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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.
Operator: Welcome to the LeMaitre Vascular Q4 2025 Financial Results Conference Call. As a reminder, today's call is being recorded. At this time, I would like to turn the call over to Mr. Dorian LeBlanc, Chief Financial Officer of LeMaitre Vascular. Please go ahead, sir. Dorian LeBlanc: Thank you. Good afternoon, and thank you for joining us on our Q4 2025 conference call. With me on today's call is our CEO, George LeMaitre; and our President, Dave Roberts. Before we begin, I'll read our safe harbor statement. Today, we'll be making some forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, the accuracy of which is subject to risks and uncertainties. Wherever possible, we will try to identify those forward-looking statements by using words such as believe, expect, anticipate, pursue, forecast and similar expressions. Our forward-looking statements are based on our estimates and assumptions as of today, February 25, 2026, and should not be relied upon as representing our estimates or views on any subsequent date. Please refer to the cautionary statement regarding forward-looking information and the risk factors in our most recent 10-K and subsequent SEC filings, including disclosure of the factors that could cause results to differ materially from those expressed or implied. During this call, we may discuss non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures discussed in this call is contained in the associated press release and will be available in the Investor Relations section of our website, www.lemaitre.com. I'll now turn the call over to George LeMaitre. George LeMaitre: Thanks, Dorian. Q4 featured 16% sales growth, a 71.7% gross margin, and 47% op income growth. Q4 sales were led by grafts, up 27%, valvulotomes up 20%, and shunts up 18%. EMEA grew 29%; APAC, 20%; and the Americas, 10%. Artegraft grew 29% worldwide in Q4 as our OUS launch continues. We now have approvals to sell Artegraft in 52 countries. International sales were $1.9 million in Q4 and $4 million in full year 2025. We expect to sell approximately $10 million of Artegraft internationally in 2026, contributing $6 million of sales growth for the year. In Q4, RFA vascular grew 19% and RFA cardiac grew 90%. As a reminder, we currently distribute RFA tissues in just 3 countries: the U.S., Canada, and the U.K. German distribution should begin in Q2, and we now expect to receive Irish approval in Q3. We also plan to file for approval in Austria, Holland, Belgium, Spain and Switzerland this year. On a related note, we will be consolidating our Chicago RFA facility into Burlington in 2026 as we seek to simplify operations and reduce costs. We ended 2025 with 160 sales reps, up 5% year-over-year, and we plan to end 2026 with 170 to 180. We also expect to go direct in Poland in Q4. We've begun hiring a Polish general manager. This project will include an office, warehouse, customer service team and several sales reps. We currently sell approximately $650,000 a year to our Polish distributor, and this will be the 32nd country where LeMaitre sells direct to hospitals. As mentioned on our November call, the 2026 U.S. price list reflects a blended 8% increase across the portfolio. On January 1, the price increase was installed and early results indicate hospital acceptance. Our U.S. customer service team tells us that this year's transition has been smoother than in years past. Our European customer service team also reports positive customer acceptance to a similar January 1 price increase. 2025 was another year of operating leverage at LeMaitre. Sales were up 14% and op income was up 30%. And our 2026 guidance indicates another nice year on the horizon, 12% sales growth and 21% adjusted op income growth. We recently hung our 5-year goals on the conference room wall. We call them the 2030 planks. Our playbook remains simpler: produce quality devices, build our vascular sales force, go direct in new countries, acquire niche products and focus on profitability, cash flow and dividends. I'll now turn the call over to Dorian. Dorian LeBlanc: Thanks, George. Q4 organic revenue growth was 15% with 9% price growth and 6% unit growth. Organic growth was broad-based both by geography and by product category. In Q4, our gross margin increased 240 basis points year-over-year to 71.7%. This increase was a result of higher ASPs and manufacturing efficiencies. Operating expenses in Q4 were $27.4 million, a 6% year-over-year increase. Our margin expansion and moderated expense growth in Q4 led to operating income increasing 47% year-over-year to $18.8 million, and operating margin of 29%. Q4 fully diluted earnings per share were $0.68, a 39% increase year-over-year. Our Q4 EPS includes a onetime loss on a mark-to-market adjustment in our investment portfolio of $0.5 million for an investment that has subsequently been sold. Overall, 2025 was a year of 14% organic revenue growth with 9% price growth and 5% unit growth. Adjusted gross margin of 70.4%, a 180 basis point improvement over 2024, adjusted operating margin of 26%, and adjusted EPS growth of 23%. Our adjusted numbers exclude the onetime benefit from the employee retention tax credit received in Q3 2025. We ended 2025 with $359 million in cash and securities. Our free cash flow, cash from operations less capital expenditures in 2025 was $74.5 million. In January 2026, we experienced a cyber incident that affected certain of our systems and data. We securely restored our critical systems and experienced minimal to no disruption in sales to our customers or in the manufacturing or release of product. We do not believe the incident has had a material impact to our financial position or results, and we believe we have adequate insurance coverage. The estimated impact is reflected in our 2026 guidance. However, our review of the incident remains ongoing, and we are subject to various risks described in our SEC filings, including in our upcoming Form 10-K. On February 19, our Board of Directors approved a new $100 million share repurchase program and a Q1 2026 dividend of $0.25 per share, an increase of 25% year-over-year. This is our 15th consecutive year increasing our dividend. Our increasing dividend underscores our continued focus on profitable growth, and that commitment is reflected in our 2026 guidance. We anticipate full year 2026 revenue of $280 million, organic sales growth of 12%, a gross margin of 72.1% and operating income of $77.8 million, up 21% adjusted from a very strong 2025. We are guiding EPS of $2.91 per share, up 22% adjusted. The manufacturing transfer of our Chicago RestoreFlow processing to Burlington and the opening of our new 34,000 square foot warehouse will drive an increase of CapEx to approximately $11 million for the year. Our guidance implies a constant euro-U.S. dollar exchange rate of $1.18 for the year and an anticipated yield on our invested cash of 4%. The LeMaitre franchise delivered in 2025 with a focus on niche markets, our direct-to-hospital sales model, our growing commercial organization and our disciplined expense and capital management. Thanks to our focused and dedicated global teams, we believe we are poised for another successful year in 2026. Finally, we would like to welcome Kyle Bauser to the call. Kyle has picked up the coverage of LeMaitre at ROTH. Thank you, Kyle, and we look forward to the continued coverage. With that, I'll turn the call over for questions. Operator: [Operator Instructions] Our first question comes from Kyle Bauser with ROTH Capital Partners. Kyle Bauser: Thank you for the welcome. It's a pleasure to be following the company. Maybe I'll just start off on guidance. Really nice finish to the year, continued operating leverage. 2026 looks to have some nice continued operating leverage in the business. Can you maybe rank the factors that will be key to achieving the operating growth kind of that's north of what the sales growth rate is, just kind of explain the leverage in the business? George LeMaitre: Sure. This is George, Kyle. How are you doing, and welcome to the call and welcome to covering the company. Yes, maybe looking backwards, it's a little bit of a look at the leverage, but we've been pretty good at keeping headcount at a fairly stable level. We've been good at growing our sales pricing, our ASPs to the customers. You've seen that again here at the beginning of 2026 in our gross margin. We're getting a little more efficient also manufacturing our products. So old-fashioned operating leverage was what we showed last year. To get to that was at 14% sales growth and 30% profit growth, and we expect more of the same next year. Kyle Bauser: Got you. I appreciate that. And George, in your prepared remarks, you talked about the 8% blended increase for this year in prices, and it sounds like this year's transition was smoother than in the past. I guess any additional color around maybe why it was more difficult in the past, and more over kind of the outlook for future price increases? Is 8% still kind of what you're looking for going forward? George LeMaitre: It's always on everyone's minds with us. So let's talk about prices a little bit. So this year, we decided to send the price list out on November 1 instead of December 1. And I feel like that gave everyone a little bit more time, the sales reps, the customer service reps, and the hospital purchasers, time to prepare for the transition in January. So we had a really nice transition, really smooth transition. But it may also be worth pulling out, everyone's like, well, is this business as usual? And I think why I'm calling it out in my script is I just want to communicate to folks, it feels like business as usual -- maybe a little smoother than normal for bureaucratic reasons, but it feels like business as usual, and the U.S., what I'll call, rack rate price list increases. Kyle, you're new to this group, but we've read them out sort of in January previously -- or sorry, the first call in February previously, so I'll do it again here. But in '22, we had a 6.1% price hike for the U.S. hospitals, 5.6% the next year, 5.8% the next year, 8.1% the next year, and finally, this year, 8.3%. So it's been getting a little bit higher, but I would call this business as usual in the U.S., and we're getting word back from our European colleagues that it's business as usual as well over there. Kyle Bauser: Okay. Appreciate it. And then just quick lastly, I think reps, 160, you expect to end the year at 170 to 180. Do you anticipate -- what does the cadence look like there? Is it kind of steady, evenly distributed across the year, more back-end weighted? Just curious. George LeMaitre: Right. Kyle, of course, you bumped into this one. So I had been giving this quarterly, and I think this is the first time we're going to try not to give this quarterly and just give it annually. It's really hard to keep track of individual sales reps and when they're going to quit and when they're going to get hired and things like that. So I think we're not going to try to give you quarterly check-ins exactly -- we may check in with it, but we won't tell you what we're trying to get to. I think you can think broadly that we're trying to tell you we're going to grow our sales force. And you already know a couple of them are going to be in Poland as well. So that includes the Polish move that we talked about in my script. But I hope that suffices, something like 170 to 180 at the end of the year. Operator: [Operator Instructions] Our next question comes from Rick Wise with Stifel. Frederick Wise: Great to see the excellent quarter. A couple of things. You highlighted in your starting remarks sort of who we are and what we do, the M&A, we acquired niche products, et cetera, et cetera. Hate to always hit the M&A question, but gosh, what a great job you're doing with cash generation, $359 million. Surely, all things equal, that number is going to be higher in 12 months, depending on how you manage the share buybacks. But how do we think about the setup for M&A in '26? How important is it to you now? What are you thinking about? George LeMaitre: Maybe I'll give you a quick intro and then Dave will handle most of it. Obviously, Dave is here. I would say, in a good way, one of the things we've been trying to prove over the last 5 years is that this company was a great operating company by itself and didn't have to rely on M&A. And I think the proof is in the pudding, we've had all these years of the organic growth rate of 17%, 13%, 14% and now who knows what happens this year. So we have had a bit of a chip on our shoulder about trying to prove to you guys that we could do it organically. But of course, we went out and raised all this money. We're really in the game for M&A. Maybe Dave can expand a little bit more on how he sees the field right now. David Roberts: Yes. Rick, thanks for the question. Obviously, the center of the fairway for us is still that open vascular area where we get 80% of our revenue. There are about 22 targets there, I think, as we've talked about. And frankly, we're in discussions with all of them, some more actively than others. But it's not that broad of a universe. So as you also know, we've started looking for acquisition targets in the cardiac surgery field, and that's 12% of our revenue. The sweet spot for us is revenues of anywhere from, I don't know, $15 million to $150 million. And I think some of the larger ones might be -- there are a few large ones in open vascular, but some of the larger ones are in cardiac surgery. Do I feel more pressure to do an acquisition? I don't know. I feel it's always the same. I always feel a lot of pressure to do a good acquisition. But in terms of the timing, I would say, it's nice to have cash, because the cash creates optionality, allows us to look larger. But as I've often said, it's more important to do a right acquisition that might not be as large than to just use all the cash. That's not what we're here to do. We'd love to find a great large acquisition, but we're looking for the right acquisition. Frederick Wise: And one more for me. Just maybe you could unpack the stellar really Artegraft performance in the quarter, and you highlighted a couple of points, but just help us understand, so 2 things, one, maybe is the TAM, is the opportunity perhaps bigger than the $8 million in Europe, for example, you talked about in the past? And I mean, you're already at $2 million quarterly run rate in the fourth quarter, I think, if I remember saying it right. But how sustainable is this? Any updated thoughts on the TAM? George LeMaitre: Okay. So Rick, we knew we're going to have to get to this, and I would say I just take the blame for that one. We put that TAM out there. I guess we didn't exactly understand what we had in our hands, and it's a lot better than what we thought. So for fun, again, this is not too scientific, but maybe we're going to call the TAM $30 million now instead of $8 million, and that's new for this phone call. So thanks for calling us out on that. You're right on that. The TAM, you can also add up right now. We're already -- forget about TAM, but the actual market that we're selling right now. Remember, we have that Omniflow ovine graft, that sheep graft, it's a piece of it. And then we also have this new thing, the Artegraft in Europe, which you now know is $4 million. And the other one is $6 million. I'll give you that on this phone call. We're looking backwards, it's always sort of okay, not going forward. So there's 10 million right there. And maybe we call the TAM $30 million right now. It's going great. I think it's ahead of expectations. The doctors are more excited about it. In some ways, the Omniflow, which is the ovine sheep product, sort of it smooths out the path for the doctors to be ready for the ovine version, which is more robust and, I would say, more healthy, less prone to post-implantation issues and things like that. So all good stuff over there. The market is ready for it, and we have a fantastic sales force of about, I think, 55 reps over there maybe right now -- 55 or 60, I should know the number. 55 reps over there, Rick. So yes, we're ready to go. We keep going direct in all these new places. It feels great. It's a great launch at the right time for that company. And you could see what happened last year. Organic growth in Europe is 17%. Is that quarter or is that year? David Roberts: Year. George LeMaitre: That's year. Okay. Yes. So 17% organic growth driven a lot by that product line. Hope I gave you what you wanted, Rick. Dave, do you want to add something about the different products maybe? David Roberts: I might add, Rick, that Artegraft in the U.S. is used primarily for dialysis access procedures. And in Europe, the algorithm for dialysis treatment is fistula first and then frankly, they go right to a catheter, which is difficult for patients due to the infection risk. They skip over the middle step that we have in the U.S., which is to implant an access graft, and that's where Artegraft has really shined. So in Europe, Omniflow, the graft that George is referring to, is used predominantly as a leg bypass graft. And we're seeing, in early days, Artegraft, the hospitals and doctors are ordering the longer ones for use in the leg. I think we'll be developing the market for AV access graft, dialysis access graft in the arm, but we believe it's there strictly because we see the success in the U.S., and the patients' benefit. So I think we're delighted by the uptake of Artegraft in Europe and outside the United States now. And I think we have a long-term growth potential there by expanding the use of it more into dialysis access. Operator: Our next question comes from Michael Petusky with Barrington Research. Michael Petusky: So George, I guess I'm curious about Europe and the strength there. And obviously, Artegraft gets some of the credit. But I'm just curious, do you feel like the way you guys approached MDR and sort of really got after when some other competitors didn't or just decided to sort of throw in the towel on some products. I mean, is that part of what's driving that too? And if that's the case, I'm just wondering how -- any anecdotes about picking up share and that sort of thing? George LeMaitre: Sure. Okay. So it's a little bit of that. We've been pretty aggressive with MDR. In fact, just to sit on that point for a second, we got our final necessary MDR approval for our PTFE LifeSpan product. We couldn't be more excited about that. I think we have 22 approvals and our regulatory gang has just done a knockdown job getting those things early for us. As to whether it's taking share because other people have fallen down on the job, other companies have not gotten their approvals. I think early on, we were getting worried that, that was the case. I don't have additional stories. You heard a lot about our shunt where we were sort of left as the only man standing for a while. I think 1 or 2 of them are coming back on the market now. But I would say, we're thrilled where we are MDR-wise. I don't have new stories about material players dropping out of the market vis-a-vis MDRs. I will tell you, every time a company gets acquired in and around our space, I think the Edwards' embolectomy catheters were acquired by BD 1.5 years ago, somehow the larger companies that they get traded into, they don't treat these as well and they leave opportunities for us. So maybe we have some opportunities around catheters because a very large competitor now owns the Edwards catheters. But of course, Edwards is large to start with. So no new great war stories there. Just maybe we go direct, where we went direct in Portugal last year, we went direct in Czechia, you're hearing us talk about Poland. We're really covering the map over there. And at some point, we're going to be one of the largest vascular distribution channels in Europe. So maybe that always plays into our health over in Europe. I don't know. Michael Petusky: Okay. Great. Let me ask one more question, my almost obligatory question on China. I know it's a tiny market for you, but I also know you're trying there. And I'm just wondering, any updates in China? George LeMaitre: Sure. And I think for the last 3 or 4 calls, Mike, and I appreciate you staying on the topic, it's been good news over there. And I got another good one for you, which is I think we were up 24% in revenue in Q4. It's happening there for us as just a regular company. We're a $2 million company over there. It's small versus our guidance this year for revenues is $280 million. So you and I are now talking about a $2 million entity inside of a $280 million. So it's small, but it's growing like you'd expect it to grow in China. We're over the tariff thing. The way we got over that was we just raised prices. That's helped us a lot over there. We're profitable over there now for the first time ever. I think Q4 was a profitable quarter. And that's saying a lot. That's having come a long way from losing $1 million a year over there on regulatory filings. The one sort of, I don't know what you say, negative over there is that we went over there to get XenoSure cardiac approved, and we got it approved after a long arduous clinical trial. And then quite honestly, it's been a big nothing burger over there. So it's not happening because of that. It's happening because of everything else. We also separately have now finalized our application for XenoSure Vascular in China. We shall see what that leads to. I don't want to make a big deal out of it here. But as an organic operating business, forget about XenoSure and all the clinical trials on that. It's going great over there. We're thrilled. We've got a new manager, he started about 1.5 years ago or so. He's doing a fantastic job. Michael Petusky: Okay. Great. I've got to ask this because I sort of almost can't believe the number. The 20% valvulotomes, I mean, I think that product came out when I was roughly in college. I may be exaggerating, but it's pretty close, I think. How do you put up a 20 plus 20 on a product that's been around 3 decades or more? George LeMaitre: Right. I mean, it's just a lot of focus, and we have the perfect channel. The whole channel was built around valvulotomes. For how long we've been at this, you're talking about that, I've been here 33 years, and we've been building brick by brick, a channel that's supposed to sell valvulotomes and then other stuff that Dave would buy. So it's a perfectly built channel for that. But you don't want to get too far over your skis on it. Yes, we had a great quarter, but units are roughly flat. We're not here in a market that's growing fast. So I don't want to oversell everything here. But yes, it keeps working for us. I don't know what the unit number was in Q4. We had a 20% organic -- no, 20% reported sales number in Q4. Dorian LeBlanc: 17% organic. George LeMaitre: 17% organic. And I can't right now break that down for your units, Mike. I will say, in general, it's a flattish unit market, and we're doing it by spreading our wings around the world and finding new opportunities. David Roberts: Mike, it's Dave. I would just add that the procedure in which a valvulotome is used is a peripheral vein bypass. And I agree with George, we don't want to get over our skis, overexcited. But a couple of years ago, there was this huge study done here in the United States, this BEST-CLI study from the NIH. And it showed this peripheral bypass was a more robust procedure. It held together longer with less complications, et cetera, than endovascular. Now the big endovascular companies, they have the marketing firepower to grow their businesses, no question. But if you're wondering why the valvulotomes are resilient and the units are staying flat and not going away in the face of a lot of endovascular competition and alternatives, I would say it's because it's a procedure that works. And so yes, good for us to have a good product offering in a procedure that works for patients long term. Michael Petusky: Okay. Great. And actually, you just brought to mind, I just want to ask before I get off, did you give the split between unit growth overall, not just for value, but overall for the company in the quarter? Dorian LeBlanc: Yes. This is Dorian. Mike, we did. It was 9% price, 5% units. George LeMaitre: That's for the year of 2025; and in the quarter, 9% and 6%. Operator: Our next question comes from Jakub Mlejnek with Oppenheimer. Jakub Mlejnek: Just to start with, what impact do you envision the CREST-2 trial in carotid revascularization to have on your carotid artery stenting business? And has that been -- or how has that been factored into the guidance? David Roberts: Jakub, it's Dave. Thanks for the question. It's funny. We just had a record quarter for our carotid shunt business. And so how do you square that with the fact that CREST-2 came out? And I'll get to the takeaways in a second. But to give you a sense of the scale, 15% of LeMaitre's worldwide sales are used on carotid procedures. Those are shunts and patches. We get a little over 50% of our revenue OUS, but 80% of our shunt units are sold OUS. And so these CREST-2 results, that's another NIH trial, I don't know how long it will take to impact our U.S. business. Our U.S. business has been impacted by TCAR, that alternative stenting procedure, for a while. So I think we're really well positioned because we're so diversified geographically. And then I'd also just -- CREST-2 is a Level 1 NIH study. But I would emphasize that if you peel back the onion, the exclusion criteria for stenting, they were able to exclude patients with long lesions, calcified lesions, tortuous arteries et cetera, et cetera, whereas the carotid endarterectomy cohort did not have lesion-based exclusions. And so it was a little bit of an apples and orange comparison. And it turns out if you just had 3 of the patients in the stenting -- of the 600 patients in the stenting cohort have incidents after their procedure, there would have been no statistical benefit to stenting. And so it was really pretty close to a jump ball. And then when you factor in the exclusions, I think we have to see where this goes long term. But in the meantime, I think we're pretty well positioned. Our carotid shunt business is kind of transitioning into an OUS business. And I think it's resilient for a long time to come. Jakub Mlejnek: Got it. Yes. I appreciate all the color on that. And then I guess back to the price versus unit growth, would you be able to break out for this last quarter, the price versus volume contributions within the various categories? George LeMaitre: Jakub, we've tried to stay away from that just for simplicity. So no, we'd prefer not to, if you don't mind. Operator: Our next question comes from Michael Sarcone with Jefferies. Michael Sarcone: I guess I just wanted to start on the gross margin side, do you think you can walk through the puts and takes as we make our way through 2026? It would be helpful to get some color there. Dorian LeBlanc: Yes. Mike, thanks. It's Dorian. And I think you saw a really nice step-up throughout 2025. We had an 80 to 90 basis point step-up each quarter. And when you adjust out the benefit of that tax credit, which on a reported basis gave us an extra 110 basis points. So we're up 180 basis points from 2024 to 2025 adjusted, and we're guiding to be up 170 basis points from 2025 to 2026. So we're seeing a nice continuation of that gross margin story. And obviously, we get the benefit from the pricing increases coming through. We've done a nice job of getting underperforming products out of the bag. We got rid of the [ ZEO ] midway through the year. So that helped with that cadence of improvement in the gross margin in the second half of the year. But we've got some good manufacturing efficiencies that have come through. And all that offsets the normal inflationary pressures in cost of sales, but also some of that mix of the OUS business growing faster than the U.S. business. And we all know that the U.S. business has higher ASPs in general. Back half of the year, we'll have a little bit of pressure from the manufacturing transfer for the RestoreFlow business and a little bit of pressure from opening the new 34,000 square foot warehouse we have here near the Burlington headquarters. But overall, it's just been a great gross margin story for us, up 180 and guiding for another up 170. Michael Sarcone: That's great. I guess a second one for me, and I apologize if it's been asked, but hopping between calls. Just any update on the M&A environment and what the pipeline looks like there? David Roberts: Yes. Mike, I answered the question a little bit earlier for Rick, but the summary is, the pipeline is in good shape. We're pretty busy these days, still hunting in open vascular surgery, where there are 22 targets, and cardiac surgery as well. But yes, the revenue sweet spot, as I mentioned, $15 million to $150 million. Yes, we're out hunting. And as soon as we have anything to report, we'll report back. Operator: Our next question comes from Brett Fishbin with KeyBanc Capital Markets. Brett Fishbin: Just wanted to start with a follow-up on the OUS Artegraft launch again. Just we saw a really significant upside to your original expectations in 2025, the year coming in at $4 million rather than $2 million. I wanted to just double-click on where you saw the outperformance. Just curious like on what countries are performing the best. And then just thinking about the $10 million guidance for 2026. Just curious on your approach to that, just thinking about the sequential progression in the past 2 quarters, like where it seems to be heading, if you view that as maybe a conservative approach to the year-over-year ramp? George LeMaitre: Okay. Great. So the first part of the question is what countries. And it does feel like it's most of a Central Europe type thing right now, and I would call out what we call DACH, Germany, Austria, Switzerland. And then also, I would say, Holland has been -- or Netherlands, if you will, has been really good. So maybe that's the strength so far. And it's just getting going in our very strong markets of Italy and Spain. We were trying to figure out should we allow them to have consignment. And we weren't going to do it and then all of a sudden, we changed, we decided to do it. So we're starting to ramp up specifically in Italy and Spain. And then in the U.K., we really haven't gotten going as strong as these other places. So I think you've gotten Central Europe really off to a fantastic start. And now you have Southern Europe, which we define as sort of France, Italy, Spain, and then Northern Europe, which is the U.K., the Nordics, to give, if you will. So I think you have a long, long way to go here, and we're not going to get involved in what inning we're in, because we always get ourselves in trouble doing that. But it feels like you've got a long way to go. As for quarterly cadence, we thought a lot about it, and we decided to skip the hoo-ha of all that and just give you yearly number. We really don't feel comfortable guiding on one product line. They're so small versus Europe Artegraft, what is it, $10 million this year versus $280 million for the whole guidance. We don't want to get too zoned in on that topic. So we're going to give you $10 million and try not to break it down for the quarters. But still a nice answer. You're going to pick up $6 million in growth from that product line in Europe alone -- sorry. And then also to isolate, it's mostly a European and South African thing, and it's not as much in other places so far. You have Canada to give, you have Australia to give, you just got the approvals, but it's really a European and South Africa thing right now. Brett Fishbin: All right. That was super helpful. And then I'll ask one other question. I think it was more of a topic on the last earnings call, but just wanted to ask about the overall health of the APAC market. You commented on China already, but it looks like a bit of a bounce back quarter here. And just curious if you're still seeing any signs of softness in certain countries or back to business as usual in '26? George LeMaitre: Okay. Well, okay. Yes, it was a fantastic quarter. I think it was 20% up organically and reported. So it was a real solid 20%. It seemed like in Q4, everything sort of came back, maybe with the exception of Japan came back a little bit, but not as much as we would have wanted it to. So I would say, I still feel a little softness in Japan, but we're going into the year with all kinds of optimism, because China is now -- in terms of the size of APAC, China is getting there. Korea also had a very specific incident around direct embolectomy catheters and so it's a long story. I'm not going to get into it. And that thing has gone -- that's over now, and we're direct everywhere in Korea now. So you should get some nice action out of Korea as well as China, and that should bring you along here this year, but felt much better in Q4. We'll see what the next 12 months brings in Asia. Operator: Our next question comes from Danny Stauder with Citizens JMP. Daniel Stauder: First one, I wanted to ask on the RestoreFlow cardiac call point. It sounded like it accelerated, I believe I heard 90%, and that's after a strong 2Q and 3Q. So I was curious what you saw in 4Q that is driving this performance? And then just more broadly, are there any recent trends in the area that are playing out thus far in 2026 that we should keep in mind here? George LeMaitre: Okay. Maybe this thing called the Ross procedure is sort of starting to dominate conversation inside of our company. And the sales manager in the U.S. is a fellow who lives in Toronto, and he's been the guy who's generally been building the Canadian business around allografts. He's now in charge of North America. He's been in charge for 1.5 years. And I would say, he's been pushing the cardiac side of allografts a lot harder in the U.S. proper, not just Canada anymore, but in all of what we call North America. We really don't have much of a presence in Mexico. So it's mostly Canada and the U.S. So I would say it's a bit of that. We did a big training course down at Mount Sinai in New York in October around the cardiac device, and that sort of brought a lot of interest to that device. So we're in a spot where we don't have a lot of cardiac sales. So when we sell some stuff, it looks like a lot. But still, it's was nothing 5 years ago, right? We had 0 in sales 5 years ago, and now it is something. So it's been a satisfying run, and I would say it's about the focus on cardiac. The vascular business itself is pretty good, too. It's a lot bigger, but it grew, what, 19% in Q4. So the vascular business is also doing well, but maybe the excitement is around cardiac. Daniel Stauder: Great. That's great color. Just one follow-up for me. Staying with RestoreFlow, just with the manufacturing transfer of RestoreFlow from Chicago to Burlington, I may have missed this, but should we see this benefit to gross margin in 2026? Is it already in that guidance? Or is this more of a 2027 event? How should we be thinking about that? David Roberts: Yes. It's probably a slight headwind to margin in 2026 as we ramp up in one location and wind down in another. We do think that we're bringing it here, as we have with other manufacturing transfers, to have it centralized, to have better control over it, whether or not it improves gross margins long term. I mean, I think that's our hope, but we'll get it transferred first and think about 2027 when it comes. But all the costs are fully baked into our 2026 guidance. Operator: Our next question comes from Jim Sidoti with Sidoti & Co. James Sidoti: A couple of modeling questions. The 2026 guidance, can you tell me what you're assuming for tax rate and share count? Dorian LeBlanc: Yes. Tax rate, I can give you, we had a Q4 '25 tax rate of 23.2%, and that was the same for the full year, 23.2% for 2025. So that's probably a pretty good number to plug in for your 2026 models. Share count, it doesn't change a whole lot, just the option activity. We'll hit publish on the 10-K in the morning, and I think you can pick up the numbers from there, or we can get them to you offline if you need them earlier. James Sidoti: Okay. It looks like it was down in the fourth quarter. I mean, is that a good number for 2026? David Roberts: If you're looking at it being down off of '23, remember -- off of Q3 rather, remember in Q3, we had this nuance where because of the excess income from the tax credit, we actually flipped from the convertible being excluded to being included. So we had to take the dilutive impact of that. So it was a little bit wonky on the onetime. So the Q4 number is the right number to look after. James Sidoti: Okay. All right. And then you talked about RestoreFlow in Ireland. Is that approved already? George LeMaitre: No, it's not, Jim. You're right to call that out. We had expected approval by the end of Q2 at the last call, and we're now calling for approval in Q3. The filing was a little bit delayed. It will go in, in March, and it was supposed to -- we thought it was going to go in earlier. James Sidoti: Okay. All right. And then you've also talked about the headwind to consolidate Chicago into Burlington. Is that significant? Or is that $1 million, less than $1 million, more than $1 million? Can you give us some sense on that? Dorian LeBlanc: I think we'll say, it's fully baked into the guidance, and you can see we've got a pretty consistent gross margin guide here, 72.1% for the quarter, 72.1% for the year. So obviously not having a material impact. James Sidoti: Okay. All right. And then the last one, can you give me the operating cash flow in the quarter? David Roberts: Cash from operations was $23.1 million. CapEx was $1.8 million. Free cash flow of $21.3 million. Operator: Thank you. Ladies and gentlemen, that concludes today's conference. I would like to thank you for your participation, and you may now disconnect. Have a great day.
Operator: Good afternoon, everyone. My name is Leila, and I will be your conference operator today. At this time, I would like to welcome you to the Salesforce Fourth Quarter and Full Year Fiscal 2026 Conference Call. This conference is being recorded. [Operator Instructions] At this time, I would like to turn the call over to Mike Spencer, Executive Vice President of Finance and Investor Relations. Sir, you may begin. Michael Spencer: Good afternoon, and thanks for joining us today on our fiscal 2026 fourth quarter results conference call. We are trying out a new format today and as such, have shortened our prepared remarks to ensure we have time for your questions. Our press release, SEC filings and a replay of today's call can be found on our website. Joining me on the call today are Marc Benioff, Chair and CEO; and Rob Washington, Chief Operating and Finance Officer. We also have Miguel Milano, President and Chief Revenue Officer; and Patrick Stokes, President and Chief Marketing Officer, joining us for the Q&A portion of the call. Some of our comments today may contain forward-looking statements that are subject to risks, uncertainties and assumptions, which could change. Should any of these risks materialize or should our assumptions prove to be incorrect, actual company results or outcomes could differ materially from these forward-looking statements. A description of these risks, uncertainties and assumptions and other factors that could affect our financial results or outcomes is included in our SEC filings, including our most recent report on Forms 10-K, 10-Q and other SEC filings. Except as required by law, we do not undertake any responsibility to update these forward-looking statements. As a reminder, our commentary today will include non-GAAP measures. Reconciliations between our GAAP and non-GAAP results and guidance can be found in our earnings materials and our press release. And with that, let me hand the call to Marc. Marc Benioff: All right. Thanks so much, Mike. We're so thrilled to be here with everybody. And I'll tell you what, we're here in this beautiful San Francisco on the 60th floor of Salesforce Tower, and it is a gorgeous day, 70 degrees, the AI capital of the world, and we're coming here to you live, really excited about everything that's going on. So let's start with the highlights from one of the absolute best years in our history and one of the best performances in software ever and guiding one of the best performances in software ever, we have delivered phenomenal performance across revenue, across margin expansion, across cash flow and cRPO and RPO. I mean the numbers are really incredible. For the full year, we delivered $41.5 billion in revenue, up 10% year-over-year, 9% constant currency. We had $11.2 billion in revenue for the fourth quarter, up 12% year-over-year, 10% constant currency. CRPO rose to $35.1 billion, up 16% year-over-year and 13% in constant currency. And we passed an incredible milestone with $72 billion in total RPO, which is up 14% year-over-year. Now that is $72 billion in total RPO, up 14% year-over-year in case you missed that point. I did read a tweet that RPO does not matter, but evidently, we have it if it does matter. So total RPO, $72 billion. Last year, we laid out a path towards double-digit revenue growth by the second half of fiscal year '27, and we're hitting our marks. And based on our strong Q4 performance and the fast start with Informatica, we're updating our fiscal year '30 revenue target to $63 billion. Now that means we've only spent 2 years of the 40s, kind of hard to believe. I have never seen performance like this. But this obviously is not a rational market. We all know this. So we're using our remarkable cash flows to take advantage. This is not our first SaaS Pocalypse. We have been through many SaaS Pocalypses. I remember the horrible SaaS Pocalypse of 2020 when not only the software industry was dying, but we were all dying, but we made it through that. And now everyone is back, doing great. So we're so grateful to make it through that, and we're going to make it through this one as well. And it's just a great marketing opportunity and a great buying opportunity, and that's why we are doing this incredible repurchase authorization of $50 billion. In fiscal year '26, we returned more than $14 billion or 99% of our free cash flow to shareholders. Thank you, Robin, for that. And today, we're increasing our share repurchase authorization to $50 billion because these are some low prices. So Robin will share more about that in a moment. The biggest brands in the world are choosing Salesforce to lead their Agentic transformation, companies like Amazon, Ford, AT&T, Moderna, GM, Pfizer, so many, and these are big deals in Q4, wins over $1 million were up 26% year-over-year. That's just so we know in Q4, wins over $1 million were up 26% year-over-year. Congratulations, Miguel. Wins over $10 million were up 33% year-over-year. For example, the U.S. Army run by Army Secretary, Dan Driscoll, do an amazing job, has awarded us a 10-year indefinite delivery, indefinite quantity contract with a ceiling of $5.6 billion. Thank you, Dan. This level of financial performance is a clear signal, a clear signal that companies across every industry and region are investing in Salesforce to become Agentic enterprises, just like we've been talking about now for 2 years at Dreamforce that the Agentic Enterprise is our real idea, and we're going to talk about Agentforce, and I think it just became an $800 million business. We're going to talk about that. You've heard me talk about it at Dreamforce and on these calls, our vision of humans and agents working together for years, companies bought apps. We all use apps. I've got apps right here on my phone. I've got apps on my computer. But now I'm using apps and agents. I use them at home. I use them in my company. We talking about that. That is a reality. We have 83,000 employees here at Salesforce Humans. And we have lots of agents running around as well. Miguel qualified 50,000 leads this week with agents. So we have apps and agents. We have humans and agents working together. We've been talking about that at Dreamforce as well. And this is just an incredible opportunity for Salesforce. Our market is bigger than ever because not only selling apps, we're selling apps and agents. So bringing humans, agents, apps and data together, not just to make people better at their jobs, but to redefine how work gets done. This is just an incredible exciting moment in software. So we're seeing incredible demand for Agentforce. In its first 15 months, we closed 29,000 deals, up 50% quarter-over-quarter. Customers in production have increased as well, nearly 50% in Q4. It can do more, have more power, more capability than ever. If you haven't seen the new Agentforce, you haven't seen Agentforce, the level of determinism, the voice capabilities, Agentforce Studio, Agentforce Builder. We are spending a huge amount of time on Agentforce. I just saw the new Agentforce demos from our team. It was incredible. We even have Agentforce running in Slack. We have Agentforce Builder running in Slack. We have amazing things happening. And our Agentforce and Data 360 ARR, including Informatica, now exceeds $2.9 billion. I heard ARR, doesn't matter anymore. But in case it does, we have $2.9 billion, up 200% year-over-year. More than 75% of our top 100 wins in Q4 included both Agentforce and Data 360. In a bit, we're going to hear from 3 amazing customers. Wyndham, one of my very favorite customers in the world, the world's largest hotel chain. Shark and Ninja. I just got one of their great new products. I'm sure you know about. They've got the best SLUSHi machine, but one of the most innovative consumer product companies in the world and SaaStr, an incredible community of B2B software founders, executives, investors and I think you all know that I love [indiscernible]. But I've never been more excited about our business here at Salesforce. No one else is delivering this level of capability at this scale to this many customers. And we are taking the power of the Agentic enterprise of these apps and Salesforce, and we're giving them the security, reliability, availability, scalability that you need to make them successful in business like ours, but in all businesses, in small and medium businesses and general-sized businesses and very large enterprises in the government and in ISVs as well. So this is a category that just did not really exist a year ago. I will just say that look at IT service management. We just launched Salesforce IT service in October, Salesforce ITSM. And in just a few months, Miguel has won over 180 customers, amazing Miguel. But I especially love 5 customers who got to leave the purgatory of ServiceNow, like Sunrun, Cornerstone, CoolSystems, and there's others, too, that we're not allowed to mention, but I might mention them anyway. Who are leaving in ServiceNow, now for the new Salesforce IT service product, which is about apps and agents, helping you manage all your ITSM. But don't just think it's just that. We built an amazing new life sciences product this year. Agentforce for life sciences. And since we launched so many of the global pharma companies, and I've met with so many of the CEOs myself, they're leaving Veeva, purgatory Veeva, including AstraZeneca, Novartis, Takeda and of course, Albert at Pfizer. They're all saying that they are going to Salesforce Life Sciences, which is a product that has apps and agents. And this is amazing. They are the most regulated businesses in the world, and they are choosing Salesforce. And over the years, I've met with untold numbers of customers, call it thousands, call it more than that. They used to tell me maybe, okay, I want to roll my own AI. I'm going to build my own model. I'm going to build my own agent. I said, tell me about that. Let me know how that goes. Show me exactly what you're doing. Or you can just turn it on in the Salesforce product you already have. You have Sales Cloud, turn on the agents. You have Service Cloud, turn on the agents. You have Marketing Cloud, turn on the agents. You have Slack, turn on SlackBot. And that idea that every app now has the capability to have agents. So customers tell me that they want to basically kind of get to that next level. And the way to do that is by including this context, the ability for the AI, the data to know you. No better example of that than SlackBot, immediately as you turn it on, you're a Slack customer, it looks at all your Slack. It looks at your DMs. It looks through Salesforce. It looks through Google. It looks even that Microsoft Teams as hard as that is for some agents to go and do, but we've told them how to do it. And then it says, I understand your business, and I can give you help, advice, support. And in fact, a recent survey of 100 CIOs found that the number of companies planning to use a platform like this, this idea of apps and agents has now doubled just in the last 18 months because of this, they realize this is more than just turning on Moltbot on your Mac mini, okay, which, by the way, I have a Mac and a setup is great. OpenClaw, I love it. But for companies who want to have the reliability, availability, security, okay, the sharing models, the key parts of that to really make sure that the business is safe and secure while you're running all these skilled agents. Well, let's just know that, that is what Salesforce is doing. And that's why Salesforce has become one of these incredible companies because our platform provides these amazing 4 layers that you see right here that everyone needs to convert raw intelligence into real work. Everything they need to become an Agentic enterprise. Just look at this, look at what we've built. Look at what we have built. And thank you to our team. They have done a phenomenal job. Srini can't be here because he's in India. He was at the India AI Summit this week. He could not make it back here in time. Look at what our engineering team has built, and thank you to them. Look at where it starts. First of all, yes, we can use all those large language models. We love them all. We love all of our children equally. And down below here, whether it's Anthropic or OpenAI or Mistral or Llama, all of them. And there's more coming. They're amazing. World models are coming. They're amazing. They're all down below here, and we're using them. And then, of course, we bring them into Data 360, and that lets you harmonize your data, integrate your data and federate. That means connecting the other data sources throughout your company and grab it. Other data repositories, you might be using Snowflake or Databricks, you might be using BigQuery or anything, even IBM mainframes and you can bring it into Data 360, activate your data and then it comes up into your apps. So if you're using the service app, and you want to have an experience like help.salesforce.com for your company. Now the service app has that Agentic capability, the data is coming up. And it comes up to the next level to Agentforce and you can build your agents, train your agents, put the guardrails in your agents, give them voice, they can talk now, they're talking. And then all of a sudden, you can even manage and orchestrate and collaborate from Slack. So this is our architecture. And all of this is unified, integrated. And that idea that we can deliver this unified platform to our customers to help them deliver humans and agents working together. So you can see right here, Agentforce has the tooling to build, to manage, to orchestrate the agents to make them talk, to give them determinism, to give them the capabilities that they want. And then we have the engagement layer to deliver Agentic enterprises where work happens in Slack across our apps. So if you haven't seen SlackBot. I talked to a lot of customers like, I don't see SlackBot. Why we used it? I have the free edition. I'm like, well, maybe you should pay and get the enterprise edition because boom. That's when all the SlackBot turns on and you can go through your whole company, run your company. I had one of our customers over last night, Aneel Bhusri Workday. I'm like, have you seen SlackBot? Aneel is like, no, I haven't seen it yet. I'm like, you're the biggest Slack customer we have. I'm like I just sit there and say, look at this. And I'm like, said a SlackBot. I'm having drinks with Aneel. And I just am trying to like give him a demo of SlackBot, what should I say to him? What is the strategy between Salesforce and Workday and then boom, boom, boom. It just went through the whole thing, showed them every deal. He couldn't believe everything that was happening between these -- our two companies. He had to get updated because he's the new CEO of Workday. And it was amazing. That was my real experience. Together, all of this is the complete operating system for the Agentic enterprise. Yes, I'm using it myself, and we're using it. We're customer 0. And that's crucial because, look, we already know now. Our customers aren't going to deploy just one agent. There's going to be many agents, many capabilities, the ability to automate many different types of work, and they're going to deploy hundreds or thousands. Many are going to be from us. Others are going to be from other amazing companies, like the one that I just mentioned, Workday, I love them. But these agents can't work in isolation. Like ET, each one of them needs to go home. Okay? So that home is Salesforce, and they are calling us through the MCP server or maybe even just through one of our core platforms. And the more agents that our company deploys, us or anyone else, the more essential our platform becomes. This is my personal testimonial. I'm giving you my personal testimonial of how I run Salesforce. You can come here. I will show you how I run a business with apps and agents together. And it's why nearly 90% of Forbes top 50 AI companies, Forbes top 50 AI companies use Salesforce and Slack. And if there is a SaaS pocalypse, I think it might be being eaten by the SaaS and SaaSquatch because there are a lot of companies using a lot of SaaS because SaaS just got a lot better with agents as a Service. Now I won't tell you exactly tell you what that says. But let's just say they're SaaS and there's also Agents as a Service. Now I want to tell you how we're measuring the value our platform delivers to customers. Today, we are one of the largest consumers of tokens in the world to date, now over 19 trillion tokens. So we continue to show you that because we want you to see that we're actually doing what we say. I know that there's been some enterprise software companies who say they're doing agents or they're doing AI, but then they're not showing up in the token rankings from the language model companies. So we're here's 19 trillion, okay. But we really want to take this to another level. And another level is a token on its own doesn't know your customers, your pipeline, your org chart, but Salesforce does. And the value isn't in the token. The value is in what our platform does with it, the work. That's why today, we're introducing an additional metric, the Agentic Work unit created by our very own Patrick Stokes sitting here at the table, the AWU not to be confused with our customer, AWS. And AWU represents one unit of AI work, Agentic work unit. We're rolling this out to see how you like it actually here in earnings. It's a record updated workflow triggered, decision made, MCP called. And to date, AI agents on the Salesforce platform delivered 2.4 billion Agentic work units. That is where AI isn't just thinking or calling things, it's getting work done, work done, transactions. And in Q4 alone, we delivered about 771 million of them. We're still trying to exactly figure out exactly what these numbers mean for us. But what it means for me is that we are doing what we say. That is we are explaining that humans and agents are working together. We are showing you a business at scale, running them. We are showing them how we are making our business better. Our service is so much better this year because we're using our new Service Cloud with our omnichannel supervisor deployed with Agentforce. Our sales, Miguel just hit record sales numbers. You can see them. We've never sold or had so much ACV in our history in the fourth quarter because not only does he has 15,000 account executives, but he has all these agents who are out there doing this amazing work. So that is so exciting. This is raw intelligence converted into real work. It's driving efficiency and growth. Okay. Now let me tell you about one of the biggest drivers of these work units, SlackBot. A lot of you use Slack. I use Slack every day. It's the employee -- ultimate employee agent. And many of you know that X, the social media platform hosts about 500 million messages a day, right? Elon Musk do an amazing job on X, incredible what he has done. But did you know that Slack hosts about 1 billion messages a day? So while X, amazing X, I use it myself. I just tweeted something, 500 million messages a day. Well, Slack is hosting 1 billion messages a day. And remember, every one of them is about getting work done. That's why we bought it. Remember, Slack's ticker symbol was work. SlackBot can access all of those messages as well as your files, your calendar, your Salesforce, your Google, your Microsoft Teams here this, here that. SlackBot goes around, pulls it all together. And then it knows your business. So then it's able to orchestrate with other agents and has an incredible partner marketplace, really the #1 AI ecosystem in the world and has more than 350 AI apps and agents already. There is no other AI ecosystem like it. One of those partners is in Great Anthropic, we love Anthropic, we love Dario, Daniela, I tweeted about what they did yesterday, incredible demo. Just yesterday, Dario demonstrated how he is doing something amazing with Salesforce in the enterprise. Every single one of their demos, whether it was for HR, engineering, investment banking, started and ending in Slack, pretty awesome. And so it's about agents and apps, humans and agents, it's all working together. You can see it in his demos. You can see it in our demos. By the way, Anthropic runs its whole global operation on Salesforce and Slack, I think actually every AI company does. Yes, I think they do. So maybe you saw they're hiring a Salesforce admin, Dario. Let us know if you need new names. But I think it's just a point we're making that Salesforce is doing great with these AI companies. We're so thrilled of our relationship with Dario. And I think we just put another $100 million into the new round. We're up about $330 million in Anthropic invested. It's almost about 1% of Anthropic. And believe me, I wish we had invested a lot more, John. I don't know why we didn't do more. Okay. With that, it's time we're going to hear from some of our most inspiring customers becoming Agentic Enterprises. We have the great Mark. Mark, I see you. Mark is there from SharkNinja. Mark Adam Barrocas: Marc, congratulations to you and your team. What a quarter? Marc Benioff: Mark, I'm so thrilled to talk to you, and I love all your products, and thank you for the Christmas presence. I have them, and I'm using them. Mark Adam Barrocas: Appreciate it. I'm really happy that so much of our holiday selling season was really driven by the launch of Salesforce that, as you know, happened at the end of September and would love to talk to you about it. Marc Benioff: Well, Mark, you know that we've been working together now, just me and you as well as with our whole sales team to make we can automate all of SharkNinja. We want to automate your sales, service, marketing, your commerce, everything you're doing. I'm so excited about your future. We have our best team working with you. Give us your view of what's happened and the value we've been able to deliver. What's your biggest surprise? What in the Slushi machine, what came out? Mark Adam Barrocas: Look, Marc, I mean, we launched 25 products a year, and we're really innovating at speed. And we need customer service solutions that move just as fast I mean most companies treat service as a cost center. For us, Marc, it's really about lifetime value of the consumer. I mean we view service as a growth engine for the business. And it's not just about servicing problems, it's about building lifetime value. We set up with you and your team, a guided shopping agent in 8 weeks right before the holiday season. I was nervous about it as I went to my team and I said, we're putting this in place in October. There's generally kind of a cutoff in our business where after October 1, you don't really do anything. And we launched this in 8 weeks, and it brought tremendous value to the consumer. I mean, it helped them with researching and buying and troubleshooting really all in one seamless conversation. So it was a great success for us this holiday season. Marc Benioff: Well, Mark, I think that working with you has been extremely interesting because you're very much a B2C company. And there's so many exciting things that you're doing. When you look at what Salesforce has done and deployed, especially in regards to AI agents and apps, where has it really impacted you the most? Mark Adam Barrocas: Well, look, let me start with this stat for you. I mean, just since we launched Salesforce in Q4, I mean, agents have participated in 0.25 million consumer engagements during that period of time. So just in a really, really short period of time, 0.25 million engagements. We put so many products out into the market and sometimes that many products creates complexity for the consumer. And so whether they're calling about a service issue or a troubleshooting issue or where is my order issue, it's allowed our customer service agents to focus on really the really challenging issues, and it's freed up an enormous amount of time for them. It's a win for the consumer because the consumer is getting their questions answered quickly, they're not waiting. And it's a win for us because it's driving down cost. And it's, in the end, just having a better service experience. Marc Benioff: Well, Mark, I just want to thank you so much. We're so grateful to you as a customer of Salesforce. It has been an absolute pleasure getting to know you, working with you. And I think that we have such a great future together, and thank you for the Christmas presence. I'm using them. I have made some amazing Mango sorbet actually this week, and it was awesome. Mark Adam Barrocas: Sounds great. Thanks, Marc. Marc Benioff: Bye, Mark. Great to see you. Well, I've been so thrilled to work with Mark, but I have to also introduce you to another really good friend of mine, Geoff at Wyndham, and you probably heard from Geoff this week. He had a phenomenal quarter, doing great, the #1 hotel in the world. Geoff, we are so thrilled. Geoff, congratulations on everything that's going on with Wyndham. We're thrilled. Give us your vision of what's going on in the world and with Wyndham. And we'd love to hear how you're using Salesforce as well. Geoffrey Ballotti: We have, Marc, I mean, when you think about just how far we've come in the last year, today, we have over 5,000 deployments of Agentforce across our over 8,300 hotels. It is a huge, huge part of our Agentic platform, and we are really just getting started. We're starting to roll out to Canada and Internationally. But with Salesforce tools like MuleSoft and Data 360, we have built a single source of truth, unifying all of our guests' reservation information and data, all of their loyalty information and all of their CRM data so that all of our agents now are operating with the same trusted and real-time guest and hotel information, which they weren't before. We're calling it Wyndham Guest 360. It is a key enabler for our Agent Foundry. And it is delighting in better guest experiences, improving those experiences and building on increased loyalty engagement. But most importantly, Marc, you've talked a lot about labor, which is agentic. It is taking millions of dollars of labor costs from our small business owners in the front office out of their operation, and it is driving millions of dollars of increased revenue for these franchisees. Marc Benioff: Well, I just have to say this one thing, which is I have been hugely surprised at how fast you have gone, Geoff. We work with all the major hotel companies, and I love them all. And I stay in them all. They're fantastic. I'm actually going to stay at a Wyndham Hotel tonight. I'm flying East. But I have to ask you this question, Geoff, because I don't understand how are you going so fast? What are you doing? Is this because you're leading from the top? I mean you seem to like -- I just talked from Mark at SharkNinja. He really is owning this. Why are you guys going so fast? Why are you doing so well? I mean it's just incredible. You're loading out these apps and agents, your team is crushing it. What is going on? Geoffrey Ballotti: We're in the hospitality business, and we always say it's all about humans, yes. But it is humans, as you've always said, with agents who are driving that customer success together. Think about our customers. Before our integration with you all, our agents had to spend time gathering basic guest information on who Marc Benioff was before he checked in tonight. And that was not easily at their fingertips or even worse asking Marc for his information that we should have had. And our agents now have encyclopedic knowledge, think about it of all of your guest history, all of your booking behavior, all of your loyalty status because we tied it all together, giving us an ability to answer any question imaginable that any guest like you might have before you check in tonight, before your stay in moments, not minutes, and we're booking you into your preferred room based on our knowledge, our guest sales force knowledge of your past day history. We are successfully working now. I hope to upsell you a suite upgrade if we haven't already an early check-in. It sounds like you're getting in late, a late checkout tomorrow if you'd like one. I don't know if you're bringing -- if you have pets, but if you were -- those agents would be selling you a pet fee or [indiscernible]. Marc Benioff: Don't tell dogs about that. They're going to jump in. Geoffrey Ballotti: But look, this is all being done autonomously, which small business owners and operators would not have had time to do before. We have been working so hard. It is generating so much money. We're seeing faster average speeds of answer, 0 hold times. I've heard you talk a lot about why no customer should wait. And that's why we're doing it. We're receiving and we're removing more importantly, millions and millions of dollars, as I said, in the front office, but we're generating millions of dollars of increased ancillary revenues to these small business owners. It's not costing anything. And we're also seeing, which is really, really important, a 200 basis point increase in direct bookings from AI voice agents -- and AI voice agent conversion versus having to get those bookings through expensive third-party online travel agencies. That is increasing guest satisfaction. Our guest satisfaction scores are up 400 basis points. They've never been higher. And this customer experience that we've created is more efficient. Again, humans with agents, driving customer success. We're agent first, and we're very proud of it. Marc Benioff: Well, I just want to thank you so much, Geoff, thank you, and thanks to your team because I'll tell you, it takes a great leader like you, but it also takes a great team, and you've got both. And you've made something really incredible happen. Great job and congratulations. Geoffrey Ballotti: We're proud to be with you, our Chief Commercial Officer, was on stage with you at Dreamforce. Marc Benioff: You did a great job. Did a great job. Geoffrey Ballotti: We'll be back this year. Marc Benioff: See you. I hope you come to Dreamforce this year. Bye, Geoff. All right. Well, you -- I want to now introduce you to an incredible person who I've known for 20 years, and it's very inspiring entrepreneurs, really become a huge influencer in the world, who's getting his hands dirty to a great company called SaaStr, building agents, learning how they work, deploying them, really being on the bleeding edge, the cutting edge of this technology. And thanks for being here, Jason. I'm so thrilled to have you. Jason Lemkin: Super exciting. Yes, congrats on the quarter, by the way. Marc Benioff: Jason, I just want to ask you one question. What is it that's making this happen? What is inspiring you to kind of transform yourself and transform SaaStr to this incredible opportunity? Jason Lemkin: Well, look, maybe two things. If you're -- we're builders. We've been -- I mean, you were -- I think you were like on RadioShack computers or something back in the day, right? We've been building since are there? Marc Benioff: Right down the street here, Rolodex game. Jason Lemkin: So we've been building at heart, right? And this is the most exciting time to build ever, ever for us as executives, entrepreneurs. Honestly, if you're not excited to be building an Agentic, you should quit. You should go off and go to pasture, do your next thing. So we backed into agents because I got tired after our own big event of rebuilding the team. And we went all in and we said, I want to try to rebuild the whole team with agents about almost 10 months ago. Agentforce was a key part of that. And we wanted to push it early. Can you really do all of this, all these go-to-market motions with agents, and the numbers are pretty good. Marc Benioff: Well, you've been a pioneer. You it's a funny thing because in our own independent world, here we are, we're out here building Agentforce, SlackBot, you know that. We also acquired Momentum and we acquired Qualified and so forth. We're so excited about these companies. And then all of a sudden, well, you kind of were building our vision of the future totally independently. Jason Lemkin: Yes. Marc Benioff: And so we felt very validated in a way. It was kind of crazy. But then we looked at you and said, "Wow, this is a true visionary." And you really have always had a lot of clarity, not just in SaaS before that, you know that. Jason Lemkin: Yes. Marc Benioff: And now here you are, you know as Agent as a Service as well. You have your vision there now as well. So I guess, once a visionary, always a visionary. But give us your vision then. Where are we going? Because you've heard about the SaaS pocalypse, and you know that this isn't our first SaaS pocalypse. We've had a few of them. But now where are we going over the next couple of years? Jason Lemkin: Well, I think -- and I think this is good for Salesforce, but I think we're underestimating how powerful these agents are. I think -- look, for most people, AI is confusing, the media is confusing, what the hell is going on. Let me simplify this. I was just looking at our numbers on Agentforce this morning. So far -- and again, we're a small organization. We went from 15 humans to 2.5 and 20 agents, okay? That's a lot of change. But on Agentforce alone, as a tiny organization, we closed $2.7 million. That's not the Army contract you got, but that's a lot for us, $2.7 million with an agent, and we have $3.5 million more in the pipeline. Those are agents, and it works. And so that is exciting. That is exciting that these agents can go out and sell for you. And the first thing I did. Marc Benioff: It is kind of crazy and amazing, isn't it? Jason Lemkin: It's crazy. It just wasn't -- not only was this not really possible a year ago, and this is -- a year -- the problem with all of us, we were using ChatGPT in the early days, it was all hallucinations. It was hard to believe this stuff would work even 18 months ago, wasn't it? It was hard to believe. But everything got okay last summer. And then at the end of the year, it got great. And there's reasons that Salesforce had got great. But to be nerdy, even at Anthropic, your customer, when they rolled out these 4. models up to 4, 5, for B2B stuff like we do, it wasn't a little bit better. It was like jaw-droppingly better. The hallucinations will be worse than a human makes and the productivity is high. So it's just we've never seen these gains. And the idea that now our Salesforce instance can run autonomously versus doing manual data entry, I mean this was always a dream. Marc Benioff: I want to tell everyone exactly why I wanted to do here because number one is, yes, we love, by the way, Mark at SharkNinja was awesome, right? And then we had Geoff at Wyndham. And these are very big companies, like good-sized companies. And not the biggest companies in the world, but incredible companies. But you're a small company. You're in some ways, a solopreneur, right? You're an entrepreneur, you're -- and I think that it is going to go across the whole market that is small businesses are benefiting, medium. We call small businesses 0 to 200 employees, maybe that's where you are. Then we have 200 to 2,000 medium, then we have the 2,000 to 5,000 in general business, then we have the 5,000, the Monsters, then we have the government. We have software companies. Every segment is impacted by this. Don't you think every company is impacted? Jason Lemkin: I think everyone is going to look at their business and say, -- what can I fully automate with an agent? Everyone's -- you're going to unleash a torrent of creativity, right? The key thing that I've learned for folks is just start with one use case. For us, it was what you -- the idea you came up with like last summer, reactivate the leads the sales team never talked to. That was our first use case. Find something or with Window. Marc Benioff: That is a huge thing, right? Because like there's 20 million, 30 million. We don't even know, maybe 100 million people we didn't call back in the last 26 years. But Miguel called back 50,000 people with agents last week that we would not have gotten to. Even though he's got all these reps, he still doesn't have the ability to call everybody back. It's amazing. Jason Lemkin: We did 3,000 with Agentforce. And for one -- I was just looking at a couple of examples. We closed a $250,000 customer this week, but the first one with Agentforce was Freshworks. You know Freshworks. They do support and a bunch of other stuff. But they've changed. Girish isn't the CEO anymore. The marketing teams turned over, we don't know anybody. The agent found the right person and closed the deal. That's sort of magical. That wouldn't have really been possible without agents' AI. Marc Benioff: Is that exciting. Jason Lemkin: Yes, it's just like... Marc Benioff: That's exciting, right. Jason Lemkin: It is exciting. And the fact that every company can start with something here. They can reactivate something or even with Wyndham responding after hours. And actually, my old Head of Customer Success is now Head of SMB at PayPal. They use Agentforce. And he just told me -- text to me this morning or DM this morning, they have a broken merchant flow where folks would sign up to use PayPal and then they would abandon it like an abandoned cart. They put Agentforce on it and the conversion rates are much higher, but they couldn't get any people to do this, right? So all of us have some process where there's no one to do it. Marc Benioff: That is why I think it's so exciting because you have humans and agents working together. You're working with your agents. It's the apps and the agents working together. But it's kind of fun because I think that for the last 26 years, you and I, we've been in this kind of SaaS industry, and it's all been all about apps. And that's now -- and the apps aren't gone away. But as PayPal is still using those apps, they have -- by the way, PayPal is a huge customer in sales, B2B and also service, call center, contact center. But now just as you articulated so beautifully, more productivity, more capability, the ability -- the lost card idea, that's what we're finding this ability. So now we're selling not just in the SaaS apps world, we're also selling agents. And yes, these 2 are going to be 2 markets. And who knows, maybe one will be bigger than the other. Maybe they'll both be the same size. We don't exactly know. I mean we just gave guidance that we're going to do $46.2 billion this year on revenue. So I can't tell you when the -- and Agentforce is like about an $800 million business now. So I can't tell you exactly when Agentforce will be a $46 billion or $30 billion. But it has the potential to go just like -- but I'm still planning. Jason Lemkin: What's 46 x 3 help me you guys. That's something I think Agentforce... Marc Benioff: [ 46 x 3 is 120 plus 18 is 138 ]. Jason Lemkin: I think Agentforce and I'm not being [indiscernible]. I think it will be $120 billion. want to the table because I think the value is about 3x the software. This is why I think the SaaS apocalypse or SaaSquatch pocalypse or whatever, I think there's some truth to this because agents are changing the world. And if you're not -- if you don't have Agentforce, if you're one of the leaders and you don't -- you're not there, I think it's fair to be concerned, right? But the value -- I wrote this post about how much more valuable Salesforce is up with our agents. It's not a little more value. It's like 10x more valuable. Marc Benioff: I don't think you are using Salesforce really 6 months ago. Jason Lemkin: Not really. Our team had shrunk and the value was we were using it as a data store... Marc Benioff: Fired with some reps... Jason Lemkin: Never fired, they left. Yes. Yes. Marc Benioff: They left. Jason Lemkin: They left. Yes. Yes. Marc Benioff: But now you have like a team of agents and humans and your company is bigger and more successful than ever. Jason Lemkin: We're using Salesforce all... Marc Benioff: Amazing this year, right? Jason Lemkin: Yes. Yes. Marc Benioff: Okay. Jason Lemkin: Or even -- and actually, what's interesting is not only are these agents using more Salesforce, I just figured this out today. The most dated part of our software stack is a company called Marketo. You'll remember from the old days for marketing automation. Marc Benioff: Absolutely. Jason Lemkin: Back in the day, very innovative, right? Jaw dropped in the day. We're sort of a prisoner. We're stuck on it. These agents. Marc Benioff: I got some things to show you there. Jason Lemkin: Yes. But the agents, our Salesforce agents have taken all of that data and put it into Salesforce. So now Salesforce is accumulating all the value from all these other stores and becoming the hub. So that's why whatever the math is -- I'm going to bet on the 150. I'm not going to -- it might take 8 years, but I think it's -- I think the Agentic side is worth 3x to 4x the software side. Marc Benioff: A plus. Great job. Thank you being here. Really appreciate you joining the earnings call. Jason Lemkin: It's great. Thanks, everybody. Marc Benioff: All right. There we go. We just had 3 great customers. We gave some numbers. And now I'm turning it over to you, Rob, and take it over. Robin Washington: Thanks, Marc. What an amazing trilogy of 3 great questions. Marc Benioff: Congratulations for such a great quarter. Robin Washington: Absolutely. On a great year. We're going to turn to the numbers and tell everybody about it. So good afternoon. We closed an exceptionally strong fiscal year. We have rebuilt our platform to convert the raw intelligence of LLMs into real work that drives revenue, as we just heard about, reduces costs and scales reliably without limits. This is powering the transition to the agentic enterprise for our customers and ourselves. So to share a few data points, as expected, as Marc said, we had a great quarter or a great year. We finished the fiscal year '26 with second half net new AOV growth ahead of second half AOV growth. Agentforce and Data 360 ARR, inclusive of Informatica Cloud ARR reached $2.9 billion. That's up over 200% year-over-year. This includes Informatica Cloud ARR of $1.1 billion and Agentforce ARR of approximately $800 million, which is up 169% year-over-year. New bookings for Agentforce One Edition and Agentforce for Apps or as we call it A4 X, our most premium SKUs, nearly tripled quarter-over-quarter. Our consumption flywheel is spinning faster than ever. In the quarter, more than 60% of Agentforce and Data 360 bookings came from existing customers expanding their commitments. Looking at our largest deals, every single one of our top 10 wins included Agentforce, data, sales, service, platform and analytics. Our newest addition to our portfolio, Informatica, landed in 6 of those top 10 wins, proving it is a critical component of us building the data foundation for the Agentic enterprise. So let's dive a bit further into these incredible results. Subscription and support revenue grew slightly above 10% year-over-year in nominal and constant currency. Total revenue was $41.5 billion, up 10% year-over-year in nominal and 9% in constant currency, driven by Agentforce, Data 360, Slack, Agentforce sales and service performance. Informatica's Q4 results also outperformed our expectations. This strong performance was partially offset by continued weakness in marketing and commerce, weaker-than-expected Tableau performance and the on-prem revenue timing in Tableau and MuleSoft we shared last quarter. Q4 revenue attrition ended the year at approximately 8%, in line with recent trends. Our current remaining performance obligation, or CRPO, ended Q4 at $35.1 billion, which was up approximately 16% year-over-year in nominal and 13% in constant currency, driven by strong net new AOV, especially in Agentforce, Data 360, Slack and Sales. This does include a 4-point contribution from Informatica. Our top priority remains accelerating growth. Based on our FY '26 net new AOV performance, we are more confident in our path to reaccelerate organic revenue in second half FY '27 as outlined at Investor Day. Given our strong net new AOV performance and the incorporation of Informatica, we are updating our FY '30 framework as follows. We are now targeting FY '30 revenue of $63 billion, which represents an 11% CAGR from FY '26 to FY '30. We remain on track to Rule of 50 by FY '30, and we are pleased that with our continued focus on operational excellence, we delivered 60 basis points of expansion in FY '26. As we think about FY '27 and fueling our framework, we are making targeted investments, including advancing our Hyperforce third-party infrastructure for trust and security, ramping our AE capacity and scaling FTEs to drive adoption. These investments are partially funded by efficiency we've unlocked becoming the lean Agentic enterprise as our own customer zero. Before we turn to guidance, a quick update on capital allocation. I'm proud to say that we have achieved all elements of our Investor Day commitments, including capital allocation. Also, our Board has approved a 5.8% increase in our quarterly dividend to $0.44 per share. Additionally, and as you've heard, given the current stock price dislocation, the most prudent investment we can make is in Salesforce. We are updating our share repurchase authorization to $50 billion. So let's talk about FY '27. We are initiating fiscal year '27 revenue guidance of $45.8 billion to $46.2 billion, growth of approximately 10% to 11% in nominal and constant currency. We expect subscription and support growth guidance of slightly under 12% year-over-year or approximately 11% year-over-year in constant currency. This is fueled by continued momentum in Agentforce and Data 360, partially offset by weakness in Marketing, Commerce and Tableau. Our non-GAAP operating margin guidance is 34.3%, an expansion of 20 basis points. As I mentioned, this is the year where we are making further investments to fuel long-term growth and ensure customer success with Agentforce. We expect GAAP operating margin of 20.9%, an expansion of 80 basis points. Turning to Q1 guidance. We expect revenue of $11.03 billion to $11.08 billion, growth of approximately 12% to 13% in nominal and 10% to 11% in constant currency. CRPO growth for Q1 is expected to be approximately 14% year-over-year in nominal and approximately 13% year-over-year in constant currency. Clearly, we are executing against our FY '30 framework, accelerating growth and investing with discipline, including investing in Salesforce via share repurchases. Before we wrap up, to better reflect our Agentic Enterprise strategy, we are reevaluating our revenue by cloud disclosures in FY '27. So stay tuned for an update on this disclosure prior to our Q1 earnings release. Finally, a big thank you to all of our employees for their dedication and hard work delivering a very successful FY '26 and onward to an incredible FY '27. Mike, I'll turn it over to you. Michael Spencer: Thanks, Robin. And with that, Leila, we're going to go to the first question, please. Operator: [Operator Instructions] And your first question will come from Keith Weiss with Morgan Stanley. Keith Weiss: Excellent. Congratulations on a really nice end to FY '26, particularly when it comes to the Agentforce numbers. The Agentforce numbers are definitely eye-popping getting to a big scale and still growing at really, really high rates. But on the other side of that, CRPO perhaps was a little bit disappointing. On an organic basis, you grew that at 9%, just in line with your guidance. And typically, we expect a little bit of a beat, 100, 150 basis points of a beat. And I think that's stoking some concerns with investors, can Salesforce do both? Can we grow a big Agentforce business and sustain the growth and momentum in the broader Salesforce portfolio? Can we bring it along the entirety of the business? So can you talk to that aspect? Can Agentforce catalyze the broader Salesforce product portfolio? Can it bring along everything? And what gives you confidence in that acceleration in the back half of the year? Marc Benioff: All right. Well, I think that, that is absolutely a great question. And I think the reason why it's such a great question is because Salesforce is, just as you said, it's a comprehensive business. We're closing new business, new ideas. We have been building new technology, and we also carry with us that we are a subscription business. So we're carrying with us our legacy as well, and we're renewing and moving that legacy business forward. That's also one of the exciting parts of Salesforce because that also gives us the predictability to understand what's going to happen in the future fiscal years. So yes, we are innovating, we're creating the future, we're adding to the future, we're also renewing our customers and I have to tell you, we're just very proud actually of the numbers. I mean this fiscal year is far better than I expected it at the beginning of the year in the fourth quarter, actually, even the third and fourth quarter, Miguel's numbers were far exceeded my expectations and to your point, Agentforce also and also Data 360 are exceeding our expectations. And yes, could we sell more? Could we renew more? Can we do more? Can we do this? Can we do all these various things? We absolutely can, but we are very grateful for what we've been able to achieve so far. Robin, do you want to add to that? Robin Washington: Yes, I agree with that. I think we're monetizing AI, Keith, through many different fashions. We've got multiple ways to monetize. We're seeing great growth, as I mentioned, in our premium SKUs. We're seeing acceleration. I think just listening to the 3 customer interviews, it talks about the great value that they're getting from core. It's also important to point out, we didn't talk about it a lot, but our seats, we're still seeing them grow year-on-year and quarter-on-quarter. So what we see is now with Agentforce with the system that you laid out, the system of agency, et cetera, we're just seeing incremental value to our software. And some of it's going to be consumption-based, but we're going to have a hybrid model. Seats will continue to be a key component of our growth going forward. And what we hope to see is just what you heard from the 3 customers today, incremental value coming as a result of our agentic technology and capabilities. Operator: Your next question will come from Brent Thill with Jefferies. Brent Thill: Marc, the $50 billion buyback, I guess many are asking given the falloff in big multiples, why not lean a little harder in acquiring technology in M&A versus buying the stock back? Marc Benioff: Well, I really appreciate that. I think, Brent, the way to look at this is -- I'll just tell you how I look at it, which is that there's many uses of cash. Number one is dividend. We just increased the dividend by 5%. That's one use of cash, very important. And then we also look at buyback, traditional buybacks, okay? And so we're doing that. We've done that very aggressively over the last few years, as you know. And acquisitions, we will continue to do acquisitions, but using our new formula that we put into place, and we've done now quite a few acquisitions using that new formula, and it's been great. I wish I had used it actually through the entire history of Salesforce. I think we have a much better understanding of how to do acquisitions that are accretive to the business, but not dilutive to investors. And then debt. So I think there is a role here that we're just very underleveraged on our balance sheet. And I think, look, you're a great banker. You've been a great banker for decades now. I think if you look at our balance sheet, now we're going to do more than $16 billion in cash flow this year. We're not using debt effectively. And I think at these prices in the market, the ability actually to kind of come to terms that we had some acquisitions in the past like Slack and Tableau that diluted our investors, I think now is the opportunity to take some of that stock back out of the market. And these are great prices, I'm sure you would agree with that, and we want to use our capital correctly, and I think debt is a great way to do that. And I think our stock is at a great price, and I want Robin to buy as much of it as you possibly can. Robin Washington: Yes. And I'd maybe add to that, Brent. It doesn't preclude us from doing all the things you mentioned to grow, as Marc just said, with our free cash flow, with our cash balance, with our access to market. We're going to do -- we bought 10 companies, and we also returned over 99% of our free cash flow to our shareholders via buybacks and dividends. So as we think about optimizing our balance sheet, to Marc's point, we're positioning ourselves to grow organically, inorganically and also return value to our shareholders. Marc Benioff: I think that when you look at such a huge cash flow number, although we just finished a $15 billion year coming into what will be probably at least a $16.5 billion cash flow year, then we should be really just thinking about how do we use cash correctly? What is the right way to use cash? And yes, I think that there are many ways to use cash, but focusing on those 4 things, the dividend, the buyback, the acquisition and debt, all 4 are critical. And if you have other ideas or you have other thoughts, we're very open. We -- I'd love to have the conversation, of course. Operator: Our next question will come from Kirk Materne with Evercore. S. Kirk Materne: Marc, you alluded to it in your comments. The presentation yesterday by Anthropic, I thought was an interesting example of sort of a better together strategy with you and one of the model partners. But there is continued concern that those providers might become more competitive with you over time. I was wondering if you could just give us an idea of how you see the lines of demarcation in terms of partnering as well as potentially competing down the line? Where you think you guys have a right to win, where they might have a right to win? I think just a little bit more color on that would be helpful in terms of people's view of where we might be going in terms of the partnerships with those companies. Marc Benioff: Well, no, I'd be delighted to do that. And maybe we can even put up our slide again of our kind of stack diagram because it makes it really clear what our vision of the world is, which is at one very critical part of this, these new models, whether it's OpenAI, whether it's Anthropic, whether it's Gemini, whether it's Llama, whether it's, you pick, DeepSeek, Mistral, there are so many. You can go off as well to look at that there's thousands of them. We make some of them ourselves. These models are new parts of our infrastructure that we really did not have in place a few years ago. We had some of our own models. You remember when we did Einstein, and I would talk about on the earnings call that I was using Einstein to understand what was happening in my business, that was all based on Salesforce models that we had. So we've always had models at the bottom of our infrastructure. But now we really are able to say, look at this, we've done 19 trillion tokens with these models. So these models here, that's who we have today. They will change over time. They're a critical part of our infrastructure. I think the strategic question that you're asking is this: Not only does it look like that in this slide that we just saw, but could those models themselves become platforms? So could OpenAI then also be a platform, could Anthropic be a platform, can Gemini be a platform, can DeepSeek be a platform, can Mistral be a platform, can Llama be its own platform, so that in the way that we have Windows and Mac or HTML or different things as platforms where applications all of a sudden appear, well, all of a sudden, an application come in within one of those platforms and then use some of those services? Absolutely. Those could be new platforms. There will also be other new platforms. I have a platform right here as well, iOS. There are many platforms. And our job, as a software company, is to help our customers to create success and to take that and help them connect with their customers in a whole new way. So we'll deliver our products, our capabilities, our value proposition with our customer relationships, of course, we have over 150,000, I think, customers on our core, 1 million on Slack. We have 15,000 sales reps who are out there. Their job is to work with customers to help architect their future success with these ideas. And our primary vision though today, because this -- in the current reality, this is about humans and agents working together. And these customers, like you saw today with Wyndham, with SharkNinja, even SaaStr, even Salesforce. Our job is to take what's available today and make it successful. And that isn't where those platforms are today, as you know. And in your business, you work for an amazing company, Keith works for an amazing company. And these large banks, where we are providing a lot of automation for the sales professionals, the service professionals, there is a lot to do to not only automate those call centers, those contact centers, the sales forces, the employees with Slack, but then to also then unleash the agents in a way that is compliant, that is secure, that is available, that is scalable, that is reliable, that is able to operate hand-in-hand. So if you go to help.salesforce.com today and you want to get help from Salesforce, you know that you're going to be able to automatically connect to our contact center as well. That's incredible. We couldn't do that just a couple of years ago, as you know. So that's the current way we're deploying. Well, there could there be other ways that we deploy? It's definitely possible. The future could have many different forms, but we can see right now what we're going to sell this year to our customers. We have a lot to sell and a lot to do. Operator: Your next question will come from Gabriela Borges with Goldman Sachs. Gabriela Borges: I wanted to ask the team about the $2.4 billion disclosure on AWUs. Tell us a little bit about how you translate the tokens and the agentic work units to monetization? I know you've been working on AELAs. How do you think about the evolution over time in the pricing model? Jason from SaaStr was talking about the agentic value of the stack being 3x to 4x more than software value of the stack. So tell us a little bit more about how the ELAs are going? And Robin, for you specifically, how does it impact gross margin? Marc Benioff: I think Patrick should really lead this AWU discussion because it's kind of his brainchild, and he was very unhappy that I keep bringing out this token number because I'm very impressed that we have 19 trillion tokens, but because I think that really shows that we're really using these products to deploy these agents. I mean everybody now knows Agentforce is hugely successful and all the new capabilities of Agentforce, the determinism, the voice, the programmability, Agentforce Studio, Agentforce Builder and now Slackbot as well. But I think that then there's another level, this idea of agentic work units. So why don't you tell us your vision? Patrick Stokes: Yes, sure. So as we started looking at how our customers were using Agentforce and we started looking at how we're consuming tokens from the model providers, right, all those models that sit at the bottom of our layer from OpenAI and from Anthropic, what they're doing is they're providing intelligence into our system, and we're able to measure that intelligence through the lens of a token, and that's how most of these model companies are charging. It's the amount of tokens that your platform, in our case, is consuming. But when we started looking at that across our customers, we can start to see, okay, our top 10 customers are consuming this many tokens. We know how many tokens Salesforce is consuming internally. But it begs the question, well, is it -- are they doing anything? Are they working? Are they providing any value? Or is it just input and output of intelligence, right? So you can ask it a question, it can write you a poem, but that's not really all that valuable in the enterprise world. What's valuable is creating a document for you or updating a record or helping us; right here at this table, we all used Slackbot to prepare our notes here, our customer stories, we're all preparing that with Slackbot. And so what we did is we said, what if we could count those individual work units? And then what if we could look at those work units relative to the tokens? And we said, "Oh, there's a relationship between the 2." We can start to see a ratio of tokens being consumed and work coming out. And that ratio starts to become really interesting because now we can look at our customers and say, "Hey, Customer A, you have a really nice ratio. You're getting a lot of work done on the platform for the amount of tokens that you're consuming. And hey, Mr. Customer B, your relationship is actually not so good. You're consuming a ton of tokens and not getting a lot of work done, what can we do to help you?" So it becomes a really kind of interesting way. The tokens are kind of a leading indicator, but the work unit, we think is a much more valuable indicator in terms of where the value is actually coming from for our customers and for our own transformation into an agentic enterprise. But maybe on the monetization, I can toss to you. Robin Washington: Yes. I mean this is something that we continue to look. I think you were asking specifically, Gabriela, about what does it do to gross margins? And as we think about margins in the short run, we think we're pretty neutral. Patrick talked about this differentiation between tokens and AWUs. Well, tokens, those prices, we're working with our various partners. Those are going to start to go down over time and commoditize. But also importantly, when you think about our products, engineering and product is working on ways to continue to fine-tune our products with things like Agentforce Scripts, which is going to make it easier for us to produce the work, but reduce the overall cost. So those are things. And then again, we're optimizing. We're using Customer Zero. Marc talks about the fact that we're reallocating resources. We're also looking at other things to overall continue to drive our efficiency down. So short term, we don't see gross margins getting worse, fairly neutral. Long time, we're doing everything in conjunction with our FY '27 framework and our overall operating margin improvement to continue to get efficiencies in gross margin and operating margin. Marc Benioff: Miguel, do you want to take on the question about AELAs and kind of what we're seeing in the market and how customers are consuming this technology? Miguel Milano: Yes. I've been working very hard for the last quarter to have this minute because I really want to tell you the story. Q3 was stellar. You heard the numbers at the time. We made a very clear commitment, Robin and I in partnership at the Investor Day. We shared 3 key messages to you all. Number one is we were seeing the very likely possibility of revenue reacceleration in 12 to 18 months. That was 4 months ago. Today, we are saying that the revenue reacceleration, organic revenue acceleration of subscription and support is going to happen in H2. And we are very -- we have committed to that, and we are certain now because we've seen the net new AOV growth outpacing the AOV growth in H2 last year. We're sitting now in Q1. We're looking at Q1 and Q2. And I can tell you with absolute confidence that the net new AOV growth is going to significantly outpace the AOV growth. So now 4 quarters of net new AOV pulling up the AOV growth is going to finally translate in H2 into a revenue reacceleration. That was number one. Number two was the fiscal year '30 a long-term durable growth plan. We are recommitted to that to the point that we've increased the target from 60 to 63, if you do the math, it's not all because of Informatica, it's because we are more and more certain that we are going to hit the numbers. And then the third thing, which is substantially important, and it goes to the monetization and to the AELA question is, we have found the formula to monetize AI. There are 3 ways, distinct ways and the main ones that we are using to monetize AI. Number one is our large installed base of 100 millions of seats, we are upgrading to our premium SKUs that contain already embedded AI and unlimited access to agentic for employee use cases, number one. We've seen, as Robin referred to earlier, that, that SKU business has triple Agentforce First Edition and Agentforce for Sales and Service has tripled quarter-on-quarter. Last quarter, it doubled. So it's pretty monster. The second way to monetize is this is very peculiar because now our apps are Agentforce Sales, Agentforce Service, all of them are agentic. So now the ROI that companies generate by implementing our apps has increased. So now we have access to new seats that before companies couldn't afford to roll out Salesforce or any of our apps. And the third way is for customer-facing agentic use cases, agents, which sell fuel, the credits, Flex Credits. And companies, if you look at the bookings of Agentforce in Q4, 50% were credits, Flex Credits, fuel; and 50% were higher SKUs. If you look at the top 12 deals, which, by the way, record, Robin and Marc, we've never done more than 10 deals above $10 million in any given quarter. This was our best Q4 ever, our best quarter ever. We did 12 deals above $10 million, one of them above $50 million, 3 of them above $20 million. When we look at those and if you look at the 3 ways to monetize, 6 out of the top 10 deals basically were upgrades of the existing SKUs. Seven out of the top 10 deals, we added seats. And 5 out of the top 10 deals included credits for agentic use cases, customer-facing use cases. Three of them included everything. But the beautiful thing is in every story that we heard today -- that was very incredible, these 3 customer stories, I have a bunch of stories that I wanted to tell you, but we're running out of time here. In every one of these stories, we are monetizing AI through these 3 different angles. And we are seeing it in the bookings, we are seeing it in the pipeline. I'm very confident about Q1. I mean something happened in Q4 that was monster. I mean, Marc said a target to me and to my team. I need to see bookings starting with a number, and we delivered above the number. That was incredible. I'm looking at the pipeline, double-digit growth in pipeline. I'm looking at my capacity. We've hired over time. We started last year, 12 months ago, with 0% growth in ramped AEs. This is -- these are AEs that are ready to sell. It takes our AEs a year-or-so to sell, to be prepared. We are starting this fiscal year with 15% to 17% more growth in ramped AEs. That's dynamite. We have double-digit growth in pipeline. I'm very confident about the net new AOV growth significantly outpacing AOV growth. And AELAs have been a big part of this. This is the #1 product that we sell now. We sold 120-plus AELAs in Q4. I thought we were going to do between 50 and 100. We did 120. In the top 10 deals, we sold 8 AELAs in the top 10 deals. These are customers that go all-in and commit and commit long term to our -- to the future, and they are outsized deals. Marc Benioff: Very good. Thank you so much, Miguel. Robin Washington: Thank you. Operator: Your last question will come from Raimo Lenschow with Barclays. Raimo Lenschow: I'll make it a quick one. If your cross-sell or the token upsell is working so well, you said 60% of the booking came from that one, it's kind of almost getting the message out to more customers quicker. You now have 29,000 customers. How do you think about that evolution from kind of getting new customers and getting those guys up and productive this year? How do you think about the role there and what are the roadblocks? Miguel Milano: Yes, Raimo, good to see you again. Listen, we did 29,000 Agentforce transactions. We have approximately 22,000, 23,000 customers. But you said it very well: Our role, the role of my team, the role of my executive, the role of all the AEs is to be in front of customers to explain these stories and the value that we can drive. I mean today -- yesterday or today, I don't know when, there was a world tour in Australia, we had 12,000 customers... Marc Benioff: It's actually tomorrow, but it's today. Robin Washington: Australia time. Miguel Milano: I don't know, whatever. 12,000 customers showed up. It's happened. It's already happened, by the way. And I think we just need to -- the key message that we are conveying to our customers is we are -- SaaS is more important than ever. In the world of LLMs, this is -- I mean, we are so happy that this raw intelligence exists. But to convert raw intelligence into reliable, accurate, scalable enterprise work, you need a software infrastructure like the one that Marc described with our 4 layers, the system of context, the system of work. This is our big differentiator. Nobody has 40% market share in sales and service. I'm sorry, in the customer domain, we are the systems of work. We have the system of agency, very sophisticated. Some companies are building it, whatever, but we have the best because we are proven in 4,000 production customers, 23,000 total customers. Nobody has that at the scale and the complexity because our agents are connected to the data, connected, able to trigger actions. And then we have the system of engagement, which is Slack. I mean the demo of Anthropic was incredible. It started in Slack. Then what did they do? They took it out to another UI, which is awful, by the way. But it's -- I mean it wasn't really as nice as Slack, but they did all the work, incredible work. Again, we are so lucky that these companies exist. And then they copy-pasted. They did that, right? They copy-pasted it and they put it back in Slack. Okay, today, you can do that with Slackbot. You don't have to get out and in. We have a great partnership with Anthropic. But anyway, Raimo, we are very excited. Marc Benioff: Patrick, I think you should come in here and talk about this. Patrick Stokes: Yes. I mean everybody right now, everybody through the past few years has been so enamored with the model, of course, it's this brand-new thing, this intelligence layer that we never had, but also the data. But what's really happening around us is the apps are changing. The UI is changing, as Miguel is alluding to. And that's really what we're seeing because these old apps of these point-and-click buttons, those were designed for human beings to interact with. But what happens when you have human beings and agents in the same place, right? Suddenly, a lot of those interactions, those UI paradigms kind of get thrown away. You don't need all of this complex UI anymore. And that's what makes Slack so powerful. And I think that's what Anthropic knows. I think that's what we saw in their demos yesterday, right? You kind of like process the work. But ultimately, it's coming -- that work is getting done because some person or some agent is asking for it and then you need to give it back to that person or that agent. And where do you do that? You do that in Slack. And that's what makes Slackbot so unbelievably powerful is you never have to leave. And of course, it's powered by Claude. We love our partners of Anthropic, but it knows all of the context of your business, not just the context of your systems of records, as we think about it, but all of the conversations happening inside of Slack and has access to all of that and the knowledge that it gains from that is truly unmatched. It might be our most important piece of data that we have. And so when you put all that together into this brand-new user interface, that's really where we see this big transformation in SaaS happening. It's that the apps are going to -- they're going to change and they're going to just turn into this environment where humans and agents are really working together. Robin Washington: And I think to add to that, if you think about customer success, right, we're really doubling down, as we said, on FTEs. And I think they're the folks that are on the ground with our selling teams, our solution selling teams to ultimately make this vision a reality. And I think that's the key component to converting it from AELAs to ultimately consuming. That's what we want to continue to see happening is that consumption wheel continuing to fly. Marc Benioff: Well said. Michael Spencer: Well, great. Thank you, Raimo. And we want to thank everyone for joining us today and look forward to seeing you soon. Marc Benioff: Bye, everybody. Thanks so much.
Operator: Thank you for standing by. My name is JL, and I will be your conference operator today. At this time, I would like to welcome everyone to the ACADIA Pharmaceuticals Inc. Fourth Quarter Earnings Call. [Operator Instructions] I would now like to turn the conference over to Al Kildani, Senior Vice President of Investor Relations and Corporate Communications. You may begin. Albert Kildani: Good afternoon, and thank you for joining us on today's call to discuss ACADIA's fourth quarter and full year 2025 financial results. Joining me on the call today from ACADIA are Catherine Owen Adams, our Chief Executive Officer, who will provide some opening remarks; followed by Tom Garner, our Chief Commercial Officer, who will discuss our commercial brands, DAYBUE and NUPLAZID. Also joining us today is Elizabeth Thompson, Ph.D, Executive Vice President, Head of Research and Development, who will provide an update on our pipeline programs; and Mark Schneyer, our Chief Financial Officer, who will review the financial highlights. Catherine will then provide some closing thoughts before we open up the call to your questions. We are using supplemental slides, which are available on our website under the Events and Presentations section. On today's call, both GAAP and non-GAAP financial measures will be discussed, including non-GAAP NUPLAZID net sales and non-GAAP total revenues. The non-GAAP financial measures that are also referred to as adjusted financial measures are reconciled with the most directly comparable GAAP financial measures in our earnings press release and slide presentation, which has been posted on the Investors page of the company website. Before proceeding, I would like to remind you that during our call today, we will be making several forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements, including goals, expectations, plans, prospects, growth potential, timing of events, future results and financial guidance are based on current information, assumptions and expectations that are inherently subject to change and involve several risks and uncertainties that may cause results to differ materially. These factors and other risks associated with our business can be found in our filings made with the SEC. You are cautioned not to place undue reliance on these forward-looking statements, which are made only as of today's date, and we assume no obligation to update or revise these forward-looking statements as circumstances change, except as required by law. I'll now turn the call over to Catherine for opening remarks. Catherine Owen Adams: Thanks, Al, and good afternoon, everyone. I'm pleased to report that ACADIA delivered another strong quarter, capping off a milestone year for our company. We achieved adjusted total revenues of $298 million in the fourth quarter, up 16% from the prior year. And for the first time in our company's history, annual revenues exceeded $1 billion, reaching $1.08 billion in adjusted 2025 revenue, which represented 14% growth from the prior year. This achievement underscores the strength of our commercial execution and positions us for sustained growth in the coming years. We are presenting adjusted revenues because during the fourth quarter, we received our Inflation Reduction Act invoices from CMS for NUPLAZID, which were higher than anticipated and required a nonrecurring accounting change in estimate that you see reflected in our financials. Mark will walk you through the details later in the call. As a result, we delivered adjusted NUPLAZID net sales of $189 million in the fourth quarter and $692 million for the full year. These results were up 17% and 15%, respectively, and in terms of volume represented 13% in the fourth quarter and 9% for the full year. together demonstrating the continued strength of NUPLAZID and further reinforcing our confidence in its long-term growth trajectory. So now looking forward to 2026, we expect NUPLAZID net sales of $760 million to $790 million, which would represent between 10% and 14% growth over 2025 adjusted net sales, placing the brand on a strong trajectory towards our expectation of achieving blockbuster status with $1 billion of net sales in 2028. Turning to DAYBUE. We delivered net product sales of $110 million in the fourth quarter and $391 million for 2025, representing 13% and 12%, respectively, year-over-year sales growth. This growth was driven primarily by our expanded reach into the community physician setting in the U.S. and our ex-U.S. named patient supply programs, including countries outside the European Union, where we're seeing strong interest to access DAYBUE. We're excited about the launch of DAYBUE STIX, our new powder formulation, which is still in the very early stages, but already generating significant interest from both health care providers and caregivers. Tom will share more details on how this new formulation is being received and the opportunities we see ahead. I do want to briefly address the regulatory developments in the EU. As we shared, following our oral explanation to the Committee for Medicinal Products for Human Use, or CHMP, which we gave to support our trofinetide marketing application, we were informed that the outcome was a negative trend vote. Liz will provide details on our plan to request a reexamination subject to the formal opinion. Our commitment to advancing access to trofinetide in the EU remains unchanged. Importantly, our named patient supply programs remain active, ensuring patients maintain access to treatment as we move through the regulatory process. For our 2026 DAYBUE guidance, we expect global net sales between $460 million and $490 million, which would represent between 18% and 25% growth over 2025, driven by contributions from the STIX launch in the U.S. and continued growth of our named patient supply outside the U.S. Due to the current status of our application within the EMA, this 2026 guidance does not include potential commercial sales that would result from this regulatory approval. However, it does include contributions from our global named patient supply programs, including countries within the EU where we continue to see strong interest. Longer term, we continue to project 2028 global net sales for DAYBUE of $700 million, inclusive of the EU, and we'll update our expectations after clarity on the final EMA opinion. Just for perspective, of our projected $700 million in 2028 sales, the EU sales represent less than 15% of the total, meaning we have ample opportunity for growth ahead under any scenario. Turning to our robust R&D pipeline. We are excited for the Phase II readout of remlifanserin in the August through October 2026 time frame as this presents a key event for our company this year. Beyond that, we see several important catalysts, which Liz will detail. Importantly, we have 4 unique molecules targeting large addressable markets with a combined full peak sales potential of $11 billion. Approximately $4 billion of that potential is specifically attributable to remlifanserin across both the Alzheimer's disease psychosis and Lewy body dementia psychosis indications, highlighting the transformative potential this asset represents for ACADIA's future growth trajectory. I'll now turn the call over to Tom for an update on our commercial brands. Thomas Garner: Thank you, Catherine. I'm pleased to share the strong fourth quarter performance delivered by our commercial portfolio, beginning with NUPLAZID. NUPLAZID delivered another outstanding quarter with adjusted net sales of approximately $189 million in the fourth quarter. Importantly, as Catherine mentioned, underlying quarterly volume growth remained exceptionally strong at 13%, accelerating the momentum we've built throughout the year. This growth was broad-based with strength across all channels. For the full year, volume increased 9%, reflecting sustained and durable demand for NUPLAZID. Several key metrics underscore this commercial momentum. New prescriptions led the way, growing 18% year-over-year in the fourth quarter. This performance reflects continued traction in the marketplace and validates the effectiveness of our commercial strategy to improve awareness and diagnosis of Parkinson's disease psychosis while positioning NUPLAZID as the preferred treatment option earlier in the course of the disease. This has been supported by a refined approach to targeting and segmentation. While on the direct-to-consumer front, our new branded campaign launched in the fourth quarter, and we expect pull-through benefits to build throughout 2026. From an execution standpoint, we have now completed a 30% expansion of our customer-facing teams to better support our evolving prescriber base with representatives now fully deployed in the field. Based on our experience with DAYBUE, we expect a 6- to 9-month ramp before the full impact of this investment is reflected in results. Our expanded team is now equipped with enhanced tools and resources to engage a broader and evolving prescriber base. Notably, 40% of NUPLAZID's prescribers in fiscal year 2025 were new to brand, and we are now even better positioned to meet the needs of this growing group of HCP writers. Overall, 2025 was a very strong year for NUPLAZID, and we are well positioned to build on this momentum in 2026 and beyond. As reflected in our guidance, we expect another year of solid growth. And as Catherine noted, we remain confident in NUPLAZID's path to approximately $1 billion in annual sales by 2028. Now turning to DAYBUE. We delivered another quarter of meaningful progress across multiple growth drivers. Fourth quarter sales were approximately $110 million, driven primarily by strong U.S. performance with growing contributions from our rest of world programs. This represents 13% year-over-year sales growth, supported by 12% volume growth. In the fourth quarter, 1,070 patients received DAYBUE shipments globally, which represents record highs in both the U.S. and outside the U.S. This milestone highlights our continued success in reaching more patients who can benefit from therapy. As the business matures, we expect to increasingly emphasize sales-based metrics over patient counts as our primary performance indicator. Core business fundamentals remain consistent with what we reported last quarter, including strong persistency, low discontinuation rates and continued penetration within the approximately 6,000 diagnosed Rett syndrome patients in the United States, reinforcing the significant opportunity that remains. We continue to see growing momentum from our community expansion strategy. In the fourth quarter, 76% of new prescriptions originated from community-based physicians, validating our strategy on expanding access beyond specialty care centers and bringing DAYBUE closer to where patients receive their ongoing care. Now turning to DAYBUE STIX, one of our most exciting recent developments. In December, the FDA approved this new formulation of DAYBUE, a powder for oral solution. We believe this represents a meaningful advancement in how we can serve patients and families. DAYBUE STIX has been developed based on the feedback we've heard directly from caregivers and HCPs. The powder formulation allows flexibility in mixing with different liquids and adjusting volume based upon patient preference. It requires no refrigeration, offers enhanced portability through compact packaging and contains low sugar and carbohydrate content with no red dye or preservatives. Based on our analysis, we believe there's an incremental opportunity of over 400 patients, including treatment-naive and those who have previously discontinued DAYBUE due to formulation concerns. We've been very encouraged by the early response to the approval of DAYBUE STIX across the Rett community. Initial product is already in channel, and the first patients have already begun receiving shipments. Early patient mix is tracking in line with our expectations, and we remain on track for a broader commercial launch in early Q2 as we ensure appropriate inventory levels and a smooth transition for patients. Outside the United States, we continue to make progress expanding global access to trofinetide. DAYBUE liquid is now approved in 3 markets, including Israel, following recent approval by the Ministry of Health, further expanding our international footprint. Looking ahead, we see a strong growth outlook for DAYBUE reflected in our 2026 guidance. Key drivers include the U.S. launch of STIX, continued benefits from the expansion of our customer-facing teams and ongoing contributions from the named patient supply programs internationally. Overall, the fundamentals of the DAYBUE business remains strong with multiple demand drivers in the U.S., coupled with a runway for continued growth as we expand access globally. I'd like to thank the ACADIA commercial organization for their outstanding commitment to both NUPLAZID and DAYBUE in 2025. I look forward to further building on the strong momentum we've established as we head into 2026. And with that, I'll turn the call over to Liz. Elizabeth Thompson: Thank you, Tom. I'm pleased to have the opportunity to discuss progress on our robust R&D pipeline, where we continue to see real momentum building across multiple programs and to provide some regulatory updates. As we updated last month, across our 8 disclosed programs, we anticipate initiating 5 additional Phase II or Phase III studies by the end of 2027, demonstrating the breadth and depth of our development portfolio. Over recent quarters, we've achieved several important milestones with new study initiations. Among these, we initiated a Phase II study of remlifanserin in Lewy body dementia psychosis, initiated a Phase III study of trofinetide in Japan and launched our Phase II study of ACP-211 in major depressive disorder. Soon, we expect to initiate our first-in-human study of ACP-271 in healthy volunteers, marking an important advancement for this novel asset into clinical development. As a reminder, our current target indications are tardive dyskinesia and Huntington's disease. We continue to expect to deliver 4 Phase II or Phase III study readouts by the end of 2027. The next milestone will be top line results from our Phase II study of remlifanserin in Alzheimer's disease psychosis. Based on the pace of enrollment, we remain confident in the updated August to October 2026 time line we shared last month. Recruitment in our remlifanserin study for Lewy body dementia psychosis is getting off to a solid start and is tracking in line with our expectations. Turning to our trofinetide regulatory and international development updates. As we announced earlier this month, we were informed of a negative trend vote from the CHMP. We expect to receive the final opinion this week, which we expect will be adopted following the CHMP meeting currently taking place. Based on the trend vote, we do anticipate that final opinion to be negative. We are currently intending to follow the normal regulatory process for reexamination. In total, this process would be expected to take approximately 120 days from the adoption of the negative opinion. Assuming that time line holds, we would expect the reexamination process to lead to a new final CHMP opinion around the end of Q2. Again, our intention to request reexamination is based on our current understanding of the trend vote, but we will need to review the final opinion to determine our optimal path forward. While we look to bring trofinetide to patients in the EU, we continue to make progress on other fronts. In Japan, as I mentioned, we recently initiated our Phase III study, which represents an exciting opportunity to bring trofinetide to Japanese patients with Rett syndrome. We anticipate results from this pivotal study between Q4 2026 and Q1 2027, which would position us for a potential regulatory submission in 2027 in this important market. The strength and diversity of our pipeline continues to position ACADIA for sustained growth with multiple potential opportunities to bring truly meaningful innovation to underserved patients living with rare and neurological diseases. 2025 was a milestone year for ACADIA in many ways, and I am particularly proud of what the R&D team has done to continue to move our science and our pipeline forward. And with that, I hand the call over to Mark. Mark Schneyer: Thank you, Liz. I'm pleased to walk you through our strong financial performance for the fourth quarter and full year 2025. Fourth quarter total revenues were $284 million and for the full year were $1.07 billion on a GAAP basis. Turning to NUPLAZID. Fourth quarter GAAP net product sales were $174 million and for the full year 2025 were $680 million. We are also reporting results on a non-GAAP basis to adjust for the accounting impact on NUPLAZID from receiving our first invoices for inflation cap rebates under the Inflation Reduction Act, or IRA. While we've been accruing for inflation cap rebates since Q4 2022 based upon historical data that we received from the federal government and our customers, the invoices we received from CMS indicated that our Medicare volume for NUPLAZID was higher than we had been accruing for. This volume difference required us to make a change in estimate for our IRA rebate accruals in fiscal year 2025, which is accounted for as an increase in gross to net and resulted in a nonrecurring $20 million reduction in net sales. A reconciliation from our GAAP results to non-GAAP adjusted NUPLAZID net sales and total company revenues is presented on Slide 15. The adjusted net sales methodology apportions the previously described $20 million change in estimate to the years in which the applicable NUPLAZID net sales volumes occurred. As you can see on this slide, the change in estimate is only a modest change in net sales when looking over the entire 4 fiscal year period. For the fourth quarter, adjusted NUPLAZID net sales were $189 million, up 17% year-over-year. For fiscal year 2025, our adjusted NUPLAZID net sales were $692 million, up 15% year-over-year. For the quarter, gross to net for NUPLAZID was 29.4% on a reported basis and 23.6% on an adjusted basis. Our gross to net for NUPLAZID for the full year was 25.9% on a reported basis and 24.6% on an adjusted basis. For DAYBUE, we achieved $110 million in net sales in Q4, up 13% year-over-year, demonstrating continued strong momentum in this brand. The gross to net adjustment for DAYBUE in the quarter was 19.5%. Full year DAYBUE net sales were $391 million, up 12% year-over-year. DAYBUE gross to net was 22.3% for the year. Turning to our operating expenses. R&D expenses for the fourth quarter were $85 million, down from $101 million in the fourth quarter of 2024. The decrease was primarily attributable to the $28 million upfront payment for ACP-711 in the fourth quarter of 2024. SG&A expenses for the fourth quarter were $156 million, up from $130 million in the fourth quarter of 2024, primarily driven by increased marketing investments to support NUPLAZID and from our DAYBUE field expansion and marketing investments. With regard to taxes, we released the valuation allowance on the company's deferred tax assets, resulting in a onetime noncash income tax benefit of approximately $250 million in the fourth quarter. Our cash balance at the end of 2025 was $820 million. Looking ahead to fiscal year 2026, I'm pleased to provide our financial guidance, which reflects our confidence in the continued growth trajectory of both NUPLAZID and DAYBUE. While we will be making some foundational SG&A investments this year, we expect them to deliver meaningful top line and operating income growth as we move forward into 2027 and 2028. For total revenues, we expect to achieve between $1.22 billion and $1.28 billion, representing meaningful year-over-year growth that builds upon our strong 2025 performance. For NUPLAZID, we're guiding to net sales between $760 million and $790 million Sales growth is primarily expected to be driven by expanding volume. Gross to net is expected to be in the range of 22% to 24%, and this aligns with the Medicare volume mix implied by our IRA inflation cap invoices received from CMS. For DAYBUE, we're guiding to net sales in the range of $460 million to $490 million, driven by DAYBUE STIX and continued growth in our named patient supply programs. Given the delay to any potential EMA approval, this guidance range does not assume EU commercial sales. Gross to net is expected to be in the range of 22% to 24%. We expect R&D expense to be between $385 million and $410 million. The increase in R&D spend expected in 2026 compared to 2025 is primarily attributable to an increase in clinical and personnel costs as we advance and have broadened our R&D portfolio. Our R&D expense guidance assumes our remlifanserin program continues into the Phase III portion of the program. We expect SG&A expense to be between $660 million and $700 million for the full year. The growth in SG&A year-over-year is primarily due to our expansion of customer-facing personnel and marketing investments for NUPLAZID and increased spend to support the launch of DAYBUE STIX as well as the annualization of our DAYBUE field force expansion that took place in Q2 2025. This guidance reflects our confidence in the underlying strength of our business and positions us well for continued growth as we advance towards our 2028 objectives. And with that, I'll turn the call back to Catherine. Catherine Owen Adams: Thank you, Mark. Looking ahead, in addition to the strong revenue growth we've highlighted on this call, we have a series of exciting milestones to support our growth in 2026 and beyond. Our most significant catalysts arrived later this year with top line results from the Phase II study of remlifanserin in Alzheimer's disease psychosis expected between August and October, an opportunity with the potential to meaningfully shift our long-term growth profile. We also plan to initiate our first-in-human study of ACP-271 before the end of the first quarter. With a strong balance sheet, we also have the flexibility to pursue business development opportunities that complement and support our future growth. Taken together, our commercial execution, advancing pipeline and financial strength, ACADIA is well positioned for sustained growth and value creation. And with that, I'll turn the call back to the operator to begin our Q&A session. Operator: [Operator Instructions] Your first question comes from the line of Tess Romero of JPMorgan. Tessa Romero: So how should we be thinking about ramp to your 2028 global net sales targets that you outlined at our conference last month? Any additional color you can give us now that your 2026 guidance has been outlined for both DAYBUE and NUPLAZID? Catherine Owen Adams: Thanks, Tess. I'll give you a top line view and then maybe ask Tom to add some specifics. So if we take NUPLAZID and we look at our midpoint guidance for '26 at $775 million, that's about 12% above this year's growth on the adjusted basis. And so would indicate we're expecting low to mid-teens growth out to the $1 billion. So we feel very confident in that incremental growth that we see, and Tom will explain maybe a bit more about how that tracks through to the marketing execution. And then with DAYBUE at the midpoint of our guidance, 21% over last year, again, expecting for next year and out to '28 sort of low 20% growth to continue. So those -- that's how we bridge between today and our guidance for 2028. Overall, the company's CAGR during that time will be about 16%. But Tom, in terms of the confidence to ramp, perhaps you'd add some stuff for Tess. Thomas Garner: Sure, absolutely. So as you can see by our results through 2025, both brands are coming off a very strong year. And just looking at NUPLAZID and in particular, our Q4 performance, you can see the acceleration that we actually saw in some of our metrics through Q4. This gives us real confidence going into 2026 but now with our 30% expansion of the field force in place, we can really begin to further capitalize upon the underlying demand that we are seeing in the market for NUPLAZID. Obviously, we mentioned on the call that we are really kind of positioning NUPLAZID earlier in the treatment paradigm for these patients with PDP. We are continuing to focus on our unbranded efforts. We think awareness for this patient population is incredibly important. And as we begin to tap into just some of the underlying dynamics that we see on a weekly and a monthly basis, especially as it relates to kind of our expanding a new writer base, that gives us real confidence that our strategy moving forward is going to continue to pay dividends for us. Turning to DAYBUE. We obviously got the approval for DAYBUE STIX back in December. We've been really encouraged by the early signals that we're seeing through January. And just recall, we're not anticipating a full launch for that formulation until Q2. But what we're seeing already, I think, really underpins the excitement that we had leading up and then through that approval just given the encouraging stories we're hearing both from caregivers, but also HCPs and their interest in continuing to use DAYBUE and try the new formulation, either for those patients who are naive to therapy or potentially may have discontinued due to formulation concerns. So there's 2 big opportunities that we see for DAYBUE in the U.S. Outside of the U.S., obviously, it's going to be a continuation as we further bolster our named patient supply programs. So we continue to see plenty of inbound interest from across the various countries where those programs are available, and we'll support those patients where we can. Operator: Your next question comes from the line of Ritu Baral of TD Cowen. Ritu Baral: I wanted to ask the team what good remlifanserin ADP data will look like later this year. What are you hoping to show on the primary endpoint that SAPS-HD at week 6? And if you could go through some of the powering. And in the January presentation, you noted a key exploratory endpoint of the NPIC. Is there anything in particular that you're looking for in that exploratory endpoint of note that sort of fills out the clinical story of what remlifanserin benefit in this population could be? And then I have a quick follow-up. Catherine Owen Adams: I'll get Liz to give you her response. Elizabeth Thompson: Sure. Thanks for the question, Ritu. So broadly speaking, what we're looking for in our Phase II study with remlifanserin is continued evidence that we are developing a molecule that's in line with our target product profile, what we think a drug really needs to be meaningful in this patient population. And that has a number of different components to it. And then I promise I will come to your questions about powering. But some of the components are, we know that we think it's important here to have a drug that's going to be easy for people to take and easy for them to be compliant with, particularly in this patient population. You can imagine the challenges in having people take their medicine appropriately and the potential big impact if they don't. And so something that is once a day, something that can be taken with or without food, something that doesn't have significant DDIs with other medicines or beyond. Those are all things we think are important that we feel pretty good about with remlifanserin to date. We think it's going to be important, obviously, to show efficacy and a good safety profile. And frankly, if we see something that's in line with the established NUPLAZID safety profile, I think we'll be very pleased with that. And finally, certainly, we're not going to answer this just with this Phase II trial, but we think it's going to be important to see data that's directionally supportive of other things that we think matter that we're not going to have a negative impact on motor, for example, that we're not going to have a negative impact on cognition. So those are all the kinds of things that we're going to be looking for in this study. In particular, around powering and the SAPS-HD, from a primary endpoint perspective, what we have powered for here is a moderate effect size, so 0.4 in particular. We'll be pleased, of course, if we see statistical significance on that at week 6. Around NPIC, I'm not really ready at this point to comment on specifics of what we're looking for there. That is a more recently added endpoint, and so we certainly did not power the study around that. So it's more exploratory in nature, and that's reflected in where it is in our hierarchy at this point. Operator: Your next question comes from the line of Marc Goodman of Leerink. Marc Goodman: Yes. Can you just give us a sense of what's going on behind the scenes with DAYBUE and just the persistency and how patients are being compliant with the drug, just how that's changed? We haven't heard you talk about that at all today. Catherine Owen Adams: Yes. I think Tom talked to it at a high level in his comments. So Tom, do you want to add any more color for Marc? Thomas Garner: Yes. I mean, essentially, Marc, everything is kind of in line with what we shared in previous quarters. Our discontinuations remain in the pretty low single-digit range. They've really stabilized. Consumption kind of remains as we've shared before, which I think for the full year was kind of the high 60% range. Yes, I mean, our story really now is -- now we've stabilized the business. I think now we're kind of back on a growth trajectory. Now we're kind of really seeing the benefits from the expansion that we made back in Q2. And our strategy as we expand into the community is working for us. It's really now a case of utilizing STIX to really unlock that next wave of growth, and that's what we anticipate doing as we head into 2026. Marc Goodman: It's been single digits all year. Is that what you're saying, all 4 quarters? Catherine Owen Adams: Yes. Thomas Garner: Yes. Operator: Your next question comes from the line of Rudy Li of Wolfe Research. Guofang Li: I have a follow-up question for the upcoming Phase III trial in ADP. Can you maybe just talk about the time line, how long it would start -- it would take you to start and finish the trial? And a second question regarding the EU opinion for DAYBUE. What specific concerns regarding the pathway? And how do you plan to fix that with the upcoming request for reexamination? Catherine Owen Adams: So Liz, I think that's clarity on the ADP II/III enrollment time line and then you can fill them in on EU. Elizabeth Thompson: Sure. Rudy, welcome and thanks. So first, on the remlifanserin Phase II to Phase III. So when we originally designed this program, we were building it on a wealth of information from pimavanserin. And so we took an assertive approach to clinical development, where we've got a combined program, a master protocol that includes the Phase II and 2 Phase IIIs. And the advantage of this is that they're statistically separate. So I've been talking about how we're going to provide detail or we're going to provide top line results on the Phase II in the August to October time frame, but they are operationally seamless. And so what that means is that as soon as we stop enrolling in the Phase II portion of the ADP program, sites can start enrolling in the Phase III portion of the ADP program. So we look to move from Phase II to Phase III enrollment later in the course of this year. Switching over to the reexamination. So we don't have the final opinion in hand. We expect that to show up over the course of the coming days. So I can't tell you exactly what is going to be in it. What I can say is that we do anticipate, throughout the process, we have gotten questions on things like the relevance of the endpoints to the patient population, the clinical meaningfulness of the results that we saw on our endpoints, the duration of therapy and the mechanism of action of DAYBUE and how that could be extrapolated to the kind of impact you might expect to have on the disease. So those are the types of things that we anticipate we're going to see in the final opinion. But again, that's going to come in the following days, and we'll put out a press release that provides more information on it when we have more information on it to share. In terms of -- I think there was also embedded in there a question about what we might do differently this time around. Some of that is going to depend on the nature of the questions that we actually wind up seeing. But I will say in terms of reason to believe, there is precedent for reexaminations taking a negative opinion and turning it into a positive opinion. If you look over the last 5 years, depending on how you cut it, you get something like 20% to 30% of reexaminations result in a positive opinion. There are a number of factors that can go into this. Certainly, part of the process is that you do have a new rapporteur and co-rapporteur. You have an opportunity to come in specifically addressing only those grounds that are the grounds for refusal of the application, and we have an opportunity to potentially bring some new voices into it. We're really committed to the EU patient population and are looking for ways to get our way through this regulatory process. Operator: Your next question comes from the line of Yigal Nochomovitz of Citi. Unknown Analyst: This is Caroline on for Yigal. Could you tell us how remlifanserin is differentiated from Cobenfy, which has upcoming Phase III readouts in ADP this year? Elizabeth Thompson: Sure. So mechanistically, these are different approaches to coming at psychosis. Overall, psychosis is really understood to result from an excessive ratio of your serotonergic -- sorry, I'm having a hard time talking today, serotonergic versus your cholinergic signaling, neurotransmission pathways. And we come at that from sort of different angles of the seesaw, if you want to think of it that way. One is taking down one side versus increasing the other side. So there's reason to think that either could be impactful in psychosis. Certainly, there are going to be a number of differentiators in terms of how the drugs are taken. We have a good understanding, I think, of what the dosing paradigm looks like for remlifanserin as well as what it's likely to look like for Cobenfy. And you need to think about the profile of each of these in the context of an elderly frail patient population. So we think that remlifanserin could be a good treatment option for patients if we see a safety profile that continues to be consistent with what we've seen for NUPLAZID. Operator: Your next question comes from the line of Sean Laaman of Morgan Stanley. Sean Laaman: As DAYBUE STIX rolls out more broadly in early -- I think it's early Q2 '26, you said, how should we think about net new patient capture versus switching? And do you think STIX meaningfully expands the addressable Rett population over time? Thomas Garner: Yes. Sean, it's Tom here. Thanks for the question. Yes, I mean, first off, just to reiterate, we've been really, really encouraged by the early excitement that we're seeing from the Rett community regarding STIX. As we mentioned on the call, by our own internal estimates, we think there's around 400-plus patients that we could unlock in addition to just having the liquid on the market with the STIX formulation. And that's made up of both patients who are naive, but also those that may have discontinued or maybe never started due to formulation concerns. So you take that in totality, and we believe that there is clearly additional upside that we can capture over the next few years. Worth noting that, that 400 patients that we're talking about, we don't think we're going to see all of them in 2026. We anticipate unlocking those over the next 2 to 3 years. But taken together, coupled with all of the efforts that we've already employed in 2025, obviously, we have the expanded field team. We now are doing more in terms of direct-to-consumer, we've been doing a significant amount of education, especially as we move into the community setting, we believe that there is an opportunity to further penetrate the Rett marketplace with DAYBUE, and potentially continue to expand it further. We now estimate that there's around 6,000 Rett patients diagnosed in the U.S., which is a modest increase in what we've shared previously. So I think taken together, absolutely, we believe in the long-term growth outlook for DAYBUE. Catherine Owen Adams: Thanks, Sean. We are excited about STIX and getting patient stories in already with a few -- the patients now in the channel and look forward to really giving you a full insight into DAYBUE STIX at our next call. Operator: Your next question comes from the line of Brian Abrahams of RBC Capital Markets. Nevin Varghese: This is Nevin on for Brian. Just a couple of questions on 204 remlifanserin. So I think at the R&D Day last year, you had shown that there was a dose dependence in the exposure response signal with pimavanserin in the ADP and Lewy body patients where some of that higher exposure have correlated to greater symptom reduction. So I guess what drives your confidence that the 30 mg and 60 mg doses of remlifanserin would reproduce that exposure response relationship in the same way in the RADIANT trial. And is there any way to maybe quantify that target gap or target efficacy gap versus pimavanserin's marketed dose based on some of the preclinical and Phase I PK data that you have? Elizabeth Thompson: So all right. Let me think how to come at this one. So yes, first off, we do -- part of our reason to believe with remlifanserin is based on the fact that with PIM, we did see what appears to be an exposure response from an efficacy perspective. And in neither ADP nor Lewy body, do we appear to be at the maximum or near maximum plateau level of that efficacy. I will say that, frankly, even if we were able to just reproduce similar levels of efficacy with remlifanserin that was seen with 34 milligrams of pimavanserin and do it in a more robust study that is focused specifically on the Alzheimer's population, we think that, that would be meaningful in and of itself. And so additional efficacy, I would say, is sort of the cherry on top. We do think that there are good reasons to believe that, that exposure response relationship is true and will play out when we're able to really actually test it with 2 different doses, but we do have to do that test. So I would say that even if we don't see as much of a differentiation between the 30 and the 60 as you might expect based on that exposure response, we still could have a meaningful therapy here just in the context of a more robust, more specifically designed therapy or designed trial. Operator: Your next question comes from the line of Ash Verma of UBS. Ashwani Verma: So as we think about the increase in the OpEx this year, does that mostly now enable you to get to your 2028 goals? Or is there more incremental investments coming in the subsequent years that would be key to delivering that? And then just secondly, I know like on Cobenfy ADEPT-2 trial, there's been just a lot of focus on the irregularities that they saw in terms of clinical trial execution. Just can you give us some confidence that when you look at your study execution, you don't necessarily see any type of an issue like that? Catherine Owen Adams: Thanks, Ash. I'm going to get Mark to talk about the OpEx strategy and then Liz can further discuss Cobenfy. So Mark? Mark Schneyer: Yes. Thanks, Ash, for the question. So I would say that from an SG&A standpoint, kind of you'll see incremental increases from here. this is kind of the foundational investments that we're making to achieve our goals in 2027, 2028 and beyond. From an R&D standpoint, it certainly is how the portfolio advances as it continues to be successful with the broader and bigger portfolio, it can increase. And if we see normal rates of attrition, it will increase less. We do think our margin achievement will significantly expand from here. And our expectation is really depending upon how the R&D portfolio evolves that we could see kind of mid-teens operating margins with no attrition. But if you think about normal rates of attrition in the R&D portfolio, you'd be in the low 20% operating margin in 2028. Elizabeth Thompson: As far as the question about the BMS situation and the irregularities, I mean, I'll note, like everyone else, we don't know the specifics of the irregularities that we're seeing in the BMS situation. That said, on an ongoing basis, we do look at blinded data in a number of ways. And what I can say is, at this point, we're not aware of any substantial irregularities that suggest that we have a problem. Obviously, this is an ongoing thing. We're very committed to good clinical practice. And so we do continue to look on an ongoing basis, but so far, so good. Operator: Your next question comes from the line of Evan Seigerman of BMO Capital Markets. Malcolm Hoffman: Hi, I'm Malcolm Hoffman on for Evan. I know this study is early, but can you take a second to talk about what you are looking to see from the Phase I ACP-271 healthy volunteer study that you expect to initiate this quarter? Given the mechanism and preclinical work, it seems obvious that you want to see improved levels of sedation relative to the VMAT2 inhibitors. But I just want to get a sense of whether there's other key measures you're looking to assess here. Elizabeth Thompson: Very exciting. This may be the first 271 question I've gotten, well, maybe ever. No, thank you for the question. So it is early here. But what I will say is we're -- this is some of the most novel biology we've got in the pipeline. And so part of it is we're just -- it's -- this is the first step of a GPR88 agonist into humans in clinical trials. So we are interested in understanding overall how that behaves in humans. We're interested in understanding PK and to whatever extent we can, the PK/PD disconnect that we did seem to see in some of our animal models, suggesting the potential for a long PD effect that outlasts the PK. So some initial exploration there. And yes, obviously, understanding what this looks like from an adverse event potential profile is going to be important in terms of the degree to which it bears up our hypothesis of how this could work in people. So thank you for your interest. Looking forward to talking more about this as we go through the upcoming months and years. Operator: Your next question comes from the line of Sumant Kulkarni of Canaccord Genuity. Sumant Kulkarni: I know you mentioned a couple of times today that you're running 2 Phase III trials for ACP-204 in Alzheimer's disease psychosis. But what does the FDA's recent publication of its official position on needing one robust pivotal trial plus confirmatory evidence mean for ACP-204 in ADP and Lewy body dementia psychosis, especially if your Phase II data turn out to be "very good." Elizabeth Thompson: That is -- sorry, shall I just go -- that is a great question. We are obviously really excited to see any regulatory innovation that could mean that safe and effective products could get to patients faster. That is great. There's a lot that at this point, this has been discussed in a journal article and certainly in some presentations, there are a lot of questions that I think we don't know the answer to yet that makes it hard to know exactly what this could mean for ACADIA's future development program. So obviously, we're watching this very closely. Things like what the impact is on the required safety database as an example. And of course, we always do have to think of this in terms of globally acceptable development program. So there is a fair bit to work through there. That said, I do think this, I would always want in a situation where one had amazing data to think about whether there were ways to bring something to patients further, faster. I think this gives us a little bit of additional reason to think we should try having those conversations, if nothing else. Catherine Owen Adams: That's great. And just to reiterate, as we come through our top line results in between August and October and Liz and team develop the Phase III protocol from those results, we will continue to inform you how those Phase III trials will be redesigned or designed according to what's happening in the policy environment as well as also what's driven by the data. Operator: Your next question comes from the line of David Hoang of Deutsche Bank. David Hoang: So maybe first, just one on remlifanserin commercial opportunity. I think you've mentioned a potential $4 billion peak sales number for ADP and LBDP combined previously. Could you just help put some arms around that number in terms of anything like what would be the split between ADP and Lewy body? Is that just the U.S. market? Does that contemplate competition from Cobenfy? What would ramp to peak sales potentially look like? And then just to come back on the IRA rebate accrual for NUPLAZID. Could you just help reconcile what is actually cash versus noncash for the quarter and full year? And is this a situation that may repeat in the future and would require another reconciliation? Catherine Owen Adams: So let me just talk to ADP and LBDP in terms of the $4 billion, and then we'll move to the next part of the question. So we haven't disclosed the split that we see exactly between the 2 indications, but we have said that they're roughly equally weighted. Obviously, the populations are slightly different in the U.S. and the unmet need is different as well as the population fragility. So there are some differences between the 2 indications that we will work through both commercially and financially as we come through our clinical trials. But overall, we feel this is a very strong opportunity for us in much larger markets than we are in now. And with the confidence that we have behind the design of remlifanserin for these specific populations, we feel like if the data bears out, they're going to make a huge difference to this patient population and provide us a robust value story for both our health care environment, but also patients more broadly, both in the U.S. and hopefully beyond the U.S. In terms of NUPLAZID and the IRA, do you want to talk a little bit more about it, Mark? Mark Schneyer: Sure. Thanks for the question. As far as kind of cash versus noncash, we did pay our invoice in the quarter. And for the first 2 years of the program, that was $108 million payment that went out. Over the course of the year, if we factor in the payment plus additional accruals that we made, it was kind of a net cash flow over the year of about $30 million. The adjustments that we made to net sales, those are all kind of noncash adjustments, but they're meant to be reflective of our operational performance so you can compare periods when we shared the data going back to 2022 that if we had full information, these were the accruals that we would have made rather than needing to make the change in estimate that we made now that we got the information from CMS for the first time this year. Catherine Owen Adams: Hopefully that answers the questions, David. Operator: Your next question comes from the line of Jason Butler of Citizens. Jason Butler: Just understanding it's still early. Any initial comments you can speak to out of the increased NUPLAZID field force? And how are you on an ongoing basis, assessing ROI on the full commercial investment for NUPLAZID, specifically the non-field force components? Catherine Owen Adams: I'm going to get Tom to talk to you about the field force. But just to reiterate that we assess ROI on our marketing and commercial mix on a very regular basis. That's the basis of how we manage the business and the decisions that we make in order to ensure that our investments are really driving both efficiency and effectiveness. But in terms of the team, Tom, why don't you share a little bit more about how it's going? Thomas Garner: Sure. So as we mentioned, Jason, we fully executed the expansion of the field team in January of this year, and I'm very pleased to announce, obviously, that the team are now out in the field. We've actually been really encouraged that they've hit the ground running, probably in a manner that was maybe kind of earlier than we thought, quite honestly. I mean, we are already seeing a very nice uptick in terms of their activity. Just as a reminder, with this expansion, we're able now to kind of capitalize on or meet the needs of around 60% of the overall PDP market in terms of prescribers. So we've kind of increased our target universe from about 7,000 writers to about 11,000 writers. And we believe that, that additional 4,000, 5,000 that we're now going to be targeting is really going to help us unlock this incremental growth that we anticipate seeing through 2026, '27 and '28. So I think very pleased with the early activity, early metrics that we're seeing. And we're following our top of the funnel metrics very tightly, as you would imagine, and we're actually beginning to see already a noticeable increase just in terms of referral volumes. So excited to see that, that will carry on through the year and looking forward to seeing the continued impact of that expansion and that investment over the next 2 to 3 years. Catherine Owen Adams: Yes. And just to reiterate, you can see the step-up in SG&A for 2026 versus '25, and that is being contributed by both the annualization of the DAYBUE expansion as well as the NUPLAZID expansion. And as Mark said on a previous question, we don't expect that to continue to ramp at the same rate. We expect this to be the step-up this year and then a more sort of incremental increase as we head into '28. We sort of feel like we've got a good base right now. And this will be our base with minor adjustment moving forward. So again, just to reiterate that point in terms of the OpEx to support this incremental growth. Operator: Your next question comes from the line of Jack Allen of Baird. Jack Allen: Congrats on the progress made over the course of the quarter. I wanted to ask on DAYBUE and the $700 million in sales expectations by 2028. Can you just help us understand a little bit more about the assumptions that are going in behind that number that you're throwing out there, $700 million? Does that include ex U.S. sales? And what are your thoughts around potential competition for gene therapies within that period? Catherine Owen Adams: Yes. So I'll answer it at a high level and then maybe either Tom or Liz can have a response on gene therapy. So the $700 million consists mainly of the U.S. business, which is driven through growth of STIX and liquid and expanding the patient population from where we are now into the community. It does include global sales from the named patient programs. And so that is within there where we have the ability legally and through the regulatory framework to supply the named patient programs. And it does include EU commercial sales for now. Our current assumption is that we will have an EU approval before 2028. However, obviously, once we get the decision from the final decision, we will reguide for that 2028 number. But to reiterate, now the EU commercial sales within that $700 million number is less than 15%. I hope that's a good explanation. And then... Elizabeth Thompson: I can make a couple of comments and then if there's anything you want to add, Tom. So generally, I guess there's a couple of components to your gene therapy question. One is it's probably better for you to ask the gene therapy companies when they're speculating that they're coming to market. I'll just note that the developmental milestones do take some time to mature. So whether that's going to feature into 2028 or not, we probably should leave for them to comment. In terms of the, I guess, the implied idea of whether there is room for more than one type of agent out there. I mean, I think what I'd say is that the data that we've seen so far suggests that there is -- while we all wish that these would be cures, I don't think that the data so far suggests that they are. And so I think that the predominant likelihood is that patients are going to require more than one aspect to their care. Operator: Your next question comes from the line of Paul Matteis of Stifel. Julian Hung: This is Julian on for Paul. Just wondering what you guys think is the biggest risk to the ACP-204 readout? And are there different sort of indication-specific considerations for ADP versus LBDP that you've thought of? Any chance that you plan on sharing baseline information ahead of the Phase II or anything else that you could share would be helpful. Elizabeth Thompson: Okay. So a few things here. So we're not currently anticipating that we would be sharing baseline information prior to the readout. So just to get that out there. In terms of any specifics of ADP versus Lewy body, I think there are a few things that we think about, one, of course, is psychosis is obviously impactful in both patient populations, but it is very frequent in Lewy body. So I think we do see that being a much more substantial proportion of that patient population. That's something that's important to keep in mind. And I think that while in both cases, you're generally dealing with obviously a more elderly population, I think it is also considered that the Lewy body population may be a bit more frail. And so we are especially mindful of appropriate safety profiles in that patient population. In terms of biggest risks, I mean, I think that we have done a great deal to build upon pimavanserin in terms of how we put the molecule together, how we put the program together. In these kinds of spaces, of course, you always have to be concerned about placebo effect. We are doing what we can to manage it in terms of good training of investigators, looking for outliers, all that good stuff. But that is something that you always have to be mindful in these kinds of trials. Operator: We've run out of time for any further questions. I will now turn the conference back over to Al Kildani for closing remarks. Albert Kildani: Thank you, everyone, for joining us today. We look forward to speaking to you on our next conference call. Operator: This concludes today's conference call. You may now disconnect.
Matthew Beesley: Okay. Good morning, everyone. Welcome to Jupiter's full year results for 2025. I'm Matt Beesley, Chief Executive at Jupiter, and I'm joined, as always, by Wayne Mepham, our Chief Financial and Operating Officer. You will have already seen results in our morning's release, and Wayne will talk you through the details shortly. But from a financial perspective, last year was a challenging one for Jupiter. We started the year with materially lower AUM. We see multiple years of outflows. Client sentiment for risk assets was limited and short-term performance was not where we wanted it to be. But we remain focused on what we could control. Careful planning and deliberate management actions many taken in years before this one allowed us to navigate these challenges and make meaningful progress against our strategic objectives. Across cost savings, capital allocation and revenue generation, we have done what we said we were going to do, and in many cases, quicker than we had initially expected. Moving into 2026, we are demonstrably in a stronger position than we were 12 months ago. Many leading indicators are now firmly pointing in the right direction, giving us increased confidence on being able to deliver on our targeted 70% cost/income ratio. Investment performance has improved across all time periods. Client demand, particularly for risk assets, has grown, and we generated positive net flows for the first time since 2017. We've also completed 2 acquisitions, the larger of which not only avoided any client overlap, but positioned us to move into a new part of the U.K. market. Importantly, we also end the year with a highly engaged and client-centric workforce. One particularly pleasing aspect of today's results is that investment performance, crucial for any active manager and often a lead indicator, has markedly improved over all time periods. Our key performance indicator is measured across 3 years, over which 68% of mutual fund assets outperformed their peer group median compared to 61% last year. Nearly half of our total AUM was in the top quartile on the same basis. On a 5-year view, 75% of our AUM outperformed with more than 60% in the top quartile. But the biggest move we saw was over 1 year, where the figure increased by 42 percentage points to 84% of AUM outperforming with nearly 70% of our AUM in the top quartile of its peer group. A number of funds have had really strong performance over this albeit shorter time period, including both dynamic bond and strategic bond, which moved from fourth quartile to first quartile. A number of funds with our Merlin multi-manager capability also moved into the first quartile and the whole range is now above median over all of 1, 3 and 5 years. Looking at this from another angle, our larger funds are also continuing to perform well. At end December, we had 15 funds with over GBP 1 billion of client assets under management. Of these, 11 outperformed across each time period, with 6 funds top quartile over all of 1, 3 and 5 years. We know clients are rightly more focused on longer-term performance, but it is nonetheless encouraging to see such a turnaround and across all time periods. Strong investment performance is not necessarily a precursor to inflows, but it is nearly always a prerequisite. Let's move on to look at flows that we have seen through 2025. It's been great to see that flows have been broad-based across regions, client channels and capabilities. And that so far, this has continued into the first quarter of 2026. From a growth perspective, it was a really strong year with meaningful upticks across both retail and institutional client channels. We generated GBP 16.9 billion of gross flows were the highest that we have ever recorded. Across all regions, gross flows increased compared to the prior year and our AUM from European clients grew by just under 40%. This is a significant achievement given our ambitions to grow internationally. From a net flow perspective, we generated GBP 1.3 billion of net inflows in 2025. This is our first calendar year of net inflows since 2017. The institutional channel was the largest contributor here with GBP 1 billion of net inflows. The real turnaround, though was from retail clients, where we generated GBP 0.3 billion of net inflows with over GBP 2 billion coming in the second half of the year. In terms of investment capabilities, clearly, systematic was a material driver of flows. And within that, Global Equity Absolute Return or GEAR, continued to demonstrate excellent performance. And as such, client demand remained high. But this was not simply a GEAR story. Rather, the majority of the systematic range saw net inflows, including the long-only world equity fund, which tripled its AUM to over GBP 1 billion. Global equities was also a positive contributor, including demand for global leaders and gold and silver. And finally, something we've not been able to report for some time, our U.K. equity capability had positive flows across both retail and institutional clients, most notably into dynamic and growth strategies. It is indeed possible that we could now be seeing a more constructive outlook for U.K. equities going forward. So a welcome return to positive flows, encouragingly diversified across capabilities, channels and regions. And this momentum has continued so far this year. As of a few days ago, we generated positive flows year-to-date across both channels to the tune of over GBP 1 billion, and we now manage over GBP 70 billion of client assets. This time last year, when I discussed growth opportunities, I said we might expect most of these 7 investment capabilities to be larger within 12 months. Well, today, 5 of the 7 have greater AUM, most notably our systematic and global equity capabilities, which are more than 60% larger than they were a year ago. Of these, 3 have seen positive inflows, too. Where there has been a decline in AUM, some of this was cyclical, such as within Asian and emerging market equities after strong flows in the prior periods and some was more performance driven as with our unconstrained fixed income strategies. However, all of these are now performing well, particularly over shorter time periods, and we've already seen outflows abate from levels at the start of 2025. We have strong performance, and we are now positioned to be both more resilient and to better embrace the growth opportunities in front of us. And there are an increasing number of opportunities out there. For a long time, arguably, the smart trade for investors has been to be long U.S. large cap and to do so in a cheaper way possible, which largely meant owning S&P tracker indices. But we could now be entering into a new environment where clients' assets shift away from the U.S. and where markets become less correlated. Against this backdrop, active stock picking becomes ever more important. And if these conditions persist, this should be positive for active managers and even more so for Jupiter, given our areas of investment expertise. Before I hand over to Wayne, I want to give a quick update on the CCLA acquisition, which completed early this month. As you will be aware, CCLA are one of the U.K.'s largest asset managers focused on serving the nonprofit sector. And they bought GBP 15 billion of client AUM with them across charities, religious organizations and local authorities. This is a new client channel for Jupiter, and there's absolutely no client overlap between the 2 firms. It is a stable business with a long-term sticky client base. They bring complementary investment expertise too, across equities, real estate and multi-asset. And as you can see, the deal results in a much more diversified product range. Much like Jupiter, CCLA have a culture of open, transparent communication with their clients. So it's no secret that their recent performance has not been where they would like it to be. Using their charities fund as a proxy here and on a longer-term view, their flagship fund outperformed for 7 straight years, but has lagged comparative benchmarks more recently. Given their style, which is more focused on quality and growth and given what has happened within markets, this is understandable and indeed, to some extent, even expected. There are not long-term concerns here. But between a period of softer performance and the corporate event of the acquisition, it's conceivable that clients could use this as a catalyst event to consider allocations. For our own budgeting purposes, we are conservatively expecting a minor level of outflows from the CISA strategies through 2026. Overall, however, the deal remains highly compelling from strategic, cultural and financial perspectives, and the market seems to recognize this, too. And the opportunities for us to leverage the strengths of both businesses as a more scaled player in this large and growing client segment are meaningful, whether that is broader investment expertise, a global footprint or a more technology-driven operating model. Wayne? Wayne Mepham: Good morning, everyone. So 2025 has been an eventful year for Jupiter with some key drivers of future financial growth. We announced the acquisition of CCLA, declared an additional distribution and identified further cost savings, all of which are important management actions that will drive value today and into the future on top of the organic growth in our underlying business. I'm going to put these into context both for our financial results in 2025, but more importantly, the expected benefits still to come. Of course, the CCLA acquisition completed only early this month. So the guidance I will give includes some estimates, and you should expect more on this in July. So let's kick off with the normal financial summary. Reductions in AUM have been one of our biggest challenges for a number of years. but the combination of those positive net flows Matt took you through and strong market performance since May has seen our AUM reach GBP 54 billion at the year-end. That's up over 19% with continued momentum into the new year. But of course, it's the average that matters for 2025 revenues, and that was down 5% to GBP 48 billion. Combined with lower fee margins, that results in around GBP 311 million of net revenues, excluding performance fees for the year. As revenues were down, our cost-income ratio is higher than I would like in the longer term at 82%. But our cost management initiatives brought benefits this year and the steps we have taken to grow revenue and manage costs will move us close to that 70% target. Performance fee revenues were strong at GBP 120 million. We committed to an additional distribution of 50% of 2025 performance fee revenues. So that leads to a distribution of GBP 60 million, which I will cover later. Overall, it means we delivered over GBP 138 million of underlying profits or GBP 62 million, excluding performance fees. That's a total underlying EPS of 19.4p. And without performance fees, that's an EPS of 8.7p, taking us to full year ordinary dividends of 4.4p per share. Let's look at this in a bit more detail, starting with AUM. Since the beginning of 2024, AUM has fallen each quarter and into April 2025. We all know about the outflows in 2024, nearly half of which came through in the final quarter. And early 2025 was also challenging with real market disruption in the lead up to tariff announcements. We reached a low of GBP 43 billion of AUM in April. But since then, we have seen steady progress each month from markets and importantly, for momentum, positive flows almost every month and over GBP 1 billion of flows in the last quarter alone. That's a strong sign for 2026. It means our AUM was up nearly 20% from the start of the year and it's up over 12% on the average for 2025. And that momentum has continued into 2026, so positive signs already for this year. As I've already touched on, net management fee revenues were down compared to 2024 at GBP 311 million. Fee margins were down on 2024 at 65 basis points, which was driven by ongoing changes to our business mix. That's both from net flows and market dynamics, pushing up AUM in relatively lower margin areas. It's a progression we saw through 2025, so we enter 2026 with a run rate margin of 64 basis points. It's also a trend that I expect to continue in the short term. So I'm budgeting for average margins to be around a further 1 basis point lower this year at around 63 basis points, but off a much higher starting AUM. Of course, that excludes the impact of CCLA, which I will guide to separately for this year. Along with performance fees, that's combined net revenue of GBP 431 million for this year. Those performance fees are a lot higher than I guided and is a clear demonstration of simply how difficult it is to predict, both in terms of AUM levels and alpha generated. But accepting years like this can happen from time to time, if I look back at the average income we've generated, that tells me that performance fees could be around GBP 20 million for 2026. I'd emphasize all the usual caveats and disclaimers and note as 2025 demonstrates, there is the potential for that to be much more. So let's move on to costs. Before I run through the details, I wanted to remind you of our approach here. We've always been very thoughtful on costs. We recognize there is both the opportunity and the necessity to focus on good cost management. Cost management to us means controlling necessary expenditure, but also allowing investment and controlling that expenditure whilst maintaining good investment with a high ROI requires careful planning, a good cost management culture and a willingness to explore new ways of working. And we've been doing just that for some time with our most recent work leading to that announcement in May of a GBP 15 million minimum targeted savings. And our approach translates well to the integration of CCLA with a further minimum savings of GBP 16 million through that same careful and considered approach. Matt and I have always delivered on our cost commitments. And as before, we see a path to get to that next milestone of a 70% cost/income ratio. So overall operating costs for this year, excluding those relating to performance fees, are down by GBP 5 million compared with 2024. But the split of comp to non-comp is a little different to what I expected even in July, and so I'll walk you through this. Firstly, our range of outcomes for total compensation costs is normally 45% to 49%. But for 2025, we have reported a 50% ratio, so just outside that range. That's a very short-term impact, and we don't expect that to repeat. In fact, our projections see that coming down by 2 percentage points in 2026. So the main reason we are above the target is the share price. It's nearly doubled over the course of the year, and that has an impact on the accounting for employee taxes on existing share awards. Of course, we seek to hedge the impact by buying shares, but that's an economic hedge and does not have -- does not remove the accounting cost. But these short term and largely accounting impacts have been more than offset by savings we have achieved in noncompensation costs. They are over GBP 11 million down on expectations at the start of the year and GBP 6 million down on our most recent guidance. That's the full year saving we targeted from noncompensation costs over a year ahead of schedule and absorbing higher variable costs linked to that rapid growth in AUM in the second half. And looking ahead to 2026 and still excluding CCLA, I expect our non-compensation costs to be around GBP 106 million. With the GBP 11 million saving already achieved, the increase reflects variable cost growth where they are linked to AUM. For my compensation guidance, where it's the same as I've said before, that's the 48% guidance from earlier this year and lower still in the future with combined -- and combined with non-comp costs gets us to the targeted savings of GBP 15 million. The investment we have made since 2024 in automation and through outsourcing has enabled us to achieve our lowest headcount since 2014 without adding to our ongoing noncomp costs. In fact, we have delivered savings there, too. So a lower compensation ratio through building scale and lower overall headcount despite having more people today in our investment management teams than we had some 10 years ago. And lower overall noncomp costs through systematic review of the smaller systems, the smaller supplier relationships that I said we would do and where we will continue to focus. With the results that we have a business that delivers greater operational efficiency today despite the well-documented cost headwinds. Turning to exceptional items. They were in line with guidance at GBP 6 million. I had said they might be higher this year, but it was dependent on the completion of the CCLA acquisition, and that did not happen until this year. So 2025 included some charge for the acquisition, but these will mainly come through in 2026 and beyond. Matt has already touched on this, but I wanted to provide an update on the CCLA financials, such as we can, having only owned the business for a matter of weeks. It's important that your model should only include 11 months of contribution. And of course, the half year is just 5 months. AUM was little changed from the announcement date at GBP 15 billion of AUM. The mix of business has changed a little and the run rate fee margin is now 43 basis points. The underlying fee rates have been stable for many years, but the mix of long-term assets to money market AUM driven by clients' needs could have an impact on the average in the future. From a cost perspective and before any synergies, my expectation is that compensation costs will be GBP 32 million and noncompensation costs will be GBP 20 million. That's 11 months' worth, so not quite half of that for this first half year. To remind you, we have a minimum targeted synergy saving of GBP 16 million to be achieved on a run rate basis by end 2027 and GBP 17 million of net cash costs to achieve the acquisition and integration. We continue to focus on the effective delivery of those financial measures, and I'll continue to update you as we progress. For your models, on synergies, I expect to deliver a good proportion of our target on a run rate basis by the end of 2026. But for the 2026 numbers, I've included GBP 4 million of reduction as savings from those headline costs I just gave you. On the acquisition and integration costs as well as the normal acquisition-related intangible asset, where we are reporting those as exceptional items. For that noncash intangible asset for now, I'll include an annual charge of GBP 5 million, and I'll confirm the number once finalized. For cash costs in exceptional items, I have GBP 14 million for 2026, and that leaves about GBP 5 million of integration costs still to come mainly in 2027. That is in line with my previous guidance of GBP 17 million net cash cost relating to the acquisition, which is, of course, after tax deductions. Later in the year, I will also set out how we intend to report on the group as a whole, so you can adjust your models. But for 2026, you should expect to get separate information on this business as we demonstrate delivery of the financial returns we announced. So finally, let's look at capital. So some capital movements after the balance sheet date this year. That's mainly the impact of the acquisition. And you can see the current expectation of our capital, but these are very draft numbers as at the completion date. Importantly, our capital position is broadly in line with where we have said, well above 2.5x cover of the higher capital requirement. That remains very strong, but also some of the acquisition integration costs have not come through yet. So I think about it net of those and still feel very comfortable we are well positioned for the future. Of course, this is after the ordinary dividend we proposed at 2.3p on top of the interim dividend of 2.1p, distributing half our underlying EPS for the year in line with our policy. And also that commitment to distribute half the performance fee revenues for just for this year. That's GBP 60 million of additional distributions, which the Board has elected to make through a combination of a special dividend and a new buyback program. So that's equally weighted between the 2, a GBP 30 million buyback or around 3% of issued shares and a 5.7p special dividend to be paid in May. As you know, we already have over 16 million shares in treasury. That's a share purchase we completed in 2025. The shares we're about to acquire and those treasury shares will be canceled. And when we are done, we will have bought back and canceled over 7% of our issued share capital since 2022. And that remaining capital continues to be put to work in liquidity positions for ongoing business needs and in seed capital, where we are supporting organic growth in our business. At the year-end, we held seed investments with a market value of GBP 73 million, all of which has been held for less than 3 years. And in 2025, we recycled funds from areas where we achieved our objective into our first active ETF and a Cayman Island domiciled version of our highly successful GEAR fund. It's early days for both of those. That Cayman fund has already attracted client funding. So we'll monitor the capital needs there very closely and put it to work elsewhere when I can. So to wrap up on the financials. Well, financial results are often a lagging indicator of performance, and that's really clear in the measures we have reported today. But there are also signs that give us indicators of future performance, too. Profits are up on 2024, driven by performance fees. But importantly, strong underlying revenue growth might be expected in the future, driven by rapid growth in the AUM at the year-end. We've delivered on our cost actions, implemented ahead of schedule and in considered way that doesn't compromise our growth potential. We have taken clear actions to deliver growth in the business, bringing in teams that are performing well as well as through the acquisition of CCLA. And finally, we have fulfilled our commitments to reward shareholders through strong distributions equivalent to 15.8p per share or well over 18% return on the share price just a year ago. Back to Matt. Matthew Beesley: This is my fourth full year results as CEO here at Jupiter. So 3 years since we first presented this strategy for the future growth of the business. I wanted to briefly look back across the real progress we have made, but also to look forward to what is coming next. We've consistently stated that increasing scale is and remains the most important of our objectives. While we continue to deliver on our cost commitments, focus must shift on to driving top line revenues and to building scale. Importantly, scale for us is not simply a question of increasing the absolute pounds of clients' assets we manage. But by better leveraging our operating model, we know that new assets for us to manage will lead to higher incremental profit margins. We are making material and visible progress here. AUM has increased by 19% over the last 12 months, supported by positive client flows, strong investment performance and good market returns. And clearly, that number increased by a further GBP 15 billion in early February with the completion of CCLA. We continue to add depth to our expertise, investment expertise this year with the acquisition of the team and assets of Origin Asset Management as well as bringing in the new investment team to manage European equities. We are not yet where we want to be in terms of scale, but there's both momentum and growth optionality, both organic and inorganic right across the group. To deliver our target cost ratio, this growth in scale must be paired with an unrelenting focus on efficiency and cost discipline. Wayne and I have continued to deliver on our commitments here. But reducing complexity is not simply about taking costs out of the business. It is evolving our structure to ensure we have an efficient operating model. The most material change in that through 2025 was unquestionably the consolidation and outsourcing of much of our middle and back-office operation functions to BNY, which will help us work more efficiently and ultimately deliver a better service to our clients. As we look forward, we remain resolutely focused on cost discipline as we find efficiencies in our core business and deliver on synergies through the CCLA deal. In prior years, we've talked much here around the rationalization of our product range. That product range now being largely complete, the focus in 2025 was on sharpening the attractiveness of our active offering. Within the underlying business, we've always looked for ways to broaden our range of expertise that we offer to our clients. And we launched 2 active ETFs last year listed in the U.K. and across Europe and also our first fund on our offshore Cayman platform. The joining of CCLA brings a whole new client channel to Jupiter, broadening our appeal now across into the nonprofit channel where we hadn't previously had any presence. Clients' needs continue to evolve, and we must evolve with them. But through the additions of new capabilities and new methods of delivery, I'd argue that Jupiter has never before appealed to as broad a range of clients. Our fourth and final objective is to deepen relationships across all of our stakeholder groups. For our clients, we continue to produce high-quality and improving investment outcomes. For our shareholders, who we appreciate who have not had the easiest of journeys in recent years, we have now delivered a meaningfully positive shareholder return and have announced total dividends of 10.1p per share and another share buyback program of up to GBP 30 million. Everything we have discussed this morning, though, has only been made possible by the hard work of our people who work tirelessly to serve our clients. We regularly conduct star surveys, and I was delighted to see that in our most recent survey, our engagement score was 88%. This is a truly great result. It is up 9 points from where we were 12 months ago and also 9 points ahead of the financial services benchmark. So it is fitting that in 2025, we were selected as one of the Sunday Times Best Places to Work. So we go into 2026, having made significant strategic progress. Many of our leading indicators are pointing in the right direction. Client sentiment has improved, and we are generating net positive flows. We built scale, both organically and inorganically, bringing new assets onto our operationally efficient platform. Investment performance is strong, and we have a broader platform of diversified and differentiated investment expertise than we've ever had before. However, we are not yet where we want to be. We know there is still a tremendous amount of work yet to be done, but we are unquestionably better placed today than we were 12 months ago to capitalize on the opportunities ahead of us. And if market trends persist, those opportunities for Jupiter could be plentiful. So with that, I will hand over to Alex to lead us to questions. I think first in the room, Alex, and then online. David McCann: Dave McCann from Deutsche Bank. Three questions from me. Matt, you mentioned in the remarks that you're expecting or possibly could see some outflows in the CCLA business this year because of the performance of the funds. I think that's a reasonable assumption given what we can see there. A question really is, was that expected, as you say, when you did the deal and therefore, was it priced in? Or is this sort of an unwelcome development that's, I guess, cropped up since? And then probably one for Wayne. You accepting the significant caveat you made around performance fee guidance, you have increased effectively the guidance from 10 to 20, all else equal. So I just wanted some color what is the sort of waterfall to get from 10 to 20? Is this just extrapolating from last year, noting that obviously, GEAR hasn't started this year as well, but we're obviously very short as a short-term period. But we'll start with those, and I'll come on to the other one in a moment. Matthew Beesley: Yes. Thanks, David. So the first question, the outflows from CCLA, was this expected. Yes, it was. Let's remember that CCLA as investment proposition has had many years of very strong investment performance, indeed, 7 successive years of outperformance prior to the 2 soft years of performance that they've currently delivered for their clients. So within context, as an active manager, this is not unexpected. They have a particular quality growth style of investing, and that style has been under significant pressure in the last 2 years, say, after a period of very strong performance. So while, of course, we want to see all our businesses grow, ideally, we recognize as active managers, there will be periods of time where some of our investment capability lags benchmarks. As a result of that, the outflows that we are suggesting might come to pass today are completely consistent with our prior expectations. Wayne Mepham: In terms of performance fees, what I've done here is look back over time and taking into account the AUM we now have in those areas that can generate performance fees, obviously, taking into account watermark as well with some of those being below. So it's an extrapolation as you put it, in terms of the outlook. I mean you quite rightly referenced here short-term performance. I mean it's difficult in January. I think if you'd ask me that question just a month ago, you'd be putting the question in quite a different way. Clearly, that strong return in January hasn't continued into February. So it's very difficult to predict this far in advance. But yes, GBP 20 million based on history, extrapolated, I think, is the right number for now. David McCann: Okay. And then the third and final question for me. Obviously, CCLA completed now, obviously, there's still some integration to do. But -- you touched on the remarks there, Matt, about the scalable platform and so forth. So would you be looking to do more of those kind of deals if you could find them? . Matthew Beesley: Yes. So look, you're absolutely right, David. In the short term, the focus is very much on the successful execution of the integration with CCLA and we obviously outlined both our targets and our time line in that regard. As of today, Wayne pointed out the very robust nature of our balance sheet. We know this is a very capital-generative business. We have a focus on improving the profitability of this business. We are very much focused on that 70% cost-income ratio. And with that improved level of profitability would naturally come likely an improved level of capital generation as well. What I hope that shareholders see is that we're going to be thoughtful and judicious about how we deploy that capital. When opportunities arise for us to deploy it inorganically as with CCLA, as with the Origin Asset Management deal, we believe we should be looking into -- looking at those opportunities given how attractive they can be both strategically and financially. But absent those opportunities, as we've shown today, we will return that capital to shareholders. So the outlook from here is to remain judicious focused and balanced in terms of how we generate -- sorry, how we allocate that capital that we expect to generate. Alex James: If no more in the room, we've got a couple online. One on flows for Matt and one on fee margins for Wayne. Matt, you referenced positive year-to-date net inflows across both channels. I wonder if we can give any more details around capabilities or regions or anything else. And Wayne, on fee margins, if you -- a question for a bit more detail around what's happened in the second half of this year and then the drivers of that guidance into 2026. Matthew Beesley: So year-to-date, the trends we are seeing so far are very much consistent with the trends we saw at the end of 2025. So still a very diversified range of investment capabilities that are attracting new client money and also a diversified range of geographies. And indeed, the comment I made in my prepared remarks is that, that positive flow that we've seen year-to-date is effect of positive growth in both our institutional as well as our retail wholesale investment trust channel as well. So very much so far a continuation of the trends we saw at the end of 2025. Wayne Mepham: Yes. So on fee margins, I mean, we always guide to in recent years a decline in the fee margin somewhere between 1 and 2 basis points on an annual basis. I mean, obviously, very difficult to predict because often and nearly always actually, it's due to business mix rather than any necessary fee pressure. Now I think what's slightly unique about last year is just the rapid change. I mean, I spoke about it in my prepared remarks, the AUM was down at GBP 43 billion in April, and we ended the year at GBP 54 billion. So that rapid increase in AUM and actually the weighting of the growth that came through, through that period was obviously beneficial to our business overall, it was tending towards lower fee margin areas of our business. So hence, why that increase. Now clearly, the impact so far is in this year has continued to follow really that trend that we saw towards the back end of last year. So hence, the 65 basis points for the year as a whole last year on average, end the year at 64 basis points. Clearly, I'm trying to look to the future and where it might go. At this stage, I'm seeing a 63 basis point average for 2026, of course, excluding CCLA. Alex James: Thank you. No more questions online. No more in the room? Matthew Beesley: Well, that leads me just to thank you all for being here today, and we look forward to updating you on our progress in the summer. Many thanks.
Operator: Ladies and gentlemen, welcome to the Erste Group Full Year 2025 Results Conference Call. I'm Sergen, the Chorus Call operator. [Operator Instructions] The conference is being recorded. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Thomas Sommerauer, Head of Group Investor Relations. Please go ahead, sir. Thomas Sommerauer: Thank you, Sergen, and also a very warm welcome to everybody who is listening in to our full year conference call 2025. We follow our usual procedure. That means that Peter Bosek, our Chief Executive Officer; Stefan Dorfler, our Chief Financial Officer; and Alexandra Habeler-Drabek, Chief Risk Officer of Erste Group, will lead you through a brief presentation, highlighting the main achievements, especially the financial achievements of 2025 and in particular, also of the fourth quarter of 2025. And before handing over to Peter, my usual reminder on the disclaimer of forward-looking statements, of which there will be quite a few as usual. And with this, I hand over to Peter for the presentation. Thank you. Peter Bosek: Good morning, ladies and gentlemen. Welcome again to our full year 2025 results and at the same time, fourth quarter 2025 conference call. I'm on Page 4 now. 2025 was an exceptionally successful year for Erste Group. A lot of good things happen to the bank and a lot of good things happen to shareholders of Erste Group. But allow me to briefly dive back to a year ago, the discussion back then and to a certain extent still today were all about share buybacks and dividends and somewhat subdued business outlook for 2025 on the back of rate cuts in the Euro zone and a mixed macro-outlook for Europe. What a difference the year makes. We at Erste found a better way to solve the excess capital challenge. We invested in growth, in Polish growth. And with this, we have substantially expanded our growth footprint in the fastest-growing region of Europe. In the meantime, the acquisition of a 49% controlling stake in what soon will become Erste Bank Polska has closed on time and from the first quarter of 2026 will be fully consolidated in our accounts. But this is just half of the story. The other half is about our strong performance in 2025. Quarter-by-quarter, growth momentum improved. This enabled us to repeatedly upgrade our financial outlook and, in the end, even outperformed our upgraded guidance. We are particularly pleased with revenue momentum, not only in terms of quantity, but more importantly, in terms of quality because quality brings it with sustainability. Translated into numbers, this means we posted record revenues in 2025, driven by our core income lines, net interest income and net fee income, and we closed the year in style with another set of quarterly records for these items. We are also on track in terms of costs. We were running somewhat above our 5% target in the first 3 quarters, but thanks to the cooling of cost inflation and adjusted for the booking of some integration costs for our Polish acquisition in the final quarter of the year, we managed to deliver on our guidance. Risk costs were only marginally higher in 2025 than in the previous year, but fully in line with our upgraded guidance with CEE shining again in terms of asset quality. Clearly, other result was special in 2025 as well as in the fourth quarter, flattering our reported net profit despite hefty banking taxes included in this line item. To be concrete, other result in 2025 benefited from net positive one-offs in the amount of about EUR 270 million pretax and some EUR 250 million post-tax. Stefan will give you the details later. Accordingly, underlying net profit would have been more in the order of EUR 3.3 billion rather than reported EUR 3.5 billion. Other way, no bad figures and comfortably historical records. And clearly very helpful in delivering capital gen beyond anybody's expectation, including our own. With a CET1 of 19.3% at year-end 2025, we are well positioned for first-time consolidation of Erste Bank Polska and arguably beyond. I therefore think it's not over to say that we got most of the decisions right last year and at the same time, set a clear ambition for 2026. It's our firm intention to stay focused and do the same in 2026. Ladies and gentlemen, throughout this presentation, we will make reference to our expectations for the business of Erste Group, including Erste Bank Polska in order to give you the best possible idea of our new Erste will look like. We will also detail already on the extraordinary items that come with first-time consolidation to almost all of which tax and minority fits fully. And in order to allow for a better like-for-like comparison, we will provide an outlook for Erste excluding Erste Bank Polska profit guidance for 2026 that we already repeatedly communicated, we hereby confirm that's a return on tangible equity of about 19% and a year-on-year increase in earnings per share more than 20%, taking our adjusted 2025 net profit of EUR 3.3 billion as a starting base and adjusting expected 2026 net profit for extraordinary items. This should translate into a net profit of somewhat above EUR 4 billion on a clean basis in 2026 as opposed to somewhat below EUR 4 billion on a reported basis. With this, let's now move to Page 5 of our key P&L performance benchmarks. Obviously, this very much reflects what I just talked about with a stable margin backdrop contributed quarterly NII record would have been difficult to achieve. And without improving cost dynamics, it would not have been possible to report a cost-income ratio of below 48%. We delivered on both fronts. Strong margins were not only supported by good balance in loan growth and healthy competitive environment, but importantly, by strong deposit pricing power, particularly in Austria and improving deposit mix overall. Risk costs at 21 basis points were in line with our improved full year guidance, as already mentioned. Trends very pretty much unchanged in this respect with continued low risk cost in the CEE region, while Austria saw most of the allocations in the final quarter of the year at a slightly lower level than a year ago. If one adds banking level reported under other operating result as shown in the lower left-hand chart with those reported under taxes, then the banking reached a new all-time high of almost EUR 440 million in 2025. Irrespective of this earnings per share adjusted for the AT1 dividend climbed to a record level of EUR 8.24 per share. And finally, return on tangible equity increased to 16.6% from 16.3% a year ago, quite a good achievement, bearing in mind the strong capital build through the year. When we look at the development of balance sheet on Page 6, we see a picture that is evidence of the strength of the business model. The business model is geared to our superior organic growth in customer business, a perfect case in point is the performance in 2025. Both on the asset and liability side, balance sheet growth can be explained by the expansion in customer business. Customer loans grew by almost EUR 14 billion or 6.4% in 2025, while customer deposits were up by more than EUR 11 billion or 4.7%. And in context of both, we can without exaggeration talk about high-quality growth. Loan growth was driven by the retail business in CEE on the back of a solid demand for housing finance, while deposit growth was also better than average in the retail and SME business. Austria, and in particular, the savings banks made a solid contribution to loan growth, while deposit growth was solid in both Austrian retail and SME segments. With volume momentum being good across the franchise in 2025, we see no reason why 2026 should turn out any worse in 2025. Consequently, we target organic loan growth of higher than 5% in 2026. That is for the business of Erste excluding Erste Bank Polska. Including Erste Bank Polska, we also expect an underlying growth rate in a similar ballpark. So, by the end of 2026, loan stock for the combined entity should be higher than EUR 285 billion. The key highlight when looking at our balance sheet metrics on Slide 7 are our regulatory capital ratios. Having said this, the other parameters are also excellent. We can again report an ideal loan-to-deposit ratio of 91.7. The growth of customer loans and customer deposits show good momentum. And finally, asset quality also reported an improvement with the NPL ratio improving both quarter-on-quarter as well as year-on-year. Generally, the asset quality situation remained very good across the CEE region and importantly stable in our Austrian. As usual, Alexandra will provide further detail on credit risk later. Liquidity and leverage ratios were as usual. But now to our capital ratios. Year-on-year, we recorded a massive rise in CET1 ratio of more than 400 basis points to 19.3%. Stefan will lead us later. But what is important to me as a CEO is that this puts us in a perfect position for first-time consolidation of Erste Bank Polska. A year ago, when we promised to the regulator that despite the 460 basis point CET1 ratio drawdown resulting from the Polish acquisition, we will always maintain a CET1 ratio of higher than 13.5%, and we aim to reach our new target CET1 ratio of 14.25% during the course of 2026, well above 13.5% and 14.5% Tier 1 ratio will certainly be the first consolidated Erste Bank Polska in the first quarter of 2026. Let's now briefly take the macroeconomic environment and particularly the outlook for 2026 on Slide 9. Our economies predict better economic growth for 6 out of our 8 core markets than we saw in 2025. And in the 2 markets for which they project consolidation, this is expected to happen at very healthy levels of between 2.5% to 3%. I'm specifically talking about the Czech Republic and Croatia. The new country in our portfolio, Poland will provide further growth in with real GDP growth estimated at 4% for 2026. Good news are also coming out of Austria, where the past 3 years, economic growth was almost nonexistent. For 2026, a modest recovery is predicted. In this forecast, we have not modeled any material tailwind from Germany fiscal expansion as this seems to take longer than initially hoped for. All in all, this is a very good starting point for the banking business and with further ground for profitable loan growth. The other macro forecasts are equally encouraging. Inflation is forecasted to retreat in most of our markets, while labor markets are expected to stay strong. When it comes to external fiscal balance, the picture is mixed as in many other places around the world. I'm tempted to say Austria, Czech Republic, Poland and Hungary usually enjoy neutral or positive current account balances while the Czech Republic is preventing a poster child of fiscal prudence. As far as the interest rate outlook is concerned, we assume only minor cuts in countries like Poland, Hungary, Romania and Serbia, while rates in the Eurozone are expected to stay flat. This as well will support profitable banking business in 2026. Talking about profitable banking business, let me share with you a couple of performance highlights of the business in 2025. To cut the long story short, retail business was a clear growth driver in the past year. I'm on Page 10 now. Retail loans were up by 8.1% to EUR 115.4 billion. Growth was reasonably balanced between housing and consumer loans and the quality of the retail book remained very good. Retail deposits also showed good growth dynamics with retail deposits climbing by almost EUR 5 billion to EUR 173 billion in the final quarter of 2025. Retail current account deposits grew the fastest quarter-on-quarter. Year-on-year, current account and saving deposits were up by 7% to 8% each, while term deposits declined by almost 6%. We also saw continued growth in off-balance sheet customer funds, security savings plans that enable customers to build long-term rates in an easy to manage digital format approached the EUR 2 million mark at the end of the year and generated gross sales in excess of EUR 1.5 billion in 2025. George, our digital platform for retail clients continued on its growth path. The number of onboarded users reached 11.4 million by the end of the year and the digital sales ratio in the retail business inched up 67%. Going forward, our ambition is unchanged to develop George into a fully-fledged financial adviser in order to give even larger parts of our client operation access to high-quality financial advice. In the corporate segment, I'm on Page 11 already loans were up 5% year-on-year and 0.8% quarter-on-quarter. The slight growth slowdown in the final quarter of the year was to weaker demand in large corporate business after a strong performance earlier in the year, while the SME and commercial real estate business lines continue to exhibit solid growth. In terms of products, demand for investment loans continued to be more pronounced in the fourth quarter, while year-on-year, there was a good balance between investment and working capital. On the liability side, corporate deposits enjoyed good growth. And here as well, current account deposits grew faster than term deposits year-on-year. The market business also delivered strong performance in 2025 with our ECM and DCM teams successfully executing 360 transactions with an issuance volume of EUR 211 billion. In Asset Management business, after passing the historic EUR 100 billion milestone in the third quarter, dynamic growth continued. Assets under management reached EUR 104 billion at the end of 2025. This bodes well for the future fee growth. On the digital front, the corporate business also progressed well. Client migration to George business has been completed in Austria, Romania and is progressing well in the Czech Republic. With this, by the end of 2025, some 76,000 corporate clients across our region are using George business. And with this, I hand over to Stefan for the presentation of the quarterly operating trends in the reporting segments. Stefan Dörfler: Thanks very much, Peter, and good morning also from my side. Please follow me to Page 13, and let me start by saying that for 2025, I'm particularly pleased with our loan growth performance. We achieved an acceleration in loan growth to 6.4%, up from 4.9% a year ago at the same time when we needed to speed up our capital build. To accomplish these 2 competing goals concurrently is testament to the strength of this organization. As far as loan volumes by country are concerned, the Czech Republic was the standout performer, producing consistent double-digit growth throughout the year. As highlighted already in previous quarters, Czech growth was well balanced between retail and corporate business, but within retail, mortgages led the way. Of the more than EUR 5 billion worth of net loans we added there, mortgages contributed roughly 50%. Growth in Hungary was equally driven by a massive increase in housing loans, admittedly from low levels, but still due to the introduction of a government-subsidized mortgage scheme as of September 2025. Having said this, demand for consumer loans was also quite robust, while corporate lending momentum trailed. Growth in Slovakia and Romania was more or less in line with the group average and in the former driven almost exclusively by strong momentum in the mortgage business, while in the latter, growth was mostly registered in consumer loans. In Austria, as Peter already mentioned, we saw mixed trends. At the savings banks, growth momentum improved noticeably towards end of the year. Interestingly, growth was better in the corporate than the retail business and within retail, clearly attributable to housing loans. In Erste Bank Austria, however, growth was generally subdued. On an aggregated level, in the corporate business, we saw a good growth balance between investment loans and working capital facilities, while in the retail business, housing loans in absolute terms made a better growth contributions -- better growth contributions, especially in the final quarter of the year. Thanks to this growth momentum in 2025 and the constructive macro-outlook, we target organic growth in 2026 of more than 5%, both for Erste with and without Erste Bank Polska, resulting in a net loan stock of higher than EUR 285 billion for the enlarged group by year-end 2026. On the liability side, the favorable mix towards cheaper deposits continued in the fourth quarter of 2025, as you can see on Page 14. This we observed in our core retail SME and savings bank's deposit base, which rose 5.5% over the past 12 months to EUR 209 billion, but also in our corporate business line. In both, overnight deposits increased, while term deposits declined year-on-year. Consequently, the cost of deposits fell again in the fourth quarter of 2025 with corresponding positive read across to net interest income. In terms of total deposit volumes, we are up 4.7% and 2.1% year-on-year and quarter-on-quarter, respectively. As far as geographic segment highlights are concerned, we saw strong retail inflows in both Austria retail and SME segments in the final quarter of 2025, while the quarter-on-quarter decline in the Czech segment was attributable to volatility in noncore deposits. In conclusion, we benefited from strong volume momentum, and that's true for both assets and liabilities, not just in the fourth quarter, but throughout the year 2025. Let me now move to net interest income on Page 15. As those of you who follow us for some time will remember well, ever since the end of the rate hike cycle in September 2023, we talked about NII plateauing even when rates were cut in half between mid-2024 and mid-2025. Now is the time to officially start talking about the next leg up because we are right in the middle of it. Most of the moving parts that are relevant for NII performance point in the right direction. Macro is somewhat supportive. Volume momentum is strong. Deposit mix is improving. Pricing power of Erste Group is intact. And last but certainly not least, we have an interest rate environment that bar any dramatic changes is at least not unsupportive of bank profitability. Consequently, we produced the second consecutive record quarterly NII print with NII first time topping EUR 2 billion. That's a year-on-year increase of 4.6% or a plus of 2.7% quarter-on-quarter. If we look at the annual performance, we started this year, let's say, the year 2025, of course, with a flat outlook and closed it with an increase of 3.5%, resulting in NII of almost EUR 7.8 billion. A key development in this context was the stabilization of NII in Austria as the year went on, followed by a trend reversal towards the positive in the final quarter of the year, essentially driven by a better deposit mix and continued deposit repricing. One could say that we have turned the NII tide in Austria. This is not insignificant as the Austrian retail and SME segment will still contribute more than 1/4 to NII even going forward. And it bodes well for the outlook for 2026 to which I will come in a minute. We also saw continued good performance in the Czech Republic and Slovakia, where a combination of deposit repricing, upwards fixations of mortgage loans and, of course, good volume dynamics all helped. The other segment principally benefited from higher allocations of income earned on local access capital, mainly from money market and government bond investments. And a final comment on NII 2025 and also at this point in time, our sensitivity to rate cuts has declined further to about EUR 170 million for a 100-basis point instant downward rate shock with the full impact expected at the minority-owned savings bank. So actually, no big deal for you as our shareholders. Now for the outlook for 2026. We target net interest income north of EUR 11 billion for this year. This incorporates an organic growth assumption of about 5% for the -- excluding Erste Bank Polska, strong contribution from Erste Bank Polska. The nonrecurrence of interest earned on the purchase price of Erste Bank Polska, around about EUR 7 billion, as you know, and the amortization of about EUR 170 million gross, that's about only EUR 60 million net of positive fair value adjustments recognized on debt securities and derivatives on first-time consolidation. Let's now turn to another success story of 2025 and frankly speaking, the past couple of years, and that's fee income on Page 16. At EUR 850 million, we posted another record in the final quarter of the year, up 9.1% year-on-year and 6.5% quarter-on-quarter. The drivers are in the meantime well known. Securities business, which includes asset management, continued to perform exceptionally well amid a helpful market environment and customers' increased propensity to invest in capital markets. Payment fees also made a good contribution when adjusting for the shift of loan account fees from payments to lending fees as of the first quarter of 2025. And insurance brokerage fees benefited from the usual end of year performance bonus payments. If we look at fees from the annual perspective, the story is very similar to what I've just said about the quarter. Net fee income reached nearly EUR 3.2 billion, again, a new record. This means that fees grew by 8.6% in 2025, comfortably above the target we set for the year. As for the growth drivers, we again talk about securities business, payment services and insurance brokerage. Honestly, it's hard to highlight individual country segments in the context of fee performance because as you see from the chart of the slide, Page 16, all of them made great contributions in 2025. Therefore, the main task for us is now to maintain the momentum going into 2026 as the bar is clearly moving even higher. But with an organic growth target of higher than 5%, you see that this is also clearly our goal. The inclusion of Erste Bank Polska should result in a combined fee income of about EUR 4 billion in 2026, whereas where we have to look at the final print that will also depend on the allocation of local FX income from Poland, either to the fee or the trading line. Over to operating expenses now. I'm on Page 17 already. Let me start with a quick summary on 2025. We were clearly running above our 2025 cost inflation guidance of about 25%. You all remember our discussions in the quarterly calls until the third quarter as we invested in efficiency projects, but in the end, still managed to come in right on target when adjusting for booking Polish integration costs in the amount of EUR 38 million to be fully transparent. This was only possible because of a significant year-on-year slowdown in cost growth in the fourth quarter, mainly driven by a stabilization in personnel costs and a moderation in depreciation and amortization charges as well as office expenses. Quarter-on-quarter, we saw the usual seasonality, so no surprises there. For 2026, it is our target to build on the solid performance of the fourth quarter and limit organic growth inflation to 3% as we should now benefit from efficiency gains and the downward inflationary trend in our countries, even Austrian inflation numbers came down recently. But 2026 is not only about better efficiency in Erste's pre-Poland business, but all about consolidating Erste Bank Polska. And in this respect, there will be 2 absolutely very relevant topics. First, and we have been talking about this in the past already, we can be more specific today, integration costs. Secondly, is intangibles amortization. While the former will mainly impact 2026, the latter will stay with us for the next decade. Our refined estimate of remaining integration costs now stands at EUR 180 million. The net impact will be dependent on the final split between Genna and Warsaw, but a good portion can be assumed to be booked locally based on the recent announcements of our colleagues from Erste Bank Polska in relation of rebranding costs. The amortization of intangibles, essentially, it's about customer relationships, will be based on the value of customer stock for 100% of Erste Bank Polska of EUR 2.1 billion and consequently have an outsized impact on the cost line of EUR 210 million annually. As opposed to this gross amount, the bottom-line impact at about EUR 70 million will be significantly lower as tax and minority shields fully apply. This is a noncash charge and irrelevant to regulatory capital as already fully deducted. Taking all of these items into account, we target operating expenses of about EUR 7 billion in 2026 for the enlarged Erste Group. Next up is operating results, and I'm already on Page 18. At almost EUR 11.7 billion, we posted record operating income in 2025 and at almost EUR 3.1 billion, we also posted record operating income for the quarter. The reasons we have discussed already in detail. We saw high-quality revenue growth driven by our core income lines, net interest income and net fee income. Or put differently, we enjoyed strong core business momentum. And with cost performance being in line with expectations, we saw records for both annual and quarterly operating results. As cost growth was a touch higher than revenue growth in 2025, the cost/income ratio was slightly weaker in 2025. However, much better than anticipated at the beginning of the year. When it comes to the outlook for 2026, and we just look at the Erste business, excluding Erste Bank Polska, then based on what we already said about macro, interest rates and business momentum, there's only one conclusion, and that's positive operating jaws or translating this into concrete numbers, a further improvement of the cost/income ratio towards 47%. Well, obviously, this is a somewhat theoretical statement as our 2026 financials will fully include the financials of Erste Bank Polska as well as the special effects in NII and operating expenses. But given the industry-leading efficiency level that Erste Bank Polska is operating at, that will only lead to a further improvement of these efficiency metrics. Our best guesstimate and guidance at this point in time is around 45%. And with this, over to Alexandra for more details on credit risk. Alexandra Habeler-Drabek: Thanks, Stefan, and also good morning, and welcome to this call. I'm now on Page 19. In the final quarter of 2025, we booked risk costs of EUR 159 million or 27 basis points. This is better than a year ago, even though FLI and overlay releases in both quarters were more or less comparable. As shown on the left-hand chart, we continue to book risk costs in our Austrian retail and SME operations, so Erste Bank Austria and Savings Banks, but the asset quality situation in Austria has definitely stabilized, thanks to somewhat lower NPL inflows in 2025 versus 2024. Fourth quarter risk cost bookings in Central and Eastern Europe continued to be very low. Looking at 2025 overall at 21 basis points, we came in right in line with our improved full year guidance. As in the previous year, again, EB Group and Sparkassen savings banks accounted for the largest part of net allocations in the context of an exceptionally strong performance in the CEE region. However, again, both at Erste Bank Uusterich and at the savings banks, risk costs improved compared to 2024, in line with trends seen in the broader Austrian banking industry. As far as FLI industry overlay provisions are concerned, we now hold a stock of about EUR 350 million, down by EUR 109 million compared to the third quarter on the back of FLI and overlay releases. For 2026, we currently project further releases of roughly EUR 60 million. When it comes to the risk cost outlook, including Erste Bank Polska for 2026, we forecast 25 to 30 basis points as risk costs tend to be somewhat higher in the Polish market. This is adjusted for the already previously communicated one-off ECL provisions of EUR 300 million gross with a net impact of EUR 120 million that is required by IFRS 9 on first-time consolidation. For Erste excluding Poland, we would see risk costs similar to 2025 levels, somewhere between 20 to 25 basis points given the generally robust macro backdrop. Let's now turn to asset quality on Page 20. The group NPL ratio improved both quarter-on-quarter as well as year-on-year to 2.4%, thanks to a stable NPL stock and a dynamically growing loan book. The stable NPL stock resulted from lower NPL inflows as well as higher recoveries. Let me again comment on Austria in this context as it has been and still is in the spotlight. For Erste Bank Austria and the Sparkassen asset quality metrics are perfectly acceptable and have improved in 2025. We saw lower NPL inflows, higher NPL recoveries. And importantly, we saw hardly any new entrants into our early warning list. And we expect more of the same in 2026 as the Austrian economy is recovering slowly. In Central and Eastern Europe, the asset quality performance remained excellent. It is hard to single out a country for doing better than the other, whether we talk about the Czech Republic or Hungary or Serbia because all of them did really well. In Romania, you might recall, where we saw some NPL inflows early in the year, the situation stabilized. We sold some NPLs. And with this, our NPL ratio in Romania is once again below 3%. In terms of projections for year-end 2026, we expect that the group NPL ratio will stay more or less at current levels, and that applies to both Erste with and without Erste Bank Polska. NPL coverage is projected to slip slightly, but only slightly and should stay close enough to 70%. And with this, I hand back to Stefan. Stefan Dörfler: Thanks, Alexandra. Let's turn to Page 21. To top off an exceptional year, other result also turned in a tremendous performance in the fourth quarter, again, benefiting from positive one-offs in the form of real estate selling gains and releases of legal provisions, particularly in the Czech Republic and Romania. When looking at other results from an annual perspective, we saw the best print since 2007. Thomas had to go back that far in analyzing the data to find a better print. And to put this into context, back then, banking levies or resolution fund contributions, which today run into the hundreds of millions of euros and annually were unheard of. As a result of this extraordinary performance throughout 2025, one thing must be clear. This is a onetime event that is very unlikely to be repeated in 2026. We estimate that the net positive onetime items amounted to approximately EUR 270 million, as Peter already mentioned, pretax and that in 2026, other result will more closely mirror regulatory charges, which based on higher banking levies in Hungary and Romania should be in the order of approximately EUR 450 million. Typically, we already expect one or the other positive or also negative print there for the first quarter, we are anticipating a better print due to the closing of the Erste transaction in Croatia. Based on what you heard about record annual and quarterly operating performance as well as quarterly and annual other results, and I'm on Page 22. In the meantime, it follows that quarterly and annual net profits were comfortably record prints as well. And one could argue somewhat inflated, obviously, to the benefit of capital and capital ratios, so no complaints here. But still, therefore, it is only fair to adjust net profit for onetime items. And if we do this, clean net profit prior to AT1 dividend deduction, as Peter already mentioned, would be closer to EUR 3.3 billion rather than the reported figure of EUR 3.5 billion. By extension, the same comments apply to reported earnings per share and return on tangible equity, both benefited from one-off supported net profits. If one adjusts reported 2025 EPS of EUR 8.24 for this, then underlying EPS would amount to EUR 7.72 and ROTE would be closer to EUR 515.5 as opposed to the reported figure of 16.6%. When it comes to the outlook for 2026, we confirm everything we have said since the announcement of the Polish acquisition on 5th of May 2025. We expect a significant improvement on return on tangible equity to around 19% and an earnings per share uplift north of 20%. These targets are based on reported net figures adjusted for extraordinary items with EUR 3.3 billion serving as a basis for 2025 and a figure of greater than EUR 4 billion being the target for 2026 adjusted. And with this, let's move on to wholesale funding and capital, starting on Page 24. Stability and competitive advantage are the name of the game when it comes to funding. High granular and well-diversified retail and SME deposit base remains a key source of long-term funding. Wholesale funding volumes decreased year-to-date as higher stock of debt securities was more than offset by decline in interbank deposits. The stock of debt securities was pushed up primarily by issuance of covered bonds and senior preferred bonds. On to Page 25, in order to look in more detail at our long-term wholesale funding. My short summary would be that we successfully completed our 2025 funding plan and that we had a busy and successful start to the 2026 funding year. Next to several transactions of our subsidiaries, we have issued a Tier 2 and a senior preferred note, EUR 750 million each on group level in January. Overall, we expect similar funding volumes this year as in 2025 and we'll have more focus on MREL instruments compared to covered bonds. Let's now move to regulatory capital and risk-weighted assets on Page 26. In the context of other results, I talked already about a onetime event, and I think this is also a fair statement for the development of regulatory capital and risk-weighted assets. We saw a massive buildup in capital and at the same time, a massive reduction in risk-weighted assets in 2025. Of course, most of this did not happen by chance, but was the result of a well-executed strategy that was instrumental in funding the acquisition of Erste Bank Polska exclusively from internal resources. To give you an idea about the scale of the achievements, we grew loans by about EUR 14 billion in 2025, as already discussed, while risk-weighted assets were down by almost EUR 10 billion. The main drivers for this were the increased use of securitizations, positive portfolio effects and last, but not at all least, Basel IV implementation also came in handy. These factors more than offset the volume growth related up drift. The strong growth in CET1 capital by EUR 4.5 billion during 2025 is rooted in strong profitability and temporarily increased profit retention. The former also benefited from positive one-offs as detailed earlier in the presentation, but was mainly driven by strong business momentum, while the latter was supported by suspension of the share buyback we already announced early in the year and a lower dividend payout from 2025 profits. The result of these massive moves, you can see on Page 27, our CET1 waterfall, a 408-basis point increase in our CET1 ratio in 2025. Viewed differently, one could say that we absorbed almost the entire expected CET1 drawdown expected from the Erste Bank Polska acquisition within 1 calendar year. And I can only repeat what Peter said. We have far outperformed all capital commitments that we gave to the regulator in the run-up to the transaction. That's the CET1 ratio floor of 13.5% and the new increased target ratio of 14.25% to be achieved during the course of 2026. When it comes to capital distribution, we will stick to our communicated dividend policy for 2025, resulting in a payout of EUR 0.75 per share. I think it is also evident that we have the full capacity to return to our pre-transaction dividend policy of 40% to 50% and possibly even put share buybacks back on the menu if this is in the best interest of shareholders. When it comes to the CET1 ratio outlook for 2026, the triangle of profitability, loan growth and shareholder distribution will determine the extent and speed of any further buildup. In any case, we have created a space for many options for future growth. And with this, over to you, Peter, for concluding remarks. Peter Bosek: Thank you, Alexandra. Thank you, Stefan. Let's take a step back again and look at the bigger picture. What emerges in front of us, you can see summarized on Page 29. It's about strong organic growth momentum in the Erste's business without Erste Bank Polska. On a like-for-like basis, we expect loan growth of higher than 5%. We project mid-single-digit net interest income growth. We once again target fee growth of north of 5%, and we aim to push cost inflation down to 3%. With this positive operating jaws and improved cost-income ratio are firmly on the agenda for 2026. Risk costs are expected to stay at a very level. And even if other will be more in line with the reported net profit should at least be on par with what we achieved in 2025. Erste Bank Polska to the mix that the future will be brighter still. Growth opportunities will multiply by having access to the largest market in the CEE region. On the back of a better macro backdrop, we therefore project loans to surpass EUR 285 billion for the combined entity of new Erste, if you prefer. We see net interest income north of EUR 11 billion, fees at about EUR 4 billion and costs in the order of about EUR 7 billion. Risk costs will inch up to 25 to 30 basis points, leaving aside the one-off related to first-time consolidation. All of this is set to result in a significant increased return on tangible equity of 19% and an increase in earnings per share of more than 20%. Despite this very robust financial outlook, we are not getting carried away. Our full focus and attention is on integration of Erste Bank Polska and rebranding. At the same time, you can rest assured that we will not lose sight of strategic opportunities, which we expect to open up in front of us as the year progresses. Superior profitability and consequently, fast capital build will enable us to choose from a number of options ranging from increased capital return before further M&A, all of which have the potential to create significant shareholder value. And this, ladies and gentlemen, concludes our presentation remarks. Thanks for your attention, and we are now ready to take your questions. Operator: [Operator Instructions] And the first question comes from Jeremy Sigee from BNP Paribas. Jeremy Sigee: Could you just give us a quick update on the integration time line for Poland? What are the big steps in terms of systems migration or other big things? And when do they happen? And then second question, you've talked about the various options that you've got for growth. Could you talk a bit about both organic and M&A opportunities, what your priorities are, where you see opportunities presenting themselves? Peter Bosek: If I may start with the integration in Poland, we plan to be done with the integration when it comes to IT and technology within 24 months. We have already started to work with our colleagues in Poland. So, this is a lot of work in front of us, but we have both sides very experienced IT people. So, we know what we have in front of us to be able to manage. The second also very important part is the rebranding, which will take place in the second quarter. So, we have more than 400 branches, we have to rebrand. We have a lot of ATMs, we have cards, we have papers. So, a lot of things in front of us, but very much looking forward to use the opportunity to build up a very strong brand in the Polish banking market. When it comes to growth opportunities and potential M&A, it is very much depending on the market situation. I think it's much too early. I would like to -- just to remind you, although we have a very strong capital position now, we just had closing on of January. And again, now we are very much focused on integrating Poland. But if something pops up where we think it's a business opportunity and is creating value to our shareholders, we will definitely look at it. Operator: The next question comes from Gabor Kemeny from Autonomous Research. Gabor Kemeny: Thanks for walking us through the intricacies of the Polish consolidation. But my first question is actually on the business ex-Poland and the NII guidance there, I mean, 5% growth you guide for, which is decent, but it's actually similar to the Q4 run rate. It implies similar NII to the Q4 run rate, I believe. So, what makes you assume that NII will not grow sequentially from here together with loans? And the second question would be on cost. I mean you expect cost growth to half practically on an organic basis. Can you walk us -- which is a significant improvement. Can you walk us through what you actually expect to drive this slowdown and perhaps give us some quantification of those drivers? And then finally, on the capital deployment options, how do you think about your options for this year, including if you could comment on the possibility of raising your stake further in the Polish bank. Stefan Dörfler: Let me start with the remark on the interest rates for 2026. I understood you right. You wanted a reply to, say, on our growth expectations on the former Erste Group, I would call it. Look, let's not forget there are a couple of points that we need to observe when it comes to the translation of loan growth into NII. First of all, we all know that this is a buildup throughout the year. So, if we expect better growth on the loan side than 4%, 5%, then this will only get into NII numbers over the year, not only for the first quarter. The second element is, and I mentioned it on a side comment when running the presentation, we have paid EUR 7 billion for the acquisition of Erste Bank Polska. So that's in a simple calculation around EUR 130 million that we simply have less of interest on excess liquidity. It's not a huge amount given the overall dimension of NII nowadays, but it's not to be completely ignored and it is a certain churn on our growth year-on-year. And last but not least, the interest rate environment should be still okay-ish and kind of supportive, but definitely, we will not have tailwinds or tail storms from the interest rate environment. We've put ourselves in a position that is quite neutral to interest rate developments. So, from that end, we shouldn't expect too much of an uplift. And if you look at the 2025 developments, we've had a good momentum still from our investment book. This is still there, but significantly slowing down. So, I would say, at the end of the day, we are back into a game which is mainly depending on growth. You're perfectly right, but it's not a one-on-one translation of loan growth into NII. So, I think if we can deliver 5% on existing group, I would be very satisfied. The other point was on cost growth, look, it's very simple. Inflation is now really sharply coming down even in the countries like Austria, where we saw after really super elevated prints, we saw in January now a 2% number. That will help the negotiations for collective bargaining are ongoing. We hope that there will be a reasonable behavior on all sides like it was in other industries in this country. In the other countries, we see wage inflation still around, but significantly lower than in the past. So that's the external element. And the internal element, we have always communicated that the impact of the efficiency investments that we started already in the end of 2024 should have a first-time impact in 2026, and that is also something we are committed to deliver. And this in combination would land around this 3% level. Of course, a lot of integration efforts will be there, but you were asking about the core group. And then I think capital deployment. Look, Peter already made it clear in his answer just before. We are evaluating all options, but we are also not deviating from our super focus. We got everything very well done. We were achieving not only the signing, but also the closing in a very smooth manner. And I really want to praise the teams here on all sides who guaranteed very smooth operations day 1 already across the group, and we will build on that. But let's not forget that the integration will still occupy a lot of resources. And therefore, we will elevate very, very precisely how much we have still in our pockets to invest into, let me say, new adventures. I think you know the markets that we look at. There are some of the markets which are able to do transactions, for example, on themselves. If there are options opening, we will analyze them, but I think it's much too early to say. Last comment, since this is obviously also part of your question, we will not comment at this point in time about any kind of precise dividend indication for 2026, but it's natural that we have full capacity to at least -- let me stress this, at least get back to the capital distribution that you were used to up until the year 2024. Operator: The next question comes from Ben Maher from KBW. Benjamin Maher: I actually have one. It's just on the growth in the Corporate Center NII was very strong last year, effectively doubling. I think you mentioned the securities portfolio, that tailwind perhaps tailing off a bit this year. But any guidance around NII in the Corporate Center for 2026 to 2027 would be helpful. Stefan Dörfler: In short, it's going to be slightly up, not as strong growth momentum as you rightly observed for '25, but certainly also not falling from the slightly up is an indication that I can give you. Operator: The next question comes from Amit Ranjan from JPM. Amit Ranjan: The first one is on capital. What's the current outlook on balance sheet measures going forward, SRTs, et cetera? How much did you achieve in 2025? Because if I look at the credit RWAs, they declined by almost EUR 4 billion quarter-on-quarter. So, if you could highlight that and also the costs associated with that SRT in 2025? And how should we think about that in 2026? And then the second one is on -- you have provided very clear 2026 targets. How should we think about medium- to long-term targets for the group? Is that something we can expect to be provided during 2026? Are you planning a Capital Markets Day at some point for the combined entity? And last one, if I may, on loan growth. Are you seeing any pickup in corporate loan demand in the various geographies? And is there any assumption you're making around benefit from the fiscal stimulus in Germany and the infrastructure spending for countries like Austria, Czech Republic, please? Stefan Dörfler: I'll take the first question and then hand it over to Peter. So, first thing, the costs, not to forget around securitization, around about EUR 60 million, and that's in the fees. Maybe let me use this opportunity to say 2 sentences about fee development, which I'm very impressed from colleagues do a great job there. We have had already cost for securitization during the year 2025 in fees. It's even more remarkable to see the results. And that will be around about EUR 60 million in the year 2026, first point. Second point, I want to be precise on what I said on the fee trading stuff when it comes to our EUR 4 billion target. We have observed a little bit of a different treatment in the Polish market around FX fees or let's say, fixed trading revenues rather. And we will analyze in the next weeks whether we can also show this on the group level in fees or whether we have to put it in trading. So just that you can put my remark here in perspective because it fits to this point. And last but not least, in terms of planning for 2026, so nothing tremendous being planned at this point in time for securitizations in 2026. We will do 2, 3 further transactions for sure as we use this toolbox ongoingly, but significantly less than in 2025 since the effort here was directed to the capital -- I wouldn't call it rebuild, but the capital optimization effort in 2025. Peter, please? Peter Bosek: Yes. When it comes to midterm outlook, I think as we mentioned already before, I think this year, on the one hand, we are heavily focused on integrating Erste Bank Polska. It's very clear. we will see the full positive impact in terms of P&L, of course, in 2027. On the other hand, it's also fair to say that we are very -- again, very strong being up capital, which gives us a lot of opportunities. And this is exactly the other part for this year to make up our mind and see how markets are developing and what kind of opportunities are poping up in terms of M&A or further increase in our stake in Erste Bank Polska, also depending on the Polish scheme, how we are able to increase. So, there are still a lot of things we have to think through. But you can be assured that we are very well aware. And I think we are in a luxury situation in terms of our strengths being able to build up capital. When it comes to your question about the Capital Market Day, this is something we are making up our mind. Stefan, Alexandra and myself, we are, of course, discussing it. But it's also very obvious that we would go for a Capital Markets Day if we have something detailed to you, which is worth the effort of you and your colleagues to join. When it comes to potential impact of Germany, I mean, this is something we are waiting for already 1.5 years. Of course, we expect a positive impact in countries like Czech Republic, Slovakia, Poland, Romania, but the political procedure in Germany just takes longer as we expected. And therefore, we didn't take it into consideration, as mentioned during our presentation in our P&L for this year because we are sounding a little bit like broken record every time telling that there will be an impact, there will be an impact, there will be an impact and so far we cannot. Operator: The next question now from Mate Nemes from UBS. Mate Nemes: I have 3 questions, please. The first one would be a follow-up on your -- Stefan, on fee growth. I understand the uncertainty around the treatment of some of the FX commissions or FX fees in Poland. For the rest of the portfolio, putting that uncertainty aside, is there any reason why fee growth shouldn't be in the high-single digits given your track record, given strong volume growth, given good traction with the securities business and so on? That's the first one. The second question would be just a clarification, please. Could you clarify what exactly will be added back to get to the adjusted net profit in 2026, i.e., the amount slightly above EUR 4 billion. Is that the EUR 240 million intangibles amortization and the EUR 180 million integration costs or it's only the integration costs? So that's the second question. And the third question is just a, I guess, conceptual one perhaps for Peter. The outlook on retail lending, very, very strong performance in 2025, retail growth and within that housing loan growth in the CEE region is very strong. Could you talk about expectations whether that momentum can be maintained in one or the other country, be it Croatia, be it Czech, be it Hungary? Or we could see some moderation here and there? And also in that context, perhaps, what is your expectation in retail growth in Austria? Stefan Dörfler: All right. So let me take the number question first. So, we talk about roughly EUR 350 million that you should consider in this, so to say, adjustment logic, and this is the sum of ECL impact the integration costs, as you rightly assume, and the intangibles. Honestly speaking, we really try to manage, and I think we have kind of got 80%, 90% there to absorb everything as much as possible in 2026. So, you heard the question before, the earlier question to Peter regarding integration costs. That's also what we have been discussing internally. While we will be busy with a couple of the things on 28 when it comes to really absorbing most of the matters in P&L representation and so on, I would say, given the dimension of the numbers, everything that comes there after 2026 with the sole exception of the depreciation of the customer list I would personally from a CFO perspective, say you can pretty much forget, right? So, it's EUR 50 million here, EUR 30 million there, for sure, not numbers to be ignored in a bigger sense. But the way we look at, for example, NII of a base EUR 11 billion plus, yes, have an item here in 2027 impact of EUR 80 million, EUR 90 million. But frankly speaking, a small change in interest rate environment also does a much, much bigger impact, as you very well know. Fee growth. To specify the dimension that we are discussing here with the Polish colleagues and also with the audience is EUR 200 million, just to be precise. So, it's about EUR 200 million to be allocated rather to fees or FX. So that is around the -- if you map it to the EUR 4 billion total, it's around 5% difference, not to be ignored. Of course, it doesn't do anything to the total operating income. It's pretty clear. And that was the reason why Thomas and the Board discussed which guidance should we give. Otherwise, we would have been coming up with greater than 4. Now we are around 4%. We will clarify that. And by Q1, we will be very clear about where to book this. When it comes to growth, thanks for your confidence in our growth potential. I do not disagree. However, if we look around at what happened in the last 2, 3 years, let's also be fair. We had quite strong supportive factors, not the least, a positive inflationary environment, which, of course, by indexation of payment fees and so on, not only for us, but for the whole industry was supportive. And if we now go significantly down with our growth expectations on costs, it's also consequently clear that some of the tailwinds are slowing down on the fee side. That's point number one. And point number 2, as you know better than anyone else, if we have such a supportive capital market every year as we had in the last 2, 3 years, is also not a given -- and some not all, but some components of the income here on asset management fees and securities business depending on it. So do I rule out that we come up with higher than 5%. So, I think you said upper mid-single digit again in 2026? No. Do I want to guide for it at this point in time? Also no. Peter? Peter Bosek: Yes. Thank you, Stefan. When it comes to mortgage business, when we talk about volume, it's very much about Czech Republic, Austria. So, we don't see any -- or we don't expect any change in the demand in Czech Republic. So, the market is still strong I would expect even a little bit more positive momentum in Austria because demand has come back already over the last 12, 18 months, and we saw a clear correlation that demand was picking up and interest rates are coming slightly down. And Croatia, I think we are doing very well in terms of balancing between mortgage lending and consumer lending. So, which was true also for the whole year in 2025 that we have between these 2 product lines. Good that you asked for Croatia because we took a special effort in Croatia and set up an initiative to improve our mortgage lending there because there, I think it's fair to say that from our perspective, we are a little bit underpenetrated when it comes to mortgage lending is an area we would like to take more efforts to improve the situation. Operator: The next question comes from Riccardo Rovere from Mediobanca. Riccardo Rovere: Two or 3, if I may. The first one is on the NII guidance. I mean in Erste stand-alone a couple of billion per quarter in Q4. So, say before any growth land, you could land in the EUR 8 billion region without being too sophisticated. And Erste Bank Polska reported kind of anywhere between EUR 750 million and EUR 800 million in Q4. So that could be another, say, EUR 3 billion or so more or less. So, before growth will be in the EUR 1 billion ballpark and this before, again, loan growth. So, I was kind of -- I just want to understand what -- and you also say, Stefan, if I'm not mistaken, that you expect kind of supportive policy rate environment, if I got it right during the call. So, I was wondering if there is no margin pressure and if the growth stays as you land, what could to go above or well above EUR 11 billion and more than EUR 11 billion could be EUR 11.5 billion in your mind. Then again, on growth, I mean you're growing at 6.4% before Poland. Macro is expected to be to improve. Maybe you're going to have an impact from fiscal in Germany are at 7% and pretty good when they make their projections. So why 5% when the macro is improving and you're exiting '25 at 6.4%. The other question I have is on common equity. I mean, you end at 19.3%, take out EUR 460, you end at EUR 14.7 billion divided by 2, it's another EUR 2 billion, risk assets, say, EUR 180 million, EUR 150 million from you, 30, 30-something from Erste Bank Polska is another more than 100 basis point. So, as it is today, we will land anywhere between 15.5% and 16%. So, the question here, I just want to connect to what Jeremy asked right at the beginning of this call. What's the priority here? Is because the share price suffered quite a lot on in early 2025 when there was uncertainty about capital use. So just to be clear, what's the priority here? Is the priority more M&A? Or is the priority returning capital to shareholders as you have to integrate Poland, which is a transaction? Because the numbers do not adopt just don't adapt with the numbers what you said. Just to say so, but I think the market needs a little bit of clarity on that. Stefan Dörfler: So first, unfortunately, the sound was very bad. So, let's make sure that we got everything right because you started by saying 3 questions, I only identified kind of 2.5. But anyway, the first one is very clear. And I completely -- I completely can follow your thinking EUR 8 billion here because you guys are already at EUR 2 billion in Q4, then simply extrapolate that and then add the EUR 3 billion from Poland and they go EUR 11 billion plus the growth, why don't you talk about EUR 11.5 billion. That's in a nutshell what you said. Look, it's not exactly that easy this time for sure, at least from today's perspective. Number one, again, we have a clear subtraction. This is a super simple calculation of EUR 130 million from the nonrecurrence of the interest on our paid here. It's not a huge element, but not to be completely. Secondly, and I give you the precise description, we have EUR 170 million, and we always talk about the gross figures here, right? I said it -- talk about the gross figures because 11, 11.5 is also, of course, the gross NII for 2026 in the whole group. EUR 170 million impact from hedge accounting adjustments and the debt securities, both around about close to EUR 100 million adding up there, and there's a little bit of a counter effect on other positions. So, it's a total of EUR 300 million, please, Riccardo, that you have to take. This is not something which is kind of a question of optimism or pessimism. It's just the fact that this is 100% clear that this will be booked this way. So, I have to take this into consideration because then with your expectation somewhere between EUR 11.2 billion to EUR 11.5 billion, we are already talking a little bit of a different story. And the rest -- yes, the rest is a question of interpretation if everything goes fully our way, if interest rate environment is as supportive as we expected. And therefore, we decided to go for a greater than EUR 11 billion guidance, which I think is leaving also upside. And you know us then when we have more evidence for better development, we will adjust the guidance. At this point in time, I think it's a task to get there with all the moving parts around the first-time consolidation. And on capital, look, I think referring back to the first part of 2025, I don't believe it's really helpful because you know that we were negotiating the deal at that point in time. And you guys know much better than anyone else how strict capital market communication is on indicating anything that is not really watertight in terms of insider what the hell. So therefore, yes, it was also not my most pleasant quarterly call on the 30th of April 2025. I very, very much remember, and we were dancing around how we deploy capital. I agree. This was not a pleasure, but in the same moment, it was a pleasure then making very clear what we do with the capital 1 week later. It's not the case this time. This I can assure you. We are not in any whatsoever kind of negotiations or so. But what we are in is in analyzing our opportunities, both legally, Peter already mentioned it, but also in terms of how we can manage also a step-up in Poland in an efficient manner for our shareholders and in a way that we are not endangering, so to say, our economics. Other countries, I think, have been commented on by Peter and me already. I think it's fair to say, looking at my colleagues that after the first quarter, we will have a little bit more clarity. However, to satisfy everything of your expectations, what we will do with the excess capital, it might still not be enough. And it's going to be a question of the next couple of months to evaluate the deployment. We try to do the best with the excess capital, but there are many moving parts. I think there was a third kind of question, but I didn't get it from the sound. Operator: Mr. Rovere, you're still on the line. Riccardo Rovere: Let's move to the next question please. Operator: The next question comes from Jovan Sikimic from ODDO BHF. Jovan Sikimic: I would have also a question related to Poland. I mean, your colleagues from the new subsidiary, right, they indicated a kind of new strategy in coming months. But maybe at this stage, can you tell us just the key parameters, right, in terms of loan growth, in terms of NII year-over-year? And what is actually the interest rate which you incorporate because currently, it's like 25 to 50 basis points. Let's say, difference within consensus where the rates will end up in Poland, how the sensitivity is? And also from this perspective, if you can share what would be kind of cost/income ratio in the longer-term horizon because Polish subs or Polish bank kind of has significantly lower cost-to-income ratio compared to your current subsidiaries? And if you could also remind us what's the agreement on Swiss franc provisioning. I mean Q4, in my view, in Poland was a bit below expectations in terms of kind of adding to the current outstanding volumes. But what's the position at this stage in your case? Peter Bosek: If I may start in terms of strategy, please don't expect too many changes in terms of strategy in our Polish subsidiary because from our perspective, strategy is already very much aligned. So, we have a very similar approach in retail banking. We have a very similar approach in corporate banking. I think there's a lot of added value, of course, in the corporate area because the pure size of the economy in Poland is fantastic in the way how this economy in terms of economic infrastructure was built up over the last decades. I think this is a huge opportunity also for the rest of our group. And we see also kind of network value related to it because there's a lot of money flow between companies within our region now and a lot of Polish companies operating in other parts of our group and vice versa. So there, we have very, very positive client feedback. When you refer to cost-to-income ratio, of course, it's great how our colleagues are managing efficiency. Of course, it's all kind of very supportive where we have relatively high NII margins when it comes to cost/income ratio. And please, we ask for your understanding that we don't want to comment too much on local entities, especially when they are stock listed in terms of NII sensitivity. Stefan Dörfler: And that also, if I may add, Peter, that also holds true for the strategy of the local bank when it comes to Swiss franc. I think the colleagues are commenting on that. The read-through to the group is well known. So, there's nothing to add to that. Nothing has changed on that side. And all the rest is decided by our local colleagues and will be also communicated by them in their capital market communication. Jovan Sikimic: Great. And if I may add one maybe on -- it's maybe of a minor importance, but still your positioning in Hungary on rate cuts or further rate cuts and also in Romania. How would it affect the group NII? Stefan Dörfler: No, happy to take this in a very short manner. We saw the rate cut yesterday or the day before yesterday, I guess, in Hungary. We expect overall a relatively stable development of key interest rates for this year, at least for the next 2, 3 quarters. You know the policy of the Romanian National Bank. Further later in the year, there might be some changes depending on inflationary environment and so on. But at the moment, we do not see an aggressive rate cut cycle of either of the 2 national banks. Operator: We have a follow-up from Riccardo Rovere from Mediobanca. Riccardo Rovere: And just a quick follow-up on the previous one on loan growth. Why 5% when you're exiting the year at 6.4% and the macro is supposed to get better and maybe you're going to have some boost from Germany fiscal support. And then on bank taxes, if I may, can you shed some light what should be the situation in 2026 and if possible, onward, where do we stand there? Peter Bosek: If I may start with loan growth. From our perspective, we were even a little bit more aggressive than last year in terms of giving the guidance because we see loan growth above 5%, right? And as Stefan mentioned already during his presentation or answers, loan growth is accelerating over the year. So, you don't have the full impact immediately in the P&L in the first 2 months of the year. But be assured that we believe -- strongly believe in loan growth above 5%. Stefan Dörfler: What was the other question, Riccardo? Riccardo Rovere: Just on bank taxes, what should you expect? What should we expect for 2026 on bank taxes in general? Stefan Dörfler: The existing ones, I think you know precisely. It will go up in numbers a little bit. And then you know the situation in Poland, which again is to be commented mainly by our local colleagues, but we, of course, consider in our assumptions the elevated corporate income tax in Poland of 30% for the year 2026, which is expected to go down, not expected, it's in the law, to go down to 26% in 2027 and then to 23% in 2028. Those are elements that we have to consider, which all are in our guidance that we mentioned today. Other than that, forecasting or so to say, making any kind of assumptions around political decisions, I guess, is definitely not my task. And I think, Peter, you also don't want to probably say that. Peter Bosek: I would not expect any kind of material impact during 2026, but long-term trends are very, very much depending on how budget deficits in other countries will develop over the upcoming years from that perspective. We don't see any kind of that there will be additional taxes for this year. Operator: The next question comes from Robert Brzoza from PKO BP Securities. Robert Brzoza: Congratulations on the results. Sorry if I make a repeated question because I joined later during this call. I have 3 questions, actually. One on the adjusted net target. What are the adjustments actually? Is this only the integration cost or also the fair value adjustment? So that's question number one. Question number two, the 3% OpEx growth target for '26, does it include the indexation to wages? How do you manage this? And question number three, I've spotted that the NII in Hungary and Romania were relatively flattish despite great quarter-to-quarter loan book growth. What is it related to? Does it mean that you had to compromise a bit on the pricing of loans? Stefan Dörfler: Thank you very much. You were touching upon of the stuff we discussed already, but no problem. So, first answer, I specified already before, it's around EUR 350 million of adjustment. It includes the integration cost, but not only. It's also the onetime booking of the IFRS 3 related ECLs CLSA and the intangibles, as you rightly assume. So that's a correct assumption. Those 3 components play into there. When it comes to wage inflation, I mentioned in an earlier answer, it's supposed to come down. We see inflation coming down now even in Austria and other places, and that's what will certainly drive the levels of, let me say, wage and personnel cost increases down. But I also mentioned that another element of our guidance there is that we will benefit from efficiency gains that we invested in '24 and '25. And last but not least, you're right. We had a slower development in Hungary and Romania, and it is partially due to quite some pricing competition in these markets, which we usually do not take a part in as aggressively as competitors, but we cannot exclude ourselves completely. So that's certainly a driver of the NIMs in those 2 specific markets. Just adding that in Hungary, we always say, please don't analyze this market line by line. You will not get anywhere. Look at what our fantastic colleagues there have achieved in bottom line delivery, and that's really the measure that we look at. Operator: [Operator Instructions] There are no more questions at this time. I would now like to turn the conference over to Peter Bosek for any closing remarks. Peter Bosek: Yes. Thank you very much, ladies and gentlemen, for taking your time. Thank you very much for your questions. What I would like to mention is that our Annual General Meeting will take place on the 17th of April and the results for the first quarter of 2026 are on 30th of April. Thank you very much. Operator: Ladies and gentlemen, the conference is now over. You may now disconnect your lines. Goodbye.
Ryan Chellingworth: Thank you, everyone, for standing by. Welcome to the Retail Food Group First Half 2026 Results Presentation. [Operator Instructions] I will now hand over the conference to Peter George, Executive Chairman of Retail Food Group. Peter George: Good morning and thank you for joining the Retail Food Group first half presentation. My name is Peter George, and I'm the Executive Chairman of RFG. I'm joined today by Ryan Chellingworth, who is the Group's Chief Financial Officer. Ryan was appointed CFO on the 1st of January this year, having previously served as Deputy CFO. He is a chartered accountant with over 25 years experience domestically and in the U.K., including as Group Treasurer at EML Payments. Ryan brings a strong blend of financial fundamentals and commercial acumen, and I'm confident he'll make a significant contribution to RFG's next phase. Today, we'll be providing an update on the first half business performance, financial results for the period, the outlook for the balance of the financial year and recent trading, and then we will open up to questions. RFG remains Australia's largest multi-brand retail food franchise manager. We own and manage 10 brands with a global footprint of over 1,200 trading outlets across 29 countries, including over 690 outlets in Australia. We also manufacture and distribute high-quality pies from our Sunshine Coast bakery and roast and distribute coffee from our Sydney Roastery, and we hold the exclusive license to establish Firehouse Subs in Australia. As we move forward, our focus is on building our core brands by concentrating our resources and investment under the strategic framework that will be detailed today. Turning to Slide 5 and the key messages from today's presentation. First half was a period of mixed conditions. Consumer sentiment remains subdued, particularly across shopping center exposed categories and our earnings declined as previously guided. However, the results also provided insight into the opportunities moving forward as we focus on transformation and enhancing the network. Across our core brands network sales rose 0.8%. Same-store sales were up 0.2% and average weekly sales grew by 0.9%. These metrics demonstrate improving network quality and underlying brand resilience even as the total number of stores declined through the exit of low-performing and noncore outlets. Further progress has been made on the company store strategy reset with 70% of the 50 targeted transitions or exits now either agreed or complete. The refinancing announced on the 3rd of February provides balance sheet certainty and scope to further execute our strategic priorities. Today, we are also outlining a transformation program built around 3 pillars: cost rationalization, operational enhancement and structural alignment. This program is designed to right size the organization, consolidate our Southeast Queensland offices to our Robina headquarters, remove process inefficiencies, improve supply chain and field team effectiveness and ensure brand-aligned leadership. These actions will deliver material cost savings, will improve franchise partner support and position the business for sustainable earnings growth. Our growth opportunities remain central to the longer-term earnings story and will continue to be pursued with disciplined investment. First Firehouse Subs restaurant is planned for launch in the fourth quarter of this financial year. Our Turkiye international hub is now operational, and we continue to focus on sustainable network expansion for Beefy's Pies. Turning to Slide 6. At the headline level, domestic network sales were $254.6 million, down 1% on the prior corresponding period with domestic same-store sales growth of 0.2%. Growth in Crust and Beefy's offset softer conditions across the shopping center exposed categories. Domestic outlets ended the period at 693, which was down 29 from the number at June 2025 as we exited low-performing sites and progressed the company store strategy reset. These actions have resulted in improved network quality, and we are seeing the benefits through improved average weekly sales across the remaining stores. Underlying revenue declined 1% as higher Beefy's revenue was more than offset by cycling the $2.7 million in nonrecurring insurance proceeds and $0.6 million in deferred franchise-related income recognized in the prior corresponding period. Underlying EBITDA declined 43% to $9.2 million within the $9 million to $10 million guidance range provided to the market a couple of weeks ago. The decline reflected several factors, lower gross margin on slower-than-expected ramp-up of the newer Beefy's stores, compressed coffee margins where the group chose to maintain wholesale pricing to support franchise partners through the difficult trading conditions, absorbing higher green coffee bean costs and finally, delays in the commissioning of the new international supply hub in Turkiye. Looking at the network results in more detail. Core Brands, as we said, delivered network sales growth of 0.8% and same-store sales growth of 0.2%, driven by continued strength in Beefy's and Crust as customer count improved and competitor discounting in the pizza category eased. Improving network quality was evidenced by core brand average weekly sales rising 0.9%. During the period, we opened 22 new outlets across our core brands, offset by the closure of low-performing stores and the exit of sites as part of the company's store strategy reset. Within the coffee, cake, bakery segment, Gloria Jean's and Donut King traded in line with the challenging conditions flagged at the AGM in November. The Glorange refresh and premium product innovation continue to provide positive support, which I will cover shortly. In QSR, Crust delivered same-store sales growth of 2.2%, building on the momentum that we saw in the fourth quarter of last financial year when network sales returned to growth. Beefy's continued to perform well with same-store sales growth of 4.6%. RFG's immediate priority is improving core brand network sales and operational efficiency, which will maximize value for both our franchise partners and our shareholders. This involves 3 areas of focus: first, operational improvements to enhance our service delivery to franchise partners; second, procurement and supply chain initiatives to improve buying and reduce input costs; and third, a back-to-basics marketing strategy, targeting core customers and driving foot traffic. The goals of these focus areas is to increase network sales across core brands and improve store level profitability for franchise partners. As we've previously highlighted, RFG does well when its franchise partners do well. Early proof points of this strategy are encouraging with core brand same-store sales growth of 0.2%, average weekly sales up 0.9% and the current year cost reduction run rate of $1.2 million to $1.8 million already achieved. We will also have seen further Glorange store refresh success, which I'll discuss on the next slide. As previously disclosed, following the conclusion of the potential divestment review process, the Board has decided to retain Brumby's Bakery as a core CCB brand. While the process attracted considerable interest from multiple parties, we were not convinced that the options available would be in the best interest of shareholders, franchisees or team members at this time. Brumby's remains profitable and is an important contributor to the group's performance. We are currently developing strategies to support and grow the Brumby's network, and we will share these in due course. Our key medium-term growth opportunities, Firehouse Subs, international and Beefy's will continue to be supported by disciplined investment, and I will address each of these later in this presentation. The transformation program sets out the practical actions that will allow us to execute against our strategic priorities structured under 3 pillars. The first is cost rationalization. We are rightsizing the business to align with expected revenue growth. This includes consolidation of our Southeast Queensland offices to our single headquarters in Robina and reducing management layers to improve speed of decision-making. The second is operational enhancement. We are identifying and addressing process inefficiencies, improving supply chain and field team effectiveness and simplifying internal processes. The end goal is faster, better support for our franchise partners. The third pillar is structural alignment. We are improving our core business units with brand-aligned leadership, better operational alignment across brands and more effective use of centralized support functions. These pillars have clear measurable outcomes that will deliver $1.2 million to $1.8 million in cost savings during FY '26 that we have previously disclosed, targeting to increase to $5.7 million to $7 million of annualized cost savings during FY '27. They will support our focus on increasing core brands store numbers over time, and they underpin our goal to improve RFG profitability. Crucially, these initiatives are designed to be mutually beneficial for RFG and our franchise partners. The Gloria Jean's refresh. The Gloria Jean's Glorange format continues to demonstrate encouraging performance. Sales of the refurbished Glorange outlets in Goulburn and Robina are up 31% and 25% on the prior corresponding period. Our new store at GJ Shepparton is trading at 24% above the Gloria Jean's network average, excluding the drive-thru sites. Five further Glorange refreshes are planned for the second half, which will provide additional data points to validate the format at scale. Beyond the physical store format, we're also refreshing the broader Gloria Jean's market approach and improving the in-store customer experience. The combination of a modernized store environment, improved product offering and targeted marketing is designed to reenergize this brand for its next chapter. Brand innovation continues to drive customer engagement and network sales growth across our portfolio. Donut King's premium Christmas program lifted campaign performance 15% versus the prior corresponding period with the premium donut category advancing 14% following the Pistachio and Biscoff campaigns. This continues the strong Donut King premium range trend we highlighted at the AGM. Crust rolled out 5 new summer flavors generating over $1 million in additional product sales. This follows the success of the meat deluxe collection, which delivered $1.3 million in incremental sales in FY '25. Crust continues to benefit from its position as a QSR sector leader, topping the Fonto December quarter customer satisfaction scores across pizza brands. Gloria Jean's launched a collaboration with Pistachio Papi in September 2025, building on earlier global brand collaborations and extending the brand's relevance into new beverage occasions. Beefy's Pies. Since our acquisition of 9 Beefy's Pies stores in December 2023, we've delivered 7 new outlets and consistent network sales growth. In the first half of this year, the brand delivered 19% network sales growth and 4.6% same-store sales growth. Average weekly sales across the network were $28,000, while the 7 newer stores averaged $15,000, which is 70% of the non-highway network average and was below our expectations. The newer store performance is, therefore, what we are focusing on near-term for this brand, operational and marketing improvements to lift new store ramp-up and ensure sustainable growth as we expand beyond the Sunshine Coast. Recent innovation includes the Aussie Roast Lamb Pie with over 15,000 units sold since November. This type of product-led innovation is important in driving trial and repeat purchases in new markets. International represents another important medium-term growth opportunity. Our Turkiye hub is now operational, improving service levels and purchasing compliance by positioning supply closer to our master franchise partners and unlocking road freight options across the region. This is a meaningful structural improvement that will support margin and growth for our international franchise network. We appointed a Head of International in September last year, and we are reviewing incentive structures for international franchise partners to encourage store growth in key regions. International trading outlets stood at 528 at the end of the period, effectively flat on the prior 6 months. Firehouse Subs. Further progress has been made towards RFG's Australian launch of Firehouse Subs. During the half, we advanced the selection of key suppliers, progressed stores design finalization and develop marketing launch plans with agency support. Under the terms of our 20-year development agreement with Restaurant Brands International, we have a target to open 15 company-operated restaurants in the first 3 years and have a right to commence sub-franchising from year 4 with a target of 165 stores over 10 years. We continue to target the first Firehouse Subs restaurant opening in the fourth quarter of this financial year in Southeast Queensland. Turning to the company store reset. As announced in August, alongside our FY '25 results, 50 of our 65 company-operated stores were identified for sale or exit with the remaining 15 to be retained. The retained portfolio is concentrated in Beefy's Pies, which we will continue to operate as company stores to drive brand expansion, along with Gloria Jean's and one Donut King outlet. At the end of February 2026, 70% of the 50 targeted outlets have now been transitioned, agreed for sale, exited or closed. In the first half, the stores identified for sale or exit recorded a post-AASB 16 loss of $1.2 million and a cash outflow of $2.1 million, inclusive of lease costs. This strategic reset remains central to improving RFG's cash flow profile and network quality. As transitions take effect in the second half, we expect the associated cash outflows to reduce, contributing to an improvement in group cash flow. I'll now hand over to Ryan to walk through the financial results in more detail. Ryan Chellingworth: Thank you, Peter, and good morning, everyone. Turning to Slide 17, which outlines the P&L for first half 2026. Underlying revenue declined 1% on the prior corresponding period. Higher company store revenue from Beefy's and the full period contribution from CIBO Espresso helped offset the cycling of 2 one-off items in the prior period, $2.7 million in insurance recovery proceeds and $0.6 million in deferred franchise income. Gross margins were pressured by higher coffee bean costs, which the group chose to absorb rather than pass on to franchise partners given the challenging trading conditions. A wholesale coffee price increase will take effect from March 2026, which combined with better buying of green coffee beans is expected to support gross margin improvements in the second half. Underlying EBITDA and NPAT declined as a result of the above, together with a reduction in lease impairment benefits relative to the prior period, which we have previously flagged. Whilst company store costs increased from the new Beefy's stores and the CIBO full period impact, we did see a reduction in corporate overhead costs due to a reduction in bad debt expense, insurance costs, recruitment fees and occupancy costs. On Slide 18, we reconcile underlying to statutory EBITDA with detailed reconciliations including in the appendix on Slides 27 and 28. Key reconciliation items include company store lease provisions, company store trading results for outlets identified for sale or exit, marketing fund timing differences and growth horizon investment costs relating to Firehouse Subs and international hub establishment. Statutory NPAT for the period was $2 million, a reduction from $7.3 million in the PCP for the reasons outlined on Slide 17. Moving to Slide 19. The CCB division accounts for 72% of RFG's domestic network sales, contributing a greater share of EBITDA due to the vertical integration of coffee and pies. CCB same-store sales were resilient, down 0.4% though declining customer count and noncore outlet closures drove network sales 2.4% lower in difficult trading conditions, particularly in shopping centers. Positively, average weekly sales rose 1.7% and average transaction value increased 4%, indicating improved network health among continuing stores. Underlying segment EBITDA declined 47% to $7.5 million, reflecting compressed coffee margins, the cycling of one-off revenue adjustments across insurance proceeds and deferred franchise income and a lower contribution from lease impairment releases relative to the prior corresponding period. Turning to QSR on Slide 20, which accounts for 28% of domestic network sales. Key trading metrics across QSR improved over the period. Network sales were up 2.8% and same-store sales grew 1.6% with customer count, average weekly sales and average transaction value all rising. We opened 4 new Crust outlets during the half and the easing of aggressive competitor discounting that had previously impacted the pizza category supported growth for the brand. Crust had deliberately chosen not to participate in a price war to protect franchise partner profitability and was able to capitalize through a continued focus on value for the customer. Underlying segment EBITDA declined due to the cycling of lease and bad debt provision releases in the prior corresponding period. Moving to Slide 21 and our operating cash flow. Our operating cash flow declined by $9.9 million versus the prior corresponding period. This reflects several factors. First, the cycling of the one-off benefits in the PCP, including insurance proceeds and debt recoveries. Second, lower gross profit from the decision to maintain wholesale coffee pricing to support franchise partners and a lower contribution from Beefy's. Third, noncore cash outflows, including those relating to the setup of the international hub and Firehouse Subs preparatory costs. And fourth, company store cash outflows, which are expected to reduce in second half 2026 as transitions and exits take effect. We expect a meaningful improvement in operating cash flow in second half 2026, driven by the wholesale coffee price increase from March, cost-out benefits and the progressive reduction in company store outflows following the store exit and transitions in the first half 2026. On Slide 22, we include the balance sheet. We ended first half 2026 with $16.7 million of cash, which includes $11.3 million of restricted cash relating to marketing funds, bank guarantees and Firehouse Subs commitments. Working capital increased modestly due to seasonal timing and inventory positioning through the holiday period. Lease-related assets and liabilities reduced as company store exits progressed. At first half 2026, we had drawn borrowings of $32.5 million under our previous debt facility. Post period end, we completed the refinancing of a new $41.2 million facility with WH Soul Pattinson maturing 31st of August 2027. This facility provides for an additional $7.5 million drawdown to support our strategic priorities. Moving to Slide 23. The debt refinancing delivers balance sheet certainty and supports the company's strategic priorities. Our capital allocation framework is now focused on 5 areas: first, core brand operational efficiency and targeted marketing to drive network sales; second, the cost-out program across the 3 pillars Peter outlined, which directly supports cash flow improvement; third, maintaining appropriate liquidity to execute our strategic priorities; fourth, the initial Firehouse subs rollout funded within the new facility; and fifth, leveraging the Turkiye hub to support growth in our international franchise network. With that, I will hand back to Peter to discuss our FY '26 outlook. Peter George: Thank you, Ryan. For FY '26, we continue to guide underlying EBITDA of $20 million to $24 million. This guidance implies a meaningful improvement in the second half relative to the first half, which is underpinned by several drivers that we have discussed today. Macro conditions remain challenging, and our market will stay tightly -- marketing will stay tightly focused on core customers and value-driven propositions. In the first 8 weeks of calendar 2026, core brand network sales were down 5.5% versus the prior corresponding period, primarily reflecting customer count impacts within the CCB division from outlet closures. Over the same period, core brand same-store sales declined 0.2%, demonstrating continued brand resilience in a challenging environment. Looking at the key drivers for the second half. Gross margin is expected to improve as the wholesale coffee price increase takes effect from March, combined with better green bean purchasing and improved international coffee trading. Cost-out initiatives are underway and expected to deliver $1.2 million to $1.8 million of savings in the second half with the full year FY '27 benefit expected to reach $5 million to $7 million. International growth will be supported by the go-live of the Turkiye hub and incentive programs for master franchise partners. Company store cash outflows are expected to reduce as transition benefits take effect. Beefy's will focus on brand expansion outside the Sunshine Coast and on lifting the performance of the 7 newer stores for operational and marketing improvements. And Firehouse Subs remains on track for a fourth quarter '26 opening with the refinancing providing the funding runway for the initial rollout. Before opening to questions, I'd like to take this opportunity to thank our franchise partners and team members for their commitment through what has been a challenging period. Our franchise network is the heart of this business and the actions we are taking are designed first and foremost to improve their outcomes. I'd also like to thank our shareholders for their continued support as we execute the transformation and growth agenda. While near-term earnings have been impacted by a number of factors, the strategic foundations we are building, notably a leaner cost base, stronger core brands and a compelling growth horizon in Firehouse Subs and international position RFG well for sustainable value creation. We'll now move to questions. As a reminder, if you wish to ask a question please enter it into the webinar chat. Ryan Chellingworth: Moving to the questions. So we've had some come through prior to the webinar, and there's some that have come through since the webinar started. First question: What is being done to modernize and bring back the Bakery division? Why has it not competed with other bakeries taking market share? Peter George: Well, I think it's -- since COVID, it's been fairly stable. It hasn't competed with some of the other bakery chains for reasons probably related to the allocation of capital to other areas of priority. But it is -- as we said earlier, we've decided to retain the asset, and we will come to the market with details of its strategic future in the near-term. Ryan Chellingworth: The second question that's come through from the chat, it's come through from Ling Zhang. Could you please let us know the result of the revised corporate store strategy, especially the results for cash flow in the first half 2026? I'm happy to take that one. So as we noted in the presentation, we have 70% of the 50 company stores, we have either transitioned to franchise partners. We have agreed sales in place or we've exited or closed. From a cash flow perspective, we saw cash outflows of $2.1 million in the first half 2026, which we expect to improve through the second half as those store transitions take effect. The next questions come from Ken Wagner. How many Firehouse stores do you expect to have at the end of FY '27? Peter George: We have a contractual commitment for 15 stores in 3 years. The 3 years is probably running about 6 months behind schedule for a number of reasons, access to appropriate sites. We took a while to get the supply chain for the ingredients put in place. So by the end of 2027, I would expect we'd have somewhere around half of the 15 stores in place. Ryan Chellingworth: Second question from Ken. Assuming Glorange works, how quickly can you roll it out to the rest of the Gloria Jean's stores? Peter George: Well, we're confident that it will work. We need to give it a fairly rigorous trial period, though, because we do in this industry, often see a honeymoon effect of a refurb of the store, then it comes back to its original sales performance. In order to encourage franchisees to invest the money in refurbishing, we have to have fairly compelling proof. So once that compelling proof is available, which I think it will be in the near future, the rest of the network will be refurbished in accordance with the requirements of the franchisee and the landlord, but it will take probably 2 to 3 years for the whole network to be transformed. Ryan Chellingworth: Next question from Ken. How material is the international business in terms of EBITDA? Peter George: Yes. Right now, it's not immaterial. It contributes $2.5 million of the total, so it's about 10%. There is significant upside potential though out of the new supply chain initiatives that were put in place recently, we were missing a lot of revenue because they weren't buying coffee office because of the inefficiency of providing that out of Australia and Dubai. So we think its potential in the long-term is to be much more significant, probably somewhere around the 20% of earnings level. Ryan Chellingworth: Okay. Next question comes from Larry Gandler. With regards to the debt facility, does RFG expect the facility to be fully drawn by the end of financial year 2026? Peter George: Yes. Ryan Chellingworth: Second question from Larry. What have early demand indications or what early demand indications can you discuss about Firehouse Subs? Has the company -- is the company building consumer anticipation? Peter George: The answer to that is, yes. We've done extensive taste testing and that's universally come back very positive. The proposition is that these are much higher quality products than the main competitor offers. The price differential is not great. There are a few added extras such as availability of fries, which our main competitor doesn't offer. And further down the track, the angle of the Firehouse foundation will come into play. Ryan Chellingworth: Okay. We'll just pause there for one moment while we wait for any more questions to come through. On the basis that we don't have any further questions coming through, that concludes today's presentation. Thank you, everyone, for joining in, and have a good day.
Sverre Flatby: Good morning, everyone. I am here with my colleague and CFO, Einar Bonnevie, and we thank you all for joining today. Let me start clearly. The fourth quarter 2025 was a record quarter, and 2025 was a record year. So, we have interesting topics for you to go through today, and these are the main highlights. We're going through the fourth quarter highlights, the full year '25 and of course, AI, which is important. We'll go through that deeply. [Audio Gap] Status when it comes to M&A. And as you see, we will have a presentation for about 25, 30 minutes, and we will have a Q&A session at the end of the session. So please, if you have any questions, type them in as we go, and then we will attend to them at the end of the presentation. So, let's start and talk about the fourth quarter 2025. Reported revenue, NOK 135 million. That is 17% growth compared to the fourth quarter 2024. We are quite happy with that and also happy with the fact that the reported EBITDA in that quarter is NOK 31 million and the reported EBITDA margin is 23%. And even there are some one-offs as usual, this is the reported margin without any adjustments. And then the full year, it didn't just end on the high note with the fourth quarter. The full year 2025 is also a structural step-up for Omda. NOK 496 million in sales and revenue for 2025, which exceed our guiding for '25. That is 16% growth compared to 2024. And that also means that the operational baseline, the operating baseline into 2026 is very, very strong based on what has happened in 2025. So, the profitability and performance in '25, NOK 117 million, which is good, and that also implies 24% reported EBITDA margin for 2025. So next topic will be AI. And of course, when you look at AI in the market today, there's a lot of discussions, a lot of noise and predictions, and we have to respect AI as an important topic for all businesses, including our own. What we have to do is to explain properly what we are doing and how it is affecting us. The good thing for Omda is that we operate, as you see here in the picture, in a regulated, certified specialized health care and emergency environment. And what is going on in there? It is mission-critical. It has to do with life-critical treatments and reliability and compliance is, of course, much more important for customers than speed to change things in these environments. And also, if you think about the switching cost of a situation like this, it's not only about software and code. So the stability and the mechanisms in this specialized market will stay the same, although AI will have an impact, which I will get back to in a few minutes. So, if you look at this, a user using a software in the process working in these environments, the value is not necessarily only in the code. The value is, of course, in regulatory trust in specialized workflows and expertise that we deliver and, of course, in cooperation with the customers and their demands and needs. So, if you look at it that way, AI for Omda gives us a stable situation from the customer side, but it is rather an acceleration tool for us when it comes to be more efficient, a productivity accelerator really. So that is what I'm going to explain to you. It's more like what are we actually using AI for in Omda. And these 2 pictures will give you an idea. I think many analysts have already seen what's going on. And I think it's clear that a company like Omda can use development tools with AI agents to completely change the development processes and make them much, much more efficient. So, we are using, like in this picture, a senior developer, the new era gives the possibility to get added code, testing, documentation and much more efficient workflow processes using the agents rather than a lot of other colleagues helping out creating code, for instance. And this was in '24, it was experimental. In '25, we already started projects to make sure that we could do something both in our business units, but also centrally for Omda to create toolboxes for our business units to accelerate this in 2026. So, it's no longer experimental. It's our operating model going forward. So, this is going to accelerate in 2026. And then you will ask yourself, what is the impact on our business? And if you look at this graph, and let me explain it simply to the left, the percentage is self-explanatory. But then again, you see the topping here, the 3 dimensions. One thing is what we have delivered, our guidance for this year, which my colleague will go through in a minute, and then the ambitions and the long-term targets. So, what does this mean really? If you look at the gray curve here, CapEx, which is the same as investments in our own software. We think that investments in our own software will continue with the absolute value level that we have today. But that also means that the CapEx and investment in software compared to our revenue will decline over time as we show you in this curve. And if you look at the green curve, obviously, when you reduce CapEx like that, it will give more cash from operations. So that means the cash EBITDA margin or so-called EBITDAC will, of course, then increase. And this is really the important thing for Omda. So, AI in our company is not a hype. It's actually a tool set that helps us create a much more profitable business. So that means we have delivered a very strong fourth quarter '25 and also a strong year '25. So now it's time to dive deeper into that. And Einar, if you're still awake, the floor is yours. Einar Bonnevie: Thank you, Sverre. Thank you. Good morning, everyone. Let's have a deep dive into the financials. And let's start with the quarterly comparison, the fourth quarter '25 versus the fourth quarter '24. And we see it's -- yes, it is a record quarter. And there's one -- you can say, one-off or anomaly here. It's the sales of hardware and usually large hardware order in the fourth quarter made us beat the expectations. But if you adjust for that, I think we are very much within the guidance of -- in the upper range of what we guided more than a year ago for the year. And when we look at earnings, a very marked improvement in earnings. When you look at the EBITDA or cash EBITDA, you see a very strong margin improvement in the fourth quarter. And also, if you look at the whole year, the same thing here, we see a very strong year, ending -- very much ending on a high note. And the earnings was not only a quarter or 2, we actually met or beat the expectations each quarter in 2025. And ending, as Sverre said, on a record high EBITDA and cash EBITDA. I think it's also worth noting that even though we had a very large hardware order in the fourth quarter and that for the year, actually, hardware sales doubled compared to 2024. Our gross margin was still improving. COGS is coming down and the gross margin is still improving. So, taking note of that. And that also points to where we will be in 2026 and going forward. The margin improvement should continue. In a nutshell, NOK 117 million in EBITDA. We had a CapEx of NOK 47 million, so slightly less than 10%. That was our guidance and cash EBITDA, EBITDAC. We have received some questions from various investors, why do you focus on EBITDA? Why don't you only focus on cash EBITDA? And some say EBITDA is better is more general. The thing is we need both for, say, bond purposes and current tests, et cetera, measured on EBITDA, and it's more common, so you can compare it to other companies. Cash EBITDA, on the other hand, that is what we use internally. So, let me be very, very clear. Business unit leaders, they relate to cash EBITDA and not EBITDA, all right? And that is mainly because CapEx, that is a capital allocation decision. And that is one of the few decisions that are still centrally managed. So, capital allocation is centrally managed. You can get the approvement for a capital allocation for a CapEx project or not don't go to the highest bidder, so to speak. So that is why we have them, and we need them both, and I hope this explains it. As you know, we focused a lot on recurring revenue. And in the past, we have discussed recurring software revenue, but it's not only the software that is recurring. And a few analysts also have taken notice of this that they've said your professional services, they seem to be very, very stable. And yes, indeed, they are. So, in the past, we referred to professional services as semi-recurring, but we split those and started -- as from the third quarter 2025, we started splitting the professional services in the recurring part and nonrecurring part. And what we define is that customers of ours that were also customers 1 year ago, they are defined as recurring professional services or recurring professional services customers. So, we view those as recurring, and applying that logic, you get a very different perspective on what is recurring and the stability of our business. So, we see that the recurring software business takes us up to approximately 80%. And then we can add another 15% or so on recurring professional services. That brings the real recurring or the true recurring income or recurring revenue in number up to almost 95%. So, it's an extremely predictable business and an extreme stability there to the benefit of shareholders, but also, of course, to bondholders. This really gives you a stability that you don't see very many other places. And combine this with very limited churn on the software. We have guided in the past less than 2% per annum. We can restate that guidance. Churn is limited. And speaking of churn and speaking of predictability, with the earnings in 2025, and you see the cash earnings, the EBITDA and the EBITDAC, cash earnings are coming up. Revenue is growing. Cash is stabilizing. We are moving into what we call a very low leverage territory. Here, okay, let me explain the bars, 3 bars, the blue on the left, that is the last 4 quarters EBITDA. That's how they are measured. EBITDA is measured in the bondholder agreement for incurrence test purposes. Then we have the orange bar, that is the run rate. So, if the current quarter is a template for the other quarters as a run rate, and then we have on the green bars, that is the forward-looking the next 4 quarters because what is ahead of us, it is not the past. It's the future, and we have a 2026 guidance. So, the green bars, they are based on the guidance for 2026, okay? Then the blue line, the upper blue line is the incurrence test. So, we have to be below that in order to do a tap issue on the current bond. And then we have the purple line that is at 2.5, and that is what typically is referred to as low leverage, low gearing. And you see that if you look at the first quarter -- fourth quarter '25, first quarter '26, where we currently are, you see and especially if you look at the leverage compared that to, and relate that to the next 4 quarters earnings, you see that we are indeed moving into a very low leverage territory. So, low leverage, combined with high predictability on income and earnings, that is where we currently are. And this also makes -- if you, again, taking a capital allocation perspective, what shall we -- how to spend our money most wisely. Debt repayment is probably not one of them, but maybe we can improve the debt terms. And that is exactly what we are now considering. Very strong performance on the top line, on the bottom line and low leverage that points to possibilities for refinancing of the current debt. I think, as most of you have observed, and some of them are also comment to us, saying that of the approximately NOK 70 million in cash EBITDA, a large chunk of that -- of those cash earnings from operations, they go to payout interest. And paying interest, that's the largest cash items in our P&L. And of course, that costs as all other costs, we like to reduce the cost and increase the earnings. Looking at the current bond that was issued in December '23. It's callable in December '26 and at NOK 104.3. And until then, it's a so-called make-whole clause. But the bond has been trading well, and we see that the spread has been narrowing. And the last I saw was actually a spread starting with the #3. So, we are around 400 basis points -- so 400 basis points, 4 percentage points, 4%. And the current bond is dominated in NOK. So, it's 3-month NIBOR plus 4%, translates into approximately 8%. That is where the bond is currently trading. And we have higher ambitions. And currently, the bond is trading in NOK. We will have to evaluate other jurisdictions also. So, when the bond was issued, and Omda went public, we were a very Norwegian company. As you have seen on the distribution of earnings, you can see that in the report, where are our customers, where are our employees. You see from an operational perspective we are more Swedish than Norwegian. That was on finance, and what we think there's room for improvement there. Let's move on to the guidance. We know where we are, where are we heading. Okay. We will repeat our guidance for 2026. So, we will end with revenues of NOK 500 million to NOK 525 million, ending at NOK 494 million. And even if you knock off the hardware for 2025, it shouldn't be Mission Impossible. And this is just the organic part. So, this is without any new acquisitions. This is just the organic part. We forecast a margin between 28% and 32% on the EBITDA. And as Sverre just pointed out, we will compress the CapEx. So, the cash EBITDA, the EBITDAC margin should be somewhat higher than the EBITDA. So, CapEx should be less than 10%. We forecast -- we guide on 9% for 2026, and that should absolutely be possible. Not guidance, but targets. What we just saw, they were guidance. This is where we think we're going to end up. These are what we see now are our targets. They haven't changed much since what we presented in the third quarter presentation but let me be even more specific and even more clear. We restate organic growth, 5% to 10%. That includes CPI adjustments and the like. We restate that we aim for target inorganic growth or growth through acquisitions, 10% to 20% on top of that. And EBITDA in excess of 30% CapEx going forward over the next 5-year period, we see it shrinking from where we have been in the past around 10% of sales or revenue to 5% of revenue. We see COGS. As I said, in spite of the unusual large hardware order in the fourth quarter, gross margin was still improving. COGS are still coming down from around 7%, 7.5% in '24 to 6.5% in 2025. And it should be -- there's more to come. It's not an overnight sensation, but we have gradually -- if you look 5 years back, 10 years back, you see we have constantly been improving. That improvement will continue. And we see that we can bring it down to at least 2% to 5%. Salary and personnel, we have constantly bringing it down. We have been trimming the number of FTEs compared to total revenue, to 55% at the end of the fourth quarter. In percent of total revenue, down from 70 to 65 to 60% to 55%, 54%, 55% ending -- exiting 2025, and we see we should bring it down to below 50%. Other costs currently at around 13% of sales. The original target was to bring it down to 15%. We are already there and actually beyond. We see now that the next target is to bring it down to 10%. Partly still trimming your nails and also as part of that, they will remain constant, and the top line will grow. And then last but not least, on the bond loan, it's currently NOK 500 million. If we just maintain that level, I'm not saying that we will, but just take that as a starting point, we should be able, with the improvement that we have displayed already and what is to come, to bring an end to an interest rate closer to 5% than 10%. Now I'm not saying 5%, I'm saying closer to 5% than 10%. Some analysts, have said maybe you should reach 7%, well, 7% is closer to 5% than 10%. But we are ambitious, and we are ambitious based on the strong underlying performance. Okay. And with those assumptions and targets, we will end up with revenues something like this. And you can do your own calculation, do your own math. Here, I have used those expectations to see where we end up on revenues on the organic side and on the acquired side. And you can use it in your own spreadsheets, for calculations. You can apply the speed and how fast you think we'll reach the margin improvement, and you will end up with robust margins, and you can do your own math on what you think the valuation of a company like Omda should be. Okay. Let me round off by addressing the M&A. We have a huge pipeline. We do most of the sourcing ourselves. We have a lot of targets on the radar screen. We have an active dialogue with someone between 5 and 10 companies. So, we are absolutely active in the space. In short, and some may say, well, you haven't announced anything. That is true. But as the old statistics professor once told me, absence of evidence is not evidence of absence. So don't think for a single minute that the fact that we haven't announced anything is not because we haven't been active. And sometimes, the only thing you end up with is a successful DD. But we maintain the goal of 10% to 20% inorganic growth. We will consider. Should we do bolt-ons or should we do large, more transformative deals? Sometimes the bolt-on may be less money for more value. So that is always a consideration. In the current market, we've seen there has been turbulence in the market on valuation, everything from us stocks or compounders or software companies and the AI turmoil, but that also gives opportunities for us as an acquirer. And then speaking of acquisitions, this, again, is a matter of capital allocation, and we need to spend money wisely. And we also need to reconsider this, I mean, how is it undervalued compared to other things we can buy in the market? So, share buyback is also something we need to keep considering. And last but not least, since we are moving into positive cash flow, good cash territory, smaller deals may be financed with cash from operations without having to issue any new capital in any form. That was a snapshot, and let's move into the Q&A. Einar Bonnevie: And there are a few questions here, and most of them seem to be to myself. And there's one question from John here, and it's related to the last topic, M&A. And the question is, with the incurrence test being met, and you have been expecting that for a while, given your goals, what's the next outlook on getting the M&A engine humming in the next quarters? Okay. As I just said, and you can add some comments to this, Sverre. But as I just said, it has been humming. So, it hasn't been turned off. And again, we haven't announced anything, but that doesn't mean that we haven't done anything on the subject. So, it is indeed humming. Would you like to add anything, Sverre? Sverre Flatby: Yes. I think what is important is actually that the value creation behind M&A has to do with the sequence of things. So, when we have dialogues going on for many years with many targets, we're also very good at looking at when to put things together. So, there is a very, very high activity, much more than you think, when we look at this. And I think what's going on now is that we will stick to the guidance of 10% to 20%, and they will come out, as Einar mentioned, probably of a handful of smaller acquisitions rather than a big one. So, all in all, we are very happy to tell you about the M&A processes going on because these are what will make us reach our goals in the next 5 years as well. Einar Bonnevie: Okay. Thank you. Another question here from John, and that's about the bond agreement. And the question is, remind us of your buyback opening in the bond agreement. Yes. The current bond agreement gives us the opportunity to buy back shares. And we haven't done anything for the last year or so. But the bond agreement gives us an opportunity to continue to buy back bonds. What it doesn't allow currently is to delete the buyback shares. We can buy back and continue to buy back. We still have room to buy back more shares, but we cannot delete them under the current bond agreement. But that was a trade-off we made when we borrowed money the last time, but that is something we will look into because that is one way of making the implicit dividend more effective. So, we can continue to buy back shares, but we can't delete them. Okay. There's one question pending. [Operator Instructions] And this is from Balas, and it's related to net working capital. And the question is, can you please elaborate on net working capital dynamics? It looks like this year; net working capital was a drag on cash generation. And I can understand the question and the reason behind it. Okay. We have a very active net working capital view. And as you saw in the 2024 fourth quarter, we had a minus 31%. Our official target is that we should be below minus 10%. We ended 2 years ago in '24 at minus 31%. That was a record. In 2025, we end at minus 26%, which is still very good, but not as good as last year. There are always some dynamics there. As you know, we like to invoice annually upfront as much as we possibly can and then pay our bills as late as we can to use the capital effectively. But in 2025, we issued invoices and sometimes the invoices, are paid just before New Year's Eve and other times, they are paid just after. And in '25, some of them were delayed to be paid in early January. So that is what you see. There are a few bumps there, but nothing to lose sleep about. There are now 6 new questions. So let me continue. And this is one for you, Sverre. It relates to artificial intelligence. And it goes like this. Can you explain in more detail, Omda's product moat against AI in the long run? So, contract, security relationships. So, I mean, how does AI protect us? Sverre Flatby: Yes. I think, first of all, what protects us is really what I was into when it comes to what is the priority on the customer side here, which is the regulated business they have and the reliability and compliance is critical and the life-saving activity is critical, and these are run through extremely complex workflows. So, the ability to change things is, of course, there, but the business case to change things is one thing. It's really not that relevant. It's not only the code. It's a very, very complex completeness there. And then secondly, of course, the ability to replace things is one thing. But the timeline, it takes years in these areas, not because you change the code, but because you have to refactor a lot of other things and you have to handle procurements, rollout projects, et cetera, that takes years in the complex environments. So, it's really not the AI itself that protects that part of us, but we are protected in that sense that the collaboration long-term, as you ask for here as well, the contracts, what we do now with our customers is to actually have the dialogue, how are we going to deliver add-on components that includes AI functionality. But that is not easy because you also have to certify components like that. So maybe we would use 1 or 2 years to certify, but still the customer will use maybe some years even to implement because of the criticality. So, this is why it takes time. But on the good side, although it takes time to implement on the customer side, the speed of the value creation on the inside of Omda is really what is the good thing at the moment because that is no longer, as I mentioned, experimenting with tools. These are agents that actually already now are actually giving us the ability to increase the cash from operations. Einar Bonnevie: Okay. Thank you, Sverre. There's another question about AI. So, I suggest we continue that. That's also from Matt. Thank you, Matt, for submitting your questions. Which division or business area, business unit is most at risk from AI competition? And you mentioned specifically emergency or ProSang or blood management. What will you say? Sverre Flatby: Yes, that's a good question. But it's none of those 2, that's for sure. I would say it's quite the opposite. Those are quite protected given how these systems are handled. So, it's difficult to change the engine when you have a flight over the Atlantic. So that is not the places to see. However, the specific questions, my theory would be that the analytics part of our business would probably be more competitive from outside because the usage of large data and the functionality around this is probably the area that will have more competition because they are not so tied into actual clinical and emergency critical processes. So that would be my take. However, I see already that we are using AI and working with AI components inside our analytics software and the customers would like to acquire more from us -- so it's -- please remember, we have contracts there as well and customers that want to add on. So, it's not only a competition in the market with tenders. We have existing customers that want more. Einar Bonnevie: Thanks, Sverre. There's 6 more questions pending. Thank you for submitting them. And there's another one that relates to AI also from Matt. Let's take that one before we move on to other topics. What is your average contract length? And do you have enough time to integrate AI innovations before the next round of tenders. How does this work Sverre? Sverre Flatby: Yes, that's a good question. It's important to understand that when you choose a strategy like we have done and when you focus only on these very sticky software types that could be there since you mentioned in your questions, ProSang, which has more than a 50-year history with the same customers being the same -- being customers, of course. When it stays that long, that is really what's the fact here that it won't be -- it won't change because of the fact that it's tied to the workflow processes in these areas. Einar Bonnevie: Okay. There are some more questions on the financial side and also from Matt. And the question is, do you see already an impact on private valuations and M&A targets following the current software sell-off? That is a very good and relevant question. I think I tried to sum it up on the very last slide, the M&A short slide and say bolt-ons versus larger transformative deals, we see that bolt-ons are typically -- what you are referring to, the smaller private valuations. Yes, I think it's probably now an opportunity to pay less money for more value. And also, as I said, the current market provides more opportunities than challenges from an M&A perspective if you are the buyer. Because after the -- what I say, the hype in maybe 2020, 2021, '22 and expectations were going sky high. I think a lot of the private owners, they have summed up and much more realistic expectations now than maybe at least 2 or 3 years ago. And another one on acquisitions and capital allocation also from Matt. And at current share price of NOK 38, so that's approximately 2x sales or 7x, 8x EBITDA, isn't share buyback the best capital allocation? Yes. And that is also something on the very last slide that we try to sum up. Yes, share buybacks, et cetera, is to be evaluated. It's all about capital allocation. Should we increase working capital? No. Should we invest more in R&D? No. We will use AI to be more efficient. Shall we buy companies? Yes. But again, maybe the bolt-ons rather than the larger deals, again, the best return on your investment. And as you point out, yes, if you compare Omda, I mean, from an outside in view, not speaking as a CFO, but maybe more like a financial analyst from outside in view, Omda is very attractive compared to a lot of companies that we can buy. So that has to be a part of the equation. But I think it's probably not an either/or, maybe it's -- you can have that calculated too. There are still 4 questions. And this is from Mark, and I think it goes to you Sverre, it's about M&A and start-ups with AI. And he says, in terms of M&A, do you see interesting start-ups with AI agent tech that you could add to the portfolio? Please expand on venture capital funding dynamics in the Nordics in the space. Sverre Flatby: Yes, I think the most important answer to that is that our strategy when it comes to M&A is related to customer code competence. That means we acquire companies that has a proven track record within the customer space. Of course, we look at additional AI companies that has interesting technology, but this is not our strategy. And also, because, as I mentioned, it takes many years to implement on the customer side, the type of customers we have. So, what we have -- one example of how we approach this would be the last acquisition of one of the last 3 that was Dermicus, which is an AI-based app that handles wounds or cancer -- skin cancer, for instance. And these type of components that are in production that we can integrate and add and have synergies for our own business, that will be the preferred acquisition of AI companies from our side. So, I don't think the speed of -- even if the new technology comes out, the speed on the customer side will still be the same. So, for us, we will still continue to buy customer code competence in that order. Einar Bonnevie: Okay. Let's continue on the M&A topic, and this is one from John. And he writes, with your aim for small bolt-ons for M&A, do you foresee any material impact to your expected 2026 margin guidance in that year or future years? And how far can bolt-on take you versus your targets over the years? I think I can address those. Those are 2 questions combined in one. And first, on the margin side, I guess the background for the question may be that in the past, we've done some larger deals. When we IPO-ed, we were at NOK 200 million in sales. And a couple of years later, we reached NOK 400 million. So, we doubled in size. And a lot of those we acquired were turned around or turn better candidates, they diluted our margin. Now if you look at the current guidance and we say on the current business, we grow 5% to 10% organically, and we will improve the margins. We will take down the COGS. We will take down salary and personnel. We will take down CapEx. We will take down other costs. That's on the current business. Now if you add to that bolt-ons or small acquisitions, and we said our guidance and target is 10% to 20%, that would mean that we would add NOK 50 million to NOK 100 million in sales roughly for million and you have 0 margin on that in the year it turn around -- turn better candidate and you have 0 in EBITDA. Still the dilution wouldn't be very noticeable. And it would dilute maybe the margin in percentage points with a couple of percentage points, but it wouldn't dilute the absolute number, all right? So, we expect that there may be some margin dilution on the total, but not if you look at the underlying business and that on top. And it shouldn't be dramatic. So, we're not speaking of from 30% down to 10% or something like that, but knock off a few percentage points. That should be your expectation. And how far can bolt-on takes us? Okay. Again, it comes down to what is the definition of a bolt-on. But say it's -- say we're acquiring a business, there are a lot of businesses between NOK 10 million and NOK 20 million in sales. So, 3 of those would amount to approximately NOK 50 million, 10%. So that would -- 3 bolt-ons would take us into the lower part of our guided range. So absolutely doable. There are still 3 questions. We still have 15 minutes. So, if there are any more questions, keep typing in. One question here from Draven, and that goes to you Sverre. And it goes like this. Are there any success stories from this year that you are particularly proud of that demonstrate to you the strength of the business? Sverre Flatby: Yes. I think the results speak for itself. And I think actually, the most important thing is the combination of the decentralization that we have and the ability that each business unit leader have had to work much closer to the customers. So the result of that has been a much more predictable business, and there are many smaller and bigger success stories inside those business units. But I think seen from my side, the successful transition to a decentralized organization is definitely what has changed everything and has created a new operating baseline for Omda, which is going to be very strong from '26 and onwards. Einar Bonnevie: So what are you saying Sverre is 3 things. Capital allocation is important, decentralization is important. And then in a decentralized organization, have the right people on board of the bus. So, if you control those 3, things are going pretty well. Sverre Flatby: Yes. Einar Bonnevie: Okay. Let's continue to do that. There's another question from John here, and that is directly relates to a potential bond refinancing. And the question is, have you had talk with investors in the Swedish market or banks to take advantage of the difference in STIBOR versus NIBOR. And the general answer is, yes, we have Norwegian investors, we have Swedish investors. We have American, Anglo American, French. So, we have investors, and we absolutely -- and we love to have a dialogue with our investors. And yes, we, of course, also have dialogue with our Swedish investors. And again, yes, and we have dialogue with several investment banks, and we bounce ideas. And the effect then on STIBOR versus NIBOR, the STIBOR is around 2% and the NIBOR is around 4%. So of course, if we were refinancing just as an example, I'm not saying -- this is not a guidance. This is not a target, just as an example, if we were to refinance in Swedish krona on STIBOR 2% plus where the bond is currently trading 4%, that would yield 6%. So just as an example, for those of you who are watching this call and are not that into NIBOR, STIBOR and the whole interest rate universe. There's one more question, and this one goes to you, Sverre. So, you have the -- and that is also from David. Across Europe, many health care organizations are cutting staff and budgets. How does Omda work with customers to support them to maintain standards with less staff? Has this been an opportunity for cross-selling or -- how is that? How can we support our customers? Sverre Flatby: Yes, that is a very good question. And it's a quite interesting thing, combined with the previous question about the average length of a contract because it's really not a contract we're talking about. Contracts are tools that we have to have, the way the stickiness is coming from the fact that customers are using our software. And since the situation is like that, of course, we have the dialogue with the customer on how we could help and combine offerings from our own business. So, we are doing that inside our business areas with different business units working together and come up with the broader offerings to our customers. So that will help to be much more efficient. So that is one way. But also, between different business areas, since we have a strategic dialogue with large customers and key customers, we have the ability to look at a strategic approach years ahead as well and talk about what's going on. And explicitly, you're quite right in defining the fact that the economy is very, very complex and it's hard times for health care. That is a good thing for Omda because we can help them. The cost of our recurring software is quite small compared to everything else in these businesses. So yes, we are working with the customers to make sure that they can also get much more benefit of our current software and new software. Einar Bonnevie: Okay. There we are. There is actually one more question that came in while you were addressing this one, Sverre, and this is -- also goes to you. And the question is about the pricing models. And the question is, please comment on your pricing model on seat versus usage based. This is typically from -- I take it from a SaaS perspective of thinking like how does the pricing model actually work in Omda? Sverre Flatby: Yes. First of all, there are differences between different business units. However, in general, if you look at the complex widely used national, regional, highly specialized solutions, which is the backbone of our business. This is coming from contracts many years ago and where the idea is that we pay for the usage of the software normally as a site license or a predefined pricing model might add extra for an extra department or things like that, but it's much more a conservative model from the beginning here. So, it's not like a SaaS thing as such where you can -- as you do with your Netflix account that you add it or you cancel it. So, this is much more from the beginning, a more stable income that is not related to users directly. However, we have some areas where we have volume-based, but I would say more than 80% of our recurring revenue is based on these stable long-term and many times over decades contracts. Einar Bonnevie: Okay. Thank you, Sverre. There seems to be no more questions. Happy we have addressed them all. Thank you all for watching. Thank you all for submitting questions. We very much treasure the opportunity to have a dialogue with all our investors. We hope you have enjoyed this presentation and the numbers. Tune in again on the 21st of May, that is when we are going to present the numbers for the first quarter of 2026. And before that, we will also release the annual report that will be released in April. But until we speak again, our minds and souls meets, do you some napkin calculations using the numbers we have guided on. Enjoy your day. Take care and stay safe.
Gemma Garkut: Okay. Welcome, everyone, and thank you for joining IR's Half Year FY '26 Results Webinar. My name is Gemma Garkut, Head of Communications here at IR, and I'll be hosting today's session. This morning, IR released its half year results and associated presentation for FY '26, which have been lodged with the ASX. These are available on the ASX platform and our Investor Center on our website and should be read in conjunction with this webinar. Joining me on the call today are Ian Lowe, CEO and Managing Director; and Christian Shaw, CFO, who will present today on IR's business performance for the half. We will then open the session for a short Q&A. A few housekeeping items before we begin. Today's session is being recorded and will be made available on our Investor center following the call. [Operator Instructions] If we do not get to your question during the live session, you are welcome to contact our Investor Relations team via the details provided on our website and in today's ASX announcement. A reminder that today's discussion may include forward-looking statements. Please refer to disclosures by the ASX, including the materials lodged earlier today. With that, I'll now hand over to Ian to take you through the highlights for the half. Ian Lowe: Thank you, Gemma. Welcome to the webinar, everybody. We're really going to cover 3 core themes in the course of today's presentation. I'll just quickly run through these to begin with at a headline level. So, first of all, our half 1 financial performance. So, the headlines here being revenue was slightly down due to a softer renewals book. Our earnings performance impacted by expected credit losses. This is consistent with disclosures made in November of last calendar year, and we've also seen cash improvement. The second theme around continued product-led growth execution. We've launched a number of new products in the first half. We've seen some early-stage sales and adoption progress. And I'm going to expand a little today on some new product releases that we've confirmed for 2026. And the third theme is around new business growth. And so, this is where I'm going to give some color on some modest improvement we've seen in new client revenues and also improvement in revenues derived from existing clients, which we refer to as expansion revenues. Just quickly on product-led growth highlights before we get into the financials. So as many of you will be aware, product-led growth is the central growth strategy for the business. And so, we wanted to give a high-level view of our progress against this important, this important part of the overarching strategy. So, in the first half, we launched our first AI-powered product called Iris. This is a natural language interface that allows our clients to undertake deep discovery in the very granular data that we harvest for them. And Iris will evolve over time and become a foundational component in the product-led growth strategy. So, the launch of this first iteration of Iris was really important for us. In the first half, we also launched Elevate. So, this is the same Prognosis technology that we've offered as an on-prem solution for a long period of time but provided as a service. And so, this is particularly attractive to new clients that haven't invested in the Infrastructure to maintain and run Prognosis where they can essentially outsource that process to us and consume Prognosis-as-a-service, and that is the Elevate product. We also launched this in the first half. Some time ago, we launched High Value Payments. Now we've fully implemented this product for a top 10 U.S. bank, which is a really significant milestone for us. And we're engaging with other major global banks on the sale of that same product. I'll give some more detail on that through the presentation. Our innovation initiative called IR Labs. We're looking forward to launching a new AI-powered stand-alone product in calendar year '26. I'll give some more detail on that in this presentation. And indeed, as we approach that launch, we would expect to share more information in relation to it. As mentioned earlier, we've also seen some modest early-stage improvement in the growth metrics that we've laid out to monitor our progress against product-led growth. This was underwritten by a cohort of new clients that we secured in the half, in particular, across verticals, including Government, Health and Defence. So, I'll expand on this as we go, but I'll just hand over to Christian in relation to the financial update. Christian Shaw: Thanks, Ian. My name is Christian Shaw. I've been the CFO with IR for 2 years now. It's my pleasure to provide a financial update on first half FY '26. Firstly, by way of introduction, I'd like to confirm that thanks to a strong sales close in December 2025, the company's results were at the upper end of the guidance range that was provided to the market via the ASX on the 14th of November 2025. And there's a slide included in the appendix of today's presentation to this effect. The focus of my presentation today relates to first half FY '26 results versus the Prior Comparable Period or PCP. I'll now take you through the key financial metrics for the first half of FY '26. However, shareholders are encouraged to read the Appendix 4D and the interim financial report lodged this morning on the ASX in conjunction with this results presentation. In summary, core operating performance for the period was broadly consistent with PCP. However, the incurrence of material expected credit losses ultimately resulted in an operating loss and a net loss after tax. A relative earnings shortfall is more obvious given the existence of large nonoperating gains in the PCP. Statutory revenue for the first half of FY '26 was $28.3 million, which was slightly down 2% to PCP. Renewals performance and contribution to total revenue was slightly down versus PCP, reflecting a softer book of business in the period. Expansion or cross-sell and upsell revenue outperformed, albeit against a low base. Encouragingly, new client revenue grew with multiple strong wins achieved late in the reporting period and despite shorter-than-usual contract lengths. Operating expenses, inclusive of expected credit losses exceeded PCP and without which were slightly lower. Product and technology expenses increased in line with strategy, while Sales & Marketing expenses reduced, and G&A held steady. The earnings before interest, tax, depreciation and amortization or EBITDA loss was a loss of $3.1 million and a net after-tax loss of $1.5 million, both of which were down against PCP, which reported profit results of $4.6 million for both measures. First half FY '26 cash increased to $43.6 million and net assets remained strong at $95.7 million. The company has no debt. I'll commence a deeper dive now for the period with Pro forma revenue, which is an underlying measure that alters statutory revenue by apportioning the License Fee revenue from term-based contracts as the largest component evenly over time based on contract life. This alternate view of revenue provides the ability to look through cyclical swings in the renewals book and to more readily observe underlying performance across reporting periods. It's particularly relevant to the company because as you can see from the slide, the very strong majority of our business is represented by term-based contracted revenues. For first half FY '26, Pro forma revenue was down 6% to $34.4 million versus PCP, with term-based contracts revenue down 4% and services revenue down 2% to PCP. The company's product-led growth strategy is targeting a sustainable growth in Pro forma revenue, and this will happen when increased new client and expansion of existing clients' business exceeds client churn. This next slide shows Pro forma revenue by territory and product. The Americas being our largest market at 70% of Pro forma revenue was down 6% to PCP. Pro forma revenue in the Americas was negatively impacted relative to PCP by the prior sale of the testing business, although much more importantly, by the closing of new client sales late in the period and by the broader business theme where new business sales, whilst growing, are not yet a complete mitigant to churn. APAC was down 7% in a quieter period and Europe, our smallest market, was down 6%. Turning to a product view. Our largest product, Collaborate's Pro forma revenue was down 9% to PCP, with 5% of that impact coming from less services revenue, including less testing revenue after the testing business sale. Collaborate's churn, although relatively stable, continues to impede growth acceleration in Pro forma revenue despite the recent strength seen in sales to new clients and expansion in existing clients. Infrastructure, representing 28% of Pro forma revenue, similarly to Collaborate, decreased by 9% to PCP, driven by churn, whereas Transact, our third product and 22% of Pro forma revenue was up 6% and driven by expansion business. And further information is available in the appendix to this presentation on Pro forma revenue. Turning now to Statutory revenue. First half Statutory revenue was $28.3 million and slightly down by 2% to PCP. The highlight for the half was an increase in License Fee revenue of 4% that was underpinned by a combination of new client contracts and expansion uplift business to existing clients across all territories and products despite a softer renewals book that was less than that of the prior half year period. Another minor point to note is the anomalous nature of the services revenue, which contained less testing revenue in the reporting half than the PCP due to the sale of the testing business. As a reminder, because of the accounting standards on revenue recognition, the company's Statutory revenue trends with our primary sales measure, Total Contract Value, or TCV, and in turn, the renewal book of business due to the current dependency in our business composition. One of the ambitions of our product-led growth strategy is to build and sell value in IR software over time through consumption, which will drive variable SaaS style revenues that demonstrate reduced fluctuation over the lifetime of client contracts. The next slide highlights first half FY '26 EBITDA, a common non-IFRS profit measure. For the first half of FY '26, the company's EBITDA was a loss of $3.1 million, which contrasts to the prior comparable period profit of $4.6 million and a brief analysis will follow. Statutory revenue, which has been discussed, was slightly down, driven by modestly reduced renewals and increased new client and expansion sales. Expected credit losses for the half year was $4.8 million, being an increase of $4.8 million. And for clarity, this is recorded in the consolidated statement of comprehensive income in the line item, General & Administrative expenses. The charge was principally associated with a single client and reflected an increase in credit risk, which was signaled by the client, a product reseller and was not related to software performance. Operating expenses. Excluding expected credit losses for the first half, operating expenses were down 4% versus PCP to $26.5 million, reflecting an ongoing disciplined approach to cost management despite the company pursuing a growth agenda. During the half, product and technology expenses increased 14%. Sales & Marketing expenses decreased 9% and General & Administrative expenses, excluding expected credit losses, were flat. No R&D was capitalized during the reporting period. Shareholders are advised that the company is expecting expenses to increase in the second half of FY '26 as a result of accelerated investment in the company's product-led growth strategy. And further information is available on operating expenses in the appendix to this results presentation. Other gains and losses for the first half were a modest $100,000 loss comprising a grant from the U.S. government of $1 million relating to Employee Retention Tax Credit program and currency exchange losses of $1.1 million. This contrasts sharply to the PCP gain of $3.3 million relating to the sale of a testing business and currency exchange gains. Moving now to IR's cash, which for the half year increased by $3 million or 8% to 30 June 2025, leading to a closing balance of $43.6 million at the end of the half. Our operating cash flow increased strongly for the reporting period to $5.5 million against a PCP of $0.5 million. Client receipts were $3 million higher to PCP due to timing. And in combination, payments to suppliers and employees and payments for income taxes were down $2 million due to timing and some nonrecurring payments in the prior comparable period. And further information is available in the appendix on the company's operating cash flow and its link to EBITDA. Investing activities contributed a net $1.8 million cash inflow, which was moderately increased to PCP, where increased interest receipts largely offset the prior comparable period proceeds from a sale of the testing business. Net financing outflows of $4 million was a reduction of $600,000 against PCP and included a $3.5 million payment for the FY '25 final dividend and $400,000 in reduced lease payments. Exchange rates had a minor negative impact on closing cash. Lastly, IR's balance sheet, which remains strong. At 31st of December 2025, net assets were $95.7 million, down 5% to PCP and comprised total assets of $115.3 million, which includes the combination of cash and Trade & other receivables totaling $107.2 million and total liabilities of $19.7 million. There is no debt. Net tangible assets per share closed first half at $0.53, down 7% to PCP. And I'll now hand back to Ian for product-led growth update. Ian Lowe: Thanks, Christian. I'm just going to take a few minutes here to share with everybody some of the progress that we're making on our product-led growth strategy and in particular, the new products that we have earmarked for build and release over the coming months. So I think most people are probably aware that product-led growth is really a central focus of execution. And really, this slide lays out the context around that. So our historical revenue performance has really been reflective of an overreliance on contract renewals and the value of those renewals fluctuates each year. Our underinvestment in building new products has compounded our reliance on the renewals book. And ultimately, it's limited our new business growth. And so a substantial and ongoing investment to build new products is essential for the company to return to sustainable growth, and this is product-led growth. So, with this strategy, our focus is to increase our innovation investment to build the new products that align to our clients' current and future needs and then commercialize those new products. In particular, we're focused on securing new clients and the revenue that they bring and also cross-sell and upsell to our existing clients, which we call expansion revenue. And realizing these benefits over time as we build momentum is really what should lead to the secure product-led, or securing the product-led growth that we're targeting, which in turn establishes sustainable growth over the medium term. So, with this in mind, we've previously shared three growth metrics which are really a way for us to start to share with you our progress against our product-led growth strategy. And so let me go through each of these very quickly. The first is new client revenue or, if you like, client that is derived from new clients that we've signed. So pleasingly, we've seen modest progress against this metric in the first half versus PCP. The second flavor is expansion revenue. And so as previously described, this is about cross-sell and upsell driven principally by these same new products, to the client base that we already have today. In percentage terms, we saw a strong uplift in real dollar terms, it was a modest uplift because it's off a low base. But nonetheless, we saw some progress in the second metric expansion revenue. And obviously, as we continue to release new products, and I'll expand on that momentarily, we anticipate that this should strengthen our sales pipeline over time. And then the third growth metric, Subscription fees. This is flat or down 3% against the prior corresponding period. And again, this is a growth metric that really will be largely reflective of our ability to secure clients with products that are linked to a variable pricing model. So Prognosis Elevate, for example, where clients will pay a portion of their License Fee based on consumption and new products that we plan to release in calendar year '26, and I'll cover this in more detail shortly, which should strengthen both our proposition with Elevate, but also we anticipate or we're targeting an improvement in the Subscription fee revenue. So these three metrics really will continue to give us a very good sense of our progress as we execute against our product-led growth agenda. In terms of new products, in the first half, there are a couple of particularly noteworthy product launches, which I've mentioned previously. Elevate, this is Prognosis-as-a-service. This simply allows clients to consume the existing Prognosis product in a cloud-based context as opposed to on-prem. It doesn't replace on-prem. It's really just an option that clients can take if they choose to consume Prognosis-as-a-service. This is particularly relevant for new clients. And the reason for that is where clients have already invested in the infrastructure to run Prognosis on-prem, they may want to continue to commit to that infrastructure, in which case, we're seeing that Prognosis-as-a-service, Elevate is particularly relevant for new client discussions. And we will release new products under the subscription model that I've mentioned previously. And in turn, we believe that will strengthen the Elevate proposition. In the first half, we also launched Iris, and this is in its first iteration, a natural language AI capability specifically built to the needs of observability. We've started to roll this out across the client base with our collaborate product. The feedback has been overwhelmingly positive. And we're now in the process of completing the development that would allow us to roll this out to clients on both Transact and Infrastructure. And we believe the development for that will be complete towards the end of the FY '26 period. Iris really is a key pillar in our medium-term product-led growth strategy. Iris will become increasingly central to the way that we look to monetize value moving forward, and it will become increasingly focused on consumption-based revenues. High Value Payments is a product that we launched back in FY '25, and we sold that to a foundation client in the form of a top 10 U.S. bank. I'm pleased to say that, that complicated but very important deployment for that first foundational client is complete. And in parallel with that deployment, we've been talking to a number of other global banks and Tier 1 banks in different domestic markets, and we have progress against a number of those. Moving forward, there's a number of new products that we plan for release in calendar year '26. So firstly, we've talked previously about our innovation division, IR Labs. And we're on track to deliver a new stand-alone AI-powered product in calendar year '26. This will be a minimum viable product release. And we're going to share a lot more detail about what this technology does, the value it creates and our plans for commercialization. We'll share a lot more about that as we get closer to the release date. I've also previously mentioned Iris to be launched for both Transact and Infrastructure clients, and that will happen in calendar year '26. We believe we're on track for a first release towards the end of the financial year '26, the current financial year. And we have plans to extend the Iris capability in a couple of important ways. The first is to transition from a Natural Language Query Interface to also being Agentic. And really, what this means for clients is that Iris will start to communicate with them proactively, not just reactively with important insights and discovery, and it will always be on. So this gets our clients to the point where they're essentially able to subscribe to an Agentic AI capability that is purpose-built for observability data that will feed them all of the insights they need to know to stay on the front foot and maintain the performance of their critical systems. And then secondly, later in calendar year '26, we have a data layering capability that we're planning to release. And this will allow our clients to bring data other than the data that is harvested through Prognosis to correlate to the Prognosis data to deliver richer insights again. And so that contextual correlation will allow clients again to reach new insights that previously aren't possible without this data layering. So we're enormously excited about that road map. Just very quickly, and again, we touched on this at the AGM. There are three core themes in our innovation agenda. So when we think about building new products, we really benchmark those ideas against these three core themes. The first is that we are transitioning to being an AI-first platform. That is absolutely essential, but it's also going to create enormous incremental value that shifts our value proposition in a meaningful way for all of our current and future clients. The second theme is interoperability. Historically, Prognosis has been an isolated part of the technology ecosystem for our clients, and we're setting about changing that. Prognosis will become integrated into client workflows and processes. Clients will be able to leverage the data within Prognosis in new ways. Prognosis will also start to ingest data from other sources, and we talked about how we want to layer data to the benefit of the Iris value proposition. And we also want to start to expose data from within Prognosis to new users, so extending outside of the IT organization within the client into other external and internal stakeholders. The third theme is remediation. And this is really what happens after an issue, a performance issue has been identified, which is what Prognosis does so well today. We want to go on the journey with the client to accelerate their remediation process. And that will extend into predictive capabilities that look to avoid the need for remediation in the first place as well as starting to automate elements of the remediation process by interacting with the underlying technology that is actually creating the performance degradation. So, these three themes are really central to the way we think about new products and on that basis, important that we share that. So, in summary, some observations. The first half of FY '26, our performance really does reflect this historical underinvestment in new products and a softer renewals book. So, in response to that, our product-led growth strategy will see us invest substantial amounts on an ongoing basis to build and commercialize new products, and that process is well underway, as you've seen from today's update. We are starting to see new product momentum emerge. So, this is the production line that we've built and refined to deliver these new products. And we're also seeing some very modest early improvement in the growth metrics that will gauge our progress towards sustainable growth. I think it's important to understand that this transition to a product-led sustainable growth future will take a little bit of time. Our softer FY '26 renewals book on the impacting the top line, our investment in product-led growth, building new products in terms of our expenses, those 2 things come together to impact our profit performance over the short to medium term. Importantly, the business has a strong cash position to fund our product-led growth strategy. And so we continue to focus on the execution of that strategy. Thanks very much. That concludes the presentation, and I'll hand it back over to Gemma. Gemma Garkut: Thank you, Ian. Thank you, Christian. We'll now open it up to Q&A, and we have a couple of questions. The first question is directed to Christian. The credit loss is large relative to revenue, which is very disappointing. What processes have you put in place to ensure this can't happen again? Christian Shaw: Thanks, Gemma. Look, this particular client that led to this outcome was an anomalous or an unusual client contract for us. And unsurprisingly, the management and Board of this company have been all over the nature of that. And we've put in place incremental guardrails to ensure that the structure of the nature of the contract and that counterparty won't be repeated in the company's near future or hopefully at all in the future. And that risk is contained and is contained to that particular client. And there is no such risk in quantum or in nature on our books. Gemma Garkut: Okay. Thank you. Moving on to the next question. Ian, this one will be for you. There is a lot of talk about Generative AI replacing SaaS software businesses. What are your barriers to stop this happening? And what do you have that Gen AI can't replicate? Ian Lowe: It's a good question. And with the benefit of more time, I'd very happily pull all of this apart. Look, I think the first thing is that AI will present some disruption over time in a couple of areas. At the moment, the value proposition of observability is really threefold. The ability to collect all of the telemetry that speaks to the performance of the technology that we monitor. Our ability to normalize that, centralize that, tidy that data up and present it in a way that drives reporting, analytics, notifications, alerts, things of this nature. And then the third is the ability to operationalize that data. So this is about workflow automation. It's about remediation. It's about decision-making on business performance, not just the technology in isolation. And so our opportunity is, first of all, to leverage AI, so to participate in the AI dynamic by leveraging AI and in particular, increasingly Agentic capabilities to take our clients on that journey where we are operationalizing the data in new and meaningful ways. And we think about that beyond just the client organization. We also think about that in terms of the clients' stakeholders, internal and external. So, this is a very conspicuous part of our product strategy and something we think and talk about and are building towards with new products as we speak. I think that AI will be increasingly disruptive in its ability to capture telemetry, although in an on-prem environment, that presents challenges that AI today can't really address elegantly. I think AI's ability to assemble and analyze the data is probably where it will make inroads fastest. But the operationalization of that data and using AI to do that in new and meaningful ways for our clients is really a big opportunity. And it's not a space where we see a lot of capabilities in the market today. And so we're determined to get into that space quickly. Gemma Garkut: Next question. Are you looking at M&A opportunities? And if you are, what would these look like for you? Ian Lowe: Well, look, I'm happy to take that question. So, we're not determined to undertake a transaction. We absolutely would look at a rightsized opportunity that accelerates the strategy, the product-led growth strategy. Anything that is tangential to that strategy is probably going to be less interesting. So, we remain interested in opportunities that are rightsized and can accelerate the existing product-led growth strategy. Gemma Garkut: Two more questions. Can you give a little bit more color to IR Labs and what will be launched at the end of the financial year? Ian Lowe: Probably not. And the reason for that is that, look, we're operating somewhat in stealth mode here for very good reasons. What we have said, just to reiterate, is that in calendar year '26, we will launch a minimum viable product that will be available in the market, and we'll have supporting Sales & Marketing activity around that. In the lead up to that launch, that first release, we will share a lot more in terms of what that product is, the value it creates and our plans to commercialize that product, both at that point in time and ongoing, we'll share a lot more of that as we get closer to that launch date. Gemma Garkut: And final question. You've mentioned there is a lot to do next half and into FY '27. What gives you the confidence, Ian, that IR will be able to execute on these goals? Ian Lowe: Look, that's a good question. There's a couple of things that combine to respond to that question. This business has an extraordinary base of clients to which we have direct access to inform decisions around new products and understand the journey that they are on and make sure that we're aligning our future product sets and new products with those journeys. So, with that, there is a level of trust around the IR brand and the market generally that I think is quite extraordinary and a great credit to what the company has achieved historically. And that's a big part of how we succeed moving forward. We have extraordinary talent in the business. I'm reminded of this every day. And I think critically, we've got a balance sheet that funds our product-led growth strategy. So these things all combine, I think, to put us in a position where there's a lot of work to do. It's not going to happen quickly, but we do believe that over that medium term, we're in a good position to execute our strategy. Gemma Garkut: Final question. IR is still generating cash and has a very strong balance sheet with $43.6 million in cash. Notwithstanding the increased expenses for product-led growth, there would still seem to be headroom to investigate a share buyback to improve EPS, especially knowing that profit will be subdued in the short to medium term. Wouldn't this be a good use of capital while the share price is so low? Ian Lowe: I'm happy to take this one. So, look, it will come as no surprise that we've looked at this, and we've looked at it both closely and repeatedly. I think on balance, certainly, my view is that we don't know exactly what's going to lie ahead as we pursue our product-led growth. And on that basis, we think that at this point in time, at least, preserving our capital to execute a strategy that will deliver the sustainable growth we're all seeking. We think that's the priority. We, of course, reserve the opportunity or the right to continue to review this, and we may make or take a different position if circumstances warrant taking a different position. But right now, we think that, that's in the best interest of shareholders. Gemma Garkut: Thanks, Ian. That is the final question that has been sent through. So, we will conclude the webinar there. Please do reach out to our Investor Relations team directly if you have any further questions following this webinar. But Ian, before we conclude, I'll just hand over to you for any closing comments. Ian Lowe: Thanks, Gemma. Look, I really just want to thank everybody for their interest and support. Hopefully, we've explained or laid out for you the journey that the business is on, and we're looking forward to sharing our full-year results in a few months' time. Gemma Garkut: Okay. Thank you very much. Thanks, everybody.
Sverre Flatby: Good morning, everyone. I am here with my colleague and CFO, Einar Bonnevie, and we thank you all for joining today. Let me start clearly. The fourth quarter 2025 was a record quarter, and 2025 was a record year. So, we have interesting topics for you to go through today, and these are the main highlights. We're going through the fourth quarter highlights, the full year '25 and of course, AI, which is important. We'll go through that deeply. [Audio Gap] Status when it comes to M&A. And as you see, we will have a presentation for about 25, 30 minutes, and we will have a Q&A session at the end of the session. So please, if you have any questions, type them in as we go, and then we will attend to them at the end of the presentation. So, let's start and talk about the fourth quarter 2025. Reported revenue, NOK 135 million. That is 17% growth compared to the fourth quarter 2024. We are quite happy with that and also happy with the fact that the reported EBITDA in that quarter is NOK 31 million and the reported EBITDA margin is 23%. And even there are some one-offs as usual, this is the reported margin without any adjustments. And then the full year, it didn't just end on the high note with the fourth quarter. The full year 2025 is also a structural step-up for Omda. NOK 496 million in sales and revenue for 2025, which exceed our guiding for '25. That is 16% growth compared to 2024. And that also means that the operational baseline, the operating baseline into 2026 is very, very strong based on what has happened in 2025. So, the profitability and performance in '25, NOK 117 million, which is good, and that also implies 24% reported EBITDA margin for 2025. So next topic will be AI. And of course, when you look at AI in the market today, there's a lot of discussions, a lot of noise and predictions, and we have to respect AI as an important topic for all businesses, including our own. What we have to do is to explain properly what we are doing and how it is affecting us. The good thing for Omda is that we operate, as you see here in the picture, in a regulated, certified specialized health care and emergency environment. And what is going on in there? It is mission-critical. It has to do with life-critical treatments and reliability and compliance is, of course, much more important for customers than speed to change things in these environments. And also, if you think about the switching cost of a situation like this, it's not only about software and code. So the stability and the mechanisms in this specialized market will stay the same, although AI will have an impact, which I will get back to in a few minutes. So, if you look at this, a user using a software in the process working in these environments, the value is not necessarily only in the code. The value is, of course, in regulatory trust in specialized workflows and expertise that we deliver and, of course, in cooperation with the customers and their demands and needs. So, if you look at it that way, AI for Omda gives us a stable situation from the customer side, but it is rather an acceleration tool for us when it comes to be more efficient, a productivity accelerator really. So that is what I'm going to explain to you. It's more like what are we actually using AI for in Omda. And these 2 pictures will give you an idea. I think many analysts have already seen what's going on. And I think it's clear that a company like Omda can use development tools with AI agents to completely change the development processes and make them much, much more efficient. So, we are using, like in this picture, a senior developer, the new era gives the possibility to get added code, testing, documentation and much more efficient workflow processes using the agents rather than a lot of other colleagues helping out creating code, for instance. And this was in '24, it was experimental. In '25, we already started projects to make sure that we could do something both in our business units, but also centrally for Omda to create toolboxes for our business units to accelerate this in 2026. So, it's no longer experimental. It's our operating model going forward. So, this is going to accelerate in 2026. And then you will ask yourself, what is the impact on our business? And if you look at this graph, and let me explain it simply to the left, the percentage is self-explanatory. But then again, you see the topping here, the 3 dimensions. One thing is what we have delivered, our guidance for this year, which my colleague will go through in a minute, and then the ambitions and the long-term targets. So, what does this mean really? If you look at the gray curve here, CapEx, which is the same as investments in our own software. We think that investments in our own software will continue with the absolute value level that we have today. But that also means that the CapEx and investment in software compared to our revenue will decline over time as we show you in this curve. And if you look at the green curve, obviously, when you reduce CapEx like that, it will give more cash from operations. So that means the cash EBITDA margin or so-called EBITDAC will, of course, then increase. And this is really the important thing for Omda. So, AI in our company is not a hype. It's actually a tool set that helps us create a much more profitable business. So that means we have delivered a very strong fourth quarter '25 and also a strong year '25. So now it's time to dive deeper into that. And Einar, if you're still awake, the floor is yours. Einar Bonnevie: Thank you, Sverre. Thank you. Good morning, everyone. Let's have a deep dive into the financials. And let's start with the quarterly comparison, the fourth quarter '25 versus the fourth quarter '24. And we see it's -- yes, it is a record quarter. And there's one -- you can say, one-off or anomaly here. It's the sales of hardware and usually large hardware order in the fourth quarter made us beat the expectations. But if you adjust for that, I think we are very much within the guidance of -- in the upper range of what we guided more than a year ago for the year. And when we look at earnings, a very marked improvement in earnings. When you look at the EBITDA or cash EBITDA, you see a very strong margin improvement in the fourth quarter. And also, if you look at the whole year, the same thing here, we see a very strong year, ending -- very much ending on a high note. And the earnings was not only a quarter or 2, we actually met or beat the expectations each quarter in 2025. And ending, as Sverre said, on a record high EBITDA and cash EBITDA. I think it's also worth noting that even though we had a very large hardware order in the fourth quarter and that for the year, actually, hardware sales doubled compared to 2024. Our gross margin was still improving. COGS is coming down and the gross margin is still improving. So, taking note of that. And that also points to where we will be in 2026 and going forward. The margin improvement should continue. In a nutshell, NOK 117 million in EBITDA. We had a CapEx of NOK 47 million, so slightly less than 10%. That was our guidance and cash EBITDA, EBITDAC. We have received some questions from various investors, why do you focus on EBITDA? Why don't you only focus on cash EBITDA? And some say EBITDA is better is more general. The thing is we need both for, say, bond purposes and current tests, et cetera, measured on EBITDA, and it's more common, so you can compare it to other companies. Cash EBITDA, on the other hand, that is what we use internally. So, let me be very, very clear. Business unit leaders, they relate to cash EBITDA and not EBITDA, all right? And that is mainly because CapEx, that is a capital allocation decision. And that is one of the few decisions that are still centrally managed. So, capital allocation is centrally managed. You can get the approvement for a capital allocation for a CapEx project or not don't go to the highest bidder, so to speak. So that is why we have them, and we need them both, and I hope this explains it. As you know, we focused a lot on recurring revenue. And in the past, we have discussed recurring software revenue, but it's not only the software that is recurring. And a few analysts also have taken notice of this that they've said your professional services, they seem to be very, very stable. And yes, indeed, they are. So, in the past, we referred to professional services as semi-recurring, but we split those and started -- as from the third quarter 2025, we started splitting the professional services in the recurring part and nonrecurring part. And what we define is that customers of ours that were also customers 1 year ago, they are defined as recurring professional services or recurring professional services customers. So, we view those as recurring, and applying that logic, you get a very different perspective on what is recurring and the stability of our business. So, we see that the recurring software business takes us up to approximately 80%. And then we can add another 15% or so on recurring professional services. That brings the real recurring or the true recurring income or recurring revenue in number up to almost 95%. So, it's an extremely predictable business and an extreme stability there to the benefit of shareholders, but also, of course, to bondholders. This really gives you a stability that you don't see very many other places. And combine this with very limited churn on the software. We have guided in the past less than 2% per annum. We can restate that guidance. Churn is limited. And speaking of churn and speaking of predictability, with the earnings in 2025, and you see the cash earnings, the EBITDA and the EBITDAC, cash earnings are coming up. Revenue is growing. Cash is stabilizing. We are moving into what we call a very low leverage territory. Here, okay, let me explain the bars, 3 bars, the blue on the left, that is the last 4 quarters EBITDA. That's how they are measured. EBITDA is measured in the bondholder agreement for incurrence test purposes. Then we have the orange bar, that is the run rate. So, if the current quarter is a template for the other quarters as a run rate, and then we have on the green bars, that is the forward-looking the next 4 quarters because what is ahead of us, it is not the past. It's the future, and we have a 2026 guidance. So, the green bars, they are based on the guidance for 2026, okay? Then the blue line, the upper blue line is the incurrence test. So, we have to be below that in order to do a tap issue on the current bond. And then we have the purple line that is at 2.5, and that is what typically is referred to as low leverage, low gearing. And you see that if you look at the first quarter -- fourth quarter '25, first quarter '26, where we currently are, you see and especially if you look at the leverage compared that to, and relate that to the next 4 quarters earnings, you see that we are indeed moving into a very low leverage territory. So, low leverage, combined with high predictability on income and earnings, that is where we currently are. And this also makes -- if you, again, taking a capital allocation perspective, what shall we -- how to spend our money most wisely. Debt repayment is probably not one of them, but maybe we can improve the debt terms. And that is exactly what we are now considering. Very strong performance on the top line, on the bottom line and low leverage that points to possibilities for refinancing of the current debt. I think, as most of you have observed, and some of them are also comment to us, saying that of the approximately NOK 70 million in cash EBITDA, a large chunk of that -- of those cash earnings from operations, they go to payout interest. And paying interest, that's the largest cash items in our P&L. And of course, that costs as all other costs, we like to reduce the cost and increase the earnings. Looking at the current bond that was issued in December '23. It's callable in December '26 and at NOK 104.3. And until then, it's a so-called make-whole clause. But the bond has been trading well, and we see that the spread has been narrowing. And the last I saw was actually a spread starting with the #3. So, we are around 400 basis points -- so 400 basis points, 4 percentage points, 4%. And the current bond is dominated in NOK. So, it's 3-month NIBOR plus 4%, translates into approximately 8%. That is where the bond is currently trading. And we have higher ambitions. And currently, the bond is trading in NOK. We will have to evaluate other jurisdictions also. So, when the bond was issued, and Omda went public, we were a very Norwegian company. As you have seen on the distribution of earnings, you can see that in the report, where are our customers, where are our employees. You see from an operational perspective we are more Swedish than Norwegian. That was on finance, and what we think there's room for improvement there. Let's move on to the guidance. We know where we are, where are we heading. Okay. We will repeat our guidance for 2026. So, we will end with revenues of NOK 500 million to NOK 525 million, ending at NOK 494 million. And even if you knock off the hardware for 2025, it shouldn't be Mission Impossible. And this is just the organic part. So, this is without any new acquisitions. This is just the organic part. We forecast a margin between 28% and 32% on the EBITDA. And as Sverre just pointed out, we will compress the CapEx. So, the cash EBITDA, the EBITDAC margin should be somewhat higher than the EBITDA. So, CapEx should be less than 10%. We forecast -- we guide on 9% for 2026, and that should absolutely be possible. Not guidance, but targets. What we just saw, they were guidance. This is where we think we're going to end up. These are what we see now are our targets. They haven't changed much since what we presented in the third quarter presentation but let me be even more specific and even more clear. We restate organic growth, 5% to 10%. That includes CPI adjustments and the like. We restate that we aim for target inorganic growth or growth through acquisitions, 10% to 20% on top of that. And EBITDA in excess of 30% CapEx going forward over the next 5-year period, we see it shrinking from where we have been in the past around 10% of sales or revenue to 5% of revenue. We see COGS. As I said, in spite of the unusual large hardware order in the fourth quarter, gross margin was still improving. COGS are still coming down from around 7%, 7.5% in '24 to 6.5% in 2025. And it should be -- there's more to come. It's not an overnight sensation, but we have gradually -- if you look 5 years back, 10 years back, you see we have constantly been improving. That improvement will continue. And we see that we can bring it down to at least 2% to 5%. Salary and personnel, we have constantly bringing it down. We have been trimming the number of FTEs compared to total revenue, to 55% at the end of the fourth quarter. In percent of total revenue, down from 70 to 65 to 60% to 55%, 54%, 55% ending -- exiting 2025, and we see we should bring it down to below 50%. Other costs currently at around 13% of sales. The original target was to bring it down to 15%. We are already there and actually beyond. We see now that the next target is to bring it down to 10%. Partly still trimming your nails and also as part of that, they will remain constant, and the top line will grow. And then last but not least, on the bond loan, it's currently NOK 500 million. If we just maintain that level, I'm not saying that we will, but just take that as a starting point, we should be able, with the improvement that we have displayed already and what is to come, to bring an end to an interest rate closer to 5% than 10%. Now I'm not saying 5%, I'm saying closer to 5% than 10%. Some analysts, have said maybe you should reach 7%, well, 7% is closer to 5% than 10%. But we are ambitious, and we are ambitious based on the strong underlying performance. Okay. And with those assumptions and targets, we will end up with revenues something like this. And you can do your own calculation, do your own math. Here, I have used those expectations to see where we end up on revenues on the organic side and on the acquired side. And you can use it in your own spreadsheets, for calculations. You can apply the speed and how fast you think we'll reach the margin improvement, and you will end up with robust margins, and you can do your own math on what you think the valuation of a company like Omda should be. Okay. Let me round off by addressing the M&A. We have a huge pipeline. We do most of the sourcing ourselves. We have a lot of targets on the radar screen. We have an active dialogue with someone between 5 and 10 companies. So, we are absolutely active in the space. In short, and some may say, well, you haven't announced anything. That is true. But as the old statistics professor once told me, absence of evidence is not evidence of absence. So don't think for a single minute that the fact that we haven't announced anything is not because we haven't been active. And sometimes, the only thing you end up with is a successful DD. But we maintain the goal of 10% to 20% inorganic growth. We will consider. Should we do bolt-ons or should we do large, more transformative deals? Sometimes the bolt-on may be less money for more value. So that is always a consideration. In the current market, we've seen there has been turbulence in the market on valuation, everything from us stocks or compounders or software companies and the AI turmoil, but that also gives opportunities for us as an acquirer. And then speaking of acquisitions, this, again, is a matter of capital allocation, and we need to spend money wisely. And we also need to reconsider this, I mean, how is it undervalued compared to other things we can buy in the market? So, share buyback is also something we need to keep considering. And last but not least, since we are moving into positive cash flow, good cash territory, smaller deals may be financed with cash from operations without having to issue any new capital in any form. That was a snapshot, and let's move into the Q&A. Einar Bonnevie: And there are a few questions here, and most of them seem to be to myself. And there's one question from John here, and it's related to the last topic, M&A. And the question is, with the incurrence test being met, and you have been expecting that for a while, given your goals, what's the next outlook on getting the M&A engine humming in the next quarters? Okay. As I just said, and you can add some comments to this, Sverre. But as I just said, it has been humming. So, it hasn't been turned off. And again, we haven't announced anything, but that doesn't mean that we haven't done anything on the subject. So, it is indeed humming. Would you like to add anything, Sverre? Sverre Flatby: Yes. I think what is important is actually that the value creation behind M&A has to do with the sequence of things. So, when we have dialogues going on for many years with many targets, we're also very good at looking at when to put things together. So, there is a very, very high activity, much more than you think, when we look at this. And I think what's going on now is that we will stick to the guidance of 10% to 20%, and they will come out, as Einar mentioned, probably of a handful of smaller acquisitions rather than a big one. So, all in all, we are very happy to tell you about the M&A processes going on because these are what will make us reach our goals in the next 5 years as well. Einar Bonnevie: Okay. Thank you. Another question here from John, and that's about the bond agreement. And the question is, remind us of your buyback opening in the bond agreement. Yes. The current bond agreement gives us the opportunity to buy back shares. And we haven't done anything for the last year or so. But the bond agreement gives us an opportunity to continue to buy back bonds. What it doesn't allow currently is to delete the buyback shares. We can buy back and continue to buy back. We still have room to buy back more shares, but we cannot delete them under the current bond agreement. But that was a trade-off we made when we borrowed money the last time, but that is something we will look into because that is one way of making the implicit dividend more effective. So, we can continue to buy back shares, but we can't delete them. Okay. There's one question pending. [Operator Instructions] And this is from Balas, and it's related to net working capital. And the question is, can you please elaborate on net working capital dynamics? It looks like this year; net working capital was a drag on cash generation. And I can understand the question and the reason behind it. Okay. We have a very active net working capital view. And as you saw in the 2024 fourth quarter, we had a minus 31%. Our official target is that we should be below minus 10%. We ended 2 years ago in '24 at minus 31%. That was a record. In 2025, we end at minus 26%, which is still very good, but not as good as last year. There are always some dynamics there. As you know, we like to invoice annually upfront as much as we possibly can and then pay our bills as late as we can to use the capital effectively. But in 2025, we issued invoices and sometimes the invoices, are paid just before New Year's Eve and other times, they are paid just after. And in '25, some of them were delayed to be paid in early January. So that is what you see. There are a few bumps there, but nothing to lose sleep about. There are now 6 new questions. So let me continue. And this is one for you, Sverre. It relates to artificial intelligence. And it goes like this. Can you explain in more detail, Omda's product moat against AI in the long run? So, contract, security relationships. So, I mean, how does AI protect us? Sverre Flatby: Yes. I think, first of all, what protects us is really what I was into when it comes to what is the priority on the customer side here, which is the regulated business they have and the reliability and compliance is critical and the life-saving activity is critical, and these are run through extremely complex workflows. So, the ability to change things is, of course, there, but the business case to change things is one thing. It's really not that relevant. It's not only the code. It's a very, very complex completeness there. And then secondly, of course, the ability to replace things is one thing. But the timeline, it takes years in these areas, not because you change the code, but because you have to refactor a lot of other things and you have to handle procurements, rollout projects, et cetera, that takes years in the complex environments. So, it's really not the AI itself that protects that part of us, but we are protected in that sense that the collaboration long-term, as you ask for here as well, the contracts, what we do now with our customers is to actually have the dialogue, how are we going to deliver add-on components that includes AI functionality. But that is not easy because you also have to certify components like that. So maybe we would use 1 or 2 years to certify, but still the customer will use maybe some years even to implement because of the criticality. So, this is why it takes time. But on the good side, although it takes time to implement on the customer side, the speed of the value creation on the inside of Omda is really what is the good thing at the moment because that is no longer, as I mentioned, experimenting with tools. These are agents that actually already now are actually giving us the ability to increase the cash from operations. Einar Bonnevie: Okay. Thank you, Sverre. There's another question about AI. So, I suggest we continue that. That's also from Matt. Thank you, Matt, for submitting your questions. Which division or business area, business unit is most at risk from AI competition? And you mentioned specifically emergency or ProSang or blood management. What will you say? Sverre Flatby: Yes, that's a good question. But it's none of those 2, that's for sure. I would say it's quite the opposite. Those are quite protected given how these systems are handled. So, it's difficult to change the engine when you have a flight over the Atlantic. So that is not the places to see. However, the specific questions, my theory would be that the analytics part of our business would probably be more competitive from outside because the usage of large data and the functionality around this is probably the area that will have more competition because they are not so tied into actual clinical and emergency critical processes. So that would be my take. However, I see already that we are using AI and working with AI components inside our analytics software and the customers would like to acquire more from us -- so it's -- please remember, we have contracts there as well and customers that want to add on. So, it's not only a competition in the market with tenders. We have existing customers that want more. Einar Bonnevie: Thanks, Sverre. There's 6 more questions pending. Thank you for submitting them. And there's another one that relates to AI also from Matt. Let's take that one before we move on to other topics. What is your average contract length? And do you have enough time to integrate AI innovations before the next round of tenders. How does this work Sverre? Sverre Flatby: Yes, that's a good question. It's important to understand that when you choose a strategy like we have done and when you focus only on these very sticky software types that could be there since you mentioned in your questions, ProSang, which has more than a 50-year history with the same customers being the same -- being customers, of course. When it stays that long, that is really what's the fact here that it won't be -- it won't change because of the fact that it's tied to the workflow processes in these areas. Einar Bonnevie: Okay. There are some more questions on the financial side and also from Matt. And the question is, do you see already an impact on private valuations and M&A targets following the current software sell-off? That is a very good and relevant question. I think I tried to sum it up on the very last slide, the M&A short slide and say bolt-ons versus larger transformative deals, we see that bolt-ons are typically -- what you are referring to, the smaller private valuations. Yes, I think it's probably now an opportunity to pay less money for more value. And also, as I said, the current market provides more opportunities than challenges from an M&A perspective if you are the buyer. Because after the -- what I say, the hype in maybe 2020, 2021, '22 and expectations were going sky high. I think a lot of the private owners, they have summed up and much more realistic expectations now than maybe at least 2 or 3 years ago. And another one on acquisitions and capital allocation also from Matt. And at current share price of NOK 38, so that's approximately 2x sales or 7x, 8x EBITDA, isn't share buyback the best capital allocation? Yes. And that is also something on the very last slide that we try to sum up. Yes, share buybacks, et cetera, is to be evaluated. It's all about capital allocation. Should we increase working capital? No. Should we invest more in R&D? No. We will use AI to be more efficient. Shall we buy companies? Yes. But again, maybe the bolt-ons rather than the larger deals, again, the best return on your investment. And as you point out, yes, if you compare Omda, I mean, from an outside in view, not speaking as a CFO, but maybe more like a financial analyst from outside in view, Omda is very attractive compared to a lot of companies that we can buy. So that has to be a part of the equation. But I think it's probably not an either/or, maybe it's -- you can have that calculated too. There are still 4 questions. And this is from Mark, and I think it goes to you Sverre, it's about M&A and start-ups with AI. And he says, in terms of M&A, do you see interesting start-ups with AI agent tech that you could add to the portfolio? Please expand on venture capital funding dynamics in the Nordics in the space. Sverre Flatby: Yes, I think the most important answer to that is that our strategy when it comes to M&A is related to customer code competence. That means we acquire companies that has a proven track record within the customer space. Of course, we look at additional AI companies that has interesting technology, but this is not our strategy. And also, because, as I mentioned, it takes many years to implement on the customer side, the type of customers we have. So, what we have -- one example of how we approach this would be the last acquisition of one of the last 3 that was Dermicus, which is an AI-based app that handles wounds or cancer -- skin cancer, for instance. And these type of components that are in production that we can integrate and add and have synergies for our own business, that will be the preferred acquisition of AI companies from our side. So, I don't think the speed of -- even if the new technology comes out, the speed on the customer side will still be the same. So, for us, we will still continue to buy customer code competence in that order. Einar Bonnevie: Okay. Let's continue on the M&A topic, and this is one from John. And he writes, with your aim for small bolt-ons for M&A, do you foresee any material impact to your expected 2026 margin guidance in that year or future years? And how far can bolt-on take you versus your targets over the years? I think I can address those. Those are 2 questions combined in one. And first, on the margin side, I guess the background for the question may be that in the past, we've done some larger deals. When we IPO-ed, we were at NOK 200 million in sales. And a couple of years later, we reached NOK 400 million. So, we doubled in size. And a lot of those we acquired were turned around or turn better candidates, they diluted our margin. Now if you look at the current guidance and we say on the current business, we grow 5% to 10% organically, and we will improve the margins. We will take down the COGS. We will take down salary and personnel. We will take down CapEx. We will take down other costs. That's on the current business. Now if you add to that bolt-ons or small acquisitions, and we said our guidance and target is 10% to 20%, that would mean that we would add NOK 50 million to NOK 100 million in sales roughly for million and you have 0 margin on that in the year it turn around -- turn better candidate and you have 0 in EBITDA. Still the dilution wouldn't be very noticeable. And it would dilute maybe the margin in percentage points with a couple of percentage points, but it wouldn't dilute the absolute number, all right? So, we expect that there may be some margin dilution on the total, but not if you look at the underlying business and that on top. And it shouldn't be dramatic. So, we're not speaking of from 30% down to 10% or something like that, but knock off a few percentage points. That should be your expectation. And how far can bolt-on takes us? Okay. Again, it comes down to what is the definition of a bolt-on. But say it's -- say we're acquiring a business, there are a lot of businesses between NOK 10 million and NOK 20 million in sales. So, 3 of those would amount to approximately NOK 50 million, 10%. So that would -- 3 bolt-ons would take us into the lower part of our guided range. So absolutely doable. There are still 3 questions. We still have 15 minutes. So, if there are any more questions, keep typing in. One question here from Draven, and that goes to you Sverre. And it goes like this. Are there any success stories from this year that you are particularly proud of that demonstrate to you the strength of the business? Sverre Flatby: Yes. I think the results speak for itself. And I think actually, the most important thing is the combination of the decentralization that we have and the ability that each business unit leader have had to work much closer to the customers. So the result of that has been a much more predictable business, and there are many smaller and bigger success stories inside those business units. But I think seen from my side, the successful transition to a decentralized organization is definitely what has changed everything and has created a new operating baseline for Omda, which is going to be very strong from '26 and onwards. Einar Bonnevie: So what are you saying Sverre is 3 things. Capital allocation is important, decentralization is important. And then in a decentralized organization, have the right people on board of the bus. So, if you control those 3, things are going pretty well. Sverre Flatby: Yes. Einar Bonnevie: Okay. Let's continue to do that. There's another question from John here, and that is directly relates to a potential bond refinancing. And the question is, have you had talk with investors in the Swedish market or banks to take advantage of the difference in STIBOR versus NIBOR. And the general answer is, yes, we have Norwegian investors, we have Swedish investors. We have American, Anglo American, French. So, we have investors, and we absolutely -- and we love to have a dialogue with our investors. And yes, we, of course, also have dialogue with our Swedish investors. And again, yes, and we have dialogue with several investment banks, and we bounce ideas. And the effect then on STIBOR versus NIBOR, the STIBOR is around 2% and the NIBOR is around 4%. So of course, if we were refinancing just as an example, I'm not saying -- this is not a guidance. This is not a target, just as an example, if we were to refinance in Swedish krona on STIBOR 2% plus where the bond is currently trading 4%, that would yield 6%. So just as an example, for those of you who are watching this call and are not that into NIBOR, STIBOR and the whole interest rate universe. There's one more question, and this one goes to you, Sverre. So, you have the -- and that is also from David. Across Europe, many health care organizations are cutting staff and budgets. How does Omda work with customers to support them to maintain standards with less staff? Has this been an opportunity for cross-selling or -- how is that? How can we support our customers? Sverre Flatby: Yes, that is a very good question. And it's a quite interesting thing, combined with the previous question about the average length of a contract because it's really not a contract we're talking about. Contracts are tools that we have to have, the way the stickiness is coming from the fact that customers are using our software. And since the situation is like that, of course, we have the dialogue with the customer on how we could help and combine offerings from our own business. So, we are doing that inside our business areas with different business units working together and come up with the broader offerings to our customers. So that will help to be much more efficient. So that is one way. But also, between different business areas, since we have a strategic dialogue with large customers and key customers, we have the ability to look at a strategic approach years ahead as well and talk about what's going on. And explicitly, you're quite right in defining the fact that the economy is very, very complex and it's hard times for health care. That is a good thing for Omda because we can help them. The cost of our recurring software is quite small compared to everything else in these businesses. So yes, we are working with the customers to make sure that they can also get much more benefit of our current software and new software. Einar Bonnevie: Okay. There we are. There is actually one more question that came in while you were addressing this one, Sverre, and this is -- also goes to you. And the question is about the pricing models. And the question is, please comment on your pricing model on seat versus usage based. This is typically from -- I take it from a SaaS perspective of thinking like how does the pricing model actually work in Omda? Sverre Flatby: Yes. First of all, there are differences between different business units. However, in general, if you look at the complex widely used national, regional, highly specialized solutions, which is the backbone of our business. This is coming from contracts many years ago and where the idea is that we pay for the usage of the software normally as a site license or a predefined pricing model might add extra for an extra department or things like that, but it's much more a conservative model from the beginning here. So, it's not like a SaaS thing as such where you can -- as you do with your Netflix account that you add it or you cancel it. So, this is much more from the beginning, a more stable income that is not related to users directly. However, we have some areas where we have volume-based, but I would say more than 80% of our recurring revenue is based on these stable long-term and many times over decades contracts. Einar Bonnevie: Okay. Thank you, Sverre. There seems to be no more questions. Happy we have addressed them all. Thank you all for watching. Thank you all for submitting questions. We very much treasure the opportunity to have a dialogue with all our investors. We hope you have enjoyed this presentation and the numbers. Tune in again on the 21st of May, that is when we are going to present the numbers for the first quarter of 2026. And before that, we will also release the annual report that will be released in April. But until we speak again, our minds and souls meets, do you some napkin calculations using the numbers we have guided on. Enjoy your day. Take care and stay safe.
Stella Mariss: Hello, everyone. Thank you for joining CLINUVEL's Investor Webinar. I'm Stella of Monsoon Communications. In today's webinar, CLINUVEL will share their half year results and operational highlights for the 6 months ended on 31st December, 2025. I will now hand over to Malcolm Bull, Head of Australian Operations and Investor Relations, to conduct the proceedings. Malcolm Bull: Thank you, Stella, for the introduction. I'd first like to welcome members of CLINUVEL's management team to the webinar. Not surprisingly, reflecting the focus of the webinar on the financial results for the half year to December '25, we have Chief Financial Officer, Peter Vaughan. We are joined by 2 executives who are leading the business in key operational areas: Director of Clinical Affairs, Dr. Emilie Rodenburger; and Director of North American Operations, Dr. Linda Teng. We're also joined by our Managing Director, Philippe Wolgen. I'd like to acknowledge there are several analysts on the line who cover CLINUVEL and we'll ask some questions in the webinar. It would be remiss of me if I didn't say on behalf of management and the Board that we appreciate your work on CLINUVEL, your role in telling our story to a wider audience than we could reach ourselves and your involvement in this webinar. It's pleasing also that there are over 175 participants to the webinar, reflecting increasing interest in CLINUVEL. So welcome, one and all. Before going further, I think it's appropriate to highlight why we have 5 executives in today's webinar. So you frequently see Philippe; our Chief Operations Officer, Lachlan Hay; Peter Vaughan; and Investor Relations presenting the company to a range of stakeholders. We have received feedback that it would be good to have greater access and the opportunity to hear from other executives. So for today's webinar, noting this is not the forum for a strategic review, but as a courtesy to you all, we include Dr. Rodenburger and Dr. Teng to answer questions and provide their insights direct to you. Today's webinar will be in 2 parts. First, a discussion of the half year results; and second, the analysts online will be called upon to ask questions of the CFO and management. We will be talking today about plans and intended outcomes. So I'll draw your attention to the forward-looking statement or safe harbor statement on screen that identifies a range of risks that can materialize and impact their achievement. So I think 10 seconds to review that is enough, and that is on our website and on all of our announcements. I now kindly invite the CFO to summarize the results. Peter? Peter Vaughan: Thanks, Malcolm. Good evening, and good morning, everyone, from wherever you're calling in from. It's another set of very consistent results at CLINUVEL, I'm pleased to announce, with our revenues up 4% on the prior year, maintaining a steady growth pattern. Our expenses were up 22% for the period, and this really was part of the supporting the expansion initiatives that we'd foreshadowed previously that we were going to be undertaking during this period. We continued our strong positive net operating cash flows, and this saw our cash reserves over the 6 months increase by $9 million to $233 million. We're closely monitoring all of our expenditures and any discretionary spending is being scrutinized really closely. And the good news is that our profitability for this period, whilst lower, continues to be maintained despite the increasing level of expenditure during this expansionary phase. Malcolm Bull: Thanks, Peter. I'll now ask Philippe to comment on the results. Philippe Wolgen: Thanks, Malcolm. Welcome to all the analysts and shareholders. Well, in a nutshell, we follow a plan, a strategy, which is gradual and with purpose. And for this strategy to play out, we need to manage our finances tightly in a very controlled manner. In the past 12 months, we intentionally increased our expenses. And therefore, naturally, one expects to see the net profit decrease. These expenses towards R&D, the clinical trial in vitiligo and regulatory filings. We are very much in line with our own forecast, so we're content with the results, and we will proceed on this basis. And with positive cash flows, we can expand the activities of the company, the group. We gave expense guidance from 2021 to 2025. And for the financial year, we expect to spend about $55 million to $58 million, excluding the capital expenditures. So in summary, the business model we chose is playing out really well. Malcolm Bull: I agree. So let's delve into the results and call on Peter to look at in turn revenues, expenses, profit and indeed the balance sheet. Peter Vaughan: Thanks, Malcolm. So our revenues for the period continue to grow year-on-year. And this period, I'm pleased to say we saw our highest ever sales revenue result. This period marks the 20th consecutive profit for CLINUVEL since the commencement of our commercial operations. And our expenditure, as I touched on before, whilst increasing, is very focused, controlled and targeted around the specific areas of the business that we're focusing on. Our expansion saw key developments in our R&D activities across our ACTH-NEURACTHEL program; our vitiligo study, CUV105; and of course, our peptide drug platform that we developed at our Singapore Research Development and Innovation Center that we recently announced we'll be undertaking a large expansion of. Now all of this expenditure and all of this growth has been achieved without sacrificing our overall profitability, which is really a fantastic result for the organization. Only 4% of biotechs deliver a profit and even fewer are able to sustain a profit for an extended period of time. So where CLINUVEL has done this for over a decade, it's truly a remarkable outcome. In turning forward to our revenues, specifically, we saw our revenues from sales increased by 4% from the prior period to just under $37 million. As I mentioned before, this is our highest first half year sales results we've ever seen. This reflects the increasing and continued demand for SCENESSE right across our sales regions. In particular, we saw strong growth in volume of sales across Europe. And as we announced in September 2025, the approval by the EMA, lifting the number of maximum implants per year from 4 to 6, has already seen some of the patients take up that extra initiative, and we expect other patients to follow suit as well. In the U.S., our team and -- led by Linda has able to increase the number of sites to meet the target that we had for December, which was 120 sites across North America. The patient demand has been consistent throughout the period, and our U.S. team operates extremely well given the evolving U.S. medical reimbursement landscape that is constantly changing at the moment. Perhaps at this point, Linda, as our Head of -- Director of North American Operations, I might ask you, could you provide some insight to the people listening in around the U.S. reimbursement process and in particular, the prior authorization scheme that enables us to have such a high success rate of reimbursement? Linda Teng: Sure, Peter. So first off, please excuse me for my raspy voice, as I'm still recovering from the flu. But thankfully, the technology allows me to share the insight without spreading the flu. Philippe Wolgen: Linda, we can't hear you well. Linda, we can't hear you. Linda Teng: Can you hear me now? Philippe Wolgen: No. It's very muffled. Malcolm Bull: Go off the headphones if you can. Linda Teng: Is that better? Philippe Wolgen: No. Malcolm Bull: Not really. Linda Teng: Is that better? Can you hear me now? Philippe Wolgen: Yes. Much better. Okay, let's move on. Malcolm Bull: Yes. Linda Teng: Can you now hear me? Philippe Wolgen: Yes. Okay. Linda Teng: Can you hear me now? Philippe Wolgen: Yes. Please proceed, Linda. Linda Teng: Yes? Philippe Wolgen: Yes. Linda Teng: Okay. So all right. So we're going to continue with what Peter said about prior authorization. So in short, basically prior authorization is a way for health insurance companies to control their cost, by making sure that they are only paying for treatments that are medically necessary for their patients. And so because SCENESSE is the only FDA-approved treatment for EPP, and it has a strong and also a long-standing safety records. We haven't seen any prior authorization denials for the EPP patient. And we also have a dedicated in-house team that works very closely with the physicians to really streamline the submissions and also speed up the approvals. And for SCENESSE, most of our PAs that are already approved, they are only renewed annually. There really is minimal paperwork for the physician, and so they don't have to get approval for every single treatment visit. And for those who are familiar with the U.S. healthcare system, you might notice that our approach is very unique. Most high-cost drugs, they go through the middleman or the pharmacy benefit managers or we call them the PBM. And they usually drive up prices up even more. So we made that deliberate decision to avoid the PBMs. And I think that is moving like a smart moves, especially now because the government is increasingly the scrutiny of them. And we said the 2026 Consolidated Appropriations Act, which has really signed into law a few weeks ago, including the provisions aimed at the PBM industry. And as for the patients, the feedback has been consistently positive. And I think the reason for the continued treatment year-after-year is because they are seeing real clinical benefit. And we even saw some patients are increasing their treatment dose within the year because of the clinical benefit. And I do want to be clear that we don't pay physicians or patients for any testimonials. Everything is completely organic. The feedback from the patients are voluntary and genuine. And usually, they can share more within -- happily within their patient communities or directly with my team. So I hope this gives you some insight into our prior auth process. Peter, handing back to you. Malcolm Bull: You're on silent, Peter. Peter Vaughan: Thank you, Linda. As we look forward to the other areas of revenue for the period, our interest income was up to $5.3 million this period, which was a 14% increase on the prior year. And this was really the result of a larger cash reserves balance that we continue to maintain. We generally take our surplus funds that we have at the time and invest them into term deposits to help to build and grow on that balance. And at the moment, we're extending the length of our term deposits to be able to take longer-term maturities at higher yields. So we're seeing our average term deposit for about 300 days at the moment, and we're receiving an average yield of about 4.5% across the portfolio. Our other income, now this number has swung the other way from the prior period, and it's a difference of about $4.6 million. Now just to explain, this is an unrealized foreign currency translation that occurs each balance date, so each reporting date. It's really a non-cash transaction that's effective at balance date for accounting purposes. And it takes the process of taking all of our foreign currency balances and bringing them back to account at balance date into Australian dollars. So it's not a real loss. It's an unrealized loss just purely to be able to balance the books at balance date. So if we look at our revenues overall, I would mark them as being stable, growing and also consistent. Historically, our second half of our financial period generally tends to be proportionately higher from a revenue perspective, with the EU and U.S. summers coming into effect through that second half of the year. So we're really excited to see how the second half of the year plays out given we've still got that maintaining growth. Perhaps moving to expenses, Mel, now more specifically. Malcolm Bull: Yes. Peter Vaughan: So we saw a 16% increase in our personnel expenditure. And I'd probably -- I'd just like to provide some context around that for everyone to understand. This is a strategic part of our expansionary team and increasing the in-house capability of CLINUVEL. It provides greater control and oversight of our activities. But at the same time, we're upgrading the skill and expertise within our organization. Now as everyone will know, skill and expertise within the life sciences sector is really important. And recently, we've seen regulatory challenges and hurdles that some other life sciences and biotech companies have faced in just recent times. So this highlights the need to really develop and create the skill and expertise within that team and make sure we've got the right people around the decision-making process. And when we look at CLINUVEL, CLINUVEL's never had a market authorization knock back in over 20 years of being active in the pharmaceutical sector. Now if that was to occur in some shape or form, a regulatory rejection of some sort can really have a significant effect on an organization. It erodes shareholder and market confidence in the company. It raises doubts around management's decision-making and assessment of processes and events. It can push commercialization time frames back up to 3 years as seen in some of our peers where another study or more data may need to be gathered before a resubmission can take place. And clinical trial designs and endpoints around the quality of data may suit one region, which brings in revenue, but not always both revenues -- both regions to bring in revenue across the globe. And this can really affect the total revenue pie that's available from the advancement and the approval. Our people are really critical to the process. And in plotting the path forward, we're really confident that they'll be able to obtain the right outcome around our clinical programs. In turning specifically to our clinical and non-clinical expenditure, the expansion of our CUV105 expenditures was somewhat offset by the orderly wind down of some of our earlier phase programs. We've reallocated and focused our resources towards our later stage and strategically significant programs aimed at achieving the nearest-term commercial results and prospects we can. Preparation for CUV107 has already commenced and is well underway, and we'll start to see those expenditures flow through in the second half of the year also. Commercial distribution, if we look at that area, that was up 42%, but this is predominantly off the back of increased volumes of shipments, particularly in Europe, as I touched on before. So it's all increased proportionately. There has been some temporary one-off costs that have been associated with some transitions that we've made in our supply chain to some of our warehouse providers to ensure the long-term stability of that supply chain as well as being able to scale with us for the future. The other area that is somewhat affecting the commercial distribution area is also some of our regulatory fees. Previously we used to sit under an SME discounted scheme in some of those regions for the FDA and EMA annual fees. And now that our revenues have increased to the point that they are, we're no longer eligible for some of those discounts, so we're having to pay full annual service fees now to those organizations, which is also increasing the expenditure in that area. The next area to touch on is really finance, corporate, and legal. Now this did increase proportionately from the prior year to up 47%. And really, this is the direct cost of a lot of it is being our ADR program uplift from Level 1 to Level 2 that I'm sure you're all aware of as we uplift that program for the U.S. to list on NASDAQ. There's been a substantial amount of work undertaken across that area by the finance team, but also in conjunction with our accountants, auditors and legal firms, both here in Australia and in the U.S. And this process we had to go through undertook a 3-year reaudit of all of our financials into U.S. GAAP -- converted into U.S. GAAP financial presentation, and then that was submitted to the SEC for review. Our other expenses, that's up 191%, and it's predominantly driven by the increase in our R&D programs and all the consumable materials that we use within those programs, whether it be ACTH, PRENUMBRA or NEURACTHEL, any of those developments. Our non-cash expenditure was down for the period. This is usually a change in our inventories in our balance sheet differences from period to period, that's really what reflects quite a bit of that expenditure. This period, that's a lower number than it was previously because we've actually increased our manufacturing during the period, so therefore, there hasn't been as low a drop in our inventories. It stayed more on par. Our share-based payments have also been much lower this period than in previous years, and we recently changed our share plan at the start of 2025, which meant the expenditures will now appear differently, but also it's now a 1-year plan instead of a 3-year plan. Now I've spoken fairly at length around all of the expansionary activities that we're undertaking and some of the critical advancements to our program. But this expanding expenditure should really be seen as an investment in the organization rather than just being pure expenditure. So from a financial perspective, it does take time to build up these resources internally, but it is cheaper than outsourcing to a CRO. CROs can add 25% or more costs to the bottom lines of a clinical trial program. But by having that skill and expertise in-house, it's critically important for us to maintain that control and oversight of the program. We've got Emilie Rodenburger on the call, who's our Director of Global Clinical Affairs. Emilie, in speaking around our expansionary activities and what's been undertaken, I guess, would you be able to provide some insight into why that was necessary? And what are the specific advantages of doing them in-house? Emilie Rodenburger: Yes, absolutely, Peter. I can give some additional context to the numbers. So first of all, good morning, good afternoon, good evening, everyone. It's good to be here. In my capacity as Director of Clinical Affairs, I really think more on the deliverable and how to achieve them, but it certainly ultimately impacts the numbers we report. So clinical expansionary activities are twofold. It's talent growth and building the infrastructure into which the talents operate. As Peter mentioned, the company has taken a conscious decision to build our capabilities in-house, which is not the norm in our industry. Where most are relying on outsourcing their studies, we have chosen not to rely on these models and not to work with CROs. It increases cost and can result in loss of control and oversight over studies and data. In order to deliver the CUV105 study, we had to invest in new talent and these professionals will be retained through the CUV107 and beyond. Currently, the clinical affair department that I lead is the largest department in the company spread across U.K. and U.S. with a great range of expertise, operations, data science with data management and statistics, and medical affairs and clinical quality. In addition to bringing new talents in, we have also trained and upskilled existing talent. So building and retaining the expertise in-house. And again, I repeat what Peter said, it's really critical for the health of our business. In terms of infrastructure, it's really the processes and the systems, and we've also been investing in this. This investment will continue further for us to be able to manage a significant data set that are coming from the vitiligo studies and deliver efficiently on the studies. So when we build in-house, we both supporting the present and investing for the future. I mentioned the talents, the expertise, the ownership, processes and systems. They can be seen as a platform assets that is transferable to any studies and programs that we will be conducting in the future. So in a way, we're building a CRO in-house. Peter Vaughan: Excellent. Thank you, Emilie. In turning to our balance sheet, Malcolm. If we look at our balance sheet, it keeps going year-by-year from strength to strength. As I touched on, our cash reserves increased by $9 million to just under $233 million, and it's the highest cash balance we've had in the company's history. Our net assets have also increased by $8.2 million to just under $250 million, which again is the strongest point in the company's history. And we remain debt-free for the 21st consecutive year with no equity dilution since my March of 2016. A strong balance sheet with positive net cash flows is really a strategic priority for CLINUVEL as it enables us to see clinical programs through to commercialization without any additional funding required. It also provides resilience for any unforeseen events or economic uncertainty, particularly in the current geopolitical times. It provides flexibility to ensure expansionary opportunities, acquisitions or investments that align with our objectives, can be taken advantage of, which many peers in the industry aren't able to consider without having to raise additional capital. It also enables strategic objectives to be delivered such as the expansion of our Singapore research and development facility, which we've slated for over the next 5 years to provide vertical integration of ongoing peptide and formula development and innovation. A number of our peers have recently announced capital raisings, some as much as at a 45% discount to market to fund these sorts of activities that we can take on and that we can develop without having to raise any further capital. Some of these peers are raising for clinical program developments, for raw material supplier scale-up or for product rollout into a new jurisdiction. As already touched on, CUV is funded for our full clinical trial program for vitiligo. Malcolm Bull: Thanks, Peter. I mean that was a comprehensive overview, I must say, but I'd like now to move to strategy. I mention and shared with you that a number of institutions, particularly in the U.S. have asked us why CLINUVEL stands out in its strategy. They even ask, are we a bit dogmatic and a bit rigid in our strategic focus and execution. Philippe, can you comment on this? Philippe Wolgen: Well, I'll pick up the 2 words: dogmatic and rigid. The contrary, we've built in the flexibility and optionality in this business model, and that allows us to navigate markets and cycles in pharma. But the objectives are really clear, they're fivefold. We need to expand the EPP commercial market, advance the vitiligo programs as a focal point of the company, advance the NEURACTHEL dossier, which is a large opportunity in the use of ACTH in a number of indications, advanced PhotoCosmetics, and bring in-house the manufacturing of the new and next formulation. So in any given business model, there are a number of options. We can serially raise funds like most of our peers. We can change the business strategy altogether, step away from melanocortin and do something totally different. We can self-fund the program starting gradually as we've done. And the fourth option is, we can cease operations and say, ladies and gentlemen, it's too difficult, it's too hard, and let's give the cash back to the shareholders. And we haven't chosen that because we believe that there are a number of opportunities that we worked on for decades that are worthwhile pursuing. And there are a number of underlying assumptions that the Board and management take into account that we are privy to and no one else is. And first of all is, are we conducting an honest genuine business, no one indicated in further activities. Do we keep the teams in check? Do we have technologies that are safe and work? And third of all, do the patients -- do the investors have the patience to see out the strategies? But the most important underlying assumption is whether there is perpetual funds available for this company. And we've come to the conclusion that this model is very appropriate for the way we need to reach the vitiligo and the ACTH markets. So in summary, Malcolm, we needed to accumulate these funds to execute a program, which we all believe will lead to a sustainable multi-dollar a billion-dollar enterprise. But we also need to be conscious of the realistic risks that evolve around clinical, regulatory and execution. And for that, you need to have optionality and optionality is cash. And that will eventually lead to a diversified company. So that's how the company stands out. Malcolm Bull: Thanks, Philippe. So moving to another area where we've had numerous questions, and this is on the readout of vitiligo. And Emilie, it's good to have you here, and this is where you come in. What can you tell us about the regulatory process and path to market on vitiligo? Emilie Rodenburger: Thank you, Malcolm. I will address your question by providing a number of specific observations that support the regulatory process and path to market for SCENESSE in vitiligo. Some of these observations are unique to SCENESSE and some you might also be familiar with, but allow me to go through them. The first one is SCENESSE is already on the market for another indication, EPP. It's a product for which we have accumulated 2.5 decades of safety data and a safety profile that has been maintained over time. The regulatory agencies know the product well from the Annual Report or regulatory and pharmacovigilance teams are and have submitted for 1 decade now. In regards to vitiligo, vitiligo is a condition with visible symptomatology and the treatment effect -- skip that one. And the treatment effect that we desire, repigmentation, is visible. So from the cases we received and cases published by physician, one can gain much confidence that the effect of the treatment are visible. From an operational point of view, the trials can't be blinded. The work -- the drug either works or not and physician and patient can see the effect very quickly, the visible efficacy. So what I'm trying to say here is that in vitiligo, the photographs do not lie. And part of the analysis is to have centrally assessed photographs up to 32 per patient, which is up to 6,000 assessments. Very importantly as well is the patient experience and how they appreciate the return of their pigments. JAK inhibitors, some currently in Phase III, one recently submitted to the EMA and FDA for marketing approval, they take a long time to work, thereby suppressing the immune system. And last but not least, we are living in a very dynamic regulatory landscape where the concept of generating clinical evidence is evolving. EMA speaks about totality of evidence for drug approval, while as I'm sure you've seen the FDA recently announced that single trial will now be the default for drug approval. So what I really wanted to convey by all of this is that, these are positive considerations for SCENESSE to come to market for vitiligo, as we are continuing on the same trajectory. I can't tell you exactly when. But for sure, vitiligo is the natural home for afamelanotide, a pigment activating peptide, which is an analog of hormone that's naturally produced by our own body. Thanks, Malcolm. Malcolm Bull: Thanks, Emilie. So before we go to analyst questions, all stakeholders want to know what's next. Philippe, can you summarize that for us, please? Philippe Wolgen: Sure. So there are a number of catalysts that we're approaching over the next 2 years. The most immediate ones are the top line results from vitiligo CUV105 in the second half of 2026, the start of the vitiligo CUV107 study, and the preclinical results on the peptide formulation in the latter half of this year and the listing of the ADRs on NASDAQ that we await the SEC answers for. So the catalyst will naturally change the complexion of the company, and this is exciting, and we've navigated the waters over time to arrive at this point. And so we all need to get patients and see what the impacts are from these results. So there's much to look forward to, yes. Malcolm Bull: Indeed. Thank you, Philippe. So let's go to analyst questions. But thank you, Peter, Emilie, Linda, Philippe for the discussion. Some good insightful comments there, and I hope those on the line also have got some insights and appreciate that. The first analyst to ask a question is Dr. David Stanton of Jefferies. Hello, David, are you there? David Stanton: I am. Can you hear me? Malcolm Bull: Yes, David. Please go ahead. David Stanton: So my question is, do you have to wait until you have the results of CUV105 -- sorry, CUV105 and CUV107 before you file for approval in vitiligo? And in which geography would you file in first and why, please? Emilie Rodenburger: I'm going to take this question, Malcolm. Malcolm Bull: Okay. Emilie Rodenburger: It's a -- yes, it's a good follow-up and from what I was mentioning a couple of minutes ago. So thank you, Dr. Stanton for this question, question that's relevant and often asked. Our intention is to complete CUV105 and CUV107 before going to the EMA and FDA. And the recent announcement on single trial for drug approval from the FDA doesn't change this strategy. So based on the ongoing interactions we have with both agencies, EMA and FDA on the specificity of our work that we are conducting, we will need the CUV107 study to complete our program. For the second part of the question, we opt to file with the EMA first and then FDA second. And this really -- this strategy really much follows the approach we had with EPP back in 2012. I want to say more. I think it's important for me when we speak about regulatory agencies, I want to give a bit more color. An agency, as you know, it's a conglomerate of thousands of people, so at the EMA in Amsterdam, there are more than 1,000 permanent staff and more than 4,000 part-timers and experts. We are dealing with 2 European reporters that are representing the National Competent Authorities, which are Lithuania and Poland, with a scientific adviser representing the Scientific Advice Working Party, a very knowledgeable German physician. At the FDA in Silver Spring, there are more than 8,000 permanent staff and another 6,000 elsewhere consultant part-timers. We interact with the Division of Dermatology and Dentistry now led by Dr. Jill Lindstrom in the Center of Drug Evaluation and Research. And we have a new Commissioner, as you know, Dr. Martin Makary, who has reshuffled the agency, bringing new procedures and new approach. In our EMA reporters, we find willing listeners and may I say more supportive of our regulatory and market strategy. We are the only company focusing on patients of darker skin color and this point resonated very well in our recent discussions with the EMA. The approach we have on vitiligo is so novel that we deem the European regulators to be the first protocol, and then it will make it easier for the FDA to assess similar data. Malcolm Bull: Okay. Thanks, Emilie. The next question is for -- from Dr. Melissa Benson of Barrenjoey. Hi, Melissa. Melissa Benson: So I had a question in regards to the ACTH program, so NEURACTHEL. Just to help us understand, you've mentioned there later this year, you expect to file with EMA. A similar question to the lining of vitiligo, but understand like how does filing with Europe first and then the FDA, how does that kind of expedite the U.S. opportunity? And then secondly, any color you can kind of provide on the differences, I guess, between the commercial landscape for a product like this in Europe versus the U.S.? Because I understand one market is quite a synthetic peptide-based and the other is a natural hormone based. So that would be great. Malcolm Bull: Philippe, for you. Philippe Wolgen: Thanks, Melissa. Yes, we've talked about this in the past. NEURACTHEL will first be filed in Europe through the route of mutual recognition. And as you know, the analogues of ACTH, in our case, NEURACTHEL are used by many institutions, both as a therapeutic and as a diagnostic. And so we opted to go to Europe first and U.S. second. Once you've filed through the mutual recognition procedure, you can file shortly in the U.S. after. ACTH products are mostly distributed to specialty centers in Europe. They prescribed by internal specialists, endocrinologists. And we believe that it's possible to make the first inroads directly to these centers in Europe. Reimbursement in Europe is albeit lower than in the U.S. So both markets are sizable and are attractive, but we have experience in leveraging the European regulators and the resonance there is high. So it's a slightly different strategy than most of our competitors, but so far it worked. Malcolm Bull: Okay. Thanks, Philippe. We've just lost you on camera. So if you can try and get back to us, we'd like to continue to see you. Let's move to Dr. Thomas Schiessle of Parmantier in Germany. Thomas, you're a long way away, but let's hope you're connected. Thomas Schiessle: I would like to ask a question, what does the recent FDA decision on Disc Medicine's Bitopertin mean for your business and growth outlook, please? Malcolm Bull: Okay. Peter? Peter Vaughan: Sure. Yes. No problem. I can answer that one. So I guess thank you doctor for your question. From a finance perspective, I'm happy to answer that. So I see it from a way of increasing our monopoly in the market with the other player, obviously, not being able to enter that market yet as we're really the only approved drug treatment for EPP with a proven safety and efficacy record in the U.S. So it could take them, I would estimate about 1 to 2 years to come back or even longer to enter the European market. So it could be quite an extended period of time that we still maintain a monopoly within that market. So I guess that's how I see it, doctor. Malcolm Bull: I'll come back to you, Thomas, to ask another question because we've covered that fairly succinctly. But I'd like Linda to make some comment because some shareholders have asked what's our reaction to the FDA's decision on this. So can you make some comment on that, please, Linda? Linda Teng: Sure. First, can you hear me okay? Malcolm Bull: Yes. Linda Teng: Okay. Right. So first, I definitely can comment. However, I do prefer not to comment on the setbacks of other companies or their management. And I will just leave that to the external observers. And while competitors may have made critical remarks about our work, I don't consider it to be elegant to respond in kind. However, what I will say is that it is not easy to get a regulatory approval in one go. Our team have done this by working thoroughly and diligently. And at the end of the day, it is really all about the patients, making sure that the drug is safe and that it shows significant clinical improvement in their quality of life. And the FDA really raised questions regarding the bioavailability and efficacy of Bitopertin, which, by the way, I'm sure most of you already know. This was actually originally developed for an antipsychotic drug for schizophrenia before it was abandoned by Roche. And so for EPP, the company had then had to increase the dose from 20 milligrams to 60 milligrams to achieve a statistically significant reduction on the biomarker of the protoporphyrin level. But higher doses also mean that there's going to be extra stress on the patient's liver or kidneys. And this is very concerning, especially for EPP patients because they are already at a higher risk of liver disease. And on top of that, oral pill higher dose also increased side effects, complications and drug-drug interactions with other medications. So as the pharmacist, I really cannot see how this is a benefit for the EPP patients. And the other point that the FDA also raised, a very valid concern, was its primary endpoint. And this was based on the change in the biomarker protoporphyrin IX. So in case -- I don't know how much you guys know about biomarkers. Well, biomarkers are a very helpful tool for scientists, for physicians to really understand what's happening in our body, but it does not always reflect real-world meaningful clinical benefit. And an example that comes to mind is there was a drug that was received an accelerated FDA approval back in 2016 for an advanced soft tissue sarcoma, and this was approved based on a biomarker endpoint. But once they came to real life, the real-world clinical outcomes did not show any survival benefit. And so at the end of the day, the FDA had to pull the approval soon after. And from a bigger picture pharmacological perspective, it also seems very unusual to me to prescribe a lifelong oral pill that affects the central nervous system to lower the protoporphyrin IX marker -- biomarker levels. So I guess, I suppose, we'll really have to wait to see the results of their future trials to see whether this drug can really show both the efficacy and the meaningful clinical benefits for the patients. Malcolm Bull: Right. Very insightful. Coming back to you, Thomas, do you have a follow-up -- a quick follow-up question? Thomas Schiessle: Yes, indeed. Thank you, Malcolm. Absolutely another issue. The FDA -- no, no, no, no. That's a second one. What impact does NASDAQ listing have on CLINUVEL's future regular reporting concerning frequency and content, please? Malcolm Bull: Okay. Peter, for you. Peter Vaughan: Sure. I can answer that one, Malcolm. So we'll be listing on the NASDAQ or uplisting our ADR program and listing over there as a foreign private issuer. So what that basically means is that we'll continue to lodge half year and full year financials. In the U.S., we'll be reporting in U.S. dollars and also in U.S. GAAP accounting. But I guess, in short, Thomas, it's -- it will be exactly the same as what we currently do every 6 months and then every 12 months for the half year in the annual reporting. So no real change to the frequency. Malcolm Bull: Thanks for dialing in Thomas. I just mentioned that several shareholders have asked for an update on our listing application. So Peter, give us an update, please. Peter Vaughan: Sure. No problem. So we lodged our initial filing, which was a 20-F document to the SEC in mid-December or 18th of December to be specific. And we did foreshadow that there may be some delay in the turnaround time because it was also -- it was Christmas period, but also the government was -- had come out of shutdown mode and the SEC that obviously affected them. So they needed to catch up and clear the backload of filings and other documentation they had. But we have had some further correspondence back and forward with the SEC, and we're refiling our response to them. So we're hoping to be able to receive clearance from them in the very near future and then move quickly to implement the ADR program uplift. So watch this space. Malcolm Bull: Okay. We sure will. Let's now call on Sarah Mann from Moelis. Sarah, please. Sarah Mann: My first question is just on the EPP market. Could you provide us any details around what percent of your patients are covered under Medicaid? And just curious how you anticipate some of the cuts to Medicaid potentially impacting your ability to reach those patients? Malcolm Bull: Linda, for you. Linda Teng: Sure. I'll take this one. Sarah, thank you for your question. So we're actually seeing less than 5% of our U.S. EPP patients on Medicaid benefits. So in short, we don't really have a noticeable impact. And in fact, like you mentioned the One Big Beautiful Bill, it actually broadens the orphan drug exclusion. It now allows orphan drugs to -- with more than one rare diseases to remain exempt from Medicare price negotiations and potentially so far looking like it's indefinite unless the drug is later approved for a non-orphan indication. So one can theoretically say that the TAM would increase through curing the federal programs. But given that most of our patients are commercial insurance patients, we don't really see a worthwhile impact in the U.S. market at this time. Malcolm Bull: Okay. Sarah, a follow-up question. Sarah Mann: Just on a separate topic. Just curious if you could provide more color around the cosmeceutical strategy. Obviously, it's been in market for a couple of years in, I suppose, prototyping or early stage testing. Yes, just curious how you expect it to ramp up this year and any learnings that you've had over the past couple of years as well, please? Malcolm Bull: Philippe, can I call on you? Philippe Wolgen: Sure. First of all, good to see you back, Sarah. It's been a long time. On numerous occasions, we mentioned that the PhotoCosmetics are in development, and they accompany a complement our pharmaceutical program. That's quite an unusual strategy to have both pharmaceuticals and the PhotoCosmetic franchise, not many pharmaceutical companies do that. And so the first was the P line, the photoprotection lines, providing polychromatic photoprotection in population of the highest risk and extreme conditions. And then that will be followed by the M line, the melanocortin containing peptides. And they intend to provide assisted DNA repair and self-bronzing or the so-called sunless tanning. And in all these properties, the endeavors goes really to launch products with a substantial marketing effort. And that needs to provide visibility to our products. And we started to gradually increase our marketing spending online to focus groups, advocates, target populations and channels. And so we are in the prelaunch phase where we get feedback on these products. But ideally -- and nothing is ideal, but that was the anticipation and the model, when the vitiligo trials start to yield results, we then see a parallel large-scale effort to promote the M lines, because the concept was that the medical tanning that you see in vitiligo follows a parallel path to the PhotoCosmetic self-bronzing properties. So in short, we advance, but we're not really ready to launch these products, not from a scientific point of view and not from a marketing. But what we aim to see is lotions and serums applied a number of times a day that assist the self-bronzing in the epidermis. And we're not quite there yet, but we're advancing. The other part is in order to make this a commercial success, the company needs to differentiate itself in all aspects. The retail experience needs to be changed or disrupted, if you wish. The primary packaging, the secondary packaging, the way we distribute it, the retail store concept and all that at a reasonable large scale. But thereby we are conscious of the spending and the budgets we put aside for this exercise while keeping the company profitable. So it's a balancing act that we do need to navigate all the obstacles, but to decrease the risk of failure and that we do that in a very gradual and deliberate manner. Malcolm Bull: Okay. So let's move to Madeleine Williams of Canaccord. Please, Madeleine. Madeleine Williams: So I think, firstly, I was just wanting to know, you've got a few things happening at the moment. Obviously, last year, Europe allowed the increased number of doses and then also in the U.S. as the Disc Medicine trial completes this year, I assume there's sort of going to be more patients available. Just thinking about how you're thinking about the growth in those jurisdictions and sort of the splits going forward. Malcolm Bull: Well, Peter, do you want to comment initially on... Peter Vaughan: For me? Yes, sure. No problem, I can comment on that. So I would say that there's a segment revenue note that we've included within the half year report that does show the breakdown. But I guess a quick summary would be the U.S. revenues have increased year-on-year. And this period, we saw a rise more predominantly in the European volumes, partly spurred on by some patients taking up that increase from 4 implants being a maximum during the year up to 6 that was announced in September 2025. I guess at the moment, the current revenue split is about 53% U.S., 47% for the rest of the world. So that kind of -- that's the insight that I can provide there. I guess on the peptides side, that's probably more Philippe perhaps might be able to answer that one. Malcolm Bull: No, we'll park that. I think we'll move on to Mark Pachacz, because I think he's got to leave pretty soon. So Mark, if you're still there, can you ask your question? Stella Mariss: Malcolm, looks like Mark is no longer here. Malcolm Bull: Okay. That's all right. Well, fortunately, we have another analyst, Thomas -- Thomas Wakim of Bell Potter. Do you want to ask a question please, Thomas? Thomas Wakim: Yes. It's a bit of a follow-on from the previous one actually. So in that revenue segment, the split between U.S. and non-U.S. sales for the period just gone, where we saw a decline in the U.S. and a significant increase outside the U.S. So can you just kind of explain in a bit more detail what those factors were that were at play there leading to that? And how does that look moving forward? Peter Vaughan: Sure. So there was some effect on the U.S. side from the government shutdown. So the government shutdown met delays in Medicare processing as well as also the processing of reimbursements. So in some instances, some of the smaller centers didn't want that longer-term delay on their payment cycles and things like that. So that did cause some headwind there for them. And then we also passed on a CPI increase in 2025 and some of those have caused some negative reimbursement pressure on some of the centers. But overall, we anticipate that the U.S. is still stable and still growing across that, and that's where we've continued increasing the number of centers across North America. So we're seeing new centers come online and start to bring patients to the floor as well. So there is that difference between prior year and this year, but I think it's really explained by the U.S. government shutdown predominantly. Malcolm Bull: Okay, Peter, thanks. And as I was talking with Madeleine before and also with Mark Pachacz, there was a fair bit of interest in peptides. So let's come back to peptides and ask Philippe to comment on the potential of that new area of development. Philippe Wolgen: Well, we spoke for a long time in public about the skill set of the company and how it was expanding concentrically. So we started off as a company focused on clinical affairs. We understood the melanocortin peptides really well. Then we focused on the delivery methods, the best way to deliver and administer a drug into a human body. And from that, we built our Singapore labs and progressed fundamental research into new formulations. We call it formulations of the next generation using liquid injectable peptide platforms. And so naturally, once we mastered these technologies, it opened up the realm of fantasies of what other peptides could you use to deliver a product in a sustained or controlled manner. And that's where we are. So you're going to expect much more from that team and our activities in Singapore. Malcolm Bull: Thanks, Philippe. Very exciting. It's about time that we wrap up, but I didn't want to conclude without addressing a couple of shareholders who asked me about the company's dividend policy and whether we have one, and I can say we certainly do. It's available on the CUV website, but I can tell you that it is the Board's intention to pay a dividend subject to the sufficiency of our funds and the operating and investment needs of the business and indeed future growth and needs to fund that growth. So the Board will determine that, and you can investigate, as I say, the dividend policy online. So I want to say thank you to all the analysts online for asking their questions. Peter, Emilie, Linda, Philippe for their contributions, good insights and all attendees, thank you very much. A link to the webinar will be posted to the CLINUVEL News website as soon as possible for other stakeholders to review. So I'll now close the webinar, wishing you all good health and fortune. Thank you.