. And then if there's anything you've seen in some of that true-up in the third quarter on what might be driving that acceleration in cost trend, I would be interested just to hear if there's any color on that at this point. Jeffrey Schwaneke: Yes. Sure, Jack. Thanks for the question. Yes, you're right. So what we saw in the third quarter, in the prepared remarks, we commented on really higher inpatient stays. So we had a lot more inpatient volume. Specifically, we had several cases that were over $1 million. And if you aggregate those, it's roughly $6.5 million of cases that were over $1 million in the third quarter. And so sitting at this point, we took the cost trend in Q3 from the low 6s to 7.2%. And listen, we recognize that we have limited claims visibility, paid claims visibility for the fourth quarter. But we felt it prudent given that Q3 is kind of coming in so high that we moved Q4 up to 7.4%. And so what that did is it took the full year from the low to mid-5s to 6.5%. So right now, we have 2025 at 6.5% cost trend. Jack Slevin: Okay. That's really helpful. I appreciate that color. And then maybe just to follow up on some of the '27 commentary, sort of acknowledging you all have a lot of wood to chop in '26, and I think that seems to be clear in sort of the guidance that's laid out. But maybe just on '27 on the rate notice and then on the ACO front as well. I guess I'm on record saying I think value-based care players can get to roughly 5% on rev trend. It sounds like you guys maybe have a slightly different bridge there, but are landing in a similar zone. Considering that sort of environment, 7.5% cost trend that seems possibly conservative for '26, but maybe unclear where that goes. How do you think about what actions you might need to take in '27 on MA, whether it's further contract adjustments? Maybe just -- I'll leave it open ended there, but interested to get sort of what that landscape might look like. And if I can squeeze in a loose second piece on the ACO front, I heard the LEAD commentary. Would love to hear just sort of how you're approaching what to do in '27 on that front with the end of REACH. Jeffrey Schwaneke: Yes. Yes, I'll handle the '27 commentary that you talked about, and then I'll send it to Ron for the ACO part. But really, Jack, it's the same actions we've been taking, right? So it's contracting, it's our burden of illness program. We'll see how the final rate notice shakes out. But it's the same levers that we've been, I would say, executing on this year. We will do more of that as we think about '27. I would say the 2 open components are what happens with payer bids. And so obviously, we get a preview of what those bids look like before we enter into our contracting discussions. So that will be an important piece. And then overall, what the cost trends do. But I think from our perspective, we believe that we can continue to improve margins beyond 2026 through all of these levers that we've talked about today, and that's what we're focused on. So -- and then -- and Ron, on the ACO. Ronald Williams: Yes. Look, Jack, I think the ACO new model is encouraging in the sense that it's a 10-year model, which provides for a longer period of time, gives you a basis to plan and perhaps to make investments to support the development of the model. Now we have encouraged from a policy point of view, further clarity, much greater even stretching out of the implementation of the program. I think that at this point, there's not a lot that we know, but the main thing that we know is that it represents a continuing opportunity. And I think that the work that we've done so far in the current model will position us very well in terms of however the program unfolds. And so we're looking forward to being actively involved. As a matter of fact, I'll be in Washington next week. Dr. Oz is going to be in a meeting on that, and we'll continue to advocate physicians to make that program effective for patients, for physicians and for us. Operator: And the next question comes from Jailendra Singh with Truist. Jailendra Singh: I want to follow up on the incremental inpatient admit costs you just were talking about for Q3. Were those claims tied to some specific payers and geographies? Just trying to understand if your Q3 reserving of 7.4% versus 7.2% in Q3 kind of assumes -- Q4 reserving of 7.4% versus 7.2% in Q3, assumes those inpatient stays continue at a similar level or get worse? Just trying to understand if cushion built in Q4 is enough. Jeffrey Schwaneke: Yes. Thanks, Jailendra. I guess a couple of things. Number one, they weren't concentrated in specific markets is what I would say. And we did see utilization step up, not across the board, but in several of our markets, specifically in inpatient stays. And I would say September appears to be the highest of the quarter. And so it was more focused on the end of the quarter is where we saw that. And I understand your point, you're saying, could these just be random acute events that don't reoccur. That's certainly possible. But again, with limited claims visibility as we closed out the year, we just felt it was prudent to provide a solid foundation from which to jump off into 2026. And so we went ahead and moved that cost trend up to 7.4%. So again, limited claims visibility for us, but we felt it necessary to provide a good stepping off point. Jailendra Singh: Got it. And then my quick follow-up on your OpEx cost initiatives, which is now $35 million benefit in 2026. Do you guys see any additional opportunities in terms of streamlining cost? And what areas that could come from? Jeffrey Schwaneke: Yes. I think it's all the areas that generated the $35 million. Certainly, we're not done looking, okay? Let's put it that way. And so I think there are further opportunities for cost reduction. Some of that's going to require automation and AI and technology. So I think they'll be harder to achieve, but it doesn't mean it's not there. And so that's what we're focused on as we think about executing on 2026 and heading into 2027. Operator: And the next question comes from Michael Ha with Baird. Hua Ha: Wondering, is there any update you've received on the '25 fee-for-service trend within ACO REACH? Is it still 8.5%? And then also just on trends more broadly across both REACH and MA. There's been some conversation about the MA rate notice, I'm saying that back half trends are actually less steep. So if CMS were to include more back half '25 claims experience, it might actually drive the effective growth rate slightly lower than the advanced notice, but it sounds like your own back half trends have actually stepped higher versus the front half, which would obviously go against that thinking. So I'm curious to hear your thoughts on the ongoing conversation. Jeffrey Schwaneke: Yes. Yes, for sure. Thanks, Michael. I think the first half we commented on is in the mid-5s for us. So in the MA population, we certainly did see an acceleration of cost trends, at least for Q3. We'll have to see how Q4 plays out. But at least for Q3, we certainly saw that. The fee-for-service cost trend, the latest on that is 8.1%. So it came down a little bit. But what I would say is in the ACO program, it was also concentrated in the back half, and we have a lot more current data there from the government is what I would say. And so those cost trends were tilted toward the back half as well, but they've come down from 8.5% to 8.1%. Hua Ha: And one more on the rate notice. I'm curious, after you've reviewed it yourself, I'm just wondering if you -- there's anything you view as most notable with potential for CMS to improve. Again, there's conversation about another area about the treatment of skin subs and the risk model recalibration. By that, I mean, they adjusted the effective growth rate to exclude it, but it doesn't look like they did that for -- potentially for the coefficients aligned with those skin subs. So now we have this strange situation potentially where it's distorting the risk model recalibration and driving this rate headwind. I'm curious if that's an area you've been looking at thinking about and just broader thoughts on areas of improvement into the final rate notice. Jeffrey Schwaneke: Yes. Certainly, all of those items that you have mentioned, in addition to what is the final kind of cost trend, all of those items are top of mind for us. I guess what I would say is, again, just broadly, ultimately, we're looking for rates that account for the cost trends that we've seen over the last several years. However that shakes out. That's ultimately what we're trying to achieve. I guess we'll have to see how all of these things that you mentioned play out. Hopefully, some of those get delayed or lengthened or spread over time to balance, I would say, the cost trend dynamics that we're dealing with. But ultimately, we'll have to see how that shakes out. Operator: [Operator Instructions] And our next question goes to Ryan Langston with TD Cowen. Ryan Langston: A few of the larger public plans have highlighted expected margin recovery in group MA specifically. I think the last disclosure of your mix was around 17% or 18% kind of midway through last year. I guess where does that percentage sit now and in 2026? And I guess, how is that potential recovery reflected in the guidance? Jeffrey Schwaneke: Yes. Thanks, Ryan. It's a little early to figure out kind of where the membership is going to play out is what I would say. But I don't think that we're going to have too different of a mix heading into 2026. But obviously, we really don't get final membership until towards the end of the first quarter. And so we'll kind of give an update at that point in time. But right now, there's nothing that says our mix is going to be substantially different from that. Operator: And the next question goes to Matthew with Needham & Co. Matthew Shea: I wanted to hit on quality. Nice to see the medical margin opportunities there. I think in 2025, you've been targeting $25 million of opportunity tied to quality. How did you do on achieving that? And then for 2026, as we think about that opportunity doubling, could you maybe just give us a sense of what those increased incentives look like and pathway to achievement? Is that just greater stars improvement or any discrete strategies you're laying out to achieve that quality opportunity? Jeffrey Schwaneke: Yes. So a couple of things. The quality, obviously, the measures aren't done yet. There's runout that has to happen. But I think we're in the ballpark or getting close to what we thought we would achieve for 2025. That's the first thing. The second piece, which you mentioned is there's an opportunity for us to -- there's doubling of the potential for us to earn. And what I would say is broadly across our network in 2024, we were roughly at 4.2 stars. We made progress and improved that in 2025. Now the verdict is not all the way out because we have the runout that has to happen, but we're pretty confident that we will do better in 2025. And as we think about 2026, the opportunity is there. What we have included in our guide is similar performance to 2025. And so we haven't banked on that in the guide, but we're obviously shooting for a higher level of performance. And we have programs that are centered, as you can imagine, around driving that performance. Operator: And the next question comes from Stephen Baxter with Wells Fargo. Stephen Baxter: Just want to make sure that I'm fully tracking the comments on the advanced notice that you gave and why you think that your view of it is more in line with the effective growth rate. I think you're saying that you have, I guess, little to no exposure to unlinked chart review, which makes perfect sense given the model that you operate. But in terms of the other risk model changes, including the normalization impact, that 330 basis points item in the CMS announcement, are you saying that you just don't have exposure to that? Or you're saying that other things like coding trend and clinical efforts offset that? I'm just trying to get to what an apples-to-apples comparison is for you guys. Jeffrey Schwaneke: Yes, yes. Good clarification. I would say, yes, we are exposed to that. And generally, we've run the math, and we're very close to what is outlined in the rate notice. What we are saying is that we've shown the ability over the last several years to offset the implementation of V28. And recall, V28 was roughly 3% to 3.5% per year. And so we feel pretty confident that we can do that again in 2027. And so that's what -- that was the comment that was made is we have a way to offset that. And so generally, we're viewing it as the effective growth rate is really the number. Ronald Williams: Yes. I would just add that what's been driving has really been the implementation of our clinical pathways and particularly with our congestive heart failure, we ended the year with about 90% of the platform well implemented in that program. So we think we're crossing over with a pretty good run rate, and we think there's still a lot more prevalence in the communities for us to help patients get diagnosed and get on the right kind of therapy to help better manage that condition. And we also will be implementing additional clinical pathways, which we talked about that we think will be important contributors over time. And I think that one of the things I would say also is that we recognize that we need to focus on 2027 in terms of taking a step up in order to address this. So we're not saying that what we're doing, we think is perfectly adequate. We think it's a really, really solid foundation, and we're going to be doing more to make certain as best we can that we can get to where we need to. Stephen Baxter: Got it. And then my actual more tangible question, just on the medical margin bridge that you guys gave us in the slides. The $127 million for the payer contract, there any rough sense you can give on how much of that is percent of premium changes versus having less Part D risk. I'd love to just get a better sense of what inning you feel like you're in on this percentage of premium effort and whether you kind of characterize the success you're having as being relatively broad-based or maybe having more success with a subset of payers and maybe there's more opportunity in front of you? Jeffrey Schwaneke: Yes. I would say the majority of that is either percent of premium or relief from the payers stars -- specific payer stars issues that they've had. And that is contracted and done. So that's -- those are -- that's locked in value is what I would say as we think about the 2026 P&L. Operator: And the next question comes from George Hill with Deutsche Bank. Wenji Li: This is Liz on for George. I just have one question on the special need plans. Could you help frame the current exposure to the special need plans versus the traditional MA membership and whether the mix shift towards a special need plan means a structurally higher margin opportunity over time? Jeffrey Schwaneke: Yes. I don't -- yes, if I just look at our special needs plans, it's roughly 7% roughly for us, right around 7%. And I don't think we have enough information right now with our membership to determine if there's been a big mix shift, but more to come on that one. Operator: And the next question comes from Justin Lake with Wolfe Research. Justin Lake: A couple of follow-ups for you guys on the stuff you've already talked about. First, on the membership exits, right, and some of the recontracting you've done there. I -- is it fair to think that you've kind of walked away from the contracts and the plans that you think are not good partners? And the kind of go-forward improvement here will be execution and hopefully, rates that reflect cost trends? Or do you still feel like there's more to come on that side? And also, were there any partners that stood out there? Is it concentrated in 1 or 2 plans that you walked away from? Or are you seeing that more broad-based? Jeffrey Schwaneke: Yes, Justin, I guess what I would say is it's probably payer and market specific. So it's not specific to any one payer. I think as you know, economics are different across payers and markets. And so I wouldn't single any payer out to say they were specifically an issue. And so it's broad-based. And ultimately, as we think about it going forward, I think these are members that we can ultimately get to a contract sometime in the future. But obviously, we're in challenging macroeconomic times. And we just couldn't get to a deal this year. So it doesn't mean we can't get to a deal ever. It just means the economics and the risk wasn't right for us at this point in time. And that's the same lens that we'll have as we renew contracts for 2027. Ronald Williams: Yes. I think the point I would make, Justin, is that we've been pretty clear about the value that we create. And that if we're not going to be paid for it, then we will not be delivering that value. And we'll see what happens next year as they realize that what we were telling them was really an important contributor to their success. So we're hopeful, but we're also firm about it has to be the right agreement for us and for our physician partners. Justin Lake: Perfect. And then just last follow-up on the -- on trend. I think this question has been out there for a while, but CMS went on their call and said, we think trend is 5.5%. ACO REACH have been pushing 8% to 9% in the last couple of years. Have you been able to -- you sit in a unique position kind of playing in a significant way in both. Have you been able to sit down and kind of bridge that gap in terms of -- I know skin substitutes is a big part of it. But beyond that, do you think there's 300 basis points of difference between ACO REACH and Medicare Advantage? Or do you think there are a couple of pieces that the industry can kind of bring down the DC and sit down with CMS and say, here's what you're missing. Jeffrey Schwaneke: Yes. I guess what I'd say, Justin, is I think the industry and we are aligned that there seems to be a disconnect between the ultimate rate at the bottom line that's getting paid and the cost trends that everybody, including fee-for-service has seen over the last several years. So there's no -- I think there's no answer here that bridges that gap is what I would say. And I think that's why everybody is advocating for kind of a revisit of what the initial rate notice is. Operator: The next question goes to Craig Jones with Bank of America. Craig Jones: I want to follow up on the chart review comment you made. So do you say you're in line and be in line with the 1.5% or do you think it will be like closer to 0%? And then as you think about how that spread among your payer partners, is it a pretty tight cluster or some potentially going to have like a 5% impact and some will have a 0% impact? Jeffrey Schwaneke: Yes. I think what we're saying is the removal of selected diagnosis is minimal for us just given our model because we're highly aligned with the primary care physician. And really, we're seeing those members in the office. And so for us, there's not a lot of unlinked conditions given how our model is designed and our proximity to the primary care physician. So I'd say that's just broad across everywhere. The Part C risk model changes, that obviously would be different by market. Operator: And our last question goes to Daniel Grosslight with Citi. Luismario Higuera: This is Luis on for Daniel. I just have a quick cleanup question. I know you're intentionally slowing down market growth this year, but guidance still includes $15 million of new geography entry expenses. Can you remind us where exactly that is allocated to? Jeffrey Schwaneke: Yes. That's really capital commitments from prior growth. There's some of that, that drags into the following years, what I would say. And there was a little bit of growth this year. And obviously, there's some other groups that we're talking to, but not really getting into that right now. Operator: And that does conclude the Q&A portion of today's call. So I will hand back over to you, Ron Williams, for any final comments. Ronald Williams: Yes. Thank you. I would like to close by really expressing a deep appreciation and a huge thank you to our physician partners whose commitment to quality care to their patients is really fundamental to our long-term success. I also want to thank all of the employees of agilon who have really been focused on this transformation that we've gone through this year, positioning us for the kind of success that we've outlined in our guidance. So -- and thank you for joining the call. We appreciate your questions and the opportunity to engage with you. Have a good day. Operator: Thank you, everyone. This concludes today's call. Thank you for joining. You may now disconnect.
Operator: Good day, and welcome to the CBIZ Fourth Quarter 2025 Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Chris Sikora, Vice President of Investor Relations and Corporate Finance. Please go ahead. Christopher Sikora: Good afternoon, and thank you for joining us on today's call to discuss CBIZ fourth quarter and full-Year 2025 results. During this quarter, we posted an earnings presentation that tracks to our prepared remarks. The presentation is available on our Investor Relations website. Before we start, I'll remind all participants that you will be hearing forward-looking statements during this call. These statements reflect the expectations and beliefs of our management team at the time of the call, but are subject to risks that could cause actual results to differ materially from these statements. You can find additional information on these factors in the company's filings with the SEC. Participants should be mindful that subsequent events may run in this information to be out of date. We will also discuss certain non-GAAP financial measures on today's call. As noted on Slide 3, a reconciliation between GAAP and non-GAAP financial measures can be found in the supplemental schedules of the presentation. Joining us for today's call are Jerry Grisko, President and Chief Executive Officer;Brad Lakhia, Chief Financial Officer; and Peter Scavuzzo, Chief Strategy Officer and Technology Leader. I will now turn the call over to Jerry, who will begin on Slide 4. Jerry Grisko: Thanks, Chris. Good afternoon, everyone, and thank you for joining us. I want to start today by highlighting how CBIZ positioned to win in the middle market. We have nearly doubled in size, enhanced our service offerings and advanced our investments in people, technology, and automation. The middle market professional service industry has historically grown above GDP with a large and growing total addressable market of diverse clients that rely on trusted advisers to help them navigate complex operating environments and grow their business. The industry benefits from secular growth drivers tied to greater complexity for business leaders a shortage of accounting talent leading to increased outsourcing of accounting services, constant changes to accounting and tax standards as well as the ongoing importance of adapting and modernizing processes with advances in AI and automation. We are now among just a handful of firms that have the scale and capabilities to meet middle market clients growing demand for greater industry expertise, leading technology and a broader range of services delivered by trusted advisers. Our strategic focus in 2026 and beyond is ensuring that we organize and invest in our capabilities to maximize the value of our scale and competitive position. We expect these investments to further strengthen our value proposition to clients, differentiate CBIZ in the market and accelerate our growth. Moving to Slide 5. It is important to recognize that many accomplishments the CBIZ team delivered in 2025. We made significant progress by completing the vast majority of the Marcum integration priorities. We brought our teams together physically, enhanced their ability to work together through common systems and processes and strengthened our go-to-market capabilities. These steps were necessary to unlock the opportunities associated with the acquisition and position CBIZ for sustainable long-term growth. I want to thank our entire team for their hard work and support and their commitment to our clients, team members and CBIZ during this important year of transformation. In 2025, we delivered approximately 2% organic revenue growth with solid year-over-year improvement in bottom line profitability. We continue to generate healthy cash flow from operations to support our business and to invest in attractive opportunities. While our revenue growth is impacted in part by soft market conditions that affected the entire industry, there was also a portion related to productivity losses, often experienced in the first year following the combination of 2 organizations of similar size. We believe these headwinds will abate in 2026 as we have seen improving middle market sentiment, and we're in the process of completing our first busy season as a combined company on common platforms. Now moving to Slide 6, operationally, we've built upon market's investments in transformation and innovation, including AI and data-focused priorities, and we've improved how we deploy our combined offshore teams. Having our teams work on common systems and apply the standardized processes and workflows that were established in 2025 allows us to increase utilization and enhance client experience by matching our best people to the clients most in need of their expertise. From a people and leadership standpoint, we've completed most of our internal reorganization priorities. Over the past year, we strengthened our leadership bench by placing our best leaders into roles that directly drive growth, accelerate the formation of our industry groups and advance the adoption of AI and Innovation. Thanks to our team's hard work, key retention metrics around clients and managing directors are in line with expectations and synergies are double our initial expectations. While there remains technology and real estate-related immigration work ahead of us, along with opportunities for further cost synergies, the integration is largely behind us, and we are now focused on how we leverage our scale to accelerate growth. With that, I'll turn to our 4 strategic priorities guiding our efforts on Slide 7. We are focused on 4 strategic priorities to drive growth and increase our value to our clients, attracting and retaining top talent, elevating our national brand, utilizing industry specialization, and delivering value through our enhanced breadth and depth of service offerings. Together, these priorities will strengthen our ability to win the new business, retain and expand client relationships and enhance and realized pricing. Our first growth priority is to attract and retain top talent. For 2025, we were pleased to fund substantial amounts of incentive compensation to recognize the contributions of our team in this critical year of transition. And in 2026, we plan to return to full incentive program funding tied to delivering on our top line growth objectives. We will also increase our producer count within our Benefits and Insurance group by approximately 15% this year, and we are investing in sales development resources to capture new opportunities. We now have the ability to attract a unique level of talent to CBIZ. Recent examples include bringing on the head of AI incubation and ahead of data from Big 4 firms. And we have a pipeline of senior professionals who want to join the unique platform that we have now built. Our history tells us that we have a strong track record of high returns on our investments in talent. We're confident that the continued investments in talent will allow us to command better pricing, expand existing relationships and win new logos. We have scaled our brand and marketing approach and our second growth priority is to continue to raise our brand visibility and to ramp up targeted marketing initiatives. While CBIZ has a strong reputation with existing clients, we need to always be top of mind for new clients and event-driven project-based work. We see a large opportunity to explain the power of our new platform and the ways in which we can help current and potential clients. In 2025, our team generated more than 50,000 net new leads across key markets using targeted TV, digital, and out-of-home advertising, leading to improved win rates. In 2026, our focus will be on translating increased visibility into engagement for our services, supporting new client opportunities and reinforcing our position with companies pursue transformational events. Our branded marketing investments are a key component to both our go-to-market and our talent recruitment strategies. Our third growth priority is deepening and growing our industry specialization. Clients want advisers who bring deep industry-specific insights and our expanded scale positioned us to do just that. We've organized into 12 industry verticals, which allows us to lead with insights, anticipate client needs and deliver coordinated tailwind solutions supporting stronger retention and more consistent growth. The strategy and model has already proven successful. Construction executive recently named CBIZ as the #1 firm on its 2025 list of the top 50 construction accounting firms, reflecting the strength of our position in that industry. We are leveraging national resources while maintaining our local delivery advantage, and we're encouraged by the early progress we're seeing. All 12 industry verticals now have dedicated leadership that does align national and regional support to drive improved collaboration, cross-serving and industry-focused client engagement. Finally, we are delivering a more coordinated client experience across our services. With our highly recurring essential revenue base, and strong client retention, our most immediate growth opportunity is expanding relationships with our existing clients. We are seeing notably increased collaboration across service lines, early success from cross-serving initiatives and growing interest in bundled solutions. This strengthens our new business efforts, allowing prospects to see the full breadth of our capabilities. In 2026, our efforts are centered at increasing the number of clients using multiple services. We've built the foundation for this work, and we are expecting the efforts to become a more meaningful contributor to organic growth over time. Taken together, we believe strong execution against these 4 priorities positions us to drive attractive levels of growth. At the same time, we remain focused on delivering their growth with strong earnings quality. Now turning to Slide 8. An important value driver is our investment in automation, including artificial intelligence. In time, AI will meaningfully change how professional services firms operate. They will increasingly automate routine manual tasks and reshape workflows across our service offerings. We want to be clear about what AI does and does not change. The core role of the trusted adviser applying judgment, advocating for outcomes and leveraging the experience, collaboration in ethics remains indispensable. Trust is uniquely human. Our clients trust us as their advisers and look to us to harness these tools on their behalf, and that's exactly what CBIZ is doing. We are positioning CBIZ to lead and view AI as an extension of the automation initiatives we've leveraged for many years to generate a high return on investment. Critically, we are implementing AI as an enterprise-wide capability rather than a series of isolated pilots. This means standardizing workflows, strengthening data discipline and establishing governance, so outputs are reliable, repeatable and audit ready. Today, we have over 60 dedicated professionals focused on our technology and our AI strategy, and we are collaborating with top-tier cloud and AI providers to accelerate our transformation. We are embedding AI tools in our daily workflows, enabling all of our employees with structured training and scaling proven capabilities already in production. A good example is tax. We currently use tax automation software to streamline 1040 return preparation. In parallel, we are layering in AI capabilities to process more complex data like K-1 footnotes. Over time, we expect these enhanced capabilities will support margin expansion in our tax business, not by charging less, but by delivering more value with greater efficiency. AI also has the potential to create new revenue opportunities, particularly within our higher growth, higher-margin advisory practice. As the regulatory and operating environment grows more complex, clients need more help interpreting data in making strategic decisions, exactly the kind of judgment intensive work where clients seek out trusted advisers, especially one who can leverage AI. We believe our competitive scale and strategy positions us well to benefit as AI reshapes our industry. Our middle market clients typically do not have the scale, capital or internal expertise to build and govern AI infrastructure themselves. We do. Our size and breadth allows us to invest in and deploy advanced tools across our platform, while pairing them with trusted adviser relationships that clients depend on. Because the majority of our revenue is fixed fee or commission based, we expect a great deal of productivity gains to flow to margins without pressuring our top line. Lastly, coming to the current demand and pricing, we are not seeing AI put pressure on either one. To the contrary, our pipeline remains healthy, retention is strong and clients continue to lean into their advisory relationships. The use of efficiency tools is not without precedent. Over the past decade, our industry has significantly expanded the use of lower-cost offshore labor with full transparency to our clients, reducing the cost to deliver work with accounting firms generating meaningful margin expansion from these activities. We see AI following a similar pattern, delivery costs improved, but the value to the client remains and even grows and pricing reflects that value. Firms that are prioritizing AI adoption are being rewarded with deeper client relationships and expanded wallet share. We believe we are well positioned on that side of the equation. In summary, our foundational platform work and scale automation initiatives are expected to support more efficient growth, margin expansion and an increasingly favorable revenue mix. We believe that AI deployed with discipline and governance will be a meaningful driver of long-term value creation. Slide 9 details how offshore continues to be a meaningful opportunity for CBIZ. We are accelerating our use of global resources to improve utilization, expand capacity and support margin expansion. Ultimately, we believe offshoring provides a better experience for our U.S.-based team, enabling a higher level of service and responsiveness to our clients. Today, we operate offshore delivery centers in the Philippines and in India with more than 500 professionals supporting our tax and attest services. We expect to increase offshore hours from approximately 6% in 2025 to 10% in 2026. Over the next several years, we plan to expand this to more than 20%. We believe achieving these levels which are consistent with comparable firms, will drive significant growth and margin opportunities over time. Now to wrap up my opening remarks, I want to comment on the current business climate and our outlook. While 2025 turned out to be a more cautious operating environment for our clients, our proprietary Pulse survey and ongoing discussion with clients points to a more encouraging backdrop heading into this year. What we're hearing from clients is greater comfort with the business environment. While clients still recognize the economic and political environment remains highly dynamic, the incremental comfort indicates an increased opportunity for project-based work. We saw this picked up in the second half of last year. As a reminder, more than 70% of our revenue is recurring and resilient across cycles. The remaining portion is more project-based and our assumptions regarding the level of activity largely drive the rate of our 2% to 5% organic revenue growth outlook. Finally, as Brad will discuss in more detail we are pleased with the strong free cash flow generation we expect in the coming year and view stock repurchases as highly attractive, given our long track record of growing free cash flow. Now I would like to turn the call over to Brad for our financial review. Brad Lakhia: Thanks, Jerry, and good afternoon, everyone. My comments begin on Slide 11. Consolidated financial results for the fourth quarter and full year demonstrate the strength and resiliency in the CBIZ model. We delivered strong profitability and free cash flow despite tempered top line growth. Fourth quarter revenue was $543 million, up 18% versus the prior year driven by the acquisition. You will recall our remarks on the third quarter call. Two things had to happen for us to meet our fourth quarter expectations. First, market conditions had to be consistent with the third quarter and we're pleased that assumption held true. The second assumption required we drive above-average utilization by working with our clients to get an early start on the busy season. This assumption did not come through, as utilization remained at normal historical levels due to client preference to pursue this work in 2026. Fortunately, the work was pushed into 2026, and we are well positioned to convert on this activity during the first half of the year. For the full year, revenue grew 52% versus the prior year as reported, and we estimated we grew approximately 2% organically. As we shared during 2025, this was below our initial expectations due to less favorable market conditions in the first half as well as lower demand in our SEC capital markets practice. The CBIZ model generates strong recurring essential revenue, and our client retention remains high. As we move past a transformative year, we are excited to execute on our top line growth initiatives in 2026 and beyond. Operating expense declined as a percentage of revenue, reflecting lower incentive compensation tied to our top line performance and the acceleration of synergies that contributed approximately $35 million of savings in 2025. Together, these 2 items helped drive 250 basis points of year-over-year gross margin expansion. Roughly 80% of our operating expense is personnel related with incentive compensation as the primary variable component. Incentive compensation programs have historically represented approximately 16% to 17% of our total compensation and benefits. While incentive expense was lower in 2025, we ensured our high-performing teams are recognized and rewarded for their 2025 accomplishments, and we remain committed to investing in the best people in our industry. For the fourth quarter, adjusted EBITDA was a loss of $29 million. And for the full year, adjusted EBITDA was $447 million. Full-year adjusted EBITDA margin increased approximately 530 basis points versus last year with lower incentive compensation expense driving approximately 270 basis points of that improvement. Excluding the impact from incentive compensation and acquisition timing, we believe our margin expansion is consistent with and even exceeds historical performance, representing the benefits of greater scale and higher-than-expected synergies. Fourth quarter adjusted diluted earnings per share was a loss of $0.70, bringing our full year adjusted EPS to $3.61. This is in line with our original 2025 guidance and is a strong testament to the team's ability to deliver improved profitability and achieve the year 1 accretion we committed to when we announced the Marcum transaction. We repurchased approximately 2.4 million shares totaling $160 million in 2025 under our right of first refusal and through the open market. In addition, our Board of Directors recently approved the continuation of our share repurchase program, authorizing the repurchase of up to 5 million shares. Full year free cash flow increased $65 million to $176 million and conversion from adjusted EBITDA was approximately 40%. Conversion was tempered in 2025 due to elevated integration-related spend that will begin to abate in 2026. Our business model drives meaningful cash generation under nearly all business climates. This affords us flexibility to support high-return capital allocation priorities that drive top line growth, improve client experience and margin expansion. Moving into our segment review. Financial Services fourth quarter revenue was $439 million, up 23% year-over-year, benefiting from an additional month of the acquisition compared to last year. Full year 2025 revenue was $2.3 billion, an increase of approximately 70% driven by the acquisition. Adjusting for known items, we estimate we delivered low single-digit growth in our core accounting and tax service lines, which offset headwinds in our SEC related business. In addition, our advisory business grew in the second half, capturing improved market conditions relative to the first half. Financial Services adjusted EBITDA was up $264 million, ending the year at $449 million. Adjusted EBITDA margin expanded 600 basis points, driven by the impact of synergies, lower incentive compensation expense and additional scale benefits. In terms of pricing, we were pleased to deliver mid-single-digit rate increases for the year. We are competing favorably and realizing rate increases that exceed overall inflation and capture the value we bring to our clients. Our long-term target for Financial Services is solid mid-single-digit annual organic revenue growth and we expect continued adjusted EBITDA margin expansion driven by top line growth and operating efficiencies. Turning to our Benefits & Insurance results on Slide 14. Overall, it was another solid year for B&I with year-over-year revenue growth and strong profitability. 2025 revenue was $410 million and represents 2% growth year-over-year primarily driven by growth in our Employee Benefits Group and the payroll and human capital management group. This was partially offset by softness in the property and casualty market as well as producer attrition. For the year, adjusted EBITDA was up $3 million, representing 4% growth and 20 basis points of margin expansion. Growth drivers for B&I in 2026 include enhancing client and key producer retention while driving new business. We are also tying a larger level of producer incentive compensation to cross-serving targets. We are capturing opportunities for outsourced services and seeing increased interest in our solutions to mitigate rising health care costs and navigate workforce dynamics. Slide 15 provides a look at our quarterly seasonality for revenue, adjusted EBITDA and free cash flow. Seasonality is driven by the accounting in tax busy season and the related timing of billing and collections which impacts working capital. We ended with net debt of approximately $1.45 billion, resulting in a net leverage ratio of 3.3x and we had over $400 million of available liquidity under our revolver as of December 31. Turning to our 2026 outlook on Slide 16 and you could also reference Slides 21 through 23 in the appendix for additional detail. At a high level, we expect to deliver year-over-year growth in revenue, profitability and free cash flow. Revenue is expected to be between $2.8 billion to $2.9 billion, representing 2% to 5% year-over-year growth. The difference between the high end and the low end of the range is largely driven by macroeconomic assumptions, which could impact project-based work. In terms of seasonality and consistent with historical patterns, revenue is expected to be weighted at approximately 55% in the first half and 45% in the second half. Adjusted EBITDA is expected to be in the range of $450 million to $460 million. The funding of incentive pools will correlate with our top line performance. At 2% growth, we would expect a little to no headwind compared to 2025; and at 5% growth, we would expect incentive compensation to be refilled at target levels and would therefore realize the full $65 million headwind. Investing in talent remains a top priority and it's critical to our long-term success. We're balancing that investment with a disciplined approach to profitability, supported by efficiency initiatives and synergies that will partially offset higher compensation. We expect $70 million to $80 million in integration costs in 2026. Compared to 2025, business-related integration costs will decrease, but will be partially offset by higher facility optimization costs. The first half and the second half split for adjusted EBITDA is expected to be approximately 70% and 30%, respectively. Adjusted EPS is expected to be in the range of $3.75 to $3.85 per share and this contemplates a tax rate of approximately 28.5% and a weighted average fully diluted share count of approximately 62 million shares. Free cash flow is expected to be in the range of $270 million to $290 million, representing approximately 60% conversion at the midpoint of our adjusted EBITDA outlook. This is largely driven by lower acquisition-related items and the benefit of approximately $50 million of purchase price adjustment we collected this January. We are factoring in only modest contributions from working capital efficiency and lower interest payments. Capital expenditures will be higher in 2025 by approximately $20 million to $25 million tied to facility optimization plans. And in 2027 and beyond, we expect capital expenditures will normalize to approximately $20 million to $30 million annually. M&A earnout payments are expected to be approximately $30 million in 2026. Beyond 2026, we believe we have opportunities to further enhance free cash flow conversion. And these levers include: driving profitable revenue growth, enhancing working capital management with a focus on DSOs, lowering interest payments and maintaining an asset-light low CapEx model. On Slide 17, we outline our capital allocation priorities as we continue to generate strong free cash flow. Our first priority remains funding organic growth and maintenance capital. Second, we remain committed to delevering, targeting net leverage ratio of 2x to 2.5x. At our current valuation, which implies a high-teens 2026 net free cash flow yield, we believe share repurchases are highly accretive and represent a compelling use of capital. Similar to 2025, we intend to be active and disciplined in executing repurchases balanced with steady debt reduction. The strength and scale of our business model, combined with our consistent free cash flow, gives us confidence that we can simultaneously invest in growth, return capital through share repurchases and achieve our leverage targets. Thank you for joining us today, and I'll turn the call back to Jerry. Jerry Grisko: Thanks, Brad. Our top priority in 2026 is reigniting our growth engine and leveraging our scale. We have clear strategic growth priorities and efficiency enablers that we are confident will drive value creation for shareholders in 2026 and beyond. We believe we have the building blocks to deliver on our long-term growth algorithm. Our diverse client base positions us to cross-serve and drive larger share of wallet. We are finding that our ability to provide specialized industry expertise is enabling us to deepen core client relationships and differentiate ourselves from our competitors. Looking forward, we are focused on compounding value through multiple growth engines. We see tremendous opportunity to not only retain business and expand within our existing clients, but also to land clients who seek multiservice capabilities we can now offer. Work completed in 2025 has built the foundation for us to realize operating margin expansion as we increasingly deploy technology and leverage our offshore teams. And last but certainly not least, we remain committed to high return capital allocation priorities that are supported by strong and consistent cash flow you have come to expect from CBIZ. Thanks again to our CBIZ team for your hard work and thank you to our shareholders for your continued support. We look forward to your further engagement with you throughout the coming months. And with that, operator, please let's open the call for Q&A. Operator: [Operator Instructions] The first question today comes from Faiza Alwy with Deutsche Bank. Faiza Alwy: I wanted to ask about, Jerry, your comments around your revenue growth that you said was impacted by soft market conditions and also related to some productivity losses. And I'm curious if you can talk a bit more about that, particularly around the soft market conditions and the improving middle market sentiment that you mentioned, maybe if you have any views around why sentiment was softer last year and what's improving and your confidence around that? Jerry Grisko: Yes, Faiza, Happy to take the question. As we've talked for years, our client -- that middle market client is a highly resilient client, but what they need in order to invest forward is certainty and stability in the playing field or a business climate. And we saw anything but that certainly in the first half of the year and our market, our competitors, everybody kind of experienced the same thing. So that's really what I was referencing when I referred to kind of soft market conditions. What we did see kind of encouragingly is that as the year progressed, things did settle in a little bit, and our clients did begin to get more comfortable with investing and we benefited from that. We saw more activity in our advisory work, and we're expecting that work to kind of get you through into 2026 for sure. You asked a second part of that question that I can't recall. Faiza Alwy: I guess just around the confidence and the improving sentiment around the customer. Jerry Grisko: Yes, Faiza, we do a middle market pulse survey. What we're seeing in that survey is that our clients are more comfortable, more confident today than they were at this period -- at this time last year. And we're seeing that not only in our -- in the survey works, but we're also seeing it in the kind of green shoots that we're seeing on the project side of the business. So everything appears to be holding true. And we're expecting that, again, more of the activity that we saw kind of start to emerge in the second half of the year will continue through the first part of and into 2026. Faiza Alwy: Okay. And then I wanted to ask about your comments around the role of the trusted adviser and -- as you know, there's a lot of concern in the market around AI and all of that, and you certainly addressed a lot of it in your prepared comments. And I'm curious, as you think about that -- the role of the trusted adviser, are there portions of your business that are maybe a little bit more formulaic where some of your customers could just with big ease as it relates to new technology advancements? Like are there certain parts of your business where there's potential room for disruption or just would love to hear your perspective on that. Jerry Grisko: Yes. Again, Faiza, and I'll turn it to Peter Scavuzzo because he's obviously leading this with us, and he's here alongside us today, but let me start with the answer to that. Our client -- the answer is we see AI over time, definitely augmenting the work that we do for our clients. And there are certainly pieces of the work that we do that will be more automated and therefore, more efficient as a result of the tools that are available in the market. But it's very hard to separate that work from the remainder of the work that we do for them. And our clients, that middle market client oftentimes turns to that trusted adviser more than just for a tax return, more than just for an audit, more than just for payroll or benefit to insurance or the other services we provide but really for deep knowledge of their business, familiarity with them, deep knowledge of their industries and kind of a holistic approach to helping guide them through what is increasingly a complex business environment and some of their most important and impactful events in their lives, whether it be expansion of a plant or making an acquisition, it's very difficult for that client to separate one isolated piece of work that may have been performed more efficiently from the holistic body of work that we do. That's the special relationship that we have, the trusted relationship that we have with that middle market client. Peter, I don't know if you have anything to add. Peter Scavuzzo: Yes. A couple of items I'd add is they're coming to firms like CBIZ not because they need less advisory. They need more. Our role is providing human judgment is going to be more critical than ever. The reliance on trust becomes more critical than ever. AI is adding more complexity to the businesses. And the middle market organization is going to depend on CBIZ to help them demystify these complexities and help them navigate through this. Operator: Next question comes from Chris Moore with CJS Securities. Christopher Moore: So maybe we can start with pricing. So at Q3, we had talked about roughly 4% for the year versus 6% or 7% in '23 and '24. You talked about mid-single digits. So that mid-single digits for '25, that's roughly 4%. Is that what we're saying? Jerry Grisko: Yes. Chris, we didn't specify 4%, 5%. But I will tell you, squarely in the mid-single-digit range for 2026. Brad Lakhia: Chris, Brad here. The -- for 2025, listen, we did what we said is we were navigating through the second quarter. We did see some -- listen, it was not a period of uncertainty. And what we saw with some of our clients coming to us, again, as trusted partners, long-standing trusted partners asking us for some assistance as they navigated through -- the broader world navigated through some uncertainty. But even with that, as we closed out 2025, Chris, we still delivered very consistent mid-single-digit price realization for the full year. So we're pleased with how we exited the year. And as we turn now well into 2026, and we see line of sight into this busy season and beyond. We see that holding up very nicely. Christopher Moore: Got it. So, so far in '26 -- I mean, so there is an argument to be made that pricing in '26 could be a little bit better than you got in '25. Brad Lakhia: Yes. We're not -- listen, the guidance we have, the 2% to 5% guidance does not assume any significant year-over-year improvement in the pricing environment. So consistent normal pricing environment year-over-year mid-single digits, as Jerry said. Christopher Moore: I'll jump maybe to incentive comp. Brad went through this, but I didn't quite get it. So the -- in '25, I think we talked about roughly 9% of revenue, then we would kind of normalize, but that would depend on where we were in the 2% to 5% growth. So if we got to 5% growth, then we would get back kind of fully baked in closer to a 12% level if we get between the 2% and 5%, it will get somewhere between the 9% and 12%. Is that the way to look at it? Brad Lakhia: Yes, that's the way to look at it. What I mentioned in my remarks earlier, Chris, was if we saw a 2% growth to the low end of our guidance range, we would expect and we wouldn't really be seeing any incremental funding of those pools year-over-year. As we move and migrate to the top end of that guidance range 5%, we would be funding those pools more at historical targeted levels, and that would kind of result in a headwind of somewhere in the neighborhood of $60 million to $70 million year-over-year. And that's largely what our EBITDA or adjusted EBITDA guidance reflects. Christopher Moore: Got it. That's helpful. And in terms of the going -- the delta between the 2% and 5% revenue growth. So that is mostly project revenue is the difference between whether or not we're at 2% or 5%. Is that right? Jerry Grisko: I would say broad market conditions, macro market conditions, right, that really drive more project-related work. Christopher Moore: Can we talk maybe about -- I know SEC Capital Markets is one area that was softer in '25. Can we talk about kind of some of the project areas in '25 that were softer and what your thoughts are at this point in time in '26? Jerry Grisko: Yes. By the way, I appreciate the way you're framing it because the capital markets work that we experienced in '25 is really also market related, right? So we talk about market conditions. It's really all the project work we do and those -- that work that we're -- that is more susceptible to market conditions. So I put the capital markets work in that category. But to get to your specific question, we saw work within, for example, more discretionary work. So we do a lot of work around valuation. We do risk and advisory work. We have worked within that category that is IPO-related that was soft during that period of time. So there's a wide range of the -- what would normally be higher growth, higher margin, very attractive advisory services that we provide that in those environments, where our clients are doing less of that work and the markets are less receptive to that work. That revenue slows a little bit for us. But when the markets improve, it's a significant catalyst to our growth in our margin. Christopher Moore: And do you have any thoughts in terms of '26, whether that markets are shifting in that direction? Jerry Grisko: Yes. Just I would say I would say, more optimistic and more favorable at this time than they were in the first half of 2025. So we're encouraged by the environment that we're entering into '26. Operator: The next question today comes from Andrew Nicholas with William Blair. Andrew Nicholas: I wanted to follow up on that last point and sorry to keep pointing in on it. But in terms of like the bottom and upper end of your guide, it sounds like the project-based work is a decent bit better than first half '25. Is that continuation giving you to the midpoint? And I guess maybe another way to ask the question, you talked about '25 growth between core accounting and advisory. Is there any way to kind of qualitatively speak to the different kind of chunks of your business, core accounting, advisory, B&IS and what your expectations are that are embedded in guidance for '26? Brad Lakhia: Yes, Andrew, there's a couple of parts there. Let me try to take the first part first, which is the -- how we're thinking about the midpoint of the guidance. I just kind of restate what Jerry said, which is really largely -- the range itself reflects kind of a view around macro conditions and how those macro conditions could shape the nonrecurring more advisory parts of our business. And so if you're looking for me to provide you like what is more prescriptively the midpoint of that range. I wouldn't want to do that. But what I would say is, though, to the extent that those market conditions continue to remain supportive as they were in the back half of 2025 and as we see them today, the midpoint of the guidance becomes something we feel is more realistic, more achievable. So I'll pause there and get your reactions to that because then I want to come back to the second part of your question. Andrew Nicholas: Yes, that's helpful. And then, yes, I guess, the second part of my question was just how to think about core accounting versus advisory versus B&IS if there's a way to kind of disaggregate the growth rates there. I think core accounting is obviously less susceptible to the macro than the rest of it. Jerry Grisko: Yes. So the pieces that you identified, core accounting impacts and benefits in insurance, let me remind everyone that our revenues are largely recurring in essential and so those tend to be more predictable and grow at kind of steadier rates. The other pieces of the business are a little less predictable, but when the markets are favorable obviously, they grow faster, and the margins are enhanced. Last year, what we saw is really just as a result of the market -- the way the market just unfolded is slower growth in our advisory practices in the first half of the year, but it picked up in the second half of the year. So net-net, the business was in line with what we experienced on both the accounting and tax side and the Benefits & Insurance side. It just played out a little different as a year ago. Andrew Nicholas: And then just a kind of related question. So this year, revenue guide 2% to 5% the long-term target is still mid-single digits. Can you help us kind of bridge to that target? Is the opportunity in '27, '28, '29 going forward? All centered around the cross-sell opportunity. And it sounds like you're incentivizing B&IS a little bit differently to help augment that. Or is there anything else that we should be thinking about as we bridge that to the medium-term target? Jerry Grisko: Yes. So Andrew, we really look at our growth opportunities with 3 levers, right? Pricing, and we talk a lot about pricing, and we're really pleased with the mid-single digits that we experienced in 2025. And again, what we're -- what we expect to see in 2026. Where the real opportunity comes as the next 2 levers, which are expanding the client relationship, so breadth of services that we can provide to them and new logos. And we think we have an opportunity on both of those fronts, primarily driven by the industry initiatives that we now have in place. If we think about those industries we are unmatched in the market among our competitors among -- with the breadth of services that we can provide. What we're doing within each of those industry groups is identifying the profile of the client, their unique needs in bringing really unique bundled services to that client. That will expand the share of wallet that we have with that client and also allowed us to go out and track and we're seeing evidence of this already being able to track very high-profile clients within that industry as a result of that service offering that no one else can have. So we think over time, '27, '28, as these things start to take hold, the real growth opportunity is going to be an expansion of wallet and in our ability to win new logos over time. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Ryan Chellingworth: Thank you, everyone, for standing by. Welcome to the Retail Food Group First Half 2026 Results Presentation. [Operator Instructions] I will now hand over the conference to Peter George, Executive Chairman of Retail Food Group. Peter George: Good morning and thank you for joining the Retail Food Group first half presentation. My name is Peter George, and I'm the Executive Chairman of RFG. I'm joined today by Ryan Chellingworth, who is the Group's Chief Financial Officer. Ryan was appointed CFO on the 1st of January this year, having previously served as Deputy CFO. He is a chartered accountant with over 25 years experience domestically and in the U.K., including as Group Treasurer at EML Payments. Ryan brings a strong blend of financial fundamentals and commercial acumen, and I'm confident he'll make a significant contribution to RFG's next phase. Today, we'll be providing an update on the first half business performance, financial results for the period, the outlook for the balance of the financial year and recent trading, and then we will open up to questions. RFG remains Australia's largest multi-brand retail food franchise manager. We own and manage 10 brands with a global footprint of over 1,200 trading outlets across 29 countries, including over 690 outlets in Australia. We also manufacture and distribute high-quality pies from our Sunshine Coast bakery and roast and distribute coffee from our Sydney Roastery, and we hold the exclusive license to establish Firehouse Subs in Australia. As we move forward, our focus is on building our core brands by concentrating our resources and investment under the strategic framework that will be detailed today. Turning to Slide 5 and the key messages from today's presentation. First half was a period of mixed conditions. Consumer sentiment remains subdued, particularly across shopping center exposed categories and our earnings declined as previously guided. However, the results also provided insight into the opportunities moving forward as we focus on transformation and enhancing the network. Across our core brands network sales rose 0.8%. Same-store sales were up 0.2% and average weekly sales grew by 0.9%. These metrics demonstrate improving network quality and underlying brand resilience even as the total number of stores declined through the exit of low-performing and noncore outlets. Further progress has been made on the company store strategy reset with 70% of the 50 targeted transitions or exits now either agreed or complete. The refinancing announced on the 3rd of February provides balance sheet certainty and scope to further execute our strategic priorities. Today, we are also outlining a transformation program built around 3 pillars: cost rationalization, operational enhancement and structural alignment. This program is designed to right size the organization, consolidate our Southeast Queensland offices to our Robina headquarters, remove process inefficiencies, improve supply chain and field team effectiveness and ensure brand-aligned leadership. These actions will deliver material cost savings, will improve franchise partner support and position the business for sustainable earnings growth. Our growth opportunities remain central to the longer-term earnings story and will continue to be pursued with disciplined investment. First Firehouse Subs restaurant is planned for launch in the fourth quarter of this financial year. Our Turkiye international hub is now operational, and we continue to focus on sustainable network expansion for Beefy's Pies. Turning to Slide 6. At the headline level, domestic network sales were $254.6 million, down 1% on the prior corresponding period with domestic same-store sales growth of 0.2%. Growth in Crust and Beefy's offset softer conditions across the shopping center exposed categories. Domestic outlets ended the period at 693, which was down 29 from the number at June 2025 as we exited low-performing sites and progressed the company store strategy reset. These actions have resulted in improved network quality, and we are seeing the benefits through improved average weekly sales across the remaining stores. Underlying revenue declined 1% as higher Beefy's revenue was more than offset by cycling the $2.7 million in nonrecurring insurance proceeds and $0.6 million in deferred franchise-related income recognized in the prior corresponding period. Underlying EBITDA declined 43% to $9.2 million within the $9 million to $10 million guidance range provided to the market a couple of weeks ago. The decline reflected several factors, lower gross margin on slower-than-expected ramp-up of the newer Beefy's stores, compressed coffee margins where the group chose to maintain wholesale pricing to support franchise partners through the difficult trading conditions, absorbing higher green coffee bean costs and finally, delays in the commissioning of the new international supply hub in Turkiye. Looking at the network results in more detail. Core Brands, as we said, delivered network sales growth of 0.8% and same-store sales growth of 0.2%, driven by continued strength in Beefy's and Crust as customer count improved and competitor discounting in the pizza category eased. Improving network quality was evidenced by core brand average weekly sales rising 0.9%. During the period, we opened 22 new outlets across our core brands, offset by the closure of low-performing stores and the exit of sites as part of the company's store strategy reset. Within the coffee, cake, bakery segment, Gloria Jean's and Donut King traded in line with the challenging conditions flagged at the AGM in November. The Glorange refresh and premium product innovation continue to provide positive support, which I will cover shortly. In QSR, Crust delivered same-store sales growth of 2.2%, building on the momentum that we saw in the fourth quarter of last financial year when network sales returned to growth. Beefy's continued to perform well with same-store sales growth of 4.6%. RFG's immediate priority is improving core brand network sales and operational efficiency, which will maximize value for both our franchise partners and our shareholders. This involves 3 areas of focus: first, operational improvements to enhance our service delivery to franchise partners; second, procurement and supply chain initiatives to improve buying and reduce input costs; and third, a back-to-basics marketing strategy, targeting core customers and driving foot traffic. The goals of these focus areas is to increase network sales across core brands and improve store level profitability for franchise partners. As we've previously highlighted, RFG does well when its franchise partners do well. Early proof points of this strategy are encouraging with core brand same-store sales growth of 0.2%, average weekly sales up 0.9% and the current year cost reduction run rate of $1.2 million to $1.8 million already achieved. We will also have seen further Glorange store refresh success, which I'll discuss on the next slide. As previously disclosed, following the conclusion of the potential divestment review process, the Board has decided to retain Brumby's Bakery as a core CCB brand. While the process attracted considerable interest from multiple parties, we were not convinced that the options available would be in the best interest of shareholders, franchisees or team members at this time. Brumby's remains profitable and is an important contributor to the group's performance. We are currently developing strategies to support and grow the Brumby's network, and we will share these in due course. Our key medium-term growth opportunities, Firehouse Subs, international and Beefy's will continue to be supported by disciplined investment, and I will address each of these later in this presentation. The transformation program sets out the practical actions that will allow us to execute against our strategic priorities structured under 3 pillars. The first is cost rationalization. We are rightsizing the business to align with expected revenue growth. This includes consolidation of our Southeast Queensland offices to our single headquarters in Robina and reducing management layers to improve speed of decision-making. The second is operational enhancement. We are identifying and addressing process inefficiencies, improving supply chain and field team effectiveness and simplifying internal processes. The end goal is faster, better support for our franchise partners. The third pillar is structural alignment. We are improving our core business units with brand-aligned leadership, better operational alignment across brands and more effective use of centralized support functions. These pillars have clear measurable outcomes that will deliver $1.2 million to $1.8 million in cost savings during FY '26 that we have previously disclosed, targeting to increase to $5.7 million to $7 million of annualized cost savings during FY '27. They will support our focus on increasing core brands store numbers over time, and they underpin our goal to improve RFG profitability. Crucially, these initiatives are designed to be mutually beneficial for RFG and our franchise partners. The Gloria Jean's refresh. The Gloria Jean's Glorange format continues to demonstrate encouraging performance. Sales of the refurbished Glorange outlets in Goulburn and Robina are up 31% and 25% on the prior corresponding period. Our new store at GJ Shepparton is trading at 24% above the Gloria Jean's network average, excluding the drive-thru sites. Five further Glorange refreshes are planned for the second half, which will provide additional data points to validate the format at scale. Beyond the physical store format, we're also refreshing the broader Gloria Jean's market approach and improving the in-store customer experience. The combination of a modernized store environment, improved product offering and targeted marketing is designed to reenergize this brand for its next chapter. Brand innovation continues to drive customer engagement and network sales growth across our portfolio. Donut King's premium Christmas program lifted campaign performance 15% versus the prior corresponding period with the premium donut category advancing 14% following the Pistachio and Biscoff campaigns. This continues the strong Donut King premium range trend we highlighted at the AGM. Crust rolled out 5 new summer flavors generating over $1 million in additional product sales. This follows the success of the meat deluxe collection, which delivered $1.3 million in incremental sales in FY '25. Crust continues to benefit from its position as a QSR sector leader, topping the Fonto December quarter customer satisfaction scores across pizza brands. Gloria Jean's launched a collaboration with Pistachio Papi in September 2025, building on earlier global brand collaborations and extending the brand's relevance into new beverage occasions. Beefy's Pies. Since our acquisition of 9 Beefy's Pies stores in December 2023, we've delivered 7 new outlets and consistent network sales growth. In the first half of this year, the brand delivered 19% network sales growth and 4.6% same-store sales growth. Average weekly sales across the network were $28,000, while the 7 newer stores averaged $15,000, which is 70% of the non-highway network average and was below our expectations. The newer store performance is, therefore, what we are focusing on near-term for this brand, operational and marketing improvements to lift new store ramp-up and ensure sustainable growth as we expand beyond the Sunshine Coast. Recent innovation includes the Aussie Roast Lamb Pie with over 15,000 units sold since November. This type of product-led innovation is important in driving trial and repeat purchases in new markets. International represents another important medium-term growth opportunity. Our Turkiye hub is now operational, improving service levels and purchasing compliance by positioning supply closer to our master franchise partners and unlocking road freight options across the region. This is a meaningful structural improvement that will support margin and growth for our international franchise network. We appointed a Head of International in September last year, and we are reviewing incentive structures for international franchise partners to encourage store growth in key regions. International trading outlets stood at 528 at the end of the period, effectively flat on the prior 6 months. Firehouse Subs. Further progress has been made towards RFG's Australian launch of Firehouse Subs. During the half, we advanced the selection of key suppliers, progressed stores design finalization and develop marketing launch plans with agency support. Under the terms of our 20-year development agreement with Restaurant Brands International, we have a target to open 15 company-operated restaurants in the first 3 years and have a right to commence sub-franchising from year 4 with a target of 165 stores over 10 years. We continue to target the first Firehouse Subs restaurant opening in the fourth quarter of this financial year in Southeast Queensland. Turning to the company store reset. As announced in August, alongside our FY '25 results, 50 of our 65 company-operated stores were identified for sale or exit with the remaining 15 to be retained. The retained portfolio is concentrated in Beefy's Pies, which we will continue to operate as company stores to drive brand expansion, along with Gloria Jean's and one Donut King outlet. At the end of February 2026, 70% of the 50 targeted outlets have now been transitioned, agreed for sale, exited or closed. In the first half, the stores identified for sale or exit recorded a post-AASB 16 loss of $1.2 million and a cash outflow of $2.1 million, inclusive of lease costs. This strategic reset remains central to improving RFG's cash flow profile and network quality. As transitions take effect in the second half, we expect the associated cash outflows to reduce, contributing to an improvement in group cash flow. I'll now hand over to Ryan to walk through the financial results in more detail. Ryan Chellingworth: Thank you, Peter, and good morning, everyone. Turning to Slide 17, which outlines the P&L for first half 2026. Underlying revenue declined 1% on the prior corresponding period. Higher company store revenue from Beefy's and the full period contribution from CIBO Espresso helped offset the cycling of 2 one-off items in the prior period, $2.7 million in insurance recovery proceeds and $0.6 million in deferred franchise income. Gross margins were pressured by higher coffee bean costs, which the group chose to absorb rather than pass on to franchise partners given the challenging trading conditions. A wholesale coffee price increase will take effect from March 2026, which combined with better buying of green coffee beans is expected to support gross margin improvements in the second half. Underlying EBITDA and NPAT declined as a result of the above, together with a reduction in lease impairment benefits relative to the prior period, which we have previously flagged. Whilst company store costs increased from the new Beefy's stores and the CIBO full period impact, we did see a reduction in corporate overhead costs due to a reduction in bad debt expense, insurance costs, recruitment fees and occupancy costs. On Slide 18, we reconcile underlying to statutory EBITDA with detailed reconciliations including in the appendix on Slides 27 and 28. Key reconciliation items include company store lease provisions, company store trading results for outlets identified for sale or exit, marketing fund timing differences and growth horizon investment costs relating to Firehouse Subs and international hub establishment. Statutory NPAT for the period was $2 million, a reduction from $7.3 million in the PCP for the reasons outlined on Slide 17. Moving to Slide 19. The CCB division accounts for 72% of RFG's domestic network sales, contributing a greater share of EBITDA due to the vertical integration of coffee and pies. CCB same-store sales were resilient, down 0.4% though declining customer count and noncore outlet closures drove network sales 2.4% lower in difficult trading conditions, particularly in shopping centers. Positively, average weekly sales rose 1.7% and average transaction value increased 4%, indicating improved network health among continuing stores. Underlying segment EBITDA declined 47% to $7.5 million, reflecting compressed coffee margins, the cycling of one-off revenue adjustments across insurance proceeds and deferred franchise income and a lower contribution from lease impairment releases relative to the prior corresponding period. Turning to QSR on Slide 20, which accounts for 28% of domestic network sales. Key trading metrics across QSR improved over the period. Network sales were up 2.8% and same-store sales grew 1.6% with customer count, average weekly sales and average transaction value all rising. We opened 4 new Crust outlets during the half and the easing of aggressive competitor discounting that had previously impacted the pizza category supported growth for the brand. Crust had deliberately chosen not to participate in a price war to protect franchise partner profitability and was able to capitalize through a continued focus on value for the customer. Underlying segment EBITDA declined due to the cycling of lease and bad debt provision releases in the prior corresponding period. Moving to Slide 21 and our operating cash flow. Our operating cash flow declined by $9.9 million versus the prior corresponding period. This reflects several factors. First, the cycling of the one-off benefits in the PCP, including insurance proceeds and debt recoveries. Second, lower gross profit from the decision to maintain wholesale coffee pricing to support franchise partners and a lower contribution from Beefy's. Third, noncore cash outflows, including those relating to the setup of the international hub and Firehouse Subs preparatory costs. And fourth, company store cash outflows, which are expected to reduce in second half 2026 as transitions and exits take effect. We expect a meaningful improvement in operating cash flow in second half 2026, driven by the wholesale coffee price increase from March, cost-out benefits and the progressive reduction in company store outflows following the store exit and transitions in the first half 2026. On Slide 22, we include the balance sheet. We ended first half 2026 with $16.7 million of cash, which includes $11.3 million of restricted cash relating to marketing funds, bank guarantees and Firehouse Subs commitments. Working capital increased modestly due to seasonal timing and inventory positioning through the holiday period. Lease-related assets and liabilities reduced as company store exits progressed. At first half 2026, we had drawn borrowings of $32.5 million under our previous debt facility. Post period end, we completed the refinancing of a new $41.2 million facility with WH Soul Pattinson maturing 31st of August 2027. This facility provides for an additional $7.5 million drawdown to support our strategic priorities. Moving to Slide 23. The debt refinancing delivers balance sheet certainty and supports the company's strategic priorities. Our capital allocation framework is now focused on 5 areas: first, core brand operational efficiency and targeted marketing to drive network sales; second, the cost-out program across the 3 pillars Peter outlined, which directly supports cash flow improvement; third, maintaining appropriate liquidity to execute our strategic priorities; fourth, the initial Firehouse subs rollout funded within the new facility; and fifth, leveraging the Turkiye hub to support growth in our international franchise network. With that, I will hand back to Peter to discuss our FY '26 outlook. Peter George: Thank you, Ryan. For FY '26, we continue to guide underlying EBITDA of $20 million to $24 million. This guidance implies a meaningful improvement in the second half relative to the first half, which is underpinned by several drivers that we have discussed today. Macro conditions remain challenging, and our market will stay tightly -- marketing will stay tightly focused on core customers and value-driven propositions. In the first 8 weeks of calendar 2026, core brand network sales were down 5.5% versus the prior corresponding period, primarily reflecting customer count impacts within the CCB division from outlet closures. Over the same period, core brand same-store sales declined 0.2%, demonstrating continued brand resilience in a challenging environment. Looking at the key drivers for the second half. Gross margin is expected to improve as the wholesale coffee price increase takes effect from March, combined with better green bean purchasing and improved international coffee trading. Cost-out initiatives are underway and expected to deliver $1.2 million to $1.8 million of savings in the second half with the full year FY '27 benefit expected to reach $5 million to $7 million. International growth will be supported by the go-live of the Turkiye hub and incentive programs for master franchise partners. Company store cash outflows are expected to reduce as transition benefits take effect. Beefy's will focus on brand expansion outside the Sunshine Coast and on lifting the performance of the 7 newer stores for operational and marketing improvements. And Firehouse Subs remains on track for a fourth quarter '26 opening with the refinancing providing the funding runway for the initial rollout. Before opening to questions, I'd like to take this opportunity to thank our franchise partners and team members for their commitment through what has been a challenging period. Our franchise network is the heart of this business and the actions we are taking are designed first and foremost to improve their outcomes. I'd also like to thank our shareholders for their continued support as we execute the transformation and growth agenda. While near-term earnings have been impacted by a number of factors, the strategic foundations we are building, notably a leaner cost base, stronger core brands and a compelling growth horizon in Firehouse Subs and international position RFG well for sustainable value creation. We'll now move to questions. As a reminder, if you wish to ask a question please enter it into the webinar chat. Ryan Chellingworth: Moving to the questions. So we've had some come through prior to the webinar, and there's some that have come through since the webinar started. First question: What is being done to modernize and bring back the Bakery division? Why has it not competed with other bakeries taking market share? Peter George: Well, I think it's -- since COVID, it's been fairly stable. It hasn't competed with some of the other bakery chains for reasons probably related to the allocation of capital to other areas of priority. But it is -- as we said earlier, we've decided to retain the asset, and we will come to the market with details of its strategic future in the near-term. Ryan Chellingworth: The second question that's come through from the chat, it's come through from Ling Zhang. Could you please let us know the result of the revised corporate store strategy, especially the results for cash flow in the first half 2026? I'm happy to take that one. So as we noted in the presentation, we have 70% of the 50 company stores, we have either transitioned to franchise partners. We have agreed sales in place or we've exited or closed. From a cash flow perspective, we saw cash outflows of $2.1 million in the first half 2026, which we expect to improve through the second half as those store transitions take effect. The next questions come from Ken Wagner. How many Firehouse stores do you expect to have at the end of FY '27? Peter George: We have a contractual commitment for 15 stores in 3 years. The 3 years is probably running about 6 months behind schedule for a number of reasons, access to appropriate sites. We took a while to get the supply chain for the ingredients put in place. So by the end of 2027, I would expect we'd have somewhere around half of the 15 stores in place. Ryan Chellingworth: Second question from Ken. Assuming Glorange works, how quickly can you roll it out to the rest of the Gloria Jean's stores? Peter George: Well, we're confident that it will work. We need to give it a fairly rigorous trial period, though, because we do in this industry, often see a honeymoon effect of a refurb of the store, then it comes back to its original sales performance. In order to encourage franchisees to invest the money in refurbishing, we have to have fairly compelling proof. So once that compelling proof is available, which I think it will be in the near future, the rest of the network will be refurbished in accordance with the requirements of the franchisee and the landlord, but it will take probably 2 to 3 years for the whole network to be transformed. Ryan Chellingworth: Next question from Ken. How material is the international business in terms of EBITDA? Peter George: Yes. Right now, it's not immaterial. It contributes $2.5 million of the total, so it's about 10%. There is significant upside potential though out of the new supply chain initiatives that were put in place recently, we were missing a lot of revenue because they weren't buying coffee office because of the inefficiency of providing that out of Australia and Dubai. So we think its potential in the long-term is to be much more significant, probably somewhere around the 20% of earnings level. Ryan Chellingworth: Okay. Next question comes from Larry Gandler. With regards to the debt facility, does RFG expect the facility to be fully drawn by the end of financial year 2026? Peter George: Yes. Ryan Chellingworth: Second question from Larry. What have early demand indications or what early demand indications can you discuss about Firehouse Subs? Has the company -- is the company building consumer anticipation? Peter George: The answer to that is, yes. We've done extensive taste testing and that's universally come back very positive. The proposition is that these are much higher quality products than the main competitor offers. The price differential is not great. There are a few added extras such as availability of fries, which our main competitor doesn't offer. And further down the track, the angle of the Firehouse foundation will come into play. Ryan Chellingworth: Okay. We'll just pause there for one moment while we wait for any more questions to come through. On the basis that we don't have any further questions coming through, that concludes today's presentation. Thank you, everyone, for joining in, and have a good day.
Operator: Good morning, everyone, and welcome to D-Wave Quantum Inc.'s fourth quarter fiscal year 2025 earnings conference call. Today's conference call is being recorded. At this time, I would like to turn the call over to Kevin Hunt, Senior Director of Investor Relations. Please go ahead. Thank you, and good morning. With me today are Dr. Alan Baratz, our Chief Executive Officer, and John Markovich, our Chief Financial Officer. Kevin Hunt: Before we begin, I would like to remind everyone that this call will contain forward-looking statements, which are subject to risks and uncertainties and should be considered in conjunction with cautionary statements contained in our earnings release and the company's most recent periodic SEC reports. During today's call, management will provide certain information that will constitute non-GAAP financial measures under SEC rules, such as non-GAAP gross profit, non-GAAP gross margin, adjusted EBITDA loss, adjusted net loss, and adjusted net loss per share, as well as operating metrics such as bookings. Reconciliations to GAAP financial measures, definitions, and certain additional information are included in today's earnings release and are available in the Investor Relations section of our company website at www.dwavequantum.com. An on-demand webcast and a transcript of the conference will be posted on the Investor Relations section of the website within 48 hours after the call. Given that D-Wave is now fortunate to have 15 sell-side security analysts publishing research on the company, we may have to limit each analyst to one question during the first round and, time permitting, proceed to a second round of questions. I will now hand the call over to Alan. Alan Baratz: Morning, and thank you all for joining us today. Fiscal 2025 was not just a strong year for D-Wave. It was an inflection point for the company and for the quantum computing industry. For years, this sector has been defined by unrealized promises, dependence on government grants, and an inability to deliver customer value. In 2025, D-Wave separated itself from that narrative. We delivered proof. We delivered revenue. And we delivered real-world advantage. While 2025 was declared the International Year of Quantum Science and Technology, for D-Wave, it was something more important: the year quantum computing moved decisively from research to real-world impact. 2025 was a year of objective proof, evidence of D-Wave's technical and commercial progress. We began the year by closing our first Advantage quantum computer system sale to the Jülich Supercomputing Center, marking the first time a commercial annealing quantum computer was purchased for integration into a national supercomputing facility. We then became and remain the only quantum computing company to demonstrate quantum supremacy on a useful real-world problem. That result, which was achieved natively on our Advantage2 quantum processing unit, has not been successfully challenged for nearly two years after the paper's initial publication. This demonstration was an entirely quantum computation, not a hybrid computation. Moreover, no other companies other than D-Wave, Google, and Quantinuum have achieved quantum supremacy on any problem. Not Rigetti, not Infleqtion, not Xanadu, not IQM, not IBM, not IonQ. All attempts other than D-Wave, Google, and Quantinuum have been spoofed. Critically, we transitioned that technical leadership into commercial performance. With record revenue of $24.6 million in fiscal 2025, up 179% year-over-year. Then in May, we launched general availability of our Advantage2 system, the same system that achieved that supremacy milestone, and our sales opportunity pipeline expanded by nearly 1,500% year-over-year. Bookings were the second highest quarterly bookings in the company's history and up 471% from the immediately preceding third quarter to $13.4 million in Q4 bookings. In an industry long on promises, D-Wave is delivering measurable results. And now we have entered 2026 with extraordinary momentum. In January alone, we generated more bookings than in the entirety of fiscal 2025. We closed a $20 million system sale with Florida Atlantic University. We signed a two-year $10 million enterprise quantum compute-as-a-service agreement with a Fortune 100 company, one of the largest enterprise quantum computers-as-a-service deals in the history of the quantum computing industry. We completed the acquisition of Quantum Circuits. It has been our strategy for five years to position D-Wave as the world's leading quantum computing company and the only dual platform quantum computing company. Our dual platform approach is important because it allows D-Wave to be a one-stop shop capable of solving the full range of the complex problems customers face. This approach is not new, but let me be clear. The acquisition of Quantum Circuits fundamentally changes the competitive landscape. We dominate optimization today with annealing. And now by combining Quantum Circuits' industry-leading dual-rail qubit technology with D-Wave's proprietary on-chip cryogenic control, we are also positioned to be the leader in error-corrected gate-model systems. Annealing quantum computing remains a strategic focus for D-Wave. Optimization is one of the largest and most immediate commercial opportunities in quantum computing. It spans logistics, defense, telecom, manufacturing, finance, and energy—virtually every major industry. D-Wave has demonstrated material performance advantages over classical systems for optimization. To our knowledge, no gate-model quantum computing company has demonstrated a practical advantage over classical systems for optimization. They likely never will. Academic literature suggests optimization problems require annealing quantum computing. It is a commercially proven architecture with expanding performance gains. We are running production workloads today across a multitude of optimization use cases. Annealing dominates optimization today, and we believe that it will continue to dominate as the market expands. With our Advantage3 system in development, we expect to further extend that performance gap. Now let's talk about gate-model. Most superconducting competitors are pursuing legacy transmon architectures that require massive physical qubit overhead for effective error correction and complex wiring schemes that will struggle to scale economically. With Quantum Circuits, D-Wave takes a different path. The dual-rail technology is transformational. With it, we believe that D-Wave gains a decisive architectural advantage. Dr. Rob Schoelkopf, the inventor of the transmon qubit, developed dual-rail qubits to move beyond that architecture with built-in erasure detection that identifies 90% of errors that occur. Our erasure detection and our observed erasure rate of 0.5% allow us to deliver logical qubits with an order of magnitude fewer physical qubits compared to architectures without this capability. With erasure detection, this technology delivers gate fidelities that exceed 99.9%, bringing trapped-ion fidelities along with superconducting execution speeds to today's gate-model algorithm developers. Error correction is essential to unlocking broad quantum utility, and we believe that the dual-rail technology offers the fastest path to large-scale error-corrected architectures. I cannot emphasize this enough. The dual-rail technology allows us to achieve superconducting speed with the fidelity of ion-trap or neutral-atom approaches. That is a fundamental improvement in the metrics that matter. Speed matters. Error-correction overhead matters. Scalability matters. Our approach achieves logical qubit ratios of roughly one logical qubit for every 100 to 200 physical qubits compared to about one logical qubit for every 1,000 to 2,000 physical qubits in conventional superconducting designs or neutral-atom systems. What is equally remarkable are the gate speeds. Dual-rail gate speeds are 1,000 times faster than high-fidelity ion-trap systems. And D-Wave now holds advantages in each. But our gate-model innovations do not stop there. In January, D-Wave demonstrated that the on-chip cryogenic control currently being used in its Advantage annealing quantum computers can be used to control gate-model qubits without loss of fidelity. This industry-first milestone advances the development of commercially viable gate-model quantum computers by providing a path to significantly reduce the wiring to control large numbers of qubits. We are now working on leveraging this technology to provide full qubit control at scale. This would ultimately enable the ability to control gate-model qubits with multiple orders of magnitude fewer control lines than required by competing superconducting gate-model systems. That difference is not incremental. It is architectural. It is essential. As we discussed at the time of the Quantum Circuits acquisition, we have an eight-qubit gate-model system available to select customers today, and we expect to start generating some quantum compute-as-a-service revenue from our gate-model systems this year and expect the 17-qubit system later in 2026. We have already seen tremendous interest from customers, and we expect our gate-model offering to deliver a small but growing stream of revenue in 2026, while also building a pipeline of gate-model system sales opportunities for delivery beginning in 2027. We believe that the Quantum Circuits acquisition positions D-Wave as the leading contender to deliver the first fully error-corrected, scalable superconducting gate-model quantum computer. This effectively doubles our long-term addressable market by delivering both annealing and gate-model quantum computing solutions. What is also particularly noteworthy is our rapidly accelerating commercial traction, which reflects a differentiated strategy from most all other quantum computing companies. At our Qubits conference in January, our largest and most successful user conference ever, we announced a $20 million Advantage2 system sale with Florida Atlantic University, as well as a two-year $10 million enterprise QCaaS agreement with a Fortune 100 company, one of the most significant enterprise deals in the history of the quantum computing industry. This is not research revenue. It represents commercial adoption and more. The U.S. government is also taking note. We recently launched a dedicated U.S. government solutions business unit. Unlike other quantum companies that are focused primarily on securing federal R&D grants and characterizing those as commercial revenue, our strategy is very straightforward: solve real mission-critical problems now and derive government revenue today. At Qubits, we demonstrated a missile defense simulation in collaboration with Davidson Technologies and Anduril. For a 500-missile attack simulation, we showed a 10x faster time to solution, a 9% to 12% improvement in threat mitigation, and 45 to 60 additional missile intercepts. As complexity increased, D-Wave's technological advantage increased. This is operational relevance. Anduril's President and Chief Business Officer, Matthew Steckman, spoke during my Qubits keynote and indicated that he was surprised at how fast and mature D-Wave's technology is. We believe that there is significant opportunity in U.S. government applications across both our annealing and gate-model platforms. We are also seeing growing interest in system sales. We continue to advance discussions in South Korea, as well as with additional HPC systems in Munich in Germany, Q Alliance in Italy, and Florida Atlantic University in the U.S. In addition to annealing and gate-model quantum computing system-related agreements with academic and government institutions, these are premium-priced systems with high gross margin profiles. On the gate-model side, we expect to see the development of a multimillion-dollar R&D system sales pipeline for collaboration going forward. Underpinning all of D-Wave's technical and commercial traction is a very strong leadership team with decades of deep expertise in their respective areas of focus. We recently brought on Jack Sears Jr. to lead U.S. government solutions; Stan Black as our Chief Information Security Officer; and, as I previously mentioned, Dr. Rob Schoelkopf, who brings world-class superconducting leadership and maintains strong ties with Yale University. Our Chief Development Officer, Dr. Trevor Lanting, will oversee product development across both annealing and gate systems, ensuring integration, speed, and execution. The strength of our management team and its track record of success and execution continue to expand with the announcement that D-Wave's headquarters and operational footprint will relocate from Palo Alto, California, to Boca Raton, Florida, later this year, where we will also open a major U.S.-based R&D center. We are building a distributed innovation footprint designed to attract top-tier quantum talent and ultimately provide bicoastal redundancy in case of disaster recovery, with three main R&D hubs: Burnaby, British Columbia; New Haven, Connecticut; and Boca Raton, Florida. We are building a distributed innovation footprint designed to attract top-tier quantum talent and ultimately lead the next era of computing. Near-term opportunities and long-term growth are key to maximizing D-Wave's sustained capital market support. Let me close with a broader industry observation. Quantum computing is entering a new phase. The first phase was scientific exploration. The second phase was capital formation. The next phase will be commercial separation. Over the next several years, we expect that this industry will consolidate around a small number of companies that can demonstrate three things: real performance advantage, real commercial adoption, and a scalable, economically viable architecture with a credible pathway to full error correction. Many will not make that transition. D-Wave already has. We are the only company running production applications for 2,000 enterprise customers. We are the only dual platform quantum computing company with a commercially proven annealing quantum computer generating meaningful revenue and a differentiated superconducting gate-model platform. We are the only company to demonstrate real-world quantum supremacy on a useful problem. We have proof of commercialization with contracts and expanding bookings. Others are still pursuing proof of concept, government funding, or long development timelines. Others have made product development decisions that focus on either superconducting speed or ion-trap and neutral-atom fidelity. We can deliver both. As the market matures, capital will flow toward companies with operating leverage, commercial validation, and technical defensibility. We believe D-Wave is uniquely positioned at that intersection. The quantum industry will not support dozens of long-term winners. It will support a handful of durable platforms, and we intend to be one of them. Fiscal 2025 marked the moment when D-Wave moved from participant to front-runner. The momentum we are seeing in early 2026 suggests that this gap is widening. With that, I will hand the call over to John to provide a review of our fourth quarter and fiscal 2025 results. Kevin Hunt: Thank you, Alan, and thank you to everyone for taking the time to join today's call. Alan Baratz: John? John Markovich: I will begin with the non-GAAP financial measures for the most part, as we believe these metrics improve investors' ability to evaluate our underlying operating performance. These measures are defined in the tables at the bottom of today's earnings press release and include non-GAAP gross profit, non-GAAP gross margin, adjusted EBITDA loss, adjusted net loss, and adjusted net loss per share, adjusting for non-cash and non-recurring expenses. In my review of the fiscal year 2025 and fourth quarter results, I will be providing non-GAAP operating metrics, including bookings, as well as non-GAAP financial measures that include non-GAAP gross profit, non-GAAP gross margin, adjusted net loss, and adjusted net loss per share. Revenue for fiscal 2025 totaled $24.6 million, an increase of $15.8 million, or 179%, compared with fiscal 2024 revenue of $8.8 million, with fiscal 2025 revenue including $16.2 million in systems sales revenue, $5.5 million in QCaaS subscription revenue, and $2.7 million in professional services revenue. I would like to highlight several aspects of D-Wave's revenue that clearly distinguish the company from a number of other so-called quantum computing companies. First, all of our revenue is derived from selling, providing access to, or providing services for quantum computing systems. We do not recognize any revenue from any products or services that are not directly related to quantum computing, such as quantum sensing, quantum networking, and encryption systems that rely on quantum physics but not on quantum computing. We defined quantum computing systems as computing systems that harness superposition and entanglement to solve complex computational problems. In addition, we do not give, grant, invest, or lend funds to any of our customers that they utilize or intend to utilize towards the purchase of our products or services. Fiscal 2025 bookings were $18.7 million, a decrease of 22%, or $5.2 million, from fiscal 2024 bookings of $23.9 million, keeping in mind that the 2024 bookings included an eight-figure booking of the company's first system sale. Subsequent to the end of fiscal 2025, D-Wave has closed over $32.8 million in additional bookings that includes a $20 million system sale to Florida Atlantic University, and a $10 million two-year enterprise license deal with a Fortune 100 company. With respect to the diversity of our customer base, in fiscal 2025, D-Wave recognized revenue from over 135 individual customers, encompassing over two dozen Forbes Global 2000 enterprises. The average revenue per commercial customer increased by 20% over fiscal 2024, and the total revenue recognized from Forbes Global 2000 customers increased by 70% on a year-over-year basis, with the average Forbes Global 2000 deal size up 90% on a year-over-year basis. GAAP gross profit for fiscal 2025 was $20.3 million, an increase of $14.7 million, or 265%, from fiscal 2024 GAAP gross profit of $5.6 million, with the increase due primarily to a higher-margin quantum computer system sale during the year. Non-GAAP gross profit for fiscal 2025 was $21.1 million, an increase of $14.7 million, or 229%, from the prior year non-GAAP gross profit of $6.4 million. GAAP gross margin for fiscal 2025 was 82.6%, an increase of 19.6% from fiscal 2024 GAAP gross margin of 63%, with the increase again due primarily to a higher-margin quantum computer system sale during the year. Fiscal 2025 non-GAAP gross margin was 86%, an increase of 13.2% from the prior year non-GAAP gross margin of 72.8%. Net loss for fiscal 2025 was $355.0 million, or $1.11 per share, compared with the fiscal 2024 loss of $143.9 million, or $0.75 per share. The increase in net loss was primarily driven by $250.5 million in non-cash, non-operating charges related to the remeasurement of the company's warrant liability as well as realized losses stemming from warrant exercise, both directly related to the increase in the price of the company's warrants and common stock. Excluding this non-cash remeasurement charge, the adjusted net loss for fiscal 2025 was $84.5 million, or $0.26 per share, an increase of $8.9 million, or 11.8%, when compared to the fiscal 2024 adjusted net loss of $75.6 million, or $0.39 per share. The reduction in net loss per share was due to a higher issued and outstanding number of common shares in 2025 when compared to 2024. Adjusted EBITDA loss for fiscal 2025 was $71.8 million, an increase of $15.8 million, or 28%, from the fiscal 2024 adjusted EBITDA loss of $56.0 million, with the increased loss due primarily to higher operating expenses, partially offset by higher gross profit. Now we move on to the fourth quarter. Revenue in the fourth quarter totaled $2.8 million, an increase of approximately $0.5 million, or 19%, from the prior year fourth quarter revenue of $2.3 million, with fourth quarter 2025 revenue including approximately $1.1 million in systems sales revenue, $1.0 million in QCaaS subscription revenue, and approximately $0.7 million in professional services revenue. Bookings for the fourth quarter were $13.4 million, a decrease of $4.9 million, or 27%, when compared to the year earlier quarter of $18.3 million that included the eight-figure system sale that I referenced earlier. On a sequential quarter-to-quarter basis, bookings increased $11.0 million, or 471%, from the immediately preceding fiscal 2025 third quarter bookings of $2.4 million, with the increase due primarily to the previously announced €10 million booking for a multiyear 50% capacity commitment for a D-Wave Advantage2 annealing quantum computing system to support the development of a Lombardy, Italy-based state-of-the-art quantum computing and research facility. GAAP gross profit for the fiscal 2025 fourth quarter was $1.8 million, an increase of approximately $0.3 million, or 21%, from the fiscal 2024 fourth quarter gross profit of $1.5 million, with the increase due primarily to the growth in revenue. For the fourth quarter, non-GAAP gross profit was $2.0 million, an increase of approximately $0.3 million, or 17%, from the prior year fourth quarter non-GAAP gross profit of $1.7 million. GAAP gross margin for the fiscal 2025 fourth quarter was 64.8%, an increase of 1.0% from the fiscal 2024 fourth quarter GAAP gross margin of 63.8%. For the fourth quarter, the non-GAAP gross margin was 71.8%, a decrease of 1.2% from the fiscal 2024 fourth quarter non-GAAP gross margin of 73.0%. Net loss for the fourth quarter 2025 was $42.3 million, or $0.12 per share, a decrease of $43.8 million, or $0.25 per share, from the fiscal 2024 fourth quarter net loss of $86.1 million, or $0.37 per share. The decrease in net loss was primarily due to a decrease of $57.7 million in non-cash, non-operating charges related to the remeasurement of the company's warrant liability, partially offset by higher operating expenses. Excluding this charge, the fourth quarter adjusted net loss was $31.8 million, or $0.09 per share, an increase of $14.0 million, or $0.01 per share, from the fiscal 2024 fourth quarter adjusted net loss of $17.8 million, or $0.08 per share. Adjusted EBITDA loss for the fourth quarter was $25.0 million, an increase of $9.7 million, or 63%, from the prior year fourth quarter adjusted EBITDA loss of $15.3 million, with the increase due primarily to higher operating expenses, partially offset by higher gross profit. Now I will address the balance sheet and liquidity. As of 12/31/2025, D-Wave's consolidated cash and marketable securities balance totaled $884.5 million, representing a 397% increase from the year earlier consolidated cash balance of $178.0 million, and a 6% increase from the immediately prior fiscal 2025 third quarter consolidated cash balance of $836.2 million. During fiscal 2025, D-Wave raised over $800.0 million in gross proceeds from the issuance of equity under two ATM programs, an ELOC program, and from the exercise of warrants and stock options. During the fourth quarter, the company received $63.7 million in cash proceeds from the exercise of warrants. As previously announced, subsequent to year-end, we invested $250.0 million in cash in conjunction with the acquisition of Quantum Circuits, and we believe that our remaining liquidity is sufficient to support a fully funded plan to profitability. With respect to 2026, we will continue our practice of not providing formal financial guidance. However, I would like to provide some parameters. As we have previously noted, the system sales process is fairly complex and the sales cycle is usually lengthy in duration, not only for our Advantage2 annealing system, but also for our dual-rail gate-model quantum systems. With respect to bookings, we are obviously off to a tremendous start, with fiscal 2026 year-to-date bookings already exceeding our annual bookings for any year in the company's history. As Alan noted earlier, our sales opportunity pipeline entering 2026 was up nearly 1,500% to 2025. That includes a 700% increase in the total number of prospective sales transactions. We continue to see interest in potential system sales, and we continue to see interest in potential system sales as well as QCaaS and professional services deals. With respect to revenue recognition on system sales, please keep in mind that most of these transactions will involve site preparation, installation, calibration, and other key steps before the systems are fully operational that are likely to encompass multiple months and possibly quarters depending on the unique elements of a particular system transaction. As a result, our revenue recognition on system sales is on a percentage-of-completion basis. In addition, we anticipate that most system sales transactions will involve a multiyear service and maintenance revenue component, and some may include a multiyear LeapCloud access component, which we expect will be in the second half of this year. The €10 million booking in Italy will be recognized ratably over five years commencing once the system is fully installed. With respect to the recently announced $10 million enterprise QCaaS agreement, this revenue will be recognized ratably over a two-year timeframe commencing in the current quarter. To summarize, we expect incrementally higher revenue growth in the second half of this year when compared to the first half. With respect to operating expenses, we intend to continue to invest aggressively in both our annealing and gate-model technology development initiatives that consist primarily of research and development headcount, fabrication expenses, and to some degree, capital expenditures. As we previously outlined, approximately 65 research and development professionals joined D-Wave through the Quantum Circuits acquisition, and we intend to expand this New Haven, Connecticut-based gate-model team by at least 50% over the course of this year. In addition, we will be making significant headcount and capital investments at our recently announced U.S. R&D facility in Boca Raton, Florida, to support our LeapCloud service offering. Over the course of fiscal 2026, we expect to increase quarterly operating expenses by approximately 15% sequentially over the immediately prior fiscal quarter. Lastly, given the recent formation of our government business unit, we will be making meaningful investments in this area given the magnitude of opportunities that we see here. In conclusion, as we have previously stated, we continue to believe that D-Wave has the opportunity to be the first independent publicly held quantum computing company to achieve sustained profitability and to achieve this milestone with substantially less funding than required by other independent publicly held quantum computing companies. With that, operator, please open the call for questions. Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing any keys. If at any time your question has been addressed, and you would like to withdraw your question, please press star then 2. As a reminder, please limit yourself to one question and requeue should you have a follow-up. At this time, we will pause momentarily to assemble our roster. Our first question comes from Harsh Kumar of Piper Sandler. Please go ahead. Harsh Kumar: Alan, I had one for you. I wanted to ask about the gate model, particularly. Can you help us think about the advantage with the built-in error correction that you have? And I am asking specifically from a time-to-market standpoint and all the progress you are making on technological achievements. Should I just think of this as you need a lot less, like 10x fewer qubits to get to a commercial system? I have to believe this translates to some kind of a timing advantage for you as well. Alan Baratz: Yes, it absolutely translates into a timing advantage. The reason it translates into a timing advantage is because the complexity of building a fully error-corrected system and scaling it to the size needed to achieve quantum utility is much lower, given the dual-rail technology combined with our cryogenic control technology. The dual-rail technology gives us very high gate fidelities, on par with some of the best in the industry, including trapped ion and neutral atom, while preserving the thousand-times speed advantage of superconducting over the other modalities. Because of the higher fidelities, we are able to error correct with many fewer physical qubits per logical qubit. That is a complexity reduction advantage. Then you add the on-chip cryogenic control, which will ultimately allow us to control qubits with just hundreds of I/O lines versus hundreds of thousands of I/O lines, as with other superconducting approaches. Again, we believe that combination will allow us to build and deploy scaled error-corrected superconducting gate-model systems ahead of anybody else. We believe that, ultimately, superconducting will lead because of the speed advantage and the reduction in the complexity. Operator: Our next question comes from Quinn Bolton of Needham & Company. Please go ahead. Quinn Bolton: Hey, guys. I will also offer congratulations on a great 2025. John, I just wanted to come back. I know you are not giving guidance per se for 2026. But as we think about the integration of QCI now into the business, can you give us any sort of points as to how much OpEx you would expect to incur for the year now that the QCI acquisition is closed? Is the incremental OpEx for that team sort of fully factored into that 15% OpEx quarter-on-quarter increase that you talked about for March? Just trying to think about if we had a base model for D-Wave prior to the QCI acquisition, how much additional OpEx would you think we would be putting into the models in 2026 with that acquisition? John Markovich: Quinn, my comments earlier in terms of the sequential 15% growth in OpEx include the incremental costs associated with QCI. The answer to your question is yes. That includes expansion in not only their R&D team, but other expenses including fabrication expenses, as well as some capital expenditures. Operator: Our next question comes from William Kingsley Crane of Canaccord. Please go ahead. William Kingsley Crane: Congrats on the really strong momentum. John, for you, QCaaS has moderated a bit the past year with system sales driving growth. I am wondering if you have a sense of what you think an ideal net retention rate for that segment can be or what that could be this next year. And then if Stride Hybrid Solvers and new ML integration capabilities could change that upsell conversation at all with existing customers? John Markovich: We have not published retention rates, but what I can tell you is when you take a look at the composition of the QCaaS in 2024, a significant component was Jülich, and that transitioned to a system sale. And when you take a look at the bookings that we recently announced, including the €10 million booking for a multiyear 50% utilization of the system in Italy, as well as the enterprise QCaaS deal, we are starting to see substantially larger transactions in the overall QCaaS than what we have seen in the past that give us incrementally more visibility on the growth. Alan Baratz: Kingsley, we have been saying all along that system sales and QCaaS are very complementary models for us. System sales for now are larger deals, with earlier revenue recognition than the QCaaS deals, which are a bit smaller and recognized ratably over a multiyear period in general. However, we are beginning to see an increase in the size of QCaaS deals. I started signaling this last year when I said we are now looking at larger companies doing larger deals with us, including potentially enterprise all-you-can-eat licenses. That is starting to transition QCaaS into larger enterprise license deals. The two-year $10 million Fortune 100 company deal that we closed at the beginning of this year is the first example of that. Now, revenue for those deals still gets recognized ratably, so the revenue recognition is generally over a longer period of time than the system sales. But I think we are going to really start to see QCaaS picking up the pace as we begin to do more enterprise licenses. Operator: Our next question comes from Joe McCormick of Evercore. Please go ahead. Joe McCormick: Yes. Thanks for taking the question on for Mark Lipacis. Maybe just around Quantum Circuits and how it is playing into that sales pipeline increase that you are talking to. I saw that you closed a little bit north of $2 million in bookings for QCI in January. Can you speak a little bit to the levels of engagement that you are seeing, and if there is any qualification around what that book of business looks like from a backlog perspective that is folding in as we enter the 2026 year? John Markovich: I am happy to. As we articulated when we first announced the transaction, we do expect revenue contributions from Quantum Circuits this year on the professional services and QCaaS side. They also have a book of business that is government-related, and they actually have some revenue last year that was government-related. Then, as we have previously outlined, we also expect to start to develop a sales pipeline over the course of this year for potential system sales. Alan Baratz: The only other thing I will say is we are seeing a lot of interest in the dual-rail systems, including the eight-qubit system that we have operational today with some early customers using it, and the 17-qubit system we expect later this year. A number of our current annealing customers have expressed interest in that system in addition to the annealing system. We are quite encouraged by the interest that we are seeing. Operator: Our next question comes from Krish Sankar of TD Cowen. Please go ahead. Krish Sankar: Yeah. Hi. Thanks for taking my question. I just wanted to find out, like, one of your competitors is buying one of your foundries. Kind of wondering how you are looking at risk mitigation. And also, does QCI use the same foundry as D-Wave, or is this a different foundry? Alan Baratz: Okay. So currently, the dual-rail technology is not fabricated at SkyWater. For our annealing technology, SkyWater does fabricate the wiring, but they do not fabricate the active components—the Josephson junctions—which is the most important fabrication component from an IP perspective. The active components we fabricate ourselves in our R&D facilities, and SkyWater does the wiring. On dual-rail technology, SkyWater is not involved at all. So my view on the IonQ acquisition of SkyWater is that, on the one hand, they are saying all the right things relative to continuing to work together exactly as we have been, and we should not be concerned about anything changing as a result of this transaction. On the other hand, we are skeptical and we are concerned. And so we are actively working on other sources of fab support for our systems. Operator: Our next question comes from Kevin Garrigan of Jefferies. Please go ahead. Kevin Garrigan: Good morning, and thanks for the question. You mentioned commercial value and production use. How are customer conversations evolving, and what metrics are customers really focused on when evaluating quantum as a solution? Is it all about speed-up time, or is it convenience, or just that your quantum annealer is far better than anything out there? Alan Baratz: First of all, the annealing quantum systems are the only ones that can actually deliver any commercial value today. They are the only ones that are used in production by customers today. No other quantum computer is capable of that level of computation and commercial ROI on real-world problems. The way this evolves is that we basically engage a customer on an initial application, and we have gotten very good at being able to identify up front whether the application will benefit from our systems or not. When we start an initial application development with a customer, we have a very high degree of confidence that they are going to be able to see a very strong ROI. That allows us to move more quickly to getting that initial application into production. Then, that is what generates interest in other applications. The Fortune 100 deal that we did started with a first application. They were blown away by the results that we achieved, including a dramatic improvement in their bottom line based on using this technology. Then they came back and said, “Okay. We have quite a few other applications. We want an all-you-can-eat license.” We are now starting to see some other large companies see similar benefits from the initial application and talking about similar kinds of engagements. Operator: Our next question comes from Ruben Roy of Stifel. Please go ahead. Ruben Roy: Alan and John, congrats on the progress. These are probably a little bit longer-term in nature questions. With your annealing customers, obviously you have a lot of success stories on the annealing side. With the dual platform approach, are there opportunities in your view to combine annealing and gate-model quantum computing? Again, it is probably pretty early here, but are there opportunities longer term to have hybrid solutions or whatnot to even expand the TAM further? Have you started to have some conversations on potential commercial customers on the gate-model side? Alan Baratz: First of all, yes. A number of our annealing customers have approached us and said, “Look, we have some other use cases here that we would like to look at in the context of your gate-model technology.” Our customers understand the difference between annealing and gate. We have educated them on that. They understand the types of problems that require annealing versus the types of problems that require gate. They recognize that they have other problems that potentially could demonstrate benefit from gate, and they have started to engage us on those discussions. The only other thing I will say relative to your second question is that there is some early evidence based on the fact that we have integrated some digital controls into our annealing systems. Maybe read that as some gate operations in our annealing systems. We are seeing some very interesting scientific results based on that. But it is way too soon to be thinking of that as a viable commercial opportunity. Operator: Our next question comes from Troy Jensen of Cantor Fitzgerald. Please go ahead. Troy Donavon Jensen: Hey, gentlemen. Congrats on all the momentum here. My best takeaway from Qubits 2026 was there are dozens of customers out there that have piloted programs and seem ready to move forward. So my question: on multiple eight-figure enterprise QCaaS deals, can you talk about how much capacity you have with your existing annealing computers, and the time that they take to launch more if you need to ramp quickly? Alan Baratz: We have plenty of capacity in our Leap Quantum Cloud service to support minimum tens of enterprise deals. We have four of our quantum computers available today. Our quantum computers are very capital efficient. Each quantum computer can support $25 million to $30 million of revenue per year. The capital cost is only about a couple of million dollars. The build time, once we have the componentry, is like three to four months. With some lead time, we have no problem deploying additional systems for these kinds of deals. Operator: Our next question comes from Craig Ellis of B. Riley Securities. Please go ahead. Craig Andrew Ellis: Yeah. Thanks for taking the question, and guys, congratulations on the real strong execution. Alan, I wanted to ask you a higher-level question, and I will rewind the clock a little bit. I think it was three quarters ago, you told us to expect increased R&D and go-to-market spend, and here we are now. We start the year with, I think, around $45 million in trailing bookings. The pipeline is extremely robust. So as we start the year, if you can give us any color on what you see in the pipeline on the system side and with that all-you-can-eat newer offering, are we seeing signs of execution of what you were pointing to, or were you expecting something else? It would be greatly appreciated. Thank you. Alan Baratz: The short answer is yes. On the R&D side, our investments were designed to accelerate work on the gate-model system—one of the key elements that we uniquely were bringing to the table was on-chip cryogenic control—and to really start accelerating work on our Advantage3 system, which includes analog-digital capability as well as multichip for scaling to 100,000 qubits. The investments are playing out as we had planned. On the go-to-market side, you said it. We are making really good progress. It is robust at this point in time. Our pipeline has grown significantly, and we are feeling quite good about what we can expect to see this year. So the investments in go-to-market are playing out exactly as we expected as well. Craig Andrew Ellis: I like what you are doing. A question on Advantage3. Could you give us any more information about circuit tests that incorporate Advantage3? Any information that you could give us relative to how you are progressing there and what the capabilities might be compared to Advantage2? Thank you. Great work. Alan Baratz: I called out the two key elements. Functionally, the big things for Advantage3 are putting some digital controls into the annealing fabric, as well as a multichip for scaling far more rapidly. With each generation of system, it is more qubits, more connectivity, and higher coherence times. We have our first chips back that demonstrate the analog-digital controls, and we are close to having our first chips that demonstrate multichip interconnect. We are making good progress on all fronts. Operator: Our next question comes from David Williams of Benchmark. Please go ahead. David Williams: Hey. Good morning. Let me also echo my congrats on the execution here. Maybe, Alan, can you speak to some of the pipeline that you talked about? In the script, just the strength there, where that is coming from, and really what you are hearing from customers, and how quickly can this pipeline turn into confirmed revenue or when those orders could come in? Just kind of that life cycle of that pipeline. Alan Baratz: Honestly, we have a strong pipeline for both system sales, QCaaS, and professional services deals. I am not going to address the revenue piece because that is all based on the revenue recognition policies of the company, and different deals have different recognition timelines. But as far as closing the deals, our pipeline for system sales right now is very robust. When we talked about this at the beginning of last year, I said expect maybe one a year for the foreseeable future. We are beyond one a year at this point in time. The same is true on QCaaS. We are closing deals with much larger companies—one of the world's largest airline companies, one of the world's largest health care companies, largest chemical companies. These are much larger deals from the outset, and we are progressing through them much faster. Very strong go-to-market environment for us right now. Operator: Our next question comes from Antoine Leblond of Wedbush Securities. Please go ahead. Antoine Leblond: First, let me echo my congratulations on the progress in 2025. There have been reports that the Pentagon's budget would increase significantly into fiscal 2027, with some of that budget likely to be allocated to Quantum Technologies. Can you tell us a bit more about the magnitude of the opportunity ahead and how that might benefit you, particularly given your new government business unit? Alan Baratz: First of all, we are not primarily pursuing R&D research grants to be able to fund our R&D roadmap. This is not about the government funding us to build our systems. We have plenty of liquidity. What we are focused on is helping the government solve their hard computational problems today. We have a very interesting pipeline there. I will be very frank with you. When we talked about the Davidson-Anduril deal at Qubits, and Anduril talked about what they had seen in using our system, that generated a very significant inflow of interest in leveraging our systems to solve hard problems within the U.S. government. With Jack Sears on board and building the government business, we are feeling quite good about the opportunity. Operator: Our next question comes from Richard Shannon of Craig-Hallum. Please go ahead. Tyler Anderson: Hi, guys. This is Tyler Anderson on for Richard. Thank you for taking my question. You mentioned that you have 50% of the capacity of your system booked. When we are thinking about future new systems that are coming online for the Advantage3 and beyond, is there a potential where we see multiple of those systems come online right away and have that capacity reserved for customers that you are talking to today? Are you having those conversations? Just want to get some color on that. Alan Baratz: Yes. So, Tyler, first of all, when you say 50%, the only time we have talked about 50% of capacity was in the QAlliance deal in Italy. They purchased 50% capacity of an Advantage2 system. In general, in our cloud service today, we are not yet even at 50% capacity. We have plenty of capacity in our LeapCloud service to support our professional services engagements and quantum computers-as-a-service customers. When we bring a new system to market, we try to upgrade all our cloud systems as quickly as possible. We do installation so that we can upgrade all our cloud systems as quickly as possible. Operator: Our next question comes from David Liu of Mizuho. Please go ahead. David Liu: Hi. I am going for Vijay. Thanks for taking the question and congrats on strong momentum here. You called out the interest and momentum in system sales growth going into 2026, as well as the enterprise traction for QCaaS. How should we think about QCaaS and sales mix going forward? And in relation to that, the OpEx number as well for the year? Alan Baratz: In the past, because the numbers have been small, we have just done them one at a time. However, now that we are seeing a lot more interest in system sales, we are making some investment in the team and the capabilities so that we do not have to serialize. We can do more in parallel going forward. So the answer is yes. John Markovich: With respect to the OpEx number, as I articulated earlier, my comments were based upon our consolidated OpEx. My comments were that we are expecting OpEx to grow at 15% sequentially quarter to quarter over the course of the fiscal year. With respect to the mix, the mix is going to be lumpy for the foreseeable future, where we could have a substantially higher QCaaS enterprise mix in any given quarter than we have systems bookings, or vice versa. It is entirely a function of the composition and elements of the bookings, which, as we have articulated in the past, could have unique revenue recognition elements to it—for instance, the percentage of completion on a system installation. This concludes our question and answer session. Operator: I would like to turn the conference back over to Dr. Baratz for any closing remarks. Alan Baratz: D-Wave is different. We are pulling away from the quantum computing pack, as demonstrated by our undeniable commercial traction and our remarkable technical leadership. D-Wave is the only dual platform quantum computing company capable of delivering both annealing and gate-model systems. The only company with quantum computers that have demonstrated quantum supremacy on a useful real-world problem. The only company that has customer applications in production now. The only company with highly differentiated gate-model technology that delivers the remarkable speed of superconducting and the fidelity of ion-trap or neutral-atom approaches, a powerful combination that positions D-Wave to win in the error-corrected gate-model race. 2026 is the year of D-Wave Quantum. The year we emerge as a defining company in the quantum era. Thank you all for joining us today, and we look forward to updating you on D-Wave's progress in the coming months. Operator: Thank you for participating, and have a pleasant day. You may disconnect your lines. This concludes today's conference call.
Operator: Good afternoon. Welcome to Chime's Fourth Quarter Fiscal 2025 Earnings Call. [Operator Instructions] As a reminder, this conference call is being recorded, and a replay of this call will be available on our Investor Relations website for a reasonable period of time after the call. I'd like to turn the call over to David Pearce, Vice President of Investor Relations and Capital Markets. Thank you. You may begin. David Pearce: Good afternoon, everyone, and thank you for joining us for Chime's Fourth Quarter 2025 Earnings Conference Call. Joining me today are Chris Britt, our Co-Founder and CEO; and Matt Newcomb, our CFO. Mark Troughton, our President, will participate in the Q&A. As a reminder, we will disclose non-GAAP financial measures on this call. Definitions and reconciliations between our GAAP and non-GAAP results can be found in our earnings release in our earnings presentation posted on our IR website at investors.chime.com. We will also make forward-looking statements on this call, including statements about our business, future outlook and goals. Such statements are subject to known and unknown risks and uncertainties that could cause our actual results to differ materially from those described. Many of those risks and uncertainties are described in our SEC filings, including our Form 10-Q filed on November 10, 2025. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We disclaim any obligation to update any forward-looking statements, except as required by law. With that, I'll hand it over to Chris. Christopher Britt: Thanks, David, and thank you all for joining us. I'm proud to report another strong quarter. In Q4, we again delivered results that exceeded our guidance, closing out a momentous year. But before I get into the details, I want to reflect on 2025 and preview plans for a year of acceleration in 2026. Despite headlines of a pressured consumer, we continue to see stability, consistent with what we reported last quarter. Member spending remained healthy in Q4 and with steady growth across, both discretionary and nondiscretionary categories among our tenured cohorts and across all income levels. We're seeing higher average deposit balances and consistent use of our liquidity products with lower losses, including all-time low loss rates on MyPay, and importantly, no signs of increasing job loss within our member base. Our business is rooted in primary account relationships and every day, largely nondiscretionary spend. So we're built for resilience. In times of uncertainty, our value proposition becomes even more compelling. Fee-free access to liquidity, payroll on-demand, high-yield savings, credit building, tools that help members build financial stability. In 2025, we delivered 31% revenue growth with strong operating leverage, including a 12-point year-over-year improvement in adjusted EBITDA margin to 10% in fourth quarter. In Q4, we also added approximately 500,000 net new active members, bringing our total to 9.5 million. In 2025, our biggest unlock was ChimeCore, our homegrown transaction processor and ledger. We're now 100% on our own tech stack after completing a multiyear migration in Q4. ChimeCore strengthens our cost advantage with a cost to serve of roughly 1/3 of large banks and 1/5 of regional banks. ChimeCore also reduces transaction processing costs by an estimated 60% supporting our long-term gross margin target of 90%. But the bigger impact for us is velocity, owing our own tech stack enables us to innovate faster and deliver the lowest cost products to our members. That unique advantage powered our 2025 product launches extending our lead over traditional banks and fintechs as the most rewarding place for mainstream America to bank. For example, Chime Card, our new secured cash-back credit card and first product built entirely on ChimeCore. Direct depositors earn 1.5% cash back on everyday spend, a 3% savings rate, which is 7x the national average, fee-free overdrafts, early access to pay, free credit building that increases average scores up to 70 points and access to a free ATM network that's larger than the 3 biggest banks combined, all at no cost. No other company offers this breadth of services for everyday consumers, and we deliver it with an over 70% transaction margin. Chime Card is already resonating at the top of the funnel and driving strong engagement. Over half of members in our new cohorts are adopting it, and those members are using it for over 70% of their Chime spend. This has resulted in credit spend as a percent of overall purchase volume increasing to 21% in December, up from 16% in September. As a reminder, spend on Chime Card earns us nearly 2x the take rate of our debit card serving as a multiyear tailwind to revenue growth. MyPay, our on-demand payroll product had a standout year. We scaled MyPay to over $400 million in revenue run rate in Q4, while generating transaction margin of nearly 60%, only 1 year after launch. We began 2025 with MyPay loss rates of 1.7%. And in Q4, we reached our steady-state loss rate target of 1%, significantly faster than planned. With losses stabilized and a new variable pricing model in place, we can now scale both access and profitability. We're focused on making MyPay available to more members with higher limits and on driving growth in transaction profit dollars while maintaining MyPay as the low-cost product in the market. We also launched Chime Workplace, our employer financial wellness offering, bringing Chime into the enterprise channel with MyPay at Work. We saw early traction in 2025, onboarding our first customers and channel partners, and we entered 2026 with strong momentum and a growing pipeline. More broadly, our progress across liquidity products showcases our structural repayment advantage that comes from deep primary account relationships and enables low cost, low credit risk liquidity offerings. Across SpotMe, MyPay and Instant Loans, we exited the year at over $40 billion in annualized origination volume. In 2025, we also cemented our position as the primary bank account of choice for mainstream America. In terms of brand consideration, Chime is now #1 for online banking, among Americans earning up to $100,000 a year based on third-party survey data. In 2026, NerdWallet named Chime the Best Checking Account and Best Online Banking Experience. And last year, TIME's National Consumer survey recognized us as the #1 brand in banking. Our marketing isn't just driving awareness, but also primary account intent. Recently, J.D. Power named Chime the leader in U.S. checking account openings, ahead of all other financial institutions. They estimate that 13% of all new checking accounts opened in the U.S. were at Chime, nearly 50% more than the #2 brand on the list, Chase, and above a long tail of other U.S. banking and fintech brands. Our momentum in 2025, combined with the launch of ChimeCore, sets the foundation for accelerating product velocity in 2026. This year, we're focused on 3 priorities to advance our growth agenda. First, we're going to extend our lead as the best financial partner for everyday consumers. In the coming weeks, we'll launch a new premium membership tier with an even more rewarding value proposition for our most engaged and higher-earning members, including those making more than $100,000 a year. It will deliver higher savings rates, exclusive perks and even better rewards, all fee-free while maintaining our advantaged unit economics. We're also expanding our product suite to meet the needs of our fastest-growing segment. Members earning $75,000 a year and more by introducing new value propositions to address more complex needs, deepen engagement and drive long-term growth and profitability. For example, we'll launch joint accounts as well as teen accounts and custodial accounts, so members can more easily manage shared family finances. This summer, we'll be expanding into investing, automated and self-directed, and we will support Trump Accounts. These offerings provide members with new and accessible ways to build wealth. With tax season underway, we're increasing awareness of Trump Accounts among millions of eligible everyday Americans, broadening access and participation at scale. That translated into strong early traction with tens of thousands of members initiating enrollment through tax filing with Chime in the first week alone. Our second priority is accelerating momentum in our enterprise channel. Chime is transforming the direct-to-employer earned wage access industry by delivering a full suite of financial tools and pay on demand for free for employers and employees. We've seen a strong response from the market, including a growing roster of employer partners and channel partnerships like Workday and UKG. Our offering is resonating with employees. Among early cohorts, adoption is high, and these members are transacting more and retaining better than new cohorts in our direct-to-consumer channel. In 2026, our focus is scale. Expanding to more employers and building enterprise into an evergreen customer acquisition channel. We're off to a strong start, and we recently announced several new employer partners and expect additional announcements in the very near future. And finally, we'll continue to deeply embed AI across Chime and into the member experience. A lot has been written about the financial literacy gap in our country, and it's real. More than half of U.S. adults lack basic financial knowledge. And even when people are educated, they often lack the tools, the support and consistency needed to take action and turn good intentions into lasting financial progress. And that's why we're excited to expand our consumer AI offering. Chime's relationship with our members is fundamentally different than most fintechs. The majority of our members rely on Chime as their primary account, and our average member engages with us 5 times per day. We sit at the center of our members' financial lives, and that depth of engagement allows us to not just provide insights but to take intelligent real-time action with and on behalf of our members. In Q2, we'll launch the next generation of our consumer AI offering, Jade. With the vision of delivering an always-on financial copilot embedded in-app, providing personalized guidance that helps members take action automatically and make smarter financial decisions. We're currently testing Jade with employees, which gives us valuable feedback ahead of launch. With Jade, we'll move from reactive tools to more proactive financial management, helping members spend smarter, save more, pay bills on time, borrow responsibly and build long-term wealth, transforming the way mainstream consumers manage their finances. Beyond Jade, AI is already transforming how we operate. Over the past 3 years, we've reduced our cost to serve by nearly 30% and increased our ARPAM by 23%, all while improving customer satisfaction levels. AI has driven step-change efficiency across customer support, reduced fraud rates by 30% since 2023 and meaningfully increased internal productivity. We boosted developer throughput cut code review times and more than doubled marketing creative output while reducing production costs. In disputes, automation has reduced time to decision by 30% while maintaining over 99% accuracy, delivering faster, high-quality resolutions for our members. This is the leverage of a technology-first financial services company embracing AI at scale, grounded in relentless member obsession. We innovate faster, deliver better experiences and operate at a fraction of the cost of legacy players. This allows us to deliver more value to our members and these advantages compound as we grow. Last year, we generated nearly $2.2 billion in revenue with approximately 1,500 employees. As we shared on our last call, we expect to continue to scale without needing to add headcount. I'll now turn it over to Matt to cover Q4 and our 2026 outlook. Matthew Newcomb: Thanks, Chris. Q4 capped off a landmark year for Chime, our shareholders and our financial position. We went public, strengthened our balance sheet and continued to drive strong financial results. In 2025, we delivered 31% revenue growth and significant operating leverage, growing our adjusted EBITDA margin by 12 percentage points year-over-year in Q4, each ahead of our guidance. And we expect to maintain this momentum in 2026 with a clear line of sight to strong growth and further operating leverage, including GAAP profitability for the balance of the year, an important milestone that we expect to achieve ahead of previous internal expectations. But first, let's discuss Q4. Our third consecutive quarter of strong results as a public company when we again exceeded our prior guidance on both top and bottom lines. We grew revenue by 25% year-over-year and transaction profit by 31% year-over-year in Q4, compounding growth even as we fully lapped 2024's launch of MyPay. We've done this by continuing to execute across multiple dimensions of growth: active members, average revenue per active member or ARPAM, and transaction margin. In Q4, we added approximately 500,000 net new active members quarter-over-quarter and 1.5 million year-over-year. Of course, our actives aren't just any actives. They're deeply engaged, a result of our relentless focus on serving our members in a primary account capacity. Our average active member transacts with us 55 times per month that is very different from other fintechs with single-point solutions whose comparable metric is often in single digits. We have a fundamentally different customer relationship. Primary accounts drive consistent and resilient top of wallet spend, provide us an underwriting advantage through our privileged repayment position and give us a unique opportunity to cross-sell and deepen engagement even further over time. This results in consistent, durable and long-lasting member cohorts. Our oldest cohorts are now nearly a decade old and are generating more transaction profit now than they did pre-COVID, and that's net of churn. And our cohort performance is getting even better. Building on our success in H1 with our early engagement initiatives, which made it easier to get started with Chime. In Q4, we improved the quality of our new cohorts in several other areas. First, in Q4, we saw a record high number of new members convert to direct deposit. Second, we continue to grow engagement. Our new cohorts are attaching to more products faster, including with many of the products we launched and scaled in 2025, like our new Chime Card, MyPay, Outbound Instant Transfer and Instant Loans. Members using 6 or more products each month now make up 15% of our actives, up from 5% 2 years ago. Finally, fueled by these increasing levels of product attach, we've also grown monetization. This is particularly true in our newest cohorts, we are seeing members do more of their spend on Chime Card, compared to prior cohorts that transacted more on debit. Chime Card earns us approximately 175 basis points on purchase volume, compared to under 100 basis points on debit. Taken together, we've strengthened the quality of our new member cohorts while continuing to acquire at attractive CAC, yielding 5 to 6 quarter transaction profit payback periods, and LTV to CACs of over 8x. In Q4, overall ARPAM increased 5% year-over-year and 21% over 2 years to $257, driven by the strength in both payments and platform-related revenue. Our tenured cohorts have reached ARPAM of nearly $400. In terms of transaction volumes, we continue to see very steady spend trends consistent with a resilient consumer. Combined purchase an OIT volumes grew 16% in Q4, fueling payments and OIT revenue growth of 21% year-over-year, an acceleration from Q3, driven by higher take rates on Chime Card and OIT. Platform-related revenue increased 47% year-over-year or 37% year-over-year, excluding OIT. One additional contributor to ARPAM growth is Instant Loans, our up to $1,000 installment loan product with terms of 3 to 12 months. Instant Loans complement our short-term liquidity product offerings to meet our members' larger, more episodic liquidity needs. We originated approximately $400 million of Instant Loans in 2025. And as of Q4, 10% of active members had an open loan. We expect Instant Loans to scale further in 2026 and like we demonstrated with SpotMe and MyPay, unit economics improve significantly as the portfolio matures. We've seen as much as 50% lower loss rates for repeat borrowers compared to first-time borrowers. In Q4, we increased transaction margin to 72%, up from 69% in Q3, a result of delivering on 2 critical strategic priorities that we committed to as part of our IPO last summer, completing our ChimeCore migration and reducing MyPay loss rate to 1%. In addition to the velocity and innovation benefits that ChimeCore unlocks, the final stage of our migration also drove a 200 basis point increase in our gross margin, helping us close in on our long-term target of 90%. This improvement alongside our faster-than-expected progress to our 1% steady-state loss rate target on MyPay, helped us grow annualized transaction profit to $1.7 billion in Q4, up 31% year-over-year. Finally, alongside our strong growth, we continued to drive operating leverage with $57 million of adjusted EBITDA in Q4. In Q4, non-GAAP OpEx as a percent of revenue fell 9 percentage points year-over-year. Our adjusted EBITDA margin growth accelerated further with 12 percentage points improvement year-over-year in Q4, the largest margin improvement of any quarter in 2025. In our first call as a public company, we committed to delivering an uptick in profitability in the back half of 2025, and that's exactly what we did. The 57% incremental adjusted EBITDA margin we delivered in Q4 exceeded our initial guide as well as the higher bar we set for ourselves on our last call. So meaningful progress last year, but we're even more excited about the opportunity ahead. We believe we're extremely well positioned entering 2026 with a number of tailwinds that will support both continued strong top line growth, even faster transaction profit growth and further bottom line margin expansion this year. First, we're the market leader in account openings and the #1 brand in banking. In 2026, we expect to continue delivering steady and predictable growth in our core business, powered by a growing member base and their resilience everyday nondiscretionary spend. Second, we have several strong top line tailwinds exiting 2025, including Chime Card, driving higher take rates, a new variable MyPay pricing model, unlocking further scale and higher monetization. In our Instant Loans products ramping across our member base with strengthening unit economics. Third, our new products and go-to-market priorities that Chris outlined, including new premium membership tiers, investment accounts, joint accounts and Chime Enterprise will set the stage for continued growth in 2026 and in years to come. And finally, we'll do all of this without needing to grow our headcount, thanks to efficiencies from ChimeCore, and our ongoing AI initiatives. Turning to our guide. In Q1, we expect revenue between $627 million and $637 million, resulting in year-over-year revenue growth between 21% and 23%. We expect adjusted EBITDA between $90 million and $95 million and adjusted EBITDA margin of 14% to 15%. For full year '26, we expect revenue between $2.63 billion and $2.67 billion, resulting in year-over-year revenue growth between 20% and 22%, and adjusted EBITDA between $380 million and $400 million. An adjusted EBITDA margin between 14% and 15%. This represents 8 to 9 points of margin expansion year-over-year and an incremental adjusted EBITDA margin of over 55%. And as mentioned previously, we expect to be GAAP profitable for the balance of the year. There are a few things to keep in mind about our Q1 and full year outlook. First, we have a seasonal business, specifically, Q1 is tax refund season, but we like to call the most wonderful time of the year. Each Q1, with the increased activity resulting from members receiving their tax refunds, we see seasonally higher purchase volume, ARPAM, transaction margin and net new active member additions. And in each Q2, we see a normalization of these seasonal trends. with significantly fewer net new active member additions than in other quarters and lower sequential purchase volume, payments revenue and transaction margin. This Q1, we also expect to benefit from larger-than-usual tax refunds resulting from the One Big Beautiful Bill Act, which would magnify the seasonality. It's still early. We haven't yet hit the peak of tax season, and the timing of this year's refunds are a bit later than in the years prior. That said, so far, refunds are tracking higher, in line with our expectations. More broadly, for the full year, we will continue making progress across our growth framework, active members, ARPAM and transaction margin. As the market share leader in new account openings, we expect to maintain strong momentum and net new active member additions this year. For the full year, our goal is to add approximately 1.4 million net new actives at attractive ROI, building on the increasingly strong cohort quality we saw in Q4. We will also continue to drive ARPAM growth as we scale Chime Card, MyPay and Instant Loans, helping us grow LTVs and reinforce our strong cohort quality. And finally, we expect transaction margins remain consistent with Q4 '25 level as we realize the ongoing benefits of lower transaction processing costs from our ChimeCore migration. From an OpEx perspective, as Chris noted, we're excited about our road map this year and plan to invest in sales and marketing behind our new product launches, particularly in Q2 when we plan to launch our new premium membership tier. With that, I will open it up to Q&A. Operator: [Operator Instructions] Our first question comes from Tien-Tsin Huang from JPMorgan. Tien-Tsin Huang: Great results for you guys. I want to ask a couple of member questions, if that's okay. Just curious, and thanks for the outlook and all the details that you gave. I know there's been a lot of talk in the past about widening the product funnel. I'm just curious if you're getting the member behavior reaction that you're looking for from those actions and how you might do that differently in '26 versus '25 in terms of member growth focus? And I heard, Chris, you talked about the premium tiering and the new strategy there. I think that's great. I'm curious, are you solving for new member growth there or higher engagement retention, that kind of thing as you're thinking about the outlook in '26 and beyond? Christopher Britt: Thanks, Tien-Tsin. Yes, maybe just as a setup and a reminder for folks on the call. A little over a year ago, we kicked off a series of initiatives to try to make the top of the funnel, even wider, if you will. So we did things like made it easier to fund the Chime Account, to get access to certain features like credit building and our Outbound Instant Transfer feature, right out of the gate. And I mean, I think there's no question that this has been a positive development for our top of the funnel numbers and you can see it in the results. In the prepared remarks, we talked about the J.D. Power survey that showed Chime is opening up more checking accounts than any player in the industry, 50% higher than the #2 player, Chase. And so going forward, we intend to continue to be the market leader in terms of new checking account openings. We're going to do that. I think with -- we're excited about the new product innovations that we'll be rolling out in some of these new channels that I'm sure we'll talk about more on the call to ignite our growth. And we're going to do that while continuing to manage towards increasing levels of profitability. We're also seeing that these new cohorts that we're bringing in are delivering high-quality members into the fold and maybe Matt can talk to what we're seeing on that front. Matthew Newcomb: Thanks Chris. Yes, I agree. We feel really good about the overall pace of headline net new actives. But I think what's most exciting and really what's even more important for the business is the quality of our new active cohorts. That's continuing to get stronger and stronger. We mentioned, we've been setting record highs in terms of the number of new members, converted to direct deposit or early engagement initiatives have been a contributor to that. We continue to drive very meaningful lift on engagement, and we're also driving higher monetization. That's particularly true among our newest cohorts that are adopting Chime Card at a very strong rate. So we're feeling very good. And I think the proof is in the pudding. You're seeing that in our cohort metrics. Our transaction profit payback periods are strengthening. They're now at 5 to 6 quarters that supports a long-term LTV to CAC over 8x. And then at the enterprise level, the strong cohort performance is translating into very strong growth in profitability, which, again, we're balancing goals there alongside our -- so again, we feel good, not just at the quantum, but also importantly, the quality of our active member growth to enter the year. Christopher Britt: And maybe just a follow-up on the other questions you asked, Tien-Tsin, I don't think we would do much in the way of anything different. We really like this opportunity to have more active members in the mix and have them have a relationship with Chime because we know that the point in which in someone's life that they make a conversion to direct deposit is different. It might be the results of a life change or a new job. And so the more people that we can have relationships with so that we're in the mix at that moment of time, we think that's a great place to be. And as it relates to the question about the new product sort of membership tiering, that's really just based on our analysis of our member base and the fact that we can see we're growing among our higher income level members. We're growing that at a nice clip. We want to make sure that we have products and services that really deliver great value to them. So that's what you should expect to see in new tiers, members who give us more of their direct deposit are going to get even more rewarding experience using Chime as their primary bank account. So yes, I guess it's intended to open up that segment of the market even further and make sure that we are -- give ourselves the best chance of retaining those higher income numbers as well. Tien-Tsin Huang: Like Chris, anything to call out on the competitive landscape, thinking about what you're seeing from your peers? And is that impacting member behavior at all? And I'm especially curious as we go into tax season, if you're seeing any change in customer acquisition strategy from the group? Christopher Britt: Well, I think like Matt said, tax season is always a great 1 for us. We have a tax prep service. We're seeing huge engagement with that. We're continuing to see lots of -- even though it's early, we're seeing lots of tax refunds into the accounts. We're seeing people signing up for Trump Accounts and kicking off that process within the tax filing process, which is really exciting. And I just think a great development for our country, particularly the kind of everyday consumers that we serve. Yes. Of course, we're always looking across the competitive landscape. Most of the primary checking account relationships in America reside at the big banks, and we continue to outperform relative to those players. And of course, we're always keeping an eye on other fintechs that are trying to get into the area of the business that I think we've been able to prove some success in. So we're monitoring, but we feel really good about the position that we enjoy right now. Operator: We'll move next to James Faucette with Morgan Stanley. James Faucette: I appreciate all the color here. I wanted to ask you just on kind of the activity levels and continuing to add users at a pretty good clip. But wondering how we should think about that in context of your efforts to really ungate more products to more of your customers? What you're learning from that process? How we should expect refinement during '26? And I guess, really what we're kind of looking at is -- is there a possibility that we could even see some acceleration from a pretty consistent rate of member growth? Christopher Britt: Right. Thanks for the question, James. Like we said, we feel really good about the efforts and the impact of opening up the top of the funnel, and Matt sort of shared some of the highlights. Our payback periods on our customer acquisition are as good as they've been in a really long time and getting better. So we feel like these early engagement initiatives are absolutely playing out well for us. We don't anticipate any major changes to them. We're constantly trying to figure out ways to make it even easier to fund an account and to get engaged, to get access to services that are appealing to you, we're going to continue to innovate and test services that allow our members to gain access to trial, temporarily getting access to higher-level tiers if you're not quite qualified for it yet. So -- we think there's going to be lots of ways to give people a taste of all the benefits of Chime, so that when they have that moment -- that life moment when it's time to convert a primary banking account relationship that we're hopefully on that consideration set for them. And at the same time, we're seeing huge success building a brand and not just awareness of the brand, but the building a brand that is trusted and stands for really a new way to manage your money. It's authentically helpful and easy and in most cases, free. James Faucette: Yes, makes a lot of sense. And then I wanted to touch quickly on credit. Credit mix seems to be improving nicely, especially following the Chime Card relaunch. Any color there? In particular, how has customer response been to rewards on the secured card? Are you seeing incremental spend per user or other things? And I'm just wondering if and how this may tie into some of the plans you have to be attractive even to consumers that are making above $100,000 a year? Matthew Newcomb: Thanks, James, for the question, this is Matt. Yes, we're really thrilled about the early progress on Chime Card. Again, that's our new secured rewards credit card. And we do think this is going to be a multiyear growth tailwind for us. I think you know this card earns up nearly 2x the take rate versus debit. So it's a really exciting opportunity for us to continue to improve our unit economics. If you just take a look at credit mix as a percentage of purchase volume, you saw that increase from 16% when we launched the card in September to 21% in December. So a 30% increase just in the past few months. And in particular, we're really seeing very strong adoption among our newest cohorts. Our newest cohorts over half of them, half of our new members are spending with the Chime Card. Those that do adopt it are using it for over 70% of their Chime spend. And on your question, these members are spending more than members who've not adopted Chime Card. So net-net, we're seeing really strong credit mix for these new cohorts. The credit mix of new cohort specifically is close to 50%. And on a go-forward basis, we're -- we think there's a lot of opportunity to continue to drive this higher, including through this year's product road map and specifically our new premium membership tier, where we're going to offer even better rewards and exclusive perks while maintaining pretty similar take rates overall. Operator: We'll move next to Andrew Jeffrey with William Blair. Andrew Jeffrey: Great to see things play out as anticipated in the business. I thought I might drill down a little bit into Instant Loans because it feels like that product is moving a little bit more front and center for Chime? And -- it's an area where we've spent a lot of time and are very bullish, just broadly speaking, short-term consumer liquidity products, which are so much better than alternatives in the market, of course, Instant Loans and MyPay included. Could you just sort of frame up for us how the credit performance is in that particular product, what the growth opportunity is? And -- maybe just your perspective on how this suite of liquidity products really enhances consumer value as I think there's some confusion or some pushback in the market about fairness and implied APRs and all the kind of stuff that folks don't like about payday loans and credit revolving credit. So kind of a far-reaching question, but I'd just love to get some perspective on your products, in particular, in our overall view. Mark Troughton: Yes, sure. This is Mark. Just to frame Instant Loan. Instant Loan is an installment loan product that, as Matt indicated earlier that our members use for their larger, more episodic needs. So unlike MyPay or SpotMe, which tends to be intrapay period liquidity, this is longer duration. It's anything from 3 months up to a year, we're testing right now. And right now, we're looking at limits anywhere between $300 and $1,000. So it's really for -- it's really used for sort of larger longer-term liquidity requirements amongst our members. And this is something we've been testing and you guys have heard us talking about this. We've been testing this for some time now and really refining the risk models and making sure we have this really solid. We're very excited about the performance in '25. We did $200 million of originations, and we reached a 10% product attach rate by the end of Q4. And like all our lending products, Instant Loan is only available to our direct deposit members, who have been with us for a period of time. So this is a product, where we're actually able to use the privileged data we have in terms of their behavior and our privileged position at the top of the repayment stack to sort of to manage the risk here and therefore, actually offer rates that are unmatched for these members in the market. So as you -- like any lending product here, what tends to happen is as you start off and certainly with your first-time loans, you tend to have higher losses. But what we're seeing -- what we've really seen here, as Matt has indicated, is as much as a 50% reduction in our repeat loans. And we actually expect the loan performance on Instant Loan to mirror the trajectory that we've seen with SpotMe and MyPay over the years, so it's now at the point where it really is ready to scale. You started to see some of that in Q4, and you will see that throughout '26. And it really has become a sort of growth platform for us that we think is going to be a much more meaningful contributor to transaction profit over time. Having said that, these are riskier loans, they're longer duration, higher limits. So you're not going to see the sort of attach rates that you would see with something like MyPay. But if you were to look at the APRs on a product like this, this is well within the sort of lending 36% APR cap. So this is not a -- to compare this to a payday loan or even some of the sort of more creative products out there would be a huge injustice to this product. In fact, it's such a great product. This is actually our highest NPS product that we have today in our portfolio. And we're really, really excited about its prospects for '26. Andrew Jeffrey: Yes. It sounds that way. And just to be clear, Matt, will Instant Loans be transaction profit margin accretive in '26 or comparable to the rest of the company, I guess, the way to ask the question? Matthew Newcomb: Yes. We do expect this to be a contributor to transaction profit dollars, particularly as we exit the year. Andrew Jeffrey: But perhaps lower margin with the opportunity for going forward. Matthew Newcomb: Yes. Look, I think from a marketing perspective, it will look different than other parts of our liquidity products, but this is also, as Mark mentioned, something that will continue to improve over time as our portfolio matures, as the portfolio shifts to more repeat borrowers for longer duration. Again, very -- kind of a very similar playbook that we saw with SpotMe and MyPay, where unit economics just get better and better over time. Operator: We'll take our next question from Will Nance with Goldman Sachs. William Nance: I was hoping to zero in on some of the commentary around the new variable pricing model for MyPay? Obviously, really great traction in getting the margin profile to where it is and losses down to 1%. With the new variable pricing model, could you talk about your expectations for how that will impact both the ARPU and the transaction margin starting in the first quarter? And then -- maybe you can elaborate a little bit on some of the commentary around expanding access. How should we think about that in the context of, obviously, higher revenue from higher pricing, is there room to maybe tweak up the losses to expand access? Would you expect a lot of that to flow to the bottom line and ultimately to the margin? Just how you think about some of those moving pieces? Christopher Britt: Thanks, Will. Yes, just to tee this up a bit, I think we're really excited about the tailwind that we have with MyPay from a revenue perspective going into '26 here. We think it's one of many tailwinds that we have. We talked about Chime Card adoption, talked about Instant Loans, but we are excited about some of these changes, both on the revenue side, but also in terms of opening up the availability to more folks. So maybe I'll pass it over to Mark since he oversees that part of the business. Mark Troughton: Thanks, Chris. Will, yes, as we indicated in the prepared remarks, MyPay really was a breakout for us in '25, $400 million in revenue, transaction profit margin by the end of Q4, almost 60%. And that's really in the first year of this as a lending product, which we were very excited about. I think, as you know, we started MyPay off with a fixed fee pricing model. So it was free if you received your advance within -- after 24 hours, and it was a $2 fixed fee if you did it immediately. What we realized pretty quickly was that we were trying to scale the product trying to give access to bigger limits to more people faster, that fixed fee actually became a hindrance to our ability to be able to do that. And so we shifted it to a variable pricing model that really will allow us to leverage this much more a growth platform and sort of scale MyPay over time. We did that in a series of actions really that started in Q4 last year and culminated in the middle of January this year. So you would already have seen some of the increase in MyPay yield already in Q4 over Q3. There is more to come in Q1 and beyond. Having said that, it's still very early days. We -- with respect to the latest pricing changes, we haven't even had our first full calendar month yet. So I think it's fair to say that -- this is meeting our expectations, and we're excited by the impact of this. But we're not going to be giving specific guidance on the MyPay impact individually for 2026, but it is built into our overall revenue and EBITDA guidance for the year. And I think what you're going to see with us to come back to the second part of your question, we do see opportunities going forward for us instead of necessarily maintaining that 1% loss rate for us to really optimize MyPay more effectively from a net experience and a transaction profit perspective. So this is going to be a strong growth platform for us going forward. And we're going to continue to do that while maintaining the lowest cost product in the market. William Nance: That's great. Appreciate that color. And then just on the user growth, obviously, pretty strong this quarter, and I hear the commentary on your expectations for the full year. I'm just wondering if you could talk a little bit about the trajectory of Chime Enterprise over time with some of the partners, and it sounds like more to announce in the near future. How are you thinking about when Chime Enterprise could be a more meaningful contributor to the user growth? And is that something we could see as we progress through the year? Mark Troughton: Sure. I'll continue with that one. In terms of an enterprise, we continue to be really excited and there's the reason that it's 1 of our priorities for 2026 as Chris outlined upfront. We're seeing the value prop is resonating really well with employers. It's a broader suite rather than just wage access, totally free from very expensive offerings out there. And we find that any employer that we speak to really has a solid installed base of prime members, which gives us a strong differentiator. And so I think you started seeing that manifesting itself in this steady drumbeat of employers that we've been announcing, and we just announced another few partners here earlier this week. Look, it is a new go-to-market motion for us, and it does take longer than ramping up our consumer channel. But we have a solid pipeline. We expect to be making some more announcements here in the near future. We're not giving specific guidance related to adds from enterprise. But again, those are included in our overall guidance. One piece of data I can share is that we -- at our employer partners, we are not only seeing strong adoption, but what we're actually seeing is higher monetization and greater retention on our enterprise members than we're actually seeing in our direct-to-consumer channel. So this is something we continue to be excited about. Operator: We'll move next to Jeff Cantwell with Seaport Research. Jeffrey Cantwell: I wanted to ask one on your LTV, the CAC. I want to ask if you can drill into that customer acquisition cost side of the equation. Can you maybe talk about what the trend is right now? Because you added 500,000 active members this quarter just really strong. So I'm curious whether you made any changes in terms of how you acquire customers? And then related to that, can you maybe unpack or help us understand what's driving that LTV to CAC, you're highlighting in the deck? Is that more of the impact when we spending the new products and the penetration is driving LTV higher? Or how should we be thinking about LTV versus CAC? Christopher Britt: Yes. Thanks for the question, Jeff. So what I would say first on the new customer acquisition side is very consistent trends that we've seen in the past. Over 50% of new actives continue to come to Chime via organic and member-driven channels like referrals that continues to be a star of our show. We've actually made some gains on the CAC side year-over-year. CAC for the full year in 2025 is actually down about 10% relative to the prior year. A lot of the early engagement initiatives that Chris mentioned earlier about making it easier to get started with Chime were big contributors to that. So doing really good, I think, about the overall trajectory on CAC. I think probably even more so, are we feeling good about the LTV gains that we're seeing. And that I think is probably the primary driver here of the strong print on overall LTV to CAC of north of 8x. A few of the contributors to that have been the overall step-up in transaction margin resulting from our ChimeCore migration. That's driven a step-up an additional benefit has certainly been on MyPay loss rate improvement. You've seen that build into our transaction margin as well. And then third, again, particularly among our new cohorts. Chime Card is really resonated. Again, where new cohorts are seeing close to 50% credit mix. And of course, credit earns nearly 2x the take rate compared to debit. So -- yes, I guess, in summary, we're mentioning strong progress on both sides, both CAC and LTV. Jeffrey Cantwell: Appreciate it. I want to ask you about ARPAM. As you're thinking about 2026, do you mind just telling us what is the right growth assumptions you have for ARPAM. It seems like you have, I'm hearing you, it has good product momentum right now across Instant Loans and MyPay and others. And so maybe just talk about that and what you see as some more immediate drivers impacting ARPAM over the course of 2026? Mark Troughton: Yes. I think, Jeff, a lot of the similar drivers that I mentioned will flow through to 2026 as well from an ARPAM perspective. So Chime Card, I think, is probably the a great one to start with, again, for 2x the take rate. This new MyPay pricing and monetization model that we have will also be a contributor to ARPAM growth we expect this year, and Instant Loan as well is a third contributor to ARPAM growth this year. So multiple exciting tailwinds of products that we've already launched and are really scaling. And then beyond that, we're also very excited about the new product road map that Chris mentioned, again, across new membership tiers, investing products, joint accounts and other. Operator: We'll move next to Adam Frisch with Evercore ISI. Adam Frisch: Really nice update here and execution. I want to hit operating leverage for a sec. Obviously, a lot of the algorithm depends on growth on the top line, but are the cost levers still the same heading into the next few years? And if you could talk about maybe the top few biggest levers is core at the top of the list? Or has a lot of that been realized? Where is that leverage going to come from? And then on MyPay, losses reached 100 basis points. Is there still room to improve further? Or is this the level that you want as the right balance between growth and loss? Christopher Britt: Yes. Thanks for the question, Adam. So I think the high level answer here is, yes, we do continue to expect a continued trajectory of strong operating leverage. You've seen that across every part of our base, and you should expect to continue to see that across every part of our OpEx base this year. As you mentioned in the remarks, now that we have ChimeCore behind us, and of course, a result of our ongoing AI initiatives. We can just do more. We can move faster. We can innovate more quickly and be more nimble. And that's allowing us to get more done without needing to grow our headcount. So we are excited about continued operating leverage, again, across the business. I'll pass it to Mark to talk a little bit about MyPay loss rate. Mark Troughton: Yes. Adam, I think your hypothesis is exactly right. We will continue -- everything else being equal, we will continue to see improvements in those loss rates if we were just lending to the same people because we've got to get more and more efficient, and we're still seeing meaningful improvements in our loss rates in our understanding. And we're also just benefiting from older -- more tenured members who have more loans. So there would be a natural decrease in loss rates for MyPay over time. I think what you're going to see us do, though, is reinvest some of those in growth of MyPay to continue to expand attach and adoption rates, limits and optimize overall transaction profit from MyPay. So my guess is you'll see something probably a little bit higher than that in the future, but it will be far more than compensated for by an increase in revenue. Adam Frisch: Sorry, Mark, did you say a little bit higher than 100 going forward, but more revenue to show for it? Mark Troughton: I think it's going to be in a range. It's going to be in a range, a little bit below that to a little bit above it. I'm not giving a specific guidance with respect to where it would be. I think what we're really trying to do is to give you a sense of the -- conceptually how we're thinking about using MyPay to drive greater transaction profit going forward rather than just meeting that 1% loss rate threshold. Adam Frisch: Got it. So maybe it flexes up a little bit when you have a big marketing campaign in a quarter, but it goes lower than that when you digest the growth and that's just the way the business is going to run. That makes sense. Operator: We'll take our next question from Sanjay Sakhrani with KBW. Sanjay Sakhrani: I just want to follow up on some of the questions that were asked for. Maybe just one on the strong uptake on the new products and initiatives, including the fact that you have stronger tax refunds this year. I'm just curious, as we think about what's embedded in the assumptions that you guys have, how much of that have you sort of factored in? Christopher Britt: Yes. Thanks for the question, Sanjay. So we are, as I mentioned, expecting an outsized tax season this year as a result, again, of the One Big Beautiful Bill Act. It's -- we haven't yet seen the peak of tax season. It is the timing of refunds are a little bit later this year than we've seen in years past. But again, we do expect the magnitude to be higher. And so far, we are seeing that they are higher. If you take a look at the average tax refund as of the end of last week, it was up double digits compared to the average tax refund at the same time last year. So we have more to go, more data to see here in the next few weeks. But so far, that's what we're seeing. And what we're seeing so far is embedded into our guidance. Operator: We'll move next to Darrin Peller with Wolfe Research. Darrin Peller: Some of my questions were asked, but I want to hone in a little bit more on the products, the product velocity you guys have been putting out. Obviously, it was very strong with MyPay this year. When we think about the new products that will contribute in your view, the most in '26 incrementally above and beyond the pricing and the MyPay dynamic beyond that, what are you most excited about in the year ahead? And I guess, related to that also on the Chime Enterprise or workplace, it sounds like it's going really well in terms of users, partners to add and employers to add. But is that incorporated in the 1.4 million of new users? I would hope that would actually be somewhat additive versus last year where I think you did about 1.5 million. So just how should we think about that, too? Christopher Britt: Thanks for the question. Look, when we look out over the course of next year or this year, I should say, and what product initiatives we're most excited about having impact in terms of the revenue for the business. I think clearly, the continued adoption of Chime Card is going to be a major tailwind for the business. We're seeing it at the top of the funnel. We're also seeing more and more of our existing installed active debit card using member base take this card as well. And then I think when we launch this next new premium tier, we believe that it's also going to continue to drive even more adoption of this core secured credit card and drive even more spend through that product category, which is going to be really helpful to the business. I would say those are -- those 2 initiatives are probably the 2 most likely to have an impact for 2026. I don't know what you'd add to that. Mark Troughton: No, I think that's correct. In terms of the enterprise, I think as we indicated earlier, those we're not going to give specific guidance related to enterprise ads. Those are included in our overall guidance. But this is a new business. So we're obviously going to be conservative in terms of what we're putting forward with respect to enterprise. Operator: At this time, we've reached our allotted time for questions. I'll now turn the call back over to Chris for any additional or closing remarks. Christopher Britt: Great. Thank you all for joining me today and thanks to the Chime team for incredible execution. We look forward to spending more time with you all soon. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to the McGrath RentCorp Fourth Quarter 2025 Earnings Call. [Operator Instructions] This conference call is being recorded today, Wednesday, February 25, 2026. Before we begin, note that the matters the company management will be discussing today that are not statements of historical facts or forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to the company's expectations, strategies, prospects, backlog or targets. These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected. Important factors that could cause actual results to differ materially from the company's expectations are disclosed under Risk Factors in the company's Form K and other SEC filings. Forward-looking statements are made only as of the date hereof. Except as otherwise required by law, we assume no obligation to update any forward-looking statements. In addition to the press release issued today, the company also filed with the SEC earnings release form on Form 8-K and its Form 10-K in the year ended December 31, 2025. Speaking today will be Joe Hanna, Chief Executive Officer; Phil Hawkins, Chief Operating Officer; and Keith Pratt, Chief Financial Officer. I will now turn the call over to Mr. Hanna. Go ahead, sir. Joseph Hanna: Thank you, Stephanie, and good afternoon, everyone. We appreciate you joining us for McGrath RentCorp's Fourth Quarter and Full Year 2025 Earnings Call. This is a particularly meaningful call for me personally. It will be my final earnings call as CEO of McGrath. As many of you saw in our February 5 press release, I will retire as CEO effective April 3, but remain a Director on the McGrath Board. I want to start by expressing my deep gratitude to our customers, our team members, our Board and our shareholders. It's been an honor to lead this organization. I'm very proud of our company culture, our reputation with customers and the growth we have realized over the past 9 years. Our Board invested considerable time developing a thoughtful CEO succession plan and is confident that Phil Hawkins is the best leader to succeed me, given his industry stature and experience at McGrath since 2004, most recently as Chief Operating Officer. Phil is a seasoned industry professional who embodies the core values of our company, and his experience will enable him to continue the execution of the company's strategy and maintain its positive growth trajectory. I've had the pleasure of working with Phil for over 20 years, and I could not be happier to have Phil succeed me as CEO. For today's call, I will cover our fourth quarter and full year 2025 results. Phil will then provide comments on our business outlook and plans for 2026. Keith will share the financial details including our financial outlook for 2026. And then we'll open the call for questions. I should also highlight that our Board of Directors today announced our company's quarterly cash dividend for the quarter ending March 31, 2026. This will be McGrath's 35th consecutive annual dividend increase. Now for the fourth quarter 2025 total company revenues rose 5%, driven by rental operations revenue growth across all 3 of our rental businesses. Adjusted EBITDA increased 14% from a year ago. I am pleased with this performance, which was driven by strong results at Mobile Modular and TRS-RenTelco. Across the company, our rental businesses performed well in a mixed demand environment. At Mobile Modular, activity was steady, portable storage showed continued stabilization and TRS maintained the healthy momentum we saw throughout the year. Looking first at our Mobile Modular business. Rental revenues increased 2%. Our Mobile Modular Plus offerings and our geographic expansion efforts gave us opportunities to grow in a slow nonresidential construction market. We continue to benefit from the shift in demand towards mega projects, which helped to offset lower demand across other nonresidential construction categories. Sales of new modular units were down in the fourth quarter and for the full year as a challenging nonresidential construction market presented fewer opportunities. In contrast, our Enviroplex business had a very strong fourth quarter and full year with healthy education demand, growing revenues with high gross margins. Turning to Portable Storage. We continue to realize gradual top line improvement, while broader commercial construction remain soft. We benefited from seasonal retail business and geographic expansion progress. In the quarter, rental revenues increased 3% year-over-year. Finally, TRS-RenTelco, rental revenue grew by an impressive 13% in the fourth quarter. This business completed a notable year of recovery ending with sustained utilization in the low to mid-60s and healthy demand across both general purpose and communications segments. As I reflect on 2025, our company had a strong fourth quarter, which played an important role in delivering a solid full year result in a mixed environment. Over the course of 2025, weakness in nonresidential construction created headwinds for the company but our strategic initiatives made a positive contribution and helped offset those pressures as well as the performance at TRS and Enviroplex, which bolstered our overall results. I want to thank each of our team members for your accomplishments and steadfast commitment to delivering the highest quality service to our customers. Our culture at McGrath is a driving force behind our growth, and it shines through in every customer interaction. Phil, over to you to comment on our business outlook and our 2026 plans. Philip Hawkins: Thank you, Joe, and good afternoon, everyone. I appreciate the opportunity to join the call today and to share more perspective on the business. I'd like to start by saying McGrath has been my home for more than 20 years, and I've had the opportunity to work across nearly every part of the organization. I worked closely with both Joe and Keith with a shared focus on disciplined execution and building long-term shareholder value. Joe is behind an impressive legacy of leadership and service commitment that he is thoroughly ingrained throughout our company. It is a great honor to succeed Joe as CEO and to continue leading our capable team. As CEO, I look forward to building upon that foundation, continuing to strengthen our market positions and leading McGrath to capture long-term opportunities that lie ahead of us while delivering value for our shareholders. Now let's look at the year ahead. The key drivers of our performance in 2026 will be continued progress from our modular growth initiatives and building on the market recovery at TRS. I'll discuss those further after I outlined the overall demand environment for our businesses. In the modulars business, uncertain market conditions persist, nonresidential construction indicators such as the Architectural Billings Index, or ABI, remains soft. While we do not expect meaningful improvement in the environment this year, we have proven our ability to grow in these conditions. At Mobile Modular, we started 2026 with lower utilization but with some solid momentum driven by the ongoing success of our services and geographic expansion initiatives. In our commercial business, mega projects, such as large industrial projects, data centers and government work remain active. Our fleet size and modification capabilities provide a competitive advantage in these opportunities and these strengths are helping our pipeline and bookings. In education, we expect a stable market this year. Overall, our education markets and modernization backlogs are healthy. The modular business remains our largest long-term growth opportunity. Turning to portable storage. We remain hopeful that the market demand has stabilized. While industry utilization remains low, our order activity has shown some positive momentum and we are starting 2026 with a slightly higher rental revenue run rate than at the beginning of 2025. At the same time, profitability remains a key challenge in this highly competitive market. We are laser-focused on improving sales effectiveness to get more units out on rent while protecting margin. We will continue to invest in growing our presence in existing markets, expanding into new locations aligned with demand and pursuing tuck-in acquisitions that support our growth. TRS is entering 2026 with good momentum. We see continued strength in aerospace and defense, data centers and semiconductor segments. Our 2026 performance will be accomplished through a strong leadership team with deep technical expertise and the ability to deploy capital effectively. In summary, across McGrath, we are entering 2026 in a healthy position. We are confident our strategy is sound, and we have the right team to execute. With that, I will turn the call over to Keith, who will take you through the financial details of the quarter and our outlook for 2026. Keith E. Pratt: Thank you, Phil, and good afternoon, everyone. Before I give the financial details and outlook for 2026, I want to recognize Joe for his leadership and many years of service to McGrath. Joe has played a critical role in shaping the company's strategy, driving results and positioning the business for long-term success. I also want to congratulate Phil on his well-deserved appointment to CEO. Phil and I have worked closely together. He brings deep strategic, operational and financial knowledge of the business, and I'm confident he will provide strong leadership as we continue to execute our strategy. So now on to the financial highlights. As Joe mentioned, we delivered strong results in the fourth quarter, driven by increased revenue across each of our businesses and the strong adjusted EBITDA performance at Mobile Modular and TRS-RenTelco. Looking at the overall corporate results for the fourth quarter. Total revenues increased 5% to $257 million with rental operations increasing 6% and sales revenues increasing 5% during the quarter. Adjusted EBITDA increased 14% to $105 million. Reviewing Mobile Modular's operating performance as compared to the fourth quarter of 2024, Mobile Modular had a good quarter, with adjusted EBITDA increasing 13% and to $68.7 million. Total revenues increased 2% to $175.8 million. The business saw a 2% higher rental revenue and 10% higher rental-related services revenues, primarily due to higher site-related services projects, which were partially offset by 1% lower sales revenues. Total gross profit grew 9% for the quarter, driven by a higher mix of used equipment sales, which have higher margins than new sales. Rental-related services also delivered growth and at higher margins than a year ago. Average fleet utilization was 71.3% compared to 76% a year earlier. Consistent with the challenging demand environment experienced throughout the year, fourth quarter returns of rental units were higher than new shipments. Fourth quarter monthly revenue per unit on rent increased 6% year-over-year to $874. For new shipments over the last 12 months, the average monthly revenue per unit decreased 3% to $1,169. We continue to make progress with our modular services offerings. Mobile Modular Plus revenues increased to $10.5 million from $8.4 million a year earlier, and site-related services increased to $10 million, up from $6.9 million. Overall, Mobile Modular had a good quarter as we continue to make progress with our modular solutions growth strategy. Turning to the review of Portable Storage. Adjusted EBITDA for portable storage was $9.6 million, a decrease of 3% compared to the prior year partly driven by lower margin on our delivery and pickup services and reflecting a very competitive market. Rental revenues for the quarter increased 3% to $17.3 million benefiting from some incremental seasonal retail business, while commercial construction activity remains soft. Average utilization for the quarter was 61.2%, which was comparable to a year ago. Quarterly utilization was relatively steady throughout the year and provided an indication that demand conditions are showing signs of stabilization. Turning now to the review of TRS-RenTelco. Adjusted EBITDA was $23.1 million, an increase of 21% compared to last year. TRS had another strong quarter with total revenues up 19% to $40.6 million, driven by higher rental and sales revenues. Rental revenues increased 13% to $28.7 million as the industry continued to experience improved demand conditions. Demand was robust throughout the quarter with a modest seasonal slowdown at year-end. Average utilization for the quarter was 64.5%, up from 59.1% a year ago and rental margins improved to 44% from 40% a year ago. Sales revenues were notably strong in the quarter, increasing 42% to $10.3 million and with gross margins at 64% compared to 58% a year ago. The remainder of my comments will be on a total company basis. Fourth quarter selling and administrative expenses increased $2.7 million to $54.4 million. Interest expense was $6.5 million, a decrease of $2.4 million as the result of the lower average interest rates and lower average debt levels during the quarter. The fourth quarter provision for income taxes was based on an effective tax rate of 26.4%, compared to 25% a year earlier. Turning to our full year cash flows -- cash flow highlights. Net cash provided by operating activities was $256 million compared to $374 million in the prior year. The decrease was primarily attributed to the absence of the nonrecurring $180 million merger termination payment received from WillScot in 2024, net of $63 million McGrath merger costs. Rental equipment purchases were $143 million compared to $191 million in the prior year. In addition, to investments in new fleet, healthy cash generation allowed us to pay $48 million in shareholder dividends. At quarter end, we had net borrowings of $515 million, and the ratio of funded debt to the last 12 months actual adjusted EBITDA was 1.42:1. Finally, our 2026 financial outlook. For the full year, we currently expect total revenue between $945 million and $995 million. Adjusted EBITDA between $360 million and $378 million, gross rental equipment capital expenditures between $180 million and $200 million. Our current outlook for each of our businesses is as follows: We continue to see solid opportunities at Mobile Modular, where we have multiple growth initiatives in progress and we expect this business to grow adjusted EBITDA in 2026. Given current utilization levels, we have equipment available to meet demand in most established markets. We expect to spend approximately $5 million to $8 million higher operating expenses in 2026, preparing available fleet to meet customer orders. Last year, we increased the size of our sales team to broaden our geographic coverage. And as we enter 2026, we see good momentum in several new regional markets where we will invest capital in new rental equipment to support demand. At Portable Storage, we see some signs of more stable demand in a very competitive environment. Until utilization improves, we expect it will be challenging to grow adjusted EBITDA and 2026 performance is expected to be comparable to 2025. At TRS, market conditions improved last year, and we expect to see more growth in 2026. As a result, TRS should contribute higher adjusted EBITDA again this year. Given recent high utilization levels and our growth outlook for the business, we expect to increase capital investment in TRS in 2026. Our Enviroplex business, which sells new modular classroom units had a very strong 2025 with strong revenue growth and higher gross margins than a year earlier. For 2026, we expect revenues, margins and adjusted EBITDA to be in a more normalized level and closer to 2024 levels. Our 2026 outlook also includes the following expectations for the company: Rental equipment depreciation expense of $85 million to $89 million; direct cost of rental operations of $122 million to $126 million; SG&A expense of $225 million to $229 million; and interest expense of approximately $26 million to $29 million. In summary, we remain committed to building long-term shareholder value through sound, strategic focus disciplined capital application and consistent execution. I will now turn the call over to Joe. Joseph Hanna: Thank you, Keith. Before we open the call for questions, this company has been a major part of my life for 22 years, and I'm incredibly proud of what we've built together. I'm excited about where McGrath is headed. We have the right strategy, the right teams and the right leadership. I would like to specifically call out the executive team and thank them for their support during my tenure. To our team members, thank you for your dedication. To our customers, thank you for your trust. To our shareholders, thank you for your investment in our company. Stephanie, you may now open the lines for questions. Operator: [Operator Instructions] We'll take our first question from Scott Schneeberger with Oppenheimer. Daniel Hultberg: It's Daniel on for Scott. First off, congrats to Joe and Phil and best of luck going forward to both of you. Jumping into the questions. Historically, you guys have guided the initial guide pretty conservatively out of the gate. How do you see the drivers this year that could potentially take you above that guidance range? Keith E. Pratt: Daniel, it's Keith. Let me make a couple of comments. I think the first thing is it's always hard to develop the financial outlook. And I always, at this time of the year, reflected a couple of things. First of all, the calendar. It's still very early in the year. And if you look at our business, typically, the second half of the year is the biggest contributor to our financial performance. So we really have to be humble at the start and say there's a lot we don't know, especially about the second half. I think right now, in particular, the macro presents some challenges. We've talked at length about the nonres construction market, some of the challenges there. We're not assuming a change in those conditions this year. And obviously, I outlined looking across our businesses, there's a little bit of a different outlook in the context for each business. If you look at what things can present upside in our year, it's really looking at each of the businesses and each of the initiatives we have underway and saying we do more, we made greater progress than is reflected in the initial guide, that's not an easy thing to do. Our team did a phenomenal job last year, particularly right through the fourth quarter. But that gives you some context. We have a lot to work with. It's early in the year. We are clear on strategy, and we have a team that knows how to execute but it's still not an easy environment. One other thing I will say, when you look at the revenue range being quite wide, what would push you to the upper end, it's really the sales activity in our Mobile Modular business. That's an area where if you look at the details of last year, we actually took a step back we didn't sell as much on the new equipment side, even though our used equipment sales were up a bit. But if we look at that part of the business, we have a good team. We have a lot of good opportunities we see in the market. We think it's a great long-term opportunity. But it's very hard to predict exactly where that can land. So we're assuming some growth there. If we do well, it could be pushing us more towards the upper end. On the other hand, if it's a difficult year, it could push us lower within our range from a revenue point of view. Daniel Hultberg: Got it. That's a helpful overview. Switching gears to your initiatives in Mobile Modular. We saw a real nice acceleration in the growth there for both Mobile Modular Plus and Site Related Services, I mean, despite being in a pretty tough environment now, could you speak to the accelerated momentum you've seen for those offerings? Philip Hawkins: Thanks. This is Phil. We're happy with the progress we're making in capturing additional profitability on every project with these service offerings. Our product and service offerings come with the building, that's Mobile Modular Plus and our construction services outside the building. Site Related Services continue to grow at double-digit rates. We have several customers, many customers that see value in having one provider provide those activities while our units are on the job site and before units get there. Daniel Hultberg: Got it. And switching to TRS. Rental revenue growth really accelerated nicely in the quarter. Could you please elaborate on what drove that acceleration? And what type of visibility do you have to sustain this momentum into '26? Joseph Hanna: Sure. We were very happy with how TRS performed. We are -- we actually -- you know there's 2 different components to the rental business there. One is our general purpose fleet and the other is our communications fleet. The general purpose fleet saw growth in aerospace and defense and semiconductor business, which is just a recovery of more projects that we're seeing in that customer base. And then over on the communications fleet, we're seeing a nice demand from data centers. And if you think about a data center, all the different connections the testing that has to be done, it's very intensive and requires considerable amounts of test equipment to get those facilities up and running. And so we're the company that people go to when they need that equipment and it worked out very nicely for us during the year and especially in Q4. Keith E. Pratt: Yes. One thing I'd add is in that business, we typically see some slowdown in activity as we get to the period from Thanksgiving to year-end. And this year, business remains strong with really very little drop-off in activity through December 31. There was a little bit of a dip right at the end but I would characterize that as a very healthy, very consistent fourth quarter and finish to the year. And a good example of where things really broke in our favor in that business for the final quarter of the year. Operator: We'll take our next question from Manav Patnaik with Barclays. John Ronan Kennedy: This is Ronan and Kennedy on for Manav. Congratulations to both Joe and Phil. The CEO transition, it sounds like it was thoughtful, should be smooth to seamless. Phil, you spoke of strategic continuity and continued disciplined execution. Are there any areas, whether it's portfolio management or mix, M&A appetite, capital returns where your approach may differ even if subtly for Joe's once you step into the CEO role? Philip Hawkins: Thanks, Ronan. I think Joe, Keith and I have worked closely together along with other members of our leadership team to craft our current strategy and refresh that over the last several years. And those strategic initiatives are in progress. We're happy with the products we're making, and I don't expect any near-term changes. John Ronan Kennedy: Got it. And beyond the performance of TRS and Enviroplex, total company basis [ 425, ] which specific strategic initiatives were most impactful in offsetting the nonresi headwinds and which do you anticipate will be most impactful for '26? Philip Hawkins: I would say geographic expansion, the additional salespeople, we added into the market in 2025 that we talked about on prior calls, momentum we have in those markets coming into 2026 or one of the biggest drivers in offsetting the impact that we're seeing to some of the more challenged areas of the commercial market. John Ronan Kennedy: Appreciate it. And then with the Mobile Modular starting 26% lower utilization, but guiding to the adjusted EBITDA growth, even with higher operating expenses and CapEx repair fleet. Can you walk us through the bridge on that? And what the key drivers are there, whether it's pricing, utilization, the Mobile Modular, Site Related Mix or and from take standpoint cost absorption? And then what's the incremental margin on the Mobile Modular Plus and Site Services versus base rental? Keith E. Pratt: Yes. A lot to unpack there. What I would say, Ronan, is, and Phil alluded to we've got several initiatives in play that we feel good about. So as always, there's a range of possible outcomes here. We'll be working to try and make the most of each of those initiative areas. I think the geographic expansion is important to call out. We stacked up over 25%. We feel good about the traction we're getting in the market. We'll put new capital to work because a lot of that geographic coverage is in areas where the -- we do not either have equipment in the market or we don't have the right kind of equipment available in our fleet. In terms of margin impact, I wouldn't see margin impact being dramatically different within the individual revenue streams, so areas like Mobile Modular Plus, areas like Site Related Services, I would look at what we've done historically and said, margins are probably going to stay pretty consistent. Probably the biggest wildcard is the sales piece of the business. You saw in the fourth quarter -- even though sales were down a bit for Mobile Modular, we actually increased our gross profit contribution from sales, and that was the impact of a higher mix of used sales. So when we turn that and look into '26, again, there's a range of possibilities here. We put our best estimates on the table but we look a lot around sensitivities. So that area a little bit hard to tell but I think we have a realistic midpoint in our range that reflects some continued progress with sales at Mobile Modular, probably not as heavy weighting towards the used sales more on the new, and that can be slightly detrimental from a margin point of view. So let us know if you like more color? I know you touched on a lot of individual topics there. John Ronan Kennedy: No, that's great. And then ask on the monthly revenue per unit, I think you rose 6% year-over-year, while new shipment revenue per unit fell 3%. Could you talk about the drivers there, whether it's mix drive pricing, customer-driven and potential implications for the portfolio and future economics as the portfolio churns. Keith E. Pratt: Sure. I'd probably start with the 6% increase in the revenue per unit on rent. So that's really looking at all of our assets that are held by customers and are at work, so to speak. That is really the key metric. And you see that 6% lift is very good in this environment. We're very pleased with that. The offset was fewer units being on rent, and that netted out to about 2% rental growth for the quarter. In terms of new activations, based on an LTM look at new shipments, the number there was down by 3%. So it was down from $1,203 to $1,169. I think there's a few things going on there. First, we are within those numbers. We are making progress with MM Plus. If we look at the base rent, that is actually lower and that's for a couple of reasons. The primary reason is mix related when we look at the types of units, the regions they're in, the contracts they're on, mix plays a big factor there in making the base rent lower but in addition, we're also seeing parts of the market for modulars are very competitive. Others are more stable but there's definitely a lot of competition in the marketplace. So that's how I would sort of summarize what we're seeing. I think when we look at the economic opportunity, there's still a significant gap between the revenue we're getting for units in our fleet today and where we're executing new shipments. That combination of discipline on base unit pricing, good progress with services. There's still an opportunity over time to raise that fleet rate by as much as 33%. Operator: We'll take our next question from Daniel Moore with CJS Securities. Dan Moore: Joe, congratulations going out on a strong note, so to speak. And Phil, congratulations to you. I look forward to working more closely going forward. CapEx or purchases of new rental equipment, you touched on several times, tick higher in Q4 as well as our guide for 26. Is that primarily kind of expanding into new geographies? And just talk about the confidence that you have to turn on the CapEx to get a little bit more required more rental equipment in this environment? Philip Hawkins: Dan, this is Phil. The primary driver of that higher CapEx on the modular side of the business is definitely geographic expansion, where we're growing our fleet in a newer market. There are some product areas of our portfolio in mature markets where we'd also be adding and then TRS, the health of the TRS business is another place where the CapEx will be likely higher than it was a year ago. Keith E. Pratt: Yes. And Dan, always good to look at history when you look at that number, it really takes us back to a level similar to what we spent in 2024. It's still lower than what we spent in 2023. And one other comment I will make is that the portion of additional spend, it also includes maintenance CapEx on some of our modular units, where we're doing a long-term refurb on the unit and we're not really adding any units to the fleet. And so think of a number, order of magnitude around $20 million in that CapEx guide, that is really extending the life of units we already own as opposed to adding units. Dan Moore: Got it. That's helpful. Any color, Keith, kind of the cadence of growth in margins embedded in the 26 guide, starting with Q1, how do we see kind of revenue and EBITDA growth? And how do you see it progressing over the course of the year? Keith E. Pratt: Yes. The way I would look at it is we're not assuming business conditions get any better anytime soon. So I would look at the first quarter as maybe be more comparable to how we started last year, second quarter, probably more of the same. And then second half of the year, by then, I think we're likely to be seeing more impact from deploying some of that new capital, particularly in some of the new modular markets. That's sort of how we characterize it at a very high level. Dan Moore: Very good. See if I have one more. I guess just from a capital allocation perspective, obviously picked up the dividend. Balance sheet's in great shape. Maybe talk about the M&A pipeline for '26 and kind of strategic priorities from a capital allocation perspective this year? Philip Hawkins: We continue to have an active M&A pipeline. We're consistently looking for opportunities, particularly in those geographic areas that we would like to enter. And the timing on those is always uncertain based on finding the right assets, right business in the right geography at the right valuation. It continues to be part of our financial allocation model and place that we spend a lot of time. Operator: We'll move now to Steven Ramsey with Thompson Research Group. Steven Ramsey: I extend my congratulations as well. When thinking about the geographic expansion, can you give a little bit more flavor on how the ingredients for how you go to market if it's Modular and Storage, how you're thinking about going to densely populated areas versus mega project-oriented areas? And then maybe lastly, in the areas with success how much is Modular Plus and SRS a factor or attaching to those wins? Philip Hawkins: All right. The way I would think about geographic expansions. We are looking for metro areas and based on metros that states that are strong opportunities for both -- for our entire Modular Solutions platform, which would include modulars, portable storage and all the service offerings that you referenced in that. So when we enter a new market, our goal is to provide all those offerings. And then it always helps if there's some large mega projects in those markets that provide a nice anchor, but we believe that -- and we've demonstrated through entering the Pacific Northwest after Design Space, Midwest after Vesta that we can enter these markets, come in with quality people and processes and add CapEx and take share. We'll participate in growth that exists in that market. Maybe to add to your question on Mobile Modular Plus, I think you think about that being a small portion of the revenue on unit, it really becomes more impactful as you get more units on rent in that market, and you're seeing that flywheel build over time. So I wouldn't say that's a material needle mover early in the process. Steven Ramsey: Okay. That's helpful. And then maybe to continue on SRS and modulars showing such great growth makes up $74 million or 16% of Modular segment rental revenue, do you expect the strong double-digit growth of those product lines to continue in 2026? Philip Hawkins: I think we have -- we believe there's a nice long-term opportunity there. On the -- as penetrations increase on the Mobile Modular Plus side, we add more service to that offering. We think there's room to continue turning that flywheel and give lift. -- the site-related services side, that could be lumpier, right? Those are larger revenue items tied to specific projects, and those can -- a little bit like sales tend to be a little lumpier in the process. We believe we've got a runway to continue to grow those. I'd be careful about the trajectory that we make in there and how long that high growth that we see can continue. Keith E. Pratt: Yes. Steven, one thing I'd point out is we've been doing this for a few years. So as we, if you will, anniversary some of the success of earlier MM Plus contracts, sometimes we'll have returning units, which actually bring the number down because they come back and they had MM Plus on the contract. And so simply replacing that with another contract that is MM Plus is necessary to hold the line. So Again, we've made a lot of progress. We think there's more opportunity. We've broadened the offering. Those are all good long-term drivers. But keep in mind, as we start rotating here, some of our earlier success has to be replaced. Steven Ramsey: Okay. That's helpful perspective. And then last one for me, serving data centers with TRS. Can you talk about how much you can do to grow intentionally that product set? Or how much of it is following customers? And then with data centers being supportive of TRS growth can you put the data center vertical into some kind of context of size within total TRS revenue. Philip Hawkins: Yes, I don't think we want to try to give a specific size of that related to TRS but I would characterize that word as following existing customers that are doing fiber connections or other communications type of testing and electrical testing into that data center space. So this is the work that we do every day across many different project types. There just happens to be a lot more of it in these data center projects. Operator: We'll take our next question from Marc Riddick of Sidoti. Marc Riddick: So first of all, I want to start, Joe, thank you so much. It's been a pleasure working with you over all these years and certainly wish you the best on your retirement. You've worked with us at Sidoti for many years, and it's certainly been a pleasure to do so with you and certainly looking forward to having a very positive retirement well. I know you're not completely going to do here but it's good for you and, it's been a pleasure. So full congratulations there. Joseph Hanna: Thank you, Marc. Marc Riddick: And Phil, we're certainly looking forward to working closer with you over time and certainly wish you're the best going forward. And really, really do appreciate all the color that you guys have already given on the call. One of the things I did sort of want to touch a little bit on the expansion. You touched on the organic pursuits on the expansion side and the geographic footprint side. Maybe you can touch a little bit on the potential of acquisitions. I guess there hasn't -- the pace of acquisition activity hasn't been what it was prior to everything at WillScot and the like. And maybe you could talk a little bit about what you're seeing out there valuations, appetite. Anything color-wise that you can give there would be appreciated. Philip Hawkins: Maybe I'll start with reminded everyone that we did 2 small deals related to our geographic expansion efforts last year, one in portable storage and one on the modular side of the business. So those are examples of the type of opportunities and transactions that represent our pipeline and that we look for. I think a couple of things to think about are we don't determine the timing of those, the owners do. And so a lot of our pipeline are people that we keep in close contact with when they're ready to sell or their first call, but they may not be ready at a particular time that we're having conversations with them. And for ones that are ready, there's a process to go through diligence, evaluating fleets and making sure it's the right fit for us, and then the valuation starts have to align. So I think we are rigorous in that process. We don't feel compelled to do deals. We look for ones that make sense for us, again, based on the market the valuation and the timing of the opportunity. And so those are the 2 we found this year. We continue to be hopeful that there's more. It's not something that we bake into our earnings guidance or our plan. Marc Riddick: Okay. Great. And then the one thing I sort of -- as a quick follow-up. As far as the timing of investments and timing of CapEx, is there anything we should be thinking about there as far as whether there's -- whether that would be concentrated to any particular part of the year? Or do you anticipate that sort of being sort of a consistent level as you go through 2026? Keith E. Pratt: Yes, Marc, it's a good question. I would say, generally, it's likely to be front loaded. So the first couple of quarters, the spend is likely to be heavier because as you heard us describe in some of the earlier Q&A, one of our opportunities with the geographic expansion is building the revenue base particularly in the second half. So capital will generally be flowing earlier in the year. And then you're going to see that if all goes according to plan, showing up in the revenue streams, particularly in the second half. Operator: Ladies and gentlemen, that appears to be the last question. Let me now turn the call back over to Mr. Hanna for any closing remarks. Joseph Hanna: Thank you, Stephanie. Now Phil, how about if you finish the closing remarks. Philip Hawkins: It would be my pleasure. On behalf of Joe and Keith and the entire team here at McGrath, I'd like to thank everyone for joining us on the call today and for your continuing interest in our company. We look forward to speaking with you again in late April to review our first quarter results. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Stella Mariss: Hello, everyone. Thank you for joining CLINUVEL's Investor Webinar. I'm Stella of Monsoon Communications. In today's webinar, CLINUVEL will share their half year results and operational highlights for the 6 months ended on 31st December, 2025. I will now hand over to Malcolm Bull, Head of Australian Operations and Investor Relations, to conduct the proceedings. Malcolm Bull: Thank you, Stella, for the introduction. I'd first like to welcome members of CLINUVEL's management team to the webinar. Not surprisingly, reflecting the focus of the webinar on the financial results for the half year to December '25, we have Chief Financial Officer, Peter Vaughan. We are joined by 2 executives who are leading the business in key operational areas: Director of Clinical Affairs, Dr. Emilie Rodenburger; and Director of North American Operations, Dr. Linda Teng. We're also joined by our Managing Director, Philippe Wolgen. I'd like to acknowledge there are several analysts on the line who cover CLINUVEL and we'll ask some questions in the webinar. It would be remiss of me if I didn't say on behalf of management and the Board that we appreciate your work on CLINUVEL, your role in telling our story to a wider audience than we could reach ourselves and your involvement in this webinar. It's pleasing also that there are over 175 participants to the webinar, reflecting increasing interest in CLINUVEL. So welcome, one and all. Before going further, I think it's appropriate to highlight why we have 5 executives in today's webinar. So you frequently see Philippe; our Chief Operations Officer, Lachlan Hay; Peter Vaughan; and Investor Relations presenting the company to a range of stakeholders. We have received feedback that it would be good to have greater access and the opportunity to hear from other executives. So for today's webinar, noting this is not the forum for a strategic review, but as a courtesy to you all, we include Dr. Rodenburger and Dr. Teng to answer questions and provide their insights direct to you. Today's webinar will be in 2 parts. First, a discussion of the half year results; and second, the analysts online will be called upon to ask questions of the CFO and management. We will be talking today about plans and intended outcomes. So I'll draw your attention to the forward-looking statement or safe harbor statement on screen that identifies a range of risks that can materialize and impact their achievement. So I think 10 seconds to review that is enough, and that is on our website and on all of our announcements. I now kindly invite the CFO to summarize the results. Peter? Peter Vaughan: Thanks, Malcolm. Good evening, and good morning, everyone, from wherever you're calling in from. It's another set of very consistent results at CLINUVEL, I'm pleased to announce, with our revenues up 4% on the prior year, maintaining a steady growth pattern. Our expenses were up 22% for the period, and this really was part of the supporting the expansion initiatives that we'd foreshadowed previously that we were going to be undertaking during this period. We continued our strong positive net operating cash flows, and this saw our cash reserves over the 6 months increase by $9 million to $233 million. We're closely monitoring all of our expenditures and any discretionary spending is being scrutinized really closely. And the good news is that our profitability for this period, whilst lower, continues to be maintained despite the increasing level of expenditure during this expansionary phase. Malcolm Bull: Thanks, Peter. I'll now ask Philippe to comment on the results. Philippe Wolgen: Thanks, Malcolm. Welcome to all the analysts and shareholders. Well, in a nutshell, we follow a plan, a strategy, which is gradual and with purpose. And for this strategy to play out, we need to manage our finances tightly in a very controlled manner. In the past 12 months, we intentionally increased our expenses. And therefore, naturally, one expects to see the net profit decrease. These expenses towards R&D, the clinical trial in vitiligo and regulatory filings. We are very much in line with our own forecast, so we're content with the results, and we will proceed on this basis. And with positive cash flows, we can expand the activities of the company, the group. We gave expense guidance from 2021 to 2025. And for the financial year, we expect to spend about $55 million to $58 million, excluding the capital expenditures. So in summary, the business model we chose is playing out really well. Malcolm Bull: I agree. So let's delve into the results and call on Peter to look at in turn revenues, expenses, profit and indeed the balance sheet. Peter Vaughan: Thanks, Malcolm. So our revenues for the period continue to grow year-on-year. And this period, I'm pleased to say we saw our highest ever sales revenue result. This period marks the 20th consecutive profit for CLINUVEL since the commencement of our commercial operations. And our expenditure, as I touched on before, whilst increasing, is very focused, controlled and targeted around the specific areas of the business that we're focusing on. Our expansion saw key developments in our R&D activities across our ACTH-NEURACTHEL program; our vitiligo study, CUV105; and of course, our peptide drug platform that we developed at our Singapore Research Development and Innovation Center that we recently announced we'll be undertaking a large expansion of. Now all of this expenditure and all of this growth has been achieved without sacrificing our overall profitability, which is really a fantastic result for the organization. Only 4% of biotechs deliver a profit and even fewer are able to sustain a profit for an extended period of time. So where CLINUVEL has done this for over a decade, it's truly a remarkable outcome. In turning forward to our revenues, specifically, we saw our revenues from sales increased by 4% from the prior period to just under $37 million. As I mentioned before, this is our highest first half year sales results we've ever seen. This reflects the increasing and continued demand for SCENESSE right across our sales regions. In particular, we saw strong growth in volume of sales across Europe. And as we announced in September 2025, the approval by the EMA, lifting the number of maximum implants per year from 4 to 6, has already seen some of the patients take up that extra initiative, and we expect other patients to follow suit as well. In the U.S., our team and -- led by Linda has able to increase the number of sites to meet the target that we had for December, which was 120 sites across North America. The patient demand has been consistent throughout the period, and our U.S. team operates extremely well given the evolving U.S. medical reimbursement landscape that is constantly changing at the moment. Perhaps at this point, Linda, as our Head of -- Director of North American Operations, I might ask you, could you provide some insight to the people listening in around the U.S. reimbursement process and in particular, the prior authorization scheme that enables us to have such a high success rate of reimbursement? Linda Teng: Sure, Peter. So first off, please excuse me for my raspy voice, as I'm still recovering from the flu. But thankfully, the technology allows me to share the insight without spreading the flu. Philippe Wolgen: Linda, we can't hear you well. Linda, we can't hear you. Linda Teng: Can you hear me now? Philippe Wolgen: No. It's very muffled. Malcolm Bull: Go off the headphones if you can. Linda Teng: Is that better? Philippe Wolgen: No. Malcolm Bull: Not really. Linda Teng: Is that better? Can you hear me now? Philippe Wolgen: Yes. Much better. Okay, let's move on. Malcolm Bull: Yes. Linda Teng: Can you now hear me? Philippe Wolgen: Yes. Okay. Linda Teng: Can you hear me now? Philippe Wolgen: Yes. Please proceed, Linda. Linda Teng: Yes? Philippe Wolgen: Yes. Linda Teng: Okay. So all right. So we're going to continue with what Peter said about prior authorization. So in short, basically prior authorization is a way for health insurance companies to control their cost, by making sure that they are only paying for treatments that are medically necessary for their patients. And so because SCENESSE is the only FDA-approved treatment for EPP, and it has a strong and also a long-standing safety records. We haven't seen any prior authorization denials for the EPP patient. And we also have a dedicated in-house team that works very closely with the physicians to really streamline the submissions and also speed up the approvals. And for SCENESSE, most of our PAs that are already approved, they are only renewed annually. There really is minimal paperwork for the physician, and so they don't have to get approval for every single treatment visit. And for those who are familiar with the U.S. healthcare system, you might notice that our approach is very unique. Most high-cost drugs, they go through the middleman or the pharmacy benefit managers or we call them the PBM. And they usually drive up prices up even more. So we made that deliberate decision to avoid the PBMs. And I think that is moving like a smart moves, especially now because the government is increasingly the scrutiny of them. And we said the 2026 Consolidated Appropriations Act, which has really signed into law a few weeks ago, including the provisions aimed at the PBM industry. And as for the patients, the feedback has been consistently positive. And I think the reason for the continued treatment year-after-year is because they are seeing real clinical benefit. And we even saw some patients are increasing their treatment dose within the year because of the clinical benefit. And I do want to be clear that we don't pay physicians or patients for any testimonials. Everything is completely organic. The feedback from the patients are voluntary and genuine. And usually, they can share more within -- happily within their patient communities or directly with my team. So I hope this gives you some insight into our prior auth process. Peter, handing back to you. Malcolm Bull: You're on silent, Peter. Peter Vaughan: Thank you, Linda. As we look forward to the other areas of revenue for the period, our interest income was up to $5.3 million this period, which was a 14% increase on the prior year. And this was really the result of a larger cash reserves balance that we continue to maintain. We generally take our surplus funds that we have at the time and invest them into term deposits to help to build and grow on that balance. And at the moment, we're extending the length of our term deposits to be able to take longer-term maturities at higher yields. So we're seeing our average term deposit for about 300 days at the moment, and we're receiving an average yield of about 4.5% across the portfolio. Our other income, now this number has swung the other way from the prior period, and it's a difference of about $4.6 million. Now just to explain, this is an unrealized foreign currency translation that occurs each balance date, so each reporting date. It's really a non-cash transaction that's effective at balance date for accounting purposes. And it takes the process of taking all of our foreign currency balances and bringing them back to account at balance date into Australian dollars. So it's not a real loss. It's an unrealized loss just purely to be able to balance the books at balance date. So if we look at our revenues overall, I would mark them as being stable, growing and also consistent. Historically, our second half of our financial period generally tends to be proportionately higher from a revenue perspective, with the EU and U.S. summers coming into effect through that second half of the year. So we're really excited to see how the second half of the year plays out given we've still got that maintaining growth. Perhaps moving to expenses, Mel, now more specifically. Malcolm Bull: Yes. Peter Vaughan: So we saw a 16% increase in our personnel expenditure. And I'd probably -- I'd just like to provide some context around that for everyone to understand. This is a strategic part of our expansionary team and increasing the in-house capability of CLINUVEL. It provides greater control and oversight of our activities. But at the same time, we're upgrading the skill and expertise within our organization. Now as everyone will know, skill and expertise within the life sciences sector is really important. And recently, we've seen regulatory challenges and hurdles that some other life sciences and biotech companies have faced in just recent times. So this highlights the need to really develop and create the skill and expertise within that team and make sure we've got the right people around the decision-making process. And when we look at CLINUVEL, CLINUVEL's never had a market authorization knock back in over 20 years of being active in the pharmaceutical sector. Now if that was to occur in some shape or form, a regulatory rejection of some sort can really have a significant effect on an organization. It erodes shareholder and market confidence in the company. It raises doubts around management's decision-making and assessment of processes and events. It can push commercialization time frames back up to 3 years as seen in some of our peers where another study or more data may need to be gathered before a resubmission can take place. And clinical trial designs and endpoints around the quality of data may suit one region, which brings in revenue, but not always both revenues -- both regions to bring in revenue across the globe. And this can really affect the total revenue pie that's available from the advancement and the approval. Our people are really critical to the process. And in plotting the path forward, we're really confident that they'll be able to obtain the right outcome around our clinical programs. In turning specifically to our clinical and non-clinical expenditure, the expansion of our CUV105 expenditures was somewhat offset by the orderly wind down of some of our earlier phase programs. We've reallocated and focused our resources towards our later stage and strategically significant programs aimed at achieving the nearest-term commercial results and prospects we can. Preparation for CUV107 has already commenced and is well underway, and we'll start to see those expenditures flow through in the second half of the year also. Commercial distribution, if we look at that area, that was up 42%, but this is predominantly off the back of increased volumes of shipments, particularly in Europe, as I touched on before. So it's all increased proportionately. There has been some temporary one-off costs that have been associated with some transitions that we've made in our supply chain to some of our warehouse providers to ensure the long-term stability of that supply chain as well as being able to scale with us for the future. The other area that is somewhat affecting the commercial distribution area is also some of our regulatory fees. Previously we used to sit under an SME discounted scheme in some of those regions for the FDA and EMA annual fees. And now that our revenues have increased to the point that they are, we're no longer eligible for some of those discounts, so we're having to pay full annual service fees now to those organizations, which is also increasing the expenditure in that area. The next area to touch on is really finance, corporate, and legal. Now this did increase proportionately from the prior year to up 47%. And really, this is the direct cost of a lot of it is being our ADR program uplift from Level 1 to Level 2 that I'm sure you're all aware of as we uplift that program for the U.S. to list on NASDAQ. There's been a substantial amount of work undertaken across that area by the finance team, but also in conjunction with our accountants, auditors and legal firms, both here in Australia and in the U.S. And this process we had to go through undertook a 3-year reaudit of all of our financials into U.S. GAAP -- converted into U.S. GAAP financial presentation, and then that was submitted to the SEC for review. Our other expenses, that's up 191%, and it's predominantly driven by the increase in our R&D programs and all the consumable materials that we use within those programs, whether it be ACTH, PRENUMBRA or NEURACTHEL, any of those developments. Our non-cash expenditure was down for the period. This is usually a change in our inventories in our balance sheet differences from period to period, that's really what reflects quite a bit of that expenditure. This period, that's a lower number than it was previously because we've actually increased our manufacturing during the period, so therefore, there hasn't been as low a drop in our inventories. It stayed more on par. Our share-based payments have also been much lower this period than in previous years, and we recently changed our share plan at the start of 2025, which meant the expenditures will now appear differently, but also it's now a 1-year plan instead of a 3-year plan. Now I've spoken fairly at length around all of the expansionary activities that we're undertaking and some of the critical advancements to our program. But this expanding expenditure should really be seen as an investment in the organization rather than just being pure expenditure. So from a financial perspective, it does take time to build up these resources internally, but it is cheaper than outsourcing to a CRO. CROs can add 25% or more costs to the bottom lines of a clinical trial program. But by having that skill and expertise in-house, it's critically important for us to maintain that control and oversight of the program. We've got Emilie Rodenburger on the call, who's our Director of Global Clinical Affairs. Emilie, in speaking around our expansionary activities and what's been undertaken, I guess, would you be able to provide some insight into why that was necessary? And what are the specific advantages of doing them in-house? Emilie Rodenburger: Yes, absolutely, Peter. I can give some additional context to the numbers. So first of all, good morning, good afternoon, good evening, everyone. It's good to be here. In my capacity as Director of Clinical Affairs, I really think more on the deliverable and how to achieve them, but it certainly ultimately impacts the numbers we report. So clinical expansionary activities are twofold. It's talent growth and building the infrastructure into which the talents operate. As Peter mentioned, the company has taken a conscious decision to build our capabilities in-house, which is not the norm in our industry. Where most are relying on outsourcing their studies, we have chosen not to rely on these models and not to work with CROs. It increases cost and can result in loss of control and oversight over studies and data. In order to deliver the CUV105 study, we had to invest in new talent and these professionals will be retained through the CUV107 and beyond. Currently, the clinical affair department that I lead is the largest department in the company spread across U.K. and U.S. with a great range of expertise, operations, data science with data management and statistics, and medical affairs and clinical quality. In addition to bringing new talents in, we have also trained and upskilled existing talent. So building and retaining the expertise in-house. And again, I repeat what Peter said, it's really critical for the health of our business. In terms of infrastructure, it's really the processes and the systems, and we've also been investing in this. This investment will continue further for us to be able to manage a significant data set that are coming from the vitiligo studies and deliver efficiently on the studies. So when we build in-house, we both supporting the present and investing for the future. I mentioned the talents, the expertise, the ownership, processes and systems. They can be seen as a platform assets that is transferable to any studies and programs that we will be conducting in the future. So in a way, we're building a CRO in-house. Peter Vaughan: Excellent. Thank you, Emilie. In turning to our balance sheet, Malcolm. If we look at our balance sheet, it keeps going year-by-year from strength to strength. As I touched on, our cash reserves increased by $9 million to just under $233 million, and it's the highest cash balance we've had in the company's history. Our net assets have also increased by $8.2 million to just under $250 million, which again is the strongest point in the company's history. And we remain debt-free for the 21st consecutive year with no equity dilution since my March of 2016. A strong balance sheet with positive net cash flows is really a strategic priority for CLINUVEL as it enables us to see clinical programs through to commercialization without any additional funding required. It also provides resilience for any unforeseen events or economic uncertainty, particularly in the current geopolitical times. It provides flexibility to ensure expansionary opportunities, acquisitions or investments that align with our objectives, can be taken advantage of, which many peers in the industry aren't able to consider without having to raise additional capital. It also enables strategic objectives to be delivered such as the expansion of our Singapore research and development facility, which we've slated for over the next 5 years to provide vertical integration of ongoing peptide and formula development and innovation. A number of our peers have recently announced capital raisings, some as much as at a 45% discount to market to fund these sorts of activities that we can take on and that we can develop without having to raise any further capital. Some of these peers are raising for clinical program developments, for raw material supplier scale-up or for product rollout into a new jurisdiction. As already touched on, CUV is funded for our full clinical trial program for vitiligo. Malcolm Bull: Thanks, Peter. I mean that was a comprehensive overview, I must say, but I'd like now to move to strategy. I mention and shared with you that a number of institutions, particularly in the U.S. have asked us why CLINUVEL stands out in its strategy. They even ask, are we a bit dogmatic and a bit rigid in our strategic focus and execution. Philippe, can you comment on this? Philippe Wolgen: Well, I'll pick up the 2 words: dogmatic and rigid. The contrary, we've built in the flexibility and optionality in this business model, and that allows us to navigate markets and cycles in pharma. But the objectives are really clear, they're fivefold. We need to expand the EPP commercial market, advance the vitiligo programs as a focal point of the company, advance the NEURACTHEL dossier, which is a large opportunity in the use of ACTH in a number of indications, advanced PhotoCosmetics, and bring in-house the manufacturing of the new and next formulation. So in any given business model, there are a number of options. We can serially raise funds like most of our peers. We can change the business strategy altogether, step away from melanocortin and do something totally different. We can self-fund the program starting gradually as we've done. And the fourth option is, we can cease operations and say, ladies and gentlemen, it's too difficult, it's too hard, and let's give the cash back to the shareholders. And we haven't chosen that because we believe that there are a number of opportunities that we worked on for decades that are worthwhile pursuing. And there are a number of underlying assumptions that the Board and management take into account that we are privy to and no one else is. And first of all is, are we conducting an honest genuine business, no one indicated in further activities. Do we keep the teams in check? Do we have technologies that are safe and work? And third of all, do the patients -- do the investors have the patience to see out the strategies? But the most important underlying assumption is whether there is perpetual funds available for this company. And we've come to the conclusion that this model is very appropriate for the way we need to reach the vitiligo and the ACTH markets. So in summary, Malcolm, we needed to accumulate these funds to execute a program, which we all believe will lead to a sustainable multi-dollar a billion-dollar enterprise. But we also need to be conscious of the realistic risks that evolve around clinical, regulatory and execution. And for that, you need to have optionality and optionality is cash. And that will eventually lead to a diversified company. So that's how the company stands out. Malcolm Bull: Thanks, Philippe. So moving to another area where we've had numerous questions, and this is on the readout of vitiligo. And Emilie, it's good to have you here, and this is where you come in. What can you tell us about the regulatory process and path to market on vitiligo? Emilie Rodenburger: Thank you, Malcolm. I will address your question by providing a number of specific observations that support the regulatory process and path to market for SCENESSE in vitiligo. Some of these observations are unique to SCENESSE and some you might also be familiar with, but allow me to go through them. The first one is SCENESSE is already on the market for another indication, EPP. It's a product for which we have accumulated 2.5 decades of safety data and a safety profile that has been maintained over time. The regulatory agencies know the product well from the Annual Report or regulatory and pharmacovigilance teams are and have submitted for 1 decade now. In regards to vitiligo, vitiligo is a condition with visible symptomatology and the treatment effect -- skip that one. And the treatment effect that we desire, repigmentation, is visible. So from the cases we received and cases published by physician, one can gain much confidence that the effect of the treatment are visible. From an operational point of view, the trials can't be blinded. The work -- the drug either works or not and physician and patient can see the effect very quickly, the visible efficacy. So what I'm trying to say here is that in vitiligo, the photographs do not lie. And part of the analysis is to have centrally assessed photographs up to 32 per patient, which is up to 6,000 assessments. Very importantly as well is the patient experience and how they appreciate the return of their pigments. JAK inhibitors, some currently in Phase III, one recently submitted to the EMA and FDA for marketing approval, they take a long time to work, thereby suppressing the immune system. And last but not least, we are living in a very dynamic regulatory landscape where the concept of generating clinical evidence is evolving. EMA speaks about totality of evidence for drug approval, while as I'm sure you've seen the FDA recently announced that single trial will now be the default for drug approval. So what I really wanted to convey by all of this is that, these are positive considerations for SCENESSE to come to market for vitiligo, as we are continuing on the same trajectory. I can't tell you exactly when. But for sure, vitiligo is the natural home for afamelanotide, a pigment activating peptide, which is an analog of hormone that's naturally produced by our own body. Thanks, Malcolm. Malcolm Bull: Thanks, Emilie. So before we go to analyst questions, all stakeholders want to know what's next. Philippe, can you summarize that for us, please? Philippe Wolgen: Sure. So there are a number of catalysts that we're approaching over the next 2 years. The most immediate ones are the top line results from vitiligo CUV105 in the second half of 2026, the start of the vitiligo CUV107 study, and the preclinical results on the peptide formulation in the latter half of this year and the listing of the ADRs on NASDAQ that we await the SEC answers for. So the catalyst will naturally change the complexion of the company, and this is exciting, and we've navigated the waters over time to arrive at this point. And so we all need to get patients and see what the impacts are from these results. So there's much to look forward to, yes. Malcolm Bull: Indeed. Thank you, Philippe. So let's go to analyst questions. But thank you, Peter, Emilie, Linda, Philippe for the discussion. Some good insightful comments there, and I hope those on the line also have got some insights and appreciate that. The first analyst to ask a question is Dr. David Stanton of Jefferies. Hello, David, are you there? David Stanton: I am. Can you hear me? Malcolm Bull: Yes, David. Please go ahead. David Stanton: So my question is, do you have to wait until you have the results of CUV105 -- sorry, CUV105 and CUV107 before you file for approval in vitiligo? And in which geography would you file in first and why, please? Emilie Rodenburger: I'm going to take this question, Malcolm. Malcolm Bull: Okay. Emilie Rodenburger: It's a -- yes, it's a good follow-up and from what I was mentioning a couple of minutes ago. So thank you, Dr. Stanton for this question, question that's relevant and often asked. Our intention is to complete CUV105 and CUV107 before going to the EMA and FDA. And the recent announcement on single trial for drug approval from the FDA doesn't change this strategy. So based on the ongoing interactions we have with both agencies, EMA and FDA on the specificity of our work that we are conducting, we will need the CUV107 study to complete our program. For the second part of the question, we opt to file with the EMA first and then FDA second. And this really -- this strategy really much follows the approach we had with EPP back in 2012. I want to say more. I think it's important for me when we speak about regulatory agencies, I want to give a bit more color. An agency, as you know, it's a conglomerate of thousands of people, so at the EMA in Amsterdam, there are more than 1,000 permanent staff and more than 4,000 part-timers and experts. We are dealing with 2 European reporters that are representing the National Competent Authorities, which are Lithuania and Poland, with a scientific adviser representing the Scientific Advice Working Party, a very knowledgeable German physician. At the FDA in Silver Spring, there are more than 8,000 permanent staff and another 6,000 elsewhere consultant part-timers. We interact with the Division of Dermatology and Dentistry now led by Dr. Jill Lindstrom in the Center of Drug Evaluation and Research. And we have a new Commissioner, as you know, Dr. Martin Makary, who has reshuffled the agency, bringing new procedures and new approach. In our EMA reporters, we find willing listeners and may I say more supportive of our regulatory and market strategy. We are the only company focusing on patients of darker skin color and this point resonated very well in our recent discussions with the EMA. The approach we have on vitiligo is so novel that we deem the European regulators to be the first protocol, and then it will make it easier for the FDA to assess similar data. Malcolm Bull: Okay. Thanks, Emilie. The next question is for -- from Dr. Melissa Benson of Barrenjoey. Hi, Melissa. Melissa Benson: So I had a question in regards to the ACTH program, so NEURACTHEL. Just to help us understand, you've mentioned there later this year, you expect to file with EMA. A similar question to the lining of vitiligo, but understand like how does filing with Europe first and then the FDA, how does that kind of expedite the U.S. opportunity? And then secondly, any color you can kind of provide on the differences, I guess, between the commercial landscape for a product like this in Europe versus the U.S.? Because I understand one market is quite a synthetic peptide-based and the other is a natural hormone based. So that would be great. Malcolm Bull: Philippe, for you. Philippe Wolgen: Thanks, Melissa. Yes, we've talked about this in the past. NEURACTHEL will first be filed in Europe through the route of mutual recognition. And as you know, the analogues of ACTH, in our case, NEURACTHEL are used by many institutions, both as a therapeutic and as a diagnostic. And so we opted to go to Europe first and U.S. second. Once you've filed through the mutual recognition procedure, you can file shortly in the U.S. after. ACTH products are mostly distributed to specialty centers in Europe. They prescribed by internal specialists, endocrinologists. And we believe that it's possible to make the first inroads directly to these centers in Europe. Reimbursement in Europe is albeit lower than in the U.S. So both markets are sizable and are attractive, but we have experience in leveraging the European regulators and the resonance there is high. So it's a slightly different strategy than most of our competitors, but so far it worked. Malcolm Bull: Okay. Thanks, Philippe. We've just lost you on camera. So if you can try and get back to us, we'd like to continue to see you. Let's move to Dr. Thomas Schiessle of Parmantier in Germany. Thomas, you're a long way away, but let's hope you're connected. Thomas Schiessle: I would like to ask a question, what does the recent FDA decision on Disc Medicine's Bitopertin mean for your business and growth outlook, please? Malcolm Bull: Okay. Peter? Peter Vaughan: Sure. Yes. No problem. I can answer that one. So I guess thank you doctor for your question. From a finance perspective, I'm happy to answer that. So I see it from a way of increasing our monopoly in the market with the other player, obviously, not being able to enter that market yet as we're really the only approved drug treatment for EPP with a proven safety and efficacy record in the U.S. So it could take them, I would estimate about 1 to 2 years to come back or even longer to enter the European market. So it could be quite an extended period of time that we still maintain a monopoly within that market. So I guess that's how I see it, doctor. Malcolm Bull: I'll come back to you, Thomas, to ask another question because we've covered that fairly succinctly. But I'd like Linda to make some comment because some shareholders have asked what's our reaction to the FDA's decision on this. So can you make some comment on that, please, Linda? Linda Teng: Sure. First, can you hear me okay? Malcolm Bull: Yes. Linda Teng: Okay. Right. So first, I definitely can comment. However, I do prefer not to comment on the setbacks of other companies or their management. And I will just leave that to the external observers. And while competitors may have made critical remarks about our work, I don't consider it to be elegant to respond in kind. However, what I will say is that it is not easy to get a regulatory approval in one go. Our team have done this by working thoroughly and diligently. And at the end of the day, it is really all about the patients, making sure that the drug is safe and that it shows significant clinical improvement in their quality of life. And the FDA really raised questions regarding the bioavailability and efficacy of Bitopertin, which, by the way, I'm sure most of you already know. This was actually originally developed for an antipsychotic drug for schizophrenia before it was abandoned by Roche. And so for EPP, the company had then had to increase the dose from 20 milligrams to 60 milligrams to achieve a statistically significant reduction on the biomarker of the protoporphyrin level. But higher doses also mean that there's going to be extra stress on the patient's liver or kidneys. And this is very concerning, especially for EPP patients because they are already at a higher risk of liver disease. And on top of that, oral pill higher dose also increased side effects, complications and drug-drug interactions with other medications. So as the pharmacist, I really cannot see how this is a benefit for the EPP patients. And the other point that the FDA also raised, a very valid concern, was its primary endpoint. And this was based on the change in the biomarker protoporphyrin IX. So in case -- I don't know how much you guys know about biomarkers. Well, biomarkers are a very helpful tool for scientists, for physicians to really understand what's happening in our body, but it does not always reflect real-world meaningful clinical benefit. And an example that comes to mind is there was a drug that was received an accelerated FDA approval back in 2016 for an advanced soft tissue sarcoma, and this was approved based on a biomarker endpoint. But once they came to real life, the real-world clinical outcomes did not show any survival benefit. And so at the end of the day, the FDA had to pull the approval soon after. And from a bigger picture pharmacological perspective, it also seems very unusual to me to prescribe a lifelong oral pill that affects the central nervous system to lower the protoporphyrin IX marker -- biomarker levels. So I guess, I suppose, we'll really have to wait to see the results of their future trials to see whether this drug can really show both the efficacy and the meaningful clinical benefits for the patients. Malcolm Bull: Right. Very insightful. Coming back to you, Thomas, do you have a follow-up -- a quick follow-up question? Thomas Schiessle: Yes, indeed. Thank you, Malcolm. Absolutely another issue. The FDA -- no, no, no, no. That's a second one. What impact does NASDAQ listing have on CLINUVEL's future regular reporting concerning frequency and content, please? Malcolm Bull: Okay. Peter, for you. Peter Vaughan: Sure. I can answer that one, Malcolm. So we'll be listing on the NASDAQ or uplisting our ADR program and listing over there as a foreign private issuer. So what that basically means is that we'll continue to lodge half year and full year financials. In the U.S., we'll be reporting in U.S. dollars and also in U.S. GAAP accounting. But I guess, in short, Thomas, it's -- it will be exactly the same as what we currently do every 6 months and then every 12 months for the half year in the annual reporting. So no real change to the frequency. Malcolm Bull: Thanks for dialing in Thomas. I just mentioned that several shareholders have asked for an update on our listing application. So Peter, give us an update, please. Peter Vaughan: Sure. No problem. So we lodged our initial filing, which was a 20-F document to the SEC in mid-December or 18th of December to be specific. And we did foreshadow that there may be some delay in the turnaround time because it was also -- it was Christmas period, but also the government was -- had come out of shutdown mode and the SEC that obviously affected them. So they needed to catch up and clear the backload of filings and other documentation they had. But we have had some further correspondence back and forward with the SEC, and we're refiling our response to them. So we're hoping to be able to receive clearance from them in the very near future and then move quickly to implement the ADR program uplift. So watch this space. Malcolm Bull: Okay. We sure will. Let's now call on Sarah Mann from Moelis. Sarah, please. Sarah Mann: My first question is just on the EPP market. Could you provide us any details around what percent of your patients are covered under Medicaid? And just curious how you anticipate some of the cuts to Medicaid potentially impacting your ability to reach those patients? Malcolm Bull: Linda, for you. Linda Teng: Sure. I'll take this one. Sarah, thank you for your question. So we're actually seeing less than 5% of our U.S. EPP patients on Medicaid benefits. So in short, we don't really have a noticeable impact. And in fact, like you mentioned the One Big Beautiful Bill, it actually broadens the orphan drug exclusion. It now allows orphan drugs to -- with more than one rare diseases to remain exempt from Medicare price negotiations and potentially so far looking like it's indefinite unless the drug is later approved for a non-orphan indication. So one can theoretically say that the TAM would increase through curing the federal programs. But given that most of our patients are commercial insurance patients, we don't really see a worthwhile impact in the U.S. market at this time. Malcolm Bull: Okay. Sarah, a follow-up question. Sarah Mann: Just on a separate topic. Just curious if you could provide more color around the cosmeceutical strategy. Obviously, it's been in market for a couple of years in, I suppose, prototyping or early stage testing. Yes, just curious how you expect it to ramp up this year and any learnings that you've had over the past couple of years as well, please? Malcolm Bull: Philippe, can I call on you? Philippe Wolgen: Sure. First of all, good to see you back, Sarah. It's been a long time. On numerous occasions, we mentioned that the PhotoCosmetics are in development, and they accompany a complement our pharmaceutical program. That's quite an unusual strategy to have both pharmaceuticals and the PhotoCosmetic franchise, not many pharmaceutical companies do that. And so the first was the P line, the photoprotection lines, providing polychromatic photoprotection in population of the highest risk and extreme conditions. And then that will be followed by the M line, the melanocortin containing peptides. And they intend to provide assisted DNA repair and self-bronzing or the so-called sunless tanning. And in all these properties, the endeavors goes really to launch products with a substantial marketing effort. And that needs to provide visibility to our products. And we started to gradually increase our marketing spending online to focus groups, advocates, target populations and channels. And so we are in the prelaunch phase where we get feedback on these products. But ideally -- and nothing is ideal, but that was the anticipation and the model, when the vitiligo trials start to yield results, we then see a parallel large-scale effort to promote the M lines, because the concept was that the medical tanning that you see in vitiligo follows a parallel path to the PhotoCosmetic self-bronzing properties. So in short, we advance, but we're not really ready to launch these products, not from a scientific point of view and not from a marketing. But what we aim to see is lotions and serums applied a number of times a day that assist the self-bronzing in the epidermis. And we're not quite there yet, but we're advancing. The other part is in order to make this a commercial success, the company needs to differentiate itself in all aspects. The retail experience needs to be changed or disrupted, if you wish. The primary packaging, the secondary packaging, the way we distribute it, the retail store concept and all that at a reasonable large scale. But thereby we are conscious of the spending and the budgets we put aside for this exercise while keeping the company profitable. So it's a balancing act that we do need to navigate all the obstacles, but to decrease the risk of failure and that we do that in a very gradual and deliberate manner. Malcolm Bull: Okay. So let's move to Madeleine Williams of Canaccord. Please, Madeleine. Madeleine Williams: So I think, firstly, I was just wanting to know, you've got a few things happening at the moment. Obviously, last year, Europe allowed the increased number of doses and then also in the U.S. as the Disc Medicine trial completes this year, I assume there's sort of going to be more patients available. Just thinking about how you're thinking about the growth in those jurisdictions and sort of the splits going forward. Malcolm Bull: Well, Peter, do you want to comment initially on... Peter Vaughan: For me? Yes, sure. No problem, I can comment on that. So I would say that there's a segment revenue note that we've included within the half year report that does show the breakdown. But I guess a quick summary would be the U.S. revenues have increased year-on-year. And this period, we saw a rise more predominantly in the European volumes, partly spurred on by some patients taking up that increase from 4 implants being a maximum during the year up to 6 that was announced in September 2025. I guess at the moment, the current revenue split is about 53% U.S., 47% for the rest of the world. So that kind of -- that's the insight that I can provide there. I guess on the peptides side, that's probably more Philippe perhaps might be able to answer that one. Malcolm Bull: No, we'll park that. I think we'll move on to Mark Pachacz, because I think he's got to leave pretty soon. So Mark, if you're still there, can you ask your question? Stella Mariss: Malcolm, looks like Mark is no longer here. Malcolm Bull: Okay. That's all right. Well, fortunately, we have another analyst, Thomas -- Thomas Wakim of Bell Potter. Do you want to ask a question please, Thomas? Thomas Wakim: Yes. It's a bit of a follow-on from the previous one actually. So in that revenue segment, the split between U.S. and non-U.S. sales for the period just gone, where we saw a decline in the U.S. and a significant increase outside the U.S. So can you just kind of explain in a bit more detail what those factors were that were at play there leading to that? And how does that look moving forward? Peter Vaughan: Sure. So there was some effect on the U.S. side from the government shutdown. So the government shutdown met delays in Medicare processing as well as also the processing of reimbursements. So in some instances, some of the smaller centers didn't want that longer-term delay on their payment cycles and things like that. So that did cause some headwind there for them. And then we also passed on a CPI increase in 2025 and some of those have caused some negative reimbursement pressure on some of the centers. But overall, we anticipate that the U.S. is still stable and still growing across that, and that's where we've continued increasing the number of centers across North America. So we're seeing new centers come online and start to bring patients to the floor as well. So there is that difference between prior year and this year, but I think it's really explained by the U.S. government shutdown predominantly. Malcolm Bull: Okay, Peter, thanks. And as I was talking with Madeleine before and also with Mark Pachacz, there was a fair bit of interest in peptides. So let's come back to peptides and ask Philippe to comment on the potential of that new area of development. Philippe Wolgen: Well, we spoke for a long time in public about the skill set of the company and how it was expanding concentrically. So we started off as a company focused on clinical affairs. We understood the melanocortin peptides really well. Then we focused on the delivery methods, the best way to deliver and administer a drug into a human body. And from that, we built our Singapore labs and progressed fundamental research into new formulations. We call it formulations of the next generation using liquid injectable peptide platforms. And so naturally, once we mastered these technologies, it opened up the realm of fantasies of what other peptides could you use to deliver a product in a sustained or controlled manner. And that's where we are. So you're going to expect much more from that team and our activities in Singapore. Malcolm Bull: Thanks, Philippe. Very exciting. It's about time that we wrap up, but I didn't want to conclude without addressing a couple of shareholders who asked me about the company's dividend policy and whether we have one, and I can say we certainly do. It's available on the CUV website, but I can tell you that it is the Board's intention to pay a dividend subject to the sufficiency of our funds and the operating and investment needs of the business and indeed future growth and needs to fund that growth. So the Board will determine that, and you can investigate, as I say, the dividend policy online. So I want to say thank you to all the analysts online for asking their questions. Peter, Emilie, Linda, Philippe for their contributions, good insights and all attendees, thank you very much. A link to the webinar will be posted to the CLINUVEL News website as soon as possible for other stakeholders to review. So I'll now close the webinar, wishing you all good health and fortune. Thank you.
Operator: Good morning, ladies and gentlemen, and welcome to the Teleflex Incorporated Year End 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please note that this conference call is being recorded and will be available on the company's website for replay shortly. The press release and slides to accompany this call are available on our website at teleflex.com. In addition, we have provided supplemental non-GAAP income statement information for continuing operations for 2025, which can be found on our Investor Relations website. Those wishing to access the replay can refer to our press release from this morning for details. I will now turn the call over to Lawrence Keusch, Vice President of Investor Relations and Strategy Development. Lawrence Keusch: Good morning, everyone, and welcome to the Teleflex Incorporated Year End 2025 Earnings Conference Call. Participating on today's call are Stuart Randall, Interim President and Chief Executive Officer, and John R. Deren, Executive Vice President and Chief Financial Officer. Stu and John will provide prepared remarks, and then we will open the call to Q&A. Before we begin, I would like to remind you that some of the matters discussed in the conference call will contain forward-looking statements regarding future events as outlined in the slides posted to the Investor Relations section of the Teleflex website. We wish to caution you that such statements are, in fact, forward-looking in nature and are subject to risks and uncertainties factors referenced in our press release today, including our Form 10-K, as well as our filings with the SEC, which can be accessed on our website. Actual events or results may differ materially. I will now turn the call over to Stu for his remarks. Stu? Stuart Randall: As a reminder, the board made its decision to transition the Chief Executive Officer position following the announced sale of our acute care interventional urology and OEM businesses, and as Teleflex enters its next phase as a more focused, higher growth organization. We remain grateful for Liam J. Kelly’s impactful leadership and the significant contributions he made during his tenure. The board is actively conducting a CEO search with the support of Spencer Stuart, a leading executive search firm who is evaluating external candidates. While we are moving with urgency, we are taking a disciplined and thorough approach to ensure we identify the right leader with the experience and capabilities to guide Teleflex in the future, and ensuring continuity across the organization. At the same time, it is critical that we maintain momentum across our strategic priorities during this transition period. As interim CEO, my immediate focus is on execution. In January, I stepped into the role of interim CEO, and I bring more than three decades of experience in the medical device and health care industry. By way of background, I have had the privilege of serving on Teleflex’s board since 2009, working closely with our leadership team to keep the business moving forward aligned with our strategic objectives. With that context, let me expand on the key elements of our strategy. In December, we signed definitive agreements to sell the acute care, interventional urology, and OEM businesses to two separate buyers. The strategic divestitures will result in total cash proceeds of $2.03 billion with net after-tax proceeds of approximately $1.8 billion. As an update, we are working through the regulatory and other conditions to closing and continue to expect the sales to close in 2026. To be clear, our value creation strategy is unchanged. And we intend to use these net proceeds to return significant capital to shareholders through our previously announced share repurchase authorization of up to $1.0 billion while also reducing debt to enhance our financial flexibility and support future growth and value creation. These planned actions signal our commitment to disciplined capital allocation and shareholder returns. We will continue to evaluate additional opportunities to return capital to shareholders as appropriate, consistent with our focus on long-term value creation. We are positioning Teleflex as a medical technologies leader with increased flexibility to invest in innovation, and compete in these priority markets. Specifically, product innovation will be a strategic priority for investment going forward, and we expect R&D expense for RemainCo to represent approximately 8% of sales compared to approximately 5% of revenue that Teleflex spent historically. The creation of Teleflex RemainCo, which represents our continuing operations, resulted in a more focused and optimized portfolio centered on highly complementary businesses: Vascular, which now includes the emergency medicine portfolio; Interventional, which no longer includes the intra-aortic balloon pump portfolio; and Surgical. A couple of comments regarding our 2026 adjusted EPS guidance. For 2026, our adjusted EPS guidance is in the range of $6.25 to $6.55. However, it is important to note that there are a number of assumptions included in this guidance that will have significant impacts on our EPS as we move through 2026 and into 2027. First, this guidance range includes the full-year negative impact of stranded costs related to our strategic divestitures, which we estimate to be $90 million. Stranded costs are necessary to support both continuing and discontinued operations that will come into effect on the closing of the strategic divestitures. Second, to fully offset the aforementioned stranded costs, we expect the transition services (TS) and manufacturing services (MS) agreements to fully offset stranded costs on an annualized basis from the recognition of TS and MS agreements during a transitionary period of time. Furthermore, we are taking action on reducing expenses and have announced an initial restructuring plan to mitigate approximately $50 million of cost to right-size the organization post divestitures. Finally, our 2026 adjusted EPS guidance does not include the anticipated positive impact from our announced plans to repurchase $1.0 billion of our common stock and repayment of debt with remaining proceeds from the strategic divestitures, both of which we intend to execute following the closings of the transactions. We anticipate these actions will result in a meaningfully lower share count and significantly reduced interest expense. Although we have not included the benefits of these actions in our 2026 adjusted EPS guidance, we continue to anticipate closing of the strategic divestitures in 2026. Taken together, we expect these factors will contribute to significantly higher adjusted EPS in 2027 and beyond. Now moving to the agenda for the remainder of this morning's call. First, we will discuss our continuing operations results, then conclude with our financial guidance for 2026. Before I begin, please note that we have reclassified the assets associated with our pending strategic divestitures of acute care, interventional urology, and OEM businesses as discontinued operations to reflect the strategy to separate the company and provide a clear view of the ongoing performance of RemainCo, and in accordance with accounting guidance requirements. I will limit my comments to the continuing operations for 2025 inclusive of the acquisition of Biotronik’s vascular intervention business. All growth rates that I refer to are on a year-over-year adjusted constant currency basis unless otherwise noted. Pro forma adjusted constant currency growth excludes the Italian payback measure in 2025 of $9 million, and the impact of approximately $14 million in RemainCo product revenue by global product category that was discontinued in 2025 due to a strategic realignment. Pro forma adjusted constant currency growth guidance includes revenue generated by the acquired vascular intervention business for the prior year period. Now let's move to the second half 2025 continuing operations revenue by global product category. Commentary on global product category growth from continuing operations for 2025 will also be on a year-over-year pro forma adjusted constant currency basis unless otherwise noted. Starting with Vascular. Revenue increased 2.4% year over year to $472.7 million, an increase of 8.1% was primarily driven by growth in our central access, hemostatic, and atomization products, in part due to military surge orders that did not repeat in 2025. Moving to Interventional, the strong performance for the second half was driven by a broad interventional portfolio. For 2025, reported vascular intervention revenues were $202 million. In our Surgical business, revenue was $219.3 million, an increase of 3.2% reflecting impact of volume-based procurement in China, offset by a tough comparison from the prior year period. Underlying trends in our core surgical franchise continued to be solid with strong double-digit growth from the majority of our franchises. This completes my comments on the second half revenue performance. Now I would like to turn the call over to John for a more detailed review of our financial results. John? John R. Deren: Thanks, Stu, and good morning. All results that I speak to will be on a continuing operations basis for 2025. Due to the reclassification to discontinued operations, historic continuing operations reflect the impact of stranded costs in all periods presented. Given Stu's previous discussion of revenue, I will begin with margins. For 2025, adjusted gross margin was 63.7%. A 200 basis point decrease year over year was primarily due to the adverse impact of tariffs, the addition of the vascular intervention acquisition, which has a slightly lower gross margin than the corporate average, higher operating expenses associated with the acquisition of the vascular intervention business, and a negative impact of foreign exchange rates. Adjusted net interest expense totaled $93.6 million for 2025 as compared to $77.4 million in the prior year. The year-over-year increase is primarily due to the borrowings used to finance the vascular intervention acquisition, and to a lesser extent, increased logistics and distribution costs and foreign exchange. Full year adjusted operating margin was 22.7%. For 2025, our adjusted tax rate was 12.6% compared to 13.4% in the prior year. The year-over-year decrease is primarily due to the beneficial tax provisions included in the recently passed One Big Beautiful Bill Act, including the ability to deduct U.S.-based R&D expenses. At the bottom line, 2025 adjusted earnings per share was $6.98, representing an 8.7% increase year over year. The increase is primarily due to higher revenue and adjusted operating income, including the impact of the vascular intervention acquisition, a lower tax rate and share count, partially offset by negative impact of interest expense and foreign exchange. At the end of the fourth quarter, our cash, cash equivalents and restricted cash equivalents balance was $402.7 million as compared to $285.3 million as of year end 2024. As we have indicated, 2026 results include a number of transient factors related to our strategic divestitures that will impact our near-term results, which we expect will be mitigated with the close of both transactions, ultimately building a clearer financial profile with significant improvements in margins, interest expense, and adjusted earnings per share. With that context, I will go over items that will impact our 2026 results. First, we will incur approximately $90 million of stranded costs associated with the classification to discontinued operations throughout 2026. Once the strategic divestitures close, which is still expected to be in 2026, transition service and manufacturing service agreements are estimated to fully offset the stranded costs on an annualized basis. Of note, until the divestitures close, cash generated by the discontinued operations will accrue to RemainCo, thereby reducing the economic impact on the company from the stranded costs until fully offset by the transition service and manufacturing service agreements. Accordingly, our initial 2026 guidance reflects the fully burdened cost structure for RemainCo inclusive of approximately $90 million in stranded costs. Second, the exact timing of the closings of the strategic divestitures will pace our ability to deploy capital during 2026. As we receive these proceeds, we will execute on our capital deployment initiatives. As a reminder, we expect to receive net proceeds of approximately $1.8 billion after tax from the divestitures. We remain committed to returning significant capital to shareholders through our previously announced $1.0 billion share repurchase authorization and our intention to repay debt with the remaining proceeds from the strategic divestitures. As we look forward to 2027 and beyond, we anticipate these capital deployment actions, in combination with the impact of the transition service arrangements and manufacturing service arrangements and our efforts to further mitigate stranded costs and right-size the organization, will result in a significant increase in our adjusted EPS. Moving to a review of our 2026 guidance. Please note that our 2026 guidance is provided on a continuing operations basis and excludes the acute care, interventional urology, and OEM businesses. For year-over-year comparison purposes, 2026 guidance is based on a pro forma adjusted constant currency growth that excludes the Italian payback measure in 2025 of $9 million, the impact of foreign exchange of $14 million, and the impact of approximately $14 million in product revenue that was discontinued in 2025 due to a strategic realignment. Pro forma adjusted constant currency growth guidance for 2026 includes vascular intervention revenue. We expect pro forma adjusted constant currency revenue growth for 2026 to be in the range of 4.5% to 5.5%. To put the 2026 growth outlook into context, continuing operations delivered 4.7% pro forma adjusted constant currency revenue growth in 2025. This performance establishes a solid foundation for our future mid-single-digit revenue growth profile, and we remain confident in our ability to achieve this goal as we move forward. Turning to adjusted earnings per share. We expect the range of $6.25 to $6.55 in 2026. Again, this reflects a set of assumptions and excludes a number of factors as already discussed. Additionally, for modeling purposes, you should consider the following. We expect 2026 adjusted operating margin to be approximately 19%, which reflects the full impact of approximately $90 million in stranded costs associated with the separation activities and no offsetting benefit from transition service and manufacturing service agreements during 2026. In addition, I would also note that our 2026 operating margin is inclusive of R&D investment of approximately 8% of sales. Of note, when taking into account the positive impact of transition service arrangements and manufacturing service arrangements, we estimate that our underlying steady-state adjusted operating margin will be approximately 23%, which is 400 bps above our fully burdened adjusted operating margin guidance for 2026. Once the strategic divestitures close, we expect at least $90 million on an annualized basis from the recognition of transition service and manufacturing service agreements to fully offset stranded costs, which will be netted in our expenses. As a first step in the process to mitigate the approximately $90 million in stranded costs, a restructuring, as disclosed in today's press release, has been approved by our board to eliminate a portion of these stranded costs, streamline global operations, and improve our long-term cost structure, primarily through workforce reductions and capital asset rationalization reducing costs and increasing operational efficiency. These actions are expected to be substantially completed by mid-2028. We expect the restructuring to result in approximately $50 million in annual pretax savings. Looking forward, we see opportunities over the next several years to improve adjusted operating margin through leverage from revenue growth and other cost saving initiatives above our steady-state margin profile of approximately 23%. Moving to assumptions below the line. Net interest expense is expected to approximate $105 million for the full year 2026. Our estimate reflects a refinancing of our $500 million 4 5/8 senior notes, which are due in November 2027. Finally, we are assuming a 2026 tax rate of approximately 13.5%. For shares outstanding, we are not assuming any share repurchases in 2026 guidance, implying a share count largely consistent with 2025. Nonetheless, we are committed to executing our $1.0 billion share repurchase program upon the closing of each of the strategic divestitures and will provide updates to our guidance throughout the year. That concludes my prepared remarks. I would now like to turn it back to Stu for closing commentary. Stuart Randall: Thanks, John. In closing, I will highlight our three key takeaways from the fourth quarter. First, Teleflex is in the midst of a transformation that optimizes our portfolio, creates a more focused medical technologies leader, and positions our company for meaningful value creation opportunities going forward. It is energizing to see how focused and committed our team has been to delivering for customers, patients, and shareholders. Second, RemainCo delivered strong pro forma adjusted constant currency growth of 4.7% year over year in 2025. This growth performance over 2025, which reflects the period in which we have owned the vascular intervention business, and our 2026 pro forma constant currency growth guidance of 4.5% to 5.5% are in line with our mid-single-digit growth profile and represent a strong reflection of the stable growth potential of our go-forward business. We continue to expect our two strategic divestitures to close in 2026. And we remain committed to using the estimated $1.8 billion in after-tax proceeds from the transactions to return significant capital to shareholders through a $1.0 billion share repurchase program while also reducing debt to enhance our financial flexibility and support future growth and value creation. Third, the closing of the transactions will also enable us to recognize TS and MS fees, which are expected to be at least $90 million and fully offset the stranded costs on an annualized basis. We are also actively engaged to reduce our costs with today's announced restructuring that is targeting approximately $50 million in savings. With the more streamlined portfolio and clear strategic priorities, we will be well positioned to drive durable performance and long-term value for shareholders. We expect our financial performance to improve through 2026 and more fully reap the benefits of our efforts in 2027 and beyond with meaningful increases in adjusted earnings per share. That concludes my prepared remarks. Now I would like to turn the call back to the operator for Q&A. Operator: Thank you. We will now open for questions. We ask that you limit yourself to one question and one follow-up. If you would like to ask additional questions, we invite you to add yourself to the queue again by pressing star one. Please ensure your mute function is turned off to allow your signal to reach our equipment. Our first question today comes from the line of Michael Stephen Matson with Needham & Company. Michael, please go ahead. Michael Stephen Matson: Yeah. Thanks. So just in terms of the use of proceeds from the divestitures, you have the $1,000,000,000 share repurchase authorization, and I think I heard you guys saying that you are planning to fully utilize that. Maybe you could just comment on what $1,800,000,000 is going to look like between share repurchases and debt repayment. And then just in terms of the restructuring savings, the $48,000,000 to $52,000,000 I believe the press release said. Was any of that baked into the $6.25 to $6.55 EPS guidance range? John R. Deren: Well, yeah. If you got me started already. So it is $1,000,000,000 for the share repurchase. And that other $800,000,000, we are committed to paying down debt. So the deferred draw revolver we put in place for the Biotronik acquisition is about $700,000,000, and then we will put the other $100,000,000 towards our revolver. On your restructuring question, the current restructuring has some savings in 2026 that are already baked into the guidance. And there is some nuance. We also announced another restructuring in Q4 for the Biotronik acquisition, and that is going to go towards additional post-2026. So we also have line of sight on $50,000,000 post 2026 between the two restructurings. Lawrence Keusch: Great. Thanks for the questions, Mike. And our next question comes from the line of Jayson Tyler Bedford with Raymond James. Jayson, please go ahead. Jayson Tyler Bedford: Good morning, and thank you for all the detail here. I appreciate there are a lot of moving parts, and I wanted to ask about the pro forma 4.7% growth in the second half. Do you have either a first half number or a full-year number, just trying to think apples to apples here? And then just on Surgical, you mentioned double-digit growth in most franchises. What is driving the double-digit growth, and how much of the VBP impact is left for 2026? John R. Deren: Jayson, I think we think the 4.7% is the most representative of the growth profile where we own Biotronik. I think this is an opportunity for you to model off that 4.7% along with our guidance. Lawrence Keusch: For the full year, we will not be getting into organic growth. We have put everything into the pro forma number for strength really across the portfolio. One standout has been our instrument portfolio, which is seeing strength now for many quarters. We have a refreshed instrument line there. And keep in mind, this instrument portfolio is really aimed at ear, nose, and throat procedures. Of course, ligation continues to be a good driver of growth, with the exception of China where the VBP has been hitting. So that is kind of the key drivers within Surgical. Stuart Randall: Yeah. And I would say too as we get into 2026, we have an automatic appliers that can show some nice growth, and there is some real opportunity for that growth in EMEA. Great. Operator: Thank you for the questions, Jayson. And our next question comes from the line of Bradley Bowers with Mizuho. Bradley, please go ahead. Bradley Bowers: So first one on cost. We are getting the full sales profile. Just wanted to hear where we are in the pro forma cost profile, if there are any stranded costs to speak to? John R. Deren: So first on costs, you are getting the full sales profile. On the pro forma cost profile, there are items you cannot directly attribute to the disposition but nonetheless you need to run the whole company. So that is some of the overhead burden that exists, and the accounting unfortunately does not allow you to allocate it; it makes you keep it in continuing operations. And as we said, there is $90,000,000 worth of stranded costs sitting in our P&L. We are still managing that business, and while it sits in discontinued ops, we still have the opportunity to use those cash flows. And as we have disclosed and discussed, we are looking for opportunities to fully mitigate that—in the beginning with the TSA and MSA arrangements, and then finally, through restructuring programs. It is our intention to go after that entire $90,000,000. Lawrence Keusch: And I would just add that as you look at the 2025 adjusted income statement that we have provided, that also is inclusive of the stranded costs for the continuing operations. So that is already in there as well. Operator: And our next question comes from the line of Shagun Singh with RBC Capital Markets. Shagun, please go ahead. Shagun Singh: Thank you so much. So, you know, obviously, 2026 is a transition year, but can you give us a look into what the company might look like in 2027 and beyond? Maybe touch on strategic priorities, how we should think about sales growth, margin profile, and where the company could go beyond that. And then my second question is just on the CEO search. Who is the right leader for this role, and what qualities or experience are you looking at? Thank you. John R. Deren: I will start with your first question and think about the mid-single-digit growth. If you start and think about 2027 with our ability to take out the stranded costs, our ability to pay down a significant amount of debt, and then buy back shares, with your own math, I think you will find a really nice underlying op margin. And then with the share buyback, you should find yourself coming up with a significant uplift in the EPS. I do not have guidance for 2027, but I will let you do that math. Stuart Randall: On the CEO search, as we have previously reported, we are working with Spencer Stuart on the search. We are really focused on people who have demonstrated experience operating a mid-size, high-growth organization on a global basis, really focused on high-acuity hospital settings. Operator: Alright. Thank you for the question, Shagun. And our next question comes from the line of Ravi Misra with Tru Securities. Ravi, please go ahead. Ravi Misra: Hi. Great. Thanks for taking the call. So this is a couple of questions. Given the recent rulings on tariffs, help us think about maybe what gets this back to that mid-20s and above range. Thank you. Help us think about maybe how quickly the pace of that could come in, and this kind of cost reduction program that you have implemented and the mitigation that is coming in the following year. We are kind of in the low-20s. Is the new base that we should be thinking about? John R. Deren: Yeah. I think operating leverage—so if you start and you take out these stranded costs, you back in the mitigation for the stranded costs, you will have to decide how you model that. As for tariffs, our plan does contemplate tariffs that were expected last week before the Supreme Court's decision. And now there is certainly some significant uncertainty whether the additional tariffs will come in 10% tariff or 15% tariff or wherever it may land. We did consider that we have additional tariffs of about $18,000,000 this year on top of a lot of what is in our plan is already sitting on our balance sheet. I think with all the uncertainty, we have left our plan where it is at before the Supreme Court decision. So there is likely some upside. But again, I cannot tell you that for sure. Of course, the savings get much less if you are in the 10% to 15% realm, and then the question becomes is this 150 days the end of it? Is the administration going to find another opportunity to push tariffs? Despite anybody's guess right now, many think it is going to be very, very difficult to get a refund from the federal government. When we pay tariffs, they get capitalized in inventory. So that would happen and will come to find its way into the P&L. You are typically looking at at least two quarters before you start seeing some relief. We will continue to update everyone as we know more as the days progress. Operator: And our next question comes from the line of Matthew O'Brien with Piper Sandler. Matthew, please go ahead. Matthew O'Brien: Just to be more direct on this, John, you do not want to talk about 2027 too much. But as I do the math on the stranded cost, the potential benefits from the debt pay down and then the share repurchase as well for this year—and I know it is all pro forma and you are not doing it all this year—but I am getting more like $9.5, almost $10 in earnings this year. Is that a fair way to think about what the pro forma 2026 number could look like? Then I do have a follow-up. Thanks. John R. Deren: Yeah. I do not want to confirm your model. I think there is some opportunity in there too, and the reality is we are also going to have some of the restructuring benefits happening at the same time. So there is the restructuring, there is the covering the TSA, MSA costs. If you are modeling 2027, I assume you should be able to come up with some leverage if you are thinking mid-single-digit growth. So you have that opportunity, and I cannot speak for how you are coming up with your shares. That is going to be a debate on share price to be sure, but I would think you would find yourself closer in that $10 or more range is what I would think. And I would say you have significant interest savings you should be modeling for 2027. Lawrence Keusch: And I would just again reiterate that we absolutely intend to deploy the proceeds from the transactions—$1.0 billion for the share repurchase and the remaining $800 million is debt paydown. Operator: And our next question comes from the line of Larry Biegelsen with Wells Fargo. Larry, please go ahead. Larry Biegelsen: Hey, guys. Can you hear me? Operator: We are having trouble hearing you, Larry. We will move to the next question and circle back. Operator: Our next question comes from the line of Michael K. Polark with Wolfe Research. Michael, please go ahead. Michael K. Polark: Hi. Good morning. I did not hear a ton about Biotronik integration. Can we just get an update on how that is going? Salesforce? Retention, cross selling U.S. versus Europe, what have been the highlights so far? Any challenges that have popped up? As a follow-up, I want to ask about R&D as a general concept—8% as a portion of revenue for RemainCo. Can you just remind us, is that step up versus historical Teleflex entirely explained by Biotronik and some of the pipeline there? Or does RemainCo expect to increase investment in Surgical, existing Interventional, and Vascular? For probably, what, two years. But once those go away, do you have enough kind of juice in the bag, I guess, to continue to expand margins once the TSAs go away in a couple years? John R. Deren: You know, I think it is going well. The Salesforce integration is taking place. The bags have been combined for the Salesforce, and we think there is some significant opportunity for revenue synergies moving forward. We have been able to retain, so no big regrettable losses from our standpoint. If you go back to Q4, we did announce a restructuring related to the VI acquisition. That has kicked off well. We expect very much back half of the year and a little bit into the first half of Q1. It is going well. On R&D, yes, Biotronik came with a higher amount of R&D. We were, as total Teleflex, about 5%. Now, with the discontinued business, we are about 5%. In addition to what Biotronik was spending, we have made some decisions to put in additional R&D resources for the Interventional space, and then second to that would be in the Vascular space, we have increased our R&D as well. Surgical, I would say, to a lesser extent. There are much bigger investment opportunities in the Interventional and Vascular spaces. When the TSAs go away, there is going to be a little bit of overlap here with some of the restructurings and while we are getting TSA revenue. In fact, it may give us a little bit of a headwind as we get into later years because we will have a little bit of both happening at the same time. But our goal is to completely mitigate and offset those stranded costs. Keep in mind, the op margin profile with the growth profile should also contribute to some significant leverage over time to continue to move up that op margin on its own. We will continue to look at cost-saving initiatives. As an organization, we have been very lean on the OpEx side, and we will continue to be looking for those opportunities. That is kind of our long-term thinking, if you will. Again, we do not have a long-range plan in place yet, but I think that is the real opportunity. Stuart Randall: And I would say these organizations are fully integrated and are working together. Putting good marketing plans in place. So I feel really good about the integration of the sales forces and the opportunities that lie in front of them. This is Stu. I would just add I was at our Asia and North America sales training meetings the last couple weeks. Operator: Alright. Thank you for the question, Michael. And our next question comes from the line of Travis Steed with BofA Securities. Travis, please go ahead. Travis Steed: Hey, everybody. I guess looking ahead a little bit, obviously the TSAs are going to offset a lot of the onetime stuff. It sounds like you probably have an ability to continue to grow earnings and get EPS leverage going forward. Can you talk about 2027 plus and beyond? John R. Deren: To be sure. Once you kind of cover those costs, your real opportunities are that P&L leverage as you continue to grow—you keep a big base of that OpEx the same, and you end up with a much better op margin. And that is kind of our long-term thinking. And I think some of that opportunity for leverage exists in 2026 as well and 2027. It is not just resetting the base in 2027. Operator: Great. Thanks for the questions, Travis. And we have a follow-up question from Larry Biegelsen. Larry, please go ahead. Larry Biegelsen: Alright. Thanks. Sorry about that, dropped a couple times. Hopefully, I do not think this was asked yet. Just on revenue for 2026, you grew 4.7% in 2025. The guidance calls for similar growth in 2026. So what is giving you the confidence to start the year there, given that you guys have had some missteps recently, and you do not have a permanent CEO? Thank you for taking the questions, guys. That is my first question. Maybe just a second, John. Just any phasing considerations for 2026 for revenue and margins. John R. Deren: Sure. And Larry can spend some time with you later on some of the cadence, but there will be a step up over the four quarters from the beginning of the year, with the recent integration and the new combining of the bag. There is also some step up as you move through the year for that sales synergy to take place. And again, the VBP impacts in 2025 were more pronounced in the second half because of the comps, so the comps get a little easier in the second half. We will still have some VBP impacts in 2026, likely in our Surgical business. But we think the lion's share of VBP is behind us now. Operator: Great. Thank you for those follow-ups, Larry. And that is all the questions we have today. So I will now turn the call back over to Lawrence Keusch for closing remarks. Lawrence? Lawrence Keusch: Thank you, and thank you to everyone that joined us on the call today. Operator: You may now disconnect your lines. Thanks, everyone. Lawrence Keusch: This concludes the Teleflex Incorporated Year End 2025 Earnings Conference Call.
Operator: Good evening, ladies and gentlemen. Welcome to Nu Holdings conference call to discuss the results for the fourth quarter of 2025. A slide presentation is accompanying today's webcast, which is available in Nu's Investor Relations website, www.investors.nu in English and www.investidores.nu in Portuguese. This conference is being recorded, and the replay can also be accessed on the company's IR website. This call is also available in Portuguese. [Operator Instructions] [Foreign Language] [Operator Instructions] I would now like to turn the call over to Mr. Guilherme Souto, Investor Relations Officer at Nu Holdings. Mr. Souto, you may proceed. Guilherme Souto: Thank you, operator, and thank you, everyone, for joining our earnings call today. With me on today's call are David Velez, our Founder, Chief Executive Officer and Chairman; and Guilherme Lago, our Chief Financial Officer. Start with this quarter's result, we're introducing a new managerial reporting framework, including managerial indicators and our managerial P&L. All financial metrics discussed and presented today reflect this framework. Lago will provide additional details during his presentation. These managerial measures are important to how we manage the business but are not financial measures as defined under IFRS and may not be comparable to other companies. A full reconciliation to the most directly comparable IFRS figures is available in our managerial P&L reconciliation report and in the appendix to this presentation. Unless otherwise noted, all growth rates discussed today are presented on a year-over-year FX neutral basis. Today's discussion may include forward-looking statements, which are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those expressed or implied. Please refer to the forward-looking statements disclosure included in this earnings presentation for additional information. With that, I will now turn the call over to David. Please go ahead, David. David Velez-Osomo: Hello, everyone, and thank you for joining us today. 2025 was a fantastic year for Nubank, and Q4 '25 truly showed the strength of our business model. During the year, effectively, most of our key indicators from customer love to scale, engagement and profitability moved in the right direction, while we continue to invest significantly on long-term growth. We closed the year with 131 million customers adding 17 million net new customers and maintaining an activity rate of 83%. Scale and engagement remained the foundation of our model. ARPAC reached $15 per active customer, up approximately 9% quarter-over-quarter and 27% year-over-year, driven by deeper monetization across our platform. As a result of strong customer growth and higher ARPAC, revenues in Q4 '25 reached $4.9 billion, up 45% year-over-year. Gross profit in the same period reached nearly $2 billion, up 38% year-over-year. At the same time, we maintained discipline with an efficiency ratio of 20% under the new methodology even as we continued investing in our core markets and new technologies. Net income reached $895 million, translating into a record 33% return on equity while maintaining strong capital buffers and scaling our credit portfolio responsibly. These results reflect the priorities we set and the discipline of execution throughout the year. One way to see this execution is to look at what we put in customers' heads. Across our markets, we launched more than 100 new products and features. More important than the number was the intent. Each launch aimed to deepen engagement to expand access and strengthen unit economics. Individually, these initiatives are incremental. At scale, they compound. In payments, we evolved Pix with AI-enabled features, launched instant payments in Colombia and expanded Mexico's cash in and cash out network to more than 30,000 physical points. In credit, we expanded responsibly, launching new payroll loan modalities in Brazil, the subscription-based credit card in Colombia and rolling out programs like Fresh Start to help engage customers regain access to credit. We also introduced the under 18 credit card, beginning to build financial relationships earlier in customers' lives. On the affluent segment, Ultravioleta continued to strengthen our value proposition. For SMEs, we scaled credit products and launched tools like Charging Assistant to help small businesses manage cash flow. Behind this execution was a clear set of priorities, cutting our allocation of capital and talent throughout the year. As you may recall, our top priority is to build the largest and most loved retail banking franchise in Latin America. In 2025, we made measurable progress across all 3 markets. In Brazil, we became the largest private financial institution by number of customers, reaching 113 million with an activity rate of 86%. Scale and engagement continue to reinforce each other. In Mexico, we reached 14 million customers, advanced our banking license process, and roughly half of our customers received their first credit card through Nu, reinforcing our role in expanding access to credit. In Colombia, we surpassed 4 million customers, and the subscription-based credit card significantly increased approval rates while maintaining healthy unit economics. In our digital ecosystem, we reached over 12 million unique active customers across initiatives such as NuCel, NuPay and NuTravel. Adoption remains early relative to our base, but growth and satisfaction indicators are compelling. On AI and global expansion, our foundation model, nuFormer, is now in production for credit decisioning in Brazil and in testing across additional use cases. AI is already improving underwriting, conversion and service quality with Pix with AI surpassing 10 million monthly active users. In January, we also received conditional approval from the OCC for a U.S. national bank charter. Overall, we delivered on our 2025 priorities while strengthening the foundation for what comes next. Let me now turn to how we're thinking about 2026. As we enter 2026, we see this as an inflection year. The year we begin transitioning from a Latin American leader to a global digital banking platform. Our priorities are organized around 3 pillars. First, winning in our core markets. Brazil and Mexico will continue to absorb the majority of our capital and management attention. In Brazil, we will deepen leadership in the mass market, expansion of wallets and ARPAC, strengthening small businesses and grow our high-income presence through Ultravioleta. In Mexico, finalizing our banking license process is critical as it unlocks the next phase of credit growth and customer depth. In Colombia, we will continue scaling credit and bringing a number of new products. Across all 3 markets, our focus remains on experience, principality and monetization. Second, strengthen foundations for international expansion. During 2026, we will lay the operational groundwork for our U.S. opportunity, building on the conditional bank charter approval. Latin America remains our primary growth engine. Third, AI as a superpower. We will expand nuFormer to lending in Brazil and credit cards in Mexico, and continue putting AI directly into customers' hands, moving closer to our long-term vision of an AI-powered personal banker in every customer's pockets. With that context, I'll hand it over to Lago to walk through the quarter's financial results. Guilherme Marques do Lago: Thank you, David, and good evening, everyone. Now before moving into this quarter's financials, I will briefly explain an evolution in our disclosures. As Nubank has become a multiproduct, multisegment and multicountry platform, we are introducing a managerial P&L to provide a clear view of value creation and internal performance. This evolution does not change economic reality. It only clarifies it. The managerial P&L is derived entirely from our IFRS results and represent our structural reorganization of IFRS line items designed to enhance comparability and better reflect economic contribution. The framework preserves net income, cash flow, equity and regulatory capital and is fully reconciled to IFRS. The key benefit is clear visibility into how margins, operating leverage and value creation evolve as the Nubank platform scales across multiple products, segments and geographies. And to support this new disclosure, we are publishing a detailed managerial P&L reconciliation report on our Investor Relations website, including the full bridge to IFRS and the complete methodology used. We have also updated historical data back to the first quarter of 2021 under this new framework. With that context, I will now walk you through the quarter's performance already used in the managerial P&L. We ended the quarter with a total portfolio of $32.7 billion, up 40% year-over-year, driven primarily by credit cards and unsecured lending. Credit cards increased 12.2% quarter-over-quarter. This was the strongest quarterly growth since the end of 2023. This reflects continued limit expansion in Brazil supported by our foundational credit models, along with typical fourth quarter seasonality. Now unsecured lending balance surpassed $8 billion with record-high originations of $4 billion in the fourth quarter. Secured lending grew 3.8% quarter-over-quarter. Recent changes to FGTS regulations have reduced new originations by more than half, though the impact on outstanding portfolio remains limited given the longer duration nature of the secured loans. We remain very comfortable with the portfolio's growth trajectory and risk profile underpinned by very disciplined credit underwriting and the evolving nature of our credit models. I will now turn to deposits where we continue to build a scalable and resilient funding base. We ended the quarter with total deposits of $41.9 billion, up 29% year-over-year, with growth across all 3 countries. In Brazil, growth reflected typical fourth quarter seasonality, including the 13th salary. In Mexico, following pricing and product adjustments in the third quarter, deposits resumed growth in the fourth quarter. On funding costs, we saw improvements across all geos. The cost of deposits declined to 87% of the interbank rate on a consolidated basis by the end of the fourth quarter, reflecting mixed dynamics, disciplined pricing and seasonality. Now deposits remain a very strategic lever for us. Strengthening balance sheet resilience, supporting earnings and reinforcing customer engagement while we continue to manage pricing with discipline to preserve attractive economics. Turning to NII, CLA, and risk-adjusted margins. Net interest income increased 13% quarter-over-quarter, driven by portfolio growth and improved funding costs, especially in Mexico. Credit loss allowance increased primarily as a function of growth. As we expanded credit card limits and balances, provisions rose mechanically due to front-loaded origination accounting while underlying credit quality remained stable. We also recorded a one-off item related to Mexico. As background, Prosofipo is a sector-wide deposit insurance fund to which all Sofipos are required to contribute to. As the largest Sofipo in the country, Nu was required to make an extraordinary contribution of approximately $25 million, which is reflected in interest expenses this quarter. This is a onetime nonrecurring regulatory levy, not a reflection of the credit quality or the financial health of our operations in Mexico. Risk-adjusted NIM closed at 10.5%, and would have been broadly stable quarter-over-quarter excluding the Prosofipo contribution. Moving to asset quality. As our portfolio has diversified across products, segments and geos, we are now presenting consolidated NPL metrics. We believe this provides a more holistic view of credit quality across the Nubank platform. Now given Brazil's relative size, trends remained largely driven by the Brazilian portfolio, where credit performance continues to track our expectations, supported by disciplined underwriting. As you see in the slide, early-stage delinquencies measured by 15 to 90 NPLs improved for the fourth consecutive quarter, declining 20 basis points to 4.1%, partially reflecting the seasonality of the quarter in Brazil. As a result of prior improvements in early delinquencies, 90+ NPLs declined 10 basis points, pointing to 6.6% in the quarter. Coverage ratios remained strong, both on total balances basis and on 90+ NPLs, providing continued comfort across loss absorption. We typically see a seasonal uptick in the 15- to 90-day NPLs in the first quarter of the year. This pattern is expected for this coming quarter, aligned with historical trends. Overall, we see no signs of deteriorations and remain comfortable with our credit quality indicators. Turning to gross profit. Gross profit reached a nearly $2 billion in the quarter, up 38% year-over-year. In terms of composition, float contribution increased, reflecting strong deposit inflows in Brazil and improved funding economics in Mexico following the pricing adjustments implemented in the prior quarters. Fees also performed well, driven by very strong purchase volumes supporting the largest quarterly increase in our credit card market shares in Brazil in over 10 quarters. The credit component reflected higher front-loaded credit loss allowances consistent with the strong portfolio growth in the quarter. Now looking ahead, we will remain credit first. Credit represents the largest profit pool in financial services and is a key driver of engagement and relationship depth across our platform. At the same time, fees and float provide diversification and support a more resilient gross profit profile as we continue to scale across products, segments and geos. Going to the efficiency ratio now. As part of our disclosure evolution, we updated the methodology for calculating this metric to better align with industry practice and enhance comparability. Details of this new methodology are included in the appendix to this presentation, and we are also presenting the ratio under the prior methodology for reference. Under the new methodology, the efficiency ratio declined to 19.9%, falling below 20% for the first time in our history. This reflects operating leverage with net revenues growing faster than operating expenses even after typical fourth quarter seasonality in marketing and transactional costs. In the fourth quarter, we also recognized approximately $22 million of transition expenses provisions related to our return-to-office decision, which becomes effective only in mid-2026. These cost provisions are temporary and not indicative of the ongoing run rate. Now looking ahead, as David outlined before, 2026 is in fact, an investment year. We are laying the operational foundations for global expansion and accelerating the adoption of AI and other new technologies across the platform. These are deliberate investments in long-term capacity building Nubank, and they will likely put upward pressure on the efficiency ratio in the near term. We are comfortable with this trade-off. The structural drivers of operating leverage, revenue growth, scale and disciplined cost management remain unchanged, and we expect efficiency to continue improving over the medium term as these investments that we are making today begin to generate returns. To close the P&L review, net income. In the fourth quarter, net income increased 50% year-over-year to $895 million, delivering a record-high ROE of 33%, while we continue investing in growth and maintaining quite robust capital buffers. This includes certain nonrecurring items in the quarter, a positive impact of approximately $58 million of net income related to the remeasurement of deferred tax assets following the CSLL rate increase in Brazil and a negative impact of approximately $29 million related to return-to-office provisions and the Prosofipo levy in Mexico. Now together, these results demonstrates the scalability of our operating model, growing earnings while sustaining high returns. Now turning to capital and liquidity. At the holdings level, total capital stands at $8.9 billion. Of that, $3.6 billion covers regulatory requirements across our 3 geographies. $2.2 billion represents excess capital in our operating entities. And $3 billion sit at the Nu Holdings level as unrestricted cash and equivalents available to fund both continued growth in our core markets as well as our global ambitions. Now on the liquidity side, available funding of $38.8 billion represents approximately twice our net credit portfolio of $19 billion, which represents our gross credit portfolio net of credit card accounts payable, which provides very significant headroom to continue scaling credit responsibly while also seizing the opportunities coming from further balance sheet optimization. Our capital liquidity positions reinforce our ability to invest in growth from a position of strength, and that is exactly what we intend to do. Taken together, our capital and liquidity positions are not simply a reflection of our past performance. They are, in fact, the foundation of what comes next, and we enter 2026 with the financial strength and to win our core markets, the firepower to accelerate globally and the discipline to do both things responsibly. Now I'd like to thank you, and we are very happy to take your questions. Operator: [Operator Instructions] I would now like to turn the call over to Mr. Guilherme Souto, Investor Relations Officer. Guilherme Souto: Thank you, operator. Could you please open the line for Mr. Eduardo Rosman from BTG Pactual? Eduardo Rosman: I have a question for David Velez regarding AI. David, do you see a risk that Nu could be disrupted by AI? Or do you see Nu as a potential winner in this transformation? It would be great if you could elaborate a little bit since I think the stock and then the sector in the U.S. has been suffering lately because of that. David Velez-Osomo: Sure. And the answer is both. It is both a challenge and has potential for disruption as well as significant opportunity. Net-net, we think it's more opportunity than challenge for us. But we have to take it pretty seriously, and we are taking it very seriously. A couple of ways to think about it. I think there is one specific trend or one common denominator across every technology transformation, and this goes all the way to even the internet era, which is any business model that relies on simply moving bytes from point A to point B, where you're effectively a broker, tends to be heard the quickest because one of the things that technology does is remove a lot of that friction in those processes. So I think to some of the commentary that has been around in the market about financial services is, I think, businesses in financial services that are simply moving money from one point to another point will have the higher risk of potential disruption. You need to be able to add more value than that. And I think from that angle, we think -- we have always believed that credit, specifically, credit revenue is actually the most sustainable type of revenue in financial services because of the capital intensity, the regulatory nature of it, the balance sheet aspect and the proprietariness of the data where AI plays a role and ultimately allows you to make a better decision on that. So I think from one angle, there is potential for challenging around the business model, but I think we're very well positioned given the way we are set up and the strength around credit. That we have. I think a couple of our opportunity is really on the revenue side. And as a reminder, our package $15 a day and our incumbent competitors are something like $40, so we have a significant opportunity to increase ARPAC, is around new cross-sell and new products that we will -- can be delivering to the very significant consumer base that we have. And I think everything around cross-sell, everything about using the data that we already have to offer new products and services, it's a big opportunity and nice and enabler. And here, we've discussed a few times over the past year the significant lift that we're seeing when we're using our own foundation model on credit but also cross-sell and a number of other revenue-related opportunities. And then you have the cost side, and I think the cost side is a little bit more clear. I think every single company really might benefit from that, where every function that you do, especially as a bank from customer service to compliance to regulatory to AML, will be significantly enhanced or is being significantly enhanced through AI. So net-net, I do think that there are potential disruptive vectors in some of the business models. But I think when you compare -- when you think about the fact that 95% of the world's financial services profits are still concentrated in incumbent banks that still have significantly larger cost structures, means that we're very well positioned to take advantage of AI as a technology enabler for revenue and cost and ultimately be one of the winners in this technology shift. Guilherme Souto: Operator, could you please open the line for Mr. Jorge Kuri from Morgan Stanley? Jorge Kuri: Congrats on the numbers. I wanted to ask a question about your loan growth for the quarter. And I guess it's a two-part question. First, can you help us dimension the impact that your clip increases are having on your credit card growth? To what extent -- I know there is evidence in the seasonality, but if we think at the year-on-year growth, how much do you think came from those clip increases? How much of that acceleration in credit cards, do you think, is still going to roll over into 2026? And then the second part is on FGTS. Is there a way to quantify what was the headwind on your loan book based on FGTS? In other words, excluding FGTS, what would have been the portfolio sequential growth? Guilherme Marques do Lago: Thanks for the questions. Let me try to slice them in those 2 parts. So your first question was on the clip. Look, this was a year in which we have deployed this new technologies and approach to credit underwriting very successfully so far in allowing our customers to increase kind of their credit limits, especially in Brazil so far. And the best way for me to kind of illustrate the magnitude of this increase is, Jorge, maybe, refer you to Explanatory Note #32 of our financial statements in which we are then starting to provide, what I call, the unused credit limits. And you can see that unused credit limits went from about $18 billion to $29 billion, so an increase of about $11 billion, which accounts for about 60% increase in unused credit limits. It's a big one. And I think it wouldn't be possible for us to do so if we hadn't been leveraging kind of the entirety of the predictive AI credit underwriting tools that have been kind of developed by us over the past now 18 to 24 months. Have we seen all of those benefits translated into net income? The answer is no, not yet. So usually, I think at least I see kind of credit limits increases playing out in 3 steps. First, you have to offer the additional credit limits. Then the credit limit translates into purchase volume. And then you have to see whether the purchase volume will then translate into IBB. We are starting to see the first step, Jorge, which is, in the fourth quarter of 2025, our market share in purchase volume in Brazil has gone up by about 50 basis points. It was the biggest market share gain that we've seen in Nubank over the past 10 to 11 quarters. There's 2 more to come, and then we still have to see kind of all of those purchase volumes reflecting into IBB. Even though 2025 was, I think, a big sign of the magnitude of this ability to increase clip, I don't think it will stop there. You will continue to see this kind of unfolding in new models and new improvements throughout 2027 -- 2026, 2027 and onwards. And I would also say that the advent of the predictive AI technology will not stop at clip Brazil, right? It will be and is being exported to clip Mexico, clip Colombia, and then we're going to go acquisition Brazil, acquisition Mexico and what -- you're going to go to fraud. It's going to go to deposits, pricing and designs. So it's -- there's a plethora of options that we're going to be leveraging on. So that's my attempt to address your first question, Jorge. The second question was on FGTS. So the new regulations of FGTS came into effect on November 1, 2025. And we have seen our originations of FGTS loans dropping by about 50% to 60% in the period in which the new regulation has become effective. It was more than offset by the growth in public consignado, in public payroll loans, but it has certainly been a headwind to the origination of this very kind of interesting asset class. Jorge Kuri: And is there a way to quantify that? Thinking about it on a quarter-to-quarter basis, what would have been the total balance of credit expansion excluding that? So instead of the 11% FX-neutral quarter-on-quarter, what would have been the number without FGTS? Guilherme Marques do Lago: Yes, it would have been about 13% to 14%. Jorge Kuri: Okay. So quite significant. That was super clear. Congrats again. Guilherme Marques do Lago: Thanks, Jorge. Guilherme Souto: Operator, could you please open the line for Mr. Pedro Leduc from Itau BBA? Pedro Leduc: A little more as you look into 2026 and I'm going to use some of the prepared remarks there, especially in terms of efficiency trajectory. You mentioned that there might be some pressures. I want to see if you can maybe go into detail about it. And of course, it's a ratio. And also as I'm trying to think about revenues, of course, you're ending on a very high pace of loan book, NII. But as I look forward, can you help us understand a bit on the drivers when we see funding costs go up -- go down, sorry, if we can see that continuing a little bit on the portfolio. Just help us think a bit about these drivers now that you are already 35% ROE. Guilherme Marques do Lago: Leduc, thanks for the question. Look, I will refer to Slide 16 of our earnings deck, which is -- brings the efficiency ratio evolution. And we have seen, kind of over the past quarters and years, the continuation of the operating leverage potential of the organization. We wanted to highlight very clearly that we may see kind of upward pressure on efficiency ratio in the coming quarters, i.e., in the short term, like the next 4 to 6 quarters. As a result of very deliberate investments, I would bucket them in 3 categories. Number one is we have recently announced a return-to-office policy, right, and which starting on July 1, 2026, employees will start going back up to the office 2 times per week. That means that we're going to have to kind of prepare the offices, increase the leased area to welcome our employees as they prepare to come back to the office. We believe that this will bring enormous benefits to the company, including about kind of ingenuity, kind of innovation, coordination, but it does come with an increase in OpEx in the short term, and we wanted to clarify this. I would say that the return to the office will likely bring kind of our efficiency ratio, all else constant, up by about 80 to 100 basis points. The second bucket, I would say, Leduc, is the -- all of the investments that we are making in AI and new technologies. So that brings new talent that we have to hire, eventually new investments in R&D and research in GPUs that will have kind of a short-term cost, which we believe will be way, way, way more offset by the medium-term gains that we're going to have, but we will not shy away to make investments in talent, R&D and GPU to maximize the impacts of our efforts in AI. And I would say that kind of we have return to the office. You have AI. And the third one is the globalization. So there is a lot of investments that we are making in laying down the foundation for us to go beyond Brazil, Mexico and Colombia. And no, a substantial amount of those expenses are not capitalized and are incurred in 2026, first, to collect revenues and margins in the following years. So that's the direction. I wouldn't be able to provide you, Leduc, at this point in time more kind of a precision on the effect of all of the 3, but we think that they would put some kind of upward pressure in the coming quarters. Guilherme Souto: Operator, could you please open the line for Mr. Yuri Fernandes from JPMorgan? Yuri Fernandes: Congrats on the year. Most metrics, they look very good. But there is one line here that I think investors are a little bit more puzzled this quarter. That is the tax rate, right? And I know there is a managerial adjustments, and we see some incumbents in Brazil also having similar adjustments. So I think it's easy to understand and explain. But regarding this quarter, and maybe Lago can help me here, I would like to understand what drove the lower accounting tax, if this was the DTA? And you have lower DTAs, but just checking if this was DTA, some kind of tax-exempt bond, IOC. And maybe some kind of color going ahead, what should we expect for the tax rate for Nubank? Guilherme Marques do Lago: Sure. So Yuri, look, I think the lower effective tax rate in the fourth quarter can be explained by, I would say, largely 2 things: 1 completely nonrecurring and 1 recurring. What's the nonrecurring one? So about beginning of December 2025, the federal government approved an increase in the corporate income tax applicable to fintechs, including those like Nubank that essentially kind of increased progressively the corporate income tax from about 40% to 45% starting in 2026 and then going all the way in the next 2 years. Even though that, in the medium term, is a headwind for our effective tax rate, in the quarter in which this kind of legislation is passed, we have to remeasure our deferred tax assets. So our DTAs remeasure up, and that increase in the DTA, which was about $58 million, Yuri, is recognized in the fourth quarter of 2025, decreasing the effective tax rate in the quarter. So that's the portion that I attribute as a nonrecurring one-off event. The recurring ones is that kind of as we increase the amount of investments that we have been making in technology across the firm in Brazil but also in the other countries, we end up also benefiting from kind of a technology investment tax breaks that some of the governments provide. And that may increase a little bit the OpEx, but they are more than offset by lower effective tax rate. Those are the 2 aspects that have kind of impacted ETR this quarter. Yuri Fernandes: So very clear, Lago. And you also had the nonrecurring on the Prosofipo, like the deposit as you mentioned, so not the same magnitude but also negative versus this tailwind you had in the quarter. Guilherme Marques do Lago: No, Yuri. No, that's precisely clear. I think we have basically 3 one-offs in the quarter, right, what I would say. One is the $58 million DTA reassessment that we just discussed. The other 1 was the about $25 million one-off expense of the Prosofipo. And the third one was the $22 million provision expense for the return-to-office program, right? So those are the 3 moving parts that we have: DTA positive, return to the office negative and Prosofipo negative. Guilherme Souto: Operator, could you please open the line for Mr. Mario Pierry from Bank of America? Mario Pierry: I wanted to focus a little bit more on the provision expenses, right, because we did see your cost of risk go up this quarter. And last quarter, if I recall, you were talking about your ability to extend credit to existing clients because you're employing AI and then you're seeing a lower cost of risk in this reverse this quarter. So I wanted to understand a little bit better what happened with provisions in the quarter. Also, if you can talk a little bit -- you showed your NPL relatively stable. But this is a consolidated NPL, correct? And before, you were showing us Brazil NPL only. It seems like your NPL on a consolidated basis is lower than the previous number. Just trying to understand why the NPLs, as you're expanding into Mexico especially, are you seeing lower NPLs in Mexico than you had in Brazil? Guilherme Marques do Lago: Mario, thanks so much for the questions. Let me try to address each of them in order. So the first one is we did have an increase in CLA item this quarter. And I would be very clear. This was entirely attributed to growth, not to any type of asset quality deterioration experienced in the quarter. So we didn't see -- we saw asset quality performing very much in line with our expectations, including the seasonality trends. And now we are on like February 25, and we continue to see kind of our asset quality metrics. They're trailing our expectations very well in all asset classes in Brazil, in Mexico and in Colombia. So we watch this kind of quite closely, but as of now, we have not seen any signs of degradation in our asset quality. What we have seen to justify the increase in CLA is not only the increase in the credit book in itself, which you can see kind of in Slide 11 that grew by about 11% quarter-over-quarter, but also, Mario, in the increase in credit limits, unused credit limits, which do not show up as credit portfolio per se but are exposures for which we do need to build CLA. So again, CLA growth, entirely driven by growth in exposure, not degradation of assets. The one thing that I would highlight, at least, Mario, that I like to see going on a recurring basis when I look at those numbers is like NPL formation was fairly stable, 3.6 to 3.5, Stage 3 formation fairly stable. And one metric that I personally look as a ballpark, Mario, is the CLA divided by average credit portfolio. So it used to be like 3.9 fourth quarter '24, then 4.3, then 3.9. Then in the third quarter of 2025, we went down a little bit from 3.9 to 3.3, and now it's back to 3.9. So I think the third quarter, as we updated them, all those with higher recovered ratios, it may have come kind of slightly below. Now it's going back to 3.9. I'm sure you're going to ask the question what's next. I think what's next is something around or below the average between 3.3 and 3.9 on the coming quarters, of course, something that we don't control, but that would be more or less our expectations with the mix that we have today. So that's your first question. I think your second question was on the NPLs. Would you provide kind of now consolidated NPL trends, simply because as we grow the book internationally with Mexico, Colombia and hopefully, other countries in the next years, we start to see those metrics kind of better representing the economic reality of the company rather than looking at Brazil only. However, if we were to post the Brazil-only NPL charts, they would equally show kind of a fairly benign trend of asset qualities, moving very much in the direction of seasonality that we expect to see in the fourth quarter. And then your question about, look, how can you actually aggregate Mexico and Colombia and get to lower NPLs, it is justified mostly by the write-off policies that we have in those countries than on the risk of those countries. So for example, in Mexico and Colombia, we can have shorter write-off policies than we have in Brazil, and that kind of affects the overall NPL calculations. But in general, Mario, no concerns at this point in time with asset quality. It is super point -- super important to highlight, and I know that you've been following this for many years, so I speak more for -- to the other participants of the call. Fourth quarter of every year, we usually observe a benign movement in NPLs because of seasonality, but equally, we do expect to see kind of an uptick in NPLs in the first quarter of 2026, also following natural seasonality, right? Guilherme Souto: Operator, could you please open the line for Mr. Gustavo Schroden from Citi? Gustavo Schroden: My question is regarding credit products and also client mix. We could see a relevant increase in loan book for credit cards and personal loans, but I'd like to explore more the secured loans. Lago explained about -- Lago, you explained about the FGTS change recently, indeed, has impacted the evolution of this portfolio. But I'd like to understand the appetite for payroll loans, I mean, public and private payroll loans, how the bank sees these products, we should expect some, let's say, replacement of FGTS by this private payroll loans mainly. So any view on that would be great. And also about the client mix, should we -- could you explain us how the bank is evolving in this, let's say -- exploring the affluent market, I mean, mid- to high-income customers, especially after this increase in credit limits? That would be great. Guilherme Marques do Lago: Thanks for the question. Let me try to address the first one on the breakdown of originations of our secured loans, and then David may address the second one on our performance in both the, what we call, super core and high-income segments. So I would basically divide our, what we call, secure loan portfolio in 3, right? So we will have the FGTS. We have the public payroll loans, and we have the private payroll loans. So FGTS is the one that has recently received kind of a negative impact of the new regulations starting on November 1, 2025. It has dropped kind of our originations by about 50%, and we continue to have a very good dialogue with the government to try to influence the agenda for 2026 and 2027. We have become market leaders in FGTS. It was a very -- it is and it used to be a very good product, and we believe it will continue to play an important role in the formation of our secured lending book. Even though if regulations don't change, will probably play a smaller role than it could have played before. But that's bucket number one. Bucket number two, public consignado or public payroll, which I put here, including both SIAPE and INSS, we are very bullish on this. We think it is still a market that has kind of a lot of opportunity to increase efficiency in the intermediation and in the distributions. We can offer products at materially lower cost than most of the other market participants. And it's now finally entering into time in which we will see interest rates drop in Brazil. And with that, we hope that kind of portability will pick up, and we like to believe that we're going to be one of the biggest beneficiaries of that -- of the trend. So I think it is one that we think regulation is there. Portability is there. Interest rate cycle is there. So we are bullish that this will kind of have an even faster growth in 2026. The third bucket is private consignado. So this is a product with which we are very, very optimistic and bullish on a structural form by which I mean it is a way for fintechs such as Nubank to have access to information and to customers who used to be primarily served by incumbent banks, which own the payroll service of large corporates in Brazil. So it's a massive opportunity for us. And it's one that we will lean in as soon as we see the mature improvements in credit risk that this product offers. We are still not seeing that. I think part of that is kind of a counterparty risk of the corporates. Part of that is the collateral is not yet operating at its full potential. We, however, think it's a matter of when, not a matter of if. Gustavo, you've also been following this quite closely for some time. You may recall that when public consignado was introduced a few years ago, it took kind of a year, 1.5 years for everything to -- all of the collaterals to be working well. And we are just waiting for this to happen for us to lean in more heavily. Now let me pause here, see if you have any follow-ups and then pass the floor to David for him to comment on the affluent part of your question. Gustavo Schroden: All clear, Lago. Guilherme Marques do Lago: Perfect. David Velez-Osomo: I think I'll say on the secured lending side is it is -- continues to be a very significant opportunity for us. I think growing within that existing profit pool has been probably more complicated than we expected given the significant operational complexities that the product has. There is a fair amount of features that need to be built into the product, specifically around portability. Most of the growth of those products are portability and when customers are doing that portability, you need a lot of different integrations. There's also a fair amount of fees. All of that friction is going away. I think the tailwind, if there's one consistent tailwind in Brazilian financial services, is that all those -- all that friction and cost that historically have improved -- or had made it harder to move towards the best product, it's going away. So we're seeing accelerating market share gain, and we are ready to -- we're building a lot of those features, and we're getting significant share on the secured line. So while I wish the traction to date had been significantly higher, I think every single month, we're seeing an acceleration of market share and the tailwinds are helping. On the high-income side, we continue to see a very good growth. Again, this is a competitive environment. It's a competitive segment. A lot of banks, incumbent banks and others are going upmarket. We define upmarket for us as customers are making above BRL 12,000 per month. So this is not 1% of Brazilians. This is probably closer to 10% of Brazilians. And within this consumer base, we already have 2 out of 5. About 40% of those Brazilians in that bracket are customers of Nubank today. They're just not really using us as their primary card. We are the third card. We have small share of wallet. A lot of the times was because we gave them a low credit limit initially. And if we had opportunities to improve credit limits on mass market and we're seeing that with AI models, we have even more opportunities to improve credit limits on high income because the customer type that we didn't really understand. So we have to fix credit limits, which we're doing. We have to improve the value proposition of the product, specifically on credit card, which we are. Over the past couple of quarters, we launched new improvements, different cash back rates. We announced a lot of integration with our NuTravel platform. So it's a really good product where we guaranteed the price of any ticket or hotel that you book in our app. We're seeing customers getting significant value out of that. So it's very well integrated with the travel value proposition. We announced our frequent flyer lounge in Guarulhos in Sao Paulo. That is getting a lot of acceptance. So there's a long path of opportunities that we have to improve the product on the credit card side. And we see that translating into increasing market share. This segment for us grew something like 40% year-over-year and is gaining share across our portfolio. So we're seeing good traction. A lot of these investments are paid off. The second part of the value proposition is investments, which you might know that, obviously, we've discussed it a few times. It's taken a while for us to build a very, very compelling investment value proposition in our app. We're getting very close. We are close to really product parity. We have now all the products that this segment needs in our app. We have fixed income products, equity products, crypto products. We have all the type of visualizations that this customer is asking. So we're getting very close to have a very good investment platform that it's critical to win this high-income segment. So overall, these are -- these 2 specific opportunities that you mentioned, they are not 1-, 2-quarter opportunities where you're significantly gone. These are long journeys of a lot of product improvements, but we feel very good about the progress we've made and the opportunity we have ahead. Guilherme Marques do Lago: And Gustavo, just one additional point. We mentioned about the mass market, which, in our definition, our customers will earn up to BRL 5,000 per month. And then you asked about what is called high income, which are customers who earn more than BRL 12,000 per month, which was the answer that the David had provided. But in the middle, which is what we call super core, i.e., customers who earn from BRL 5,000 to BRL 12,000 per month, it is the segment in which we are growing the fastest, right? So as David mentioned that in the high income, we've been growing at about 40% per year. In what we call super core, we are growing at about 100% in 2025. So I would kind of invite you and others to kind of segment this at least in 3 parts. And I think there's a massive opportunity for us to go into the super core there as well. Guilherme Souto: Operator, could please open the line for Neha Agarwala for HSBC? Neha Agarwala: Keep it short. Just wanted to follow up on the private payroll segment. We do understand your concerns regarding operational complexities at this point, but we do see a lot of other lenders being more aggressive in this market. And the market has doubled during 2025. Do you see the risk of some of your customers who might have personal loan with you going -- or have a credit card with you going to other banks and taking private payroll loans and ultimately, their leverage increases and that could impact the asset quality for those customers for you on the unsecured side? Guilherme Marques do Lago: Yes, very good question. And yes, we are very mindful of those 2 risks, which I call kind of the cannibalization, i.e., customers borrowing from another bank and kind of us losing the primary banking relationship. That's one. The second one is structural subordination, right? So customers borrowing and providing the collateral and ourselves becoming structurally subordinated to someone else. The same can be made when we lean in into this product. Even though we have been very mindful of this, we have not yet seen any evidence that any of those 2 risks that you've laid out are materializing within our customer base. In fact, most of the customers who have been applying for private payroll loans have been customers with higher credit risk, at least that has been our experience, and most likely customers who would not be entitled to have access to an unsecured personal loans or even sometimes to unsecured credit cards. But it -- but we are tracking this very, very closely. In terms of the growth of the market that you've also pointed out now, I would highlight that there are a few things to adjust in this growth. One is there's just a natural shift from asset classes that were considered private consignado without the collaterals that were instituted by the government and are just now migrating to the new private consignado. Those are usually loans that have been carried by kind of the more traditional incumbent banks, and they account for a fairly substantial portion of what is seen as the growth of this new asset class, i.e., is just migration from the old to the new. The second one, we now see kind of players playing in this space with very 2 kind of different approaches. The incumbent banks who have relationships with the corporates when it comes to payroll loans, they are more focused on the lower risk customers, and the digital players are more focused on the higher-risk customers. But when we step back, we are seeing kind of this market operating with first losses of low double digits, which is not yet conducive to the quality of the collateral that this product can have. Once we see kind of a credit improving as the product will deliver, we will not shy away to leaning very heavily and the term cannibalization is just not a term that we use. We will be there offering the best product for our customers irrespective if they will actually use the proceeds to prepay or repay higher yield assets. We are not moving ahead with this as strongly as others not because of the risk of cannibalization but more because of conservatism with credit risk. Neha Agarwala: Understood, Lago. And in terms of cannibalization, yes, your NIMs might go down, but risk-adjusted NIMs might not be impacted as much even if you replace the credit from unsecured to secured with some of your customers, right? Guilherme Marques do Lago: That's correct. The other component of that, Neha, is that you may see, at some point in time, the amount of capital that you have to allocate to private consignado possibly being lower than the ones for unsecured. So not only risk-adjusted NIMs may be preserved or even increased in an absolute amount, but the return on equity may be as appealing, if not more appealing because you have to post lower capital to that. Yet to be defined. Neha Agarwala: I just wanted to understand why not offer the private payroll. And I understand that there are complexities, and you can price for those complexities and collateral not working smoothly. Why not offer it to some of the customers whom you deem to be riskier and you don't want to give them an unsecured loan at this point? Why not start off with the secured private payroll loan with them and price it accordingly? Guilherme Marques do Lago: Yes, we most certainly could. I think what we are saying is that the benefits of the collateral for the higher-risk customers have not proven to be material enough to justify a substantially different credit underwriting or pricing policy to date. But again, just to be super clear, I think it is a matter of when, not a matter of if. This is a good product. This is a good structure. This will benefit kind of consumers, by and large. We just don't think that is yet ready to be kind of the product in which we will lean in that heavily at this point. Guilherme Souto: Operator, could you open the line for Mr. Tito Labarta from Goldman Sachs, please? Daer Labarta: I guess my question is following up a bit more on expenses. First, you talked about 2026 being an investment year and thinking more about the global expansion. Just help us think a little bit about what investments are needed there because, I mean, you got the initial license pre-approval, I guess, in the U.S. But is there more investments that you need to make in the U.S. already in 2026? Just help us think about what are these investments that you need to lay this global foundation. And then also just specifically in the quarter, because if I look at the accounting P&L, which, I guess, is more comparable to the estimates that are out there, there was a big jump in expenses, and I know there was the one-off from the return to office but marketing expenses jumped quite a bit. G&A expenses jumped a bit. If you can just give some more color, what specifically drove those increases in operating expenses in the quarter would also be helpful. David Velez-Osomo: Thanks, Tito. Quickly on U.S., we will continue to invest. I mean, kind of we are investing more, mostly on team building and product. It's de minimis. It's not a significant source of investing for launch in the U.S. We did announce a number of bigger marketing partnerships over the past couple of months. And those really are related to both our core markets as well as U.S. and potentially future markets around the world. So there is an increased a bit on marketing. There are team increases that we're having for the U.S. launch. But I wouldn't say they're going to -- they expect to be significant in 2026. Guilherme Marques do Lago: And then, Tito, on your questions about the breakdown of our OpEx in the fourth quarter of 2025, I think the marketing one is a traditional seasonal one. It usually spikes a little bit in the fourth quarter of the year. The other one was incorporated in the tax breaks related to technology investments. So many of the increases in Lei do Bem that are recognized as OpEx, but they actually drive quite a bunch of off-tax efficiency. But nothing extraordinary or nonrecurring other than those 3 moving parts that we've mentioned. Daer Labarta: Okay. No, super helpful. And maybe just one quick follow-up for David. Any just initial thoughts on what the expansion plan in the U.S. will be, like just a high-level footprint on what you're targeting segments, go to market there? Any color or thoughts that you can provide would be super helpful. David Velez-Osomo: Sure. On a very high level -- and we're not really ready yet to disclose specifically what the strategy there is going to be, but at a very, very high level, this is the largest market in the world. And while, at a very high level, it seems like a very saturated or competitive market in certain segments, when you dig in into subsegments in certain niches that, by the way, happen to be the size of Brazil, we actually find opportunity to solve a number of consumer problems that are similar to what we've done in the past. So we're going to have a very targeted strategy. We're going to be very disciplined on investing. There are a lot of focuses on certain potential geographies or subsegments that we are interested about. You're not going to see us kind of shooting in all directions here because it's a bit of a long journey, and we fully acknowledge that this is a very competitive and sophisticated market in certain areas. But we do think that it's -- there are opportunities for us to create a meaningful business in certain subareas of the United States. Guilherme Souto: So thank you, everyone. We now have approached 60 minutes of the call, so we are now concluding today's call. On behalf of Nu Holdings, our Investor Relations team, I want to thank you very much for your time and participation on Nu earnings call today. Over the coming days, we will be following up with questions received tonight but we are not able to answer. And please do not hesitate to reach out to our team if you have any further questions. Thank you, and have a good night. Operator: The Nu Holdings conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good afternoon. Thank you for attending today's Teladoc Health Q4 2025 Earnings Conference Call. My name is Tamia, and I will be your moderator for today's call. [Operator Instructions] I would now like to pass the conference over to your host, Michael Minchak, Head of Investor Relations. Please proceed. Michael Minchak: Thank you, and good afternoon. Today, after the market closed, we issued a press release announcing our fourth quarter 2025 financial results. This press release and the accompanying slide presentation are available in the Investor Relations section of the teladochealth.com website. On the call to discuss the results will be Chuck Divita, Chief Executive Officer. During this call, we will also discuss our outlook, and our prepared remarks will be followed by a question-and-answer session. Please note that we will be discussing certain non-GAAP financial measures that we believe are important in evaluating our performance. Details on the relationship between these non-GAAP measures to the most comparable GAAP measures and reconciliations thereof can be found in the press release that is posted on our website. Also, please note that certain statements made during this call will be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed or implied on this call. For additional information, please refer to our cautionary statement in our press release and our filings with the SEC, all of which are available on our website. I would now like to turn the call over to Chuck. Charles Divita: Thanks, Mike. Our financial performance reflects a solid finish to 2025 as well as progress we've made across our strategic priorities. Fourth quarter results were generally in line with our previously discussed expectations, including consolidated revenue and adjusted EBITDA both modestly above the midpoint of our guidance ranges. Consolidated revenue was $642 million, slightly higher than the prior year period, and adjusted EBITDA was $84 million, representing a 13% margin for the quarter. Net loss per share was $0.14, which included amortization of intangible assets of $0.52 per share pretax and stock-based compensation of $0.09 per share pretax. For the full year, consolidated revenue of $2.53 billion was 1.5% lower than the prior year, and adjusted EBITDA was $281 million, representing an 11.1% margin. Net loss per share of $1.14 included the following pretax amounts, amortization of intangible assets of $1.99 per share, stock-based compensation expense of $0.46 per share, a noncash goodwill impairment charge of $0.41 per share and restructuring costs of $0.11 per share. These items were partially offset by discrete tax benefits totaling $0.20 per share. Full year free cash flow was $167 million, and we ended 2025 with $781 million in cash and cash equivalents on the balance sheet after retiring $550 million in convertible debt at maturity in June. Net debt to trailing fourth quarter adjusted EBITDA was under 0.8x at year-end. Turning to segment results. Fourth quarter Integrated Care revenue of $409 million grew 4.7% over the prior year's quarter and came in near the upper end of our guidance range, benefiting from both performance-based revenue and U.S. virtual care visit volume related to a strong flu season. The acquisitions of Catapult Health and TeleCare contributed approximately 260 basis points to year-over-year growth and international delivered double-digit constant currency revenue growth. Chronic Care program enrollment was $1.19 million at quarter end, increasing 2% sequentially versus the third quarter. U.S. integrated care membership finished the quarter at 101.8 million members. Fourth quarter Integrated Care adjusted EBITDA was $65 million, up 23% over the prior year period and representing a 16% margin for the quarter. For the full year, Integrated Care segment revenue increased 3.3% to $1.58 billion, with acquisitions contributing approximately 210 basis points to segment revenue growth. U.S. Virtual care visit revenue grew double digits year-over-year, more than offset by a lower subscription revenue due to the shift towards visit-based arrangements we've spoken about previously. International revenue grew mid-teens on a constant currency basis for the full year. Adjusted EBITDA increased 2.7% over 2024 to $239 million, representing a 15.1% margin, about 10 basis points lower than 2024. Excluding the impact of M&A, adjusted EBITDA margin would have been up approximately 20 basis points year-over-year. Shifting to better health. Fourth quarter revenue was $233 million, 6.7% lower than fourth quarter of 2024. Average paying users for the quarter declined 6% year-over-year to 375,000 with a low double-digit increase in non-U.S. users, partially offsetting a low double-digit decline in U.S. users. Segment results also included approximately $7 million in insurance-based revenue, in line with our expectation. In the fourth quarter, BetterHelp adjusted EBITDA increased to $18 million, up from $4 million in the third quarter. The adjusted EBITDA margin was 7.9% compared to 1.6% in the third quarter and was driven primarily by seasonal pullback in ad spend due in part to higher ad prices during the holiday season. For the full year, BetterHelp revenue was $950 million, a decline of 9% from the prior year. This included insurance revenue of $13 million, in line with our expectation of $12 million to $14 million. Adjusted EBITDA of $42 million represented a margin of 4.4% compared to 7.5% in the prior year period. This year-over-year decline was driven by lower overall revenue and investments to scale the insurance offering, partially offset by a 7% reduction in advertising and marketing spend compared to the prior year. With that overview of our results, I would like to shift the focus to 2026, our priorities and where we see opportunities going forward. First, a critical area of focus for us is advancing our position in the U.S. markets served within our Integrated Care segment. While we have a well-established leadership position, we see opportunities to broaden our impact on patient care and client value and in turn, business growth and performance. We're going after this opportunity through product and capability innovation and the strength of our care model across virtual care, chronic condition management and mental health. For example, we recently launched our enhanced 24/7 care offering, the next generation of our flagship virtual care service. By leaning into the shift from subscriptions to visit-driven value, this new offering creates broader engagement points by expanding the range of conditions we can address, supporting our care providers with real-time access to specialists and placing more information at the point of care to address care gaps and other needs. We're also advancing innovations in our chronic care programs to support and improve the health of people living with chronic conditions. The human toll and the cost of chronic illness are major issues facing the health care system, and we intend to deepen our role in this area. In 2026, we're leveraging our extensive data in new AI-enabled stratification capabilities together with additional targeted clinical interventions to address the needs of rising and high-risk members, including coordination with primary and specialty care when appropriate and manage care more holistically. These AI models align and efficiently activate care teams for personalized action. In addition, we are rolling out new connected devices, in-home testing and other features to support our comprehensive approach, and we intend to build on these advancements in our product development pipeline going forward. And as part of our care model, we can also extend our various services for new and impactful use cases to support our clients. For example, as part of a broader implementation, a large Blue Plan is utilizing Catapult Health's virtual checkup program to engage Medicare Advantage members to ensure they complete their annual wellness visit. An example of how we can further leverage the potential of our virtual care assets and capabilities, meet people where they are and connect them with the care and support they need. As a virtual native, clinically focused organization, technology is central to delivering integrated patient care at scale and the investments over the past year further support our innovation agenda. These include enhancements to our Prism care delivery platform to surface actionable and personalized information across our care teams and efficiently deploy AI tools to support their important work. And seeing the significant opportunities to leverage AI, more extensively in our business, we made important investments over the last year in our new Pulse data and AI platform. Pulse brings together and unifies our extensive data, provides context, applies intelligence and most importantly, connects AI-driven insights to activation and orchestration in support of patient care. All of these and other innovations are aimed squarely at driving engagement, clinical outcomes and client value in direct support of our growth opportunities in Integrated Care. In 2026, we also remain highly focused on leveraging our scaled position in virtual mental health services and have several initiatives underway to advance our position. This includes the launch of Wellbound, our new employee assistance program offering that combines strengths across Integrated Care and BetterHelp as well as rapidly scaling BetterHelp's insurance coverage offering. We are making considerable progress, and we are now live in 20 states plus Washington, D.C. and have more than 4,500 credentialed and enrolled providers at this point. Additional network arrangements have also been secured bringing covered lives to more than 120 million. Early trends are encouraging, including strong growth in insurance sessions, which now exceed 1,200 sessions on average per day, an annualized revenue run rate of over $40 million, which further informs our approach to 2026 for both the consumer cash pay and emerging insurance market and reflected in the guidance that I'll cover later. We will continue a methodical expansion throughout the year, further scaling provider capacity and payer network coverage while prioritizing and ensuring strong user experience. And with BetterHelp's broad reach and brand recognition, there are millions of potential users that start the registration process at BetterHelp each year. In addition to improving conversion by expanding payment options with insurance, we also remain focused on growing our acquisition funnel through greater awareness. As an example, we are excited that BetterHelp has been named the exclusive online therapy provider for AARP, which advocates for 125 million Americans, 50-plus and older with an expected launch over the next 60 days. In addition, BetterHelp has partnered with Walmart to join their Better Care Services initiative, which launched earlier in the year. BetterHelp's international expansion also continues to be an important growth driver. Non-U.S. revenue represented nearly 24% of total segment revenue in 2025, with continued growth in our English-speaking offering and further boosted by localized launches in France, Germany, the Netherlands, Spain and Austria. With solid performance in these localized markets, we expect to expand the model into additional countries in 2026. We are actively executing the turnaround of BetterHelp through these initiatives, and look forward to demonstrating the underlying potential of the business as we progress through 2026. Our third priority is driving value creation in Integrated Care through our international offerings, which combine a global reach with a strong understanding of the unique characteristics of each individual market. This includes deepening and expanding long-standing partnerships with existing clients, growth with public health systems and expansion of hybrid care models that bring virtual services into physical care settings to meet local needs, including emergency services, primary care and specialty care across several countries, including Canada, France and Australia. Finally, our fourth strategic priority is operational excellence. Over the past year, we've sharpened our strategic focus, driven cost and productivity initiatives and accelerated innovation. We also achieved ISO 9001 certification for key U.S. integrated care processes, reflecting the level of operating rigor across the company. In 2026, we had one of the most successful implementation seasons in our history from a volume and performance standpoint, another important validation of the team's relentless and ongoing focus on execution. I also want to take this opportunity to further comment on the role of technology and artificial intelligence advancements in shaping the future of care at Teladoc Health. Firmly grounded in clinical care and patient safety, we are excited about the opportunity to responsibly apply AI to improve outcomes, simplify the experience for members and clinicians and reduce friction across the health care journey. Care is at the heart of our innovation agenda with our technology experts working alongside health care professionals to develop, evaluate and align with evidence-based standards and support high-quality care experiences. Our responsible AI framework ensures that innovations undergo rigorous review to preserve safety, accuracy and trust. With an extensive, diverse and well-established client base of over 12,000 organizations, our partners and patients look to us to deliver quality experiences that perform and endure. We've been building the infrastructure, expertise and partnerships for decades, and our models improve with every touch point, creating smarter systems at scale. As I mentioned earlier, Teladoc Health Pulse, our data and AI intelligence platform, serves as the backbone of our AI initiatives by unifying unique multidimensional data from patients, care providers and partners. It provides context for the data and the ability to apply AI to this contextualized data to support a wide range of value-accretive activations across the patient experience, clinical and care team support and the operations of our business. In addition to the gains we've already made, we intend to further scale the benefits of Pulse through 2026, including in our product innovations and initiatives to drive greater efficiency and performance of our business. With that as a backdrop, let me provide a few examples of how AI enhances many of the moments that define high-quality care for us. In our chronic condition and cardiometabolic programs, AI transforms connected device signals, member reported data and other data sources into dynamic health insights. These insights help us personalize outreach, identify changes in health earlier and support healthier decisions related to sleep, nutrition, activity and stress. This improves engagement and overall health and helps prevent members from progressing to higher risk. In clinical settings, AI helps connect members to the right provider, supports clinicians with ambient generated documentation and informs next best actions for our members. These tools enhance consistency, reduce administrative burden and free clinicians to focus on questions and matters that require judgment and human connection. They do not replace clinical teams, they extend their reach and effectiveness. Pulse enables us to empower care teams with a more complete picture of a person's health and sharper insights that help them understand and predict patient needs, guide targeted interactions and connect the right care at the right time. It is helping us move faster and smarter, transforming the way we work and our ability to drive better health outcomes. And in our hospital and health systems offerings, our AI-enabled Clarity solution uses computer vision and audio analysis to identify patients' safety risk and signs of behavior escalation. This helps care teams intervene earlier, protect staff and patients and expand capacity. These capabilities have become increasingly important as health systems balance safety needs with ongoing workforce constraints. In mental health, including BetterHelp, AI is improving intake and matching while also reducing therapists' administrative workload, for example, by automating clinical documentation and enabling clinicians to spend more time on patient care and improving overall efficiency. At the same time, therapy remains grounded in a human relationship where AI assists, it is applied transparently, responsibly and with a clear governance framework that prioritizes quality, privacy and trust. We believe this is the path to stronger engagement, sustained ROI for our clients and a better whole person experience for the people we serve. This approach positions Teladoc Health to continue leading the evolution of virtual care and to help our clients bring forward the next generation of AI-enabled health care in a safe, integrated, compliant and clinically grounded way. Stepping back, the macro challenges across the health care industry remains significant, and our clients are focused on affordability and rising medical costs, the prevalence of chronic disease, unmet mental health needs and other needs. And as a strong partner and leader in virtual care, we believe we're well positioned to drive outcomes, leverage advancements in technology and deepen our impact, and the work we are doing across our strategic priorities further enhances that position. We entered 2026 on a stronger foundation and renewed underlying momentum driven by new innovations in Integrated Care products and capabilities, strong progress towards scaling BetterHelp Insurance, growth in international markets and continued focus on execution and business fundamentals. Moving now to 2026 guidance. We expect full year consolidated revenue to be in the range of $2.47 billion to $2.59 billion, approximately leveled with 2025 at the midpoint. Consolidated adjusted EBITDA is expected to be in the range of $266 million to $308 million, representing 2% year-over-year growth at the midpoint. Full year free cash flow is expected to be between $130 million to $170 million and reflect working capital build related to BetterHelp's significant growth in insurance in 2026 as well as lower net interest income on cash and cash equivalents due to the paydown of the 2025 convertible and lower assumed interest rates on cash balances generally. We project full year stock-based compensation expense to be below $60 million in 2026, representing a year-over-year decline of at least $20 million versus 2025 and down more than 70% versus 2023 levels demonstrating significant progress over time and an important area of focus for us. For the first quarter, we expect consolidated revenue in the range of $598 million to $620 million, and adjusted EBITDA in the range of $50 million to $62 million. For the Integrated Care segment, we expect full year 2026 revenue to grow in the range of 0.4% to 3.9% over 2025. The midpoint includes approximately 60 basis points of tailwind from our recent acquisitions. As we've spoken about previously, segment revenues continue to be impacted by the migration of U.S. virtual care subscriptions towards visit oriented models which are more reflective of the U.S. health care fee-for-service construct. However, with visit revenue now comprising more than half of U.S. Virtual Care revenue, we expect the impact of this shift on our top line to moderate going forward relative to prior years and as we move towards the later stages of this transition. And over the long term, we expect to see visit revenue growth outpaced the decline in subscription revenue with Virtual Care being a net positive contributor to growth. We are guiding to a full year adjusted EBITDA margin of 15.1% to 16.1% for Integrated Care, which represents an increase of approximately 45 basis points over 2025 at the midpoint. This increase reflects the net impact of gross margin changes resulting from subscription to visit-based revenue and mix-related impacts more than offset by lower operating expenses due to ongoing cost savings and efficiency related initiatives. Our guidance also currently reflects an expected $5 million to $7 million headwind from tariffs in 2026, up from a $3 million headwind in 2025, an area we will continue to monitor for further developments. We expect U.S. integrated care members to end the year in the range of 97 million to 100 million members, modestly down versus 2025 levels due to reductions in the enrollment at certain health plan clients related to government programs, including the impact of expiration of the enhanced subsidies on Affordable Care Act business. We are guiding to first quarter Integrated Care revenue down 1.2% to up 2.0% versus the prior year period. This includes 155 basis points of growth from the Catapult and Telecare acquisitions at the midpoint. Adjusted EBITDA margin is expected to be in the range of 12.5% to 14%, up approximately 30 basis points at the midpoint. Factors impacting the first quarter year-over-year comp reflected the prior year's quarter including recognition of favorable performance on risk-based deals in Chronic Care, the year-over-year headwind from the previously discussed client contract loss in the second quarter of 2025, and lower expected infectious disease visit volume in the first quarter of 2026 compared to the prior year's quarter due to a timing variation in the flu season. From a cadence standpoint, we'd expect the first half versus second half revenue split in 2026 to be slightly more weighted to the second half relative to 2025, given these factors, although generally consistent with the average split over the past 5 years for Integrated Care. Moving to the BetterHelp segment. we are guiding 2026 revenue down 7% to down 0.5% versus 2025, reflecting a moderating rate of decline versus both 2025 and 2024 at the midpoint of our guidance. With the traction we expect in our insurance offering, we are focused on scaling it through the year and in turn, moderating the level of advertising and marketing expenditure we expect in 2026. Our guidance also reflects continued growth in non-U.S. markets as well as factors such as the macro backdrop, demand levels, customer acquisition costs and churn rates. With respect to insurance, we expect to generate revenue of $75 million to $90 million in 2026, with a steady sequential ramp and exiting the year at an annualized revenue run rate of more than $100 million. As I mentioned earlier, insurance sessions continue to grow at a strong pace, and we expect session growth to continue as we progress through the year driven by several factors, including strong underlying demand for mental health services, together with BetterHelp's planned rollout of new states, increasing payer coverage, adding credentialed providers and growing the insurance user base in existing states. We also launched insurance-covered psychiatry services in February as well as new enhancements such as new scheduling features and instant therapist matching. We expect continued headwinds in U.S. direct-to-consumer cash pay driven both by a challenging consumer backdrop and our intentional decision to further rationalize the level of ad spend given our progress in insurance, an opportunity to refocus investments on scaling this rollout. This outlook contemplates direct-to-consumer revenue in total being down 14% to down 9% year-over-year, inclusive of potential cannibalization from our U.S. insurance rollout. We expect to see double-digit growth in non-U.S. markets with contribution from both the legacy English-speaking offering as well as newer localized market launches. For the first quarter, we are guiding to BetterHelp segment revenue down 11.25% to down 7% year-over-year. This outlook contemplates insurance revenue of $10 million to $13 million in the first quarter, up from $7 million in the fourth quarter of 2025 as well as the timing and impact of advertising and marketing spend actions. We are targeting sequential quarterly revenue improvement for the BetterHelp segment, beginning with the second quarter and continuing through the balance of 2026. We are guiding to an adjusted EBITDA margin of 3% to 4.6% for the full year and 0.75% to 2.75% in the first quarter. Key factors impacting margin include revenue mix, reduced advertising and marketing spend, which we expect to be down by a mid- to high-single-digit percent versus 2025 and investments to enable the successful scaling of the insurance offering. Similar to prior years, we expect to deliver the highest adjusted EBITDA margin in the fourth quarter. As we ramp and mature our insurance position over time, we expect to see improvements in lifetime value, customer acquisition costs and operating leverage as we stabilize and grow the revenue base and offset changes in gross margin from this revenue mix. One final note with respect to guidance, the ranges we have provided at this time for free cash flow and net loss per share do not assume any specific changes in our current debt structure as our remaining convertible notes don't mature until June 2027. However, as we previously discussed, we continue to evaluate various options with respect to our long-term financing needs. Subject to market conditions and absent any other significant developments, our current expectation is that we will address the 2027 convertible notes in 2 phases. The first would be to pay off a substantial portion through a combination of existing balance sheet cash and new traditional term loan debt and do so potentially before year-end. And then second, we would retire the remaining balance at maturity with existing cash at that time. After addressing the 2027 converts, we expect our resulting gross debt position on a go-forward basis to be significantly below the current level and appropriately aligned with our financial profile and needs. We will provide further updates as necessary. In closing, as we move into 2026, we have clear priorities and the foundation to support our growth and performance initiatives. We are focused on execution and acceleration as we progress through the year and strengthening the underlying drivers of long-term performance and business value. With that, let us open it up for questions. Operator? Operator: [Operator Instructions] The first question comes from David Roman with Goldman Sachs. David Roman: I wanted just to maybe see if you could help us wrap a lot of the moving parts together here. I think it's now been 1.5 years of you in the seat as CEO. As you reflect on the guidance here for 2026, it does include another year of relatively challenging organic revenue growth and year-over-year trends in adjusted EBITDA. So where do you think we are in sort of the journey of stabilizing the business? And what is it going to take to get back to more consistent year-over-year revenue growth? And is there a path even growing this business at, call it, a low to mid-single-digit rate? Charles Divita: Yes. Thanks for the question. I think first on integrated care, which I think is primarily what you're asking about, as I mentioned in my prepared remarks, and you know we've talked about previously, this headwind from subscriptions to visits has continued to be a factor. We've had strong underlying growth in visit revenues, but not enough to offset that headwind that's come in subscription revenue. We do see that -- now that we have over 50% of the Virtual Care revenues coming from visits, we do see that moderating and ultimately visit growth being a driver of growth. And that's been a factor out there that we've spoken about. In Chronic Care, we continue to see opportunities in terms of both the bundled products we have there and the level of recruitables. But more importantly, what we've been building over the last year in terms of the clinical foundations, I mentioned the data and AI capabilities and our ability to really drive stronger ROI across populations for our clients. And in turn, that's going to drive growth for us. So we entered 2025 with a very similar product portfolio that we had in 2024. And now with these enhancements and the foundations that we've been building, we think there's a bigger opportunity for us to go after. So yes, I do believe there's growth potential in the business. I do acknowledge the headwind that we've had from the subscription, the visit mix changes. That's been well talked about outside. And the underlying growth in visits, I think, will be a factor for us going forward. In BetterHelp, it's really about the insurance scaling. We were excited to enter the market mid last year. We've been scaling it pretty materially over that time period. And as I mentioned also in my prepared remarks and in the guidance, we're going to see some significant growth in 2026 from that. So I think getting BetterHelp turned around and really leaning into the market opportunity in integrated care, particularly in the U.S. coupled with the growth we're seeing internationally, I think, is how I would answer that. Operator: the next question comes from Richard Close with Canaccord. Richard Close: Yes. Maybe just a follow-up to that, Chuck, in terms of Chronic Care enrollment. Just curious in terms of how cross-sell is going. If you can just talk about the trends there through the most recent selling season, and the new products that you're talking about, are they gaining traction? Or just the level of demand interest currently in the new offerings? Charles Divita: Yes. Well, first of all, our ability to manage across conditions is a selling factor and our ability to do that without multiple integrations in one offering. And that's -- we've had some really good success with that in terms of bundling products and crossing populations. We're seeing continued good interest in our weight programs and our bundled products. So all of that. I think going forward, in addition to the things that I mentioned in my earlier response, it's really about going after the population health more strongly and more broadly. And we are uniquely positioned with the clinical model that we have and that we've been building pretty materially over the last year to be able to go after those populations, provide a range of services, really identify where things are falling through the cracks and develop the right levels of clinical interventions for high-risk and rising risk populations. Those are the things that drive the medical costs and there are also things that drive the human costs. So our operating model and our value proposition and, in turn, our product portfolio is going to lean into that. And that's really where we're going to see the longer-term growth of this company. Clearly, we're out there competing on a day-to-day basis with the product portfolio we have and the competitive environment we have. But ultimately, our ability to lean into this clinical model that we've built is what's going to drive stronger growth going forward. Operator: The following comes from Daniel Grosslight with Citi. Daniel Grosslight: We have one just about the ramp in BetterHelp EBITDA this year. The guide implies a bit of a steeper ramp than prior years. The first quarter EBITDA in BetterHelp is around 11% of full year, in the past, it's been closer due to high teens. Can you just walk us through the cadence of BetterHelp adjusted EBITDA margin improvement this year? What's driving that steeper ramp and kind of the levers that get you to the bottom and top of that full year guidance range? Charles Divita: Yes. There's some moving parts in BetterHelp. Obviously, the level of advertising spend, the most material mover there. And we also have some investments we're making, obviously to scale insurance, really the fundamental drivers of the EBITDA margin. Of course, as you've seen in the past, we do expect the fourth quarter EBITDA margin to be the strongest as we pull back ad spend with respect to the holiday season. But Mike, I don't know if you want to comment further on the ramp. Michael Minchak: Yes. I would just say, obviously, with the investments that we're making to scale the insurance, that's obviously one of the factors that's impacting the first half of the year. So that's, I think, one of -- another factor. Daniel Grosslight: And the levers that get you to the bottom and top end of the range? Operator: The next question comes from Sarah James with Cantor Fitzgerald. Charles Divita: [indiscernible] question if we're still live on the line here. Sarah James: Okay. I don't know if you heard that last question, but I thought it was great. The levers that get you to the high end versus the low end of your 2026 guidance? Charles Divita: I apologize. Can you repeat the question? It broke up a little bit on our end. I apologize if you could restate that. Sarah James: Yes, no problem. Can you walk us through the primary assumptions that differentiate the high end versus the low end of your 2026 guidance range? Charles Divita: Are you talking about -- at a segment level? Sarah James: I would love if you could do the whole company touching on those segments. Charles Divita: Okay. Yes. So I think, first of all, I'll make some comments and then Mike can weigh in. We see the guidance ranges in BetterHelp being wider because of the changes we're making there, both in terms of the variability in the consumer market as well as the ramp in insurance. So that's really a driver of the variability you see on the low and the high in Integrated Care, it's a little bit tighter. But obviously, as our business moves more and more to visit-based arrangements, there's some variability there as well as the ramp of Chronic Care enrollment, those kinds of factors and what we see with respect to some seasonality in our visits. So that's the predominant variation around the range. But Mike, anything else you want to add to that? Michael Minchak: No, I think that covers all. Operator: The next question comes from Jailendra Singh with Truist. Jailendra Singh: Maybe it is a little early to talk about it, but with the 2026 selling season effectively closed, what is the early feedback from 2027 RSP discussions? Are health plans still in the state of its strategic uncertainty? Or is there a clear strength towards unbundling Virtual Care and Chronic Care from broader insurance package? Trying to understand if that health plan headwind you have been talking about might start to ease it a little bit more in the next few quarters or few years? Charles Divita: Yes. I appreciate the question. I would say the -- it's mixed in the sense that the macro environment that we've spoken about and has been facing, and I know you're well aware of in facing the health plans, those things just continue to sort themselves out. And clearly, with the -- what happens with the expiration of the enhanced subsidy is ultimately in their books of business, some of the things that are going on at a federal level. Those things are out there. I would say when I say it's mix, we're having much stronger renewed conversations with health plans, and I would characterize more strategic conversations with health plan specifically about how our suite of services and a vision on what we're building can really uniquely help them in the things that are challenging them the most. And we -- I mentioned in my prepared remarks, what we've done with Catapult as an example, for a large blue plan in terms of their Medicare Advantage population, we need those populations to get their annual wellness visits. It's important to their health, and it's also important to the economics of the health plan. So I think there's a stronger and a renewed interest to really dig in and evaluate how our unique solutions can help them. Another example with our enhanced 24/7 care offering. That's -- it's not your normal 24/7 care. There's a number of features there that are beneficial to all of our clients, but certainly beneficial to health plans in terms of the ability to avoid unnecessary specialist referrals, the ability to navigate patients to the next best action to close care gaps, to address a broader range of services. So those are really resonating in those conversations, and I think they're going to give us a lot of opportunities to lean in with our unique set of solutions. Operator: The following question comes from Jessica Tassan with Piper Sandler. Jessica Tassan: Just given some of the early experience with the insurance paid BetterHelp members, could you just describe kind of how those numbers are behaving? How long are they remaining on the cash pay BetterHelp? When are they converting to insurance paid? And then just as they move into insurance, what is their utilization and retention look like? Charles Divita: Yes. Well, I'll make some directional comments. Obviously, it's still a bit early, right, to draw any definitive conclusions on that. But everything we're seeing that we're looking to accomplish, we're seeing it in the trends in terms of conversion, usage, number of sessions, the interest level in using their insurance. All of those things are consistent with our expectations. And obviously, in our more mature markets, which is still very, very early, but in our more mature markets, we're really seeing that play out pretty consistently. And as I mentioned earlier, the growth in sessions has been pretty significant since we started this, and it's not just in terms of acquired users with insurance, but it's the utilization of services of those acquired users. So all of those things are directionally supportive of what we're looking to accomplish. Obviously, we want to see it play out longer, but we like what we're seeing so far, and that's why we've really been focused on scaling insurance and really yielding the benefits of the funnel and the platform that we have. Operator: The next question comes from Sean Dodge with BMO Capital. Sean Dodge: Yes. Maybe just staying on BetterHelp. Chuck, you mentioned the success you've had recently driving growth by scaling it internationally. I know international pricing is a little different than here in the U.S., but so our customer acquisition cost. So I guess just anything you can share on the margin profile of BetterHelp in the U.S. versus BetterHelp international. Is the mix shift that's happening there, is that responsible for some of this BetterHelp margin pressure you're guiding to? Or is that -- is kind of the mix impact you're talking about on BetterHelp margins. Is that more from the insurance side? Charles Divita: Yes. It's not only the insurance side, but there is a different profile internationally, although we get to the bottom line margins that we're looking to accomplish there. So there's a little bit of that. And now as you know, and I mentioned, international has been growing nicely, and it's now over 24% of the revenues of BetterHelp in the consumer. And with these localized models as well as our English-speaking offerings, seeing nice growth there. If you think about in a lot of those international markets, there's an access issue. And I think with our consumer experience and the ability to resonate locally, there's a lot of interest. Mental health is not just a U.S. issue. So I think that's going on as well as, obviously, the growth in insurance. It does have a different margin profile, but we do believe over time is going to have a different economic construct when you think about customer acquisition costs, lifetime value, efficiency of our ad spend. And I think that's predominantly what you're seeing in the margin profile. Operator: The following comes from Elizabeth Anderson with Evercore. You may proceed. Ayush Vyas: This is Ayush on for Elizabeth. You noted previously that competition from insurance enabled providers has sort of pressured the U.S. cash pay business. As you expand your own insurance footprint, are you guys seeing that competitive dynamic begin to kind of moderate in those markets? And then in the states where insurance has been like the longest, are you seeing any meaningful differences in engagement patterns compared to cash pay users? Charles Divita: Yes. Yes. I appreciate the questions. The -- there's a number of things going on in Virtual Mental Health. First of all, I would say pre-pandemic, I would say there was not as much probably appreciation of recognition of the challenge that we're out there. And I think post-pandemic, unfortunately, we've seen the payers and everyone really understand and focus on mental health and take a number of actions to expand access there. And also Virtual Care post-pandemic is one of the areas of virtual care that's sustained high levels because, obviously, you don't necessarily need to be in person for those kinds of sessions to occur. So all that's been going on. The underlying unmet need is still there. The demand is there. And so I think that's a factor in our growth and the session growth that we're seeing, and you see that with other parties as well. So I think even though we were a bit later joining the insurance market, we do believe there's going to be strong underlying demand, of course, with BetterHelp's position and funnel and experience we should be able to see that going there. In terms of the behaviors, as I mentioned earlier, it's a little bit hard to draw definitive conclusions. But we are seeing good data in terms of when we show insurance, people selecting to use insurance, the number of sessions that we're seeing. So I think the patterns are, at this point, consistent with what we expected. And I think that underlying demand for mental health services is going to continue to bode well for our insurance uptake. Operator: The next question comes from George Hill with Deutsche Bank. George Hill: I'll say one quick one and one kind of more developed one. The first one is, does the AARP relationship have any significant economic drag to it just because I know AARP tends to extract pretty significant like price concessions to work with them to have that relationship. And then on the topic of moderating the BetterHelp marketing spend. My understanding is the correlation of the revenue to that business with the marketing spend has historically been pretty high. So I guess like how do we think about the risk of pulling back on the marketing spend in BetterHelp and the idea that, that leads to accelerating revenue erosion? Charles Divita: Yes. I appreciate the question. In terms of AARP, I will get into details on it, but what we're doing with AARP, we have reflected in the guidance that we have out there and we're excited about it. The ability to be the exclusive mental health care to an organization like AARP and bringing that really 2 leading brands between AARP and BetterHelp to address mental health and really we see it as an opportunity to grow the awareness and adoption within that population and obviously, new opportunities in terms of the funnel. The cash pay component of that, people will be able to avail themselves to a discount in the first month of the cash pay and also insurance seems there won't be a discount there. But standard benefits and cost sharing will apply there, but people will be able to access their insurance as we scale that. And we're also able to, in addition to offering this normal services we have, we're going to have virtual mental health webinars, workshops led by our licensed clinicians, with topics that really resonate with that population. And they also get 3 months free of better sleep to help them with sleep and relaxation and stress. So we're excited about AARP. We haven't necessarily -- we're not quite sure what the ultimate demand generation is going to be there. But we've built it into our guidance, what we're expecting with respect to AARP, including our arrangement with them. What was your second question, again? George Hill: I'm sorry, Chuck. It was just on the -- yes, ad spend, the risk of ad spend, yes. Charles Divita: Yes, I appreciate that. Sorry. there is a high correlation between advertising spend and the direct-to-consumer pay model, and we'll continue to see that correlation we believe we have an opportunity to make that ad spend more efficient. First of all, we have international growth opportunities that are out there and they have a bit of a different expenditure pattern on what it takes to secure that membership. And we also see that there's a number of initiatives to sort of improve the conversion of members. So get more efficiency out of the ad spend, we've broadened our channels, how we -- what levers we pull. So there will be a significant correlation to your point, it is going to be down versus 2025 and 2025 was down versus 2024. But we feel like we've got the right mix of focusing the resources on scaling insurance while also making sure we're activating the top of the funnel. Operator: The next question comes from Brian Tanquilut with Jefferies. Brian Tanquilut: Sorry to pound the table more on BetterHelp. But just as I think about the push into the insurance side of the business, how are you thinking about the KPIs to manage to? And what second looks like when we think of percent of sessions, reimbursed, payer plan coverage breadth, the reimbursement rates to now selection performance, things like that. Just how do we think about those KPIs as we try to think through our models? Charles Divita: Yes. I'll make some comments and then Mike can jump in. So clearly, it's -- we're looking at things like conversion, right, user acquisition. We're looking at the number of sessions that a user -- that a person needs. And we expect that since the -- one of the barriers you will, with respect is cost. And with kind of removing that barrier or moderating that barrier, it's going to be more about therapy decisions as opposed to economic decisions. So we expect to see that. We do expect to not have to maybe spend as much money to reacquire users when people need therapy. So the customer acquisition component of it. We do expect to see some, obviously, gross margin differences in that book of business going forward, but also lower cost to acquire those members and be able to achieve the margins we are. We're also looking at therapist capacity. How many sessions -- how many therapists are on the platform, how many sessions they're able to pursue. I mean, that's one of the benefits of BetterHelp and with this massive therapist network. And we're able to, with the demand we have, fill up their calendars. And as you know, these virtual therapists, they've got to secure patients for their own business model. So our ability to kind of bring that demand and match it up with the therapist is going to be key. And then obviously, there will be some operating expenses as we administer insurance. And to your point, contracted rates with payers for the services we have, and we think we're bringing a lot of value to the table and we should be able to secure the rates we need. So it's those kinds of KPIs. It's not unique in the sense that we have a pretty considerable B2B business in Virtual Care in our Integrated Care business. So we have a good understanding of what those levers look like. Operator: The following is from Allen Lutz with Bank of America. Allen Lutz: Chuck, I want to ask another question on the BetterHelp assumptions for 2026. You had $13 million of revenue in 2025 from insurance. How should we think about the visibility into that $75 million to $90 million? Is that just based on you're in a specific region of the country and that equates to that $13 million. And then the size of the addressable market that you're moving into over the course of 2026 correlates pretty directly to that $75 million to $90 million? Or are there other variables we should think about there? Charles Divita: Yes. In terms of 2025, recall that the acquisition of Uplift brought a certain level of revenues and book of business with them. We were able to acquire a solid base of payer contracts, some capabilities and, of course, some talent. And then as a result of the integration, be able to start launching markets with BetterHelp, starting obviously with Virginia. So the revenues in 2025, we're largely uplift insurance revenues. And so what we're seeing now is a significant ramping of BetterHelp's revenues. And that's why in my prepared remarks, I wanted to share that we're up over 1,200 sessions on average per day, and again, starting from 0 with BetterHelp, not too long ago. And that's been a nice growth week over week over week, and even on that basis at an annualized run rate of over $40 million. So as we roll out new markets, as we have more sessions, more users on the platform for longer, we're seeing that play out in the data, and that's what gives us confidence in the ramp, not only based on state rollout, but also based on utilization and access and awareness. And of course, we're always continuing to add payer contracts as well. And that's really what you're going to see the sequential ramp through the year and why we shared on the last point in the prepared remarks about the exit rate as being around $100 million run rate. Operator: The following comes from Stan Berenshteyn with Wells Fargo. Stanislav Berenshteyn: I guess I'll volunteer myself to ask an Integrated Care question here. So you ended the year with about 102 million members. You're guiding 2026, I think at the midpoint, down 3 million, give or take. Can you comment on the drivers here? How should we think about the timing? It seems at least some of this decrease is going to happen after Q1? And should we expect that dynamic to impact chronic care enrollment at all? Charles Divita: Yes. I think on the latter part, no, we don't expect that. We still have a massive membership base to cross-sell into with Chronic Care. I think what you're -- what we're seeing and what we tried to anticipate in our guidance on that particular number was really the dynamics in the marketplace. We've got strong retention, and so none of that is really related to client loss. It's really the enrollment we are expecting. And the reality of it is, with respect to the Affordable Care Act subsides going away, the health plans to quite yet know what the ending enrollment is, even though we're in 2026 already. We believe there was a lot of people that signed up that we're expecting or assuming that the subsidies might continue and they might disenroll. So we're just trying to factor in what we're thinking there, obviously, the Medicaid situation and ultimately, though, it's less important about the raw enrollment membership council, though that's -- it's a factor. But as we move more towards visit-oriented economics, it's really about visits and utilization. And what we see in some of these membership declines we've assumed that the level of utilization in some of those areas aren't as penetrated as others. So we're not necessarily seeing that as a significant headwind at the end of the day from a revenue generation standpoint, but we did want to share our thinking on the raw number. Operator: The next question comes from Ryan MacDonald with Needham & Co. Ryan MacDonald: I wanted to ask about incremental opportunities for BetterHelp, especially since as you continue to scale the insurance initiative here. Obviously, CMS had announced the access program that's going to be launching later this year, actually covers multiple areas that I think Teladoc could take advantage of in terms of not only mental health but also in diabetes care. Just curious how you view this opportunity given the recently announced reimbursement rates and if it's an attractive opportunity you view for the business to invest towards in 2026. Charles Divita: Yes. I would say, first of all, on BetterHelp. I think we are predominantly focused right now on mostly commercial business. And we've got a number of levers there. I mentioned earlier that we've launched psychiatry in there. So there's a number of levers we have on the BetterHelp side. With respect to ad to access program, it's something that we're continuing to evaluate, certainly aligns with the value prop of our program. And it also -- we frankly like seeing more attention to chronic illness and in particular, even some underserved populations and rural populations. So we're continuing to evaluate it. There's some implications of those programs in terms of the reimbursement levels and other things. So again, it's something that we're going to continue to evaluate. But longer term, I do think it's really good that the country is focusing more on Chronic Care. And frankly, I think our programs play pretty well into that. Operator: The next question comes from Jeff Garro with Stephens. Jeffrey Garro: I'll ask another one on Integrated Care business development. I was hoping you give some comments breaking down demand between the health plan versus employer channels, particularly given some of the challenges for the health plans and the exchange and MA markets and how that all will impact your go-to-market strategy into the next selling season? Charles Divita: Yes. Thank you. So we ended 2025 on a solid footing. We had really good demand and results in the employer channels. And we had good interest in the health plan channels, notwithstanding the challenges I've talked about. So we had some nice wins and some expansions as well as some headwinds and all that. I think for purposes, as we enter 2026, a lot of the dynamics are still in play, a lot of need and interest in the employer markets. But I think even more in the health plan channel, as I mentioned earlier, having more strategic conversations about how we can move the needle on their medical costs. And it varies in terms of the population, it varies in terms of lines of business, in terms of what the drivers are to their economics. But because of our position and the suite of services we have and frankly, the investments and the innovations we've done over the last year, we're in a much stronger position to lean into those strategies. They -- there are some health plans that have brick-and-mortar primary care strategies. We think we can complement those. There are others that are heavily focused in particular lines of business. And so we're really just leaning into where our opportunities are to serve those health plans, move the needle on the populations that they're responsible for and ultimately drive cost outcomes and ROI for them. So I think we're in a good position, notwithstanding some of those macro headwinds that are still out there. Operator: The following comes from Scott Schoenhaus with KeyBanc. This concludes today's conference call. Thank you for your participation. You may now disconnect your lines.
Operator: Good afternoon, and welcome to the BJ's Restaurants Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Rana Schirmer, Director of SEC Reporting. Please go ahead. Rana Schirmer: Thank you, operator. Good afternoon, everyone, and welcome to our fiscal year 2025 Fourth Quarter Investor Conference Call and Webcast. After the market closed today, we released our financial results for our fiscal 2025 fourth quarter. You can view the full text of our earnings release on our website at www.bjsrestaurants.com. I will begin by reminding you that our comments on the conference call today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are not guarantees of future performance and that undue reliance should not be placed on such statements. These statements are based on management's current business and market expectations, and our actual results could differ materially from those projections in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements or to make any other forward-looking statements, whether as a result of new information, future events or otherwise, unless required to do so by the securities laws. Investors are referred to the full discussion of risks and uncertainties associated with forward-looking statements contained in the company's filings with the Securities and Exchange Commission. We will start today's call with prepared remarks from Lyle Tick, our Chief Executive Officer and President; followed by Todd Wilson, our Chief Financial Officer, after which we will take your questions. And with that, I will turn the call over to Lyle Tick. Lyle? Lyle Tick: Good afternoon, everyone, and thank you for joining us today. Q4 was another strong quarter for BJ's, delivering our sixth consecutive quarter of sales and traffic growth as well as our fifth consecutive quarter of profit and margin expansion. From a top line perspective, in Q4, we delivered 2.6% same-store sales growth, driven by 4.5% in traffic growth. On the profit side, we delivered 16.1% restaurant-level operating margins and 10% adjusted EBITDA margins, representing an improvement of 70 and 40 basis points, respectively, year-over-year. Given the strong performance in Q4 2024, I'm particularly proud of how the team worked together to deliver a strong finish to 2025. Worth double-clicking on is the implied check compression between the comp sales and traffic in Q4. Our traffic momentum builds on the progress we have made throughout the year and underlines the continued improvements in operations, the resonance of the Pizookie Meal Deal and BJ's relevancy in the holiday and social splurge occasion. Two additional drivers in Q4 beyond these foundational elements are the buzz around our LTO Pizookies, which brought in a hard-to-reach younger demographic and drove an increase in the number of what we call Pizookie trial checks as well as our continued outperformance in late night. While both of these occasions carry a lower dollar check, they help us continue to introduce BJ's to new customers, give existing guests new reasons to come back and sustainably grow sales and profit dollars. For the full year 2025, on the sales side, we ended at 2% same-store sales growth, driven by 2.8% in traffic. And from a profit perspective, we landed at 15.5% restaurant-level operating margins and 9.6% adjusted EBITDA margins, representing an improvement of 110 and 100 basis points, respectively, year-over-year. As I talked about previously, 2025 was a year of strengthening foundations and learning, guided by our 4 strategic priorities. We created alignment, understanding and shared ownership of our strategy. We built trust, improved accountability and showed resilience when encountering performance challenges. We added 3 strong new leadership team members who have integrated well and made a difference with Jen Jaffe, our Chief People Officer; Tom Kowalski, our Chief Supply Chain Officer; and most recently, Todd Wilson, our Chief Financial Officer. We clarified our growth drivers and continue to refine how to leverage them most effectively. In Q4 specifically, the combination of better execution, value rooted in the Pizookie Meal Deal and compelling product news driven by seasonally relevant Pizookies and the renovated pizza platform allowed us to continue to deliver strong traffic-driven growth. We evolved our marketing strategy, leaning more heavily into social and word of mouth to support our product news, while leveraging broader paid channels to deliver value through the Pizookie Meal Deal messaging, further refining how we deploy media and message most effectively. Throughout Q4, consistent with 2025 overall, our key metrics continued to build confidence in our progress with improvements across our NPS scores, our team member retention, operational metrics and frequency across age and income cohorts. Some key callouts with respect to Q4. On the team member experience side, we completed the rollout of our new manager and hourly team member training. On the menu front, we built on our seasonal Pizookie momentum with 2 successful LTOs with the return of the Monkey Bread Pizookie and the introduction of the Dubai Chocolate Pizookie, which also had an accompanying Martini. We launched the renovated pizza platform, which is resonating well with guests and performing consistently with what we saw in test markets with incidents up just under 10% and check-in margin in line with expectations. We ended 2025 with a net reduction of 6 menu items and 4 ingredient SKUs. From a brand perspective, our marketing teams continue to do a great job optimizing how we deploy our media and messaging. In Q4, we leaned more heavily into word of mouth and social with relevant product news, which drove significant dialogue, interest and trial as reflected in our traffic numbers. Together, these launches generated a 4x increase in Pizookie impressions quarter-over-quarter, outperforming what had previously been our strongest social performance with Spooky Pizookie in Q3. It also drove overall organic social impressions up 12x year-over-year in Q4. On the operations front, we continue to lean into our core initiatives to drive everyday table stakes improvements and made further progress across our key guest and team member metrics with NPS recommend scores up just under 10% in the fourth quarter, led by improvements in pace, value and food scores. We deployed our AI-based activity-based labor model to 30% of the system at the year-end and intend to deploy to the full system in 2026 and pilot a follow-on use case. With respect to Keeping Our Atmosphere Fresh, in 2025, we completed 19 remodels, bringing the total to just shy of 50% of our pre-2016 fleet as of year-end. We also modernized our facilities program, tagging and tracking all of our equipment, moving from a more reactive to a more planful approach to ensuring that our team members have the tools they need to deliver on our high standards, and we can put our best foot forward with our guests. As we enter 2026, we've continued to see positive momentum in the business. While calendar shifts and weather always create noise in Q1, I'm pleased with our performance so far in the quarter and our performance versus Black Box, which continues to outperform on both sales and traffic year-to-date. As I look ahead through 2026, I'm confident in our plans, and we remain focused on delivering consistent growth and improving shareholder value by putting the guest and team member at the center of everything we do. Our 4 strategic priorities remain unchanged. We will continue to focus on Investing in our People, ensuring they have the tools and support needed to bring our brand to life every day. We will advance our operational excellence initiatives focused on making BJ's better and easier for both team members and guests. We will progress our menu renovation work and set the foundation for future net unit growth. Our team members are the heart and soul of BJ's. In 2026, our key priorities with respect to the team member experience will be training, embedding the new manager and team member training, ensuring our teams have the right support to deliver for our guests, leadership development, refreshing our high-potential development programs as we continue to build restaurant and above-restaurant management pipeline to support future growth and culture, continuing to build engagement and alignment around our values and behaviors. With respect to Handcrafted Food and Beverage, we will progress our menu renovation work across our priority categories. We kicked off the year building on 2025 momentum with the Butterfinger seasonal Pizookie, our first LTO pizza with Mike's Hot Honey, which quickly became our third most popular flavor out of 9 and a Korean Sticky Rib appetizer leveraging an existing wing sauce and ribs to create an easy and craveable new option. We also removed 2 lower-performing items that were heavy on single-use SKUs, which resulted in the removal of 5 single-use ingredient SKUs. As we move forward in 2026, our culinary priorities will be to continue to drive buzz and engagement with seasonal Pizookies, and I'm excited about the pipeline we've built, continue to renovate our core categories, refresh strong sellers with clear NPS and executional opportunities, and continue to find opportunities to simplify while maintaining and protecting the turf coverage that allows us to win across so many occasions and consumer groups. We're currently in market in the early stages of testing refreshes to our burger category and chicken sandwiches. Our culinary team has been hard at work, and we have a pipeline of category and core item improvement tests that will follow suit. These refreshes are still in their early stages. And like we did with pizza, we will follow a structured approach to gain operational and guest feedback and make adjustments ahead of rollout. And also like with pizza, I will provide further updates as appropriate. Our third priority is Delivering WOW Hospitality. Our focus in 2026 is to build off the foundations we've laid and continue to improve our guest satisfaction, throughput and efficiency. We'll continue to focus on great fundamentals and not seeding conceded ground by continuing to drive accountability through our directors of operations and GMs, having clear and consistent KPIs, lifting up our outliers and driving best practices. Our simplification team continues to work to remove unnecessary barriers and complications, things like integrating Apple Pay into pay at the table, simplifying split check procedures for our team members, simplifying Pizookie and cocktail ordering and ringing in processes and so on. As mentioned previously, we'll continue to advance our technology initiatives to help our GMs and managers have the right people in the right place at the right time. 2026 is an important year for our fourth strategic pillar, keeping our atmosphere fresh. We're going to continue to invest in our remodel program, which has shown strong results and pilot a refreshed BJ's prototype, setting the foundations to grow our restaurant portfolio. With the progress we're making on the core business, we're now laying the groundwork to reignite net unit growth. We're actively building a flexible pipeline as we target up to 2 new openings in the second half of '26 to pilot a refreshed prototype and set the foundation for further growth in 2027 and beyond. You will see this reflected in our capital allocation for 2026, which Todd will talk about in more detail. Before I close, I would like to once again express my thanks to all our BJ's team members from our restaurants through the support center for their passion and commitment. I'm proud of the progress we made in 2025 and excited about the road ahead. I will now turn it over to Todd to provide further color on how we closed the year and our 2026 outlook. Todd Wilson: Thank you, Lyle, and good afternoon, everyone. As Lyle has just outlined, the BJ's brand and business are healthy and thriving. In fiscal 2025, BJ's delivered growth across all key financial measures, sales, traffic, restaurant level profit, net income, EPS and adjusted EBITDA. Comparable restaurant sales increased 2%, restaurant-level profitability increased 110 basis points to 15.5% and adjusted EBITDA increased 14.5% to $134.1 million. Turning now to the fourth quarter. In the fourth quarter, we generated total revenue of $355.4 million, a 3.2% increase versus last year. Comparable restaurant sales increased 2.6%, led by 4.5% traffic growth and a 1.9% lower average check led by the drivers Lyle outlined earlier. Restaurant-level operating profit increased from 15.4% last year to 16.1% this year, led by the leverage benefit of growing sales and continued efficiency gains captured by our operators. Cost of sales was 25.5%, 40 basis points favorable to last year. The favorability was led by menu price increases and continued gains from our gross to net initiative focused on simplifying the efforts of our team members and more consistent execution for guests. This favorability outweighed food cost inflation led by beef costs of approximately 14% higher than last year and increases in produce costs, partially offset by favorable poultry prices. Total labor expense is 35.8% of sales in the fourth quarter. While this result is unchanged versus last year, our restaurant teams continue to operate more efficiently while also delivering higher guest satisfaction. The efficiency gains are a credit to the great work of our operators and overall simplification efforts with contribution from the activity-based labor management tool that is rolled out to approximately 30% of the system at year-end. These efficiency benefits were offset by increased bonus costs for restaurant management as a result of the sales and profit growth, and we continue to see higher workers' compensation expense due to rising medical costs despite our progress in reducing the number of claims. Occupancy and operating expenses, which include marketing, was 22.6% of sales in the fourth quarter, a 30 basis point improvement versus last year. Sales leverage more than outweighed inflationary pressure across the category. General and administrative costs are $25.1 million and 7.1% of sales, an increase of 20 basis points compared to last year. The increase is a result of 2 primary factors. First, we determined that certain previously capitalized expenses no longer held future value and expensed them in the quarter. Second, we incurred costs related to different aspects of leadership transition, particularly in the finance function. Excluding these unusual expenses, our run rate for the quarter would have been approximately $22 million or 6.2% of sales, in line with expectations. Depreciation expense increased 30 basis points compared to last year as a result of our investments in restaurant renovations and new restaurant openings. These components delivered growth across all profitability measures. Net income in the quarter increased to $12.6 million in 2025 as compared to a loss of $5.3 million in 2024. Adjusted EPS increased 40% to $0.66 per diluted share from $0.47 last year. And adjusted EBITDA increased to $35.6 million, a 7.4% increase compared to $33.1 million last year. In the fourth quarter, we repurchased and retired approximately 167,000 common shares for $5.4 million. During fiscal 2025, we repurchased approximately 2 million shares at an average price of $33.80. With over $90 million of Board authorization to purchase additional shares remaining, we have significant capacity funded by the business' durable and growing cash generation to repurchase shares when the market price is at a meaningful discount to its intrinsic value. Importantly, our balance sheet remains healthy as we ended the fourth quarter with net funded debt of $61.2 million, comprised of a debt balance of $85 million and cash and cash equivalents of $23.8 million. Now turning to 2026. Our financial guidance for 2026 is as follows. First, comparable restaurant sales growth from 1% to 3%. We expect continued traffic growth and a marginal increase in average check as we anniversary promotions that affected check in 2025 and implement prudent pricing action to address inflation. I would note, comp sales results to date in the first quarter, including the impact of Winter Storm Ben in late January are in line with this annual guidance. Second, restaurant-level operating profit of $221 million to $233 million. We expect sales gains and further efficiency from initiatives, including gross to net and cost of sales, activity-based labor management and multiple initiatives from our supply chain team to drive this growth versus 2025 and outweigh approximately 2% to 3% inflation in our commodity basket, labor rates and other costs. Third, adjusted EBITDA of $140 million to $150 million. In addition to the restaurant level operating profit, we anticipate total G&A costs will normalize near $90 million or 6.2% of sales, a 30 basis point improvement versus 2025. This G&A estimate is inclusive of approximately $11 million in stock-based compensation expenses. Fourth, capital expenditures of $85 million to $95 million. This is an accelerated pace from 2025 and represents incremental investments in IT and a restart of our new restaurant opening pipeline. On the new restaurant front, we expect to open up to 2 restaurants in the second half of 2026 with additional restaurants under construction in 2026 slated for 2027 opening. Fifth, we may repurchase up to $50 million of stock depending on market conditions. This is an important lever that demonstrates the cash-generating power of the business. We expect cash from operations to fund our CapEx, including an accelerated pace of new restaurant openings and have flexibility to return excess cash to shareholders through the share repurchase program or use it to further strengthen our balance sheet. As we demonstrated in 2025, we have the financial capacity and intent to put our capital to work, buying back stock when the market undervalues our shares. Finally, as we model the quarterly shape of 2026, I would note 2 items. First, inflation accelerated in the second half of 2025, led by beef commodities, and we expect that elevated inflation to carry through the first half of 2026 before moderating in the second half. Second, we expect a more even spread of G&A across the quarters in 2026 than 2025, resulting in a G&A increase in the first half of the year and reduction in the second half. While we expect to increase our profitability in all quarters, as a result of these factors, we expect growth to be more measured in the first half of the year then accelerate in the second half. In closing, 2025 was a tremendously successful year for the BJ's business. Financial results across all key measures increased significantly as the team executed across all aspects of the strategic plan. Congratulations, and thank you to our restaurant team members, field operators and everyone at the restaurant support center. As we look forward to 2026, we are confident in our strategic direction and our ability to continue to sustainably grow the business to create value for shareholders. With that, we'll turn the call over to the operator for questions. Operator: [Operator Instructions] The first question is from Jeffrey Bernstein with Barclays. Jeffrey Bernstein: Great. I wanted to talk a little bit about the comp components. Clearly, the traffic is very strong and seems to be driven by a lot of compelling value. But on the flip side, I guess, you talked about how the mix shift seems to be down somewhat large in the fourth quarter. I'm just wondering how you think about your mix of sales on value, however you define it, what -- where that is now versus where it was a year ago? And if you're comfortable with the balance of value versus premium or whether the value mix might be too high? Just trying to think about the mix shift in general and what your expectation is as we look through '26. Lyle Tick: Yes. Sure, Jeffrey. This is Lyle. I'll start off and Todd, you can build. I mean as you look at Q4, I wouldn't actually -- I mean personally, I wouldn't characterize it as value particularly in Q4, taking a larger role, right? Because it wasn't -- in Q4, it's not like the Pizookie Meal Deal suddenly took a much larger role, and that's what drove it. It's -- the Pizookie Meal Deal continues to resonate and have growth. But actually, what drove some of that delta between sales and traffic, which is the implied check compression was the kind of resonance of the seasonal Pizookie that we had. And so we have people coming in. They're not buying the Pizookies on a discount per se. They're just coming in to try Pizookies. And you see what we see is a younger cohort coming in, which I'm pleased with, right? It's a hard group to get, and we have more of those folks coming in. You combine that with better operations, hopefully, more of those folks will then choose to potentially come back. But we are seeing more of those checks where it's them coming in and having a Pizookie or not everybody is having an entree or you're having a Pizookie in some drinks. And so we saw a resonance and real movement there in mix. And then we continue to see the outperformance of late night in Q4. So the things that drove more check compression in Q4, I wouldn't necessarily think about as headwinds, right, so to speak, or like more from a discounting perspective. There's other small things in there like in our features for the holiday season. This year, we featured salmon over the ribeye given what was going on with the cost of steak. That carried with it a bit of a lower check but a better margin. So there's a number of little things in there, but I wouldn't say it was driven by a sudden jump in reliance on value in Q4 versus what we've been seeing. Todd Wilson: I'll just quickly add 2 items of building on Lyle's point of the any "trade down in check or lower check", it's just a mathematical equation of we drove incremental traffic at a lower check average with those -- especially those seasonal Pizookies. The other piece I'd call out, and I think it was part of your -- where you're going, as we look forward to 2026, we do expect -- we continue to see PMD grow, and that's obviously a good thing for us as that value message resonates with guests. And so we do expect to see some continued check trade down, but not to the degree that we saw in 2026, meaning we do expect some expansion of net check. And that's just a matter of the pricing to cover off inflation. Jeffrey Bernstein: Understood. And can you share the -- just on the inflation side, I think you called out a couple of particular commodities, but just wondering what the commodity and labor inflation was in the fourth quarter and what your outlook is for full year '26? Lyle Tick: Yes, absolutely. So the total basket in the fourth quarter was about 2.5%. We called out beef. We called out produce as the big drivers of the commodity basket. Labor was a similar ballpark between 2% and 3% in Q4. We think the first half of the year, quite frankly, will be in the 3% to 4% range in terms of total inflation. Those same drivers really drive the start of the year, but then we see that moderating in the back half. Operator: The next question is from Brian Bittner with Oppenheimer & Company. Brian Bittner: 4% traffic growth in the fourth quarter, really impressive. I think it was your sixth straight quarter of positive traffic. And as you look to '26, your 1% to 3% same-store sales guidance, I think it clearly builds in a more balanced check and traffic, I think, and that's kind of what you just said to Jeff's question. And just in your internal models, how are you anticipating the overall comp trends could be throughout the year? Do you expect them to be pretty steady throughout the year? Is there any interesting drivers we should be aware of that happened post first quarter? Todd Wilson: I don't think there's anything we call out. There's obviously some movement in our internal models, but I don't think it's enough to call out. I go back to some of the comments we made in the call, Lyle commented on this, and I did as well that we're pleased with the start of the year. I pointed to our annual 1% to 3% guide and that our results to date are in line with that. And so that gives you a sense of what we're seeing at least so far in Q1. I know there's been thought internally and externally about anniversarying PMD, which the company did successfully back in 2025. And so we're always looking ahead to make sure that we're planful in those things. I think you see that in the fourth quarter with the seasonal Pizookies that kept that momentum going. So we try to be very planful there. But ultimately, I wouldn't call out anything as big movements within the quarters. But to be clear, we are looking to grow comp sales and expect to grow comp sales and traffic in every quarter. Brian Bittner: Okay. And just a follow-up on the restaurant profit guidance, I think it assumes kind of a 50-ish basis point expansion in restaurant level margins. If you can just kind of confirm that. And you've been on this really strong margin expansion path recently. What's going to keep the margins expanding as we look forward in '26? If that 50 basis points is the right kind of base case, where is that coming from? Lyle Tick: Yes, I'll start, and Todd, you can jump in. The -- as we look at next year, I mean I think there's 3 components to it, right? One is delivering consistent sales growth, right, and having some leverage on the top line, which I think I've maybe been a little bit repetitive on is that we're really focused on delivering a more consistent and durable BJ's that delivers that kind of consistent growth. So that helps. Number two would be the continued focus on the programs that I've talked about previously, which is we have a really strong core set of KPIs that we're driving accountability down through our teams. We're really focused on bringing up our outliers or kind of our bottom quartile of performance. So continuing to bring that bottom up. And so you see ideally everybody getting more efficient, but that bottom coming up and getting more efficient than the rest. And then as you look at things like our gross to net, that is going to be a continued focus that we're pushing against with a particular focus on comp food and beverage, right? That is a continued area for us of real focus. Because for me, that is the best indication of when you're moving that, that suggests you're executing better, you have less bad conversations with guests, you can turn tables quicker. So none of that is totally wrung out. I think also I've talked about previously, as we look at continuing to roll out the activity-based labor model, that's going to be rolled out over 2026. We're going to do that in a measured fashion because you kind of roll it out, you need to learn, get adoption from the GMs and keep going and you don't want to see conquered ground. So it may be more of a 2027 impact. But that -- as that rolls out, the [ ABLM ] is suggesting there are some hours that we can save. I think I've talked about this a little bit before on the shoulders and on our lower shifts and in the high times, we actually need more labor. But the real focus for us on the [ ABLM ] has been consumer metrics, right? And are we seeing improvement across our pace, across our food quality, across hospitality. That's the real kind of, I think, focus on having the right people in the right place at the right time. But I think as you observed on a lot of those initiatives, I think last year, we were able to get a lot of what was kind of more obvious, if you will. And that as we come into this year, you are seeing the level of expansion not be quite as big, right? And it's because as we come over that, while there's more to have there, each year we come over that, we expect to get more efficient and effective. But the degree of it is going to evolve over time. Todd Wilson: Brian, just quickly confirming that the -- you mentioned the 50 basis points or so that we're thinking about it the same way, I'd say, in broad strokes, that's in the range of what we would expect. So your math aligns with ours. Operator: The next question is from Sharon Zackfia with William Blair. Sharon Zackfia: It's really interesting to continue to hear about the LTOs on the Pizookies bringing in younger demographics, and it sounds like it really accelerated for you in the fourth quarter. It may be too early, but what does engagement look like with those customers after they do come in for an LTO? Are you seeing kind of a tail of engagement with those cohorts? Lyle Tick: You're right. I mean given average frequency of our business in full service, it's too short of a time for me to feel comfortable saying, I definitively am or not. So I want to get more time under our belt. I think big picture, as we looked across 2025, we did see increases in frequency across our age and income cohorts with a little bit more on the younger and a little bit more on the older and more actually on the lower income cohorts. And I think those dynamics to me show -- and this is, again, my inference. But you look at it and you look at the growth and you look at the mix are correlative to the resonance of PMD and the resonance of Pizookie. But it's too early for me, Sharon, yet to definitively tell you that, that is true. Sharon Zackfia: That's completely fair. Are you doing something different in social media? Have you augmented your capabilities there? Or is that increase that you alluded to, is that just organic and coming from your consumers? Lyle Tick: No, no, no. It's -- we've changed kind of the way we go to market. I mean we did bring on a new team member here who's doing a great job, who is far more socially conversant than anyone than Todd or I or Rana, anyone in this room in fairness. We also have looked at some of our agency resources. But when you look at the shift, a lot of our social previously was what I would call kind of brand-produced top-down that we would then push out. And we've not only increased our investment as a percentage of our overall spend in social and influencer. But now that content is really influencer-produced versus brand-produced. So people speaking on behalf of us versus us just speaking on behalf of ourselves. Sharon Zackfia: Great. And then last question. Now that we've kind of fully lapped the meal deal, how does the weekend traffic look versus weekday? Lyle Tick: As we look through Q4, we saw growth through Q4 of all dayparts grew with the highest growth coming from late night. But yes, I'm looking at it right now. So as we look at all dayparts grew and late night was the biggest grower with mid-afternoon and dinner being quite similar and lunch growing, but not quite to the same amount. So that's what we saw from a daypart point of view in Q4. Operator: The next question is from Brian Mullan with Piper Sandler. Allison Arfstrom: This is Allison Arfstrom on for Brian Mullan. On the refreshes to the burger category in chicken sandwiches, curious if you could speak more about what led to the decision on these 2 platforms? And then what opportunity might be there and if we should expect a similar time line or stage gate process as the pizza relaunch? Lyle Tick: Yes. I mean so working backwards, in terms of the process, yes, the process will be similar for most things that we take to market, right? We're going to identify opportunities through 2 things. One is, as we look at our menu satisfaction, intent to reorder, value perceptions, all of those things, that helps us identify areas of opportunity. We look at kind of what are driver categories, so what categories attached to a lot of checks. And then generally, upstream on the big categories, we'll do some screener work to get a sense of conceptually, are we in the right space from a consumer. And then as we go to market, operations feedback, guest feedback. Just like with pizza, I would expect we'll have to do some tweaking when we get that and then go to market. So the process will be the same. I may have answered both questions there about kind of how we identify it. But we're too early in the -- it actually being in test market for me to have any material stuff to talk about. Operator: The next question is from Todd Brooks with Benchmark StoneX. Todd Brooks: First question, on the activity-based labor, I think you talked about a ratable rollout across the course of this year, 30% was in the barn last year. I mean by celebration season this year, you think you're kind of 50% penetrated with having it rolled out? Lyle Tick: I don't know if we'll be all the way to 50%. I would say celebration season is probably the season where we are most cautious about creating disruption. So I think in the first half, we'll have some more rollout. I don't know if we'll get all the way to 50%. I think our windows for rolling something out that we have to kind of intake and get comfortable with. Q1 is a pretty good window and Q3 are pretty good windows. So it's not that we won't advance it at all, but we want to be really judicious about any disruption that we might cause during celebration season as GMs get used to it because there is a getting used to it, right, when you go now to getting that labor schedule from the AI and kind of learning how to balance the GM's overlay with AI. There's a bit of a learning process, which we've seen in terms of getting comfortable with it. So we'll be judicious about how much of that happens over celebration season. Todd Brooks: And just kind of looking at some of the earlier units that have implemented the platform, you talk about wanting to see a bend higher in certain scores. Can you start to put a framework around how much improvement you do see once the store is on that platform? Lyle Tick: I mean I'm not going to be -- I won't give specific numbers at this point. But when I look at the shape where we're seeing improvement, we're seeing improvement pretty much when you look at the pre-post versus the control group across pretty much all of our metrics. The one that we're actually seeing move the most is pace, which is -- which I'm encouraged by because it's about getting the right people in the right place at the right time. So that's where I'd like to see the most movement. The others, we're seeing movement, but varying degrees of movement. But pace seems to be the one that's getting the most improvement, which would be, again, as you might imagine, a core metric for getting the right people in the right place at the right time. Todd Brooks: Okay. Great. And the final one for me. Todd, you said earlier in Q&A that you continue to see the Pizookie Meal Deal grow. Can you talk to what mix looked like in the fourth quarter maybe versus what you were seeing in Q3 as far as percent of checks on PMD? Todd Wilson: Yes, absolutely, Todd. When we look back at Q4, PMD grew almost 16% of checks in the fourth quarter. That was up almost 2% versus the fourth quarter a year ago and an increase versus Q3. So broadly, that platform continues to grow for us, which there's obviously been a lot of traffic associated with that over the last 5 or 6 quarters. So it's good to see that. That does come, Lyle hit on this. The check is just a little bit lower is what we see on the PMD checks. It's about 5% lower. So there's a little bit of a check trade-off there, but obviously, getting that traffic in is a big win for our business. Lyle Tick: Yes. And the only other thing I would build on there, the percentage margin of those checks looks a lot like the percentage margin of our other checks. If you look at over the course of all of 2025, it's about 15.5% of checks and Q4 was a little bit higher than that. And when you look at it as kind of a percentage mix of sales, it's more like 6%. Now that's full week, Brian (sic) [ Todd ]. I know we've talked about in the past, which remains true that during the week, you're in kind of a -- Todd, sorry, you're in the low 20s, Todd, when you're looking at during the week. Operator: The next question is from Jon Tower with Citi. Jon Tower: Maybe -- I'm curious to hear that you guys are seeing relatively strong late-night business. It's good to hear. I'm just curious, one, if you're doing anything special to drive it relative to what you've done in the past? And is that also inclusive of the off-premise business when you speak to the strength there? Lyle Tick: Well, so the -- I mean all of late night is growing. I'll let Todd pick up on the channel mix because I don't have that answer at hand. Jon, I wish I could tell you that we were doing something super unique to drive the late-night business. I think we have a great environment. I think we have a good offer because our happy hour offer we offer at late night. And I think I've talked about this before, I do think some of it is supply and demand. I think on balance, in the past several years, if anything, you've seen less people kind of either extend or go back to kind of full hours. And I think there's less late night supply. I think we probably have some demand coming back. And I think we are a great or better alternative to a lot of folks for late night. And I think that's helping us win. But we don't have like a specific marketing push or very specific unique like offer for late night that is uniquely driving it. Todd Wilson: Jon, I'll tag in on -- Jon, just to give you -- it's Todd here. I'll give you some quick color on off-prem versus on. As we look at -- if you just split our business into on-prem versus off-prem, the dine-in business, the on-prem business is incredibly strong. Obviously, that's the majority of our business in the quarter. Traffic in dine-in was up almost 7%, a little over 7%. So just tremendously strong there. The off-prem part of our business has seen declines. That wasn't new in Q4. That has been a headwind for us for the past few quarters. And so it's a matter of -- we've got folks dedicated to work to address that, but the strength of the dine-in business is particularly strong. Jon Tower: Okay. And just following up on the comment regarding late night. That anywhere near -- like if you guys were to recover, I guess, from an average weekly sales standpoint, back to peak, like how much more room do you have to go or better ask like how far has late night declined relative to your kind of peak times or peak windows or years? Lyle Tick: I mean honestly, I don't have the number to hand of whether we're there or whether late night, if we look back, I assume we're talking like kind of pre-COVID like what the late night AUV was. I mean what I can say is as part of what we talked about in Q1, which is the continued momentum we're seeing in Q1, the shape of that continues to see particular strength in late night. So that has continued into this quarter. I don't know, Todd, if you have [indiscernible] in terms of specific AUV. Todd Wilson: Jon, maybe we can tag those... [Technical Difficulty] Jon Tower: Okay. Hopefully, you guys can still hear me. Just one last question that I had. Okay, great. Just you had mentioned, obviously, you're going to be opening new stores in the back half of this year. Can you just speak to what the new prototype might look like, high-level features that are different versus the baseline they could even just be square footage. But I would assume there's probably a little bit of a differential even off-premise access to the stores versus maybe some of the legacy asset base that you have today and even the cost to build? Lyle Tick: Yes. So I mean as we look at it, right, I mean from a design perspective, I think what we're ultimately trying to achieve is a contemporized expression of our brand that is familiar to the people who know and love us, but also kind of exciting to new guests. And we leveraged our brand positioning to do that design work. And so I think it will feel familiar but contemporary. And we have, I think, some branding elements that we're bringing in that are evolved and new. I think how we're using some of the nods towards our craft beer heritage with the silos is going to be evolved and new. So there's a number of things, but it won't be -- it will be a familiar but contemporized version. As we look at the footprint of it, I'm a big believer in right size, right cost, right place. Now the first couple that you build in my experience doing this are generally relatively prototyping. And then as you kind of go forward, and so as we look into the next couple as we move into 2027, I think we will be looking to look at building them not always at the same square footage, maybe in certain markets, it would be relevant to go smaller. I think we're looking at conversions in the appropriate markets. So we're not going to be dogmatic about every time it has to be just a prototype ground-up build. And so part of that influenced the design process, whereby what we're really coming out with is a clear set of brand standards for BJ's that we can apply to different sizes, different shapes, but it always looks and feels like a BJ's. With that on a cost to build size, I mean, really, what we look at by each individual evaluation of a new unit is do we feel like it's delivering an attractive IRR so that we're being good stewards of the capital. But we are obviously conscious of what is going on with construction and inflation. And so as we built the new design, we are looking for opportunities with that kit of parts to be able to apply them flexibly and get the kind of cost to build to sales and profit and ultimately, IRR where we want it. But I think what you'll see going forward, Jon, is in certain markets, you're going to see something that looks quite like the size of a BJ's right now because it's appropriate for that market. And in another market, you might see something of a smaller footprint or a conversion that allows us to deliver the right return for the capital we put in. Jon Tower: Great. And have you shared those IRRs before that you're targeting? Lyle Tick: I don't know that we've -- I think that we've shared it before. I mean in the past, I think we talked about like mid-teens IRR would obviously have us at a place where it exceeds our weighted cost of capital. But I think our ambition is far better than that. Operator: This concludes our question-and-answer session, and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Ridley Corporation Limited, RIC 1H FY '26 Presentation. [Operator Instructions] I would now like to hand the conference over to Mr. Quinton Hildebrand, Managing Director and CEO. Please go ahead. Quinton Hildebrand: Thank you, and good morning to everyone. Thanks for your attendance on our conference call today. I have with me Richard Betts, who will present his final set of financial results before retiring from Ridley after 5 successful years. We also have Chris Opperman, incoming CFO, who started at Ridley on the 5th of January. Chris joins us from Energy Australia, where he was CFO. And prior to that, he was with Dyno Nobel, where he held a number of executive leadership roles, including CFO and later President of Incitec Pivot Fertilisers. For this morning's address, I'll be talking about the slides that are uploaded on the ASX website. So starting on Page 2, the financial summary. The business delivered a first-half underlying EBITDA of $55.4 million, a 9% increase on PCP. This result included 3 months' contribution from the new Fertilisers segment and a strong performance in Bulk Stockfeeds, which carried the softer outcome in the Packaged and Ingredients segment. I'll speak to the performance of each of these segments in the next few slides. As you will see, we had a very positive operating cash flow, and this has reduced our net debt, with the leverage ratio post-acquisition now at 0.8x. On the back of this performance, the Board determined a progressive dividend of $0.051 per share, fully franked. Moving to Slide 3. The Bulk Stockfeeds segment delivered an EBITDA of $27.1 million, up 25% on PCP, a very pleasing result, especially when you consider that there were $1.7 million in lost earnings in FY'25 from the Wadley feed mill, which was sold on the 30th of June 2025. This result was achieved by 13% volume growth in ruminant sales and 7% volume growth in monogastric sales, together with higher-margin supplementary feeding of beef and sheep at the start of the period. Once again, Ridley Direct, now in its fourth year, was able to generate profit by leveraging our grain and co-products procurement flows and accessing a broader customer network. Moving to Slide 4. As we foreshadowed at the AGM in November, the Packaged and Ingredients segment had to contend with a number of short-term challenges, which decreased the EBITDA by 28% to $25.6 million. Short-term ovine supply constraints at OMP due to lower lamb slaughter rates across Australia impacted sales through this period. We endured lower prices for protein meals when compared to the prior year. And lastly, we experienced some temporary processing challenges. The first was due to a slip in the main cooling dam wall during a rain event at the Maroota rendering facility. This made this dam inoperable and imposed processing constraints, requiring us to incur costs diverting material to Laverton and other processes. The second temporary processing challenge has been with the commissioning delays at the new OMP Timaru greenfield facility, which has impacted our daily throughput and yields. On the positive front, the raw supply volumes to the rendering plants grew 7%, and the packaged dog sales also grew 7%, taking up the extrusion capacity vacated from the aquafeed transition. So a challenging period for the Packaged and Ingredients segment, which should correct itself through the second half as we've added additional supply of land bones to OMP and are addressing the processing constraints with capital projects, and I'll address these in greater detail later in the presentation. Moving to Slide 5. The Fertilizer segment delivered an EBITDA of $10.3 million, above the top end of our expectations and above the PCP under the previous owner. This was achieved through good cost control and margin management in a period that is known to be the lowest seasonal demand quarter. To provide some context, on the right-hand side of the slide, we've provided the average monthly volumes dispatched by Incitec Pivot Fertilisers over the past 7 years. This clearly illustrates that our Q2 is the lowest seasonal demand period and also shows how our dispatches build in Q3 and Q4. The table below the graph offers some more detail on the timing of the various crops and the volume intensity in each month. I'll now hand over to Richard, who will take you through the financial results in more detail. Richard Betts: Good morning, everyone, and thank you, Quinton. I will now present the financial results for the first half of FY'26, beginning with the profit and loss summary on Slide 7. Quinton has already talked you through the operating segments, which delivered a combined EBITDA for the half of $63 million. The corporate costs increased by $0.8 million to $7.6 million, with the increase primarily associated with the employee incentive schemes, which now incorporate all the employees of the IPF business. The reported underlying EBITDA of $55.4 million represents a 9% increase on the PCP. During the period, the business reported net individually significant gains after tax of $31.4 million, which related to the acquisition of the IPF fertilizer business. I will cover this in greater detail in a later slide. Depreciation and amortization for the period was $18.6 million, a $3.5 million increase on the PCP. This relates to the depreciation and amortization of the newly acquired IPF business, which totaled $3.6 million. The underlying depreciation included several significant capital projects that were depreciated for all or part of the period, including the recently completed debottlenecking projects. As anticipated, finance costs increased from $4.9 million to $8.7 million on the back of debt funding relating to the acquisition of the fertilizer business, which was partially offset by the interest received from the half 2 FY '25 capital raise. The income tax expense for the underlying operations decreased by $1.6 million as a result of the lower profit before tax. The underlying effective tax rate was 29.9%, an increase from prior periods, but in line with the lower available research and development deductions. Turning now to Slide 8 and the balance sheet. The balance sheet looks significantly different from 30 June 2025 following the acquisition and related debt financing. The pro forma balance sheet highlights the impact of the acquisition on the movement since 30 June in order to better understand the movements that relate to operations. Excluding the acquisition, working capital has reduced by $72.5 million during the period. This gain will be covered in further detail on a later slide. Property, plant, and equipment has increased by $15.3 million, with the increase relating primarily to the Ridley growth projects, including OMP's new facility at Timaru and the debottlenecking projects within both bulk stock feeds and rendering. Net debt reduced by $22.4 million, driven by improved EBITDA and the reduction in working capital, partially offset by the increase in CapEx, dividends, tax, and interest payments, all associated with the higher earnings. Now turning to Slide 9. As outlined on the previous slide, the group working capital increased significantly following the acquisition of IPF, where the business acquired $387 million of working capital. In line with what the business would traditionally hold at a September balance date, together with the additional inventory held to support the transition of the Single Super Phosphate business, or SSP, from being a manufacturing business based out of Geelong to an import-only model and the associated longer supply chain. Subsequently, the fertilizer working capital has reduced by $98 million. This was due primarily to the timing of receipts and payments associated with the export products sold by fertilizers from the Phosphate Hill facility, and management's focus on ensuring working capital reduced to align with the seasonal sales cycles. The working capital for the Ridley business units increased by $26 million, with $14 million related to receivables associated with the increased volumes. Debtor days remained at a very healthy 33 days, in line with the prior period. Payables reduced despite the higher volumes due to the shorter payment terms associated with the strategic decision to purchase increased volumes of raw materials directly from Farmgate. Moving to Slide 10, capital management net debt. During the period, net debt increased by $321 million, with $358 million used to fund the acquisition of the fertilizer business, with the difference relating primarily to the cash from operations that was used in part to fund the CapEx and the increased dividend. The business has increased its available funding lines by $500 million to $690 million through a combination of a $200 million revolver facility and a new $300 million working capital facility. Our existing and new revolver facilities have been split between 3- and 5-year tenors to provide greater certainty regarding the long-term financial capacity of the company. The working capital facility is uncommitted and provides the flexibility to manage the annual seasonal highs in the working capital cycle of the new fertilizer business. Bank leverage for covenant purposes was 0.8x, comfortably within covenant levels despite the recent acquisition of the fertilizer business. Turning now to Slide 11 and the capital allocation framework. First implemented in FY '21, this remains pivotal in prioritizing the capital within our business and ensuring we are aligned to making the best investment decisions to maximize shareholder returns. This will become an even greater priority now that have acquired the fertilizer business. During the period, the business delivered strongly against the model, including ensuring the improvement in underlying business translated to a very healthy operating cash flow of $128 million. We continue to prioritize reinvestment in our underlying asset base through the focus on maintenance capital, with spend of 60% of depreciation aligned to our committed range. We continue to deliver on the targeted leverage range, supporting the decision to increase the interim dividend to $0.0510 per share, up from $0.0475 in half 1 FY '25 and in the middle of our targeted range at 59% of underlying NPAT. Pulling all this together, the business has been able to deliver the acquisition of IPF for $357 million and still report a covenant bank leverage that is below the 1.2x targeted range. On Page 12, we have set out the individually significant items that were reported during the period as a result of the IPF acquisition that occurred on 30 September 2025. The total consideration for the fertilizer business was $433 million, which included a cash outlay of $357 million. This is $57 million higher than originally reported as we acquired higher working capital, mostly associated with the take-on balances associated with the Geelong SSP business, the higher inventory associated with the Geelong SSP business, which totaled roughly $30 million. The fair value of the assets acquired has been assessed at $489 million, which is primarily made up of $386 million of acquired working capital. Following the acquisition for less than net assets, the business has booked a provisional gain on bargain purchase of $56 million. The gain is provisional as further work will be required in half 2 to finalize the carrying values of land and buildings, long-term leases, and any future additional site rehabilitation costs. Partially offsetting the provisional gain was acquisition costs of $17.8 million, which related to stamp duty, legal, and advisory fees for the acquisition. And separately, the business has incurred $1.7 million of project office and IT integration costs. The business also incurred a cost of $5 million relating to the unwinding of the inventory step-up created as part of the provisional gain on bargain purchase. The unwind was required as the inventory has now been sold. The net effect on profit of this item during the period was nil. All of these items resulted in a net gain of $31.4 million. Before I hand back to Quinton, as he said, this will be my last official duty as CFO. And as such, I want to thank all of you that I have worked with over the journey. The 5 years have been a great ride. And as I look at these results for the half, they align with what we reported for the full year just over 5 years ago. The acquisition of IPF was a career highlight, and I genuinely believe represents a golden opportunity to transfer this company again. I wish Quinton and the team all the luck in this journey. And as a significant shareholder, I will be watching with interest from the golf course or racetrack. I will now hand back to Quinton, who will take you through the remaining slides. Quinton Hildebrand: Thanks, Richard. I'll just take you through the strategic progress on the year-to-date and starting Slide 14. I'm very pleased with the progress we're making with the transition and integration of Incitec Pivot Fertilisers. Having owned the business for 4 months, and being confident that our pre-acquisition thesis of a regional distribution model is correct. In the last few weeks, we flattened the structure and reduced the matrix model with the appointment of regional general managers in 5 regions. They'll each have responsibility for both the sales and the execution of those sales through the primary distribution centers, making us more responsive to the customer and driving accountability for cost control. This is the model that we applied in the Bulk Stockfeeds business back in 2019, and has seen us grow to the business that we are today. The outcome of this initial restructure is the removal of 45 roles, reducing costs by $8 million per annum from FY '27 with a one-off cost of around $3 million in FY '26. The migration from Dyno Nobel's SAP platform to Ridley's Microsoft Dynamics platform is expected to take place in calendar year '26 at an estimated cost of $30 million. And once complete, should release corporate synergies of $7 million per annum from calendar year '27. And lastly, just to keep you informed, the urea offtake agreement with Macquarie Commodities is on track to commence in FY '28 upon the commissioning of the Perdaman facility. And the decision on the future supply contract with Phosphate Hill is expected in this financial year as Dyno Nobel run a process to find a buyer for that business. Moving to Slide 14, the Bulk Stockfeeds strategic progress to date. Ridley's flywheel strategy continues to drive momentum in this period, and we've secured significant new layer and dairy business. On the back of additional demand and as we are already operating 7 days a week at the Lara feed mill, we have committed to a $5.7 million debottlenecking project to complete in calendar year '26. And in November, we completed a 1.6 million concentrates production line at the Gunbower feed mill, adding a new product to our offering. On Page 16, we outlined the investments we are making in the underlying assets within Packaged and Ingredients to improve our processing performance. The first 2, the commissioning at Timaru and the replacement of the billing dam at Maroota are to address the short-term impacts we have endured in recent months. And the third additional small pack line at the Narangba extrusion plant is to replace labor and meet new customer expectations. All these investments provide the runway to significantly improve the operating cost base and deliver incremental volumes. Turning to the outlook statement. Ridley's diversified businesses and market exposures provide the group opportunities and resilience in commodity and weather cycles. In FY '26, Ridley expects group earnings growth to be driven by 9 months contribution from the Fertilizer segment, including the second half seasonal peak demand, increased market share and volume-related operational efficiency in the Bulk Stockfeeds segment, processing improvements from capital investments in the Packaged Feeds and Ingredients segment and modest commodity price recovery in the second half. For the longer-term outlook, this will be presented in the form of the FY '26 to '28 growth plan at the Investor Strategy Day on the 10th and 11th of March 2026. On the next page, we've included the program for the Strategy Day and site visits, and we're excited to take you through the expanding opportunity in Australian agriculture and how we can position ourselves as #1 in each business sector to give ourselves a competitive advantage. We'll outline what we are doing to support our customers to become a critical player in their supply chains and how we look to unlock value from the fertilizers acquisition. Ultimately, we want to demonstrate to you the resilience and opportunity of our diversified portfolio and to give you some appreciation for the platform that we are establishing for future growth. That concludes the formal part of our presentation, and I'll now hand back to the moderator and ask to facilitate the questions. Operator: [Operator Instructions] Thank you. The first question is from the line of Apoorv Sehgal from Jarden. Apoorv Sehgal: First question, just on the core business EBITDA, excluding the fertilizer contribution. I think going back to the AGM, you were indicating modest growth for the core business for FY '26. I can't see your line in the presence for that today. But are you still expecting the core business EBITDA to grow modestly in FY '26? Or has the weakness in that Ingredients segment potentially changed that? Quinton Hildebrand: We are AP for the full year expecting modest growth. We expect there to be ongoing momentum in the Bulk Stockfeeds segment, and we expect a modest recovery in the Packaged and Ingredients segment in the second half. So the combination of those playing through to the statement. Apoorv Sehgal: Let's unpack the Ingredients segment a bit more then. So the Ingredients segment EBITDA was down $10 million year-on-year. Could you maybe allocate that across the different dot points you got there on Slide 4, I'm just sort of calling out 3 things. You've got the OMP issues with the slaughter rates and the Timaru delays. You've got the lower protein meal prices and then the capacity constraints at Maroota. Could you like just allocate that the $10 million headwind across those different buckets? Quinton Hildebrand: Well, I'll give you a high-level split on that. And as you can appreciate, there are some positives as well that are partly offset. So on Slide 4, we've got the volume increases in rendering and the packaged performance there. So I think the first impact, which is the reduction in land bones in Australia for supply to OMP would account for roughly half of what we're considering here. And then lower protein and meal prices would be about half of the balance quarter and the capacity constraints at both Maroota and Timaru accounting for the final quarter. Apoorv Sehgal: Then if we're then looking into the second half, how much of those headwinds do you think you can recover? So I guess looking at the commentary here, okay, you're expecting higher commodity prices in the second half. So there's a little tick up there. That's good. I would presume the Maroota and Timaru commissioning issues get fixed. But the slaughter rate issue, which is obviously the bulk of the earnings fall, I think slaughter rates are still pretty weak, aren't they looking at the MLA data over the last sort of 1 or 2 months. So just keen to explore into the second half, to what extent do those headwinds kind of recover? Quinton Hildebrand: So just starting with your last point first, which is the slaughter rates. Our supply of bones into OMP in Australia is back on track. And as I indicated just in the address, we have brought on some additional supply. So whilst slaughter rates across the sector are not back up substantially, we've sourced additional raw material. So in the second half, we are processing back at the level that we would expect. I just flagged that our main market is North America, and there's a lag in the supply chain. But for the majority of the second half, we will see that recovered position. Then in terms of the Maroota dam wall, subject to weather, that should be complete within a month, and that would return us to that position. As we progress the commissioning of the Timaru facility, we would expect incremental improvements during the second half. Apoorv Sehgal: And actually, the one headwind I missed, I'm not sure if it was discussed on the pro. remember the $3.5 million or $3 million to $4 million hit you had from the avian AI export restrictions back in the second half of '25. Did that impact from those restrictions remain all the way through the first half of '26 as you're working through the excess inventory? And if that's the case, are we now back to normal in the second half of '26? Like is that a headwind that now gets recovered? Quinton Hildebrand: So AP, the AI that led to the excess poultry meal in the marketplace, yes, that's there are still higher volumes in the market. And this is a combination of both that we started with high levels from avian influenza. But if you look at alternative protein sources, canola meal, soybean imports, those the protein complex was lower priced in this first half. And there is some improvement now, and that should also facilitate the movement of stocks. Apoorv Sehgal: Yes. Sorry, last final follow-up before I jump back. Overall then, just to round out the Ingredients business, should the Ingredients segment EBITDA grow for the full year of '26 versus full year '25? Or is that too optimistic? Quinton Hildebrand: That's too optimistic. I think where we see it, AP, is that we will see improvement in the second half over the first half. But as we reported at the AGM, that won't be caught up in terms of delivering a stronger result in terms of the PCP. Operator: We have the next question from the line of James Ferrier from Canaccord Genuity. James Ferrier: Richard, thanks very much for all of your efforts and support over the last few years and good luck with the next stage of your career. Can I ask, first of all, on the fertilizer business. So that from an EBITDA perspective, you talked about the growth on PCP being driven by cost control and margin management. Firstly, how did volumes compare to PCP just thinking about the sort of the tail end of winter cropping and whether or not you're seeing any early season pull forward sales volumes for the upcoming season into the quarter. So firstly, just how volumes were in that 3-month period? Quinton Hildebrand: So it is traditionally the lowest demand quarter. Volumes were slightly lower than the prior than PCP. But as we indicated, more than offset by margin and cost control. James Ferrier: So on that basis then, Quinton, if you think about that early run rate of cost control and margin management, which that's the sort of hitting zone for what Ridley is trying to achieve and focus area for improvement. When you look at that run rate and appreciate it's only 3 months and it's the smallest seasonal period, but how do you think that compares if you extrapolate it to the full business case earnings for the business and assuming all else equal, how do you think you're tracking relative to that business case earnings on an annualized basis? Quinton Hildebrand: I think Ridley's philosophy is starting to get early traction. within the business. And our recent restructure and focus will support that together with the savings in the underlying cost base. So yes, early signs, but we think there's more to come through engaging the teams, particularly in the regions to be able to embrace the new approach. And obviously, some of this will be shared with customers as we grow, but that will support our volume position, which is what we see as a critical advantage relative to competitors. James Ferrier: On the margin management side of things, a lot of what you've referenced today with organizational structures and the like is probably more OpEx centric. But within margin management, can you talk a bit about where gross margins are for the business at the moment and whether or not it's sort of BAU there or perhaps there's some management-led improvement coming through there as well? Quinton Hildebrand: Yes. We're being very cautious in that area. We need to make sure that as we take on the business, we manage those risks effectively. And so we're engaging directly with the expertise and the team that we've inherited, where we have some significant strengths. Then Chris Opperman joining and bringing his previous experience to this part of the business is also all part of the key process for us transitioning the business into Ridley. So we're taking a conservative approach in how we manage the supply chain in that regard, although we do think as a business, we should be able to bring our general commodity risk management philosophy over time and make sure that we act decisively in the process. James Ferrier: The second topic is on the Bulk Stockfeeds segment. AP covered a lot of the content in the packaging ingredients. But on bulk, I mean, that was a super impressive result. And we could see the volume growth accelerated from what was achieved in FY '25 across both Ruminant and monogastric. And you've referenced there some of the mix of the volumes with supplier margin subs volumes coming through. So I get that. But I'm just interested in your views on where the bulk business sits today from an operating leverage perspective and asset utilization perspective. On the assumption that volumes keep growing in this business, are you still in a sweet spot in terms of incremental volumes and the operating leverage you get from that? Or are you starting to bump up against capacity limits. And so maybe in the period ahead, you don't quite get as much operating leverage before your debottlenecking efforts kick on again? Quinton Hildebrand: Yes. So in the South, so Victoria, Tasmania, we have got high utilization rates. And it's for that reason, expanding Lara gives us further runway. And as you can appreciate, we do operate as a network. So you do a relatively significant expansion at Lara, and it gives you all your monogastric feed mills some capacity. So in the South, where we are highly utilized and we're continuing our debottlenecking journey. In the North, so the 2 mills in New South Wales and the 2 mills in Queensland, at those facilities, we're underutilized still as in we were using only 1 or 2 shifts a day over a 5-day operation. So we have got growth capacity. They have been running at high utilization within those shifts, which is very positive. But we've got further capacity should dry conditions support increased demand. James Ferrier: And last one for me, and maybe you could try this one to your colleagues, given you've been carrying all the load there, Quinton. Working capital expectations going into the second half, noting where you were at the December balance date for the existing business and for fertilizer? Richard Betts: Yes. I mean, look, James, as we've always said, this business tracks against the seasonal sales cycles. So we will head into a period of significantly higher working capital within the fertilizer business. And in fact, we'll probably peak somewhere in the area of around $200 million higher than where we are at December. That is fully funded within the facilities and was always assumed in our thesis. So June will obviously be a little bit dependent upon which side of -- because obviously, June is right smack in the middle of the peak season. So there will be a little bit of where are we against that. But certainly, by the time we get to June, we will see a significantly higher utilization of the new working capital facility to allow us to adequately fund all the working capital requirements to take full advantage of that peak season. James Ferrier: Yes. And any callouts on the business expert? Richard Betts: Business expert? James Ferrier: From a working capital perspective. Chris Opperman: You're spot on. You are going into the highest point of the season, especially in February, you get the ultimate high February and March and your stock holding and you start to sell that down. And your June, July is really your 2 months that could swing around your working capital. But your general swing is about that 200 up, could be less depending on how good we go with sales in June, and that's all pharma demand. Operator: [Operator Instructions] We have the next question from the line of Richard Barwick from CLSA. Richard Barwick: I just wanted to do a more general discussion given the rainfall outlook looks pretty ordinary, at least on a 3-month view. So for starters, just from a Bulk perspective, I'd imagine that presents quite an attractive backdrop. And so just interested to hear your comments just then about the Queensland facilities being underutilized. How quickly can they be ramped up? And then if you got capacity in the North, but you're constrained in the South, you did mention that you operate as a network, but that network effect, does that work across the full geography? I'm just wondering if we do have a dry period, how can the Bulks actually respond? Quinton Hildebrand: Yes. So in Bulk, the network is more regional, so state-based. So transporting finished feed from Victoria to New South Wales happens only at the margin. And what we have done in the past is set up temporary depots in the dry areas in New South Wales, and we've shipped full loads of feed direct into those regions. So we can at the margin. How quickly can we ramp up? In Queensland and New South Wales, it requires additional shifts. So it just takes training. You're looking at a 3-month period to get to full capacity as we stretch. And in the past, we have said that in an extended period of dryness, so with buildup, there's a circa $5 million EBITDA potential upside per annum in the Bulk Stockfeeds from supplementary feeding in a drought. Richard Barwick: And that comment would relate to a widespread drought as opposed to something that we've seen more recently is very centered in the South. Quinton Hildebrand: Yes. Yes. For the full benefit, so to speak, for the Bulk Stockfeeds business, that would have to be across the network. Richard Barwick: And then from a ferts perspective, you talked about the other situation. So if we are running into a dry period, I know obviously, you haven't owned the business very long, but I don't know to the extent that you can see the historical data, how much of a swing factor which might we expect in the ferts business from the same conditions. So extended dry across the eastern growing regions and how negative might that be for the fertilizer business? Quinton Hildebrand: If we look back over the history, the range in volumes is about 1.8 million tonnes a year up to 2.2 million tonnes a year. So that would demonstrate the extremities of the fertilizer volume exposure. As you can appreciate, we're geographically well spread from the North Cairns all the way through to Tasmania, South Australia Port area. So if you look at across that, you normally have a fair bit of diversification. But nevertheless, your point is absolutely right. And I think I would expect the diversified portfolio of Ridley, the fertilizer impact in a drought circumstance would be greater than the benefit to the Bulk Stockfeeds. And hard to know and all depends on what region, what timing. But if Bulk Stockfeeds is $5 million EBITDA you might find that fertilizer could be double that to the negative. So that's sort of how we're interpreting it at this point. Chris, anything to add to that? Chris Opperman: Yes, Quinton, I think you're right, especially the width of the swing isn't that much because the 1.8 billion you were talking about, that's really extreme dry weather conditions. We're not seeing that at the moment. And then just for in year, more specifically, the business do write contracts throughout the season going into the high season. So as we stand today, we've already got a fairly large position written, which you can basically lock in. Quinton Hildebrand: So I hope that answers your questions, Richard? Richard Barwick: Yes, it does. And just the last one on the first. Just looking at the map in a very simplistic view. I look at some of the placement of the blue dots and the red or pink dots, some of them sit pretty close together. So in the fullness of time, do you see opportunities here for potentially some consolidation in the number of sites? Quinton Hildebrand: So yes is the answer. We bought the distribution-only part of the business and Incitec Pivot used to be a manufacturing and distribution business. So the footprint can be enhanced as we go forward over time, and that is part of our planning. So if you're able to attend the Strategy Day on the 10th and 11th of March, we'll give a bit more color to that. Operator: There are no further phone questions at this time. I'll now hand the conference back to Mr. Hildebrand for closing remarks. Quinton Hildebrand: Great. Thank you, Myron. And thank you, everyone, for your attendance today and appreciate the questions. I just want to take the opportunity to publicly thank Richard for his contribution to Ridley over the last 5 years. And during that time, we have substantially driven the earnings of the business, and he has played a significant role in that. Then culminating in the acquisition of IPF last year and the mountain of work that he did in concluding that transaction. So I'd just like to thank Richard and appreciate the conscientious handover that he's done with Chris. We look forward to working for him as a critical shareholder on the other side. So thank you, everybody, for your attendance today, and thank you to Richard. Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Amelia Lee: Good morning, everyone. Thank you for joining us at Seatrium's Full Year 2025 Results Briefing. My name is Amelia, and I take care of Investor Relations for Seatrium. This morning, we have with us our CEO, Mr. Chris Ong; CFO, Dr. Stephen Lu. Chris and Stephen will bring us through a short presentation before we open the floor to questions. Chris, please? Leng Yeow Ong: Thank you, Amelia. Good morning, and thank you for joining us today at Seatrium's Full Year 2025 Results Briefing. Before I start, I'd like to wish everybody a very happy and a healthy Lunar New Year, good year ahead. I'm pleased to report a strong set of results in our second full year since merger with robust revenue growth driven by strong project progress and doubled the net profit that is an undeniable reflection of our laser-sharp focus on driving margin efficiencies and execution. For the first time, we have recorded a positive 1-year total shareholder return of 5.2% as we strive to continue driving lasting value for all shareholders on strengthened fundamentals. Our strong performance also comes on the back of heightened geopolitical and macroeconomic uncertainties that companies around the world had to grapple with. Despite some delays in investment decisions in several markets in the first half of 2025, we still secured over $4 billion of new orders in FY 2025. This replenished our net order book that stands strongly at $17.8 billion as at 31st of December 2025. Meanwhile, we are actively pursuing more than $32 billion in pipeline deals, which reflects sustained investments by our customers to meet growing energy demand that is fueled by technological advancements, including AI. Third, we are today stronger and leaner than before. We have spent the last few years transforming our business and cost model, the way we work and the way we do business. 95% of our net order book today is made up of Series-Build projects that offer lower execution risk for both ourselves and our customers. Non-FPSO legacy projects, which are relatively lower margin and higher risk compared to post-merger contracts now constitute just over 1% of our net order book. We have also achieved our synergy and cost saving targets, accelerated noncore divestment to reduce overheads and importantly, brought closure to Operation Car Wash in FY 2025. This allowed us to move forward with greater clarity and step forward with larger strides as we leave legacy issues behind us. Today, these achievements reflect the merits of our strategy and that we are ready to build real sustainable momentum for the future. Turning to our financial performance. We delivered a second consecutive year of strong top line growth with revenue growing 24% to $11.5 billion from $9.2 billion a year ago. This reflects the strength of our order book and the disciplined execution that continues to drive reliable delivery to our customers. Net profit came in at $324 million, more than double of $157 million in FY 2024, outpacing revenue growth and underscoring the strong progress that we are making in expanding margins, which Stephen will talk about in greater detail. Our progress is best reflected in how we execute for our customers. Let me now highlight 2 projects that showcase the power of our One Seatrium global delivery model. First, FPSO P-78. We have achieved first oil in record time on 31st of December 2025, and first gas is expected in first Q 2026. Being built across our yards in Brazil, China and integrated in Singapore, this accelerated progress is a strong testament of our One Seatrium global delivery model and also showcases the expansion of our end-to-end delivery capabilities from engineering to offshore commissioning. P-78 is the first of 6 advanced greener P-Series FPSOs and it sets a strong benchmark for subsequent units. Next, on Empire Wind. The project is now over 97% complete and is situated on site in U.S., on track for delivery this year. Once operational, it will deliver 810 megawatts of clean energy to New York, enough power to power more than 500,000 homes. Both the topsides and jacket were built across our Singapore and Batam yards, demonstrating our integrated delivery capability. The remaining exposure in our net order book to the U.S. offshore wind has reduced to less than $10 million with Empire Wind and offshore substation for [indiscernible] very close to completion. The WTIV for Maersk Offshore targeted to complete end of the month. In fact, we are in discussion to deliver her within the next few days. Our future is taking shape with clarity, strong order book today for near-term earnings visibility and a resilient pipeline that sets us up for sustained growth tomorrow. We have been disciplined in ensuring we win high-quality contracts with world-class customers, with mid-teens risk-adjusted project margins and progressive milestone payments. Our ability to win these projects reflect the strong trust customers place in us across conventional energy and renewables. Amidst a tough macro environment, we secured over $4 billion of new orders, supported by returning customers and new partnerships. This include our first collaboration with Penta Ocean Construction, marking our entry into Japanese offshore wind market and DolWin 5, our fourth 2-gigawatt HVDC project with TenneT and our first for Germany under the 2-gigawatt program. Next, our net order book of over $17 billion is equivalent to over 1.5x of our very strong FY 2025 revenue. 6 P-Series FPSOs, 3 U.S.-bound FPUs and major HVDC and HVAC platforms are all progressing well, demonstrating the strength and depth of global delivery model. We have been transparent about the challenges we face from non-FPSO legacy projects, which now constitute just over 1% of our net order book. In the same spirit of transparency, we also like to share that the delivery of Naval project NApAnt has been delayed to 2027 instead of the original 2026 schedule. We are working closely with the customer to navigate this specialized shipbuilding project to manage execution risk. With a declining proportion of lower-margin non-FPSO legacy projects, we expect an improving mix of higher-margin post-merger contracts and a reducing trend of provisions moving ahead. Moving ahead, we still see ample market opportunities as we actively pursue $32 billion in the pipeline deals. Despite the lower oil price environment, it is widely established that the breakeven price of deepwater fields remain well below prevailing oil prices. Alongside strong demand for energy, the ongoing energy transition and the need for energy security, especially in Europe, where we are seeing some favorable wind developments for offshore wind, this gives us a long runway to capture high-value work across the full energy spectrum. We have been asked how are we positioned competitively to capture a good share of these pipeline opportunities. Despite being just formed 3 years ago during the merger, we have under our belt 60 years of proven track record and a unique ability to deliver projects with consistent safety standards and quality across a large global manufacturing footprint that presents scalability, geopolitical diversity and some cost arbitrage opportunities. These are not competitive levers that many players around the world have, but we do not ever stop evolving. We have been in business for over 60 years. We are not new to change. We are still standing strong today because we have successfully evolved alongside the industry, which is essentially critical now as the whole world is in transition towards cleaner energy sources. This is only possible with robust capabilities in technology development, where we take a practical market-led approach to innovation, to stay ahead and maintain our long-term competitive edge. Today, we own proprietary designs such as FlexHull that we are already using in active FPSO tenders to sharpen our competitive edge where proposed designs are evaluated as part of the bid. We also developed our own designs for FLNG and offshore substation, which has recently attained AIP. Longer term, we are also developing solutions for floating wind and other emerging energies to ensure we remain ahead of the curve. Our Series-Build approach, design once do many reduces execution risk, short-term schedules and improve margins, ensuring projects are delivered safely, on time, on quality and within budget. Today, about 95% of our net order book comprises Series-Build projects, underscoring the strength and scalability of this approach. On top of the existing franchises in gray, where we established the Series-Build strategy, we're expanding this to powerships where we see strong potential as well as applying the same principle to FSU FSRU conversion, especially since we already done 90% of the world's FSU FSRU conversion, which is an unparalleled track record worldwide. Last August, we signed an LOI with a long-term partner, Karpowership for the integration of 4 new generation powerships plus the option for 2 more, a strong endorsement of our capability and scalability in this adjacent segment. Integration works will start 1Q 2027. The LOI also includes conversion, life extension and repairs of 3 LNG carriers into FSRUs. These are examples of higher value work that we are refocusing our repair and upgrade business on. These capabilities and high-value franchises will position us well for the next wave of opportunities. Our $32 billion opportunity pipeline over the next 24 months is diversified across segments, geography and asset types, some of which offer distinct market cycles for business resilience. Many of these opportunities are also aligned to our Series-Build franchises. Over the next 24 months, we are pursuing $23 billion in oil and gas opportunities, driven mainly by Americas region. We still see strong opportunities in Brazil where our long-term customer has disclosed its pipeline for the next 5 years. This is also where we have strong leadership for local content through our 3 established yards. We are also well positioned in Guyana for high-value integration work and topside fabrication, where we have participated in all of the FPSO work for the Stabroek Block so far. Apart from the usual opportunities that the market expects, we are also pursuing opportunities in FLNGs and fixed platform in the Middle East and Africa region, and to a smaller extent in Europe and Asia Pacific. For offshore wind, Europe remains the largest and the most developed market, driven by its energy security needs. TenneT continues to be an important customer for us as we pursue opportunities in both Netherlands and Germany. With the award of DolWin 5, it demonstrates TenneT's confidence in our ability to deliver, and we are ready to scale up and take on more HVDC projects when the opportunity arises. Meanwhile, we will also continue to pursue opportunities from other European TSOs as well as HVAC deals in Asia. We have also identified $2 billion in conversion opportunities such as those with Karpowership that I mentioned earlier. All in all, we are well positioned and confident in our ability to capture a healthy share of these pipeline opportunities that will fuel our ability to deliver consistent performance. I shall now hand over to Stephen to bring you through the financial review. Hsueh-Jeng Lu: Thanks, Chris. Next, I will dive deeper into our financial performance for FY 2025 and highlight the progress that we have made to shape a stronger, leaner and more competitive Seatrium. We delivered a set of solid numbers for 2025. The 25% rise in revenue was driven by a steadfast execution of a healthy, well-diversified order book, which provides strong visibility and resilience amid the evolving market conditions. Our gross margin, which I think is a reflection of the true operational performance has more than doubled to 7.4% in FY 2025 from 3.1% last year. We've continued to make significant progress in streamlining G&A expenses and lowering finance costs. As a result, net profit has also doubled to $324 million in FY 2025, up from $157 million in FY 2024. We also saw operating cash flow grow by about 4.5x to $440 million from $97 million, excluding one-off payments relating to legacy issues. And on the same basis, FCF doubled to $443 million. After taking into account these one-off payments, we still generated almost 46% more cash from operations year-on-year of $142 million from $97 million a year ago. We have also taken decisive steps to streamline our asset base by divesting noncore assets. This disciplined approach sharpens our focus, enhances operational and cost efficiencies. Diving straight into the key revenue growth drivers. The 24% growth year-on-year was mainly driven by a strong progress registered by both the offshore wind -- the oil and gas and offshore wind segments. Revenue from Oil & Gas Solutions grew 24% to $8.1 billion, underpinned by steady execution, progressive revenue recognition of the 6 new build Petrobras FPSOs. Notably, P-84 and P-85, which commenced work in the second half of '24. Offshore Wind Solutions also increased its revenue to $2.1 billion, driven by our 3 TenneT 2-gigawatt HVDC platform projects. The repairs and upgrade business registered lower volume and revenue due mainly to trade-related uncertainties and weaknesses in the LNGC market. We are, however, continuing to focus the business towards higher value projects, such as FSRU conversions and the integration of powerships that Chris mentioned earlier. In the meantime, our 23 long-standing strategic partnerships with large global customers continue to provide a steady baseload revenue of a more recurring nature. In the other segments, increased contributions from specialized shipbuilding, chartering as well as rig kit sales and MRO projects delivered through Seatrium offshore technology or SOT led to a 55% jump in revenue. While this business is small today, SOT capitalizes on our unparalleled track record and rigs expertise to monetize proven design IPs. It delivers a healthy margin, and we see growth potential ahead. Next, let's take a look at gross margin. Year-on-year, gross profit increased to $848 million in FY 2025 from $291 million, and gross margin increased sharply by 430 bps to 7.4%, driven by an improved mix of higher-margin projects, higher asset utilization, improved productivity as well as cost discipline. This was partially offset by provisions to the U.S. projects, where the final project was delivered subsequent to year-end and a little bit from a NApAnt, which Chris mentioned earlier. Other operating income was lower in FY 2025, mainly due to a one-off provision relating to the Admiralty Yard restoration before its return to authorities in 2028, net FX movement, lower scrap sales and a nonrecurring settlement gains that was recognized in 2024. G&A expenses as a percentage of revenue declined by 50 basis points to 3% compared to 3.5% in FY 2024 as we benefited from the continued cost optimization activities. Net finance costs also dropped by 18%, driven by debt repayment and lower financing costs, offset by a decreased interest and dividend income from equity investments such as the Golar Hilli, which we divested in 2024. Overall, net profit more than doubled to $324 million in FY 2025 from $157 million in FY 2024, underscoring the significant uplift in our core performance powered by revenue growth, stronger margins, sustained cost optimization and disciplined execution. As mentioned, we also reported much stronger cash flows in FY 2025, which is the reflection of the discipline that goes into ensuring that all our projects on our progressive milestone payment terms and robust project cash flow management throughout each project. Consequently, operating cash flow increased to $142 million in FY 2025 from $97 million. Excluding the effect of one-off legacy payments, operating cash flow rose 4.5x to $440 million, reflecting the level of cash generation that we expect moving forward. Investing cash flow was largely neutral with $122 million of project and safety-related CapEx, such as that for Batam yard to prepare for the 2-gigawatt HVDC projects, balanced by asset divestment proceeds. We will continue to be measured in our capital expenditure, which is mostly focused on investments that will enable growth. All in all, we generated $443 million in free cash flow excluding one-off legacy payments. This is more than double that of FY 2024. And we are confident in the execution and the cash flow of our post-merger contracts. Moving on to capital structure. We continue to adopt a prudent and disciplined approach to enhance resilience and afford us the financial agility to position for growth. Our gross debt decreased 5% year-on-year to $2.5 billion as at end December 2025. And through active refinancing, our cost of debt has declined from 4.9% at end December 2024 to 3.4% at end December 2025, driven both by lower base rates and tighter margins. We continue to broaden our funding sources and leverage our improved credit profile to secure favorable refinancing outcomes. Our liquidity position remains strong with $3.1 billion in cash and undrawn committed facilities, giving us ample headroom to support operations, pursue growth opportunities and other capital allocation requirements. In summary, our balance sheet remains robust with a low net leverage ratio of 0.8x and a net gearing of 0.1x as at 31st December 2025. With the FY 2025 performance covered, I'd like to touch on the efforts that we've been taking to transform our cost and margin profiles that will have lasting impact into the future. If we take a step back in FY 2023, when both companies first came together, Seatrium have focused on integration and harmonization. And so the new company can start on a clean slate. In FY 2024, our full financial year since merger, we quantified the benefits and scale of coming together, providing market guidance on 2 targets, $300 million on synergies, on cost savings and $200 million in procurement savings. These targets reflect the efforts that started from the moment the 2 companies came together. We looked at our cost items line by line removing what we didn't need and leveraging our combined scale for economic benefits. These changes have fundamentally reduced our cost levels and will continue to have a lasting impact moving forward. We are today in year 3, and we are pleased to share that we have exceeded those targets and the proof is in the numbers. Gross margins has turned from negative 2.9% at FY 2023 to 7.4% in FY 2025, alongside an improved mix of higher-margin Series-Build projects. G&A expenses as a percentage of revenue has also declined from 5% in FY 2023 to 3% in FY 2025. And as mentioned earlier, the cost of debt has also significantly declined from 5.7% to 3.4%. And we are not done yet. Initiatives implemented late last year have not seen its benefits fully baked into our financial numbers yet, and we also continue to drive greater cost discipline and internal efficiencies by embedding digitalization, AI and machine learning meaningfully into the way we work across our global business. We believe this will greatly improve visibility, control, risk management and operational efficiencies that will reflect in our margins and financial performance in the time to come. As I've alluded earlier, gross margin is an indication of our operational performance. And we are starting to see the fruits of our labor in FY 2025, and our reported gross margin of 7.4% is a vast improvement from where we started. But it is a reflection of what Seatrium is capable of. We are just getting started. As we continue to streamline operations and tighten overheads, we see accelerated pathways to further expansion through our ongoing divestments of noncore assets. This is an important lever to really reshape our cost structure to unlock efficiencies that will strengthen our long-term resilience and competitiveness. Since 2023, we started divesting assets on our books that are not really required for our global operations. And these assets are broadly categorized into yards and other assets such as vessels and floating cranes. We've accelerated the pace of these divestments in FY 2025, including Amfels and Karimun yards, GNL, our PSV vessel fleet of tugboats, floating docks and the Crescent yard that is expected to complete very soon. The sale of the Amfels yard and GNL vessels have already been completed and the rest are expected to complete by first half 2026. These transactions will deliver more than $50 million in annualized cost savings. These assets would have otherwise laid idle on our books are also expected to unlock more than $230 million in gross gains and over $330 million in cash proceeds, of which $110 million was received in FY 2025. We plan to do more, having identified more than $200 million additional noncore assets to divest by 2028, alongside the scheduled return of Admiralty Yard. Together, the transactions already -- with the transactions already announced, we expected the cumulative to generate cost savings over $100 million by FY 2028. As our business needs evolve, we will continue to review and evaluate opportunities to drive greater efficiencies. These structural improvements will enable us to reduce overheads and drive operating efficiencies, which will, in turn, bring us closer to our target margins, enhancing our business resilience and offering stronger fundamentals, which will deliver sustainable long-term returns. With that, let me now pass back the time back to Chris. Leng Yeow Ong: Thanks, Stephen. To reiterate, Seatrium is at an inflection point today, and we are now ready to commit to creating tangible lasting value for our customers, shareholders and other stakeholders. This year, we are proposing to double the dividend to $0.03 per share, in line with doubling of our net profit in FY 2025. We also plan to continue our share buyback under our existing $100 million program, reflecting our confidence in the business and in the momentum ahead. You can clearly see the fruits of our labor. Total shareholder returns have turned positive at 5.2% and ROE has nearly doubled to 4.9% in FY 2025. These are early signs of the value we are unlocking as our strategy takes hold and we believe that there's further room for growth. Most importantly, we are balancing reinvestment for growth with consistent capital returns. This is how we will drive long-term durable value creation for our shareholders. Let me close by bringing this all together. Our strategy has always been clear and consistent from driving organic growth to executing strongly and transforming our cost structure for margin expansion, ongoing financial discipline and allocating capital prudently to enable sustainable long-term returns. Our value creation framework captures all of this, aligning everything we do from the way we deliver projects for our customers to how we manage costs to how we plan to deploy capital for sustainable return. On capital allocation, our priorities are disciplined and focused, investing for growth in areas where we have clear competitive advantage, optimizing our balance sheet, ensuring the right debt structure to support long-term value creation, returning capital through dividends on share buyback as we grow and exploring strategic M&As that strengthen our long-term position and business resilience. This framework keeps us focused with clear progression towards our FY 2028 steady-state financial targets, we are on the right trajectory to building a stronger Seatrium designed to outperform for the longer term. Thank you. Amelia Lee: Thank you, Chris. We'll now open the floor to questions. For those of you in the room with us, please raise your hand to ask a question. Zhiwei please. Zhiwei Foo: Zhiwei from Macquarie. Congrats on a wonderful set of results. Two questions from me. The first one is regarding your order book, right? I think you're roughly about $17 billion of order book and you have a revenue run rate of about $11 billion this year. So how do we think about your revenue run rate and your order replacement rate? Because from the looks of it you'll run down this by if you don't have a similar amount of order intake? The second question is more on your margins. Now your gross margin is what -- I think you reported 7.4%. And then if you were to just look at second half and net out the provision on onerous contracts to get to about 9%. Then assuming you execute on all your cost savings, that's another $100 million. And then if I'm generous, that adds another 1% of gross margin, which takes us to 10%. So assuming that your cost saving programs work through, you don't -- have no recurrence of provisions. Does that mean that we can start to anchor our thinking of 10% gross margins going forward? Leng Yeow Ong: I think I'll take the order book question. I think you asked the same question the last half, I remember. And I think that the key thing is about getting close to the customers and home running the opportunities that are out there. This is order book business. And the key thing is about how do we take a look at getting quality -- balance between quality projects that we can get and get it in. The $11 billion, I will say that it will roughly be around there moving forward. This shows that the capacity -- our capacity management has been very sharp because I believe that about 2 years ago, the question from all of you was that, are you sure you can consistently produce $10 billion. So that's out of question. But it will basically hover around there. We think that the capacity would allow us to do that. And if you look at the burn rate, it's not linear. The $17 billion doesn't burn down just like that. So technically, it's also a mix of building up to the order book. And as mentioned last year, even as a very challenging year, we're almost half a year or more than that, that are quiet because of obvious reasons. We still manage the home run quite a bit towards the end of the year. So technically, there are good pipelines in the market. And again, I always said I can't control the FID timing. But we are quite confident that based on the diverse product line that we have now and the franchises that we have seen, we will continue to be the go-to person for some of these more complex projects. So it is a zero-sum game. You have mentioned that we are confident that we are able to maintain that resilience when the projects -- I guess the real answer is that when the projects come into the order book. Hsueh-Jeng Lu: So on the second question, let me take this. I think if you look at FY 2025, your calculation is correct, right? But I think the bigger picture is this. There are a few factors that we are -- that move in our favor, right? One is you would have seen the legacy projects, the proportion of that is coming down. The contracts that we secured post merger with risk-adjusted mid-teen returns are becoming more important, two. Three, the cost and productivity measures, I think you talked about with the divestment of the yards and all that, that will take out costs directly from overheads. I think the other factor that you have to consider is as projects move along. I think we mentioned this before, when you hit critical milestones, the contingencies that we -- which are costs that we've set aside for certain risks that we anticipated, if they don't materialize, then that will also be released. So I think the margins will continue to improve from where we have achieved today. I think it will -- we've guided towards a project margin of mid-teens. But as you know, there are some overheads in production side, which is related to basically underutilized capacity. So there will -- the number will move towards 15%, but it won't hit 15%. So I think that's the -- that's where we're looking at right now. Leng Yeow Ong: And just to touch -- come back to the point on order book. At $17 billion, if we've taken a look back in history, it is still one of the highest for the last 10 to 12 years, both combined. But what is different today is that I think you all will appreciate that it's not based on one product. And it is based on milestone payment that it basically is a high-quality order book right now for us to execute. The other thing -- the other point is that we have also been sharing that getting on to the franchise when we signed the very first or the second FPSO or HVDC, there were also a lot of doubts and question whether is it -- are we capable to build on that? I think today, that should put it to rest. What we are -- what I hope everybody sees that the ability to actually deliver a very complex product straight to Brazil field and start operating in 2 months, that actually builds on the reputation and our ability to get the customers on the table in a very short time. Zhiwei Foo: If I have 2 follow-up questions. You mentioned the contingencies. I understand that they are significant. Could you share some color about how big it may be so that we can appreciate what that actual underlying margin is? Otherwise, the second question is, what would your underlying gross margin be if we were to just look at your project and take out all your other inefficiencies right now? Hsueh-Jeng Lu: Contingency is commercially sensitive, because -- but there are risks. So each contingency item is tagged to amount, right? And so when the risk goes away, it will be released. Amelia Lee: Next question from Mayank, please. Mayank Maheshwari: Yes. Chris, a question -- more subjective question here. There has been a lot of commentary by your largest customer around how they are tightening their screws at their end. Like in terms of conversations you had and considering you were showing the order book being a large part still sitting in LatAm. How do you think about the path going forward? And what are the kind of conversations you're having with them around their objectives and how you are aligning to it? So that was the first question. And the second one, to the CFO, I think congratulations on reducing the interest cost quite a bit. But if you think about it, your interest cost and the finance cost still has a reasonable gap. I think there are lease liabilities and a few other things in there, which are still quite chunky. Can you just give us a bit of an outlook of how you're kind of tightening your screws there? Leng Yeow Ong: I will take the part on customer conversations. I think tightening of screw whether it is a challenging environment, my customers always tell them that their screws are very tight with us. The key thing is about how then do we sit across the table and determine the work value because it's a balance for them also. There's no lack of competitors and especially after we have proven that our formula worked and we are able to deliver a functioning FPSO directly to the field and startup, and that's a very powerful signal. If you talk about LatAm, obviously, you're talking about mainly Brazil. Of course, they have various different formula now. One is the build, operate and transfer. And it is now mixed with eventual EPC projects coming online. The key thing is about it has different risks, it has different approach. But the fundamental is the ability to execute because all these projects takes many years to execute. And you can see that from their ambition, they have printed out the 5 years of ambition. To be very honest, one of the biggest questions that they had to ask themselves is that can I expect the FPSO to arrive because right now, especially so when you talked about the challenges of the market is very unpredictable and oil prices it can fluctuate and volatility is quite high. But they have their investment case all set up. So I think that you will come online. But the key question is that when will the cash flow be realized, and that is really around the assets that's going to flow there. So I think we have proven ourselves that we are able to execute right on time and able to deliver compared to our competitors deliver something that operates directly with them. The key right now is of course strategy around who we partner up for BOT, the strategy around how can we also make sure that it's seamless. And then for EPC, of course, it's all about cost and price. So I think that, that part itself, I'm happy that we are not starting from ground zero. I think that we have now a very clear database and the organization is very clear on how to execute these type projects. So that is the type of conversations. And even with or out of LatAm, it's the same conversation with majors like Exxon, for Guyana, even new prospects in Africa is basically down to certainty, the ability to provide solution because mega projects, you will have excitement of technology hiccups and all this, how do you then help them to overcome that and still be able to maintain the predictability at the end of the day. That, I think, is a huge value. Hsueh-Jeng Lu: Mayank, on the second question, look, I think if you look at our finance costs, the largest component is still interest costs, right, to banks and et cetera. I think the key focus for us here is actually around deleveraging. I think we've done a substantial amount of refinancing with the support of our banking partners, but we have to delever. I think you would have seen the operating cash flow significantly improve so then we had to think about where we can allocate capital. Do we use that for growth because we're returning capital to shareholders, but it's also important to delever over time because I think the leverage on a gross level is still relatively high. Amelia Lee: Next question from Pei Hwa. Pei Hwa Ho: This is Pei Hwa from DBS. Congrats on the strong results. Just 2 questions from me. One is for Stephen, it's on the provision for your onerous contracts, this is amounted to $96.5 million. Could you give us a bit more color on the breakdown of all this, especially for legacy contracts, it was so close to completion that we didn't expect to have this much. I think second is on the project pipeline, especially from Petrobras and TenneT. Maybe you could give us a bit more color and how based on a conversation with our customer is TenneT on track? Or they still as per plan, will continue to award some contract this year? And also maybe some -- also, I mean, in general, how we think about your order pipeline and the conversion from the $32 billion pipeline to this year? Hsueh-Jeng Lu: Chris, maybe I'll take the first question first. I think the provisions of our $96 million that relates principally to 3 projects. That's the 2 U.S. projects, which we have since delivered. So you can think of that risk as have gone away, right? I think the reason for additional provisions is because the project took a little bit longer than we wanted, and so there were additional costs associated with that. On the third project, which I mentioned in my speech earlier, was around NApAnt, which was a legacy specialized ship building project that we're delivering in Brazil. And so there were -- the project has delayed and so there are some provisions relating to that. But it's a relatively small project. I think its our initial contract value was about $200 million. And so we're working very closely with the customer to sort of manage that risk going forward. Pei Hwa Ho: When is this project going to be delivered? Hsueh-Jeng Lu: 2027. So initially, it was supposed to be end 2026. Now it looks like 2027. Leng Yeow Ong: I guess for Petrobras, TenneT, and you mentioned about conversion pipeline I wouldn't repeat what I said for Petrobras. I think that's very clear on their development plan and what's going to come online. For TenneT, your question was around whether they are still on track. And the short answer is that as far as we know, yes, because as promised they have gone through the same allocation and competition end of last year. We're quite happy that we are able to land DolWin 5 for -- that's the first Germany unit that we are getting. So that also sets up our potential and production line for both the Netherlands projects and the Germany projects. This year, if my memory serves me correct, and please check and don't quote me because there will be projects coming online for tender in Germany and also followed by Netherlands. When they were FID that when they will start engaging us, that depends on when they are ready. But those projects are real through our conversation. Now on conversion pipeline. As mentioned, the team has worked very hard to deliver value to the customer. We have proven that when we said that we will deliver this way and when we have proven to the customer as One Seatrium, we are able to do that. Customers are also seeing that they are able to assess the different capabilities of different facilities and different teams within the group. So in a very short time within 3 years, we have come together and delivered very differentiating value in terms of being able to provide solutions to the customer. And that's not all talk, and we have delivered that to them. The key thing around conversion of cost is also the -- because of this ability to prove that we are able to do this. There are many people that are trying to come online as competition. So that segment actually is -- but as mentioned in my speech, there are certain segments that we have a very commanding track record. Again, there's no difference from the new build because it's complex, because it requires capability, it requires safety, basically practices within and quality, ability to deliver quality products. We think that this is an exciting area every year. As mentioned, Powership, if you take a look at this segment, why we highlight that, if we believe that the world is starved of power and also digital, AI, the growth of it, I think the floating assets is something that is very sound. The concept is sound. We just have to make sure that our customers are able to take a look at the financial ability around the economics around that. There's also a floating data center. There's many things that in the market that may be too premature for us to say. But all this $2 billion of conversion prospects, I think it ties into the whole energy type of products. And why conversion is because the speed to market is very important. So again, the ability to execute, the ability to engineer on the go and deliver them safely with quality is our hallmark and customers know why they come to Seatrium and why we're able to build on that will be then a track record in the convergence space. Amelia Lee: Thanks, Chris. Pei Hwa, I hope that answers your question. Next, we will take a question from online. Luis from Citi. Luis Hilado: Congrats on the good set of results. I just had -- most of everything has been asked. Just 2 housekeeping questions, please. Just to clarify on the $50 million annualized cost savings. Since most of the -- it will conclude in the first half. So it's essentially $25 million savings in the second half. So -- at least in the second half. Is that the way to look at it? And the second question is just I know it's difficult to discuss arbitration cases in terms of timing, but we have a feel for amongst those, which ones can resolve sooner, not when, but which would resolve sooner? And are your legal fees material at all on an annual basis? Hsueh-Jeng Lu: Luis, you had 2 questions, right? Okay. On the first question on -- sorry, what was that? Leng Yeow Ong: $50 million. Hsueh-Jeng Lu: $50 million. Yes, $50 million. A part of that divestments were completed towards the end of '25, right? So that -- a portion of that will be fully baked in from the 1st of January. The MFLs you would have seen we completed in January, and so that will be another component. So I think if you're looking at it over the full year period, it's probably -- if we can complete everything this month, it will be closer to the $50 million than the $25 million. Leng Yeow Ong: Arbitration, depends, but if you want to ask for which one would probably be settled first. It is all basically time based, right? P-52 will probably be the first one. that will be settled, and we hope that we will have a conclusion this year. You asked whether the legal fees is material? It depends on material against what. But it's never -- of course, that's not always the first avenue that we will go for. But I just want to impress upon that. Actually, arbitration is a professional way of basically settling differences. And usually in this industry, we are able to differentiate what we need to settle while we professionally advance on our both interests on ongoing projects. So yes, P-52 will probably be the first one that we are targeting. Amelia Lee: Thanks, Luis. Next question, also online from Amanda. Amanda Battersby: Yes, I'm here. Great. Amanda Battersby from Upstream. Thank you very much for the frank results, statements and sharing as always, Chris and Stephen. A couple of questions, if I may, please. You mentioned that the potential for BOT FPSO contracts, specifically in Latin America and one would think with Petrobras. Are you actively bidding for any BOT work for floaters? And if so, would you be looking for a partner on a project-by-project basis or perhaps a more formal arrangement to allow you to tender to go forwards, please? And the other 2 shorter questions, if I may, do you foresee any more sort of legacy arbitration contracts lurking in the wood work after sometimes more than a decade? And thirdly, please any more plans to rightsize the headcount as some of your projects come to completion? Leng Yeow Ong: Well, I'll take those questions. Thanks, Amanda. We are missing you here. Well, for BOT contracts, we will definitely need to have a partner and bidding strategy. Whether you'll be project-by-project basis or whether there is a long-term type of tie-up, we have both strategies in place. And it depends on time and space also, right? We have to look at -- I guess the fundamental is that we are in for the bid, and our focus is to win. So it's likewise for partners. Our operating partner would also have the same driver. So it will depend because timing of the tender and potential on both sides on the tender really decides how we choose our partners. Whether we will partner somebody for long term and across all projects, it depends whether the interests align at a point where we are signing up. So I can't have a clear answer, but we are in on the BOT bid for the BOT projects and definitely with an operating partner. On arbitration legacy, I think what I can promise you is transparency. As of now, as mentioned, we do not see that there are any that are lurking. But like what we mentioned, when there are any disagreement that we need to settle is always professionally been elevated to settle an arbitration if we cannot come to terms. So it's very hard for us to actually forecast. But all I can say is as of now, we don't see any. Now about rightsizing I would actually approach the rightsizing question as less of a manpower issue than I think more on the operational excellence angle. I think we have always mentioned about what is our strategy going forward. And I remember 3 years ago, when we talked about integration topic and we talked about how we optimize and during the first year, we did not even remove any headcount. And I think that all of that has basically actually worked out. Our first stance is always to make sure that we take care of our people. When projects are completed or when we get more efficient and our processes get more efficient, retraining has always been the first one, all right? So we are not approaching from a headcount and hire fire approach. But of course, when we look at our yards and our future footprint, which we have always been very transparent in sharing, that is strategic, right? That's strategic. And it's about trimming down the noncore, building on the core and, of course, have an eye of capability building, depending on what products that we are looking at. As we have mentioned, we further invested in the Batam yard to make sure that we have lines ready for offloading -- building and offloading 30,000 tonnes of topsides, which is mainly our HVDC today. We expect to eagerly contest to build a more stronger pipeline behind each of them. So there are a lot of ways that we are looking at rightsizing. The other thing is that one of the actions that we are taking, of course, is in the national news that Admiralty Yard is going to be redeveloped. And we knew that even way before Seatrium was formed. So we are taking that proactive step to actually rechannel resources. And that's the strength of the One Seatrium delivery model. We actually rechannel resources not only to Tuas Boulevard, but also a lot of our high ports and young managers are now in Batam, helping to build up the capabilities over there. So there's many dimensions to that. But I guess the main driver of this question is, I guess, about cost efficiency. And I think that has been the top line strategy that we have always said. We are very sensitive to cost but we are also very sensitive to capabilities, retaining capabilities, retraining capabilities and getting ahead of the curve to be able to service our customers. I think that will differentiate us very strongly. Amelia Lee: Next question, Siew Khee, please? Lim Siew Khee: Can I just follow up on the onerous contracts? So given that the U.S. projects have been delivered, can we expect a significant drop in the overall provision for onerous contract? Hsueh-Jeng Lu: Yes. Lim Siew Khee: Will it be lower than 2024 because 2023 was high and in 2024, it was not? Hsueh-Jeng Lu: As I explained earlier, I think there were 3 projects, right? So the remaining risk around NApAnt, but as far as we can see today, there is no need for additional provisions. Lim Siew Khee: Okay. So within your order book, there's nothing that is looking that you think could delay? So therefore, that would actually help to pave the way for better margins as you execute. Leng Yeow Ong: Yes. So as I explained earlier, right, I think the key risk was always around the premerger contracts, I think that portion has come down significantly. Lim Siew Khee: Okay. And just wanted to just check, you mentioned that you hope to all settle the arbitration. Is there a need for any provisions if it's concluded this year? Leng Yeow Ong: No. Lim Siew Khee: Is there any need for provisions for any other litigation that you might see be in negotiation? Leng Yeow Ong: No. Usually, when we talk about provisions, it's about legal opinion on the chances, right? So as of now, whatever that we reported that there's no need for further provision. Lim Siew Khee: And then just on your order pipeline target. Why did you raise from $30 billion to $32 billion so specific? What's that $2 billion? Leng Yeow Ong: Well, the other pipeline depends on what projects come into the market. We didn't raise it. It's a customer wanting in the market to basically look at development. These are real projects that are out there. Lim Siew Khee: Is there anything significantly different or new from compared to when you told us vessels of $30 billion now arriving to $32 billion. So what is the optimism coming from? Hsueh-Jeng Lu: Maybe I'll take that. So in that... Leng Yeow Ong: Hang on. It's not optimism. Again, I say that it is the projects that are out there and the real targets that we are going after. So when you talk about what are there any difference, of course, there is no secret that there are a lot more production assets, contracts that are foreseeable in the market and that is basically public. The other point that we are trying to make is, of course, there are also conversion projects. As we mentioned, they are out there in the market. So as we get knowledge and those are the projects that we are going after, we actually actively put it in the pipeline and say that, okay, these are all the go get, but that's to convert into order book. Hsueh-Jeng Lu: If I may add, the number there is we have an internal pipeline that we track and our commercial teams update very regularly. And so we just summed up that total and then gave that to the market. So these are all actual projects that we are chasing, right? So I think if you were talking about the change, I think, between the $30 billion and the $32 billion, there were some projects that we won, DolWin and then the BP project. And then those were replaced by other projects that customers have now inquired with us on, we want you to submit a bid or we're in bilateral negotiations with them. So it's our actual projects that we are chasing and not managed up, that's what we were trying to say earlier. Lim Siew Khee: Okay. Just last 2 questions, just on housekeeping wise. So the $50 million cost savings you mentioned, where can we actually see it more significantly, in G&A or of sales? Hsueh-Jeng Lu: It is in a different -- some of it will be in cost of sales, some of it will be in G&A and some of it will be other operating income. So it's actually in different areas. Lim Siew Khee: Is there any -- is there one that is like maybe higher, perhaps in cost of sales? Hsueh-Jeng Lu: It's mostly in the cost of sales because if it's relating to the yard, all of that goes into the COGS line. Lim Siew Khee: And my last question is, so the divestment gain that you actually guided. $160 million, if it is completed in 2026 will be recognized in 2026, is that right? Hsueh-Jeng Lu: $150 million. Lim Siew Khee: $150 milliion will be recognized in 2026. Hsueh-Jeng Lu: Yes. So $70 million was recognized in FY 2025, another 50 -- and $150 million in 2026. Amelia Lee: Thanks, Siew Khee. With that, we've come to the end of the briefing. Unfortunately, we've run out of time. For the 2 questions that we received online, we will reach out to you directly on e-mail. For further questions, if you require any further clarifications, please feel free to contact us at our Investor Relations e-mail address. Thank you very much for joining us this morning, and we wish you a very pleasant day ahead. Thank you. Bye.