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Unknown Executive: Welcome to the Westgold Resources First Half '26 Financial Results Presentation. Our presenter today is Westgold Managing Director and CEO, Wayne Bramwell. Go ahead, Wayne. Wayne Bramwell: Thank you, Steve, and welcome to everyone on the call. Thank you for taking the time to dial in today. With me today, I have our Chief Financial Officer, Tommy Heng. We are assuming you've all seen our report. I'm going to hand over to Tommy to run today's call, and I'll jump in at the end to talk to what's ahead before opening up the call for questions. So, Tommy, over to you. Su Heng: Thanks, Wayne. It's fair to say that this was a record half. But before I go through the numbers, I think it's important to reflect on the journey that has brought us to this point. Our outcomes this half aren't accidental. They stem from years of disciplined effort. We worked through the tough times, stayed focused and made deliberate long-term decisions about how and where to invest in this business. We committed early to becoming unhedged, strengthening Westgold's infrastructure, investing in drilling and development and upgrading our equipment base. And that strategy has been validated by increasingly consistent operational performance across the group. And whilst we have substantial room to improve, what we're seeing now is the direct result of executing that strategy, progressive improvements in operational consistency, production growth and a relentless internal focus on managing and reducing cost pressures. Importantly, all of this work has been delivered at a time when the gold price environment is becoming increasingly favorable. As an unhedged producer, we've been fully exposed to those strong prices, giving us the ability to convert this operational momentum directly into financial returns to shareholders. Thanks to this increasing production and the realized gold prices, our revenues effectively doubled compared to this time last year, allowing us to deliver $550 million in underlying treasury build, a remarkable step up from the $100 million recorded in the prior corresponding period. This momentum has strengthened our balance sheet substantially, driving our closing treasury balance to $654 million compared to $152 million in H1 FY '25. Our operating performance translated directly into earnings with underlying EBITDA rising to $612 million, up from $224 million and the underlying net profit before tax increasing to $447 million, a significant uplift from $89 million a year earlier. This accumulated in underlying net profit after tax of $314 million, more than 5x the previous corresponding periods $57 million. Overall, H1 FY '26 marks an exceptional financial performance and demonstrates the capability of the business to generate sustained value. Slide 5. Not surprisingly, our record financial results coincide with record production results. Production from Westgold's mined ore amounted to 170,000 kilo ounces of gold for the half at an all-in sustaining cost of $2,871 per ounce. This production is a core business, which generated $517 million in net cash flow. From core business to side hustle, Westgold commenced production from ore purchased from New Murchison in September 2025. Over the half, we produced 25,000 of gold at an all-in sustaining cost of $5,644 per ounce. These are comparatively low-margin ounces as we purchased this gold at a discount to the average spot price, yet this strategy has generated an additional $15 million of net cash flow for the period. The key point about the OPA that is not captured in these numbers is that the OPA ore does not displace our own ore. In fact, the opposite is true. The blending of soft oxide material from the OPA with Westgold mine hard underground ore actually allows us to process increased volumes of our own ore, effectively increasing the throughput of our Meekatharra mill and dropping unit processing costs. So combined, Westgold's group production for the half was 195,000 kilo ounces of gold at an all-in sustaining cost of $3,225 per ounce, allowing us to generate $532 million of net cash flows from operations. Slide 6. This slide breaks down our P&L and the record underlying profit we were able to deliver this half. $1.2 billion in revenue drove a gross profit of $436 million. Fair value appreciation in some of our liquid investments were offset by admin costs and the negative impact of fair value movements in our royalty agreements, resulting in an underlying net profit before tax of $447 million. Unsurprisingly, when you're making profits, you pay taxes. Westgold's income tax expense was $133 million for the half. This accumulates in an underlying profit of $314 million. To reconcile to statutory profit, we need to account for one-off items, the most impactful of which is the accounting loss on the sale of the Mt Henry-Selene project. Though the sale hadn't completed by the end of this period, the accounting standard dictates the assets are moved to assets held for sale, resulting in a preliminary loss of $178 million. This one-off accounting loss on sale is 100% noncash, but it's important to note that the sale generated immediate real cash inflows of $15 million and approximately $65 million in Alicanto shares and up to $30 million in deferred considerations payable in cash or shares upon the achievement of agreed project milestone. This demonstrates our ability to generate value from noncore assets that would have otherwise remained unrealized within our portfolio. The loss results in a positive adjustment to the income tax expense to the tune of $53 million, resulting in a strong statutory profit of $191 million. This compares very favorably to the statutory loss of $28 million for the prior corresponding period. Slide 7. Key slide for me, $550 million in underlying treasury build for the half before paying $129 million for growth and exploration, $76 million in stamp duty for the Karora transaction, $50 million in debt repayment to end the period debt-free, $29 million for dividends and share buybacks, $2 million in New Murchison capital raise and receiving $26 million of cash inflows from the sale of the Lakewood mill and the deposit from Alicanto for the Mt Henry-Selene sale. We ended the period with $521 million of cash and an impressive $654 million in treasury closing balance. After paying for growth and one-off payments, our treasury still grew by $290 million in the half. Slide 8. This slide shows our treasury growth over the longer period. Since the acquisition of Karora, cash is king, and we're happy to see our strategy is increasing cash flows and further strengthening our balance sheet. This balance sheet strength gives us flexibility and optionality as we build momentum post our merger with a steadfast focus on delivering our guidance and 3-year outlook. Slide 9. To that end, we maintain our production and cost guidance for FY '26. We maintain a conservative estimate for third-party ore purchases going forward as we don't control mining for this ore source. We expect to produce around $365 million for the period being the guidance midpoint at an all-in sustaining cost between $2,600 and $2,900, excluding the OPA. Slide 10. Let me quickly recap our 3-year outlook. We're on a clear path to grow production from 326,000 ounces in FY '25 to 470,000 ounces by FY '28 with the all-in sustaining cost stepping down towards circa $2,500 per ounce. This is a high confidence executable plan built on organic growth from our existing operations, not blue-sky assumptions. The strategy is simple: mine and process higher-grade ore and optimize the mills. By investing sensibly in our mines and processing hubs, we're steadily upgrading the grade profile and matching capacity with better quality feed, lifting ore sources and margin. And importantly, we're delivering against this plan. Beta Hunt infrastructure upgrades have lifted development rates, setting up a sustainable ramp-up towards 2 million tonnes per annum. Great Fingall filed its first reef stope, a key milestone in the Cue Hub's high-grade transition. Starlight continues to deliver strong high-grade stopes, improving feed quality through Fortnum. This is real progress and exactly the trajectory our 3-year outlook sets up. Slide 11. Now while the 3-year outlook gives us a solid high confidence baseline, it's important to remember that it does not capture all of the upsides we're actively advancing. I won't run through everything on this slide but let me call out a few of the material opportunities already in motion. Bluebird South Junction. Our plan assumes 1.2 million tonnes per annum by FY '28, while we're aiming to hit 1 million to 1.2 million tonnes by early FY '27. Higginsville mill expansion, feasibility work is looking beyond 2.6 million tonnes with options assessed up to 4 million tonnes per annum. Operational improvements. We've made significant gains that aren't baked into the base case and have the potential to drive further cost and productivity benefits. Each of these represent meaningful tangible upside to our 3-year outlook baseline. And collectively, they highlight just how much flexibility and growth optionality sits within the Westgold portfolio. Before I hand over to Wayne to wrap up, I would like to touch on shareholder returns. Westgold continues to deliver on its commitment to shareholder returns. We declared a $0.03 per share final dividend for FY '25. And while we did not declare an interim dividend for H1 FY '26, during the half, we upgraded our dividend policy for FY '26 to demonstrate our growing confidence in the business and commitment to delivering against that policy. In addition, we launched a 5% on-market share buyback program, a clear signal of our belief in the value of our shares and our disciplined approach to capital management. These initiatives are underpinned by strong cash generation and a robust balance sheet, positioning us to continue rewarding shareholders while investing in growth. We paid $28 million for the FY '25 dividend during the half and commenced on the market share buyback. With that, I'll hand over to Wayne. Wayne Bramwell: Thank you, Tommy. What a gorgeous set of numbers. We made some tremendous progress on our portfolio simplification goals during the half, bringing forward value from noncore and nonproducing assets. After the end of the period, we completed the sale of the Mt Henry-Selene Project to Alicanto Minerals for a total consideration of $110 million, comprising $80 million of immediate value from $15 million in cash and $65 million in Alicanto script and up to $30 million in deferred consideration based on specific performance criteria. This transaction was consistent with our strategy to unlock value from assets that would otherwise remain unrealized within our greater portfolio. We are also making good progress on the planned divestment of Peak Hill and Chalice, which like Mt Henry-Selene, are assets that sit outside of our 3-year plan. We are demerging our noncore Reedy's and Comet assets in the Murchison into a new soon-to-be listed company called Valiant Gold. Like the assets on the previous slide, Reedy's and Comet are assets that for Westgold have value but are under scale and don't feature in our longer-term plans. What makes this different is that their proximity to each other and to our processing hubs lend themselves to become a great value generator under a smaller focused management team where these assets are their top priority. The prospectus for Valiant was released last week, describing the $65 million to $75 million IPO with a $20 million priority offer for eligible Westgold shareholders. Following the raise, Westgold will retain a 44% to 48% cornerstone equity position in Valiant. As part of the transaction, we are entering into an OPA with Valiant, providing them with a fast-track pathway to cash flow. I think of this as an analog to the deal we've recently done with New Murchison Gold. If you would like more information on the Valiant IPO, I encourage you to obtain a copy of the prospectus from the Valiant Gold website. Okay. Final slide for me. This is a great set of results, and I'm incredibly proud of what the team has delivered. Our strategy is working and the early outcomes are clear. But we're not in celebration mode here. There is still plenty of work ahead of us. Our focus remains exactly where it needs to be on safety, on delivering our full year guidance and on executing the 3-year outlook, which sets the minimum bar for what this business can and should achieve as we continue to live performance. With that, let's move straight to questions. Unknown Executive: Your first question comes from Adam Baker. What is the reasoning behind not paying a dividend for H1 FY '26, noting minimum dividend policy of $0.02 per year and a maximum of 30% of free cash flow. To you, Tommy. Thank you. Su Heng: Thank you, Adam, for the questions. Our reason for reasoning is we would like to pay a fully franked dividend, such as the timing of when our tax returns are launched, the franking credits will only materialize circa in the second half. So hence, that's why we want to pay a fully franked dividend and stay tuned. Unknown Executive: Next question comes from Hugo. Should we still expect Fletcher reserve and resource updates in the coming months? Wayne Bramwell: Thanks, Hugo. Certainly, we're continuing to drill Fletcher, so I would expect a resource uplift this year and a small reserve conversion. We're basically doing both. We're doing infill and extensional and that will feed into resource and reserve updates. Unknown Executive: Next question also from Hugo. Can you provide some color on the timing of integrating recent ore purchase agreements and the impacts to FY '26 production and cost guidance? Wayne Bramwell: Thanks again, Hugo. Certainly, the NMG ore purchase agreement was factored into our FY '26 guidance. Going forward, '27, '28, none of the other ore purchase agreements that we have in place, for instance, with Valiant have been factored in. Unknown Executive: Next question comes from Kevin. How far above nameplate could you run Higginsville mill given the blending of soft Forrestania resource? Wayne Bramwell: Thanks, Kevin. Even with us feeding our own sort of softer oxide from Lake Cowen late last year, I mean, on face value, that Higginsville mill has a 1.6 million tonne per annum throughput. There were days where there was a high blend of soft in it doing 1.7, 1.75. So we'd expect to see similar numbers with Forrestania. Unknown Executive: Stay with us while we go through some other questions. Next question comes from Ganesh. When does the mill expansion at Higginsville proceed? What is the grams per tonne from Beta Hunt and Great Fingall you are targeting? Wayne Bramwell: Thanks for that, Ganesh. Expansion of Higginsville, the proposal to do that is with the Board now. Your second question is? Okay. The number that we use in our mine plan for Beta Hunt is circa 2.4 grams. It often does better than that, but we forecast and schedule Beta Hunt conservatively. The same is true with Great Fingall. We at steady run rate. Great Fingall, we schedule at 4 grams, but our expectation is in that ore body with high components of gravity gold, we'd see numbers much higher than 4. Unknown Executive: Next question comes from Paul. Wayne and team, you moved a few deposits from exploration into development, including Larkin and A Zone. How quickly could you bring these into development? Wayne Bramwell: Good question. We are actually mining in the A Zone. So currently, West Beta Hunt, we mined A Zone and Western Flanks. And we do actually have stopes in Larkin. So really, what we see as the opportunities in terms of scale at Beta Hunt, Western Flanks, A Zone, Fletcher, Murchison, Larkin, these are all things which were either drilling or actually mining from. So yes, Beta Hunt, much bigger system than we would expect. Unknown Executive: Another question from Paul. With the ore purchases, why have you not upgraded guidance? Wayne Bramwell: I think I answered that one. We basically -- the existing FY '26 guidance has already got the NMG ore purchases baked in. But until Valiant actually starts to deliver, we'll be conservative. We won't build any of that in until Valiant starts to produce. Unknown Executive: We have no further questions at this time. I think I'll give it to you, Wayne, to close off. Wayne Bramwell: Look, thanks, everyone, for patching in today. And I think the main issue Tommy explained well was that in terms of why no half year dividend, really, it's the fact that we're in the process of building our franking credits. From an investor's perspective, and I'm one as well, I much prefer fully franked dividends than unfranked, and that's really the focus going out to the full year.
Andrew Livingston: Good morning, everyone, and welcome to Howden's 2025 Results Presentation. So I'll begin by introducing our performance for the year. Jackie Callaway, our CFO, will then review our financial results for the period. And then I'll share my perspectives on our 2025 performance and our plans for this year and then we'll take your questions. The business advanced on all fronts in as we anticipated a challenging U.K. marketplace. The results were at the top end of our expectations and we've made an encouraging start to 2026. Group sales were up 4% year-on-year, with the business continuing to perform well in the final two periods of the year. In the U.K., we gained kitchen market share, which helped us mitigate a small single-digit decline in the overall market size. Our kitchen volumes rose which helped us consolidate the significant market share gains that we've made over the past 5 years or so with our longest established depots making a substantial contribution to the share gains that we've made over this period. We delivered an industry-leading gross margin with gross profit up on last year, and we balanced recovery of cost rises with our commitment to providing competitive pricing for our customers. Reported profit was 5% ahead of last year, increasing at a higher rate than sales. We progressed our strategic initiatives for the U.K. and total sales of our international operations increased significantly. At the year-end, we had a total of 970 depots trading, including 891 in the U.K. The business delivered strong operating cash flow, and we maintained a robust balance sheet. This gives us flexibility to continue to invest in our growth plans for the business and provide shareholders with an increased total dividend for the year. For 2026, we've also announced today a new GBP 100 million share buyback program. Our full year results demonstrate the strength of our local trade-only, in-stock model, a strong product lineup, high stock availability, industry-leading service levels and a very engaged team have all contributed to our performance which benefits from the ongoing investments in our strategic initiatives. In the U.K., the number of customer accounts as at the year-end and the number of accounts trading during the year were similar to last year's record levels with customers and average spending more. So far this year, our performance has been in line with our expectations. And whilst it's early in the year, we are on track to meet current market expectations for 2026, what remains a competitive marketplace. For 2026, our planning assumptions that the overall size of the kitchen market will be about level year-on-year following several years of decline. We are well prepared for the challenges and opportunities ahead with our customers who are typically self-employed. People are highly adept at winning business in all market conditions. And delivered by our highly entrepreneurial and well-incentivized depot teams, I believe, are service-orientated, trade-only, in-stock local model is the right one to deliver sustainable market share gains. Our model is hard to replicate, difficult to compete with, and we have initiatives in place to make it even more so. In 2025, we believe the value of our principal U.K. markets totaled some GBP 11 billion. versus our U.K. sales of GBP 2.3 billion, which also includes the contribution from our fitted bedroom initiative, bedrooms being a significant market in its own right. Our markets remain relatively unconsolidated and there are significant long-term opportunities for us. We will invest in the business on this basis. So I'm going to update you on our strategic initiatives, which are key to our longer-term development of the business after Jackie takes you through our financial results for the year. So Jackie, thank you. Jacqueline Callaway: Thanks, Andrew, and good morning, everyone. I'm pleased to present Howden's financial results for 2025, and I'll begin by summarizing the key highlights. The business performed well against all financial metrics in a challenging marketplace. In the second half, we continued the positive trading momentum achieved in the first half and following our last trading update, the business continued to perform well in the final two periods of the year. Group sales increased by 4.1% to GBP 2.4 billion. Gross margin was 110 basis points ahead of last year. We benefited from the price increase implemented at the start of the year and from effectively managing price and volume as we continue to take market share. We maintained our focus on productivity and delivered further sourcing and manufacturing efficiencies in the year. Operating expenses were tightly controlled, and we delivered an EBIT margin of 14.7% with profit growth ahead of sales while continuing to invest in our strategic initiatives. Profit before tax is up 5.1% to GBP 345 million. The effective tax rate was 22.4%, down from 24% in 2024 as we refined the patent box claim. And finally, we delivered an EPS growth of 8%, and this reflected the profit growth achieved in the year, a lower tax rate and the lower share count as a result of the share buyback program. Now let's look at sales growth in a bit more detail. In challenging market conditions, we maintained a disciplined approach to pricing and volume through delivery of a differentiated business model by a highly entrepreneurial depot teams, we also gained share in a market we estimate fell by around 3%. Overall, U.K. revenue increased by 3.8% to GBP 2.3 billion, was up 2.6% on a same depot basis. The price increase implemented at the start of the year had an impact of around 2%. And our international depots, revenue was EUR 99 million, 12% ahead of 2024 and 9% higher on a same depot basis. In France, the new senior leadership team focused on strengthening depot capabilities. Our Irish depots have traded well since we entered the market 3 years ago, and we expect to expand the footprint further this year. Andrew will talk through these initiatives in more detail shortly. Now turning to profit before tax. Starting from profit before tax of GBP 328 million in 2024. Gross profit was GBP 84 million higher. The price increase delivered a GBP 41 million benefit with volumes and mix contributing GBP 29 million and sourcing and manufacturing benefits a further GBP 14 million. Kitchen volumes increased, and we grew our share of sales in each of the three price bands we follow as we continue to invest in new kitchens and associated kitchen products. We believe there are significant longer-term growth opportunities across all three price bands. Our in-house manufacturing and strategic sourcing capabilities remain a key competitive advantage for us. We are progressing plans to develop the Runcorn site, which will increase capacity there by around 1 million rigid cabinets, supporting our longer-term ambition for the business while preserving the low-cost manufacturing advantage. Total operating cost increases were held to GBP 68 million, balancing tight cost control with investment in our strategic initiatives. This disciplined approach supported an increase in EBIT margin and a profit before tax of GBP 345 million for the year. Now let's look at operating costs in a bit more detail. Ongoing investment in our strategic initiatives was GBP 28 million in the year. This included the incremental costs of the new U.K. depots, which totaled GBP 12 million and included the cost of the 52 depots opened this year and in the prior year. We invested a further GBP 13 million in other strategic initiatives, predominantly digital. We invested in our international businesses, for example, by expanding our presence in the Republic of Ireland. And our existing U.K. depots, additional costs of GBP 11 million related predominantly to volume increases, we also incurred GBP 11 million of additional labor costs arising from the government's changes to the employees, national insurance and the minimum wage, which came into effect last April. And other costs, this mainly related to variable pay and incentives, which were higher this year given the strong trading performance and the actions we are taking to optimize the depot network in France. I would also highlight that we offset around GBP 27 million of inflationary cost increases with productivity and efficiency actions taken in the year. In 2026, we expect continuing inflationary headwinds of around GBP 30 million in the total cost base, in areas such as commodities, labor and additional property costs. And as in previous years, we will offset these where practicable with further productivity and efficiency savings. We will also continue to invest in our strategic initiatives to fund future growth, and Andrew will take you through our plans for 2026, shortly. Next, our cash flow. Cash generation was strong, and we ended the year with GBP 345 million of cash. In total, we invested around GBP 26 million in working capital in the year to support our growth. Capital expenditure for the year totaled GBP 125 million as planned before the GBP 31 million for the purchase of the Runcorn site. Our normalized CapEx spend will continue to be around GBP 125 million a year and aside from maintenance CapEx, which is around GBP 30 million a year, within this total, there are three major investment categories that we are prioritizing to support our growth. First, manufacturing. We continue to make investments in our U.K. manufacturing base to enhance productivity and increase capacity and broaden our capabilities. Second, depot reformats and openings. Our updated format provides the best environment to do business with our trade customers, and we continue to see attractive investment returns when we convert a depot. And finally, digital, we will continue to support our trade customers for upgrades to our digital capabilities to make them more productive and to raise brand awareness. We are also using technology to support new services and ways to trade while delivering productivity benefits to the depots. Moving on to cash tax. We benefited from the prior year tax credit arising from our patent box claim. And looking forward into 2026, we expect cash tax to be around GBP 60 million, with an effective tax rate of around 23% to 24%. And finally, you can see that in the year, we returned over GBP 216 million to shareholders through ordinary dividends and share buybacks, and we'd expect to have a similar approach in 2026. Moving on to the pension scheme. Over the last 9 months, we have worked with the trustees to review the strategy of the defined pension scheme. The scheme is well funded with a surplus on an ongoing funding basis, meaning that, no contributions are currently payable by the company. The current funding arrangement is in place to the end of May 2027, while we undertake the next triannual valuation, which is due at the 31st of March this year. We are now actively engaging with the trustee to manage and reduce pension risk over time through a collaborative joint working party framework. This will look to reduce and manage pension risk proactively in areas such as investment strategy, data and benefits and scheme funding. Howdens is a strongly cash-generative business, and we have a robust balance sheet, which gives us the opportunity to invest in future growth as well as rewarding shareholders with attractive cash returns over a long period of time. In total, we have generated GBP 3.8 billion in operating cash flows in the last 10 years. We've invested over GBP 900 million in the business. This high returning capital investment has been across both strategic organic growth initiatives and bolt-on opportunities like the investment in the solid work surfaces business 3 years ago, alongside our maintenance CapEx programs. Howdens remains disciplined in the returns we achieved from our capital allocation and investment. This discipline is unchanged over many years and has driven our overall return on capital employed which in 2025 is a healthy 25% -- sorry, 23%, well ahead of our cost of capital. Over the same time frame, we've returned over GBP 1.5 billion to shareholders in dividends and buybacks. In 2025, we grew earnings per share by 8% as a result of our earnings growth, a lower tax rate and the buyback we completed in the year. Now moving on to capital allocation. Our capital allocation policy is unchanged with the principles set out on the slide. We continue to operate within our clear capital allocation framework. And for several years, we have operated with a policy where year-end surplus cash defined as amounts in excess of GBP 250 million is returned to shareholders. This is unchanged and appropriate for Howdens despite the significant growth in the business over time. This still provides sufficient headroom to accommodate our seasonal working capital requirements, support CapEx into organic growth and ongoing investment into our strategic initiatives and opportunities whilst maintaining our strong balance sheet. We also recognize the importance of the dividend and dividend growth to shareholders. The Board is recommending a final dividend for 2025 of 16.9p an increase of 3.7% and resulting in a total dividend of 21.9p per ordinary share. And the final dividend will be paid on the 22nd of May 2026. Taking all of this into consideration and reflecting the group's continued strong financial position, the Board is also announcing today a new GBP 100 million share buyback program for 2026. So to summarize, we have performed well this year in a challenging marketplace. Our trade model is different -- differentiated, and our strategy is well defined, and we are executing well. For 2026, our planning assumption is that the overall size of the U.K. kitchen market will be level year-on-year after several years of decline. We continue to be proactive in delivering productivity and efficiency savings to deliver profit growth and offset inflationary headwinds. Our robust balance sheet and cash generation support our continued investment in the business. And we remain confident of delivering growth ahead of our markets while generating strong cash flow and attractive returns for shareholders. While it's early in the new financial year, we're on track to meet current market expectations for 2026 and what remains a competitive market. Thank you, and I'll now hand back to Andrew. Andrew Livingston: Thank you, Jackie. As I mentioned earlier, we believe that our markets give us significant long-term growth opportunities. Our strategic initiatives are key to capitalizing on these. And I'm going to use those as a framework to review our 2025 performance and our plans for this year. They are based around our key -- the key features of our business model, such as industry-leading levels of service and convenience, trade value, product leadership, but they're all delivered by highly entrepreneurial teams who, in turn, build long-term relationships with local tradespeople. So our initiatives are to evolve our depot network, to improve our range in supply management, to develop our digital capabilities and services and to expand our international operations. So first, depot evolution. And high service levels, including local proximity and immediate availability are very important to our customers. And we continue to see profitable opportunities to open up depots. Overall, we have a line of sight to around 1,000 depots in the U.K. In 2025, we opened up 23 U.K. depots, including 18 in the two final periods with a total of 891 trading at the year-end. This year, we expect to open around 25 more depots, and we continue to take a highly disciplined approach to the location of our depots. Our updated format enables us to provide the best working environment for our depot teams and to make productivity and space utilization gains in a cost-effective way. We will now show you a short video that takes you around our Stockport depot, which we opened last year, and whose layout is very typical of the latest situations of our formats. The kitchen displays show most of our kitchen families, including paint-to-order options and solid surface. Our trade counter stocks many of our everyday products and provides a chance for a chat and a brew. Our open plan business area makes it easy for our trade customers to easily access advice from our teams. We have space for our designers to plan kitchens for trade customers and a full wall of our kitchen collection known in our depots as the Wall of Fame. And we have a new selection area for customers to view our kitchen door and work top combinations, including our solid surface proposition. And our presentation rooms are private and have high-definition screens to bring to life customers' kitchen choices in 3D. Our sales conversions here are extremely high. Our restructured warehousing and racking is a vital Howdens USP and enables us to serve the trade with stock reliably and often instantly. The updated format has strengthened our competitive proposition and our program to convert older depots to this format is well advanced. Last year, we completed a further 60 revamps, including nine relocations, taking the total so completed to 410. These principally comprise conversions of our larger and longest established depos. Now this year, including relocations, we plan to convert another 45 depots. And by the end of this year, we'll have revamped around 68% of all depots, which opened in the old format, and we'll have around 77% of all U.K. depots trading in the updated one. As I mentioned earlier, the latest iteration of the format has a separate area for customers to view kitchens, doors and worktop combinations. And over the next 2 years or so, we will also be making the minor layered modifications necessary to include this area in the depots that were prior to the 2025 refits. Next, range and supply management. Investment in service, product and availability helps us develop long-term customer relationships and build competitive advantage. Sales of new products are a significant contributor to our performance. Sales of product introduced in 2025 and the prior 2 calendar years represent around 29% of U.K. product sales, with product launch in 2023 being the largest contributor. Value for money is a constant feature of our purchaser's buying decisions, and we are committed to providing our customers with market-leading, easy-to-fit and fairly priced product. And given pressures on high sale budgets, price featured predominantly in 2025, and we expected to do so again this year. With an emphasis on value for money and choice at all price points, our offering is well positioned to take advantage of this. Our kitchen NPI for 2026 makes more colors, styles and finishes available to more budgets, including at entry and mid-level price points. We are innovating in other long-established product categories and adding more colors and styles to our fitted bedroom offering launched 2 years ago. As we continue to invest in product innovation to capitalize on the significant growth opportunities we have, efficient management of our kitchen range is crucial to balancing customer choice and availability with our profitability. Our rigid kitchen platform is shared across all our families, which helps us introduce new kitchen options at more price points cost effectively. And our stock management and replenishment enhancements, including our XDC network, enabled us to provide best availability on a broader offering at a lower cost. More efficient new product testing enables us to bring more proven new styles to market more quickly. Our increased presence in the premium end market, which is where range innovations are usually made is also forming -- informing and accelerating our ranging decisions at other price points. Excluding paint-to-order, we have 24 new kitchens confirmed for 2026 as compared to 23 last year and 11 in the prior year. We will enter the second half with our entire offering of such kitchens organized into 11 families with a similar total count to last year. In 2025, sales of our entry-level and mid-level kitchen families represented, respectively, the highest number of kitchens we sold and the most kitchen sales by value. Last year, we brought to market 13 new kitchens for our established entry and mid-level families and launched Frome in four colors, a new family whose styling updated that of our long-standing Chelford family. This year, we have 15 new kitchens for these families. For our entry-level families are Heartland -- our traditional Heartland, we have five new kitchens in colors, which are popular elsewhere in our offering, including Greenwich, and Witney in porcelain and Allendale, shown there in Reed Green. At mid-level, we have discontinued Chelford, and we will add six colors to our most modern and shaker range Frome, including Mist and Pebble. Elsewhere, we've introduced some more emerging colors and finishes to our best-performing mid-level families, including Clerkenwell in Super Matt Mist and Halesworth in Ash Green. We've upscaled our higher-priced kitchen portfolios in recent years, utilizing Howden's scale, supply and manufacturing capabilities to offer the bespoke look most associated with high street independents at competitive pricing. Our offering now comprises four families including three shaker-style Timber families, which are closely marketed as Classic Timber Kitchens. In 2025, our Classic Timber Kitchen families performed particularly well with the paint-to-order options growing in popularity. The number of our Chilcomb and Elmbridge kitchen sold and paint-to-order colors, which are priced at the premium to stocked colors increased significantly in 2025. This year, we are refreshing our paint-to-order pallet with four new colors with two of the leading paint colors becoming Chilcomb and Elmbridge stocked colors. Last year, we extended the reach of our timber offering with the launch of a new family called Ilfracombe, an in-framed timber kitchen of classic design. Precision above Chilcomb and Elmbridge families, Ilfracombe is exclusively available in 24 paint-to-order colors. Solid surface worktops, which are often but not exclusively associated with the sale of higher-priced kitchens continue to represent significant opportunities for the group. In recent years, we have increased the number of decors we offer in this service. And for this year, we've introduced clearer and simpler ranging and more delineated pricing to demonstrate the value we offer at all price points. Ahead of peak trading later this year, our total offering will comprise a similar number of options to last year with increased space available to display worktops in more of our depots. We continue to upgrade our offering in other categories, including our own category, specifically own label brands, which complement the third-party branding product we sell. So our Lamona branding is one of the leading integrated appliance brands in the U.K. And for this year, we have a major refresh of our brands offering. We've modified the design, lowered the prices of a suite of high-volume products without compromising these products functionality. Elsewhere, we've updated the design and specification of a number of high-priced products, including washing machines, fridge, freezers and cookers. Launched in 2023, our own label flooring brand, Oake & Gray now represents a substantial portion of the category sales, having introduced water-resistant laminates last year. New product for this year includes sustainably sourced engineered wood flooring with market-leading standing water resistance. In Ironmongery, we launched our own label called Fuller & Forge. Fuller & Forge product has landed well and has significantly improved this offering in our category. For this year, we have new finishes and new designs, and we'll be adding new subcategories. As well as being substantial businesses, Doors and Joinery remain a key footfall building product for us in our depots. Last year, we launched our more colors and bolder styles at all price points to our door lineup. A new product this year includes a new premium range of Howden branded solid engineered doors. In Joinery, we will continue to develop the subcategory extensions into wall paneling, stair parts and lost spaces that we initiated in 2025. Fitted bedrooms were well ahead of the previous year. Bedrooms represent a growing source of incremental sales and profit and help us foster customer relationships. Installing fitted bedroom suits the skills of our customers who fit kitchens. And last year, a substantial portion of our total bedroom sales represented purchases either by new customers or by customers who bought from us relatively infrequently. We developed our bedroom ranges in house, utilizing our existing design and supply infrastructure, and they have a high cabinetry content, which, of course, matches our manufacturing capabilities. In 2025 -- our 2025 offering comprised bedrooms in five leading family designs drawn from our kitchen portfolio, including new family Clerkenwell launched during the year. This year, we will continue to target entry and mid price points with five new bedrooms, including new colors for Bridgemere and Halesworth. Our product offering is underpinned by our dedicated sourcing operations, which manufacture or source the right product in complex categories and distribute it efficiently across our depot network. Howdens is an in-stock business and the trade tell us that high levels of stock availability is one of the key reasons that they buy from us. The investment in our XDC network, which enables us to offer next day delivery service and other recent initiatives, including Daily Traders facilitate exceptional levels of service to our depots. In 2025, deliveries totaled some 73 million pieces, and our service level from primary to our depots was at 99.98%. Now that is a world-class performance by any standard. Our in-house manufacturing capability has a source of competitive advantage for us. And we always keep under review what we believe is best to make or buy by balancing cost and overall supply chain availability, resilience and flexibility. Recent investments in manufacturing have strengthened our competitive position by increasing our manufacturing capacity and by adding broader and new capabilities. So our Runcorn factory with its high volume, low-cost making capability has always been an integral part of our manufacturing and logistics strategy. With planning permissions in place, our development program for Runcorn site is now underway. And at the end of last year, we also acquired the freehold of this site. We expect the works will take about 3 years to complete in line with our long-term ambitions for the business. And the program will give us at Runcorn more capacity, more flexibility and broader capabilities to deliver lower cost of goods sold than might otherwise have been the case. Now turning to our digital platform, and we use digital to reinforce our model of strong local relationships between our depots and their customers. And we do this by raising brand awareness to support the business model with new services and ways to trade with us and to deliver productivity benefits and more leads into our depots and into our depot teams. Usage of our online account facilities, which provide efficient -- which provide efficiencies and benefits for our customers and depots alike has continued to increase. New registrations have totaled some 59,000, around 61% of our customers had an online account at the year-end. Total users viewing our trade platform has increased by 45%, with around 80% of users regularly looking at their individual and confidential pricing. Customers with online accounts have on average continue to trade more frequently and spend more than non-users. We generated high levels of engagement with our web platform and grew our social media presence, which also stimulates interest in viewing our products and services online. Total visits totaled some -- site visits totaled some 24 million in the year. Amongst kitchen specialist, we continue to have the highest number of fitted kitchen site visits in the U.K. The time spent viewing pages and the number of sessions were consistently at high levels. Across the leading social media channels, our follower base at around 720,000 was up 18%, and with around 6.8 million engagements in a month. Usage of our upgraded Click & Collect service for everyday products increased and the new depot account management tool introduced last year is helping depots manage their customer relationships more efficiently and more productively. We have also recently introduced a new depot pricing and margin tool, which we call PAM, and its now operational in all our U.K. depots. We designed this in-house and PAM makes depot price management easier and more effective. It provides comprehensive data for depots to make more informed pricing decisions with a higher degree of confidence and enables depots to access quickly and see the impact that it has on their margin. Depot feedback has been very positive, and we are seeing both more bespoke local pricing and improvements in depot margins on products, which we incorporate in the system. And finally, international. In 2025, year-on-year sales of our international operations based in France increased at a higher rate than in the previous 2 years. In tough market conditions, the business responded positively to the measures taken to improve existing depot sales performance. We now have in place a highly experienced leadership team adept at depot management and have invested in enhancing offerings of footfall promoting products alongside a number of other initiatives. In 2026, we will continue to build out our depot teams capabilities, particularly account management, and actively manage our depot estate, including by closures and relocations where necessary as we look to build on the progress that we've made there. We are also trialing a more compact version of our format initially at a test depot in Reims in France, to the west of Paris. At around 500 square meters, this version is under half the average size of a current U.K. depot has a lower rental cost and the layout incorporates all the latest U.K. format innovations that you saw in the video earlier. We expect to maintain the aggregate number of depots trading at around the current number as we actively manage our depot estate to optimize its performance. Sales in the Republic of Ireland, we're well ahead of last year, and we will be opening more depots there in 2026. The Irish market suits our differentiated model and one which sets us apart from the competition there. We opened for business in the Republic of Ireland in 2022, and we used a similar depot location strategy to that in France with the local team supported by our U.K. infrastructure and also our digital platform. By the end of 2025, we had 16 depots trading, including nine clustered around Dublin, with three serving Cork. This year, we expect to open around five more depots, which would increase the number trading to 21 by the year-end. So for 2026, we are well planned, including on our strategic initiatives. These are aimed at increasing our market share profitably as day-to-day, we deliver value to customers across all price points and product categories. We have 24 new kitchens in stock well ahead of peak autumn trading plus a very competitively priced paint-to-order kitchen offering. And overall, our lineup in all product categories is the best that we've had in my time at Howdens. We have a program of Rooster promotions in place to keep Howdens at the front of the trades minds together with other price initiatives. We will continue to improve service and availability and increase the range of services and functionality we offer online to the benefit of our depot teams, customers and end users alike. During 2026, we plan to open around 25 depots in the U.K. and refurbish around another 45 existing depots to the updated format. In total, we expect to end the year with around 85 depots trading in the Republic of Ireland, France and Belgium together. So lastly, before we take questions, outlook. So far this year, our performance has been in line with our expectations. And whilst it's early in our financial year, we are on track to meet current market expectations for 2026 in what remains a competitive marketplace. We are planning for the size of the kitchen mark to be level year-on-year following several years of decline, and we are well prepared for challenges and opportunities ahead. We aim to retain a profitable balance between price and volume as we continue to maintain competitive pricing whilst aligning operating costs and working with suppliers to keep product and input costs controlled. We are confident that our business model is the right one to address the opportunities of our markets. And in summary, we're well placed to outperform our competitors again in 2026 as we both continue to invest in our strategic initiatives and return GBP 100 million to shareholders through the new buyback program that we've announced today. So thank you very much for listening to me and to Jackie, and we will now both take your questions. Allison Sun: Allison Sun, from Bank of America. Congratulations. It's very good results. Two questions from my side. So first is what makes you confident that 2026 overall kitchen market will be flattish instead of another decline? And second is, can you give us a bit more color in terms of the sales rate for P12, P13 last year and year-to-date? Andrew Livingston: Yes. We do a really incredible job in our business of listening to our depot managers and we highly value our day-to-day trading and the rhythm that we feel out of that comes a lot from our meeting with depot managers. And I go to -- we have 70 regional boards where we have about 90 managers coming to meetings, that happen 70 times a year. I get to 92% of those meetings this year with Austin, who sat with us today. So you feel it. You can see the numbers online. You can feel the rhythm of the business. Last Tuesday, Austin, and I had some of our top managers to dinner in London. They come from different parts of the U.K. and Austin, I wanted to talk about a number of issues in front. All of them are feeling pretty good about the market. They say it's tough. They say it's competitive. There's no doubt, we're out fighting. And the retailers who go out with their false sales in my mind of establishing prices in December and giving you a half-price dishwasher and interest-free and all that nonsense. That's what we're fighting against at the minute, but we are making good progress against it all. And I would say our feeling and our knowledge of the market would lead us to believe that we've got a decent year from a market perspective in us. Things like interest rates moving down and we would, of course, help. Do we feel that on a day-to-day basis? I don't know. But I think a combination of our initiatives, the product that we're landing this year and I have not chosen to show you all the product we've got coming this year because I just feel it's too sensitive now to be sharing in this forum to the market. So what James McKenzie has done and brought to this business is brilliant. We've got so much product coming through in the second half of this year, and it will -- I think it's sensational what's happening. So I think it's a combination of the market is going to be a bit better. We are so well placed to take more of it. Look, the back end of the year was good. There were different days of trading. We tend to trade pretty well towards the back end of the year, because we were the only guys in time with stock on the ground. And if somebody wants to get a job done pre-Christmas, they come to us. And so we have a sort of rhythm in our business where we closed out our accounts. We've done Trade Fest, which was a great success for a new sort of branded proposition of our peak trading, honoring the trades and supporting the trades, great Trade Fest, delivered it all out, closed out the year, get the price increase prepared for, bedded in, in January and then come out fighting in January. And all of that, we would say it's gone very well to plan. So not really going to comment on individual figures. We used to give out periods one and two at these events. And actually, if you look at it, it doesn't give you any indication as to whether the year is going to be good or bad, but we're just saying we're comfortable right now. Aynsley Lammin: Aynsley Lammin from Investec. Just two for me, please. Maybe just elaborating on the kind of early trade in terms of timing and scale of price rises you expect this year? And within the 2.6% same depot sales last year, how much of that was price? And then secondly, I guess just coming back again a bit more on the market share. You've obviously outperformed the market for, I think you said the market was down 3% last year, do you expect to continue to grow market share as much as you have been over the last couple of years in '26? Andrew Livingston: Yes. Look, we've probably become more and more sophisticated in our price increases as we've put them in and mentioned the PAM tool, which is mostly outside of kitchens where the depot managers will be flexing more prices as they go through the year, you'll see us do more dynamic prices as more and more customers go online, see their confidential pricing. But we want them to see pricing that our managers are completely comfortable with on a local level, and we've been making progress on that side. On kitchens, we typically go out with the sort of 4%. We hope to retain about 2% of it type of thing, but it's too early to say that we've done that at this point in the year, given the depots are out fighting in the market. So -- but we're pleased with how that's all sort of laying out in terms of the like-for-like for last year. I think you can read a sensible mix between half price, half volume. I think that's what we are pleased about what happened last year. I would continue to say that the market this year will be competitive, there's no doubt. We love the scrap. And our customers are so well placed because they're running their own businesses. And when the market is tough, our customers go out and win the business, there's more at stake for them. And the depots that really perform like the depot managers, that Austin and I had in the room on Tuesday night, they're incredibly close relationships with their customers. It's like here, it is like -- and people say they know their customers in the business. We know our customers and our business. And when I say we know them, they really are very close to their customer base. And one of the depots had 1,600 customers there. One had 800 customers there. The depot with 800 customers happens to be our highest-performing depot in the whole estate. And they don't change and they come back and they're regular and they just spend more and more with them. So I would say the proposition is well placed with what we've got from a sort of a product point of view. We believe interest rates, I think, I say that, I'm not leaning on that as a thing for this year, but this is self-help, and it's the model really working incredibly well with the initiatives and our very strong day-to-day trading. The thing I would add to it also for last year, people and our teams, I think they feel well. Morale in the business is high. And people have had a good taste of making money. And we don't turn up for the dental plan in this business. We turn up to grow profitable volume and I'm excited to see our depots earning well with the opportunity to earn even more in the coming years. They're a formidable bunch. Christen Hjorth: Christen Hjorth from Deutsche Bank. Two for me. First one, just for Jackie. So your first full year will be in 2026. Just an idea of the sort of areas that you'll be looking to focus on, is relatively new to the business. And the second one, just for Andrew. You point there's a lot more to go for in terms of strategic growth. I mean, how should we think about that? Is that sort of leveraging the investment that you've done to date in XDC and range, et cetera? Or are there more new areas to invest in to drive growth? That's the two. Andrew Livingston: Do you want me to start? Jacqueline Callaway: Yes, let me make a start. So look, it's been -- it's 9 months here at Howden's. It's been an absolutely fantastic first 9 months. It's an amazing business. And you don't really know till you get in. Having got in, it's well invested, very well invested. We've invested through what has been a difficult cycle, I think, in the industry. We're well set up for growth going forward. And we've got highly motivation teams to support us. So from a -- is there things that I think I need to come in and massively fix, I think the answer to that is no. Because the business is well placed. There's a few areas that I am focusing on. I think pensions would be a good example of one that we talked about. I think there's some good opportunities around our pension scheme and how we might derisk it. So that would be an area. And I think it's around just within finance is just driving the finance team to be a good business partners to the business and to support what we're doing strategically. Those would probably be my two key areas. Andrew Livingston: And in answer to your second question, I think one of the things that we've got really right here is actually our strategic plan, which we call raised ambition internally is well understood right up and down the organization. And we tie together our business design with trusted trade relationships right at the center, and we constantly think about product innovation at value and making sure it's really convenient for customers to buy. But then, of course, we're always developing new things. You'll see in our depot format, we're moving on the iterations. I'll never let this get as bad as it was when I sort of turned up. The depots were retired, and I don't think they did represent the right environment for us to do business with our customers. And I remember my first presentation, Geoff Lowery gave me a knock and said, sort of, isn't it about time? And that has been a very, very successful program. We continue to do that and take lessons into France and just think about sizing as well to make them more profitable quickly. From a ranging point of view, there is always more you can do, and we are very keen to stay on the front foot of a high proportion of innovation brought in as a big portion. So we measure it. We're incentivized on it, and the teams are incentivized it from bonus and LTIP point of view. So we do it because it's the right thing. It drives interest for customers. It drives margin accretion. It helps us deal with old stock. So we are obsessive. We spend an extraordinary amount of time on ranging. We're very good at testing it. And I say these things because we're a kitchen and a joinery business. And we think in our heads about joinery driving footfall, joinery being the place where customers start working, they do flooring, they do doors, they do skirting, they do wall paneling and then they start creeping into doing kitchens. And we've got to keep on getting people into doing these trades. And there is a bit of a thing here about AI is going to change jobs and markets and so on. AI is not yet fitting kitchens in my mind. So we are keen on doing a lot of great work about how you build your business. We've got to build a business builder program on in Howdens at the minute where we want to encourage people to go and start their own businesses in this trade space, and you can make a fantastic living out of the fit and out of the product on margin. We feel we're comfortable with the categories. And each one of those categories, we feel we can grow in. So we're only 24% of the kitchen market by value. 75% of the market that we're not having right now, we've got a significant opportunity. And I think we're upsetting our competitors as we progress forward with that. And out there, you've got a number of competitors who are either clearing what they're doing and they're lashing out on price or they're trying to make it work and you've got some people under new ownership. And just chasing down a price rate is not the way to win in this market. I'm also excited about what we're doing digitally and in preparation for the future, and people will think about how they design and plan and do thing -- different things on kitchens in the future. And then I suppose the final part of it is the international piece of the business, and we are making progress in France, and I'm excited about the work that we've been doing on the estate there. And we've got two divisions that are flying. We had 1/3 of the depots that performed incredibly well there last year. Fortunately, we've got a 1/3 that need work. So we adjusted some of them and we're going through manager-by-manager and under SEB's leadership, we will get to a good place. And Ireland, we've gone in. We don't offer trade credit accounts in Ireland interestingly. We just have gone in and done cash. It's not held us back in any way because the proposition is so fresh to the market and where it gets right. So I was explaining to the teams I've been down to Wexford to see the opening of our Wexford depot, right, the most beautiful plum site right in the middle of Wexford, and we will dominate the market. The depot only just opened. It had 150 accounts already opened. It opened three when I was stood there. The manager and the team were exceptional. So we're really making a difference and understanding more and more how this model lands well because we're able to give new depot managers to our business tools and kits that help them run the business a bit more that we may not have been able to do before. So they get daily traders and they get a better stock management system, and they can do livestock. They're supported with online activity. They've got PAM now. They're well supported from an availability point of view. And I think we've become better and better at doing that. And I think overall in the business, we've become strong at sort of pairing up, used to feel like a sort of supply and a trade division that feels very much like one business where we think right up and down. And even in France, Seb sits on the exec, he's part of the team. He -- we've even done a thing where we're twinning depots in France with U.K. depots and the way you sort of towns are twin. We're doing that. So U.K. manager, will work with a French manager plus an interpreter and build a relationship together. So a bit of a long answer, apologies. Benjamin Pfannes-Varrow: Ben Varrow from RBC. I'll do two as well, please. First one on the market share, in the U.K. Could you provide some more detail on how that's developing at the different price points? And the second question is building on the France topic. What do you need to see there to start accelerating the depot rollout again? Andrew Livingston: Yes. I think one of the things on the market share and you're right on price points because sometimes you think of families as you go up and down the architecture and what is brilliant about our offering is it all sits on a common carcass platform. So it's a bit like the chassis of a car business, and you can move your way up and down. And if you want to hit your price point by putting a lower-priced door standard carcass and then invest in the solid surface work surface. That might be what you want to do. We've seen growth at all price points. We've seen growth at opening price points all the way through difficult times because we're sort of untouchable down at that bottom end. Many of our kitchens will not even make it into customers' homes, because you'll find them in universities and council houses and whether it's genuine churn. And we brought some innovation at opening price. Mid-price, we've grown. It's been tougher because everybody is at that mid-price thing and some people throw on credit, consumer credit and that type of thing. But we have stayed ahead by innovating and being faster than others to market and bringing things like metallics in into some ranges that might be sort of needing that kind of innovation. And the best end of the market for us has been a combination of just beautifully styled product that I think is better quality than the independents. You'd expect me to have a Howden's kitchen, but it's what I've put in my house, the paint-to-order offering is just beautiful. And with a solid surface, good lighting, walk to any one of the independents around where I live in London, and I'm thinking it ain't as good as what I've put in my home. And I think more and more people are discovering that do I go to an independent and I spend GBP 60,000, GBP 80,000 or do I go to Howden's, I've got a really strong relationship with my builder, and I'm doing it for considerably less. And I think you'll just see us continue to grow in that space of the market, and you'll see us doing work like this that just makes people reassess the brand and people sniff at value. So we've done well at all price points. And we think we wouldn't particularly pull out one over another. We're just pleased with how we're doing. What do we want to see in France? I want to see more consistent delivery across all of the regions and we're very clear with that. More depots in profit. And we've got and had to put some fixed cost in France that will only be covered when the depots gets to -- the depot estate gets to a certain level of turnover. But we're pleased with how it's progressing. And we've made some choices about depots that perhaps we opened too quickly post-COVID, when we were growing very, very fast. And we got all our eyes with attention on this new smaller format that we're doing there. But I'm very pleased with the team and the level of energy in that business is fantastic. Jackie and I went over to do their year-end celebration, and it was electric. Yes. Shane Carberry: Shane Carberry from Goodbody. Just two for me. Firstly, you've mentioned a couple of times the competitive markets. Could you just expand on that a little bit more? Is it the pricing point that you made earlier? Or is there some kind of shift in industry dynamics we should be aware of? And then second, just kind of a longer-term one. When I think about this business in kind of 5 years' time and I think about the mix of products obviously doing a lot more in the bedrooms, doors, other joinery components. How big a portion of the pie could that be going forward? Andrew Livingston: Yes. I think when we say competitive market, we think about -- I suppose we think about price and we think about availability of product and we think about product innovation. And if I split it down like that and I think about product innovation, nobody is anywhere near us from a product point of view. And I think 8 years ago, when I turned up in the business, I think people were ahead of us. And what we've done with innovation and find the gap and testing products and bringing more products to market, we're leading. We're not following at all. And with that and with our availability, the combination of those two, it's very, very tough combination to fight against. But of course, if you've got people trying to get any kind of volume to put over their fixed costs, they're going to come out fighting on. January is the time. It's a very, very difficult period for a retailer. They don't have a bit of success in January. It's a long, long journey up until the summer for them. So I say competitive in that context. But when we think of our depot managers, Austin's language is no kitchen left behind. And we're very, very clear about that. I think if you think forward to this business, we're pretty good at sticking to our knitting. And we're pretty good at realizing the customer first and in our case, trade customer, trade customer all the way. And the stronger you are with your trade relationships, the stronger the business will become. They do well, we do well, and we appreciate entrepreneurialism deeply. We appreciate it in the depots, and we appreciate it amongst our supply base as well, those who come first to market. We -- James has got a suppliers conference in about a month, and that will be a big topic for all of us to talk about. So I think the business will always be kitchen-centric, kitchen dominant. And I think you'll see innovation and new ways of shopping online and AI and scanning the room with your phone to help develop plans. But we see these as opportunities to help our design consultants or help customers get an image of where they want to go to, but we think it's important that we keep going with our business model. Charlie Campbell: Charlie Campbell at Stifel. I've got sort of two. The first one was on the efficiency gains. So sort of GBP 41 million in the year, GBP 14 million of that is from suppliers. Just does that not get harder and harder as the more to get out of that bucket? The GBP 27 million from kind of manufacturing efficiency, does that get more difficult as you're moving towards the new Runcorn? And then the other question, just want to detail really, there's a GBP 6 million sort of exceptional around France, is that the end of that? Or does that kind of run on for a bit more as you further kind of arrange the branches? Jacqueline Callaway: So let me take the -- both of those. The efficiency gains, we've had a good result last year, to say GBP 14 million and cost of goods sold and GBP 27 million in OpEX. I think as we go into the budget, we see that there were inflationary headwinds coming again this year. We've guided that at around GBP 30 million, and it's across a number of areas, a little bit of timber inflation, a little bit of -- we see people inflation and also some property inflation, particularly around London rents. We will always look to offset inflation with efficiency projects. And I think one of the things that positive with Howden's has got a very strong muscle in this space. And it's one that we already have a track on the costs, and we already have all the projects that -- a lot of the projects identified. So I feel confident that we can make a good dent in the inflationary amount again this year. And it's across multiple projects. I look to Julian here. So across manufacturing, it will be things like waste reduction, more efficient use of labor, good examples across logistics, it could be thinking about how we can optimize deliveries out to depots. It's another area that's a big project for this year. So I think we've got good confidence that we'll certainly dent a lot of that inflationary pressure this year. And then on the cost for the French depots that we were looking to close over the next 2 years. It's a GBP 6 million charge in OpEx, and we don't see any further any further amount coming through at this point. Ami Galla: Ami Galla from Citi. A couple of questions from me. The first one was just understanding the bundles that typically a customer takes in. Can you talk about some of the attachment rates of flooring currently? And is this scope to penetrate that further? The second question was on the pricing model that you are talking about today. What sort of information do you think does the depot manager now have it handy, which you previously did not have? I mean, just understanding more in detail as to what is different today with the model that we have in place? And the last question was just on the maturity of the existing network in the U.K. Often, you've talked about the potential of the younger branches to kind of come up to the mature level. Can you give us the range as we sit here today of what the mature U.K. depot looks like? And where is the opportunity as we think over the next couple of years? Andrew Livingston: Yes. I'm sort of rethinking what maturity is for our business. Because when I wrapped up here, people said, they all mature in 7 years, then we thought of all these initiatives that we've brought into the business, like solid work servicing better kitchens, you grow your account base, we've been more efficient in the warehouse. I was telling Matthew Ingle about our best depot there last year and where it had got to, and he nearly fell off his chair because it was about twice the level that he's seen before. And he offered the manager, if he hits his number here of GBP 10 million this year, he's offering a case of champagne, which he is very thoughtful about. So I think we've just got such a long way to go even at our first depot hitting a big milestone like that. And so I don't know where the top end of maturity is. We've got a lot of work. If you think of the range between sort of GBP 10 million down to a depot at GBP 1 million, you've got a wide range there. And a lot of it's down to the capabilities of the manager and making sure the manager is empowered to develop the local relationships. Of course, there's area and all the rest, but one of our depots we talk a bit about in Great Yarmouth is a very big job in our peak trading period. It's his sort of thing that he does each year. Half of his catchment in the sea, but he's the biggest depot. So I would say we've just got really significant opportunity. And even when this business runs out of space and depots and we hit the 1,000, we will still grow and the like-for-like will still grow because we see so many opportunities in that. Your question about the pricing model is a good one, because our range count has grown, given XDC -- and we put in XDC to make sure that product is available, and we've become very clear with Richie's leadership from supply chain about what's right to hold in stock in a depot and what's right not to hold in stock in a depot, because it might have high value, it might create a long discontinued problem later on. So we've -- our shape of our stock in our depot is brilliant. And we gave the depots tools to develop that, and we call the system TED. Those of you who have been around some of our visits and depots, we often demonstrate it. And then through meetings that I've taken with some of our managers, some of the managers then said, well, can we not use the same sort of thinking where we can look by SKU, balance it out and bring the same thinking into pricing, and we went back and built PAM. And what it gives our depot managers is understanding of where their price volume mix per SKU, per range, sort it all out and they can see where they're at versus their region. And then we feed in local pricing data. And it gives them real confidence that they're not only too cheap on some stuff or they're not too expensive on some stuff. When we've got promotions going in that we do from a group from a sort of Rooster point of view, they can press a button and accept them. They're going to override them and not do it. All of this is to empower our depot managers not take power away from them because it's our managers operating locally. But it's using tech to make sure they're better enabled to make the right pricing decisions for customers and confidence levels go up with it as well. Hopefully, that explains that. You did ask about flooring and attachment rates. We've got loads of room. We're only fourth in the U.K. on flooring. We're #1 in kitchens. We're #1 in doors. We've done some great work on own brand and own ranges. It's a priority for Austin to sell more flooring this year. Our attachment rate is not bad with kitchens, but there's lots more to do. Geoff Lowery: Geoff Lowery, Rothschild & Co Redburn. A question really around your supply business. If you had to rank what it really does for you across those buckets of product exclusivity, flexibility, resilience, sheer cost advantage, what would that ranking really look like? And I guess the second question is you've obviously invested considerable amounts in that back-end infrastructure and transformed this in a wonderfully positive way. But we haven't really seen it at this scale, at this efficiency in an upmarket. So in a theoretical scenario where your volumes were plus 20%, say, would we see a meaningful leverage of a fixed cost component there? Different issue what you did with it, but the maths of that, would it be a kicker on your margin? Andrew Livingston: Yes. I think when I was looking at from Howdens from the outside, and I was running Screwfix at the time I was going around all the U.K. depots, I remember in the conversation with the guy that I taken over running Screwfix from and he said, businesses often have strengths. And it's clear to me that Howden's strength is in its manufacturing capability because you've got some incredible front-end implementation in the depots. But the strength -- I think the big strength of this model is our vertical integration, our supply, our exclusivity, the cost advantage it gives us, our nimbleness around us, our ability to keep raw materials untouched and then flex in. We do things that I have never seen other businesses be able to do because of our agility. And that's at scale on big product, but also when we go and do a testing, a small testing thing, we've got -- James has got in his capabilities, a small batch production unit. And the amount of work that batch production unit does for us around building out extra doors, flexing up and flexing down, making small batches that we can go and test in markets. It gives us an agility of [ Azara. ] And I think there is -- it gives us fundamental lower cost base where we can take higher margins in the market. If -- I think we probably demonstrated our strength when we came out of COVID and we were able to flex up so quickly, and we hardly missed a beat. I mean, our service levels weren't at 99.98%, but they weren't very far off even though volumes dramatically lifted. And you saw the business started making 20% on sales. So it's a cash machine when you push volume through it. I mean, there isn't anybody who could manufacture this level of volume for us and need another 1 million cabinets, hence, the investment in Runcorn. But I suppose we think about panel manufacturing where we're making -- we're moving beyond raw materials, but we're leaving stuff as work in progress. And then we build those items up to deliver to customers through our peak trading period. But I think it's absolutely fundamental and it's incredibly hard to replicate what we've done. And I just sort of add just a wee bit of color to it. We -- I went to our Runcorn Christmas party and took my wife, which was an eye-opener for -- I can tell you. She -- but the feeling of our 1,000 manufacturing personnel at Runcorn at that party because we had purchased the site, made very clear what our plans were that this is a big future, and I stood up in front of them and said, you do a fantastic job for us. You make 3 million cabinets. The trouble is, I need another 1 million. And I think they are -- it's very common to meet people in our Runcorn site that have got 20, 30, 40 years' experience working for us. You don't -- you can't just -- one of our suppliers, Egger -- Michael Egger, Senior, who makes most of our chipboard for us. He said to me, Andrew, you can buy the assets, but you can't buy the people. And I think it's that sort of combination of that is very powerful for a business. I don't know if I've answered you well enough, Geoff, but it's fundamental to us. Zaim Beekawa: Zaim Beekawa, from JPMorgan. The first is on the new product sales. I think you said 29% in recent years, but quite excited about what's to come. So is that a number that you feel will pick up in the coming years? And then secondly, obviously, very strong on the gross profit margin in '25? Can I think about the moving parts into '26, please? Andrew Livingston: Yes. I sort of feel comfortable that 2025, it will move up and down depending on what we do. I feel comfortable with where we're at. When you bring new range into a business, you've got to make sure people understand it. The depot teams understand it. We do have a big exercise in James' team. We build an expo. Some of you have been up to the expo at the factory, and we've got an expert Runcorn, and we're opening up our first expert, Watford next month worth going and having a look at. And we use these spaces to show off our product offering, and you've got to train it into the team. So there's only so much a business can consume. You don't want to throw too much range in and not land well. And I think our cadence of about 2024 feels pretty good on the kitchens where the majority of the profitability is. You will see us do more on own labels. You'll see us do more innovation on outside kitchen areas. Kitchen is a fashion business. We've got to stay up on the front foot on it. Colors change, styles change very rapidly. I think we were pleased with the margins, but margins, we've got to leave enough room for the managers to flex it. We did well last year. I think Austin incentivized the teams incredibly well last year to deliver margin and volume. We all understand the rules on it, but if the kitchen comes out and it's cheaper, we will always take it, and we will develop the margins on the other side. But we're comfortable with our industry-leading margins. We don't chase the percent. We chase cash. We like cash. And I would say probably more of the same this year would be my guess, yes. Jacqueline Callaway: So we've got time for one more. Christian, do we? Priyal Mulji: It's Priyal Woolf here from Jefferies. I've just got two questions on the International division. I appreciate you said that in the U.K., you're rethinking what maturity even means. But can you give us any sense of what maturity time line looks like in France, just in the context that, obviously, you're slowing down on the depot openings, focusing more on getting to profitability there. And then the second one is just a quick one. Obviously, you're expanding in Ireland, you will be again at some point in France, is finding the correct sort of sites, any sort of obstacle yet at this point in time? Andrew Livingston: I think the quick answer on the second is no. We're always looking at -- we've been able to find the right sort of price location mix and very similar type of setup on trading estates in Ireland. And when we go into these secondary towns, we're getting good value, and we're getting prominent locations. So -- we've said around about 40. I don't know, it might be more, but a business of 40 in Southern Ireland would feel pretty good to us, and we'll be about halfway there by the back of this year, lots of growth to put on it. In France, yes, we were very clear. We're putting the foot in the ball. We're going to get the operations absolutely where they want to be. This year is an important year for the French team. And next year, the one after will be the same, but we want to see that business getting to breakeven in a sensible time frame. And we understand that happens when you push more depots on top to cover the fixed cost, but we want every depot in profitability in France in the near term. There's one question that we have to take because you've tried about 15 times now. Charlie Campbell: My arm is so tired from going up and down. I've got loads, but I'll keep it to two. Wren has bought Moores, it takes them into the trade bar, the kitchen market. Do you think that changes the way about how they attempt to broaden their addressable market in the U.K. at all? That was the first one. The second one was on the small branch depot formats you're going to start opening in France. Should we be looking to see those pop up in the U.K. anytime soon? Andrew Livingston: Yes. Yes, I don't -- it's interesting. The Wren business have tried several times to open up a trade business to be like us. Often, they've opened up a specific site, and we get wind of it and we release margin criteria to our depot managers and extinguish any potential flame coming out. On the contracts piece, we like routine, repetitive, repeating sort of maintenance type of businesses that we would sort of consider contract. The housebuilding stuff, we're happy to leave that to somebody else. I don't want large, long production runs that disturb high-margin supply to trade customers. And I think it could distract us. We're very happy to take local, smaller regional house builders if the margin is right for us. But I'm not looking to chase after big house builders. Symphony Group is better at doing that than us, they're better set up to do that than us. And the market is big. I don't know what their plans are, but I don't think it's going to change anything in the near future. Small depots in the U.K., I think we just -- it's more important for us to be in the catchment than not be in the catchment. So sometimes we go in and we will take a site that's a bit bigger or a bit smaller. You'd certainly see us doing a wee bit being a bit -- wee bit more curious in London. And of course, we've got the capabilities to do it. We've become much better at how we merchandise depots, built all that skill, and we're amazing at how we fulfill and supply depots, and we know what to put in the depots. It's the right type of product. So you can cope on smaller spaces. We're just about to open up in the arches at Waterloo, and that would be worth popping down having a wee look there. Limited parking, we think it's going to be a flyer. I think we'll call it quits there, if that's okay. So thanks very much for your time.
Operator: Good morning and thank you for standing by. Welcome to the Worley Half Year 2026 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Chief Executive Officer, Chris Ashton. Robert Ashton: Good morning, everybody, and welcome to the call today, and thanks for joining the half year results presentation for Worley for 2026 financial year. The results are defined by a solid revenue growth and resilient earnings outcome, once again showing our adaptability in the face of dynamic markets. As I start my seventh year as CEO, these results continue a pattern of consistent growth. Despite market disruptions, Worley continues to deliver. Our performance reflects deliberate decisions about portfolio, capability, where we compete and the agility with which we can adjust. And we have a dedicated team around the world who work to deliver the outcomes that our customers trust. Let me now give you an overview of our business performance for the period before our CFO, Justine Travers, takes you through the financial results in more detail. I'm pleased to share an early look into how we're positioning for the next phase of growth as we go through this presentation today with the strategy focused on increasing our total addressable markets and generating value for shareholders. Today, we reconfirm the outlook we provided to the market at our full year results in August last year. We continue to expect a year of moderated growth, but calendar '26 has started with renewed momentum. Some big wins recently include being provisionally named as EPCM partner on Glenfarne's Alaska LNG pipeline and appointed marine and port infrastructure technical adviser for the WA Westport program in Western Australia. We're already delivering Phase 1 of Venture Global CP2 LNG project in the U.S. and are continuing our partnership to deliver Phase 2. These wins on some of the largest projects in the world demonstrate the confidence customers have in our capability to execute major complex projects, and we continue to scale across a growing pipeline of these opportunities. Given this momentum, we're encouraged by the visible signs of growth for Worley beyond this financial year. Turning to Slide 2. I remind you to review the disclaimer shown here. I'd also like to take the time to acknowledge the Gadigal people of the Eora Nation, the traditional custodians of the land from which I'm calling today, and I pay my respects to the elders past, present and as well to the emerging leaders. Turning to Slide 3. Let me now turn to our business performance for the first half of the financial year. And so let's turn to Slide 4. As I said, revenue has grown even while navigating challenging market conditions and earnings have been resilient. The last 6 months, we've seen solid revenue growth of 5.4% over the prior corresponding period. A number of major projects in execution phase contributed to steady earnings and bookings are up 63% on the prior period. Venture Global CP2 Phase 1 was a major contributor, but I want to highlight some of the other significant wins across the sectors and regions, like the EPC for ConocoPhillips Scandinavia for their Norwegian Continental Shelf project, the FEED for OQ Refineries and Petroleum Industries decarbonization project for the Sohar refinery in Oman, and construction for ExxonMobil's major reconfiguration project of its integrated complex in Baytown, Texas. Momentum through increased wins in the first few months of this calendar year reinforce our confidence we can deliver a stronger second half. We've taken deliberate actions to enhance earnings quality. Our cost out and business restructuring initiatives are well advanced, and we're targeting more than $100 million of annualized savings from 2027 onwards, resetting our cost base and positioning the business for our next phase of growth. We acknowledge there's been $82 million of transformation and business restructuring costs this half, and Justine will talk to this later. And finally, our balance sheet remains strong. Disciplined working capital management drove strong first half cash performance, giving us the capacity to keep investing in growth. Turning to Slide 5. Our highest priority remains the safety of our people. Our safety performance has been maintained with a total recordable frequency rate of 0.10. At Rio Tinto's Rincon project in Argentina, for instance, we recently marked more than 1 million work hours with 0 safety accidents incidents. Visiting last year, I witnessed the discipline, care and pride the team brings to their work, and it's milestones like this that reflect the safety leadership on the ground and the commitment to looking out for one another each and every day. Positive ESG progress continues too. We've maintained leading external ESG ratings, and we've strengthened our approach to preventing modern slavery. And we remain on track with our own Scope 1 and Scope 2 emissions reduction targets. We're also well prepared for the new Australian sustainability reporting requirements. Bookings are up 63% compared to the prior 6-month period. And in the first half, bookings totaled $9.8 billion, including Venture Global CP2 Phase 1, which achieved FID last July. Sole source wins also increased, reinforcing customer confidence in Worley's capability and delivery. And as I've mentioned, a number of significant project awards already this calendar year build on this momentum. Energy and resource have both grown with the Americas continue to deliver wins for our portfolio and the mix of bookings reflect increased construction, fabrication and procurement activity as these projects move into the execution phase. The quality of these bookings remains high. As noted, large complex projects where Worley is supporting customers across the full project life cycle underpin backlog quality and forward earnings visibility. Turning to Slide 7. I'll now turn to leading indicators. Backlog remained resilient at $6.7 billion (sic) [ $16.7 billion ], providing good visibility of revenue into the second half of FY '26 and into '27. Backlog is slightly lower than the reported period for June '25, and this reflects the delivery timing rather than a drop-off in demand. $6.3 billion has been added to backlog through scope increases and project wins during this period. And while work on the Baytown Blue project has paused, we've retained in the project backlog and continue to work closely with ExxonMobil on that. Project wins already in the first few weeks of calendar year '26 will add more than $3.5 billion to backlog. Our factored sales pipeline remains robust, and we continue to convert opportunities into backlog as we secure contract wins, and the pipeline keeps replenishing. Around 46% of these opportunities are expected to be awarded in the next 12 months, reflecting the extended project delivery time frame for major projects. As we target more of these projects, we're focused on opportunities in the early-stage consulting phase with potential for pull-through and consulting opportunities increased by 24% in our pipeline over the past 6 months. Turning to Slide 8. The slide shows the diversification and competitive strength underpinning our business model and earnings resilience. Our broad exposure across sectors, geographies and services reduces reliance on any single market or customer decision and revenue is well balanced across energy, chemicals and resource. It's geographically diversified with meaningful scale across the Americas, EMEA and APAC. Our services mix across professional services, construction and fabrication and procurement shows our increasing relevance to customers across the full project life cycle. And we're attracting a greater share of project capital with expanded capabilities. We also continue to differentiate through our use of digital and AI. Enterprise efficiency is a non-negotiable. Technology is transforming project delivery. Our digital and AI initiatives will reshape how we deliver projects and strengthen our competitive advantage. For customers, intelligent solutions will bring their assets into operation sooner and accelerate returns on capital. I'd now like to give an update on each of our sectors and turning to Slide 9. Aggregated revenue from energy work increased 8.8% over the prior corresponding half, and growth was driven by major projects moving into the execution phase, lifting construction, fabrication and procurement activity, particularly in the Americas. Integrated gas continues to be a growth driver. Demand for gas is supporting ongoing LNG import and export terminal developments and integrated gas work represented 25% of Worley's total revenue during the period. The variety of LNG projects we're working on around the world is notable in places like Germany, Indonesia and Australia as well as the U.S. While the outlook remains softer overall in oil, activity is increasingly concentrated in higher-margin offshore projects and selected onshore developments, particularly shale. And power is an important growth market. Structural change is driving energy demand and investment across gas-fired power generation, renewables and nuclear. Turning to Slide 10. The global chemicals market remains important to us. Near-term conditions are challenging, reflecting regional [Technical Difficulty]. Aggregated revenue declined 9% over the period with project cancellations in Western Europe and lower professional services activity across APAC and EMEA. This was partially offset by ongoing major project execution in the Americas, where construction and fabrication activity continues. Looking at specific subsectors, refined fuels remains promising, and it continues to attract investment in product slate optimization, decarbonization and asset life extension. Petrochemicals remain a major contributor to our chemicals revenue, although Western European plant closures related to global overcapacity have had an impact. Low carbon fuels present more selective opportunities where projects are commercially viable. Turning to Slide 11. Finally, resource have delivered growth for Worley in the first half and aggregated revenue has increased 12.3% over the prior corresponding period. Resources now represents 29% of our business. Population growth, urbanization and the energy transition are demand fundamentals, which will continue long term. Fertilizers remains our largest subsector. Here, demand is supported by population growth and food security. Demand for copper is driven by the need for energy transition materials and an increasing demand from data centers, cloud and AI infrastructure. In battery materials, there's been a resurgence in activity and sentiment with a focus on front-end work and commercialization of technology. And we're confident resources will make an important contribution to second half growth, and we expect this to continue beyond the next year. I'm now going to hand over to Justine for further details on the financial results. Justine? Justine Travers: Thanks, Chris, and good morning, everyone. Turning to Slide 13. Our half-year performance and execution of strategic priorities such as cost management and earnings quality, coupled with strong capital management positions us well to deliver moderate growth this year. I want to reemphasize 3 points in relation to the results we are delivering today. First, we continue to deliver aggregated revenue growth and solid earnings, supported by our global operations and strategic focus on major project delivery. Second, targeted actions to reset the cost base are underway and aim to strengthen earnings quality and resilience. And finally, we remain in a strong financial position to support growth and return capital to shareholders. Aggregated revenue for the half was $6.3 billion, up 5.4% on the prior corresponding period. We continue to see an increase in construction and fabrication revenue as we execute on major projects as well as an increase in procurement revenue. Supported by the contribution from our global operations and our major projects, underlying EBITA was steady at $377 million. Underlying NPATA was $207 million. A lower statutory NPATA at $152 million reflects the inclusion of transformation and business restructuring costs. While business as usual costs are included in underlying EBITA, these transformation and business structuring costs were beyond the scope of the normal course of business. Normalized cash conversion was 95.5%, a fantastic achievement. This continues to be an important focus for our business. Our balance sheet strength and strong cash position provide capacity to invest in growth and return capital to shareholders through our ongoing buyback and payment of dividends. Leverage at the end of the half was 1.5x, comfortably within our target range, reinforcing the strength of our financial position. Turning to Slide 14. Our aggregated revenue growth has supported steady earnings despite the challenging market backdrop. As I've highlighted, a driver of revenue growth this half was major project activity with increased volumes flowing through construction, fabrication and procurement, particularly across the Americas. This work is delivered under a lower risk contracting model and has supported a stable earnings outcome, reflecting both project delivery stage and disciplined delivery across the portfolio. As a reminder, we don't do competitively bid lump sum turnkey projects. On the right-hand side, the EBITA and margin walk highlights our continued focus on rate improvement. Margins reflect the combined impact of volume, mix and pricing with rate improvement partially offsetting mix impacts in the period. Importantly, this demonstrates an ongoing focus on margin discipline. While near-term earnings reflect project phasing, the underlying drivers of margin improvement continue to build through backlog, the cost-out program and disciplined execution. Turning to Slide 15. As communicated at the full year results in August, we're transforming the way we work by removing complexity, improving efficiency and driving consistency. This work is well underway. We acted proactively to reposition the business in response to softer conditions in chemicals and some project cancellations in Western Europe to strengthen margins and ensure ongoing business resilience. We've accelerated actions aligned with our strategic priorities, specifically resetting the cost base, scaling GID and expanding margins. During half one, we incurred $82 million of costs associated with these actions, much of this being severance and related costs, predominantly in Western Europe, where we have seen high restructuring costs due to local labor protections. We expect further costs in the second half as the program continues. However, we do anticipate these costs being lower than those already incurred in half one. The actions we've taken include repositioning capability to areas of higher demand and rightsizing where demand has softened. These restructuring actions together with our efforts to transform the way we work are setting the foundation for stronger earnings and margin quality. Our business will be supported by a leaner, more scalable operating model, supported by global integrated delivery, GID. In delivering this transformation, we are progressing at pace. With a disciplined cost-out program, we're targeting over $100 million annualized savings from FY '27 onwards. Our cost management efforts are focused on and include repositioning capability to areas of higher demand, increasing enterprise service center utilization, rationalizing our third-party contracts and adjusting our office network to reduce costs while supporting global delivery. We're also deploying digital solutions to simplify processes and improve productivity. Embedding AI across our business will be an ongoing part of our broader strategy to leverage technology and new ways of working to create sustainable value. I have been working closely with the business on this program, and it is clear to me that steps that we are taking strengthen our cost discipline and will enhance our earnings quality. We will ensure we retain the capability and capacity required to support growth and deliver for our customers with greater cost discipline, commercial agility and technology focus. Turning to Slide 17. Finally, I'd like to take you through our capital management position. Operating cash flow is strong. Normalized cash conversion of 95.5% is above our target range and continues to reflect strong underlying cash generation and a disciplined approach to working capital management. Day sales outstanding of 46.2 days remains well controlled and comfortably within our target. We have been consistently delivering returns to our investors through dividends and our buyback program. The Worley Board has determined to pay an interim dividend of $0.25 per share, which is unfranked. We continue to execute our share buyback program of up to $500 million, reflecting the confidence we have in our business. As at 31st of December, 2025, we had purchased over 24 million shares for a total consideration of $324 million. We will continue to execute on this program. During the half, we continued to invest in the business in a measured way while prudently managing debt and maintaining flexibility to invest in growth with capital directed towards initiatives aligned with our strategic priorities. Our balance sheet remains strong with leverage at 1.5x, comfortably within our target. We continue to use free cash flow to manage liquidity and support growth. We remain committed to maintaining a diversified funding base and proactively manage our debt maturity profile. We are looking at a variety of options for the group's euro medium-term note debt as it matures at the end of the year. I am getting to know our debt investors and we are confident and well placed to manage this upcoming maturity in June. Our weighted average cost of debt remains stable and our effective tax rate continues to track within our expected range. Overall, our disciplined approach to capital management remains a key differentiator and supports long-term value creation. I'd like to make a final comment on foreign exchange rates. The Australian dollar has moved over the past few weeks and we note the possibility of FX being a headwind in the second half if it remains at these levels. In summary, our solid half year performance and execution of strategic priorities, including cost management and earnings quality, coupled with consistent and strong cash conversion and balance sheet strength positions us well to scale for growth. I'll now hand back to Chris to take you through strategy and outlook. Robert Ashton: Thanks, Justine. Just moving straight on to Slide 19. But before I share the outlook for '26, I want to step through some of the fundamentals underpinning growth, and then I'll turn to our growth strategy. Worley is a diversified, resilient business with a robust foundation and demonstrated agility to adapt to market changes. And this foundation and agility gives us the confidence as we move into our next phase of growth. Our end markets are supported by strong structural tailwinds. Energy security, affordability, electrification, energy transition and decarbonization, along with the rapid progress of AI and digitalization are long-term demand drivers. And Worley's growth should be viewed independently of cyclical factors. Our growth has been secured across commodity cycles, not dependent on oil prices and continues to outpace customer capital expenditure. Turning to Slide 20. Our strategy has 3 pillars supported by disciplined capital management and operational excellence. One, we're strengthening leadership in our core markets; two, we're expanding into growth markets and along the value chain, including expanding EPC and EPCM capability; and three, we're innovating to differentiate delivery with technology. This strategy supports sustainable growth and resilient earnings. Moving to Slide 21. We remain committed to our purpose of delivering a more sustainable world, and Worley's next phase builds on our strengthen, expand and innovate strategy to secure both within and beyond our core markets. We've built a leading position across energy, chemicals and resources with sustainability solutions embedded now in the business. And now we'll grow our total addressable market by extending our project delivery capabilities to capture a greater share of spend across the customer asset life cycle. This positions us for more EPC and EPCM scopes with continued growth in consulting and value-added services from concept to completion. These capabilities mean we can target high-growth adjacent markets beyond ECR. We'll selectively expand into adjacent complex critical infrastructure where our skills are transferable. And the next phase of growth is supported by disciplined capital allocation, margin focus, which will ensure accretive and resilient growth. Turning to Slide 22. We're expanding our total addressable market by accessing a greater share of our customers' capital expenditure. The graphic on the left represents a typical customer capital program for an asset. As projects progress into execution, customer spend scales significantly. And by extending our EPC and EPCM delivery capability enabled by technology, we're positioning Worley to capture a larger share of this overall capital investment. And you can see the results of this focus as we turn to Slide 23. The major projects shown here in LNG, cement decarbonization and iron ore demonstrate our execution capability at scale and reward our deliberate shift to more EPC and EPCM scopes. And while major projects are reinforcing our confidence in this strategy, extending our ability to support customers across the asset life cycle is not just about project size. It's an evolution as we expand the services we offer all customers globally, deepening and broadening the capability of our workforce. EPC and EPCM have always been part of Worley. Consulting and other services along the value chain enabled by digital and AI differentiate how we deliver. And now we're leaning into scaling this full project delivery with intent, and we're excited by the early success shown in major projects. Turning to Slide 24. Backed by the capabilities I've described, our growth strategy seeks to strengthen our leadership in existing markets by growing market share and expanding into high-growth adjacencies. LNG and energy transition materials are areas where Worley has an established presence and a strong track record in execution, and we can further grow market share with more major projects. We're also expanding into new growth opportunities in complex critical infrastructure markets such as data center infrastructure, power, ports and marine terminals, and industrial water. These are capital-intensive markets where we have an existing or an emerging presence and can leverage transferable engineering services, EPC, EPCM and digital delivery capability. Importantly, these markets offer a clear pathway to scale. Together, these existing and new market opportunities reflect a balanced but deliberate approach, and they build on what we do well today while selectively expanding into adjacent areas of growth. And more detail of this will be shared at our Investor Day in May. Turning to Slide 25. Before I present the group outlook, I'd like to give a brief update on key focus areas. Our first is full project delivery, a key enabler for our growth strategy. And as I've outlined today, we're winning and delivering more of this work within a disciplined risk appetite. As Justine said, we will not do lump sum turnkey EPC. We'll seek to balance the portfolio with high value early-stage consulting, study, FEED and scale as we pull through to more execution phase construction and procurement work. Alongside this, we're resetting the cost base to build a more efficient technology-enabled business, targeting $100 million plus exit run rate annualized savings. We continue to focus on margin growth by targeting higher quality work and delivery excellence, scaling global integrated delivery and deploying digital, embedding AI across the business to drive capability efficiency and differentiation. And together, these deliberate efforts set us up for the next phase of our growth. Turning to Slide 26. Geopolitical uncertainty and shifting market dynamics are a reality of today's market. Nevertheless, we've continued to deliver growth in revenue and steady earnings in the first half. This speaks to our business model resilience, portfolio diversification and disciplined execution strategy. We reconfirm our moderate growth outlook for the current financial year on a constant currency basis. We're targeting higher growth in aggregated revenue than FY '25 and growth in underlying EBITA and expect the underlying EBITA margin, excluding procurement, to be within the range of 9% to 9.5%. We continue to benefit from favorable long-term macro tailwinds, and these support demand in our existing end markets with high-growth adjacent markets also identified to support Worley's growth beyond FY '26. A diversified business model, increased cost focus, commercial and financial discipline and a strong balance sheet positions us well for both the short and the long term. That concludes the formal presentation today. Justine and I are now happy to take any questions from those on the call. Operator: [Operator Instructions] And our first question comes from the line of Scott Ryall of Rimor Equity Research. Scott Ryall: Chris, thanks for the presentation and some of the color. I just wanted to follow up on your comments on Slide 24 and the energy and power slide that you were talking about before. And I'm just wondering, you've moved into new markets historically and you've had to invest money a couple of years ago. You did that across a range of different industries. Are there investments you need to make in terms of expanding into some of these new areas? How long do you think it will take? And can you just remind us on -- you mentioned nuclear in the presentation. What's Worley's nuclear capability or experience, please? Robert Ashton: Well, let's start with the nuclear first. So Worley is the engineer of record for 15% of the U.S.'s nuclear commercial power generation capacity. We're currently doing a nuclear project for -- in Egypt, the El Dabaa project, that's over 2 gigawatt nuclear facility where we own as engineer. We're currently doing nuclear work for Canada OPG. So we have a long track record of doing nuclear. So it's expanding into that. In terms of investing, we invested -- when we did the transition or the push into sustainability, we committed $100 million of investment over 3 years to support that transition. And look, and where we have -- we've got effectively there's 3 growth pathways: organic, strategic partnering and M&A. And where we need to develop -- invest in ourselves then, we're actually going to -- we're absolutely going to make sure that we commit to building the incremental capability. The reality is when it comes to power, just even look at the thermal power, we're currently doing the U.S.'s largest thermal -- in construction, the largest thermal power generation facility, over 2 gigawatts, that happens to be in the CP 2. So we've got a long history in power out of our Reading office in Pennsylvania. So power, nuclear, long history. Industrial water, we do a lot of industrial water. It's integrated part of the offering to our customers, but we see that is going to be an increasingly important part of our future. And so it's about putting focus on it. And our data center infrastructure, if you look at this really through the lens of data factories, these are becoming increasingly complex in terms of needing independent power generation and also cooling. So you look at the water and the power needs for some of these multi-gigawatt data factories, that's in the sweet spot. So we've got capability in these areas. It's about expanding them. And certainly, should it require organic investment for organic growth, we'll do that. And more will come in Investor Day. Operator: Our next question comes from the line of John Purtell of Macquarie. John Purtell: Look, just in terms of what you're seeing from customers, Chris, obviously tariffs impacted decision-making through calendar '25. What are you seeing on the ground? And maybe if you could just provide some commentary on the different segments there for you as far as Energy Resources and Chemicals. Robert Ashton: Yes. Look, I would say in the latter part of '25 calendar year and now coming into '26, we're seeing a different tone of voice coming from our customers. Clearly not across every sector, every geography, but certainly on the resources side. We're seeing a lot of interest in the major project delivery capability. But our customers in the Middle East, North Africa, definitely a sense of, I guess, stability. Last year was a lot of uncertainty around the tariffs and the customers working through that. And we did say we thought by the end of the calendar year '25, things would have settled down. I would say that's occurred. Look, the single area of softness continues to be the conventional chemical side in Western Europe and just generally as a result of overcapacity. But on the energy side, integrated gas, power, oil, that that continues -- certainly seeing a renewed interest and a renewed, I would say, buoyancy in that. On the resource side, whether it's on iron ore, copper, lithium, on the [Technical Difficulty] materials, we're seeing a return in interest or a continued buoyancy there. So I think generally, John, the tone has shifted with our customer base, from last year where everybody was thrust into a period of uncertainty as a result of what was happening in the U.S. But that seems to have [Technical Difficulty] been normalized with the decisions that our customers are making. Operator: The next question comes from the line of Nathan Reilly of UBS. Nathan Reilly: Just a few questions in relation to the restructuring activity. The number came in probably a little bit higher than what I was expecting. Was there a decision made to maybe accelerate/even increase the level of restructuring activity when you sort of previously flagged that back at the AGM? And can I just get a little bit of an update [indiscernible], I guess, the nature of some of that restructuring activity in the first half, but also what you're expecting to undertake in the second half? Justine Travers: Sure. Yes. And Nathan, you're right. The amount of work that we've done around restructuring is greater than we had anticipated. And I would say the cost of both the cost and scale is higher than what we would have initially thought we would have incurred for the first half. It is really driven by predominantly severance and associated costs that we've seen in Western Europe as we've looked to restructure that workforce and move into areas of higher demand. And so what we've seen is the scale and duration that it's taken to actually move on that restructuring was longer than anticipated. We've also taken the opportunity, though, as we looked at this, it was a real catalyst to take deliberate decisions around accelerating that shift of moving from higher cost location to areas where we would see higher demand. You'd note within a number of our priorities, we talk about scaling GID. This has really been an opportunity to say how do we accelerate in doing that and actually driving a lower cost base through the business. In terms of what we would expect for the second half of this year, we do expect continued restructuring costs in the second half. We're doing work looking across our enterprise services as part of that restructuring. We do, however, expect those costs to be lower than what we've incurred in the first half. And what we want to do is not continue to have a multiyear program of restructuring. We're really saying what can we do in FY '26 to reset the cost base and reposition ourselves strongly as we go into FY '27. Operator: Our next question comes from the line of Gordon Ramsay from RBC Capital Markets. Gordon Ramsay: Chris, just wanted to ask you about where you stand in terms of project cancellations or scope reductions. I know there were none in the second half of FY '25. Is there anything you can comment on in the first half for FY '26? Robert Ashton: I mean the only one as we talked about before was the Shell Red Green project in Europe, but that was announced at the time. So we've not seen a continuation or any sort of trend around cancellations other than the ones that we've talked about previously. And I think that's just -- that reflects a shifting confidence in the market. But yes, we've not -- there's no trend of continued cancellations. Gordon Ramsay: Just on deferrals, are you seeing companies, especially in what I call the green energy or renewable transition area, it looks like a lot of companies are kind of slowing down investment there. Are you seeing that in your work at all? Robert Ashton: I think it depends on which region you're talking about. Certainly, in the U.S., the extreme green has slowed down, but not in Europe. You saw just this week, we announced a hydrogen backbone pipeline project in Europe. So it just depends by region. But certainly, in the U.S., the more extreme green has seen a slowdown in that. And that's reflected in our future factored sales pipeline. We've actually reflected the slowing down of that. But again, no material trend around cancellations. Now there's always deferrals. And I would say the deferrals are no more or less material than they are historically at this point, yes. Certainly, in '25, as what was happening in the U.S. with the U.S. changing its position, you saw a ripple effect, but I would say that's really dropped off now. And I think we're probably in a much more -- well, we are in a much more stable environment. Operator: And our next question comes from the line of Megan Kirby-Lewis of Barrenjoey. Megan Kirby-Lewis: My question is just on the margins and by activity. So it just looks like professional services and construction dipped slightly year-on-year, but procurement has held steady. So I guess just keen for you to talk through the dynamics for each of those areas and how we should be thinking about them going forward? Justine Travers: Yes. Thanks, Megan. We don't see a structural issue with margins. And we don't see a decline in the quality of work that we're being engaged to do. I think what we are seeing is, as you said, procurement margins have hold relatively steady. Construction and fabrication, we see that more as a phasing around the execution stage of the projects that we're undertaking at this point in time. And with the portfolio of major projects, we expect to see that really normalize over a period. In terms of professional services, again it's largely driven by how we would see in terms of the stage of the projects that we're undertaking. But we're not seeing anything structural within that margin profile that gives us a cause for concern. And I think on top of that, the actions that we're doing around cost management, the efficiency within the organization, removing some of that legacy complexity that we've had is really all in service of ensuring that we maintain that margin resilience as we go through and over the next 12 to 18 months. Megan Kirby-Lewis: And I guess just as a follow-up on that, like more focused on the construction piece, but you are continually talking about moving more into EPCM and EPC. I guess just how like that will start to flow through to margin. Is there anything sort of to think about in terms of risk sharing between customer and contract -- customer and Worley and how that might impact the margins there? Robert Ashton: Well, as we grow the EPC business, the mix of what we do across, the phasing of those, the phasing of engineering against another major being in the procurement phase or in the construction phase. So it's the mix that will -- the mix of the phase of projects that will drive the margin rather than EPC alone. I think you've got to look at it as always a portfolio of projects, which, yes, we'll do more engineering procurement and construction. But it's just driven by mix, Megan. I mean, yes, I mean, I'm not sure what more. Justine Travers: No. And I'd say, Megan, we're holding our outlook position on the margin, excluding procurement, between 9% and 9.5%. So looking at that from a mix perspective, we think that's able to be maintained. I know you've covered Worley for a long time, and you will have seen over the course of the last few years that we've really gone from strength to strength in terms of our margin profile across the portfolio. So something absolutely that we're mindful of in terms of that composition of volume, mix and rate. And so we need to be doing the things that we can proactively manage around quality of what we bring into our pipeline and then through to backlog, and we need to be resilient around the work we're doing on cost discipline and margin expansion. So yes. Operator: Our next question comes from the line of Cameron Needham of Bank of America. Cameron Needham: Just one quick question for me, just on Baytown. Could you talk me through the logic of leaving that in your backlog, please? And then just more generally, could you talk through the process that you guys go through internally in terms of deciding if a project meets requirements to actually stay in the backlog versus what comes out as a cancellation? Robert Ashton: Yes. Baytown Blue has not been canceled. So it remains in the backlog. If you look at Exxon's announcement, it's been paused. And until it's been canceled, it will remain in backlog. So we have a very rigorous process of what goes in or comes out of backlog, and we consistently apply that. But Baytown Blue, if you read ExxonMobil's announcement, has been paused, not canceled. Operator: And our next question comes from the line of Tom Wallington of Citi. Tom Wallington: A quick question on customer mix and growth adjacencies. So just noting 28% of the backlog is associated with traditional work, including oil and gas. And I appreciate you've highlighted these complex critical infrastructure scalable opportunities in your priority markets. Can I just get a bit of color as to how these early customer engagements have been and how we should think about the mix of Worley customers evolving over time? Robert Ashton: I would say that the early engagement has been very, very positive. And the customer mix, I think it's an important point because we often, in conversations, have the conversation pivots around capital expenditure of customer base is shrinking or dropping off or may not be as big as the previous year. And I'm speaking generally. And it may be for the majors. But if you look at the number of customers that we're working with that are outside of that analysis, it's significant. You look at Glenfarne, Venture Global as 2 examples. These are not necessarily companies that attract when the overall market or the overall capital spend is being considered. So look, early phase conversations are fantastic and certainly a lot of interest in what we're offering, whether it's in the full project delivery side or on the power ports or marines or industrial water or even on the data factory infrastructure side. So good early engagement, very positive early engagement, I would say. And in terms of opportunity to grow, I think that there's significant opportunity to grow outside of the addressable market that are traditionally sort of assessed and associated with Worley. So we do a lot of work for customers that are -- that is outside of the majors, outside of the Rios, outside of the BHPs, outside of the ExxonMobils or Chevrons, outside of the BASFs. And we see increased opportunity for growth in that space. Tom Wallington: That's very helpful. And potentially a second question, if I can, a follow-up to Nathan's question around the restructuring costs. Noting that the scale and the scope of these costs has likely exceeded initial expectations. Just curious, going into the result, we thought that these costs would be taken above the line, noting that they are taken below the line now given they have exceeded those initial expectations. Can you give us, I guess, any color as to why the change of thinking as to how this would be treated for from an accounting purpose and potentially what this might have implied if all of these costs were taken above the line? Robert Ashton: I don't think the -- in terms of -- well, I'm going to let Justine answer the technical side. But look, there's a lot of things that go into the decision-making around this and clearly, and I have communicated, we've communicated that the cost will be taken above the line. What changed was as we got into the -- toward the end of the year, as we got into the detail of the restructuring costs, we saw an opportunity to restructure parts of the business more deeply than we initially assessed with an objective of relocating that work when the markets -- when the opportunities and the projects present themselves, repositioning and relocating it to India. So rather than keep people on the bench and do a moderate restructure, we took a strategic decision to do a deeper restructure with the intent of moving the work to a higher profit location such as India or Bogota at our GID center there. So it was a strategic decision. Now in terms of the accounting side, I think I'm going to hand over to Justine. Justine Travers: Thanks, Chris. And Tom, clearly, the costs that we've seen in the first half of the year around this transformation and restructuring are outside the normal course of business. And putting them below the line for us really and hopefully for the market provides a much clearer and more transparent view of our underlying operating performance. It also makes it much easier to look at the comparability of our results across periods. And it is a very typical treatment of costs of this nature for Worley historically, but also if we looked at our customers and/or other peers that are undertaking similar programs of work to have treated them in this way. So we believe that is very comparable to what the industry would do, what we have done historically. And it is important that it does provide a more transparent view around our underlying operating performance of the business. Operator: Our next question comes from the line of Rohan Sundram of MST Financial. Rohan Sundram: Just one for me. Following on from John's questions around the tone of customer discussions. Take on board, there's a renewed buoyancy in the market. But Chris, just can you hear your thoughts on how that's translating into higher sole sourcing on the back of all of that? Robert Ashton: Well, it is. I mean what it is, is the customers that we have strong deep relationships with and have historically looked at sole sourcing is their capital -- is their confidence around investment returns, then it's leading to an increased level of sole-source work. And sole-source work is now up to 48% of what we do. And so we actually look at this very closely. And so you look at the percentage of sole-source work, it's increased compared to the prior corresponding period. And I think that's a great sign that the customer confidence is returning and the confidence they have in Worley in terms of supporting them. Operator: Our next question comes from the line of Ramoun Bazar of Jefferies. Ramoun Lazar: Just a couple from me for Justine. Just in terms of the treatment of the restructuring costs now below the line, how should we think about the seasonality in the business in the second half? Is that going to look more like what it did last year now? Justine Travers: Yes. Ramoun, we do expect the phasing to be broadly similar with what we've seen in FY '25. We know and traditionally have seen a strengthening in the second half. And so you can assume that that would be a similar profile to what we've had if you're looking at the underlying result, just consider that phasing broadly similar. Ramoun Lazar: Yes. Got it. And within that, are you assuming any benefits from the restructuring coming through in the second half out of that $100 million annualized number? Justine Travers: The $100 million, really we see as an exit run rate, and we see the real benefit of that coming through into FY '27. We will see a little bit into the second half as we start to see the translation of that cost come through that resetting of the cost base. But the $100 million is really a reset for FY '27 and should be considered in that way. Operator: I'm showing no further questions at this time. I would now like to turn the call back over to Chris Ashton, CEO, for any closing remarks. Robert Ashton: I just want to thank everyone for joining today. And I know over the next 4 days, 5 days, we've got a number of meetings with yourselves and others on the call or on the -- dialing in on the Internet. So look, we look forward to having the conversations, answering further questions after you've had an opportunity to digest what we presented today. Look, I do think that it is a strong first half result. And look, I look forward to -- Justine and I look forward to talking to you and hopefully being able to answer the questions that you've got. So we'll be connecting with you over the next few days and today as well. So thanks, everyone, for your time and look forward to meeting. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Better Collective Annual Report 2025 Presentation Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Better Collective Co-Founder and Co-CEO, Jesper Sogaard. Please go ahead. Jesper Søgaard: Thanks a lot, and good morning, and welcome, everyone, to Better Collective's Full Year 2025 Webcast. My name is Jesper Jesper Sogaard, Co-Founder and Co-CEO of Better Collective. Normally, our VP of Investor Relations, Mikkel opens the call, but as he is currently out sick, I'll have the pleasure of doing so today. I'm joined today by our CFO, Flemming Pedersen, and I will provide today's business update in connection with our full year report that was disclosed yesterday. Please follow me to the next slide. We ask you to pay attention to this slide where we display our disclaimer regarding any forward-looking statements in today's webcast. Please turn to the next slide. Here you see today's agenda. I'll start by providing a business update, including some of the highlights for Q4 and full year 2025. Whereafter Flemming will take you through some of the financials before handing the word back to me for the key takeaways. As usual, we'll end the call with a Q&A session. Please turn to the next page. Let's dive into the highlights of report that for the first time is a combined Q4 report and a full annual report as we have moved the full year reporting forward by several weeks compared to earlier years. Please follow me to the next slide. Before turning to the details of Q4 and the full year of 2025, I would like to extraordinarily to take a step back. Over the past decade, we have successfully navigated multiple structural shifts across technology, regulation and market dynamics. Today, new themes such as AI and the emergence of prediction markets are increasingly shaping the industry landscape. Against that backdrop, it's relevant to provide a broader perspective on how Better Collective has evolved to reach its current position and what lies ahead. Better Collective has been built over more than 2 decades of continuous evolution in a fast-changing landscape. Our growth has come through a combination of organic growth and a series of acquisitions that have expanded our capabilities, strengthened our market presence and significantly increased our scale. Over time, this has enabled us to build a comprehensive ecosystem positioned at the intersection of sports media, sports betting and casino affiliation. The industry we operate in has never been static. I still remember the early shift from Yahoo being the leading search engine to Google gaining dominance, which was an early reminder of how quickly digital audience and traffic dynamics can change. Since then, regulation, technology and user behavior have continuously evolved and each structural shift has required us to adapt our model. We started as a small local affiliate business and quickly recognized that scale was essential to survive, which led to our transformation into a leading global aggregator. Over time, we also saw the strategic importance of owning stronger brands and direct audience relationships and gradually evolved into a global digital sports media group, while remaining anchored in affiliate marketing as our core monetization engine. Strategic acquisitions have played a key role in this journey, enabling us to establish strong positions in what are now some of the most important global markets, including North America, U.K. and Brazil, all while navigating changing regulatory environments. In parallel, we identified early that paid media would become an increasingly important acquisition and monetization channel, which led to the acquisition of Atemi and the subsequent significant scaling within the group. In essence, external change has consistently driven internal evolution at Better Collective. This long history of adapting to shifts in platforms, regulation and market structure has made adaptability a fundamental and embedded characteristic of the company. Importantly, we do not look back to anchor ourselves in the past, but to extract lessons from it. Experience across multiple market cycles provides perspective and informs how we prioritize investments, develop products and prepare for the next structural shift rather than the previous one. Today, we operate a scaled global platform with a very large audience reach, diversified monetization and strong positions across both sports betting and casino affiliation, supported by leading sports media brands and long-standing sportsbook relationships. Our positioning at the intersection of content, audience and iGaming is strategically relevant in an ecosystem that continues to converge and evolve. Looking ahead, the landscape will continue to evolve through AI, new wagering formats, regulatory developments and shifting user journeys. Our focus is, therefore, forward-looking. By learning from the past while preparing for what comes next, we believe we're strongly positioned for the next phase of industry development, supported by our scale, M&A track record, diversified business model and unique position at the intersection of sports media and iGaming. Moving back to 2025. The year has been defined by disciplined execution and structural strengthening of the business. We simplified our operating model, enhanced scalability across the organization and delivered on the full EUR 50 million efficiency program. This focus was about building a leaner, more focused and more scalable platform for long-term growth. We delivered on our full year guidance despite significant external headwinds, Brazil regulation, foreign exchange movements and sports win margin volatility all impacted reported performance during the year. Navigating through those factors while maintaining high profitability demonstrates the resilience of our diversified business. We are adding new layers to our ecosystem, strengthening engagement, data capabilities and partner value. The development within AI is on most companies and management's agendas these days. Let me also address this and its implications on Better Collective. AI is one of the most significant structural shifts in the digital landscape in decades. For Better Collective, it is first and foremost an enabler. We have embedded AI across product development, content optimization, data analysis and commercial optimization. Playbook is a clear external example, while internally AI is improving productivity, scalability and execution speed across the group. At the same time, we take a disciplined view on potential structural risks. We closely monitor AI-driven changes in search and discovery. Importantly, we remain unaffected by recent shifts and our traffic and commercial performance continue to demonstrate resilience, supported by strong brands and diversified acquisition channels. Most of our revenue base is structurally resilient. Within publishing, the existing recurring revenue share is not exposed once users have been referred to our partners. which provides a stable earnings foundation. Our advertising revenues are likewise not directly dependent on search dynamics as they are primarily driven by audience scale, engagement and direct commercial relationships. Paid media is also structurally robust. As a performance-driven, highly agile acquisition engine, we can dynamically allocate spend across channels and platforms if traffic patterns or user journeys shift. This flexibility significantly reduces platform dependency risk. [ esport ] in turn is built on strong direct community engagement and brand loyalty, making it inherently less reliant on traditional search and discovery channels. The area with the highest long-term exposure is future publishing growth, particularly related to new revenue share NDCs and CPA-driven NDC growth, where changes in search, discovery or user behavior could influence acquisition dynamics over time. We do not underestimate this risk. However, we have successfully navigated multiple structural shifts in the digital ecosystem over more than 2 decades and our diversified audience mix, strong brands and scalable platform give us confidence in our ability to adapt to future changes as well. My intention is not to suggest that AI does not introduce risks, but rather to emphasize that we are proactively addressing them and closely monitoring the development. Any potential impact is primarily concentrated in specific areas of our otherwise well-diversified revenue streams. which limits the overall exposure at group level. Another important emerging theme is prediction markets. During 2025, prediction markets have emerged as a structurally important addition to the broader sports and event-based wagering ecosystem. For us, this is an expansion of the total addressable market. Prediction markets introduce new product formats and attract incremental user segments while overlapping meaningfully with our existing sports and betting audience. Given our position at the intersection of sports content and wagering, we're structurally well positioned to support this evolution. We already have commercial relationships in place and are collaborating with relevant players. It's still early days with only a limited number of platforms live, and we expect increased competition in the coming year, which typically strengthens the aggregator position. Overall, we see prediction markets as a natural extension of our core business with the potential to diversify revenue streams and expand long-term growth opportunities. Lastly, we look forward both as shareholders and as sports enthusiasts to what is expected to be the largest World Cup in history. Importantly, for us, it will be played across some of Better Collective's core markets. Beyond its global appeal, the tournament represents a significant commercial opportunity. Historically, major football tournaments provide strong acquisition tailwinds, and we expect 2026 to be no different. The World Cup is likely to drive elevated user acquisition across our platforms as well as meaningful reactivation of dormant users and increased activity across our existing player base. This combination of new customer intake and high engagement levels supports both revenue growth and lifetime value expansion. Given our strengthened position with broader revenue mix and scalable platform, we believe we're well positioned to capture the incremental activity associated with the tournament. I'm extremely proud of the organization and my colleagues for navigating through another demanding period of change with focus and discipline. And I look forward to returning to a year of renewed growth in 2026. With that, let us move to the usual webcast. Please turn to the next slide. Overall, we are pleased to report a strong finish to the year with underlying growth and record profitability. Group revenue reached EUR 94 million in Q4, corresponding to minus 2% year-over-year and plus 2% in constant currencies. We were negatively impacted by a lower sports win margin compared to the year prior. Normalizing the sports win margin to a similar level as the year prior, revenue growth would have been 7%. Group costs were down 8% year-over-year, reflecting the disciplined execution and continued harvesting of synergies from acquisitions. We delivered record EBITDA before special items of EUR 37 million, translating into a 39% margin and growth of 10% year-over-year. In Brazil, we continue to see good activity levels in line with recent quarters with revenue above our expectations. However, the market remains affected by the marketing restrictions, which continues to dampen our ability to send new customers to our partners. In North America, revenue share amounted to EUR 7 million in Q4 as our revenue share database continues to ramp up, making it EUR 17 million pure revenue share for the year versus our own expectation of EUR 10 million to EUR 15 million. Value of deposits reached a record level of EUR 820 million in the quarter, up 6% year-over-year and 13% quarter-over-quarter. This was achieved despite being -- we continue to see strong momentum in Playbook, our AI betting solution, and I look forward to scaling the product across the U.S. and into additional geographies and platforms. Please turn to the next slide. Let me briefly put the 2025 financial performance into a longer-term perspective. Looking at the full year, revenue declined from EUR 371 million in 2024 to EUR 337 million in 2025, corresponding to minus 9% year-over-year. EBITDA before special items decreased from EUR 113 million to EUR 102 million or minus 10%. Since 2018, we have delivered a revenue CAGR of 35% and an EBITDA CAGR of 30% -- while 2024 and 2025 shows a temporary slowdown in organic growth, this must be seen in the context of significant headwinds from external factors such as foreign exchange headwinds on revenue of EUR 9 million as well as the regulatory transition in Brazil, which impacted EBITDA negatively by EUR 22 million and lower sports win margin volatility of EUR 17 million. These factors implied a combined headwind versus 2024 of more than EUR 40 million on EBITDA in 2025. Please turn to the next slide. Let me now turn to what we see as important part of the next chapter of growth journey driven by innovation with Playbook and FanReach. Starting with Playbook, we successfully introduced our AI-powered betting solution in 2025, just ahead of the NFL season. The product is designed to integrate naturally into how sports fans already consume content and make decisions. We have seen strong early engagement with millions of bets sent to our partners. Importantly, Playbook enhances user engagement and improves conversion strengthen the monetization of our existing audience while also opening new avenues for geographic expansion and product development. We will continue to invest in product refinement and international rollout to unlock further scalability. On the FanReach side, this is central to our advantage ecosystem. FanReach combines our proprietary first-party data with advanced audience segmentation, enabling more measurable, scalable and precise media solutions for advertising partners. FanReach was launched firstly in the U.S., utilizing data from selected brands, currently reaching more than 50 million sports fans across our network. We are moving beyond traditional performance marketing and adding a broader media monetization layer built on audience ownership and distribution strength. Together, Playbook and FanReach expand our monetization stack, deepen engagement and reinforce the structural scalability of the business. They are key building blocks for our next phase of profitable growth. Please turn to the next slide. On this slide, we show our new guidance for 2026 and the medium-term outlook. For 2026, we expect organic revenue growth in the range of 7% to 12%. On EBITDA before special items, we guide for growth of 8% to 18% or EUR 110 million to EUR 120 million. This reflects growth with lower cost base, continued focus on operational efficiencies and an expected stabilization of external factors compared to 2025. We also plan to execute an annual share buyback of EUR 40 million, in line with our capital allocation priorities and are confident in the long-term value creation potential of the business. At the same time, we remain committed to maintaining net debt-to-EBITDA below 3x, ensuring continued financial discipline and flexibility. Looking beyond 2026, for the 2027 to 2028 period, we expect continued positive organic revenue growth and target an EBITDA margin in the range of 35% to 40%. This margin ambition is supported by scalability in the business model, a maturing recurring revenue base, especially in the U.S. and increasing AI enablement across products and operations. Furthermore, we expect continued strong cash conversion and net debt-to-EBITDA to stay below 3x. With that, let us move to the next slide and over to Flemming. Flemming Pedersen: Thank you, Jesper, and good morning to you all. Please follow me to the next slide as we dive into the financials. Let me start by bridging the Q4 revenue development in more detail. We started from Q4 '24 revenue of EUR 96 million. During the quarter, foreign exchange negatively impacted revenue by EUR 4 million. Sports win margin volatility reduced revenue by a further EUR 5 million, reflecting more player-friendly results compared to last year. In addition, the regulatory transition in Brazil impacted revenue negatively by EUR 3 million. In total, these external factors reduced revenue by EUR 12 million year-over-year. This was partially offset by EUR 10 million of underlying operational growth across the business, mostly driven by paid media, talent-led media and sports media. As a result, Q4 2025, revenue landed at EUR 94 million, corresponding to a minus 2% year-over-year and positive growth of 2% in constant currencies. The key takeaway is that the underlying business continues to grow, but reported performance in the quarter was impacted by temporary external factors. As these headwinds normalize, the operational growth becomes more visible in the reported numbers. Please turn to the next slide. Let me briefly comment on recurring revenue as revenue share remains the backbone of our recurring earnings model and supports visibility and cash flow generation going forward. Revenue share continues to account for approximately 3/4 of our recurring revenue base. In Q4 '25, revenue share amounted to EUR 41 million out of total EUR 55 million of recurring revenue. Looking to the North American market, historically, a larger portion of the revenue share income has come from hybrid deals with a meaningful upfront component. Over the past 2 quarters, however, we see a clear transition towards predominantly pure revenue share agreements. This represents a meaningful improvement in earnings quality as pure revenue share provides stronger long-term visibility and cohort value. For the full year, we outperformed our expectations in North America. We expected EUR 10 million to EUR 15 million in revenue share, but delivered EUR 22 million. Out of this EUR 17 million was pure revenue share. Importantly, this number would have been even higher in constant currencies, highlighting the underlying strength of the region. In short, North America is scaling with an improved revenue mix, strengthening the recurring revenue and compounding nature of our earnings base. Please turn to the next page. Let me now bridge the EBITDA development in the quarter. Lower revenue year-over-year reduced EBITDA by EUR 2 million, as I just spoke to. In addition, we deliberately increased paid media investment, which impacted EBITDA by EUR 5 million downwards. This reflects continued confidence in the long-term return profile of our paid media activities, where we, to a large extent, spend to harvest the revenue later through revenue share agreements. However, these effects were more than offset by EUR 10 million in cost reductions, driven by the execution of the EUR 50 million efficiency program and broader structural improvements across the organization. And a lot of these cost savings relate to the synergies from previous acquisitions. As a result, EBITDA increased to EUR 37 million in Q4 '25, representing a 10% growth year-over-year and the highest quarterly EBITDA in our company history. This clearly illustrates the operational leverage in the model even in a quarter with slightly lower revenue, external headwinds and increased growth investments, disciplined cost execution enabled us to expand profitability and deliver record EBITDA. Please turn to the next slide. Let me now turn to 2 of our main KPIs, net depositing customers and value of deposits. As expected, NDC levels in '25 were impacted negatively by the regulatory transition we saw in Brazil. The marketing restrictions on welcome bonuses continue to deliver -- continue to limit our ability to send new customers to partners in that market, which is reflected in lower reported NDCs. However, and importantly, Q4 '25 did not show a return to growth quarter-over-quarter of 9%. Also in Q4, value of deposits reached an all-time high of EUR 820 million, showing growth year-over-year of 7%. This is a very strong outcome, especially considering the regulatory headwinds in Brazil during the year. Deposit values are reported quarterly and are not accumulated, meaning this represents actual quarterly activity. The fact that we reached a new record despite regulatory constraints clearly demonstrates the strength and loyalty of the users that we have in the revenue share databases. In combination, the graphs illustrates that while new customer intake has been temporarily impacted, existing cohorts remain highly engaged and continue to generate increasing deposit activity. Furthermore, it signals that we are -- that we continuously manage to send higher-value customers to our partners. This supports the durability of our revenue share accounts and underlines the quality of earnings. Please turn to the next slide. Now let's focus on our funding position and our considerations regarding capital allocation. From a financing perspective, we also took an important step in 2025 that further strengthens our financial position. During the year, we signed a new EUR 319 million 3-year committed club facility with our banking partners, including an EUR 80 million accordion option as well as a new EUR 50 million dedicated M&A facility. This extends our financing maturity profile through October 28 and significantly enhances our financial flexibility. Access to long-term committed financing on attractive terms has been a structural advantage for Better Collective since the IPO in 2018 and has been a strong facilitator in our M&A strategy. It has allowed us to act with speed and certainty when strategic opportunities arise while maintaining a balanced capital structure and disciplined leverage profile. In a fragmented and fast-evolving industry, the ability to combine strategic M&A with stable financing is a clear competitive advantage. Moving to 2025. We guided free cash flow at the low end to be EUR 55 million and landed at EUR 38 million. The deviation was driven by short-term working capital timing effects of EUR 15 million shifting into 2026. We also invested in new significant partnerships in Q4, where we'll see the most of the upside from 2026 and onwards. These deviations are mostly timing and growth related in nature and do not reflect any structural change in the underlying cash generation profile in the business. Cash conversion for the year ended at 92%. Board of Directors and executive management has formalized our capital allocation framework, which is as follows: First, we prioritize deleveraging when net debt-to-EBITDA exceeds 3x. Second, we invest in high-return organic initiatives and selective value-accretive acquisitions. Third, we return excess capital to shareholders, primarily through share buybacks and secondarily through dividends. Overall, we believe this balanced framework supports our focus through many years. For 2026, the Board of Directors has decided on an annual share buyback of EUR 40 million, in line with this framework. Please turn to the next page as I hand the word back to Jesper for the key takeaways. Thanks. Jesper Søgaard: Thanks, Flemming. Let me conclude with the key messages. 2025 was a year of disciplined execution and structural strengthening of the business. We delivered on our full year guidance despite significant external headwinds. In North America, revenue share ramp-up exceeded expectations. Innovation accelerated with Playbook and the continued build-out of FanReach. Looking ahead, 2026 marks a return to growth. We expect the World Cup in men's soccer to be the largest in history and played across some of our core markets to act as a big catalyst. Lastly, prediction markets is expanding our total addressable market and is becoming a clear tailwind despite it being early days. I'm proud of the organization for navigating a demanding period, and we look forward to delivering renewed growth in 2026. With that, we are happy to take your questions. Jesper Søgaard: [Operator Instructions] Our first question comes from the line of Sebastian Grave of Nordea. Peter Grave: Congrats on a strong result. And also thank you for a very comprehensive presentation. Now it's encouraging to see that you expect to return to growth here in '26 and with further top line expansion beyond that. I know you don't provide concrete numbers on the midterm target, but I'm going to try to push my luck anyway here. So the 7% to 12% growth in '26 is led by, easy comparisons in Brazil and from sports margins. And you also see significant tailwinds from a strong sports calendar here in '26 and prediction markets, as you highlight, Jesper. So I guess my question is, is this, i.e., 7% to 12% growth, is this as good as it gets? Or do you also believe that you're able to reach similar growth levels beyond '26? Jesper Søgaard: Yes, it's a bit boring, but obviously, we will not sort of comment further on the targets for '26 and 2028. But looking at the coming years and also a bit to the second half of '25, where we have seen the underlying growth in the business, we really feel we are on track to deliver this growth. And we're sort of further out feeling confident about continued organic growth. But for us, it's too early to start to put numbers to the outer years. Peter Grave: I guess it's not a big surprise, but I tried at least. My second question is on the midterm margin guidance, which you also reiterate here, 35% minimum from '27 kind of big leap from the implied margin here in '26. So how do we get to that number? And I mean, if this is just a question about scalability, well, then I guess the implied growth rates you give here for '27 is quite upbeat? Flemming Pedersen: Yes. I think the guidance, Flemming here, I can try to answer that. The guidance that we give 35% to 40%, you can say, reflects, of course, the scale that we see in the business, mentioning Jesper touched upon some of the growth areas that we see with Playbook, the AI bot that we have launched, FanReach speaking into the advantage and increased CPM revenue. And then you can say the scale from that is, of course, also reflects our opportunities for investing further to mention one is paid media, where we also can, you can say, invest part of the increased revenue into further growth when we see opportunities and of course, also in other growth areas such as talent-led media, which comes with a bit lower margin. So I think the scale is one thing. And with these, you can say examples, we see a higher margin. Actually, in Q4, we saw a 39% margin. So it's a scale that will drive this on a much lower cost base that we have seen in past years. Peter Grave: Okay. And just the last question from my side on the EUR 8 million tax effects you bake into the guidance in '26. I guess it's fair to assume a similar effect on top in '27, given the delayed impact on sports betting taxes in the U.K. Now I guess my question is, is this a gross or a net number that you provide? Meaning do you assume any mitigating actions from operators such as lower odds, et cetera? Or this is just sort of a mechanic gross impact from higher taxes? Flemming Pedersen: It's a number that we have, I would say, tried to assess as a net number also with mitigating factors because there will likely also be market factors such as lower bidding prices within paid media in the Google auctions. And you can say, in general, likely, you can say, lower competition. So there are also counteracting factors where we have a good position. So this is a net number that we have tried to assess and also continue that into the outer year guidance. Jesper Søgaard: [Operator Instructions] Our next question comes from the line of Hjalmar Ahlberg of Redeye. Hjalmar Ahlberg: Just wanted to check a bit on -- if you look at the Q4 numbers here, we see that CPM and sponsorship saw good growth at least what I could see initially here. Just wanted to hear if for the CPM part, if you already see kind of positive impact from Advantage there or what drives the CPM improvement? Flemming Pedersen: Yes. So on the sort of CPM and overall advertising developments, yes, we are starting to see effects of optimized ad campaigns and formats that is sort of part of the Advantage ecosystem. And as we already -- as I alluded to in the speak, is that we now have launched here in '26, the FanReach part of Advantage. So yes, we are gradually incrementally seeing the effect of Advantage, which we also expected that, that would be the way we could tell it in the numbers, incremental and gradual development. Hjalmar Ahlberg: Okay. And also listening to the Playbook here, it sounds like you are getting ready to expand the product internationally here. Is this something you will do during the World Cup? Or is it a broad expansion or is it more gradual expansion in new markets? Flemming Pedersen: So the view we take on this is that we obviously look at core markets and where the product would be most relevant and have the biggest impact. And that guides decisions for the launch. And yes, we have obviously in mind that the World Cup is a good event to have a product like a Playbook out. So yes, we are assessing where we will see the biggest effect from launching Playbook and have the World Cup in mind. Hjalmar Ahlberg: And then just a question on your efficiencies here. So really strong progress in cost savings during the year. Do you see more efficiency from here? Or is it more that you have the new cost base now and then the next step is maybe more to invest in growth? Flemming Pedersen: I think we are, of course, constantly driving efficiencies throughout the business, and now we have a new framework. So this is what we will go with. And you can say the primary focus is now to scale revenue from here on that lower cost base. So hence, also why the higher margin guidance for the outer years. So it's -- yes, it's a constant work in progress, but I think the big chunk we have behind us. Hjalmar Ahlberg: And then just a final one. I don't know if you have a comment on that, but looking at the kind of seasonality for the year, I guess, World Cup means that Q2, Q3 could be a bit more seasonally stronger than normal. But if you have any flavor on the seasonal effect over the year, it would be interesting to hear. Flemming Pedersen: No, you're correct on that, that the World Cup will sort of support Q2 and Q3. And then as usual, Q4 will be the quarter with the highest activity for our business. Jesper Søgaard: I will now pass to the speakers for questions via the webcast. All right. And I'll be taking those. So yes, there in Danish, I'll try and just sort of get to the essence of the questions and read that out loud. Yes. And it has always been already been answered to some extent because it relates to the margin profile in '27 and '28 and the structural drivers. And essentially, I think we will not -- like Flemming covered that just before. So I'll move to the next question, which relates to the continued buildup of our revenue share database, in particular in North America, whether we can quantify how big a part of the future EBITDA growth in '26 to '28, which is expected to come from already existing users rather than new depositing customers. And no, we are not quantifying that. But I think as the value of deposits show, there is a very high quality in the database and players already there. So in general, a significant part of the revenue and earnings generated are stemming from our databases, existing databases. And then a last question. Elon Musk implemented a new policy on X, which limited gambling affiliation marketing. Please comment if you noticed any impact on your partnership with X for Playbook. And we have seen no changes. And with that, I think we are at the end. So thank you very much for showing interest in Better Collective, and we wish all of you a very nice day. Thank you. Bye. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, and welcome to the investor and analyst call for LSEG's 2025 Full Year Results. [Operator Instructions] I would like to remind all participants that this call is being recorded. I will now hand over to David Schwimmer, Chief Executive Officer, to open the presentation. Please go ahead. David Schwimmer: Good morning and welcome to our 2025 full year results. I'm joined by our CFO, MAP; and our Head of IR, Peregrine Riviere. We have delivered another year of strong performance and rapid strategic transformation for the group. Revenues grew 7.6% with all businesses contributing positively and Data & Analytics accelerating. Our focus on driving efficient and scalable growth delivered 210 basis points of margin expansion, a little over half of that organic, taking full year EBITDA margins north of 50% for the first time. Adjusted EPS grew 16%, reflecting our disciplined execution throughout the P&L. We continue to invest in future growth with the Post Trade Solutions transaction in Q4. We continue to deliver strong cash conversion with GBP 2.8 billion of dividends and buybacks in the year. And today, we've announced our plan to execute a further GBP 3 billion of buybacks over the next 12 months. We see a great opportunity to invest in our own shares during this market dislocation. This strong performance is a direct result of the strong execution of our long-term strategy and the rapid transformation we're driving across our business. November's Innovation Forum provided insight into how we are innovating across LSEG as we deliver on our AI strategy. We are already seeing the fruits of that innovation. Our LSEG Everywhere AI data strategy is embedding our trusted data into the AI tooling of financial services. It's only been a few months since we launched our MCP server, but early demand has been very strong. I'll give you some numbers on that later. We're also innovating to capitalize on the accelerating pace of change in capital markets, building new platforms for growth in digital assets. We launched our digital markets platform last year and, at the start of this year, successfully piloted tokenized cash settlement via our new Digital Settlement House. The strategic partnership with 11 leading banks we announced at our Q3 results is accelerating growth and helping us unlock the multiyear opportunity in Post Trade Solutions, a great example of our strong customer relationships and partnership-led approach, creating unique opportunities for growth. Let's take a step back and look at our 2025 performance in the context of the multiyear delivery of our strategy. We have achieved a lot over the last 5 years. Financial performance has been very strong with organic growth [Technical Difficulty] improving significantly. [Technical Difficulty] all of our businesses. Across the whole group, we've driven significant revenue and cost synergies, built better products and better infrastructure, integrated the operations and unified the brand and culture. This is all still work in progress. And every day, we discover new ways to transform our business. But right now, I can see more growth opportunity in front of us [Technical Difficulty] trading, settlement and depository have huge potential for future growth. But let me take a step back. Right now, the market seems to be taking a view on the impact of AI on our business. We do not agree with it, and all fact-based evidence would indicate the negative market narrative is wrong. We feel as confident today about our products, our partnerships and our prospects as we ever have. [Technical Difficulty] entering into enterprise agreements, run some of the most rigorous procurement, risk and technology processes in any industry. They understand exactly what our products do, they know how their own workflow needs are evolving with AI, and they know the role of our data, analytics and infrastructure in their operations. [Technical Difficulty] heavily regulated and risk-averse customers are going to rely on outputs compiled from the public Internet. That is how much you should be worried about. But more importantly, let's look at the 98% of group revenues that are not from public data. I'll cover the rest of D&A in detail later. But in a nutshell, these revenues are derived from [Technical Difficulty] that are proprietary, used in regulated environments [Technical Difficulty] intelligence and particularly World-Check is an industry leader. Two things that are not well understood about this business. First, its value goes far beyond the thousands of official sources. Our customers make 200 billion checks a year across 700 million of their own end customers. And once anonymized and aggregated, we can use the decision data to improve our own detection and matching capabilities in a huge and constantly evolving content set. World-Check is the leading product in this space and we are able to continue to improve the product to extend that lead through what is in effect a massive and constant flow of customer contributions. Second, history is important. Customers need to justify decisions they made about counterparties going back decades, for example, in high-profile tax or fraud cases. We have all that history with the information that was available at the time. AI cannot create that past record for customers. And moving to Markets, 40% of our business. AI is a tailwind here, too, as more data consumption drives more insights, leading to more trading volumes and ever-growing demand for risk management. So our positioning is strong, and our strategy is working. I'll say more in a moment about our strong commercial and strategic progress and the opportunities we are seeing with AI. But first, I'll hand over to MAP to discuss our financial performance in more detail. Michel-Alain Proch: Thank you, David, and good morning, everyone. It has been a very strong year of financial execution for LSEG. So first, some headlines, and then I will unpack this all in more detail. Organic growth was 7.1%, slightly above the midpoint of our guidance and another year of organic growth above 7%. EBITDA margin improved by 110 basis points underlying plus another 100 from the Post Trade Solutions transaction. We delivered this performance through a significant improvement in our labor cost ratio. And this strong growth, combined with operational leverage, translated into EPS growth of over 15%. So that was the P&L. Now moving on to cash and capital allocation headlines. Capital intensity continues to trend down, as guided, but do note that we are still investing in our business at least twice the rate of our peers. The dividend is increasing by 15%, in line with EPS, and we doubled the rate of share buybacks in 2025. With the growth in cash flow and the reduction in share count, this translates into 14% growth in free cash flow per share, which is actually 60% over the last 2 years. In summary, we are growing our business strongly. We are investing in our future growth, we are generating significant free cash flow, and we are being very decisive and agile in our capital allocation. So let's cover revenue over the next few slides. On this slide, you can see that our growth is very broad-based with Risk Intelligence continuing its double-digit momentum and Markets growing high single digits against a huge year in 2024. FTSE Russell continues its revenue trajectory and D&A accelerated on 2024. As you know, I like to look at our subscription businesses as a whole, and here, we have achieved 6% of growth for the year, as we guided to. We will start with D&A in more detail on the next slide. We achieved good growth across all lines in D&A. In Workflows, we completed the migration from Eikon, the largest ever of its kind in financial markets. As a result, clients are using the platform more frequently, and we continue to innovate and improve it. In Data & Feeds, we maintain our strong momentum. We are adding significant new data sets, particularly in private markets, and we have launched our LSEG Everywhere strategy for AI-ready data. As David will cover, the initial uptake here is very strong. Our Analytics business is well advanced on its acceleration journey. In partnership with Microsoft, we have driven a strong acceleration through the Analytics API and have just launched the Model-as-a-Service platform with our first partner bank, Societe Generale, onboarding its own models. Overall, D&A is posting a 5% organic growth, accelerating versus 2024, as communicated during our half year results. Turning to the other subscription businesses, we continue to see strong momentum and healthy demand. In FTSE Russell, we have seen balanced growth between subscription and asset-based fees, and we expect the growth rate to improve again in 2026. Risk Intelligence had another very strong year. World-Check, which represent the bulk of its revenue, continues to innovate from its position as market leader, launching World-Check On Demand for real-time updates. This platform is increasingly deeply embedded in customers' regulated workflow. Our Digital Identity & Fraud business accelerated in 2025 with transaction volumes up 16%, and the launch of our global account verification platform. I will spend a little longer on this slide to talk about some new KPIs we are introducing for 2026, there will be an addition to ASV. And from 2027, we will report only these new KPIs and we will be retiring ASV. We are doing this to give investors more insight into our commercial progress and with measures that are less volatile than ASV. But let's come back to ASV. As you remember, I previously guided to 5.8% growth at the end of Q4, and we achieved a bit better than this at 5.9%. This reflects a very strong end to the year, which set up well for 2026. And now on the new measures. Before beginning, I shall tell you that they cover exclusively our 3 subscription businesses: D&A, FTSE and Risk Intelligence. We have given you the baseline here. Gross sales represents the annualized total amount of new business over the last 12 months, so not contract value but more annual recurring revenue across our subscription businesses. We performed strongly in H2 2025 with a rolling figure increasing around 11% over H1. On revenue retention, we already mentioned that this typically sits in the low to mid-90s depending on the product. We are formalizing that today at 92.4% on a consolidated basis, you can see that it's pretty much stable on H1. And finally, we are introducing a KPI that measures the level of innovation or newness in our product set, the new product vitality index, or NPVI. This measures the proportion of revenue from products that are new or enhanced in the last 5 years, giving you insight into how our investment into product is translating into revenues. Taken across our subscription businesses, this figure sits at a very healthy 24%, growing strongly against 2024 and H1 2025. A significant proportion of this relates to Workspace, as you would expect, and reflects the substantial enhancements to the customer experience that the new product gives to customer. In other business lines, this index sits more in the mid- to high single-digit range, which we expect to increase over time. Finally, we plan to give these KPIs, including ASV for 2026, twice a year as we see little benefit in reporting them quarter-to-quarter. Turning now to our Markets businesses. These are incredible strong franchise, which I believe do not get the attention they deserve, and they continue to deliver exceptional performance year in, year out. In Fixed Income, as I have already reported, Tradeweb had another very strong year with continued high levels of activity across all main asset classes backed up by great execution. And in Foreign Exchange, we recorded our best performance in recent years with 7.5% growth. In OTC Derivatives, our Post Trade businesses went from strength to strength, and David will detail them in a few minutes. Finally, and for ease of presentation, we have shown Equities on this slide with some other lines from Post Trade. Our Equities business had a solid year with revenue up 5.1%. We launched our Private Securities Markets with the first transaction taking place right now, and we also went live with our Digital Markets Infrastructure, built in partnership with Microsoft. So now on to EBITDA and the rest of the income statement. We translated the 7.1% organic top line growth into 11.8% growth in adjusted EBITDA, 14.3% growth in AOP and, finally, 15.7% growth in EPS. And as you can see from the main table, EPS growth was 19.4% on a constant currency basis. This is truly operating leverage at work, plus very good control in financing, tax and our share count. Let's take each of those levers to improve earnings in turn. Number one is cost control with total OpEx up only 3.5%, half the rate of revenue growth. Within this, you can see that we have really managed third-party services very effectively, down 11.6% year-on-year. This is a core part of our labor strategy. Total headcount is roughly stable, a small decrease of 700, with ratio of internal employees rising to 75%, driven mostly by engineering. As previously mentioned, this is not just about cost. We have seen significant upskilling and improvements to productivity as we build a true engineering culture. As usual, we show the margin improvement graphically on this slide. Once you adjust for FX at either end, the improvement year-on-year is 210 bps. 100 of this relates to the SwapClear revenue surplus agreement, and that leaves 110 bps of underlying. Actually, the real underlying improvement was 140 bps, taking into account the minus 30 bps of the disposal of our Euroclear stake and its related dividend income stream that ceased. On net financial expense, we saw a slight reduction year-on-year. The underlying position was broadly similar. But as reported at H1, the numbers include a GBP 23 million credit from the bond tender offer we completed in March and a one-off gain of GBP 12 million following the discontinuance of a U.S. dollar net investment hedge. We currently expect net financial expense to be in the GBP 260 million to GBP 270 million range for 2026, reflecting the effect of refinancing existing low coupon debt in 2025 by higher rates in 2026 and, obviously, the new buybacks announced today. On the next slide. Our tax rate came in at the lower end of our guidance range, and we expect the same range for 2026. So if you take all of those lines together, this is giving 15.7% growth in AEPS for the year, more than double the rate of organic revenue growth. Over the last 4 years, we smoothed out some FX impacts along the way. That's a steady compound growth rate of 11.5%. And as I said last year, we expected nonunderlying costs to come down in 2025, and they did. Integration costs fell by 41% as we came to the end of the formal Refinitiv process, and we expect them to come down again in 2026 as the other areas of restructuring continue to reduce. Now turning to cash flow. This continues to be another highlight of the business model. We posted a record free cash flow of GBP 2.45 billion. As I'm sure you remember, we guided at, at least GBP 2.4 billion at constant rates. And we beat that at current rates, absorbing the current weakness of the dollar. We are posting this very strong result despite a negative variation of working capital of GBP 400 million. There are three main reasons for that. First, a reduction of around GBP 90 million of the pay accrual for our SwapClear partners following the reduction of the revenue share; second, an GBP 80 million reduction in creditors related to the net treasury income, reflecting lower balances and interest rates; and third, we triggered around GBP 150 million of payments that we've made earlier than usual to suppliers to crystallize better procurement conditions before year-end. Anyhow, going forward, typically a working capital outflow of GBP 100 million to GBP 150 million is a safe assumption to model. Given the ongoing buybacks, this 12% growth in free cash flow translates into 13.6% growth in free cash flow per share. Turning now to capital allocation on the next slide. Against the GBP 2.4 billion of free cash flow, we deployed GBP 3.5 billion across shareholder returns and M&A activity. Total dividends were just over GBP 700 million, and we are proposing a final dividend of 103p today, up 15.7%, in line with our EPS growth. We have deployed a net GBP 700 million on the Post Trade Solutions transaction that I already mentioned. And finally, we have had a record year for share buybacks with GBP 2.1 billion completed in the year. This demonstrates our very active approach to capital allocation and reflects our strong view of the deep value inherent in our own shares. Even with this very active year, we ended 2025 with leverage at 1.8x net debt-to-EBITDA, still slightly below the midpoint of our target range. So now let's look forward to 2026 and beyond. We are very well positioned as we enter 2026 with a record fourth quarter for gross sales in our subscription businesses and very healthy volume growth already at Tradeweb and our Post Trade businesses. We are guiding to organic revenue growth of 6.5% to 7.5%, the same as in 2025, but importantly, with a steady acceleration in our subscription businesses as I have mentioned before. Within this, we also expect our D&A business to accelerate. On margin, we expect 80 to 100 bps of improvement on a constant currency basis. So if you take the midpoint, 90 bps, you will find 60 bps to complete the 250 bps improvement that we committed to for '24, '25, '26 and an extra 30 bps, which comes from the further decrease in revenue surplus share terms at SwapClear. For CapEx, the steady downward trajectory in intensity will continue, and we are targeting around 9.5% for 2026. And finally, we see this all translating into at least GBP 2.7 billion of free cash flow. And as I mentioned earlier, the tax guidance remains unchanged at 24% to 25%. On this slide, I want to take a slightly longer-term view on how our cash generation and capital allocation has developed over the last 4 years and into 2026. The most important message here is how purposeful and consistent we have been in deploying capital to build a better business. We have maintained high levels of capital intensity to invest organically in the business. We have grown the dividend strongly. We have done regular bolt-on M&A to strengthen our offering to customers. And then, when appropriate, we have returned surplus capital through share buybacks. This approach has supported strong top line growth, more innovation, improving margin and strong shareholder returns. Our plan for 2026 continue that consistency. CapEx will be pretty consistent as an amount, but reducing to around 9.5% of revenue in terms of intensity. Free cash flow will grow strongly to at least GBP 2.7 billion. Dividends will continue to go up in line with earnings. And we remain active in our search for good M&A targets depending on fit and value. And then today, we announced a further GBP 3 billion buyback over the next 12 months. So you can assume, given we have already done over GBP 400 million this year, that there will be a total of around GBP 3 billion in 2026, and then we will complete the new commitment in early 2027. And finally, we are updating our medium-term guidance today, so I mean from 2027 to 2029, after several years of strong growth and margin delivery. On revenue, we are confident of mid- to high single-digit growth, including acceleration in our subscription businesses. So after the 6% reported in 2025, you can think of it at around 6.5% for 2026, heading to 7% for 2027, as I mentioned last year. On EBITDA margin, we will carry on improving our productivity, and we are now guiding to a cumulative improvement of circa 150 bps over the period 2027 to 2029. We will drive this through continued strong revenue growth, investment in technology and other ongoing operational efficiencies, but while allowing room to reinvest in future sustained growth. On CapEx, we expect intensity to come down to circa 8% in 2029. So think of that as the absolute CapEx figure staying relatively steady at GBP 900 million, GBP 950 million while revenue continues to grow. And then finally, on cash flow, we are moving to a free cash flow per share metric, and we are guiding to double-digit compound annual growth in this important figure for the years to come. And now I will hand over to David to take you through our strong strategic progress. David Schwimmer: Thank you, MAP. Let's start with the obvious topic, AI. As we discussed at the Q3 results and the Innovation Forum, we're benefiting from our unique position at the forefront of AI-driven change, and we are excited about what that means for our customers, our people and our future growth. You've seen these three pillars before: trusted data, transformative products and intelligent enterprise. Over the next few slides, I'll update you on how we're bringing this to life today for our customers and our organization. We have a great starting point, and everything we are doing is only making us stronger. As a reminder, roughly 90% of our Data & Feeds revenues come from proprietary data and solutions. Our customers are using this data to power business-critical activities in highly regulated environments where accurate, timely, trusted data is nonnegotiable. It is often deeply embedded in transactional workflows. Our breadth and depth are unmatched. Alongside proprietary data sources and exclusive licenses, we also have a network of more than 40,000 contributors proactively contributing data, continuing to enhance the value of our products through strong network effects. The result is comprehensive industry standard data that we are constantly updating. That puts us in pole position to take share and drive growth as customers are able to interrogate and analyze more data at speed using AI. As I said at the beginning of the call, our customers can see that our solutions are more valuable in an AI world. In the fourth quarter of last year, global investment banks and asset managers, all highly sophisticated institutions like Citi, Bank of America and Standard Chartered, signed GBP 1.9 billion of long-term data agreements with LSEG. These organizations are securing their access to our data for up to 7 years invariably in contracts that step up in value over time. And they span a range of different segments: global investment banks, commercial banks, alternative investment firms. We meet their needs and they are confident we will continue to do so across Workflows, Data & Feeds, Risk Intelligence and FTSE Russell. Only LSEG has this breadth of offering. It is a perfect demonstration of why these businesses are so valuable together. The demand for and consumption of data is accelerating, and we are facilitating that growth. The history of data consumption growth is the history of technological advancement, the Internet, fiber networks, mobile, the cloud and now AI. The chart on the left-hand side shows how the amount of data or messages coming through our real-time data feed continues to grow at pace, exceeding 15 million new data points a second in December. This represents a 4x increase in real-time data over our network in the past 10 years, a trend that we expect to continue. With our direct connection to nearly 600 exchanges and venues, and our ongoing investment in technology and capacity, we are strengthening our market leadership. I often call this business the market infrastructure for all market infrastructure. It is live data delivered over our own infrastructure. AI does not and cannot replicate or replace this. If anything, it creates more demand for this data. On the right, you can see the demand for our Tick History data, an evolving data set currently spanning 100 million instruments over 30 years. It's proprietary data that links today's price moves with those of the past. This is a critical point that people often don't get. This data is valuable because it ties 30 years of market moves to the present day. And with hundreds of billions of new data points added each day, without constant updating, this Tick History becomes less and less useful. We have the past, and we have the present. That is what creates the value. No one else has the past like us, and we are the leading provider of the present. Customers find this combination highly valuable with over 5 million customer requests a month. I'll say it again, AI does not and cannot replicate or replace this. It will just drive more demand, customer demand for data that is accurate, up-to-date and comprehensive, verified and auditable is significant. That is where LSEG sets the standard. And by making it easier for customers to access and consume this data through new cloud distribution channels or AI partnerships, we're likely to sell much more of it. And we are only at the beginning of that journey. Increasingly, customers want to use our data in AI applications, opening up a new distribution channel. We're embracing that through our LSEG Everywhere strategy, delivering AI-ready data to any environment in which our customers want to work. Since we last showed you this slide, we've added a new partnership with OpenAI, becoming the first financial data provider to enable customers to access their data through ChatGPT. You should expect us to enter into further partnerships in 2026 and beyond where there is customer demand and strategic logic. These channels have only recently become available, and we are seeing very strong customer interest and engagement. Over 60 financial institutions have connected to our MCP servers directly or via one of our AI partners, connecting hundreds of users. And we have a strong pipeline of customers awaiting connection. Many of these users are new users at existing customers, by which I mean the bank or asset manager already had an LSEG data license, but these particular teams or individuals were not users of our data, proof that our AI partnerships are increasing reach within existing customers. Our AI partnerships are also expanding our distribution footprint, attracting new customers through the accessibility and ease of natural language. Already hundreds of prospective customers have attempted to access our data via our AI partners. Since no one can access our data without an LSEG license, this is creating valuable sales leads. Once connected, customers are engaging with our data and content on an ongoing basis, driving rapid growth in data consumption through our AI partnerships. This is a great start to what we expect to be an important distribution channel for our data and also a natural mechanism for cross-selling. As we make more of our data available via MCP, the user, whether that is a human, a model or an agent, will naturally discover the full breadth and depth of our data across Data & Analytics, Markets, FTSE Russell and Risk Intelligence. We're moving quickly down this path, investing in our AI-ready data and making more of it available through MCP connectors and multi-cloud environments. We have a large pipeline of data coming to MCP, as you can see on the left. We're also supporting customers in their migration to cloud-based alternatives, and that is driving meaningful new sales and displacements. Platforms like Databricks and Snowflake are helping us close big new contracts and drive increased sales of some of our most popular products like DataScope. And we keep investing in expanding the data we offer, whether that's in low latency feeds, ETF data or private markets. Turning to the second pillar of our AI strategy, transformative products. The success of the migration to Workspace means our customers are now in a modern, modular, customizable platform where we enhance functionality week in and week out. That gives us a strong foundation from which to launch transformative AI-enabled products that bring speed, accuracy and conviction to customers' workflows. As a reminder, 70% of Workflows revenue comes from trader licenses and activity. These users, humans today, maybe agents tomorrow, need real-time data, a network community and integration with a range of pre- and post-trade tools. This is regulated workflow with transactional features embedded. And to address a question that comes up from time to time, what if the number of human traders is significantly reduced by AI, could that hurt our Workflows business? We don't see that happening. But also remember that over many years, our Workflows business has been moving away from a per seat model towards one focused more on data consumption or enterprise agreements. And also if the scenario is that human traders are replaced by AI agents, then each agent will effectively be a licensed LSEG customer. In an AI world of agent-driven workflows, we will have more users consuming more data. Workspace is getting better and better with hundreds of updates every year. To name a few recent enhancements, we extended trading capabilities through the expansion of Advanced Dealing. We streamlined banker workflows with the integration of DealWatch. And we enhanced our leadership in news with a dedicated app for Wall Street Journal and Dow Jones News. This is driving real, measurable improvements in engagement. As you can see on the right-hand side, investment management and trading users are accessing roughly 25% more applications than a year ago. Let's turn now to the Microsoft partnership. We made a lot of progress in 2025, and that pace of delivery continues to accelerate. On Workflows, to continue from the previous slide, our Teams-based collaboration tool, Open Directory, is live with accounts across 3 customer communities: FX, commodities and execution. And we have more than 50 accounts in our onboarding pipeline. We're also piloting natural language functionality in Workspace interoperable with Teams and other Microsoft products. And Workspace Deep Research provides extensive AI-driven research and analysis, leveraging the full power of Workspace data. We expect to roll out both AI tools in the first half. In Analytics, we've seen great traction and revenue growth since launching the API with over 50 customers adopting the platform. And just a few days ago, we launched Model-as-a-Service with Societe Generale as the launch partner distributing its own models through our API. We're seeing great progress in Data-as-a-Service or DaaS. We are accelerating the migration of data into the new integrated architecture and expect to have almost all data sets onboarded by the end of the year. This is increasing our speed to market for new products and driving significant customer demand to access these data sets, whether via Fabric or other platforms like Snowflake and Databricks. And last point, we have launched our Digital Markets Infrastructure powered by Microsoft Azure, another growth opportunity as tokenization takes off. Turning now to the final pillar of our AI strategy, deploying AI across our own business, accelerating innovation and improving customer outcomes. I've mentioned before that we are resolving customer queries much more quickly and efficiently through our adoption of an AI-powered question-and-answer application. In December, we made that tool available directly to customers and has had significant traction already, and it will only get better. Adoption of AI-powered workflows is also driving improvements in efficiency, quality and timeliness of data ingestion. We spoke about this at November's Innovation Forum, 9x faster content extraction, 52% reduction in data quality issues and 11% increase in productivity of our engineering teams. This all contributes to the ongoing margin expansion that MAP highlighted earlier. I'm going to turn now to our Markets businesses. You've heard me say this before, but the whole premise of LSEG is this. In financial markets, data has become infrastructure. Access to data is just as essential as access to trading infrastructure. That's why these businesses belong together. Electronification of markets, growth in data-driven decision-making and more sophisticated risk management are all blurring the lines between markets and data activities, deepening their interdependency. This is driving multiyear structural growth in our transactional businesses, delivering a 5-year CAGR of over 13%. The Markets business delivered further strong growth in 2025 with double-digit growth in clearing revenues across interest rate swaps, FX, CDS and repos. Tradeweb also extended its leadership in trading of interest rate swaps, increasing its share by 180 basis points. Our FX venues saw their strongest volumes ever. There's sometimes a misconception that growth across our Markets platforms just happens. Nothing could be further from the truth. The growth we're delivering today is the result of innovation and customer partnership going back years, often decades. We build solutions that solve customer pain points and meet their critical needs, and we become deeply embedded in their core businesses. In that vein of innovation and customer partnership, we're innovating rapidly in digital markets, building the transaction and settlement infrastructure our customers will need as they increasingly adopt digital assets and tokenize traditional asset classes. As you can see in the lower right quadrant of the slide, we are doing a lot in this space. But it is a big topic, so we will tell you more about it later in the year. Another good example of our innovation and partnership in Markets is our success in the clearing of OTC products. The growth in this business over the last 15 years is extraordinary, a threefold increase in member banks, a 200-fold increase in clients and tenfold growth in notional value cleared each year to roughly $2,000 trillion. We have become the global clearing destination of choice for interest rate swaps, FX and CDS. Now in partnership with 11 global banks, we're going after the opportunity in uncleared derivatives, which is roughly the same size as the cleared space. Our members and clients want to manage their whole book in one place, bringing efficiency to their capital and margin requirements and materially simplifying and standardizing processes. We are uniquely placed to do that given the assets we have built and brought together under one roof, and we're entering 2026 with really good momentum. Revenue in Post Trade Solutions is growing double digits, we're adding new customers and the network is expanding. We're driving strong growth and building platforms for the future across our business. We've also integrated our products and platforms for our customers' benefit. This dynamic exists clearly in our data flywheel. The data we generate from our own markets infrastructure feeds into our D&A business. helping customers make better informed decisions when they trade, therefore, creating more data. Second, Workspace is becoming the fully integrated workflow through which customers can access many of our services, not only for all D&A data but now also for FTSE Russell tools, FX trading, LCH data and, in the next few months, Tradeweb. And we've established a powerful end-to-end ecosystem in FX, providing a front end in Workspace linking to the execution venues and straight through to our clearing business with FX hedging capability for Tradeweb and our data and benchmarking content adding incremental value along that trade life cycle. We have similar connectivity in swaps given the customer trust in the Tradeweb and SwapClear franchises. I spoke earlier about the strong demand we've seen for our multiyear data access arrangements. Those integrate services from across our business, from Data & Feeds, Workflows, FTSE Russell, Risk Intelligence and Analytics. And they demonstrate the competitive advantage provided by our full-service business model. As we've said before, big, sophisticated institutions want to do more with fewer partners. You can see that in the success of our LDA agreements. Through our unique model, we've positioned our business to have deep moats and highly recurring revenues in areas of growth. Our diversification across products, customers and geographies gives our business model an attractive combination of growth and stability that performs well in environments like this. Despite big swings in capital markets and the global economy in 2025, we continue to deliver strong and consistent growth, and we expect more of the same in 2026. So to wrap up, we have achieved another year of very strong financial performance, driving continued top line growth through significant investment in our products and a consistent focus on partnership with our customers. LSEG Everywhere and other innovations like Open Directory, Post Trade Solutions and our Digital Settlement House are establishing platforms for future growth. Through the transformation of our systems and the use of AI and other technologies across LSEG, we continue to deliver material operating leverage. And we are allocating capital in a thoughtful way to grow the business, drive innovation and return surplus capital to shareholders. We're very excited about the opportunities ahead of us. With our leading trusted data, ongoing investment in product and the strength of our customer relationships, we are very well positioned for continued growth. And with that, I'll pass to Peregrine for Q&A. Peregrine Riviere: Thank you, David. Before we start the Q&A, can I please ask you to restrict yourself to one question. We plan to wrap up at about 11:30. Hopefully, we'll get through them all. But if we don't, please follow up directly with me or Chris later today. Thanks. Operator: [Operator Instructions] And your first question comes from the line of Tom Mills from Jefferies. Thomas Mills: Thanks for the helpful new disclosures, and that's my question. At a recent conference, the CEO of S&P said of the AI LLM platform, I'd say that our clients are getting additional value by being able to use our data in more ways, more ways they use it, the more value it creates and the better opportunity for value-based conversation at renewal. And we talk to those customers. We've also seen really nice uptick in demand for add-ons and that's something that's helped with net new revenue. I think that ties in well with the content you provided on Slides 31, 32. But I'd be curious to hear, you touched on the point about improving the opportunity for value-based discussions at renewal. And any uptick in demand for add-ons that you're seeing via the partnership so far? David Schwimmer: Sure, Tom. Thanks. So for now, as you would expect, we are focused on adoption and just seeing the customers sign up and get access to this and seeing the usage grow. And that, as we mentioned on that Page 31, is growing very quickly, and we're really seeing a pretty significant and intense engagement there and, frankly, kind of day by day. So I think, over time, the really significant opportunity here is in the context of consumption-based pricing and really charging the customers over time for usage. And for now, we're continuing to focus on our, I'll say, traditional subscription model. But as we move over the course of the next year plus to more of a hybrid model, which is keeping the subscription, we think the subscription model is very attractive and very important, but incorporating into that the consumption-based pricing as well, that will be a very attractive way of capturing that kind of dynamic. And I mentioned this earlier in my prepared remarks, but the fact that you have a combination of humans, models and agents consuming this data, it's, I think, pretty intuitive for you all to recognize that when an agent or a model is consuming the data, they tend to consume a lot more of that data than a human might. And we've said in the past that humans barely scratch the surface of the amount of data that we have. So that's another angle here just in terms of as usage shifts to more AI-driven consumption, as we shift our model to more consumption-based pricing, we see that as a very, very attractive trajectory. Maybe actually just... Peregrine Riviere: Sorry, hold on a second. David Schwimmer: Just one other point I want to add, and I touched on this earlier, but I think it also answers your question, kind of captures this dynamic, which is I've described the AI models combined with the MCP server as a very effective cross-selling machine. And the model is not asking for data from a particular data set. The model is asking for answers to a question. And if that question can be answered by extracting data from multiple different data sets that we are making available through the MCP server, that is a great angle as well just for additional access, additional sales of additional data sets that the customer might not have originally known that we even had. So that's another aspect of this. Now on to the next question. Thank you. Operator: And your next question comes from the line of Hubert Lam of Bank of America. Hubert Lam: I just got one of them. So how should we think about pricing and ability to keep your customers? Will we expect more competition in the future from MCP? I assume MCP makes it easier for users to switch between different data providers. So would it be harder to raise pricing in the future? And would there be more risk on bundling data contracts now that users have more choice, more flexibility as to who they want to consume with? David Schwimmer: Hubert, so we see a very consistent pricing environment this year relative to last year. And I think it's about the quality of the data. If you think about the new AI channels and MCP as just another way of accessing the data, that's great for us. That doesn't mean that it is an environment where we're seeing incremental pressure on the pricing. The quality of the data remains the same. The, in some cases, proprietary nature of the data means that no one else has access to it. And so we see this as a way of accessing more users within existing customers and accessing new customers as well. And as I mentioned, from a pricing perspective, we're seeing a very consistent dynamic this year as we have seen last year and the year before. Operator: And your next question comes from the line of Arnaud Giblat of BNP Paribas. Arnaud Giblat: So my question is on capital returns. So you've announced a GBP 3 billion buyback. That pushes up your leverage ratio perhaps towards the end of the year towards 2.0x, 2.1x net debt to EBITDA. So how should we read into this? Are you still -- I suppose you are leaving yourself the opportunity to step in and do further bolt-on acquisitions. My question is just how are you seeing any potential dislocation in valuations in private markets? We've seen some significant shifts in public markets with data and software companies coming up quite a lot. Are we seeing the same thing in private markets? And perhaps does that create opportunities for you to step in, in the near term and add some more content inorganically to your platform? David Schwimmer: Thanks, Arnaud. Maybe MAP will touch on the first part of your question. I'm happy to take the second part. Michel-Alain Proch: Yes, sure. On the buyback, you're absolutely right. We have coined GBP 3 billion in order to do two things. First, having a true increase into the return to our shareholders on the basis of the inherent value that we see in our share. Remember, 2 years ago, we did GBP 1 billion; 2025, GBP 2.1 billion. And here, we're talking about GBP 3 billion. And by doing this GBP 3 billion, and you've made the calculation right, taking into account the dividend and the second part of the Post Trade Solutions, okay, altogether, this will bring us to 2x net debt-to-EBITDA by the end of 2026, so which will allow us to keep firepower for M&A that fit in terms of strategic alignment, obviously, and value. David Schwimmer: And Arnaud, to your question about sort of the state of the markets. Yes, there's obviously been some dislocation. There's clearly some stress amongst some of the private equity holders out there. And you should expect us to always be evaluating opportunities. And nothing to talk about near term, but as MAP mentioned, we are always evaluating opportunities that could make sense in terms of our both strategic fit and then attractive financial returns. And I think the buyback balances that appropriately in terms of an appropriate return to our shareholders while landing at that 2x net debt to EBITDA and maintaining the right kind of flexibility going forward. Operator: [Operator Instructions] And your next question comes from the line of Enrico Bolzoni of JPMorgan. Enrico Bolzoni: I had one on EBITDA margin, please. So it looks like you're clearly doing more than what you initially thought. I remember from calls 1 year ago or so saying that, at some point, EBITDA margin would reach a ceiling because, clearly, there's a need to reinvest in the business. And here we are with a new set of targets that actually guides us towards further improvement. So I was keen to hear your thoughts on whether you think this is just driven by the operating leverage and revenue accelerating, or you found more ways to cut cost. And perhaps, does this new target include any meaningful benefit from the deployment of AI within the organization? David Schwimmer: Thanks, Enrico. I don't think we've ever said that we were planning to hit a ceiling, but I'll let MAP address that. Michel-Alain Proch: No, no, but I understand what Enrico is saying. So just a reminder for everybody, we committed ourselves in November 2023 of an increase of margin of 250 bps. 2026 is the third year of this plan. We are delivering the 250 bps. And on top of that, we have 130 coming from our Post Trade Solutions. So 380 that we will have delivered for the period '24 to '26. Now what we've said is, going forward, because there was some question about what about after '26, that going forward, due to the operating leverage that the group has, I mean, building once and distributing many, obviously, this operating leverage, we can crystallize it into the margin or having a balance between the margin and reinvesting into future growth. And what you see, Enrico, is 150 bps by 2029 is exactly that. It's the balance between operational efficiencies that we are harvesting, our natural operating leverage, so plus-plus, okay, and the investment we make into talent and technology for future growth. And to answer the second part of your question, the answer is yes, you're right. We will crystallize in this 150 bps, you have indeed the financial consequences of what we do with AI within the company, particularly on our backbone and our -- and the ingestion of data. Operator: Your next question comes from the line of Andrew Lowe of Citi. Andrew Lowe: I have one on Tradeweb, please. Would you be willing to give an indication of how much the Tradeweb-generated data sets account for your Data & Feeds revenues? And then whether any of those data sets are exclusively distributed by LSE? David Schwimmer: Andrew, I don't think we have broken out and I don't think we intend to break out the amount of the Data & Feeds revenue that comes from Tradeweb. I can tell you that some of it is exclusive and some of it is nonexclusive. But I would also mention that, that is one of several different areas across the group, where we have very strong linkages between Tradeweb and the rest of LSEG. We've talked in the past about the benefits both to Tradeweb and to FTSE Russell from the usage in FTSE Russell indices of Tradeweb pricing, and that flows both ways. We've used -- I'm not sure we've talked about this in the past, but Tradeweb has benefited from some of our middle and back office functionality in India and in other places. We, of course, have the straight-through processing, if you will, from the Tradeweb swap execution facility into SwapClear. We've got the FX execution into Tradeweb. So a number of different areas. And then maybe the last thing I should just touch on is that over the course of the next few months, we will be plugging Tradeweb access into Workspace, which is yet another significant opportunity that should be particularly attractive for Tradeweb users. Operator: Your next question comes from the line of Ben Bathurst of RBC Capital Markets. Benjamin Bathurst: My question is on the new medium-term guidance where you're pointing to subscription business acceleration, which I think is like perimeter change versus the D&A revenue growth acceleration you've previously called out and are, in fact, restating again for FY '26. I just wondered, could you elaborate a bit on the decision to make that change and perhaps make a comment on expectations for D&A growth contribution to that total subscription business acceleration you're talking about? Michel-Alain Proch: Sure. So I mean, the reason why we're looking at the subscription business altogether is mainly for 2 main reasons. The first one is it's the same subscription model, okay, which are governing the 3 divisions. And the second, as it was presented in the slide, they are more and more intertwined. And we have true synergies in between the 3. LDA that David was mentioning at the beginning of the call is the obvious example. So now on the medium-term guidance and for the subscription business, I hope you got it from my remarks. What we expect in there is we posted 6% in '25, circa 6.5% in '26, going to 7% in 2027. And on this, obviously, D&A will be accelerating, too. I mean, just to be clear, due to the size of it, it's the main lever for this acceleration, for sure. And if I may just add one more thing, which is you see this slide, I don't remember it was 31 or 32, with this adoption of MCP. So you see that it's extremely strong and we are concentrating of usage. So for sure, AI can be an accelerator of this trajectory that I just mentioned. You see what I mean. But I mean, it is still the early days. We just switched on the MCP just before Christmas. So you see it's not a long time ago. So it's a bit early to size it. But for sure, it's in the plus category, if you want. Operator: Your next question comes from the line of Julian Dobtovolschi of ABN AMRO. Julian Dobrovolschi: You've mentioned that a large portion of your data sets are already available now via the LLMs such as Anthropic, Databricks and OpenAI and a bunch of others. I was just curious to know, what percentage of LSEG's total data universe will ultimately be available through the AI-native channels? And if there is a view to keep some of this fully in-house for various reasons? David Schwimmer: So I would expect that we are going to be making, and we've got a slide in here that touches on this, I would expect that we're going to be making as much of our data as possible available through these distribution channels and through MCP. And just to be really clear, the implication of your question is that we might keep some away to somehow protect it. But again, to be really clear, providing access to a model through MCP does not mean that the model then can get that data and never need it again. And so we can provide access through to MCP to a model and continue to protect and maintain the value and the integrity and the proprietary nature of that data. This seems to be kind of a common misunderstanding that people have. So we view this as a great channel to distribute our data, whether that's proprietary data, whether that's a linkage of multiple different data sets. And the fact that we are making it available through MCP, think of it as a very structured, disciplined gateway, and we can actually put our usage meter on top of that as well. So again, I understand your question, but I just want to make sure that I'm clarifying. There should be no misinterpretation of making data available to a model through MCP as somehow vitiating the value of that data or the proprietary nature of that data. Operator: Your next question comes from the line of Benjamin Goy of Deutsche Bank. Benjamin Goy: One question, please, on your LSEG data access agreements. You mentioned almost GBP 2 billion signed in Q4. But can you give a bit more qualitative color on these agreements, whether it was Q4 or more recently signed? Do you see any change in customer dynamics? Do you see put options or breakup clauses in those contracts now or basically same contracts as you had a year or 2 years ago? David Schwimmer: Yes. No sort of structural changes in these. We've talked in the past about how they can take a couple of years to put in place because of the way that we and our customers set them up. It takes some real top-down focus in organization and coordination and planning. But no, we view this as an increasing recognition by our big important customers of the value of the integrated offering that we are providing. They do have a line of sight not only into what we are providing today, but what we are building for them in the next couple of months and in the next couple of years. They are multiyear in nature. And I believe the ones that we have announced most recently tend to be out to 7 years. They all have extensions built into them as well. So I think it's just what you see is what you're getting here in terms of our customers really understanding the quality of our offerings and wanting to commit to that for many, many years to come. And I think just it's worth reiterating this. I understand some people might have had a little trouble hearing at the very beginning of the call. We have the most sophisticated financial institutions on the planet who have very rigorous risk management processes, very rigorous analysis of what their technology needs are, very clear understanding of their requirements. And they, after extensive work -- and I said, in some cases, these take up to 2 years. After extensive work, they are making decisions to, I used this phrase earlier, they're voting with their wallets to commit to consuming our data through our channels for the next, in many cases, up to 7 years. And so we think that is a pretty clear indication that these highly sophisticated institutions recognize the value of the content, the data, the workflow that we provide and recognize that, that is increasing in an AI world as opposed to decreasing. Operator: Your next question is from the line of Oliver Carruthers of Goldman Sachs. Oliver Carruthers: Oliver Carruthers from Goldman Sachs. Thanks for the very detailed presentation and the incremental disclosure. Very helpful. I think Slide 31 is really interesting around the growth in customers you're highlighting. In terms of those customers connecting to your MCP server, so that 67 number, I appreciate it's moving a lot, but can you give us a flavor of the types of institutions, investment banks, hedge funds, asset managers, who is using this? And any steer on the use cases would be really, really helpful. David Schwimmer: Sure. So it's lots of different kinds of institutions. Typically, we see smaller institutions moving more quickly. But in this case, we're seeing smaller institutions and large institutions. I'll give you one example. There's one very large institution that is using this service to evaluate, I'm not going to go into specific names, but to evaluate one AI functionality against another AI functionality. And the constant they are using is our data because they know the quality of our data and they know what to expect from us. So they are using us as the baseline and they are using that to make a decision as to which of the AI distribution channels they want to actually use. But that's just one example. And Oliver, as you mentioned, this is changing literally day by day. And we're kind of getting a running commentary from the team on how this is growing and how we're seeing increasing and expanding desire to access through this as well as incremental sales leads. Oliver Carruthers: As a very quick follow-up. You still own these customer relationships, even when it's not your own MCP, but even when it's a third party? This is a query tool they come to you, but you still own these customer relationships. Is that the correct way to think about it? David Schwimmer: Yes, it is. Thank you for asking that question. Let me be really, really clear about this. The way this works is that if you have a license with LSEG, you can then turn on access to LSEG via, for example, Claude or via ChatGPT. There's a little connector button when you pull up a certain window in these. And you have to flick that on to get access to LSEG data. You can only do that if you have a license with LSEG directly. And therefore, we maintain the ownership of the customer relationship we're contracting with the customers. Now when we talk on that Page 31 about over 300 prospective users, what we mean by that is that there are a number of prospective users who are using these channels to try to get access to our data. They're effectively knocking on our door through MCP. And they don't have an existing license. But the way this is designed is that we are informed of their interest. And so it's a great origination channel, it's a great sales channel for us. We then take those leads. Our sales team directly receives those leads and we follow up with those customers. Does that help? Oliver Carruthers: Yes. Very helpful. Operator: Your next question is from the line of Marina Massuti of Morgan Stanley. Marina Massuti: I have a question on the AI adoption given some of your peers have given numbers around the efficiency opportunity from internal AI implementation. Can you also provide a bit more color or be a bit more specific on how much of the current and future AI deployments contributes towards the 150 basis points margin expansion targeted in the medium-term guidance? David Schwimmer: Yes. Thanks, Marina. So we haven't put any specific guidance out there in terms of the efficiencies that we're seeing from AI. I did mention in my remarks, and on Page 36 you can see some of the stats, we are seeing meaningful improvement in productivity, in efficiency. We're seeing this in customer service. And then we are also seeing improved efficiency in terms of our engineers and our software development. We've seen up to this point, and this number is going up pretty regularly, but we've seen at this point, I think I can comfortably say, 11% efficiency in our engineers. So I would bake that into the numbers that MAP was referring to earlier in terms of continuing margin improvement in the business. But we haven't given anything specific around that. Operator: Your next question is from the line of Michael Werner of UBS. Michael Werner: Thank you for the long-term targets in particular. A question on LDAs. I was just wondering with regards to, a, the step-ups that you mentioned in terms of pricing, are they contingent upon certain deliverables? And ultimately, are these step-ups typically higher than what you see in kind of the base rate? And then also, how does MCP servers fit into those enterprise agreements? Is that already included? Or is that potential upside from a revenue generation or a client wallet share perspective going forward? David Schwimmer: Thanks, Michael. So every LDA is a little bit different. And some of the step-ups are a little bit higher than what the regular price rises would be. Some of the step-ups might be a little bit lower. They are all typically in the same general range unless there are, for example, commitments that we have made to add a specific new product or new capability. Or sometimes in these LDAs, the customer may be locked into another competitor product for a year or 2, and it takes them a year or 2 to get out of those and migrate on to ours. And there may be a step-up associated with that kind of migration. So everyone is a little bit different, but that gives you a sense of some of the different variables. To your second question, there is a defined perimeter around the LDA agreements in terms of effectively focusing on existing product, and it's well defined perimeter. And in the context of these MCP capabilities and this distribution and AI model consumption, that is, I think I can say with certainly, not included in the data access agreements that we have struck at this point. Michel-Alain Proch: Yes, yes. For none of them. David Schwimmer: Yes. So that is all incremental usage that's coming through these channels, that is upside. Operator: And this concludes questions on the conference line. I will now hand the presentation back to David Schwimmer, Chief Executive Officer, for closing remarks. David Schwimmer: Well, thank you all for your questions. Thanks for spending time with us this morning. I know it's a little bit longer than usual in terms of the presentation. We did feel there was a lot to get through. And to the extent you have any additional questions, please do not hesitate to get in touch with Peregrine or Chris. Thanks again.
Natalie Davis: Good morning, and welcome to Ramsay Healthcare's financial results for the 6 months to 31st of December 2025. My name is Natalie Davis, and I'm joined today by Anthony Neilson, our Group CFO, who commenced with Ramsay in late November. After 12 months in the role, I'm pleased to report that we're making good progress on our key priorities. The refresh of our group executive is now complete, strengthening capability and supporting the acceleration of our multiyear transformation program. We remain focused on delivery against the 3 priorities I first outlined this time last year that are shown on Slide 3. First, disciplined execution of the transformation of our market-leading Australian hospital business. In the half, we've improved patients, people and doctor NPS, grown admissions with a focus on higher acuity and have lifted our theater utilization. Our second priority is strengthening capital allocation and improving returns across the portfolio. You will have seen last week's announcement regarding the proposed distribution of Ramsay's investment in Ramsay Sante to Ramsay shareholders. Subject to obtaining the relevant approvals, we believe this will simplify the group and enable focus on the transformation of the core Australian hospital business. We have also progressed the turnaround of Elysium by rightsizing the business for the current environment through site closures and reducing available beds. With Joe O'Connor joining as CEO in January, we expect the turnaround to continue to gain traction. Our third priority is evolving our culture to innovate and accelerate delivery. I'm pleased to say that our group leadership team is in place, strengthening capability and our patient and people NPS scores remain high across the group, reflecting the commitment of our teams and clinicians and the quality of the care we provide. Turning to the half year results on Slide 5. We reported 7.3% growth in underlying EBIT and 8.1% growth in underlying NPAT and that was driven by Australia. The Board has determined a fully franked dividend of $0.425 per share, up 6.3% and representing a 60% payout ratio of underlying earnings. Slide 6 shows the underlying performance across each region and the contribution to the funding group and the consolidated group results. Australia was the key driver, reporting underlying EBIT growth of 7.1%, supported by good activity growth, higher acuity, improved PHI indexation and cost management, which together helped offset the impact of the new funding mechanism at Joondalup Health Campus. The team at Joondalup have progressed a range of operational programs, including a focus on reducing agency usage, which has also helped to partially mitigate this impact. A lower underlying net loss from Ramsay Sante supported the results, reflecting growth in Sweden and performance actions in France that partially offset the government funding pressures in that market. Turning to the performance of each region and starting with Australia. Slide 8 lays out our 2030 strategy, where our vision is to innovate to be Australia's most trusted leading health care provider and to deliver long-term value for our shareholders through the 5 pillars of our strategy. Our strategy will innovate Ramsay. We will lead in local catchments, growing our services, patient care and relationships with specialists and GPs in communities around our strategically located hospitals; differentiate ourselves in priority therapeutic areas, including cardiology, orthopedics and cancer care; create One Ramsay advantages powered by digital and AI to capture the synergies enabled by our market-leading scale; connect patient and doctor journeys from hospital care to community-based care and work with our communities and partners to shape Australia's leading health care system for the future. We will measure progress with clear financial and nonfinancial metrics and early indicators include our patient, doctor and people NPS metrics, growth in admissions, cost efficiencies through One Ramsay advantages and revenue indexation that better matches cumulative cost growth. Turning to Slide 9 and through all the change underway, it's important to reinforce that our patients, people and clinical excellence remain at the heart of what we do and how we operate. We've leveraged Ramsay's strong reputation in clinical trials to launch a national Ramsay research and development network, supporting 23% growth in clinical trials activity in the first half. Growth in admitting VMOs and strong theater utilization contributed to good activity and market share gains. The changing environment in the delivery of private health care is creating opportunities for us given our strong and stable reputation and portfolio of strategically located and owned facilities. The proposed acquisition of National Capital Private Hospital is a clear example of this, delivering us access to an attractive catchment area where we're not currently represented and a hospital with a strong reputation for clinical excellence. Our focus on utilization across catchment areas has also seen some development projects postponed or reshaped with development spend now expected to be below the bottom end of the guidance range. We continue to drive cost efficiencies and maintain capital discipline through our Big 5 hospital initiatives, supported by pilot programs across the business. Following last year's review, digital and data OpEx remains on track to be at or below FY '25 spend. Turning to the Australian results on Slide 10. The business delivered top line and profit growth despite the impact of the new funding mechanism at Joondalup. Revenue from customers increased 8.2%, driven by a 3.1% increase in hospital admissions and improved indexation. Revenue from our private hospital portfolio grew 8.7%. EBIT margins, excluding Joondalup, improved by 40 basis points on the prior period, driven by higher activity levels and case acuity, increased theater utilization and improved PHI indexation relative to wage inflation. Looking at activity in more detail on Slide 11. Our core surgical admissions grew 5.7% with day admissions growing more strongly than overnight admissions. However, a higher acuity mix resulted in inpatient IPDAs increasing at a faster rate than inpatient admissions. We remain disciplined with our CapEx spend in Australia, where it's focused on projects with good returns and strategic value. On Slide 12, the major development projects in the half were the completion of Ramsay Private at Joondalup campus and the final phase of the expansion of Warringal in Melbourne due to be completed in the second quarter of financial year '27. We have 23 new theaters and procedure rooms scheduled to open in financial year '26, concentrated in major hospitals in key catchment areas. Development CapEx for the full year is now expected to be in the range of $170 million to $190 million, below our previously guided range, reflecting our disciplined approach to utilization and capital allocation. Turning to the outlook for Australia on Slide 13. In the second half, we'll continue to advance our multiyear transformation program in Australia. We aim to finalize negotiations on the Victorian and Queensland nurse EBAs by the end of this financial year. We will continue to work with our payers to recover both the gap created by cumulative revenue indexation below cost indexation and future wage inflation as well as innovating our funding to better support innovation in care models. We have one major PHI contract renewal due in the second half. We expect EBIT growth momentum in Australia to continue in the second half, driven by growth in activity in our priority therapeutic areas, revenue indexation, cost focus and partial mitigation of the impact of the new funding mechanism at Joondalup. We will continue to progress the proposed acquisition of National Capital Hospital, which is expected to transition into the Ramsay portfolio in the first quarter of financial year '27 and be EPS accretive in the first 12 months of ownership. Turning to the U.K. region on Slide 14. Both businesses operating in challenging conditions. The U.K. acute hospital business was impacted by NHS budgetary restrictions towards the end of the period. This was mitigated by a focus on high acuity and private work as well as operational initiatives. Elysium continues to face weak market demand from local authorities. The turnaround plan is underway and beginning to gain traction, including central cost reduction, agency reductions, site optimization and fee negotiation. Turning to the acute hospital business results on Slide 15. The business delivered 3.5% revenue growth in constant currency, driven by a higher acuity case mix, increased private pay admissions and tariff indexation. NHS admissions slowed and declined in quarter 2 as NHS budgetary constraints began to impact activity. Our continued focus on managing complexity and consistent operational excellence helped to mitigate the impact of lower NHS volumes. The result included backdated indexation. Excluding this impact, underlying EBIT margins improved 30 basis points to 9.3%. Turning to the outlook for the acute business on Slide 16. NHS activity outlook for the third quarter financial year '26 is expected to remain negative compared to the prior period. The U.K. hospital business will continue to focus on growing private volumes and driving operational excellence to help offset the NHS funding uncertainty, which we expect to prevail until the new NHS fiscal year. As the leading private provider to the NHS, Ramsay U.K. remains well positioned to support the U.K. government's objective to reduce elective surgery, outpatient and diagnostic waitlist when additional funding is anticipated to be made available in the new NHS fiscal year from the 1st of April with a strong pipeline of patients through its outpatient clinics. On Slide 17, Elysium has remained focused on its turnaround program informed by the recommendations of the performance diagnostic completed in the second half of financial year '25. Key priorities include site optimization, cost reduction and fee negotiation that better reflects the complexity of services we provide. This resulted in the closure of 163 beds at underperforming sites in the first half with 5 sites expected to be closed in the second half. A number of these properties have been put to market for sale. Turning to the outlook on Slide 18. Elysium's new CEO, Joe O'Connor, commenced in January and is leading the performance improvement plan. We expect the ongoing focus on the plan and the initiatives already taken in 2025 will see the turnaround continue to gain traction. Turning to Ramsay Sante on Slide 19. As announced last week, we are progressing the proposed demerger of Ramsay Sante via an in-specie distribution of our 52.8% investment to Ramsay shareholders. While this process continues, we remain focused on the performance improvement programs across the European business and particularly in France, which continues to face funding headwinds and broader market uncertainty. In the Nordics, the focus remains on continuing the performance momentum of the Swedish business and the turnaround programs in Denmark and Norway. Turning to Ramsay Sante's results on Slide 20 and the business delivered a 4.4% increase in underlying EBIT in constant currency, driven by a strong result from the Nordics region, in particular, the performance in Sweden. This was partially offset by weaker results in France, where the reduction in subsidies of EUR 20 million compared to the prior period and the inadequacy of tariff indexation continue to pressure earnings. Turning to the outlook for Ramsay Sante on Slide 21. Across Europe, the focus remains on cost control, efficiency and cash generation as well as continuing the performance momentum of the Swedish business. Activity growth in Europe is expected to continue in the second half, driven by day admissions, partially offset by the impact of a 3-day French doctor strike in January. The new contract at St. Goran commenced 5th of January 2026 for 8 plus 4 additional years on improved terms, which will assist the Nordics results. As outlined in detail in last week's announcement on Slide 22, we believe that the proposed demerger of Ramsay Sante through in-specie distribution will simplify Ramsay and enable both organizations to focus on transforming their respective businesses. We will update the market as we work towards the release of the demerger booklet and subject to receiving necessary approvals, currently expect to complete the in-specie distribution in December 2026. I'll now hand you over to Anthony to run through the financials in more detail. Anthony Neilson: Thanks, Natalie. Good morning, everyone. Natalie has already covered much of Slide 24. So I'll just highlight a few points, noting currency translation has impacted some of the movements on the P&L and balance sheet for this half. In this result, we have focused on underlying numbers given the large nonrecurring items in the U.K. region and Ramsay Sante in the first half of last year. Items excluded from underlying profit this half were $11 million negative impact on net profit and primarily relates to transaction and restructuring costs. There is a detailed reconciliation shown in the appendix. Underlying NPAT showed strong growth for the half of 8.1%, driven by activity growth across Australia and Europe, combined with higher acuity across Australia and U.K. and revenue indexation in Australia. There continues to be a focus on operational efficiencies across all regions to mitigate cost pressures. The underlying NPAT tax rate was 36%, slightly higher than last year. This reflects the impact of CVAE taxes in France, which calculated on turnover despite France being in a pretax loss position in the first half. The full year tax rate is forecast to be approximately 35%, reflecting a higher rate in Ramsay Sante. Operating cash flow on Slide 25 improved 16.9% to $350 million for the period, driven by the performance of Australia and lower tax paid than the previous corresponding period, which included the sale of Ramsay Sime Darby. Improving our cash conversion is one of our key priorities in all regions and we are all investing in systems and processes to strengthen cash collection and drive cost out and efficiency programs across all businesses. CapEx cash outflow increased from prior period, mainly due to development projects in Australia. I will touch on CapEx in more detail on Slide 31. Dividends paid increased 20%, reflecting the suspension of the dividend reinvestment plan for fiscal year '25 final dividend. Turning to Slide 26. Currency translation had a significant impact on the face of the balance sheet for this period to the tune of $84 million. Movements in working capital primarily related to Ramsay Sante and the timing of periodic true-up payments with the French government with advances repaid, reducing payables. Consolidated net debt is $5.1 billion and I'll show a separate breakdown between the funding group and Ramsay Sante on the coming slides. 67% of the consolidated group's floating rate debt in the second half of this fiscal year '26 is hedged at an average base rate of 3%. We have provided both the funding group and Ramsay Sante summary balance sheets in the appendix, so you can see the group results, excluding Sante. Turning to the Funding Group performance on Slide 27. Underlying NPAT grew 5%, which was driven by good growth in Australia, partly offset by a lower contribution from the U.K. U.K. margins were impacted by higher costs and lower occupancy at Elysium. Elysium cost efficiency initiatives began to gain momentum late in the half with continued focus on these initiatives in the second half. Total financing costs, including lease costs, increased 1.3% in constant currency due to higher average base rates and a small increase in drawn debt during the half. Moving to the Funding Group debt and leverage on Slide 28. Given the separate funding arrangements of the Funding Group and Ramsay Sante, looking at the group's consolidated leverage is not a meaningful metric. The Funding Group shows leverage, excluding Sante and is 2.22x, within our target range of less than 2.5x and interest cover remains strong. Fitch has recently reaffirmed its BBB- investment-grade rating for the Funding Group. We have adequate liquidity in place for the purchase of the National Capital Hospital in FY '27 and leverage is expected to remain within our target range of less than 2.5x. During the period, we successfully refinanced our key syndicated debt facilities, extending tenure and reducing our margin by 30 basis points. While base rates are increasing, our weighted average cost of debt has declined 20 basis points since 30th of June 2025, reflecting the refinancing of our facilities at these lower margins. We remain reasonably well hedged with 65% of our debt hedged at an average base rate of 3.65%, which is below current spot rates for the second half of the year. Moving to Ramsay Sante's debt position on Slide 29 and it remains well supported by its own separate funding arrangements with tenure extended significantly over the last 12 months. The business has EUR 391 million of liquidity available with leverage of 5.3x and the company is focused on improving cash flows and driving cost out and efficiency programs to reduce leverage over time. Turning to Slide 30 and our focus is on improving capital management, cost discipline and cash flows across the group. First, we are improving capital allocation and returns. A range of programs are underway to recycle capital into higher returning projects of the business and lift utilization of existing facilities and assets. In the overseas business, we will drive capital discipline and focus on maintenance projects and the optimization of service and assets. Second, we need to strengthen both operating and investing cash flow. We have multiple initiatives in place to improve working capital with revenue cycle management, cost out and efficiency programs being a key focus. We are also reviewing capital spend and we'll be pushing all these initiatives harder. In the near term, our priority is maintaining our leverage and our credit rating at current levels. Looking at capital expenditure in more detail on Slide 31. Our focus is on capital discipline with CapEx modified for the current environment with both U.K. and Ramsay Sante spend lower in local currency. Group CapEx increased $27 million between periods in constant currency terms due to higher Australian development CapEx with focus on development projects increasing procedural capacity in Joondalup and Warringal. We have reduced the full year CapEx range to between $755 million to $795 million, which is $40 million below the previous range to reflect the lower spend. I will now hand you back to Natalie to talk about the outlook. Natalie Davis: Thanks, Anthony. So to recap briefly, our strategic priorities remain clear: transforming our market-leading Australian hospital business, strengthening our capital discipline and improving capital returns across the portfolio and evolving our culture of people caring for people to innovate and drive performance. Our financial year '26 full year results are expected to reflect the following: in Australia, we expect continued EBIT growth momentum, driven by increased activity in priority therapeutic areas, revenue indexation, cost focus and partial mitigation of the impact of the new Joondalup funding mechanism. In our U.K. hospital business, we expect NHS activity in the third quarter to remain negative compared to prior period due to NHS budget constraints for the remainder of the U.K. fiscal year ending 31st of March. Ramsay U.K. remains well positioned to support the U.K. government's objectives to reduce waiting list and has a strong pipeline of patients through its outpatient clinics when anticipated additional funding is made available in the new NHS fiscal year from the 1st of April. For Elysium, we'll remain focused on improving performance and expect the turnaround to continue to gain traction over the second half. In Europe, we expect activity growth to continue in the second half, driven by day admissions, partially offset by the impact of the French 3-day doctor strike in January. Our net financing costs are forecast to be $590 million to $610 million and our underlying effective tax rate is expected to be approximately 35%, given the higher tax rate in Ramsay Sante. Group CapEx guidance has been reduced with spend in the second half to be lower than the first half. Finally, the dividend payout ratio for the year is expected to be 60% to 70% of underlying net profit after tax and noncontrolling interest. Overall, I'm very proud of the progress we have made and the commitment of our team members to providing excellent care for our patients while we transform and strengthen the business for the future. And with that, I'll open up to questions. Operator: [Operator Instructions] Your first question comes from Lyanne Harrison of Bank of America. Lyanne Harrison: Congratulations on a very strong result for Australia. What we saw compared to the results, the first quarter results that you mentioned at the AGM, we certainly saw an acceleration of growth, both at revenue and EBIT in the second quarter. What are your expectations as we are in third quarter now and then for the fourth quarter as well? Can we expect that revenue growth and that EBIT growth to continue to grow at a faster rate? And what would be supporting those? Natalie Davis: Thank you, Lyanne, and thank you very much to the whole team in Australia for really focusing on growth and performance momentum over the half. I think what we've guided to today is really looking at year-on-year EBIT growth momentum continuing throughout the year. I think it's important to remember that there is seasonality in Australia in some of our businesses, it works the other way. So we do tend to have a lower EBIT result in the second half because of January when a lot of doctors are on holidays and we don't do as many surgeries in the business as well as Easter has a smaller effect. So what we're guiding to is the year-on-year EBIT growth momentum will continue and we're not saying anything more specific than that. Lyanne Harrison: Okay. And as a follow-up, you've renegotiated some of your PHI contracts over the last few months and with some good fee increases. Can you comment on -- we've seen PHI premium increases in the vicinity of -- it's going to be about 4% or a little bit more from April of this year. How will those increases be captured in the fee terms on the contracts you've already negotiated? Natalie Davis: Thank you for the question. And it's been very pleasing to see that Australians have kept up their private health insurance coverage even through significant cost of living pressures. I think the minister when he approved the latest round of premium increases acknowledged the very significant cost increases and cost pressures that the private hospital sector is facing. And we would expect those premium increases to be passed along to private hospitals to cover those cost pressures. And the minister has talked about the benefits payout ratio having decreased over time since COVID and his expectation that, that would increase. And so we will be talking to all our private health insurer partners to ensure that the revenue indexation we receive on an ongoing basis reflects our genuine cost pressures. And those pressures are real and they will continue into the medium term. Operator: The next question comes from Andrew Goodsall at MST Marquee. Andrew Goodsall: Just a focus on the U.K., if I may. I guess just with Elysium, just obviously, you're doing some performance improvement there. But just wondering whether you can see that as a permanent resolution to something that might be more structural? And then secondly, on U.K., just I saw that the NHS has got this idea of a sprint to the end of the financial year with additional elective surgery, but that's not reflected in your comments. So just wondering what your thoughts were there as well. Natalie Davis: Thank you for those questions. So focusing on the U.K. and I'll take each business separately. With Elysium, we completed last year a very significant performance diagnostic and the team has gone about implementing that under the, first of all, the leadership of Nick Costa and now Joe O'Connor since he joined in January. We see a very significant improvement potential for Elysium from the current performance, which is very weak. We have focused a lot over the last 6 months on cost reduction. So central cost reduction. We've now done 2 phases of reducing FTE in that business. We've focused on reducing agency costs. And importantly, we focused on decreasing the number of available beds. And the demand that I think we've experienced throughout the half has probably been weaker than we originally expected. And so you see we've closed 163 beds in the half and we will continue to look at potentially site closures and putting properties up for sale to make sure that the services we provide really match the demand from the sector. However, having said all that, we see significant potential for us to turn around the performance and to continue focusing on both the top line through providing high-quality services for very complex patients and making sure that our fees reflect the quality and the complexity of the service we provide, improving our conversion rates, which we have improved in the half, but there's more opportunities to do that when we get a referral to making sure that we convert all of those referrals and continuing to focus on costs and we continue to see more potential for that. So we continue to be confident that, that turnaround is continuing to gain traction and we saw an improvement in performance towards the end of the first half. On the U.K. and what's happening with the NHS, we're certainly seeing -- from the end of the first half, we're certainly seeing a step back in activity across our hospitals. A number of our hospitals have activity management plans in place. In some cases, where those plans have been in place, we have managed to get effectively separate contracts to fund further activity above that activity plan level. But overall, as we said, we expect negative NHS activity in quarter 3 and then we're well positioned when we anticipate there'll be more funding provided from April to grow our business over there. Andrew Goodsall: And just a quick one for Anthony. I appreciate you breaking up the Funding Group debt. But just with the refis, just if you had any sort of separate costs associated with that and if they were taken through the P&L? Anthony Neilson: Anything was small was in the nonrecurring items for that. And we did take some items capitalized into the balance sheet. Operator: The next question is from David Low at UBS. David Low: Natalie, if I could just start with Joondalup. So you're quite specific as to the headwind there. We can back calculate from the comment about 40 basis points better. But just wondering relative to your expectations there in terms of the headwind, whether anything has changed, whether you've been able to mitigate it more than expected. Natalie Davis: Yes. So last year, we talked about the new funding mechanism at Joondalup Public and the expected impact that would have. We also said we would partially mitigate that impact on the campus itself. And we have continued to do that. And I would say that the mitigation is in line with what we're expecting. And there's a number of things we've done there. We've worked to increase activity with the government. WA like many states across Australia, experienced a very strong flu season. And so we had additional capacity that has been funded at the beginning of the financial year in that flu season. But we're also continuing to work on our operational initiatives and there's been a big focus, in particular, on reducing agency at Joondalup, which we successfully at the end of the half, ran what we call a professional pathways program. And that program attracts nurses out of nonhospital sectors, so sectors like aged care into the hospital system. We had a very successful recruitment drive. And I think around 50 nurses have started with us at the hospital, which will enable us to reduce agency at that hospital. We also -- last week, we also had the pleasure of opening Joondalup Private. So that's the expansion of the private facilities. It's a very significant expansion. It creates for the first time, dedicated private theaters in that campus. And we're now focusing on ramping up the growth in the private part of that hospital. So overall, I'd say the mitigation that we expected is on track and as we thought. David Low: Okay. Perfect. Look, the other question I had was, I think certainly, the revenue growth in Australia was a positive surprise. Just wondering, we can see the activity that you've broken out there and back calculate price increase. But within the activity, is mix a positive driver there? And can that trend continue on into this calendar year? Natalie Davis: Yes. I think what we saw in the half was pleasingly a focus by our teams on higher acuity work. And you can see that in the activity numbers, so not just in admissions, but in EBITDA growth. And the fact that our EBITDA growth was in line with admissions growth, I think, has driven that positive mix benefit. It came through on both surgery, but it also came through on some of our medical admissions. And so that's something that continues to be a focus for us. We're very focused on utilizing our theaters as much as we can and thinking about our theater utilization in terms of catchments so that our major hospitals are very much focused on attracting high acuity work. And then some of our smaller day centers and smaller hospitals can then attract the lower acuity work. And so we're trying to really optimize the way we're thinking about our portfolio within catchments to focus on mix. David Low: Okay. Great. So it sounds like that can continue as a positive trend second half... Natalie Davis: It will continue to be a focus for us. Operator: The next question is from Craig Wong-Pan at RBC. Craig Wong-Pan: Just wanted to understand about the Australian CapEx. The guidance there has been revised and your comments about being disciplined on CapEx. Just wanted to see if you could provide any comments about how we should think about the run rate of CapEx going forward? Natalie Davis: Thank you. So what we're really doing and I just explained, I think the catchment thinking that Stuart Winters, in particular, who's our new Chief Operating Officer, is bringing to the business. We're continuing to really focus on existing theater utilization, but we're also really thinking through our portfolio and how do we -- for example, in Lake Macquarie catchments, we opened Charlestown, which is a day surgery that was operationally separately managed to Lake Macquarie, which is our big hospital there. They're now all under the same leadership, and we're now developing a catchment strategy across that. The other thing that Stuart is really focused on is thinking through how do we better use the physical infrastructure that we have in our existing hospitals to be able to add procedural capacity effectively and efficiently. And I think St. George is a good example of this where we're doing a development and we're effectively taking existing space within the hospital that's an ICU and converting that into theater space, which is linked to the existing theater complex. And we're moving ICU into an area that was full of beds that were not being utilized. So what we're trying to do is, as we've said over the last year is focus very much on procedural capacity, adding beds by exception and utilizing the existing assets that we have within a catchment fully before we're increasing procedural capacity. So you'll see very selective and strategic developments from us going forward. We're not yet guiding to next year on that. Craig Wong-Pan: Okay. And then I just wanted to move to the clinical trials research and development network that you talked about. Could you just provide some more details around that and specifically the benefits that the Ramsay Group gets from having that network? Natalie Davis: Yes. Thank you. It's a small part of our business, but it's one that we're all incredibly excited about. So with clinical trials, we have traditionally run a site-by-site model and we had around about 20 sites that were providing capacity to doctors who wanted to do research in our hospitals. To give you an example, it's very common and important in cancer care. So a lot of patients when they're coming for treatment to their doctors are looking for the latest chemotherapy drugs and treatment. And if we can provide access to clinical trials, we can provide actually leading treatment for patients. And we can also ensure that we're attracting doctors. And we can actually see that doctors who do clinical trials with us actually have a higher NPS with Ramsay. So it's a small part of the business at the moment. I think it has a significant potential and it's important to reinforcing our core hospital business because it does mean that we can provide leading care to patients and also attract more doctors to working with Ramsay. Craig Wong-Pan: Okay. Makes sense. And then just my last question, one for Anthony. The comments you made about improve or having cash conversion as a key priority. Just trying to understand what you're focused on here just about faster collections or something about like claims? Yes, could you just give some color on what you're trying to do there? Anthony Neilson: Yes. Thanks, Craig. Yes, look, definitely, receivables improvement is a big driver that we have there in the revenue cycle management, looking at all of our systems and processes, both from an Australia and an international perspective to get the days debtors down and the improvement through the billing cycle and cash collection, accuracy of billings, all of those sorts of things are a big driver that flows straight through to the bottom line if we can improve that working capital position. Operator: The next question comes from David Stanton at Jefferies. David Stanton: Impressive 5.7% growth in Australia in surgical admissions. Firstly, bottom line, what's driving that? Is it the market growth at that level? Or do you think you're taking share? And if so, how is that happening? Natalie Davis: Thank you, David, for the question. We think we're probably taking market share at the moment when we look at our growth relative to the market. I don't know if there's more market statistics coming out tomorrow, so we'll see how that goes. I've spoken previously about the focus we're doing on growth across our hospitals. So over the last 12 months, we've been providing to all of our hospital CEOs data that's very easy for them to use, which enables them to do a few things. First of all, it looks at every therapeutic area by doctor and it looks at theater utilization. It gives an indication of profitability of that work. It also gives an indication of to what extent is that doctor canceling lists and what period of time do they let us know if they are canceling a list because the more time we have, obviously, the more we can then fill that theater with other work with other doctors. The other data set that we're giving to our hospitals is around catchments and more data around the specialists in that catchment that do work with us and don't do work with us as well as the GPs and the ones that are referring to specialists who work in our hospitals and other GP practices that are not. So that's been new. It's all in one place and it enables our team, therefore, to go and have conversations with doctors where we know we need to increase their utilization. And it also enables us in terms of our business development managers and our GP liaison offices to be much more targeted around where they're spending their time to be able to attract new doctors to come and work with Ramsay. And I think the other thing that's been helping us over the last 6 months is obviously this very strong clinical reputation that we have, but also our stability as a very strong business with ownership of our hospitals. And I think that's also been helping in the current environment to attract more doctors to come and work with Ramsay. And we're continuing to really focus on how do we improve and strengthen our doctor proposition and our proposition in our therapeutic areas that we're focusing on. David Stanton: Understood. And is it fair to say, given your previous commentary that with these upcoming EBAs, you believe that they'll more than likely be covered by the increases in PHI premiums? Or what should we be thinking there? Natalie Davis: So we continue to see wage pressure out into the medium term and that's coming through from public sector nursing EBAs and we have to be competitive to be able to attract the nursing workforce that we need in every state. The one that we are negotiating at the moment is in Victoria and that's obviously against the backdrop of a very significant public sector EBA increase of 28% over 4 years, but significantly backdated to November, December 2027 calendar year. So we expect continued pressure on wages across Australia. And we will continue as we negotiate with private health insurers to cover that cost pressure and it's very genuine it's being experienced by the whole sector in terms of the revenue indexation that we're receiving. In some cases, we have now got dynamic -- what we call dynamic indexation in place. There's 3 contracts where we do this and we're talking to more health insurers about this. And what that basically does is once we agree the first year indexation, the second and the third year indexation in the contract are linked to externally referenced cost benchmarks. So that those cost pressures when they're genuine and they're sector-wide will be reflected in our revenue indexation. And the importance of that apart from ensuring that we're paid fairly is also freeing up management time to actually look at the structure of these funding agreements, the way we're providing care and innovating our care models and innovating the funding to support that. So that's the opportunity for us to work with our private health insurer partners to really innovate the proposition for Australians for private health care. David Stanton: Very clear. And finally from me, we've talked to -- or you talked -- or the company talked to digital upgrades. Can you give us sort of an update on spending options and timing potentially? Natalie Davis: Thank you. So we've been in a bit of a reset, I think, on digital and data transformation. And as we said last year, while we did that, we focused on effectively maintaining and even possibly reducing the spend in that team. We've now got Dr. John Doulis, who's joined us as our Chief Technology Officer. John comes from HCA hospitals in the U.S., which I would say is one of the leading hospital health systems when it comes to thinking through how to really use technology and digital technology to drive better patient experience, team experience and business outcomes. So John joined in early November. He's now at the point where he's got some very clear priorities for where he's going to work with the team on. And they're very much aligned with the Big 5 initiatives that we've been talking about in our hospitals. So they're very much linked to operational improvement. The top 3 are really around revenue cycle management and in particular, upgrading our patient admin system or PAS, which is very outdated. That will enable us to speed up our revenue cycle management system and also improve accuracy in that system. The second one is around workforce and introducing a smart rostering system. That's something that will free up a lot of time around nurse unit managers who spend a lot of time on rostering at the moment with 3 legacy systems. It's a pretty manual process. It will also give our team more flexibility. And the third one is thinking through how do we use technology to really track prosthesis and consumables as they're being sourced into our hospitals and used in our hospitals and then charged to private health insurers. So very clear priorities and we'll continue to keep everyone updated as to our technology road map. Operator: The next question comes from Davin Thillainathan at Goldman Sachs. Davinthra Thillainathan: Just wanted to think through the Australian business and your revenue growth that you're demonstrating there. I think in the first quarter, you did a growth that was about 6.5%. And then in the half, that stepped up to 8.2%. So clearly, some better momentum happening in that second quarter. Now my understanding was in the first quarter, you had benefited from some high flu admissions and I wouldn't have expected that to continue. So perhaps could you talk through any sort of material changes that occurred over the second quarter to allow that level of growth to step up, please? Natalie Davis: Yes. So that is true. So we do benefit in that July to August period from winter flu season and that was a particularly serious flu in terms of the impact it had on Australians right around the country. So we did see more medical admissions and longer length of stay associated with those admissions. But as I've said, we continue to experience good growth through the half. And I think that really was a continued focus by our hospital teams on recruiting doctors and utilizing theaters. And you also would have seen in the results, we also shared that our public work increased a little bit. Some of that was at Joondalup, but some of that also was in New South Wales. So that continues to also be an area of focus. So I don't think there was one thing I can point to, to say it was due to that. It's a focus for us and we really continue to focus on that going forward in every major hospital and catchment that we have. Davinthra Thillainathan: Great. And my next question is on your CapEx, which you have lowered in Australia. I understand part of that is clearly you're utilizing your existing facilities better. But just thinking about other changes you've made with CapEx delivery. As an example, I noticed that your Joondalup CapEx was also lower than your budget. Could you perhaps talk through any other changes you're making on the actual delivery of all these sort of growth initiatives? And perhaps is that what's sort of helping that CapEx lower as well? Natalie Davis: Yes. I think Joondalup was a very well-delivered project. We had a good delivery partner there and it was delivered on time and on budget, actually slightly earlier and that's hard to do. So I think that was a really good example of working well with a delivery partner. But most of the decrease in our guidance on CapEx is really about us as a leadership team, myself and Anthony, who are in the capital forum that we've described in the document, really stress testing with the teams around do we need to do this development proposal and do we need to do it right now and really encouraging the teams to, first of all, focus on utilization before bringing business cases to us. So it really is more that rigor around the way we're approving capital projects. Davinthra Thillainathan: Yes. And my last one, just trying to understand the sort of digital and data spend in your P&L. I think you had about $90 million in FY '25. Can you sort of help us understand what was spent in the first half and what the expectation is for FY '26, please? Natalie Davis: Yes. I think we've said before that digital and data spend will be at or below, if we can, that level of last year and we've said that we're on track. We're not going to split that between halves. Operator: The next question is from Laura Sutcliffe at Citi. Laura Sutcliffe: Firstly, on the U.K., is the volume headwind that you've seen in the third quarter enough that you could potentially end up with revenue in the second half being flat or going backwards versus the first half? Or do you still expect that revenue to grow in the second half over the first half in the U.K.? Natalie Davis: So we're not guiding to revenue in the U.K., but I will make a few comments. We do -- as we've said in the release, we do see NHS activity being negative in the third quarter. And then we're well prepared as we anticipate new funding to come in, in quarter 4 to grow NHS activity. But we're also focusing on acuity. So acuity EBIT, and that's supporting the results that you've seen in the first half. And the team is also focusing on growing private and that includes both self-pay and our agreements with private health insurers. So all of those factors we'll be focusing on. And of course, remembering seasonality in the U.K. is the opposite to Australia. So we see a weaker summer over there, which impacts the first half. Laura Sutcliffe: Are those activities you just mentioned the mitigation activities that you were mentioning earlier? Or is there a bit more to the mitigation piece? Natalie Davis: Yes. So the mitigation is around growing our private work. So we focus very much on NHS work in that business, but we are putting more and more focus on private work, which you can imagine is more profitable for us than NHS work. We are focusing on acuity of mix and we're also focusing on operational efficiencies and cost mitigation. We'll be stepping up the cost focus as well given the uncertainty on the NHS funding front. Laura Sutcliffe: Okay. That's clear. And then secondly, looking at some of Sante's reporting and the proposed distribution, could you tell us if any of the mechanics around change of control there would potentially leave you in a position where you had to make payments to Sante or others? Natalie Davis: So as Anthony explained today, the Sante debt is nonrecourse to Ramsay Health Care. And so the debt that we hold as the Funding Group relates to Australia and the U.K. businesses. So when you think about the separation of Ramsay Sante from Ramsay Health Care, in this case, Ramsay Sante is already a separate listed entity on the Euronext. It already has its own governance structure. It has its own debt structure. And so the approvals will be happening mostly in the Australian context around our shareholders and putting proposals to them through a scheme of arrangement around thinking through whether there's value to Ramsay Health Care shareholders from effectively holding these 2 entities separately. And we do think that there is a strategic logic and it's quite strong logic around effectively Ramsay Sante is an independent entity focusing on their strategy of integrated health care in European markets and Ramsay Health Care really focusing on the priorities that we've laid out today and in particular, the continued transformation of the Australian business. So I think it's important just to understand that there's -- the debt of Sante is nonrecourse and there's no guarantees from Ramsay Health Care. Laura Sutcliffe: Okay. I just thought I would clarify because the potential amount they mentioned in their documents is quite large. Operator: The next question is from Steve Wheen at Jarden. Steven Wheen: I just had a question with regards to the Victorian EBA. We've seen your offer that you've provided to the nurses. Just trying to understand what the reaction to that offer has been and whether or not you're getting recognition from the PHIs as to that step-up that happens sort of in the back end, I think, of '28, where you're mimicking what happened in the public EBA in Victoria? Natalie Davis: So we're in the process at the moment of negotiating the Victorian EBA with the unions and with our team. And so I won't be commenting today on how that negotiation is going. Steven Wheen: Okay. Then can I ask a bit of an extension of the EBA question, which is you've mentioned in your presentation from an outlook perspective that you're attempting to close the funding gap from payers from the cumulative gap from payers versus the cost inflation. Can you talk to how that is possible? I mean, I can see with the arrangements that you've got in place already that you're covering current inflationary pressures in FY '26, but how do you claw back some of those historical underpayments from the insurers? Natalie Davis: Yes. So I think the discussion that we have with our private health insurer partners and this is a discussion that's really happening, you can see at a sector level in regards to private hospital viability. But overall, the premium increases that have been approved for private health insurers over the last 5 years since COVID have not fully been passed through to private hospitals and that benefit payout ratio has decreased over time. Now we believe that those premiums that Australians pay should be passed on to hospitals and the hospital sector is experiencing very genuine cost pressures. And so that is the discussion that we have with our private health insurer partners. And we've experienced, as I've described, an improved level of revenue indexation, but we haven't yet managed to achieve that closure of that cumulative historic gap. And that is a challenging discussion, but we will continue to strive to achieve that. And quite often, as we're entering into new contract renewals for a number of years and looking at partnership opportunities and talking about dynamic indexation in the outer years, that is the opportunity for us to work through that cumulative gap because you can't really agree to dynamic indexation unless the base is correct or the base is corrected over time. So it's a challenging discussion, but it's one that we continue to have. Steven Wheen: Okay. Great. And just some points to confirm. The coverage that you're getting from the insurers at the moment in FY '26, how much line of sight do you have for that coverage to extend beyond FY '26 relative to the EBAs that you've put in place? Natalie Davis: So we always -- when we negotiate with private health insurers, we always look at the -- effectively the cost pressures that have been effectively locked in through EBA arrangements, but we also do forecast out what we expect EBA pressure to be. And if for some reason, the EBAs end up being at a higher level, we will always go back to the private health insurers to discuss that. I think the dynamic indexation that I was describing is a way that, that becomes a very fair discussion because it's referenced to external benchmarks, which really do show whether there is genuine industry-wide cost pressure in the system. Steven Wheen: Okay. So knowing what you know now, you can still say that your PHI coverage extends into FY '27? Natalie Davis: No, that's not what I'm saying. I'm saying there's a series of contracts that we have with private health insurer partners. We're in the process of negotiating one at the moment in the second half. And so it's a rolling process. In some cases, we have existing contracts in place, but the 3 examples I've given on dynamic indexation that's in place in the outer years. But in others, we have contracts that will come up for renewal in the next year or 2 and we'll have to renegotiate that as well. So it's a dynamic process. Steven Wheen: All right. Maybe could you indicate how many of the insurers are on these -- I mean, you said 3, but are they the big ones? Or are they the more smaller ones? Natalie Davis: Yes. We've said before that the 3 that we've got at the moment are not the major insurers. Steven Wheen: Okay. Last one for me. Just with regards to the Joondalup offsets, was there any evidence of that in first half? Or are we expecting that sort of more second half and beyond? And then in addition, is there any way we could sort of get a better understanding of the sequencing of data and digital because obviously, the key point for the stock at the moment is the turnaround in margins in Australia and that can be a bit distorting unless we know what that sequencing looks like between first half and second half? Natalie Davis: So the Joondalup mitigation, I've described in, I think, a previous question. So we're on track in terms of what we planned for Joondalup. In the first half, there was a benefit from public activity, which was due to the flu season and the pressure that was putting on the health system in WA. We then obviously, over the half, focused on putting in cost and operational initiatives, including that focus on agency reduction, which we recruited that group of nurses into Joondalup around November, December, takes a period of time, obviously, for them to be trained so that we can reduce agency spend. So we're continuing to focus on it and the flu impact won't be repeated in the second half, but you'll see other operational initiatives having more impacts like the one I've just described. The digital and data OpEx, I think what we've said is this year is really one of a reset. We're keeping that spend in line with the current year or less. We're very much -- John is really focused on his priorities and developing that road map going forward. We're on track overall for the year. And we really do understand as a management team that we're aiming here to get year-on-year margin growth in the Australian business. And so we will think about very much the digital and data investments we make, ensuring that they're connected to operational initiatives that have payoffs so that we can then reinvest in further digital investment as it's required. But understanding that over time we are all focused on improving the performance of the Australian business. Operator: The next question comes from Saul Hadassin at Barrenjoey. Saul Hadassin: I'll try and stick to 2 questions. First one, Natalie, just you mentioned, I think, at the AGM that theater utilization had improved by about 1% in the first quarter of fiscal '26. I'm just wondering if you had any comments about where that went in the second quarter of the fiscal year? Natalie Davis: Yes. I thought we had given you that number and it was -- we've given you a 12-month rolling number. 130%, so 1.3% in the last 12 months in terms of theater utilization. So that's on Slide 9. Saul Hadassin: Sure. So the assumption being that it's improved into the second quarter versus the first? Natalie Davis: So we're seeing overall improvement in theater utilization and that's including the impact of new theaters that we've opened over that time. So obviously, as we increase admissions and IPDAs, that fills the existing theaters, but then we open capacity and we have to fill up that new capacity as well. So the 1.3% improvement over the last 12 months, I think, was a very strong result given that there was a very large number of new theaters opened in that time, 16 new theaters. Saul Hadassin: Sure. And then just a follow-up. I note in the presentation of the wholly owned funding group result that labor costs and contracted costs on a constant currency basis was up 6%. I just wanted to see whether there was any disparate growth rates between the U.K. and Australia in that? Or is that reflective of sort of both regions in terms of their labor cost inflation? Natalie Davis: I'm going to pass that one to Anthony. Anthony Neilson: Yes. Thanks, Saul. Look, there's nothing materially different. It's largely reflected between both regions with similar numbers, give or take, in the wages. Operator: The next question comes from Sacha Krien at Evans & Partners. Sacha Krien: Just a bit of an extension to one of the earlier questions. It looks like you've removed the reference to revenue indexation being greater than or equal to labor cost inflation. I'm just wondering if anything has changed on that front. And I think your labor cost growth in Australia was circa 7.8 or something like that? Natalie Davis: Yes. So the 7.8, I think you're referring to is the growth in the total labor dollars. And so that includes both activity and wage inflation as well as any mix impact. And activity was in the region of 3.1, excluding the impact of Peel. So you can get a sense from that as to what's happened with wage inflation and similarly on the revenue line in terms of Australian revenue and that level of implied indexation, noting that there's always a mix impact as well. Sacha Krien: Yes. But does that previous statement around '26 and '27 still stand? Natalie Davis: So I think what we said in the last statement was saying is a leading indicator that the revenue indexation was in line with cost indexation and that continues to be the case in the half. So we're definitely experiencing improved revenue indexation relative to both what we paid historically and relative to cost indexation. But as I've described on the call, it's an ongoing focus for us and we need to continue to make sure as we renew contracts that we're taking that. Sacha Krien: Yes. I guess I'm just wondering, I think that statement previously applied to '27 and I can't see it unless I'm missing it. So I mean, are you suggesting it's maybe been a little bit harder to close the gap than expected? I'm just trying to [indiscernible] if anything has changed. Natalie Davis: I think you're reading into something that wasn't there in the first place. So that comment at the AGM was in relation to the performance in the first quarter. It wasn't an outlook statement into F '27. Sacha Krien: Okay. And then second question, just on the U.K. I'm just wondering the proposed NHS tariff increase, I'm just wondering if there's any scope for that to be increased as we've seen in previous years given some of the award wage increases that have come through? Natalie Davis: Yes. So I think that is a good question. So we saw effectively the tariffs being guided to 0%, 0.03% in the U.K. That reflected broadly speaking, a 2% assumption on wages in the U.K. in the health sector, offset by an efficiency assumption of about 2%. I think a few weeks ago, we've seen a wage number come out of the NHS that's more likely to be around 3%. And so historically, when that's happened, at least over the past 2 years, we have seen effectively a backdating tariff increase. It may not be the full amount of the difference. It's not guaranteed. So Nick Costa would say that there have been some years where that hasn't been played back and backdated. So we have to wait and see. But in the past 2 years, there has been an adjustment if wages have been higher than what has been assumed, but we don't know yet. Sacha Krien: Okay. Can I sneak one more quick one in on the U.K.? Just in terms of the NHS activity, are you expecting a full rebound into '27 given some of the -- I mean, I guess, the government's recommitment to sort of closing or reducing the waitlist and using private hospitals to do that? Natalie Davis: I think it's very hard for all of us to really know. It depends very much on the budget in the U.K., therefore, the budget that gets given to the NHS. As you know, this government has previously been very clear that their election priority is to reduce waitlist and that there's a very important role for the private sector to play in doing that. And we are the largest provider of NHS services in the U.K. So we are well positioned, but it's very hard for us at this point, I think as it is for everyone in the U.K. to be certain of what will happen. It really does depend on budget outcomes and political outcomes in the U.K. Operator: The next question comes from Andrew Paine at CLSA. Andrew Paine: Congrats on the results. Just wanted to circle back to Elysium. Really just wanting to know if you think the current performance there is leading to a shift in your longer-term plans for that business? Or do you think you continue to focus on adjusting cost base and keep things like growth CapEx on hold? Natalie Davis: So for the moment, the posture is that the focus is on performance improvement. So any growth CapEx is on hold, continues to be on hold. And the focus very much is on making sure that we're managing costs and managing the services we provide to the local levels of demand. There's also a focus in the turnaround around thinking through how we actually improve the offers that we're providing into the market. So we've previously called out neuro as an area where we think we need to reposition our services towards a slightly lower complexity, lower acuity cohort where there's a bigger demand pool. The team is also focused at the moment on bespoke packages. And this really is, I think, somewhat unique to Elysium because we have a very, very good reputation of providing care to very complex individuals. And so in a number of locations, we are talking to local authorities to take individual patients with very highly complex needs. And those packages are developed with pricing that's commensurate to the effort that we need to put and the care that we need to put around those individuals. So I think we have more work to do in the future around thinking through how do we strategically position our services in the market. But very much at the moment, the focus is on turning around the business and continuing to gain momentum from that in the results. Andrew Paine: That's great. Yes, that makes sense. And just another quick one. Just any numbers you can give us around the expected contribution of National Capital. I know you said it's expected to be EPS-accretive in the first 12 months, but if you can give us any numbers, that would help. Natalie Davis: Yes. At this point, we're not giving out any numbers. So we're very excited about welcoming the NatCap team to the Ramsay family. That will happen, we think, around the end of July. At the moment, we're in the transition planning period, but it's a very attractive catchment area with high rates of private health insurance. It has a great leadership team in place. They have a good reputation with doctors and they have -- they do work in the complex therapeutic areas that we do and they have a very strong relationship with the Canberra Health Service. And so NatCap is very much a hospital which is very akin to some of our major and very successful hospitals around the country. Operator: The next question comes from David Bailey at Morgan Stanley. David Bailey: The Joondalup headwind was about $14 million. So I'll just touch on an earlier question. How much was the benefit from lower digital and data spend in the first half? Natalie Davis: So as I've said, we're not giving any half guidance on our spend. So we're on track to basically maintain or slightly lower our spend on digital and data for the year, but we're not providing any specific guidance on the half. David Bailey: Okay. But it says in the pack that it was lower. How much lower was it? Natalie Davis: I'm not providing any specific numbers on digital and data. David Bailey: Okay. Fair enough. Okay. In terms of the commentary around PHI increases, it sounds like it's offsetting wage inflation at the moment. You made the comment that participation is still holding up, but there is a significant increase in the proportion of exclusionary policies, which looks to be a drag on utilization. If we think into fiscal '27, if price is matching your cost inflation and there is potential for lower utilization on the fact that people are downgrading their policies, do you see a situation whereby you can grow your EBIT margins at 60 basis points implied by guidance and potentially 100 basis points at the top end? Natalie Davis: Thank you for the very detailed question. I think when we look at private health insurance coverage in Australia, what we have seen is downgrading, as you've just mentioned, particularly from gold into silver and bronze policies. But the overall rate of hospital level coverage is staying at around about the 45% level. Now the significant impacts of that downgrading are being felt in particular in maternity and mental health that are only available on that gold level coverage. And that has probably a very significant impact, particularly for younger people looking at whether to take up private health insurance because those 2 features are important. And so we're very much a strong participant in the sector-wide discussion that is going on around how do we maintain the proposition for Australians around affordable private mental health and maternity level coverage. And I won't be going on specific -- any specific guidance on margin in the outer years apart from saying that it's our focus as a management team and we're making progress. The transformation is underway and we will continue to focus on lifting the performance in the Australian business with all the challenges that we're facing, but also the opportunities that we have as Australia's largest private health care company. David Bailey: And just one final one for me. Just the Fair Work Commission work value case, just the status of that and expectations around potential further wage increases duration and from when they could potentially be implemented as well? Natalie Davis: So that at the moment, the fair work value case is before the Fair Work Commission. So we're also waiting to see where that eventuates. We are expecting, I think, a level of phasing to any increase that is approved in there. So -- and I previously said at the moment, when you look at our wages, we are above award wages. And we, therefore, expect that and the combination of phasing really to mean that the pressure from that in terms of sector-wide and our wage pressure will be more in the outer years rather than in the short term. So I think that might be the last question. Operator: And it was the last question, if you'd like to make any closing remarks. Natalie Davis: Thank you. Well, I wanted to thank you all for joining the call and for a really great set of in-depth questions on our business. As you've seen in the results, I laid out 3 very clear priorities for Ramsay Health Care and we are well underway in terms of the work we're doing as new group executive leadership team to really capture the potential of Ramsay Health Care and we look forward to engaging with you all on that journey. Thank you. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Thank you for standing by, and welcome to the Cleanaway 1H FY '26 Results Briefing. [Operator Instructions] I would now like to hand the conference over to Mark Schubert, Managing Director and CEO. Please go ahead. Mark Schubert: Good morning, and welcome to everyone listening in today. Thank you for joining Cleanaway's financial results briefing for the first half of the 2026 financial year. I'm Mark Schubert, and I'm joined by Paul Binfield, Cleanaway's CFO; and Richie Farrell, General Manager, Investor Relations and Sustainability. Following the presentation, as usual, we will open the call for questions. So moving to Slide 7. I want to begin today by addressing health and safety. This is foundational to who we are and what we do at Cleanaway. Regretfully, we reported 2 fatal incidents at sites that we own in the first half of FY '26. Each occurred in different operational contexts. And in the case of MRL, it happened when a commercial customer was struck by one of their colleagues' vehicles in a back up area. We remain committed to learning from these tragic incidents and ensuring we have strong controls in place at our sites so that everyone goes home unharmed each day. I am pleased to report that we are seeing significant improvements in our safety performance. When compared to the first half of FY '25, our serious injury frequency rate was 64% lower, at 0.36 and our total recordable injury frequency rate was 35% lower, at 3.5. And we know that our TRIFR is significantly below domestic comparable companies and international industry peers. A Board-commissioned independent safety review has been completed over the last 3 months. There were 4 key findings from the review. Firstly and importantly, no systemic safety issues or failures were identified. The HSE strategy is fit for purpose, reflects contemporary safety thinking, and is aligned to the organization's most significant risks, that our implementation is well advanced at an enterprise level, but there is an opportunity to strengthen consistency and feedback loops closer to the front line given the variable but improving translation at branch level. And finally, our overall approach is aligned with contemporary good practice in comparable high-risk asset-intensive industries. The report also found that fatality reporting across peers is inconsistent and in some case, lacks transparency. And therefore, direct comparisons with Cleanaway are unreliable and should not be used to draw conclusions about relative safety performance. The external review confirmed our approach remains sound and that we should stay the course. The areas to work on are consistent with our stage of progress in the 5-year strategy journey. We also commenced 2 key programs of work during the half that represent tangible evidence of systematic risk reduction across the enterprise. By the middle of this calendar year, we will have completed the rollout of a yellow gear pedestrian detection system that uses latest Generation AI cameras to alert operators to human presence. And by December 2026, we will have rolled out in-vehicle monitoring systems or IVMS across our roughly 3,500 collections heavy vehicles. The cost for all these initiatives are included in our FY '26 CapEx guidance with approximately $21 million of capital spent on risk reduction in the first half. On the environment, we're proud to report 0 major or significant incidents. Moving now to the first half FY '26 financial results highlights. On behalf of the approximately 10,000 Cleanaway team, I'm pleased to report robust financial results for the half. Through our Blueprint 2030 strategy, we are creating a stronger, more stable Cleanaway. We have transformed the business by installing the foundations, the right people, the right standards, the right systems, the right network, and the right operating model. And you can see those benefits coming through in the underlying performance. We have continued our track record of delivering on the fundamentals that matter with 13% net revenue growth driven by a combination of disciplined pricing and strategic acquisitions. The acquisitions completed in July last year brought further scale and industry-leading capability to our operations. Again, our continued focus on operational efficiency has translated into margin expansion. We did this through better rostering, better workforce planning, and more efficient fleet R&M. Contract Resources performance this half with revenues up 19% and exceeding their 4-year CAGR of 13.5% validates what we discussed after the acquisition. Group ROCE improved by 80 basis points, to 9.4%. This reflects our disciplined approach to capital allocation and the improvements we are making to operational efficiency. Importantly, this says we are growing profitably and efficiently. EPSA was 18.2% higher and reflects our ability to convert operational performance into improved shareholder value. The Board declared an interim dividend of $0.0335** per share, an increase of 19.6%. This reflects the Board's confidence in our trading outlook, sustainable cash generation ability, and its commitment to providing attractive returns to shareholders while maintaining balance sheet strength. The free cash flow movement was driven by catch-up tax and acquisition integration costs and our strategic indirect cost program that permanently lowers our cost base. We expect a significantly stronger second half cash flow. Looking further forward to FY '27, we won't have any of those items repeating, and so we will see further acceleration of free cash flow growth. Looking ahead to the second half EBIT, we have a clear pathway to support the earnings step up. Our corporate costs were higher than usual in the first half. This was largely attributable to a planned project to upgrade our human resources systems with costs to revert to their traditional run rate in the second half. The second half outlook for our Solids business is positive, and our Environmental and Technical Solutions division is also well positioned to deliver improved performance. We're expecting strong organic growth across most lines of the OTS business. We expect to deliver $3 million in synergies from the Contract Resources acquisition and expect an initial $15 million in-year capture of structural efficiencies from our strategic indirect cost review. As part of our strategy refresh, we completed a comprehensive strategic review of our cost base and restructured our indirect labor to enable the strategy. We have restructured our solid SBU down key business lines. We centralized key functions such as sales, pricing, customer service, and fleet, removed duplication and created a leaner, more efficient, and more aligned organization. This has resulted in a reduction of approximately 250 FTAs with most of these changes already implemented. This supports continuing margin expansion, reinforces our market leadership, and sets us up to deliver our improved customer value proposition. We've also identified further opportunities for nonlabor cost rationalization, spanning corporate overhead reduction, shared services optimization, and increased procurement efficiency. Once fully implemented from FY '27, we expect at least $35 million in annualized recurring benefit embedded in our operating model. Based on a robust first half performance and our confidence in the outlook, we're pleased to be able to upgrade our full year EBIT guidance range to $480 million to $500 million. With that overview, I'll now move on to the segment results. Solid Waste Services delivered a strong performance in the first half. We grew net revenue by 7.5%, to $1.25 billion, and EBIT is 11% higher, at $196.7 million. We also demonstrated the operating leverage in the business by expanding EBIT margins by 50 basis points, to 15.7%. In Collections, we grew our C&I net revenue through price increases, strong regional volume growth, and the Citywide acquisition. We also expanded margins by improving labor and fleet efficiency. We delivered similar improvements in our municipal collections business, where, in addition to improving labor and fleet efficiency, we have remained focused on rigorous contract management to support improving profitability. We secured the Cairns municipal collections contract. This is a 7.5-year agreement starting in December 2026 and will contribute over $100 million of revenue over the life of the contract. It is a strategically important win that demonstrates our ability to compete successfully in the municipal tender market when the economics are right. Our Post Collections business delivered net revenue and a EBIT growth across our core landfill portfolio, driven primarily by higher project volumes and prices. As planned, we closed New Chum landfill on the 30th of November, which incurred a loss of approximately $3 million for the period. Our transfer station network delivered improved profitability. We optimized our network, improved payloads, and reduced R&M costs. Finally, we delivered strong earnings from our Resource Recovery business through continued growth in CDS volumes and improved cost efficiencies. We also grew our organic volumes, primarily through successful tendering for commercial and municipal processing off the back of the FOGO mandate in New South Wales. This represents a long-term structural growth opportunity as more New South Wales councils implement FOGO. Old corrugated cardboard or OCCC (sic) [ OCC ] prices softened through the half. This created a slight headwind in the first half where customers receive rebates using a lagged price, noting we expect this to be a relative tailwind in the second half. As part of the strategy refresh, we have made the decision to retire the construction and demolition SBU and rationalize our service offering to align with our C&I customers' needs. We will continue receiving C&D residuals for our post-collections network. The decision is based on focusing on our efforts in parts of the market where we can achieve an adequate return and illustrates our commitment to disciplined capital allocation. Overall, Solid Waste Services is achieving strong results. The scale, diversity, and integration of our network provide a competitive advantage and a growing earnings and margin trajectory. We expect this momentum to continue through the second half. Moving now to our Oil and Technical Services and Health Services. In aggregate, net revenue fell 5.1%, to $342 million and EBIT fell 12.6%, to $36 million. EBIT margin contracted 90 basis points, to 10.5% with the underperformance driven by Health Services. In OTS, we delivered EBIT growth and margin expansion despite some revenue headwinds due to capacity constraints at Christie St. We continue to perform strongly in packaged waste, with a high focus on high-margin work where our portfolio of total waste solutions, network, and safety standards provide a competitive advantage. We realized the initial integration benefits from the former LTS and Hydro business units and simplified the network as well as saw increases in volumes through our equipment services business. As expected in Health Services, our revenue declined following the competitive tender for the HealthShare Victoria work, where we retained 85% of the work. The disruption to our Yatala health facility in Queensland continued in the first half following ex-Cyclone Alfred. This resulted in approximately $2.4 million higher logistics costs. Repairs have now been completed and normal operations have resumed. Importantly, we are seeing the turnaround in Health Services, leading to a significantly stronger second half outlook. We are expecting higher revenue from increasing secure product destruction services, and we're using data analytics to reduce revenue leakage. Turning now to Slide 12. The performance of the Industrial Services segment is reflective of the outperformance from Contract Resources. At the overall segment level, we delivered 74% net revenue growth, to $339 million and 164% EBIT growth, to $28.8 million. EBIT margins increased 290 basis points, to 8.5%. Contract Resources increased revenue by 19.5%, to $157.8 million during the first 5 months of ownership. This compares favorably to its 4-year revenue CAGR of 13.5%. Contract Resources increased EBIT to $17.5 million and EBIT margin to 11.1%. This illustrates the quality and resilience of this production critical and turnaround services business. EBITA is a better reflection of CR's operating profit, given it adds back the noncash amortization of quality customer contracts recognized at acquisition. EBITA for the half was $20.1 million and converts to an EBITA margin of 12.7%. This is comparable to the overall group EBIT margin of 12.2%. The integration of CRs and our Industrial Services segment is on track and delivering synergies ahead of plan with our new structure in place since the 1st of January under the leadership of the Contract Resources CEO. We're beginning to realize synergies, particularly in shared customers, workforce planning, and greater asset utilization. And we expect these to build during FY '26 through cross-selling and operational leverage. We now have the leading industrial services platform that positions us to execute on the growing pipeline of significant decommissioning, decontamination, and remediation opportunities. In Cleanaway Industrial Services, we are undertaking a review of metro activities to align our operating and delivery models with the Contract Resources platform, improving consistency, scalability, and long-term performance. We also executed disciplined contract management and delivered on several fleet initiatives to offset the revenue headwinds. We will focus our IS work on activities where, like in CRs, we can earn appropriate risk-adjusted returns with less variable outcomes and as a result, transition towards a structurally higher-margin portfolio. And with that, I'll hand it over to Paul. Paul Binfield: Thank you, Mark. Cleanaway has a sustained track record of earnings improvement, having now delivered 6 consecutive hours of underlying EPS growth. This reflects the quality and resilience of our business model and shows the strength of our established integrated network of infrastructure. Looking at the underlying metrics on the left-hand side of the slide, net revenue for the first half came in at almost $1.9 billion, up 13%. EBIT was $228 million, up 16.9%, with EBIT margin improving 40 basis points to 12.2%, reflecting improving asset utilization, cost efficiency, and demonstrating operational leverage. EBITA was 17.4% higher, at $239 million. This metric excludes the noncash acquired amortization charges and offers a clearer view of the business' underlying cash-generating capability. Net finance costs increased to $73.4 million, reflecting higher debt levels following the Contract Resources acquisition. And at 2.3x leverage is reducing and well within our target and financial covenants. NPATA was 18.5% higher, at $117.3 million, with EPSA up 18.2%, to $5.2. Free cash flow was $74.2 million, $20 million lower than the prior period. Return on capital employed, or ROCE, is a metric that we're transitioning to as it's more commonly used by our peers and adjust for the noncash amortization of acquired customer contracts. ROCE improved 80 basis points, to 9.4%, proving that we're deploying capital more efficiently, generating better returns for our asset base. Similarly, ROIC increased 60 basis points, to 6.3%. So moving now to underlying adjustments. As Mark said in his overview, we're creating a stronger, more stable Cleanaway. The first phase is transforming the business by installing the foundations, the right people, the right standards, the right network, the right systems, and the right operating model. If we think about the underlying adjustments through that lens, the cash costs fall into 4 categories, but all but the first one aligned to our Blueprint 2030 strategy. So the first category relates to costs associated with issues identified as we layered in the strong foundations. In this case, it's treating legacy waste and remediating a legacy enterprise agreement, both dating back to 2018. OTS, post Christie St, we sought to increase the capacity of the network for our customers, and we reviewed the waste inventory at all of our sites. Retesting of legacy waste at one of our sites found that due to the nature of the waste, treatment and disposal costs would be significantly higher than expected. The subsequent independent review for the network -- of the network has confirmed that all waste inventories are adequately provided for. Similarly, with respect to the enterprise agreement, as we strengthened our capabilities to address the backlog of expired EAs, we identified inconsistencies between the evolved scope of work at certain branches and how the expired EA had been drafted. Expense in this half includes review costs to date and a provision for potential further employee compensation that may arise following review of EAs with similar characteristics. We expect to incur low single-digit million EA review costs in each of the next couple of years as we complete this assessment. In both cases, the costs being incurred in this period, don't relate to revenue generated in this or recent reporting periods. And therefore, we've excluded them from our underlying result to provide a true reflection of our continuing performance. The second category of adjustments relates to one-off strategy refresh costs associated with executing the strategy, including driving towards a leaner organization. This will be completed in the second half with a similar cost to the first half. The third category relates to the one-off modernization of our IT systems, where costs cannot be capitalized due to the nature of the software solution. This is foundational to the way that we were going forward and underpins the strategy. We again expect a similar cost in the second half. The last category, the costs associated with building the right network of leading waste infrastructure assets. In the past, that's been acquisitions like Suez, Sydney assets and GRL. And today, it's Contract Resources and Citywide. This has created the leading waste infrastructure network in Australia. We expect approximately $5 million of further integration costs in the second half. The strategy refresh has refined where we want to play with our focus on attractive returns and capital discipline. And you can see this with the rationalization of our C&D service offering and reducing certain [ IS ] metro activities. The outcome of the assessment of the future profitability of the C&D business has resulted in a noncash impairment of the associated assets. We also took a noncash impairment charge against our investment in the Circular Plastics Australia joint venture, where policy is lagging the desire to promote recycled HDPE, resulting in a softer market price outlook. Looking forward, we believe that underlying adjustments will reduce as a result of the foundations that we've installed to build a stronger and more stable Cleanaway. So now moving to free cash flow, just focusing on the material items in the bridge. We generated $56 million or 14.6% more underlying EBITDA. The cash impact of underlying adjustments was $40.2 million or $20.8 million higher than the prior corresponding period. This reflects the cash component of the underlying adjustments detailed in the earlier slide. We expect the full year cash impact of underlying adjustments to be about $30 million higher than the prior year. Working capital movements were adverse at $12.2 million, largely attributable to an increase in receivables related to a growth in the business. The interest paid was $9.2 million higher. And again, this reflected the higher average debt balances from fully debt funding $470 million in acquisitions. Tax paid was $16.5 million higher, and this reflects our higher taxable earnings and a $58.7 million catch-up tax payment. This is the final catch-up tax payment. Maintenance CapEx was $22.7 million higher and is largely timing in nature with the full year expected to be broadly in line with prior year. So the net movements resulted in $74.2 million free cash flow for the half. We expect significantly stronger free cash flow in the second half and importantly, into FY '27 as tax payments normalize, underlying adjustments reduce, and our relative capital intensity continues to decline. So now moving to capital expenditure. Our total FY '26 outlook stays unchanged at approximately $415 million. This includes $15 million allocated to Contract Resources. HS&E CapEx was $8 million higher for the half, but the full year is expected to be lower than FY '25. Our investment in energy from waste continues to be modest as we pursue our originator model. However, recently, we did enter into a joint development agreement for the Parkes Special Activation Precinct in New South Wales. Our 35% minority interest has not resulted in any material upfront capital outlay or binding capital commitment, and any future investment will need to meet our investment hurdles. We decided to pursue the Parkes location when it became clear that there were complex planning issues that [indiscernible]. So having largely built out our infrastructure network of scarce processing assets, our capital intensity is on a declining trajectory. This year, our CapEx guidance as a percentage of net revenue will be the lowest for 5 years. Furthermore, you will see the nature of our CapEx change. There will be fewer larger projects that have been - that have characterized our spend over the last 5 to 10 years and an increasing proportion of our spend on fleet. Fleet CapEx is, by its nature, lower risk, but still delivers good returns to reduce running costs, improved utilization, and more dependable customer service. So finally, I'll turn to net finance costs and dividends on Slide 18. Underlying net finance costs increased $14.5 million, to $73.4 million, driven by the debt financing of Citywide and Contract Resources acquisitions, which was only possible due to the strength of our balance sheet. FY '26 full year outlook for net finance costs is around $155 million. Our previous guidance, approximately $150 million was based on the forward curve in August when we provided our initial guidance. February rate rise is clearly outside of our control. What is in our control is delivering to or above operational expectations, which we're demonstrating today with our upgraded EBIT guidance. Moving to dividends. The Board has declared a fully franked interim dividend of $0.0335 per share, up 19.6%. This increase reflects the business' strong underlying growth, our confidence in future delivery, and strategy execution, including our ability to deliver strong free cash flow growth. With that, I'll hand back to Mark. Mark Schubert: All right. Thanks, Paul. As we look beyond FY '26, I want to provide a preview of how we are positioned for sustained value creation through to 2030. We have now completed a comprehensive refresh of our strategy that ensures we maintain the positive momentum generated over the last few years. The review of our cost base has always been part of our strategy. We have restructured our indirect labor, accelerating the realization of embedded operational efficiency created during the first phase of the Blueprint 2030 strategy. We've also identified further nonlabor cost reduction initiatives. At the heart of our refresh strategy is driving top line growth by delivering an improved, hard-to-replicate customer value proposition that combines 2 critical elements. Firstly, value for money. This means competitive pricing backed by reliable service, operational excellence, and scale and network advantages that our customers can't get elsewhere. And secondly, seamless customer experience. In today's digital world, this means customers expect easy and seamless experiences, transparency, responsiveness, and frictionless service. We're investing in systems and processes to deliver this. Our CustomerConnect investment positions us as Australia's most digitally enabled waste operator, creating barriers to entry that smaller competitors cannot replicate. Unlike fragmented regional players, Cleanaway's technology-enabled solutions will provide seamless customer experience across our unrivaled network. Our technology platform will increasingly leverage data analytics-led insights to understand customer behavior and optimize pricing by segment and route, allowing us to deliver personalized solutions to capture premium pricing where differentiated service is provided. We have the largest heavy vehicle fleet and the most extensive network of interconnected collections depots, transfer stations, processing facilities and landfills across Australia. Our scale creates operating leverage and strategic advantage that's hard to replicate. We will leverage our scale and lock it in, in 3 ways: Firstly, we'll use our digitally enabled sales and customer service teams to drive higher internalization and utilization of our integrated network. We capture a higher marginal contribution from every incremental ton of waste we handle through our existing network and through our powerful operating leverage. Secondly, we will extend our scale as an advantage by consistently executing best practices across our new national verticals in solid waste by flexibly reallocating resources based on demand patterns by cross-selling total waste services across our portfolio of customers and by ensuring we get value for money pricing. Third, we'll hardwire our branch-led operating model end-to-end, which ensures stability, creates transparency, drives local ownership and enables fast decision-making. Finally, our refresh strategy will deliver strong free cash flow growth from top line growth, margin expansion, and strong capital discipline. We are planning a dedicated strategy investor briefing on the 21st of April with further details to follow soon. Now let me provide you with an update on our FY '26 guidance and trading outlook. We are pleased to upgrade FY '26 EBIT guidance to between $480 million and $500 million. This is based on the robust first half performance and our confidence in the outlook for the rest of the year. I will walk you through the key drivers of second half performance that give me the confidence in providing that guidance today. We will continue to exercise price discipline in our Solids segment and expect positive organic growth. We're seeing supportive market conditions for project work in Post Collections in the second half. We also typically have a second half skew with higher CDS volumes across all states during the late summer months and the timing of our carbon benefit realization. Our Environmental and Technical Solutions division is well positioned to deliver improved performance. We are expecting strong organic growth across most lines of the OTS segment. We expect continued OTS integration benefits and a strong recovery in Health Services. And we will also begin to realize some of the synergies resulting from the Contract Resources acquisition. As I discussed earlier, we're expecting to capture approximately $15 million in-year savings from the organization restructuring completed over the last couple of months. Importantly, these savings are expected to deliver an annual continuing benefit of at least $35 million in FY '27. This all supports a stronger second half, which is reflected in our guidance. We have clear line of sight to these drivers, positive operational momentum, and confidence in our ability to deliver within this range, noting the midpoint of the range represents approximately 19% year-on-year EBIT growth. What's exciting is the trajectory continues beyond FY '26 with our refresh strategy unlocking many organic growth levers. Critically, our capital intensity is on a declining trajectory. The $415 million CapEx guidance will represent the lowest capital spend to revenue ratio in the last 5 years. This sets up accelerating free cash flow growth and improving returns beyond FY '27, which brings me to my final slide for today. As you can see, we now have a track record spanning multiple years of doing what we said we would do. Calling out a few highlights. We have grown the top line by 52.5% or $646 million over this 4.5-year period. We have demonstrated the powerful operating leverage we have in the business, growing underlying EBIT by 75.4% or $98 million across the same period. We are focused on both the returns from capital we spend and improving the base business, and this translates to the steadily improving return metrics you see here. What you cannot see on this graph is that we have done all of this by pulling sustainable handles. That is handles that will continue to be available and grow into the future. We are delivering resilient and dependable returns underpinned by our network of infrastructure assets with an enviable growth trajectory. Our expanding margins, improving returns, and strengthening free cash flow create compelling value. We are building a stronger, more stable, more capable, and more profitable Cleanaway. The exciting part is that with the refreshed strategy, we have line of sight and a laser focus to continuing this performance in the years ahead, and I'm really looking forward to discussing that with you soon. Before we hand over to questions, I do want to sincerely thank our employees for all their hard work. These strong results would not be possible without them. And with that, we will now take questions. Operator: [Operator Instructions] The first question today comes from Lee Power from JPMorgan. Lee Power: Just Mark, can you talk a little bit around the -- just the volume backdrop? I get there's a lot of moving parts which is better for Citywide. I think you're still calling out low metro volumes for C&I. I'm just trying to reconcile that volume piece with the pricing backdrop given that the commentary of the 2H around positive organic volume and price outlook. Mark Schubert: Yes. No worries, Lee. Thanks for the question. So I mean the first thing I'd say is sort of on metro C&I, we would say volume is flat, price is up. I think you should think about that as us also exiting some low-value C&I, which creates capacity for high-margin customers. I think, yes, the Citywide obviously coming through on a PCP basis is a positive. I think then on sort of other sort of volume areas, so landfill volumes -- just remember, landfill volumes is not just C&I. There's muni, there's civils, there's C&I, there's restricted waste, all those different things. What we're seeing particularly strongly in the landfill volumes is civil jobs coming through. So we've got a strong runway of civil jobs. The example to bring that to life would be, say, the M8 tunnel works in Sydney that we're seeing coming through. And then finally, just on price. While I've got the -- sort of the question on volume, I will also talk on price. I think price has been positive and importantly, well above inflation. Lee Power: Yes, that's really useful. And then maybe just when we think about into the second half, like if I just annualize your implied 2H guide at midpoint, you get $524 million EBIT. Is there any sort of color you can give us around the seasonality? I mean you've obviously called out a 2H skew in the Solids business. So help us think about updated thinking on the ramping profile of acquisitions through that period. I guess what I'm trying to get at is, what's an exit -- a sensible exit run rate? And how much of that's your initiatives versus just a normal skew in the business? Mark Schubert: Yes, sure. I mean let me try and bridge you the second half, which I think will answer your question. So like -- as you said, if you take the half 2 number implied by the midpoint of the guidance, that's how you get that number 260-odd that you just talked through. I think the drivers -- importantly, the drivers we've got good line of sight to. If I split them in 3 ways, if I talk about Solids firstly. So what we're seeing on Solids is strong Solids volumes coming through and price. We just talked through some of the drivers of that just a moment before. We are definitely seeing that Solid second half skew, and we talked about that previously, but just to go through it again, that's the CDS scheme is driven by volume in the late summer months. That's when the volume comes through, and that's obviously in that -- in the second half of the year. Carbon benefits also always come through in the second half. So that's kind of the Solids picture. If we go to ETS, we can see a good outlook of projects -- OTS projects in the outlook. We can see the Health business recovering. And just remember, that's -- we won't have the same issues that we had in the first half, which were related to the roof at the Yatala facility and having truck waste down to the South Coast. So that business will recover. We've got the OTS integration benefits coming through. So remember, that's the merger of Hydro and the LTS business, and we're talking about those benefits coming through. You get the first round of CR synergies, that's around sort of $3 million. And then the third bucket in the second half is you'll get the benefits of the indirect cost review. And remember, that's the $15 million in the second half that helps us step up those earnings. And just to kind of like recap and remember, so that $15 million is the number that then becomes more than $35 million as we go into FY '27. So $15 million in the second half, more than $35 million in FY '27. The difference is $20 million. Lee Power: And then maybe just one more, if I can. Just Paul, like you're obviously confident around the cash piece into the second half. I think in your comments, and correct me if I'm wrong, before, you said the full year cash impact of some of those adjustments will be $30 million higher than the prior year. Obviously, the first half is a pretty big part of that. So can you just remind me what that means on a second half basis in addition to the catch-up of the cash tax piece finishing? Paul Binfield: Sure. So Lee, if we look at prior year, the impact -- cash impact underlying adjustments is roughly about $50 million. So I'm calling out a $30 million step up on that. So roughly $80 million for the full year. We've taken $40 million in the first half. In terms of the tax catch-up, again, $58 million that we paid in December, that is the last catch-up tax payment. So we had back to normal installment payments into the second half. And you should think of a figure sort of in that region of about $48 million to $52 million, $53 million in terms of installments into H2. So if you look then beyond that into '27, again, hopefully fewer underlying adjustments, you're seeing no more catch-up tax payments. You're seeing a reduction in capital intensity in the business going forward and increased earnings and much of that increased earnings obviously coming through from higher margin type activity. So again, you don't have that nasty pinch in terms of the need to deploy additional capital to drive those earnings. So again, it gives us some confidence that the H2 will be better, but '27 will build on that further. Operator: The next question comes from Peter Steyn from Macquarie. Peter Steyn: Congrats on the upgrade. Just Paul, keen to just understand the underlying adjustments a little bit better and particularly the tax-free impact in the EBA issues. If you could just -- I mean, you've made the point that they were back in 2018 time lines. How far did they extend time line wise? Why is it that they've only become an issue now? Just keen to understand that and then your conviction at it being the -- you're drawing the line underneath those issues. Mark Schubert: I might have a go at that, Peter, if that's all right. By the way, I got my motorways wrong in the previous question. It should be the M12, not the M8. I am a bit confused on the motorways. All right. So just in terms of legacy waste. So let me start by saying today, we are fully aware of our waste inventories. We only accept waste where we understand the disposal pathway. We have clean waste acceptance matrices that drive that, and we make appropriate provisions at the time of acceptance. Let's go through the history. So the provision -- the original provision was made at the acquisition in 2018, but the adequacy wasn't checked because of manual systems. Since 2022, what we've been doing is installing the foundations into the company, and we talked about safe, stable, profitable Cleanaway, and like Paul said, right people, right standards, right systems. Post Christie St, as we sought to maintain the capacity of the network for customers, we did a review of waste inventory at one of our sites and found that the cost of treating and disposing that waste was significantly more expensive. We then had that validated by third parties. We also conducted further cross-Cleanaway auditing to ensure there was nothing else like this. We also confirmed that there's nothing for the CR's acquisition, and there's nothing from Citywide. And as Paul said, the costs are not related to the revenue received over the last 8 years, and that led to the decision to exclude it from the underlying -- to give you the best view of the ongoing performance of the business. If I run through the same summary for the enterprise agreements. So just remember, this has been flagged as a contingent liability for a couple of years now. Again, this is about we've been installing the foundations into Cleanaway, again, right people, right capability, those sorts of things. In the case of sort of industrial relations and enterprise agreements, we've been increasing the capacity and the capability of the function. We did that to initially clear the backlog of expired EAs, so we could get into the approach that we're in now, which is the proactive approach to negotiation. As we renegotiated this time, we identified a 2018 enterprise agreement where the work on the ground was different to that anticipated by the expired enterprise agreement. That led to a review of the enterprise agreement, and during the first half, the remediation of that enterprise agreement. We're now proactively looking at EAs with similar attributes. The underlying adjustment covers the 2018 EA, the remediation of the cost and a provision for other similar EAs. So I think that -- hopefully, that sort of like summarizes both those answers, Pete, for you. Peter Steyn: Yes. That's useful. And then just if you could give us a little bit of a sense of what you're seeing around ops excellence more generally, the margin improvement at solid waste was pretty handy in the half. If you could just shed a little bit more light on how the momentum in that program is going. Mark Schubert: It's going strongly. And I think what you should find is it will really -- it will accelerate. So we're pretty happy with the Solids performance and outlook. So in terms of the ops excellence, I mean, you saw us really focus on the branch operating model, labor and fleet efficiency. I think I say accelerate, Pete, because what we're seeing is we've got the branch-led operating model in now. But then what the switch now to the national verticals means that we've co-located all the like branches. So all the landfills are together, all the transfer stations are together, all the resource recovery facilities together. And so the value drivers are all the same. And the risks are all the same as well. And so it just means we're going to have experts running those plants, led by experts in those plants, and we will get much further operational excellence coming through. So I think the initial strong foundation has set the branch-led operating model, enabled us to do the restructure in a stable way, and now we get to really accelerate through the ops excellence. Operator: The next question comes from Jakob Cakarnis from Jarden Australia. Jakob Cakarnis: I just wanted to focus on the free cash flow, if we could, please. I appreciate the commentary about a stronger second half. It looks like you might best the first half somewhere between $40 million to $50 million based on the bridge items that you've got us. But it does look as though, at least from what I can see initial impressions, you'll be below the PCP. Can you just kind of calibrate those 2 things for me if that's the right way of thinking about it? Paul Binfield: Yes. I'm not going to give specific guidance in terms of free cash flow for the half. I guess the important thing I'm seeing here, Jakob, the key trends in terms of an improving outlook. So I think we've been pretty clear in terms of expectations about a further $40 million in the second half of underlying adjustment spend. We've been through the CapEx lines in terms of giving you an indication as to how we see that spend dropping out. Working capital, typically really well controlled in this business. We haven't seen any real deviation in terms of cash collections or credit risk. I don't have concerns on that front. I think importantly, too, you should look at the impact of the strong second half EBITDA performance as well, and that clearly has a beneficial impact in terms of the 2H cash flow. And as I said, if you look at '27, you have the additional benefits of lower cash outflow in terms of underlying adjustments and decreasing capital intensity as well. Jakob Cakarnis: And then just one for Mark. I mean, Contract Resources for a lot of people was a little bit of a surprise. It's good to see that it's doing a little bit stronger maybe than the business case and towards the margins that you thought it could do when you acquired it. Do you want to add just a little bit more color for how we think about that into '27 as well, just the scope of work that's coming down the pipe and I guess the integration more importantly with the existing business, please? Mark Schubert: Yes, sure. So I think maybe just in terms of the second half, I mean, what I'd say is we have a really strong first 5 months from the Contract Resources team. I think you should understand that, that includes sort of the peak Australian turnaround season, and that's just because really where winter falls. That's when the work gets done in those plants because it's the most comfortable time to do it. And so I think in terms of the sort of second -- or full year performance for Contract Resources, don't go and take 17.5 divided by 5 and multiply it by 11. That's not right. I think what you should estimate it to be -- for Contract Resource and Cleanaway, you should think -- sorry, Contract Resources and Citywide, you should think the number is about $35 million, excluding the $3 million of synergies. Again, that's a really strong outcome. If you think about where we were in August last year when we were talking about sort of circa $30 million. You're seeing the growth come through in all parts of CRs. They are continuing to gain customers and grow the share of wallet within their customer set, both here and the Middle East. So it's really positive performance, and it's pretty much exactly what we thought it would be as it's come across. Jakob Cakarnis: And then just into '27, sorry, Mark, like, is this -- Mark Schubert: Yes. Jakob Cakarnis: -- a more sustainable earnings base, do you think, like a representation of go forward? Mark Schubert: Well, I think we -- I mean, our expectation is CRs will continue to grow. I think there's real opportunities in -- we'll be more thinking about CRs plus IS going forward as opposed to CRs by itself. We've already -- we already see people dressed in red, driving blue trucks and all of that sort of thing. So that's well in hand. It's going to be really difficult to separate the 2 because the work is just being done by the most logical group and the assets are all starting to be shared. I think longer term, you should definitely think about that growing DD&R sort of vector, that is alive and well. The example there is Contract Resources today, we've got 3 groups on 3 different platforms in Bass Strait doing work for Exxon. So that is -- that's real DD&R. The nice part is Contract Resources doesn't even call it DD&R, they just call it work. And I think we should think that, that will continue to grow steadily into the future. Operator: The next question comes from Owen Birrell from RBC. Owen Birrell: Just a quick one on the financing cost. I think previously, it was 150, that's jumped up to 155. Just off that the leverage at 2.3x, is there a deleveraging time line? Or you guys are still pretty comfortable with where you sit in the headroom? And any refinancing risks looking into '27, '28? Paul Binfield: Yes. Thanks, Owen. In terms of delevering, again, expectation that we will continue to steadily delever. So if you look at -- if we take our long-term view into '27 and '28, we expect to see that to continue through that timeframe. And again, obviously, that's supported by the comments you've heard today about the lower capital intensity going forward. In terms of refinancing risk, we've done the heavy lifting on that front. So you'd have seen that we issued USPP notes for $500 million for tranches of 8, 10, 12, 15 years. So we pushed a really significant amount of debt out with some great tenure. So to be honest, I don't have any concerns about refinancing risk at all. And I'm very comfortable, frankly, with the leverage as well. Owen Birrell: Great. And just one other one. The MRL Southern expansion CapEx, is that just very much a one-off? Or could we expect more of that to come? Paul Binfield: No, that simply is now construction. So the bit of MRL that we moved into now, we call it the Southern expansion, and that is simply construction, one of the major sellers there. And that simply is ongoing. It tends to be a bit lumpy as you'd expect, but it is simply ongoing. Owen Birrell: Great. And just on associates, I noticed that was up $6 million. Is that a sustainable piece or [ bit of a question then ]? Paul Binfield: Yes. The primary driver there has been, we've seen the improved profitability of the CPA PET facilities, which has been good. Obviously, the continued weakness is in the HDPE facility. But the main driver was the Eastern Creek joint venture we have with Macquarie in terms of the org energy from waste property. So we had a block of land there. Clearly, we have no need for that land going forward, and we sold it at quite a significant profit, I think about an $8 million profit, and that would come through the JV result. That JV has been closed down now. Operator: The next question comes from Cameron McDonald from E&P. Cameron McDonald: Just 2 questions from me. Mark, just when you're talking about the visibility in the building blocks going into the second half and then into '27, can we -- can I just throw some numbers -- some items at you to get some granularity if we can. So the defense contract, please, like where -- what was sort of the benefit for that in the first half? And what's the expectation for the second, the Eastern Creek organics investment, and then the ramp-up in that, and then the Western Sydney MRF please, and then Tasmanian CDS? Mark Schubert: Yes. So I mean I think we're not necessarily commenting specifically on the profitability of sort of individual contracts. I'll talk around them. I mean, I think the defense contract is well established now. We obviously had the large -- Cameron McDonald: Talisman Sabre? Mark Schubert: -- Talisman Sabre exercise, but I think there's lots more opportunities to expand our offering with the defense contract. And obviously, we're working actively through that. Eco, which is the old GRL for sort of long-time listeners, that's the -- that's going well. You're definitely seeing us win muni contracts and the organic stream. So that's the tailwind that I talked about where there's 2 things going on. The government has mandated the shift to FOGO. That comes through muni where all councils need to have a FOGO offering by 2030. And we call it the COFO mandate, which is a commercial food organic, that basically is July of this year that large customers need to offer their -- will need to provide a food organics solution. That's all what that means, that's all good for us because we've got the infrastructure to process that. So we'll continue filling up Eco with those sorts of contracts and volumes. Western Sydney MRF is going really well. Again, the expectation was we would slowly build contracts into that. As you guys all know, that's a really well-located plant there and can intercept volume that would otherwise find its way coming further closer to town. So we've been successful there, winning a couple of council contracts. And Tas CDS is still in the ramp-up phase. Just remember that CDS schemes take about 18 months to ramp. Volumes there have been ahead of what we would have expected. And obviously, that program started up really strongly. There's a lot of pent-up, I think, storage of containers that surged through. And then we've seen the summer surge as well. So it's just really pleasing to see. Cameron McDonald: Okay. And then just is there any update on potential license and/or height extension in New South Wales on your landfills, please? Mark Schubert: Yes. So I mean, I guess the news there is we continue to work through the, we call it the extension -- extension or expansion -- I got to remember -- it's extension, Lucas Heights extension, which is the extension of the landfill to the area where the -- sort of the gun club was previously. That is a really active project. There's lots of work going on around the environmental approvals of that. And that's obviously a key project for Sydney and for New South Wales in terms of landfill air space. But I would say that is on track at the moment. I think in terms of other landfills, obviously, there's -- we're looking at the Eastern Creek -- sorry, the Kemps Creek, I guess that's the expansion. And of course, there's some work underway at Erskine Park in terms of hydros. So there's lots of sort of extension activities, all which I would classify as on track and in hand. Cameron McDonald: And so what would be the expectation around timing at this stage on getting approvals or some sort of decision? I mean, it's difficult with -- dealing with government, but best guess. Mark Schubert: Yes. I think what I would say there is we have significant airspace in Sydney until the early 2030s timeframe. What this project is trying to do is extend that forward for a long period of time and bridge into obviously, energy from waste, which then even extends it further. I think it's not something where we need approvals in some sort of rush, and we're just working through the long lead time type stuff and stepping that forward. So again, it's on track. The idea with these is to do a cost-driven project as opposed to a schedule-driven one, and we're on the cost-driven track at the moment. Operator: The next question comes from Robert Koh from Morgan Stanley. Robert Koh: First question is on HDPE, which I think you said that the small impairment on Circular Plastics was due to policy not being where you wanted. Could I maybe just ask what was the policy that you would have liked and what do we end up with? Mark Schubert: Yes. So I mean this is -- so just to recap for people. So in Circular Plastics, there's joint ventures, there's 3 plants. The easy way to remember it is the ones that start with A, which is Altona and Albury, they are the PET ones. They're performing well. And as Paul said before, that's because the plant is performing well and then the offtake is strong. And the offtake goes to, in Albury's case, to Asahi and to Altona's case, to Coke. And the joint venture there is the 4-way joint venture between Asahi, Coke, Pact and us. The challenge that we've had is at the Laverton plant, which is the HDPE or PP plant. If you remember what is that, that's milk bottles, ice cream containers, shampoo bottles, that sort of thing. This is a joint venture between Cleanaway and Pact. The good news is the plant itself is performing really well. The issue is that the federal government hasn't introduced a minimum domestic recycled content in milk bottles. And what that means is that dairies are unwilling to pay the extra price associated with recycled material. That would be like less than $0.01 per milk bottle. And instead, they're importing virgin material to make those milk bottles. I think at a headline level, this is the right plant at the wrong time. And so hence, with that sort of policy setting, we've taken the decision to write down the investment. Robert Koh: Just moving over to DD&R. Just -- and congrats on very encouraging early results there. Can you talk to any of the regulatory developments that are coming up in that space that might help or hinder you? You've got a Victorian parliamentary inquiry. Are we anticipating that NOPSEMA issues any more directions or anything like that? Mark Schubert: I think we're not really relying on sort of regulatory drivers. I mean what you see when you look at CR, is CR's top 8 customers are the #1 oil and gas companies in the country. They're at such a maturity level with those customers that they're virtually embedded into their operations, and they become the natural go-to to help out with that work, and help plan it, and then execute it. And that's what we see happening. Like I said before, Rob, like surprisingly, the CR's team doesn't even talk about DD&R, they just talk about as work as the natural work that follows on from being the incumbent. And so I think I know there's things like, we'll have to pull out the subsea pipelines and stuff like that. We don't really worry about that because there's enough work to do even if that's excluded, and we'll still be involved in the work of cleaning those pipelines before they get abandoned in any case, regardless of whether they come out of the ocean or not. Robert Koh: Okay. That sounds good. Final question for me. I'm just trying to think about this more than $35 million annualized cost saving that you're talking to. Is that incremental to the previously guided CustomerConnect benefit, which from memory was about $5 million in FY '27? Or is CustomerConnect part of this $35 million plus? Mark Schubert: No, it's incremental. Rob, good question. Yes. The way you should think about that, just to go back over the number so everybody listening can follow on. So we're saying it's $15 million in the second half of this year. That converts to more than $35 million in FY '27. It's mainly labor. It's around 250 FTAs. It represents about 10% of our indirect labor force, and it's mostly done. What we've said, when you say it to be greater than $35 million, you should think that what that means is there's further nonlabor opportunities that we've talked about, and we've listed them out in the voice over. But that seems like procurement efficiencies, further overheads rationalization. And when we talk about procurement, we're talking about both upstream and downstream procurement, where we've got a laser focus on some opportunities there. Operator: The next question comes from Nathan Lead from Morgans. Nathan Lead: Just interested in your comments there about the capital intensity and the declining trajectory. Can you put a bit more around that because obviously, you're quite a capital-intensive business. So if you can get the CapEx flat to declining, it's particularly strong value driver. So just how are you defining capital intensity? And where do you think that could end up? Mark Schubert: Well, I guess we're defining it as CapEx divided by net revenue. That's how we're defining it. So hopefully, that's right. I think you should think about the fact that over the last period of time, in the whole history of Cleanaway, Cleanaway has been evolving this fantastic network. Over the last 3 or 4, 5 years, we've been trying to complete that network. And we actually -- when we looked at the strategy work, the next phase of the strategy, we look back and we go, you know what, the network looks pretty good. It's basically complete. The only sort of outlier there is, obviously, we will upgrade Dynon Road in 2028, and you guys all know the numbers there. So therefore, the investment shifts towards smaller investments rather than the larger investments that we've been doing in the past. And the easy example there is fleet replacement, which has a very certain return. And obviously, we're really excited about modernizing the fleet. So when we look at CapEx as a percentage of net revenue, we see that number dropping. We see it has dropped and it will continue to drop as we look forward. So that's kind of what we mean. Hopefully, that's the color you were looking for. Nathan Lead: Yes. That's great. And second question is just in terms of the landfill remediation spend that goes through that cash flows. Can you give us a bit of an idea about what that looks like over the next 3 to 5 years? Paul Binfield: I'm not going to go out 3 to 5 years here, Nathan. But certainly, I think we've given you some indication that you should expect a slightly higher spend in the second half. And into '27 -- you should expect to see it step up a little bit in '27 and '28 as well. So importantly, you would have seen us obviously close the New Chum landfill and there's obviously a requirement to get on with the capping process there that will drive some of that remediation spend. And we've got some remediation activities, so capping activity at MRL and that as well. So again, you should expect to see the remediation spend a little higher in the second half and '27 and '28 a little bit higher than '26 as well. Operator: The next question comes from Nicole Penny from Rimor Equity Research. Nicole Penny: Referring to Slide 10 and the Solid Waste business splits, could you provide some guidance on which of the business lines see the greatest opportunity over the 3 to 5 years' timeframe, please? Mark Schubert: I'm just going to look at Slide 10. Okay. Interesting question. So I think my reaction to that initially would be, well then I would absolutely look at one of these sort of national verticals and think that any particular one has something special. Each has significant growth and improvement opportunities within it. So if you go back to what we're saying sort of -- I alluded to in the sort of strategy refresh sort of take there, there's a significant opportunity on margin expansion and efficiency that we have been setting up for in the first half of the strategy that now with the digitization layer coming in now will then be further enabled by just improving the way we work and also improving how we optimize the hard assets. I think if I look at -- we'll reduce -- the volume will obviously drive the equation. And one of the things there that you saw us talk about through the customer value proposition discussion also was we're not -- our plan is not to really add to the network. Our aim is to really drive the network like it's never been driven before in a really positive way and get increased internalization, increased utilization and those sorts of things. There's definitely tailwinds as well. There's tailwinds through the FOGO transition that we talked about before. There's tailwinds through the data analytics work into eventually AI and stuff like that. And that will drive volume and price through this network. Operator: The next question comes from Amit Kanwatia from Jefferies. Amit Kanwatia: Well done on the guidance increase. Congrats. Just a couple of quick questions. Similar to Kemps, if I unpack the second half EBIT a bit more, at the midpoint, it's -- sorry, $262 million at the midpoint in second half that's implied. And then if I think about the contribution from acquisitions, I mean, you've got LMS coming in. You've got the cost savings as well coming in. I'm just more interested in kind of understanding the growth in the base business into second half versus first half? Mark Schubert: Yes. So I mean we're not going to quite break it in that detail. I think what you should be thinking about is the business -- the base business is performing strongly. You can see that in the guidance upgrade that you just mentioned. You should be thinking that CRs and Citywide will deliver that number around sort of 35. And obviously, the base business progressed. That's obviously after some of those first half headwinds that we talked about probably around the AGM time, things like New Chum and stuff like that. So really, the underlying business is looking robust. And then I think it's back to kind of that bridge where you break it into Solids EPS and sort of indirect cost review benefits. It's -- in Solids, it's the price volume coming through. It's the Solid -- it's the second half skew driven by particularly CDS and carbon. In -- so ETS, it's the project outlooks; in OTS, it's health recovering, it's the OTS integration benefits and the CR synergies. And then at the group level, it's the indirect cost review, which is the sort of the $15 million. I think if you want to get to the one, which is like, what do you need to believe to get to the top of the range? Well, you just need to believe lots of small things. There's no one big thing that drives it to the top of the range. And that's a great thing about Cleanaway. Cleanaway is just a sum of lots of smaller moving parts. And so therefore, it's quite resilient. Amit Kanwatia: Sure. Yes, I think fair to say that second half growth will be more than first half. I mean if I can just move on to the capital allocation and then I mean, given the context of capital intensity, but maybe if you can speak to how are you thinking about capital allocation given your comments today over the next few years? Mark Schubert: Well, I think on capital allocation, you're seeing a few things. You saw us talk about the fact that we are -- what we're doing on construction demolition. So we're allocating -- we're strategically allocating capital to parts of the business that we think we can get the right returns for the risk that sits within them. In the case of C&D, we don't see that because the resource recovery activities moved to the demolition side. And so we will participate in that at the landfills and equip the tickets there. So that's absolutely fine. I think in terms of the capital allocation, you're seeing us be very thoughtful about muni where we've allocated capital to the Cairns contract. We see Cairns as a great location, regional location, where we can create a strong position there. And that's very consistent with the sort of the muni strategy. You can see us in Industrial Services reducing our capital allocation towards high-margin but low ad hoc metro work and instead shifting to contracted work using the sort of the CRs operating model. And then at a more macro level, you can see us saying, listen, the network looks pretty good now in terms of completeness. So therefore, you should expect us, therefore, to require less overall capital as a result, and our strong focus will be to fleet renewal and then just really driving our volume through our network using the advantage that we've built over the last 80 years. Amit Kanwatia: I mean it looks like the free cash flow seems to be improving, earnings strong. I mean, obviously, leverage is there. Is there a case for payout ratio to go up in the next couple of years given what you've said today? Do you think? Mark Schubert: You want to talk about payout ratio, Paul? Paul Binfield: Yes, payout ratio. It's not something we've given too much thought to at this stage, Amit. We think the ratio of 60% to 75% is -- it feels pretty sensible. We're obviously at the top end of that range. Obviously, we have significant franking credits, and therefore, that sort of encourages to be paying out perhaps more than less. But at this stage, we are focused on making sure that we get that balance right between capital and dividend and maintain that deleveraging profile as well. Amit Kanwatia: And just a final one. Maybe just the strategy around waste-to-energy in New South Wales and maybe if you can touch in the Victorian market as well. Mark Schubert: Yes. So I mean in New South Wales, I guess, sort of the statements that we sort of shared around that, which we haven't talked about in these calls, but it's not -- it's been sort of announced by others. So we've signed the JDA for the Parkes energy-from-waste with Tribe and Tadweer. That is just -- that's the capital-light originator model playing out. We end up with a 35% interest and the waste supply for the C&I tranche. So that's the low-cost access for customers that we've been driving for. We prefer the Parkes location now over Willawong, and that's just due to planning uncertainty and the Parkes has sort of more support from locationally from the government and from various stakeholders. So that's the sort of progress there. There's a long way to go with these sorts of projects. So there's nothing really much in the near term there in terms of investments. I think in terms of Melbourne; Melbourne, again, is just in long-term sort of progressing capital-light approvals. And so that's the status there. So I guess the main update was the one that Paul walked through on Parkes. Operator: At this time, we're showing no further questions. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: It is now my pleasure to turn the conference over to Mr. David Hoffman, Delcath Systems, Inc. General Counsel. Thank you. You may begin. Please note this conference is being recorded. Greetings, and welcome to Delcath Systems, Inc. Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Thank you, and welcome to Delcath Systems, Inc. fourth quarter and year-end 2025 earnings call. David Hoffman: With me on the call are Gerard Michel, Chief Executive Officer; Sandra Pennell, Chief Financial Officer; Kevin Muir, General Manager, Interventional Oncology; Vojislav Vukovic, Chief Medical Officer; and Martha Rook, Chief Operating Officer. This statement is made pursuant to the safe harbor for forward-looking statements described in the Private Securities Litigation Reform Act of 1995. All statements made on this call, with the exception of historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Actual results may differ in a material manner from those expressed or implied in forward-looking statements due to various risks and uncertainties. Although the company believes that expectations and assumptions reflected in these forward-looking statements are reasonable, it makes no assurance that such expectations will prove to have been correct. For a discussion of such risks and uncertainties which could cause actual results to differ from those expressed or implied in the forward-looking statements, please see risk factors detailed in the company's annual report on Form 10-K, those contained in quarterly reports on Form 10-Q, as well as in other reports that the company files from time to time with the Securities and Exchange Commission. Any forward-looking statements included in this call are made only as of the date of this call. We do not undertake any obligation to update or supplement any forward-looking statements to reflect subsequent events or circumstances. Our press release with our 2025 results is available on our website under the Investor section and includes additional details about our financial results. Our website also has our latest SEC filings, which we encourage you to review. A recording of today's call will be available on our website. 2025 was a pivotal year delivering over 40% volume growth. Gerard, please proceed. Gerard Michel: Today, we operate 28 active treatment centers and the highly anticipated CHOPIN results demonstrating clear clinical benefit when Hepzato PHP is sequenced with checkpoint inhibitors is slated for publication. Entering our third year of launch with strong momentum, we are confident that continued site activations and commercial expansion, and the CHOPIN results will drive meaningful revenue acceleration and create substantial shareholder value. 2025 was a pivotal year in which we achieved over 40% volume growth and achieved record annual revenue of $85,200,000. We currently have—excuse me for that little bit of a glitch on the screen here. We have organized our commercial strategy around three priorities: expanding site capacity, changing prescribing patterns, and building referral networks. We track our progress against these priorities through three internal KPIs: number of site activations, rate of new patient starts per site per month, and the average number of treatments per patient. Capacity is a function of the number of active sites and the volume of patients our sites can treat. As expected in the launch phase of any product, the first two KPIs have shown significant variability where small changes in patient numbers can have a large impact, especially when treating an ultra-orphan patient population. Despite this variability, we are very encouraged by the trends we are seeing. Treatment number per patient has remained consistent at approximately four cycles per patient. We use these KPIs internally to model our projections and set guidance. The first strategic priority, expanding site capacity. We had a strong surge in activations early this year, bringing three new sites online. Specifically MD Anderson, UT Southwestern, and Mayo Clinic, Scottsdale. We now have 28 REMS-certified treatment sites. Leading cancer centers continue to engage and we are targeting 40 active treatment centers by 2026. The pace of activations will likely be variable, given the planned timing of the Salesforce expansion, as well as the anticipated increase in interest and support following the pending publication of CHOPIN results. We expect more activations to occur in the second half of 2026 compared to the first half. The expansion of the U.S. commercial team divides the country into nine regions. In addition to the expanded commercial team, we have revamped our medical affairs team with both new leadership and a new team of MSLs. We are off to a strong start in 2026, having treated new patients per site per month at a rate of approximately 0.75 for the first two months of 2026, similar to the pace we saw in 2025. For context, for the full year in 2025, the average rate was 0.5 new patients per site per month, with significant seasonality. We anticipate some seasonal loss of capacity in the late summer. Seasonality is partially driven by the small number of REMS-certified team members at a treating site. For instance, when key personnel take vacation, sites cannot easily add new patients while also servicing our existing accounts. While we are working to minimize the seasonality by increasing bench strength—sites cannot easily add new patients. Total site capacity is a function of open sites and the total number of patients a center can treat, which can vary by month. Our 2026 projections regarding total site capacity, which can vary by month, assume a similar summer seasonality pattern that we experienced last year. Our second strategic priority is changing prescribing patterns by expanding the set of patients our treating oncologists consider appropriate for PHP. With PHP clearly addressing a significant unmet need in liver metastases from uveal melanoma, recent 2025 publications and real-world evidence have reinforced the value of early and effective liver-directed therapy. Several of our strongest advocates highlighted that initiating PHP treatment earlier in the disease course can meaningfully improve outcomes by reducing tumor burden, and that combining Hepzato with systemic therapies can further enhance effectiveness. We expect increasing impact from the CHOPIN phase 2 data. As a reminder, this investigator-initiated trial showed that sequencing PHP with ipilimumab and nivolumab delivered statistically significant and clinically meaningful improvements in one-year progression-free survival, overall survival, and objective response rates versus PHP alone, all within a very short 10-week treatment window. The ability to quickly initiate this combination therapy addresses concerns about delaying systemic therapy, and the combination itself addresses concerns regarding treating patients with extrahepatic disease. Leading centers such as UCLA and Massachusetts General Hospital are already adopting CHOPIN-inspired protocols, including flexible sequencing and combination use with agents like bevacizumab in eligible patients. These data are helping both to establish Hepzato as a preferred first-line liver-directed option and to expand the patient populations our treating oncologists are comfortable referring for PHP treatment. Our third strategic priority, developing referral patterns, is critical to ensure eligible patients are identified and efficiently referred to one of our treating centers. The majority of patients with uveal melanoma are initially diagnosed with disease and managed at community or non-PHP institutions, making early referral a critical lever for both patient capture and better outcomes. To address this systematically, we are currently leveraging a variety of data sources to identify oncologists who have a patient who has very recently been diagnosed with metastatic disease before treatment decisions are locked in. Our oncology managers then engage those physicians to provide education on treatment options and the locations of our treating centers. We believe this upstream approach is already producing results and will be a meaningful driver of new patients per site going forward. The development of referral networks to our treating centers will also support this third strategic priority and strengthen these referral networks across the country as a top priority to support the 2026 guidance Sandra will share shortly. Collectively, these three priorities and the underlying KPIs again, the expansion of both the commercial and medical field forces and the active referral development, will deliver continued long-term growth. I will now turn to an update in our clinical development programs. Our ongoing metastatic colorectal cancer trial continues activation of new trial sites. While opening and training sites for medical device clinical trials is more complex than a clinical trial with conventional drugs, we are on track to activate nearly all of the currently targeted 26 trial sites by mid-2026 and to present interim data results in late 2027. Our second program in metastatic breast cancer has one active clinical trial site, and additional sites are opening soon. Compared to physicians who treat metastatic colorectal cancer patients, breast cancer doctors have much less experience with liver-directed therapies. This lower level of awareness requires extensive communication and education on the potential benefits of PHP for patients with metastatic breast cancer. We have had numerous well-attended advisory boards. There are clear areas of unmet need in the subset of these patients with liver metastases. We will provide guidance related to the readouts from the metastatic breast cancer trial later this year, once progress of operational activities allows for more precise forecasting. We are now targeting 15 trial sites and expect to activate them by late 2026. Based on the results of the CHOPIN trial and the resulting interest in the medical community, we are evaluating combination PHP immune checkpoint inhibitor trials across various tumor types. It will take another three to six months to finalize the build plans for future combination trials and other indications. I look forward to sharing future updates on this topic. I will now ask Sandra to review our financial results. Sandra Pennell: Thank you, Gerard. Revenue from our sales of Hepzato was $19,000,000, and ChemoSAT was $1,700,000 for the quarter, compared to $13,700,000 for Hepzato and $1,400,000 for ChemoSAT during the same period in 2025. Full year 2025 revenue was $78,800,000 from Hepzato and $6,400,000 from ChemoSAT, compared to $32,300,000 for Hepzato and $4,900,000 for ChemoSAT in 2024. We recognize gross margins of 85% in the fourth quarter and 86% for the full year. Research and development expenses for the quarter were $9,400,000 compared to $2,900,000 for the same period in the prior year. Full year 2025 SG&A was $43,000,000 compared to $29,600,000 in 2024. SG&A expenses versus last year have increased primarily due to continued commercial expansion and an overall increase in general business functions. While full R&D expenses in 2025 were $29,200,000 compared to $13,900,000 in 2024. The growth in R&D spending was primarily driven by ongoing investments in our clinical team and the initiation of the phase 2 clinical trial evaluating Hepzato in combination with standard of care for mCRC and mBC. We do expect our R&D expenses to increase in 2026 by nearly 90%, primarily due to CRC. With regards to SG&A, we also expect our SG&A expenses to increase in 2026 by nearly 50%, primarily due to the sales and marketing initiatives and the commercial expansion. Our fourth quarter 2025 net loss was $1,900,000 compared to a $3,400,000 net loss in the fourth quarter of the previous year, while full year 2025 net income was $2,700,000 compared to a loss of $26,400,000 in 2024. Adjusted EBITDA for the full year was $25,100,000 compared to an adjusted EBITDA loss of $2,500,000 for 2024. Non-GAAP positive adjusted EBITDA for the fourth quarter was $2,400,000 compared to positive adjusted EBITDA of $4,600,000 for the same period last year. We ended the year with approximately $91,000,000 in cash and investments and quarterly positive operating cash flow of $8,300,000 and full year operating cash flow of $22,500,000. As of today, we have no outstanding debt obligation and no outstanding warrants. Six hundred and twenty-eight thousand five hundred and seventy-two common shares were repurchased for $6,000,000 through December 31, 2025 under the approved $25,000,000 share buyback program. Turning to 2026 guidance, we are guiding to total revenue of at least $100,000,000 for the year, which represents greater than a 20% increase in Hepzato Kit procedure volume and greater than 10% growth in ChemoSAT. The revenue guidance reflects the 340B pricing change, and based on our current and projected customer mix, we do expect the 340B pricing impact to result in an average selling price of around $175,000 per kit for Hepzato, approximately a 10% discount off our published list price. Forecast for 2026 gross margins are between 84% and 87%. Given the concentrated nature of our customer base, this dynamic will continue to introduce some variability in realized pricing as we add new sites and as centers’ 340B eligibility kind of fluctuates quarter to quarter. This does conclude our prepared remarks, and I will ask the operator now to open the phone lines for Q&A. Thank you. Operator: We will now conduct our question and answer session. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. Our first question comes from the line of Marie Yoko Thibault with BTIG. Please proceed with your question. Marie Yoko Thibault: Hi, good morning, Gerard and Sandra. Thanks for taking the questions. I wanted to ask my first one here on some of the assumptions around your guidance. You gave us a lot of details on pricing and volume expectations, but I just wanted to clarify, you mentioned seasonality. Is that your third quarter that you are talking about when you talk about summer seasonality? And because we had the NDRG come in last year, maybe you could remind us on the magnitude of that seasonality just because things were a little bit noisy with that pricing change. And, Sandra, on the price you said $175,000, I think, for this year. That is a little higher than where you kind of exited the year. I would love to hear a little bit about the trends behind that. Gerard Michel: We do expect seasonality in the third quarter. Not all of the seasonality last year was due to pricing. A great deal of it was. And although we are trying to increase staffing at the certified teams at the hospitals, it is a tall order to get physicians and perhaps patients taking time off. From Q2 to Q3, from a volume perspective, because it was noisy last time with the pricing, we expect only modest growth, perhaps even flat, given the seasonality we saw last year. We have small numbers to work with, but that is what we are assuming. And as Sandra mentioned, due to 340B across all our customers, it is looking like it is closer now to getting closer to 10%, so a bit in our favor. Sandra, you can comment on the magnitude of the pricing question. Sandra Pennell: Sure. Thanks. I will deal with the seasonality at a high level. We do expect seasonality in the third quarter, so you may see a bit of a maybe flat to modest growth from Q2 to Q3, similar to what we saw in 2025, and then with that growth starting back up from Q3 to Q4. So from a pricing perspective, yes, we did have a slight price increase. Our list price went from $187,500 last year to $189,100, again limited by inflation. And then we are seeing a more favorable mix. I think we have said, Marie, in previous calls, that we thought we were going to have more of a 20% discount, but seeing that some of our higher-end users tend to not be 340B eligible at the moment, we had some favorability there and really were tracking closer to a 12% net effective reduction on price. It swung closer to 10% in the fourth quarter. We came up with the 10% based on the mix of hospitals that we think will come on board. Again, we will continue to update everyone if that changes significantly outside of $175,000. Marie Yoko Thibault: Alright. Very clear. Thank you for that detail. And then when we look at your websites from time to time, you mentioned the REMS certification process. You also mentioned some clinical trial centers. I wonder if you could just remind me of the difference between your Hepzato Kit REMS site, your Hepzato Kit site, and then how we should be thinking about the differentiation between the sites that are, you know, commercial and those that are purely clinical as we keep track of some of these metrics. Thanks. Gerard Michel: Yeah. I am glad you asked that. It is our intention for the Hepzato Kit REMS site to be compliant, and for it to be compliant for the FDA, we cannot put hospitals on that are accepting referrals but have yet to do their first patient. We want patients to know where to find treating centers, so that is why we put together the hepzatokit.com website with a physician finder on that as well. I did say in the past that we believe REMS-certified centers, even if they have yet to do their first, needed to be put on that first FDA website. Upon further digging, it is a bit of a gray area. But on further digging, we have reached the determination that it is probably best not to put on clinical trial centers unless they are going to be commercial centers. So, actually, I am glad you asked the question because this is a change. So if investors and analysts want to know how many treating centers there are, you just go to hepszatokitrems.com. Everybody there is either actively treating UM patients or is REMS certified and will soon treat a UM patient. We do have some clinical trial overlap, but we will only put those on there that are going to be commercial centers. Short answer is look at hepszatokitrems.com for the number of treating centers. If you are a patient, go to hepzatokit.com because that is all the centers that are accepting referrals. Marie Yoko Thibault: Alright. Very helpful. Thank you. Operator: Our next question comes from the line of John Lawrence Newman with Canaccord Genuity. Please proceed with your question. John Lawrence Newman: Hi, team. Good morning, and thanks for taking my question. I just had two here. On the CHOPIN study, really impressive data last year. How you plan to use that study in the United States and when we might start to see an effect? And then, Gerard, just curious on the timing on the publication there, anything you could tell us? And then also just from an operations perspective on the business, you have got two really interesting and important clinical studies running in colorectal and breast cancer. Just curious if you are more focused on those studies and making sure that they enroll quickly, or if you are kind of balancing that with keeping the business cash flow positive this year? Thanks. Gerard Michel: Okay. Thanks for the questions. In terms of timing of CHOPIN, as I think everyone on the call knows, this is an investigator-initiated trial. We are told that it is imminent. I think probably within the next month or so it will be published, but I cannot absolutely promise that. In terms of how we will use it, it is going to be used in a multifaceted way. The sales reps will certainly make the treating physicians aware that it exists and give them access to the publication, as well as make our medical science liaisons and our senior medics at the company available to answer detailed questions about how doctors might interpret the data and based on these data both in respect of highlighting Hepzato was probably the liver-directed therapy to use for most patients, showing its combination therapy with ipi/nivo can be safely utilized. And thirdly, I do believe a number of KOLs believe that the guidelines should be updated, and perhaps even downgrading the role of clinical trials in the guidelines. So that is another critical way we are going to try to utilize the data. In terms of prioritizing clinical development versus cash flow positive, we have a very healthy balance sheet of over $90,000,000. I do not think there is any need for us to focus on positive cash flow from quarter to quarter. We may go cash flow negative on some quarters, but we think that is the right thing to do for the long-term value of the business. We are not going to chase a perceived optical gain that would simply hinder the long-term value of the company. John Lawrence Newman: K. Great. Thanks very much. Operator: Thank you. Our next question comes from the line of Chase Richard Knickerbocker with Craig-Hallum. Please proceed with your question. Chase Richard Knickerbocker: Good morning. Thanks for taking the questions. Just a quick one to start. As far as commercially, can you give us a sense for the average treatments per patient and kind of an update there? And with that in mind, to that average number of treatments, is it kind of been every six to eight weeks, or are we seeing a little bit longer in the real world? Even more so, how long it is taking a single patient to get to the next treatment? And then on your guide, can you kind of walk us through what it assumes as far as new patient starts? Because if you use that number that you gave around 0.75, you could theoretically get to a number that can be above $100,000,000. Right? So should we think about it conceptually as a floor? And then have an updated thought as far as cadence of new center adds this year. I realize it can be pretty variable, but just as we think about our models and kind of the pipeline that you have right now I am sorry if I missed it again. And then, Sandra, maybe just last one. Any sort of guidepost that you would be willing to give us just around either kind of R&D spend or kind of EBITDA—same kind of question. But any sort of help as you kind of think about how you are modeling patient enrollment in your ongoing studies? Gerard Michel: Average still is for treatments per patient around four. That has changed very little. How long it takes them is more of a decay curve—what is the probability of getting to the next treatment. Any single patient might just get one or up to six. Some are going past six. In terms of the interval between treatments, it is probably stretching out closer to eight than to six. Every site is different. The actual interval is probably seven-point-some-odd at this moment, which is what we saw last year. And with growing sites, that means growing revenue. I do not think it is going to go past eight. I do not think it is going to drop down to six. It is going to be in that realm. We are assuming, as we said before, that the first two quarters of the year are stronger than the third quarter, and then the fourth quarter rebounds, which is what we saw last year. We think it is prudent to think that as we gain more sites—and we keep the average new patient per site per month consistent with what we saw last year. In other words, the average site does not get incrementally more productive as we add new sites, which is what generally happens. The newer sites take a while to reach their stride on average. I do not think the average productivity will decline. It will keep steady as we add sites. There are two things that will increase the pace in the back half of the year. That is the addition of more reps—we are going from six to nine regions—as well as we reinvigorated our medical affairs group. We have an expanded team in the field right now. So increased field presence. And then the second thing will be the publication of CHOPIN results. We believe that will take a bit of time to really make its mark, and I think that will be in the back half of the year. As a function of all of that, we expect more centers being activated in the back half of the year than the front half of the year. Sandra Pennell: Yeah. So we are expecting R&D to increase by nearly 90% in 2026 over 2025, primarily due to CRC. Now, again, this is dependent on making sure we get those sites open and enrolled. With regards to SG&A, again, we are expecting nearly a 50% increase overall this year, primarily due to the sales and marketing initiatives and the commercial expansion. Q1 alone will probably go up nearly 30% to 40% over Q4, and then more of a healthy growth, maybe 15% each quarter thereafter. Q4, probably flat or modest increase each quarter thereafter. Hopefully, that will give you a little bit more information for your modeling from an expense side. Chase Richard Knickerbocker: Yes. Thank you, Sandra. Thanks, guys. Operator: Thank you. Our next question comes from the line of Sudan Naveen Loganathan with Stephens. Please proceed with your question. Sudan Naveen Loganathan: Hi, thanks, Gerard and Sandra. My first question is around the third quarter. You mentioned kind of having a potential seasonality. But, you know, you guys have a lot of other potential catalysts coming through such as the CHOPIN publication and also the focus on the new regions that you kind of split up the Salesforce. So, you know, is there any catalyst or anything else to kind of rally around for the third quarter that could maybe help mitigate some of this seasonality? Also, maybe even some more site starts coming online that quarter that could potentially help? Is there anything you can kind of give details on? Gerard Michel: Yeah. I think the one aspect of the seasonality that will always be with us to some extent is physician schedules. At our high-producing sites, they are flat out. They book room time ahead of time, and they fill it with patients. When one or two of those members take time off, they lose capacity, and they generally just treat existing patients. They do not bring on new patients. So for us to kind of counter that effect, we would have to efficiently refer patients to other centers that seem to have capacity, and that is tough to do. We just think it is prudent despite the fact that we are trying to increase bench strength at these various centers to take that into account and assume it is going to happen again. Are there upsides? Could CHOPIN increase the number of site activations because of CHOPIN? Yeah. That is an upside as well. So, yeah, we are hopeful for upside. I think for now we are just being not overly conservative but reasonably conservative in our guidance. Sudan Naveen Loganathan: Again, I have to ask it, though, but I appreciate it. Thank you. Alright. Operator: Thank you. Our next question comes from the line of Charles Wallace with H.C. Wainwright. Please proceed with your question. Charles Wallace: Hi. This is Charles on for R.K. Thank you for taking my question. You mentioned that the procedure growth and also the site activation may be weighted in the back half. But as you add more patients from these sites, do you expect that the discount will expand from the current 10%? As potentially more 340B patients get added to this mix? And are you still targeting 23.1 treating centers? And then one more question on gross margin. You reached 86% in 2025. Expect to maintain this level in 2026? Gerard Michel: Yeah. So I think the discount for the 340B is very difficult for us to be precise as to what we think the discount will be. What matters then after that number is the mix—the effective average value per kit that we are getting, the discount off of AMP for ASP. We have modeled 10% for the year, which is a little bit better than we were running close to 12%. It swung closer to 10% in the fourth quarter. Looking forward, we are doing the best we can. We came up with the 10% based on the mix of hospitals that we think will come on board. Sometimes we do not know until we are ready to ship a product to a hospital. Sometimes it is even after the fact that we find out whether or not they want to claim 340B pricing. Some of them roll on and off the DSH eligibility. That is disproportionate share hospital. And some of them actually choose not to use it because they want to use a different legal entity. So it is highly complex. I think for now, just stick with the 10%. That is what we are modeling. Sandra Pennell: Yes. We are guiding right now from 84% to 87% in 2026. So I think it is obviously dependent on each quarter’s sales as well as any pricing impacts over this next year, but even potentially hitting close to 90% in 2027 and beyond. Operator: Perfect. Thank you. Our next question comes from the line of William Maughan with Clear Street. Please proceed with your question. William Maughan: Hey, good morning and thanks. So with the pricing reset around mid-’25, are you pleased with the amount of volume increase that you feel you have gotten from that expansion into 340B hospitals? And then you have spoken before about one of Hepzato’s major competitors for patients being competitive trials. So can you just comment on anything you have seen from those competitive trials in terms of increasing or finishing enrollment that might leave more patients available to you? Thank you. Gerard Michel: I think it is impossible for us to state whether or not we are getting increased volume due to 340B pricing. Just as a reminder, it is not that there was an access issue to these hospitals. It was a matter of, you know, how much margin, frankly, would they make for each kit. And, not surprisingly, we will never know. My jokingly say, unless we have a kind of a parallel universe experiment. We just will not know. We simply count the number of patients being recruited by the ongoing trials that we can see listed on clinicaltrials.gov. Thankfully, the IDEA trial, which was a big one, finished enrolling late last year. Around the second quarter of last year, there was a large expansion of Replimune access trials—sites—as well as Thomas Jefferson on a number of single-center trials at their center, which definitely took some patients out of the mix. So I think we have a steady headwind. It is definitely a bit less than what was ongoing last year. Operator: Thank you. Our next question comes from the line of Yale Jen with Laidlaw. Please proceed with your question. Yale Jen: Good morning, and thanks for taking the questions. Just two up here. One of those is the referral development. I appreciate you highlight some of the major efforts in terms of going forward. Would that be more of an emphasis given that will potentially create much more flow of patients from much larger sources? Gerard Michel: You know, thanks for the question. It has to be because, as we get deeper into the TAM, we are now going to be looking for patients that are, you know, less, let us call it, educated, who are seeking out our sites. To do that, we have to get patients whose doctor—who is likely a doctor who treats cutaneous melanoma—just quickly says, “Hey, ipi/nivo for HLA-A2 negative, or tebentafusp for HLA-A2 positive.” Cutaneous melanoma docs do not refer a lot of patients for liver-directed therapy. It is not first on their mind, important in their normal mixed practice. We need to get in front of those docs who have patients who are not online looking for the latest and greatest, and to get in front of those docs early, introduce them to a physician at one of our treating centers, educate them on the product so they can offer that option to their patient. So, yeah, it is a critical activity for us to continue to deliver growth. Yale Jen: Okay. Great. That is very helpful. One other question is that given some of the sites treating patients for quite a while, maybe already been a couple quarters up to now. Do you feel most of those sites are heavily rich, steady state at fewer patients? Or would you be able to deepen the number of patients to be treated over there, or do you feel that, for all those sites, you are pretty much at a steady state at fewer patients? Gerard Michel: Yeah. There are certain centers—we have a set of centers. I think MGH would be a good example—that for them to do a lot more patients, they are going to have to book more room time and get another team. That would be the dial that has to be turned to increase their capacity. We would love it if they did that. We are ready and willing to help them on the training of the new team members. There are other centers where we have a low share. Think of a narrow set of patients, like no extrahepatic disease, which is not a limiter. It should not be per our label. Another reason being that the physician is just a believer that cancer is a systemic disease. “I will only treat this patient if they only have hepatic disease.” Clinical trials being one of them. It is usually a mix of reasons. So the first one of those is we will try to impact by changing guidelines, if at all possible, to deemphasize clinical trials. And the second one, we will try to put the data in front of the docs saying, “Look. You can treat these patients with extrahepatic disease with systemic and our product at the same time.” That is an educational component. So, in some of the higher-volume centers where we have a low share—our high-volume centers—modestly changing training patterns at our lower-share hospitals where there is a high volume, the CHOPIN data, perhaps some changes in the guidelines, all should help us there. Yale Jen: Maybe the last question here, just squeeze in. I know it is often difficult to predict, but do you feel the NCCN guideline could happen maybe later this year or maybe early next year? Or that is too elusive to predict? Gerard Michel: The first driver is the expanded MSL force and the expanded Salesforce. In terms of NCCN, they have all been known to have off-cycle meetings. I think this one, the schedule is November. They have all been known to have off-cycle meetings. That is a physician-initiated activity more than a company-initiated activity. All we can do is discuss the available data with the KOLs, share our perspective that perhaps there are some areas of the guidelines that should be modified based on the latest data, and they really need to drive it. We can send notes in—pharma companies requesting or providing information into the guideline committees. But at the end of the day, it is up to them to drive it. We are hopeful that they will foster the conversation amongst them, but, again, this is more of a physician-initiated activity than a company-initiated activity. Our mission at the company is simple: to improve survival and quality of life for patients with liver metastases by delivering the most effective liver-directed therapy available. None of this progress would be possible without the dedication and hard work of our entire team and the support of our investors who are in many ways part of the team. And I want to thank every one of them. We look forward to sharing our continued momentum with you throughout 2026. Have a great day. Operator: This concludes our question and answer session. I would like to turn the floor back over to Gerard Michel for closing comments. Gerard Michel: Thank you all for joining us today and for your continued support and thoughtful questions. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.
Dwight Gardiner: Good morning, everyone, and thank you for joining us. Frank sends his apologies. He's not with us today due to personal medical reasons related to a cycling accident, and we expect him back shortly. So Mark Strafford, whom we all know well, and I will be hosting the call. Our plan is that I will provide an overview of 2025 and an update on the business before handing over to Mark to take you through the numbers. I'll then come back to talk about the progress we're making on our growth strategy. And we'll finish by opening up to questions, which you can either ask verbally or submit online. On to Page 3, please. You're all familiar with our purpose, which is to enable a zero carbon, lower-cost energy future. I'll start as I always do by reaffirming that that is our purpose, and it guides everything that we do. In terms of our strategy, which is to create value by investing in the U.K. energy transition, we're focused on a couple of things. First, we are preparing the group for the new running regime that the new low-carbon dispatchable CfD will require. That process is well underway, and that will underpin the earnings and cash flow, which I'll talk about later that we expect to earn between now and 2031. Second part of our strategy is investing that cash to grow our U.K. power business as the energy transition continues and AI drives electrification and growth in demand. And I'll talk more specifically about the investments we're making in BESS and the progress we're making on a data center. Finally, and most critically, our people are at the heart of Drax and their safety and well-being is an absolute priority for us. And while we've had to take some difficult but necessary steps to position our business effectively for its exciting future, it's more critical than ever at the times like this that everyone feels a valued member on a winning team with a worthwhile mission. Turning to Page 4. We've delivered a strong operational and underlying financial performance across the group, which is underpinned by a continued focus on safe and efficient operations. We produced a record level of renewable power, primarily from the Drax Power Station, which serves to emphasize its ongoing importance. We're a major provider of renewable power in the U.K. as well as flexibility, accounting for around 6% of overall power and 11% of renewables. And in certain periods of peak demand, we have been more than 50% of U.K. renewable power generation when there has been limited levels of wind. We've also delivered a record level of pellet production, while at the same time, reducing our costs in the U.S. South, which we see increasingly as highly integrated into our U.K. biomass generation operations. The signing of our low-carbon dispatchable CfD agreement for the Drax Power Station is a key inflection point for the group, enabling us to continue to support the U.K. system while investing for growth. As you know, we're committed to our plans to generate free cash flows of about GBP 3 billion between 2025 and 2031, of which we delivered about GBP 0.5 billion last year. And to be clear, this is from the current business before accounting for new cash flows associated with our growth plans. Of that GBP 3 billion, we expect to initially allocate over GBP 1 billion of free cash flow to shareholder returns. which is inclusive of the ongoing GBP 450 million 3-year share buyback program. And up to about GBP 2 billion of that then will be allocated to incremental investment in growth as we seek to enable the energy transition and support the growth of AI. And we're making great progress. First, at the Drax Power Station, we're developing plans for as much as 1 gigawatt or more of data center capacity, while at the same time, continuing to provide energy security for the U.K. Secondly, in our FlexGen business, we're developing a gigawatt scale BESS pipeline. And you will have seen that in the last 6 months, we have purchased or made agreements, which will give us operational control of over 700 megawatts of batteries across 5 different sites. We've also acquired a new optimization platform and one of the leading players in that space, Flexitricity. And third, we're continuing to assess further investment in flexible renewable energy, about which we would provide further updates later in the year. And finally and critically, we remain very much committed to disciplined capital allocation and delivering attractive returns for our shareholders. Turning to Page 5. So sustainability remains at the heart of what we do. And we've made excellent progress this year and have started to see that reflected in third-party ratings and accreditations. Of particular note, we received 2 A ratings for our CDP disclosures on climate and forestry. Only 4% of the 22,000 companies making CDP disclosures receive an A rating and even less received 2, which we believe demonstrates our commitment clearly to sustainability and, importantly, also to transparency. We are also A rated by MSCI. And in addition to that, during the course of the year, we undertook a significant number of new initiatives, including a new sustainability framework, our climate transition plan, and we continue to progress our reporting and alignment with both TCFD and TNFD as well as SBTi, which has recently validated our targets going out to 2040. And finally, in January, we launched a public tracking tool, our biomass tracker, which shows the provenance of our biomass supply chain, and I would encourage you all to have a look at that. Moving on to Page 6. I just want to reiterate, as we said at the beginning of last year that we have a target to deliver post 2027 adjusted EBITDA of GBP 600 million to GBP 700 million per annum across the combined pellet production, biomass generation and FlexGen and as we said before accounting for development expense. We're very much committed to that target, but as a reflection of the continued development of the U.K. power system, shifts in the Canadian pellet business and increasing value from the flexible generation, we now expect the FlexGen business to comprise a greater proportion of that mix over time. And if you take those targets, together with the strong contracted cash flows that we have up until 2027, we believe we will deliver free cash flow of about $3 billion between 2025 and 2031. And delivering this plan supports our options for growth and enhanced value creation. And my plan now is to go through each of the different parts of the business and explain how we are doing. On to Page 7. FlexGen, I'll start with pumped storage and hydro. So that portfolio has performed extremely well since we purchased it in 2018. And as a reminder, Cruachan represents about 1/3 of the total megawatt hours of long-duration storage in the U.K. It can run for up to 16 hours at full load and has the equivalent of over 7 gigawatt hours of stored energy. Under our ownership, Cruachan has seen an increase in its operating activity over the last 6 years from 20% to 60%, which reflects both its role in our portfolio and the growing need for system support across the U.K. The strong performance of these assets has provided an exceptionally good return on investment and a 5-year payback. And reflecting the value we see in these assets, we're investing in an ongoing upgrade at Cruachan to replace 2 of the 4 turbines with new larger machines. This is a major program of work for the team and an investment of GBP 80 million in U.K. energy security that's going to take place between 2025 and 2027. As you know, Units 3 and 4 of Cruachan are currently unavailable due to a grid connection failure in late December caused by assets owned by the Scottish network operator, SSEN. We're working with them to restore the connection, and they will provide a timetable for that repair shortly. We're taking advantage of that downtime to progress planned outage work on Unit 3 for minimizing the overall impact. Second piece of this business, the open cycles. We expect to take commercial control of the first of those shortly with the unit already receiving capacity market payments. The second and third sites are expected to commence commissioning in 2026. The earnings of the open cycles are underpinned by around GBP 270 million of capacity market payments, complemented by system support services, peak power generation and a low operating cost base. And again, we expect to retain these assets as a part of our FlexGen portfolio. The third piece, which we're getting increasingly excited about as demand side response becomes a more important piece of the puzzle, is the energy solutions business. So in addition to power sales to industrial customers, we're also an enabler of more renewables on the system as we provide a route to market for 2,000 embedded generators. Across our customer book, we offer demand side response, whereby we can reduce load to industrial customers at certain periods of high demand, creating value for our customers as well as for Drax. It's also of note that we had significant experience enabling customers to purchase power through both the wholesale market and through PPAs. Turning to Page 8 and the low-carbon dispatchable CfD. So the signing of a CfD for post 2027 is a key inflection point for our group and a significant endorsement of the contribution that biomass makes towards energy security as well as decarbonization and value for money, saving bill payers billions over the term of the agreement. Under the terms of the agreement, we will sell the equivalent of 6 terawatt hours per year or about 30% of the load of those units. The structure of the agreement allows us to constantly reprofile generation to the periods of greatest need and highest value. So in periods of high demand, we would expect to use all 4 units to produce and sell as much power as possible at the highest prices. And in periods of low demand, we'll add value by buying back forward sold baseload power at lower prices. And by operating this way, we support energy security, provide flexibility to the power system and earn a higher average price for our power. The agreement also includes the continued evolution of sustainability standards and a further reduction in supply chain emissions limits. We're very comfortable with that and supportive of those measures. As a reminder, we expect to use around 2 million tonnes of our own pellets from our operation in the U.S. South. Again, a further reminder, we've hedged all of the FX requirements associated with the deal as we have our logistics requirements for our own pellets, and we are progressing agreements to finalize biomass and logistics hedging from third parties. So the third piece, turning to Page 9, our sustainable biomass business. So this is a bit new. We're increasingly looking at our pellet business in a new way. Our U.K. business is fundamentally part of our U.K. supply chain. That business is doing very well with its current level of value supported by existing contractual arrangements. As you will have seen, our Canadian business is more challenged, and we've been talking about this for some time as margins have come down due to fiber costs rising in Canada more rapidly than indexed power prices in Asia. As we noted last year, this dynamic contributed to the decision we've made to close one of our pellet plants in Williams Lake towards the end of last year. So against this backdrop, we're not currently expecting to commit any more capital to this segment, and we are -- that includes the paused Longview project. Now overall, in the pellet market, while the market dynamics we expect to be challenging through the 2020s, as a company or as a group, we're largely insulated from that by the contracted nature of our book. Now if anything, we'll look to benefit from lower market pricing by accessing the spot market by pellets at attractive prices for Drax Power Station. And longer term, we continue to see opportunities for biomass to play a key role in energy transition and our Elimini business gives us an important capability and brand to continue exploring those opportunities in SAF, BESS and other areas. But again, as you will have seen, reflecting the current market environment, which we've seen for some time now and been talking about, we are reviewing strategic options for that Canadian business. And with that, I will hand it over to Mark. Mark Strafford: Thank you, Will, and good morning, everyone. I'll now take you through Frank's section of the presentation, starting on Page 10. We see tremendous value for the group in the delivery of our purpose and strategy through which we are supporting energy security, creating solutions for the energy transition in the U.K. and enabling AI growth. Unlocking that opportunity is a strategic puzzle, which the team are working through and, in doing so, creating value for shareholders and other stakeholders alike. We have a very strong business today with a strong balance sheet, and we are generating strong cash flows, which can support value-accretive growth and returns to shareholders. But we must operate well and safely and execute our plans diligently to realize this. Moving on to the financial summary on Page 11. Operationally, we performed well in 2025, generating GBP 947 million of adjusted EBITDA. This reflected a particularly strong December, where market conditions allowed us to generate additional volumes, leading to a record year for biomass power production, which totaled 15 terawatt hours. Adjusted earnings per share of 137.7p was an increase of 7% on 2024 and reflects the reduction in EBITDA, offset by the ongoing share buyback program and a lower net finance cost. Strong cash generation meant that net debt of GBP 784 million was 0.8x 2025 EBITDA. This is significantly below our long-term target of around 2x. Total cash and committed facilities was GBP 942 million, a strong position, which supports our plans for growth across the group. Our expected full year dividend of 29p per share is an 11.5% increase on 2024 and reflects the confidence we have in the business. We are committed to value and are pursuing this through disciplined capital allocation decisions. During 2025, we completed a GBP 300 million share buyback and commenced a further GBP 450 million program. So the 24th of February, we have purchased GBP 57 million of shares under the new program. Moving on to EBITDA by business unit on Page 12. I'll now take the performance of each business unit in turn, starting with pellet production and biomass generation, which, as Will mentioned, we see as increasingly interlinked through the vertical integration between our operations in the U.S. South and Drax Power Station. Pellet production's EBITDA reduced from GBP 143 million in 2024 to GBP 129 million in 2025. Let me explain this movement. Volumes produced increased in 2025 to 4.2 million tonnes, which is a new record. We also showed progress on cost reductions, reducing the cost per tonne of biomass produced. For internal sales, the reduction in cost is then passed through to the generation business at a lower cost of biomass as part of a well-established cost-plus transfer pricing methodology. To be clear, this is a positive outcome for the group. And if the price had remained at 2024 levels, pellet production EBITDA would have been over GBP 150 million in 2025. This is the rationale for why we see U.S. pellet operations and Drax Power Station as increasingly integrated. And accordingly, we are considering adjusting our reporting going forward to reflect this. Outside of EBITDA, against the backdrop of an expected softening in the global pellet market post 2027 and a constrained fiber supply in British Columbia and Alberta, we have reduced our expectations for the Canadian business and recognized a charge of GBP 198 million. We have also paused our development project at Longview in Washington State and have taken the decision to impair this asset with a charge of GBP 139 million. We retain the land and the option to progress this opportunity at a later date if market conditions become attractive. Moving on to biomass generation, which had another strong year. Despite an expected decrease in achieved power prices, the business produced record volumes of generation and had a particularly strong year-end, capturing value from meeting higher winter demand. As I mentioned, the business also benefited from cost reductions in the U.S. South and therefore, lower prices of internal pellet supply as well as a reduction in the electricity generator levy. This reinforces our view that Drax Power Station is a vital source of reliable renewable generation and energy security, both now and in the future. Below the line, reflecting the lack of progress in development of appropriate commercial and regulatory support for carbon removals in the U.K., we have booked an impairment of GBP 48 million in relation to BECCS at Drax Power Station. However, we continue to believe that carbon removals at scale remain vital for the U.K. to deliver its commitment to net zero by 2050. As such, we retain the option for future development, minimizing cost and maximizing optionality so that we could proceed if the opportunity develops. Moving on to FlexGen. Cruachan continued to perform well in 2025 and after adjusting for planned outages, maintained a high utilization rate, which is well above historic averages. EBITDA reduced from the previous year as planned outage works, including the Unit 3 and 4 upgrade program, progress. In energy solutions, our I&C business performed well, maintaining a broadly consistent margin on a smaller revenue base against the backdrop of lower power prices. The windup of Opus Energy is now largely complete with a small residual loss in 2025. Moving on to development expenditure. Elimini spend has reduced as we have been disciplined in allocating capital to that business against the market backdrop that does not currently support significant investment in carbon removals. Other DevEx, which includes a component of uncapitalized OCGT cost, is broadly flat. Turning to Page 13 and the balance sheet. Our balance sheet remains strong. During 2025, we repaid over GBP 230 million of debt, extended facilities and secured a new term loan. Our year-end cash and committed facilities position was strong. At 0.8x levered, we have significant headroom to fund our plans for growth through the investment cycle. Moving on to Page 14 and capital investment. We have continued to invest in growth and in our core business, including the OCGTs, our first battery acquisitions and the upgrade project at Cruachan. In addition to the acquisition of the Apatura battery project and Flexitricity, we have committed GBP 300 million to battery tolling agreements, which Will cover later in the presentation. These themes continue through 2026 as we commission the OCGTs and the enhancement work on Cruachan. Of the growth CapEx in 2026, we expect over half will be on batteries. Lastly, we will continue to invest in the maintenance of our asset base to deliver good operational availability and safe and efficient operations. We expect an increase in maintenance CapEx in 2026 to reflect a major planned outage on one biomass unit at Drage Power Station. Moving on to Page 15 and cost management. Our post 2027 EBITDA target requires us to be disciplined on costs, and we are making good progress towards putting in place the structures and cost base to allow us to succeed and deliver long-term value to stakeholders. Our targets are eminently achievable, and we are progressively taking actions to deliver significant cost reductions. By 2027, we expect to establish structural savings of over GBP 150 million per year compared to a 2024 base year. You are aware of several areas of efficiency already, including a reduction in output from Drax Power Station post 2027, which will drive a lower cost base, an appropriately sized corporate and core services structure and a focused external supplier cost reduction program. But to reiterate, these savings are already reflected in the GBP 600 million to GBP 700 million post 2027 EBITDA target and are not additional to that. Turning to Page 16 and capital allocation. Our capital allocation policy, which remains unchanged, is at the heart of the financial decisions we make and supports our focus on value creation and opportunities for growth. Our balance sheet is strong, and we remain committed to a long-term target of around 2x net debt to adjusted EBITDA. We will continue to invest judiciously in the core business to deliver safe and efficient operations and options for growth in flexible renewable energy. Since 2017, the dividend per share has grown on average by 11% per annum, including the expected 11.5% increase in 2025. Income returns to shareholders are an important part of our investment case, and we remain firmly committed to our policy to pay a sustainable and growing dividend. And lastly, to the extent there is a surplus of capital beyond our investment requirements, we will consider the best way to return this to shareholders. We see buybacks as an investment which we can make in the business to create value for shareholders alongside opportunities for growth. And with that, I'll hand back to Will. Dwight Gardiner: Thank you very much, Mark. Turning to Page 17. I'm not going to provide a wider strategy update here, but plan to do that later in the year. For today, I want to focus on the areas we're making the most progress in, Drax Power Station and batteries. Turning to Page 18. And before I get into the whole question of growth, let me share with you how we're preparing the company to run under the new CFD mechanism. We're putting in place the financial and operational structures, systems and performance culture, which will allow the company to succeed, and we call this program Future Focus. As a part of this, we recently announced a consultation process for the U.K., and we've announced changes to our North American businesses, which could see a reduction of 350-plus roles across the group. We have conviction that this is the right thing to do for the business, and we will complete the process in a respectful and considerate way as quickly as possible. So moving on to the Drax Power Station on Page 19. We believe that the size, flexibility and location of Drax Power Station making an important long-term part of the U.K. energy system, and we are focused on options to maximize value from the site. Options for a data center are a priority. But we could also utilize the site for multiple generation technologies, new system support services and, in the longer term, we're still excited about carbon removal. So on Page 20, let me talk a bit more about options for a data center. The site, which is located centrally in the U.K. and next to one of the country's largest substations, comprises over 1,000 acres and has 4 gigawatts of grid access, of which 2.6 gigawatts are flexible renewable generation. We also have cooling systems on a secure site with proximity to the U.K. fiber optic cable network. And this makes it ideal for the development of a data center. So we're discussing the potential for a data center with a developer. We don't have more details to share at this stage, but we'll update the market as soon as we do. What I can say is that we envisage development of the site in 3 phases. The first is for around 100 megawatts, utilizing existing infrastructure and transformers to import power directly from the grid, and we expect to submit a planning application shortly. The second and third phases are behind the meter. The second phase aims to utilize 500 megawatts of capacity before 2031. And since this is during the period under which the station is operating under the CfD, that development will be subject to agreement with the U.K. government. And the third phase would follow from 2031 onwards and add further 600 megawatts of capacity or more. So again, we believe that Drax Power Station is uniquely placed to do this in the U.K. and that the development could represent a multibillion-dollar foreign investment opportunity for the U.K., creating thousands of jobs while continuing to support energy security through the period of 2031 and beyond. And quite importantly, we have a very talented workforce who are experts in U.K. power in planning and in consenting. Turning to batteries on Page 21. I wanted to share some thoughts on the rationale for that market and why we're excited about it, how we see the market developing and the progress that we've made so far. NESO's future energy scenarios show power demand is likely to double in the U.K. over the next 25 years due to the electrification of heat, transport as well as new industrial demands like data centers. At the same time, intermittent renewables like offshore wind are expected to triple and flexibility will continue to fall, largely reflecting the removal of gas in the system. So as a result, there's likely to be either too little or too much power on the system at any one point in time. To help manage this, NESO's analysis suggests a requirement for over 30 gigawatts of BESS by 2030 compared to 7 gigawatts today. As you know, BESS can respond very quickly, capturing higher prices when available and then storing the power when the demand is low. BESS also nicely complements our existing portfolio, having super-fast response and short duration storage for our existing portfolio, meaning we are well placed to maximize value no matter what the needs are of the system. But again, having the right assets in the right location at the right time will be critical to success as well having the tools to manage that portfolio effectively. So what are we doing about it? If we look at Page 22, reflecting this demand, we're developing a gigawatt scale pipeline of BEV opportunities. And we're doing that in 2 ways. First, we're investing in the ownership of physical assets where we believe the locations are optimal and there are opportunities to invest in the sites in the long term. Secondly, many BESS assets will be developed by infrastructure funds who are looking to secure cash flows through floors and tolls. And that provides us with additional opportunities to access the BESS market and use our deep expertise in trading Flex assets. We believe that by acquiring development projects and tolling agreements with existing grid connections, we can benefit from a shorter time to power and at the same time, reduce our exposure to development risk. In addition, the recent acquisition of Flexitricity bolsters our ability to provide our own assets as well as third-party owners with best-in-class optimization services. Flexitricity's platform, combined with Drax's 24/7 trading capability, underpins our ability to maximize returns for flexible assets, both in front of and behind the meter. So again, we're making good progress. We've committed on the order of GBP 0.5 billion with a control of over 700 megawatts of capacity in addition to the acquisition of Flexitricity. Let me give you a little bit more detail on our progress. Turning to Page 23. In October of last year, we acquired 3 development projects for 260 megawatts under an agreement with the developer Apatura. It's a fixed price deal that's structured such that we have protection in the event of cost overruns. Two of the sites are located in the key England, Scotland transmission constraint corridor and a third is in East Yorkshire near the Drax Power Station. This deal also gives us option rights over an additional 289 megawatts of capacity. In addition to that, on Page 24, so in addition to physical ownership, we've entered into tolling agreements for 450 megawatts with the developers of Fidra and Zenobe. This model complements physical ownership, but differs in that there is no cash outlay or ongoing maintenance costs. We'll pay a tolling fee in return for which the developer is responsible for building, maintaining and making the asset available. We, on the other hand, have full operational control and keep all revenues from operation other than capacity payments and, for Zenobe, certain other immaterial ancillary revenues. And we expect this model to work well for both parties. The asset owner gets a predictable revenue stream, and we can access the value which we see from the energy market dynamics that I described previously, but with no capital outlay and a shorter time to power. And both of these projects are targeting FID this year. For the third leg of this approach on Page 25, was in January, we agreed a deal to acquire the asset optimization platform, which is Flexitricity for about GBP 36 million. Flexitricity provides front of and behind-the-meter solutions to third parties with a customer base of over 900 megawatts across a large number of sites, including Air Products and Severn Trent. The technology is an important component of managing the enlarged FlexGen business and the gigawatt scale BESS portfolio, which we are developing. If we didn't have this capability, we would have had to outsource it. But by retaining it within the group, we keep the IP and value associated with an end-to-end trading and optimization capability, and we expect the transaction to complete in March. Turning to Page 27. Our primary investment opportunities are currently in the U.K., where we are a leading provider of flexible renewable energy. Our expertise operating FlexGen and 24/7 operations makes us a good owner of these assets, and we believe we can create additional value through growing the portfolio. During this year and through 2028, we will start to add additional capacity from OCGTs and from BESS, providing a range of technologies, durations and dispatch feeds, which will enhance our capabilities. We also have options over additional BESS developments as well as the grid access we have at Drax Power Station. In addition to which we expect to have close to 2 gigawatts of route-to-market services for over 2,000 small renewable assets as well as grid scale assets by Drax Energy Solutions and Flexitricity. In total, 8 gigawatts of capacity we own, we toll or provide other route-to-market services for. So importantly, to wrap that all together, while the earnings from Drax Power Station will reduce next year with the new CfD, we are expecting to grow earnings in our FlexGen business and overall as a group as we bring these new generating assets on stream through the rest of the decade. Finally, on Page 28. So let me bring it all together. First, we have performed well again in 2025. And Drax is already a leading provider of flexible renewable generation in the U.K., as I have described. We see a great opportunity to grow that position. The first key underpin is the low-carbon CfD and the new operating regime that we are creating. The second one is we've already begun our investment program, as I've described, and look forward to growing our business through the rest of the decade and creating value by investing in the U.K. energy transition. We will be disciplined about how we approach these opportunities in line with our existing capital allocation policy, and we will be very focused on creating value and delivering excellent returns to shareholders. With that, I'll hand it back to the operator, and we are ready to take any questions that you may have. Operator: [Operator Instructions] Our first question comes from the line of Alex Wheeler from RBC. Alexander Wheeler: Two questions from me, please. Firstly, on the impairment in the Canadian pellets. Should we think about this as formalizing the messaging you've already given? Or is there an implication here that you think things are getting worse? Then if you could also give some color on the strategic options for that business, that would be great. And then secondly, just on the guidance, just interested in why you've not included the BESS assets within the current medium-term guidance and when you think you'll consider formally adding those? Dwight Gardiner: Great. Thank you, Alex. So in terms of the impairment, I think you described it well. We have been, I think, communicating over the last sort of probably 6 quarters, the weakness that we see in the Canadian market. It's really a long-term sort of structural issue related to the nature of our contracts and the shrinking fiber supply becoming more competitive and not driving up the cost of our inputs, right? So it's absolutely not -- it's not an indication that things are getting worse. It's just really a sort of formalization, I think, of where we have been, right? So -- and again, for the avoidance of doubt, the GBP 600 million to GBP 700 million that we've been talking about for some time, very much takes into account where we think the Canadian pellet business is and has been and will be. In terms of strategic options, I mean, we're working with our suppliers to sort of manage our costs as best we can. We're working with our customers, again, to manage the contracts as best we can to drive increased profitability. We have had to shut the Williams Lake facility. We will look at the best way to optimize where we're supplying pellets from relative to where they're going. So that's another piece of that puzzle. And again, disposal of the asset would also be an option we will explore. In terms of BESS, I mean the GBP 600 million to GBP 700 million, as we've said, is before those investments. And frankly, what we're planning to do is come back to the market sometime later in the year and sort of talk more completely about how the overall strategy fits together. And I think at that time, we would probably look to update our views of where we think numbers will be as we go through the rest of the decade. Operator: Our next question comes from the line of Pavan Mahbubani from JPMorgan. Pavan Mahbubani: I have 2, please. Firstly, on the EUR 3 billion of cash flow and the uses, you talk about EUR 2 billion of investments and you've given us visibility on batteries. Can you give a bit more flavor or color as to where you see the rest of that capital deployed? Do you see it all as going into batteries? Are you looking at gas or maybe some other investments? Would be great to hear how you're thinking high level about where this money is going to go if it all gets deployed? And my second question is, Will, on the confidence you have in the phasing of the data center opportunity as you laid it out in your slides, is this based on what you think your capacity is? Or is it based on the conversations you're actually having? I would appreciate any color around that as well. Those are my questions. Dwight Gardiner: Thanks, Pavan. So first, in terms of the allocation of capital, I think -- so again, to make sure it's clear, GBP 3 billion is what we expect to generate. Again, that includes '25. So that's sort of over the next -- last year plus the next 4. The uses of that, I think, again, we talked about GBP 1 billion or GBP 1 billion plus that goes back to shareholders. Again, that should be pretty transparent in what we've already described. And then the GBP 2 billion. So I think at this point in time, we've already allocated about GBP 0.5 billion to batteries as we've described. One of the things that give me a little bit of caution about investing a lot more in that now is that we haven't really seen the results of that investment yet. I mean those earnings will come on stream probably '27, '28, '29. So we need to watch how that develops to some extent. Although, again, we are excited about that market, and I could see plus or minus up to GBP 1 billion potentially of the GBP 2 billion moving into that space. I would call that a hard target. That's something that, again, we'll come back and sort of later in the year, give you more color. But the other area, I think, which is -- before I get to the other area, the other thing that's interesting is that the data center, we would expect largely to be a source of capital, i.e., the type of deal we would look to be doing is one where we would be selling the powered land and then providing a PPA to the end customer. We will be making some investment in that space as we get to the bigger pieces of it, and I'll come back to that in a second, but again, largely a source of capital. And so -- but again, other things we'd be looking at, I mean, we are still very much committed to our purpose, as we said, enabling a lower cost zero carbon energy future. Again, I think that ports probably more in the direction of more renewables, although I wouldn't rule out gas, as you know, we've got the open cycles, but more intermittent renewables is the area that I think we're exploring at the moment. And I guess, how do I see that? -- really, it needs to be -- well, the first thing I would say is it's very much consistent with our core business, right? We are a flexible renewable generator in the U.K. To add intermittent renewals to that portfolio would be a very logical extension of where we are today, right? It's the same trading environment, same regulatory environment, same grid environment, all of those things are very much part of our core competencies, right? Second thing is though, it would need to really meet a sort of set of criteria that we are working through now. So it clearly has to be -- the returns have to be attractive. And I think it's actually -- there is more potential for that than there would have been, let's say, 5 years ago when a lot of these assets were being built. It's likely to be at least in the initial piece through acquisition, something that's generating cash probably more interesting in the first instance than just a development asset. We have to be convinced, and I think we're getting convinced that there's interesting sort of commercial and industrial logic, i.e., the potential to create attractive products for customers. The third piece, which I think is one of the more interesting ones is that as we grow the FlexGen portfolio and given the characteristics of the bridge, our in-year earnings, we would expect to become more volatile. We're very much -- we're excited about the growth and volatility. But again, it does make our in-year earnings potentially more volatile and not as hedgeable as they would have been in the past, right? Adding longer-term contracted earnings, let's say, through intermittent renewables is quite an interesting sort of counterbalance to that. And that's one of the things that we think is quite an interesting thing to look at. So again, we're looking at those intermittent renewables. We haven't made any decisions. And again, we'll probably come back and make sure that we make a clear case for that as we look at it further. On the data center, I think -- I mean, I've highlighted sort of 3 different phases for a couple of important reasons. So the first one is that we think that our ability to use 100 megawatts of in-feed to the Drax Power station quite quickly is differentiating. There aren't many ways that you can build a data center, potentially be online next year without -- not many people have that 100 megawatts available. So that's one of the reasons we described that. Second reason we talk about the 500 is that very explicitly in our dispatchable CfD agreement with the government, we have effectively -- they've agreed that they will discuss with us. If we can -- and if we meet certain criteria, they would be very much open to us using that 500 megawatts for a data center. So that's the reason we discussed that. And then the third piece is, ultimately, we think we have enough biomass behind-the-meter generating capacity to do something in excess of 1 gigawatt. And the final point is the logic for that is both a function of what we think makes sense and a function of what we are discussing. One thing I want to be very clear, it would not be very -- I would much -- I would be very disappointed if we ended up with 100 megawatts and not more, right? So that's very much part of the thinking. Operator: Our next question comes from the line of Dominic Nash with Barclays. Dominic Nash: A couple of questions from me as well, please. I think the first one might have a couple of more parts in it, and it's following up from sort of the data center angle. On the first 100 megawatts, will you have the ability to switch that to behind the meter at a later date? Or will that permanently be in front of the meter? And secondly, on the economics of this, clearly, if you're in front of the meter that you've got no real competitive advantage, I presume, except the speed, which you mentioned. But when we then go to behind the meter, you've clearly got quite a high marginal cost of biomass. How are your conversations going with potential offtakers or what your thoughts are on, a, their desire to source power from biomass; and b, your relative economic position from behind the meter with biomass versus behind the meter from OCGTs? And of course, the follow-on question from that is, could you also provide gas from the Drax turbines at some point post 2031 or before? And the second question is on the biomass part, you're moving from 7 million tonnes of consumption to 3 million tonnes. I think more than 2 million tonnes are going to be from yourself. You're saying you're contracting with third parties. Can you just tell us what sort of scale and when do we expect to get the news flow on who you're going to contract from? And the follow-on question from here is that do you not think there's a bit of a risk if you end up contracting too much of your feedstock from the United States alone, particularly in light of a very sort of capricious trade issues between the U.S. and everyone else and whether or not you should have some sort of diversification for your biomass sourcing. Dwight Gardiner: Okay. I think there's probably about 7, Dominic, if I count them back. Thank you for the questions. I'm more than happy to respond, just kidding. So on the data center, the first one, I think, was could we switch to behind the meter later. And I would say, again, it's all -- we don't have a sort of negotiated deal. So that's obviously something we have to get to as we go. But I guess the key thing to think about from our perspective is that if you only have 100 megawatts of generation that's behind the meter, you don't have enough to effectively support a full unit at the full power station. So we will need to structure it in such a way that actually it manages that risk, right? Secondly, the economics, I think you've absolutely landed on it in the sense that the behind-the-meter cost of biomass power is well below the front of the meter power cost. So we're clearly highly competitive relative to something that you get off the transmission network. But clearly, again, someone who's got behind-the-meter gas would be more sort of competitive than we are, right? Now getting behind-the-meter gas and having that online between now and the rest of the end of the decade is not that straightforward. So again, we think we have advantages there. So again, all of this is something that we are and have been discussing with counterparties. And so again, the proof will be in the pudding. So when we come back and say, if and when we've got something done, I think that's probably the best way to answer that part of the question. Could we do gas? Again, as you well know, Dominic, we had a plan to do a repowering with gas at one point in time. I guess what I would say is that that's -- it's not a trivial activity. And basically, it's a new power station or a massive refurb it's a big activity. So it's not something that we could do, but we would have to consider that as effectively a new investment. And frankly, with 2.5 gigawatts of capacity available, I think that's definitely our first port of call. Just to be clear, the 2 million tonnes we have is effectively the capacity we have in the South. So we will be using all of those pellets. 7 million was a target. We never got to that. So the northern pellets again is about 2 million, and that's what the numbers are currently. Using another 1 million tonnes is something we're doing because of a combination of diversification. So yes, we clearly want to make sure we manage the geographical risk as we'll do that. Clearly, we want to manage price risk, so we want to make sure we can track that in the best possible way. And that's why as soon as we have something that is enunciable, we will do so. So that's all I will be saying at the moment. Again, it makes sense. I may have missed something, Dominic, I'm happy to come back if I have. Operator: Our next question comes from the line of Mark Freshney with UBS. Mark Freshney: Thanks for your presentation, but to summarize, half your pelletization capacity is in Canada. It's uneconomic. You can't source the fiber. You're looking at shutting it down because it's high cost and it will be squeezed out in the impending pellet oversupply as subsidies are cut. That seems to be the synopsis of what you're saying. So it's of that 2 million tonnes that you may shut down, what would be the additional impairments and onetime costs of shutting it down? Just secondly, on the cost-out plan, I think the 150, the existing one, mainly centered around Yorkshire. I think you only took a GBP 9.4 million charge below the line. So what would be additional -- are there any additional charges next year and the year after? And would they appear in the middle column or the left column? And my final question -- Dwight Gardiner: What are you referring to the second thing, Mark, I don't understand. Mark Freshney: The GBP 9.4 million charge for the cost reduction. So exceptional costs -- are there any additional such costs to come through? Or are you booking it in the middle line or in underlying, so it's within the EUR 600 million to EUR 700 million EBIT? And finally, just on the cabling issue with SPN, is there any compensation that you could get to the extent that you're not an outage? Dwight Gardiner: Thank you for your questions, Mark. I guess first thing I would say is that the Canadian pellet business is effectively in the same position it has been for some time. So I'm not sure there's much new news there. I mean we're not -- I think you are saying that we're going to shut it down. We're not saying we're going to shut it down. So I think we should be careful in the way you characterize it. We are looking at various different options for how we manage that well. We have contracts with customers, which we intend to deliver on. And so that's quite important, right? So just to make sure everyone else on the call understands what's happening here. We have contracts through the 2030s with customers in Japan, some in Korea, and we fully expect to deliver on those contracts. So we are not saying by any means that we are closing the Canadian business, right? And the value that remains there, we believe, is well underpinned by the assets that we have, right? So that's the first thing I'd say. Second thing is we have taken, as you mentioned, a part of that impairment or part of the exceptional charge associated with the Future Focus program, and that is what we're doing for now, and that's all there is there. And in terms of SPN, I mean, the key thing we're doing now is we're making sure we work closely with them to get those assets back online. That's our focus. Operator: Our next question comes from the line of Harrison Williams with Morgan Stanley. Harrison Williams: A couple from me. Firstly, coming back on the pellet division. You previously provided quite a useful EBITDA margin target of around GBP 50 per tonne, appreciating. Clearly, there's been some deterioration. Can you provide an update to that margin target now? The second question I had was on batteries. Clearly, quite an attractive investment opportunity as things currently stand in the U.K. market. But can I ask how you are thinking about maybe the risk of cannibalization as we think a few years out if we really do see as much battery capacity added to the grid as some of these forecasters expect? And then finally, can I just get one clarification. You mentioned the GBP 150 million cost saving plan is included in the medium-term guidance of GBP 600 million to GBP 700 million in EBITDA. Could you just confirm that was always the case, i.e., when you provided that medium-term guidance on EBITDA a few years ago? Dwight Gardiner: So maybe, yes, it was always the case. On batteries cannibalization, I mean, we see batteries as an attractive participant in the wholesale market and the balancing market. So it effectively still will be a small piece of the overall market. So we think that that's -- there's lots of room for those to sort of deliver good value over time. And in terms of pellets, I think what we've been talking about for some time now is the 600 to 700 combination of pellets, biomass generation and FlexGen, and that's very much in line with where we've been. And again, there's no new news in Canada other than the impairments. And so that's consistent with where we've been for some time. Mark Strafford: I was just going to add, Harry, I mean, that GBP 50 target that you mentioned there, I mean, that is well underpinned by operations in the U.S. South, that business is in a good place. And the point we're making today is that lower EBITDA in U.S. pellets maps across the higher EBITDA in generation. It's just where that value sits. Fundamentally reducing the cost of biomass is a good thing for the business. So that value, that target is captured within the U.S. business and Drax Power Station. Of course, Canada more challenged. Operator: Our next question comes from the line of Adam Forsyth with Longspur Research. Adam Forsyth: Just a couple of quick questions on the BESS opportunity. Do you see an ideal split between tolling and outright ownership? Or is that something that's really just likely to be driven by the opportunities that come up in the market? The last tolling deal you did for our non-escalating, is that the sort of agreement you would like to be seeing going forward or even into longer durations? And just on that longer duration opportunity, I mean, if we start to get a lot of assets coming -- being delivered through the cap and floor mechanism, do you see any opportunities for you there, either in maybe buying post-development assets? Or even perhaps I'm not sure if tooling really makes sense with cap and floor, but maybe it does. Is that something you've had to look at? Dwight Gardiner: Thanks, Adam. Can you tell me what was the second part of your question? Adam Forsyth: The second one, just about the last tolling deal for ours and non-escalating. Is that the typical sort of deal you would like to be seeing going forward? Mark Strafford: Yes. I mean I think having a mix of durations, Adam, is quite attractive, having that 2-hour and also 4-hour in the portfolio in addition to the longer duration storage we have at Cruachan. So having a mix of technologies and durations, I think, is helpful in terms of how we operate the portfolio. And in terms of the duration of the tolling agreements, 10 to 15 years, I mean, I think every deal is going to be slightly different, but something in that sort of range is something we're comfortable with. Dwight Gardiner: And I think in the first part of your question, Adam, if you think about the sort of differences between them, I mean, clearly, there's a different risk profile, right? So with the tolling agreement, we're not taking the development risk, i.e., we only have the obligations and get paid when they start operating, not taking the operating maintenance risk and then we get attractive returns. And so I think what we're doing for now as we build the portfolio, we will look at the relative returns and the relative risk on a case-by-case basis and see which we want and think are more attractive. But we think that there's value in having sort of both of them, but we haven't set a sort of explicit target as to how much we want to have of each in the portfolio. In terms of the cap and floor, I mean, I think my guess is that the cap and floor probably sort of makes a tolling or floor arrangement sort of less interesting because the government is effectively providing a lot of that for you already. And currently, we're focused much more -- we're actually focusing more on things that are actually on a merchant basis and, frankly, we're providing a lot of sort of stability in the earnings that maybe a cap and floor would otherwise provide. Operator: Our next question comes from the line of Charles Swabey from HSBC. Charles Swabey: Three for me. Just on -- back to battery storage, would you consider a move into markets outside of the U.K. for BESS to diversify some of the price risk there as you get more comfortable with the technology? Two, on data centers, when you're thinking about the pool of developers that are interested in using Drax Power Station, how has that changed over the last year in terms of the number of interested parties and the type and what they're looking to actually use the site for? And then three, with the dispatchable CfD in place, could you give any insight if there are any discussions with governments already about sort of plans for DPS post 2031? Dwight Gardiner: Okay. I got that. So in terms of moving outside the U.K., I would say we are very much focused on the U.K. for now, Charles. And I think that's quite an important piece of what we're trying to do here is extend our sort of -- extend our generating technologies, but sort of consistent with maintaining that within a market regulatory and framework that we're quite interested in. I would say that the strategy is very much a sort of M&A sort of given one, right? So if there was something that was super attractive and largely U.K. or vast majority of U.K. but had some other pieces outside, we might look at that. But the focus is very much on the U.K. In terms of parties, I mean, I think we've been quite clear we're working with a developer, and they've been talking to multiple parties. And I would say that, that group of parties, obviously, there are sort of people come in, people go out. But I guess I wouldn't say that there's a sort of a trend in the way that that's moved over time. I think there's still quite a few people that they are talking to. And then in terms of the dispatchable CfD, I mean, we're in very close contact with the government on this all the time. We're very focused right now on getting ready for the first part of the one we've got, right? So we haven't started any explicit discussions post '31. And frankly, we're also -- we need to talk to them first, I would say, about the data center carve-out. So that's probably the next item on our agenda with government. Operator: Our next question comes from the line of Mark [indiscernible] with Citi. Unknown Analyst: I've got one slightly around the edges for Drax, I suppose. But on the U.K. capacity market auction, the upcoming ones, can we get your views on how you think that will go? I mean we saw there's a lower capacity target requirement, potential greater headroom there. And if I look at your slide, I think your illustrative 60 kilowatt expansion [indiscernible] per kilowatt on that. Have your views -- or what are your views on how that might go in the next couple of weeks, please? Dwight Gardiner: I'm afraid I'm going to be deeply unhelpful. I mean, I guess maybe the best way to think about it is we will be putting a series of our assets that are price takers into that market. Effectively, we don't have any new significant projects we're putting in. So I haven't spent a lot of time sort of focused on where we think that will come out. And I think probably better for me not to give a forecast. Mark Strafford: And I was just going to add that the number in the presentation, Mark, that is purely illustrative and based on what it was historically, just to indicate that there is future value from the capacity market for existing assets when that current contracts under the scheme expire. Operator: As we have no further questions on the conference line, that concludes our Q&A session. And I would now like to turn the call back over to management for closing remarks. Dwight Gardiner: Okay. Well, I believe there are no questions in the webcast. So I guess I'll wrap up by saying I think the -- maybe I want to leave you with one thought, right, which is that I think where we're going to go from here is that we had a strong 2025. I was pleased with the way we overdelivered on our operating earnings there. Looking into 2026, again, we are comfortable with the consensus, and we're looking forward to delivering on that. When we get into 2027, I think we start to really become, in some ways, quite a different company, right? We'll have the new CfD, and we actually have a strong growth trajectory from there, right? We've got the battery transactions you've already seen. We expect to be investing more of that sort of GBP 2 billion of available cash flow going forward. So -- and also the sort of the mix of things will start to shift, right? We'll be sort of maybe 50% biomass, 60% FlexGen and, over time, FlexGen should grow, and we look forward to sort of developing that new business as a sort of a leading growing dispatchable renewable energy company in the U.K. So watch this space. Mark Strafford: Thanks, guys.
Hakon Volldal: Good morning, and welcome to Nel's Fourth Quarter and Full Year 2025 Results Presentation. My name is Hakon Volldal, I am the CEO. With me today, I have our CFO, Kjell Christian Bjornsen; and our Head of Investor Relations, Marketing and Communications, Wilhelm Flinder. Today, we have the following agenda. We will skip the Nel in brief section and go straight to the fourth quarter and fiscal financial year 2025 highlights. We will have a commercial update. We will talk about our new technology that we are about to launch, and we will, as usual, end with a Q&A session. Quarterly highlights. Revenue from contracts with customers came in at NOK 330 million in the quarter. We had an EBITDA of minus NOK 36 million. Solid order intake. I think it's the second best order intake in Nel's history of NOK 686 million. Order backlog increased to NOK 1.3 billion, and we ended the year with a cash balance of NOK 1.6 billion. In the quarter, we had several highlights. Among them, the PEM purchase orders from HyFuel and Kaupanes from hydrogen solutions in Norway, together with a combined value of more than $50 million. We were chosen as a technology provider for GreenH projects in Kristiansund and Slagentangen in Norway. And we received a third order for containerized PEM solutions from H2Energy in Switzerland. We also took a final investment decision on industrializing the Next Generation Pressurized Alkaline platform. Coming back to that a bit later in the presentation. Looking at the fourth quarter results. Revenue, as I said, came in at NOK 330 million. That's a 9% increase quarter-on-quarter and a 20% decline year-on-year from the fourth quarter last year. EBITDA flat versus last year and also flat quarter-on-quarter. The big difference versus last year is actually on the EBIT line with a negative EBIT in the fourth quarter of NOK 920 million compared to NOK 106 million minus in the fourth quarter last year. That is due to roughly NOK 800 million in impairment losses due to our next-generation technology influencing the value of the current platforms or the legacy platforms. I'll come back to the specifics a bit later. No cash effect, of course, on the impairment. That means we end the year and also the quarter with a solid cash balance of NOK 1.6 billion, slightly down from NOK 1.9 billion at the end of '24. In a historical context, 2025 came in below '23 and '24, but still higher than '22, '21 and '20. EBITDA losses came in at minus NOK 275 million, again, as a consequence of the reduced revenue. So not a year that we wanted. But still, in a historical context, around NOK 1 billion is decent. Alkaline was the main reason for the decline on the revenue side and also on the EBITDA side. We went from NOK 1 billion in '24 and a positive EBITDA of NOK 127 million down to NOK 562 million in '25 and a negative EBITDA of NOK 16 million. Again, this was partly due to canceled contracts or also the bankruptcy of one of our customers that was supposed to drive top line and EBITDA performance in '25. On the PEM side, we increased revenue slightly from 2024, and we also improved EBITDA slightly. More revenue is needed in order to bring the PEM business into black numbers on the bottom line. Order intake and backlog. That was a very positive development in the fourth quarter. As I mentioned, the fourth quarter was the second -- or is represented the second best order intake for Nel ever. I think we had one quarter in '22 that was better, but compared to what you can see here in '24, '25, it was a big, big step forward, of course, driven by the big contracts in Norway with HYDS. It also means that the backlog has increased from below NOK 1 billion to NOK 1.3 billion, and 2/3 or roughly 70% of the backlog is now related to our PEM technology. Order intake accumulated ended in line with previous years, below 2022, which was a very good year, but again, a big step forward from NOK 977 million in 2024. And as you can see here on this slide, most of the order intake in '25 came on the PEM side. Important for Nel is to protect our cash balance. And the cash burn rate historically has been high as the company has invested into R&D and also production assets. We have been cautious in '24 and '25 to bring down the cash burn rate. We continue to invest into technology, but there is not the same need to invest into assets as there was historically. Compared to '23, we reduced the cash burn by 35% in '24, and we have reduced it further by 41% in 2025. Again, there will be some investments into production assets, production equipment for manufacturing lines and also some investments on the technology side. But if you look at the operational losses and CapEx together, we will not go back to what we witnessed in '21, '22, '23 and '24. We will have a controlled burn rate going forward. This is driven by a reduction in, among other things, full-time employees. We have gone from 430 people in total in Nel to 346 at the end of '25. And as a consequence, we have also reduced personnel expenses from NOK 646 million in '24 to NOK 569 million in '25. That's a 12% decline. The impairments that we took in the fourth quarter actually reflect our optimism around next-generation technology platforms. We have developed a new technology that we believe in. We believe the new technology will be superior to the technology we have sold traditionally. And that means, as a consequence of this new technology, we expect demand to shift to the new platforms and there will be less demand for the old or existing products. And that means the value of those platforms will be reduced, and we have reduced also the book value of these assets. We took an impairment loss of NOK 361 million related to our atmospheric alkaline production assets, more specifically Line 1 at Heroya, and we've also taken NOK 439 million in impairment related to goodwill and intangible technology assets stemming from the acquisition of the PEM division back in 2016. Moving on to the commercial update. 2025 was not a lost year. We also had some good progress. Among the highlights, I would like to mention the partnership agreement with Samsung E&A. We became their preferred global partner for hydrogen. We received the third purchase order from a major U.S. steel producer, a nice big purchase order from Collins Aerospace for U.S. Navy stacks, where we equip submarine vessels with our PEM stacks. We sold a solution to the Aberdeen Hydrogen Hub in Scotland. As I mentioned, big orders from HYDS in Norway and a nice third order from H2Energy in Switzerland, and also the recognition of Nel as the technology provider for GreenH projects in Kristiansund and Slagentangen. Going a bit more into detail on the contracts that we signed in the quarter. This is a picture of an installation we have done in Switzerland together with H2Energy. It's in Kobel. It's close to hydrogen power station. This is not what we will develop based on the order that we received, but it shows what we have done with them. And now they have placed an order for a similar facility, and it represents the third such order to Nel from H2Energy and we take pride in that because it means that when somebody comes back to you and orders more equipment, they're happy with the performance. In the hydrogen industry, there have been lots of stories about equipment that doesn't work and suppliers that can't make plants run. This is a customer that has had the opportunity to check our equipment, test it, run it and they come back to us to buy more. I think that's a nice testimony of the quality of what we now deliver on the PEM side. The purchase order for 40 megawatts from HYDS was the highlight in the quarter. The 2 projects they will develop are the HyFuel project and Kaupanes, 20 megawatt each, and we plan to deliver the MC500 containerized PEM systems to these 2 projects. Both projects are funded partly by Enova and total contract value exceeds $50 million, and that represents the largest order for PEM equipment that Nel has received so far. And also the second largest contract we have signed in history. We will produce the solutions at our PEM manufacturing facility in Wallingford, Connecticut. We will deliver more than 20 megawatts to 2 projects in Norway that will be developed by GreenH. The minimum scope agreed for each of these projects is 10 megawatt of electrolyzer equipment plus engineering and technical support. The 2 sites are designed to supply clean hydrogen to industrial and maritime users, and they will form part of GreenH's network of distributed regional hydrogen production facilities. Again, these projects are partly supported by Enova with funding. And also size and delivery of the schedules for these 2 projects will be confirmed at a later date, exactly when they will produce it and what technology that has been chosen. If we sum up what is happening in Norway, on the maritime side is actually starting to look quite interesting. There are the 2 projects with HYDS, Floro and Egersund; there are the 2 projects with the GreenH, Slagentangen and Kristiansund; and then there's also the Rjukan project with the Norwegian Hydrogen, where they announced a maritime offtaker of the hydrogen they will produce at Rjukan. And altogether, this forms a quite interesting picture of what is happening in Norway and also the fact that you can supply now hydrogen from different sites, means that it becomes more attractive to invest in hydrogen vessels for ship owners, because you're not dependent on one site only, you have multiple sites available, and that redundancy of fueling options and bunkering options is important. In the fourth quarter -- actually, that's not correct, earlier this year, we launched the Electrolyzers for Europe initiative. It's an initiative consisting of 6 leading electrolyzer OEM manufacturers, all European, to promote electrolyzers made in Europe. Europe has more than 10 gigawatt of annual electrolyzer production capacity, but less than 1 gigawatt has actually been deployed, and that means we're lagging behind EU's target of having 40 gigawatt installed by 2030. This slow uptake is, among other things, due to unclear and/or to rigid regulations, insufficient offtake and cancellations across many early-stage hydrogen project developments. What we aim to do with this initiative is to unite the leading electrolyzer OEMs and help push for clearer frameworks, predictable demand signals, and faster policy execution. And by speaking with one voice, a unified industry voice, this initiative aims to protect Europe's technological leadership, strengthen competitiveness versus subsidized imports and accelerate large-scale hydrogen deployment. So that's a good initiative. Nel is one of the founding members of this body, and we hope more industry players in Europe will join this initiative going forward, so that we can help politicians shape the regulations that we need to drive the industry forward. Talking about or coming to the outlook section and offering somewhat a market perspective going forward, it's slightly challenging. But what we have seen is that order intake in 2025 increased by 15% versus 2024. And again, it was not evenly distributed throughout the year. We had low order intake in the first -- actually, first quarter was good, second and third quarter not so good, and then the fourth quarter was very strong. It accounted for almost 60% of the total order intake for the year. It's difficult to predict order variations between the quarters. But if we look at the long term or mid- to long-term trends, we are positive. What about the short-term trends? We continue to see several promising projects in the 20 megawatt to 150 megawatt range. And these projects are expected to take final investment decision over the next quarters. Especially on the PEM side, we see a lot of opportunities. And the reason why containerized PEM has strong momentum is that projects have indeed become smaller. They have been scaled down from maybe several hundred megawatts to something which is slightly smaller as the first phase. Developers had to start with 20, 40, 50 megawatt instead of going directly to hundreds of megawatts in order to phase in demand. And that means, with the first step of 10 to 50 megawatt, we are in the sweet spot for Nel's containerized PEM solutions. With a containerized PEM solution, you also get a proven, efficient and standardized alternative to customized solutions. And I think a lot of the customers have seen that designing a hydrogen production plant from scratch is expensive. The amount of engineering and planning that you need to put into it is quite substantial. And then having something ready to go arriving in containers simplifies overall project execution and also enables you to shorten the schedule to go to market with hydrogen. It also improves the redundancy, because you have access to multiple systems, and it's easy to build it out stepwise to scale it over time. Significant CapEx reductions on this particular solution, of course, also help. We have worked hard over the past couple of years to get the cost down. The market is price sensitive. So as a result of our cost reductions, we also see that we can enable more projects to move forward with a profitable business case. With respect to geographies, Europe is currently the most active and promising region for Nel, but we also have leads and opportunities in North America, the Middle East and Asia. Then we move on to the technology update. As I have said before, we have spent a long time developing a new generation of alkaline electrolyzers. We have spent more than 7 years developing a brand-new platform. It has taken a long time, but we really wanted to build it from scratch and build a product that is in fact better than what we have on many, many different dimensions. We wanted to be the best electrolyzer the world has ever seen. And now we are here. This is not a PowerPoint rendering, this is a picture of the prototype at Heroya. It's close to our production plant located inside the Heroya Industrial Park, where we for some time now have tested a real version of our pressurized electrolyzer. And what do we aim to accomplish with this solution? We hope that this new solution will set new industry benchmarks. We see that this solution is extremely compact. We can reduce system footprint by up to 80% if we compare it to our existing atmospheric alkaline solution. Why is that important? Well, especially in Europe where there is -- which is the most promising region at the moment, you don't have all the land that you would like to have. Land is expensive. And sometimes you need to locate your hydrogen production plant inside an industrial park or you need to develop a brownfield site. That means having a compact solution that can fit on the site that you have access to, the plot that you have available, it's important. Even more important, I would say, is to get the system CapEx down, the cost of building the entire plant, not just the electrolyzer itself, but everything that goes with it. It's the complete system cost that has to come down for our customers. With this solution, we believe we can bring the total system cost down by 40% to 60%. And that means we start to get close to a level where hydrogen becomes very attractive. Long term, of course, it's not only about the CapEx, it's more about the OpEx side. And OpEx is driven by electricity consumption. This solution will significantly improve the energy consumption for generating hydrogen. We believe that on a system level, we can get down below 50-kilowatt hours per kilogram of hydrogen. And that is a 10% to 20% improvement over most systems today. To add some color to why we are confident that we can deliver on this CapEx and OpEx improvements, I'll just touch briefly on some important points. OpEx, again, the electricity consumption, it's the design of the electrolyzer itself. We have improved the energy efficiency, so 0 gap electrode design, improved diaphragms. We have also spent a lot of time designing a smart system that limits the shunt currents that typically plague pressurized electrolyzer systems. We have a unique and patented solution for avoiding shunt currents. So all of that design work leads to improved energy efficiency in the stack itself. Also important is the fact that you can operate the electrolyzer at different loads. We have a wide operating range, meaning you can run the electrolyzer at the 100% or you can run it at 10%, 20%. So that wide operating range is important when you want to optimize the electricity cost and how much hydrogen you produce, at what hours during the day. We also had a quick ramp up and down. And that is important because it means you can respond to price changes in the market rapidly. If you spend hours bringing your electrolyzer load down, you will not benefit from the fluctuations in electricity prices. Our system has been designed to use as little electricity as possible and still give customers the opportunity to optimize the electricity consumption based on pricing in the markets and how you want to run your system. CapEx reductions are driven by the fact that our system now consists of fewer and cheaper modules. Because there is pressure generated inside the electrolyzer, gas is coming out at 15 bar pressure instead of coming out at atmospheric pressure, we can avoid modules such as scrubber and the gas holder. And we also, because of that pressure, can reduce the size of the modules. Our system has been designed for outdoor installation, which is rather unique. I'm not aware of any other pressurized alkaline electrolyzer technology that can be installed outdoor. Most are installed inside buildings. Having a separate building for your electrolyzer adds a lot of costs, because there are safety regulations linked to ATEX zones, et cetera, that drive up the cost of the building. So we avoid all of that cost. It can operate outside, even in Norwegian or Nordic climate, through the winter conditions. The footprint is small, as I commented on, and this helps reduce cabling, piping and site works linked to concrete, et cetera. It brings all of the construction costs down, because you don't need to prepare thousands of square meters. You get the small compact footprint with less work. And that means all in all, also because our system is standardized, modularized, everything comes inside 20-foot skids, we significantly reduce the engineering, construction and commissioning cost. Why is that important? Because the labor part sometimes account for more than 50% of the total CapEx for the customer. So it's not only about getting the hardware cost down, it's also about getting the labor cost down, and our system delivers on both of these things. We announced, I think right before Christmas, that we delivered first gas with solid results, confirming our anticipated business case. And that led to the Board of Directors giving us the green light for building 1 gigawatt of stack production capacity at Heroya. So very pleased with the results so far. And now it's full speed ahead to commercialize this technology. We have produced gas on the prototype plant, as we said, in 2025. We took final investment decision on the gigawatt production line in the fourth quarter. We will launch the product commercially in the first half of 2026. May 6 is the magical date when we will invite customers and partners to come observe this technology, and also share more technical data and commercial data with them for what this system can do. We aim to validate the full customer pilot in the second half of 2026 and be in position to deliver at scale. What does that mean? Well, it means hundreds of megawatts in 2027. This project is funded by the European Union. We have received EUR 135 million in grants for industrializing the concept. Doesn't mean that we will spend all of that, but we are lucky and very happy that we have a solid financial backing for building the production line and running the pilot tests from the European Union. Then we are done with the official presentation and move on to the Q&A part of the quarterly presentation. And then you have a script you need to go through first, Wilhelm. Wilhelm Flinder: Thank you, Hakon. Before we start the Q&A session, just a few practical points. [Operator Instructions]. To manage the time, we ask you limit yourself to, I think we can take 2 questions at a time. If there's room at the end, you are welcome to rejoin the queue. We will also take written questions submitted through the Q&A function if time allows. If we don't get your questions, feel free to reach out to us at ir@nelhydrogen.com. And as a reminder, we will not comment on outlook specific targets, detailed terms and conditions for individual contracts, or questions about specific markets. Modeling questions are also best handled offline. And with that, I think we can get started. Wilhelm Flinder: As of now, I see no one has actually raised their hand, but we have received some questions -- here, we have one. Anders Rosenlund, I'll bring you on the screen. Please go ahead. Anders Rosenlund: You talked about this new pressurized alkaline system with the energy reduction of some 10% to 20% compared with most systems today. And the indication of below 50 per kilo is a bit vague. But could you just give us an indication of what you think energy consumption is for alkaline today, or what the systems that you deliver are consuming? Hakon Volldal: I think the big -- if you look at PEM and atmospheric alkaline, it's usually in the 55 kilowatt hour to 60 kilowatt hour per kilogram range, depending on who the OEM is. And then there are lots of OEMs claiming to be at very low figures for pressurized alkaline. And the problem is, yes, you might be that on the stack itself, but you lose a lot of that electricity due to so-called shunt currents, so electricity spent on producing hydrogen where you don't want it, in the manifold system. So if you look at the real energy consumption, it might be 15% to 20% higher than what we stated in data sheets because of that effect. And that means you, in some cases, are well above 60 kilowatt hour per kilogram of hydrogen, which comes as a big surprise to customers when they turn on the plant and they compare the electricity consumed versus the hydrogen coming out of the plant. Anders Rosenlund: And the above 60, that applies for PEM or alkaline... Hakon Volldal: That above 60 is for pressurized alkaline technology with high shunt currents. PEM is typically around 55, I would say, on the system level. And then, of course, a lot of these systems degrade over time. So there's a degradation effect of 1% to 2% per year. And our system has been designed to minimize that degradation effect, so that you end -- after, say, 6, 7, 8 years, your energy efficiency is still okay and not just during the first couple of years. Anders Rosenlund: And just a follow-up there because you said -- you referred to the others out there with those electricity consumption levels. But I presume that also applies for your equipment, that your equipment is not materially different since this is an improvement compared to what you already are producing? Hakon Volldal: No, I would say, if you look at PEM, there were not those big variations. It's either 53, 54, 55, 56. I mean most OEMs are in that range. And then plus the annual degradation. The big unknown is on the alkaline side. We produce atmospheric stacks where you have very low shunt currents, but higher energy consumption than we will have with the new technology. The problem is related to the existing pressurized alkaline stacks on the market today. And without throwing specific companies under the bus, we can say that most of these technologies are plagued by high shunt currents, which means you might operate in the 55 to well above 60 kilowatt hours per kilogram range. So we don't have the problem with shunt currents because we don't deliver pressurized alkaline technology today. When we do, the whole product has been decided to avoid that problem, and that is the differentiating factor. Wilhelm Flinder: Thank you, Anders. I see no hands. So let's jump to some written questions. From Morten, will you sell your old alkaline stacks in the future when your new tech is available, or just deliver on placed orders and then switch to pressurized alkaline? Hakon Volldal: I think we will still sell some atmospheric electrolyzers. There are some use cases for atmospheric stacks that are quite good. But as we have said, we think the majority of the market will prefer our new technology, because it is cheaper. The levelized cost of hydrogen will be lower for many customers, and that is the reason we have done the impairment, but we will be in a position to supply customers with the old or existing products if they want them. So I think we will sell both, but over time, the majority of the demand will be related to the pressurized alkaline technology. Wilhelm Flinder: So another one from Morten, do you think there will be consolidation in the electrolyzer world? And do you think Nel will survive these initiatives? Hakon Volldal: I think we have -- I can start and then you follow up, Christian. I think that consolidation has already started. There are a couple of companies that have gone bankrupt or given up. And I think that is likely to continue. There will be fewer players out there. Nel aims to be one of the companies that remain when the dust settles. And then, of course, we are a publicly listed company. Anybody can buy us. If somebody wants to buy us and pay a very high price, I think it's up to the shareholders to consider that, but we plan to remain a leading company. We remain to be one of the key players in the industry. And with the launch of the new product, first, the pressurized alkaline product and, in a couple of years, the new PEM technology, we believe we are in a position to capture a significant share of what we believe will be a sizable hydrogen market. Anything to add here, Christian? Kjell Bjørnsen: No, nothing. Wilhelm Flinder: So will you need PEM in the future when you have pressurized alkaline solution? And if yes, why? Hakon Volldal: So we will -- PEM and alkaline technology have slightly different use cases. Some customers prefer PEM, some customers prefer alkaline. We are in a position to pick the one solution that fits the business case or the project the best. And then we are of the opinion that it's much better for Nel to disrupt itself than for somebody else to do it. That's why we continue to invest into the R&D side. The pressurized alkaline technology will cannibalize and over time, outcompete the atmospheric alkaline version. It might even cannibalize the PEM product. And then if we launch a new PEM product, it is because we believe that product either has some unique benefits that will drive demand from certain segments, or because it will even outcompete the pressurized alkaline technology. So Nel aims to bring the best technology to market that we can possibly come up with. And if that means cannibalizing the old technologies, so be it. Wilhelm Flinder: Good. Also a question from Thomas on here. And I don't think we can be very specific, of course, but maybe some general comments around it. Are there large EPC tenders where Samsung and Nel are currently jointly bidding on? Hakon Volldal: Yes. Wilhelm Flinder: Yes. Good. We've also got some questions from David Lopez on e-mail. Some of these are already taken, but will the new pressurized alkaline technology be able to compete on price for projects worldwide with electrolyzers made in China? Hakon Volldal: Yes. And especially outside China. If you go back to my comment earlier that when you look at the total cost of starting a project, if you look at the CapEx side, more than 50% could be related to labor costs. And that is engineering hours, construction, commissioning, testing, et cetera, happening on site. Whether you start with equipment coming from China or equipment coming from Europe, you need to perform that with local labor on site. So even if the hardware cost is cheap for Chinese equipment, that labor portion is still very, very high. And what we aim to do with our solution is to bring that labor cost down to a minimum. That means we can be a bit higher on the hardware side if we can be much better on the labor cost side. I believe that with our pressurized alkaline technology, we are competitive on the hardware cost side, and we are much better on the labor cost side. And that means we have a winning solution for CapEx. Over time, the Chinese will probably -- they learn fast, they move fast. We have to expect that they will have a lasting competitive advantage related to their supply chains that will enable them to beat us on CapEx. We will do as best as we can, but it's fair to say that they -- or assume that the electrolyzers coming out of China will have a lower production cost. What can we do then? Well, we can beat them on the OpEx side. The OpEx is still more important than CapEx. CapEx is the first hurdle, but for the levelized cost of hydrogen, energy consumption is key. And that's where we, with this technology, have taken a giant leap forward in terms of efficiency and where we still see opportunities to improve. And compared to what is there today coming out of China, we are many, many steps ahead on the actual performance on the electrical consumption. So I believe we have, with the pressurized alkaline system, a world-leading technology that will put Nel in a position to win projects globally. Wilhelm Flinder: Thank you. I'll do another one from David Lopez. Given the Trump administration's policies, have there been any advances in the Michigan plant project? And if the project has been halted, will we have to wait until the new U.S. election to see if the new administration is more supportive of green energy? Kjell Bjørnsen: So we've said before on this topic that we will not build an empty factory. And unfortunately, in a market situation as it is, there is no market for building that facility. So we are not actively doing anything on that side. We would have loved to, but we would need to wait until there is a market. Wilhelm Flinder: Thank you. I see we have another question from Anders Rosenlund. Please go ahead. Anders Rosenlund: Could you comment on working capital and possible efforts to bring down the very large inventories? Kjell Bjørnsen: Yes. So the key thing on the large inventory is inventory that we have because some of our customers basically stopped their projects. Some of them even went bankrupt. We are working very hard to get that over to a cash conversion, working with several concrete projects, but we are dependent on new project wins to sell that. We're not adding to the problem by producing more. Also for the PEM side, with the newly advanced orders, we are making sure that we hold back our commitments until we have money on the book. So you could say the larger than normal inventory we have is a result of some of the historical project cancellations. Anders Rosenlund: And the reason why it stays high for a couple of quarters in a row is because of lack of alkaline sales? Kjell Bjørnsen: Yes. So there's limited new large alkaline orders that are possible to both sign and then deliver on. That's one of the things we are working very hard with and it's a key priority to get that sold. Wilhelm Flinder: Thank you, Anders. It seems we are now out of questions, so I think we'll end the Q&A session here. If anything comes after the call, you're always welcome to reach out to us at ir@nelhydrogen.com. And I'll hand the word back to the management for any final remarks. Hakon Volldal: Yes. I think if we look isolated on the 2025 financials, we are, of course, not happy with the figures. We wish the performance would have been higher, but it became clear quite early that we would have a difficult 2025 in terms of top line and EBITDA. What I'm happy about is that 2025 has definitely not been a lost year. We have used 2025 to strengthen key partnerships with strategic EPC partners, Reliance, technology development partners. We have massively invested in our new technology platforms and successfully developed those platforms towards commercial launch. Because of the difficult markets and lack of demand for legacy products, we had to accelerate the R&D effort and bring the launch plans closer to us, and I am proud of the organization for its ability to deliver on that ambition. We go to market now with a new product in May. And I really, really believe in that product, because it has been designed from scratch based on the right set of, let's call it, guiding stars, so what is required to make hydrogen projects work. We have looked not only at our piece, the stack, but we have taken a system view and really tried to look at this from the customers' perspective, what can we do to bring total system costs down? What can we do to bring the cost of producing hydrogen down? And that makes me quite optimistic about 2026. Despite a difficult 2025, we had a good ending to the year with important contract wins in Norway. We still see demand for our PEM products. I think we are likely to sign more PEM contracts going forward. And then hopefully, we can get more momentum on the alkaline side through our efforts to get rid of the inventory of electrodes, but also start to build the order backlog for the pressurized technology going into '27 and '28. So with that, I think we will come back in April with even more news on the launch of the new product platform, and we look forward to maturing that.
Operator: To withdraw your question, please press 1 again. To withdraw your question, please press 1 again. This call is being webcast and can be accessed in the Investor Relations section of ir.priviahealth.com along with today’s financial press release and slide presentation. Some of the statements we will make today are forward-looking in nature based on our current expectations and view of the business as of 02/26/2026. Such statements, including those related to our future financial and operating performance and future business plans and objectives, are subject to risks and uncertainties that may cause actual results to differ materially. As a result, these statements should be considered along with the cautionary statement to today’s press release and the risk factors described in our company’s most recent SEC filings. Finally, we may refer to certain non-GAAP financial measures on the call. Reconciliations of these measures to comparable GAAP measures are included in our press release and the accompanying slide presentation on our website. I will now turn the call over to Robert P. Borchert. Please limit yourself to one question only and return to the queue if you have a follow-up so we get to as many questions as possible. Robert P. Borchert: Thank you, and good morning, everyone. Joining me are Parth Mehrotra, our Chief Executive Officer, and David Mountcastle, our Chief Financial Officer. The financial results reported today are preliminary and are not final until our Form 10-K for the year ended 12/31/2025 is filed with the Securities and Exchange Commission. Following our prepared comments, we will open the line for questions. Now I would like to hand the call over to our CEO, Parth Mehrotra. Parth Mehrotra: Thank you, Robert, and good morning, everyone. Privia Health Group, Inc. delivered a very strong 2025. Our 2025 performance and very strong value-based performance clearly demonstrate our ability to perform in all types of market and healthcare regulatory environments. We are proud to deliver on our mission to achieve the quadruple aim that our outcomes lower costs, improve patient experience, and happier and more engaged providers. New provider signings and implementations remain strong across all markets, which provides great visibility through 2026. At year-end 2025, we had 5,380 implemented providers, caring for over 5,800,000 patients. We continue to demonstrate very high gross provider retention of 98% and patient NPS of 87 across our footprint. Added 591 providers, a 12.3% increase year-over-year. We ended the year with 1,540,000 value-based attributed lives, up 22.7%. Privia’s diversified value-based platform serves over 1,500,000 patients through more than 130 commercial and government programs. We remain highly focused on generating positive contribution margin in our value-based book. This was driven by new provider growth across our markets, as we continue to execute extremely well and drive growth across our markets. The combination of implemented provider growth helped increase practice collections 16.9% in 2025. We continue to show strong operating leverage on cost of platform and G&A expenses. Adjusted EBITDA for the year increased 38.8% to $125.5 million with EBITDA margin as a percentage of care margin expanding 480 basis points to reach 27.2%. On December 5, we completed the acquisition of Evolent Health’s ACO business. This added over 120,000 value-based attributed lives across existing and new states. We also entered Arizona in April with our anchor partner, IMS. IMS was implemented on the Privia platform at the end of Q3, and we are seeing strong sales momentum in the state. Privia Health Group, Inc.’s national footprint now includes a presence in 24 states and the District of Columbia, including the Evolent Health ACO business. We have proven that we can build scale and manage risk without depending on any one particular contract, while we continue to implement clinical and operational enhancements in our medical groups. Lives attributed to the CMS Medicare programs were up 52%. Commercial attributed lives increased more than 16% from last year to reach 910,000. Medicare Advantage and Medicaid attribution increased 15% and 23%, respectively, from a year ago. Our performance over the past few years is a testament of our approach to value-based care and the strength of our actuarial underwriting, clinical operations, and physician-led governance structure. Our 2025 performance and momentum positions our business extremely well as we converted 130% of EBITDA to free cash flow. We expect to drive EBITDA growth of approximately 20% at the midpoint of our 2026 guidance and convert 80% of EBITDA to free cash flow, assuming no new business development. This positions Privia Health Group, Inc. to end 2026 with approximately $600,000,000 in cash in a very difficult healthcare services environment. We deployed $180,000,000 for these transactions, and our cash balance ended the year at $480,000,000. This was only $11,000,000 below a year ago, due to the tremendous cash flow generation of our business in 2025. Our 2025 results and 2026 guidance further demonstrate our ability to continue to compound EBITDA and free cash flow. Now I will ask David to review our financial results and 2026 guidance in more detail. David Mountcastle: Thank you, Parth. Privia Health Group, Inc.’s strong operational performance continued through the fourth quarter. Implemented providers grew 130 sequentially from Q3 to reach 5,380 at December 31, an increase of 12.3% year-over-year. Implemented provider growth along with solid value-based performance in ambulatory utilization trends led to practice collections increasing 9.6% from Q4 a year ago to reach $868.7 million. Adjusted EBITDA increased 26.4% over the fourth quarter last year to reach $31.5 million, representing 27% of care margin, which is reconciled to GAAP net income in the appendix. All metrics were substantially higher than our initial guidance that we provided at the beginning of 2025, with practice collections and platform contribution coming in at the high end. For the year, we exceeded the high end of our updated 2025 guidance provided in November for all key operating and financial metrics, reflecting our strong execution amidst a very challenging environment, as we continue to generate significant operating leverage. Practice collections increased 16.9% to reach $3.47 billion. Care margin was up 14.4%. And adjusted EBITDA grew an exceptionally strong 38.8% to reach $125.5 million. Our business continues to generate very strong financial leverage as conversion from EBITDA to free cash flow was 130% in 2025. This is a 390 basis point margin improvement year-over-year as we continue to generate significant operating leverage. We ended the year with $479.7 million in cash with no debt. Given our outstanding cash generation with minimum capital expenditures, we expect to end 2026 with approximately $600,000,000 in cash assuming no capital deployment for new business development. This positions us with significant financial flexibility to take advantage of opportunities as they present themselves in the current market. Using the midpoints of our new 2026 guidance, implemented providers are expected to increase 10.6% year-over-year. Attributed lives are expected to be approximately 1,580,000. We expect practice collections to grow 6.6% and care margin 13% at their respective midpoints. We are guiding to adjusted EBITDA growth of 19.5% at the $150,000,000 midpoint and expect 80% of full-year 2026 adjusted EBITDA to convert to free cash flow as we become a full cash taxpayer this year. While our guidance for 2026 assumes no acquisitions, we will remain disciplined and strategic in our capital deployment. We expect to continue to actively seek business development deals both in new and existing markets to continue to grow the business and compound our EBITDA and free cash flow. Privia Health Group, Inc.’s business momentum, powered by the consistent execution by our provider partners and our employees across economic, healthcare, and regulatory cycles over the past nine years validates the strength of our business model. I would like to take this opportunity to thank each one of them for their continued hard work. Operator, we are now ready to take questions. Operator: We will now open for questions. Your first question comes from the line of Joshua Richard Raskin of Nephron Research. Please go ahead. Joshua Richard Raskin: Hi. Thanks, and good morning. Can you speak to tech investments including AI and maybe advancements that you are making on your model for physicians? I am interested in any new capabilities that you have implemented, maybe efficiencies you are seeing on both the administrative side and the revenue cycle side. And then lastly, anything athena has rolled out that you think is making an impact on your implemented provider base? Parth Mehrotra: Yeah, thanks for the question, Josh. So I think it is very timely, and I would like to just step back maybe. When we think about AI-related investments, there are three components that are important to understand in our business model. We are very uniquely positioned with the ACO entity, with our medical group structure, with the single-TIN medical groups, and then with the full tech and services platform where we are deeply embedded in the workflow. I think of a lot of data access and ownership across every single patient, five plus million, every single specialty, every single practice, across the whole care continuum. So the medical groups have access to every single patient encounter, the clinical records. Our MSO has access to every single claim that goes through the RCM engine. It is a very data-rich environment, and we are really excited to enable us to benefit from all of this innovation that is going to happen now and into the next two to three years. You know, that will lead us to enhance all potential applications of AI. So with that being true, the second key point is what buckets of investments we can make between the corporate side and the physician practice side. On the corporate side, one is every single corporate function at Privia. We are implementing Gemini in every single thing that we do in a HIPAA-compliant manner. We are working with our existing technology partners. So you mentioned athenahealth. There is also Salesforce. There is Workday. And then there are new innovators that are innovating across the spectrum that we are continuously piloting. So that is on the corporate side. And then on the physician practice side, I think there are three buckets: the entire fee-for-service workflow, the entire value-based workflow, and then the patient engagement workflow where we are looking at different applications of AI with both existing vendors that we work with, like athena, but then also new companies. So we invested in Navina last year as we talked about. Balance between how much we can implement sooner versus a little bit delayed as these models are becoming better and faster, helping us with clinical decision support with suspect medical conditions, with better documentation of patients, scribing as an example. And the last bucket is actual care delivery. There is a shortage of PCPs, shortage of nurse practitioners, and APPs in a capacity-constrained manner. So how our doctors interact with patients, with our service lines, with after hours, interaction with the patients, scheduling patients, chart prep, medication adherence, risk assessment, obviously, stratify the population, work with the high-acuity patients, and just all of that to how the doctors interact with the patients. The productivity enhancement we can get across our whole organization is massive. So I think if you look at slide 11 on our investor presentation this morning, you know, we have gotten the business to, if you look at the midpoint of our guidance for 2026, at 29% EBITDA margin as a percentage of care margin. That is very close to what we thought at IPO as our long-term range, 30% to 35%. I think with all that we see from what we can do with AI, I think we can get to the high end of the range or even exceed it over the next many years. There is no reason why a company like ours with this much opportunity should not be able to do that. So I think that is going to lead to really good results for margins and then ultimately shareholder returns. Jailendra P. Singh: Thank you, and good morning, and congrats on a strong quarter. I was wondering if you can provide some color on practice collection trends for both Q4 results and 2026 guidance. Practice collections declined slightly, like 40 basis points, from Q3 to Q4. I also notice in your slide that the care center locations declined slightly from Q3 to Q4. Not sure if that is the primary driver. Mean Q4 results and 2026 guidance are both pretty solid. But that is the one metric where there is some variability versus what you have typically seen and 2026 guidance. Have practice collections historically grown in ‘26 at the rate you are guiding, and how should we think about that? Parth Mehrotra: Yeah. Thanks for the question, Jailendra. So in Q3, as you recall, we recognized there is a lot of prior period true-up on our value-based book from ‘24. That obviously led to the great outperformance on EBITDA. But we talked about this last quarter where Q3, we had some prior period adjustments, so the quarter-over-quarter comps get a little bit tougher. And then annually, there are two or three variables. So one is, if you look at page 10 of our press release where we break out revenue by source, you will see the capitated revenue line went up by close to $100,000,000. And that was a result of increase in lives. And then also on the Evolent ACO business, important to highlight, we are not recognizing any premium revenue in practice collections on our value-based book other than this capitated line. So that makes the comps tougher. I think the right way to look and compare is at the care margin line. That is what we are focused on, on what Privia can get from a shared savings perspective. At the midpoint, care margin is growing low double digits, which is very consistent with how we looked at the business. Just some year-over-year nuances. And then on the care centers, I think it is just rounding. To be precise, it is 1,300 plus care centers. I do not think you are going to see—we are not assuming—the guidance does not assume that that will repeat itself. We are pretty prudent with our guidance. Overall, it is pretty strong trends. The provider growth speaks for itself. The implemented providers is really strong. We had one of our best sales years, best implementation years. You can see the year-over-year growth. You can see the guidance for this year for ‘26. So that is the key metric there. Operator: Your next question comes from the line of Lisa Gill of JPMorgan. Please go ahead. Lisa Gill: Good morning, and thanks for taking my question. I have a question around utilization trends. Obviously, it has been a really strong utilization environment the last few years. What are your thoughts around ACA and Medicaid enrollment and any potential impact that it could have? Parth Mehrotra: Yes. Thanks for the question, Lisa. So look, I think as we have said previously, we really have to bifurcate the utilization into ambulatory versus the inpatient. Physician community-based physician practice, primary care, and OB, the community-based care utilization versus the inpatient that you see more in the post-acute or acute facilities. Post-COVID, as the trends normalized, I think we have consistently said, and that holds true, that the ambulatory utilization continues to stay elevated, and we expect it to remain elevated. And that is actually a good thing. That is the lowest cost setting. You want patients to interact with their primary care providers. I do think, like you pointed out, with what is happening with the ACA population, with Medicaid, with all the changes, either enforced by the government or otherwise, payers reacting to it, you are going to see a lot of churn. We expect that to happen. I think our diversified model across commercial, MA, MSSP, exchange positions us really well. We do not have a big Medicaid population, do not have a big exchange population. Whatever we have tends to get normalized. People tend to see their primary care provider. Children tend to see their pediatrician. Even if they lose coverage or move on, we see a lot of uninsured or self-insured folks show up. So we do not see any trends abating for us. Overall, I do think for the acute and post-acute care, there are going to be nuances as all of this normalizes over the next couple of years. I think that bodes well for our business. Operator: Your next question comes from the line of Jeffrey Robert Garro of Stephens. Please go ahead. Jeffrey Robert Garro: Yeah, good morning, and thanks for taking the question. I want to ask about EBITDA to free cash flow conversion. Conversion guidance was 90% a couple of years ago and 80% last year and now here in 2026. You also materially outperformed on that metric ultimately in 2025. And I know there are a couple moving pieces with taxes and folding in ECP. So was hoping you could help us bridge between those historical expectations, 2025 outperformance, and the FY 2026 guidance on EBITDA to free cash flow conversion? Parth Mehrotra: Yeah, absolutely. I will start, and then Dave will give some of the specifics. So look, I think you have highlighted one of the strongest elements of our business model. If you look at slide 11, this is nine years of data, including this year’s guidance. We have averaged over 100% conversion. We love free cash flow. You can quote me on it. It is the cleanest purest metric. You cannot adjust it. It is either in the bank or it is not. Everything is expensed on the P&L, and it is a very clean metric. So I think we are going to manage that as the best we can. Obviously, our guidance always assumes normalization. And then if things turn out better, we hope that benefits the shareholders. Our guidance reflects becoming a full cash taxpayer in 2026 as we run down the NOLs, and David will walk through some of the nuances. We manage a negative float in this business. We focus on collections, get money to our providers. It is a strength of our business model relative to others in the space. And I think enterprise value to free cash flow is a key metric here. So that is reflected in the 80%. And then I will let David answer any specifics on that one. David Mountcastle: Yeah. I mean, outside of that, I would just say we had a really good collection year. And we had a few timing issues at the year end that I think we were originally expecting them to come in January, and they came in at the end of the year. So did have a little bit of timing there at the end, but we are definitely confident in our 80% or more for 2026, and we will become a full cash paying taxpayer in ‘26. So that is going to put a little hit in our number for ‘26. Operator: Your next question comes from the line of Whit Mayo of Leerink Partners. Please go ahead. Whit Mayo: Hey, thanks. Good morning. You are going to have $600,000,000 of cash at the end of the year. You do not have any debt, and it is not very efficient to have this much cash sitting on the balance sheet. So just maybe any updated thoughts around capital deployment and if priorities have changed at all. Parth Mehrotra: Yeah, I appreciate the question, Whit. Look, I think, first of all, in probably the toughest healthcare MA regulatory environment, we really love our position in the space. The strength of the model, the cash flow generation, the balance sheet strength, relative to others, private or public companies. Our priority will be to continue to deploy capital to keep compounding the business. You saw us deploy $180,000,000 last year. We have doubled EBITDA ‘23 to ‘25. On a rolling basis, we are going to double it again ‘24 to ‘26. I think our answer is consistent to that question. We think our ability to use cash to acquire assets across this ecosystem and keep compounding our units, whether it is entering new states, adding implemented providers, adding lives, can acquire medical group tax IDs, ACO entities, MSO entities. Such a diversified business model, and there are a lot of companies that are challenged public and private. I think a lot of medical groups have partnered with other companies that may not be doing that well, to get them at least to have a relationship with Privia in an ACO entity and be part of the Privia family. I think our ability to be the partner of choice for a long-term perspective for a lot of the physician groups out there, given our track record, gives us the ability to be the partner of choice. And then also, we like to keep a sufficient cash balance for a rainy day. We do not like leverage on businesses that could potentially have variability in shared savings. As we all know, pandemics happen, hurricanes happen. We are supporting our medical groups. There is a rainy day fund. But then also, we have the flexibility to return capital as a last resort if our stock price deviates meaningfully from what we think is intrinsic value. We have that option too. But I think the priority is going to be continue to deploy capital and keep compounding the business the way we have been doing. Operator: Your next question comes from the line of Matthew Dale Gillmor of KeyBanc. Please go ahead. Matthew Dale Gillmor: Wanted to ask about the Evolent acquisition. Now that you have owned the asset for a few months, I was curious if you had any updated perspective about the business or the synergy within the acquisition. I was particularly curious about the cross-sell discussions with Privia’s platform into that physician base, whether that is new or existing states. Thanks. Parth Mehrotra: Yeah, appreciate the question, Matt. So we just closed this in December. I think we are really excited to have the team join us. I think the core business that they run is solid. You can compare their savings rate on that book relative to our overall savings rate. It is publicly available. Our hope is we can increase that savings rate pretty meaningfully this year into the next few years. I also think it allows us to have an offering in this care partners model where the provider groups that they focused on are really providers that are not on our technology stack that we can go out and reach out to a lot more providers that have partnered with other companies that may not be doing that well, to get them to at least have a relationship with Privia in an ACO entity, and then obviously cross-sell into our full medical group business model. And then obviously in new states as we enter over time. So I think that will materialize itself over the next few years. We are really excited to have that business be part of our offering, and I think we are going to realize as many synergies as we can. Operator: Your next question comes from the line of Sean Dodge of BMO Capital Markets. Please go ahead. Sean Dodge: Yes, thanks. Maybe just staying on the Evolent ACO acquisition. Parth, you mentioned increasing their savings rate up to the levels of the other Privia ACOs, maybe as quickly as this year. Just mechanically, how do you do that? What are the first couple of levers you can pull there to drive that? And then initially, you said it would contribute positively to EBITDA in 2026. Any quantification you can share on how much you have embedded in the guidance for ‘26 from the Evolent acquisition? Parth Mehrotra: Appreciate it, Sean. So just to be clear, I did not say it would happen this year. I think it will happen over time. We have a playbook that we run. You have all the quality metrics that you want to improve. There is some basic block and tackling: getting the patients to see their doctors, making sure we prevent the ED rates and inpatient rates, all of those things. Then all the nuances as we stratify the population, look at where you have some high-acuity patients, manage those, things like that. It is a little bit nuanced given that these providers are not on our platform. So we are focused on making sure we have the right level of engagement with the practices, right level of data that comes through the technology stack that is implemented on top of their existing infrastructure. We have known that we have been in MSSP for the last eight, nine years. These things take time. We just got the business. I think rule number one is do not do anything stupid and disrupt it. We are going to run our playbook, implement how Privia does things hopefully a little bit better, and so this will happen over time. The acquisition is accretive. You saw their savings rate. It makes money. We did not break out the EBITDA. It is all included in our guidance. We are growing another 20% this year. Part of that is from the acquisitions that we did, and there will be opportunities in some existing states where we have the medical group presence. The synergies are to be had. Our growth algorithm is going to be based on adding new providers, adding lives into value-based arrangements, same-store care center growth, and then doing deals that are accretive. So I think we are going to keep doing all of those four things and hopefully keep compounding EBITDA here. Operator: Your next question comes from the line of Andrew Mok of Barclays. Please go ahead. Andrew Mok: Hi, good morning. The corporate G&A expense dropped sharply in the quarter. Was there anything to call out driving the beat? And is this the right run rate to think about for 2026 even with the moderation in practice collections growth for next year? Thanks. David Mountcastle: No, there is not really anything to call out. We definitely had some sequential decreases in things like legal and some of our consulting. I would look at our 2026 guidance as maybe a better way to look at all of our expenses. We do expect to continue to gain leverage in the G&A space. Operator: Your next question comes from the line of Matthew Dineen Shea of Needham & Company. Please go ahead. Matthew Dineen Shea: One of the things that has impressed us is the continued provider growth in existing markets. So it is good to hear you are already seeing strong sales momentum in Arizona in particular as well as any other noteworthy markets. Do you expect your sales or growth efforts to be different in the value-based care ACO-only states versus the implemented provider states? Or is it the same playbook and resources sort of across markets? Thanks. Parth Mehrotra: Yeah, I appreciate the question, Matt. So look, our playbook in the core medical group business is the same across all our markets. Our objective is to develop really dense delivery systems with a very low-cost provider base with community-based providers at the forefront. That materializes differently in every state. We establish presence, work with a great anchor group if we can get a pretty sizable anchor partner like we did with IMS. Doctors know doctors the best. Before we show up in the state, this model pretty much does not exist. We establish ourselves, we establish the sales team, we start knocking on doors, and then showcase what we have done in other states. The payers know us. They know the playbook that we run. There is a win-win here given all the cost pressures and everything that is wrong with the healthcare ecosystem. This is where cost can really be taken out, quality can be improved. So how that materializes to your question, we got a great anchor group, great set of physicians with IMS. They are super excited to be part of Privia. They see what we have done elsewhere. It leads us to then reaching out to the networks around these patients and the independent practices that can stay autonomous and yet be part of something bigger like a Privia. Given the health system dynamics and the payer dynamics in the state, that is our playbook there. As a portfolio approach, implemented provider growth hopefully just continues to pick up. The way we sell the ACO-only versus the full stack just depends by state. There are nuances to both. We have a very ROI-driven value prop in each. But the medical group value prop obviously is a much deeper discussion. There is a separate sales team for each, but there will be cross-sell. We are kind of indifferent as long as we get them, whether we get them in one or the other. We will just continue to go full steam ahead on both. Some of the competitors that we deal with are also different in both of those. Our overall story should resonate with physician practices. They are looking for a full solution. So we just try to optimize that. Operator: Your next question comes from the line of Jack Garner Slevin of Jefferies. Please go ahead. Jack Garner Slevin: Hey, good morning. Thanks for taking the question and congrats on the really strong results. I wanted to touch on a little bit of the MA contracting environment. Acknowledging you have got less full risk in your book and have been on the front end of concessions that are being given by payers to value-based players that are driving value, I would be curious to hear your take on how that might develop for your business as you look at 2026 and then beyond 2027 with some of the payers looking to claw back margin, but also acknowledge the value that is being brought from PCP-led provider groups in the space. Thanks. Parth Mehrotra: Yeah, thanks for the question. It is pretty nuanced. Just to take a step back, I think us foresighting what might have happened in the MA environment and that shared risk—where the doctor, an entity like Privia, and the payer all have skin in the game—is the right model. I think what you are seeing is an adjustment in the industry by the payers. You have seen a little bit of round robin with how the payers have reacted. The lives are moving between those entities as they adjust benefits, as they prioritize it differently, between three or four of the big MA players out there as you have seen and noted on. Years ago, payer X; last year, payer Y; this year, payer Z. Whether by luck or by foresight or by execution, we kind of avoided some of the traps. We have continued to have a belief that you have to recognize the amount of work that the physicians have to do to manage a high-cost patient population and to deliver results. You have to get paid for it. If you do not get paid for it, I do not think anybody wins. We love to take as much risk as we can if we can manage it. If the payer gives us a contract that compensates us well to take that risk and compensates the physicians that are working extra hard to perform in these contracts, we are very forward-leaning. So I think we are just going to continue to look for opportunities with our payers, keep getting our delivery networks more dense, adding capabilities, and impacting the total cost of care, and delivering it and showing that to the payers. I think these things get normalized. I think we are going to flush through V28 over a couple of years here. The payer environment will stabilize, and so I think it positions us really well. If there is some delayed gratification in ramping up risk, we will do that because the doctors do not go anywhere. The patients do not go anywhere. It is just coming to a consensus with the payers on the right contract structure. Our revenue recognition methodology is different. We are not recognizing any premium revenue part of that book. Operator: Your next question comes from the line of David Larsen of BTIG. Please go ahead. David Larsen: Congratulations on another good quarter. Can you just reconfirm the Evolent Care Partners EBITDA and revenue? Is it $10,000,000 of EBITDA on $100,000,000 of revenue? And then how many of those doctors do you think you will be able to convert over to your core Privia athena platform where you are doing all the billing and AR for them? Thanks a lot. Parth Mehrotra: Yeah, thanks for the question, David. I do not think we disclosed any of those numbers. I think those were numbers that Evolent might have disclosed in their earnings call over the last couple of quarters, including this past week. Whatever numbers you are getting from them may be different for us. Our top line includes everything. You will see the results when CMS announces it in August. We are not going to break down EBITDA by any line of business. We have not done it for any acquisition or any line of business. But it is accretive. It is contributing meaningfully to this year’s EBITDA. That is why this was asked earlier on the call. We grew EBITDA 39% last year. We have grown another 20% this year, doubling EBITDA on a three-year rolling basis. And Evolent is part of that growth. Operator: Your next question comes from the line of A.J. Rice of UBS. Please go ahead. A.J. Rice: Thanks. If you could just update us on some of your newer markets and your expectations? In contribution, you are $235,000,000, up from $179,000,000 in the prior year. What have you embedded in your guidance this year? Are there any wins worth calling out there? How are they progressing relative to your expectations? Parth Mehrotra: Yeah, thanks, AJ. So look, I think our goal is to accrue prudently and then hopefully outperform. Our initial guidance was $105 to $110 million EBITDA, and we ended the year at $125 million, materially higher. A lot of it was related to shared savings, some prior year, some in-year, as we perform well. Our guidance has taken the same methodology. We would not expect a material jump. If we do better, we will hopefully see it in the results. If we do not, then we will stick with what we have. We have a very diversified book. You have written really well about all the trends that impact the whole company. It is a portfolio approach. We are now in 24 states, some in various pools of risk. There are some markets that are maturing. Some are still negative EBITDA. The mature markets are running well ahead of that number. Some may not be doing that well. We evaluate all our markets. If we do not think some markets are working well, we exit. We exited Delaware, as an example, a couple of years ago. So you will see us be very, very prudent with this business. I do not think you can make mistakes. If you think some deal structures or anchor partners or markets are not working well, and we have an opportunity to do it differently, you have to keep pruning the tree here to keep letting it grow really well. The overall business is in very good shape, 29% EBITDA to care margin. So that should tell you that the whole overall business is in very good shape. There are always puts and takes. Some do better one year, others in other markets. We just develop very dense physician networks here. Operator: Your next question comes from the line of Ayush on behalf of Elizabeth Hammell Anderson of Evercore ISI. Please go ahead. Ayush: Hey, good morning, guys. Thanks for taking my question. As CMS transitioned from the ACO REACH program towards the new ACO LEAD model, how are you guys evaluating whether that framework aligns with Privia’s long-term value-based strategy? And then as your value-based book continues to grow in scale, how do you think about maintaining the consistency of performance across cohorts, particularly as the provider mix evolves? Parth Mehrotra: Yeah, I appreciate the question, Ayush. Like with any new program, we will evaluate it. It goes into effect next year. I think we are still going through the details of LEAD versus REACH. What bodes well is, with the REACH sunsetting, it allows our sales team to reach out to a lot of physician practices and providers that may have participated in REACH. By the way, ‘25 to ‘26, anybody who is in REACH is going to see pretty significant decline in the shared savings just given how they changed some of the elements of that program. We are still studying LEAD. MSSP Enhanced Track versus LEAD is on a TIN basis. It just depends on the patient population, the state, the ACO, the majority of the patient pool. You can participate in one, not both. We have some REACH lives today, so we will see if they move into MSSP Enhanced or LEAD. As we work with other new partners, we will see if LEAD makes sense or not. If you have a pretty mature ACO in an MSSP Enhanced Track that you have been in for the last many years, we will just evaluate it ACO by ACO. We take a five to ten-year view, like I said earlier. There will be opportunities in particular states. It is a generic question; the answer is much nuanced. This is healthcare. It happens locally in every state. Every pool, every patient population, every payer, every contract is different. That is a core value proposition and moat around this business. It is hard to replicate. A lot of people can enter these businesses, but you have seen how hard it is to make real money and real free cash flow. Given the diversity of our book and the number of contracts and the payers we work with, and the scale we are operating at across different types of patient populations, I think that just speaks for itself. All of it is a core competence of this business that is very, very hard to replicate. You have to have real capabilities and a great team all around from a risk management perspective, underwriting perspective, delivery of care and total cost of care management with these practices and how you work with them, the data, the technology stack, and convert EBITDA and free cash flow with our shareholders. I think it just speaks for itself in how we have been able to deliver value to the payers, generate shared savings, and share that with physician practices. Operator: Your next question comes from the line of Jessica Elizabeth Tassan of Piper Sandler. Please go ahead. Jessica Elizabeth Tassan: Thanks, and congrats on the really strong year. I am interested to understand first what are the specific AI tools that you have rolled out nationally to all of your network providers? What did that rollout process look like? And then any early outcomes or savings data that you can share? Then, going forward, what kind of clinical category would you maybe target for AI-enabled improvement? For example, are care transitions an opportunity? Is end-of-life care planning an opportunity? Just curious if there are any one or two categories that you would call out. Thanks. Parth Mehrotra: Yeah, I appreciate the question, Jess. This stacks to what Josh asked right at the beginning of the call, so I am not going to repeat all of that. Hopefully, you got some of that. From a category perspective, given the five buckets I described earlier, we are looking at agentic AI as it relates to patient engagement, interaction with patients, scheduling patients, care gap closures, medication adherence, chart prep, risk assessment, clinical decision support, stratify the population, work with the high-acuity patients. Given our physicians are capacity constrained, the ability and the need to work deeply with every patient is front and center as we specifically, as payment models evolve to different versions of value-based care. Obviously, there is a whole host of applications on revenue cycle, on the fee-for-service workflows. From a company perspective, we are working with some existing companies that we work with today. As they innovate, we invested in this business called Navina, like we talked about last year. That was pretty tangible for us. There are a number of new innovators in the space that we are partnering with and piloting some of them. The technology is evolving really fast. The improvements that we see and the applications are pretty amazing already. I think this is going to be a three, five, seven-year journey. At some point, once it is more baked, we can implement in every single one of those buckets. We are super excited on this journey. I think it will be margin-accretive and productivity-enhancing, and I think you are going to see a lot more adoption. We will obviously highlight more, but those are the categories going forward for a business like ours. Operator: Your next question comes from the line of Michael Ha of Baird. Please go ahead. Michael Ha: Thank you. As you look across the broader value-based care M&A landscape, it appears to be heating up in a pretty big way only very recently. Acquisitions being made, especially in South Florida, interest ramping up in California. A lot of this coming from a couple of your large payer partners looking to really build greater market saturation. And some of these multiples we are hearing of, they are not too far off from your own, but the quality of these assets appear to be much lower. So I am curious to hear your thoughts on all of this. How does it look to you? What do you think is driving the activity? Is it simply now entering the end of V28, and the narrative is beginning to pick up again? And as you look ahead, how does all that you are seeing today impact your own M&A strategy? Parth Mehrotra: Yeah, it is a good question. Look, I am not going to comment on what others have done recently or any particular deal. You highlighted two geographies in South Florida and Southern California that almost run very, very differently from a large part of this country from a healthcare delivery and risk taking and the concentration MA population. Those are very unique geographies. The assets are unique. Some of the payers have rovers on some of the assets. As you know, we are not in the clinic MA space. We believe in shared risk. We are just not in the MA clinic business. We believe in community-based doctors staying autonomous, independent, and helping them. To the broader question, we are positioned really well. We have a very diversified model. We can look at assets across the spectrum—ACO entities, medical groups, MSO entities, service providers, whatever have you. We can hopefully be a partner of choice. So we are going to be pretty aggressive. I think finding quality assets is key. You could spend a lot of money buying a lot of things, and they do not have the same quality of earnings. They do not have free cash flow. They do not have EBITDA. We are going to be very, very disciplined. We do not like to pay big multiples, especially for assets that are lower quality. While we have a lot of balance sheet capacity with our cash balance, with any potential debt capacity—even though we do not like leverage on this business—we are primed to do larger deals. We are going to be very thoughtful. If we can get an asset that we can improve, make an impact, buy and integrate and synergize, and continue this compounding of EBITDA, we will pursue it. Operator: Your next question comes from the line of Craig Jones of Bank of America. Please go ahead. Craig Jones: Great, thanks for the question, guys. Thinking more about the long-term 20% EBITDA growth number you have out there. You have a lot of levers in your portfolio to drive this every year. Could you break down how you see the components of driving that 20% growth in a typical year among organic, inorganic, margin expansion, or whatever it may be? And then which components do you view as higher visibility versus lower visibility? Thanks. Parth Mehrotra: Yeah, I appreciate the question. You have to go back to slide 11 to look at this on a multiyear basis. Those are: you enter new states; you add implemented providers in existing and new states; you add value-based lives in platform practice; you grow same-store; and then you improve the cost structure like we have done, both on the cost of platform and then also on sales and marketing and G&A. Then on value-based contracts on which we have the potential to earn care management fees and shared savings. Every year is different. The components are different, but they all work together. Some years we have scaled the cost structure really well. Some years you do M&A. Like this past year, you look at ‘22 to ‘23, we grew pretty fast. We entered five new states. The cost structure did not scale, so adjusted EBITDA margin barely improved across those two years. Versus ‘23 to ‘25, you have seen that margin profile get better. It will ebb and flow, but the direction is hopefully upward right. Like I said earlier, with the application of AI and everything else, I think we are going to continue to get this margin profile better. If we do acquisitions, we are going to synergize them. If we enter new states, some of them lose money in the first couple of years. It just depends. Given the whole book where it stands today, you are going to see us pursue all those four components. It will be a combination of both organic and M&A. M&A is a core component of the strategy as we roll up the industry. How it evolves— which year, which component is higher or lower—I think it will vary, but we are going to keep executing on all of those. Operator: Your next question comes from the line of Daniel R. Grosslight of Citi. Please go ahead. Daniel R. Grosslight: Thanks. On taking on risk, I think that has been a recurring theme on a lot of these earnings calls. But it does seem like some of your competitors are now beginning to adopt your type of model or at least approach to risk taking, which I guess is good because imitation is the best form of flattery. But it does make me think about your provider recruitment over the next couple years, if your conversations with providers have shifted at all, and if so, how has that sales pitch gone? Parth Mehrotra: It is a good question. It builds on some of the themes on the earlier questions. Arguably speaking, the perceived barriers to entry in this business can be lower. Anybody can start an ACO if they raise capital from some VC or private equity fund. The issue is performing and building core competence on how you deliver value, and then execute and deliver shared savings day in, day out, every year, year after year, across cycles, and generate free cash. We have said consistently, I will repeat it: you have to share the appropriate level of risk with the doctor. That is the best long-term strategy. An entity like Privia and the payer and the doctor all share risk. A lot of money got raised and got spent in giving contracts or irrational economics to the payers and to the doctors without sharing the appropriate level of risk. You do artificial things, and the viability of the business can be put to risk. We have seen that. A lot of companies have not performed well. They are surviving. We think the TAM is pretty large, and hopefully our results just speak for themselves. We have a full-service offering with our medical group that a lot of the competitors do not have: every patient, every specialty, technology stack, payer contracts, and then we have a full suite of value-based capabilities to help them perform in those in a very integrated manner. We think that is a very differentiated approach. Now we have a lot of history and data to back it up—eight, nine years of performance like you see on slide 11, across any cycle. We want competitors to perform really well because that is good for the industry. There are some competitors that are doing really well. Hopefully, we are one of the survivors and consolidators. Some of them which were not that great, hopefully we can consolidate over time. I do not think the pitch is any different. We execute the way we do. Our record speaks for itself. Operator: Your next question comes from the line of Ryan M. Langston of TD Cowen. Please go ahead. Ryan M. Langston: Thanks for squeezing me in. On the prepared remarks, you talked about the IMS acquisition saying there was pretty strong sales momentum in that state. Can you just give us a sense on organic pick up from IMS? I am just trying to understand broadly what the growth trajectory looks like on some of these larger deals as you ramp up in new states. Thanks. Parth Mehrotra: Yeah, I mean, we do not break it up. You have the size of that group if you go to the website. It was a pretty meaningful group. A very large multispecialty group got themselves out of a health system and then found us. We found them, and there are a lot of synergies in the business model. Our best salespeople are our physicians. If we do well for them, they speak for us. We establish ourselves. We establish the sales team. We start knocking on doors. It starts small and builds up. I just do not think any one year makes a difference. It is a five-year strategy to build a big medical group there. We expect, hopefully, new signings and implemented providers. We are going to continue to go full steam ahead. When you get a sizable group, the snowballing starts sooner. Operator: Your next question comes from the line of Richard Collamer Close of Canaccord Genuity. Please go ahead. Richard Collamer Close: Morning. Thanks for fitting me in. Maybe just one last question on your appetite for new business development. How are you thinking about the best return on your investment as you are thinking about either expansion into new markets or investing in some of your more recently entered markets and really trying to build density, all in light of the challenging payer landscape that you have been referring to? How does that impact your philosophy on return on that invested capital? Parth Mehrotra: That is a great question. Every deal is different, and you have to evaluate it on its merit. Each market runs with its own P&L. They have business leaders that are responsible for growing those markets. We take a portfolio approach. These markets and these dense networks take time to build—five, six years at least. You are seeing us do a whole wide variety of transactions over the last few years, ones that we have disclosed being a public company. We can do in-market BD as opportunities arise, add new capabilities, add new markets, buy businesses like we did with the Evolent deal. Given our capital position and free cash flow profile, we have the luxury to do both. The whole business is performing really well. So if there is a market where we know we are going to lose money as we invest and put the sales team on the ground, and if it is a smaller anchor partner, but it is a big state with good demographics and enough independent physicians, we will take a five-year view because we understand the unit economics of this business really well. When you get a business operating close to 30% EBITDA to care margin, generating this much cash, we thought we would do that five, six years ago. We have seen across 15 states with the medical group model and now nine more states with the ACO-only model. We know what works, what does not work. We have seen a lot of issues over the years. We have worked with a lot of payers, different healthcare geographies, different payer dynamics, different health system dynamics. Very few companies are in this position where they can invest with that kind of a mindset. We are pretty fortunate, and we are going to keep pressing on all those fronts. We take all that into consideration as we take that five to ten-year view. Operator: Ladies and gentlemen, this concludes today’s call. We thank you for your participation. There are no further questions at this time. Please continue, gentlemen. You may now disconnect your lines. Parth Mehrotra: Thank you for listening to our call today. We appreciate your continued interest and look forward to speaking to you again in the near future. Thank you, operator.
Caroline Thirifay: Good morning, everyone. Thank you for joining us today, both in person and virtually for the management presentation of our full year results 2025. I'm here with Marc Oursin, CEO; Thomas Oversberg, CFO; and Isabel Neumann, Chief Investment Officer and Chief Operating Officer. Before we begin, we want to remind you that all statements other than statements of historical fact included in this management presentation are forward-looking statements. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected by the statements. These risks and other factors could adversely affect our business and future results that are described in our earnings release and in our publicly reported information. With that, I will hand over to Marc. Marc Oursin: Thank you, Caroline. Hello, good morning to all of you. Thank you for being here. So let's start with this page, Page #2. So you can see that we have, at the end of '25, close to 350 properties in Europe and reaching almost 1.8 million square meter of footage. Regarding the performance of the year, we have delivered another very strong one. Our revenues grew by almost 11%. We increased our NOI same-store margin by 40 bps with an EBITDA growth following the one from the revenue at 10.4%, and ending with an earnings per share growth of 1.7% versus last year despite the additional cost of debt and dilution from our scrip dividend. Meanwhile, we stay with a very solid balance sheet. We have a BBB+ rating, a leverage of 23% or 6.2x net debt over EBITDA and having an EPRA net tangible asset per share of EUR 53.3. So let's go to Page 4 for more details. So you can see on the right side of the page how the revenue growth full year of 10.8% has been achieved. We got the benefit of additional available square meters of 5% versus '24 coming from our development, renting them up by 8.8% versus '24, and combined with an increase of our in-place rent of 1.9%. When you combine all of that, you get the 10.8%. And as explained earlier, our cost management due to the efficiency of our platform allowed us to grow the EBITDA by 10.4%, therefore, in line with our revenue speed. And this performance is clearly putting us on an earnings per share growth trajectory, medium term. If you go to the next page, Page 5. So I think it is interesting to notice how the company has been able to grow physically, meaning in terms of footage and translating this square meter growth into revenue growth. So you can see on the left that we grew by almost 7% CAGR for the past 5 years in terms of number of stores, but also square meter-wise. At the same time, our revenue grew close to 11% CAGR and demonstrating that our strategy of growth delivers unique revenue increase. If we go to Page 6, and this slide is focusing on the NOI growth '25 versus '24 for the total company. It is also showing the importance of the margin generation from our so-called non-same stores, representing all the properties not yet matured and coming from organic development or M&A transactions. You can see that almost 2/3 of the incremental NOI value is delivered by our development engine, confirming our capacity to deliver profitable growth. So now let's go to Page 7. So on this page -- I think this page is really important to understand what we have achieved and how we will continue to use 2 major strengths that we have. I mean the scalability of our platform, allowing us to increase our same-store NOI margin and, at the same time, our development engine bringing profitable growth. And you can see that we got the benefit of both with a significant increase of our total NOI margin value since '21, with having the non-same-store taking the major share of this growth, 2/3 in '25, as you have seen on the previous slide, while having the same stores normalizing their NOI delivery. And Isabel, by the way, will come back later with details regarding our future pipeline. On this, I turn to Thomas. Thomas Oversberg: Thank you, Marc, and good morning, everyone. Let me now turn to the same-store performance for 2025 on Slide 8. Across our 251 same stores, we delivered a solid full year revenue growth of 3.2% at constant exchange rates, supported mainly by the continued in-place rent growth of 3.5%. Occupancy remained resilient at 89% despite the modest addition of rentable square meters during the year. Overall, demand remained steady across our markets. But as we highlighted, in several regions, market dynamics intensified during Q4, particularly in the U.K., the Netherlands, France and Germany, requiring selective pricing adjustments to protect occupancy while preserving our long-term growth. This Q4 NOI margin impact flowed through to EBITDA, as you will see later. That said, throughout the year, we were able to rely on our structural strength, disciplined pricing, the scalability of our platform and cost efficiencies delivered through clusterizations, helping us mitigating inflationary pressure, for example, of payroll and real estate taxes. As a result, full year same-store NOI grew by 3.8% and our same-store NOI margin expanded by 40 basis points, reaching 68.1% for the year. Moving to same-store NOI performance on Slide 9, where we break down the main components of our NOI growth for 2025. We delivered EUR 254.2 million of same-store NOI in 2025, up from EUR 244.8 million last year. As noted, key contributors were higher in-place rent, which added EUR 8.1 million and a EUR 1.4 million benefit from margin improvements. Rental square meters were broadly stable year-on-year, having only a marginal NOI impact. With same-store representing approximately 86% of our total NOI, this demonstrates our ability to sustain high profitability, allowing for predictable earnings growth. Slide 10 illustrates the normalization pattern, which we anticipated and communicated throughout 2025. After several years of exceptional post-COVID growth, 2025 showed the expected return to more typical revenue dynamics across our same stores. Revenue growth remained positive at 3.2%. And as mentioned, Q4 was clearly more challenging, in particular, against our very strong comps from 2024. The key message here is that the overall slowdown in revenue growth was expected. But importantly, the long-term fundamentals of our markets remain intact: urbanization, mobility and still significant undersupply. We remain convinced that our omnichannel and pricing capabilities position us well to manage through different market conditions as we have demonstrated in the past, most recently in Sweden. Turning to adjusted EPRA earnings per share on Slide 11. For 2025, adjusted EPRA earnings per share landed at EUR 1.74, fully in line with our expectations and market consensus. This performance was underpinned by a strong underlying EBITDA growth of 10.4%, reflecting the impact of our expanded portfolio and economies of scale. As noted, the performance in Q4 eventually did not allow us to expand our EBITDA margin as the Q4 slowdown flowed through to EBITDA, resulting in a decrease in EBITDA margin by 30 basis points. While interest and taxes grew in absolute amounts, we increased slightly less than what we initially estimated, resulting in a 1.7% adjusted EPRA earnings per share growth. I now hand over to Isabel, who will walk us through capital allocation and returns. Isabel Neumann: Thank you, Thomas, and let me add my good morning to all of you as well. In 2025, we have delivered exactly as guidance. We have opened about 90,000 new square meters of properties at an 8% to 9% yield for an investment of about EUR 210 million. By delivering this 90,000, yet again, we really show that we can consistently deliver this target that our development engine is working very well indeed. What I'm particularly pleased about is that we have delivered these 90,000 square meters through all the regions, across the regions and also using the different ways of growing we have. So through new developments, redevelopments and M&A. So it shows again the scalability of our platform, we can grow in all 3 ways across 7 countries. And you can really see how in 2025, this comes together quite nicely. This brings me to the next slide. We have a strong pipeline for '26 and '27 with 160,000 square meters already secured at a yield of 8% to 9%. Let me remind you that we buy our properties subject to building permit, and we don't land bank. For '26, we have 23 properties in the -- 23 projects in the pipeline for a total of 102 (sic) [ 102,000 ] square meters. And for '27, we already have 12 projects in the pipeline for a total of 56,000 square meter. We've also decided to increase the hurdle rate going forward from the current 8% to 9% to 9% to 10%, but we will come back to this later in the presentation. On the following slide, we show our strong track record in delivering the returns we set out. On the left graph, you can see how our organic projects have performed per vintage year. And on the right, you can see how our acquisition projects have performed. This is the second year we're showing these numbers. So the bars in red show the returns at the end of '25 and the bars in gray show the returns last year at the end of '24. Up to 2023, we had a hurdle rate of 7% to 8%. And since then, we have increased it to 8% to 9%. So now let's look at our track record. On the organic projects, we delivered very strong performance indeed. All vintages before 2021 already delivered a minimum hurdle rate and the younger vintages, as you can see, they continue to progress well. For the acquisitions, we generally delivered the hurdle rate with the exception of 2021, 2023 and 2024. And there are specific reasons for each of them, and let me go into that. In '21, we did the acquisition of the A&A portfolio. The A&A portfolio consisted of 4 stores in London, out of which 3 in the Kings Cross area. We have 2 topics that has impacted us on this acquisition. The first one is that we've seen a large increase of competition in the Kings Cross area in the years following our acquisition. In 2023, Big Yellow opened a very large store in the summer of '23. And in fall of '23, Access also opened a store exactly in the same area. Secondly, because of the very central location, we also -- it took us also a little bit longer to get the permits to do the work that we set out to do. So that has, I would say, caused a slight delay, but we remain confident that we will reach the hurdle rates as we have set out. Then for 2023, this is the year where we did the Top Box acquisition in Germany. But Top Box, I think, was very much like an organic project. We are 5 stores and -- 5 open stores and 2 pipeline stores, but the open stores effectively were at a very low occupancy, and we, of course, also had to build out 2 stores. So if you look at the occupancy at the time of acquisition versus the fully built-out square meters at the end, at maturity, we were only at an occupancy of 42%. So this is an organic project. This is not an M&A-type project. And therefore, if you look at the returns of 1.6% that compares in '23, that compares fairly nicely with the 1.8% on the organic side. So you can see this is just more a fact that it's an organic-type project. Then for 2024, this is the year we did Lok'nStore. We also did Pickens and Prime, and Pickens and Prime are very mature, fairly mature properties. But of course, Lok'nStore as well is a portfolio that's not mature yet. The occupancy for the existing store was about 70% at the time of acquisition, but we had quite an aggressive redevelopment program, and we also had a high number of pipeline stores. This year, effectively, we have delivered already 18,000 of the pipeline stores. And next year, we will deliver 26,000 of the pipeline stores. But if you take into account the redevelopment and the pipeline, at acquisition, we were about 50% occupancy. So you can see for 2004 Lok'nStore, it's a bit of a combination between mature and organic. This brings me to the Lok'nStore acquisition. And let me give you an update on where we stand. First of all, on the real estate side, I'm pleased to say we have fully completed the rebranding of all the Lok'nStore stores. We have installed access control, brought it up to our standard to reduce the energy consumption. So they are now, for all intents and purposes, fully Shurgard stores. Further on the real estate side, as I mentioned before, this year, we have added 18,000 square meters to the portfolio through a combination of redevelopments, remixes and the opening of 2 properties. And next year -- sorry, in this year, we will open the remainder of the stores from the L&S pipeline for a total of 26,000 square meters. So by the end of this year, the full FBO, as we had set out will be delivered. Now let me shift to the operational side. First and foremost, our occupancy is on track. We started the acquisition at 67% occupancy. And by December '25, we were at 80%, and we continue to expect to reach our target of 90% by the end of this year. Now we have said in the past that we will deliver a CAGR of about 2% of in-place rent, and you can really start to see how this is coming together, a, by an increase of the move-in rate; and two, by a decrease of the move-out rate. On the move-in rate, as we have a higher occupancy, we need less promotions and therefore, logically, the move-in rate goes up. On the move-out rate, you can really see the impact of our commercial policy of the Shurgard standardization. And therefore, you see normalization of the move-out ratio in line basically with our London portfolio. So the 2 of them together will make that our in-place rent is moving up. The last point I would like to mention is on the synergies. We have realized synergies at the high end of the range. At the time of the acquisition, we had guided towards between EUR 4 million and EUR 5 million, and you can see that we are delivering at EUR 5 million. This is through a combination of factors. First and foremost, as we put the Shurgard operating model in place, we've been able to lower the FTEs per store. All the assets have been folded under the U.K. REIT, and we have a reduction in G&A, Primarily, we have closed the former Lok'nStore headquarters. So in summary, we are delivering according to plan on the Lok'nStore acquisition. I will now hand it back over to Thomas to talk about the balance sheet. Thomas Oversberg: Thank you, Isabel. Let's now move on to our balance sheet and financing structure. Shurgard, as you know, is the only European self-storage operator with a BBB+ investment-grade rating. Our capital structure continues to be a source of competitive advantage, supporting our long-term low-cost funding. At the end of the year, our LTV stood at 23.2%, broadly stable year-on-year and comfortably below our 25% long-term target. Net debt to underlying EBITDA remained at 6.2x, fully within the boundaries of our rating. Our average cost of debt is 3.33% with a 7.2-year weighted average maturity. Liquidity remains strong with EUR 56 million cash on hand and a fully undrawn EUR 500 million revolving credit facility, giving us flexibility to fund our development pipeline. As you know, 100% of our mainly freehold portfolio is unencumbered. And this, with our commitment to our BBB+ rating, is a cornerstone of our decision-making process. On Slide 21, we outline the strategic decisions we are implementing to accelerate medium-term adjusted earnings per share growth. We have increased our investment hurdle rate by 100 basis points, as mentioned by Isabel. This means that all projects from -- approved from 2026 onwards will have to earn an NOI yield on cost at maturity of 9% to 10%. This reflects our focus on disciplined value-generating organic growth. It has no impact on the growth already embedded in our pipeline for 2026 and 2027. Further, we are discontinuing the scrip dividend options, moving to a cash-only dividend of EUR 1.17 per share. We remain fully committed to our BBB+ rating, as I mentioned. Therefore, we continue to target a long-term LTV target of 25% and below, refine our medium-term net debt-to-EBITDA target to 5x to 6x. And finally, we reiterate our commitment to continue applying a disciplined M&A framework, requiring acquisitions to be EPS-accretive in the first full year, ensuring value generating also on this front. These decisions collectively reinforce our ability to deliver sustained compounding earnings growth. Looking ahead and incorporating the current pricing and occupancy conditions and expectations, on Slide 22, we are guiding for 2026 to be a year of continuing growth. We expect all store revenue growth of 6% to 8%, driven primarily by the continued ramp-up of our properties opened or acquired in 2023 to 2025. Underlying EBITDA is expected to be in the range of EUR 278 million to EUR 289 million, reflecting our confidence in delivering operational efficiencies that offset ongoing cost pressures as the ones mentioned on the slide. As a consequence of the strategic decisions explained on the previous slide, we anticipate net interest expenses to be between EUR 57.5 million and EUR 59.5 million. Overall, resulting adjusted EPRA earnings growth will be between 1% and 6%, and is expected to translate into adjusted EPRA earnings per share between EUR 1.70 and EUR 1.81. We plan to add 100,000 to 125,000 square meters to our portfolio in 2026 with CapEx in the range of EUR 250 million to EUR 315 million. Our year-end leverage is expected to remain within the rating framework at 6.5 to 6.8 net debt to EBITDA. We expect to update the outlook throughout the year, where necessary, to ensure consistent and transparent communication. Finally, let me close with our medium-term guidance for 2027 through 2030 on Slide 23. We expect all store revenue, underlying EBITDA and adjusted EPRA earnings to reach a growth at 6% to 8% CAGR, reflecting the long-term compounding nature of our business. Our pipeline, approximately 90,000 square meter per year, will require around EUR 200 million of annual investment and continues to offer an attractive yield at maturity. We anticipate continuing to distribute EUR 1.17 dividend per share paid in cash and remain firmly committed to our BBB+ rating with landing in our target net debt-to-EBITDA range of 5x to 6x by 2030. Our model remains simple: disciplined capital allocation, a scalable platform, strong cost control and a structured demand that continues to support long-term value creation. With that, I hand back to Marc for his concluding comments. Marc Oursin: Thank you, Thomas. So in summary, Shurgard has a proven and resilient business model. If I show it, it's better. So yes, indeed, we have a proven and resilient business model, combined with a high-growth profile and, I would say, a development engine based on a real scalable platform. And that's why you've seen all these improvement in the same-store margin along the years. At the same time, as explained by Thomas, our balance sheet is solid with its BBB+ investment grade. And therefore, we have an attractive earnings growth perspective. So on that, I thank you for your attention, and I hand over to you, Caroline. Thank you. Caroline Thirifay: Thank you, Isabel, Marc and Thomas. As you can see, the next rendezvous will be the Q1 results on May 13, same day as the AGM. We are now available to take your questions. We will take first the question of the audience, followed by the question from the webcast. [Operator Instructions] We have the first question. Jonathan William Coubrough: Jonny Coubrough from Deutsche Bank. Could I ask firstly, please, on the medium-term guidance range? What is informing that current range and what's implied there for same-store growth rates? And also, whether the new guidance range reflects the new hurdle rate for yield on cost of new developments? And then secondly, on that new hurdle rate, how does that impact the opportunity set for potential new investments? Marc Oursin: Okay. So I will take the first part and you take the second part, Isabel. So regarding the -- and maybe we can share the slide of the medium term. So the medium term actually is taking into account the fact that on the same-store, we have said that many times, the normalized same-store growth should be, I would say, between 2% and 3%. That's what we have usually for this model. And then, of course, we took into account also, that's why you have a range this year. And we think it's -- we are not the only one, by the way, giving ranges. We've seen that in the U.S., and we think it's a good thing to do with the -- with you guys. So we have taken an assumption, which is on the low side, if it's not going into exactly what we are looking for. And if all the planets are globally aligned, you have the high side on the right. So that's what we are disclosing this. And the midpoint of this medium-term guidance is more or less the trajectory that we're looking for. That's for the -- I would say, the explanation to this. And regarding the hurdle rate, Isabel? Isabel Neumann: So on the hurdle rate -- so indeed, we've increased the hurdle rate to reflect our cost of capital, that is clear. With regards to the opportunities going forward, well, first and foremost, I would say 2026 and 2027 is largely already driven by the pipeline that has already been created. So there's, as such, not necessarily an immediate [Audio Gap]. We have, in the past, increased the hurdle rate from 7% to 8% to 8% to 9%, and we have still managed to find projects. However, we will only do them if they are -- they generate the returns. It means we will have to work together as a team. Our construction team will look at opportunities to lower our cost of construction, look at opportunities to lower our broker costs and so forth. So it will be a collective effort. And I would say there is a possibility that, in the first year, we will do slightly less project than we have done before, but we remain confident that we can continue to grow in an attractive way. Andres Toome: Andres Toome from Green Street. So a few questions. Firstly, on that same guidance for the medium term, and it seems it's come down in terms of what you're looking for in terms of underlying EBITDA growth, which was more in the double digits before. So maybe you can help to understand what's driving that because you -- I think you sort of alluded to the fact that your same-store guidance, implicit one, has not really changed. So is it just that the delivery on development pipeline, lease-up is under your expectations? Marc Oursin: Do you want to take this one, Thomas? Thomas Oversberg: I think we shouldn't take that conclusion from that. I think we have a very solid understanding of where we expect the markets to be. We have taken the current condition into account. And based on that, we do think that delivering in that range on a CAGR perspective is more or less in line with what we said before. I mean -- so from that perspective, we don't expect really a fundamental change in the dynamics. It's more a refinement where we see we're going to land. Andres Toome: Okay. And then I guess, looking back also on the slide with your 2024 acquisitions and the delivery there on the yield on cost so far, it looks to be lower compared to what you had, I think, when you announced Lok's acquisition in terms of just the day 1 unlevered yield on that. So I guess there are other sort of bits in that 2024 vintage as well. But just on the headline there, it looks maybe Lok'nStore is actually underdelivering on your expectations. Or is that the wrong read and there's something else included? Marc Oursin: Yes. I think it's the wrong read. If I remember, we said when we did Lok'nStore that we will deliver 8% yield on cost, '29, 2030. And that the, as explained, actually, by Isabel, when we took over, the portfolio was not at all matured because if you look at it, occupancy was 2/3, 67% of the current square meters. But with all the new ones that are coming in, especially this year, plus the expansion that we have done in the past year, the 67% is actually 40 -- less than that, 35% of the ending point of the square meters in '29, '30. So that's one. Secondly, in terms of return or let's call it, entry yield, the first year, we were saying that we were roughly below half of what we're targeting, so between 3% and 4%, which is the case shown on that slide, more or less. Andres Toome: Right. I guess from the prospectus or the sales, sort of, memorandum, I think the EV EBITDA multiple was sort of 27% on in-place income, which would be sort of at high 30% range, but... Marc Oursin: Okay. Knowing that in this, you have also other deals, you have the Pickens one, you have the Prime one plus another one we did the same year. Andres Toome: Okay. And then final question is just on your thinking around your cost of capital and how you think about net external growth because you keep on sort of plowing ahead, but your shares are trading at a pretty hefty discount. So do you have any thoughts around just because of that discount to actually sell some assets and capture any sort of private market arbitrage there might be? Marc Oursin: Well, we have said, especially in the case of Lok'nStore when we met with all of you because we had a question about the geography of Lok'nStore. And we said, we want to stick to London, the surroundings of London Southeast and therefore, Greater Manchester. So obviously, we said that we do a review of these properties. So we said, let's give us some time. It will take probably 1 to 2 years to see how the stores where Isabel has invested the money to put them up to speed are delivering. And also, are there better opportunities with this capital potentially? And you're right. So we are working on this. Valerie Jacob Guezi: I'm Valerie Jacob from Bernstein. I just have a follow-up question. If I look at your 2026 CapEx, I think you previously guided for EUR 320 million and now the number is a bit lower. And so I just wanted to understand the reason for that. And also, as a follow-up, what are you seeing in terms of your acquisition pipeline? And do you think you'll be able to offset that? Isabel Neumann: Sure. So indeed, we usually generate about 20,000 square meters in M&A. So the 102,000 that you're seeing here is organic pipeline. So M&A would kind of come on top of that. But of course, with M&A, it's always -- some years, there's lots and other years, there's less. So we never quite know where we're going to be ending up in terms of M&A in a given year. But so indeed, we have a good basis with 102,000 of organic pipeline and any M&A would effectively come on top of that. So we are expecting to kind of end up in this range that we have guided towards. Thomas Oversberg: Yes. Probably there, we always consistently have been saying we are expecting 90,000 overall, a certain amount of CapEx. And as we are not in full control of M&A, the mix might change between where we go, but the target of the square meters and the amount we are investing remains the same. Caroline Thirifay: Do we have any other questions from the audience? If not, we will take questions from the webcast. Unknown Attendee: We have our first raised hand from Vincent Koppmair. Vincent Koppmair: Congrats on the results. My first question is a little bit more information on the Q4 weakness you've seen in certain markets. Could you give a little bit more color on those, please? Marc Oursin: Okay. So thank you, Vincent. So we have seen -- as we also have said during the course of the year that the way we're looking at '25, and there's a slide actually showing this deceleration, we're anticipating the deceleration. If you remember, actually, Q1 was better in terms of results than anticipation. Q2, Q3 were in line and Q4 is not as we were expecting, to be frank. And we have seen this deceleration stronger in 4 markets: the U.K., the Netherlands, France and Germany. And I will come back to this. Meanwhile, at least 2 markets that are the Nordics, so Sweden and Denmark, did pretty well and very happy with that, of course. And back to the U.K., Netherlands and France and Germany, so the reasons are probably different. If you take Germany, for example, we have opened quite a number of stores, but especially one of our competitor called MyPlace did in Berlin, for example, in that city. And the situation in Berlin is much more -- we think, a kind of what we experienced in Stockholm some years ago. So suddenly an oversupply that the market has to digest. And therefore, in order to keep our occupancy where we want, it's what we did with Sweden, and you saw that the payoff is very good today. We are, I would say, putting more discounts. We don't see any lack of demand at all in all the 4 markets that I've mentioned to you for this deceleration. It's much more the fact that we have to do more discount to convert that demand into contracts. And why do we have to do more demand? Let's take Berlin, it's more supply and they want to fill up their properties, which is logical. And in other markets, I would say, like the U.K., for example, especially London, we have seen some competitors becoming more aggressive on their pricing, probably for different reasons. If you look at Access, for example, if you look at Safestore and the surroundings of London outside the M25, smaller players also became more aggressive. That's what we have seen. Will it last? We don't know. But what we can say is that when you start to look at the first 2 months of the year, Q1 in '26, we start to see a certain normalization on that. And the Netherlands, it's a bit the combination of both in the sense that if you go to Randstad, especially in Amsterdam area, there is openings and there is some cannibalization regarding certain properties and also some competitors being more aggressive. That's what we are experiencing. That's the answer, Vincent. Vincent Koppmair: Yes. I had one follow-up question on your 2026 guidance. I appreciate that you now give a range, so quite nice to have some more information. But should we understand, as you've mentioned that, of course, the high end of the range is the blue sky scenario, but would you, compared to the high range and the low range, aim for the middle? Or is your base case scenario a little bit closer to the higher end of the range? Marc Oursin: No, that's a good question. Thank you very much. So obviously, here, Vincent, the -- what we are looking at is to be within this range, obviously, first. Secondly, across the year that will come every quarter, and I think this is what our peers in the U.S. are doing and other companies not in real estate, you just adjust the -- where you're going to end within this range. So obviously, because year-to-date, quarter-over-quarter, you have actuals versus simply last year. So you know where you will end. So for us, we want to be in this range. And you can say that the midpoint of this range is probably where we would like to be. Unknown Attendee: Our next raised hand is from [ Stephane Afonso ]. Unknown Analyst: I'll ask them one by one. So first, regarding your 10% yield on cost, how many years does it take to reach this stabilized yield? And could you break that down between occupancy and ramp-up rents, please? Marc Oursin: Okay. So the 10% is related to maturity. So usually, this is taking more or less between 5 to 7 years, depending on the size of the property and the investment. But if you want to be on the safe side, take 7. That's one. Secondly, how do we get there between the volume effect, so occupancy first and then the rates? So occupancy to get to 90% will be between 2 to 3 years. And then the rates will start to kick in and especially the ECRI, so the increase that you do to your existing customers. And this would bring you the remaining years to this -- after 7 years to this level of targeted 10% return. Unknown Analyst: Okay. And has this time line changed, meaning does it take longer or not, no? Marc Oursin: No, no, no. Unknown Analyst: And regarding the 2% to 3% same-store annual growth that you expect, on what basis are you deriving this figure? And within the information that is publicly available, how can analysts challenge this figure? Marc Oursin: It depends on the talent of the analyst, obviously, and the knowledge of the analyst. And I think if you're the analyst, what you will do is you will look at the past first. We know that the past is not the future, but it gives you at least a good understanding how Shurgard has been able to go through the past 10 years, for example. So GFC, COVID, interest rates, high inflation. And you will see that if you are between 2% and 3%, it's, we think, reasonable. So if you want to take, [ Stephane ], something more conservative, you stick to 2%. If you are more aggressive, you go for 3%. But I think that if you are in this range, you are close to the truth as a run rate long term. Unknown Analyst: But just to understand, do you base it on inflation, for example, could be a threshold or -- just trying to... Marc Oursin: That's an interesting one because, usually, you're right, many analysts or people who are, let's say, looking at the company and this class of assets are looking at CPI. But we have demonstrated -- we have a couple of graphics in -- I think it's what we call the company presentation where we show that we have always overbeaten the CPI actually. I'm talking same-store revenue growth year-on-year. So I would say that usually, we are above CPI. And why? Because it's a need business. And that makes the whole thing very different, meaning that because you need space, and as soon as you got in, you need that space and the exit barrier to leave that space, people are sticky. So again, think about what it is, it's like having your attic or your basement in a remote location and think how you behave versus your attic and your basement when you want to leave it is because you are forced to do so. So that's why we have been able, I think, to beat the CPI for quite a long time. Unknown Analyst: And last question. If the right opportunity came up, would you be open to another... Marc Oursin: We didn't hear you at the beginning. Will you repeat, please? Unknown Analyst: Yes. Just asking one question about M&A. If the right opportunity came up, would you be open to another sizable acquisition in the short term? Or is the focus firmly on completing the Lok'nStore ramp-up? Isabel Neumann: Of course, we are very much focused on delivering the returns for Lok'nStore or any M&A that we have done. But clearly, as we have -- Thomas has also said, we are very cautious in the M&A that we do. It needs to deliver the returns that we have set out, and it needs to be accretive from the first year. So yes, of course, we will look at everything. But of course, the hurdle rate to move forward is very high. Thomas Oversberg: And let me clarify on that point also for the people in the room. We are really committed to 2 things, and that's our BBB+ rating, which defines and what we can do on the debt side and to our accretiveness in the first year. Those 2 points are not negotiable. So therefore, you will not see us coming out and saying, oh, there was this strategic opportunity and we throw everything overboard. Unknown Attendee: Our next raised hand is from Aakanksha Anand of Citi. Aakanksha Anand: I have 3 of them, and I'll go through them one by one. The first one, we're obviously speaking about increased competition and a higher level of discounts. Could you just give some color around what kind of incremental discounts are we talking about compared to previous years? That's the first one. Marc Oursin: Okay. Thank you for the question. So first, we do not disclose the intensity of discounts per market. What we can tell you is that, for example, if I would take Berlin as a reference, yes, we are increasing the discounts there. If you take usually the normalized level of discounts, we are close to 15% of the revenue. So it might go to 20%, for example, a certain period of time or less, depending -- actually, the pricing we do is per unit type in a given property. So it's very focused in terms of investing these discounts. And therefore, globally, you see this level. But it's hiding actually, very different situation per location and per type of size. Thomas Oversberg: And if I can add to that, the important part is, and Marc alluded to that, is self-storage is a need business. So what I need to make sure is that I get the people who have the need. And that means I want to give them as little hurdle to make the conversion as possible. So the prices and next to the location of convenience are the 2 really driving factors. As I don't know, who of you will stay longer than 1, 2 months, but we know that more than 60% stay with us very long, the only reasonable thing I can do is make sure I get all of you. And that's what we are trying to do. So we are always saying we want to get as many people as possible because it's a need business. It's a sticky business. So that allows us, while we are coming in at a lower price, to again increase thereafter on our ECRI. And that's really important to understand. When we are saying we're giving more discounts, this is not something which we are not expecting that is executing on our pricing strategy, which, as said, we want to have 90% occupancy because we know it's a sticky business, and we want to get as many of the customers as possible. Marc Oursin: And back to what you were saying, Thomas, with Sweden, it's exactly this is what happened. If you remember 3, 4 years ago, we had really a hard fight with one of our competitors in Stockholm mainly. And the payback today is that we were right to stick to this occupancy. Yes, it was painful in terms of revenue growth, same-store, because Sweden, the worst moment was minus 1% quarter-on-quarter, but never more than that. It's not like going to minus 5% or minus 10% -- minus 1%. And in the end, later on, you get the payback because the customer base is there, and you can apply the ECRI on it. What is your second question? Aakanksha Anand: The second one is just on the same-store revenue growth over the medium term. So which would be the top 4 geographies where you expect to see the highest, if you could rate them for us, please? Marc Oursin: Okay. So that's a -- I would say that if you look at medium term, so '27, 2030, which is the range that -- the time horizon that we have given, I would say that probably the Nordics will be on the top for -- that's one. At the bottom, I would say, probably Germany and maybe the U.K. And in the middle, I would say, Netherlands, France, Belgium. If I have to give you a ranking, I would see these 3 groups, the 3 tiers. Thomas Oversberg: If I can add some color to that, the reason why this is not an easy answer because how our pricing mechanism works is we are sort of like agnostic of where a customer is sitting because we know the customer behavior is the same in all of our markets. So what you can see is that our pricing algorithm, both on the initial pricing and on the increase to existing customers is really agnostic to that. So whenever we see dynamics which impact our occupancy, we will see that the pricing algorithms are acting on both fronts. So what Marc was therefore referring is to what you should see probably the lowest growth is where we see most of our new store own opening because we are competing with ourselves, obviously. That means we can -- we need to make investments to ramp that store up. Again, not a buck, it's a feature of our model and where we see unexpected short-term price competition by competitors. So that, I think, is the way of looking at it. But overall, because we are applying exactly the same everywhere, our model is not saying, oh, you're a U.K. customer, you're only getting X percent. That's not how we're looking at it. Aakanksha Anand: All right. And the third question, just on the investment hurdle. So the raised investment hurdle, I understand that applies to both acquisitions and the development pipeline. I think the question here is, does this mean -- I mean, are you able to find as many opportunities with that raised investment hurdle from the visibility that you have on the bolt-on acquisitions market at the moment? And if not, I guess it just basically means that the future external growth potential is going to be driven -- I mean, the share of future growth potential from the bolt-on acquisitions is going to be much lower. Marc Oursin: Do you want to take this, Isabel? Or do you want me to answer? Isabel Neumann: Well, I can start and you can add. I think the question was already kind of raised here in the room. But indeed, as we said, the pipeline for '26, '27 is kind of set, right? So there is no immediate change here for the next couple of years as, of course, we have a certain delay between the moment we do a deal and then we execute it. And our objective in terms of being accretive in day 1, this is not new. So to a certain extent, we're not necessarily changing the way we're doing it since we have done this year. M&A is always a situation whereby it's driven by effectively what is also available in the market, what is happening. And so part of it, of course, is where we want to act, but also it's what is the availability of opportunities. And that's the part we have not necessarily a control over. Marc Oursin: So to complete the answer from Isabel, I would say that you're right, the risk on the M&A is higher than on the development, organic, because as Isabel said previously, organic development, finding a piece of land, okay, dealing the land and then after that, being able to act on the cost of development are much higher in terms of capacity internally to work on than trying to negotiate a deal -- a price with a seller in order to reach your hurdle rate of 9% to 10%. So you get the deal, you don't get the deal because you are priced in at the level of the seller. That's it. So that's clear to me that probably you're right, if we are not able to satisfy the, let's say, will of the sellers, knowing that we want to be at 9% to 10% return on this M&A transaction, yes, it will diminish. But it's not a big deal to me. It's -- I prefer to be not on a bad deal than with several on a good deal -- sorry, on a bad deal. So here, organically, potentially, it might take over what we are missing on the M&A. And as said by Isabel also, in the past, we have already increased the hurdle rate. We were at 7%, 8% till '23. And as of '24, we went from 7%, 8% to 8% to 9%. So the -- let's say, the concern was the same. Would you be able to still do M&A? Would you be able to buy lands and to deliver organic at the same -- at this new hurdle rate? And the answer is yes. So I would say the coming quarters will give us a good sense of our capacity to continue to organically develop at this new level of requirement. And regarding the M&A, let's see. Isabel Neumann: And maybe one final point here is that it really shows the value of looking at our growth across M&A and organic. And there's been years whereby we've had much more organic and less M&A, and there's been years where we've had more M&A and less organic. Over the years, it all kind of levels out a little bit. But it's -- we are really depending on the opportunities, adjusting effectively how we combine the growth. Marc Oursin: Caroline? Caroline Thirifay: [indiscernible] conscious about the time. Marc Oursin: Thank you. See you in Miami. Unknown Attendee: Our next raised hand is from Ana Escalante from Morgan Stanley. Ana Taborga: My first question is also on the level of discounts. Just wanted to understand if these discounts are more focused on attracting new customers or are more focused on existing customers, meaning keeping existing customers in your properties to sustain that occupancy? And to the extent that you can comment, are you seeing those discounts being sustained into the first quarter of this year? Thomas Oversberg: Yes. So the discounts which we are talking about is indeed to attract new customers. As I said, what we are trying to achieve is that we get as many customers in and then increase their prices as long as they're staying with us. We don't see any changes in dynamics there. We are becoming, again, more sophisticated on increasing our existing customers. We're also having now machine learning tools on that running so that we are really having a risk-based approach there. But the main amount is always talking about the initial pricing, which a prospect gets to convert them into a customer. At the moment, I think we are seeing no major changes in there to what we saw in Q4. But again, that is not something which we are -- which we should have expected to see, because the dynamics -- market dynamics are not changing from one day to the other. If competitors are more competitive on pricing -- initial pricing, it's because they're obviously trying to fill up. And then it's more a question of what is the end goal. Are we dealing with a customer -- with a competitor who is happy to be at a certain occupancy and then manage the rates at that point in time? Or are we dealing with a competitor who is following our pricing strategy? We barely ever meet the ones in the second class. So at one point in time, this will naturally level out. As we also were saying, we are part of this pricing pressure ourselves because we're adding new spaces close to our existing store to enable us to plug the holes in our network and get from that the scalability effects. So again, we are obviously causing that to a certain extent as well. Ana Taborga: Okay. Very clear. Maybe also related to this, thinking medium term, do you think that there is a risk that artificial intelligence makes this sector or the price search by prospective customers a bit more transparent? Because I know that you are very clear with your first month, EUR 1 or GBP 1, but there are other competitors that are not that transparent, do you think there is a risk that AI increases the transparency here and therefore, customers become a little bit more opportunistic, not only for new customers but also existing ones trying to -- looking for cheaper alternatives and the search process being facilitated by AI advances? Marc Oursin: Okay. So Ana, here, I think, again, back to what Thomas just said and confirmed, the global revenue growth of the company is actually combining 2 engines. One engine, which is to attract new customers. That's one thing. It's where the discounts prices are public. They're on the website. The price you see is the price you pay and you have discounts after that. Discounts could be $1, EUR 1 the first month, can be additional discounts. That's one thing. And secondly, you have everything related to the ECRI, which is increasing your existing customer. And here, it's purely discretionary, it's private. So I will start with this, where AI -- actually, from a customer -- an existing customer perspective, I would say that the risk there to me are very limited because as we have said, people are sticky. You don't wake up in the morning and check every morning like a stock price if the price that you are paying for your unit can be cheaper with AI because you forget it. And that's the whole behavior of the customer. So that's very important because it's protecting actually our business, and that's key. I don't think AI will change that, to be very frank. I might be wrong. But today, with what I understood from this business after being 15 years in it, and by the way, being a customer of Shurgard before even working for Shurgard, I doubt. But where you are potentially right is on the first aspect is how, for new customers, people who are searching for a unit, how they can be, let's say, for themselves more efficient, more agile to pick up a location, a price which is closer to their home, and they can choose that. You would have told me, for example, in 2012 that in '25, 12 years later, more or less, or 13 years later, 95% of the search we have are gone through Internet and in Europe, because Google is almost a monopoly, the search engine used is Google for 95% of those, and that the people are doing that today for close to 80% with their mobile phone, when in 2012, it was 5%. I would have told you, well, I doubt. And I was wrong. So what will happen and that we have started to see is that people are using ChatGPT to search. And today, out of all the search that we have on the web within 1 year, it went from 0.1% to 0.6%. So 6x, still 0.6%. So it's a long way. And ChatGPT up to now is more than 80% of all this search in terms of tool used. So you remember, in the past, if you take the analogy with the web, you could say there was Google, there was [ Bling ] or Bing, there was -- I don't know what. And in the end, Google took over. So here, for the time being, what we see is this. So it's very early day. It will go probably quite fast. It might take also another 5 or 10 years to become more significant. There will be, I suppose, a fight between the search -- let's say, the different tools as we had with the search engine. And -- but in the end, I would say, already with the way we are pricing our products, I think that by being the cheapest in the area where we are, in the 15 minutes, that's what we are looking for, is probably the best protection. Thomas Oversberg: Yes. So probably to add just 2 sentence before Caroline stops me. So self-storage is a hyperlocal product, which means that the searches will be hyperlocal. And we are having the right network to be hyperlocal. So what is happening in the future -- in the foreseeable future is that customers are more informed making their decision. We have already pricing transparency on our website. So there's -- we are not hiding anything. So it's more difficult for the people who don't have pricing transparency. And overall, customers will have a much better understanding. It's like what does it mean? How does the contract work? How does a rating increase work? Because those are the information which you typically quest, and those are the question which AI will be able to help you. Caroline Thirifay: Do you have any additional question, Ana? Ana Taborga: Yes. Super quick, a final one. It is on your dividend, capital allocation. So you're guiding to 6% to 8% EPS CAGR in the next 4 years, but stable dividend. I understand that you want to retain cash to continue funding your expansion, right? But just wondering how do you balance that more immediate shareholder remuneration versus the long-term value creation through your growth initiatives? Thomas Oversberg: So I think that's an important point to look at. When we looked at the decisions which we took this year, we looked exactly at that conundrum of what is my cost of equity, what is my cost of debt and what are investors expecting as a return. And that led then, for example, into the fact that we're saying, okay, we need to increase our hurdle rates because the investors require a higher return there. So -- and that then, as I was saying, is we need to balance off with the earnings per share growth, which people are expecting going forward, which is obviously impacting, on the one hand, on the dilutive effect of more shares, which we have now eliminated. And on the other hand, which is then compensating is the additional interest expenses, which will reduce earnings as well. So long term, we are continuing to say, well, an investor should expect a total shareholder return, which is made of the dividend yield and the earnings growth of 10%, and we remain committed to that. Once we are seeing that there's really an imbalance where this is no longer happening, we always said and we haven't changed our opinion on that, but we are also going to change our dividend payout. But at the moment, we feel that to -- in order to deliver this growth and our strategy, we are comfortable with the dividend at the level where it is at the moment. Caroline Thirifay: So we are conscious of the time, then we will take the last question, and it's Roy Külter from ODDO - ABN AMRO. Roy Külter: It's just one from my side. I know it's a more operational real estate sector that you're operating in, but I do want to focus a little bit on property values. So we've seen the NAV per share has grown strongly, but valuation yields have remained flat. So it's basically operational performance. But we've also seen in the market some large transactions being pulled during 2025. So how comfortable are you today with your book values? And maybe secondly on that, can you give some comments on the investment market? Marc Oursin: Thomas? Thomas Oversberg: Yes. So the main increase, if you look at the value increase in our portfolio, which is around EUR 500 million, I can split that into 3 buckets. The first one is -- and they're not equal size, but for the sake of debate, let's assume they are almost. The first one is stores which we opened last year and the year before, which are ramping up. And therefore, this means that the valuation expert can reduce the discount and the risk because they are seeing that we're performing against our target. And therefore, this increases the value of our portfolio. The other part is where, indeed, we are talking about stores which we have added this year, which are under construction. So again, that results in value increases there. And the third part is, and this is not -- by far not the biggest, is the operational performance where we are delivering better performance than before. If you look now -- and on what we were saying, well, this part here, I'm talking about is mainly same stores. Same stores, as you saw in our slides, is actually performing still quite well. We're having a revenue growth there. So the NOI is growing. So everything is fine there. So we are not concerned about the operational performance that this would immediately impact our valuations. To speculate on why transaction in the M&A markets are not taking place is beyond my skill set, to be perfectly honest. And therefore, we are obviously aware of what is happening in the market. We are watching it with great interest and excitement. But in the end of the day, there's always 2, it's a buyer and a seller. And if those 2 cannot agree with each other, then the transaction's not happening. And that sounds very, very basic, but you see on the one hand, let's go to Australia where we have 2 transaction, potential transaction, which might have happened at the same time. The one was not going through because people thought the valuation was too high. And the other went through despite the fact that it's the same principle. So I think it's more a deal-specific one, but I'm surely having more experts on my left side here to deal with that. Marc Oursin: We can speak for a long time about that, but let's take it aside when we'll be with you, Roy. But I don't want to paraphrase what Thomas said in the end, it's like selling your house. I want EUR 1 million. I'm ready to pay EUR [ 700,000 ], it doesn't work. That's it. If someone is going to pay EUR 1 million for the house and taking a risk, it's a risk appetite story from the buyer. That's it. And we have precise -- and repeated what -- how we approach the risk. We have said we want the first full year to be accretive per share in terms of returns for an acquisition. So that's it. That's where we stand. Let's see how '26 will go with all these deals that have been put into the fridge. Are they coming to the microwave oven or not? Let's have a look. But thank you for the question. Caroline Thirifay: Thank you all for joining us today, and we look forward to reconnecting in this venue soon. Thank you.
Operator: Greetings, and welcome to Shake Shack Inc. Fourth Quarter 2025 Earnings Call. At this time, participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Alison Sternberg. Thank you. You may begin. Alison Sternberg: Thank you, operator, and good morning, everyone. Joining me for Shake Shack Inc.'s conference call is our CEO, Rob Lynch, and our Vice President of FP&A, Carrie Britton. During today's call, we will discuss non-GAAP financial measures and the financial details section of our shareholder letter, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Some of today's statements may be forward-looking, including those discussed in our Annual Report on Form 10-Ks, filed on 02/21/2025, and our other SEC filings. Any forward-looking statements represent our views only as of today. We assume no obligation to update any forward-looking statements if our views change. Reconciliations to comparable GAAP measures are available in our earnings release. By now, you should have access to our fourth quarter 2025 shareholder letter, which can be found at investor.shakeshack.com in the Quarterly Results section or as an exhibit to our 8-Ks for the quarter. I will now turn the call over to Rob. Rob Lynch: Thank you, Alison, and good morning, everyone. Before I begin discussing our 2025 results and our 2026 plans, firstly, I am thankful for the team that we have in place. We have so many talented people on our team, some who have been here from the beginning. I'm also grateful and excited for the executive team that we have built. We've also added some remarkable new members to the team who bring a lot of external experience and best practice to bear on the foundation that we are building to support our lofty future aspirations. My gratitude starts with all of the amazing people in our restaurants who welcome our guests every day, with warm hospitality and amazing cooking that makes Shake Shack Inc. so special. Another reason I am so excited and thankful to be here is because at Shake Shack Inc., we truly believe that we have the best food in the industry. And we endeavor to give access to that food to an ever-growing number of communities throughout the world. In order to do that, we will need to continue to use the best ingredients in our freshly prepared food and conveniently deliver it with value to our guests in every community that we serve. Our company started as a hot dog stand in a park, a park that had fallen into disrepair and needed its community to bring it back to life. So what did our founders do? They raised money for that park by selling premium hot dogs made in one of the world's most acclaimed fine dining restaurants, to everyone who was willing to stand in line to order. They served everyone with the same principles of enlightened hospitality that they were known for delivering in their fine dining restaurants. We aspire to bring that founder story to life every day and through each new Shack that we build. We want to provide the entire world access to the quality of food and hospitality that historically has only been found in higher-priced fine dining establishments. In doing so, we will prove that the world's best food does not have to be exclusive. But in order to accomplish that goal, we have to continue to use the highest-quality ingredients, turn those ingredients into our culinary-forward recipes, prepare our sandwiches, shakes, and sides fresh when ordered, and then deliver our food in a convenient and timely manner, all at a great value. Certainly not a small task. But we are well on our way to proving that food that is prepared fast with approachable price points does not have to mean that you are settling for anything less than the best in the world. I believe this endeavor is something to truly be proud of. It is why I am here. 2025 was a year of strong execution and disciplined growth. 2025 was a year of strong execution and disciplined growth. 2025 was a year of strong execution and disciplined growth. Now on to our 2025 results. We are laser-focused on becoming a best-in-class restaurant operations company. What does that mean to us? It means that we will support our team members so that they can accurately and expediently serve our guests the highest quality, best-tasting food in the industry at a great value, with enlightened hospitality. I cannot emphasize enough the hard work of our restaurant teams and the effectiveness of our strategic initiatives and disciplined execution of a focused set of strategic priorities. These outcomes reflect the hard work of our teams and made important strides in improving our unit economics and guest value proposition, despite a macroeconomic environment that remained uncertain for much of the year. At the same time, we enhanced unit economics through margin expansion, laying the foundation for greater quality and cost discipline within our supply chain, and meaningful reductions in build costs, driving improvements in operational excellence, and, more importantly, delivering compelling culinary innovation and value. Our teams have made so much progress in 2025, and I cannot wait to celebrate all of their upcoming achievements in 2026. For the year, we grew total revenue by more than 15%, increased our presence domestically and internationally by opening 85 Shacks system-wide, and delivered same-Shack sales growth of 2.3% in our company-operated business, all while we expanded our restaurant-level profit margin by 120 basis points to 22.6%, and drove 20% year-over-year growth in adjusted EBITDA, reaching approximately $210 million. Our success this past year reflects an investment in operational excellence and consistency at launch, and, of course, hospitality. As stated earlier, operational excellence remains foundational to our strategy. Positioning the business for more durable and profitable growth, we strengthened the fundamentals of the business while continuing to elevate the team member and guest experience. In 2025, we completed the first full year under our new labor model. It is not about cutting labor. It is about the optimized deployment of our talent so that we can maximize the effectiveness of it. We want to make sure that our team members are well prepared to take care of our guests during our busiest times, and that they are able to do that in a well-orchestrated, results-oriented manner. We have implemented a performance scorecard across our company-operated Shacks, providing visibility and accountability by measuring key metrics across people, performance, and profits. We have seen attainment to the labor guide improve from approximately 50% of Shacks meeting targets in mid-2024 to consistently above 90% in 2025. It reduces stress, and less reactionary to their ever-evolving scheduling needs. It is like any other thing that we do in life. When you align on a plan, you are able to better deal with the unexpected challenges that inevitably come your way. In turn, that results from unforeseen circumstances and ultimately improves performance. This is not about driving out costs. Cost reduction is an outcome, not the overarching goal. Our priority is to help our managers become more strategic, to measure results, and continue to optimize in a disciplined and consistent manner. We are highly focused on execution through optimizing deployment, improving throughput, and ensuring our teams can deliver great service. We are seeing meaningful success from these efforts, evidenced by reduced wait times across all dayparts and higher team member retention. Specifically, our wait times improved from seven minutes in 2023 to under six minutes in 2025, and team member tenure has increased nearly 40% since 2023. Those results would not be achievable if we were simply cutting labor and increasing stress on our teams. Like many in the industry, we faced a challenging commodity environment in 2025, with beef inflation reaching the mid-teens in the second half of the year. As we navigated these pressures, we approached it with a long-term mindset, not by reducing portion sizes or negatively impacting quality, but by building a significantly improved network. To mitigate rising costs and protect margins, supply chain optimization was a critical focus, and we accelerated supply chain initiatives focused on diversification and logistics. We conducted the most comprehensive RFPs in our history across key categories and onboarded additional suppliers to foster competition, augment quality, reduce business risk, and improve purchasing leverage. These structural improvements enhanced our resilience, reduced the time and distance required to transport goods as our footprint expands, and helped mitigate inflationary pressure without taking outsized price increases. Importantly, the groundwork we laid in 2025 positions us to achieve additional cost savings and further expansion in 2026 and beyond. Our progress in operational excellence has unlocked a new level of confidence and capability within our culinary organization, allowing us to introduce more elevated menu items and to be highly responsive to evolving consumer preferences and trends. In 2025, we formalized and strengthened our culinary development process by implementing a disciplined stage-gate framework to ensure every item meets three critical criteria: it must deliver our gold standard of culinary innovation and quality, resonate with our guests, and be operationally friendly in our Shacks and our supply chain. This enhanced approach delivered tangible results in 2025, giving us greater visibility and time to optimize our go-to-market planning and training, which leads to operational excellence and consistency at launch. We launched one of our most successful LTO shakes, the Dubai Chocolate Shake, which drove meaningful traffic to our Shacks and generated exceptionally strong guest satisfaction scores. We also leaned into side innovation, introducing items like fried pickles and onion rings, both of which performed strongly. In fact, onion rings resonated so much with our guests that we added them to our core menu, a testament to our ability to test, learn, and scale effectively. But our improvements are not limited to our LTOs. We also improved the quality of our core items as we made meaningful investments in improving the quality of our core sandwiches, fries, and beverages. These wins are not short term in nature. They represent the foundation that we are building for the future. We also expanded our Crackable Shake program. We are extremely excited with the sales of this premium crackable shake platform and will continue to drive innovation there. Lastly, we introduced our Good Fit menu, featuring a new way to enjoy Shake Shack Inc. and start the New Year on a healthy note for differing dietary preferences, including high-protein serving sizes. We have always made these items. We simply packaged them up and merchandised them as a timely, relevant, additional sales layer for our business. A great example of our ability to drive sales growth without significant operational or supply chain disruption. In January, we reintroduced our Korean-inspired menu, building on its previous success while elevating it with the addition of Sauce Chicken Bites, which added another exciting limited-time option to delight our fans. Innovation like Sauce Chicken Bites will help us build new chicken occasions. We believe we have a lot of opportunity to increase our chicken sales. In late January, we launched our “We Really Cook” campaign. This campaign spotlights our recipes and the quality ingredients that go into preparing the cook-to-order food we deliver each and every day. We want to reinforce the fact that we freshly prepare fine dining quality recipes in our Shacks every day, and deliver them with enlightened hospitality. This marketing platform is an investment in creating awareness amongst current and prospective guests about what really makes Shake Shack Inc. special. Over time, this awareness will continue to build our value proposition and make us even more competitive across the restaurant industry. Importantly, this platform allows us to deliver targeted value through compelling price points within our digital channels, while maintaining pricing integrity across the broader menu. Our 1-3-5 in-app promotion platform has proven to be a powerful guest acquisition and engagement tool, driving app downloads up approximately 50% since launch. The combination of elevated innovation and channel-driven value resulted in strong traffic trends, improved brand engagement, and a more balanced positioning between premium quality and everyday accessibility. The new guests that we are bringing into our app are also the foundation for the launch of our loyalty platform later this year. On the development front, 2025 was a milestone year for Shake Shack Inc., as we expanded our global footprint and are generating stronger returns. In 2025, we made significant progress in optimizing our build model. By improving build costs, through disciplined design simplification, value engineering, and procurement strategies, we reduced the average net build cost for new Shacks to under $2 million in 2025, a reduction of approximately 20% compared to the prior year, while materially improving the economics of how we build and scale the brand, maintaining AUVs, and expanding margins, and creating more efficient, profitable growth as we scale. We opened 45 new company-operated Shacks during the year. We successfully entered new domestic markets like Buffalo and Oklahoma City. The viability of these markets for our brand may have been questioned in the past, but we are proving that Shake Shack Inc. has the potential to enter every market in the United States. Looking ahead, our pipeline for 2026 is even more robust, with plans to open 55 to 60 new company-operated Shacks, primarily in markets outside of our historical footprint of the Northeast and in major tourist cities. Our licensed business also delivered strong momentum, with 40 new licensed openings in 2025. We saw particularly strong performance in our new Shacks in markets that we have entered in the past two years such as Canada and Israel. We are also proud of our strong comp performance in the Middle East, Japan, the United Kingdom, and in U.S. airports. We announced several strategic growth partnerships, including expansion into Hawaii, a new partnership with Penn Entertainment to bring Shake Shack Inc. to casino destinations, and a new agreement to enter Panama. Most recently, in January, we partnered with the Australian Open to launch two pop-up Shacks at the tennis tournament. Together, these two licensed sites did approximately $1.6 million in sales in just three weeks over the course of the tournament. Attendees there were willing to stand in a very long line to get a ShackBurger and fries, despite having never been there before, indicating strong demand for our brand in this market. These partnerships expand our global reach, reinforce Shake Shack Inc. as a premium internationally recognized brand, and give us extreme confidence in our ongoing global growth potential. As we close out 2025, we are proud of the progress that we have made, from delivering strong financial performance and improving unit economics to accelerating development, strengthening our operations, and continuing to innovate in our culinary offerings. The year was truly transformative, laying a foundation that positioned Shake Shack Inc. for sustainable, profitable growth. We are entering 2026 with confidence, guided by a clear strategy centered on profitable revenue growth, margin expansion, and strategic investments in our brand and infrastructure. We hope to achieve this by focusing on six key priorities: building a culture of leaders, optimizing restaurant and supply chain operations, building and operating our Shacks with best-in-class returns, driving comp sales through culinary, marketing, and digital innovation, accelerating our licensed business, and investing in long-term strategic capabilities. By staying disciplined in these areas, we are confident that we will continue to drive strong operating results, enhanced guest experiences, and sustainable growth as Shake Shack Inc. scales both domestically and internationally. The investments we are making in the business in 2025 and into 2026 will position us to start leveraging the capital spend and our P&L in 2027 and beyond. As a result, we expect that by 2027, we will be growing G&A at a lower rate than sales. We plan to disclose our G&A long-range plan that will deliver this leverage in 2026 after our new CFO joins the team. Our start to the year grew 4.3% year over year. I will now hand the call over to Carrie Britton, who has been an invaluable leader and partner through our CFO transition, to discuss our quarterly results and guidance. Carrie Britton: Thank you, Rob, and good morning, everyone. Building on the strong foundation Rob outlined, 2025 was a highly successful year for Shake Shack Inc. Through our continued focus on operational excellence, the effectiveness of our marketing and culinary initiatives, enhanced guest experience, and supply chain optimization, we delivered 150.4% revenue growth to $1,450,000,000, positive same-Shack sales of 2.3%, 120 basis points of restaurant-level margin expansion, and 19.5% adjusted EBITDA growth, all while facing significant commodity inflation and a challenging macro environment. We have added nearly $80,000,000 to adjusted EBITDA to approximately $210,000,000 in the last two years. These results demonstrate solid momentum and the effectiveness of our initiatives. We are very pleased with our fourth quarter results, supported by the opening of 15 new company-operated and 17 new licensed Shacks, and 23.4% year-over-year growth in system-wide sales. Fourth quarter total revenue was $400,500,000, up 21.9% year over year, which reflects strong execution across both our company-operated and licensed businesses. Our licensing revenue reached $15,200,000 in the fourth quarter, with licensing sales of $232,700,000, up 26.4% year over year. In our company-operated business, we grew Shack sales 21.7% year over year to $385,300,000. We generated $77,000 in average weekly sales. We delivered 2.1% same-Shack sales growth with 0.5% positive traffic and 1.6% price/mix. Same-Shack sales grew sequentially each month of the quarter, and we delivered positive same-Shack sales and positive traffic for the quarter. However, the last six weeks of the quarter did not meet our expectations due to inclement weather in some of our most heavily penetrated markets like the Northeast. In-check menu prices rose about 2%, while blended pricing across all channels increased approximately 4%. This compares to approximately 6% last year, with less dependence on price increases. We are off to a strong start in 2026. January same-Shack sales increased 4.3% year over year, despite weather-related headwinds that represented an approximate 400 basis point impact during the month. We saw strong year-over-year sales growth across our owned channels, led by our app channel and the success of our 1-3-5 promotion. January AWS was $68,000, down 7% year over year. The decline versus prior year was primarily attributable to the 53rd week in 2025. As a result, January 2026 did not include the benefit of the high-volume holiday period between Christmas and New Year's Eve that was captured in January 2025. Excluding this timing impact, we have shifted our same-Shack sales comparison by one week to better align operating weeks and holiday placement between periods. Additionally, to ensure a more comparable year-over-year analysis, this results in an approximate 250 basis point year-over-year headwind to total revenue in the first quarter, primarily driven by holiday timing. In the fourth quarter, food and paper costs were $110,600,000, or 28.7% of Shack sales. Blended food and paper inflation was up low-single digits, with beef costs up low-teens and paper and packaging costs flat year over year. Through proactive procurement and cost mitigation initiatives, our teams meaningfully offset industry-wide commodity pressures. Labor and related expenses totaled $97,900,000, or 25.4% of Shack sales, representing a 150 basis point improvement year over year, driven by more efficient scheduling and deployment through our labor management strategies. Other operating expenses were $59,900,000, or 15.5% of Shack sales, up 70 basis points versus last year, driven by higher delivery sales mix and repairs and maintenance expense as we continue to invest in our company assets. Occupancy and related expenses were $29,400,000, or 7.6% of Shack sales, flat year over year. G&A was $50,500,000, or 12.6% of total revenue. For the full year, G&A was $176,200,000, approximately 12.2% of total revenue, reflecting incremental investments in marketing and continued investments in our people to support growth and strategic initiatives. Excluding $1,700,000 in one-time adjustments, G&A totaled $174,500,000, approximately 12.1% of total revenue. Looking ahead, we plan to continue investing in marketing and digital capabilities to drive traffic and guest frequency, with marketing spend expected to remain in the 2% to 3% range of total revenue, above historical averages of 2% or less. Unlike last year, our marketing plan for 2026 is more evenly distributed across the quarters rather than back-end weighted. Additionally, we expect our total G&A expense to remain relatively steady each quarter of 2026. This will result in a higher year-over-year G&A step-up in the first half, tapering in the back half of the year. As Rob mentioned earlier, we expect to capture additional leverage in G&A following these incremental investments as the business continues to scale. Equity-based compensation was $5,300,000, up 21.8% year over year, with $4,800,000 in G&A. Preopening costs were $5,200,000, up 1.7% year over year, reflecting 15 new Shack openings and investments to support a strong opening schedule for the first quarter and throughout 2026. Notably, the lifetime preopening expense for the class of 2025 declined approximately 14% compared to the class of 2024. We grew adjusted EBITDA by over 20% year over year as we advance a robust 2026 development pipeline. Adjusted pro forma net income was $16,600,000, or $0.37 per fully exchanged and diluted share. Net income attributable to Shake Shack Inc. was $11,800,000, or $0.28 per diluted share. Depreciation was $26,400,000. Our GAAP tax rate was 39.6%, and our adjusted pro forma tax rate, excluding the tax impact of equity-based compensation, was 26.1%. Our balance sheet is strong, and we ended the year with $360,100,000 in cash and cash equivalents and generated $56,500,000 in free cash flow. We currently have approximately 34 Shacks under construction. Now on to our guidance for the first quarter and full year 2026. As a reminder, our guidance incorporates the year-over-year impact of the 53rd week in 2025 on this year's guidance. For the first quarter, we expect total revenue of $366,000,000 to $370,000,000, with same-Shack sales up 3% to 5%, licensing revenue of $12,800,000 to $13,200,000, restaurant-level profit margin of 21.5% to 22%, and approximately four licensed openings. In late February, we rolled off price we took on our delivery channels last year, an approximate 1% impact. We plan to exit the quarter with approximately 3.5% overall price. Our inflation outlook reflects our expectation for low single-digit inflation, with commodity pressure from beef up mid-teens, partially offset by supply chain savings initiatives. We expect labor inflation to be in the low single-digit range. For the full year, we are reiterating our guidance that we provided at the ICR conference in early January: total revenue growth in the low teens, system-wide unit growth in the low teens, restaurant-level profit margin expansion of at least 50 basis points per year, and adjusted EBITDA growth in the low- to high-teens range. We are planning for low single-digit year-over-year inflation in food and paper costs after accounting for our supply chain strategies. Excluding these savings initiatives, food and paper cost inflation would be up mid- to high-single digits, with pressure led by uncertainty in beef pricing that represents approximately 30% of our blended food and paper basket. Our outlook assumes no major changes to the macro or geopolitical environment. Thank you for your time. And with that, I will turn it back to Rob. Rob Lynch: Building off of a strong 2025, we are excited about the opportunities ahead and look forward to making progress against our strategic priorities in 2026. Above all, I am so grateful to our dedicated teams for bringing their hearts, minds, and focus to their endeavors every single day. Thank you all for your time today. And with that, operator, please open up the call for questions. Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press the star key followed by the number one on your telephone keypad. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Brian Michael Vaccaro with Raymond James. Please proceed. Brian Michael Vaccaro: Hi, thanks, and good morning. I appreciate all those details. I was just gonna ask you about kitchen equipment. I believe you rolled the new fryers in in the last several months. And could you just give us an update on where you are in terms of testing as well? And are there any new ovens and grills and the shake machines planned rollouts of any of that equipment in 2026 we should be mindful of? Rob Lynch: Yeah. Thanks for the question, Brian. We have actually implemented our fry hot holding equipment into all of our Shacks at this point. And I can tell you I have been out visiting Shacks really all quarter, and our fries have never been better. I will give you a data point. Fries cold or less than optimal fries used to represent over 30% of our guest complaints, and after implementing the new equipment, it may now represent less than 10% of our complaints. So, huge transformation in terms of improving the quality of our product through equipment innovation. We, as you know, we have our equipment innovation center that we have built here in Atlanta. We have been bringing all of our operators through that innovation center and our licensed partners through that innovation center for the last three or four months. And some of that innovation is already starting to show up, particularly in some of our licensed partner Shacks internationally where they can build faster. They have not quite as big of a pipe, so they can build faster. So, yeah, there is a lot of progress laying out the format of our kitchens, not just new equipment, but the way we are designing and architecture side of our kitchen. From the innovation both on the equipment side and the design and architecture side of our kitchen, so we are really hopeful that we will have an optimized kitchen standard that will last for years to come really starting in 2027. We have to get through our pipeline. We have the longest pipeline of permitted restaurants in the company's history. So once we start getting through that pipeline, we will move to that model, which we anticipate being really transformational for us. Brian Michael Vaccaro: Alright. Well, that is great to hear. And just to follow up on new unit development, if I could. Could you elaborate on the sales volumes you touched on in your prepared remarks, and are you able to elaborate on the sales volumes that you are seeing in the Class of 2025? And you talked about really optimizing those build costs. What kind of build cost inflation do you expect for the class of 2026? Rob Lynch: Thanks very much. We are incredibly excited about the opportunity to continue that momentum and their hard work. I just cannot give our team enough credit. I mean, given the construction and materials industry and tariffs and everything else, like, the costs have not gone down. And our team, through their ingenuity, was able to take 20% of our build costs out. So, yeah, we have rate reduction. Now I will tell you the average build cost is a function of the mix of the restaurants that we build in any given year. And as we continue to increase the mix of drive-thrus, the average build cost will not see the same type of incremental decreases in cost simply because the drive-thrus cost more to build, and they are going to be a bigger part. But the reason why we are so excited about that is we are starting to see our drive-thrus in 2025 outperform our core designs from a revenue standpoint. So we are seeing great returns there. So we are going to continue to build those. It is going to help us scale even faster. So as we build that pipeline, we will be more adept at being able to break down the type of Shack based on the cost and not just report out on the average build cost as the mix evolves. So we will be, you know, there is a little bit of noise in kind of the aggregate. That is our intention as we move forward. Here probably in 2027. Operator: Our next question is from Rahul Krotthapalli with JPMorgan. Please proceed. Rahul Krotthapalli: Good morning, guys. Thanks for taking the question. Rob, I want to touch on the evolution of the loyalty program and how best you can communicate the value of the brand through this program as we move towards the year. Then the follow-up is on the New York City and the Northeast markets that continue to be a headwind today. Are there any in 2026 that could potentially turn this into a tailwind? Thank you. Rob Lynch: Wow. Great questions, Rahul. I will go with the first one on loyalty. So one of the biggest bright spots in our business right now is our decision to launch a targeted, strategic value platform in our app. As I called out in my comments, our app downloads are up 50% as a result of that program. And we are seeing huge amounts of traffic growth each of these last three months. It gives us a huge amount of confidence for our loyalty program that we intend on launching by the end of this year. And the confidence in that loyalty program grows every day as we continue to see the engagement with our app that does not yet feature some of the added components and value that we will offer in the loyalty platform. So we are extremely excited about launching that and the ability for that to impact our business. Now I will tell you, our intention in launching loyalty is to launch it in an enlightened hospitality-driven way. So we are not going to rush in. We are going to launch it this year, but we are going to continue to optimize it as we scale it. We are going to continue to make sure that it is Shake Shack Inc.-specific and delivers the same premium enlightened hospitality experience that we try to deliver in our restaurants. So revenue, you know, sales or margin, as I have mentioned before, we have seen significant incremental sales and profit impact from that program. With minimal impact, it has an outsized impact on our ability to drive profitable growth. In regards to your second question surrounding the Northeast, there is no question that we have been impacted by weather in 2025. And, obviously, there have been two big weather situations, one in January and one essentially just wrapping up right now, where we have had some closed restaurants. And we do everything we can not to close our restaurants, but we have got to make sure we put our team members' safety first. So, yes, we mitigated some really significant weather impact. The numbers that we reported out in Q4 and then in P1 in January, we are extremely proud of, because those numbers reflect the impact we are seeing right now. As we move forward with our development, the majority of our development in 2026 is outside of the Northeast. I want to make it clear. That is not because we do not see growth opportunity in the Northeast, and that is not because we do not still love our New York roots. We are absolutely committed, and we will continue to diversify our footprint. And that is going to diversify our footprint and mitigate some of our disproportionate exposure to particularly the Northeastern and Mid-Atlantic weather situations that we are dealing with right now. We are also extremely excited about the impact that is going to have. There is just so much white space for us to go into a lot of these other markets. And, frankly, the results we are seeing in some of these other markets that we may have thought and others may have thought we could not be as successful in are really surprising us with how strong the demand is. And we are starting to remodel a lot of our Shacks in New York City, but we are going to build out markets across the United States. Thank you. Operator: Our next question is from Sharon Zackfia with William Blair. Please proceed. Sharon Zackfia: Hi. Thanks for taking the question. I think I looked back in my model, your labor is the lowest as a percent of sales since I think 2013 or 2016, so a long time. I guess I am curious, Rob, how low can you drive labor? And as we look at the future restaurant-level margin expansion, particularly for this year, is labor a key component of that, or is it really coming more from supply chain and cost of sales? And then on that six-minute wait time, is there any way to dimensionalize that between walk-in and drive-thru? And is that a happy place for you, six minutes, or are you trying to further improve that? Thanks. Rob Lynch: Great question. So what I will tell you is we feel really good about where our labor is. And moving forward, the primary drivers of our improvement on the labor line will primarily be the benefit there that has been a decrease in a lot of overtime. As our operations have improved, and our leadership across our operating footprint has continued to focus on all the KPIs that we put on the scorecard every day and holding people accountable but supporting them, and our tech has improved to help us manage labor in a much more sophisticated way, we now have a lot less overtime. And we have more people in the Shacks at lunch and at dinner and less people in the shoulder hours because we are more capable. We can run those hours, and that is really been the significant driver. We can open faster and better. We can close faster and better, so we do not need as many people during those lower volume hours. And lastly, we are really doubling down on hospitality. I hope it came through in the comments, but we have added a couple KPIs onto the scorecard that are specific to hospitality around whether guests were greeted, whether guests received a table touch. So some of the things that, you know, from an ops metric standpoint in the past, we are going to keep focusing on those, but we are adding hospitality metrics to make sure that we are delivering the best hospitality in the industry. And that is going to further drive sales. I want to make it clear. We always want to get better. We are laser-focused on being best-in-class operators, which means labor management is a big part of that. But we have now really built the model that I think is going to be consistent with where we want to be moving forward. On the overtime point, you know, that really is a key leading indicator. When you see a lot of overtime in your cost structure, it is not just a function of scheduling. It is a function of team member retention issues, because you have people calling off or getting terminated, all that stuff. We now have a lot less overtime. On the six-minute wait time, we are absolutely working to further improve that. We have gotten better across every component of our business. We are definitely not satisfied with just under six minutes. We continue to strive to get more efficient. And some of that is going to come through process improvement, but a lot of that is going to come through, as I talked about on Brian’s question, kitchen design. We have a significant improvement standardized that we will be rolling out at the end of this year heading into 2027 in our standard kitchen design, as well as we will be launching our optimized long-term kitchen design. We would roll it out tomorrow, but we have permits in place for a lot of Shacks. Do not get me wrong. Those are going to be great Shacks. And there are optimizations that we can make. But really towards the tail end of this year heading into 2027, we are really excited about both the speed impact and just overall team member satisfaction, other operating KPIs, including accuracy, and deliver the food in a much more efficient way. There has been a bigger positive impact on wait times through the drive-thru as we have optimized a lot of our drive-thru, back-of-house design and just the way we operate drive-thrus. Operator: Our next question is from Jeffrey Andrew Bernstein with Barclays. Please proceed. Anisha Dat: Hi. This is Anisha Dat on for Jeff Bernstein. Wanted to ask a question on promotions. Given the stronger January comp, can you break down what portion was driven by promotional activity, including value initiatives, versus baseline demand, and whether those customers are incremental visits or primarily trade up/trade down within existing guests? Thanks. Rob Lynch: Yeah. So we do not necessarily disclose to that level of detail, but what I will tell you is that we are focused on driving all channels of revenue, whether it is in-Shack, in-app, or delivery. Our in-Shack business has been really healthy. We have seen a lot of traffic and check benefit in our Shacks. I think it is a testament to the focus on hospitality that we are delivering in Shack. We have done a lot of work. Our tech team has done a lot of work on our kiosk to make sure that we are delivering a great kiosk experience. We sell the same Coca-Cola as everyone else. So we still make money on the things that we discount inside of our app, but we are very strategic. The incentives that we offer are part of our base business, and those things are the most comparable from a price point standpoint to our peer group. And those things are incentives on our highest margin products, particularly beverages and fries. So, you know, we consider our app the most incremental channel. Yeah, I mean, what I would tell you is these guests are incremental traffic that we are deriving benefit from. But right now, the app is definitely the highest driver of incremental traffic. Operator: Our next question is from Peter Saleh with BTIG. Please proceed. Peter Saleh: Great, thanks, and congrats on a strong start to the year. Rob, I want to go back to the 1-3-5 menu that you guys rolled out again. I think you mentioned a powerful menu bringing in new guests. Can you talk a little bit about the profile of this guest that you are seeing with this 1-3-5? And are you able to retain this guest once the promo ends? And then on the marketing push for 2026, can you just talk a little bit about how it may be different than 2025? Are you targeting any different channels? Or I know that cadence is going to be a little bit more evenly distributed, but any other details you can provide would be helpful. Rob Lynch: They look a lot like our normal guests, and our normal guests are taking advantage of the 1-3-5 program as well. So it is not significantly changing the profile relative to, like, household income and those types of things. It really is something that I think just affords everyone the opportunity to come in and improve the value that they are perceiving from our brand. We want to continue to launch premium, high-end, differentiating culinary LTOs. We are continuing to work on improving our core menu. We want to make sure that we are continuing to improve our value. We have invested in our fries this year. We have invested in our beverages this year. We have invested in our sandwiches this year. We want to make sure that we are competitive. In this environment, what I will tell you is that we spend a lot less discounting than the fast food industry. We are not out there giving away our food, trying to bring in customers from profiles that we may not be able to retain as things evolve. We are out there being strategic and targeted, and the only way you get 1-3-5 is in our app. And the acquisition cost of getting an app user used to be significantly higher than it is today with this promotion. So if you think about the holistic value creation, lifetime value of an app user, the decreased cost of acquisition in addition to the incrementality of the revenue at a slightly lower margin than our core items, but not significantly lower, all in all, it is a home run for us. And so we are going to continue to drive that program. We see this as a continued driver of incremental traffic in our model. This is not something that we see as a temporary model. And it is only going to accelerate and expand once we launch an even more premium loyalty experience that offers these types of value-driving programs. On marketing, we launched our Today’s Special and “We Really Cook” campaign here in Q1. We are going to continue to leverage that platform to launch our LTOs moving forward. And a lot of that is top-funnel media. I think in the past, what Shake Shack Inc. has done is we have invested a lot in the bottom of the funnel, a lot in conversion. Right? So a lot of paid search, email, and other campaigns offering BOGOs and other types of discounts to get that conversion. There is a big opportunity to create awareness of what makes Shake Shack Inc. so special. We have an opportunity to expand our aperture top of funnel. So we are striking a bit more of a balance between top-funnel and lower-funnel marketing. And the top funnel is going to just increase the population size. And then if we are still as adept at conversion as we have been with 1-3-5 and our other programs, then a lot more of that top funnel should flow through to the bottom line. So that is really how we are thinking about marketing moving forward. It is not necessarily a demographic push or a household income push or anything like that. We truly believe that our brand can meet the needs of every stratification of guests in the industry from the teens with the least amount of discretionary income all the way up to the high household income. We want to make sure that we are offering solutions for all of them. Operator: Our next question is from Sarah with Bank of America. Please proceed. Sarah: Thank you so much. I wanted to sort of understand what clearly looks like incrementality of total transactions. And I wanted to know if that was from the sort of app and the in-app traffic as a traffic driver. Last quarter, you said that in-app traffic was up like 500 basis points. So am I right in thinking that as it stands now, app traffic had been at the time maybe 5%? And I wanted to know if that was from the sort of app and the in-app traffic as a traffic driver? And I wanted to sort of understand what clearly looks like negative mix in the fourth quarter—maybe about 2%—and I wanted to know if that was from the app, because it sounded like more transactions. And I think total traffic was up maybe 400 basis points. So, you know, there is a lot in there, but just sort of quantifying the lift or the contribution and how I should think about perhaps mix in the future? Thanks. Rob Lynch: Great question, Sarah. So one of the biggest drivers of the mix impact, particularly in P12, was our decision to price our Big Shack at $10. So, you know, there was intentionality around cannibalizing some of our higher-priced double burger buyers, trading guests from single ShackBurgers up to the Big Shack at $10, and from doubles to the Big Shack at $10. The double price points range anywhere from $10 up to $14 depending on whether you are buying an Avocarth Bacon Burger or just a plain Double ShackBurger. And what we found—and, you know, it is not rocket science, and we learned this lesson for the last time—is that we sold Big Shack to a lot of doubles. So the negative mix impact that we saw in P12 was less about any type of app traffic shift and much more about our LTO volume. Moving forward, we will take that trade-off all day long. And as we move forward and plan our LTOs, we are making sure that we have a very clear understanding of where the volume is going to be sourced from, whether it is coming from guests that were purchasing either singles or doubles, so that we can mitigate any type of mix impact moving forward from that. Like I said, it is not as significant as you might think given the $1 drinks and $3 fries in the app. And that is because when they come in, everybody is buying a sandwich. Sometimes you have multiple party size. So the checks are not as negative mix as you might think. And the incremental traffic that we are seeing from that program is tenfold any of the mix benefits. Operator: Our next question is from Andrew Barish with Jefferies. Please proceed. Andrew Barish: Hey, guys. Just wondering on an example or two maybe on the supply chain saves for this year. I mean, the implied benefits are quite significant and impressive. Just maybe an example for us. And then is it first-half weighted, or do those saves kind of more evenly show up as we move through the year? Rob Lynch: I mean, on the supply chain, there is definitely significant savings yet to be to unfold. I mean, I think we talked about it in Q4 as we were just scratching the surface. Well, I would say we are kind of into the surface right now and really excited about the work that the team has done. And, you know, when we talk about supply chain, I think I have reinforced it a couple times. It is not just about cost. Our ingredients are not always the same as the rest of the industry. Like, we buy different ingredients. We are 100% Angus, no antibiotic, no hormone beef. We put 20% brisket into our grind. We have got to be always thinking about the brisket supply. So by going out and qualifying and diversifying our supplier base, not only has it improved our cost structure, it has also secured our supply. So, you know, moving forward, we should benefit from that really significantly here in 2026. But there is still a lot of work to do on our distribution and some of the logistics of our business. So we are going to continue to derive some pretty substantive benefit moving forward. And I will just close by saying, if we had normalized beef costs last year, we would have expanded restaurant margins astronomically. We grew restaurant-level margin 120 basis points last year with unprecedented beef costs and beef inflation. When we do see a return to normalized beef pricing, the work that this team has done in operations and supply chain is going to flow through at a dramatically improved rate. I just cannot reinforce enough how amazing the work this team has done, particularly in the restaurant operations and the supply chain. As we look, I know that beef markets right now are very unpredictable, and there are some unknowns. Lots of things going into what we think the beef is going to look like over the next year. But this team is very competent and hardworking. Operator: Our next question is from Samantha on for Christine Cho with Goldman Sachs. Please proceed. Samantha: Hi, this is Samantha on for Christine Cho. Thanks for taking my question. You highlighted a development pipeline tilted away from the Northeast with same-Shack sales growth in the Southwest and Midwest outpacing New York City and the Northeast during the quarter. How does the margin and cash-on-cash return profile of these growth regions compare to the legacy coastal core? And how should that regional mix shift influence system-wide margins over the next three to five years? Rob Lynch: Well, that is a great question. It is an interesting question. What I would tell you is the revenues that we forecast for some of these markets are less than the revenues than when we open up a Shack in New York City. They are just going to be smaller populations, and there are smaller tourists. So, tourists compression. And we are doing everything we can to mitigate that compression by opening drive-thrus, which tend to have higher revenues. So the balance in geography should be, to a certain extent, mitigated by the format. In terms of the flow-through in the margins, I have got to tell you, there are not a lot of franchise systems who are opening restaurants in New York City and Los Angeles because there are a lot of challenging business dynamics there. We do really well there. That is where we grew up, so we know how to operate in those markets. But the reason why people develop in places like Oklahoma City and Florida and Tennessee is because the real estate is less, and the labor costs are less. So, you know, if we can hold on to our AUVs through an improvement in the mix of our formats and have lower real estate cost and lower labor cost, supply chain optimization, and the diversification that we get from our footprint, we should see continued margin expansion. We continue to believe that we can expand margins through continued operating excellence year in and year out. We have guided to 50 basis points a year. We have not pulled that despite a lot of our peers coming in with margin dilution last year, and looking forward, we are not being concerned about margins from a margin standpoint. Operator: Our final question is from Nick Sinton with Mizuho Securities. Please proceed. Nick Sinton: Thank you. The January comp of over 4%, obviously, I think you guys said that includes a 400 basis point headwind. Did we lose the call, or did we just lose Nick? Rob Lynch: Yeah. I lost to Nick, but yes, it does include the 400 basis points of headwind. Operator: We just lost Nick. And we will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation. Nick Sinton: You are welcome. You are welcome. Sharon Zackfia: Thank you. Andrew Barish: Thank you.
Operator: Welcome to Perpetual's Half Year 2026 Market Briefing. [Operator Instructions]. Press the documents icon to see today's files. Select the document to open it. You can still listen to the meeting while you read. The audio queue is now open. I'll now hand over to Suzanne Evans, Chief Financial Officer. Suzanne Evans: Fantastic. Thanks, Michelle. Good morning, everyone, and good afternoon or evening to those who are joining us from other parts of the world. Welcome to Perpetual's half year briefing for 2026. Before we begin today, I would like to acknowledge the traditional owners and custodians of the land on which we present from for today. Here in Sydney, that is the Gadigal people of the Eora Nation. We recognize their continuing connection to land, waters and community. We pay our respects to Australia's first peoples and to their elders, past and present. We would also like to extend our respect and welcome to any Aboriginal or Torres Strait Islander people who are listening to this briefing. We acknowledge the traditional custodians of the various lands on which all of you work today. Presenting our results today will be our Chief Executive Officer and Managing Director, Bernard Reilly; and myself, the Chief Financial Officer, Suzanne Evans. There will be an opportunity, as you've heard, to ask questions at the end of the presentation. Can we please ask that we start with just 2 questions per person to ensure that we have time for everybody who would like to participate today. Before I hand over to Bern, we'd just like to also draw your attention to the disclaimer that's contained on Page 2 of the presentation. Bern, over to you. Bernard Reilly: Thank you, Suzanne. Good morning, everyone, and thanks for joining us today for Perpetual's First half '26 results briefing. Reflecting on the overall group performance this half, we delivered a solid result, achieving both revenue growth and underlying profit growth as well as making good progress on our strategic objectives. As you'll see from the table below, our headline results showed total operating revenue of $697.9 million for the first half, up 2% underlying profit after tax of $112.7 million, up 12%. We reported a statutory profit after tax of $53.9 million. The Board has determined to pay an interim dividend of $0.59 per share unfranked, and diluted EPS on NPAT was $0.971 per share, 9% higher than the first half of 2025. We maintained disciplined cost management, resulting in an improvement in our expense guidance for the full-year. We continue to make strong progress on our simplification program. To-date, we have now delivered $60 million in annualized savings, and we remain on track to achieve the targeted $70 million to $80 million by FY '27. In Asset Management, earnings growth was supported by improved market conditions and cost management, partially offset by currency and net outflows, primarily in global, international and U.S. equity strategies. Importantly, over the period, our Australian boutique performed well and Barrow Hanley's contribution improved. Corporate Trust continued to perform consistently, delivering strong growth across all 3 business segments and reinforcing its importance as a diversified earnings engine for the group. The business benefited from strong securitization markets and client growth throughout the half. Wealth Management showed resilience during the half by maintaining focus on delivering for clients as the sale progress -- has continued to progress. While we've made good progress with Bain Capital and are progressing documentation, there is no certainty that a binding agreement with Bain will be reached or that a transaction will proceed. Turning to the next slide. I want to now spend some time framing our asset management business in the broader industry environment. Quality asset managers come into their own during down markets and periods of heightened volatility. We continue to expect more flows between active managers. As you can see on the chart on the bottom right-hand side of the slide, flows between core active funds still dwarf flows from active to passive funds. The line between public and private markets is blurring with private capital increasingly accessed through mainstream vehicles across wealth, retirement and insurance. McKinsey also know the convergence of traditional alternative assets. For Perpetual, this underscores a clear path to growth. High conviction, differentiated active capabilities and increasingly ETF wrapped strategies aligned to new distribution channels. With that context, let me now turn to performance and flows across our boutiques. Our multi-boutique model provides earnings diversification across capabilities, client segments and importantly, regions. As you can see in some of the points on this slide, we saw pockets of strong performance across a variety of our capabilities in the first half, with 54% of strategies delivering outperformance over the important 3-year time frame, reinforcing our relevance in an environment where active flows increasingly reward demonstrated performance. During the half, we saw $22 billion of gross inflows and $32 billion of gross outflows, resulting in a net $10 billion of outflows. While collectively, we saw outflows in U.S. global and international equity capabilities, emerging markets and Australian equity strategies saw areas of investor inflows. This was supported by a strong half for fixed income capabilities, highlighting the benefits of a diversified asset management platform. Net outflows in the half were offset by stronger equity markets and foreign exchange movements, supporting earnings growth and increased AUM over the half. We remain focused on active client retention and delivering strong investment performance, which together underpin improvements in our flow profile over time. Turning to the next slide for some more detail on our Australian asset management business. The integration of our Australian distribution capabilities has materially strengthened our local platform. We now have a large and diversified footprint across both the intermediary and retail channel, which I'll refer to as wholesale and the institutional channel with $71 billion of AUM across Australia. If we look more closely at the wholesale channel, we managed $32 billion of AUM. Of the over 15,000 ASIC registered financial advisors, nearly 11,000 have holdings in Perpetual Group products. We also have key sales and distribution team members working closely with asset consultants and subchannels, including high net worth researchers and brokers. Wholesale delivered $1.5 billion in net inflows for the half. In our institutional channel, we managed $25 billion of AUM across superannuation funds, government clients, insurers, endowments and foundations. We did see outflows for the institutional channel in the half. However, we saw an improvement on the second half of 2025, and we've secured several wins in the first half. These flows include a $250 million contribution from a super client into Australian equities, $110 million contribution from a large institutional client in J O Hambro's emerging markets capability and $100 million new multi-asset mandate from a large superannuation client. Important to note, we also manage $14 billion of AUM in the cash channel. Importantly, our Australian distribution is now a unified platform with strong expertise in distributing across asset classes and boutique brands through a single coordinated team. Our team of 46 includes sales, marketing and client services and is one of the largest local distribution teams in the industry. We're also seeing the benefits of strong product development, including the launch of contemporary investment solutions, and I'll touch on them in more detail on the next slide. A key priority for asset management is ensuring our product range is aligned to evolving distribution channels and strategies where we see sustained client appetite, particularly in fixed income. During the half, we launched the Perpetual Diversified Income Active ETF, which performed well relative to other ETF launches in the period and held over $215 million in AUM as at the 31st of December. We also successfully raised $268 million for the Perpetual Credit Income Trust with assets now in excess of $800 million. In working with our client base globally, we were able to successfully launch Barrow Hanley's U.S. Mid-Cap Value Fund into the U.K. market in June with the fund reaching over AUD 165 million in assets in or $110 million by the end of December 2025. This represents a significant achievement, especially given Broadridge's global market intelligence data, which indicates that fewer than 1% of newly launched funds surpassed the $100 million of assets in AUM. Looking ahead, we have an active pipeline of strategies under development and where appropriate, we will support them through seed investments to target attractive growth areas. Suzanne will talk further about our seed capital program shortly. We expect the continued convergence between traditional and alternative capabilities to remain a feature of the industry globally, driving a forecasted $6 trillion to $10 trillion of capital reallocation over the next 5 years. To that end, our discussions with Partners Group have advanced and an early-stage product design is now being introduced to the market to assess interest. We're also looking at the launching of a direct bond SMA in Australia to expand our suite of fixed income solutions for advisers and platforms. Turning to ETFs. The U.S. active ETF market represents a significant opportunity. While active ETFs remain a relatively small portion of overall AUM, they are becoming an increasingly important channel, capturing a high share of industry flows and revenues. We will continue to build on our established ETF platform here in Australia, and we're going to apply some of these learnings to the U.S. market. We've decided to enter the U.S. ETF market in a risk-managed basis by a third-party provider of multi-series trust structures. This structure is lower in cost and offers quicker speed to market, helping us to bring scale before we need to invest more heavily. If we now turn to the work we're doing with J O Hambro. I've spoken previously about restoring J O Hambro to its heritage strength, and it remains a key priority for us. We've made progress on revitalizing the business, and this will continue through the second half and beyond. In September last year, we announced the appointment of Bill Street as CEO. Building off the work we've already started with J O Hambro, Bill has quickly commenced implementing a clear strategic direction, beginning with the simplification of J O Hambro's operating model to create J O Hambro International an aligned platform that better positions the business for growth. The future success of J O Hambro is an important component of our global offering, and we look forward to updating you on its progress over time. Turning now to Corporate Trust. On the next slide, please. Thanks. The business experienced another strong half and continues to deliver steady growth across all 3 of its business segments. The Australian securitization market remains robust, supporting continued growth in debt market services. Importantly, we continue to see growth across the non-bank lenders, contributing to a more favorable mix of mandates for us. Managed Fund Services growth was driven by custody and our Singapore business, benefiting from both new and existing client growth. Digital and Markets also delivered a 5% uplift in assets under administration compared to the second half of 2025, reflecting continued investment and expansion of our client offerings. Highlighting its strength in the market more broadly for the 10th straight year, Corporate Trust was awarded the KangaNews Australian Trustee of the Year. Looking forward, the business remains focused on executing its 5-year growth strategy, including investing in its core business and digital markets. Corporate Trust has proven time and again to be a highly resilient and growing business. UPBT has grown steadily at a CAGR of 11% from around $22.4 million in first half of '19 to approximately $49 million in the first half of 2026. The cost-to-income ratio has remained broadly stable in the mid-50s range, underscoring our disciplined investment in the business as revenue has continued to grow. This slide also illustrates what is driving that growth across each of our business segments. Notably, Corporate Trust's service-led operating model is aligned both to the credit-linked and equity market growth, which provides a stable, diversified earnings base that is less exposed to equity market volatility. That diversification is particularly relevant in the context of asset management's market sensitivity, reinforcing Corporate Trust's role as a consistent and resilient earnings business within the group. Moving now to Wealth Management. In the half, the business remained focused on delivering for its clients while the sale process continued. Underlying profit before tax was lower, reflecting expense growth. However, wealth management was resilient. Funds under advice grew by 6% over the half, supported by institutional flows and strong equity markets. It was also pleasing to see the strength of this business recognized externally. Five of our advisers were recognized in the Barron's Top 150 financial adviser list, reinforcing our position as a trusted provider of high-quality client-focused financial advice. We were again recognized as a finalist in 2 categories of the 2025 IMAP Managed Account Awards, marking our third straight year of distinction. Wealth Management is at the core of Perpetual's 139-year history and has all the hallmarks of a successful business. Strong funds under advice, 12.5 years of consecutive net inflows as well as being one of Australia's largest managers of philanthropic funds with a very strong client advocacy measure, as you can see here. In relation to the sale process more specifically, I'd like to reiterate that while we have made good progress with Bain and are progressing documentation, there is no certainty that a binding agreement will be reached or that a transaction will proceed. In parallel, we are establishing a clear stand-alone operating perimeter for the business to support a potential sale and ensure continuity with minimal disruption for our clients and for our teams. Our Wealth Management business is a high-quality profitable business with growing funds under advice, and the Board and I are focused on ensuring that any transaction that Perpetual may ultimately enter into is in the best interest of our shareholders. Turning to the next slide. Our simplification program remains on track to deliver our overall target of $70 million to $80 million in annualized savings by June 2027. Importantly, the benefits are now flowing through into reported earnings alongside a simpler, more streamlined operating model. The chart on the right-hand side of the page highlights our planned program of work, which, as you can see, is well advanced. As at 31, December, we have delivered $60 million in annualized savings, of that $26.9 million of actual savings was reflected in the first half '26 results. The majority of savings to-date have come through workforce-related efficiencies, supported by ongoing rightsizing across the global business and the removal of duplication as we simplify structures and reinforce organizational or reduce organizational complexity. We incurred $4.4 million of additional cost savings in additional costs to achieve these savings during the half, and they are recorded as significant items. Looking ahead, the areas of focus for the second half of FY '26 remain finance systems transformation, back-office simplification and the ongoing rightsizing of functions across the group. Total costs to achieve the program are expected to remain at approximately $55 million. In summary, we are pleased with the progress we've made so far, acknowledging we still have more work to do. I'll now hand over to Suzanne to walk through the financials in more detail. Suzanne Evans: Fantastic. Thanks, Bern. It's great to be able to present a little bit more detail around Perpetual's half year results for the period ended 31, December 2025. We'll start by moving just to the next slide, Slide 15, that has a summary of our results. Operating revenue of $697.9 million was 2% higher than the 6 months ended 31, December 2024 or the prior corresponding period, driven by continued AUM and further growth across the group. As noted in our recent second quarter update, revenue included performance fees of $10 million, mainly generated by our Perpetual and J O Hambro boutiques. Total expenses of $547.8 million were within our guidance of 2% to 3% growth for the financial year 2026. I'll step through some of the drivers of our expense growth and also the basis for our improved expense guidance range shortly. Underlying profit after tax was $112.7 million, 12% higher than the prior corresponding period, supported by improved contributions from asset management, continued momentum in Corporate Trust and reduced funding costs following the refinancing of our debt facilities in the last financial year. The effective tax rate on UPBT was lower at 24.9% compared with the prior corresponding period. Now this was a combination across the halves due to a write-off of a deferred tax asset in the prior corresponding period and in the current half and unrelated prior period adjustments lowering the effective tax rate. If I look forward in the medium-term, we would expect the effective tax rate to normalize around the 27% to 28% range. Significant items for the half year were predominantly non-cash in nature, and I'll cover those in more detail later. Earnings per share on UPAT was 9% higher. Finally, on the summary slide, the Board has declared an interim dividend of $0.59 per share, unfranked and to be paid on the 7th of April 2026. Now if I move to the next slide. On here, we've just got a high-level visual snapshot of performance across our divisions. I'll step through each division in slightly more detail, beginning with Asset Management. Asset Management underlying profit before tax increased 4% to $106.9 million, demonstrating top line growth, but also how our cost discipline is beginning to translate into an improved cost-to-income ratio when compared to the prior corresponding period. Higher average AUM drove higher management fees. However, performance fees were slightly lower than the prior corresponding period. Total expenses declined 2%, reflecting some of the early benefits from the simplification program that Vern has outlined. These were partly offset by foreign currency movements and continued investment in upgrades to our fund technology platforms. Now moving on to Corporate Trust. Corporate Trust experienced steady UPBT growth in the half, up $5 million on the prior corresponding period across all 3 of its business lines. Increased volumes in Debt Market Services, along with new client flows, further supported underlying FUA growth in the securitization portfolio. The result was 10% growth on the prior corresponding period revenue. Managed Fund Services revenue increase was driven by growth in custody services and continued momentum in our Singapore operations, both from new and existing clients. Digital Market Services experienced particularly strong growth with revenue up 20%. Some of that reflected an elevated level of implementation fees for Perpetual's intelligence SaaS offerings as well as continued growth in markets and the fixed income platform management solution. Operating expenses were higher, supporting growth and increased client volumes as well as continued investment to enhance digital capabilities across the business lines. Moving now to Wealth Management. Wealth Management's UPBT decreased by $5.5 million. Given the backdrop of the ongoing sale process, the business remained resilient. Revenue was broadly flat at $118.8 million. Market-related revenue increased modestly, supported by stronger equity markets, while non-market revenue declined slightly, mainly due to lower fiduciary and risk advisory income. Total expenses were up 6% with increases across staff, technology and premises costs. Funds under advice were up 6% on the first half to $21.9 billion with positive market movements and net inflows from new institutional clients. Moving now to the final division, our Group Support Services. Underlying loss before tax decreased by $3.3 million, with higher revenue over the half compared to the prior corresponding period. Revenue was supported by higher income from seed investments, interest received on cash balances and some foreign currency revaluations. Compared to the prior corresponding period, interest expense declined, reflecting the benefit of the refinanced debt facilities in May last year that I referenced earlier. Moving now to the next slide with a reconciliation between underlying profit after tax to net profit after tax. Significant items for the half were $58.8 million and were predominantly non-cash in nature. During the period, we undertook a review of significant items and began developing a clearer policy around classification, which resulted in some age projects being closed or where appropriate, moved back above the line. If I step through our results from UPAT to NPAT, the main drivers were costs relating to the Pendal transaction, the proposed sale of the Wealth Management business and our simplification program. I will call out on Pendal, these are the final costs associated with the transaction, and we're expecting no more to occur by the end of financial year 2026. The simplification program and any associated costs with Wealth Management are expected to continue into the financial year 2027. The remaining significant items are non-cash in nature and include revaluation adjustments. Reflecting the impact of these significant items, we reported a net profit after tax of $53.9 million. Now if I move to a bit more detail around our expenses. Controllable cost growth was 1%, largely attributable to expenses in Corporate Trust and Wealth Management as well as variable remuneration linked to improved contributions from Barrow Hanley and also our Australian boutiques. Now this was partially offset by simplification program benefits, which also helped to mitigate inflation-related cost pressures. Cost growth was also impacted by foreign exchange movements, albeit not as negatively as the prior 6 months. Looking ahead, we've improved our FY '26 expense guidance, and it's now reduced to between 1% to 2%, down 100 to 200 basis points on the prior guidance provided. It is important to note, however, included in this guidance is that expenses will continue to fluctuate depending on FX movements and interest rates. We've provided our currency assumptions in the footnotes to this slide. Moving now to cash flow. Free cash flow of $33.8 million for the half included $82.9 million in net cash receipts in the course of operations. There was a net increase in free cash flows in the half compared to the prior corresponding period. Borrowings did increase by $10 million over the period, but that was predominantly due to timing differences in drawings on our working capital facility relative to the upstreaming of dividends across our global operations. After paying dividends totaling $60.3 million and adjusting for timing on seed repayments and foreign currency movements, total cash at 31, December 2025 was $325.6 million. Moving now to the balance sheet. The balance sheet at 31, December 2025 remains robust and is supported by operating activities across our diverse sources of earnings. The majority of our cash is held for working capital, but also for regulatory capital purposes and predominantly in the United Kingdom. For greater clarity, we have also disaggregated the other financial assets in the balance sheet into 3 segments: seed capital, IIP balances and a loan receivable. By way of background, the IIP units is where Perpetual is hedging employee incentive obligations. Of course, there is an offsetting item in the liability side of the balance sheet. Importantly, we have $150 million of surplus liquid funds available, of which the majority relates to undrawn lines of credit. Now moving on to one of these categories, seed capital. Our seed capital is deployed to support organic growth and product development. Capital is deployed selectively, recycled actively and governed through a formal committee oversight process. The average holding period is approximately 3 years. We've included some case studies here to illustrate how seed capital can be used, whether it's to build early scale, launch strategies, develop track record and then recycle capital once external demand is established or the sometimes difficult and more challenging part to exit where scale is not achieved or commercialization does not occur. Now finally, turning to dividends. The Board has declared an interim dividend of $0.59 per share for the half, which will be unfranked and paid on the 7th of April 2026. The interim dividend represents a UPAT payout ratio of 60% for the half, which is lower than the prior corresponding period where the payout ratio was set at 70%. Dividends are expected to remain unfranked in the second half of this financial year. We will, of course, continue to assess the appropriate payout levels within our stated range, taking into a number of factors into account, including our ability to frank. I'll now pass back to Bern for some comments on the outlook. Bernard Reilly: Thanks, Suzanne. Before we move to questions, I want to spend some time talking about the progress that we've made on our strategy over the half. Thanks. Next slide. Great. Our strategy is aligned to 3 pillars, as you can see here on the page, simplifying our business, delivering operational excellence and investing for growth. We've made progress within each of these pillars over the half. Firstly, with Simplify, as I've already spoken to today, our simplification program has streamlined the group's operating model and delivered an additional $16 million in annualized savings for the half. Progress has also been made on our finance and transformation projects. Delivering on operational excellence. Our 3 businesses are now established as focused, largely decentralized business lines with greater accountability for delivery and financial outcomes, supported by continued group oversight and governance. Additionally, we have delivered on our cost commitments, resulting in an improved expense guidance for 2026. Finally, as we discussed earlier today in investing for growth, we have supported the launch of new product innovation in asset management with an example being the Perpetual Diversified Income Active ETF. Our Corporate Trust business also completed the acquisition of IAM's term deposit broking business, increasing scale in markets, broking and fixed income areas. Corporate Trust will continue to look for additional capabilities that will help drive business growth. We have also progressed AI transformation initiatives, embedding AI into core workflows to enhance decision-making, productivity and scalability across the business. These 3 pillars will remain the platform for execution for our business activity for the remainder of 2026. Now looking ahead, we have a clear and focused set of priorities. We'll continue to deliver on our cost reduction commitments. We'll retain our leadership position in Corporate Trust by investing in capability to drive further growth for that business. We'll continue to target investment in new products and capabilities across our asset management business, and we'll work to remove complexity to create a leaner, more efficient structure for the group. Thank you for listening this morning. Suzanne and I are now happy to take questions that you may have. I'll hand back over to Michelle, our operator, to manage these questions. Thanks, Michelle. Operator: [Operator Instructions]. Our first question comes from Elizabeth Miliatis from Macquarie. Elizabeth Miliatis: The first one is just on the sale of the Wealth division. If you could give a little more color on why things are taking a little longer than perhaps we'd expected. There's also been press reports that the brand is potentially up for sale as part of that transaction. Yes, just a little more color would be much appreciated. Bernard Reilly: Sure, Liz. I'll start and maybe Suzanne can add in. The process for the sale of the wealth has taken longer than I think the market would have liked. I think to put it into context, I think it's important. Firstly, this is a business that we've owned -- Perpetual's owned for 139 years, and it is intertwined in particular with the other businesses that we have, in particular, Corporate Trust. If you think about the prior transaction that we had contemplated, we were selling 2 businesses together to one buyer. Now we are selling one business to -- potential progressing selling one business to one buyer. We need to untangle that business from the broader organization to be able to do that. There's an element here of negotiating a sale while also untangling the business to be able to do that. It's actually quite a complex process to be able to do. I think the one point that I'd like to reiterate that I have said in my formal remarks, was that the Board and I are very focused on delivering the best outcome for our shareholders. So we're very focused on that, and so understanding the complexity that's in front of us, we're driving to get to an outcome of clarity for the market, but also for our team and our clients as quickly as we can. I was focused on the first bit. Really, we don't comment on media speculation, but when we thought about the sale process, brand was an important part of the consideration for us. I'll probably leave it at that. Elizabeth Miliatis: Then just the upgrade to the guidance for OpEx, so now 1% to 2% from 2% to 3%. It seems like most of that change is currency. Can I just confirm that? Then also secondly, I mean, just the rates in there look pretty conservative. Obviously, we'll see how things progress over the next 4 months or so, but potential upside risk to that number as well just because of currency? Suzanne Evans: Yes. Liz, you're spot on. In fact, that was probably one of the big swing factors in the full-year last year. Fair to say that probably has made me quite conservative as the CFO. Yes, I mean, FX is a big swing factor for us, and we've tried to capture that when we've provided the guidance. What I would say, though, is we're already 2 months into the second half, and there's a lot of things there which are still controllable costs. I think that's given us the confidence to tighten the range. Obviously, the combination of us staying quite vigilant on the expense base and also some of the benefits coming through from the simplification program, I'd like to think that we can comfortably deliver within the guidance we've given. Operator: Our next question comes from Nigel Pittaway from Citi. Nigel Pittaway: Just first question on -- just on J O Hambro. It seems as if your aims there to restore it to its heritage strength is still being somewhat hampered by the net outflows from the international and global select strategies. I was just wondering, do you feel you're any closer to be able to extend those outflows? Or is that something that we can expect unfortunately to go on for some time? Bernard Reilly: Nigel, yes, with J O Hambro, the select strategies have still -- you're right, still experienced outflows. You're 100% correct there. What we are seeing is a real focus on client retention, in particular with a lot of the wholesale clients in the U.S. The team are very focused on that. I think what drives investment outflows or inflows is performance, right? Performance there has still remained soft, and that makes that challenge a little bit harder. What I would say on the other side of that, our other global strategies and our emerging market strategies in J O Hambro have actually been receiving inflows as well. They do -- you do see some of the offset there as well. It remains a focus... Nigel Pittaway: Then just, I mean, following up, those 2 strategies, the outflows from there seem to be the main explanation as to why the revenue margin in asset management ex-performance fees dipped quite a bit in the second half last year. There seems to have been some partial recovery in that this half despite those outflows continuing. Is there anything going -- else going on within that revenue margin for asset management? I say stripping out performance fees that made it improve this half? Bernard Reilly: You're right. The margin compression that we saw in the prior half was related to the outflows in Select. You're also seeing at the margin, you're seeing the asset mix is changing. We touched on some of the strategies that we launched in the most recent half, and we've seen those fixed income strategies, which are a lower basis point average relative to equities where we've seen the inflow. You do see some of it is in that. It's not in all in outflow. We've also seen a pickup in some of the Barrow strategies as well. Suzanne Evans: Yes. I think as Nigel just called out, the way we report it includes performance fees. Operator: The next question is from Andrei Stadnik from Morgan Stanley. Andrei Stadnik: Can I ask my first question around distribution efforts in U.S. and U.K.? Are you pleased with the progress there as you are in Australia? Or what's the update on U.S. and U.K. European distribution? Bernard Reilly: Sure, Andre. We highlighted the Australian distribution in this half because we've actually spoken about the global in the prior half or the half before. I can't remember now. I thought it was an opportunity given a lot of the work in the Australian -- bringing the Australian teams together was really finalized. I wanted to highlight that and the fact I think they've done a great job in delivery on coming together as a unified team and delivering positive flows for the business. I suppose that's the first point, I suppose to explain why we put it in there for you to give you some context. I also think the size of that team and our footprint is something that we don't always talk about, and I think it's actually a great asset for the business. Reflecting that, I think, is important. It is far -- that team is far more advanced than our international distribution footprint would be a fair assessment to make. The work that we're doing with the team is continuing to drive that. Am I happy where it's at? I'm probably never going to be happy enough with where it's at from a distribution perspective. I might say the Australian team, some of them are listening have done a good job. There's still more that they can do. I suppose we're focused on continuing to drive what we can on both on -- I think the market segment piece is important. If I think about the U.S. and the U.K., I think a great example of some of the work that we've done was launching the Barrow Hanley strategy in the U.K., which was effectively a strategy we have in the U.S. that there was a real appetite for that opportunity in the U.K. The multi-boutique model allowed us to actually offer that in a different market that the Barrow team never would have been able to access had we not had they not been part of the group. I think a good fact point around the business strategy and structure that we have. An example of that. I think there's more we need to do in the intermediary space, wholesale space in the U.S. It is a little bit hampered, to be honest, by some of the outflows we're seeing in the select strategy, but that's an area of focus that I can assure you the team are clearly focused on that. The other part to, I think, think about in the U.S., given you raised the U.S. is how that market is changing. Active ETFs are clearly -- while it's a small start, right, but active ETFs garnering an outsized share of flow. We've talked about it in the past, us having a footprint in the active ETF space in the U.S. is going to be important for the future. As I mentioned in my remarks, we've made some steps there to go down the path of actually using a third-party provider. The reason we're doing that is a couple of fold. I think from a risk of execution perspective, we're taking some of the risk off the table by using someone who is using a multi-series fund. We're effectively using their scale to help us launch. It's quicker to market for us. We don't have to spend all the time building and getting approvals. We can get to market more quickly. Then we can assess the success of that and the progress of that before we look to invest more heavily. I hope that answers. Andrei Stadnik: I can ask the second question. Just on the seed capital, $183 million of seed capital. Can you talk a little bit about how that's shaped evolved over time, where you would like to see that number? How many strategies might be behind that $183 million of seed capital? Suzanne Evans: Yes to take that one. Thanks, Andre. Bernard Reilly: Suzanne is the Chair of the Committee, so she can take that. Suzanne Evans: Look, the thing is to deal with one of your questions, it is very diversified. We've got a lot of strategies that only required a relatively small amount of seed either to build the initial portfolio construction to build a track record. We've got quite a few bets in there. There'd be more than 20 capabilities that we've got ceded today. Also included in that number is investments in our CLO business via Barrow Hanley. Now those are obviously longer-term structures, so not liquid. Those ones have more duration to them. I think the important thing there is we're quite focused on, I think the size that we have deployed at the moment is appropriate. Obviously, the discipline that we're very focused on is how do we recycle. It's quite easy putting money into funds. It's sometimes a lot harder at recycling or as I sort of called out, if something isn't working, and that may just be that the market demand wasn't where you expected it to be. You have the discipline around closure and bringing that capital back. I wouldn't see us looking to materially increase the pool that we have today. I think with what we've got and with some of the recycling we're starting to think about, we'll be able to continue to support some of the innovation and product development that has spoken about. Operator: The next question is from Lafitani Sotiriou from MST. Lafitani Sotiriou: Can I start off with the wealth management business and sale process? $14 million spent in the last half is quite a lot of money for a business you may not sell in addition to the $5 million odd you spent the half before. Can you talk us through exactly what that money is being spent on? Have you got a better idea on potential stranded group costs and further separation costs if you are successful? Bernard Reilly: Sure, Laf. If you look at the $14 million pretax number, that is spent in -- there's obviously legal and other costs in there, but I think the larger part of that is around actually the separation of the business, which, to be honest, as part of our simplification strategy, we would do anyway. There's a part there where we are creating -- bringing the team into a separate perimeter and systems and other sorts of things that we are -- the technology that we're implementing that's in that number. You're right, $14 million is not an insignificant number, and it's one that we are keeping a very close eye on in addition to the $5 million you mentioned from the prior half. Suzanne Evans: I think it's a good point, Laf, because I think it's -- some of that is obviously cost that we may otherwise have incurred, but maybe in a slightly more accelerated time frame with some of the work we're doing around putting more autonomy into each of our business lines. The stranded cost, obviously, is something I'm very focused on. I would say we've already had a mind to that through the simplification program. Wherever we end up with the sale process, I'm pretty confident that those will be relatively immaterial. Now that does require us to do some more work just as we've done across the rest of the organization, but that's not something that probably touches my mind that much. The other part that around what will it cost if we are successful with the sale. I think we're going to have to progress a little bit further with that process to be able to articulate that in a way that I wouldn't be giving you a misleading number. I guess it's fair to say we have had a reasonable amount of spend already. That's some cost, which we can leverage if there is a sale that proceeds. Lafitani Sotiriou: Can I clarify? I understand that there are costs that you can move around, but one of the criticisms has been you had the strategic review and simplification cost program previously, that was over $130 million. Now you've got a new simplification program, which is $60 million. This is even separate to that, right? This wealth management $20 million spend is another one-off program that is being kept off and separated from the underlying cost. There seems to be a lack of consistency. On the one hand, you've got one-off costs for your tax you've reduced your tax cost in the underlying number this period, but it's from one-off capital gains losses that you would typically strip out, but you've then stripped out a lot of costs from your wealth business, which you still have, and you've also stripped out still $6 million from your Pendal business. I'm just not sure how we should reconcile and think about one-off costs going forward? Suzanne Evans: Yes. Thanks, Laf. Just one point of clarity and sorry if I wasn't clear before. Some of the impact that we've had in the prior period around the deferred tax asset wasn't actually a capital gain loss. We had a deferred tax asset that was sitting there, which was a timing part. We took a view around our Singapore business, and that was reversed. It's just slightly different and sorry if I didn't clarify it. I think we've definitely heard from the market views around significant items, and I made a commitment at the last half that we would start to look at that. I can't change some of the history, but I think I have been very focused on working with both the executive team and the Board around how we do have more discipline as to what gets classified as a significant item. I think there will be items from time-to-time and the potential sale of the wealth business is one of them, which I think if we don't break that out and provide some clarity around it, it is going to be very hard for people to think about the ongoing expense base. I will say we've heard you. We've heard what the market has given us this feedback, and we're starting that process. I think by the time we come back at 30, June, I think we can be much clearer as to what you should expect on a go forward in terms of the classifications for significant items. Lafitani Sotiriou: Just to be clear, so the wealth management business, some of that is actually BAU that's in that perimeter that's been separated. The teams -- that's people headcount that are part of the wealth business that are being excluded from the underlying number. That tax piece, that Singaporean thing still, whether it's a CGT thing or not, that's one-off in nature. Suzanne Evans: Yes, you're correct on the one-off. That's right. It's not people in the wealth business. We do have a team at the moment that are assisting us with the separation process. That separate team makes up some of that cost. I wouldn't categorize this as BAU spend. It is something that we're doing over and above. Obviously, if this was a BAU process, we would take a lot longer around some of these separation activities. The fact is, as Bern said, we're trying to separate 2 businesses that have operated together quite closely for close to 140 years. There's a lot of unwinding to do. Some of that's quite technical in nature around the co-sharing of licenses and operations that have existed for a long time. Lafitani Sotiriou: Just finally, so can you just clarify why the one-off tax gain is included in underlying the one-off BT Pendal-related expenses still being excluded from underlying? Suzanne Evans: The Pendal one, I think -- and forgive me if I haven't got a little of the history, but I understand at the time the Pendal transaction occurred, it was indicated that it would take approximately 3 years for those costs. In that program, as I'm aware, all of the integration work is completed, but there is still a bit of a tail around some of the incentive arrangements that is still coming through in that number. That won't be there from FY '27, which is what I called out. As with the tax, I guess what we're trying to do is mirror both above and below the line. In terms of the one-offs, those were highlighted previously in significant items. I guess it's an open call as to whether you think they're material enough to call out. Given the movement that also pushed us below what we would expect our effective tax rate to be on a medium-term basis, which, as I said, is around the 27% to 28%, we wanted to call it out. Operator: There are no further questions. I'll now hand back to Bernard Reilly. Bernard Reilly: Thank you, Michelle, and thank you, everyone, for joining us on the call today for our update on our first half '26 results. Thank you.
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: If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. I will now turn the call over to Sarah Jane Schneider, Vice President, Investor Relations. Sarah Jane Schneider: Thank you, and welcome to NCR Voyix Corporation’s Q4 2025 earnings conference call covering our 2025 fourth quarter and full-year results. A copy of our earnings release and the presentation we will reference are available on the Investor Relations section of our website at www.ncrvoyix.com and have been filed with the SEC. With me on the call today are James Kelly, Chief Executive Officer; Nick East, Chief Product Officer; Darren Wilson, President, Retail and Payments; Benny Tadele, President, Restaurants; and Brian J. Webb-Walsh, Chief Financial Officer. Before we begin, please note that today’s remarks will contain forward-looking statements. These statements are subject to risks, uncertainties, and other factors that could cause actual results to differ materially. Please refer to our earnings release and SEC filings for additional information. We undertake no obligation to update these statements. We will also discuss certain non-GAAP financial measures, which we believe provide additional clarity regarding our performance. Reconciliations to the most comparable GAAP measures are included in our press release and supplemental materials on our website. With that, I will turn the call over to James Kelly. James Kelly: Thanks, SJ, and good morning, everyone. Thank you for joining us for our fourth quarter and year-end earnings call. Our results for both the quarter and the full year reflect the positioning of the company now as a platform-led business supported by our leading service capabilities and integrated payment solutions. As we began our transition, it became clear that while we had a strong product team, we lacked centralized product leadership at the executive level. Making this a critical leadership role, Nick was appointed our first Chief Product Officer across both retail and restaurant. Nick originally joined the company through a prior acquisition and brought the right combination of technology expertise and deep company knowledge to step into this role. Nick has been instrumental in accelerating the launch of our new platform solutions and repositioning us as a platform-powered company. Reflecting on 2025, my initial objective as CEO was to strengthen our executive leadership across retail and products, reorganize and fortify our sales organization, and deliver our platform solutions to market. Accordingly, I appointed Darren as President of Retail and Payments. Since stepping into the role, Darren has appointed new leadership across three of our four regions, revamped the sales compensation plan, and played a key role in outlining expectations for our platform solutions as we work to achieve sustainable growth. The most consequential achievement in 2025 was the completion of a five-year transformation that rebuilt the company’s software foundation from the ground up. More than 50 legacy on-premise applications were modernized and unified into a single scalable platform built to power the mission-critical operations customers rely on every day. In addition to these achievements, we executed a series of cost actions to address the termination of the hardware ODM agreement. We streamlined and sourced key functions and began consolidating redundant systems. We engaged with nearly 400 companies, including more than 100 new prospects, and hosted investor events featuring live demonstrations of our Voyix portfolio. A clear illustration of the market’s confidence in our go-forward strategy is reflected in the feedback received at the NRF show in New York this January. Our successful execution was on full display as we launched our modernized products, providing a strong foundation from which to scale. We are very encouraged by the response from both new and existing customers and the demand our new offering is already generating, as reflected in the more than 20 platform contracts we have signed, including three in the fourth quarter. This includes two new retail customers in the Philippines and Belgium, and our first enterprise restaurant platform customer Chipotle. We continue to broaden our payments offering across geographies and industry verticals and expand our payment capabilities. We are enhancing our proprietary gateway, Voyix Connect, to be able to scale our payments business together with the rollout of our platform solutions. Later on the call, Darren will discuss our recent progress in more detail. Next is services. With global scale and deep domain expertise, we operate inside some of the most complex retail, restaurant, and fuel environments in the world. Our services business represents over 50% of total revenue today and remains a clear competitive differentiator for enterprise business. We are leveraging our service organization to expand our existing customer relationships and win new business, particularly as we deploy our new platform solutions. This will improve operational efficiency and deployment speed for both retailers and restaurants. Finally, as we recently announced, the phased transition of our hardware business to EnerCom commenced in early January. We remain on track to complete the transition by the end of the first quarter. Brian will provide additional details on the financial impact later on the call. With that, I will turn the call over to Nick. Nick East: Developed over the past three decades across geographies and vertical markets, our end-to-end offering provides the flexibility and agility—as well as integrated payments and support services—to enhance the consumer experience and drive operational efficiencies. For the first time, we were able to showcase a fully integrated modern cloud platform that leverages our extensive global software library of more than 30,000 unique features, IT security, and insights for retailers and restaurants across supply chain and back office, and toward adoption of a comprehensive set of capabilities spanning point of sale, self-checkout, and platform management. The capabilities we previewed at NRF will be lab-ready by the second quarter, with initial customer deployments scheduled for the back half of the year. This represents a meaningful step on our path toward broader commercialization and scaling of our platform. Based on the more than 20 customer contracts we have already signed, we have a backlog that we expect to deploy consistently over the next nine to eighteen months, which aligns with the enterprise market segment and the technology roadmap to be able to accelerate new implementations, deliver seamless updates, and lower deployment costs for both the customer and the company. Further, our platform is designed for innovation at pace in the cloud and at the edge, allowing customers such as Chipotle to innovate their operations. In 2026, our product team is focused on AI innovation for the platform. For example, we are now leveraging AI to examine the business logic of the live production stores of our customers. This again demonstrates the innovation and speed at NCR Voyix Corporation. In addition, we have developed and demonstrated a store-in-a-box offering for major fuel that could be self-deployed in under fifteen minutes. These offerings are priced to meet the expectations of small and mid-market customers, and we will launch our restaurants and grocery offerings in the second half of the year. Since NRF, we continue to engage new and existing customers in our labs and at major trade shows globally. Darren recently returned from EuroShop in Düsseldorf, where our demonstrations generated strong interest and reinforced demand for our platform solutions. Next month, James will attend Retail Tech Japan to showcase our localized applications, and in May, Benny will be at the National Restaurant Association Show in Chicago. We are building on this early momentum to meet the growing demand for our modern cloud-to-edge solutions. With that, I will turn the call over to Darren. Darren Wilson: Thanks, Nick. I would like to begin with an update on our payments strategy. Historically, third parties have had the ability to connect directly. Going forward, all third-party integrations will route through the gateway, improving security, consistency, and scalability. We continue to scale our payments capabilities across industry verticals and geographic markets. Voyix Connect, our proprietary gateway, serves as the conduit between our platform—including payments—and third-party authorization processes. More broadly, the gateway becomes the single integration layer into individual applications for our platform. In the U.S., we continued to progress on integrating Voyix Connect with Corpay and WEX to be able to support commercial fuel payments. We achieved certification with Corpay in January and expect to be certified by WEX in the second quarter. We also migrated our remaining customers from the JetPay front-end platform. Our U.S. payment offering now includes both gateway and processing, and we are registered as an acquirer. Internationally, we remain focused on expanding Voyix Connect to integrate with local acquirers and enable processing through end-market referral partners to scale our payments business more quickly. Lastly, we recently signed a referral agreement in Mexico to support payment acceptance for our customers in Latin America. For example, we continue to implement pricing escalators where appropriate across certain retail and restaurant contracts with most agreements structured on three- to five-year terms. These escalators are being introduced upon renewal for both new and existing customers as they adopt our platform offerings. As a result, the financial impact will build gradually over time. Our primary focus remains embedding our end-to-end payment solutions with our enhanced gateway functionality later in the year. We will look to form similar relationships for our customers in Canada and Europe. This deepens integration, removes intermediaries between POS and payments, lowers customer costs and complexity, expands recurring revenue, and increases long-term value for both our customers and the company. Turning to retail. In the fourth quarter, our retail business signed 40 new customers. Our platform and payment sites increased 6% and 12%, respectively. Software ARR increased 8% and total ARR increased 4% in the quarter. The launch of Voyix POS and our fully integrated platform solutions continue to show early signs of success, as demonstrated by two new enterprise logos we secured in the fourth quarter. We secured a long-term agreement with Colruyt Group, a leading Belgium-based grocery chain, to implement Voyix POS for grocery across more than 850 stores in Belgium, Luxembourg, and France. These customers chose to adopt the Voyix Commerce platform functionality because of the flexibility and operational efficiencies it provides. These solutions will allow them to integrate their entire technology estate, improve both in-store and above-store functionality—including third-party applications—and seamlessly adopt additional capabilities following the initial rollout. In Asia Pacific, we signed a multi-year contract with 7-Eleven Philippines, the number one convenience retailer in the Philippines, and will implement Voyix POS for c-store across more than four and a half thousand stores beginning later this year. The rate at which we are attracting retailers to our platform solutions has further accelerated following our demonstrations at the trade shows we recently attended. I am confident that this trend will continue as we also ramp our initial platform contracts following our upcoming deployments across our global footprint. With that, I will turn the call over to Benny. Benny Tadele: Thanks, Darren. In the fourth quarter, our restaurant business signed more than 150 new customers. Software ARR increased 3% and total ARR increased 6%, while SMB performance was impacted by headwinds related to market dynamics and the legacy nature of our current SMB offering. Our enterprise and mid-market segments maintained steady growth this quarter, excluding our SMB business. Platform and payment sites increased 11% and 13%, respectively. In the fourth quarter, we renewed and expanded our long-standing relationship with Red Robin, a fast-casual chain with nearly 500 locations across the U.S. and Canada. Our new five-year agreement includes managing the service desk operations and delivering all tools, technology, and support. Additionally, as an existing user of Aloha point of sale, Red Robin will now be the first enterprise table service brand to adopt Aloha OrderPay, our next-generation handheld solution to improve ordering speed and guest satisfaction. As shared in November, the launch of Aloha Next enabled us to renew and expand our partnership with Chipotle through an exclusive six-year global agreement. The rollout remains on schedule, with Aloha Next now in their lab and both teams remaining aligned on readiness milestones. In addition to Chipotle, we are now in two additional enterprise restaurant labs, underscoring the confidence global brands are placing in our latest technology. We are advancing the deployment of additional platform capabilities, including Menu and SmartManager. Menu is being rolled out to multiple enterprise customers next month, enabling real-time unified menu management across channels. SmartManager is already in pilot with multiple customers. These early implementations are providing valuable insight into sequencing and workflows and further strengthen our value proposition for restaurant operators. As we enter 2026, we are encouraged by the momentum in our enterprise pipeline and the depth of customer engagement. Our strategy is resonating in the market, and we are well positioned for accelerated growth in the year ahead. In our SMB business, we are reengaging with customers in preparation for the launch of Aloha Next. Designed for the SMB space, our modern and cloud-native store-in-a-box solution, Aloha Next for SMB, will launch in the second half of the year. It streamlines workflows, reduces costs, supports quick self-installation, and allows restaurants to easily scale features as they grow. We will look to sell our latest solution into our existing base and to new prospects to address the recent performance of this business and enhance the growth profile of our restaurant segment. I will now turn the call over to Brian. Brian J. Webb-Walsh: Our results for the quarter and for the year were in line with our expectations and reflect the progress we have made to streamline our organization and reposition the company as a platform-led business supported by our leading services offerings and integrated payments capabilities. For the quarter, total revenue increased 6% to $720 million due to higher hardware sales in the period, partially offset by lower fees earned from the transitional service agreements with NCR Atleos and Conduent. Reported recurring revenue increased 1% to $422 million, and 3% when excluding a certain divestiture. Software ARR and total ARR both increased 3%. Platform sites increased 8% to 80,000, and payment sites increased 4% to 8,600. Adjusted EBITDA increased 17% to $130 million as margin expanded 170 basis points to 18.1%, driven primarily by our cost containment actions. Non-GAAP EPS increased 48% to $0.31, while GAAP EPS was $0.49 in the fourth quarter. The GAAP EPS included a $65 million tax benefit related to a legal entity restructuring we completed in Q4. The cash from this will likely be received in 2027. Turning to our segment results. Retail segment revenue increased 9% to $508 million, primarily due to higher hardware sales. Recurring revenue increased 3% to $279 million, driven by an improvement in software revenue. Segment adjusted EBITDA increased 12% to $114 million, as margin increased 70 basis points year over year to 22.8%, driven by revenue growth coupled with our cost initiatives. Turning to restaurants. Total segment revenue of $212 million was flat, which reflects hardware growth offset by a decline in one-time software and services revenue. Recurring revenue increased 6% within our enterprise and mid-market businesses, and weaker performance in the SMB business, as Benny outlined. Segment adjusted EBITDA decreased 3% to $66 million, as margin decreased 110 basis points to 31.1% due to lower one-time software and services revenue compared to the prior-year period. Lastly, net corporate and other expenses decreased $9 million, or 15%, to $50 million. Turning to our cash flow. Adjusted free cash flow, excluding restructuring, for the full year was $136 million, about $40 million below expectations due to timing, including a $13 million delayed tax refund and higher working capital use primarily from increased hardware sales and inventory. Restructuring cash outflows of $109 million were related to severance, stranded costs from the spin-off of the ATM business and the sale of the digital banking business, internal infrastructure investments, and, to a lesser extent, ODM transition costs. We invested $46 million in capital expenditures during the quarter and $165 million for the year, inclusive of accelerated product investments. These investments directly enable the launch of our new platform solutions unveiled at the NAC show last October and the NRF show this January. In December, we also sold a non-core warehouse and training facility, which generated an additional $60 million in cash for the quarter as we continue to streamline our footprint. We ended the quarter with net leverage of 2.1x based on our net debt as of December 31 and the full-year adjusted EBITDA. Finally, we repurchased approximately 69,000 shares, or 25%, of the Series A convertible preferred stock for $74 million, in addition to $4 million of common shares. We expect to complete the ODM transition by March 31. Thereafter, hardware will be sourced through EnerCom, and we will earn a commission rather than carry it in inventory. Turning to our 2026 outlook, we expect reported revenue of $2.210 billion to $2.325 billion, down 13% to 18% due to the ODM implementation, effective April 1. On a pro forma basis, adjusting for the change in hardware revenue recognition, revenue is expected to be down 2% to up 3%. Adjusted EBITDA is expected to be $440 million to $445 million, or 4% to 7% growth, and non-GAAP adjusted EPS is expected to be between $0.93 and $0.96, or 3% to 6% growth. Seasonality remains consistent with 2025, with Q1 expected to be the lowest quarter. For both retail and restaurants, we expect recurring revenue to improve throughout the year. We expect margins for both segments to step up in Q2 upon implementing the hardware ODM model. Restaurant margin will improve modestly through the year, and retail margin should show additional expansion. Adjusted free cash flow is expected to be between $190 million to $220 million, reflecting the partial-year working capital benefit from the ODM transition, offset by approximately $120 million of anticipated cash outlays related to the following: severance actions taken in 2025 and 2026, stranded costs associated with the completion of the spin-off, internal infrastructure investments, costs related to the ODM transition, and an accrued litigation matter. We anticipate the elevated restructuring will step down in 2027. I will now turn the call over to James for closing remarks. James Kelly: In 2025, we completed a heavy lift. Using AI and our application library, we modernized more than 50 legacy solutions into a unified cloud-to-edge platform. That five-year effort leaves us with a modern architecture, full-feature capability, and the ability to serve all segments of the market domestically and internationally on one integrated platform. I view this as a three-year term with year one complete. Now we move from transformation to scaling. In 2026, the focus is building backlog across all markets, accelerating deployments, and driving adoption across retailers and restaurants. We are no longer building the platform. We are selling it and delivering it. Enterprise implementation takes time. Enterprise relationships know our markets, understand how to position the comprehensive value of our platform, and are executing with discipline and focus. As a modernized infrastructure, we are well positioned to continue delivering the full functionality they rely on today through a modern platform that provides materially greater capability. What gives me the strongest belief in our ability to deliver is our seasoned sales leadership and the team behind them. A critical component of that conviction is building meaningful sales backlog this year. The backlog we build in 2026 begins to accelerate revenue in the second half of the year into 2027 and beyond. As a reminder, we support approximately 400 of the world’s leading enterprise retail and restaurant customers across the 35 markets in which we operate. Making backlog a key metric, this is complemented by new customer logos we are winning in the market, accelerating recurring revenue and overall revenue growth this year into next. I will now turn the call over to the operator for Q&A. Operator: Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press 1 on your telephone keypad. If you are called upon to ask your question and are listening by a loudspeaker, please pick up your handset and ensure your phone is not on mute. Your first question comes from the line of Matt Summerville with D.A. Davidson. Your line is now open. Matt Summerville: In the back half of the year when it comes to organic revenue, is there any sort of comparison versus the prior year, the prior couple-year period, and how that metric informs the sort of inflection you are pointing to? And then I will follow up. Thank you. Brian J. Webb-Walsh: Thanks, Matt. I’ll start and then hand it to James. As we look to the back half, the organic trajectory ties closely to the timing of deployments from our growing platform backlog. James can add more color on cadence and enterprise timelines. James Kelly: Our customer base, while we cover the full spectrum from SMB to enterprise, the enterprise side is our most significant segment. And that group, as I mentioned in the comments, takes time for them to modernize—nine to eighteen months is what I’ve seen here, sometimes even longer. The products that were on display at NRF in January are the ones now in active demand. We’ve done 25 demos since NRF, and Darren just came back from Düsseldorf with strong interest. We’re at the beginning of this modernization cycle. We already have more than 20 customers that have signed contracts, and those will be deployed this year into next. One of the things Darren, Benny, and I, along with a broader team, worked on was a revamp of the compensation plan. This is the first time in a long time the company has come to market with something truly material rather than re-selling legacy applications. For right now, backlog is the more important KPI for us to focus on. It’s not new to the company, but we’ve now structured incentives to reward signing accounts. We see backlog starting to build because we have 20 customers that have already purchased and signed, and we are focused on accelerating those deployments this year. Nick can add a couple of concrete examples. Nick East: Maybe just give you a couple of concrete examples because it does vary by customer and also by product that they are adopting. Right now, over the next two weeks, we have a customer rolling out our AI Pick List Assist functionality. That’s a simple add-on, the deployment is automated, and it will roll to all stores after a couple of months of pretesting—so three to four months end-to-end across a large estate. But for major POS changes, in retail especially, there are seasonal freeze periods around November when you can’t make changes. So any complex rollout invariably bridges a year and has to navigate those blackout periods. The pace depends on the extent of environmental change and integrations—whether it’s a simple add-on like Pick List Assist or a more complex transformation. James Kelly: There are components to it. The product can deploy in under an hour into a store environment, but there’s still training. Even though we can modernize and emulate existing screens to ease migration, stores must learn new features. As Darren mentioned, 7-Eleven Philippines—4,000 to 5,000 stores—will take time. We’re accumulating backlog across nine to eighteen months, and we’ll move as fast as possible, but this is “heart surgery” for these customers—mission-critical to their revenue. It has to go smoothly with no disruption to store operations. Hopefully that clarifies your question. Matt Summerville: Appreciate the color. And then, a follow-up: I was hoping you could expand a little bit on Benny’s SMB comments and the headwinds you saw in the quarter. Is this something more acute as far as the guide for 2026, or something more chronic? And kind of frame up what that means. James Kelly: Historically, the SMB is the smallest piece of the business here. The SMB market is highly competitive and fast to churn, and over time—especially following acquisitions of portions of the dealer network—we’ve seen contraction. More recently, the announcement around Aloha Next and the legacy nature of our SMB products versus modern competitors have been headwinds. Unlike enterprise, SMB has a large number of ISVs and new entrants. Our prior SMB offering didn’t fully leverage cloud benefits in the way the market expects. I made the decision over the summer to pivot quickly to next-gen, and with Aloha Next and our store-in-a-box approach, we’ll be positioned in the second half to address this more effectively. I expect improvement over time. Benny, anything you’d add? Benny Tadele: James summarized it well. Three points: first, there’s the historical context of how the SMB business was managed and integrated. Second, the SMB buying journey is very price-sensitive, fast to switch, and highly fragmented with many entrants—so competition isn’t just about product, it’s about a crowded market. Third, the product we had in that segment contributed to the pressure. With Aloha Next launching in the second half as a cost-effective, easy-to-implement store-in-a-box, we expect to address these issues and improve performance. Operator: Your next question comes from the line of Kartik Mehta with Northcoast Research. Kartik Mehta: Hey. Good morning. Hey, James. You have made a lot of changes at the company. It seems like things are moving in the right direction. You are on this ODM hardware transition. Once that is complete, what do you think is the organic revenue growth rate of this business? James Kelly: Thank you, Kartik. It’s evolving. As I said in my comments, we expect 2026 to improve in software, services, and payments, excluding hardware. One headwind the market is seeing is AI-driven chip demand and related pricing, which could have an impact. But culturally, we’ve also shifted: historically, there wasn’t consistent price escalation on the retail side. I’m confident we’ll see ARR and total revenue grow and accelerate locations into 2026 and especially 2027 as deployments ramp. As we deploy these applications, we’ll see a software step-up—our platform is market-leading in configuration across retail and restaurant—and we’re embedding payments with new sales rather than retrofitting legacy estates. I expect this to be a good year, and next year to be even better. Kartik Mehta: Perfect. And just a follow-up, Darren, in your prepared remarks, you talked about the third-party integration and maybe change there. What is the benefit? Is there a revenue benefit, cost benefit, cross-sales benefit? What is the benefit to Voyix from the changes you are making? Darren Wilson: The key benefit for customers is a single, integrated solution—one throat to choke. With our gateway as the integration point, we control the end-to-end proposition across hardware, software, deployment, payments, and service. Commercially, we capture pricing upside by switching revenue from third-party payments providers to ourselves, often at similar cost to the customer, and we can optimize incentives across the total solution. Strategically, end-to-end payments data in our platform—tracking from supply chain through SKU, checkout, reconciliation, and settlement—unlocks value for retailers and feeds loyalty and analytics. So the benefits span service quality, revenue capture, simplification, and data-driven value. Kartik Mehta: Perfect. Thanks, Darren. Really appreciate it. Operator: Again, if you would like to ask a question, please press 1 on your telephone keypad. Your next question comes from the line of Daniel Perlin with RBC Capital Markets. Your line is now open. Matt Roswell: Yes. Good morning. It’s Matt Roswell filling in for Dan this morning. Two questions. First, more of a guidance modeling question: can you walk through some of the puts and takes around adjusted EBITDA and margin—the accelerated investments, the ODM transition, etc.? It looks like a 250 to 300 basis point margin improvement over last year, with some from the shift to the ODM model April 1. Brian J. Webb-Walsh: Thanks, Matt. EBITDA is growing 4% to 7%, a bit faster than revenue. We are lapping some tailwinds from last year—specifically TSA fees that helped 2025 and roll off in 2026—which tempers the year-over-year growth. The accelerated investments you mentioned were largely CapEx last year, so they don’t impact EBITDA in 2026. The remainder is margin improvement from cost actions already taken and additional actions as we move through the year, plus the mix and margin benefits from implementing the ODM model beginning in Q2. Matt Roswell: Okay. Excellent. And then bigger picture question. Where do we stand with the Worldpay agreement in terms of payments? James Kelly: The agreement was signed earlier in the year and the plan remains consistent. The focus of that agreement was on JetPay, and as Darren mentioned, that migration is complete. On enterprise, rather than retrofitting legacy applications, we’re prioritizing embedding payments with new platform sales as customers modernize to our architecture. As we meet with customers, we’re positioning holistic new installs that include payments as part of the platform deployment. Operator: That concludes our question and answer session. I will now turn the call back to the CEO for closing remarks. Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect. James Kelly: Thank you, operator, and thank you all for your continued interest in NCR Voyix Corporation.
Operator: Ladies and gentlemen, welcome to the Warner Bros. Discovery, Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participant lines are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. Additionally, please be advised that today's conference call is being recorded. I would now like to hand the conference over to Mr. Peter Lee, Senior Vice President, Investor Relations. You may now begin. Good morning. Peter Lee: Thank you for joining us for our Q4 and full year 2025 earnings call. Joining me today from Warner Bros. Discovery, Inc. management are David Zaslav, President and Chief Executive Officer; Gunnar Wiedenfels, our Chief Financial Officer; and JB Perrette, CEO and President, Global Streaming and Games. This morning, we issued our earnings release, shareholder letter, and trending schedule, and these materials can be found on our website at investors.wbd.com. Today's presentation will include forward-looking statements that we make pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on our current beliefs and expectations. Future financial and operating results, objectives, expectations, and intentions are subject to significant risks and uncertainties outside of our control that could cause actual results to differ materially. For additional information on factors that could affect these expectations, please see the company's filings with the U.S. Securities and Exchange Commission, including but not limited to the company's most recent Annual Report on Form 10-K and its reports on Form 10-Q and Form 8-K. Before we begin Q&A, I would kindly request that you limit your questions to topics related to our Q4 results and related business and financial topics. As noted in our shareholder letter, management will not be taking questions regarding the Netflix transaction. I will now turn the call over to David. Good morning, everyone, and thank you for joining us. David Zaslav: It is clear we fulfilled our ambition. Warner Bros. Motion Picture Group delivered a historic run of success. The most innovative and exciting place to tell stories in the world. We set our goal for Warner Bros. Discovery, Inc. has been to make this great company weapons, looking at 2025, seven consecutive films opening with more than $40,000,000 in box office sales, a first for any studio. And our films spent 16 total weeks atop the global box office. We accomplished this through brilliant original films with nine films debuting number one at the box office in 2025, Sinners, like One Battle After Another, and global tentpole titles like a Minecraft movie and Superman. And we revived IP like The Conjuring: Last Rites and Final Destination: Bloodlines. Fans responded and critics did too. Our film slate won nine Golden Globe Awards, including Best Picture, Musical or Comedy, for One Battle After Another, and Cinematic and Box Office Achievement for Sinners. Next month, we are up for an industry-leading 30 Academy Awards. We are up for an industry-leading 30 Academy Awards. The incredible original films we produced have generated over $160,000,000 at the global box office in two weeks, including an $83,000,000 opening weekend. Including an $83,000,000 opening weekend, the incredible original films we produced have generated over $160,000,000 at the global box office in two weeks. We are up for an industry-leading 30 Academy Awards. To exceptional original storytelling, further reinforcing our commitment with tentpole and franchise powerhouses on the horizon, and talent we have worked with, our 2027 film slate is set to deliver, be recognized, and will deservedly be recognized. And we are seeing momentum continue in 2026. Our ninth consecutive Wuthering Heights theatrical release, for the world's leading creative talent. And we are optimistic as a premier destination, from Godzilla vs. Kong 3, Superman: Man of Tomorrow from James Gunn, and our position. Building on the momentum, a truly monumental year for Warner Bros. Discovery, Inc., to open number one, Minecraft 2, The Conjuring: First Communion, The Batman Part II from Matt Reeves, Gremlins, and The Lord of the Rings: Gollum. We also brought innovative and exciting storytelling to television, both in streaming and through our linear networks. So many of the series that shaped global culture in 2025 were delivered to audiences around the world by HBO and HBO Max. In the fourth quarter, with several breakout sensations. That momentum is ongoing. In the fourth quarter, with several breakout sensations. That momentum is ongoing. Has also debuted strongly, which averaged 13,000,000 viewers an episode and drove meaningful social media engagement. Both The Pit and Industry have become cultural sensations with their new seasons, which debuted in 2026. A Knight of the Seven Kingdoms, building on shows like The Pit, HBO continued to deliver hits, seeing 30–50% respective audience growth versus their prior season. The third installment of the Game of Thrones franchise, The White Lotus, and The Last of Us, in HBO history, averaging 27,000,000 viewers per episode. And Heated Rivalry, It: Welcome to Derry delivered the fourth strongest debut season, Euphoria, averaging over 24,000,000 viewers per episode and growing. With House of the Dragon, The Gilded Age, Dune: Prophecy, and Hacks returning this year, as well as the premiere of Lanterns in 2026 for HBO. Our streaming segment also delivered terrific growth. Scaling HBO Max globally has been one of our core priorities for four years. We have executed our plan with focus and discipline. For four years, we have executed our plan with focus and discipline. For four years, we have executed our plan with focus and discipline. Following the successful launches of HBO Max in Germany and Italy and the upcoming launches in the UK and Ireland, we are on track to reach more than 140,000,000 total streaming subscribers by the end of the first quarter. And we are well on our way to exceed 150,000,000 subscribers by the end of the year. The 130,000,000 subscriber target and improved general entertainment viewership trends in recent months also continue, now exceeding, with 17 of last year's top 25 new cable TV series, we set out in August 2022. Our global linear networks teams clearly remain highly attuned to today's audiences. While secular headwinds persist, our portfolio of networks attracted 30% of all prime time cable viewing in the U.S. And we advanced critical initiatives like the launch of CNN All Access. Encouragingly, we saw a sequential improvement in advertising trends during the fourth quarter, which has continued into Q1. The 2026 Milano Cortina Olympic Winter Games, which closed this past Sunday, was a massive success for Warner Bros. Discovery, Inc. Warner Bros. Discovery, Inc. was a massive success and reignited important legacy Warner Bros. IP like our DC attack plan. Like our DC attack plan, and reignited important legacy Warner Bros. IP, was a massive success for Warner Bros. Discovery, Inc., which James Gunn and Peter Safran have been executing, that have shaped Lord of the Rings, four years ago, Harry Potter, in need of transformation. Warner Bros. was a business in need of transformation. Over the course of the Winter Games, we have invested aggressively. We invested in streaming technology. Over that time, together, telling stories, global culture, and we more than tripled our streaming audience. We saw more than 50% growth in linear hours viewed throughout Europe on HBO Max and Discovery+. Compared to the 2022 Winter Games, and turned HBO Max into a world-class DTC platform that we have now launched globally in over 100 countries and territories. And we invested in our global networks, evolving our brands, accelerating our digital future, and empowering teams to adapt, innovate, and continue entertaining audiences worldwide. The result has been a creative renaissance at Warner Bros. Motion Pictures, Warner Bros. Television, DC, and HBO. We have taken decisive actions when we made clear we were evaluating all paths, which led to eight price increases. We have taken decisive actions, which led to eight price increases, when we made clear we were evaluating all paths, and have thus far achieved a 63% increase in value, and thorough sales process, while mitigating downside risks. Since our Q3 2024 earnings call, and ultimately, a comprehensive, strategic review. Our board continues to lead a rigorous, highly competitive, strategic review to unlock value, then announcing the planned separation of Warner Bros. and Discovery Global, first through our corporate reorganization. Our focus has and always will be maximizing value and certainty, delivering significant value for Warner Bros. Discovery, Inc. shareholders throughout the process. And the board will evaluate any proposal against that standard with the objective of delivering the best deal for our shareholders. When we started Warner Bros. Discovery, Inc. in April 2022, the WBD stock was around $24. Since then, we have been laser focused on transforming the business for the future, investing big in our creative culture and original storytelling at HBO, and original storytelling at HBO, all of which created meaningful shareholder value. Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. One moment please while we assemble the queue. Your first question comes from Rich Greenfield of LightShed Partners. Please go ahead. Please press the star key followed by the number two. Rich Greenfield: Hey, thanks for taking the question. Really, the first one for Gunnar. As you think ahead to the spin-off of Discovery Global this summer, there is a tremendous amount of investor focus on what leverage it can handle and what is really achievable. I guess, do you see any issues with Discovery Global being three to four times levered given the free cash flow dynamics of DG right now, and why do you believe—because there has been, obviously, a lot of focus on Versant—why do you not look at that as a good comp for DG? Thanks. Peter Lee: Okay. Good morning, everyone, and thank you, Rich, for those questions. Gunnar Wiedenfels: Look, I do not want to talk about specific comparison with our competitors here, but I do want to talk about the opportunity for Discovery Global, in general, internationally and locally. We have iconic brands reaching a billion people. We have trusted journalism with CNN and TV and another players everywhere in the world, fan-favorite talent, world-class sports portfolio, and I will say a little bit more about sport and how that differentiates. And a strong digital footprint that is already contributing meaningfully to the monetization of our brands and our network content. I have spent a lot of my time over the past half a year working with the great networks leadership team—you know, fantastic people—and I really do believe we have an opportunity to double down on what already makes us a global leader in the field. We have unmatched scale, and we are committed to continuing to support that portfolio with opportunities as they arise, but we feel very, very well positioned. I do want to start with the international opportunity a little bit because that is typically harder to understand from a domestic perspective here. But number one, we have fundamentally different trends internationally. For example, we are expecting to be flat to slightly up in international ad sales this year. Obviously, a fundamentally different setup than the domestic business and largely impacted by the fact that we have meaningful free-to-air presence in many of the key markets. We also have scale internationally that allows us to partner, potentially think about M&A, partnerships, representation with other players in the market, and a team that has been in these individual territories for decades. So that is number one, and I think hard or sometimes overlooked from a domestic perspective. Number two is sports, and I will talk about the U.S. side here for a second. Not all sports rights are created equal. And if you look at our sports portfolio and if you just take one metric over the past 12 months, we have had 440 events where we reached 2,000,000 people or more. Do want to talk about Discovery+ for a second. We have not talked about it a lot because HBO Max has been the core priority. But if you remember back when we merged into Warner Bros. Discovery, Inc., we were trying to shut down Discovery+. And the fact of the matter is we still have millions of viewers who are very regularly engaged, who love the content, and there is a tremendous opportunity. We have already opened up the buy flow again in certain international territories, and as you saw in our proxy, it is a profitable business and I think has a lot more ahead for us. CNN, I mentioned the journalism. CNN is the most trusted global news brand. The news-gathering organization is unrivaled, from my perspective. Whenever something happens anywhere in the world, we do not have to have people at a desk. We do not have to send people. We have people on the ground who are within hours or minutes sometimes able to cover whatever is going on. And that is reflected in the broader monetization interaction model we have launched into, a much more ambitious interaction with our news offering to give people however and whenever they want. And, again, you saw in our proxy that we are planning to begin growing that business again after a phase of investments, and the strong viewership we have seen coming into the first quarter of this year. And then, I will speak as the CFO here again for a second, the capital structure. It is sometimes overlooked, and that goes to the first part of your question. Again, if you do the math based on what was disclosed in our proxy, you would see that Discovery Global would come out of the gate with roughly, call it, the 3.3x net leverage number. That is absolutely sustainable and supportable. I actually think that rating agencies are probably going to—and, again, it is early days; we do not have final ratings yet—but I would expect that we are going to see single-B, maybe low double-B ratings for Discovery Global. So absolutely sustainable, and there is a huge opportunity because, as we have shown in the past, we are very well able and willing to leverage the opportunities in our long-dated low-interest capital structure. We are targeting to not have to move any debt around. David Zaslav: Does not sound like you are losing a lot of sleep over leverage. Gunnar Wiedenfels: Absolutely not. I mean, look, you are right. There has been a lot of investor focus. There has been a lot of debate. We put in that estimate range of $0 to $2,000,000,000 in the proxy to give ourselves some wiggle room, and that is the end of it. Also about this famous debt allocation mechanism, just to be absolutely clear, we are targeting to optimize shareholder value in everything we are doing. And, you know, this board and the management team, we are ready to get going. Peter Lee: Thanks. Thanks, Rich. Next question. Operator: Your next question comes from Robert Fishman of MoffettNathanson. Please go ahead. Robert Fishman: Good morning, everyone. Looking at all your premium Warner Bros. and HBO original content and the franchise IP that you started to talk about, what do you think is now finally being appreciated that was overlooked before the sales process heated up? And how difficult is building new franchises from scratch? And then just separately, as we think about your internal forecast for streaming profits to roughly triple by 2030, can you help us break down the drivers to reach that goal? What do you think is misunderstood areas of growth? Is it advertising, pricing, subscriber increases, or even more efficient spending? Peter Lee: Thanks, Robert. David Zaslav: Thank you. I think that there was a lot of focus on delevering this company and paying back debt. We certainly had a team, me included, that was focused on delevering this company and paying back debt. The question we asked in each case is, how is this content and how are these stories helping us? And are they doing well? And so we canceled a lot of stuff that was down 50% or 60% that we did not think was going to be successful. We hired a great creative leadership team, and we invested enormously in this mission of investing in original content and bringing back the great franchises. You know, what stories will we tell at this great company? At Warner Bros., at HBO, at Warner Bros. Television. So we really tripled down on investing in getting the best writers and directors back at Warner Bros. We did not lose any creative talent in the last four years, and we added substantially to that. And not just investing in existing franchises. I do not think anybody is investing in original the way we have. It did take time. You know, we are on a long cycle company, and you will continue to see it. When you look at 2027, Batman 2 is very important to us. And Minecraft 2 is important to us. Penguin and Superman. Our commitment to original content, you saw it coming slowly. It came out with Minecraft and talking about building new franchises. Mike and Pam were able to do that with Minecraft, and Minecraft 2 is coming back. It had made almost a billion dollars, and it is coming back in 2027. So I think when you look at Warner Bros. today and HBO, it is a company that is storytelling first, focused primarily on the creative culture, and with a superb creative team that has been given great latitude to take risks to tell original stories. Because we are a business of challenge and failure, but with the Warner Bros. library, together with the creative talent we have, it is stunning. And it is all coming together for Warner and for HBO as well. HBO has never been stronger, and you see it across our entire creative slate. Casey, and the team at HBO have shepherded an extraordinary creative slate, and JB and his team fought to take that all around the world. And now that we will be launching in the UK, Germany, Ireland, and Italy, it is a huge accomplishment to take this business global and to see it soar. We are not done yet. JB Perrette: Robert, on your question about the levers for growth and what makes us highly confident about the future growth of HBO Max in the streaming business, I would say there are five different levers that we look at. One is the product is the content, and it starts with we have never been clearer about what we need, the kind of content we need, the customer segments we have to go after and strengthen. And we have been at work at that for the last four years, continuing to improve it. And some of the hypotheses that we had, like the need for a longer-running series, ended up with The Pit and with the strength of the team that Casey and his organization have. We have a track record of delivering an incredible batting average with the swings that we take. And so we are seeing—and we do expect—further volume and penetration growth as the content is strengthening. The second is launches in big, sizable new markets. Including the European markets that we are in the process of completing this quarter. And then we are in the second inning of our password sharing enforcement. It is just beginning to get scale. It has not expanded globally at all. That will start in 2026. And so there is more growth to be had in those markets. Penetration growth in our existing markets driven by, partly, the content slate, social outreach that is strengthening, a sharper marketing focus, and product enhancements. We talk about this all the time—that we went from not good to good—but we still have a ways to go to get to great. Every day, we made hundreds of improvements last year that moved the dial inches every time. To improve engagement and retention, we have a number of marketing products and enhancements going forward this year and next that will continue to drive churn and retention lower. And then the last is just monetization, which is obviously a combination of both price and ad sales, where we are very early in the ad sales growth trajectory. We are still launching in new markets with our ad tiers, and we think there is further upside. Based on the fact that our fill rates are still relatively low internationally, we feel great about the next couple years and the years to come. We have great visibility to a strengthening content slate, which is at the core of everything we do, and the launches in big markets. It all flows together to drive that growth. David Zaslav: Backing Channing and her great team on rebuilding Warner Bros. Television is such a key initiative for us, and doubling down on the quality content. And also having as the largest and premier producer of TV in the world. But one of our big bets was the motion picture business. We believe in the motion picture business. We love the motion picture business. And four years ago, most of the movies were being made to go direct to streaming. We did get rid of a lot of those movies. But then we took those economics, plus some, and we as a company believe so deeply in putting movies on the screen for shared experience, and with an ambitious idea that people will come back to the theaters. Mike and Pam believe that. James Gunn and Peter believe that. Bremer believe that. And it is what we all grew up with and were awed by. It is at the core of the motion picture business of our company. And it is what when we look at this year and we look at next year and the year after, it is the top of the pyramid. We are just excited about the fact that people are going back to the theaters, and they are going back to see our content. JB Perrette: Thank you, Robert. Thank you, guys. Next question, please. Peter Lee: Your next question comes from Peter Supino of Wolfe Research. Please go ahead. Peter Supino: Hi. Good morning, everybody. Wanted to ask you to expand on the expansion of DC. You mentioned earlier in today's call that the programming is the product, and so I am wondering if the amount of programming that you are offering international audiences is today driving enough engagement to get you a level of ARPU that enables you to make money, or does that flywheel that you are working on require more programming dollars, and does it require any local programming? Thank you. Peter Lee: Yeah. JB Perrette: Yeah, Peter, I guess a couple observations. When we kicked off this journey four years ago, we said that we thought we could actually return to be profitable within a three- to five-year time horizon. That turned out to outperform that metric significantly and turned profitable in most markets within one to two years of launch. And so we are well ahead of where we thought, and the international businesses that have been around for a couple years, like Latin America, for example, are meaningfully profitable. And so we continue to see opportunities to drive that profitability further. The big benefit that we have compared to some is that we would focus on launching in markets where a lot of the IPs that we are working with have global audiences already, whether it be obviously the HBO brands, the Game of Thrones universe as an example, and even on the theatrical side, other series and other things that we have in development that piggyback off of already established global franchises. We do not need to have a meaningful spike up. Our content appeals to those global audiences in a unique way that is different than most streamers in many parts of the world. So our need to do a lot of local international content is a little bit different. We are already investing in local content. We do not see that there is a particular need to have a meaningful spike up. We will continue to invest in those markets as is currently in our plan and in the financials you see represented in the proxy. But that can certainly continue. Certainly, local international content continues to be important, but we do not see a major step change needed to continue to drive our growth. We are doing, and we have been doing, select international content in markets that either have strong scaled opportunities or where the content tends to travel. We were early a couple years ago to acquire the biggest leading local streamer in Turkey, which is a content type that travels well—Turkish novellas across many parts of the world. And we announced this partnership with CJ last year on Korean content, which also obviously has a great track record of traveling well. And so we target investment in markets where both there are strong scaled opportunities as well as opportunities where the content seems to travel better than in most places. Peter Lee: Thanks, Peter. Your next question comes from Bryan Kraft of Deutsche Bank. Please go ahead. Bryan Kraft: I had two, if I could. Just first on the studio, I was wondering if you could provide some more color on the video games pipeline and how your broader strategy is evolving there, including what is coming in 2026? And just any kind of directional color on what your guidance assumes for 2026 EBITDA with a contribution from video games relative to 2025. And then I just want to ask on the network side, could you give a little more color on the advertising improvement? I know there was an NBA headwind, but how much improvement did you see in domestic advertising, excluding sports, versus the international side, which also sounds like it is performing well and had some improvement. Thanks. JB Perrette: Yeah. Thanks, Bryan. On the first one, on the games side—so, obviously, for the games business, 2025 was a year of reset relative to 2025. The largest part of it was we had too broad a set of studios. We allowed ourselves to get distracted going after too many IPs, and we really went back to kind of the basics. And the core of last year's reset was around getting back to proven studios with proven games and proven players. And so that is where we are now. Obviously, 2026 is a year—given that 2024 we had an unfortunately unsuccessful launch, 2025 was this reset year—so we did not really replenish the pipeline. 2026 will see a sort of year that looks similar to 2025. In 2026, we have two big IPs launching. One in May, from one of our most prolific studios in the UK, TT Games. We are thrilled about what we announced that game last August. We just released another trailer yesterday, and the feedback and the trending and tracking is looking terrific. The quality of the game is fantastic. That is on the console/PC side. And the second game for 2026 is out of our Boston studio with our successful mobile franchise, Game of Thrones: Conquest, which will be coming out with a second game called Dragonfire that will be launching this summer. And, again, that is a different profile. As you know, mobile games tend to have a more upfront cost based on the UA and the marketing cost. But we feel confident, just like its predecessor—Game of Thrones: Conquest, which eight years on is still delivering significant financial returns—that that one will also see a similar trajectory and will help us build an even more robust library, with some of our biggest franchises launching in that time frame and returning to those franchises. We have not announced those yet. Gunnar Wiedenfels: Thank you, JB. And then on the ad sales improvement, the drivers here are, number one, the new upfront has kicked in. We have had 17 out of the top 25 premieres for freshman series. And, importantly, once you correct for NBA, we have done really well with the MLB playoffs. NHL has done well. CNN has seen headwinds in terms of ad sales. And look, number two, we are seeing good scatter premiums. But number three, really, some real health improvement. From our perspective, the market itself has been relatively consistent with prior quarters, and the sequential improvement that you mentioned is the underlying audience delivery, and that is across the board. We do not talk about this enough, but this is across all of our key networks. We had top shows for TLC with Bailing Out Loud, Follow-Up Diddy on ID, Flip Off on HGTV, Tournament of Champions on Food Network, and Discovery with Naked and Afraid: The Pocket Wolf. So all of our top networks are continuing to create high-quality output, and that, I think, puts us in a very good position for 2026 as well. We are seeing those trends continue, with an even more pronounced uptick on CNN audience. Turning to the international side, international, again, as an entire business line, has, relative to the U.S., different trends in the different regions. EMEA, our largest region, continues to do very well, and underlying delivery has been a real helper. As I mentioned earlier, I think we can see some real stability, potentially even a little bit of growth in ad sales going into 2026. We will take the next question, operator. Operator: Your next question comes from John Hodulik of UBS. Please go ahead. John Hodulik: Great. Thank you, guys. Maybe a couple of follow-ups on the Discovery Global side. Gunnar, you guys gave some guidance for ad and OpEx savings for 2026 on that side. Anything you can tell us about the cost savings? Is it just the NBA, or are there additional opportunities for cost savings there? And then is there a way to bottom-line it in terms of how you see EBITDA trends in that business as we look out to 2026 and maybe beyond? And then I would love to get your view on how you see the sports business. You talk about the TMT sports app. Just what is your appetite for building a sports business and potentially securing additional rights? How do you see that business going forward? Peter Lee: Thanks, John. Thank you. We will take the next question, operator. Gunnar Wiedenfels: Yep. Thanks, John. So, look, in terms of cost guidance, you have our projections and long-range plan in the proxy, and I think that answers your question to some extent. Again, there is a big benefit from NBA cost savings, obviously, and it is a little bit of a weird situation because we have maintained that profitability through such a transformation of our sports portfolio, and it has been a great outcome for us. We are going to continue to be very focused on efficiencies in general. We are looking wherever we can at utilizing AI to further improve our efficiency and our effectiveness. We have some great projects ongoing that are creating much better visibility into our content, etc. Those are all going to be things that will help us drive efficiency and generate more output with the same cost structure. On the sports business specifically, we continue to have appetite for sports rights. It is one of the important strategic pillars, as you heard earlier. And what has not changed is we are going to be disciplined. We are not going to be doing deals that do not make financial sense for us, but we are open for business. You will always see us involved in every process that is ongoing, and we will know what is, and we will continue to be great partners. We are very happy with the partnerships that we have, and there will certainly be continued appetite as we go forward, even after separation into Discovery Global. Operator: That concludes today's conference call. Thank you for your participation. You may now disconnect. Peter Lee: And there will certainly be continued appetite as we go forward, even after separation into Discovery Global. Thank you, John, and thank you, everyone. John Hodulik: K. Thanks, Peter. Operator: Thank you, ladies and gentlemen. There are no further questions at this time.
Operator: And then one follow-up if needed. Q&A after management's prepared remarks. Please note that in the interest of taking as many of your questions as possible, all lines will remain in listen-only mode during the presentation portion of the call, and the company respectfully asks that you limit yourself to one question. Hello, and welcome to Warby Parker Inc. fourth quarter 2025 earnings conference call. My name is Harry, and I will be coordinating your call today. I will now hand the call over to Jaclyn Berkley, Head of Investor Relations, to begin. Please go ahead. Jaclyn Berkley: Thank you, and good morning, everyone. Here with me today are Neil Blumenthal and David Gilboa, our Co-Founders and Co-CEOs, alongside Adrian Mitchell, Chief Financial Officer, and Josh Trupo, Vice President of Financial Planning and Analysis. Before we begin, we have a couple of reminders. Our earnings release and slide presentation are available on our website at investors.warbyparker.com. During this call and in our presentation, we will be making forward-looking comments. Actual results may differ materially from those expressed or implied. These forward-looking statements are based on information as of February 26, 2026. For more information about some of these risks and uncertainties, please review the company's SEC filings, including the section titled “Risk Factors” in the company's latest annual report on Form 10-K, available on our IR website. Additionally, we will be discussing certain non-GAAP financial measures. These non-GAAP financial measures are in addition to, and not a substitute for, the most directly comparable U.S. GAAP measures. A reconciliation of our non-GAAP measures to the most comparable GAAP measures can be found in this morning's press release and our slide deck. Except as required by law, we assume no obligation to publicly update or revise our forward-looking statements. And with that, I will pass it over to David to kick us off. David Gilboa: Thanks, Jaclyn, and good morning, everyone. Thank you for joining us today to discuss our fourth quarter and fiscal 2025 results and our outlook for 2026. 2025 was an eventful year and one that we are proud of. We took decisive actions that enabled us to continue delighting customers, invest in innovation, and position Warby Parker Inc. for long-term success, all while delivering sustainable growth. We drove double-digit revenue growth each quarter. We will speak to these and other core business drivers shortly. We reported our first full year of positive net income, even as we navigated tariffs and a dynamic consumer backdrop. Looking ahead, 2026 will be an exciting year for Warby Parker Inc. We continue to see tremendous runway in scaling our existing growth initiatives, from opening more stores to driving Progressive’s growth, increasing insurance penetration, bringing together great design and an unparalleled customer experience underpinned by technology, and meaningfully expanded adjusted EBITDA. This year, we also plan to introduce our first AI glasses in partnership with Google and Samsung, which we expect will unlock significant new TAM, enable us to take advantage of the biggest technology shift in our lifetime, and serve as a demand catalyst with clear proof points of consumer eagerness to embrace these new devices. Over the last 16 years, we have reimagined how people shop for eyewear. Over time, we have seen how this powerful combination of innovation and customer obsession has drawn consumers to our brand and helped us capture market share. Today, we believe the optical industry is in a period of transition. While the core eyewear category remains large and more stable than most consumer sectors, we have seen more volatility in demand and transient softness than usual in the post-pandemic era, including during some periods over the last year. Our confidence remains in the long-term durability and attractiveness of the category given the increasing health need that it serves, and given our inherent advantages as a tech-enabled brand and omnichannel retailer, we believe we are better positioned than the rest of our category to successfully navigate and capitalize on the transition from traditional eyewear to intelligent eyewear. This gives us a great deal of confidence in our 2026 plan given recent trends. At the same time, enthusiasm for smart glasses is accelerating, but we are planning conservatively for the near term and as we enter Warby Parker Inc.'s third act. Acts one and two were about pioneering the direct-to-consumer brand, then evolving into a holistic eye care provider. Act three is all about AI. We plan to introduce new products like AI glasses while also leveraging AI across the organization to drive productivity and enhance the customer experience. With that, let us turn to results. In fiscal 2025, we delivered 13% revenue growth driven by 47 new store openings, the most ever in a single year, high single-digit customer growth, and mid single-digit average revenue per customer growth. We believe this performance reflects continued market share gains. We drove healthy unit volumes, average selling price, and customer growth while prescription glasses units declined 6% industry-wide according to The Vision Council. We also achieved our first full year of net income profitability and generated $44 million in free cash flow. Full-year adjusted EBITDA was $95 million, up 30% year over year, driven by leverage in non-marketing SG&A expense. We mitigated the impact of tariffs while preserving our unmatched value proposition, including our $95 prescription glasses, and maintaining prices on the vast majority of our offerings, while much of the category relied on significant price increases. We believe our innovative designs, value proposition, and seamless omnichannel experience position us well to continue gaining share in any market condition. We delivered these results while continuing to invest in our long-term strategic initiatives and strengthen the foundation of our operations. We implemented changes that mitigated the impact of tariffs, demonstrating the flexibility of our supply chain and the resilience of our team. In addition, we streamlined our operations by sunsetting our home try-on program and completed several infrastructure upgrades in our labs and across our tech stack to support future growth and prepare us for our AI glasses launch. Turning to the fourth quarter, revenue grew 11%, and adjusted EBITDA margin was 7.2%, roughly in line with last year. As we shared on our last call, we experienced softer retail traffic, contact lens growth slowed, and we saw a slowdown in our one-year and two-year growth trends in December, which pressured our e-commerce channel. Looking ahead, we remain as excited as ever about the opportunity in our core business and the role we expect AI glasses to play in expanding our addressable market and growth potential beyond traditional eyewear. However, our guidance assumed that the trends we saw in September and October would continue through the end of the year. As a result of this, fourth quarter adjusted EBITDA came in below our expectations. While we are not satisfied with that outcome, we responded quickly and incorporated learnings directly into our 2026 plan. We saw softness concentrated in our 25- to 34-year-old consumer cohort, while our older Progressive customer remained more resilient. Today, we represent approximately 1.3% share of the $70 billion U.S. eyewear market, and that does not include any future spend in AI glasses. While the market is large, many customers remain underserved by a category that has not prioritized innovation, customer experience, and transparency. While the category has relied largely on price increases, our team has proven that our brand, product assortment, omnichannel offering, and value proposition resonate well with consumers across market conditions. We are prioritizing expanding access across our omnichannel platform and continuing to elevate the customer experience as we scale. While The Vision Council projects the total eyewear market to be down this year, we are committed to delivering low double-digit revenue growth and long-term profitable growth. As we look to 2026, our strategy is scaling the drivers of our core business to accelerate growth, including store expansion, increasing insurance penetration, and preparing the organization for the launch of AI glasses, while staying focused on the initiatives we can control, given the macroeconomic trends that remain outside of our control. We believe these investments position Warby Parker Inc. for sustained market share gains and healthy value creation. This guidance does not include any potential revenue from AI glasses, but it does include the operating expenses and capital investments required for launch. We are investing thoughtfully and from a position of strength. We look forward to sharing more about our launch plans in the months ahead. Before I turn it over to Neil, let me take a moment to talk about Q1. As many of you know, the country has faced historic winter storms and cold weather to start the year, and we are not immune to those impacts. Our high concentration of stores on the East Coast, which are among our highest-volume stores, has presented a challenge early in the year, resulting in store closures and lower traffic. And with that, I will turn it over to Neil to walk through our 2026 plan. Adrian will provide further details later in the call when reviewing guidance. Neil Blumenthal: Thank you, Dave. Let me begin by highlighting our three strategic priorities for 2026. We are focused on this in three primary ways. One, expanding our retail footprint; two, increasing revenue within our existing fleet through eye exams and product mix; and three, continuing to enhance our online experience. We ended 2025 with 323 stores, just a fraction of the almost 45,000 optical shops in the U.S. and well below our long-term potential of at least 900 stores. When we survey consumers who have not yet shopped with us, one of the top reasons is that there is not a store nearby. That is why we will continue to scale points of distribution while driving convenience and awareness in those markets where we already operate. In 2026, we plan to open 50 new stores, and a large portion of those new stores will be located in existing markets. We are also seeing clear benefits from our infill strategy in that markets with the highest number of stores frequently have the highest customer growth, driven by greater brand awareness and customer engagement across channels. Our approach to retail expansion is deliberate, with a rigorous site selection process designed to shorten ramp time, including strong four-wall margins and healthy payback periods, reinforcing our confidence in our ability to expand retail locations thoughtfully as we scale. Second, we see significant opportunities to drive additional growth within our existing fleet, particularly through eye care and higher-value products. Industry-wide, three-quarters of glasses are purchased in connection with an eye exam. In 2025, supported by rolling out features like digital retinal imaging, eye exams grew 37% to approximately 6% of our business. We now have exam capabilities in almost 90% of our stores and find that stores offering eye exams deliver higher sales conversion, and gross profit, while delivering a more seamless experience for our customers and patients. In 2025, eye exams accounted for $11 billion in industry spend. Over time, we believe eye exams within our business can scale to levels comparable to the broader industry and support sustained revenue and margin growth over time. We will continue scaling eye exams as a core lever by expanding coverage in high-demand markets and optimizing scheduling capacity to serve more customers and patients. Dave and I would like to extend a special thank you to the approximately 550 full-time and part-time optometrists that are part of the Warby Parker Inc. family for their exceptional commitment to patient care. In addition to eye care, we are broadening our product assortment and increasing customer choice to drive engagement and experience. In 2025, we launched 15 new collections, and we plan to maintain a steady cadence going forward across both optical and sun. In 2026, we will also enter new categories with the launch of our first sport collection, featuring performance lenses—one of the most requested categories from our customers. We believe expanding into this category will attract new customers, while fueling incremental purchases from our existing base. At the same time, we plan to drive higher average revenue per customer by expanding our offering of complex lenses, tints, coatings, and other enhancements. Progressives are a key component of that opportunity. In 2025, progressives represented approximately 22% of our prescription units, compared to an industry average of roughly 40% across progressives, bifocals, and multifocals. Third, we will continue to invest in e-commerce and an increasingly personalized online experience and in driving retention over time. In 2025, e-commerce grew low single digits, as the channel continued to face a high single-digit headwind from the decision to sunset our home try-on program. Excluding home try-on, direct online glasses and contacts purchases grew in the mid-teens, giving us confidence that this channel can return to higher growth levels year over year with our investments in personalization, as we lap the phasing out of home try-on later this year and next year. We are also driving e-commerce growth through tools like Advisor, our proprietary AI-powered recommendations engine launched in 2025, which, paired with our award-winning virtual try-on tool, is driving higher conversion by simplifying the shopping journey and enhancing the customer experience. We will continue to leverage these assets to drive growth in 2026. Our second priority this year is preparing for the launch of AI glasses. As we look ahead, we believe the opportunity in front of Warby Parker Inc. is larger than ever as we enter Act Three. While our core mission remains unchanged, this next act is about expanding our reach and integrating groundbreaking technology into a product people already love and wear every day. We are expanding manufacturing capacity and building the operational infrastructure necessary to support and scale a new category. With the integration of powerful AI models like Gemini, we are building glasses that deliver real-time, personalized assistance, allowing you to keep your phone in your pocket and stay present in the moment—a powerful personal assistant that is there when you need it and invisible when you do not—embedded in beautifully designed eyewear made for everyday, all-day use that you would expect from Warby Parker Inc. In 2026, we will continue building capabilities across several areas to support this next phase of innovation. First, we are prioritizing production and supply chain readiness to address the added complexity, strengthening systems and quality control processes as we enter this new category. Second, we are readying our stores and store teams for the launch of AI glasses. This includes adding dedicated fixtures, investing in training, and designing a best-in-class shopping experience across channels. We are equipping our teams to support product education, demonstrations, servicing, and ongoing customer support from day one. Third, on the technology side, we are advancing a multiyear product roadmap supported by continued research and development and investments across engineering, where AI is now generating more than 50% of our code base. These initiatives involve targeted operating and capital investments aligned with our expected launch timeline later this year, with additional products and features already in the pipeline. We are working closely with our strategic partner, Google, who is offsetting a large portion of prelaunch investments. At the same time, we continue to use AI across the organization to drive productivity and efficiency, from creative and design to engineering. And finally, our third priority in 2026 is to make additional strides to increase insurance penetration while continuing to invest in brand awareness and customer acquisition. A significant opportunity in the business today is expanding access for both in-network and out-of-network insurance customers. From the beginning, our pricing philosophy has been to offer fair, transparent pricing whether a customer pays out of pocket or uses insurance benefits. Customers using in-network benefits at traditional optical retailers still pay approximately $200 out of pocket, whereas at Warby Parker Inc., they can purchase a complete pair of prescription glasses starting at $95. Our goal has always been to deliver compelling value regardless of how a customer chooses to pay. At the same time, we recognize that many customers have vision insurance benefits, and we have worked diligently to make it easier for them to apply those benefits when shopping with us. Insured customers continue to be among our most valuable, spending more on their initial purchase, selecting progressive lenses at higher rates, and returning more frequently over time. In 2025, our in-network insurance penetration was approximately 8%, up from 7% the prior year, representing approximately 40% year-over-year dollar growth. In 2026, we are expanding covered lives by strengthening relationships with existing carriers and scaling pilots with additional carriers, while also scaling utilization by increasing awareness and simplifying how customers access their benefits with both in-network and out-of-network plans. That includes making it easy to verify coverage across three dimensions, clearly communicating eligibility, and ensuring Warby Parker Inc. is visible when customers are actively searching for covered providers. Third, we are improving the experience for out-of-network customers. Last year, we piloted a new capability designed to simplify reimbursement, reducing friction and making it easier for customers to use their benefits with us. We are encouraged by the early results and plan to scale this to all stores this quarter. We are working diligently to increase insurance penetration. While competitive dynamics make this challenging, we remain relentless in our pursuit, as we believe this is a key driver of revenue growth and market share gains for our business over time. In parallel, we continue to invest in marketing to drive awareness and acquire customers in ways that complement our retail and insurance strategies. In 2025, we increased investments in top-of-funnel marketing, including launching a three-year partnership with Arch Manning, a Warby Parker Inc. customer since middle school and a glasses wearer since age three. This partnership has allowed us to participate in a national linear media campaign and connect with a younger demographic, particularly in key markets across the Southeast. In 2026, we plan to pursue differentiated partnerships, collaborations, and brand initiatives designed to reach a broader audience. We leverage more advanced measurement tools and analytics to inform our media mix decisions in the midst of rising media costs. We remain committed to marketing spend in the low teens as a percent of revenue while continuing to improve productivity across a broader set of both established and emerging channels. We are actively optimizing and reallocating spend towards higher-return marketing channels, including reinvesting savings from the sunset of the home try-on program into brand awareness initiatives and customer acquisition. Taken together, these three priorities are designed to strengthen the core eyewear business, expand into new categories, and establish the capabilities for us to drive higher levels of revenue growth over time, positioning the company to accelerate as these investments scale. As we grow the business, we remain guided by the belief that scale and impact go hand in hand. In 2025, through our Buy a Pair, Give a Pair program, we surpassed 20 million pairs of glasses distributed globally and expanded Pupils Project to reach more students across the U.S., committing to distribute an additional 40,000 pairs of glasses over the next two years in Baltimore, Boston, Newark, and Washington, D.C. I also want to take a moment to recognize Josh Trupo, our VP of FP&A, for his meaningful contributions during this critical transition period, and for his steady leadership and partnership. We are grateful for the role he has played. Now I am thrilled to welcome Adrian Mitchell to Warby Parker Inc. Adrian brings deep operating and financial leadership and experience across some of the world's most recognized consumer brands. He joins us at an important moment in Warby Parker Inc.'s evolution. With that, I would like to welcome Adrian Mitchell, our new Chief Financial Officer, to share some additional detail on our results for the quarter and our outlook for the balance of this fiscal year. Adrian Mitchell: Thank you, Neil, and thank you, Josh. I have always been impressed by Warby Parker Inc.'s innovative brand leadership, relentless focus on customer experience, and its history of innovation while making vision care more accessible for all. I am excited to join the team at this important moment, to work alongside you, Dave, and the broader team to support long-term sustainable growth. I will review our fourth quarter and full year 2025 results in more detail and then provide guidance for full year 2026. Our gross margin accounts for a range of costs, including frames, lenses, optical labs, customer shipping, optometrist salaries, store rent, and the depreciation of store buildouts. Our gross margin also includes stock-based compensation expense for our optometrists and optical lab employees. For comparability, I will speak to gross margin excluding stock-based compensation. Let us start with the fourth quarter. Fourth quarter revenue was $212 million, up 11.2% to last year. Retail revenue increased 15.2% year over year, driven by contributions from both new and existing stores. E-commerce revenue was $56.8 million, up 1.6% year over year. Turning to gross margin. Fourth quarter adjusted gross margin was 52.5%, 170 basis points below last year. The decrease in adjusted gross margin was primarily driven by tariff-related headwinds in glasses, deleverage in the fixed portion of gross margin—which included increased doctor headcount as we staffed up in advance for our busiest period—and an increase in expedited customer shipping costs. These impacts were partially offset by selective price increases taken earlier this year in glasses and increased penetration of higher-margin progressive lenses and other lens enhancements. We also experienced increased penetration of lower-margin contact lenses. Shifting to SG&A, fourth quarter adjusted SG&A expenses were $110.3 million, or 52% of revenue, 200 basis points lower than last year, reflecting revenue growth outpacing expense growth. Adjusted SG&A excludes non-cash costs like stock-based compensation expenses. Marketing as a percent of revenue was 12.9%, flat to last year. The majority of the leverage was driven by adjusted non-marketing SG&A, which was 200 basis points below last year. Fourth quarter adjusted EBITDA was $15.2 million. As a percent of total revenue, it was 7.2%, or 10 basis points below last year. Now I will turn to the full year 2025. Full year 2025 revenue was $871.9 million, up 13% year over year. Retail revenue increased 17.3% year over year, driven by contributions from both new and existing stores. E-commerce revenue was $241 million, up 3.1% year over year. Full-year adjusted gross margin was 54.4%, down 110 basis points. The decrease in adjusted gross margin was driven by tariff-related headwinds in glasses, increased doctor headcount, continued growth in both contact lenses and eye exam sales, and customer shipping costs, partially offset by selective price increases for lenses and lens enhancements at the April price increase and increased penetration of progressive lenses and other lens enhancements, partially offset by mix shift into lower price point frames and higher contacts mix. We finished 2025 with 2,700,000 active customers, representing growth of 7% year over year on a trailing twelve-month basis. Average revenue per customer increased 5.7% year over year to $324 in 2025. Full-year adjusted SG&A expenses were $433.3 million. As a percent of total revenue, adjusted SG&A was 49.7%, 280 basis points lower than last year. Marketing as a percent of revenue was 12.6%, 20 basis points higher than last year, and as expected, the majority of the leverage was driven by adjusted non-marketing SG&A, which was 300 basis points below last year. Notably, our balance sheet is a meaningful strategic asset. We ended the year in a strong cash position of $286 million, up $32 million from the prior year. 2025 marked our third consecutive year of positive and accelerating free cash flow. As anticipated, we generated approximately $44 million in free cash flow in 2025, up from $35 million in 2024. In addition, we have a $120 million credit facility expandable to $175 million, which remains undrawn other than $4 million outstanding for letters of credit, providing us with additional liquidity and flexibility. Growth in our cash balance is a result of increased profitability and disciplined capital management. Now shifting to capital allocation. It gives us the flexibility to self-fund the strategic initiatives underway in 2026, support the launch of AI glasses, and position the business for accelerated growth. As it relates to capital allocation, we will continue to deploy capital deliberately to support growth, while maintaining financial flexibility. We evaluate capital allocation holistically, balancing investments in the business with returns to shareholders. Earlier this week, our Board of Directors authorized up to $100 million in share repurchases. We intend to use this authorization opportunistically and in a manner consistent with our capital allocation priorities. We are pleased that our cash flow generation allows us to self-fund our priorities, primarily to offset dilution over time this year, while also providing the flexibility to return excess capital to shareholders through this share buyback program. Equally as important, our primary focus remains investing in high-return initiatives. Now let us turn to our outlook for 2026. Spending in the broader optical industry is expected to decline low single digits on both a unit volume and dollar basis. Based on recent trends and core eyewear industry headwinds, we believe it is prudent to adopt a measured approach. While we have conviction in our strategic initiatives and the underlying health of our business to support long-term profitable growth, we are focused on executing across our omnichannel model, continuing to elevate the customer experience, and successfully launching AI glasses—all of which we believe will create a durable platform for long-term profitable growth and healthy value creation. Before getting into the specifics, we want to also share that we are assessing what metrics we disclose to ensure that our stakeholders can better track the drivers of value creation within our business. It is also important to note that our 2026 outlook excludes any revenue contribution from AI glasses, reflecting an appropriate balance of transparency and conservatism. We expect gross margin to be in line with full-year 2025, reflecting mix dynamics across glasses, contacts, and eye exams, as well as ongoing supply chain efficiencies, partially offset by non-product related investment costs and doctor salaries. For the full year 2026, we are guiding to revenue of $959 million to $976 million, representing approximately 10% to 12% year-over-year growth. We are guiding to adjusted EBITDA of $117 million to $119 million, which equates to an adjusted EBITDA margin of 12.2% across our revenue range and 130 basis points of expansion year over year. We expect marketing to remain in the low teens as a percent of revenue. We expect e-commerce to grow in the low single-digits range for the full year, with the impact of sunsetting the home try-on program more concentrated in the first half and moderating in the second half of the year. Turning to the first quarter. Since we sunset the home try-on program, retail is expected to represent approximately 75% of our revenue in the first quarter. Encouragingly, retail delivered high-teens year-over-year growth in early January of this year, reflecting an acceleration from December. Starting in mid-January and extending through this week, in these weather-impacted areas, which include many of our highest-volume locations that generate over 70% of total retail sales for Warby Parker Inc., we experienced significant snow and prolonged cold weather conditions that materially impacted store traffic and sales. When we look at the Q1 performance for stores in these areas, during periods of inclement weather, retail growth has been low double digits, but deteriorated performance to low single-digit declines year over year, and these stores returned to normal operations and pass after snow and cold weather conditions, we have seen high-teens year-over-year retail growth during periods of normal weather. In non-weather impacted markets, retail growth performance returned to high-teens growth year over year. For e-commerce, growth trends have been muted, which is consistent with new store growth in these markets. For e-commerce quarter to date, our direct glasses and contacts purchases have been growing in the low double-digits range, reinforcing the fact that the forward-looking parts of our e-commerce business remain healthy despite the headwind from sunsetting the home try-on program late last year. Taking all this into account, our quarter-to-date top-line growth for the full business as of earlier this week is in the mid single-digit range. As a result, for the first quarter of 2026, we are guiding to revenue of approximately $238 million to $240 million, assuming no further significant weather-related disruptions for the remainder of the quarter. We expect an adjusted EBITDA of $27 million to $28 million, approximately 11.5% EBITDA margin at the midpoint of our range. As expected, first quarter adjusted EBITDA is impacted by lower revenue resulting from the impact of inclement weather, and we expect to drive year-over-year leverage in the remainder of the year as top-line growth normalizes. 2026 is a year we are intentionally investing in building the capabilities necessary to support accelerated revenue growth over time. We are focused on scaling the core business, expanding access across our omnichannel platform, and executing the launch of AI glasses. While there are external factors beyond our control, we are planning our business with discipline, staying focused on what we can control, and continuing to make progress on the initiatives that matter most. Before I wrap up, I will share a few observations from my first few weeks here. First, our powerful brand proposition, positioned at the intersection of exceptional style, superior quality, and outstanding value, creates a meaningful runway for our core business to demonstrate sustained mid-teens to high-teens growth and continued gains in market share. Second, our culture and proven track record of innovation position us incredibly well as a leading player in the smart glasses category, which complements our core business. Finally, our healthy balance sheet and strong free cash flow allow us to self-fund strategic growth initiatives as we scale our business in future years, while also maintaining the flexibility to return capital to shareholders through our share repurchase program. All this is possible because of an impressive team across Warby Parker Inc. right now who are enabling us to embark on our next ambitious phase of growth. I am energized to be a part of this team. With that, I will now pass it back to Dave for closing comments. David Gilboa: Thank you, Adrian. 2026 is an important year for us, and we believe we remain uniquely positioned to continue delivering strong growth and market share gains while we expand the profitability of our business over time. At the same time, we are excited about the launch of AI glasses later this year and have a clear plan to drive growth in 2026 and beyond. I also want to recognize our team. Neil and I are inspired by the talent and dedication of our team members across Warby Parker Inc. right now who are enabling us to embark on our next ambitious phase of growth. We are excited about the road ahead and confident in what this team continues to accomplish. With that, operator, please open the line for Q&A. Operator: Our first question today will be from the line of Brooke Roach with Goldman Sachs. Please go ahead. Your line is open. And when preparing to ask your question, please ensure that your device is unmuted locally. Finally, please note that in the interest of taking as many questions as possible, the company respectfully asks that you limit yourself to one question and one follow-up if needed. Brooke Roach: Good morning, and thank you for taking our question. Can you elaborate on the softness that you are seeing with your younger customer? Are you losing share with that age cohort, or is that simply a function of the broader industry pressure? And what actions are you taking to shore up this part of the business in 2026? David Gilboa: Yeah. Thanks, Brooke. We believe this is reflective of pressure that the category is seeing overall. If you look at some of the industry sources like The Vision Council, they indicate that both prescription glasses units and contacts units were down on a unit basis in the mid single digits year over year, and that those trends deteriorated in the back half of the year in Q4. On a relative basis, we believe we are continuing to outperform the category, but there is no question that consumers are feeling pressure, and younger and lower-income people are being conscious around the dollars that they are spending, impacting some of their purchasing behavior in the category. Now we are taking actions to engage with that demographic. We are adding incremental media dollars and new campaigns on channels where younger consumers are spending time, including TikTok, Reddit, YouTube Shorts, and others. We also recognize that consumers are looking to take advantage of their vision insurance benefits, and we have been investing in efforts to make their dollars go further, both by educating folks around their new in-network benefits—where Warby Parker Inc. may be an option for the first time for them—and then also making it easier for them to have visibility into their out-of-network benefits. We ran a pilot in Q4 that was quite successful, where, regardless of insurance carrier, customers can get a precise indication of the reimbursement that they will receive from their out-of-network benefits, and our teams can help them submit those forms. Given the success of that pilot, we will be rolling that out more broadly and anticipate that it will help drive conversion for all demographics, but in particular those younger and lower-income cohorts. Brooke Roach: Great. And then as a follow-up, Neil, you spoke in the prepared remarks about supply chain readiness for the upcoming launch of AI glasses. Can you speak to the unit capacity that you are preparing for in launch year, and how quickly you might be able to scale the supply chain should demand follow a similar cadence of growth as the broader industry? Neil Blumenthal: Sure. Thanks, Brooke. One of our advantages from day one was building a vertically integrated brand so that we could be responsive to customer demands as well as customer needs and changing interest. Our team, which is based in New York but has presence globally, ensures that we have a robust and resilient supply chain, one that has only gotten stronger given some of the tariff crises of recent years. Coming from an eyewear-first, and in particular a prescription eyewear-first, perspective puts us in a unique position and puts us ahead of eventual competitors. We think about our store fleet of 300-plus stores, staffed with long-tenured, incredibly passionate, but tech-forward team members, and how to properly sell, market, and serve customers of AI glasses to ensure that this product—which we believe is the first one that is really designed for all day, every day wear—meets the capacity and the new capabilities that we need. Brooke Roach: Great. Thanks so much. I will pass it on. Operator: Next question today will be from the line of Dana Telsey with Telsey Group. Please go ahead. Your line is open. Dana Telsey: Hi, good morning, everyone, and welcome. As you think about the cadence of this year—and, obviously, we have the weather impacts, and hopefully the snow will be ending, but who knows what—how are you thinking about growth rates going forward? And I noticed you are opening 50 stores this year. Include the five Targets. How are those Target shop-in-shops doing? What are the learnings? And how are you thinking about the volatility that is currently going on and what pricing looks like for 2026? Thank you. Tariffs given— Neil Blumenthal: Thanks, Dana. I will take the Target question first. We grew our own store fleet in a very deliberate way, starting with a showroom in our office to doing shop-in-shops in hotels and, at one point, buying marquee stores across the U.S., including an old yellow school bus and converting it into a mobile store as part of the Warby Parker Inc. Class Trip. This is part of our strategy to test and learn, just as we have opened five shop-in-shops last year and are anticipating opening a similar number this year. I had a chance to visit our Brick location in Brick, New Jersey. It looks beautiful. It is the first thing that you see as soon as you walk into the Target. Our team there is fantastic. We are seeing slightly older demographics, so we are seeing share growth after the pilot. We continue to believe, given the strength of the proposition, that we will continue to be a market share gainer, not a market share donor. Adrian Mitchell: Dana, good morning. It is great to be with you. With regards to our outlook, we talked a little bit on the call about the headwinds that we saw with weather in the first quarter. The one thing that I would share is that our growth is actually quite healthy. If you compare to what we saw last year in the industry, which was up about 4%, we grew at actually three times the rate of the industry. So that is an important dimension in terms of the health. Even though we expect a softer Q1, just given the weather impact and what we spoke about on the call, we do expect to see acceleration and return to more normalized trends as we look ahead. The big takeaway is that the fundamentals of the business remain healthy. In those periods where weather was not an impact, we talked about the high-teens growth of our retail business. When you think about the normalization of the headwinds with e-commerce, we are seeing very healthy, low double-digit growth in terms of web glasses and contacts. We also want to be consistent in delivering what we say we are going to deliver. Josh, would you like to talk about tariffs? Josh Trupo: Hi, Dana. As it relates to tariffs, you are absolutely right—certainly volatile. The Supreme Court ruling from last week is pretty recent, so we are still analyzing those impacts. When you think about that ruling, you break it down to two pieces: first, there are the refunds on what we already paid for. We have not assumed anything in either our margins or our cash flow plan for the year as it relates to collection of those refunds. We will obviously take the necessary steps to preserve our rights as it relates to those refunds. And in terms of the go-forward piece of tariffs, the Supreme Court did not really say anything specific regarding that, so we are continuing to monitor that. Steve Miller: The ruling removed the emergency tariffs. However, pretty quickly, the administration responded with a new global surcharge of 10%, and they have indicated they are likely going to move that up to 15%. So given all of that, we have not incorporated any sort of benefit into our 2026 guidance tied to that ruling. We do think that any benefit will largely be offset by these statutory changes to tariffs that the administration is currently exploring. With that being said, we are in a position to continue to be nimble and navigate the tariffs as we have in 2025. Operator: Thank you. The next question will be from the line of Mark R. Altschwager with Baird. Please go ahead. Your line is open. Mark R. Altschwager: Good morning. Thank you, and welcome, Adrian. You were clear that you are not incorporating any revenue from the smart glasses, but curious if you are making any assumptions regarding how the launch may impact traffic and conversion for the core business. Following up on the revenue guidance and the acceleration after Q1, more on the margin front, can you help us reconcile the acceleration in store openings with the dip you are seeing in average retail productivity? Specifically, what are the other components that are enabling you to sustain the target four-wall profitability? Thank you. Neil Blumenthal: Thanks, Mark. We are not, and have not, factored in halo effect from the launch of AI glasses in our guidance. Adrian Mitchell: So within margin in Q4, non-marketing SG&A was up 200 basis points. One of the things that we have talked about—our store fleet and our four-wall margins—you look at our gross margin as well as our non-marketing SG&A. Within Q4, we did experience a little bit of pressure in SG&A. A piece of that obviously impacts experience leverage in non-marketing SG&A. In Q4, we did experience certain impacts around gross margins, specifically related to cadence throughout the quarter. Dave talked a little bit about the revenue decelerated in the month of December, which allowed us little time to make some adjustments, especially as it relates to doctor salaries, and we had staffed ahead of the holiday season. Those are very specific to Q4 impacts. We expect a normalized gross margin. As I talked about, we expect gross margin in 2026 to be very much in line with 2025. Mark, if I could just also briefly build on Josh’s point, we have pretty clear standards for our new store opening results. We look at payback period and four-wall margin, as you mentioned, but the reality is, like any retail company, there is going to be a variety of performance as you look at individual stores. What we are very pleased with is the performance across the portfolio as a lot of these new stores that are opening continue to mature. David Gilboa: I would also just call out some of the channel dynamics. E-commerce continues to be an evolving part of our business, in particular with the sunsetting of our home try-on program. This is our first quarter without that offering, and we are seeing the strongest volumes in Q1 historically. We anticipated that we would be able to drive a significant portion of those home try-on customers to our stores. We are seeing some speed bumps to that plan in markets that have been impacted by weather but remain confident that we will be able to serve those customers effectively. If you isolate the performance of our retail stores, we continue to see very healthy dynamics in terms of customer generation, overall growth, and profitability as we would expect, and that gives us the confidence to continue to invest and accelerate our store rollout plans. Mark R. Altschwager: Very helpful color. Thank you. Operator: Your next question today will be from the line of Oliver Chen with TD Cowen. Please go ahead. Your line is open. Oliver Chen: Hi. Thanks a lot. Hi, Neil, David, and Adrian. Neil and David, as you know from our Wharton days, a lot of the large language models rely on unsupervised and supervised training models. What are your views on personalization and some unlocks that will set you apart? What might be proprietary to Gemini and Google versus LLM training and other comp levers? Adrian, as we look at guidance going forward, what is unique to Warby Parker Inc. that is incorporated in your guidance view? What are your thoughts on units relative to traffic and conversion for the core business? Thanks, gentlemen. Neil Blumenthal: Thanks, Oliver. We are very excited about the transformation that will be happening within the optical industry over the next decades, particularly as we transition from traditional eyewear to intelligent eyewear. We believe that Google is the best partner for us for a variety of reasons, including their AI leadership overall and writing the research papers that all LLMs are based off of, and how they continue to innovate and lead with a product like Gemini. But it is not just their work in AI. It is their suite of products that billions of people use every day—from Google Maps to Calendar to Chrome to Gmail to YouTube and more—that makes them a great partner for us. We do not plan to develop any of our own models. We will develop IP around the eyewear itself, prescription lenses, and fulfilling those, and we will ensure that we are always customer-first because we are engaging directly with our customers and patients every single day. We have the shortest feedback loop to our product development team, our design team, our supply chain teams, and more, and we are able to act on market and customer feedback faster than everybody else, which has been a key part of our success over the last 16 years. Adrian Mitchell: Good morning, Oliver. It is great to be with you. I would say that as we look at the outlook for 2026, it starts with an important premise: that we have a very healthy brand proposition that will allow us to continue to outperform the market. The market this year is projected to be down low single digits, but we are committing ourselves to being up low double digits. Just to put in a little bit of perspective, we do expect to continue to see healthy levels of traffic in stores and online. We have continued to see healthy growth in progressives. When you think about how the industry spends, there are opportunities for us to mirror the industry penetration, which actually provides real growth for us in exams, contacts, and glasses relative to the industry. In an industry with over 45,000 locations, we are opening 50 stores to reach more markets, more customers, and more communities. We believe that we have at least 900 stores on the horizon. When I look at this business and we talk about driving success in 2026, one is clearly the number of points of distribution. The second thing is the composition of our business in terms of mix. We do expect to continue to see very healthy growth in exams and conversion both year to year. We have a very healthy cadence of innovation across new categories and new collections. As we spoke about earlier, sport and athletic is a new collection for us that we believe will have a healthy level of adoption. AI glasses has had a clear impact in demand for customers that we have already spoken to. The last thing I would say is really around price. We just have a healthy mix of balancing units, ASP, and growing our customer base, which is unlike what we see in the industry, which has really been driven by compounding price increases on a like-for-like basis. When you think about the way that we drive price, we are very encouraged by what that can do for us this year and beyond. Oliver Chen: Thank you. So helpful. One follow-up. We are getting questions from clients around parameters on timing. It is probably very dynamic regarding what you are testing in relation to a framework for timing the AI glasses launch. Any thoughts you have on that? Thanks a lot. Best regards. David Gilboa: Yes. We cannot share specifics at this moment, but we are very excited by the progress that we are making on the product. We were out in the Bay Area earlier this week meeting with some of the senior leaders at Google and Samsung, and we are just really excited about the progress that we are making together and look forward to sharing more later this year. For now, all we can say is that we are excited to introduce these to customers later in 2026. Oliver Chen: Thank you very much. Operator: The last question we have time for today is from the line of Paul Lejuez with Citi. Please go ahead. Your line is now open. Paul Lejuez: Curious if you think that customers are putting off purchases because of higher prices in the assortment. Do you think it is just more of an issue across the retail environment, maybe specific to the categories you called out, and some weaker industry trends all year in the fourth quarter? When we think about that increase in active customer accounts versus revenue per customer, if you can frame that for us—sort of what underpins your revenue guidance for next year for 2026. The second is, I just want clarity on what you are saying about the revenue assumed from the Google partnership. Are you assuming that there is no incremental revenue to the business this year? Or are you saying at this point you are kind of pretending like those glasses do not even hit the assortment, and so there will be zero revenue from Google glasses? Neil Blumenthal: Thanks for your question. To answer your last question first, just to clarify, we have not included any incremental revenue through the sale of AI glasses in our guidance. We have included the expenses that we will incur to prepare and launch this new category for us. We plan to share more around timing and projections later in the year, but we do anticipate that with the launch there would be incremental revenue. We are also not including any halo effect or anticipation of additional traffic. These will generate quite a bit of excitement and sales drivers for the existing products, and we view that all as upside once we launch that product. But we are not baking it into our guidance. David Gilboa: And we are also planning for the core business as it stands today. We expect the launch to drive people to our stores and our digital properties that will generate additional benefits. But, again, right now, we are just projecting the core business as it stands today. Neil Blumenthal: And then to tackle your first question, I will start, and then hand it over to Adrian. We are seeing, based on the category data, that some customers are putting off their purchases. One of the reasons why we continue to outperform is that our $95 opening price point, including anti-reflective prescription lenses, is competitive. Our competitors continue to take price, and in a category that has historically been resilient but is experiencing some volatility, we think that our pricing model—which has been consistent now for 16 years—has been more competitive than ever. This is one of the reasons why we continue to be competitive in acquiring customers and driving units. We are also hearing from other folks within our category, and across the consumer and retail landscape, that the younger consumer in their twenties is behaving more cautiously and is under financial stress. We are not surprised that the category is seeing this particular customer pull back a bit. We again think we are best positioned, and we are going to continue to acquire customers, whether they are younger or whether they are older. One of the things that we see with our older customers is that progressive penetration, which helps drive ASP, gross margin, and contribution margin overall, is an area of strength. Adrian Mitchell: Hi, Paul. I think Dave and Neil actually captured it quite well. Just to amplify the point, the way we think about it is units, ASP, and new customers. When you think about the expansion of 50 points of distribution, that is clearly a way to really reach out to more customers where we know from our data that one of the biggest drivers of opportunity is to actually have a physical location nearby. What is really exciting about that is it is at a healthier price point, but in terms of its distribution, which is heavily driven by mix. When you think about the sport and athletic introductions that we plan to have later this spring, it is at a great value price point, and we think there is a lot of opportunity to begin to mirror those penetration levels. Those dimensions on mix really help us quite a bit. As we think about units, we are thinking about our existing comp stores that exist within the business and getting more and more customers from the neighborhood into those stores, but also getting units through the new stores that we are opening as well, as the fleet progresses through its maturity curve. We have a healthy way to think about ASP, and we also have avenues for us in our omnichannel platform for this year and beyond. Operator: Thank you to everyone who was able to join us on the call today. Thank you. With that, we will conclude the Warby Parker Inc. fourth quarter 2025 earnings conference call. You may now disconnect your lines.
Operator: Hello, and thank you for standing by. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, please press star 11 on your telephone. To withdraw your question, please press star 11 again. You would then hear an automated message advising your hand is raised. We ask that you limit yourself to one question and one follow-up. Good morning, and welcome to Papa John's International, Inc.'s fourth quarter and full year 2025 earnings conference call. Earlier this morning, we issued our earnings release, which can be found on our Investor Relations website at ir.papajohns.com under the news and events tab. I would now like to hand the call over to Heather Hollander. You may begin. Heather Hollander: Chief financial officer and president, North America. Comments made during this call will include forward-looking statements within the meaning of the federal securities laws. These statements may involve risks and uncertainties that could cause actual results to differ materially from these statements. Forward-looking statements should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our SEC filings. In addition, please refer to our earnings release and our Investor Relations website for the required reconciliation of non-GAAP financial measures discussed on today's call. Lastly, we ask that you please limit your questions to one question and one follow-up. And now I will turn the call over to Todd. Todd Penegor: We have substantially improved our brand health, customer experience, restaurant fleet, and cost structure. To our brand health, technology platform, innovation pipeline, together with key leadership appointments and organizational changes, as well as our value and quality perception with our customers, we achieved growth, and higher utilization amongst our loyalty members, or our most valuable customers, increasing loyalty orders redeeming Papa Do from 24% last year to 48% at the 2025. Our international business, we have delivered five consecutive quarters of positive sales comps. We have made progress against our technology roadmap with the goal of establishing Papa John's International, Inc. as a best-in-class technology leader in QSR. We established a plan to deliver at least $60,000,000 of system-wide supply chain cost savings to our company and franchise restaurants without compromising the customer experience. We identified at least $25,000,000 of non-customer-facing corporate cost savings to be realized through 2027. And we ended the year meeting or exceeding our updated guidance targets, while investing $21,000,000 in supplemental marketing year over year to support our value proposition. These actions begin to take hold. And near-term performance is mixed as our transformation initiatives continue to gain traction. Still, our progress is just beginning. As we work to build on this momentum, I am even more confident that Papa John's International, Inc. is well positioned for meaningful medium- and long-term growth and value creation than I was at this time last year. For example, from a consumer lens, in the fourth quarter, we saw strength in our loyalty customers and existing customers in North America. However, new customer acquisition was lower than last year. From a product perspective, core pizza remains resilient, with the total number of pizzas sold actually increasing 1%. On the other hand, single pie orders declined during the quarter, and total pizza sales declined low single digits as our order mix shifted towards smaller, non-specialty pizzas. From a geographic perspective, we delivered strong 6% comparable sales growth internationally, driven by strength across key markets in the Middle East, Asia Pacific, and Europe. Performance highlights include 7% comp sales growth in the UK, as the market benefited from our transformation work. As for fulfillment channels, in North America, we were pleased that our carryout business returned to low single-digit order growth supported by the 50% carryout offer in November. There was also notable strength in Uber Eats performance. This upside was offset by year-over-year order declines in total delivery. As we look to 2026, we are positioning the business to win in a category that has staying power and growth opportunities. Pizza is a go-to for families and friends. In everyday moments, special occasions, and gatherings, I am confident Papa John's International, Inc. will capture this global market opportunity. And that deep-rooted consumer affection ensures pizza remains one of the most durable food categories. By being the best pizza makers in the industry, we will win new customers, and leverage our rebuilt innovation pipeline. Our two largest opportunities to gain share are expand our total addressable market, elevate our pizza order mix to more premium pizzas, and drive add-ons. Let me share more on each. Starting with our value proposition. In the fourth quarter, promotions such as our 50% carryout deal, $9.99 create your own pizza, and our popular Papa Pairings were effective, improving our value perception scores, which increased mid-single digits compared with last year, even as QSR peers introduced aggressive new promotional offers. We will continue to pulse compelling promotions to meet the customer where they are. We are also significantly evolving our promotional intensity to really think about how we meet the consumer where they are. We will continue to pulse compelling promotions to meet the customer where they are. We are also significantly evolving our promotional intensity using our premium ingredients and featuring our signature sauce. We will continue to pulse compelling promotions to meet the customer where they are. We are also significantly evolving our promotional intensity using our premium ingredients and featuring our signature sauce. Second, a steady dose of innovation is critical for new customer acquisition, and our innovation engine is firing on all cylinders. At the January, we launched our pan pizza platform. Following extensive culinary research and development, our teams have crafted an elevated, differentiated pan pizza experience with a crispy garlic Parmesan crust, a six-cheese artisan blend, and a fluffy soft interior. Pan pizza fills an important menu gap for us, and it raises the bar on a nostalgic type of pizza that we know our customers love. While early, pan pizza mix is performing above expectations. And we plan to build momentum off the pan pizza launch, driving trial and awareness of this outstanding product. We are also excited to expand pan pizza into several priority international markets in the coming months. Our innovation pipeline expands our aperture beyond traditional QSR pizza. It is designed to drive incremental sales and attract a broader customer base, serving up new crispy coated chicken tenders alongside new dipping sauces at accessible price points. For example, part of our product innovation work in 2026 is centered around crafting compelling side items at accessible price points. To provide a handheld option as an accessible price point, we are pleased with the early results. As we elevate our offerings outside of core pizza and drive benefits to total ticket, sales, and four-wall margins, we are testing oven-toasted sandwiches in North America and will soon begin testing in certain international markets. These chef-crafted sandwiches are made on bakery-fresh ciabatta bread, brushed with our signature garlic sauce, and packed with innovative flavors and high-quality meats. In the UK, we are pleased with the early results of this new growth platform, with our new sandwiches increasing sales of non-pizza items in test markets. We plan to build upon these learnings for chicken innovation in the US. Our innovation is supremely customer-centric and insights-driven. We recently piloted a protein crust pizza featuring an industry-first protein-infused dough that aligns with the customer's desire for protein-rich options. When paired with our premium toppings, this pizza delivers up to 55 grams of protein per serving with 23 grams in the crust alone. Customer feedback during the test was highly positive, but we are still in the early development phase. The protein crust pizza is an example of how we are rebuilding our innovation pipeline, soon joining our menu lineup. The protein crust pizza is an example of how we are rebuilding our innovation pipeline. The protein crust pizza is an example of how we are rebuilding our innovation pipeline. We expect the benefits of a comprehensive value proposition to begin to take hold. And look forward to providing updates in the coming months. We are also building partnerships with notable brands and strategic collaborations to introduce Papa John's International, Inc. to new customers. With the competitive dynamics in the QSR marketplace, we are equally focused on sharpening our marketing message. At Papa John's International, Inc., innovation extends beyond the menu, along with consumer-led, data-driven product innovation to win new customers and improve order mix on the path to sustainable, profitable top-line growth. The foundational work we have done to recalibrate our ovens to adjust bake temperatures and optimize bake times has made our expanded innovation pipeline possible and has improved product quality and consistency. We are putting innovation behind these partnerships, and we are excited about what is ahead. While it is too early to share the details about these partnerships, we know pizzas are a game played nationally, but won locally. With a new single-serving pizza to drive incremental orders from existing customers and aligning with the trends that matter most to our customers, we are supporting our product launches with an all-new creative platform developed in partnership with our new agency of record. I am thrilled to share that we have reestablished co-ops across 50 markets in the United States, which includes the majority of our priority markets. These co-ops enable franchisees across regions to pool resources for more effective localized targeting and brand support, with collaborative local campaigns. Now nearly half of our North American system-wide sales are supported by an advertising co-op. For example, as we prepared for our pan pizza launch, we launched a comprehensive campaign built around online video, social and owned channels, TV, influencer and media activation, and widespread press outreach. Our messaging around pan is performing well, especially among younger consumers with strong purchase intent, with pan front and center because we know great pizza deserves a star. We will continue to anchor on our six simple ingredients promise. These new campaigns will also connect with customers by leaning into culture-forward omnichannel storytelling. Investing in technology and our tech stack is essential to being at the forefront of digital leadership in QSR and elevating the customer experience. Early in the fourth quarter, we launched our new omnichannel apps across both iOS and Android devices. This enhancement consolidates our apps onto a single modern code base, makes digital innovation faster and more efficient, and increases our agility in adapting to customer needs. The new app experience is delivering strong early results, outperforming our legacy platforms in reliability and conversion, with response times nearly 40% faster and a 70 basis points improvement in conversion. Over the next two years, we will migrate from our legacy system to a modernized POS, combined with AI-powered labor, inventory and restaurant management systems. We have partnered with leading food service technology provider PAR Technology. To reduce complexity and improve workflow in our US restaurants, we have partnered with PAR Technology to migrate to PAR POS, consolidating inventory management, make line operations, and AI-powered labor, inventory and restaurant management systems onto one platform and enable real-time insights. PAR POS provides us with powerful data and insights to inform our decisions and better serve our customers. The new system will utilize existing hardware, minimizing implementation expense and accelerating deployment. Additionally, we continue to expand our partnership with Google Cloud. In the second quarter, we plan to launch an advanced voice and group ordering feature to transform digital ordering through its AI-powered food ordering agent, and frictionless reordering for Papa Rewards members. Together, these enhanced tools will simplify the ordering experience, reduce cart abandonment, and shorten the path from app open to checkout. We will continue to leverage our strong partnership with Google Cloud to deliver additional enhancements to make the customer experience even more seamless. Differentiating our customer experience across every demand channel remains a top priority. Our loyalty program, Papa Rewards, is one of our most valuable assets, connecting us with nearly 41,000,000 fans and engagement across all customer cohorts, leveraging personalization and exclusive offers to drive urgency, exclusivity, and incremental visits. In 2025, our loyalty members placed two and a half times more orders than non-rewards members, indicating both the strength of our loyalty program and the opportunity associated with capturing new members. We are also engaging customers more frequently and helping to build advocacy among younger, value-orientated consumers. And given the importance of the carryout channel, we are also providing franchise incentives to support remodels and elevate the in-store experience. Finally, we continue to partner with and evolve our franchisee base. Our Papa Rewards loyalty program continues to increase order frequency, engagement across all customer cohorts, and we are already seeing green shoots. I am pleased to report that we continue to gain momentum with our efforts to optimize our North American supply chain and reduce overall costs to serve. As we have progressed with the work, we have identified additional productivity opportunities and now expect to achieve at least $60,000,000 of North American system-wide cost savings, with $20,000,000 to $25,000,000 realized by 2026. These cost savings will equate to at least 160 basis points of four-wall EBITDA improvement by 2028. Next, we completed a strategic review of our restaurant fleet for both company and franchise restaurants and identified targeted opportunities to strengthen it through selective closures. In November, we refranchised 85 restaurants, and we are currently in negotiations to refranchise 29 additional restaurants in the Southeast to another strong growth-orientated operator and expect to finalize that transaction in the second quarter. Partnering with well-capitalized strategic growing franchisees enhances local execution, improves operational efficiency, and unlocks future growth. In addition to accelerating refranchising, we are accelerating our refranchising program and expect to reduce company-owned restaurants to mid-single-digit percent of the North American system. Turning now to our cost structure. We have conducted a comprehensive review of non-customer-facing costs as well as our corporate and field resources to create incremental flexibility across the company, further strengthen execution, and support profitable long-term growth for the Papa John's International, Inc. system. Together with the just-reviewed actions to optimize our restaurant portfolio, we expect this program to deliver at least $25,000,000 in cost savings outside of marketing through 2027. I will briefly walk through the key drivers of these savings in a moment, and Ravi will share the expected financial impacts from these initiatives in a few moments. Starting with our organizational structure, we are taking action to better align corporate and field resources with our transformation priorities, including business areas that we believe have the greatest potential to drive sustainable growth, expand our addressable market, simplify operations, and optimize spans and layers in our organization. In parallel, we also evaluated non-customer-facing costs and are executing against identified opportunities to reduce indirect spend. A portion of these savings will be reinvested to ignite even more customer enthusiasm and to remain agile and, as needed, to invest on behalf of the system in innovation, marketing to supplement national advertising, return co-ops to full strength, and support compelling price points across the system; technology such as our new POS and advancements in personalization and loyalty to drive customer engagement; priority markets and franchise development incentives that deliver strong returns for both franchisees and franchisor; and supply chain to improve cost leverage and four-wall EBITDA across the system. We have established clear success criteria and are closely tracking returns on these investments, and we are already seeing green shoots. In summary, as we accelerate our transformation through focused investment in product and priority markets, we are making visible progress executing our strategy and are confident in our direction and in our ability to deliver sustainable, profitable long-term growth and capitalize on opportunities. And with that, I would like to turn it over to Ravi. Ravi Thanawala: Thank you, Todd, and good morning, everyone. I will begin by sharing an update on our progress to improve restaurant profitability and optimize our restaurant portfolio, collaborating with our franchisees, and reviewing the North America restaurant fleet. I will then provide an overview of our fourth quarter financial results, and conclude with our outlook for fiscal 2026. First, I am honored to step into the role of president in North America in addition to my CFO responsibilities. I have spent the last three months in our restaurants, and I am struck by the engagement of our team members and franchisees and look forward to continuing to work with them to accelerate our transformation. To drive profitable growth across the Papa John's International, Inc. system, I am highly focused on improving four-wall EBITDA for both company-owned and franchise restaurants. Given the high flow-through inherent in our business model, transaction growth supported by an elevated customer experience, and TAM-expanding product innovation such as the pan pizza, sandwiches, and sides that Todd referenced, will serve as a critical driver for four-wall margin over the medium and long term. Lower cost and greater efficiency are additional pillars of the four-wall EBITDA improvement. In addition to reducing our overall cost to serve, the supply chain optimization that Todd referenced will drive cost efficiency in our restaurants and improve customer service. We are developing new tools that allow us to better predict sales demand and give our restaurants better visibility to align staffing needs with peak and off-peak periods. We are leveraging new AI capabilities, including our Google Cloud partnership, to simultaneously drive customer experience across the category. Optimizing our restaurant portfolio and strategically closing underperforming restaurants are among the most impactful actions we can take to improve restaurant profitability and fleet health. We have completed a strategic review of our restaurant fleet and identified targeted opportunities to strengthen it through select closures. The vast majority of our global restaurants have performed well over the years and delivered strong returns for both corporate and franchise owners. However, we have identified approximately 300 underperforming restaurants across North America that are not meeting brand expectations or lack a clear path to sustainable financial improvement, as well as locations where we can effectively transfer sales to a nearby restaurant. These locations are primarily franchise-owned and are mostly operating at negative four-wall EBITDA. We expect to close the majority of these restaurants by the end of 2027, with approximately 200 closures occurring in 2026. We believe these closures will further strengthen the system. This is the same strategy we successfully deployed during my tenure managing our international business. We delivered significant upside, improving AUVs in the UK by 17% after implementing our transformation plan. Similarly, select strategic closures will allow our North American franchisees to redirect resources towards operational excellence and improve franchisee health by allowing franchisees to reallocate resources in their remaining restaurants and open units in priority markets. While domestic four-wall EBITDA has been pressured over the last two years by food costs, labor inflation, and fixed cost leverage, we expect to generate at least 200 basis points of improvement in four-wall EBITDA over the medium term driven by supply chain savings, operational efficiency, and market optimization. In addition to healthier corporate and franchise restaurant portfolios, we expect the increased restaurant-level profitability will accelerate unit growth. We expect the increased restaurant-level profitability will accelerate unit growth. We expect the increased restaurant-level profitability will accelerate unit growth. As an incremental lever to assist our franchisees in growing profitably, we are also investing in long-term restaurant development incentives, with an emphasis on accelerating growth in our highest priority markets. I am also highly focused on reducing menu complexity to improve restaurant operations. Based on productivity studies and feedback from both franchisees and customers, we have made the decision to eliminate Papadias and Papa Bites from our North America menu in the second quarter. We expect that this menu revision will exert approximately 150 basis points of near-term pressure on 2026 North America comparable sales, but ultimately benefit the brand as we improve operations and grow sales of products outside of core pizza as the benefit of our reinvigorated innovation pipeline builds. Turning now to our financial results. Please note that all comparisons and growth rates referenced today are compared to the prior-year period unless otherwise noted. In 2025, we met or exceeded our updated financial targets for system-wide sales, comparable sales growth, and adjusted EBITDA as we pivoted during the second half of the year to amplify our value proposition in response to a weaker consumer backdrop and intense competitive promotional activity while prudently managing our expenses. We also opened 279 new restaurants and ended 2025 with 96 restaurant openings in North America and 183 in international markets. For the fourth quarter, global system-wide restaurant sales were $1,230,000,000, down 1% in constant currency, reflecting a system-wide sales decline of just under 1%, as higher international comparable sales and 1% global net restaurant growth were more than offset by lower comparable sales in North America. As Todd described, we are taking actions to further increase our agility across our restaurants. In 2025, our US market share slightly softened. As we move throughout 2026 and build momentum behind our transformation, we expect to recapture share. North America comparable sales decreased 5% in the fourth quarter driven by a 5.5% decrease in transaction comps. Carryout grew 1% but was more than offset by declines in total delivery. The international team delivered another exceptional quarter with comparable sales improving 6%. We saw continued momentum across our key markets driven by new menu offerings, aggregator expansion, and improved brand and marketing performance. Total consolidated revenue for the fourth quarter was $498,000,000, down 6%, as lower revenue at our domestic company-owned restaurants, North America commissary, and all other business units was partially offset by higher international revenues. North America commissary revenues decreased $7,000,000 primarily due to lower pricing, slightly offset by higher volumes. Domestic company-owned revenues decreased $24,000,000 primarily due to refranchising of 85 corporate restaurants. All other business unit revenues decreased $7,000,000 driven by lower advertising fund revenue as a function of lower sales. Partially offsetting these declines was a $4,000,000 increase in international revenue driven by improved performance across our priority regions. Fourth quarter consolidated adjusted EBITDA decreased to $51,000,000 as we sharpened our value proposition during the quarter in addition to lower comparable sales in the prior year, and approximately $2,000,000 of higher management incentive compensation. Fourth quarter consolidated adjusted EBITDA performance was impacted by marketing investments and subsidies of approximately $8,000,000. These declines were partially offset by lower cost of sales related to the refranchising transaction and commodity deflation. In 2025, consolidated adjusted EBITDA was $201,000,000, including $21,000,000 of incremental marketing investments, building on approximately $4,000,000 of incremental marketing investment in 2024. In the fourth quarter, domestic company-owned restaurant delivered four-wall EBITDA of $19,200,000 and a four-wall margin of 12.7%. Domestic company-owned restaurant segment adjusted EBITDA margin, which includes G&A expenses, was 6.3%, improving by approximately 10 basis points as a flow-through from higher average ticket offset lower transaction volumes and labor inflation. North America commissary segment adjusted EBITDA margins were 7.7%, an increase of 150 basis points primarily reflecting higher volumes. Food costs and restaurant labor were each approximately 32% of domestic company-owned revenues during the quarter. Turning to our balance sheet. At the end of the quarter, our total available liquidity was $515,000,000 and our covenant leverage ratio was 3.2 times. We continue to maintain a strong balance sheet that provides ample flexibility to invest behind our transformation initiatives. Turning now to cash flows. Net cash provided by operating activities in 2025 was $126,000,000. Free cash flow was $61,000,000, an increase of $27,000,000, primarily reflecting favorable changes in working capital and timing of cash payments for the national marketing fund and cash taxes. Capital expenditures decreased approximately $8,000,000. Now turning to our 2026 outlook. Our financial guidance is provided on an adjusted basis, excluding restructuring charges. As we improve our cost structure to support our transformation, we expect to incur restructuring charges of approximately $16,000,000 to $23,000,000 associated with our transformation work. We expect these will be primarily cash charges to be recognized in 2026 and 2027. We have reduced our corporate workforce by approximately 7% and expect to close approximately 200 North America restaurants in 2026 and 100 in 2027, representing approximately 21% of annualized global system-wide sales, respectively. These impacts are reflected in our financial guidance. For 2026, we expect global system-wide sales to range between flat and low single-digits decline. For North America, we expect comparable sales to be down 2% to 4%. Our guidance reflects both the benefit of innovation pipeline and considerations around the current cautious consumer environment we expect to persist throughout 2026. These factors are expected to influence our comparable sales trends through the year. Quarter to date, comparable sales are down mid-single digits, and we expect to end the first quarter in that range, followed by improved trends in the second half of the year. Internationally, as we build on our transformation momentum, we expect comparable sales to increase between 2%–4%, supported by the benefits of our product innovation, marketing co-ops, and new aggregator marketing strategy. As Todd shared, we are negotiating the refranchising of 29 additional restaurants in the Southeast and expect to close the transaction in the second quarter. This transaction is expected to reduce 2026 consolidated revenues by approximately $9,000,000, including the impact of eliminations, and benefit adjusted EBITDA by approximately $1,000,000. We also plan to refranchise additional restaurants in 2026, but those transactions are in the earlier stages and are not factored into our guidance at this time. We will provide updates on financial impacts on future earnings calls on those transactions’ progress. For 2026, we expect consolidated adjusted EBITDA to be between $202,000,000–$210,000,000. Recall that 2025 and 2026 are our investment years as we support our transformation initiatives, and we do not expect this $22,000,000 investment to continue after 2026. In 2026, we expect to invest approximately $22,000,000 in supplemental marketing and franchisee subsidies as we lean into a promotional strategy in this year's innovation calendar, and we continue to stand up local co-ops. As Todd described earlier, our 2026 consolidated adjusted EBITDA outlook includes $13,000,000 of cost savings outside of marketing on our way to achieving $25,000,000 of total cost savings by 2027. As our transformation advances, we will continue to be prudent with cost management to support our menu strategy and enhance franchisee profitability. For non-operating expense items, we expect net interest expense between $35,000,000 and $40,000,000, adjusted D&A between $70,000,000 and $75,000,000, and capital expenditures between $70,000,000 and $80,000,000. As we move to a more asset-light model after 2026, we expect capital expenditures to step down to approximately $60,000,000 to $70,000,000 per year, on average. We expect our 2026 GAAP effective tax rate to be in the range of 30% to 34%. For Q1, our tax rate is expected to be between 34%–38%, reflective of an anticipated shortfall of the vesting of restricted shares resulting in additional tax expense when compared with the prior-year period. Turning to restaurant development. We expect to open between 40 and 50 gross new restaurants in North America in 2026. In the near term, we are focused on elevating four-wall economics and capitalizing on significant market share opportunities over the medium term. Internationally, we expect to open 180 to 220 gross new restaurants in 2026. We anticipate international closures will represent 5% to 6% of our international system as we continue to pursue strategic closures with the intent of accelerating new restaurant development and our consumer experience, and closures returning to 1.5% to 2% per year after 2027, with new restaurant growth comparable to 2025 levels. Overall, we are pursuing an asset-light model that generates higher free cash flow. We believe that our accelerated refranchising program combined with our efforts to grow transactions, improve restaurant-level profitability, and reduce corporate G&A will generate higher free cash flow. While transformations are not linear, we are managing the current environment while taking deliberate strategic actions to deliver long-term value creation for all of our stakeholders. Now we would like to open up the call for any questions you may have. Operator? We will now open for questions. Operator: Ladies and gentlemen, as a reminder, to ask a question, please press star 11. Please limit yourself to one question and one follow-up. Our first question comes from the line of Brian Bittner with Oppenheimer. Your line is open. Brian Bittner: One of your competitors suggested the QSR pizza industry as a whole is pretty stable, in fact, growing. And your same-store sales guidance for 2026 is a 2% to 4% decline. And the question is just what is holding you back from holding or taking share in 2026 in your view? I realize you see a cautious consumer out there, but it seems like your guidance does assume a market share decline in 2026 and just would like your commentary on that. And then I just have a quick follow-up. Todd Penegor: Yeah, Brian. Thanks for the question. You know, as we think about 2026, our opportunity is really about bringing our innovation calendar to life. As you think about where some of the opportunities have been for us over the last year or so, you know, and it was really around recruiting new customers to our brand. And we do believe that innovation is going to play a big role with that. Actually doing a nice job continuing to protect and drive frequency with our existing customer, and you saw that in the prepared remarks with the work that we have been doing in Papa Rewards and the targeted CRM offers. We are seeing good repeat rates early in the game. You know, the sandwich come with a fun property tie-in. So those are things that we know we have to drive on innovation to recruit new customers. We also know we have got to bring news, continue to drive our core pizza business. You know, the good news is we sold 4% more pizzas in 2025 on a full-year basis than we did the year before. Even though we saw some of the mixed trade downs from large and specialty into medium, which provides a little bit of pressure on our business, we know we have an opportunity to drive add-on with affordable sides. So we have got that news coming through this year. But we do think as we go through this year, you know, bringing to life pan pizza, we are already seeing a nice mix in that product. We know we have an opportunity to recruit new customers into our brand, and it is a great product once they try it. It is doing really well in test. So I would expect to see that come to life during the course of this year. And the single-serve pizza opportunity is an opportunity for us to start to expand our total addressable market because we do not play in that category yet. And that will really compete better at the local level, and we have been working hard over the course of the last eighteen months since I have been here to get the co-ops back up. And as you heard in the prepared remarks, we now have 50 co-ops representing half the system sales in the US up and running. So all of those are the nice tailwinds in our business that we are going to see during the course of this year. Why do we have the guidance that we have with all of that news? Well, we have got a couple of things that we know we need to evolve and change. We talked about we are going to do the things that are right for the long term of the business. And we know we have got to compete even stronger in the 3P channel. And that is not just national offers, that is working local, and the co-ops will help us really position to do that even stronger at the local level. So we think we will continue to see some of the mixed trade downs, and we are going to be focused on doing that. But you know, we think it is a prudent approach to the business. We are managing our cost structure appropriately. We continue to invest to bring the news to life. And we do really think that kind of prudent approach to our business will set ourselves up for long-term success. Anything else, Ravi? Ravi Thanawala: And just, Brian, as we think about dimensionalizing the 2025 comp, 180 basis points of our comp pressure came from our sides business. Fifty basis points were from channel mix, the balance was really a mix shift within the pizzas that sell from larger sizes to medium sizes and a little bit of a mix out of specialty and to create your own. So there are a couple of dynamics there, but as Todd mentioned, we are really focused on wearing in our innovation strategy and competing well. Todd Penegor: Thanks, Brian. Follow-up. Yeah. I think, you know, on competing on value, we really think about how do we meet the consumer where they are at. And, you know, we did that in partnership with our franchise system in the fourth quarter. Our 50% carryout offer met them where they are at, and, you know, that is a great offer and a great overall service experience because we do really well on the carryout side. You know, having $9.99 create your own did meet the consumer where they are at, but we have to compete on both ends of the barbell, and that is why bringing this innovation is so important. And you can see that as we come out with a compelling price point on pan, at $11.99, it is still a trade-up from our $9.99 create your own offering. So that does help margin in check and dollars. But what we really need to do is continue to recruit new customers because if we can get them into our rewards program, we see higher frequency, and there is a lot of value that can be created with Papa Do redemptions. We have seen a nice uptick in the Papa Do redemptions, and our frequency, as we said on the call, is two and a half times more with a loyalty member than a non-loyalty member. You know, the work we are doing on innovation to have affordable sides certainly helps us on value. And we said earlier, we are going to have to make sure that we have got the appropriate offers in 3P to compete even better to make sure we have got not just our fair share of the pizza category, but our fair share of QSR in the 3P channel. It is going to have to be a balance. We are just going to have to continue to drive folks over into our program. So as you think about more personalized one-to-one communication to drive value, drive behavior with those customers, we will continue to lean in on that. A great way to compete for the size and scale of the business that we are against the bigger competitors that are out there. Operator: Please stand by for our next question. Our next question comes from the line of Sara Harkavy Senatore with Bank of America. Your line is open. Isaiah Austin: Hi. Thanks for the question. I am Isaiah Austin on for Sara. Just briefly, how do you guys think about competing on value? I know it is kind of derivative of the previous question, but how do you think of competing on value when you think of going against a larger scale competitor? And then I just have a quick follow-up. And do you mind letting me know how you guys see growth? Is that coming more from aggregator platforms, or if there is an opportunity to drive growth primarily through the one key platform? Ravi Thanawala: Yeah, and just like as a reminder in our prepared remarks, we talked to an opportunity for capturing 200 basis points of margin upside on a four-wall basis in the system, with 160 basis points coming from supply chain and the balance coming from labor and market calendar. So even in this value-centric world, we are pulling levers to continue to maintain and drive our four walls. And just more broadly, from a four-wall standpoint, in December 2024, we provided a and figured that our domestic company-owned restaurant four-wall margins were $150,000. And as we look at the numbers for year end 2025, we are at $135,000. So just from a broader system standpoint, we went slightly backwards, but we have a clear plan that we just laid out to reaccelerate there. And then by having this balance of value messaging that I referenced and wearing in our innovation program, we think there is an opportunity to drive growth from a carryout standpoint in our 1P business, and we see that as a core focus. We continue to attack, really bringing new customers, and that is not just in our traditional channels to carryout and 1P, but also helps a lot in 3P as we bring all this news to life. And just like as a reminder in our prepared remarks, we talked to an opportunity for capturing 200 basis points of margin upside on a four-wall basis in the system, with 160 basis points coming from supply chain and the balance coming from labor and market. And just more broadly, from a four-wall standpoint, in December 2024, we provided a and figured that our domestic company-owned is at a $1,250,000 AUV, roughly at a 10% EBITDA margin. And our top 75% of our fleet AUVs are roughly $1,400,000 at a 12% EBITDA margin. So when we look at the top 50% of our fleet right now in the US, we see opportunities to continue to accelerate four-wall margins and drive increased check and traffic in that channel. Todd Penegor: We have been first movers on the aggregators, and we continue to grow and expand that business in both. As we have talked about, we see a lot of runway still left on the different platforms. So we are going to continue to lean in both, but I think we have to be agile both at first party and third party. And we truly believe our strong innovation calendar will help us really bring new customers, and that is not just in our traditional channels to carryout and 1P, but also helps a lot in 3P as we bring all this news to life. Ravi Thanawala: As, you know, look. There are lots of different offers that consumers are seeing in this value-centric world. But I think we have to be agile both at first party and third party. James has got lots of experience on managing the third-party experience and third-party business, and we will continue to shift and adjust as needed. Operator: Our next question comes from the line of Todd Brooks with Benchmark. Your line is open. Todd Brooks: Hey, good morning. Thanks for the question. Ravi, you just gave us some hints on kind of the overall system performance. But can you maybe take the metrics that you gave us for unit-level EBITDA for company and apply that to the overall base, how much that 500 restaurants system that they are operate a rough—company and apply that to the overall base, how much that—different perspectives in terms of managing ticket versus transaction as well that could impact individual franchisees' performance. But what we are all rallied around—is recapturing 200 basis points of margin rate upside. And as I think about 2026 relative to 2025, we expect four-wall profitability to slightly increase year on year on a dollar basis. Ravi Thanawala: Yeah. I cannot give specifics on the declines from a system standpoint, but what I would say is it is a probably a reasonable starting point to work from. I think more broadly, across our system, there are different perspectives in terms of managing ticket versus transaction as well that could impact individual franchisees’ performance. But what we are all rallied around is recapturing 200 basis points of margin rate upside. And as I think about 2026 relative to 2025, we expect four-wall profitability to slightly increase year on year on a dollar basis. And the last thing I will add, I think we really have the opportunity to lean in on our CRM and figured that our domestic company-owned, and our top 75% of our fleet AUVs are roughly $1,400,000 at a 12% EBITDA margin. So just from a broader system standpoint, we have a clear plan that we just laid out to reaccelerate there. And then by having this balance of value messaging and wearing in our innovation calendar, we continue to accelerate four-wall margins. Todd Penegor: Yeah, Todd. And I would add, you know, that is why we really took a thoughtful approach to the closures and really conducted a full strategic review, as we said in the prepared remarks, to make sure that we really strengthen the system and help on the four-wall profitability and help on our overall AUVs. Take a look at restaurants that maybe the trade areas have moved away or there was going to be significant investment to get them up to grade, both from how we are operating them as well as how they are perceived because they may look a little more older and tired. Todd Brooks: Okay. Great. So I am trying to dimensionalize the 300 that you have identified for closure. How much healthier does that make the rest of the system from an economic standpoint? Todd Penegor: To really strengthen the system and help on the four-wall profitability and help on our overall AUV and our more challenged EBITDA restaurants. You know, that opportunity is an opportunity to really take care of our lowest AUV and our more challenged EBITDA restaurants. Ravi Thanawala: So the AUVs increase about 3% on an average basis from the restaurant closures, and I would say the recapture rates vary by individual trade zones. But our recapture rates are very healthy in the business. So we took a pretty surgical approach of looking at quality of operations, quality in the trade zone, quality of the assets itself, and made a pretty clear determination in terms of restaurant by restaurant, which are the ones that we felt should close. And, you know, we have had great partnership with the franchisees to make sure we are thinking about each market holistically, that we are setting ourselves up for a stronger system. Todd Penegor: Yeah. Appreciate the work Ravi has been doing with each franchisee on the joint capital planning front to really look at what is going to be the best opportunity to not only be there for our consumer, but set our system up and our franchise up in those markets for ultimate success. Whether that is a relocation, whether that is a closure, whether that is a reimage, whether that is a new build, we are working hard to really make sure that we partner with our franchise community to set them up for long-term success. Operator: Thank you. Our last question will come from the line of James Jon Sanderson with Northcoast Research. James Jon Sanderson: Hey. Thanks for the question. I wanted to get a little bit more feedback on the delivery channel. Any feedback on how the third party performed relative to first party? And what do you think the biggest unlock or opportunity ahead is to really drive increased check and traffic in that channel? Ravi Thanawala: Thanks, Todd. In the quarter, third-party delivery grew low single digits on a dollar basis. The decline came from the first party side. We think that there is still meaningful work that we can get after to improve consumer satisfaction scores on the delivery side. There is no one thing we are doing there. There are a number of things we continue to work on. We are leveraging our Google Cloud partnership to continue to evolve that digital experience journey. We are looking at different strategies to make sure that we are improving taste of food, which is a key measure of consumer satisfaction. Which is a key measure of consumer satisfaction. Which is a key measure of consumer satisfaction. On the delivery of product. And third is we are going to continue to leverage CRM to make sure we are getting our most loyal consumers into that delivery channel. Todd Penegor: Well, I would like to thank everybody for joining the call this morning. I know it is a busy morning with a lot of other folks announcing. So I appreciate your continued interest in Papa John's International, Inc. Thanks, Jim. I appreciate your continued interest in Papa John's International, Inc. James Jon Sanderson: Alright. Thank you very much. Operator: Ladies and gentlemen, there are no more questions in the queue. I would now like to turn the call back over to Todd for closing remarks. Todd Penegor: Most importantly, I want to thank our team members and franchisees for their dedication to serving our customers as we accelerate our transformation in 2026 to set ourselves up for mid- and long-term success. We are confident we have the right plan in place to create meaningful value across our organization for our team members, franchisees, and shareholders. Have a great day. I look forward to some of the follow-up calls this morning. Thanks, everybody. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good day, everyone, and thank you for standing by. Welcome to the Encore Capital Group's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Bruce Thomas, Vice President of Global Investor Relations for Encore. Bruce, please go ahead. Bruce Thomas: Thank you, operator. Good afternoon, and welcome to Encore Capital Group's Fourth Quarter 2025 Earnings Call. Joining me on the call today are Ashish Masih, our President and Chief Executive Officer; Tomas Hernanz, Executive Vice President and Chief Financial Officer; Ryan Bell, President of Midland Credit Management; and John Young, President of Cabot Credit Management. Ashish and Tomas will make prepared remarks today, and then we'll be happy to take your questions. Unless otherwise noted, comparisons on this conference call will be made between the fourth quarter of 2025 and the fourth quarter of 2024 or between the full year 2025 and the full year 2024. In addition, today's discussion will include forward-looking statements that are based on current expectations and assumptions and are subject to risks and uncertainties. Actual results could differ materially from our expectations. Please refer to our SEC filings for a detailed discussion of potential risks and uncertainties. We undertake no obligation to update any forward-looking statements. During this call, we will use rounding and abbreviations for the sake of brevity. We will also be discussing non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are included in our investor presentation, which is available on the Investors section of our website. As a reminder, following the conclusion of this conference call, a replay, along with our prepared remarks will also be available on the Investors section of our website. With that, let me turn the call over to Ashish Masih, our President and Chief Executive Officer. Ashish Masih: Thanks, Bruce, and good afternoon, everyone. Thank you for joining us. On today's call, I will start with a high-level recap of 2025. Then I'll review our strategy and market position as well as our view on how we create value for our shareholders. This will be followed by a few key measures that are important indicators of the state of our business and a 2025 recap of our MCM and Cabot businesses. Then Tomas will review our financial results, after which I'll touch on our financial objectives and priorities and provide guidance on several key metrics for 2026. At the conclusion of today's call, we will also post to our website our annual report, which includes our 10-K and my letter to shareholders. We will begin with a look back over the past year. With the momentum of our largest business, MCM leading the way in the U.S., Encore delivered very strong results in 2025. For the full year, we grew portfolio purchases by 4% to a record $1.4 billion and increased collections by 20% to a record $2.6 billion. Average receivable portfolios increased 12% to $4.1 billion and estimated remaining collections, or ERC, rose 14% to a record $9.7 billion. These results clearly demonstrate Encore's leadership in the consumer debt purchasing industry and reflect the strengthening of our operating model through exceptional execution and investments in innovation. I'll provide more detail on both MCM's results and Cabot's performance later in the presentation. Our leverage improved to 2.4x at the end of the year compared to 2.6x a year ago. Importantly, we continue to improve and delever our balance sheet, even with continued significant portfolio purchases as well as the resumption of our share repurchase program early in the year. We repurchased approximately 9% of our outstanding shares in 2025 for approximately $90 million, reflecting our confidence in Encore's future performance. Our record collections performance in 2025 led to $257 million of net income for the year or earnings per share of $10.91. Before I continue, I believe it's helpful to remind investors of the critical role we play in the consumer credit ecosystem by assisting in the resolution of unpaid debts. These unpaid debts are an expected outcome of the lending business model. Our mission is to create pathways to economic freedom for the consumers we serve by helping them resolve their past due debts. We achieve this by engaging consumers in honest, empathetic and respectful conversations. We pursue our business objectives through our 3-pillar strategy of participating in the largest and most valuable markets, developing and sustaining a competitive advantage in these markets and maintaining a strong balance sheet. We employ a strategy across our 2 main businesses, Midland Credit Management, or MCM in the U.S. and Cabot Credit Management in select European markets. We believe value is created in the consumer debt buying industry through optimal execution of 3 critical drivers: buying, collecting and funding. When these drivers are executed well within attractive markets, leveraging the resources we possess and our strong balance sheet, we believe they enable high consistent returns and profitability. I'll take a moment to describe each of these 3 critical drivers of our value engine, which form the virtuous cycle of buying well, collecting efficiently and funding competitively. The cycle begins with a commitment to purchase portfolios of charged-off receivables at attractive returns, which is the buy well component of our value engine. Over the many years of our industry leadership, we have built a trusted reputation with the sellers of portfolios, the largest credit card issuers, which provides us access to bid on the opportunities we seek. Our disciplined portfolio purchasing is underpinned by superior data and analytics capabilities, which when applied to a very large data sets stemming from our scale and history, optimize portfolio valuation through account level underwriting. As a result, we win more portfolios at strong returns, enabled by our superior collections as reflected in our industry-leading portfolio yield and collections yield. The cycle continues with our commitment to collect efficiently, maximizing net collections to realize strong yields. Our operational excellence, advanced analytics and our consumer-centric approach produce industry-leading yields while still exhibiting a solid cash efficiency margin. Because of our large scale, we have a broader reach within the portfolios we buy than our competitors, as we often see consumers we have come to know in previously purchased portfolios. As a result, our very effective, personalized engagement with consumers leads to payments with predictable, consistent cash flow. This cash flow helps to complete the cycle as it contributes to our commitment to fund competitively based on low-cost funding and a strong balance sheet. Importantly, our balance sheet strength enables access to capital at competitive costs through the credit cycle. In summary, Encore's value engine is the critical enabler of our competitive advantage that allows us to execute our proven 3-pillar strategy to drive shareholder value. I would now like to highlight Encore's performance for the year in terms of several key metrics, starting with portfolio purchasing. Encore's global portfolio purchases for 2025 were a record $1.4 billion, an increase of 4% compared to 2024. Keep in mind that the comparison to the prior year purchase level is impacted by the outsized $200 million of portfolio purchasing by Cabot in the fourth quarter of 2024. As a result of the attractive market conditions and higher returns available in the United States, 83% of our portfolio purchasing dollars were spent in the U.S. in 2025. Global collections in 2025 were up 20% to a record $2.6 billion. This exceptional collections performance is the result of strong execution and continued significant portfolio purchasing as well as the deployment of new technologies, enhanced digital capabilities and continued operational innovation, especially in the U.S. Our global collections performance in 2025 compared to our ERC at the end of 2024 was 109%. We believe that our ability to generate significant cash provides us with an important competitive advantage, which is also a key component of our 3-pillar strategy. Similar to the collections dynamic I mentioned earlier, strong execution, higher portfolio purchases at strong returns over the past few years as well as operational improvements have also led to meaningful growth in cash generation. Our cash generation in 2025 was up 22% compared to the prior year, and we expect it to continue to grow. Let's now take a look at our 2 largest markets, beginning with the U.S. The U.S. Federal Reserve reports that revolving credit in the U.S. remains near record levels. At the same time, since bottoming out in late 2021, the credit card charge-off rate in the U.S. increased to its highest level in more than 10 years in 2024 and still remains at an elevated level. The combination of strong lending and elevated charge-off rates continues to drive robust portfolio supply in the U.S. Let me illustrate this impact by highlighting the annualized amount of net dollar charge-offs, which can be estimated by multiplying revolving credit outstandings by the net charge-off rate. Using Q3 2025 data, the most recent quarter reported by the Federal Reserve, annualized net charge-off volume was more than $54 billion. Similarly, U.S. consumer credit card delinquencies, which are a leading indicator of future charge-offs, also remain near multiyear highs. With the revolving consumer credit at an elevated level and the charge-off rate above 4%, purchasing conditions in the U.S. market remain favorable. We are observing continued strong U.S. market supply and favorable pricing as well. Fourth quarter delinquency data supports our expectation that the portfolio purchasing environment in the U.S. is expected to remain robust for the foreseeable future. With portfolio supply in the U.S. market growing to its highest level ever in 2025, we purchased significantly more portfolio than we ever have in the U.S. MCM leaned into this opportunity by finishing the year with a record $1.17 billion of portfolio purchases, up 18% compared to the previous record high in 2024. That's an increase of $175 million on a year-over-year basis. In addition to solid portfolio purchases in 2025, our MCM business continues to excel operationally. MCM collections increased in 2025 to a record $1.95 billion, which was an increase of 24% compared to 2024. Our collections momentum continued throughout 2025 with Q4 collections of $503 million, the highest collections quarter ever for our U.S. business. The collections overperformance in the U.S. was driven by the deployment of new technologies, enhanced digital capabilities and continued operational innovation, which enabled us to reach more consumers, leading to more payments as well as a large and growing payer book. These initiatives had a greater impact on the early stages of the portfolio's life cycle, leading to overperformance of our recent vintages. We expect that our collections forecast will gradually adjust to reflect the positive impact of these initiatives. Our outstanding results not only reflect the improvements we've made in our collections operation and the overall effectiveness of our collection platforms, but also the strength of the U.S. consumer. Despite some of the negative news and macro uncertainty in the U.S., our consumers' payment behavior remains stable. This is in line with what many of the bank and credit card issuers are saying in the recent earnings calls. We, of course, continue to monitor for any signs of change. Turning to our business in Europe. Cabot delivered a solid year of performance in 2025. Cabot collections in 2025 were $641 million, up 9% compared to 2024. We continue to be focused on Cabot's operational excellence and cost management, including leveraging relevant best practices from our MCM business. This is particularly relevant in the U.K., where banks are increasingly selling fresh portfolios and forward flows. Our operational focus and initiatives have enabled Cabot to continue to deliver stable collections performance. Cabot's portfolio purchases in 2025 were $234 million, which is in line with the historical trend, but lower than 2024 due to the exceptional Q4 2024 purchases of $200 million that included large attractive spot market portfolio purchases. We continue to be selective with Cabot's deployments as the U.K. market remains impacted by subdued consumer lending and low delinquencies in addition to continued robust competition. I'd now like to hand the call over to Thomas for a more detailed look at our financial results. Tomas Hernanz: Thank you, Ashish. Moving to the financial results slide. For the year 2025, we delivered strong growth in collections and portfolio revenue of 20% and 12%, respectively. The strong collections performance was supported by the high levels of U.S. portfolio purchases in recent quarters, our focus on execution, operational improvements and a stable consumer behavior. Collection yield for the year was 63.6%, an improvement of 3.9 percentage points compared to the prior year. Portfolio revenue in 2025 increased by 12% to $1.46 billion, supported by 12% growth in average receivable portfolios and a portfolio yield of 35.7% As a reminder, changes in recoveries is the sum of 2 numbers. First, recoveries above or below forecast is the amount we collected above or below our ERC expectations for the quarter and is also known as cashovers or cash unders. Second, changes in expected future recoveries is the net present value of changes in the ERC forecast beyond the current quarter. Changes in recoveries were $209 million for the year. Of that total, the vast majority, $198 million, were recoveries above forecast. Changes in expected future recoveries were $11 million. For the fourth quarter, changes in recoveries were $68 million. Of that total, $57 million were recoveries above forecast. Changes in expected future recoveries in the fourth quarter were $11 million. Both of our businesses, MCM in the U.S. and Cabot in Europe were net positive contributors to changes in recoveries for the fourth quarter and the full year. Put differently, during 2025, we collected $198 million more than we forecasted in our ERC, which is incremental cash flow. The collections overperformance in the U.S. was driven by the deployment of new technologies, enhanced digital capabilities and continued operational innovation, which enabled us to reach more consumers, leading to more payments as well as a large and growing payer book. These initiatives had a greater impact on the early stages of our portfolio life cycle, leading to overperformance of our recent vintages. We expect that our collections forecast will gradually adjust to reflect the positive impact of these initiatives. As this takes place in the next few quarters, we expect any future cashovers to migrate eventually into portfolio revenues. Debt purchasing revenue in 2025 increased by 37% to $1.66 billion, and the resulting net purchasing yield was 40.8%. Approximately 5.1% was the impact of changes in recoveries. Other revenue in 2025 were $104 million, bringing total revenue to $1.77 billion, reflecting growth of 34%. Operating expenses in 2025 decreased by 1% to $1.14 billion as reported. However, operating expenses for the year, adjusted for onetime items, were up 11% compared to 20% growth in collections, reflecting significant operating leverage in the business. Cash efficiency margin for the year improved by 3.2 percentage points to 57.8% compared to 54.6% in 2024. We expect cash efficiency margin for the year to exceed 58% in 2026. Interest expense and other income for the year increased by 15% to $291 million, reflecting higher debt balances. Our tax provision of $79 million in 2025 implies a corporate tax rate of approximately 24%, which is in line with our previous guidance. Finally, net income in 2025 was $257 million, resulting in earnings per share for the year of $10.91. We believe our balance sheet provides us with very competitive funding costs when compared to our peers. Our funding structure also provides us financial flexibility and diversified funding sources to compete effectively in this favorable supply environment. Leverage closed for the year at 2.4x, a 0.2x improvement versus last year and lower than a quarter ago. In October, we issued $500 million of senior secured high-yield notes due 2031 at an attractive coupon of 6.625%. Also in October, we settled $100 million of 2025 convertible notes entirely in cash. In November, we repaid EUR 100 million of the principal outstanding under our 2028 floating rate notes. The combination of these transactions improve our balance sheet, leave us with no material maturities until 2028. and provides strong liquidity to continue to grow our business well into the future. With that, I would like to turn it back to Ashish. Ashish Masih: Thanks, Tomas. Now I would like to remind everyone of our key financial objectives and priorities. Maintaining a strong and flexible balance sheet, including a strong BB debt rating as well as operating within our target leverage range of 2 to 3x remain critical objectives. With regard to our capital allocation priorities, buying portfolios, particularly in today's attractive U.S. market, offers the best opportunity to create long-term shareholder value by deploying capital at attractive returns. This is indeed what we are doing as highlighted by our track record of purchasing receivable portfolios at strong returns. Next on our capital allocation priority list are share repurchases. As I mentioned earlier, we repurchased approximately 9% of our outstanding shares in 2025 for approximately $90 million, reflecting our confidence in Encore's future performance. And finally, we remain committed to delivering strong return on invested capital throughout the credit cycle. Our ROIC improved to 13.7% in 2025, up from 7.5% in the prior year and at the highest level in the last 4 years. As a result of our strong performance in 2025, the business momentum we are carrying into the new year and a positive outlook for 2026, we are providing the following guidance on key metrics: We anticipate global portfolio purchases in 2026 to be within a range from $1.4 billion to $1.5 billion. We expect global collections in 2026 to increase by 5% to $2.7 billion. In addition, after a strong year in 2025 in which productivity enhancements and strong execution across the business contributed to a new level of earnings power. We expect our EPS in 2026 to increase by 10% to $12 per share. We expect the combination of interest expense and other income to be approximately $300 million for the year, and we expect our effective tax rate for the year to be in the mid-20s on a percentage basis. In closing, as I look ahead at this year and beyond, I'm truly excited about how Encore is performing and our future prospects. Let me state 3 reasons why I feel this way. First, we're buying record amounts of portfolio at strong returns. Through our MCM business in the U.S., we are the largest debt buyer in the largest and most valuable consumer credit market in the world. The U.S. market continues to be very favorable, driven by growth in consumer lending and charge-off rates that are at the highest level in 10 years. Given our superior collections capabilities, we are able to purchase record amounts in the U.S. at strong returns. Second, our collections operations are performing very effectively. At the same time, our teams are continuing to enhance our collections capabilities through innovation in areas such as omnichannel and digital collections. And our collections effectiveness is also enabling us to reduce leverage while growing portfolio purchasing. The third and final reason is our funding. We have adequate liquidity to continue to grow the business as a strong flexible balance sheet provides us the capacity to capitalize on any opportunities that come up in the market. Now we'd be happy to answer any questions that you may have. Operator, please open up the lines for questions. Operator: [Operator Instructions] Your first question comes from the line of David Scharf with Citizens Capital Markets. David Scharf: Obviously, this attractive part of the cycle is translating into the very strong results. So focusing less on the quarter and more on 2026 guidance. Just drilling into the EPS guidance a little bit, a couple of questions. And just setting aside the actual number of $12 per share, I think maybe what's most noteworthy for investors is just the fact that you provided earnings guidance. Can you provide maybe a little bit of what the thought process was behind kind of why you felt now after so many years was the right time to give guidance and why it was a particular single number and not a range because I think all of it certainly is going to be viewed positively. Ashish Masih: David, thanks for your question. This is Ashish. So as you -- just a bit of context, you correctly point out this part of the cycle is helping drive strong purchasing and collections. But I would like to just underscore and highlight that it's not just the market that's strong, which is the case, favorable U.S. market, but we are really buying well and executing well and not the case with everyone I would imagine. So we feel really good about how collections are performing. And in terms of your direct question on the guidance, this is indeed a different path we are taking because what we're finding is our expectations for the future and earnings power of the business was not truly getting reflected in some of the estimates that are out there. So we wanted to make sure investors and analyst community can take that cue from us. And your question around point estimate versus the range is a good one. We kind of thought that through, and we feel comfortable with this $12 number at this point. Of course, we'll monitor performance throughout the year, how that goes. But we just felt compelled to kind of make sure everybody was understanding kind of what our prospects are, and so we put it out there. David Scharf: Got it. Understood. Certainly speaks to more earnings visibility. Maybe diving into the actual guidance itself a little more. As we think about 10% EPS growth. Are you able to, I guess, provide how much of that is coming from kind of the future share buybacks, just the lower share count, if we should be factoring in buybacks this year as well as whether or not a lot of the upfront legal expenses are going to level off into 2026? Ashish Masih: So we kind of develop our guidance based on a range of factors and we'll continue to monitor it through the year. So clearly, you can estimate what happened last year in terms of the share repurchases impact. So that's a reasonable one to take, I guess. But we are not providing an estimate on repurchases amount for the coming year. Now in terms of legal expenses, they will rise, I would say, as we are buying a lot of accounts. But at some point, they do level off. Also, as you noticed, percent of legal collections is at an all-time low for MCM, around 34%, 35%. So we are collecting more and more in early part of the cycle, stage of a portfolio or a vintage, and that's going to call center and digital collections and increasingly to digital collections. So we feel really good about it, but we are buying a lot of portfolio in the U.S. So there will be some legal increase, I would imagine. At some point, it tapers off. So we took into account a whole range of things, as you can imagine, to provide that $12 number. Tomas Hernanz: Yes. One more thing is I wouldn't focus so much on the specific lines of the OpEx line. But just keep in mind what I said in the call where we do expect cash efficiency margin to be better than 58%, right? So which is very much what we printed in '25. So regardless of where we end up in legal, we think that margins are going to increase year-on-year. Operator: Your next question comes from the line of Robert Dodd with Raymond James. Robert Dodd: Congrats on the quarter and with David on thanks for the earnings guidance as well. On the -- in answering David, you just said that you would not be giving guidance for how much to expect on the buyback front. But when I look at the rest of the guidance components, right, I mean, collections growing, I mean, obviously, purchases growing, but you generate such a large amount of cash and efficiency is improving. All of that would tend to point to your leverage is going to continue heading lower. And in my opinion, at least. And you're already below the midpoint. So I mean, while you maybe not giving guidance per se, would it be reasonable to -- for an investor to think that maybe buybacks would accelerate in '26 versus what we saw in '25? Ashish Masih: Robert, thanks for your question. You're right on the leverage. So as we are -- we have grown purchasing, but we are collecting really well. Our leverage will continue to trend downwards. And kind of how that impacts repurchases. So what we have said, our priorities are very clear. And in terms of we said where as you approach midpoint, we will resume share purchases -- repurchases, which happened last year. But there are other factors we've said like balance sheet and liquidity -- strength of balance sheet, liquidity, continued performance, kind of outlook on the markets and so forth. So those factors are there as well. But we did accelerate, to your point, our repurchase rate towards the end of 2025 compared to early part of 2025. So that's kind of we are well positioned to continue supporting repurchases, as I indicated, but we haven't given an exact number. Robert Dodd: Got it. Got it. Appreciate that. I mean one other thing I did know, I mean, in the past, when you've given capital allocation priorities, M&A is a bit on the list, usually at the bottom of the list, to be fair. It's well below portfolio purchases. This time, it's not on the list at all. I mean, is that an indication that just the market for portfolio purchases is so good that you cannot see M&A representing a good candidate for capital allocation over the next 12 months? I mean is that just -- it just doesn't -- it seems very, very unlikely to you? Or any color there? Ashish Masih: Yes. So 2 things there, Robert. So one is we changed that hierarchy in Q3 2024 results, in November 2024. So at that time, I stated and I kind of still hold to kind of what we are seeing is a very consistent set of portfolio buying opportunities, particularly in U.S. So we feel very comfortable. And M&A, of course, it's always there as a possibility. We see all the opportunities. We look at it. The bar for us is high. We've been very disciplined. It does not mean that if a very attractive opportunity came by, particularly if there's a back book with it or whatever it might be, that we would not take it more seriously, we would. But based on the opportunity that we see, combined with the purchasing environment in the U.S., we felt portfolio buying is clearly the #1 priority and M&A had moved, of course, a little bit lower. So that's what change we made about 15, 16 months ago, and we are still holding true to that right now. Robert Dodd: Got it. Got it. I appreciate. My memory may be failing me. One more, if I can. On the efficiency, and I mean, obviously, your collections performance has improved markedly. And at the early parts of the curves and as you say, you haven't -- that hasn't fully flowed into the curves themselves right now, and you need more proof case. But at the same time, your collections efficiency seems, if anything, to be accelerating, right? I mean -- so I mean, how far -- for lack of a better term, how far behind the curves or how far behind are the curves versus the pace at which your operational efficiency and execution continues to improve? I mean another way to put it, like how many quarters do you think it will take for all of those improvements to actually be reflected in the curve might be the simpler way of asking it. Ashish Masih: Yes. So I kind of got the 2-ish parts of your questions. So on that one, it will take a few quarters. So as we get actual results -- and again, these are the early stages of the 2024 and '25 vintages, which are very large, by the way. So that's why the dollar impact is huge. '24 was $1 billion of purchasing. '22 is close to $1.2 billion. So these are large vintages. It takes -- it will take a few quarters as the actual data comes through. Now what you will see then is the cash over revenue, which is recoveries above forecast will migrate over time to portfolio revenue. So that's one element of your question. I think the other one is the efficiency or the cash efficiency margin on the operating leverage, that's continuing to kind of improve as well, and we continue to innovate and improve our operations. If you look at our headcount that we disclosed, the total headcount, I mean, it's been flat for 3 years, and our collections are up from '23, '24, '25, our headcount was flat, and our collections have gone up almost 40% in that time. So you can see the operating leverage is truly kicking in combination with improvement in our collections as well, not just pure fixed variable issue. Are there any other questions in the queue? Operator: Yes, excuse me. The line for Mike Grondahl is now open with Northland. Mike Grondahl: Congratulations on a very strong finish to the year. Ashish, I got on a little late, so I apologize if this has been asked, but I think it's important, too. I can't remember the last time, and this is probably going back 5, 10 years that ECPG has guided earnings for a forward year. But here, you guys are guiding to $12 for next year, roughly a $3 per quarter run rate. What is sort of giving you the confidence to do that? What's sort of driving this change, if you will? Ashish Masih: Mike, thanks for your question. So we've been buying really well for many years and collecting really well in a very consistent manner as we expected our collections to grow. We've also kind of stabilized Cabot. So there was a couple of years where we were kind of restructuring Cabot operations in terms of operations performance as well as its cost structure. And after we made some of the corrections at the end of '24, last full year has been very stable performance that Cabot team has delivered. And on top of that, MCM team continues to deliver innovation, operational excellence and growing collections. So all of that is playing into our confidence, and we see very good purchasing outlook for 2026 as well in the U.S. And we'll, of course, be disciplined at Cabot, and we are buying our kind of fair share there at the right returns. So overall, the environment feels -- we feel very confident, combined with kind of how we are executing in the market to provide the guidance. Now of course, as I said earlier, part of that motivation was also that the investment community, the estimates were not truly reflecting our prospects. So we felt compelled to kind of provide it at this stage so that everybody can get a sense of what our future prospects are as we feel them at this moment. Mike Grondahl: Cool. And then maybe 2 more questions. Clearly, we're in early '26. This purchase environment has been good for you guys for the last, I'll say, 3 or 4 years. I described it as you're kind of filling up your bucket. Are there -- as we roll from '25 to '26, would you say the environment is steady, the same? Is there really any changes you're observing in the U.S. purchase environment? Ashish Masih: Yes. It's -- I would say you characterized it correctly. It's very steady. So overall volume of supply that we see and our team can kind of seize all the deals is very stable in terms of total dollars available for sale. Now that's also dependent on the environment itself. So outstandings are at a record level. The charge-off rate is near 10-year high. So the combined impact of that is, as I said in my prepared remarks, if you take Q3 data from Federal Reserve, it's about $54 billion in annualized charge-offs. It's a very big number. So overall supply is stable. The second element is pricing is also very stable. We see a rational environment there. So both of them are very similar to 2025. And therefore, we guided to a number we expect it to exceed 2025 purchasing of $1.4 billion, and we provided a range there. Of course, we are very focused on returns. We're not going to buy for the sake of buying, but we feel it can grow based on the 2025 number. Mike Grondahl: Got it. And next, a question about technology. Would you say technology is helping Encore more on the expense side by lowering costs? Or is it helping more on the revenue side because lower cost to collect, you can pursue more accounts that were kind of previously uneconomic. Ashish Masih: I would say it's helping more on the collection side, which is the revenue side. So our yields, our portfolio yields that we now disclose, and you can compare those calculations to anyone in the industry in Europe and here in U.S. are the highest. So we are collecting more. And our cash efficiency margin is solid. It is not the lowest. So we are really spending a bit more, and a lot of that is on technology to collect even more. So the net collections is the highest. And as I said, our omnichannel and digital collections are rising. All of that innovation is driving more and more collections. And yes, we are spending some more, but the netback is very attractive. And therefore, we are able to bid and win the portfolios we want in the market. Mike Grondahl: Got it. And then last question. I know you're investing in the business buying back shares second and then maybe M&A. But it seems like from a cash flow and a deleveraging basis, '26 is going to be even better than '25. Are we naive to think that buyback almost has to be higher in '26 than '25, annualizing 3Q, 4Q, the back half of '25, a lot of cash flow. How do you want people to think about that? Ashish Masih: I would kind of reiterate what I said, and I think on one of the questions as well. Leverage will trend down from what we can see based on how we are collecting and even though we are growing purchasing. So leverage will continue to trend down. And we have a very clear framework. So we did accelerate repurchases later in the year in '25, of course. So we stand by our kind of framework, which was 15 months ago, we said that we will resume buybacks at midpoint of leverage and potentially accelerate as we get to the lower end. So that's the framework that I think would be most appropriate for you to think about. Clearly, leverage will improve, and we'll watch it every quarter how it's going to go, and that would impact. Other factors are important, too, opportunities may be there for more portfolio buying or some potentially M&A or who knows what could come, although the bar is very high, as we said. So we have to look at kind of what's happening today, but also the outlook and then factor in and decide kind of on those repurchase levels, if you would. Operator: Your next question comes from the line of Max Fritscher with Truist. Maxwell Fritscher: I'm on for Mark Hughes. Did you see any tailwinds to collections in 4Q from the lower interest rates? And then how would you expect that to affect 2026 collections in your guidance if rates were to go a little bit lower and help ease that marginal pressure on consumers? Ashish Masih: Max, we cannot isolate kind of small changes in interest rates to collections. I mean, overall, I would say and reiterate what I said in my prepared remarks, in terms of the U.S. environment, the collections consumer is very stable. We are seeing good payer rates, how people are holding on to the plans. It's been very stable. So overall, fairly stable consumer outlook on payment behavior. And just remember, our consumers who we deal with are already in some kind of financial distress, and we know how to work with them. So small changes in interest rate or other factors may or may not impact them, and we have a lot of flexibility. We don't charge kind of interest or fees and things of that nature. So we are able to change the payment plans and adapt. So we have not seen any kind of noticeable impact on payment behavior in late 2025, as you asked. And from what I can sitting here tell, we don't expect that any of the interest rate changes to impact in '26. Now if any other things happen, we'll be monitoring them, of course. Maxwell Fritscher: Understood. And then what is your assumption on the change in recoveries that you expect in 2026? Ashish Masih: So changes in recoveries is calculated every quarter based on our forecast, kind of there's 2 components, right? Cashovers or recoveries above forecast. And then the second component is the NPV of the forecast change. So in 2025, vast majority was cashovers. And again, those were heavily coming in U.S. from the 2024 and 2025 vintages, which, by the way, as I said, were driven off because of our improvements in digital and kind of other operational improvements impacting the early part of the curve. Now those vintages are starting to age, and we expect over time, these cashovers to migrate into portfolio revenue over time, and it will take a few quarters, as we said. Operator: You have another question from the line of David Scharf with Citizens Capital Markets. David Scharf: Ashish, it's been quite a while since we really asked about competition in the U.S., but there's clearly been a much more benign regulatory environment at the federal level under the current administration. It's led to a lot of actions taken by consumer finance companies getting bank licenses and other such things. Has it -- has -- the perception that there is a less onerous CFPB or other framework, has that impacted how sellers are thinking about potentially engaging with new competitors? Or is it still a very kind of small circle of buyers that are approved and likely to continue to be that way? Ashish Masih: So there were a couple of different things in your question, David. So in terms of the regulatory environment, the rules are all well set for the industry. They took years of rulemaking and then 4 years ago, they went into effect. So all of those rules, everyone has to comply with them. They are good rules for the consumer, good for the industry. Those are there. Whatever state-level regulations are there are still there. So I just want to make sure I address your question broadly. So none of that regulatory kind of perhaps whatever you mentioned on CFPB, all of that is pretty stable. I don't think that's impacted number of new buyers coming into the picture because they can get financing or other things that are possible perhaps. So we're not seeing any new competitors. There's a bunch of -- a few midsized and a lot of small ones that have always been there, so nothing new. Some of them buy a significant amount and then go away as they see the performance. So that phenomenon is pretty stable on that front. So on the buying side, that's the change. On the selling side, yes, I would say, as I think we indicated a few quarters ago, off and on, there's a bit of chatter, banks trying to figure out whether they should sell or not, some who don't sell or test water. So nothing material to report on that front right now. But that chatter has been there for the last year or so, if you would. Operator: Your next question comes from the line of Mike Grondahl with Northland Capital Markets. Mike Grondahl: Two more. One, just curious, any benefit in 1Q '26 that you're seeing from higher tax refunds? Ashish Masih: It's still early. Yes, it's still early to see. We monitor tax refunds on a weekly basis, the data that comes out. There is kind of news out there in terms of how the tax bill was structured. So some of the benefits that consumers would have gotten, people would have gotten last year, they're going to get in refunds. Now it also depends on which income strata it's going to go to and how it trickles down or trickles sideways, whatever might happen. So we are going to observe, but that's kind of out in the news and how it will impact, it's way too soon in the quarter. Operator? Operator: I'm showing no further questions at this time. And I'd now like to turn it back to Mr. Masih for closing statements. Ashish Masih: Thanks for taking the time to join us today, and we look forward to providing our first quarter 2026 results in May. Operator: Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.