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Operator: Thank you for your continued patience. Your meeting will begin shortly. As a reminder, please be sure to silence all cell phones and laptops. Stand by, your meeting is about to begin. Good morning, everyone. My name is Beau, and I will be your conference operator today. Welcome to Ecovyst Inc.’s fourth quarter 2025 earnings call and webcast. Please note, today’s call is being recorded and should run approximately one hour. Currently, all participants have been placed in a listen-only mode to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period. Lastly, if you should need operator assistance, please press 0. I would now like to hand the conference over to Mr. Gene Shiels, Director of Investor Relations. Gene Shiels: Good morning, and welcome to Ecovyst Inc.’s fourth quarter 2025 earnings call. With me on the call this morning are Kurt J. Bitting, Ecovyst Inc.’s Chief Executive Officer, and Michael P. Feehan, Ecovyst Inc.’s Chief Financial Officer. Following our prepared remarks this morning, we will take your questions. Please note that some of the information shared today is forward-looking information, including information about the company’s financial and operating performance, strategies, our anticipated end-use demand trends, and our 2026 financial outlook. This information is subject to risks and uncertainties that could cause actual results and the implementation of the company’s plans to vary materially. Any forward-looking information shared today speaks only as of this date. These risks are discussed in the company’s filings with the SEC. Reconciliations of non-GAAP financial measures mentioned in today’s call with their corresponding GAAP measures can be found in our earnings release and in the presentation materials posted in the Investors section of our website. I will now hand the call over to Kurt. Kurt J. Bitting: Thank you, Gene, and good morning. Overall, we are very pleased with our fourth quarter results and the execution of our strategic objectives. Regeneration services contributed to a solid quarter. In terms of financial results, the fourth quarter was also a significant quarter in the context of our ongoing portfolio transformation. We completed the divestiture of the Advanced Materials and Catalysts segment earlier than expected for a sales price of $556 million, utilizing $465 million of the net proceeds to pay down our term loan, leading to a net debt leverage ratio of 1.2x at year end. This transaction has transformed the company, initiating a new focus to drive progress by delivering reliable sulfur solutions for clean fuels and critical materials. In 2025, we began executing on our capital allocation strategy with the acquisition of the Wagaman sulfuric acid assets for approximately $40 million and repurchased just under $50 million of common stock. We enter 2026 with a strong balance sheet and significant liquidity that we believe positions us well to continue our capital allocation priorities directed at growth, both organic and inorganic, and the continued return of capital to our stockholders. Turning to the demand trends on slide five, our demand outlook for 2026 remains positive, underpinning the volumetric growth we anticipate. We expect favorable contractual pricing for regenerated sulfuric acid and stable pricing for virgin sulfuric acid. In 2025, U.S. refineries underwent extensive maintenance, including our customers. This year, we expect our refining customers to run at high utilization, benefiting from favorable alkylate economics. With less planned customer downtime than in 2025, we anticipate higher sales for our regeneration services in 2026. We are also anticipating higher sales of virgin sulfuric acid in 2026, with demand growing in mining, which accounts for 20% to 25% of our sulfuric acid sales, especially for copper, to support energy infrastructure in some areas. For 2026, we currently expect sales into the nylon end-use to be relatively flat compared to 2025. And while the balance of our industrial exposures are diversified, further weakening of macro factors could translate into softer demand in some areas. The integration of the Wagaman sulfuric acid production assets acquired in May has enhanced our supply network, allowing us to meet anticipated growth in demand for this year. Looking ahead, we anticipate that mining demand for sulfuric acid will increase as many traditional high-grade ores are depleted. Solvent extraction electrowinning processing of copper, which utilizes sulfuric acid for mineral extraction, is expected to become more prevalent. Ecovyst Inc. is well positioned to support expanding mining applications. Accordingly, we are investing approximately $20 million in growth capital in the Gulf Coast region for projects aimed at increasing storage capacity and improving rail logistics, thereby strengthening our ability to serve the evolving needs of the mining industry. Lastly, the long-term outlook for our Chem32 ex situ catalyst activation business remains positive. With future growth supported by the recently completed expansion at our Orange, Texas site. I will now turn the call over to Michael P. Feehan, who will review our financial results. Michael P. Feehan: Thank you, Kurt, and good morning. We closed out the year with a solid financial performance in the fourth quarter. Delivering full-year adjusted EBITDA of $172 million, ahead of our previously provided guidance. As a reminder, with the divestiture of the Advanced Materials and Catalysts segment, the results for the business are reported in discontinued operations for all periods. My comments this morning pertain to the reported results from continuing operations. Our strong fourth quarter results were driven by continued sales growth in both volume and pricing, resulting in adjusted EBITDA of $51 million, 8% ahead of the prior year. We generated $78 million of free cash flow, of which we used $20 million in the fourth quarter for share repurchases. And with the proceeds from the sale of the Advanced Materials and Catalysts business, we paid down $465 million of our term loan, resulting in a 1.2x net leverage ratio, leaving $265 million of available liquidity. Diving a bit deeper into the numbers, fourth quarter sales were $199 million, up $51 million, or 34%. Excluding the $28 million impact of higher sulfur cost pass-through in price, sales were up 15%. However, this was more than offset by higher sales of virgin sulfuric acid, including the contribution from the acquired Wagaman assets, and favorable contractual pricing for regeneration services, partially offset by higher planned fixed manufacturing costs, including incremental costs of the acquired Wagaman assets, and by unplanned and extended customer downtime. The 8% increase in adjusted EBITDA for the fourth quarter reflects the favorable volume and price impact at the sales level and favorable contractual pricing for regeneration services. While the adjusted EBITDA margin decreased 630 basis points compared to 2024, this reduction primarily reflects a significant increase in sulfur costs, which we passed through with no material impact on adjusted EBITDA. The pass-through effect accounts for approximately 500 basis points of the period-over-period decrease in margin. Turning to the adjusted EBITDA bridge, I will highlight the major components of the change in adjusted EBITDA for the quarter. As previously noted, sulfur costs in the fourth quarter were approximately $28 million compared to the year-ago quarter, with the pass-through having no material impact on adjusted EBITDA. Our price/cost impact was a positive $8 million for the fourth quarter, primarily driven by favorable contractual price in our regeneration services business. And while we had lower regeneration services volume in the quarter due to unplanned and extended customer downtime, higher volume from our virgin sulfuric acid sales, including the contribution from our Wagaman acquisition, drove the nearly $6 million volume benefit in adjusted EBITDA. Other costs increased approximately $11 million, the majority of which reflect incremental fixed cost associated with the acquired Wagaman assets, along with higher planned manufacturing costs associated with general inflation. As we move to cash and debt, for the year, we generated adjusted free cash flow of $78 million, which included both continuing and discontinued operations. We utilized our cash generation to execute on our capital allocation strategy, including the $41 million acquisition of our Wagaman sulfuric acid assets and share repurchases aggregating $47 million for the full year. We currently have approximately $183 million remaining under our share repurchase authorization. With our significantly reduced leverage, our ample liquidity, and in light of our historic cash generation capability, we believe that we have significant flexibility as we look to fund our growth initiatives, both organic and inorganic, and continue to return capital to shareholders through an active share repurchase program. Turning to our 2026 outlook, we currently anticipate full-year sales to be in the range of $860 million to $940 million, with the favorable volume and price impact at the sales level, and the pass-through of higher sulfur costs of approximately $125 million compared to 2025. As we have previously discussed, we expect higher turnaround activity at our manufacturing plants in 2026, in part due to the addition of the Wagaman assets. Given the scope and number of turnarounds planned for the year, we expect turnaround costs to be higher by approximately $8 million in 2026. With the higher expected volume, we expect higher sales volume for both virgin sulfuric acid, driven by higher projected mining demand and sales of oleum grades used in the production of nylon precursors, and higher volume for regeneration sulfuric acid, as we expect less customer downtime compared to 2025. We also anticipate continued favorable contractual pricing in regeneration services. With the favorable volume and price impact at the sales level, partially offset by higher manufacturing and transportation costs and additional turnaround costs, we expect full-year adjusted EBITDA to fall in the range of $175 million to $195 million. We are opportunistically investing growth capital in 2026, including the funding of a number of projects to debottleneck assets and accelerate organic growth. These include the ongoing expansion of tank storage and adding additional rail capacity in the Gulf Coast. As a result of these growth projects, we expect higher capital expenditures this year, approximately $20 million higher, resulting in a range of $80 million to $90 million. As a result of the higher growth capital spending, as well as an expected $10 million increase in working capital, driven by the impact of higher sulfur costs on inventory and accounts payable and the associated pass-through impact on sales and accounts receivable, we expect adjusted free cash flow to be in the range of $35 million to $55 million. In addition, with the significant reduction in our term loan, we expect interest expense to be approximately $18 million to $22 million in 2026. With our current cash balance and expected free cash flow generation, we plan to continue to execute on our capital allocation strategy, driving value for shareholders through growth opportunities and further share repurchases in 2026. As we move to the next slide, I will provide some directional guidance by quarter for next year. As you will recall, our results for 2025 reflected significant planned customer downtime, as well as a higher level of planned turnaround activity at our sites. While we have an active turnaround schedule in the first quarter, with three of our seven planned turnarounds, increasing our expected turnaround cost, we do not expect the same negative impact on sales volume from the customer downtime. For the first quarter, we expect continued favorable contractual pricing, and we expect increased volume for virgin sulfuric acid, driven by high alkylate demand and regeneration activity during the summer driving season. As has been our usual practice, our presentation slides include some commentary around turnaround cadence by quarter for the year. The cost for individual turnarounds can vary by site and scope, and the timing is subject to change. We expect first quarter adjusted EBITDA to be up $8 million to $13 million compared to 2025. We expect the second and third quarters to be peak quarters for adjusted EBITDA consistent with historical experience. I will now turn the call back to Kurt for some closing remarks. Kurt J. Bitting: Thank you, Mike. We are extremely pleased with our progress in 2025, and I want to thank my Ecovyst Inc. colleagues for their efforts in supporting our customers, delivering on our commercial objectives, and for their contributions as we continue to implement our strategic plan. In a challenging demand environment, our business demonstrated resilience in 2025. Sales of virgin sulfuric acid increased, in part driven by the acquisition of our Wagaman sulfuric acid assets. As the integration of the Wagaman site continues, we are benefiting from the positive network effect Wagaman’s assets have on the reach and capability of our supply chain. In terms of demand driven by high refinery utilization, the favorable business fundamentals of our regeneration services business remain unchanged. Although our regeneration services business was adversely affected by a significant number of unplanned and extended customer outages in 2025, in 2026, we are expecting growth for both our virgin sulfuric acid sales and the value represented by alkylate economics for our regeneration services business. With stable pricing expected for virgin sulfuric acid and continued positive contractual pricing for regeneration services, we look beyond 2026 and believe the demand outlook remains positive for all of our businesses. The divestiture of the Advanced Materials and Catalysts business at year end represents a transformative event in our ongoing portfolio optimization. As we move forward, driving growth for the eco services platform, we will do so with a more stable and predictable business profile, a significantly strengthened balance sheet, and with a cash generation capability and liquidity position that we anticipate will provide for significant capital allocation flexibility. This year, we are increasing our capital budget to support targeted organic growth projects that we expect to strengthen our service offering for mining clients. Key initiatives include expanding Gulf Coast storage and optimizing logistics, which will strengthen our service offering. These projects are scheduled for completion in 2027. In 2025, we repurchased approximately $50 million in common stock, and during 2026, we plan to continue this strategy with additional repurchases totaling between $25 million and $40 million. We plan to take a disciplined approach towards inorganic growth, prioritizing accretive acquisitions that extend our reach to customers and end segments. Concurrently, we remain committed to returning capital to stockholders through an active share repurchase program. In summary, our focus this year will remain on driving profitable growth, positioning Ecovyst Inc. for future opportunities, and optimizing value for the benefit of our stockholders. At this time, I will ask the operator to open the line for questions. Operator: Thank you, Mr. Bitting. Ladies and gentlemen, at this time, if you do have a question, please press. We will go first today to John Patrick McNulty of BMO Capital Markets. John Patrick McNulty: Yes, good morning. Thanks for taking my question and congratulations on a solid year. Just wanted to dig into the Wagaman opportunities a little bit more. So you have had the asset for a bit of time, you have made some investments in it. I guess, can you help us to think about how much capacity that has freed up for you and as a result, how much growth you could necessarily get without having to put in much capacity or incremental capacity? Because it sounds like you are even further trying to unlock some flexibility with the storage increase and the rail increase. So I guess, can you help us to contextualize all this? Kurt J. Bitting: Sure. Thanks, John. So the Wagaman sulfuric acid assets that we added last year, of course, added roughly around 10% of volume to the overall network. It came along with its own customer book and sales, which we are obviously servicing. We are really seeing the positive network effect. It is a force multiplier with our Gulf Coast network where all the sites now can back each other up in terms of turnarounds and so forth, and enable themselves to take advantage of additional opportunities that they may have had to pass on if they were on their own. It fills the cracks in terms of the supply network and allows us to take advantage of more opportunities. It also is our only site that has a deepwater vessel dock. We actually did export a ship of sulfuric acid there. It adds a lot of capability to our overall site. As we move forward, the way we look at our Gulf Coast network and the investments that we are making, we clearly want to focus the Houston production more to the West. We are making additional investments that we talked about on our logistics and storage capabilities, which are going to be Houston-based to service more of the Gulf Coast assets with that plant, and the Wagaman assets and the production that that brings allows capacity into our Gulf Coast system, enables us to further service that and take advantage of the rising tide on the mining demand. Does that make sense? John Patrick McNulty: Yes, completely. That definitely helps. And then, I guess, on the regen contract pricing, can you help us to quantify that a little bit? It sounds like you were getting some benefits in 2025. It sounds like that is a continual kind of repricing, but how should we think about the lift in 2026? Michael P. Feehan: Yes, John, thanks for the question. Yes, it is going to be a similar lift. I think, as we have talked in the past, every year the contractual agreements that we have start to roll off. It is usually between 15% to 20% a year; it just depends on the size of the customers and how they shape up. With basic costs going up, with the inflation and how the contracts are structured, with indexing and other factors, it does provide a benefit. So it is a continued benefit similar to what we saw this year. That is going to extend into next year, and again, it just depends on timing of when some of those customer contracts come up and when they are put in place. John Patrick McNulty: Thanks very much for the color. Just regarding the weakness that you are citing in industrial applications—nylon, obviously, we have seen some pretty promising indicators with U.S. PMI inflecting, maybe nylon bottoming out—but are there any specific applications that you want to call out or factors that you would highlight, which is giving you some caution here? Kurt J. Bitting: Patrick, thank you for the question. Our basket of what we call industrial uses spans a very wide spectrum. As you know, sulfuric acid is the most widely used chemical in the world, and there is anything from core alkali production to nylon to other petrochemicals. There are a lot of different things and a lot of different drivers there. We just see some caution in some of those areas. I do not think it is over-caution or a real worry. We service such a wide and diverse basket of folks there that could be impacted by any of the global things going on between tariffs or some of the downturns in some of the chemical end markets. For us, our biggest one is, as you referred to, nylon. As we have clearly pointed out, we expect to be roughly on par with where we were in 2025, so we do not really project any degradation there. Operator: Thank you. We will go next now to Patrick David Cunningham of Citi. Patrick David Cunningham: Hi, good morning. On a go-forward basis, as you think about CapEx or acquisition multiples, how do the economics of greenfield versus debottlenecking compare to current existing virgin facilities? It seems like there is a lot you may want to do or need to do to meet long-term mining demand. Kurt J. Bitting: Yes. That is a great question. I think with the way we have treated our sites over the past, I would say, 10 or 15 years, the demand from the mining sector has risen, and we are going to continue to do that—debottlenecking in our sites from both the production standpoint as well as the logistics standpoint. As that rising tide happens with mining, we are able to stay ahead of it by making the logistics and storage investments that we just talked about. We have got some additional debottlenecking that we can do. We can leverage more of Wagaman’s production into our Gulf Coast system, and we are going to continue that pattern, enabling us to stay ahead of the demand and further service that. Operator: Thank you. We will go next now to Aleksey V. Yefremov of KeyBanc Capital Markets. Aleksey V. Yefremov: Thanks. Good morning, everyone. I just wanted to follow up on the same subject. The expansion that you are undertaking in 2026, is it tied to any specific ramp at your customers in mining or elsewhere that you anticipate? In other words, do you have contracts or some sort of indication from your customers that they will need additional volumes for sulfuric acid, specifically as it relates to copper? Kurt J. Bitting: We have long-term relationships with those customers, and we are confident that the demand will be there. It is a mixed bag of what is driving that additional demand—there are actually some new projects that have come online, and there is also additional demand from existing mines. We have been servicing a lot of these mines. So we feel it is appropriate for us to add this additional capacity. We have the logistics capacity to meet that growing demand long term, coming from our plants in the Gulf Coast. Aleksey V. Yefremov: And as a follow-up, how would you characterize the current state of the merchant acid market either right now or if you have a view on 2026—is the market sort of long, tight, or about balanced from a supply-demand perspective? Kurt J. Bitting: Thanks for the question. I would say it is in a balanced position. In our call, we talked about pricing being stable. I would say it is leaning towards a balanced market, however, there are certain segments of the market that are all over the board in terms of the different end-use applications. Some of those are up, some of those may be down. On the whole, our view at this point is a push in general. Other sectors that use sulfuric, like mining, are obviously rising. The long-term trend, certainly as you look at things like mining, is growing demand there. Operator: We will go next now to David L. Begleiter with Deutsche Bank. David L. Begleiter: Thank you. Good morning. Kurt, on your full-year guidance, the low end looks maybe a little conservative. What would you need to see to get the low end of the range? And conversely, what type of drivers would you expect to see to get to the high end or above that range for the year? Kurt J. Bitting: Thank you for the question. Starting at the high end of the range, if there is a lift in things like virgin acid pricing that comes about because of demand growing and it putting upward pressure on pricing in the virgin sulfuric acid market, that would help. Our outlook on regeneration, as we talked about, is expected to run at pretty high utilization. We expect a pretty healthy year in terms of regeneration. I do not think there is going to be tremendous movement on that because that is a stable, contracted business, and we do not expect spot volumes that become available. On the low end, it would largely be driven by things like unplanned customer outages similar to what we had last year, or potentially a macroeconomic event that causes a deterioration in either pricing or volumes on virgin sulfuric acid. Conversely, if there is some positivity and pricing, or spot, we could trend toward the upper end. David L. Begleiter: Very clear. And, Kurt, now with the balance sheet restored to strength, how do you see Ecovyst Inc. in three to five years? What do you want to be? Where do you want to go? From an inorganic standpoint, in terms of M&A, what could be additive to the portfolio that you are looking at today or maybe down the road? Kurt J. Bitting: Thanks for the question. The Board and the management team are carefully looking at our capital priorities as we focus on maximizing the value for our shareholders over the long run. Number one, we see opportunities in front of us in mining and other spaces. That is going to entail us investing in organic growth as we see the demand for sulfuric acid and the sulfur molecule grow. We want to make investments there and continue to be a leading supplier in that space, so we can further service our existing customers or existing industries that we service in a better way. Number two, growth through sensible and accretive acquisitions—accretive bolt-on acquisitions that make sense that are either adjacent to us from a chemistry standpoint or a service standpoint—to become bigger. And finally, as we have talked about with our flexible capital allocation strategy, we still see value in share repurchases as well as a tool. It is a flexible strategy that allows us to push in all three of those directions, which we think can help us drive better value for shareholders over the long run. Operator: Thank you. We will go next now to Hamed Khorsand at BWS Financial. Hamed Khorsand: Hi. Sorry if I missed this, but are you done with the investments you need to make at Wagaman? And in the near future, as you further integrate it, are you able to deliver the sulfuric acid to mining that might be a little bit higher in demand, or are your contracts pretty much fixed on volume? Kurt J. Bitting: Thank you for the question. Good to talk to you, Hamed. The integration is going well. We talked about it—It has had a positive network effect on our ability to supply our customers in the Gulf Coast. We have owned the site now for about nine months. The site is going to have a maintenance outage this quarter. There are still some additional investments that we want to make in the near future as we further integrate it and try to raise the operating rate on the location. From an operating and integration standpoint, there will be some investments made, and we expect that there will be further investments necessary if the nylon or industrial end markets are as weak as you are expecting. As we have talked about before, and I know people have followed the company, most of our virgin sulfuric acid business is not 100% supply contracts. We have very close relationships with our customers. They provide us great and accurate forecasts into what they are going to do, not only in mining but in some of the other sectors in terms of industrial. That helps us plan as we look at our year and say where we are going to place our volume. If there is a downturn or something unexpected, we do have the ability to place some additional product into different end-use segments and move things around—probably not all of it, but some portion thereof—whether it is into mining or other industrial segments that may be in the Gulf Coast. We have some flexibility to move around net volumes. Operator: We will go next now to Laurence Alexander of Jefferies. Laurence Alexander: Good morning. Just can you give a higher-level view on your M&A opportunity set? When you look at the landscape in terms of other assets producing sulfuric acid, is there any titration in terms of the quality of the assets? Can you separate out the market in terms of the addressable versus the assets that you would just not like—is it 30% to 40% of the market that you would have no interest in? Or is it potentially all of interest? Kurt J. Bitting: Thanks for the question. We would generally be interested in all those types of assets because we would have use for both since we are a leader in both spaces. We are pretty broad in terms of our sulfuric acid and the end uses we service. We service a wide swath of the market. We are not just a regeneration sulfuric acid producer or just a virgin sulfuric acid producer like some of the others out there. I would also say that extends to other exposure in terms of making sulfur derivatives for water treatment or various things where the sulfur molecule is important, as well as services where, obviously, the regeneration services, our hazardous waste services business, our Chem32 businesses all serve very high-value service businesses. Expanding further into those spaces would also be of interest. Laurence Alexander: Thank you. Operator: Ladies and gentlemen, just a quick reminder: any further questions today, please press. And, gentlemen, it appears we have no further questions in queue at this time.
Operator: Good morning, and welcome to Public Service Enterprise Group Incorporated's Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. Ladies and gentlemen, thank you for standing by. My name is Rob, and I will be your operator today. At this time, all participants will be in listen-only mode. Later, we will conduct a question-and-answer session for members of the financial community. At that time, if you have a question, you will need to press star then the number one on your telephone keypad. To withdraw your question, press star then the number two. If anyone should require operator assistance during the conference, please press star then zero. As a reminder, today's conference is being recorded today, February 26, 2026, and will be available for replay as an audio webcast on Public Service Enterprise Group Incorporated’s Investor Relations website at investors.pseg.com. I would now like to turn the call over to Carlotta Chan. Please go ahead. Carlotta Chan: Good morning, and welcome to Public Service Enterprise Group Incorporated's Fourth Quarter and Full Year 2025 Earnings Presentation. On today's call are Ralph LaRossa, Chair, President and CEO, and Daniel J. Cregg, Executive Vice President and CFO. During today's call, we will discuss non-GAAP operating earnings, which differ from net income as reported in accordance with generally accepted accounting principles (GAAP) in the United States. We include reconciliations of our non-GAAP financial measures and a disclaimer regarding forward-looking statements on our IR website and in today's materials. Public Service Enterprise Group Incorporated's earnings release, attachments, and slides for today's discussion are posted on our IR website at investors.pseg.com. We will also discuss forward-looking statements and estimates that are subject to various risks and uncertainties. Our 10-Ks will be filed later today. Following our prepared remarks, we will conduct a 30-minute question-and-answer session. I will now turn the call over to Ralph LaRossa. Ralph LaRossa: Thank you, Carlotta. And thank you all for joining us to review Public Service Enterprise Group Incorporated's fourth quarter and full year 2025 financial and operating results and our financial outlook for the year ahead, and our long-term projections through 2030. But before I dive in, I would like to thank our employees who, once again this past week, prepared and restored our system from yet another intense combination of winter weather and single-digit temperatures that brought over two feet of heavy snow and 60-mile-per-hour winds to our service areas in New Jersey and Long Island. I cannot say enough about our crews' dedication throughout this entire winter season working in freezing conditions to keep the lights on and our customers warm. Now, starting with our financial results, Public Service Enterprise Group Incorporated reported net income of $0.63 per share for the fourth quarter and $4.22 per share for the full year of 2025. Our non-GAAP operating earnings were $0.72 per share for the fourth quarter and $4.05 per share for the full year of 2025. Also, earlier today, we announced our dividend declaration for 2026, setting the indicative annual rate at $2.68 per share. This is a $0.16 per share increase, an increase of approximately 6% over last year's dividend and higher than last year's increase of $0.12 per share, all reinforced by our confidence in our long-term projection. Starting with operations, on 02/07/2026, we had a seasonal gas send-out peak when temperatures dipped below 10 degrees Fahrenheit, registering the fifth-highest send-out in our history. During that same cold snap, PSE&G's appliance service business responded to nearly 2,000 no-heat calls per day compared to an average of 600 calls on a typical winter day, and our electrical systems also performed well, with a comparatively small group of customers affected, and PSE&G was able to restore service to virtually all customers within 24 hours. Beyond the storms seen in 2026 to date, Public Service Enterprise Group Incorporated's full year results for 2025 were achieved while facing multiple severe storms and extreme weather events throughout the year that stressed our electric and gas systems. PSE&G's response, guided by our operational excellence model, achieved excellent results in safety, reliability, and customer satisfaction measures. I am also very proud of the work Public Service Enterprise Group Incorporated is doing in support of New Jersey's efforts to minimize utility bill increases. Last July, we implemented several summer relief initiatives in cooperation with New Jersey regulators to help our customers manage the impact of PJM-related electric supply costs that PSE&G passes through to customers. The latest example of our efforts occurred on February 1 when PSE&G held its residential gas rate flat for the remainder of the winter 2025 through 2026 heating season. Extending the stability of our gas rates further highlights PSE&G's favorable residential gas bill profile, which is not only the lowest cost in the state, but also the lowest in the region. And there is more good news to report on the customer front. Earlier this month, the New Jersey Board of Public Utilities approved the results of the latest electric supply auction known as the Basic Generation Supply Auction, or BGS, which will result in a 1.8% reduction in the average monthly bill for PSE&G residential electric customers starting June 1 when seasonal electric use is at its highest. Over the next several months, we will introduce even more ways to help our customers manage and save on their utility bills with increased budget billing education, new time-of-use rates, and more energy efficiency solutions. PSE&G also received approval to extend the three-year GSMP II program, which will continue our efforts to reduce methane emissions, a powerful greenhouse gas. We know that our cumulative progress from these programs has reduced our methane emissions by over 30% systemwide from 2018 levels. And recent winter weather has validated how effective our gas system investments have been by reducing both the number of pipe breaks and low-pressure issues compared to similar low-temperature events in the past. Our operating performance continues to be a positive differentiator in the state and the region. PSE&G received the 2025 ReliabilityOne awards for Outstanding System Resiliency, Outstanding Customer Engagement, and, for the 24th year in a row, Outstanding Reliability Performance in the Mid-Atlantic region. PSE&G ranked number one in customer satisfaction among large electric utilities in the East Region, according to the J.D. Power 2025 U.S. Electric Utility Residential Customer Satisfaction Study. PSE&G ranked number one in customer satisfaction among large electric utilities in the East Region according to the J.D. Power 2025 U.S. Electric Utility Business Customer Satisfaction Study, marking the fourth consecutive year PSE&G has earned the top position in this segment. And PSEG Long Island, yes, PSEG Long Island ranked number one in customer satisfaction among large electric utilities in the East Region, capping an eleven-year rise from the bottom of the rankings since PSEG Long Island took over the operation of the electric grid on Long Island. And by the way, PSE&G was number two in that same study. Finally, PSEG Long Island was awarded a five-year contract extension to continue as the electric transmission and distribution operator on Long Island and the Rockaways through 2030. We look forward to continuing our constructive partnership with LIPA that has enabled us to become the best performing overhead electric service provider in New York State and, like PSE&G in New Jersey, a top performer nationally for reliability and safety. 2025 was a successful year for our company, both operationally and financially. 2025 was a successful year for our company, both operationally and financially. PSE&G executed on its capital plan, investing approximately $1 billion in the fourth quarter and approximately $3.7 billion in total for the year, in regulated capital spend. On the generating side, PSEG Nuclear posted a 91.2% capacity factor for the full year, producing approximately 30.9 terawatt-hours of 24-by-7 carbon-free baseload power for the grid, including during the intense June 2025 heat wave when New Jersey needed it most. Public Service Enterprise Group Incorporated's non-GAAP operating earnings for 2025 were at the high end of our narrowed guidance range of $4.00 to $4.06 per share, extending management's track record of delivering results that either met or exceeded our earnings guidance for the 21st consecutive year. Turning to our outlook for 2026. First, we initiated a non-GAAP operating earnings guidance in the range of $4.28 to $4.40 per share, an increase at the midpoint of 7% over 2025 results. Our 2026 guidance is based on our investment program at PSE&G and expected nuclear output realizing market prices that exceed the nuclear PTC threshold. And we are approximately 95% hedged for the remainder of 2026. We will also keep to our longstanding practice of stringent cost control and continuous improvement to support affordability and benefit our customers. Regulated capital spending is forecasted in the range of $22.5 billion to $25.5 billion over the same period and supports a rate base CAGR of 6% to 7.5%, with over 90% focused on regulated investments. For the 2026 to 2030 period, $24 billion to $28 billion of regulated capital spending is forecasted, and our solid balance sheet supports execution of this robust five-year capital plan without the need to issue equity or sell assets. Second, we updated Public Service Enterprise Group Incorporated's GAAP earnings growth outlook to 6% to 8% through 2030. With these updates, we are raising Public Service Enterprise Group Incorporated's long-term non-GAAP operating earnings CAGR to 6% to 8% through 2030. This higher growth rate is supported by our best-in-class utility operations executing on a customer-focused infrastructure modernization and energy efficiency investment program. This regulated growth is supported by nuclear generation ownership, a significant cash flow generator and therefore a differentiator among our peers. Potential growth beyond our forecasted 6% to 8% CAGR range could be achieved through opportunities to contract existing and additional generating output to provide for residential universal bill credits and through incremental regulated capital investments. We look forward to constructive dialogue with the BPU on these issues, including the exploration of regulatory reform to again offset electricity supply rate increases. Now turning to the legislative front, in the past few days, a bill was reintroduced in the state legislature to establish a new natural gas power plant procurement program at the BPU and incentivize development of new natural gas power plants in the state. This gas bill pairs with an earlier bill that established a new nuclear procurement program also within the BPU that was introduced at the start of this legislative session. We look forward to working with policymakers to advance energy strategies and resources that secure affordable, reliable, and diverse energy supplies, and support legislation that would increase competition for generation supply should New Jersey decide to pursue new in-state generation. The supply-demand dynamic we are seeing in New Jersey as prompted executive orders to be issued to explore supply options. The executive orders also direct the BPU to again offset electricity supply rate increases, provide for residential universal bill credits, and through incremental regulated capital investments, including the development of an additional 3,000 megawatts of community solar and battery storage. We have been cooperatively working with policymakers since last November, and we look to help New Jersey achieve the high-priority goals of these executive orders. We have sites with grid connection capability and pipeline supplies, as well as the in-house expertise to build new supply here in New Jersey with prevailing wage labor. And as we have previously mentioned, we are well positioned to help meet that need. I will now turn the call over to Daniel, who will walk you through our 2025 financial results and the outlook for 2026. And then I will rejoin the call for Q&A. Daniel J. Cregg: Thank you, Ralph. And good morning, everyone. Public Service Enterprise Group Incorporated reported net income of $4.22 per share for the full year of 2025, compared to net income of $3.54 per share for 2024. For the fourth quarter of 2025, net income was $0.63 per share, compared to $0.57 per share in 2024, and non-GAAP operating earnings were $0.72 per share for 2025, compared to $0.84 per share in 2024. Slides eight and ten detail the contribution to non-GAAP operating earnings per share by business segment for the fourth quarter and full year of 2025. PSE&G reported non-GAAP operating earnings of $352 million for 2025 compared to $378 million in 2024. Compared to 2024, distribution margin increased by $0.07 per share, mostly reflecting incremental gas margin from the third quarter GSMP II roll-in, an increase in the number of customers, and higher gas demand. Higher investment in energy efficiency also contributed to distribution margin in the quarter. On the expense side, distribution O&M increased $0.04 per share compared to 2024, primarily due to higher reserves related to bad debt and operational costs. Weather during the fourth quarter, measured by heating degree days, was 9% colder than normal and 23% colder than 2024. As a reminder, the Conservation Incentive Program, or CIP, decouples weather and other economic sales variances from a significant portion of our distribution margin, all while helping PSE&G promote the widespread adoption of energy conservation, including energy efficiency and solar programs. Under this CIP, the number of electric and gas customers drives margin, and the residential customer growth for both segments was approximately 1% in 2025. Depreciation and interest expense rose by $0.20 per share, reflecting higher levels of depreciable plant and long-term debt at higher interest rates. Lastly, distribution-related taxes were $0.05 per share higher compared to 2024 due to plant-related taxes and lower write-offs. On the capital front, as Ralph mentioned, PSE&G invested approximately $1 billion during the fourth quarter. And for the full year 2025, our capital spending totaled approximately $3.7 billion with continued investments in infrastructure modernization, energy efficiency, and distribution reliability and resiliency investments supporting growing customer demand. For 2026, our planned capital investment program for the regulated business is approximately $4.2 billion. Our 2026 to 2030 regulated capital investment plan amounts to $22.5 to $25.5 billion, which compares to our prior plan of $21 to $24 billion, and is expected to produce a compounded annual growth in PSE&G's rate base of 6% to 7.5% through 2030, starting from a year-end 2025 balance of approximately $36 billion, which includes construction work in progress. The $1.5 billion increase in regulated investments is primarily driven by anticipated load growth due to data centers and other new customers. We also rolled forward our five-year regulated capital plan through 2030, plus other incremental investments. These investments help us maintain our best-in-class reliability and customer service, as well as meet New Jersey's energy savings goals. Earlier this month, the BPU certified the results of the annual New Jersey BGS auction that was held to secure electricity for customers that have not selected a third-party supplier. Based on the competitive auction results, the cost of electricity supply on PSE&G residential electric bills will decline by 1.8% starting June 1, 2026. This decrease reflects the net impact of a lower overall 2026 BGS price that will replace the 2023 auction result that contained higher energy costs. Moving to 2025, PSEG Power & Other reported a net loss of $37 million for the fourth quarter compared to a net loss of $92 million in 2024. Non-GAAP operating earnings were $10 million for the fourth quarter compared to non-GAAP results of $43 million for 2024. PSEG Power & Other reported net income of $366 million in 2025, compared to $225 million in 2024, and non-GAAP operating earnings were $284 million in 2025, compared to $292 million in 2024. Referring to the fourth quarter waterfall on slide nine, net energy margin was flat compared to the prior-year quarter as higher gas operations were offset by the absence of zero-emission certificates at our 100% owned Hope Creek nuclear plant and lower generation volume due to the scheduled refueling. O&M was $0.04 per share higher during the Hope Creek refueling outage as we transitioned the unit from an 18-month to a 24-month refueling cycle going forward, which will yield additional megawatt-hours as well as O&M savings over the long term. Depreciation expense was $0.01 per share favorable compared to 2024, and taxes and other were $0.01 per share favorable compared to the year-earlier quarter, driven by a contribution to the PSEG Foundation. Interest expense rose by $0.04 per share, reflecting incremental debt at higher interest rates. Non-operating expenses were $0.02 per share higher compared to 2024. On the operating side, the nuclear fleet produced approximately 7.2 terawatt-hours during the fourth quarter of 2025, compared to approximately 7.3 terawatt-hours in 2024, mostly driven by the Hope Creek refueling outage, and for the full year 2025, nuclear generation was approximately 30.9 terawatt-hours, up slightly from 30.6 terawatt-hours in 2024. Capacity factors for the nuclear fleet were 83.7% and 91.2% for the quarter and full year of 2025, respectively. Touching on some recent financing activity, as of December 2025, PSEG total available liquidity remains strong at $2.8 billion, including approximately $130 million of cash on hand. On the financing front, in December, PSEG Power amended its existing $400 million, 364-day variable-rate term loan, which increased the balance to $500 million and extended its maturity to December 2026. Liquidity was supported by solid cash from operations during 2025, totaling more than $3 billion and higher working capital balances. As of December, PSEG's variable-rate debt consisted of the 364-day term loan at Power for $500 million, which matures in December, and our level of variable-rate debt represents approximately 6% of our total debt. Looking ahead, our balance sheet supports the execution of Public Service Enterprise Group Incorporated's five-year capital spending plan, which is dominated by regulated CapEx, without the need to sell new equity or assets through 2030 and provides the opportunity for continued dividend growth. Funds from operation to debt is projected to be in the mid-teens through 2030, comfortably above our minimum threshold. Now, before I conclude my remarks, let's review earnings drivers for 2026 as outlined on slide five. First, we are starting with a higher rate base of approximately $36 billion at year-end 2025, and that is up about 7% over year-end 2024. In addition, clause-based recoveries for investments in distribution infrastructure and CEF Energy Efficiency II are expected to contribute to utility margin. On the distribution side of the business, electric base rates for 2026 are projected to be stable. As we discussed on the third quarter call, PSE&G's annual FERC transmission formula filing was implemented on January 1, with an $82 million increase in annual transmission revenue subject to true-up. Like last year, we do not expect to book earned revenue on January 1, with an $82 million increase in annual transmission revenue subject to true-up. At PSEG Power & Other, the zero-emission certificate amounts earned by our New Jersey nuclear units concluded in May. And just as a reminder, expected generation output for 2026 is approximately 95% hedged. Our nuclear refueling cycle for 2026 includes a spring refueling at Salem Unit 2 and fall refuelings at Salem Unit 1 and Peach Bottom Unit 2. Hope Creek is scheduled for its next refueling in 2027 following the completion of fuel cycle extension work in 2025 and a shift to a 24-month refueling outage schedule. As we continue to stringently manage our controllable costs, we will see interest and depreciation expense that will rise with a higher investment balance at PSE&G and higher interest expense at PSEG Power and Parent related to refinancing maturities at higher current interest rates. In closing, we are proud to have delivered, for the 21st year in a row, on meeting or exceeding our earnings guidance, and we carry that confidence forward to our full year 2026 non-GAAP operating earnings guidance of $4.28 to $4.40 per share, 7% higher at the midpoint over 2025 results. We increased our dividend by over 6% and updated our long-term non-GAAP operating earnings CAGR to 6% to 8% using a higher baseline for the second year in a row. Earnings growth beyond our forecast is achievable through opportunities to contract our existing output and planned uprates, as well as from incremental regulated capital investment. That concludes our formal remarks. And we are ready to begin the question-and-answer session. Operator: Ladies and gentlemen, we will now begin the question-and-answer session. If your question has been answered and you wish to withdraw your polling request, you may do so by pressing star then the number two. If you are on a speakerphone, please pick up your handset before entering your request. One moment, please, for the first question. The first question is from the line of Shahriar Pourreza with Wells Fargo. Shahriar Pourreza: Hey. Good morning. Hey, guys. Good morning. Good morning, Ralph. How are you doing? Ralph LaRossa: We are good. How are you? Shahriar Pourreza: Not too bad. Not too bad. Busy. Busy. Can you just maybe talk about the timing of the bill, so next steps, will there be, like, an IRP process? Could there be, like, a PPA where you earn a return on the PPA, assuming a generator wins the RFP? And how do we, like, work through things like air permits and turbine queue backlogs? I guess, how do you think about this whole process around this for some time around new gas? Ralph LaRossa: Yeah. Boy, there is a lot there. But you also answered your own question a little bit. That is your answer, Shar. Because, you know, much of it is in play, right? As you said. And many of those variables that you laid out are the exact variables that policymakers need to come to grips with. Right? So there are a couple of bills that are floating down in Trenton right now that will help enable new nuclear and potentially new gas. I think the governor already has the ability to move on a lot of solar and potentially battery storage. So the way we have been thinking about it is trying to help policymakers think through and then enable the opportunities for gas or for new nuclear. And that is really what we have been trying to do is help them think through that at this point. It does not drive the output. The IRP will make recommendations as policymakers will, in quite a few different settings, and they will be the ones that really own that as they go forward. But I think that process, again, just informs the output. We could help out with an IRP for New Jersey. We could help out with an IRP for PSEG. We do all the time on Long Island. But they are not going to be the decisions. They do not carry the word of law. Right? Shahriar Pourreza: Got it. And then just lastly, can you just maybe help us quantify, like, what level of hedges and upside versus the PTC you are kind of embedding in that 6% to 8%? Is the bottom end of that CAGR kind of anchored in PTC out years? Daniel J. Cregg: And so I think you are looking more at a market view to try to get you to what that out year looks like. I think that market view is supported by some of the fundamentals that you are seeing out there. And if and as that moves over time, which we would expect that it would, we will take that into account as we are making our comments and updating what is going on. But I think that is the way to think about it. Shahriar Pourreza: Got it. That is perfect. Thank you, guys, so much. Much appreciated. Daniel J. Cregg: Thanks, Shar. Operator: Our next question is from the line of Nick Campanella with Barclays. Nicholas Campanella: Good morning, everyone. Thanks for the updates. Ralph LaRossa: Good morning, Nick. Daniel J. Cregg: Thank you. Nicholas Campanella: You know, when you had a five to seven, you kind of talked about it being nonlinear. And now you have the six to eight, which is great to see. And I just recognize you have things like refueling outages and timing of rate case outcome at some point in this plan. So just maybe you can talk to whether this CAGR is linear or not? And you may fall within the CAGR 27, 28, and just the kind of critical drivers that people should be paying attention to here? Thank you. Daniel J. Cregg: Yeah. So, Nick, I think, you know, we have talked about for the last three years about being more predictable. And, yes, our goal remains to be as linear as possible. But we work really hard to do that. Right? There will be structural changes that happen where we have to modify, and right now, I think the structural change has been the supply-demand curve, and we have seen that. And it has taken us above the PTC floor. So we adjusted. Our goal remains the same, which is to be a predictable, delivering the results that we said we were going to deliver. And I think we have been able to achieve that by investment. So with that is our effort to be as linear as possible. That does not mean we will be 100% linear. But I think our, you know, effort is to continue to be as predictable as we can be. And we feel confident in the plan that we put forth today. Nicholas Campanella: Thank you. And I recognize that you forecasted the base off a higher midpoint of 26 as well. So, thank you for that. Maybe just, you also can talk about, you know, nuclear contracting. You talked about nuclear contracting to kind of put you above that range. Just maybe what is the latest thoughts on that at this point? I know the prior state administration was very focused on bringing data centers to the state. How is that kind of looking over this new administration? And just maybe anything you can offer, the most near-term things that you ought to be able to think about as this administration comes in and settles in on their views on this, and what your conversations have kind of been with customers on that? Thank you. Daniel J. Cregg: Yeah, Nick. And I think that the story is fairly consistent. I think that, obviously, the facilities that we do have in Pennsylvania, where I think there has been a more firm view over time and more stability with respect to who has been in the governor's office there, as well as some of the smaller opportunities that we have more locally within New Jersey. And we have talked about a lot of the applications that the utility has seen. And so there is, I think, less opportunity for something of a sizable scale in New Jersey just from the standpoint of where the administration has been. To the extent that that changes and the receptivity is increased there, there could be incremental opportunity. But I think for the time being, the more fertile ground right now would be Pennsylvania for something larger and some of the smaller New Jersey locations, and I think those discussions have progressed well. Ralph LaRossa: Yeah. And I would just add, Nick, just from a normal rhythm of transition for administration like this, in the way it works in New Jersey, there is a real focus now. First of all, let us staff up, and I think the governor has done a great job of getting a number of people in place not just in our industry, but in other areas that matter to the state run well. And I think the second thing they need to do is really focus on the budget for New Jersey. And so that is where my understanding from conversations we have had is the focus of the governor right now. When she gets through that process, I think economic development will be right behind that as an area of focus, and we are already having conversations on that. I chair, Choose New Jersey, about the role we will play in the organization and the areas of focus, but that has not been finalized yet. Nicholas Campanella: Understand that this RBA process is going on right now. And there are discussions around extending the RPM collar for another two years and extending, you know, a, a week or two ago, a $4.20 per megawatt-day number was kind of thrown out there. Just what are your kind of thoughts on that? Okay. And then if I could just throw in one follow-up on through 2030, and then what is kind of embedded at the current cap rate in the plan? Daniel J. Cregg: Look. I think embedded within your question, Nick, is the fact that you have got a market out there where you can see what things are looking like, but it will remain somewhat dynamic as you step through time. And that is the best information that we have as well. And so what we are doing is trying to look at what that looks like. I think we feel good about where we are and how it all fits together within the plan. But I think it is those same market signals that we see that you are seeing out there. I mean, a reminder, I would highlight the fact that the location of our facilities is in the PECO zone. So if you are thinking about pricing and trying to do math to figure out what this means in the out years, that zone is most highly correlated to the actual generator buses where we run. So West Hub trades north of that. We said it trades about 20% above what we would be seeing from where our generator bus is. And so it is those market points that we look at to try to derive where we are headed within the plan and what we put forth to you. And we think we are in a really good place against that backdrop, but that is what we look at as we go forward. Nicholas Campanella: Okay. I appreciate the thought. Thank you. Operator: Our next question is from the line of William Appicelli with UBS. Ralph LaRossa: Morning, Bill. Daniel J. Cregg: Rob, maybe you want to go to another one and see if Bill rejoins? Operator: Sure. The next question would be from the line of Julien Patrick Dumoulin-Smith with Jefferies. Julien Patrick Dumoulin-Smith: Hey, Julian. Hi, Julian. Hey. Good morning to you guys. Thanks for the time. I appreciate it. Look. Let me follow, and by the way, nicely done on the CAGR increase. Got to hand it to you guys. If I could, on the gist of what Shar and Nick were asking us about here. Let us talk about the overlap between the BPU here and what next steps are from both and how they might overlap. Right? Because clearly, there is a certain degree of legislative process of mutual alignment between the two in theory. Can you comment a little bit on timeline? I know Shar was kind of pressing at that as well here. Ralph LaRossa: Yeah. Look. I think you are going to have a little bit of give and take that will continue as people find their footing in this new legislative area and how the regulator is going to work. The administration is finding their footing, but the administration recently introduced these two bills that would kind of direct the BPU to do certain things. The BPU has the ability to do certain things today. You know, go out and procure gas, to go out and procure new nuclear. Right? We had the exact process in the past. But they are limited in what they can do. So they could use a little more direction to make the process a little cleaner for them by some legislative changes. So I think I cannot tell you it is going to happen in the next 30 days, and I cannot tell you it is going to happen in the next six months. And it all comes out of the back end of the last 12 months of discussions about the need for us to change that balance somehow. The scarcity is there, and we have got load increases that have taken place across PJM, even if we do not have a data center in New Jersey, and we do have higher electricity costs from a supply standpoint. The load increases are happening right across the river, and it is impacting the pricing here in New Jersey. So I think the BPU has recognized that they do not want to be in the same level of import that they are. I mean, policymakers feel the same way, and they want a little more control over the pricing of the product that ultimately residents of New Jersey hold us all accountable for. Julien Patrick Dumoulin-Smith: Got it. And if I can zero in a little bit, guys, on the 2026 guide here, and thanks again for your help earlier, how do you think about what the breakdown is between the regulated utility side of that year-over-year increase versus what is reflected in power? And then even within power, can you comment a little bit about where you guys are hedged? I know you said you are 95% for this year. Just comment a little bit about where you are relative to that floor, if you will. Want to make sure we are all on the same page here. Just as that starting point. Daniel J. Cregg: Yeah. I mean, obviously, we are north of it because that is how we described it and how we put it out there. I think to go much beyond that, we would start to break down the pieces beyond what our overall guidance is. And so I think, just maybe repeating a little bit what I said before, Julian, if you think about what the market signals are that are out there, that is what we are leaning on. I would say that 2026, we gave you a 95% hedge. 2027, I think it is fair to say that we are largely hedged for that year. And in 2028, I think if you think about a ratable approach over three years that we have talked about, we have leveraged that liquidity to be able to hedge up a fair bit of 2027–2028, but 2029 and 2030 remain more subject to market forces as we go forward. Well, let me try this differently. How do you think about earned returns in the current year here for the utility and or what is implied year over year in growth on an EPS basis? Yeah. Look, Julian, I think we have been pretty clear about the fact that where the structural changes will make changes. And when the changes are not structural, we will look at what opportunity sets we have for maintenance activities that might be in a four-year cycle and try to look at that from a predictability standpoint for the investment community. So we look at our plans every year. We adjust to that. And, again, I just want to reinforce that we are really happy with the pattern that we have talked about from an earnings standpoint. We were really happy with the top end of the five to seven we have been running for the last couple of years, but we thought the scarcity issue of power was enough to change our thought process to be in that six to eight, based upon where prices are, driven by both the capacity and the energy side. Julien Patrick Dumoulin-Smith: Excellent, guys. Thank you much. Operator: The next question is from the line of William Appicelli with UBS. William Appicelli: Yes. Hi, Ralph. Dan. Thank you. Apologies for that technical problem. Just maybe building on some of these other incremental regulated capital investments, and forgive me if you already addressed it and I missed it. But I guess, where in the spectrum would those fall? And what types of projects are we talking about there? Ralph LaRossa: I think they come in really two buckets. Right? There is incremental transmission that is in the PJM region. We have been active in that process, and we are successful, as we have talked about a bunch of times, in Maryland. And we continue to look at those opportunities when they present themselves. There is a very specific effort going on in the state of New Jersey right now about being ready for solar. And the need for us to make sure that our distribution system is ready, that has been an ongoing process to continue to make sure that this focus on solar and batteries at the Board of Public Utilities, and there were comments received on that in the last couple weeks down there, if I recall correctly, can be enabled by the distribution system that they are going to be interconnecting to. And then the third bucket is the opportunity for us to participate on the generation side again, depending upon where policymakers land on that front. So I would say all three of those are the areas that we talk about around the table on a regular basis. Daniel J. Cregg: And then on top of that, Bill, I would just add that, embedded within kind of the base plan that we have in front of us, things that Ralph mentioned could add to that. I would still characterize what we put out as the updated capital forecast as there is nothing in there that is a single project that is a huge part of the capital. It is all stuff that sits in front of us and is shorter term in nature, and we can kind of knock out without a whole lot of red tape that we have got to get through or challenges we have got to get through. It is just kind of a basic set of capital that we know we can achieve. Ralph LaRossa: No. It is a really good point that Dan is saying. I mean, everything I just said is above and beyond. We are not building in a percentage of any one of those buckets as we put out this capital forecast. These are small projects that are really, 90% of them are being based upon end of life on the regulated side. So, you know, I have kind of been telling my family anyway, if you think about what we do every day in replacing the infrastructure, it is just like the Portal Bridge. For those of you that are in the New Jersey region and see New Jersey Transit delays right now as they upgrade that, the infrastructure in New Jersey is old and we have an opportunity to make upgrades as a result of that. William Appicelli: Alright. No. That is very helpful. And then just one other one on the O&M side. I guess, what is embedded, you know, in the plan in the six to eight? On that front? Just to do at the utility level. Daniel J. Cregg: Yeah. As we build our plan, and Ralph has often described it this way, we take a look at what is in front of us and whatever kind of an inflationary assumption we have there, and then we look to the businesses to try to pull back on that to end up in a more reasonable place from a cost-cutting perspective and overall cost management perspective. So, if you have got a 3% inflationary assumption, you can pull that down to 2% to 2.25%. Everybody is looking for opportunities within those budgets to try to move to a better place. So that is kind of how we structure it and how we move forward on it. We know that we do have our labor agreements that are running out through 2027, and those will get re-upped and have an effect as well. But we kind of lay out a baseline plan and then pull back some efficiencies to get to where our final plan lands. Ralph LaRossa: Bill, it is relatively flat with some inflation, and then we back it off, as Dan said. I know some people think we talk about, you know, finding pennies in the couches, which I actually like. My wife and I still have a little bucket that we put our pennies in. So it is not the worst thing in the world to go looking for them because they all add up at some point. William Appicelli: Okay. But some assumption on the re-upping of those labor agreements is reflected in this plan? Daniel J. Cregg: Oh, yeah. That is all in there. There are no expectations of major dislocation there. William Appicelli: Okay. Alright. Thanks very much. Operator: The next question is from the line of Michael P. Sullivan with Wolfe Research. Proceed with your question. Michael P. Sullivan: Good morning, Michael. Hey, Ralph. I think for a while now, you all have had in your slide deck over the forecast period 90% regulated earnings. Is that still true under this updated plan? Or any sense you can give us of what the mix is over the forecast period? Daniel J. Cregg: No. I mean, what I would tell you, Michael, is I hope that number goes down a lot because that means power prices are going to go up. We are going to do better. I would think about the utility side of the business continuing to do what it does, and to the extent that we see some movement up from a power price perspective, given the demand-supply dynamic that you are seeing, you might see a modest shift there. And again, kind of the tongue-in-cheek way of saying it is I hope it goes down a lot because that means that we are doing better on the other side of the business. But I would not think about any major shifts compared to what we have seen in the past. It is going to be more modest as we step through time. Ralph LaRossa: Okay. Michael, I may even go a little bolder than that. We have said this also for a long time in our decks. The PTC floor is a regulated-type return. And so when we think about it from that perspective, you could argue that the merchant is only above the PTC floor. Right? Because the federal government has regulated that PTC floor as the return for the nuclear plants. So I know it is not traditional regulated, but when we think about it from a risk profile standpoint, it sure feels a lot like that. Michael P. Sullivan: Okay. No. That is totally fair. But it just sounds like you are not going to tell us what your merchant assumption is above, out in time. Daniel J. Cregg: Well, we are going to tell you what our earnings projections are, and we are going to meet them as we have done. Michael P. Sullivan: Okay. And then on the utility side, I just think, historically, the rate base kind of rebase of the CAGR has been a bit higher than we saw this past year. And anything to make of that? Or what is kind of driving that? Daniel J. Cregg: Oh, from the standpoint of the baseline? Look. I would think about that rate base as growing the 6% to 7.5% that we have put out for the past couple of years. And I think that that is still consistent. I would say, to our credit, that has been on a growing base that for some years has been above that. And so continuing to grow 6% to 7.5% has been a consistent CAGR growth. To the extent that what you are implying is correctly that that rate base has grown more than that the last few years, we have continued to grow 6% to 7.5% off of that higher base, which implies a little bit higher growth. Michael P. Sullivan: Okay. Great. Thank you. Operator: The next question is from the line of Anthony Crowdell with Mizuho Securities. Please proceed with your questions. Anthony Crowdell: Hey. Good morning, team. Hey, Ralph. You went to double game last night. I hear the opening ceremonies are really exciting. Was he the fan applauding in the beginning? I know there was some booing going on of some of the elected officials. That is awesome. Hey. I just have a cleanup question. I believe the BPU is in a 180-day pause right now coming from the governor's executive order. I believe it is a 180-day pause of no increase in rates. Just curious if that includes outcomes of any of the rate riders. And then also, if you could talk about what happens at the end of the 180-day pause, maybe some of the things changed by the prior administration. Ralph LaRossa: Our esteemed CFO did. We did not make it down there last night, but our esteemed CFO did. Daniel J. Cregg: It was fantastic. Anthony, all I heard was USA chants, and they were deafening. It was fantastic. No. So, the pause that they put in place was on regulations that were passed in the months leading up to the election. And so they paused them. I do not know if it is 180 days or 90 days, but they basically said, hey, listen. If we were going to change the speed limit on the Turnpike and that was a change that was put in place by the prior administration, it will not go into effect for another 90 or 180 days. And so there were a few things there that were on the fringes to our business, but nothing after we did the review that would impact our business. And I mean that from a labor-wage standpoint, from a benefit standpoint, from any of the above. So no impact on that as a change, but those regulations were regulations that were changed by the prior administration in the months leading up to the election. Anthony Crowdell: No. That is fine. I know you are looking for pennies in the couch, but do you know when the 90-day ends? Daniel J. Cregg: Yeah. No. It is 90 days after she took office. So I want to say it is April, May. I think she took office on January 12 if my memory is right. Anthony Crowdell: Perfect. Thanks so much. Daniel J. Cregg: Thanks, Anthony. Operator: Our next question is from the line of Jeremy Tonet with JPMorgan. Jeremy Tonet: Hi. Good morning. Daniel J. Cregg: Good morning, Jeremy. Jeremy Tonet: Alright. Thanks for all the color today. Just one last question for me. As we think about future generation in the state of New Jersey, you have talked about the ability to host SMRs in the past. I am just wondering any updated thoughts you might be able to provide on how likely that is to, I guess, come to fruition or just thoughts on the topic in general. Ralph LaRossa: Yeah. I would put our—look, if we were advocating, we are advocating on a nuclear front for big nuclear. We think that that makes the most sense based upon our property and our footprint. But there could be other places where it makes sense for people to put small SMRs and to try that technology out. I think also from a gas facility standpoint, we have said that we have a site that makes a ton of sense where we have pipes and wires ready to it as well. So, yeah, SMRs, from our standpoint, would not be the highest and best use of our property. Remember, our early site permit is technology agnostic. So we could go in any direction on that. But we would be open to people if that was really what folks wanted us to enable. Jeremy Tonet: Got it. That is helpful. I will leave it there. Thanks. Operator: Our next question is from the line of Nicholas Amicucci with Evercore ISI. Nicholas Amicucci: Hey, good morning, Ralph and Dan. How are you? Ralph LaRossa: Good morning, Nick. Daniel J. Cregg: I would hold on to those pennies because there is probably some scarcity value associated with that. Ralph LaRossa: Exactly. Exactly. They add up. Nicholas Amicucci: Yeah. So actually wanted to kind of continue down the nuclear rabbit hole here if we could for a little bit. Just as we think about, you know, kind of the nuclear fuel and how you guys are hedged out through, you know, over the course of the capital plan. Just knowing that, you know, Russia is kind of going offline in 2028. How are you guys kind of—are you guys kind of front-loading or kind of prebuying any type of nuclear fuel just to ensure that, you know, affordability kind of does not go too haywire? Daniel J. Cregg: Yeah. Look. When I start thinking about nuclear fuel, the first thing I think about is the fuel in the reactor because that is most of what we are going to be using for the next couple of years. Then I look to where we have contracted, and we are contracted out for the next few years for most of what we are going to need. I also think about what is going to be purchased from places where we are going to purchase from. And if I think about movements with respect to supply-demand pricing, you could see some modest movements in prices, but I do not think anything that is going to be all that dramatic. Prices that sit somewhere around $50 and fuel that sits somewhere around $78 on the overall scheme of things. The availability is a critical aspect for us, and I have no question that the fuel that is being produced is the fuel that is going to be produced. And if Russian fuel does not come here, Russian fuel will go somewhere, and that will displace fuel, and we are going to continue to see availability. It is only when you get to the tail end of that five-year period when things are going to change. And, not to get too deep into world markets, but I think conceptually, we are hedged out for the next couple of years in pretty good shape, and you could see some modest movement in prices. Nicholas Amicucci: Got it. Great. And then if I could as well, I know, Ralph, you have been kind of a big proponent on more large nuclear relative to SMRs. But I think if I understand correctly, Governor Sherrill is more—she is, just given her naval background, more in tune with SMRs. But is there anything, any kind of, I guess, appetite from her just given that, you know, we did have, a couple months ago, the DOE type of procurement of the 10 AP1000s. I mean, is there any opportunity for you guys to partake in those allocations, the Brookfield Westinghouse selection? Ralph LaRossa: Yeah. Look. I think we have said we will continue to educate and advocate on behalf of the state probably to a nauseam now. And so we will be there advocating that we want to help enable exactly that. I do not want to predetermine a selection for something like an AP1000. I think that is one that it appears that DOE is firmed up on, but I also hear that all the i’s are being dotted and t’s crossed. So we will be there advocating as far as we are going right now. And I think the education that is ongoing for the incoming administration is something that we are also trying to help with. Nicholas Amicucci: Perfect. Thanks, guys. Daniel J. Cregg: Thanks. Operator: Thank you. Our last question is from the line of David Arcaro with Morgan Stanley. David Arcaro: Hey. This is Amanda on for Dave. Thanks so much for taking my questions. Daniel J. Cregg: Hi, Amanda. David Arcaro: Hey. So maybe lastly, just on the executive orders, how are you thinking about the scope of the current BPU study? And are there any financial impacts currently contemplated in the long-term plan based on any potential changes? Or do you think it is still too early to assess those changes? Daniel J. Cregg: Yeah. I think it is too early right now. There are a lot of conversations going on. You can look across the country and see a number of different ways that things have changed from a regulatory standpoint and how utilities have been compensated for the utilities that have been involved. We have looked at many of those, and I think many of those at the end of the day have worked out. It is just a different way of thinking about things and providing those returns for those utilities. So we have not changed. We have not put any different regulatory process in place in the projections that we have made. But we fully expect that the outcome is going to be an outcome that makes sense for both us and for the customers. David Arcaro: Great. Thanks so much. And maybe just a quick follow-up. With the two new commissioners in the BPU, any initial comments on conversations with them, just based on the first few months of their appointment? Daniel J. Cregg: Yeah. No. Our team has continued to meet with folks, but our conversations have been limited to, I would basically put it, meet and greets at this point. David Arcaro: Got it. Thanks so much again. Operator: This is all the time we have for questions. I would like to turn the floor back to Mr. LaRossa for closing comments. Ralph LaRossa: Thank you, Rob. I had a couple of comments prepared, but I actually started this call, as you heard, talking about the great work of our team. During the last storm, our facilitator here today, Rob, actually started our morning off by thanking us for the work that was done and communicated during the storm. So I just want to reinforce the thank you to the team. We can talk all we want about finances and the outcomes that we have here, but if we do not deliver on our operational mandates day in and day out, no regulatory construct is going to matter for us, and our plants will not run. So I thank the employees every day. And when I get comments like we just received from Rob when we opened up this call, it makes it all worthwhile. So, Rob, thank you, not only for facilitating the call, but for reinforcing for all of us that what matters is the work that is being done day in and day out by our employees in the field. With that, thank you, Rob. We are going to be out quite a bit over the next month and a half and look forward to seeing you and the in-person conversations. Operator: Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good morning, everyone, and welcome to the MYR Group Fourth Quarter 2025 Earnings Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now turn -- like to turn the call over to Jennifer Harper, Vice President of Investor Relations and Treasurer, for introductory remarks. Jennifer Harper: Thank you, and good morning, everyone. I would like to welcome you to the MYR Group conference call to discuss the company's fourth quarter and full year results for 2025, which were reported yesterday. Joining us on today's call are Rick Swartz, President and Chief Executive Officer; Kelly Huntington, Senior Vice President and Chief Financial Officer; Brian Stern, Senior Vice President and Chief Operating Officer of MYR Group's Transmission and Distribution segment; and Don Egan, Senior Vice President and Chief Operating Officer of MYR Group's Commercial and Industrial segment. A copy of yesterday's press release announcing our fourth quarter and full year 2025 results, can be found on the MYR Group website at myrgroup.com under the Investors tab. A webcast replay of today's call will be available on the website for 7 days following the call. Please note today's discussion may contain forward-looking statements. Any such statements are based upon information available to MYR Group's management as of this date, and MYR Group assumes no obligation to update any such forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Accordingly, these statements are no guarantee of future performance. For more information, please refer to the risk factors discussed in the company's most recently filed annual report on Form 10-K. Certain non-GAAP financial measures will also be presented. A reconciliation of these non-GAAP measures to the most comparable GAAP measures is set forth in yesterday's press release. With that, let me turn the call over to Rick Swartz. Richard Swartz: Thanks, Jennifer. Good morning, everyone. Welcome to our fourth quarter 2025 conference call to discuss financial and operational results. I will begin by providing a summary of the fourth quarter and full year results, and then we'll turn the call over to Kelly Huntington, our Chief Financial Officer, for a more detailed financial review. Following Kelly's overview, Brian Stern and Don Egan, Chief Operating Officers for our T&D and C&I segments, will provide a summary of our segment's performance and discuss some of MYR Group's opportunities going forward. I will then conclude today's call with some closing remarks and open the call up for your questions. We closed 2025 with strong financial performance in the fourth quarter and full year revenues of $3.7 billion. A steady backlog of $2.8 billion at the end of 2025 reflects a healthy bidding environment and the continued investment in infrastructure to meet the growing electrification needs across the U.S. and Canada. Our work this year underscores the stability and expansion of our clients' relationships as well as our measured pursuit of new opportunities. We continue to see strong bidding activity across our business segments, and are closely monitoring these opportunities and positioning ourselves to strategically pursue and execute projects with operational excellence. As always, our success is grounded in an unwavering commitment to our customers through safe and reliable project execution. Our teams are dedicated to helping our customers advance their business objectives, and I'm grateful for their continued hard work. Now Kelly will provide details on our fourth quarter and full year 2025 financial results. Kelly Huntington: Thank you, Rick, and good morning, everyone. For the year ended December 31, 2025, we reached record annual revenues of $3.7 billion. Full year net income of $118 million and EBITDA of $233 million. Our fourth quarter 2025 revenues were $974 million, which represents an increase of $144 million or 17% compared to the same period last year. Our fourth quarter T&D revenues were $531 million, an increase of 18% compared to the same period last year. The breakdown of T&D revenues was $330 million for transmission and $201 million for distribution with increases of $64 million in revenue on transmission projects, and $17 million in revenue on distribution projects from the prior year. Work performed under master service agreements continue to represent approximately 60% of our T&D revenues. C&I revenues were $443 million, a record high for our C&I segment and an increase of 17% compared to the same period last year. C&I segment revenues increased primarily due to an increase in revenue on fixed price contracts. Our gross margin was 11.4% for the fourth quarter of 2025 compared to 10.4% for the same period last year. The increase in gross margin was primarily due to the fourth quarter of 2024 being negatively impacted by certain T&D clean energy projects and a C&I project. In the fourth quarter of 2025, gross margin was also positively impacted by better-than-anticipated productivity, favorable change orders and a favorable job close out. These margin increases were partially offset by an increase in costs associated with inefficiencies on certain projects. T&D operating income margin was 7.4% for the fourth quarter of 2025 compared to 6.7% for the same period last year. The increase was primarily related to the fourth quarter of 2024 being negatively impacted by certain clean energy projects. In the fourth quarter of 2025, T&D operating income margin was also positively impacted by a favorable change order and better-than-anticipated productivity. These operating income margin increases were partially offset by an increase in costs associated with project inefficiencies on certain projects. C&I operating income margin was 6.6% for the fourth quarter of 2025 compared to 3.9% for the same period last year. The increase was primarily related to a larger portion of our C&I projects progressing at higher contractual margins, some of which are nearing completion. In the fourth quarter of 2025, C&I operating income margin was also positively impacted by better-than-anticipated productivity, a favorable change order and a favorable job close out. These operating income margin increases were partially offset by an increase in costs associated with inefficiencies on certain projects. Fourth quarter 2025 SG&A expenses were $65 million, an increase of $8 million compared to the same period last year, primarily due to increases in employee incentive compensation costs and employee-related expenses to support future growth. Fourth quarter 2025 interest expense was $1 million, a decrease of $1 million compared to the same period last year. The decrease was attributable to lower interest rates and lower average outstanding debt balances during the fourth quarter of 2025 as compared to the same period last year. Our fourth quarter effective tax rate was 21.2% compared to 40.9% for the same period last year. The decrease was primarily due to changes in state tax rates used to measure our state deferred income taxes and lower permanent difference items. Fourth quarter 2025 net income was a record $37 million compared to $16 million for the same period last year. Net income per diluted share of $2.33 compared to $0.99 for the same period last year. Fourth quarter 2025 EBITDA was a record $64 million compared to $45 million for the same period last year. Total backlog as of December 31, 2025, was $2.8 billion, a 9.6% increase from the prior year. Total backlog as of December 31, 2025, consisted of $1.0 billion for our T&D segment and $1.8 billion for our C&I segment. As a reminder, our backlog includes projected revenue for only a 3-month period for many of our unit price, time and equipment, time and materials and cost plus contracts, which are generally awarded as part of a master service agreement. However, our master service agreements typically have a much longer duration. Fourth quarter 2025 operating cash flow was $115 million compared to operating cash flow of $21 million for the same period last year. The increase in cash provided by operating activities was primarily due to the timing of billings and payments associated with project starts and completions, higher net income and lower contingent compensation payments associated with a prior acquisition. Fourth quarter 2025 free cash flow was $85 million compared to free cash flow of $9 million for the same period last year, reflecting the increase in operating cash flow, partially offset by higher capital expenditures to support future growth. Moving to liquidity. We had approximately $265 million of working capital, $59 million of funded debt, $408 million in borrowing availability under our credit facility and $150 million in cash and cash equivalents as of December 31, 2025. We have continued to maintain a strong funded debt-to-EBITDA leverage ratio of 0.25x leverage as of December 31, 2025. We believe that our credit facility, strong balance sheet and future cash flow from operations will enable us to meet our working capital needs, support the organic growth of our business, pursue acquisitions and opportunistically repurchase shares. I'll now turn the call over to Brian Stern, who will provide an overview of our Transmission and Distribution segment. Brian Stern: Thanks, Kelly, and good morning, everyone. The T&D segment delivered steady fourth quarter and full year results, supported by a healthy mix of smaller to midsized jobs and ongoing master service agreements. Our performance reflects the continued application of our core business principles around safety, quality and reliable execution. Bidding activity remains healthy as backlog, revenue, margins, and income increased from 2024 to 2025. We continue to expand relationships with long-term clients and pursue opportunities with new and existing clients, building on the positive industry outlook. This quarter, Great Southwestern Construction executed a new 7-year master service agreement in Kentucky for transmission line construction and maintenance projects. L.E. Myers was awarded a transmission project in Virginia as well as transmission work in Iowa. In addition, Sturgeon Electric won two transmission projects in Oregon and transmission work in Arizona. Both Sturgeon Electric and High Country Line Construction were awarded station and line work in Washington, California and Arizona. Harlan Electric was selected to perform multiple jobs throughout New Jersey and Pennsylvania. According to electric -- Edison Electric Institute industry data, investor-owned electric companies are projected to invest approximately $178 billion in transmission construction between 2025 and 2028. This level of planned investment reflects an ongoing need for grid modernization and the increased capacity to accommodate load growth. As utilities invest in these upgrades, we believe we are well positioned to benefit from expanding backlogs and long-duration project pipelines. With our experience, we continue to position ourselves to capture future 765 kV projects along with 500 kV and 345 kV transmission and substation projects over the next 10 years. MYR Group subsidiaries are prepared to pursue and perform these opportunities across the U.S. and Canada. In summary, we are proud of our accomplishments in the fourth quarter and all of 2025. We will continue to actively bid and execute projects of varied capacity, size and complexity across the U.S. and Canada, while maintaining our consistent focus on safety and the development of our dedicated workforce, who ultimately enable us to take on the important work ahead. I will now turn the call over to Don Egan, who will provide an overview of our Commercial and Industrial segment. Don Egan: Thanks, Brian, and good morning, everyone. Our C&I segment achieved solid results in the fourth quarter, thanks to the health of our core markets. We continue to see steady bidding activity and increases in backlog as we strategically monitor and pursue new opportunities in collaboration with our valued customers. We believe our ability to safely and skillfully execute projects of various sizes continues to create many long-term opportunities in our core markets. Data centers continue to be one of the most active areas of investment nationwide, fueled by the accelerating need for cloud, AI and digital infrastructure. Industry researchers expect this demand to remain robust through 2026, with utilities and developers working to expand power capacity to support this surge. Infrastructure-related construction is also benefiting from ongoing commitments in transportation, clean energy, wastewater and fresh water treatment facilities. Our ever-expanding network of clients continues to engage us early on upcoming opportunities in these segments. Our teams across all subsidiaries continue to execute and pursue an array of work. During this period, we were awarded multiple data center projects in Colorado, Arizona, California and New Jersey. In addition to data centers, our subsidiaries were awarded projects in clean energy, manufacturing and industrial projects in California and Arizona. These accomplishments highlight our ongoing momentum and solid market presence throughout the U.S. and Canada. In conclusion, we believe our core markets remain healthy and the depth of our customer relationships continues to create new opportunities. This success is driven by our dedicated employees whose commitment to quality and safety is at the heart of everything we do. Thank you, everyone, for your time today. I will now hand the call back to Rick for his closing remarks. Richard Swartz: Thank you for those updates, Kelly, Brian and Don. We are proud of our fourth quarter and full year 2025 performance, which demonstrated the strength of our sound business strategies and our ability to maintain and expand long-term customer relationships across both segments. We believe our core markets are well positioned for continued growth as investment in electrical infrastructure accelerates. We remain committed to safely executing projects, strategically bidding opportunities and supporting our customers in an ever-changing energy environment. We believe our proven track record of collaboration, integrity and dependable project delivery puts us in a strong position for opportunities ahead. We are excited to play a meaningful role in strengthening the electrical infrastructure that keeps our communities running. I would like to thank our employees for their invaluable contributions and our shareholders for your continued support of MYR Group. I look forward to the year ahead. Operator, we are now ready to open the call up for your comments and questions. Operator: [Operator Instructions] Our first question comes from Sangita Jain of KeyBanc. Sangita Jain: First, Rick, can I ask you for your thoughts on the large transmission market out there? I know you were optimistic on late 2026 potential bookings for 2027 revenue. Just wondering if you're seeing the same type of trend right now. Richard Swartz: We are. Nothing's changed on that side. I mean it takes a while to bring these projects to market, and we've known that. So we're in good conversations with our clients, and we believe we'll capture some of that work that will start to burn in '27. Sangita Jain: Got it. And then, Kelly, maybe for you, cash flow has been really, really strong this year. So I'm trying to figure out if some of that was catch-up from the pending payments from last year's solar projects or if there's any meaningful advances in new projects that we should be aware of? Kelly Huntington: Yes. Thanks, Sangita, for that question. Yes, a very strong year for cash flow and particularly in the fourth quarter. A lot of that is driven by our lower DSOs. We're now -- we've been in the mid-50s versus the historical average of around 70. And that's driven by a combination of things. We saw a 16-day improvement if you look year-over-year with 11 days of that in the third quarter. Part of it is getting beyond those -- the problem projects that we had in 2024. But I'd say a larger factor is just that we have a very strong net overbuild position, really driven by some of the large fixed price work that we have on the C&I side, in particular. So I think that does represent potentially a little bit of a headwind as we look forward. And part of that will depend on the mix of work that we have as far as awards this year and how much of it is some of that mid- to large-sized fixed price work that can have a more favorable billing profile versus more MSA weighted, which is great work to have, but doesn't have quite as positive of the cash flow profile. Operator: Our next question comes from Julien Dumoulin-Smith of Jefferies. Brian Russo: It's Brian Russo on for Julien. Could you just comment more on the strength in the T&D backlog at $1 billion, looks like it was up about 20% year-over-year, quite a bit of improvement from the year-over-year progression that we've been seeing in the last few quarters. Just curious, are any of the new projects, in particular that Kentucky MSA agreement included in the December backlog? And then also, is there any Xcel $500 million 5-year MSA in that December backlog as well? Richard Swartz: As far as the backlog goes, I'd say on the Xcel stuff, very little of that is in that backlog as of now. I mean we said it would be a slow start to the year and then kind of progressing throughout the year and increase. So again, not too much of that in our backlog right now because we only count 90 days of that MSA work, as Kelly highlighted in her script within our backlog. When we look at the Kentucky side, that work really will start later this year. So not much of that in there. So again, we've seen great activity in the markets out there, and we're being selective on what we take on and really focused on long-term relationships with clients. 90% of our business is return clientele. We're always looking for those one-off projects as additive. But again, how do we grow with our existing clients, and that's where our focus is at. Brian Russo: Okay. Great. And just a follow-on there in T&D. We saw a very large Texas-based wires company announce a rather robust 5-year capital plan update. And can you just remind us what your positioning is currently in Texas? And then maybe what your level of activity has been kind of in the past up-cycles in capital spend that we've seen? Richard Swartz: Yes. Texas has been a good market for us. for the last decade. I mean it's been a good market. We continue to see that grow. We're excited about some of the opportunities that are out there with some of the 765 work, but even some of the 500 and 345 work we're -- we do that every day. So I think the 765 is upcoming. We're excited about our positioning on that. But again, we're seeing good activity, not just in Texas, but across the nation. Lots of good opportunities out there. Brian Russo: Okay. And the strong C&I margins in the fourth quarter, plus 6%, how does that fit into the 5% to 7.5% operating margin target step-up you're guiding towards this year? And then just kind of tie that into the backlog. Are there still projects still to be completed that would be in that old kind of 4% to 6% target? Or are those really nearly all burned? So everything from here on out is really in the new 5% to 7.5% range? Richard Swartz: Well, I would say our forecast when we look at it for the year is operating within the midpart of both our T&D and C&I margin profile. So in that midpoint of that, we see good opportunities out there. We continue to see good activity in the market. So with that being said, we haven't changed from what we said last quarter on both from a revenue standpoint, we look at that 10-ish percent growth in both segments and as a company overall. And then we look at operating in those -- that mid part of that range. So good opportunities there, and I think we'll continue to do everything we can to increase our margins from our standpoint as far as what we do from a prefab standpoint, from an efficiency standpoint, from utilizing our equipment better, and we'll continue to try to maximize on that side. Operator: Our next question comes from Justin Hauke of Baird. Justin Hauke: Great. So I had two quick ones here. The first one, I was just going to ask about -- in your backlog, you break out what you expect to book over 12 months and what you expect to book beyond 12 months. And it looks like almost all the backlog increase this quarter was kind of the longer duration backlog. And so I guess I just wanted to understand the components of that. Is that some of the data center work from C&I that you're talking about? And so like your -- the duration of your projects is just extending because the size is getting bigger? Or maybe just kind of how to think about that. Richard Swartz: Sure. On our larger project side, I would say those go out a little way. So they go out -- some of those data centers take 18 months to construct or so, 18 to 24 months when you look at the larger projects, and that goes for transportation work. Some of that goes beyond that. They're 4- or 5-year projects. But again, good activity on the small and midsize that's burning quickly. But on the larger projects, it does take a little longer to construct those projects. Justin Hauke: Okay. And then I guess my second question, not to be myopic, I guess, but obviously, there's been a lot of winter weather all over. 1Q is not typically your productive quarter versus the summer. But just curious if there's anything you would be thinking about or you want to communicate in terms of potential weather impacts in the first quarter that would be unusual that have occurred thus far? Or maybe it's not, maybe it's just in line with kind of normal seasonality? Richard Swartz: I think for us, we always did our work on normal seasonality. I think there's always going to be some storms that take place if it's -- I don't think [indiscernible] always affects us in the way that maybe really wet weather where we can't traverse the right-of-way. That seems to affect us a little bit more. But again, we're always monitoring the weather, and it really has to do where those -- what projects are affected. You can see in any given area, I mean, you can be 50 miles away and it really affects one area and it may not affect the other. So again, the weather hasn't affected our business across, I guess, the country everywhere equally. So I would say we'll -- we continue to look at that. Weather is the biggest impact we can have. But again, it hasn't affected us across the country as a whole, just in some select areas. And with that, sometimes we have some offset of some storm and other type works that we're doing for repair. But again, our base business is that day-to-day MSA and just construction projects. We like storm work. But again, we're not dependent on it. Kelly Huntington: Yes. And I would just add a little bit broader context, Justin, and looking at first quarter revenues, we are expecting that we will trend in the first quarter a little bit above that full year rate of about 10% growth, and that's really driven by first quarter last year, we had a little bit slower start. So it is a bit of an easier comp compared to the rest of the year. So just as you're thinking about modeling that, we would expect a little stronger revenue growth in the first quarter. Operator: Our next question comes from Caitlin Donohue of Goldman Sachs. Caitlin Donohue: Just focusing on the data centers, you outlined a few awards this past quarter. How are you seeing that project pipeline shape up for 2026, 2027 as you're speaking with your customers? Richard Swartz: The conversations are strong on that side. It's not just '27 and '28. I mean we're having conversations with customers that go well beyond that time frame. So again, I think our awards are always lumpy just on how long it takes the projects to get finalized. But again, great conversations going forward. So good activity in that market. But again, not completely dependent on that market by itself. We like the diversification we have with transportation, health care, some of that other work we do. So good opportunities on that side also. Caitlin Donohue: That's helpful. And then just on capital allocation strategy for 2026. We've seen CapEx step up a little bit. You've done buybacks in the past. How are you thinking through MYR Group's strategy for the year? Kelly Huntington: Yes. We are seeing great opportunities to continue to grow our business organically and through acquisitions. And so I think as we've talked about before, we'll continue to prioritize our capital allocation to growth. We do use share repurchases opportunistically. And I think the last 2 years are a great example of that with deploying over $150 million at an average price of $117. So -- but I think at this point, really focused on the growth opportunities that we see both organically and from acquisitions. Operator: Our next question comes from Manish Somaiya from Cantor Fitzgerald. Our next question comes from Brian Brophy of Stifel. Brian Brophy: Just want to kind of continue the conversation on the large transmission opportunity and some potential awards you may see there. Would those -- assuming you see something in the back half of '26, as you kind of alluded to, would those projects be additive to growth in 2027? Or would you have to pull resources from somewhere else to meet some of that demand? Richard Swartz: I don't see us having to pull any resources. I mean we've done a good job of retaining our employees, recruiting and developing people. So to us, that's additive. And it goes into '27 and beyond. So it's not just the work that's going to start in '27. We see the cycle being much longer than that. So I think it's a decade worth of growth out there, and we're going to capitalize on it where we can, and there's some great opportunities we feel coming our way. Brian Brophy: Great. Yes, that's good to hear. And then just as a follow-up to that, how do you think about some of the large transmission wins potentially impacting the profile of the business -- margin profile of the business at all, maybe not from an individual project standpoint, but capacity utilization overall. Should we think about that being a margin driver? Richard Swartz: Yes. I think it can show, I guess, marginal -- margin increases on that side. Again, it's how can we better utilize our equipment, how can we take labor out of the field and do more things on the prefab or the kitting side. So we're always looking at that side and being a solution provider for our customers. So I think along with that, we're always looking to enhance our margins. But again, our relationships with our clients are long term. So it's not always -- on this side, it's -- they're a regulated business. We'll continue to, I guess, push margins where we can, but more from an efficiency standpoint than what I'd call ever reaching out and trying to gouge our customers or anything like that. We really build on long term. Again, over 90% of our business is return clientele, and we always want to make sure we maintain those relationships. Operator: Our next question comes from Manish Somaiya from Cantor Fitzgerald. Manish Somaiya: Can you hear me? Richard Swartz: Yes. Manish Somaiya: Okay. Wonderful. Rick, I have the first question for you. In the press release, we talked about the bid environment being steady. Maybe if you can just give us a sense as to what you're seeing in terms of pricing by geography, by end market? And what are you walking away from business that may not be attractively priced? So maybe if you can just give us a sense of what's going on in the marketplace. Richard Swartz: I think for us, our -- I would say we've got a select client list. We're not trying to be everything to everyone, if that makes sense. So if on the -- let's take C&I as an example, if it's a customer we've done work for a long time with or somebody that's a continued relationship or we can build a continued relationship, we're really focused on that side, not the one-off ones. We're not focused on bidding a project that has 20 bidders on it. We like the customers that have select bid lists or we have teaming arrangements with. So with that side, good activity, good opportunities there. I would say, market by market when you're talking geographies across the U.S., some are a little tighter than others still, but we see those areas that are maybe not as busy as others getting busy in the future. So we're always monitoring that. We've got 65-plus offices across the U.S. and some in Canada. And with that, we're always using that local expertise to help us pick what work we want to go after, which ones really fit us and which ones don't. So along the way, we always evaluate those opportunities. And again, we're seeing good activity in all our marketplaces. Manish Somaiya: And I know we talked a bit about the data centers. Maybe Don can shed some more light. Are the customers on the data center side, hyperscalers, GCs, developers? Maybe if you can just give us a sense. And then as it pertains to backlog, is -- it seems, obviously, everybody is doing more data center work. But would you say that the backlog on the C&I side is diversified? Or is it kind of more concentrated? Don Egan: Well, I'll answer that question first. It is -- our backlog is very diversified. Yes, you're absolutely correct. There is a lot of activity in the market, and we're having conversations with end users, the hyperscalers, general contractors, developers. It's ongoing conversations on a very regular basis, if that answers your question. Manish Somaiya: And in terms of the customers on the data center side, would it be hyperscalers or general contractors, developers? Don Egan: Again, as I stated, it's all the above. We are having conversations with hyperscalers on a daily, weekly basis, same with general contractors and end users, owners. Manish Somaiya: Okay. And then just lastly, Rick, from a high level, obviously, you guys don't give guidance, but what would be the puts and takes for '26 as you kind of look at your internal benchmarks and targets? How should we think about the risks and opportunities? Richard Swartz: Let me go back to Don's question real quick, the one you asked for him. I would say the other side on data centers is it's not just the new construction. I think that's really what has the headline, but a lot of it is the retrofits in existing buildings, too. Existing data centers that have been there, I mean, they're living buildings. They're always changing the technology. So as that happens, that repeat work for us is very important. And once we're in a data center, we tend to stay there for a long time. So it's not just the new builds. It's also that retrofit work. That's the only thing I would add to that. When we look at kind of the puts and takes going forward, I would say the biggest impact we can always have on the T&D side is weather. Other than that, the activity in the market other than something that would -- we don't see right now from any of our conversations with our client would be any kind of slowing in the market. But we don't see that nor do we anticipate it. So it's really the weather on our T&D is the biggest impact. And then the timing of these projects, how quick they roll out would be the other kind of risk out there because it's not if these projects are going to be built, it's when. So sometimes you can see a 2- to 4-month push on projects, but it's not like they're going to be pushed out years. And that's kind of how we see it now. And then the other side on the T&D side that I'd probably highlight is permitting. Sometimes that can push a project out a little bit. But again, it's not if the projects are going to be built, it's when. So again, good activity on both sides, both T&D and C&I. Operator: Our next question comes from Tim Moore of Clear Street. Timothy Michael Moore: Great job with your backlog growth and book-to-bill. My equipment utilization tailwind for the T&D side was already asked. So I just have two questions remaining. Maybe, Rick, you can maybe walk us through or even Kelly elaborate on kind of the trade-off in your selectivity for staffing for maybe like an 18-month data center versus cross-selling a more medium-sized utility project. I know they're are separate segments, but I'm just kind of wondering if you could talk a bit more to like the regional staffing playing in, cross-selling opportunity. And if it is a new customer, not more than 90% incumbents. Richard Swartz: Yes, I'll start there. Like what you just said, I mean, 90% of our business is return clientele. We're always focused on that. We're always trying to cross-sell. There's lots of opportunities on that side, especially on data centers where the substation in that side might be on -- within the owner side of it rather than the utility side. So either way, we're able to construct that portion of the project. I would say we're always looking at those opportunities. We're always going to focus on our long-term clients first. And then we'll take the one-off ones later. If they're just going to build one project and out, that's probably not our focus. But if they're going to build multiple projects, that's where we're focusing. And I think we've done a very good job on, as an example, some of our data centers where there are facilities that are -- they build one building, then they move into the next. And as they build out their campus, it's a great place for us. There are some of them where we might be on -- as an example, we're on building 3 of maybe a planned 12 buildings. So again, this goes out for many years forward, and that's really where our focus is. Kelly, do you want to add? Kelly Huntington: I think you covered that well, Rick. Thanks. Richard Swartz: Okay. Timothy Michael Moore: Great. That was really helpful. The only other question I had, given your liquidity and the cash and the bolt-on acquisition opportunity, can you maybe just talk high level about the philosophy? Is your priority within T&D more of the electrical contractors? And then on the C&I side, is it to build geographic scale like in the Southeast? Just kind of curious if you can add any color. Kelly Huntington: Sure. I can start on that one... Richard Swartz: Go ahead, Kelly. Kelly Huntington: I was just going to say on the T&D side, we definitely focus on electrical contractors. We do have really good geographic presence across the U.S. and up into Canada and Ontario on the T&D side. So we also look at opportunities that would be ancillary services like right-of-way or foundation or environmental work. Those can be of interest to us as well. On the C&I side, I would say really two primary screens from a strategic perspective. First would be the geographic fit because we don't have quite as consistent of coverage as we do on the T&D side and then really taking a close look at the end markets they serve. So does that acquisition opportunity have a similar profile as far as exposed to those higher growth tend to be less cyclical, more complex core markets like we are. So those would be the main things we're looking at, really still focused on tuck-in acquisitions in the places we know and the risk profiles that we understand as well. Operator: Our next question comes from Jon Braatz of KCCA. Jon Braatz: Rick, your markets are very strong, and I think you -- and you've indicated that the top line, you could see 7% to 10% type of revenue growth. But should the opportunities present themselves as they might, do you have the ability, the capacity, the labor force and infrastructure in place to maybe accelerate that growth as we go forward? Richard Swartz: Yes. I mean we've got that opportunity. I think if you look back in our history, we've grown more than that in certain years, and we -- other years, we've tamed that back a little bit. Again, it's timing of the awards, how they happen. I see good opportunities out there, but where we're really focused is controlled growth also. I think anybody could really add revenue at this point, but could they do it profitably. And for us, it's maintaining that right amount of growth, so we can be profitable. We're definitely capable of doing more than that. But we have said for this year, we anticipate growing in that 10%-ish range. So a little more than the 7%. But again, making sure we have controlled risk and then we take on the right opportunities. Jon Braatz: Sure. Given the strength of the market and the number of projects out there and so on, I sense that you could be more selective and maybe the risk profile of the work that you're doing has improved. Would that be a fair statement? Richard Swartz: Sure. We're always focused on that as we select our projects is how do we limit our risk, how do we partner with our customers? How do we make sure that we have those kind of conversations. But again, derisking our projects is definitely important to us, and that's one of the evaluations we go through as we look at projects is I would say we have less risk in our backlog today than we had in our backlog a year ago or 5 years ago. Operator: I'm showing no further questions in the queue. I would now like to turn the call back over to Rick Swartz for additional closing remarks. Richard Swartz: To conclude, on behalf of Kelly, Brian, Don and myself, I sincerely thank you for joining us on the call today. I don't have anything further, and we look forward to working with you in the future and speaking with you again on our next conference call. Until then, stay safe. Operator: Thank you. This concludes today's conference call. We thank you for your participation, and you may now disconnect.
Operator: Good afternoon, and welcome to the PROCEPT BioRobotics Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the conference over to Matt Bacso, Vice President, Investor Relations, for a few introductory comments. Please go ahead. Matthew Bacso: Good afternoon, and thank you for joining PROCEPT BioRobotics Fourth Quarter 2025 Earnings Conference Call. Presenting on today's call are Larry Wood, Chief Executive Officer; and Kevin Waters, Chief Financial Officer. Before we begin, I'd like to remind listeners that statements made on this conference call that relate to future plans, events or performance are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. While these forward-looking statements are based on management's current expectations and beliefs, these statements are subject to several risks, uncertainties, assumptions and other factors that could cause results to differ materially from the expectations expressed on this conference call. These risks and uncertainties are disclosed in more detail in PROCEPT BioRobotics filings with the Securities and Exchange Commission, all of which are available online at www.sec.gov. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of today's date, February 24, 2026. Except as required by law, PROCEPT BioRobotics undertakes no obligation to update or revise any forward-looking statements to reflect new information, circumstances or unanticipated events that may arise. During the call, we will also reference certain financial measures that are not prepared in accordance with GAAP. More information about how we use these non-GAAP financial measures as well as reconciliations of these measures to their nearest GAAP equivalent are included in our earnings release. With that, I'd like to turn the call over to Larry. Larry Wood: Thanks, Matt. Before discussing our fourth quarter results, I want to share context on progress since joining the company as CEO. When I joined PROCEPT, I outlined an immediate near-term plan for the organization that I believe was critical to positioning the company for its next chapter. It was essential to move with a clear vision, a strong sense of urgency and a culture grounded in discipline and accountability. Historically, PROCEPT executed effectively in its first chapter of growth. That work created the foundation the company benefits from today. However, as the company evolves, so do the requirements for success. The next stage of PROCEPT's development requires shifting the operational focus towards increasing procedure volume, expanding margins and achieving profitability and gaining market share. At the same time, we must deliberately build an organization that supports both near-term performance and long-term sustainable growth. We recently made two changes to our commercial organization that we believe are strategically important for long-term performance. First, we have realigned our commercial team into an integrated regional structure where our clinical and sales functions now report to a common regional leader. The new structure creates a single point of accountability at the regional level to ensure clinical and commercial activities are coordinated around customer success and procedure growth. Second, we formed a dedicated launch team by reassigning a small number of our top performers to focus specifically on new system placements. The intent is to drive more consistent launches, reduce variability in activation and accelerate time to value for customers because we see launches as a key lever to improving downstream utilization and performance. In the near term, the sales realignment and formulation of the launch team creates some short-term disruption. Certain account coverage has changed and temporarily, we have fewer tenured resources in the field as we stand up the launch team. We view this as a normal transition period as teams ramp, establish account relationships and standardize new operating processes. Importantly, we believe these changes better position us for sustained high growth through clear leadership, better alignment and more repeatable launches. We will continue to manage through this transition thoughtfully, and we expect the benefits to build as the organization settles into the new model. Now turning to fourth quarter results. In the fourth quarter, we completed 12,200 procedures, reflecting approximately 69% annual growth. On the third quarter earnings call, we reduced our previously issued Q4 guidance by 1,000 handpiece units as we reestablish customer inventory targets that we felt were appropriate based on usage volume. Separate from establishing inventory targets, it became clear as the quarter progressed that accounts have become accustomed to purchasing large quantities of handpieces and receiving bulk discounts in the final weeks of the quarter. I've always believed pricing discipline is foundational for long-term success. At PROCEPT, I have been focused on implementation of handpiece price discipline. And as part of that, we eliminated the historical practice of providing discounts on bulk purchases, particularly at the end of the quarter. Despite customer requests, we remain disciplined and did not allow bulk purchases at a discount. As a result, handpiece unit sales were approximately 80% of procedures in the fourth quarter and for the first time, procedures exceeded handpieces sold. While this resulted in lower-than-expected revenue, it delivered a significant improvement in handpiece selling price. Average fourth quarter selling price was $3,340 or up $140 or approximately 5% sequentially from the third quarter. Historically, handpiece unit sales exceeded procedure volumes by approximately 8% to 16%. Based on the last several months, we now expect handpiece unit sales and procedure volumes to be in close alignment on a go-forward basis with sustained improvement in handpiece average selling prices. These business practice changes resulted in a reduction of our projected 2026 handpiece revenue. The revenue impact is meaningfully offset by the increase in handpiece average selling prices. Based on the combination of these factors with the short-term disruption associated with the sales force realignment, we are now resetting 2026 guidance to $390 million to $410 million, representing annual growth of 27% to 33%. Before I turn it over to Kevin to walk through the financials, I want to close by previewing what to expect at our Investor Day tomorrow morning. For the first time since the IPO nearly 5 years ago, we will provide a more detailed multiyear look at our financial guidance, including more details on '26 and '27, our path to profitability and an update on the Water IV Prostate Cancer trial as well as a vision for our future. I hope to see everyone there. With that, I'll hand it over to Kevin to walk through the financials for the quarter. Kevin? Kevin Waters: Thanks, Larry. Total revenue for the fourth quarter of 2025 was $76.4 million, representing 12% year-over-year growth. U.S. revenue for the quarter was $66.6 million, reflecting 10% growth compared to the prior year period. Turning to U.S. procedures. As noted by Larry, we completed approximately 12,200 U.S. procedures in the fourth quarter of 2025, representing approximately 69% year-over-year growth. Handpieces sold totaled 9,400 units at an average selling price of approximately $3,340 during the quarter, reflecting a 5% price increase compared to the third quarter of 2025. Other consumable revenue totaled $2.3 million in the fourth quarter. As a result, total U.S. handpiece and other consumable revenue was $34 million in the fourth quarter of 2025, representing 16% growth compared to the fourth quarter of 2024. Turning to U.S. robot placements. In the fourth quarter, we sold 65 new HYDRO systems. At the end of 2025, we had an installed base of 718 systems, representing a 42% increase compared to year-end 2024. Total U.S. system revenue was $27.6 million in the fourth quarter comparable to the prior year period with systems sold at an average selling price of approximately $425,000. International revenue in the fourth quarter of 2025 was $9.8 million, representing year-over-year growth of 25%. Moving down the income statement. Gross margin for the fourth quarter of 2025 was 60.6% compared to 64% in the fourth quarter of 2024. The approximate 450 basis point shortfall compared to fourth quarter guidance was driven primarily by lower-than-expected U.S. consumable revenue as well as a onetime voluntary field action that contributed approximately 240 basis points of pressure. On a full year basis, 2025 gross margin was 63.7% compared to 61.1% in 2024. Total operating expenses for the fourth quarter of 2025 were $77.4 million compared to $63.4 million in the prior year period. The increase reflects continued investment to support commercial expansion, continued innovation across our BPH platform technology and increased funding for our Water IV Prostate Cancer trial, positioning us to drive long-term growth and expand our clinical and technology leadership. Net loss for the fourth quarter of 2025 was $29.8 million compared to a net loss of $18.9 million in the fourth quarter of 2024. Adjusted EBITDA was a loss of $19 million in the fourth quarter of 2025 compared to a loss of $10.3 million in the prior year period. Cash, cash equivalents and restricted cash totaled $285 million as of December 31, 2025, providing a strong balance sheet to support our strategic priorities. Moving to our 2026 financial guidance. We now expect full year 2026 total revenue to be in the range of approximately $390 million to $410 million, representing growth of approximately 27% to 33% compared to 2025. This guidance range assumes international revenue to be in the range of $50 million to $51 million. Additionally, we now expect 2026 total U.S. procedures to be in the range of 60,000 to 64,000, representing growth of approximately 39% to 48%. As Larry noted, the adjustment to our 2026 revenue guidance is driven by a few factors. As a result of our business practice changes, we now expect handpiece unit sales to be closely aligned with procedure volumes, which results in a reduction in 2026 handpiece revenue. This revenue reduction is meaningfully offset by the increase in U.S. handpiece average selling prices, which we now estimate to be $3,500 in 2026. Our updated guidance incorporates both factors above in addition to the short-term disruption of our sales organization, as discussed by Larry. Importantly, our 2026 outlook does not change our confidence in the company's long-term growth and profitability trajectory through 2026 and 2027. Turning to gross margins. We expect full year 2026 gross margin to be approximately 65%, which includes $5 million to $6 million of tariff expense compared to $1.3 million in fiscal 2025, which is an approximate 100 basis point headwind to 2026. Turning to operating expenses. We expect full year 2026 operating expenses to total $350 million, representing a 17% increase compared to 2025. After considering all relevant factors, we expect full year 2026 adjusted EBITDA loss to be in the range of $30 million to $17. Our revised revenue guidance reflects positive EBITDA in the fourth quarter of 2026 at both the low and high end of the revenue range. For the first quarter, we expect total U.S. procedures to be in the range of 12,000 to 12,800, representing growth of 29% to 37%. This anticipates the implementation of multiple commercial initiatives designed to drive more durable and sustainable procedure growth. As these initiatives take hold, we expect procedures to accelerate, reaching growth of over 50% in the second half of the year compared to fiscal 2025. We expect total revenues for the first quarter of 2026 of $79 million to $82 million, representing growth of 14% to 19%. Included in our total first quarter revenue guidance is U.S. system revenue of approximately $20 million and $10 million of international revenue. I would now like to pass it back to Larry for closing comments. Operator: Thanks, Kevin. While financial performance in the fourth quarter was lower than anticipated, the changes we have made are critical to driving sustainable high growth and paving a clear path to profitability. We are very excited to share more details on 2026 and beyond at our investor conference tomorrow morning at 8:00 a.m. Eastern. With that, we are happy to take questions. Operator? Operator: [Operator Instructions] Our first question comes from Matthew O'Brien with Piper Sandler. Matthew O'Brien: I think we can ask two. But the first one upfront here is just -- I think, Larry, everybody knew that the quarter was going to be soft on the handpiece side, but the level of softness here just wasn't anticipated. So maybe just talk a little bit more about what unfolded in Q4? And specifically, did you flush -- just looking at some of the math, did you flush about 4,000 handpieces in Q4 on the inventory side? And then I do have a follow-up. Larry Wood: Yes. Thanks, Matt. Well, first, I'd just say we're dealing with two distinctly different dynamics. The first was we had signaled on the Q3 call that we expect there to be some destocking, but that was really about establishing part levels for accounts based on their usage. And I think directionally, that number was still pretty sound. The thing that came to light later in the quarter was how much our business practices of allowing bulk purchases at a discount was influencing customer purchase behavior. And when we did a deep review of that, I just didn't think it made sense for us on a go forward to be running that practice and discounting that way. I think without that incentive, customers no longer did the bulk purchasing, and that's obviously what contributed to the revenue mix. I think the big thing is it had two positive structural effects for us. The first one was the obvious one of ASP. We saw our ASP increase to about $3,340 in the quarter. But the other thing is it's going to improve our quality and predictability of revenue by aligning shipments more closely with underlying procedure volumes. And the health of our business was never going to be defined on customer stocking patterns or bulk purchases. It's always going to be about our procedure growth. And so that's really what we focused on. And so yes, there was a lot more reduction in inventory. I think our handpiece sales were about, I think, I don't know, 77% of procedure volume. So I think you can do the math on that and get to the number of units that came out. But I think the big thing for us is, as we look at 2026, we're now modeling those being at about a 1:1 ratio, and we're modeling an ASP of about $3,500, which is about a 9% improvement over where we were in 2025. And these are the structural foundational fundamental things that I just feel we have to do to really to ensure our path to profitability in the time frames that we want to be. Matthew O'Brien: Okay. I appreciate that. And then as far as the guide goes for '26, it's obviously back-end loaded. I'm looking at the Q1 commentary, it's just, it's still -- it's the toughest comp of the year as far as handpieces go, but it's pretty modest. So it just seem like the impact from the commercial reorg is still going to be influenced in Q1. I guess, why such confidence that you're going to see this benefit towards the back half of the year? Because I just don't -- I'm just hoping we don't have to cut the expectation for the full year again? Larry Wood: Yes. No, thanks, Matt. And I understand your question completely. We put a range and try to give guidance on where we think we're going to be in Q1. And I think Q1 always starts a little bit slow coming out of the holidays. That's always something that we have. And I think I've seen that in previous companies as well. I think the other thing, though, is we did just signal that as the as the sales force matures into the new alignment as they rebuild relationships with customers, we have people covering different accounts. We just wanted to signal that there's -- that's going to take a little bit of time for it to mature. But we do think these are going to pay dividends to us. We do think having people that are just dedicated solely on procedure growth in their territories and they're no longer distracted by launches and then having dedicated launch teams, we do feel that, that's going to pay benefits. But those are going to show up more in the back half of the year rather than the front half of the year. And we're going to provide a lot more detail tomorrow. We're going to walk across the procedure walk. And you're -- we're going to be completely transparent about it. I know we've talked before about really procedure volumes. We focus on handpiece revenue. But tomorrow, we're going to walk through all of that in detail and I think give you all the components of it. And I think you'll be able to make informed decisions about how confident you could be in our plan. Kevin Waters: I just want to follow on to Larry here, Matt, this is Kevin. And we're going to go through this, as Larry mentioned tomorrow, to give a full cohort analysis. And to your concern or question around the low end of the range, we're going to provide everybody with comfort that at the low end of the range, we are only expecting very modest utilization growth in our legacy installed base. We're actually going to show you that tomorrow to directly answer your concern that you just brought up. Operator: Our next question comes from the line of Chris Pasquale from Nephron Research. Christopher Pasquale: It looks like handpiece sales exceeded procedure volumes by a little over 10,000 units over the past 3 years, including this quarter's drawdown. So what gives you confidence that the ratio is going to be 1:1 in '26? Why shouldn't the rest of that gap need to be closed? Larry Wood: Yes. Thanks for your question. I think there's a couple of things here. When we look at the history here, handpiece sales have been about 108% to 115% of procedure volume, and now we're modeling that at 1:1. But we're modeling it 1:1 even though that we're going to increase our installed base by a couple of hundred systems that are all going to have to take inventory and take stocking orders and do all those things as we expand our installed base. So even with that, we're modeling at a 1:1. Based on all of our analysis and assessments, I think there's probably more upside to that number than downside. But I think 1:1 is where we're modeling it at. And that's a significant change from how we've done all of our previous modeling. And that actually is probably the biggest impact to the reduction in guidance. If we would have modeled handpiece sales at 110% even of procedures like we historically had, then that would have been worth a little over $20 million, probably $20 million, $22 million. And we're able to offset a lot of that with the price increase. But again, I think the long-term health of our business is going to be focusing on procedure growth and having steady, stable revenue. The other thing I can say is we made this change in the fourth quarter of pretty much the last month. So we have about 8 or 9 weeks of runway under this new business practice. And we continue to see now handpiece sales and procedures pretty much flying in formation. And I think that's what gives us confidence that that's that the 1:1 ratio is going to be appropriate for 2026. Christopher Pasquale: Okay. And then, Kevin, you talked about the gross margin impact of a field action in the quarter. Could you just give us some details around what that was and if that impact is contained to the fourth quarter? Larry Wood: Yes. I'll start with the field action. And here's what it was. It was a onetime nonrecurring field action. There were no patient safety issues. There were no concerns. It had to do with compatibility between the handpiece and between the system itself. And what we did was we were just able to go to a field upgrade that just took that issue off the table for us. And so we've upgraded our systems and made the appropriate changes. So that was contained in the fourth quarter. Kevin, if you can walk through the math on it. Kevin Waters: Yes. It was approximately $1.5 million, which was 240 basis points of pressure is the math. But as Larry said, onetime, and it will not impact us moving forward. Operator: Our next question comes from Josh Jennings of TD Cowen. Joshua Jennings: I was hoping to just get a better understanding of the fourth quarter dynamics and the go-forward outlook just on ending the bulk -- end-of-quarter bulk purchase deals that were offered previously. Are you seeing any customer dissatisfaction? And do you anticipate that some high-volume or medium volume and low-volume centers will decrease their utilization at least in the short term until these higher handpiece prices are digested? Larry Wood: Yes. Thanks, Josh. We don't anticipate that, and we haven't seen that. I think there were some customers, frankly, in December that were waiting us out to see if we would bring back these incentives before the end of the quarter, and we didn't. But we've seen the ordering patterns and certainly in Q1 and even late last year, people were having to reorder to support the cases that we're doing. And I don't think it impacted utilization or our case volume, and we haven't heard anything about that. We're just, again, really focused on being disciplined about this. And again, we're fairly deep in Q1, and I just don't think that's impacted us. I think there was a little bit of a mindset in the company that if we -- if people took these orders and we -- and the idea of bulk discounts isn't unique to PROCEPT or anything else. I think people thought like if they have much more handpieces, maybe that would be an incentive for utilization. And I just don't think the two are related at all. So we're going to continue to drive our procedure growth, and that's going to be our key area of focus. That's why we made the changes to the sales force. But we're going to be very disciplined about handpiece pricing. And we're going to be disciplined about system pricing as well. Joshua Jennings: Understood. And you took -- you made some comments, Larry, just on the -- some disruption just in the commercial work or the commercial restructuring. Just wanted to hear about just the stability of the sales force and some of your all-star clinical specialists and reps on the capital side as well. I mean, is it relatively stable? Are you seeing any attrition? And are you planning on adding to the team as you move forward in 2026 and beyond? Larry Wood: Thanks, Josh. Yes. No, I think our team has been stable. We haven't seen any higher attrition. When I talk about the disruption, it's not about losing people. And I'll just provide a little bit more color on this, and we'll talk about it more tomorrow as well. But what we did to create the launch teams is we took some of our most tenured people, some of our most seasoned people, and we moved them over to the launch team because we really want launches to go well. And I learned this in my time at Edwards. When we launched TAVR site and they launched -- and they launched well with steady rhythm and steady volume, they just became healthy programs for us. If somebody launched and they launched poorly, it took a long time for them to get up to the projected volumes of where we thought they should be. So we really want to focus on these launches and make sure they go well, make sure teams have all the support and they deliver spectacular outcomes for their patients, especially in those first early procedures. In creating those launch teams, though, we took some of our best people out of the utilization team, plotting at procedure support team. And in doing that, we backfill those positions. We have people in place on those, but they have to rebuild relationships with those customers. You don't have somebody that maybe has a long-standing relationship. And we also realigned territories that we think allow us to better service our customers and drive the growth. But whenever you do that, people have to reestablish relationships and do all those things, and that's just what we're going through now. But this isn't anything that's unique to us when out of the network, and we used to split territories and hire new reps. You have new people calling on established accounts, and it takes time for them to build those relationships. So I see this as being very transient, been very normal. We just did a lot more of it all in one fell swoop rather than the normal course of business where you're splitting territories periodically. But I think we have great people. I think we have people in the right places. It's just going to be a matter of people maturing and selling into their new accounts that they cover. Operator: Our next question comes from the line of Richard Newitter of Truist Securities. Richard Newitter: I have two. The first one, just on systems. I think you had said a $425,000 ASP or blended ASP. You did 65 systems. So can you just tell us what the kind of the greenfields were? Were there any operating leases in there and trade-ins, et cetera? And then for 2026 on systems, I don't think you gave an explicit placement number. I think the Street at around 220 something for the year. Doing the math, it would suggest you're basically kind of -- or I think that's what you're backing into. Can you confirm that? And then I have a follow-up. Larry Wood: Yes. I'll start with the pricing. Our capital pricing varies a little bit quarter-to-quarter, and it really has to do with our customer mix, whether we're selling into some of the big IDNs or whether their individual systems are being placed. So the $425,000 doesn't reflect any softness in the capital. I think what we're modeling next year is we expect ASP for systems to be flat to up compared to what we saw this year. And so that's kind of where we are. And I think in terms of systems, I think we're modeling Greenfields to be very similar to this year. We're going to shed more light on that tomorrow. But Kevin, do you have anything to add? Kevin Waters: No, we're going to walk through the different components, Rich, of guidance tomorrow, but your observation around roughly flat system sales with a slight increase in ASP is a fair assumption. Richard Newitter: Okay. And then Larry, just starting from the first quarter or fourth quarter of last year even, I know this predates you, there were some seemingly transient or was explained to us was transient externalities, things like the hurricane, the impact on solution, et cetera. And then there were some onetime factors as we move through the year. And then you -- on your last call, obviously prepared us for this destocking or the stocking component and trying to get that right now. It seems like there was some discounting. I guess with respect to kind of where we are today and what you see in the business going forward, what can you tell us about the health of the actual underlying demand for procedures? Is there anything with the reimbursement changes, doctor usage patterns? Is it all, in fact, self-inflicted type items that are leading to the drawdown here or the lower consumables forecasting? I think there's just been a lot of consecutive kind of noise around procedures, and now we're entering a period where there's some internal self-help factors. So how can you get people confident in your visibility, the ability to execute on this new seemingly reset level and that there's nothing underlying on demand side or the penetration curve that's just -- you're bumping up against the wall? Larry Wood: Yes. Thanks for the question. And I understand where you're going with this. And again, one of the things that we never reported on before with actual procedures, we always report on handpiece revenue. And to provide a new level of transparency, we -- externally, we're going to talk about procedures. And if you look at our procedure growth, it was almost 70% in the quarter. And so compared to year-over-year. So I think the procedure demand -- and I'll tell you even at that number, we're trying to accelerate well past that and drive further growth beyond that. But it was pretty healthy procedure growth. The revenue shortfall wasn't really driven on the procedure side. It really was about the customer ordering behavior. And it was being driven much more than probably we appreciated by these discounts that people have become accustomed to, and we were living in the cycle of people stocking up at the end of the quarter and then depleting going into the next quarter, which is leading to very lumpy sales. And again, I reviewed that practice with the team, and we just looked at it hard and said, I don't think this makes any sense for us. And if you look at the ASP that we're modeling for next year, I think that's where we're going to get the benefits from it. And to some degree, I traded off continuous this ordering cycling at discounts for having more ASP and steady revenue that's going to mirror procedures. And I just think these are foundational fundamental things that needed to happen. But I feel very strongly that these things are behind us. We've talked about the sales force reorganization that I expect to improve our execution around procedure growth. And we're going to talk tomorrow about what our value proposition is for Aquablation in the clinical community. And I think we have a compelling story to tell. And so if you make the investor conference tomorrow or watch online, we're going to provide a lot of detail on that, that we've never provided before. But I think we have a solid strategy, but it all starts with these fundamental pieces. And price is just something that's always a huge part of that. And our margins and our path to profitability, those are key areas of focus for us. And the steps that we've taken are the things that I believe are going to drive us to the success and profitability that I think we all want. Operator: Our next question comes from Brandon Vazquez from William Blair. Brandon Vazquez: Larry, in a story like this, I mean, ideally, we're trying to put this behind us and use the analogy of ripping the Band-Aid off in one quarter. I think what investors often try to grapple with here is that meaningful changes to the commercial side or big inventory changes like this typically aren't a one quarter 1 and done, but it feels like you guys have some of the confidence that, in fact, you're going to just continue growing through the year despite some of the noise going on and even some of the externalities that Rich was talking about that have been impacting the business for a little bit. Maybe you could spend another like couple of minutes on -- you said it's been a couple of weeks that you guys have been doing some of these new initiatives. Any metrics you can give us on what's already being done in the early days that's kind of giving you confidence that this is done, that there's not going to be another thing that we need to change on a go-forward basis? Larry Wood: Sure. Thanks for the question. Well, I'll start with the procedure matching to handpiece revenue. We made those changes in the last month -- in December of last year. So we have pretty many weeks of run rate now where we're seeing those 2 numbers pretty much aligned. And so that's one of the things that gives us confidence that that's behind us. But again, we're going to increase our installed base by a couple of hundred instruments this year, and all of those are going to need inventory to drive. So even if there was a little bit more destocking in our installed base, which I don't have any evidence that there is, we're still going to have all these new systems coming in that are going to need inventory, which is why I said there's probably a little more upside than downside. But again, I think our focus is going to just be strictly on procedure growth because the health of our business is never going to be impacted by customer ordering or stocking patterns. It's going to be driven by our execution in the field and by growing procedure volumes. And that's why we made the changes to the sales organization, and we made them all at one time, so we can get it behind us. We can get the team moving forward and they can go execute. And we've aligned the team under our common regional leader now to where we have the focus and we have the accountability and aligned incentives to go drive our growth on the things that matter the most, which, again, is going to be procedure growth. So I understand the question and I understand the comments, but we had to make these changes to drive the organization the way that we need to drive it. And I'm building this thing with a multiyear plan in place, not an individual quarter. And so we just had to stop some of these things that I think we're hurting our margins, and I think we're encouraging the wrong customer behavior. And that's what we've done. And I feel very confident that the inventory issue, I feel very confident that is behind us. And on the sales organization, I'm confident that this will pay dividends to us down the road. But again, it's a big organization change. It does take time for those things to settle in as people will reestablish those relationships, but all of that is factored into our 2026 guidance. Brandon Vazquez: Okay. And switching gears a little bit, just because this will probably start to come up a lot in investor conversations going into the quarter, of course, I'm sure you guys have heard that a lot of noise around PAE given the reimbursement there and a lot of experts doing or a lot of urologists doing more PAE cases these days. You gave the procedure numbers, which is super helpful. But maybe talk to us a little bit what you're seeing in the field and help us bridge like you called 10 urologists and 9 out of 10 of them are doing more PAE, your procedures are still growing. Kind of give us the lay of the land of how you're seeing Aquablation and PAE playing out in the field. Larry Wood: Yes. No, thank you. We're going to provide more detail on procedure trends at the investor conference tomorrow, but we're still very early in penetrating a market with more than 400,000 surgical BPH procedures annually. So our primary opportunity improving commercial execution is going to be consistently taking share. From a competitive standpoint, we continue to think that we offer a very strong value proposition, particularly related to term. Specific to with respect to PAE, while the site and service economics can be attractive, we're seeing continued variability in clinical durability. And we've also seen more variability in payer coverage. And our current market intelligence suggests that coverage may be more selective over time rather than broader. And as a result, we don't see changing the long-term competitive dynamic for patients who are appropriate for resective therapy. But we're going to show some data tomorrow, and we're going to walk through what we think our value proposition is and why we think we're going to be successful making inroads from a share perspective in this patient population. Operator: Our next question comes from Suraj Kalia from Oppenheimer & Co. Suraj Kalia: Larry, can you hear me all right? Larry Wood: I can hear you fine. Suraj Kalia: So Larry, I want to follow up on Chris' question. Obviously, the math is the math in terms of inventory in the field. I guess if I could comment it from a different angle, Larry, look, the Board signed off, the Audit Committee had to sign off on the previous sales process, right? Now a completely new process has been instituted. My question, Larry, would be, why now? Why couldn't this be staged? And what specific thing has triggered the Audit Committee, everyone to say, okay, we bless this. This is the path to go and now is the time to do this? Larry Wood: Well, look, one of the things that we've talked about, and we'll show more detail on it tomorrow is the -- if we look over the last 4 or 5 years, the handpiece revenue was always higher than our procedure volume. And if we look at what was happening with pricing, pricing was pretty stable during that period of time. But I signaled last year that I thought inventory levels in the field were higher than they needed to be, and that's why we signaled that we thought we would take some of that inventory level down. It wasn't until we were deep in the quarter that I think we started to get an appreciation for just how much these incentives were really driving the customer stocking behavior. And I think -- when I look at that, price is such a hard thing to do and improving margins is such a challenge. And I just thought there's a huge opportunity here. To be at a $3,500 price point in our 2026 plan is a really meaningful upside, but that's not going to pay dividends just for us in the short term. That's going to pay dividends over the next several years as we think about our path to profitability and improving our margins. And so the idea that you would try to like whittle these things down and bleed this thing off over many quarters, it was just going to be a headwind that we frankly would have to keep talking about and just gradually do it. And I think we would not have seen the ASP benefit if we would have tried to bleed this off over a long period of time. So we just made the decision. And look, we understand completely why it created a revenue shortfall, but the impact that it has to ASP next year is so significant. To me, again, building these foundational pieces for the long term, it's just critical. And so we just took a step. I think we also wanted to recondition our customers that these practices are behind us and that we're not going to be doing these things anymore. And so they can just order based on their procedural usage rather than ordering on other things. And none of the changes we made impact our future growth trajectory, and they don't impact our path to profitability. So I think they were just the right decisions for us to make. I understand the point that you're making, and sometimes it may look tempting to try to bleed this stuff over time. But then I think you just continue to confuse your customers with these incentive plans. And we just wanted to put that behind us and be done with it. Suraj Kalia: Fair enough. And Larry, my second question, so you mentioned customer behavior a couple of times in your remarks, presumably that is referring to wanting end-of-quarter discounts and whatnot. So these customers have been -- their behavior has been primed by PROCEPT's sales practices, and it is over multiple years, right? Have you all done a sensitivity analysis based on your existing customer base where the switch that you all are turning on or off, it's going to now change the end customer behavior once again and almost instantaneously? Larry Wood: Yes. Thanks. We've had multiple weeks of this where we've been dealing with it. Again, we did this in December of last year, we made these changes. So I think we've had a decent run now where we've been able to evaluate that. And we don't really see any impact or change there, and I don't expect that we will. I think the -- I see it in terms of customer conditioning, but we're a party to that as well. We were offering incentives. We were offering discounts. Customers were taking advantage of those. And it just wasn't a good healthy practice for us, I don't believe over the long haul. I think it's far more beneficial for us to see the impact on ASP, but also to have a stable, reliable ordering pattern and revenue stream. And so I think those are just the things that we needed to do, and that's the structural impact of this change, but I think it benefits us over the long term. Operator: Our next question comes from the line of Michael Sarcone from Jefferies. Michael Sarcone: I guess just first one for me. I know you're going to give more detail at the Investor Day tomorrow, but you carved out this team that's focused on the launch process. Can you maybe just help crystallize that, give us 1 or 2 examples of what you're attempting to change in the launch process now that will kind of position you for success? Larry Wood: Sure. Well, here's what happened in the previous org structure was our team -- we just had sort of one field team that was focused on procedures. And then obviously, we had the capital team as well. In the old process, the capital team, they would sell the instrument. And then at some point, the procedure team gets notified of it. And in addition to supporting the installed base, they would have to figure out how to launch this new system, how to provide the support, what doctors want to be trained, how they wanted to be trained. So they were sort of pulled in multiple different directions. And when you think about it this way, you have a capital team that's trying to move capital. You have the procedure team, which is made up of salespeople and clinical people, that they reported up into different leaders and sort of had their own incentives and their own plans and their own objectives. And those weren't always aligned. And so by creating the launch team, it sits under our capital organization so that when the capital team is close to closing on an order, we're already lining up who are the clinicians that need to be trained, what that process is going to be. And then we took some of our most tenured people and put them on the team because we want to make sure for every new system that's placed that they get the best support, the best care so that they have a great launch. And the metric that we're tracking to is time for PO, the time that they complete like their first-line cases. It's not just getting one case under their belt. So we're really trying to drive that repeated excellence and predictability of launches and really running a very standardized playbook, which we didn't really have historically. You have different people doing it differently. And again, they were being pulled from trying to support existing accounts and also trying to launch systems. And in some cases, maybe you're having junior level people do some of these activities. Now we have our best people in place to do those things. The impact of that is we have to rebuild those positions on the procedure team and rebuild those relationships and do those things. But again, we think that's going to pay dividends for us. We ran a pilot in Q4 when we ran that pilot, we saw about a 50% reduction in time to first-line cases when we did under the launch team model, which I think is going to have a lot of impact for us on a go forward. And again, we'll talk more about this tomorrow and go into more detail on it. But these are the foundational pieces that I think we have to get in place. And our goal is by the end of the year that everybody is launching in a launch team model. Michael Sarcone: Very helpful, Larry. And I guess the second one from me is I'll echo the sentiment from other folks here, 70% procedure growth is pretty impressive. I mean, can you give us any color on how that's split out between maybe older cohorts of existing customers versus newer cohorts? Larry Wood: Yes. Thanks. Yes, while the growth number was pretty good, I will tell you, we have much more ambitious goals than that, and that's again why we made some of these changes because we want to drive and accelerate that. In terms of where the growth comes from, I will tell you, it's highly variable. And we'll provide a little bit more color on some of our insights tomorrow, but there's just not an easy one answer. It's not to say that every customer is a snowflake, but there's not as much commonality as maybe one would think. But we're going to talk about that tomorrow. And again, we're going to be really transparent tomorrow walking people through our strategy through the changes we've made, why we believe they're going to benefit us and what we're going to do differently on a go forward that hopefully will give people confidence in our strategy and our long-term out. Operator: Our next question comes from the line of Mason Carrico from Stephens Inc. Benjamin Mee: This is Ben on for Mason. Are you -- in light of some of the recent changes that you've discussed today, could you update us on maybe your IDNs level strategy? Are you planning to lean more heavily into these negotiations in 2026? And is there any opportunity for maybe some bulk system placements in the 2026 guide? Larry Wood: I don't know that anything really changes year-over-year. We always are focused on -- we have a team that focuses really on IDNs. We have teams focusing on new greenfield placements. I don't know that anything really materially is going to change from last year to next year. But we're going to talk broadly about our capital strategy tomorrow and try to shed maybe a little bit more light on that, but I don't think there's any massive changes from last year to this year. Benjamin Mee: Okay. Great. And then you previously noted that maybe Aquablation improved outcome story -- the Aquablation improved outcome story may not be as widely understood by patients today. Are there any patient activation initiatives you plan to launch in 2026 to maybe help drive this messaging? Larry Wood: Well, if you're interested in that, then you're definitely going to want to tune in tomorrow. We have a very specific plan and strategy about making the clinical case both to patients and to clinicians about the value proposition of Aquablation. But one of the things that I may really want to stress is I think when some people hear patient activation, they think it's just about getting people off the sidelines. But there's about 400,000 people a year that get an invasive procedure for their BPH. And we're only about -- in 2025, about 10% penetrated into that group. So we have a lot of headroom just in taking share from the patients that are already being treated. You go beyond that, there's a whole other funnel of people who are on drugs and other things that we will shed light on tomorrow. But our near-term execution is all going to be focused on moving share. But I think certainly, the patient education and the physician education is going to be a key component of that. I think the other thing that people hear a lot of time is when they hear patient activation, they think Super Bowl commercials and millions of dollars of spend. And that's not anywhere in the ballpark that we're in. We're very focused on our path to profitability and the programs that we have are not going to be of that scale. And what's -- what's really good about this market for us is it's very easy for us to target and identify men with BPH. It's much simpler than, for example, in my old world where you're looking for the 5% of the people over the age of 80 that have valvular heart disease. We know exactly who these people are. So you don't have to cast as wide a net to be able to target the people with BPH. And so we can do much more targeted education programs that I think are going to be impactful. Operator: Our next question comes from Stephanie Piazzola from Bank of America. Stephanie Piazzola: I'm sure we'll get more detail tomorrow, but if there's anything you could share now on how to think about that step-up to 62,000 U.S. procedures in 2026 versus the Q4 run rate was a little under $50,000. And then also I just wanted to clarify on the ASP uplift that you expect this year. Is that just a result of the change in the customer ordering practices or something else, too? Larry Wood: Yes. Thanks. I'll take your second question first. Yes, the ASP pickup is just by not offering incentives or discounts for end of the quarter purchases. And by eliminating that practice, we've already seen the impact on our ASP, and we expect that to continue. On the procedure walk, we are going to go into detail on that tomorrow, but it's going to be a combination. I think the biggest drivers of it, frankly, are going to be the new systems that we're adding, the benefits of the launch team, the growth that we're going to get from that. We don't have massive uptick in our installed base. There's obviously going to be some growth that comes there, but we know it's going to take a little bit of time for some of our programs to take hold. But we're going to go on a detailed walk tomorrow to walk through kind of the puts and takes on how we take our procedure total from what we had in 2025 to what we had in 2026. Stephanie Piazzola: Got it. And then just on the sales force realignment and some of the potential disruption there, how do we think about where you are in that process and how much is left to go? And how do we think about the disruption turning to a benefit and when that happens? Larry Wood: Yes. Thanks. All of the changes structurally in the organization have been made. So those are all made. Those are all in place. We rolled them out at our sales meeting in January. And so all of that work has been done. Everybody has their account targets, everybody has their quotas, everybody has their revised incentive plans. All of that work has been done. I think it's now just a matter of people maturing into these roles, learning their new accounts, building those relationships and doing the things they need to do. And just -- again, I don't want to overstate things. It's not like every single customer got a new rep. A lot of things did hold over from the old as we realigned territories. And we did pull some people out to the launch team, but it wasn't like 30% of our field force or anything. But all of these things have some impact. They do create some headwinds for us. And -- but I do believe as the organization matures, having a team of people, their only focus is improving utilization in our installed base, I think is going to pay dividends for us and ensuring that there's streamlined incentives between the commercial team, the sales team and the clinical team and having them report to a common leader in that region is going to drive a lot more focus. It's going to drive a lot more accountability and ultimately improve our execution and performance. Operator: Our next question comes from the line of Danielle Antalffy from UBS. Danielle Antalffy: I imagine we are going to get this more for this tomorrow. But Larry, I'm just curious, in the 6 months or so that you've been there, how much of a heavy lift do you think the market development component is here? I appreciate you've talked a lot about the sales force realignment and adjustments there. But just from a pure market education perspective, what's the plan? I mean, as much as you feel like saying on this call versus tomorrow? And how much of that is going to be part of this procedure volume bridge and the long-term plan? Larry Wood: Yes. Thanks, Danielle. Here's what I will say. The company historically has really been focused on placing systems and then working through the people that acquired the symptoms to make sure that they knew how to do the procedure and they delivered good outcomes with the system. And I think the team did a great job on that. In terms of marketing programs and in terms of awareness and in terms of those things, the value proposition, I'm just real frank about it, none of that work was done. If you -- if I pretended to be a patient and I went out live and tried to find information on BPH therapy, I couldn't even find Aquablation on WebMD going through what I think a patient would normally do for search firms or any of those things. So there's just some very basic fundamental work that had never been done that had never really made our value proposition case to patients. But doing these things and getting out WebMD and getting in social media and doing the comparison how our procedure compares in terms of outcomes and durability and the things that matter most to patients, we have to do that work, but this is always a build. It's never a light switch. I mean you look at TAVR journey during my entire time at Edwards, and it's a continual build that you have to do. But there's just so much basic work that can be done quickly that I think is going to make a difference. And I think we're going to spend a fair amount of time on that tomorrow during the investor conference, and I hope you're there because I think when you see the work that we're doing, you see the value proposition we have, I think we're going to make a compelling case to clinicians and also to patients. Danielle Antalffy: Okay. That's helpful. And again, I don't want to front-run tomorrow, but one thing we heard in our diligence and speaking to docs was some level of appetite to have the ability to do this in the ASC. I know you guys aren't ready for that yet. But just from a capacity perspective, is that something that could be part of the long-term plan? Anything you can say about that? Larry Wood: Yes. Thanks, Danielle. Certainly, for the long-term plan, that's going to be something that's going to become part of our story as we go through time. So I think that, that's very fair. I don't think it's something that's so much of a near-term thing for us. The other thing, and I'll just address it and we're going to talk about it tomorrow is we have people saying, like, are you going to cover cases forever because that's been our model we've done historically. And we'll provide an update on that as well on how we think these things evolve over time, and that can improve our efficiency and again, improve our ability to execute. Operator: Our next question comes from Mike Kratky from Leerink Partners. Michael Kratky: I wanted to follow up on Chris' question again earlier. I mean, if handpieces sold have consistently been above procedure volumes every single quarter for the last 3 years outside of the fourth quarter, I mean, wouldn't your customers still have a pretty substantial buildup of handpieces that they have available, that they need to work through? When you talk about this 1:1 ratio, can you just help us understand why that is -- you have confidence that, that's going to be the case? And was there anything in the voluntary field action that might have impacted that? Larry Wood: Yes. Well, I'll start with the second part. There was nothing in the field action that had any impact on this one way or the other, completely separate event that didn't have any impact. In terms of the handpieces, what I can tell you is customers still need to maintain inventory levels. Nobody is sitting there with one hand piece on the shelf. So they need to continue to carry inventory levels. It's just a matter of what inventory levels are they carrying. And I think what was happening with the incentive plans is people would stock way much -- way more inventory than they wanted and then they reverted down in the first couple of months of the quarter, and then they would repeat the process and reorder again and take advantage of these incentives. I think we eliminated that and now what we've seen is a settling into where accounts are just carrying the inventory levels that they feel are appropriate based on their usage and based on whatever their inventory policies are. We modeled next year at 1:1 and that's what has been actually happening as we look at the last several weeks since we made these policy changes or practice changes, I guess. And so that's what gives us confidence on a go forward. But the other thing is, again, we're going to install a couple of hundred systems next year, and they're all going to have to take stocking orders and they're all going to have to establish inventory levels as well, and we're still modeling it at a 1:1. So those are the things that give us confidence next year that 1:1 ratio is going to be in line. Michael Kratky: Got it. And then maybe just the last one on my side, but can you provide any additional color on the cadence of OpEx and your sales force expansion or SG&A throughout the year? Kevin Waters: Yes. On the cadence of OpEx, maybe I'll just point to what our EBITDA guidance implies. So we had said at both the low and the high end of guidance will be EBITDA positive in the fourth quarter. We're forecasting an EBITDA loss in Q1 of somewhere in the $20 million range, which would put OpEx somewhere between $85 million to $88 million in the first quarter and then build from there. And again, we're going to go through kind of that walk tomorrow as well. Operator: Our last question comes from Nathan Treybeck from Wells Fargo. Nathan Treybeck: So it sounds like handpiece sales have exceeded procedure volumes by wide margin for a long time. I guess, can you talk about what this implies for actual utilization levels at your accounts? And I guess, how would you put that into context the monthly utilization numbers that the company gave in the past for other BPH surgical procedures? Larry Wood: Yes. Utilization is highly variable. And I think, again, what we're focused on is procedure growth. I probably can't go as deep on the history here. I don't know, Kevin, do you have anything you want to add? Kevin Waters: I think if you look at it, it's been relatively consistent over the last 3 years. And just to maybe put a number that's been thrown around a few times to highlight, I think it is correct. If we're at a 1:1 ratio, you would see about 11,000 units out in the field. But remember, we're adding over 200 systems in 2026, which would put given current procedure trends, average customer inventory just a little over a month to 7 weeks, which we feel really comfortable with. Nathan Treybeck: Okay. And so on your capital funnel, I think last time you mentioned there might have been more scrutiny of budgets. It sounds like you're expecting flattish system placements in '26. I guess talk about the level of price sensitivity you're seeing in the accounts that you're pursuing now and I guess, the willingness to place an Aquablation system with just a BPH indication. Larry Wood: Yes. Well, we actually had a very strong capital quarter in Q4. We had 65 systems, which is an all-time high for us. And so I think that supports that we continue to see demand now, just the natural nature of capital, the fourth quarter tends to be our biggest quarter every year. And we are modeling about the same number of placements in 2026 is what we had in 2025, and we'll provide more detail on that. But we're actually modeling ASP to be flat or up in 2026 from where they were in 2025. And so we continue to see good demand for -- and we think the capital market, I don't want to say it's ever easy, but I don't think there's anything structurally that's changing from 2025 to 2026 that would impact our ability to execute our plan. Operator: At this time, that does conclude the question-and-answer session. I would now like to turn it back to Matt Bacso, CEO, for closing remarks. Matthew Bacso: Thanks, operator. I appreciate everyone's time today going through Q&A, listening to the Q4 call. I just want to remind everybody that we are hosting our Analyst Day tomorrow in New York at 8:00 a.m. Eastern, and please show up a little early. There will be breakfast provided, but we will start promptly at 8:00 a.m. Hope to see you there. Thank you. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Adam Warby: Good morning, everyone. Very good to be with you here today to talk about FY '25. And FY '25 was a year of real tangible growth for Ocado, but one that also saw the business mature in a number of important ways. And while we've seen robust growth in the business and good progress across most of our global operations, we also worked to help some partners address a number of key challenges in their early network decisions. This included constructive engagement with our partners in North America, as they made decisions to close sites in areas where demand has not evolved as initially expected. And in fact, last year, we reflected that a number of our partners were looking at a small number of sites, which required a different strategic approach. And while the decisions made in North America to close were difficult, it does reflect a mature approach with those partnerships and putting them on a stronger foundation for long-term and sustainable growth. With exclusivity now having ended in North America, we've begun the journey to reengage in many of the commercial opportunities available in that very large -- world's largest grocery market. And Tim will reflect on this and Ocado's approach to reentering the wider global opportunity as Ocado moves into this next phase of commercial growth. So I look forward to hearing more about that soon. I've now been Chair for just over a year. And during that period, I've spent a lot of time engaging closely with a range of stakeholders. And reflecting on what I've learned, I remain still very excited about the significant opportunity that remains in -- to solve a range of business issues across the omnichannel journeys of our retailers. And Ocado itself is still a business that has a huge breadth of talent, a unique and world-leading technology platform, a visionary leadership team and a scaled commercial relationship with many of the leading retail brands around the world. I've enjoyed getting under the skin of these issues over the past year. And while recognizing that executing in a competitive and ever-changing world is challenging, I do believe Ocado is well positioned to take advantage of the significant global opportunity, both with current and future partners. I particularly value the time spent with many of our Ocado partners, including counterparts at Coles, Ocado Retail, of course, Kroger and of course, our JV partner, M&S. This engagement gives a tremendous window into the strategic thinking of our partners and in particular, a depth of understanding on how some of the world's most successful retailers think about their own long-term success and growth. Today, you'll hear from Stephen and Tim about progress we're making towards the key priorities that we laid out at the half year. First of all, our core priority to turn cash flow positive later this year with full year cash generation in FY '27, the measures that we're taking to drive continued growth and greater efficiency with our partners, and lastly, how we're reconfiguring key parts of the business to make sure we're well set to take advantage of the renewed and significant global opportunity. So over to you, Stephen. Stephen Daintith: Thank you, Adam, and good morning, everybody. I hope you're all well. Thank you for joining us at today's full year '25 results. I'm going to take you through the financials. Next slide, please. Okay. Here are the headlines. So good financial progress across the board really. Revenue grew, group revenue by 12%. I'm going to take you through the logistics and the tech solutions growth shortly. We had strong adjusted EBITDA growth of GBP 66 million to GBP 178 million. The underlying cash flow, if you exclude the letter of credit, was a GBP 230 million outflow. But if you were to take that into account, underlying cash flow would be GBP 140 million -- GBP 130 million better, driven by that receipt from the letter of credit. I should say upfront, by the way, on the closure fees from the 4 site closures and on the letter of credit, the accounting is not straightforward. It mostly impacts fiscal '26 and future years, but we've included in the appendix a couple of charts that show you how it all works when it comes to do your modeling. So I just wanted to make that open upfront. The retail -- sorry, the underlying cash flow in terms of credit, I talked about that. Liquidity finished the year yet again with healthier liquidity of GBP 700 million or so of cash and the access to the revolving credit facility. This has been bolstered further by the GBP 279 million inflow that came in post the year-end. So we're sitting on very good cash balances today. It does mean, and I'll get into it when we look at our debt chart shortly, as we approach our debt maturities with the optionality there. Certainly, in the first instance, the GBP 350 million convertible bond that's due in January '27, we can pay out of cash, which you will see our gross debt numbers starting to come down, important factor for us, particularly when you see the trend in interest costs. Yet again, we achieved our guidance for revenue, margin and cash flow targets and hit all of those. There's probably nothing more I'll say here. I'll take you through the detail now of each business. Here's the statutory chart, getting you to your earnings before tax of GBP 403 million, a positive number, but benefiting, of course, from the big adjusting item of the valuation of Ocado Retail of the stake of our 50% in Ocado Retail when we deconsolidated the asset and M&S took over consolidation. As a consequence of that, we took our value that we put in at GBP 1.5 billion or so, half of that and then you adjust for the assets that are on our balance sheet to get to that adjusting items income. A couple of other callouts. Tech solutions revenue growth, I'll go through that. Logistics, 11%. I think it's probably worthwhile calling out the finance cost line, a GBP 48 million increase in our interest costs. As I've mentioned earlier, there are plans to address that debt and gradually reduce that gross debt level. I'll get to that shortly. So Ocado Group adjusting items. Here is the key item there at the top that I talked about, Jones Food, if you recall, went into administration last year. We wrote off those assets that were consolidated on our balance sheet. We were a consolidating company. The Kroger of lessor credit pre fiscal '25. So whilst the cash was received in early this year -- sorry, last year, in fact, there is an accounting recognition of the revenue related to prior periods, which is an adjusting item in the prior period. You'll see at the chart at the back how it works. It's not straightforward. The organizational restructure, that is not the cost of the restructuring that we're about to do. We did a small amount -- a relatively small amount of restructuring principally in G&A and in technology in the first half of this year. So there's a small amount in there. The rest is pretty straightforward. So tech solutions. Well, you know the business model, grow the average number of live modules on that point, and we'll come to it shortly. That's probably the key number in respect of becoming a cash flow positive business full year fiscal '27, turning cash flow positive in the second half of '26. 121 modules today, driven by -- the growth there is driven by new sites going live. We've got around 6 sites going live over the next couple of years, but also drawdowns in existing sites. Those are the 2 drivers of that growth in modules. The quicker we grow our utilization of those sites, fill their capacity, the more modules and CFCs that are ordered going forward. That's a key metric for us. Recurring revenues make up the bulk of that revenue, that GBP 444 million, growing by 7%. And as you'd expect, that's in line with the growth in average number of live modules, but also the fees that we get, as you'll see shortly, per module that are indexed every year to local inflation. The nonrecurring revenue, a material increase in nonmaterial revenue by GBP 41 million, but there's a lot of noise within that number. A lot of it that's in there is around the Morrisons fee that we got when we exited their 5 modules out of Erith. It's about -- I think about GBP 17 million or so there. And then there's about a GBP 15 million number in respect to the closure fees as well. So you'll see that detail later on in the pack in the appendix. Other than that, contribution margin for tech solutions, an improving contribution margin of 72%. Of course, the revenue does benefit from those items that I mentioned, but we've also included a potential decommissioning provision in there in respect of those site closures. So just to make sure that we balance it out that we haven't taken all of that benefit directly to contribution. There is some provision in there as well. These are the expense items of the technology spend and then support costs. That's the G&A costs that exist, but it's also the partner-facing teams as well. As you'll see shortly in the slide, it's sales team, but it's also G&A, corporate overhead type teams. Okay. left-hand chart showing the progression of average live modules. Now clearly, as we approach '26 and '27, we are going to be hindered in '26 by, of course, the sites that have closed in -- recently that were part of that 121 number. We make that up by the sites that go live. We also make it up by Ocado Retail drawing down on further modules as well, which they will do, self-evident given we're going to show you shortly where they are on their capacity, but as they're growing as strongly as they are another year of growth, 15% revenue growth. And that's driven by volume as well. That's a volume-driven growth. Better revenue per module, I talked about that, that progression, indexation playing a part there drives our recurring revenues. That's the math. So here you go, go live of CFCs and drawdowns to drive the growth following the resets. Here on the right-hand side, we call out the CFCs we expect to go live over the next couple of years. And again, there's some bullet points there that just reinforce my earlier comments around module drawdowns and the importance of those. We expect by fiscal '27 to be at at least 125, and we're targeting over 130. But for the purposes of the modeling of cash flow positive, this range does the job. We expect we can go further than that, but let's get there when we do. That's our ambition. Okay. Direct operating costs, we expect those to benefit further going forward, but you can see the progression here, continued efficiency in the operations. We do think we can get to these being below 25% and therefore, an over 75% contribution margin. Technology spend, you can see how it's declined in fiscal '25 to a total across CapEx and P&L costs of GBP 248 million. We will be seeing shortly in the guidance that we give for fiscal '27, again the cash flow positive. We are looking at around GBP 100 million or so reduction in that spend over the next 2 years. We have made it very clear for quite a while that the last 5 or 6 years has been a peak investment period for us. If you recall, we launched those reimagined innovations in January 2022, and now they're going into the market with our partners taking those, Ocado Retail in the U.K., Kroger in the U.S. and so on, ordering them and seeing the productivity gains that Ocado Retail is already benefiting from. So it's a natural part of our evolution as we expected for this technology spend to start to wind down. SG&A costs will reduce further as we focus on a leaner operating model. You'll see that in the mix there of SG&A costs that we've actually -- I know it's split in the first half, second half split, we'll show it a little later. We've actually put an extra GBP 6 million into partner-facing sales teams and G&A costs have come down by the same GBP 6 million. So whilst it's flat year-on-year, the mix has changed quite significantly, and we'll continue in that direction. Again, that number, we're expecting there to be about GBP 50 million lighter in '27 versus where it is currently today in fiscal '25. That gets you to your GBP 150 million of cost savings. Ocado Logistics, okay, 11% growth in revenue, orders, again, it's volume-driven growth, as you might expect. So what would I call out on this slide, pretty reliable EBITDA number that we're generating. EBITDA has grown a little year-over-year. A lot -- some of that, I should say, is down to TSAs that have rolled off that we provided to Ocado Retail that we're now charging for as those transition services agreements have concluded. So we're getting more profitability out of the business. Eaches is growth of 8%, orders per week up 10% in line with revenue growth. UPH, again, we're going to show -- we're going to see a chart in a while that shows that UPH progression, really important part of the business model and the investment case for Ocado, which is the productivity our technology can bring to warehouses, drive down labor count and drive down labor costs where labor is becoming more expensive and more scarce, a really important part of our investment case. And going through those metrics, there you go. You can see the progression in UPH. Luton has at a peak of 318 UPH recently, and we averaged 289 in fiscal '29 -- fiscal '25, sorry. And then DP8, pretty steady at around the 21 number, 21.5 this year. So just close to 22 drops per van per 8-hour shift. Ocado Retail. Another really strong year for Ocado Retail, revenue growth at 15%, strong growth in our customers and growing our market share in the online grocery market, 15% revenue growth, gross profit up by 14%. Across these cost lines, you can see the operational leverage coming through as well, with the revenue growth of 15%, CFC costs up just 7%. Service delivery, that's hit hard by U.K. labor inflation, but also by the national insurance changes that kicked in over the last year or so. Utility costs flat year-on-year. Support costs, you can see growing by just 8% and marketing costs growing by just 3%. So good operational leverage in the business model. What else? I think I've pretty much highlighted the key things there. The underlying EBITDA margin, if you were to add back the GBP 33 million of Hatfield fees is now a 3.8% number. We expect those Hatfield fees to reduce as Ocado Retail orders more modules. There is a credit system in place that as they place more -- order more modules, for every 3 ordered, roughly there's around a 2% reduction in the Hatfield fees number, which is a 13 module count for that business -- for that -- sorry, that warehouse. Ocado Retail, structural and volume-led sales growth, orders per week, so it's a volume-driven growth, not a price-driven growth, 13% growth in orders, average basket value up slightly at 1.3%, and I think you'll be familiar with these trends. Okay. Again, customer growth now comfortably over GBP 1.2 billion -- GBP 1.2 million, sorry, basket items stable and utilization. There's the chart, the important one for us. We like that chart because it means they're going to be ordering more modules and CFC shortly. Watch this space on that one. So our cash flow, when you put this all together, this is from an EBITDA basis down to a cash flow basis in fiscal '25, there's our EBITDA. The cash received into contract liabilities, we get -- that's the cash that actually came in. We deduct then, of course, the amount that was recognized through the P&L account, which is part of the EBITDA number and because that's the noncash item that we take that out. The working capital movements we benefit from. There's the interest payment line that I highlighted earlier, GBP 46 million increase in that cash outflow year-over-year. CapEx pretty much in line with last year. CapEx is principally the CFCs, of course, the MHE, but also our technology spend. OAI CapEx, that's related to McKesson. Lease liabilities, no movements there and nothing to write home about in the other line. And then finally, the proceeds from the letter of credit of GBP 113 million, getting you to that underlying cash flow of GBP 100 million. Net cash inflows. When we take into account the final receipt from AutoStore, from that settlement that we concluded, agreed with them around 3 or 4 years -- 3 years ago now. That's the final payment that's now come through. On our financing, we actually paid -- whilst we paid down less debt than the amount of debt that we've raised and benefiting with GBP 58 million on the balance sheet, which you see today. Other items, you may have read that we've sold our stake in Paneltex, which was a very small GBP 400,000 investment, and we've got back comfortably our money back from the valuation of that sale, which is around GBP 20 million sale or so. And we own 25% of the business. Okay. The outlook for the year ahead, for the next couple of years. This goes back to my earlier comments. We have guided for quite a while that we'd be heading towards 20% of recurring revenues. When you do the math, this is the GBP 250 million or so that we spent across CapEx and P&L spend in fiscal '25, declining by about GBP 100 million to GBP 150 million in fiscal '27. Tim will be talking more about that during his pack. Other than that, I will then move on. CapEx has been weighted to the Re:Imagined fees, as you can imagine. You can see the composition of the capital items in fiscal '25 in the pie chart at the top there. And then there's more commentary around the '26 and the '27 targets outlook. The cost that we are taking out of the business of GBP 150 million in aggregate, that will be an exercise that is commencing now. The key events will be in March and then later in the year as well, there'll be another event. We'll just have to see how that progresses over the course of the year. It will take place -- I should have said, it will conclude by the end of November. There'll be progressive reductions over the course of the next 6 months because a better way of framing it. Lowering and leveraging our SG&A cost remains a key focus for us. This GBP 50 million of costs come out of this area. You can see the trend has been a downwards trend. You can see the shift there between the blue and the green bars around partner-facing teams and corporate functions. I think I've pretty much commented on this dynamic already. There's the GBP 150 million, putting it all together, and just reinforcing that point. And summarizing the key building blocks to be cash flow positive for full year '27. Live modules of GBP 125 million to GBP 130 million plus, I'll explain the drivers of those. That will generate a contribution of around GBP 400 million with a cash contribution of circa GBP 3 million per module. Total tech spend and SG&A spend will be around GBP 250 million from around, you can see, the GBP 400 million in fiscal '25. That's the GBP 150 million saving. And then we get a variety of other net inflows, including upfront receipts from partners. We typically get about GBP 34 million a year from -- GBP 30 million to GBP 40 million a year from those. Logistics cash inflows, the business that generates cash for us, take off our lease costs and then whatever the movement is on working capital from year-to-year. Net interest costs are we've modeled GBP 80 million to GBP 100 million, but hopefully, there'll be opportunity there to reduce that given our strong liquidity. And as I said, when we look at our debt stack and options to address some of those maturities, some of those -- some of that debt. We've concluded here in the final bullet, there will be sufficient cash flow to be cash flow positive and to fund circa 10% module growth. So one could argue that if we did a 15% module growth in fiscal '28 versus '27, we wouldn't have the cash flow. We might not be cash flow positive because we're putting the CapEx in. That's a high-quality problem, I think. We'll cross that bridge when we get there. That would be the only reason why we wouldn't hit our target if we had some big orders for delivery in '28 and '29. But I think both Tim and I would actually welcome that. Okay. Managing our debt maturities, and I've talked about this. You can see here, by the way, the GBP 56 million convertible bond due December '25, we paid that off, if you recall, just after the year-end. The GBP 500 million has gone away. This is the one we'll be targeting out of cash, the GBP 350 million. And there may be opportunities as we look through with our cash balances to look at those other 3 debt gross items that we've got as well. So I think you can pretty comfortably expect our gross borrowings number to start to come down quite significantly, which will be good news. So summary guidance, tech solutions revenue of around GBP 500 million, and adjusted EBITDA margin of around 30%. Logistics, more of the same, no great surprises in there. We're going to be having somewhat perversely a GBP 200 million outflow in the year that we turn cash flow positive. A lot of that is driven around the timing of our cost reduction activities that I talked about, the sequencing over the year. You get the full year benefit in '27, but you then see a partial year benefit in fiscal '26, which explains a lot of this dynamic. CapEx will be around GBP 250 million, and those are all the key numbers of our guidance. And that concludes it, there you go. I'll just repeat those messages. Good management of our balance sheet. I think we've been pretty good and proactive there on debt management, strong financial performance in '25, cost and capital discipline becoming a key theme for the organization. And again, the core priority is to turn positive during the second half, but it's backed up by a very robust plan as well. Thank you very much. Tim, over to you. Tim Steiner: Thank you, Stephen. Thanks, everyone, for joining us today. All right. Let's move on. Right. So we've had a good year in a number of ways. So I think one of the key metrics is that first one is that's the international CFC volume growth of the 26%. So we just want to keep helping our clients to grow. We're helping them to grow more and more, and we want to see that number continue to grow, and the compounding effect of that will lead to more and more drawdowns of modules that are available in existing CFCs as well as demand for future CFCs. Just again, to give you some idea of scale, we shipped 72 million orders across the whole of the OSP platform last year with a 98 -- more than a 98% fulfillment rate, 0.7% of average OSP waste. And then we saw quite a lot of efficiency coming into the platform last year. We got across the platform to a 21 DP8 on a weighted average basis across all of our clients. We saw an average of a 10% improvement in CFC productivity across our clients. And as Stephen mentioned before, in the financial year, we achieved 318 UPH in Luton and since the end of the financial year have got into the 320s. The metrics keep getting better. And to put it into context that 318 UPH, that means that a 40-item order is fulfilled in less -- using less than 8 minutes of human endeavor compared to about 75 minutes to do the same thing in a manual operation picked in store. So as you know, we've been busy working with our partners on partner success. That's the one area that Stephen outlined where we've been spending more money, improving our partners. We thought we'd pick a couple of examples just to show you not just what the equipment is capable of doing, but how we help our partners and what kind of results we achieve. So this is one warehouse where we've been working closely with one of our partners. Again, because of partner confidentiality, I won't get into exactly who they are, please don't ask me. But this is an international warehouse. This is a combination of 2 things. This is a combination of new software and operational advice. In this particular first example, this is DP8, so this is deliveries coming out of that warehouse. And we helped over an 8-month period to get a 34% improvement in the number of drops per shift. To put it into context, actually, the top of that graph is 25 DP8. So actually, it's higher than the U.K. The U.K. is not a standout performer on DP8. We have achieved greater results in some of our international warehouses. And so this is not a question of somebody who is extremely poor becoming less extremely poor. These are actually quite impressive numbers and are significantly ahead of our partners' expectations. If we choose a UPH example, here is a UPH example, it's a 5-month period that we went in and helped a partner inside their warehouse. We improved their labor productivity by 1/3 in just 5 months. That is a combination of better operational processes. So we're helping partners in their planning and in their operations as well as a rollout of some of an early rollout of some of the reimagined kit into that building. But -- so quite meaningful results in short periods of time. We brought back in Lawrence Hene, who used to run a significant part of Ocado Retail for many years, and he's leading our partner success efforts, working alongside Nick de la Vega, who's come in to run our revenue sales and partner relationships. So significant progress in those areas. In terms of CFCs driving growth, here are some comments, which I won't read them out. I'll let you read them yourselves from some of our newer partners, Alcampo, Auchan Polska and Coles, who all have opened warehouses recently, who are all seeing strong growth in their sites ahead of the wider online markets that they operate in, are achieving incredible NPS scores from their customers. What we're seeing is if you take an existing geography where you have existing store-based operations and move them into a warehouse, you can see not only enormous pickups in NPS, customer satisfaction generally, but you can also see 30% to 50% growth beyond the market and beyond your baseline in a very short period of time from the better performance, better availability, better fulfillment, fresher goods that arrive from putting those volumes into the warehouses. I think, obviously, we've spoken a bit about the warehouses that have closed. You need to put volume through warehouses. These are examples of retailers that have got some volume from store-based operations and putting that volume into warehouses makes enormous sense. So historically, we built warehouses that were designed to largely do fulfillment from order today, deliver tomorrow. We've talked before, we talked at Re:Imagined about inventing new software that would enable these warehouses to be used for order today and deliver today. We have been rolling out that software during the course of the year. We are still in the early stages of rolling out that software. It is currently available for rollout with all of our partners, and we expect it to be in the vast majority of warehouses before the end of the year. It's currently deployed in 9 CFCs. We've seen the earliest deliveries from order to delivery of 73 minutes. Now 73 minutes is not an impressive number for speed of delivery of an online grocery order. You can do that in 10, 15, 20 minutes, but from micro sites with 1,000, 2,000, 3,000 SKUs in them, with efficiency levels that are really, really poor. This is an order processed in a large-scale Ocado CFC with extremely high productivity, as we spoke about before, with range of 200, 30,000, 40,000, 50,000 SKUs available to those customers. And it is not costing anything in productivity to achieve that. And that order is being delivered in a scheduled 8-hour route, but we are able to get the last from the customer ordering it to delivering it to as little as 73 minutes for a full basket order. We have seen in the first warehouse we rolled this out in days where we're achieving 40% same-day deliveries in an international CFC. We think this is a game changer, and we look forward to the rollout of this across the rest of the network and our partners continuing to work with it and increasing the amount of capacity that they have for same-day ordering, which largely addresses that large shopper universe of people who find -- want to shop online, but find it hard to plan where they'll be able to take advantage of the big ranges, the hypermarket prices and same-day delivery. We also spoke at the half year about aggregators. So we have now integrated aggregators into our platform for the first time in the past year, enabling customers who order groceries with our partners, but from wider platforms. So from aggregator platforms, those orders are going through and then those orders are processed either in Ocado CFCs or using Ocado in-store picking software in the client stores, making significant efficiency compared to having multiple apps and multiple pickers in those stores. And these changes really reflect the evolution of the online grocery market where in some markets, significant amounts of volume are going to aggregators who don't process orders themselves or don't have stores or warehouses themselves. But now our platform is flexible and those orders can get pushed through it. It has enabled Morrisons to increase their aggregator coverage in the U.K. to a further 100 geographies. It's enabled Monoprix to roll out to 22 further cities in France with one of the global aggregators that they work with. So let's just talk a little bit more about the evolution of the platform. If we went back to 2018, there's a little graphic here that described largely the platform that we sold to our early partners. We had a largely next-day service. Partners are expected to operate OSP web shops and take 100% of the orders across OSP, web and mobile. And they were processing those largely in warehouses at an average of a 6-module size for home delivery in vans, either directly or via spoke sites. It was a narrow but successful approach to the market that has served us extremely well here in the U.K. for a number of years. But the market has changed and the market continues to evolve. And today, shoppers expect to shop online with total flexibility across different platforms, lead times and shopping missions. And retailers need and want to meet those expectations without incurring the high costs associated with the traditional fulfillment. So where are we today? Today, our platform supports all different shopper lead times from sub 1 hour, 1 to 6 hours, remaining same-day and next-day deliveries. We support bringing orders into our platform through managed fulfillment where the clients run their own front ends through the OSP web shop that continues to evolve and deliver a market-leading experience as well as mentioned before, through aggregator sites as well. We can process those in in-store fulfillment over 1,000 stores live through our new store-based automation that can range from 4,000 to 5,000 square feet attached to a store up to about 17,000 square foot potentially unattached to a store. In 2 to 10 module sites, for large scheduled delivery businesses in micro fulfillment centers, as I said before, from about 4,000 to 17,000 square foot that do not need to be attached to a store if they don't want to, as well as in manual warehouses or third-party DCs, serving all the different customer missions and all of them with the best economics. And then in the last mile space, we're working today delivering customers to order -- delivering orders to customers using couriers, lockers, customers collecting it, home delivery and home delivery via spoke. It's an incredible amount of total and evolution of the platform to total flexibility for our existing global partners and future global partners. It is the product of a very large and busy R&D period for us as a business. But we've now deployed most of this evolved platform for our partners worldwide with strong results. And with our exclusivity rolling off in multiple markets, we're focused on bringing these benefits back to some of the world's most mature grocery markets for the first time in years. As we move into this new commercial phase, we're also taking steps to realign our business to better serve our global customer base and focus on new prospects opportunities with the biggest value. But I wanted to start by reflecting on the scale of some of our commercial footprint today as I think it's sometimes underestimated. Most of you are aware of our global grocery partnerships worldwide. They remain the core revenue driver for our technology solutions business and the partnerships where our technology is most fully deployed. However, our commercial footprint does extend more broadly into the wider logistics, CPG and retail sectors, primarily driven by our growing AMR business. Today, our technology is live in 127 warehouses and more than 1,000 stores worldwide with 70 commercial clients and partners. We've got more than 17,000 bots live on grids around the world as well as 431 on-grid picking arms, that number growing probably daily, more than 2,500 truck AMRs, and we're seeing keen interest in initial orders for our new case handling product, Porter case handling AMR. So as we move into a new commercial phase at Ocado, we're building on strong widespread relationships with many recognized and leading worldwide brands. We're also making changes to the structure of our technology solutions segment. Stephen has already talked through our progress towards reaching our steady-state cost base that we flagged over the last few years. We've made significant strides towards our full year '27 targets over the course of the last year, and we continue to track towards those targets as we move out of this peak development cycle and into a steady-state R&D phase. The structural changes that we're making support these goals and make sure our business is properly geared towards our priorities, namely a renewed and focused go-to-market strategy, a simpler operating model, investment concentrated where we see the clearest path to value creation. One of the first key steps is the consolidation of our commercial divisions, meaning Ocado Solutions and Ocado Intelligent Automation are now operating as a single point of sales and account management under the new leadership of Nick de la Vega, who joined us as Chief Revenue Officer at the end of last year. This change also reflects an overall shift in our approach to new commercial opportunities with a more targeted approach to the most valuable opportunities and primarily within sectors where our expertise is most needed. Taking the example here, which shows in the blue areas of the grocery supply chain where our technology has been traditionally deployed in the CFCs and delivery to homes. One of the key lessons we've learned from the market engagement of OIA has been that there's significant opportunity to go further up the grocery supply chain and the CPG supply chain. We see significant opportunities to expand into those areas, both case replenishment for stores and wider distribution networks, both where AMR products like Chuck and the new Porter solution can bring significant capital-light productivity improvements. Our AMR products are already deployed in upstream CPG supply chain environments, and we see a positive opportunity to build on this business supported by a single, more simple commercial structure. We believe that opportunities like this will bring significant added value and optionality to our core OSP business, enabling us to grow an attractive new revenue stream in our tech solutions business alongside our core automation and fulfillment assets. Our solutions are very deployable in the case pick market for store replenishment. We highlighted this next piece in the half year, but I think it's really important that we continue to focus on it, which is about bringing the right fulfillment for the right market. To be successful today, retailers need to do careful network planning to make sure they deploy the right solutions in the right places at the right time in their development of their e-commerce journey. But we have a full toolkit to address those different opportunities. It's a framework for future growth, and it underlines some of the decisions taken in recent months. We can do everything from low-density solutions where you use manual pick in store with world-leading efficiency using our software. We can do manual pick in dark stores. As we mentioned, store-based automation before, we're going to focus on that in a moment, micro fulfillment centers as well as the large automated CFCs. The critical lesson that we've learned is that you do not buy a large-scale CFC unless you have a business to put through it. They are not a profitable asset if you don't use them. But if you do use them, they're great. So moving on with a little bit of focus on a CFC to start with. So a CFC can range from about GBP 150 million of annualized sales to over GBP 500 million in capacity. GBP 500 million is approximately what we refer to as a 6-module CFC. So if we take a 6-module CFC as an online case study, it can do about GBP 480 million of annualized sales in a standard sales pattern with kind of similar metrics to an Ocado Retail business. Today, to build a 6 module CFC requires both upfront fees and retailer CapEx to put in things like fridges beyond a standard developer spec shed of about GBP 50 million of investment. The benefit of running that at GBP 480 million of sales compared to doing this in store is somewhere in the region of GBP 30 million to GBP 40 million a year, meaning it is a 1- to 2-year payoff asset. These buildings are amazing if you can use them. And that really is the key lesson. Some of the buildings in North America were not being used and those retailers working with us have made the decision to close them, where these buildings can be used when you have an existing business or you can rapidly grow into these buildings, they are significant improvements for the same volume going through them. As I mentioned before, they deliver a far superior customer service, driving up significant NPS, resulting in significant uplifts as well in sales. So if you go into a building where you've got, say, recent examples, we built some 3 module sites. We've launched a 3 module site recently. We've got another one in build at the moment. If you've got 1 or 1.5 modules of business from your store pick to go into that facility, by the time you go into it and see the uplift and you've got strong growth, you're in a very good position to drive to full capacity and see significantly quick retailer cash payback. These have been -- these principles have been a key in the engagement with all partners at the moment and are reflected in those new CFCs that we're building. And this kind of thing is reflected as well in some of the CFCs that have opened with Coles, for example, putting significant volume into their new CFCs in Melbourne and Sydney in the year that they've opened. And you saw the positive comments from Leah just before. If we move on now to the other end of the spectrum, which is store-based automation. Here's a nice little visual of our store-based automation sites with the external pickup ports, the same on grid -- the same robots operating on grid, the same on-grid robotic picking. The one new piece being the external ports, a small development that we are engaged in at the moment. Store-based automation is a phenomenal product if you have a lot of customer pickup direct from store because you can process these orders really quickly and really efficiently compared to in-store. It's a phenomenal product if you have a lot of gig-based direct-to-customer deliveries from drivers picking up 1, 2 or 3 orders. They can also interact from those ports and those products can also be picked incredibly quickly from order to delivery. It is even more important if you're doing ultra short lead time delivery because when you pick ultra short lead time orders in a grocery store, the effective pick rate drops by about 70% because you're no longer able to batch and pick in the zones. You have to run around and pick a smaller order across the whole geography of a store for a single customer. And the pickup to doing it in our machine will be comfortably into the double -- a number above double-digit percentages in terms of efficiency improvement. Now if you take some markets, if we take a market like the U.S., for example, 8 years ago, the average store was doing $1 million to $2 million of sales. These machines wouldn't work sensibly to do $1 million to $2 million of sales, but markets have grown dramatically. And so here's an example of the sites that we've been talking to retailers about in the last few weeks that we've been able to speak to retailers in the North American market. And we're seeing significant enthusiasm for this product across every conversation that we've had with retailers in that market. Typically, sales in store could be anywhere from $5 million to $40 million online. I know the $40 million sounds like a large number. There are people who are interested in sites of those size. That's also a particularly relevant size for the French market, which is a 90-plus percent pickup market. But if we take a case study of a store with $12 million of sales, that's a fairly common size. That's 10% to 15% of a store that does $80 million to $120 million of store-based sales, now doing 10% to 15% online. The full retailer upfront fees to us and CapEx would amount to about $2 million upfront, we estimate, with a greater than $1 million a year operational improvement. This ignores the improvements in NPS. This ignores the benefits of increased capacity, which is suffering in a number of the larger stores and busier stores in these retailer networks. This is just pure labor savings, predominantly labor savings in these facilities, meaning that retailer cash paybacks of 2 years are quite possible in this space across all of the stores, across markets that are doing $8 million, $10 million, $12 million, $15 million, $20 million, $25 million, which in many markets now is the kind of average. If we look at the U.S., for example, when we entered into our exclusivity arrangements with Kroger 8 years ago, the U.S. grocery market was $30 billion in size. Next year, we're not ready to roll out store-based automation in mass scale at the moment. We're looking to do a couple -- a few handfuls of sites at the moment to prove all the different points around the costs and the execution. But by 2027, when we would look to roll out in scale, the U.S. grocery market is estimated to be 8x the size it was in 2018. This is why when people rolled out what they believed were micro sites 8 years ago, they tried to roll out one site to cover 5 to 10 supermarkets worth of volume. It created incredible complexity that doesn't exist today because today, each of those sites now needs $8 million, $10 million, $12 million e-com sales from the singular site. But also the difference today is that we can build these things in a fraction of the space that was being used with a fraction of the labor that was being used because of advances like our incredible AI-powered pixels to action on-grid robotic pick, which today is doing more than 50% of the picks in Luton across a 45,000 SKU range. Globally, since we entered into a number of exclusivity arrangements, the global market has more than doubled. And so we are super excited about reentering a number of markets where we're having some very interesting conversations with a large number of grocers and keeping Nick in his new role very busy. So in summary, we're reentering markets, with a tech solutions business with a simpler operating model, with a focused commercial operations and a strong R&D base. We're seeing strong interest in a massively evolved solution set with massively more flexibility, a wider fulfillment tool set and world-leading shopper outcomes. Our partners are seeing robust underlying growth, strong year-on-year improvements in operational performance, and we have learned important lessons. We now have stronger foundations of our key partnerships and clear pathways to deliver disciplined, sustainable growth worldwide. And on that, we'll start taking questions. Tim Steiner: Tintin knows I can't handle as many as 2 at once because I forget what they were. Tintin Stormont: Absolutely. Tintin Stormont from Deutsche Numis. Two questions. If we look at that graphic that you showed, the manual pick in store, manual pick in dark stores, and you look at the level of activity in terms of pipeline and trying to speak to customers, where is it sort of kind of busiest? Where is all the activity happening? And Stephen, for you, for those types of potentially new sales, how should we think about the revenue models? Is it more upfront fees? Or are we still thinking about the recurring fee as a percent of the capacity? That was actually one question. The second question was just a modeling one on Hatfield fees just in terms of how do we anticipate that GBP 33 million to come down over the next couple of years to 2027. Tim Steiner: Let me just try, and I might answer yours as well. Stephen Daintith: Go ahead I thought you might. Tim Steiner: The first initial interest from retailers in SBA is actually around their biggest sites, their busiest sites, where a number of retailers have maxed out capacity. So the kind of first focus is, oh, wow, can you do something that gives me more capacity in those locations? The brilliant thing about that is if you do that, it's going to simultaneously show them how much economically better they are and what better experience they deliver to shoppers. So when you look at the estate, there's an amount of the estate that is just something needed because they're maxing out capacity. And then there's the vast majority of the estate where once you realize what these things are capable of doing, you'll realize you've got a 2-year payoff. But most retailers won't turn down a product with a 2-year payoff that also gives them increased customer shopper outcomes and increased capacity. So there's a lot of interest. Markets are evolving and growing fast. And the more it moves to the shorter lead times, the more attractive the product is versus the manual alternative. I've tried to explain that before with the pick speeds. Globally, 180, 200 type pick speeds, if you're aggregating orders and segmenting pick walks and stuff like that, those drop to like 60 if you're running around frantically trying to get something ready for a courier in 5 minutes. In our store-based automation products, those will be picked over 1,000 -- a human pick endeavor will be over 1,000 UPH because the humans will be doing half over 500, okay? So just massive increases in efficiency. In terms of the fees on those sites, largely, we don't expect to have any significant outlay if we roll out that product. So the upfront fees should cover the majority of our investment into those sites, meaning that for a retailer, they're likely to have as a percentage of sales, a higher upfront outlay. But as it's a much more phased because you roll out store by store where you need it. So as a function where you need it, as we showed before, it's got a 2-year payback. So attractive on both sides. Our ongoing fees are likely to be slightly lower than our ongoing fees on the OSP product because we're not amortizing and financing as much equipment. And we'd aim to make a similar percentage of sales contribution to our R&D, SG&A profitability. The Hatfield fees have got a split that's about -- that's just about 60-40. So 60% of those fees will amortize over time as the equivalent amount of volume is taken down in new sites and 40% of those fees will remain until the end of the Hatfield lease. Marcus Diebel: Marcus Diebel from JPMorgan. Maybe just on the rollouts and ramps for your partners. We've seen some delays in Korea and Japan. Can you just talk a little bit more sort of like what's going on? Obviously, you don't want to like split hairs, but obviously, we had delays with Kroger and then a different outcome than we maybe thought. So if you just can tell us a bit more what actually happens there. Yes, that's the first question. Tim Steiner: So look, they're slightly different scenarios. One is Japan. Japan, we're opening 3 warehouses in a contiguous geography. So in fact, so long as there are a sufficient number of live modules, the exact timing of when the third site goes live is not hugely important because the volume is being done in site 1 and site 2. The site 3 isn't needed from a volume basis on that date, but it's about our clients building programs and about the time lines that they give us. We can get in and build very quickly. I think we speak about the fact that we built a warehouse from scratch and went live in 12 months this year from a greenfield site. So it's really just about when those handovers to us come. Sometimes those programs are set up and for whatever reason it is, it can be an internal reason that our client or it can be an external reason to do with zoning or commissioning or something like that. Those projects sometimes, we can't be sure at this point exactly when they're going to go live. In Korea, it's actually the first site is in Busan. The second site is in Seoul. Seoul is a bigger, more developed market. So we'd like to see that site live as early as possible, but we think it's a chance it's going to roll into next year. So we'd rather be transparent about that. We are with the client in store pick, and we are now seeing good growth on that platform and excited about the first launch later this year in Busan. Marcus Diebel: Yes. And the second question is just on sort of like we talked about it before. And what is your sense in regards to the sort of like urgency at your client base because we live in times of the technology evolves quickly, both software and hardware. So why is it now really the time to go the next step or to wait? I think previously, you commented on the analogy of an iPhone, at some point, you just have to buy it. But I obviously hear this a lot more at stage. So what is sort of like the kind of like situation where clients are in? Tim Steiner: Look, I think with most of our clients, they say they're seeing significant online growth. We saw 26% through the sites. And capacity is an issue at places outperforming their competitors in terms of shopper experience and efficiency and cost structures. And we keep coming back to the same kind of point. If you've got GBP 50 million of business and it's scheduled delivery and it's spread across a 3-hour catchment area, the best way to do that is in-store, right? There isn't an automated product that will help you to do that well. If you've got GBP 150 million of business or GBP 500 million of business in a 3-hour catchment, then the rightsized warehouse is the best way to do that. And the warehouses we would build today are half the size and 75% more productive than one we would have built 3 years ago, right? And so they're an ever-increasing attractive option. If you're doing -- if you've got a wide geography with not enough density to do that or you've got more immediacy business and pickup business, if you've got $2 million, $3 million at a single site, don't build store-based automation. It's not going to have a return yet. If you've got $5 million to $8 million annual growing, it's time to start considering building it. If it works as well as we expect it to work and can be built in the size and at the price we expect it to, that mean the economics work well for us and work well for -- even better for our partners. That's what we have to show in the next 12 to 18 months. But it is a question of people aren't wanting to invest in big J curves at this point. People aren't wanting to speculatively say, I think there's going to be a giant market in this place. I have nothing. I'm going to go and build a $0.5 billion capacity facility in this small city. When we're talking about something like, as you mentioned before, in Japan, this is not a small city. We're building facilities in Tokyo, okay, which is something like 40 million people living in the geography of those cities. So that's just an enormous market. But the likes of Calgary, people aren't going to speculatively build a 6-module site in the Calgary going forward unless they're already doing 3 or 4 modules worth of business in their store pick operations. Sarah Roberts: Sarah Roberts from Barclays. So just my first question, the Kroger and Sobeys sites that were closed seem to be in the underperforming category of CFCs that I think you've spoken about before. Just wanted to understand across the wider network, not having to give any details on specific partners, but how many CFCs are still in that kind of underperforming bucket? Or have those now moved to a level where you're both happy with the utilization. Just wanted to get a sense of any potential further downside across the existing network. Tim Steiner: I would say it's very limited downside at this point. I don't want to say there's 0, but there's very limited downside at this point. Sarah Roberts: Okay. Helpful. And then on the side of store and automation side, obviously, it's a little bit more of a competitive market versus potentially the full CFC model where you are the only player that can do that level of automation. So I just wanted to understand how you're seeing yourself positioned in the kind of micro fulfillment area, a bit of the warehouse automation market, why you deserve to win and how you're thinking of playing there, that would be really helpful. Tim Steiner: Absolutely. Look, I think the key things to make these work and what hasn't been understood before and where people have failed when they've rolled some out and not had the success they wanted for clients is based on a few things. One is just actually their understanding of handling grocery and the variation in grocery, the interaction with stores. And there, we obviously are in 1,000 stores today as well as delivering whatever, we think, we said 72 million orders last year across our platform. So we've got enormous knowledge that a number of these players just have got next to none. When we see people bragging that in the last 8 years, they've had this much volume go through a platform. And when we look at it, we've done that volume in the last 1.5 weeks, right? So we've got a depth of knowledge, number one. Number two is retailers want to do this in the smallest possible sites. And cubic storage is the densest storage for the products that you need to store, number one. And we have the solution, and we've spoken about this before, that can get the highest throughput from a square meter of grid, a square meter of processing because our bots are faster, accelerate faster, deaccelerate faster and our control algorithms allow them to work in greater density, and our single space bot patent means that nobody else can achieve the density that we can achieve. So in terms of using the least amount of space to generate the highest potential throughput, we are in the best place. That is significantly more relevant when you're trying to carve out a corner of a busy store in a city than that is when you're trying to put something in a massive warehouse outside of city. Our on-grid robotic pick is completely unique and one of the most advanced cases of AI being used in the physical world today. And by having at least 50%, we're at 50% already in sites in Luton, for example, by having more than 50% picked on the grid at the top of the grid, which is sharing the same air space as our moving robots, it's an immensely complex technical challenge. It removes the need to put human pick stations downstairs or to put robotic pick stations downstairs, which then take up twice as much space as the human ones did. But by removing that space, we're able to build these incredibly dense sites. So where we have spoken to retailers who have recently built or have been exploring building alternative sites to address the challenge of capacity, we are capable of building similar capacities that they've been talking to in less than half the space and with significantly higher range capabilities. And so we cannot see anything that has the capabilities that we have in this space. James Lockyer: It's James Lockyer from Peel Hunt. Two questions as well. First one, last time you spoke about how you managed to get Detroit up capacity by 50% because of some upgrades you've been doing. I think at the time, you said you think the entire estate could benefit from 30% over time. It would be good to understand how that's been going during the period and how you're seeing that benefit your own CapEx and OpEx efficiencies. Tim Steiner: So James, yes, look, we are over the design capacity in Detroit. We are over the design capacity in all of the -- everywhere other than Erith, in Dordon, the 2 oldest CFCs in the U.K., all the other ones are operating above design capacity. Continue to believe that we'll see at least the numbers that we outlined to you before. We are starting to achieve those. They are baked in as part of the plan for U.K. expansion over the next couple of years. And it's kind of what does it mean to a new warehouse? It's part of why a new warehouse can be only 50% of the size of what we built when we built those warehouses. So we're not able to get the full 100% uplift that you theoretically could today if you took the building again and built into it, but we are looking close to 50% in most of those sites in terms of their incremental capacity that they're going to be able to achieve. And the enhanced productivity, which is separately beneficial in terms of reduced labor also then means that if you can pick half of it with robots and you are picking 50% more, you are actually using less pickers than your original design, which means the outside of the building in the car park still works for you. You need to save some of those spaces for the extra drivers that you're going to have and now driving that increased volume. So there's a lot of considerations in making those changes. The one site that's most complicated in for us in the U.K. is Luton because we've got a third-party automated freezer in it. And that's the expensive part of building. Otherwise, it's very capital efficient for us and for Ocado Retail to achieve its next step of growth. And going forward for clients, their CapEx in a building that's half the size is materially lower, their ongoing rent rates and services are materially lower. The availability of sites is materially easier closer to customers when you start to be able to build these things in smaller buildings. Our space efficiency versus some others is just extraordinary. So we were talking to a retailer recently, and they said they weren't interested in big warehouses, and we said, no, of course, in their market, it wasn't relevant, store-based automation. I said, yes, that is what we're interested in, and we're looking at some sites already. And then they gave us the size that they were looking at. That to us was a warehouse. To them, it was store-based automation, but it was between 50,000 and 100,000 square foot. And for the volumes that they wanted, we'd have been looking at 10,000 to 15,000 square foot. So we're space efficient. James Lockyer: And then the second question was on the case study you gave around, I think it was the 25 DP8 on there, which is significantly better than the U.K. you mentioned at the time. Why do you think the reasons are specifically that, that was better? Was it density? Was it urgency from the clients? Was it just more savvy users? Why do you think it was better than the U.K.? Tim Steiner: We have some U.K. sites that we operate out of that are between 25 and 30 today. So it's like if you carve out -- that particular site has a geography that more reflects some of the sites that we've got in the U.K. as it's got a small radius around a warehouse doing a lot of volume, doing the full volume of the warehouse, you can do turnaround routes. So one of the challenges is you fill the van up, let's say, in the U.K., you can fill a van with 22, 23, 24 orders, there's -- it's then hard to go above that. So where we do 28 or so, it's because we have vans that are not working a single 8-hour shift on one route. So you have to do things like having 6 -- so in the U.K. in one of our sites, we do a lot of 6-hour and 10-hour routes. So we do -- the drivers alternate 3 of 1 and 2 of the other each other week. They do 38 hours, 42 hours, 38 hours rather than 40, 40, 40, and then we can offload a whole van in 6 hours or almost 2 vans in 10 hours. In some geographies, that's hard because the stem times are not there. And we are working on some longer-term quite complex and clever solutions to that to enable us to break through those numbers. But basket size and proximity and density and things like that come into it. Giles Thorne: Yes. Giles Thorne from Jefferies. Tim, there's been a lot of public discussion about Ocado and Kroger and Sobeys. And to my reading, a lot of it has ultimately been quite gentle on Ocado and most of the blame that people are looking to apportion blame has been put at the feet of Sobeys and Kroger. But nonetheless, it would be useful to hear your reflections with hindsight on things that you could have done differently that would have led to a more orderly outcome or a different outcome. And then the second question -- go ahead, Tim. Tim Steiner: No, no, go ahead. Giles Thorne: Second question is on -- I'd like to hear you talk about some of the compromises you've had to make on your innovation pipeline as a result of the cost efficiency program. Are there any bells and whistles that you wanted to build that have been put back up on the shelf and we'll have to wait for another time? Tim Steiner: Sure. Look, on the Kroger and Sobeys one, would I like to have built the warehouses that Sobeys wants to build in a different sequence so that instead of the third warehouse being in Calgary, would -- should I try to influence management to build it somewhere with a bigger population opportunity with more density that they already had in their network or something? Did we just accept the orders? Yes. Is that in hindsight, a bit naive? Yes. Could we have -- we know this because we've been working on it for the last 8 years, but could we build warehouses where a client could build a 3-module warehouse where a client could turn it on with 1 module and where we're -- economically that is a good warehouse for us even if that client never grows beyond 1 module? We're there today. We weren't there 8 years ago. So 8 years ago, we built 4s and 6s and 8s and 10s or 7s and 10s. And we insisted on clients opening them with 3 modules or 4 modules, which economically, we needed them to do because of the CapEx that we have put into those sites, and we even needed them to grow. But it was a big outlay. It was a big ongoing cost for the clients if they didn't fill them. We didn't have a strong enough sense they weren't going to fill them, and they haven't filled them. And so hence, they're a drag and a burden. Today, we've got 3 module sites going live, as I say, with 1 module down where the client is already doing 1 module before we put the spade in the ground in their store pick operations, expect to be at, let's say, 1.5 modules the day the site goes live, and we're allowing them to grow them in quarter module increments as opposed to having to grow them in 1 module increments. So we've been aware of the challenges of our early business model, and we've been working on that for the last 8 years. We obviously still have to live with the consequences of those early sites and those early decisions. So we need something that is economic for us and our partners at smaller size. We have it today. We need something that our partners can start with the smallest volume and the lowest kind of fixed outlays, and then can they grow it? And we're talking to clients about doing this in a more flexible way in terms of their charging and how that works with their growth that are massively useful for them and still work for us. So we're learning these lessons. Ideally, we might have built 2 warehouses -- might have signed 2 warehouses in 2018 and 3 warehouses in 2019. If we could have built the warehouses that we've got in a slightly more linear way rather than kind of pushed upfront, then maybe we could have learned some of these lessons earlier and helped our clients. And maybe if some of those 7 module warehouses where they were paying us for 3 modules had only been a 3-module warehouse and they've been paying us for 1, maybe there would have been a growth path to see that filling up and those would still be open. We're not blameless as such. But again, it's not our -- there are -- our partners are the ones that need to drive the acquisition of -- we can help them, and we are helping a number of our partners to understand how to best do online marketing, how to best trade an online business, but we need our partners having made a commitment to a site to try and work very hard to put volume into that site. Giles Thorne: And what does Nick bring that you didn't have before? Tim Steiner: Nick's got a huge depth of experience working with technology partners, accounts, clients, just kind of a much greater focus than we've ever had in terms of experience of doing large complex technology implementations where how to work with those clients to influence them to create the behavior that means we're both successful. I think one of the kind of combined naiveites between ourselves and our partners would have been kind of their view of we bought this amazing stuff, and if we just turn it on, we'll have a successful business. And obviously, we've been saying for a while, that's not the case, but we still don't have that element of control where even where we realize it, some of our partners have still behaved a bit like that. And we're kind of like, he's very good at getting in there and talking through that challenge and trying to get those retailers to realize what they need to do to contribute towards making their business successful and not just a view that because we've written some clever code and we've got some [ dwizzy ] robots, that means they've got a business. Giles Thorne: And so then on the innovation puts and takes. Tim Steiner: Look, we have that combo at the moment of some of the biggest projects that we did rolling off, reimagined and the re-platforming, which you will have noticed as -- well, I don't know you personally, but a number of you will have noticed as U.K. customers, the kind of the move -- the migration to OSP. That e-com migration and mobile app migration that happened in the summer at Ocado Retail was Ocado Retail moving the last part of its business on to OSP. They were the last of the 13 partners, Morrisons in the U.K. had migrated before. So that kind of catch-up of all the tiny bits of things that drive acquisition, retention, frequency, margin, basket, et cetera, are all in OSP, and it's an onward journey from here, as well as having got live in 11 markets with payments and currencies and regulations and laws and all that kind of stuff. Together with the rollout of Re:Imagined and efficiencies that are coming through in -- with AI in terms of not just coding, but testing and various things that mean that our overall productivity per person is significantly improving. What's not on the list is hard to say, but it's the more speculative stuff is not on the list. The core things that we want to do to deliver store-based automation, to deliver the growth in existing facilities in the U.K., in particular, to do with supply chain, and we talked about this at Re:Imagined called Orbit, continued work on helping our clients attract and retain and make it easier for shoppers to shop, continued attention on making it easier to run the platform for our partners and the rollout of short lead time orders. All these things are still in there, right? Everything that we really, really need is in there. We are going a little bit slower on some of the other opportunities to deploy our kit in other logistics supply chain scenarios. We have got continued spend to enable it to move up the grocery supply chain, but we could go faster on some of those points. And we may choose to, in the future, if we start to do some significant contract wins in those areas. So there are some things that are like show and tell, like we're doing those a little bit slower, where we -- maybe if we did them a little bit faster, we could then show something and maybe win some business. But it's a very tough process. We're being very rigorous on it. But we expect to get a significant amount of innovation in terms of features and functionality coming, and probably '27 will be a record year for us in terms of innovation. '26, we've got some -- I wouldn't -- I think it would be naive to say we're going to have a record year in '26 because of the disruption of actually going through the reduction in size, but I expect by '27, we'll be back at a record level of innovation. And the amount of change in the platform that we have achieved with this -- with all these amazing people in the last few years is incredible. And I tried to outline that in that slide before, the flexibility of the platform. It's not just the flexibility, it's the intelligence of the platform and so many different things it can do today. We have done so much innovation in that time period. It's amazing. William Woods: William Woods from Bernstein. I suppose the first question, historically, you've been quite cautious on the ROI and the ROC from smaller sites. And I don't think that was just capacity. I think that was operational complexities around the ability to store certain levels of SKU breadth and depth, duplicative picking, decamp complexities, all that kind of stuff. Have you worked out those operational issues? And if it does work, why haven't you built a 1 module site, for example? And I'll come to my second question in a second. Tim Steiner: The first one is what we can build today compared to what anybody could build 5 years ago is dramatically different, okay? The lighter weight bots, the third-generation lightweight bot can be deployed in a different way to the older heavier bots in terms of safety and crash barriers and stuff. And then the space savings that might be 1 or 2 grid spaces in a huge site is not massively relevant when you make it a tiny site is massively relevant. The weight going through the grids as a result of the bots and that weight accelerating at the same speed and therefore, the forces that need to be offset and what you need to do in the floor space is relevant. So if we built these 3 or 4 years ago, we need to start piling underneath supermarket floors and stuff. So there's just differences like that. The on-grid robotic pick taking up at least 50% today and moving towards 70% or 80% of the picking, again, simplifies the whole process. The remote monitoring and operations of our grids and our on-grid robotic pick, which we centralized into facilities in Bulgaria, in Mexico and in Manila, mean that we can run multiple sites, the reliability of the robots and therefore, not needing to have like live on-site engineers at every site permanently. Just there's a whole host of these reasons why this is viable now and we couldn't have built with our infrastructure 5 years ago. Now the people that did try and build things with different infrastructure 5 years ago just didn't have the process knowledge, didn't have the automation with the right throughputs, too much capital, too much labor, too much space. And they didn't succeed at what people wanted. But I think it's important to understand 2 things have changed. That's the supply side has changed, what we're able to do. But if you think back because at one point, we were going to get killed by a company -- because there's been loads of companies over the years, everybody said we're going to get killed by. And one of them at one point was a company called TakeOff, and TakeOff was the micro sites company, and they went around to the person that we didn't sell our OSP to and sold every one of their competitors, 1, 2 or 3 of those sites and said they were going to sell them each 1,000. They did sell them 1, 2 or 3. They never sold them the 1,000 and they eventually went bankrupt. The sites were, as I say, from a supply side, they were too big, they weren't efficient enough and the process flows just weren't good enough. The output wasn't strong enough, et cetera. But the demand side was different, too, because the demand side at the time was to make this site viable, you need a $10 million site or $20 million site and you're doing $1 million or $2 million a store. So they were like a mini where -- they were trying to do a mini version of our centralization where you've got -- so they kind of didn't have the benefits of our centralization, and they didn't have the benefits of being where they needed to be because they were only actually where one store was, whereas because the U.S. as a market has grown -- will have grown by the next year ninefold in that time, those $1 million to $2 million sites are now $9 million to $18 million. And so now you can have one of these things at each location. So the offsetting disadvantage of taking a $600 million site and splitting it into 60 can be offset by the advantages of being in that local geography, leveraging existing assets of that retailer and being able to do pickup in 30 minutes or in 5 minutes in store and being able to do ultra short lead time deliveries and working with the gig economy drivers that for a whole variety of reasons are significantly cheaper in the U.S. than a unionized labor force driving your own vehicles. Does that -- William Woods: Do you not think there's an issue with kind of holding a certain number of SKUs? Could you hold the whole SKU range of a store and... Tim Steiner: Yes. So this is your second part of question. We probably ought to take this offline if you want to. But we have a lot of experience of moving product and understanding how this can work. We've come up with some very good ways of doing this where the majority of the -- significant majority of the velocity will be in the automation. There will be some stuff that is not in the automation, but we will not be -- but our automation allows you to do a robotic merge. So you're not doing one of these things where you've got some pick from here, some pick from there, some pick from there and then humans need to try and marry that up and then deliver it somehow to a customer because the whole thing will be merged by robotics in our machine. But also we do carry already multi-SKU totes in our machine, so we can carry extensive ranges. We can replenish those ranges alongside the store replenishment for things of volume. We can replenish those ranges through batch picking in the store, but not for the specific customer, like keeping a SKU of -- a single item of each SKU in the automation, but not through an optimized pick walk on a batch basis, and we can merge in the rotisserie chicken and the sushi at the point of handing it over to the customer. So we are working through all of the challenges that we are well aware that have been encountered in this space. Today, people want to look at merging prescriptions from other sources, merging general merchandise. Our grid and some of our patents around our grid process, ones that we didn't license to our competitors in the cross-licensing are very important here and enable us to do things that drive, we think, unparalleled efficiency. We need to deliver it all. There's nothing that we're trying to deliver that we see as rocket science, as in on-grid robotic pick is rocket science. Obviously, it's not Starlink or SpaceX or whatever, but it's very, very, very complex. We've done the heavy lifting because we have that technology. There's just stuff we need to do around building up those processes, leveraging other things that we do. Like we already do store pick, so we know about optimized store pick. We just need to bring some of those bits together in the next year, build the first few prototypes for our clients, hope and believe that they'll be successful as we want them to do and then believe that there's an opportunity for thousands and thousands of them. William Woods: Great. And then just the second one was just on that prototype. Have you got a prototype that's working today that's delivering the economics that you put on the slide? Or is this still a little bit theoretical? And when should we get to a point where we can see one? Tim Steiner: It's probably -- it's on a spectrum. So you're kind of outlining 2 things, something nobody has ever built and something that's live and working in the exact size and format with all the pieces of equipment. I don't have that, but I'm also not here. I'm here, okay? I've got grids and bins and robots. I've got on-grid roboting pick. I've got early prototypes working of dispatch ports. I've got the software that runs the robots around. I've got the software that does the store pick. I've got software that does consolidation. So we've got and can illustrate most of the components. We can show small sites that we built small sites, but they were 10,000 square foot. They weren't 4,000 square foot. We've got and built -- we've got robots now running around in freezers, right? So we've got robots in chill, robots in -- ambient robots in freezers. We've got and tested robots moving between temperature zones, which is an important part of this. And to come back to your other question, so we're kind of -- we're here. We want to be here before we -- I don't want to sell thousands of them into [indiscernible], right? Because I don't want to take the responsibility of delivering thousands of them that we might not be able to hit the price targets and therefore, we'll need more capital or we might have the returns or whatever it might be. And we want to clear up those process flows when we're dealing with a couple of dozen sites, not when we're dealing with 1,000 live sites, right? We don't want to be deploying 3 sites a day at the same time as trying to make the first one work, right? Your first question is why not a 1 module site? And there are people who are looking at sites that are not probably 2/3 of a module. There's a point where there's some things that you can do when you miniaturize that will only expand to a certain size. And then when they expand to a certain size, some of the costs double. So for example, if you can run a single grid with a single maintenance area and you can have a part of those robots running into a chilled area, you can eliminate a whole maintenance area. That works to a certain size and a certain size, it just isn't feasible anymore, and I need to have 2 grids. At that exact moment, I need 2 maintenance areas. I need 2 wireless controllers controlling my bot fleets. I need more grid barriers and stuff like that, right? There's a cost uplift. And so there is this kind of area between the biggest of the micro store-based automations and the other sites where you kind of get into an area where you can see an increase in cost, but it's not really worth it for the increase in volume. You'd rather have 2 of these than 1 there. And then you get to a point where, no, I'm going to take that. Does that make sense? It's kind of -- so we model an enormous amount of data around what is physically feasible to be built. And we are talking to retailers for stand-alone sites, attached sites, ranges from 10,000 to 50,000 in the grids, throughputs from $8 million to $50 million, sizes from 4,500 square feet to 17,000 square feet, different use cases, right, different peak hours, different amounts of customer interaction, courier interaction. We've designed lots of different examples, and we're very good at simulating them and understanding what throughput should be available out of them. We just hope to build a few that are good examples. One of the challenges at the moment is actually saying no to a few people who want something that we could build, but we don't think that's the thing that we need to have thousands of, and we'd like to build a few of the ones that ultimately we believe there will be thousands of to show that concept to the world in a real-live 100% operating environment. [indiscernible] Thanks very much.
Operator: Good day, and thank you for standing by. Welcome to the Enerflex 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, Jeff Fetterly, Vice President, Corporate Development and Capital Markets. Please go ahead. Jeffrey Fetterly: Thank you, Jill, and good morning, everyone. With me today are Paul Mahoney, President and CEO; Preet Dhindsa, CFO; and Ben Park, Enerflex's Controller. During today's call, our prepared remarks will focus on 3 key areas: one, the continued strong performance of Enerflex's business; two, our outlook, priorities and capital spending guidance for 2026; and three, an update on operational and strategic initiatives, including a definitive agreement to divest the majority of our operations in the APAC region. Before I turn it over to Paul, I'll remind everyone that today's discussion will include non-IFRS and other financial measures as well as forward-looking statements regarding Enerflex's expectations for future performance and business prospects. Forward-looking information involves risks and uncertainties, and the stated expectations could differ materially from actual results or performance. For more information, refer to the advisory statements within our news release, MD&A and other regulatory filings, all available on our website and under our SEDAR and EDGAR profile. As part of our prepared remarks, we will be referring to slides in our investor presentation, which is available through a link on this webcast and on our website under the Investor Relations section. I'll now turn it over to Paul. Paul Mahoney: Thanks, Jeff, and thank you all for joining us on this morning's call. We are pleased to report another strong quarter that caps off an excellent year for Enerflex. The strength of our financial and operating results is a testament to the resilience, commitment and deep knowledge of our global team. Today, we will share more about the consistency of Enerflex's results, our growing and relentless focus on execution and the strategic opportunities within a constructive natural gas market. Together, we believe these fundamentals position Enerflex for long-term value creation. Results during the fourth quarter reflect solid performance across our geographies and business lines as well as our ongoing efforts to optimize and streamline our business. The Energy Infrastructure and After-Market Services business lines continue to be the foundation of our results, contributing 65% of gross margin before depreciation and amortization in 2025. The Engineered Systems business line continued to demonstrate strong project execution and visibility for this business line remains solid, supported by a $1.1 billion backlog at the end of Q4 and healthy bidding prospects. Firstly, I would like to touch on our announcement related to Enerflex's operations in the Asia Pacific region. Enerflex has entered into a definitive agreement to divest the majority of its operations in the APAC region to the INNIO Group. This business operates principally in Australia, Indonesia and Thailand and is primarily focused on the AMS product line. Completion of the transaction is subject to standard closing conditions and regulatory approvals and is expected to close in the second half of 2026. Following close, Enerflex will continue to deliver Engineered Systems solutions in APAC, including natural gas compression, processing and electric power generation through local sales teams with equipment manufactured from the company's 3 facilities in North America. I would like to thank our strong team in the APAC region for their commitment to Enerflex and their contributions as we built a leading AMS business in the APAC region. This accretive divestiture underscores Enerflex's commitment to simplifying and optimizing our operations while sharpening our focus on our core regions of North America, Latin America and the Middle East. Enerflex and INNIO share a long-standing global relationship, including Enerflex's role as a channel partner across our core regions, and we look forward to building on this partnership. Moving to other strategic and operational highlights that Enerflex achieved in the quarter. The company continues to expand and deepen relationships with upstream and midstream client partners across the U.S. through strategic collaboration and long-term partnership development. During Q4, this momentum contributed to Enerflex securing multiple orders for large-scale compression, natural gas processing, retrofits and power generation equipment. Activity continues to be centered in the Permian, where increasing gas and NGL ratios are supportive of demand for Enerflex' solutions, but we are also seeing a broadening of opportunities, including in the Haynesville, where natural gas supply growth is expected to be connected with LNG export capacity expansion. In the fourth quarter, Enerflex established a long-term framework agreement for compression solutions with a large diversified integrated midstream client partner in the United States. Enerflex's U.S. Contract Compression business continues to perform well, led by increasing natural gas production in the Permian. Utilization remained stable at 94% during Q4 across a fleet size of approximately 483,000 horsepower. Enerflex increased its marketed fleet by 13% over the course of 2025, and we expect approved growth capital expenditures will deliver growth at a similar pace or greater during 2026. Enerflex is also securing long lead time components to further support growth in 2027. Enerflex continues to develop opportunities in the electric power generation part of our business, including projects associated with AI and data centers. In early 2026, Enerflex, one, received an order to supply power generation units for a large data center project in the U.S. with deliveries scheduled into 2027. Two, we've completed a front-end engineering and design study for a client partner related to a large data center power generation project in the U.S., advancing the opportunity toward potential future execution; and three, executed contracts to supply power generation equipment to 2 client partners in the North American market. Enerflex continues to evaluate over 1.5 gigawatt of opportunities across our Engineered Systems business line. And now a few comments on each of our business lines. Engineered Systems backlog as at December 31, '25, of $1.1 billion provides strong visibility into future revenue generation and business activity levels. Bookings of $377 million during Q4 compared to $301 million in Q4 of '24 and $339 million in Q3 of '25 as well as a trailing 8-quarter average of $336 million. ES book-to-bill ratio was 1.1x during Q4 and 1x on a trailing 8-quarter average, highlighting that the company is consistently replenishing its backlog in line with project execution. The outlook for ES products and services continues to be attractive, driven by expected increases in natural gas, associated liquids and electric power generation across Enerflex's core operating countries. Turning to After-Market services. This business line continued to benefit from strong activity levels and increased customer maintenance spending. We are particularly encouraged by the performance of our AMS business in countries where we also operate Energy Infrastructure assets, highlighting the strength of our integrated offering and competitive positioning in key markets. The Energy Infrastructure business continues to deliver solid performance, underpinned by approximately $1.3 billion of contracted revenue. Within this segment, our U.S. contract compression fleet remains a core component of our asset base and the underlying fundamentals for that business continue to be constructive. You can find additional detail on operational KPIs for this segment on Slides 15 and 16 of our investor presentation. Turning to our international Energy Infrastructure operations, which are outlined on Slides 17 and 18. We currently operate 1.1 million horsepower of compression and have 24 build, own, operate and maintain or BOOM projects across Bahrain, Oman and Latin America. This portfolio is supported by a strong contract position with a weighted average remaining term of approximately 5 years, providing durable and predictable cash flow that we expect will continue to support Enerflex's financial performance in the years ahead. I'd like to take a moment to touch on our strategic priorities. Since joining Enerflex at the end of September, I've had the opportunity to spend time across our global operations and interact extensively across all levels of the organization. Concurrent with this, we have been engaging with internal and external partners and a broader assessment of Enerflex's strategy, capabilities and market opportunities. We expect to provide further insights into our strategic priorities, including capital allocation expectations in the coming months. At a high level, Enerflex's strategy will be anchored by a continued focus on Enerflex's strengths and areas of excellence; two, alignment with the values that have guided the company for decades; and three, emphasis on discipline, providing meaningful direct shareholder returns and making investments that support long-term shareholder value creation. During 2026, the company's priorities are focused on leveraging our leading position in core operating countries to capitalize on expected increases in demand for Enerflex' solutions, enhancing the profitability of our core operations and maximizing free cash flow, positioning the company to invest in customer-supported growth opportunities and provide meaningful direct shareholder returns. With that, I'll turn it over to Preet to speak to the financial side and capital allocation moving forward. Preet Dhindsa: Thanks, Paul, and good morning, everyone. I'll start with highlights from the fourth quarter. We generated revenue of $627 million in the fourth quarter compared to $561 million in Q4 '24 and $777 million in Q3 '25. Higher revenue compared with prior year reflects strong execution and a high level of operational activity in the Engineered Systems product line. The sequential decline relates primarily to commencement of the Block 60 Bisat-C Expansion facility and the pull forward of certain projects into the third quarter. Gross margin before depreciation and amortization was $177 million or 28% of revenue compared to $174 million or 31% of revenue in Q4 '24 and $206 million or 27% of revenue during Q3 '25. The EI and AMS product lines generated 67% of consolidated gross margin before depreciation and amortization during Q4 '25. Energy Infrastructure performance continued to be strong with gross margin before D&A of $89 million compared to $86 million in Q4 '24 and $95 million in Q3 '25. After-Market Services gross margin before D&A was 22% in the quarter, benefiting from strong customer maintenance programs. SG&A was $83 million for the 3 months ended December 31, 2025, down $9 million from the prior year period, driven by cost savings initiatives, improved operational efficiencies and lower depreciation and amortization. On a sequential basis, SG&A increased from $71 million due to higher stock-based compensation and third-party expenses. Adjusted EBITDA of $123 million compares to $121 million in Q4 '24 and $145 million during Q3 '25. The sequential decrease in adjusted EBITDA was primarily related to the pull forward of certain ES projects into Q3 '25 and higher core SG&A in the fourth quarter. Return on capital employed was 16.9% in Q4 '25, an increase compared to 10.3% in Q4 '24 and consistent with the record level during Q3 '25. Higher ROCE compared to Q4 '24 is a function of the increase in trailing 12-month EBIT and lower average capital employed, primarily due to a decline in net debt. Cash provided by operating activities before changes in working capital or FFO of $60 million compared to $74 million in Q4 '24 and $115 million in Q3 '25. FFO for the fourth quarter included $26 million of tax expense related to the refinancing of our high-yield notes. Free cash flow increased to a record $141 million in Q4 '25 compared to $76 million during Q4 '24 and $43 million in Q3 '25. Free cash flow included working capital recovery of $119 million, which benefited from collection and execution of projects in the ES business line. Net loss of $57 million or $0.47 per share in Q4 '25 compared to earnings of $15 million or $0.12 per share in Q4 '24 and earnings of $37 million or $0.30 per share in Q3 '25. Included in Q4 '25 was $81 million of expenses related to redemption of the 2027 senior secured notes. On a normalized basis, net income was $24 million or $0.20 per share in the fourth quarter. The early redemption of Enerflex's 9% senior secured notes due 2027 resulted in debt redemption cost of $42 million, comprised of the redemption premium paid and derecognition of the unamortized original issue discount and deferred transaction costs. Additionally, the company incurred withholding taxes of $26 million for a total onetime cost of $68 million. The embedded derivative associated with the redemption options in the 2027 notes of $13 million was also fully derecognized during Q4 '25. While these costs impacted results in the fourth quarter, the redemption will reduce future financing and tax costs and improve capital structure. The company refinanced $563 million of 9% senior secured notes due 2027 with $400 million of 6.875% senior unsecured notes due 2031, along with availability under the company's secured revolving credit facility. The refinancing is expected to reduce annual interest costs and enhance the company's tax efficiency. Now I'll touch on our strong financial position. Enerflex exited Q4 '25 with net debt of $501 million, which included $81 million of cash and cash equivalents, a reduction of $115 million compared to Q4 '24 and $83 million compared to the third quarter of '25. Cash increased by $17 million on a quarter-over-quarter basis due to strong collections late in the fourth quarter, but we remain focused on optimizing cash balances held on a global basis. Enerflex's bank adjusted net debt-to-EBITDA ratio is approximately 1x at the end of Q4 '25, down from 1.5x at the end of Q4 '24 and 1.2x at the end of Q3 '25. Now let me shift to capital allocation. During Q4 '25, we invested $34 million in the business, comprised of $14 million for growth capital, primarily allocated to expand the company's contract compression fleet in the U.S. and $20 million for maintenance and PP&E. Capital expenditures for 2025 were $115 million, consistent with our previous guidance of $120 million. The company repurchased 102,800 common shares at an average price of CAD 15.10 per share during Q4 '25 and a total of approximately 2.8 million common shares at an average price of CAD 11.08 since its normal course issuer bid commenced on April 1 to December 31, 2025. Under the NCIB, which expires March 31, 2026, the company is authorized to acquire up to a maximum of approximately 6.2 million common shares or 5% of its public float as at the application date for cancellation. During 2025, Enerflex returned $40 million to shareholders through dividends of $17 million and share repurchases of $23 million. Now turning to 2026. Enerflex is targeting organic capital expenditures of $175 million to $195 million. This includes growth capital of $90 million to $100 million, maintenance capital of $70 million to $80 million and PP&E and infrastructure investments of approximately $15 million to support the company's ES business and activity in adjacent markets, including power generation. Organic growth capital spending will continue to focus on customer support opportunities and primarily allocated to expand the company's contract compression fleet in the U.S. Although not contemplated in the company's 2026 capital spending plan, Enerflex continues to evaluate opportunities to organically expand its business in the Middle East. And now direct shareholder returns. Going forward, capital allocation decisions will be based on delivering value to Enerflex shareholders and measured against Enerflex's ability to maintain balance sheet strength. In addition to disciplined growth capital spending, share repurchases and dividends, Enerflex will also consider further debt reduction to strengthen its balance sheet and lower net finance costs. We remain focused on enhancing profitability of our core operations, growing our business in a disciplined and structured way and ensuring Enerflex generates sustained attractive returns for shareholders. I want to thank Enerflex employees for their efforts in continuing to deliver strong operational and financial results. With that, I'll turn the call back over to Paul for closing remarks. Paul Mahoney: Thanks, Preet. Over the course of 2025, we continue to advance our business, strengthened our financial position and took meaningful steps to enhance long-term shareholder value. While there remains important work ahead to fully realize our ambitions, I'm encouraged by the momentum across our global operations and confident in our ability to build on this foundation. Once again, we believe the consistency of Enerflex's results, our growing and relentless focus on execution and strategic opportunities within a constructive natural gas market position Enerflex for long-term value creation. We are excited about the path ahead for Enerflex and look forward to providing more detail in the coming months around Enerflex's strategy, capabilities and market opportunities. And before I hand the call back over to the operator, I too want to thank the 4,400 employees around the world for their commitment, resilience and focus on customers day in and day out. We will now hand the call back to the operator for questions. Operator: [Operator Instructions] Our first question comes from the line of Aaron MacNeil with TD Cowen. Aaron MacNeil: Yesterday, a large contract compression company in the U.S. noted that lead times on large engines has extended to 110 to 120 weeks. So I'm just hoping that you can speak to sort of the amount of the Engineered Systems backlog, potential orders, including power generation beyond the backlog and the sort of energy infrastructure organic growth that would have sort of an associated engine today? And then ultimately, do you see this as a constraint that would reduce your ability to execute on the business? And then maybe more directly as it relates to the 1.5 gigawatts of opportunities, like can you practically execute or like how much of it, I guess, could you practically execute on in the near term in light of those constraints? Paul Mahoney: Aaron, great question. First, I would say, the element of availability of engines and things is not a new phenomenon. This is something that we've been strategizing, grappling with for a bit now. I would say, our '26 is secure. We are currently positioning for 2027, given the light of the delivery constraints. And to answer the question relating to power generation, we did in Q4, if you remember and even Q3, a small element of putting more of a speculative position to secure engines such that we could deliver on our commitments in '26. Aaron MacNeil: Got you. Okay. And then maybe keeping with the lead times. Again, I know you said you had '26 sort of locked in, but if lead times are effectively 2 years, is it fair to assume that you sort of now have a multiyear growth outlook for the contract compression business specifically? Like I'm thinking about you upticked the capital spend for next year or I guess, for this year. Like should we expect sort of that cadence to continue into 2027? And sort of do you have visibility to that today? And do you have customers sort of lined up ready to take that equipment today? Paul Mahoney: Yes. Great question. As we've stated, our CapEx position in '26, that demonstrates our commitment to further growth similar to what you've seen in '25. We do have customer-specific positions with that. I know there is some discussion around Permian Basin and what have you. But when it comes to gas processing, production of gas and the outlook of gas, yes, I think the statement that you've made around 2 years of confidence on growth is accurate. Operator: [Operator Instructions] Our next question comes from the line of Tim Monachello with ATB Cormark Capital Markets. Tim Monachello: Just a quick one to follow up on Aaron's question. Do you think that lead time, as you stated, 110 to 120 weeks is accurate across your product lines that you're seeing? Or is there some variability in lead times based on, I guess, the size of engines that you're looking at and end markets? Paul Mahoney: Yes. The stated 120 weeks is for a portion of the product line, I think, is the first thing to realize. And it does come in the higher horsepower ranges. I think it also -- which provides a little bit of potential opportunity. Expansion and operations in the key equipment manufacturers has been going on, and it's pretty fervent. So right now, a large horsepower, 120 weeks is the current lead time. But as we go out here over the next so many months, we should see some impact due to CapEx with the equipment manufacturers, number one. And two, there -- again, it's not the entire portfolio. It's a select piece of the portfolio that's actually 120 weeks. Tim Monachello: Got it. And then having 2026 sort of secured, would you say, I don't know, the majority or almost all of the new orders that you received today won't be delivered in '26? Or do you still have capacity to book and turn work in '26? Paul Mahoney: If you're referring to data center power gen-related items, yes, most of that would be 2027 and beyond. Do we find opportunities here or there for book-to-bill business to pursue? That certainly is the plan, and that certainly is something that we do. But when it comes to the data center world, that would be more of 2027 and on in terms of deliveries. Tim Monachello: And I meant more for the compression processing piece? Paul Mahoney: In terms of... Tim Monachello: Like if you get an order for compression tomorrow, do you have enough, I guess, orders with your channel partners for engines and components that you could deliver an order in '26? Or is that sort of the outlook for '26 in terms of that backlog for baked in [indiscernible]? Jeffrey Fetterly: Yes. Tim, it's Jeff. As Paul referenced in the remarks a minute ago, we've secured capacity to support our activity levels in '26, and that includes a book-and-bill as Paul referenced. And we also have a view for where activity and opportunities set for '26 going into '27 as well. Tim Monachello: Okay. Apologies for asking the question twice here. Preet mentioned potential growth opportunities in the Middle East. I wonder if you can elaborate on how you -- on what those opportunities look like and how you would pursue those opportunities relative to your cost of capital and relative to your growth opportunities in North America? Preet Dhindsa: Yes, Tim. So I mean, as we mentioned, the growth capital noted in our outlook is largely earmarked for the U.S. contract compression fleet, call it, 60% to 65% greater than prior year. Currently, in the growth capital, we don't have anything directly allocated to, call it, Oman, Bahrain, the countries you're currently in, good GCC countries. But we still are active in that market. We've got a team on the ground based out of Abu Dhabi who are quite well versed in that region. And those projects, as you probably mentioned earlier, don't come around every year. And if they do, when they do hit, they usually straddle a couple of year ends. And so we're active in the market. There are often good quality assets, the BOOM assets, whether finance or operating leases we see on our balance sheet, great counterparties, good economics, take-or-pay without direct volumetric or commodity price risk. So we like the asset class. But right now, we just put a marker out there that nothing in our current growth capital guidance speaks to those potential projects, but we are active exploring good markets in those good countries. Tim Monachello: Okay. And then around capital allocation, I appreciate your prepared remarks there, Preet. But just curious, in terms of the NCIB that you have outstanding for the year, do you expect to exhaust that NCIB? Or how should we be thinking about your share repurchase activity in '26? Preet Dhindsa: Tim, I mean, all the capital allocation levers that we've spoken about in the past are relevant growth capital, we put markers out there now. The dividend, as you know, we've increased as at Q3 last couple of years. And we've been active in the NCIB since inception, April 1 last year, purchased just under 5%, that being half of 5% of the authorized float that we had. But what I would say is that we'll be a little more prescriptive on capital allocation in the coming months once the strategy work is done. And right now, the NCIB is open until the end of March, and we'll make a call accordingly at that time. Operator: Our next question comes from the line of John Gibson with BMO Capital Markets. John Gibson: First, just wondering if you could maybe expand on the customers associated with these power gen contracts, are they with the order you signed or future orders you're working on? Is there any counterparty risk? Or are they all pretty high quality? Paul Mahoney: Yes, John, great question. In this market space, I think I used the word embryonic last quarter. So having a really strong disciplined approach on counterparties, on terms, on different conditions and whatnot is extremely important. But I would say that prime for us is counterparty risk, counterparty stability. So right now, in the recent win, very, very strong counterparty in the projects that we're pursuing here in the near term, very, very strong counterparty, well-developed relationships, well-developed understanding across the value stream, whether they're developers, real estate developers, power developers and then the hyperscalers. So that's been a key piece of our strategy and why we've kind of metered and been conservative, if you will, on our approach. John Gibson: Okay. Great. And then last one from me. Just given the recent disposition, is your business kind of where it's at in terms of kind of where you want it overall? Or are there any other geographies or areas you're continuing to evaluate here? Paul Mahoney: Yes. Maybe I'll just give an overview, and Preet, you can jump in here. Early on, we've deployed more of a residual cash earnings type of North Star metric. And we've looked at all geographies, all business line, all countries and certainly continue to stay focused on that, and that's around creating shareholder value. So we continue to look at it. And I would say that's just a part of our normal discipline, operating discipline, but I wouldn't go beyond that. Preet Dhindsa: The only thing I'd add is at deal close 3 years ago, we were in 27 countries. Most recently and currently, we're in 17. We'll monetize Asia Pacific, get down to likely 14 or so. And then we've got 7 core Canada, U.S., Oman, Bahrain, Brazil, Argentina and Mexico. To say, there's probably a few other noncore geographies we can get out of and free up some capital, working capital, close some bank accounts, improve our tax compliance positions in these countries. So just overly overall simplify and optimize, but there's probably a few more noncore countries to look at. John Gibson: Congrats on a great year here. Paul Mahoney: Thank you. Operator: I'm showing no further questions at this time. I would now like to turn it back to Paul Mahoney for closing remarks. Paul Mahoney: Thank you. Well, thank you for joining today's call. We look forward to sharing our first quarter financial and operation results in early May. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Suzanne Thoma: Ladies and gentlemen, welcome to our annual results communication. Thank you very much for taking the time and the effort to be here personally. It's a great honor for us. Thank you also to the 27 or so audiences that -- not audiences, but the people who are joining us from remote. Thank you for your interest in our company. And now 2025 has been an exciting year, I think, for all of us. One thing that you can see in our results, hopefully, here we are, is that we -- as Sulzer, we are serving essential industries. Now this is not just something we are saying because we need to have a nice slogan. It has a deeper meaning. The deeper meaning is that we are producing or we are serving industries that are essential for people and industries, customers, businesses around the globe. And with industries like energy, the chemical industry, and definitely, natural resources, which in the case of Sulzer is mostly linked to water, we have an underlying growth trajectory because there are more people in the world and more people moving into middle classes. And we also have in the already developed economies, a trend towards using more energy, more chemicals, and definitely also more water. But at the same time, these industries have a heavy ecological footprint. So whether this topic is in right now or not, we, as a society, will have to find way to have a higher energy efficiency to reduce emissions, to reduce pollution while keeping everything affordable. And that is what Sulzer is doing for our customers in our industries. This is why although 2025 was, let's call it an interesting year, we had an underlying growth momentum and an obvious growth momentum in all of our industries. This has not gone away. Due to the situation with the volatile political environment and the tariffs and all things that you know very well, we did in some industries, for example, in the oil and gas industry and also in the chemical industry, see that customers don't mind delaying some final decisions for their large-scale projects. If I look at our order pipeline in this industry, it is still growing. Not all the projects were only delayed, some of them were also stopped. But if I look at the figures, it's about 80% of the projects that were supposed to happen in 2025, and I'm speaking about the large-scale projects, have moved into 2026. So they're not dead. They will come this year or next year. We are still running against an ever-increasing Swiss franc, which for all the Swiss companies that are reporting in Swiss francs, of course, is on the one hand, a continuous fitness training. And at the other hand, of course, does have a certain influence on our results, particularly in sales and order intake because we are really very well distributed regionally. It does have a certain impact, but not such a high one when it comes to our profitability. Thomas Zickler will be speaking more about that. So let's look at 2025, a little bit more concretely on what we did. Well, we accelerated our strategy implementation. And our strategy is a rather down to earth, not so complicated strategy. It doesn't mean it is easy to implement it because it's thousands, many thousand different steps that we are taking. We concentrated on our markets and on our customers. And this means, for example, that we invested in our sales force. So while we were very cost conscious, we also consciously invested in our sales force and in the upgrade of our sales force. We also upgraded or invested in supporting technologies for commercial excellence. And you see it a little bit in our margin development. We learned to find a price point better than in the past, and we are on a journey to improving that. We have made important steps, but we are not there yet at all to stop having a fragmented approach to our customers to go as a One Sulzer wherever it made sense. We accelerated in the area of effectiveness and efficiency, which we summarize under the term of Sulzer Excellence. This is quite a fundamental culture change in Sulzer because we come from a history, a successful history that prides itself almost only on innovation and engineering excellence. Now this is still important for our company, no doubt, but it has to be paired with being effective and efficient from the first moment we analyze a market until we do aftermarket business with our customer. We reorganized Chemtech. We did not restructure Chemtech. It's reorganizing. That is an interesting word because we -- or interesting plain word because we believe that Chemtech is going to come back to a good level. This is also why we invested also in Chemtech in more salespeople and in an upgrade of the salespeople. But at the same time, of course, we cut costs wherever they did not contribute to value creation or not enough. And what we also did, and that was very important for Chemtech, we streamlined innovation. What do I mean with streamlining innovation? We made sure that our innovation is set up in a way that it really serves market needs and customer needs. We still have some budget for blue sky research, but most of it is now really mid-term oriented and also research for our core business, which is focusing on purification and separation. We upgraded and developed our supply chain, finding the right balance between resilience in this volatile time and purchasing from best cost country. Also, this is a journey, but we made nice progress in it, and we did report a good contribution to our profitability. And I am very proud to say that we have improved in on-time delivery. We have improved in quality, and we have improved in safety records. Now for you, that might not be so important as a very financial outlook, but it shows an underlying -- again, an underlying quality improvement in the company, including the safety record. That is why I mentioned it. And all of this leads that we can report highest reported sales, order intake, and profit. Now our CFO, Thomas Zickler said, and you have to say, Suzanne, currency adjusted and also, sorry, in constant currency and also adjusted for acquisition and divestment. And yes, he's, of course, right, like mostly, but it is also almost -- we could almost say nominally. But we are correct, right? Yes, of course. So I will go quicker through these figures because Thomas will go a bit deeper on that. We had an order intake of 2.1%. We had strong growth in aftermarket and in what we call noncyclical or water, which is more than 60% of our turnover. Our business of smaller projects, short-cycle projects grew nicely in all 3 divisions because this is the type of decisions that our customers like to do also in those volatile environments that we are acting. And we did have some large projects, customer projects that were delayed, particularly as I mentioned already, in oil and gas, in the chemical industry, and also some in what we call the new technologies. We still have order intake above sales of 1.06%. So the company is still definitely growing. And what is also growing is the customer pipeline. Now a pipeline -- and I don't mean the technical pipeline -- but, I mean, the order pipeline. Now an order in the pipeline is -- a project in the pipeline is not an order, clearly. But if you don't have a full pipeline, it's probably difficult to have orders. So it's like an early sign. We are happy to say that we grew our sales, and we did grow them with commercial discipline. We increased our margin. We were not buying sales and we're not buying order intake. And so we increased our profitability figures significantly. As you see it here, Thomas will speak about them more. These are our figures at the glance. I would just like to highlight earnings per share going up very nicely and also our EBITDA, which is a record EBITDA. We're a little bit lower in free cash flow, in line with expectation. Thomas will speak about it more. Here, you see the relative development. Again, what can I mention, yes, we upped 140 basis points in the return on capital employed. The return on capital point is a very important figure for us and the earnings per share went up 19%. If you look at this slide, we look back a little bit for the last 3 years. And the summary of this slide is the strategy is working. The strategy is working. You see that our sales grew on the average 10%. We increased the EBITDA since 2022 by more than 700 basis points, and we really upped the return on capital employed, one step after the other very systematically. And this is how we are running Sulzer with a lot of fire in our heart and at the same time, very systematically, it goes together actually quite -- it goes quite well. Given this very positive development and because we are really convinced that independent of how good 2026 is then really going to be, our company is on the right way forward. The industry that we are serving are growing and what we have to offer is more needed than ever. And at the same time, internally, we are becoming better. So we increased our dividend again by CHF 0.50 if it is approved by the general assembly to CHF 4.75 per share. So ladies and gentlemen, now let's look a little bit deeper into our figures with our CFO, Thomas Zickler. Thomas Zickler: Thank you very much, Suzanne. So good morning and good day also from my side. A lot of well-known faces I see here in the room, and thank you also for dialing in. As you heard already from Suzanne, we had in 2025, quite a good year when it comes to our profitability, but also to sales. Before I go into the details of the year 2025, let me say one thing upfront, and Suzanne mentioned this already. When you look at our order intake and sales numbers, you have to have the following thing in mind and Suzanne stressed that I noted when she's doing her presentation that we need to be aware of the FX impact. So when you look at our order intake and our sales, on both KPIs, we have around about CHF 190 million negative FX impact. So in other or in easy words, our order intake and our sales would have been around about CHF 200 million higher, excluding the negative FX impacts. Let me talk about our growth. We have a very robust growth. And when you look at our share of the aftermarket business, over the last 3 consecutive years, Services has grown double digit. So we have achieved over the last years that our aftermarket share has grown to 62%, which makes us really a highly resilient company. Why I'm addressing this? I'm addressing this because when I have to characterize the year 2025 in 1 or 2 sentences, it's that overall, I will say, smaller and non-cycle business is running very well. However, the larger orders, this was the topic of 2025, and I'm not going into the story of the geopolitical uncertainties. But you see here was then landing at around about 2% plus order intake and 5.6% plus on sales, that we are really a resilient company. When we look in Q4, you have seen on a quarter-to-quarter comparison, so Q4 2025 to Q4 2024, that we had by the end of the year 2025, our order intake growing by around about 12%. So you see that towards the end of the year 2025, we really picked up in our business development. Also, when you look at our order intake margin, we haven't really bought any orders in just to get order intake. And this is very important. I'm saying this for now 4 years in a row. We are getting our order intake with a still increasing order intake margin. And you see this compared to last year, still 70 basis points higher order intake margin. And as said by Suzanne, we have overall talking about the whole Sulzer Group, still positive book-to-bill ratio of 1.06. So talking about our EBITDA profitability. It is indeed a record profitability over the last at least 20 years. And when you look at our profitability at the EBITDA, you see it's CHF 556 million. And what you have to know, and I mentioned on the first slide that we were seeing headwinds from the FX side. On our EBITDA, we had a negative FX impact of around about CHF 40 million. So to say it in other words, our EBITDA without this negative FX impact would have been close to CHF 600 million or somehow around CHF 600 million. When we talk about the success, why is our EBIT and EBITDA increasing so much? And you see 140 basis points compared to last year. It is on the one hand side, yes, we still have very favorable markets. We are growing in most of our market segments, except of Chemtech, where I go a bit in the details later on. But we have also a lot of success from our rigorous improvement of our Sulzer commercial and operational excellence. What do I mean by this? I really mean that we have improved our production efficiency, our project execution efficiency. We are much better on the supply chain side. And we are much better on people excellence. We discussed about getting on the sales side more, from the farmers to the hunters, changing the company. And here, you see in the numbers, the success. This is what I want to address here. On the return on capital employed, I think the story is very simple because, yes, we have a higher EBIT because of all this what I explained. And on the other hand side, we have more or less a stable CapEx and, say, efficient use of our capital. And this means higher EBIT, stable capital, that the return on capital is growing up by 140 basis points. So now let me come very proudly to this slide. This is basically a reflection on the period when Suzanne and I started beginning of 2023, you see the total shareholder return of Sulzer is 121% compared to the Swiss Performance Index already also including the dividends with 33%. So we really have outperformed the market. Also when you look at the tables with the dividend and the proposed dividend for the year 2025, you see we increased the dividend then finally by almost 40% over the last years. And market capitalization, I checked just 5 minutes ago, our share price, we are more or less flattish compared to yesterday. So you see that our market capitalization from 2023 to end of 2025 went up to CHF 5 billion. When you take our share price as of today, we are close to CHF 6 billion. So I calculated we are currently at CHF 177 million. If we would have been at CHF 178 million, we would be at exactly 6.0 market capitalization. So let's go a bit deeper into our individual divisions. When we talk about Flow, what is the overall story? In Flow, we had in 2025, a really good development on the sales side and on the profitability. Look at the profitability increase. Flow increased by 160 basis points compared to last year when we talk about EBITDA profitability. They are currently standing at 13.3% EBITDA profitability. And as I said, in Flow, we have also seen a lot of operational excellence measures really realizing in 2025, helping to optimize the cost setup, helping also to improve the profitability by also, in parallel, increasing the sales. And when I talk about the sales, you see that sales in Flow increased double digit by 12.3%. And when you look at the sales increase, you see that we have here one BU really standing out. This is energy with over 20% sales increase compared to the prior year. But we also have had a very good sales development in the water and in the industry area. So overall, it is really on the sales side, on the top line, a success story for Flow. Let me also talk a bit about order intake in the Flow division. Order intake is a bit of, I call it, a more mixed picture. Why is it mixed? Because let me start with Energy. In Energy, we had in H1 2024, one large big order -- elephant order from the Middle East with USD 100 million. And these large orders, they haven't come in, in 2025. This is the overall storyline for 2025. So when you look where Energy landed by end of the year 2025, Energy landed with around about minus 3%. So minus 3% without having the USD 100 million large order means if you would have taken out this one order, energy would have been at least plus 5% and more. So you see that also on the energy side, we have a very, very good base business, which is reflected in these numbers. What we see also on the order intake side in Water, that on the Water side, we grew double digit. As you know, we are not announcing the numbers separately for Water and for Industry. So let me leave it here with the statement, Water grew double digit in 2025. And annoying Water grew double digit, you maybe have seen in January, our announcement where we announced a water treatment center of excellence, combining all our expertise, which we have in our company and even -- to even focus more on the further development of the water and wastewater treatment. As I said, when you look into Flow, you see a really very excellent improvement on profitability and sales. And as explained on profitability because of a high base with large orders, a bit of a mixed picture. When we look in the last quarter of Q4 2025, we have also seen in Flow, a very positive development. Flow had in Q4 compared to Q4 the prior year, a plus of around about 18%. So you saw also in Flow an uptick when it comes to the business performance in 2025. Then let me go to Services. Services is also really -- I'm so proud to tell you all these stories. It's a new record result when it comes to profitability. You see services, they grew by 150 basis points. So there's an internal competition, 10 basis points lower than Flow, but they grew with 150 basis points on the profitability. And what is the reason for this? Yes, also operational excellence. But as I have mentioned on the first slide, services is growing for the third consecutive year in order intake and also in sales. And you see it here in the headline, we have done in services a lot of investments into growth. Let me just give you an update of what have we done in 2025 for this growth. So in services, we opened a new service center in Argentina for the market there, for whole Latin America. We have bought in January a company called Davies and Mills for the Middle East in Bahrain. This was basically an EMS company, where we now with our full services network, we expand this. We use this as a regional footprint to tackle much more the market in the Middle East for services because you know more than half of the services business is coming out of America. This is a very important strategic move to also grow services more in the Middle East region. And last but not least, we have invested in the U.S. in our, and I wrote it down, in our largest turbomachinery center in North America. And we further invested to extend the production and service capacities there because of the still highly booming U.S. markets when it comes to pump services and turbo services. Why is it growing so much on the services side? Story is very simple. We have on the CapEx side, a bit the hesitation, the delays, the postponements from the customers. But we have also, on the other hand side, a lot of equipment which needs to stay really reliable and safe for the customers. And here, services is on its way with upgrades, modernization, repairs, retrofits to really ensure that all the customers have a reliable energy, yes, equipment available. That's from my side. I forgot one point, also order intake because I got this question this morning in some analyst calls. They said, Thomas, what's going on with services? The Q4 to Q4 order intake is only growing -- is only growing by 3.8%. I tell you the story. The reason is very simple. Last year, in Q4, we received a larger order in the region Europe, for South Africa for a big energy provider there. And when you have then the like-for-like comparison, Q4 to Q4, you have the impact that then the region Europe and Africa, they were in the minus because of this high base impact last year. But believe me, still Americas, and you saw it also in the e-mail, which we shared this morning with most of you and in the press release that Americas is still growing almost by 10% and also EMEA by more than 25%. Then more challenging environment, Chemtech. Chemtech, what is here the headline is really the overcapacity, especially the refining overcapacity on -- sorry, it's not working. Okay. Chemtech, we have the overcapacity, especially in the refining area for the refineries in China. But we have also the overall, yes, weak market sentiment in the chemical industry. When I talk about orders in Chemtech, we have seen a mixed picture. We are missing here also the larger orders, which we have received in the past because of this uncertainty in the markets. So we have basically in this smaller projects, short-cycle base business, we have a reasonably good order intake. We also have grown in Chemtech, our aftermarket services share where we go now because the equipment is there more on the services side, in the tower field services, turnaround services, and so on. So here, the strategy is really working very well. We have, on the Chemtech side, also achieved when we talk about order intake. And you know that we had our footprint mostly coming out of China and Asia. We have reduced the share of, say, orders coming in from Asia from around about 50% to 37%. So this is a reduction by 12% of the Asian share. And on the other hand side, we have increased the share in EMEA by around about 11%. And some of you remember, we are going to open a service shop in Saudi Arabia for Chemtech this year, by mid of this year. So you see also from the numbers, our strategy a bit, going out is the wrong word, relocating our focus from Asia, which were historically grown more now to the Middle East. This is working out. Last word to Chemtech on the profitability side. Yes, the profitability on Chemtech went down by 2 percentage points. But here, and Suzanne already addressed it, I really want to explain to you, this is a very value-accretive margin. And why I'm saying this? Because, yes, the profitability went down because Chemtech lost 13.6% of their sales. But on the other hand side, we have done a lot on operational excellence on the Chemtech side. We have done a reorganization where we refocused on the regions, India and Middle East and combined. We also have, on the R&D side, focused more on market topics. We have improved our supply chain by centralizing a lot of functions. And we also merged 2 BUs within the Chemtech organization. And we did cost cutting, cost cutting in the headquarter, cost cutting also in China, where basically, we dismissed more than 200 people in our factories in China. So all in all, you see that with this 2% decrease in the profitability for Chemtech, this is a very good result, seeing the sharp decrease on our sales. And on the other hand side, this means when we achieved this year on the Chemtech side, that they are slightly going up in 2026. This is what we expect, that then you have a much lower cost base, and then you will see that we have also an acceleration coming on the Chemtech side when we talk about profitability. Outlook also a bit with the Q4 to Q4 comparison. Also in Chemtech, we had around about 18% plus in order intake Q4 compared to Q4 2024. What is very important for me to address is that especially in MTCS, we had on a quarter Q4 '24 to quarter Q4 '25, an increase of more than 13%, which indicates that we most probably have seen the end -- the light at the end of the tunnel. Then let me go to the EBIT and net income. EBIT, you see here with 22% plus. I think story is the same. I don't want to repeat it. It is that we really were able to expand our gross margins, rigorous cost management, and implementation of Sulzer Excellence. Also here on the EBIT, I want to address the FX impact. Our EBIT would have been around about CHF 36 million higher if we wouldn't have had a negative FX impact on our EBIT. Net income, kind of the same story. Why is net income not growing so much than our EBIT in percentages, mainly, say, 2 reasons for this. We have because of the lower interest rates globally, lower interest income for Sulzer. And also since we earn more and more and get a higher and higher profitability, finally, we also have to pay higher taxes, and this is the reason why we are a bit lower in the growth on the net income side. Then let me talk about our cash flow. Cash flow, most of you remember when I gave updates, I think cash flow really came in, in line with expectations. Why I'm saying in line with expectations? Some of you said, hey, Thomas, why is the cash flow not going up to almost CHF 300 million? Explanation is very simple. Please recognize that in the year 2025, because of Chemtech delivering no cash flow -- free cash flow because of their business situation because they had to invest in one-offs. They had to take care of their profitability. We have missed completely the contribution for Chemtech for our free cash flow. Okay. Well, thank you. Yes. And with this, we would have been close to CHF 300 million with a working Chemtech. However, when we look in our free cash flow, you see that we are CHF 22 million less despite the fact that we have higher tax payments and lower interest income, and just to drop the numbers, tax payments are around about CHF 10 million higher and lower interest income is around about CHF 7 million. So alone, when you add these 2 ones, you see that we can explain the lower cash flow. Now it's working. So balance sheet and net debt-to-EBITDA ratio. What I did this time, I changed a bit the layout on this slide and the content because some of you were almost always addressing, Thomas, why do you show not just the net liquidity of Sulzer, and this is what we have done here, and we do it in the future. You see that when you talk about our cash and cash equivalents, and these are the cash and cash equivalents, which belong to Sulzer. This is not including the Tiwel cash. You know that we have the dividends which we basically keep in our house, and this would then increase the cash. But this is only the cash which you see for 2025 with CHF 640 million. It's only our own Sulzer cash. And on the other hand side, the debt, nothing has changed. Why is the debt around about CHF 30 million higher? Very simple. Last year, we had an expiring bond of CHF 300 million, and we replaced this bond with 2 new bonds in the total amount of CHF 330 million, and this is why we have CHF 30 million more debt. And then when you do the calculation, net debt divided by EBITDA, we have then a net debt in 2025 of CHF 555 million and an EBITDA of CHF 556 million. So you see it's 1.0x. And when you compare this with last year, it's basically a no change. It's a stable 1.0x on the net debt side. Okay. So now my last slide. Let me talk about the dividend. Suzanne already addressed it that we are proposing for the AGM to increase the dividend to CHF 4.75 per share. Just let me give you some reasoning. Look at the left side of the chart, we started with 2015 with a dividend of CHF 3.50 and you see then a lot of dots. And then until 2021, you have here still CHF 3.50. And you see in the last years that we steadily increased the dividend because we are, as you know, on our Strategy 2028, we are focusing on organic growth. We always said that we are not doing big M&A transactions, but we are also sharing a portion of our success with the shareholders. And this is why we have steadily increased the dividends. What is important because some of you already addressed, is this too high or how does it look like? We have a dividend policy within Sulzer, which stays between 40% and 70% of our core net income is in our dividend policy, what we can pay as dividend. And you see it here on the right side, in the last bullet point, we have a dividend payout ratio of 50%, in this range between 40% and 70%. So we are still on the lower end side of the possible range of the dividend. And I think with this, you see that we are very carefully also deciding on the dividend increases, and we are focusing more on a steady development in the future than increasing the dividend onetime by higher amounts. With this, I would like to hand back to Suzanne and then ask -- should we do the question? No? Suzanne Thoma: No. I still have a few things to. But as a matter of fact, we have already 45 minutes, so I will try to really stick to the most important things and not mention every word on the slide. I'll try to be short, but still, yes, interesting, I hope. So these are our industry spoke about it. The change that we have in our understanding of Sulzer is -- well, it is a fact. We just see it differently now is that our divisions serve by and large the same industries. And in many cases, they serve the same customers. This is something that we have started to leverage in 2025 and that we are going to increasingly leverage going forward. That does also require some internal changes. I'm not speaking of a reorganization, but of the way we are handling business demands from one customer to several divisions. There we are sometimes a bit our own enemy. Yes. So let's look at energy, our #1 market. We have spoken about it that large projects, exploration, large extensions, rather a little bit subdued. We do expect in 2026 to get some large orders coming through because momentum is really still there, both in the Middle East, but also the large American companies do speak about producing more in the area of oil and gas, and not less. What stays is that these operations, all energy operations have to be safe and have to be clean and compliant. And this helps our business because what is it that we are doing, we are helping to make the processes and the infrastructure of our customers more efficient and cleaner and better. Power generation is the topic. We need more electricity around the globe, which also leads to the fact that, for example, old gas-fired turbines are coming back up into operation after having been overhauled very often by our service division. The chemical industry, new capacity is indeed subdued, except for some specialty segments, purification and separation, very, very high-level purification and separation, for example, for semiconductors, for example, for batteries and other high-tech applications are increasing. If you have infrastructure, it has to be safe. It has to be compliant. It has to be energy efficient. And if you have an aging infrastructure, this is even more the case. So this is where Sulzer has a growth potential also short-term in the chemical industry. If we look at water, that is a simple story. Water is like power production, the topic around the world. We need more water, cleaner water. We cannot take, for example, for mining more and more groundwater out. We have to take care of our water, and we need more. And so industrial and municipal wastewater treatment is very important. Water in mining, you see it here in the picture, is a big topic. Desalination is coming up more and more. And water infrastructure also to transport a lot of water, for example, from the sea to a desalination plant and then to a city is an increasing business. We are looking forward to double-digit growth in water as well. New technologies, mostly Chemtech, not only. There are some uncertainties. But what you read in the news right now about new technologies does more reflect the political speech, let's say that, than what we do see in our market. We clearly see improved interest and, hopefully, large projects in 2026 when it comes to bio-based plastics. We see it in the Middle East and in Asia, not in the United States and not so much in Europe. We see carbon capture still being there, but it is clearly a niche market. It depends on the regulation and, also, let's say, on the social license that, for example, large oil companies want to have or don't want to have when they invest heavily into gas-fired power plant for data centers in the United States. What we see growing in many regions is alternative fuels, be it sustainable aviation fuels, be it bioethanol. So what do we expect for Sulzer in 2026? We see a solid order intake. It is most likely going to be somewhat muted in the first semester. And there, we are also suffering from the comparison base. If you look at our Q1 order intake, the base is around about CHF 1 million -- CHF 1 billion. So if you have a CHF 50 million order in March or you have it in April, makes a difference of 5 percentage points. This is why we really don't think that the Q1 order intake has too much of an information value. So we see not so much momentum in H1. We see very good momentum in H2. We are not just saying that because we hope that this is the case, but we see it in the pipeline of the large projects. And the communication of our customers when these orders are going to be placed in a legally binding way. We do see for all 2026, continued growth in aftermarket in small-scale project and in the water. And we do see an upwards trajectory for our new technologies in most of the regions of the world. Trying to summarize it. Our markets are growing structurally for the reasons that I mentioned at the beginning of my presentation. The macroeconomic situation creates a certain volatility, which leads to our customers maybe hesitating a bit longer than they would otherwise for projects that they are planning to do. At the same time, if we look at what is happening with population growth and so on, the global opportunities are there for our company and the challenges that our customers have in order to have safe, clean, less emission, and so on is also driving our markets. So we believe that Sulzer is clearly on an upward trajectory, potentially not every quarter. So what do we do in 2026? We accelerate and intensify our strategy implementation. It is not so easy because this company is successful. And we are now really changing the ways that we are doing certain things, and we are making it better and more efficient, but it's still a change. And human beings are not so comfortable with change. But we are pushing that through. We strengthen our aftermarket business. We are further streamlining our order winning process. We are too slow and too complicated when it comes to order winning, when it comes to tendering and when it comes to order specific engineering. And we are moving towards integrated customer solutions, solutions for specific industry centers like water, where all of our 3 divisions are selling into right now, still mostly in a fragmented way. Again, this requires to change how we are doing things. We are going to push that forwards in 2026, which also means One Sulzer. Our fragmented way of accessing customers, I put it in a positive way. There is a lot of potential for growth if we eliminate the fragmented way of accessing our customers while still staying very effective, no, becoming more effective and efficient in how we are doing our processes. This leads us to the following outlook. Now giving an outlook these days, ladies and gentlemen, is not that easy. And this outlook stands unless we -- what I want to say is this is a quite significant information. There would have been some reasons to give you a higher outlook. But it is difficult. The visibility is rather low because of the geopolitical situation. So we are guiding an order intake of 1% to 5%. We are guiding sales for 2% to 5%. And we do see an EBITDA margin that is further improving to about 16.5%. Very short. I have been told you like these examples. So I will do it, but I'll be 3 in 5 minutes, I promise. So we are still making traditional energy cleaner and less expensive and readily available. And that will continue this business for a very long time because the world needs more energy. And you see an example here where a customer of our thought they had to replace 2 full compressors, which would have shut down their offshore operations for apparently several years. But we came in with our retrofit solutions from the Services division and could upgrade the compressors. We contributed to less -- to a smaller environmental footprint because the energy consumption of the operations is now down 14%. And for the customer, most importantly, we could -- the project time was strongly reduced. This is really engineering. When we speak about repair and maintenance, it sounds so easy, but this is real engineering work and Sulzer is very good at that. Now we still speak about keeping the energy transition moving because it is still moving almost worldwide, and this is a nice example for a bioethanol plant in Brazil, where we were the main supplier and the feed for this plant is biomass from waste, very important. Now the water treatment, the Global Center for water treatment, Thomas mentioned it. We have launched it now 2 months ago. This is following the strategy of having industry-specific offers from a One Sulzer perspective. And here, very specifically, we have around the globe quite some very, very good, but smaller companies active in water treatment, who are regionally well established, and now we are opening our sales channels to them globally, and we expect very nice growth from the water treatment. Last but not least, we are scaling our global capabilities through shared business hubs. We have 4 business hubs now in Mexico, in Madrid, in Pune, and in Suzhou for the type of work that can be very easily standardized and automated mainly in some business functions and in the finance function. It has to do with sales support and tendering support and, of course, supply chain support. This is another important building blocks to support a One Sulzer approach in our back office processes. This is one example from the excellence front. Let me finish, ladies and gentlemen, key takeaways. We see further order intake and sales. In a volatile market, in the areas that we have grown nicely already in 2025, but we do see some large projects that are in the pipeline, this growing pipeline that we have that will materialize in 2026. We are working together to strengthen the foundation of Chemtech so that it is very well prepared to pick up the growth that we are expecting this year, growth compared to 2025. We don't expect a full recovery to the level of 2024 in this year. But as Thomas said, it will also then improve the profitability significantly. Sulzer Excellence is the key to making Sulzer a top industrial company. We are going to intensify and accelerate what we are doing there with also an increased excellence organization that works hand-in-hand with our business to improve the many, many good things that we are doing. So our strategy is working, and we push on with this strategy by staying very adaptable to what is going on in the world. Thank you very much, ladies and gentlemen, for your interest. That is what we wanted to present to you looking back and looking forward in 2025. We are now going to take questions, if you have any, Thomas and I together. Thank you. Patrick Rafaisz: Okay. Patrick Rafaisz from UBS. Is it -- how many questions? Can I go with 3 to start? Suzanne Thoma: It depends how complicated they are. Patrick Rafaisz: Okay. Let's start with 2 first. One is on the order intake margin. And Thomas, you mentioned the 70 bps improvement. But if I look at H1, H2, H2 was actually down, on my calculations. Can you elaborate on that? Is that mostly mix? And how should we think about the order intake margin in '26? Thomas Zickler: I'm thinking about the answer, but I'm like always, very transparent. The order intake margin when you compare H1 to H2 is a bit lower in H2 because we had the difficulties with our order intake to really come to the guidance to the end of the year. So this means towards H2, we pushed really on the order intake side to get some more orders in. And this is the true story. It is no business development, no change on the business side. It's just that really we then landed at above 2%. Patrick Rafaisz: That is indeed very transparent. Thank you. Does that maybe also explain the softer guidance for H1 or the more muted guidance because you may be brought forward some orders? Suzanne Thoma: No, it did. It was not to a large extent, definitely not. H1 is simply that when we look at our pipeline, we believe that the large projects will rather come in H2. Many of our customers have no reason to decide finally in H1. Patrick Rafaisz: Okay. And then a question on the margin expansion. It's very impressive, adding another almost percentage point or thereabouts in '26. If you allocate that to the 3 divisions, I mean, Chemtech you already mentioned will definitely improve. But how do you think about services and Flow versus '25, right? Suzanne Thoma: For 2026. Well, I definitely expect a further margin expansion in services because their relative increase was less than in Flow. Definitely still expect a continuation of the margin increase, maybe at a little bit lower level, not -- well, rate in Flow. But we are not buying sales that is very -- and not buying order intake. Patrick Rafaisz: Yes. Suzanne Thoma: The margin, of course, also not only depends on the price, it also depends on the efficiency of our operations production, and we will work heavily on the efficiency of our operations. Patrick Rafaisz: Can I go for one more? Suzanne Thoma: If it's a short one like that. Okay. Patrick Rafaisz: It's a short one like that. I just -- you talked about the large orders for the second half. Just trying to understand how much do you build in? How much optionality do we have if all goes well versus the guidance? Suzanne Thoma: We are business people, not analysts. So we don't do quite such calculations. That was meant in a referent way. Just really also like Thomas answering how this really are. I can just -- I know you want the figure for your thing. What's now? Thomas Zickler: Maybe I take over. Suzanne Thoma: Yes. Thomas Zickler: For the guidance, which we have given on order intake, we have planned very conservatively, which includes I wouldn't say almost no larger order, but say, the big orders which we are planning for and which are in our order intake pipeline for H2. These orders are not included in this guidance because of the geopolitical environment, and this was also what Suzanne addressed when she talked about the guidance. These uncertainties are too high that we are really able now to forecast for the next 12 months or next 10 months on our order intake coming in. Christian Arnold: Christian Arnold from ODDO BHF. On the margin, EBITDA margin, I mean, you achieved the record high EBITDA margin, 15.6%. Now you are guiding for quite a step actually in '26, 16.5%, which is impressive. Thinking about your order intake margin increase of 70 basis points, sales growth of 2% to 5%, which probably leads to some operating leverage. And then think about the Chemtech division, which you refocused and probably also achieving higher margins. I mean, we could even think about a higher margin than the 16.5% you are targeting despite the fact that the level is very, very high. So what could go against you? Are these higher personnel costs? Are these product mix effects, which we have to think about? Yes. Suzanne Thoma: Well, one thing that theoretically could go against us is a tightening in the raw material situation with higher costs, let's say, for steel, for example, that could be -- we don't -- we see it only a little bit right now. We don't see it in a significant way. That is one thing. We still believe that to go another percentage step up, percentage point, is already quite ambitious. It is true, some of the measures that we have taken in 2025 and also have costs will have an effect in 2026. But then you never know what's going to happen. So we give our best guess, not estimate, but assessment. Thomas Zickler: Yes. And also, we want to be in line and sustainable with the last 4 years, where we have almost every year guided with 1 percentage point growth. And we think, as Suzanne explained, we think also for 2026, we can do it. However, and I don't want to repeat everything, the geopolitical uncertainties, just think about what is happening with Iran, what is happening to other topics. I think the 1% with our excellence, which we do, we are quite comfortable. And the rest, let's see how it really develops during the year. Christian Arnold: Okay. Thank you very much. And maybe just a small question on CapEx. What do you think what will you spend in '26 and '27? Suzanne Thoma: I have to say... Christian Arnold: Yes. Sorry, same levels. Thank you very much. Alessandro Foletti: Alessandro Foletti of Octavian. Can I ask you also 2, 3 questions, please. Maybe first on the H1, H2 split. I think you guided in the press release that H1 will be lower than H2. But the backlog entering the full year is quite high, like basically like last year. Why still this H1 weakness somehow? Suzanne Thoma: Our guidance was related to order intake, not sales. Alessandro Foletti: Okay. So that means on sales that we should not expect this huge H1, H2. Thomas Zickler: Yes. Alessandro, sales is always much more stable coming from the order backlog than order intake. But our message was addressing on the order intake, where we see really from especially the larger projects in our pipeline that they are coming in the second half of this year and not in the first 6 months of this year. Alessandro Foletti: Okay. Thanks. On the profitability again, in Flow, particularly, I think Ms. Thoma, you mentioned that you did have some help from the market to increase the profitability there. Can you dissect how much of this improvement is your own actions and how much is market tailwind? Suzanne Thoma: What do you mean with help from the market? Alessandro Foletti: Good markets mean good prices, means good margin. Suzanne Thoma: Well, the markets are quite competitive in the Flow area. We did definitely have good markets in Water. I cannot dissect it per se. Maybe you can. Thomas Zickler: No, it's very difficult. What we have on the Flow side, especially is still a market where we have a bit of a pricing power left. It is much more competitive than it was whatever 2 years ago, for sure. And then this combined with our, say, cost measures, this enables us to get the profitability up. But on the pricing side, I think we are very disciplined. We have new pricing tools. We are using here a bit more sophisticated tools. But overall, yes, the markets, they are supporting this development, but I cannot really give you whatever XYZ percent. Alessandro Foletti: All right. Maybe last one on the large orders again. There were some discussion with you during the year, last year about carbon capture. Now you mentioned it, but I'm not sure that there's still the levels. Are they still around these projects? Are they not around, where? Suzanne Thoma: So we have a large project in 2025, the Teesside project in the U.K. And we are speaking about several larger carbon capture project interestingly in the United States. Why? Because they are going to use so much more energy, they will need the gas-fired turbines to do so. And there is not only -- not only a question of whether there is political support for the big AI companies. It's also a question of the social license. I mean there are still many people also in the United States who think we should reduce our CO2 footprint even if the government says something different. And in that sense or in that playing field, for the moment, we see momentum. You see in my long explanation that I'm also not completely sure about it, but we do see momentum in carbon capture. Also in the Middle East, we do not -- we see discussion in China, but that will come much later. We do not see it in India. Alessandro Foletti: Right. But is it correct -- I understand correctly that these hyperscalers or data centers, they would do it voluntarily basically? Suzanne Thoma: Possibly. Possibly. Well, voluntarily in the sense that they like to do it, I don't know. But they also -- they already do have some push for that. Thomas Zickler: Without the regulation. Suzanne Thoma: Without regulation, possibly, yes. That is the discussion they are having with us. Are they -- with very clear projects. Are they pushing it through, that I cannot guarantee. Alessandro Foletti: Right. And your assessment of the competitive landscape for those projects? Suzanne Thoma: We are definitely the market leader when it comes to large-scale carbon capture projects. Unknown Analyst: If I remember correctly, you mentioned of the 9-month orders that you have a couple of bigger projects in the pipeline where you hope to let them materialize before the end of the year. Can you tell us if some of them materialized and the projects you see now, the bigger projects coming rather in the second half of these new projects? Or are they still the same and wait another half year. Suzanne Thoma: Very good question. They are partly new project, but it is also true that many of them have moved into 2026, even H2. Some were also lost. I mean I can give you a bit of feeling for our Energy and Infrastructure business unit. In September, we were still speaking about project volume. We wouldn't have gotten all the projects, but in the order of CHF 300 million, of which we maybe would have gotten half or 40%. And of those, CHF 220 million have moved into 2026 and CHF 80 million were lost, but there are some new that have become more concrete so that they -- they weren't that concrete in September, so, I didn't speak about them. So all in all, that's what I was trying to say with my underlying momentum. There is a strong underlying momentum when it comes to energy generation worldwide, not only in power, also in oil and gas. We will -- would be very amazed if we wouldn't have any orders in the next 12 to 16 months that are really major, most likely in -- very likely in the H2. Arben Hasanaj: Arben Hasanaj from Vontobel. My question would be around the outlook for the service business for this year and also next 2, 3 years. I mean, if you look at the CapEx budgets also in the area of data centers, they have become even more bullish. So I was wondering how confident are you that this kind of momentum continues and maybe even still double-digit momentum. Yes, I was wondering, how do you see the market this year and next 2, 3 years? How long can this super cycle last in your view? Suzanne Thoma: We are very positive over the next 2, 3, 4 years because of some underlying drivers. Thomas Zickler: Yes. Let me add to this. I just want to manage a bit the expectations, and you know me, in the meantime, I'm a bit more conservative on the expectation management and then overachieve, then vice versa. So you said double digit in the next years. If we can agree mid-high single digits over the next years, I'm fine. But I think we cannot commit on double-digit growth over the next year. Suzanne Thoma: No, that was not -- that was an ambition and expectation. It was not an additional guidance. Thank you for raising that. Any other questions? Well, then we come -- no, then we come to the -- yes, exactly Marlene coming in with maybe questions from. Marlene Betschart: Yes. I have 2 questions from Fabian Piasta from Jefferies. The first one is, can you please provide more details on specific measures taken as part of operational excellence program? How much headroom is there left for improvement? Suzanne Thoma: There is a lot of headroom left for improvements. I cannot quantify it. In my assessment, we have only started in 2025 in a very systematic way with operational excellence. Now operational excellence is also many, many, many small steps. So it does take energy and it does take time, and it is a continuous improvement that we will have and not a step change. But we are definitely at the beginning in many dimensions. Marlene Betschart: Thank you. Second question for Thomas. Can you provide more details on the strong Q4 order intake? Does this mark a trend reversal or is this more seasonally driven with respect to your guidance implying a more muted first half of 2026 versus second half of 2026? Thomas Zickler: It's the latter one. It's more the year-end, the strong Q4, which we normally in the industry have every year. When with the customers, we push for the year-end closing. So we had very strong numbers in 2025, and this doesn't indicate a trend. This is why we are so cautious with our H1 order intake guidance. If it comes better, then it comes better. But seeing it, I really would say it's a normal process which happens every year in Q4, where the industry as well as the industrial companies push for order intake and also for sales in the year-end race for the Q4 numbers. Suzanne Thoma: Which also means we have already done it in 2024. So the comparison basis also Q4 in every year. So -- right? But I would also not take it as a -- not yet take it as a fundamental trend change, too early. Marlene Betschart: Fabian Piasta says, great. Thanks. And this has been -- no, wait a second. Sorry. I have another question from [ Loui Bion ]. Could you give us more details on your operational capacity in North America for the energy market? If the gas turbine maintenance market experiences a boom, will you be able to keep up with demand? Suzanne Thoma: Okay. Our business is not linked to the new turbines directly. As you know, the new turbines, they now have delivery times of 4, 5, and 6 years. Now that does still impact our business positively because in many cases, let me say, it a bit old turbines are being dug out or, let's say, reinstate with reengineering and put into operations again because that goes much faster. So taking care of the older and the old turbines is our business, a very good business because also the new turbines become old within a cycle. So indirectly, we will profit from that. Definitely, we see it today. And yes, we have invested in our operations in the United States, also capital investments, which our American colleagues were very happy about because they haven't gotten that much over the years. And also, we have improved our operational excellence, which also means that you can do the more things, more volume with plus/minus the same operations. So yes, we are going to profit from that, but not in an extreme way because there is this distribution over time in our business, which is good. Marlene Betschart: This has been the last question online. Thank you. Suzanne Thoma: Thank you very much. So again, thank you very much for attending online, and thank you very much for taking the time and the effort to come here, is much appreciated. And we are happy to invite you now for a small uncomplicated lunch like every year and continue our conversation. Thank you very much. Thomas Zickler: Thank you.
David Baquero: Hello. Welcome to this presentation of Atresmedia. This year, we were going to give the presentation in Spanish, but you can also receive the translation in English. We have a simultaneous translation service. And Silvio Gonzalez, who is the VP, will give the presentation presenting the results for 2025 and a quick overview of the strategic plan update. and also the Financial Director and myself, helping with the question of the issue of the questions. Without further ado, I'd like to hand the floor to Silvio to present the results for the year. Silvio Moreno: Good afternoon. We're going to have a quick overview of 2025. And as always, 2025 was a complicated year for the sector for macro reasons and certain sections such as automation and also because there are different competitors in streaming platforms. And this has also meant that it's been a rather complicated and challenging year. And we try to be rigorous in terms of the application of our strategy in terms of audience and the market and our products. It's been once again a very successful year. We have been leaders in audience far ahead of our competitors in the field of audiovisuals, TV and digital audiovisuals. I apologize, but we are receiving continual interruptions in the audio. We can give you the following data. In TV, we had a market share of 26.1%. And as we will see, not just in terms of global -- in overall global market share of 28.15% with the premium markets, 22.6 million monthly, which is the leading platform in this country. And in radio, it's been an excellent year with more than 3 million listeners per day, which is the best figure since 2015. And we can -- this confirms the strength of our brands. In terms of markets, -- in terms of the advertising market, it's grown at approximately 1%. And in the 2 sectors where there's been -- for example, in terms of revenue, there's been a downturn in TV of 4.4%. And in radio, it's increased by 2.6%. This has resulted in total revenues of over EUR 1 billithey're, which is slightly lower than last year. And there's been -- well, audiovisual has also fallen by 2% in total revenues and radios by plus 4%. This has given us a pro forma EBITDA. Well, as you know, we carried out an incentive redundancy plan, early redundancy plan. The EBITDA is EUR 133 million. In terms of dividends paid in 2025, EUR 146 million. And we also have to take into account the impact year-on-year. The pro forma EBITDA is EUR 146 million and a net EUR 133 million and net profit, EUR 96 million. The financial position at the end of the year gives us a good net cash position, a very high cash conversion rate of 0.9. And it's been an exceptional year in terms of dividends. We've paid EUR 146 million in dividends at a ratio of EUR 0.64 per share, which is the highest since 2017. I think that the year 2025 has been an excellent year for our shareholders. And if we take into account share revaluation, and also high profitability, the total shareholder return for 2025 was plus 26%. But now I'd like to analyze the different pillars of Spanish advertising market of Atresmedia. The total market has fallen by 4.4% in TV, and radio plus 12.6%. Outdoor has increased by 6.7%, which is above the average for the sector. And you have to remember that this is a sector which is going to complement our results. And that shows you the performance of the advertising market in the outdoor segment in the last year. And you can see that the growth is not that high, but it's been constant since 2020. As always, we try to ensure that this drop in the market doesn't have an impact on our prices. We'll look at this later on, and we compare this with digital products in our offer to our 360 offer to our clients over the year. And the figures remain fairly solid in this respect. As regards audience share by groups, we have to see that it's been an excellent year. For 5 years, we are leading audience share, increasing the gap between ourselves and our next competitor. And that's important. In reality, we compete with Mediaset because it's the only commercial competitor that's access to the publicity market, the advertising market. There you can see also the curve for TV, which is the Spanish national broadcasting company, TVE, and that continues to be an important player within the advertising market. So it's been an excellent year in terms of audience share in terms of total audience share and also the total day and also in prime time. And this all gives us an advantage with respect to our main competitor, which is Mediaset Spain. As regards to audiovisual main milestones, we can highlight the following. Again, 2025, we've been the absolute Spanish leader. Atresmedia is the first, let's say, you can see we have 4 consecutive leading in total individual and prime time audiences and contents are of significant quality. And the audience appreciates that quality. Furthermore, we've consolidated our position as a stable channel with stable channels. We're stable in the mornings with our newest channels and both during -- at bid day and also in prime time. We are practically leaders in the majority of these slots during the day, and that's allowed us to achieve stable results. And the forecast is that we will continue to achieve good results in the coming years in audience figures and also in terms of the revenues we obtained from our business. As regards Atresmedia Digital, again, it's another year in which we're leaders in these different platforms among users in AVOD and SVOD. In AVOD, we have 2.5 million users, monthly video users and 18 million registered users and more than 750,000 subscribers as of December '25 and 20 million hours of video consumed with a local platform that's able to offer quality content and achieve a large number of subscribers. As regards Atresmedia Webs, of all of the products that we develop, which is not within AtresPlayer, we have the audiovisual group with the #1 audiovisual group and the seventh overall in terms of most visited sites with 22.6 million average for -- and then also in others in the digital sphere under influence marketing H2H, which is above -- growing at above market average and Smartclip, which has had a complicated time. It's suffered a lot, but it's maintaining its position as a company, maintaining its profitability, but it's been a complicated time in digital advertising. So I think that they've achieved excellent results and good penetration in that particular segment. And we'd like to focus a little bit more on Atresmedia audiovisual content. We increased by 10% year-on-year with 750,000 subscribers. And again, we've tried to adapt the prices for all of our subscribers, which has offered a good return. That hasn't affected our audience figures too much, and the results have been pretty good. Apart from that, the platform has been very successful, thanks to strategic mix of content. Disney+, for example, it's important to value quality and Disney+ values the quality and also the market position of our platform. Another important point as part of our 360 platform, -- and something which we'd also like to focus on at the end is the agreements that we've reached, the agreements with the main streaming platforms in the country such as Prime, Movistar, et cetera. And that's another important part of our business because this also allows us, thanks to the flow of content sales to develop products of quality, more expensive products and with a very loyal audience. And also in terms of international TV, we're also the leader in -- we've got 32% of the Spanish film box office in Atres Cine or Atres Films with 14 films in distribution. And in international, well, we have 58 million households, which is plus 7.3% year-on-year. It's part of our strategic plan. Well, we continue to maintain 58 million households, and that is also a way of generating additional revenues apart from those that we achieve in other segments. And in the middle of the year, we acquired the company, Last Lap. Last Lap is an events company, which focuses fundamentally on sports and also experiential marketing. And I have to be honest that the incorporation has gone very, very well. The second half of the year was much better than the year -- previous year in the same period. And additionally, we are going to merge this with the events part of Atresmedia. So this will give rise to a company with a turnover of approximately EUR 50 million. We're talking about an average of 3 events per day, and that will make us one of the leading events companies in the Spanish market. So this market is fairly fragmented, I have to say. And I'd like to talk a little bit about Atresmedia Radio. As I said before, our radio is working very well. the audience figures, approximately 3 million listeners and that is the best data since 2021 and the best data since 2015. So that's the figure for Onda Cero is the best figure since 2015, and Access Radio has achieved the best figure since 2021. Our prime time radio programs with Carlos Alsina has achieved historic audience figures achieving more than 1.7 million listeners per day. But apart from that, I think it's also the program with most credibility and the most rigor in terms of its journalism, let's say, in the field of radio in Spain. So we're extremely happy with the results that have been achieved with that program in 2025. And as regards the revenues for the entire year, well, there you have the figures slightly lower than the figures that we achieved in 2024, EUR 1,002.3 million compared with EUR 1,017.9 million. And there you can see the breakdown. OpEx pro forma that's ex post the incentive redundancy plan is EUR 86.9 million -- EUR 868.9 million, which is plus 3.4% compared with last year. To a like-for-like comparison, then the OpEx is -- would probably have declined if it wasn't for that. And in cost terms, we are very, very committed. The pro forma EBITDA, EUR 133.3 million, which gives us a net profit on a pro forma basis of EUR 96.3 million compared with EUR 120.3 million in the previous year. The entire pro forma results, well, EUR 45 million, which corresponded to the redundancy plan, which have been provisioned accordingly, but the impact on cash flow is something that is felt during the entire period. So it doesn't reduce in any way the cash flow structure of the group and the financial structure that we have. We analyze now revenues by segment. And we can see how this EUR 1 billion has been distributed. There you can see the figures for compared with financial year 2024. And fundamentally, well, the main decrease has this been downturn of EUR 49 million in audiovisual. We are going to -- we've managed to offset this with improvements in content production and distribution of EUR 1 million and others in perimeter, EUR 29 million. That's a total of EUR 30 million. In contrast, radio has performed much better with an increase of plus EUR 3 million, increasing from EUR 83 million to EUR 86 million. Therefore, we're trying to ensure that the weakness displayed by the audiovisual sector this year is bolstered and led by the incorporation of companies that are leaders in other sectors, which will allow us to achieve greater stability. In terms of OpEx by sentence, by segment, there you can see EUR 869 million in the total group compared with EUR 840 million last year. If we consider the contributions of new perimeter companies, then OpEx by segment would be more or less flat line or possibly negative in some instances. So we continue with the idea of adjusting in cost terms with a view to maintaining our quality and our competitive quality because that is something that will allow us to generate income, revenues and based on a pricing policy that ensures that we are clearly the group that offers better prices compared with the competitors in the rest of the sector. As regards to EBITDA, well, -- the EBITDA in 2024 was EUR 178 million, which has dropped to EUR 133 million. Most of that decrease corresponds to the group's audiovisual segment for the reasons I explained before. The performance has been much worse than we expected compared in the publicity market. Some sectors have virtually disappeared such as the mobile banking sector, publicity. And that is largely due -- and also there's also not mobile phone, it's the automobile sector. And there's also a lot of uncertainty regarding the impact of electric vehicles. And we're also observing that the automobile market -- publicity market is actually increasing this year. As regards Atresmedia cash flow, well, there you have the figures there. In 2024, plus EUR 140 million, operating cash flow, EUR 126 million. And again, we've had EUR 146 million for the payment of dividends, M&A, EUR 22 million. Therefore, we end with a net financial position of plus EUR 58 million, high -- a strong financial stability. Okay. Let's move on to our strategic overview. Well, we've tried to -- you have to highlight the cost discipline that we managed to maintain and also maintaining a leading position. We've also tried to incorporate in our perimeter companies that are in sectors that have great growth capacity in the future, such as Last Lap and [ Cera ] and the companies I mentioned earlier. In terms of Atresmedia strategic overview, -- we would like to highlight 7 pillars or levers on which we have based our strategic plan. Although the strategic plan has to change and adapt to the changing environment, we believe that these are the different areas that we really have to focus on. First of all, consolidating leadership in audiovisual radio. We must be leaders in audiovisuals and radio. That's fundamental. It's essential that we continue to produce good content. Digital is core. It continues to be in the new segment because that's the only way that we can really offer a product to the market, which is of interest to our listeners and to our viewers. So that is a challenge that we consider to be essential. And we will fight to maintain our leading position. We've been leaders now for 5 years. It may seem easy. But whenever the actual -- the market changes, we have to adapt as well. And it's essential that we -- our contents and products are accepted by our users, and these are things that are often outside our control. We continue with the idea of maximizing content exploitation cycle and becoming increasingly efficient in these areas. Our aim is to ensure that leadership in audiovisual production is something that we have to extend very, very clearly throughout the whole of our perimeter. Apart from being leaders, it's essential that we have new products. And these new products will allow us to ask higher prices from our users in the market. We ended the year with a gap with respect to Mediaset of approximately 27%. So clearly, we are perhaps in the high pricing slot the gap compared with 2008. And in the case of radio, well, you have to consider the different revenues that are generated per listener in the industry. We have the highest revenues per listener in the industry. We want to continue being leaders in audience share in commercial products, and we want to maintain our premium pricing because we want to try to ensure that we can offer content that offer greater quality for -- and also are much more profitable for our advertisers. Some time again -- well, some time ago, we developed our audiovisual platform, AtresPlayer. And this is an essential element in our roster of services. We've not just incorporated traditional audiovisuals, but also our AtresPlayer platform with the AVOD and SVOD options. The idea here is to ensure that we're able to optimize our inventories and to try to get the most out of the product. We want to continue with our pricing policy review and also explore new distribution agreements and also empower our international SVOD platform or payment platform. So the idea is to explore digital as an essential element as part of the pack, which also is accompanied by special prices because, as you know, some of the low prices are not that interesting for us. We want to occupy the premium audiovisual market with prices of approximately EUR 13 or EUR 14 per, which is almost 7x more than the EUR 2.5 of traditional television. That's just for comparison purposes. We've also demonstrated that our commitment to content and the ability to actually develop all of the spheres in which we operate is a strategy that clearly yields successful results and generating revenues from every single element, no matter how small it is within that package is essential. And I think that the operation has been exceptional in the last year. In the case of Netflix, well, there was a good operation there. And we've also achieved the leading Spanish-speaking series on Netflix last year. Another example, we can also see how in each of the different segments in which we operate, this is something that we're really exploiting. So I think that we're really exploiting all of our products and trying to get the most value-added and revenues from those products. That is a strategy that we've seen has worked very well, and we have to continue developing this. We have to continue to support and reinforce that because through that strategy, we've been able to maintain stable and significant revenue. In the area of content production, we have decided that if we want to become leaders, we need to be leaders in quality and also leaders in content production. Approximately EUR 400 million each year in content production. This means that we are leaders by a long shot. And we've increased our production in Spanish producers because apart from giving good financial results, it also allows us to establish a very close relationship with the content producers. And that is something that we want to maintain as part of our strategy. We continue to be leaders in fiction and cinema. And the aim is to continue the trend that we maintained in previous years. We would like to improve production processes by incorporating AI. Many production processes are done now almost exclusively with AI. So we're incorporating AI in our, let's say, way of working. And we've always said that we believe that AI-based processes can control quality. And this is fundamental, particularly in the case of news programs and current affairs programs. We want to be responsible producers. We want to ensure that everything is controlled. We don't want to have problems for young viewers caused to -- due to errors committed on the part of our teams. We don't want to just base our production process on AI. We need the human element as well. But we always have to incorporate this vision into our production processes. What else have we done? Well, I have to mention Last Lap, as I highlighted earlier. It's been one of the most active years in the history of Atresmedia in terms of corporate operations with EUR 17 million in Last Lap, and they achieved better results than last year. In terms of the synergies with Atresmedia events, this will give us a combined revenue potential of EUR 50 million. And we believe that since they have a presence in Portugal, this has enormous opportunities for organic and inorganic growth because it's a very dispersed sector. And we believe that we can consolidate our position there. As regards to Clear Channel, the price of the agreement is EUR 115 million to acquire 100% of Clear Channel Spain. It's a strategic operation in the outdoor advertising segment. We are in the process of achieve -- we're awaiting approval by the CNMC. It's expected in the first quarter of 2026, but this is something that we don't control. So we expect that by the end of the first semester of this year or if not the first quarter of this year, then we should receive approval from the CNMC. We have high hopes with this acquisition. We believe it's a digital component that will give us a greater variety and possibility to digitalize other areas, and this will generate more value. And apart from offering a higher quality offer, it's something that we have great hopes for. And as always, we are really focused on improving our efficiency. We've developed this voluntary redundancy plan. And also, we've also tried to work on a restructuring process and action plan for rapid implementation. And the aim of this plan, it's 136 people that will be affected by this voluntary redundancy plan. And it's part of this objective of becoming more efficient. And I think that the corporate climate in Atresmedia is enviable for many of our competitors. And we aim to improve all of our internal and commercial processes to become more efficient and more cost efficient as well. So in the area -- again, we want to incorporate AI in our commercial processes, but it's also important to highlight that year after year, our commercial area is one of the most innovative commercial areas and which is capable of offering more innovative products. This year has been key. And it's one of the reasons why we are key players in our premium segment. And we hope to generate better returns, and that will continue to be the case. And every year, well, that area has done their job very, very well, and it will continue to do so. So we expect that we will see in 2026 continuing in this process of corporate efficiency as a priority. Yes. And to summarize the year, I think it's important to highlight our efforts to maximize shareholder returns with a total shareholder return of 26% dividends paid of EUR 146 million with a dividend yield of 13%. It's an estimated operating cash flow ratio with respect to EBITDA of 0.9. And in M&A, we would like to explore markets which we believe can actually add something of value to our group. And these are part of the targets that we have set. and which will fundamentally support the audiovisual area. So it's been a complicated year from the market perspective, but we performed relatively well. And for shareholders, it's probably been the best year in the history of Atresmedia. What do we expect for 2026? Well, we expect a difficult year, a difficult year. It's clear that the geopolitical and economic uncertainty and shocks don't cease, they continue. So it seems as if we're always living on knife's edge. Because of what's happening in the States, the markets are going up and down. Nobody ever knows what's going to happen with Iran, for example. So the macroeconomic situation is rather complex, rather complicated. As regards Atresmedia, we expect following the poor performance of the audiovisual advertising market last year and largely due to the uncertainty. Part of this may have been resolved, but we're not sure if any other additional uncertainties will occur. We expect the audiovisual market to more or less be flat. The radio segment will increase slightly at approximately 2%, 3% growth is what we estimate. But in outdoor, we really believe that we will achieve midrange growth, much in line with this year, like 5% or 6%. Therefore, total revenue for Atresmedia will be more or less stable at constant perimeter. And we would have to add the revenues generated by -- Last Lap in the first half of the year because we integrated Last Lap last year and also Clear Channel. We expect an EBITDA margin of somewhere in the region of 15%. And we also expect to end the year provided we -- these forecasts are fulfilled with a net financial position of minus EUR 25 million because you have to take into account that we've included the payment of dividends, the payment for the acquisition of Clear Channel and also we're pending a cash-in in the region of EUR 45 million from the tax authorities following the decision of the Supreme Court, which certain rulings that were issued before against us. So we hope that, that is something that will be concluded in the first semester of the year. The Board at its meeting yesterday, and this was supported by the general shareholder meeting, a complementary dividend of EUR 47 million, EUR 0.21 per share, which is the same amount that was -- or the same ratio as in the interim dividend. And so -- we have the feeling that there's a great deal of uncertainty in the market. We have to maintain our clear strategy, a strategy that is reasonable, but is also yielding results. We consider that it's important to maintain market prices. And to do so, we have to be creative and innovative, offering new products in the audiovisual digital sector. And we are optimistic because we believe that the contribution of the companies that we've onboarded in our perimeter will be very significant for our group. So that is how we see the year 2026. Thank you. David Baquero: Thank you. We now have a Q&A session, and we would like -- we would be delighted to answer any questions that you may have. Operator: [Operator Instructions] And the first question is from [indiscernible] from Bestinver Securities. Unknown Analyst: I have 3 questions regarding audiovisuals and one about Clear Channel. As regards audiovisual, the first question is last year, we saw a significant deterioration in the relative performance of TV compared with other platforms or media. I would like to know beyond the trends that you've highlighted in the sector, I would like to know what you consider the reason for this deceleration in the relative performance of TV is. Do you believe it's due to, on the one hand, the increase in audience of TVE, which has been promoted by strong public spending. And I know that you don't compete there in publicity, but you do an audience share? Or do you believe it's due to the eruption or the sudden appearance of many of these strong streaming platforms? What are the reasons do you consider for this different performance compared with other media? And secondly, a clarification because it's possible that I didn't read the slides properly. But in the presentation, you referred to publicity performance that's flatlined in audiovisuals, but the results that you presented indicate that you expect that audiovisual investment will improve with respect to last year. So I just would like to understand if you're referring exclusively to television or if it includes TV and digital. It's just to obtain a better clarification about what that concept includes and a better explanation about that flatline growth and the type of performance that you're beginning to see this year in the different segments. And the final question regarding Clear Channel. The question is if the delays in the decision of the CNMC is causing any impediments in this process. And with the integration of this company, what would be your management priorities in the short term? Pricing? Or what do you consider to be the main objectives there? And I apologize for the long questions as a gentleman. Unknown Executive: Thank you. I'll begin with the final question, Clear Channel. Well, Clear Channel surprised us a lot because we thought that it was going to be an operation that wouldn't have arouse too much doubt in the minds of the CNMC. In fact, it's also a interest in the market. We didn't expect this lead to such an in-depth analysis and these delays as is occurring. We haven't received any latest information from the CNMC regarding the process. So we've got no idea what the result will be. And whether it's an operation that they will approve without any further queries or whether we'll have to do anything more. And why is it good for the company? Well, the company has got a problem. I'm not sure if you know. All Clear Channel operations in Europe, I think it's only Spain remains. And there's also been a purchase by the parent company in the United States. We apologize, but the quality of the audio is extremely poor from the main room. And I think that they're also considering the impact this will have on their shareholders. So the situation is not good for Clear Channel either. I believe that Clear Channel as well as the majority of outdoor platforms or media have a certain process of digitalization to undergo. We have to consider the role of digital media, and we consider the contribution will be significant because at the end of the day, that's also a way of generating audiovisual products that many people can see on digital platforms. So we believe that the future is very positive. And what do we consider to be the reasons for the decrease or the decline in the audiovisual market? Well, in part, it's due to the situation of uncertainty in many sectors. So they are holding back on their investments. And for example, one example is the automobile sector. And this is important in terms of volume and price. Our revenues comprise 2 main pillars, the subscribers who acquire premium products at premium prices. And at the end of the day, we've observed that -- there's been little change in some segments, but there's been an overweighting of household spending compared with added value. And this has led to a decrease in the value of the market. Again, we apologize, but the audio from the main room is extremely poor, and it's very difficult to translate. As I said, such as the automobile sector, this year, we hope that there will be a significant improvement. But that's one of the reasons why the market fell last year. Competition has hurt us because it was the first full year of streaming platforms. And and also the cultural sponsorship -- the sponsorship of cultural programs by TVE, which is the Spanish national broadcasting company has also hurt us. It's important to maintain strict cost control. We're able to produce quality products being efficient and highly dynamic and efficient in costs. As regards to the other question that you had regarding whether the market had flatlined, we were performing more or less the same as we did before. We expect our performance to be very similar to last year, as I explained in the strategic overview. So when we talk about an improvement of the market, we expect it to improve with respect to last year. In the first 2 months of the year, in January and February this year, the performance has been negative, but better than we expected because as I said, we've managed to recover in certain areas. And we'll have to see exactly how the year evolves. But at the moment, we are actually better than we initially expected. And we'll have to see how the year evolves. And I think that I've answered all the questions there. Operator: The next question comes from Fernando Cordero, Banco Santander. Fernando Cordero: The first question concerns the comment that you made. about the importance of audience share leadership and also with respect to your main competitor in 2025, that audience leadership, when we also look at the evolution of the public television channel, it's the question about the difference in market share. I would like to know what the difference is due to and whether you believe that it's something that the market will end up reflecting. Do you believe that that's a relative performance on your part? And secondly, as regards your diversification policy, with Last Lap and Clear Channels in corporations, where do you think that you would have to grow in the medium and long term? Unknown Executive: As regards to audience share leadership, it's important to remember that our main focus is on leading audience with respect to Mediaset, which is our commercial competitor, although we would like to be the global leaders, which we are, but we would always like to try to be the audience share leaders with respect to our main competitor, not the public channel. If you were to -- although there's been a decrease in market share, if you look at the evolution of market share or audience share, there's been a certain degree of flexibility evident. -- the market share that we obtained between both of us is very high. In the first 2 months of this year, based on the data we have, we are actually improving our share. We have seen that there is a certain degree of structural stability in audience shares in the market between Mediaset and ourselves. In terms of diversification, well, everything related to publicity, the advertising market and all of the variables you have to consider, whether it's marketing, new media or platforms or highly digitalized platforms or media. You have to remember that we are actually working very strongly on the digital segment of the market, which is one of our main lines of action. And in the area of content, we believe that it makes sense to commit to that area significantly. But these will continue to be minority participations in, let's say, a producers. Perhaps economically speaking, they may not be performing as well compared with the in-house production, let's say. So we're analyzing different opportunities. executive opportunities, and we're also looking at opportunities for new markets where the prices are attractive. and where the markets are mature. And we're focusing on that at the moment. But at present, we don't have any operations in the pipeline, any other operations in the pipeline. We will have to see how Last Lap evolves and also Clear Channel once that agreement has been confirmed because these have been the 2 most important acquisitions that we have made since the creation of the company. And then we have to consider the net financial position of EUR 25 million -- minus EUR 25 million. We have to consider our participation in cyber and what could happen with cyber between now and the future because the value there is important. Fernando Cordero: Just one follow-up question regarding the first reflection regarding audience leadership. And I'm very grateful for your comments that you've seen that the market is -- has a structural distribution. Given that scenario, how would you reflect on reflecting that market situation where cost evolution is less flexible and extrapolate that to your investment in content for Open TV? Unknown Executive: I would say that the audiovisual market which is related to more traditional TV is where things are more stable, where there's an important difference in share is in digital with respect to our main competitor. I have to say that the digital market is still developing, still evolving. So we've got still quite a lot to discover. In terms of our aim to maintain leadership at other times in the life of the company, we've always focused on trying to maintain that leadership. And this also allows us to maintain a premium pricing, which is very important for the company. It's true that there's not much flexibility in the audience share, but there has been some variation. And we've noticed that we have increased our market share, our audience share with respect to our nearest competitor. But given the wide range of products and offer, it's not easy to achieve changes in audience share. We don't expect major improvements in revenues. I'm referring to old style TV. But in terms of our capacity, let's say, our vision for the universe by that, I refer to all of the different segments, whether it's AVOD, SVOD, content production, et cetera, that is where we can achieve better revenues. In short, it's true that traditional audiovisuals is in the period of maturity. And we believe that content production in the digital universes where we can achieve better results and better revenues. The work we've done there has been very good, but we still think there's still a lot to be done. And Fernando, let me just add one more thing. It's true that the audience shares or the audience share figures have been very similar with respect to last year. And -- but I think that a difference of 2% in audience share compared to the nearest competitor is quite a lot. It's approximately EUR 30 million or EUR 15 million, the gentleman corrects himself. So that has a big impact on results. that percentage difference in audience share is not so important, but rather the value of the content that allow us to be leaders in all of our different windows or slots. I don't think we could separate from our traditional TV lines. We couldn't separate that differential product compared with television, which may be 10x better if we didn't have those types of contents with those -- with the audience. Operator: [Operator Instructions] And the next question comes from Inigo Egusquiza from Kepler. Íñigo Egusquiza: I have 3 questions, very quick questions. Firstly, Silvio, a follow-up on something that you mentioned regarding publicity in January and February on television this year. If you could quantify a little more from things that I've discussed with other people in the sector. I understand that January and February, there hadn't been as significant decreases in October and November, but there had been increases in publicity indeed. I'd like to have -- ask if you could give me a little bit more detail about those figures. And secondly, the OpEx figure for 2025, you mentioned various times that if we were to exclude the new companies that have been integrated in the perimeter, it would have [ outlined ]. Could you explain that OpEx figure a little more? Because from the figures that I have in mind, -- Last Lap had a higher OpEx, but I think that you've only consolidated H2H. So I'm a little surprised that, that increase in OpEx in 2025. Could you clarify those figures a little more? And the third question is more about the guidance that you've given for 2026. You referred to the EBITDA margin and returning to 15%. In 2025, I think it was in the region of 13%. Could you explain a little given your revenue plan, I understand that this has been due to improvements in your OpEx figures. Could you explain the impacts and also explain the savings in the voluntary redundancy plan, which I understand is going to be rolled out gradually, but perhaps you could specify and give us more details about those figures. Unknown Executive: As regards to your comments about flatline OpEx, it's important to remember that Last Lap -- the acquisition of Last Lap took place at the end of last year. And that means that if you were to exclude the OpEx of Last Lap and a company that we incorporated called the equality or something, this would mean that the OpEx growth like-to-like would be approximately 7%. That's the explanation regarding OpEx. Secondly, as regards to the period of January to February, the publicity or the advertising market is seeing a decrease of approximately 5%. In our annual plan, we expected that to be greater. So we're more or less in line with what was actually forecast. But that was the performance in January and February. And the final question, the third question was, well, our challenge there is to be more efficient. We would like to reduce costs in relation to each of our products. That's a challenge. And obviously, when you start to embark on new areas of business, it's difficult to obtain higher margins. In the case of Clear Channel, the margin was 18%, and it could probably increase. So we're now thinking about the effect that this could have for Atresmedia. That's the idea there. Operator: There are no more questions at this moment in time. So I would like to hand the floor to the speakers. David Baquero: I would like to thank everyone for your questions. If you have any doubts or questions following this presentation, we will be delighted to answer. Thank you very much for your attention, for your participation, and we wish you all a very good afternoon. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Unknown Executive: Welcome to everybody. We're just going to wait half a minute or so, to let everybody get on to the event today. There's been a lot of interest, which is good to see. So just bear with us. Right. Okay. I think we've got a decent number now. So welcome to the webinar today from McBride, who will be covering their recently announced interim results and also talking a little bit about the outlook for the business. One or two administrative points first. This presentation is being recorded. So should you miss any of it, you can watch it again. We will be very keen to address questions after the formal presentation, which you can submit via the question button on your screen. And the presentation deck that the boys will be talking to is already available on the McBride Investor Relations page as well, along with lots of other useful materials. We're very pleased to be welcoming back CFO, Mark Strickland; and the CEO, Chris Smith. And I'm now going to pass over to you, Chris, if you can start the presentation. Christopher Ian Smith: Thanks, Andy. Good morning to everyone, and welcome to our interim results deck and presentation for the 6 months to the 31st of December 2025. We'll cover today -- on the next slide, please, Andy, a series of -- I will cover off headlines and an update on our business progress before I hand over to Mark, who will take you through a more detailed look at some of the financials, and then I'll come back to myself for the outlook and then into questions, as Andy said. Before I step through the various slides, I'd just like to comment that there are three key themes that the past 6 months can really be summarized by: First, a continued delivery of our strong financial and operational performance for the third consecutive year now. Secondly, the passing of a significant milestone in our transformation journey with our first SAP go-live in November. And then third, a clear demonstration of a balanced approach to capital allocation to support both short-term shareholder returns and longer-term value creation from business investment. Next slide, please, Andy. This is the sixth set of results, interims and finals that I presented, where the group has reported profitability levels at double the historic average, cementing our new financial strength and our optionality to deploy resources to support future growth, in line with our ambitions as we set out at our Capital Markets Day about 2 years ago. The market continues to move in favor of the private label offer we provide with the latest data showing that private label share has started rising above recent all-time highs, providing a solid platform for McBride to continue to prosper. Our divisional and central teams continue to drive the business forward, tightly aligned to their strategies, supporting our customers as our private label proposition expands to provide value to the retailers and consumers alike. McBride's private label volumes continued to grow this past period, albeit at slightly lower levels than we saw in the past 2 years, with total sales revenue increasing just under 1% to GBP 475 million. We have secured a robust pipeline of new business wins, expected to start during the second half year, leading to positive momentum as we exit financial year 2026, and we move into the next financial year of '27. Our excellence and transformation agenda has continued at pace these past 6 months. Productivity and other operational improvements, together with tight management of overheads has seen margins maintained despite competitive pricing pressures and inflationary pressures. EBITDA, EBITA, and PBT all remain consistent with the first half of last year, with EBITDA margins just under 9% for the first half and with the full year expected to be over 9%. I'm really pleased to be able to confirm that our first SAP S/4HANA go-live in the U.K. was successfully completed in the period after 2 years of preparation and design. This multiyear program is the platform for future efficiency and operating excellence as we upgrade McBride to the latest best-in-class ERP systems. Our continued strong profit levels and cash generation has supported a balanced approach to capital allocation. In the period, nearly GBP 13 million of shareholder returns were deployed in the form of reinstated dividends, share buyback program and share purchases to reduce future dilution from employee share awards. Our overall share price rise since September 2025, represents a market cap price of approximately 40%. Additionally, capital expenditure rose to support growth, efficiency and transformation programs. The group remains active in considering all options for deployment of capital in seeking to grow shareholder value. I'm now going to move on to provide an update on a series of key business progress topics. At our Capital Markets Day in February 2024 -- the next slide, please, Andy -- we set out a number of key ambitions to measure our progress. At this midpoint of FY '26, we remain committed to these key targets over the coming years, and our progress since 2024 continues to perform in line. Our volume growth, whilst a little slower these past 6 months, is comfortably ahead of the target set in 2024 cumulatively. We have an encouraging set of contract wins starting in the second half, which is expected to support better growth rates into FY '27, and a number of other material growth options in development at this time. Our EBITDA margins are consistently around the 9% level, with another 1% required to reach our 10% ambition and almost at the double of the level of the historic levels of 5%. We said at the Capital Markets Day in February 2024, that shareholders should expect some minor variability of this ratio as modest input cost swings will either benefit or impact the group's profitability between periods. Our debt position remains well within our targets, and this is after nearly GBP 13 million deployed in the past 6 months for shareholder returns. Our long-term committed facilities and liquidity availability provides ample scope for further capital deployment in pursuit of our strategic ambition. ROCE remains well above the targets and our work on excellence and transformation is delivering tangible improvements to support and develop the robust platform the group needs to support long-term success. Moving on to an update on the markets that we supply. We present here the usual panel data, which we receive each quarter. As a reminder, the data is 12 months trailing value and volumes. It covers the top 5 economies of Europe, all the bricks-and-mortar retailers and all the household categories that we supply. We've been tracking this data for over 4 years now. Having grown substantially between 2022 and 2024, private label market share in volume terms, as shown by the green line on that chart, stabilized over the last 12 to 18 months. This latest data insight, however, shows that the overall total market continues to grow a little bit towards the lower end of our 1.1x to 2x -- sorry, 1% to 2% projections, with private label again outperforming brands across all categories, with private label volume share now up to 36.1%, a 0.3% rise compared to the last 4 quarters. We will wait to see over the next 2 data drops if this further rise is sustained, but this latest data confirms our view that the more likely direction of travel is for private label to continue to take share and not revert back to pre-2022 levels. Moving on to the divisions, and I'll now give a brief update from all the businesses. Next slide, please, Andy. Mark will cover off the financial performance later, but we have seen strong profits progress overall in Unit Dosing, and Aerosols, but Liquids, and Powders was slightly weaker. The Liquids division has had a very busy period and at the same time, has had to handle the first go-live of the S/4HANA program at the U.K. Liquids site. The division saw overall volumes higher, especially from contract manufacturing, which was up 9%, with private label flat. The uncertainty on the rollout of the EU's deforestation regulation or EUDR, has seen pressure on certain raw materials, especially for the Liquids business, where palm oil derivatives are actively used. As a result, the division did see modest rises in material costs in a market where such small rises are not really able to be passed on. The business, however, was vigilant, of course, in its cost management and product engineering, and managed its margins very well in the period. With future growth anticipated, especially from laundry, the division continued to invest in capacity and new packaging formats to be able to secure new business going forward. In Unit Dosing, we saw a strong operational performance with the benefits of our Flexilence program, where we now ensure that all our pod formats can be supplied in all the various packaging formats required by customers, yielding output and headcount efficiencies. Overall volumes here were lower year-over-year, but all in contract manufacturing, where a loss contract from last year annualized out at December. Private label volumes were flat, some ins and some outs amongst various customers and some delays in a few product launches. But strong wins in recent tenders are expected to launch in the second half and early into FY '27 to provide good growth prospects ahead. The Powders business continues to outperform its strategic targets overall. The market for private label laundry has remained steady with private label share growing as branded volumes continue to fall. Total volumes for our division in McBride in Powders were broadly flat with an overall private label slightly weaker than our contract business, which is about 40% of revenues in this division. Like the other divisions, recent wins expected to launch again in the next 6 months or so will provide good growth in future periods. In the meantime, strong operational control and focus has seen margins steady with some automation capital investment introduced helping drive margins higher. Our Aerosols team have delivered again this year. Volumes were 15% higher and are now close to the 100 million cans target. Very strong growth in Germany was a result of focus over the past few years in this targeted market. A GBP 2.5 million investment in a new production line is mostly complete now and is providing the capacity needed to take us past the 100 million cans level. Finally, our Asia business, so we had a bit of a mixture with weaker-than-expected private label sales in Southeast Asia, and a quieter Australia with a loss of one part of the traded goods supply from our European business. However, prospects are looking more positive with our first household wins in Australia for products made in Malaysia expected to launch in the next month or so and a series of new contract manufacturing opportunities in discussion. Moving on to an update on our transformation program or excellence agenda, as I call it, and this has continued at pace through the period. After over 2 years of setup and design work from the SAP team, we successfully launched the new global template with the first go-live start of November in the U.K. business and Corporate Center. It is pleasing to confirm that the business is operating as usual with some limited disruption in the early few weeks to our warehouse operations, where whilst the systems are working, we became capacity limited. We did miss some sales in that short period of time, which we estimate to be about GBP 3 million with a roughly GBP 1 million impact to EBITA. This challenge was resolved quickly, and the business has seen record output and shipment days since. The focus here has now moved quickly to lessons learned, and we're now deep into planning the Wave 2 rollout of this new global template to ensure we maintain pace towards the efficiencies and benefits that will accrue once we have more locations on this new platform. The other 3 main programs in the overall plan: service, commercial, and productivity are all now into business as usual, with the service program completing in September and the commercial excellence project completing in December. Both are yielding good results with improved processes in use across the business and visible KPI improvements. Next slide, please. The past 6 months has demonstrated the group's flexible approach to capital allocation. With the strength of the group's trading position and its funding capacity, we have deployed nearly GBP 30 million in shareholder returns. At the AGM in December, shareholders approved the Board's recommended recommencement of annual dividends with the resulting payment in November of GBP 5.2 million. In light of the market valuation so far below the Board's view on where the group should be valued, the Board launched two value initiatives in the autumn. First, GBP 6.4 million was spent on buying shares at an average price of GBP 1.26 through the Employee Benefit Trust, or EBT, in order to fund the EBT with adequate share levels to use for satisfying future incentive awards that are expect to divest in the next 2 years. These share awards would normally be satisfied by new issue shares, thus diluting the total shares in issue. And hence, this action worth approximately 0.7p per share of reduced dilution in future EPS calculations. Secondly, the Board launched a GBP 20 million share buyback scheme in December. There was only 1 month for buying until the end of the half year, but GBP 1.3 million have been deployed to 31st of December. All of these actions have supported a strong recovery in the share price and our market capitalization, up approximately 40% since final results in September last year, a significant rise. But as a reminder, we are still only trading on a 4.9x EV EBITDA multiple. At this point, I'm now going to hand over to Mark for a more detailed financial review. Mark Strickland: Thank you, Chris, and good morning, everyone. The McBride business has delivered another solid set of results. As well as delivering good results, the business has also demonstrated a balanced approach to capital allocation, prioritizing short-term shareholder returns whilst at the same time, retaining the flexibility to fund our longer-term ambitions. As a result, I continue to have huge optimism for what the business can continue to deliver for its shareholders into the future. So looking at the financial highlights. Group revenues were up GBP 3.8 million, 0.8% on an actual basis, but on a constant currency basis, they were down slightly 2.1%. Whilst private label and contract manufacturing volumes were both up, McBride branded volumes suffered slightly and declined. Adjusted operating profit was down slightly to GBP 31.5 million. Without the SAP impact, adjusted operating profit would most likely have been up slightly. As in previous years, profit levels have been maintained through good margin management and overhead cost control. Adjusted EBITDA at GBP 41.8 million was on a par with the previous year's first half. Earnings per share were down to 10.8p per share, predominantly due to a particularly hard prior year comparator in relation to taxation, which was 25% in the last year first half versus 30% this year. We expect full year 2026 taxation to be broadly in line with the full year prior year rates. Over the last 3 years, we have progressively strengthened our balance sheet through cash generation and debt control, this period being no different. For the first half of the financial year, our free cash flow was a generation of GBP 24 million. And our debt -- net debt only increased slightly to GBP 120.6 million despite the nearly GBP 13 million paid out in dividend, the EBT and on share buyback. This shows that the business through its proactive capital allocation policy has the ability to balance both the short-term shareholder returns whilst retaining a flexible platform for future investments in growth, be they organic or through M&A type activities. Looking at financial performance. This slide looks at the group and divisional performance on both an actual and constant currency basis. There were 3 main drivers of the actual revenue growth of 0.8%. One, firstly, volume; secondly, price and mix; and thirdly, FX. The volume growth of 0.4% arose from contract and private label volume growth, combined with the Aerosols continued growth. And as I said earlier, that was offset by a reduction in the McBride branded volumes. The second impact was the price and mix impact with two elements at play. Firstly, there's been an element of pricing pressure, but this has predominantly been offset through product reengineering and ongoing margin management. Let me explain that further. In other words, whilst the selling price may be lower, the profitability is often similar to other products as these are often lower cost format products. Secondly, there were more sales of lower value products in the first half of the financial year compared to that of the prior financial year. The third and final impact was FX, mainly with the pound-euro exchange rate moving towards the EUR 1.15 to the pound. Next, the divisional review. So looking at Liquids. At a revenue of GBP 269 million, the Liquids division represents around 57% of the group. As mentioned earlier by Chris, there was a limited impact in November and December from the SAP S/4HANA go-live. Despite this, volumes grew 0.1% with most markets stable and only France displaying a slight decline. Margins were impacted by competitive pressures, inflation and some marginal raw material increases that couldn't be passed on to the customers given their small size. The division still delivered an adjusted operating profit of GBP 17.7 million, which represents a return on sales of 6.6%. We continue to invest in this business for the future. Now moving on to Unit Dosing. For the first half of the financial year, the Unit Dosing division delivered a revenue of GBP 116 million. On a revenue basis, the Unit Dosing represents circa 24% of the group. Whilst contract manufacturing volumes were weaker in the first half, the outlook is good for year-on-year overall volume growth in the second half of the financial year. The division delivered improved profitability in the period of GBP 12.5 million as a result of continued production efficiencies, the benefits of transformation and ongoing tight overhead cost control. At 10.8%, the division's return on sales is a pleasing step-up from the prior year. Finally, the Unit Dosing division through its Flexilence initiative and the range of its formats it can now offer -- for example, its soft pods portfolio -- continues to be well set to continue to gain business in future tenders. Moving on to Powders. At circa 9.5% of our overall revenue, the Powders division operates within an overall steadily declining market. Sales at GBP 44.9 million were lower than expected, impacted by slightly softer private label demand, primarily in the U.K., together with delayed launches of new contracts and product mix changes. Adjusted operating profit declined by GBP 1.1 million to GBP 3 million, mainly due to the aforementioned lower revenue. However, because of good cost control, operational efficiency and again, product cost engineering, the division continues to deliver a healthy return on sales, in line with our medium-term expectations. Finally, as with Unit Dosing, this business segment has a good pipeline for growth into the future. Now moving on to Aerosols and Asia Pacific. Between them, Aerosols and Asia Pacific represents circa 9.5% of the group's revenue. Over the last few years, our Aerosols division has been a huge success story. This was no different for the first half of 2026. Volumes grew by some 14.6%, whilst revenue grew by 18.1% to GBP 33.9 million, delivering an adjusted operating profit of GBP 2.1 million and closing in on our midterm return on sales ambitions. The growth is supported by significant contract wins in Germany, combined with personal care launches elsewhere in Europe. The first half of financial year 2026, also saw the continuation of the significant investments for capacity expansion at the Rosporden site in France. This investment is on course for completion in the second half of this financial year. Our smallest division, Asia Pacific, has been impacted by subdued private label demand in Southeast Asia, and has had to focus on cost management to preserve its profitability. That said, it has made good progress in private label household in Australia. Whilst currently being an incubator business, we still remain optimistic that there are significant opportunities, which will mean that we will be able to grow this business over the next couple of years. Now looking at costs. For the first half of the 2026 financial year, input costs remained flat, benign overall. But as you can see from the left-hand chart, they still remain significantly higher than in 2021. Inflation is still prevalent and some costs are still rising, albeit at slower rates than over the last few years. Hence, McBride's continuing focus on margin management has been key to the delivery of this solid set of results. This consistency of performance means that McBride as a group remains very well placed to sustain underlying profits in future years. As with most businesses, technology remains a key focus. And indeed, McBride has embraced new technology, believing that this will be a key positive differentiator going forward. Chris has indicated that the Wave 1 of the S/4HANA project has successfully gone live in the U.K., and we expect to complete the rollout of the project during the 2028 financial year, which is in line with what we indicated when we set sale on the project. We continue to invest into and benefit from our data analytics function. Real-life example of this capability is some of the market analysis information that you saw in Chris' earlier presentation. In terms of overheads, as you would expect, we continued our focus on cost optimization. Overhead costs have been tightly controlled with reductions in both distribution and administrative costs as a percentage of revenue. Moving on to other financials. Year-on-year interest remained broadly flat as did interest cover. Exceptional costs were GBP 2.4 million relating to the SAP S/4HANA implementation and an ongoing review of the group's strategic growth options. Regarding taxation, the effective tax rate in the first half was 30%, which compares to the first half in 2025 of 25%, but a full year rate of 32% in 2025. The actual tax paid in half 1 was GBP 1.8 million compared to GBP 7.1 million the previous year as the cash payments normalize for the payment of in-year liabilities only as opposed to FY '25 when there was an element of catch-up from the financial year 2024. At GBP 14.8 million, capital expenditure levels were up from GBP 12 million the previous year as the business continued to invest in the future. It is expected that the group will spend around GBP 30 million to GBP 33 million over the current full year and that the level of expenditure will continue at circa GBP 30 million for the following year before dropping off in line with the completion of the SAP project. Finally, on to net debt. As indicated at the start of my presentation, the business continues to generate strong cash flows and resulting in net debt control and a small increase to GBP 120.6 million. The business has strong core liquidity with around GBP 135 million of headroom and also has an unutilized EUR 75 million accordion facility, providing continued optionality for future capital allocation decisions. In conclusion, the business continues to be run well. The share buyback delivers good value for our shareholders. As a result of the successful SAP global template implementation, future implementation risk has been significantly reduced. And the business still has optionality through its balance sheet strength. Thank you, and I will now pass you back to Chris. Christopher Ian Smith: Thank you, Mark. As you've heard throughout the presentation, business momentum is good, and the first months of our second half have seen volumes in line with our estimates, with the start-up of new business wins still on track to meet the time lines required to meet our second half targets. As mentioned earlier, the private label market overall is expected to maintain its strong position of recent years with some potential for further growth if private label continues to grow share. We expect material costs to remain stable, possibly with some weakening of pressure for natural alcohol-based materials and recycled content plastics. Other inflation is being managed through tight overhead control and vigilance on allowing new costs to creep in. Our teams have delivered really well on all our transformation initiatives and the recent success of such a major milestone of the first SAP go-live gives confidence about the rollout of our global template to all other locations over the next 2 to 3 years. This should be seen as a big risk reduction point for investors, and the focus will turn to driving expected efficiencies, enhanced insights, and better decision support. At this stage, nearly 2 months into the second half, I'm pleased to confirm we expect to deliver full year results in line with analyst expectations. With our normalized funding position alongside ongoing high profitability levels, the reset resilient and stronger McBride is poised to consider a range of future value creation ideas to support our midterm ambitions to grow the group further and deliver still higher margins. Thank you. Now for questions. Unknown Executive: Yes. Thank you very much, gentlemen, very comprehensive and impressive performance continuing, which is good to see. Right. Plenty of questions already in. So let's dive in. First of all, about S/4HANA and the Wave 1. Can you comment a little bit more about what you've learned from the process, because no systems integration usually happens without some teething issues. And we have a related question, why did you choose to roll it out in Liquids first? Mark Strickland: Shall I pick that one? So we've learned an awful lot through the process, far, far too much to sort of go through in this 30, 40 minutes. The biggest one is testing in volume. It's the volume testing, particularly in warehousing. We had a very, very narrow issue within what's called a V&A, a pick and dispatch area. Third-party logistics worked well. Third-party warehousing worked well, but Middleton has a very specific need for putting product into and out of what's called very narrow aisles. And we didn't test the volume enough through that. Ultimately, it worked, but we became a little bit capacity constrained. So testing volume was a big learning. Training was a little bit last minute, possibly need to do a couple of weeks earlier, but we also know we don't want to do it too early. And we also concentrated on what's called the happy path. So when things go right, we probably, in hindsight, should have concentrated a little bit more on what's called the unhappy path. So how do you correct things when they go wrong. But overall, I've got to say I'm very pleased with the implementation. There's lots of peripheral learnings. There always are. But I think the way the whole team pulled together really displayed the McBride ethos and the McBride values, both the project team and the site team. It was a combined effort. Sorry, what was the second part? Unknown Executive: Why U.K.? Mark Strickland: Why the U.K. Essentially because we had two instances of SAP, one in the U.K. and one in Europe. And the U.K. only had 2 sites. So it was the simplest to move across on to new SAP. We would have had to move 12 sites and we would have ended up with 3 different instances of SAP, whereas moving the U.K., we only -- we kept 2 instances. So it's a bit of an easy decision really. Unknown Executive: Understood. Thank you. A number of questions about inorganic growth. And Chris, you referred to your low EV/EBITDA rating, although it is improving. We have a question, is that a hurdle for you to make larger acquisitions? Christopher Ian Smith: Well, yes, I think certainly, when it was down at 3 and a bit times as a multiple, it was a huge hurdle. I mean, look, the level of M&A that we might be looking at and in fact, the inorganic can also extend to contract manufacturing opportunities with where you might need capital. You may not need new sites. You just may need to fill your existing facilities with new capital. The ranges of values that we're talking about are all manageable with our debt facilities. Look, we look -- there's a lot of benchmarks in the industry at the moment around what people are paying for home care businesses with the Reckitt transaction with Advent recently. We also know there was one in Spain recently. So we have a -- I think the industry is kind of honing in on what that range of multiples need to be. And I guess having got the share price back up a little bit and got better value for shareholders with our rating today, we get closer to making it not so meaningfully difficult, if you like. Look, and I think in most cases, on the M&A side, the synergy benefits can be quick. And therefore, we look -- we'll also look at speed with which we get that multiple down post acquisition with synergies. So we're acutely aware of the challenge around multiples, but I think we've narrowed the gap, and I think we know what we need to pay. And I don't think shareholders will be -- we're not going to be out there paying 8x or 9x for anything. So people shouldn't worry. Unknown Executive: Okay. And looking at potential targets, could you say in a perfect world, which we definitely don't live in, which segments or which region would you most like to increase or find bolt-ons to add on to the current structure? Christopher Ian Smith: Yes. Look, we will absolutely align our M&A targets and contract manufacturing, frankly, with the key missions and the strategies of the company, right? So look, we're a European-focused business. So we're not going to be, I suspect, suddenly acquiring stuff in the U.S. or South America. Our focus is in Europe. There's a little bit of obviously, focus in Asia around how we develop that business, that incubated business that Mark talked about to make that more substantial, a little like we've done with Aerosols, right? We've got that business now to be credible and valuable to us. And we're on the same mission, of course, with Asia. But look, the bulk of it will be in Europe. And then we talk strongly about the bulk of our activities are going to be in the higher-margin, high capability categories where we're strong. So laundry, dish, that sort of area, probably the main focal areas. Unknown Executive: You've pre-empted a question here about contract manufacturing. Is that another part of the business quite competitive at the moment that you would still be looking to grow capacity and scale in? Christopher Ian Smith: Totally. Yes. I mean, we've said strongly, we want to get contract manufacturing to be 25% of the business. We don't want to do that by shrinking private label. We want to do by growing contract manufacturing. We believe that 25% is the right level for us to have a kind of core, core layer of solid long-term partnership relationships with some branders for categories and volumes that may not be efficient for them to manufacture. So yes, absolutely, that's a key part of our focus, and it's another potential use of capital to create long-term value. So absolutely. There's quite a lot going on in the industry at the moment. So we're quite busy with potential opportunities, nothing certain, but there's more at the moment perhaps than we've seen for some time potentially out there. Unknown Executive: Yes. This leads on to a question about capital allocation and perhaps an opportunity for you to say how, how long gestation period certain acquisitions can take to come to fruition. But the question submitted is, how do you look at the contrast between value in your own shares and doing more buybacks or allocating it in terms of nonorganic growth? Christopher Ian Smith: Well, we're constantly looking and reviewing this, of course. I think we like to think of -- we believe we've got a short-term need sometimes like with the share buyback right now and the acquisition of shares for EBT. We recognize that we have investors that like the dividend stream, and we think that the share and the equity is a mixed proposition on index re-rating as well as cash from things like dividends and other shareholder returns. But we also recognize we -- the industry and I would say the McBride platform needs to expand in the mid and long term, and we recognize in this industry that consolidation of the space for the benefit of retailers. I think the sustainability journey and regulatory environment is going to become tougher, and you need to be bigger and bigger in this industry to lead. And I think -- so we have all those at play, and we have active conversations. I guess the Board's call here is at each juncture, what is the right decision. But I think we'll -- we've demonstrated in this last period a fairly agile and what's the word variable, not variable is the wrong word, mixed approach. We're looking at all options. Unknown Executive: Yes. Well, that's the benefit of financial health and the balance sheet that allows flexibility to adapt to opportunities, I would think. Perhaps a couple of questions for you, Mark, on costs. Impressive progress. And the question is, you can't add infinitum cut costs as a percentage of revenues. So what do you think is a realistic target in the medium term as the transformation benefits all work their way through? Mark Strickland: Yes. So I think it's a very good point. At the end of the day, on occasions, it may actually be worthwhile putting extra cost into the business because the benefits you get back from that extra cost far outweigh the cost. So I don't have a particular target in mind because it depends on the different segments of the business. So the different segments will have different overhead needs. As we invest into technology, I would hope that a lot of the speed of decision-making comes down, but also the cost of that decision-making comes down. But also, let's not forget that the software companies also like to put up the license fees as well for utilizing that software. So it is a balance. I don't have a specific ratio or a specific cost in mind, but I always talk about cost optimization, not necessarily cost saving because we can't save ourselves rich. We do have to invest in this business, and we do have to grow the business. Saving will keep us in business, but I don't know anybody that's ever saved themselves, rich. Unknown Executive: Wise words, wise words. And specifically, on input costs, we've got a comment, which is very true that you're not involved in the supply of precious metals or rare earths that can make some businesses in a particularly painful position at the moment. But are there any concerns within the supply chain more about the cost of shipping or anything like that as you move some of the basic commodities around to your sites? Mark Strickland: So at the moment, being honest, it's pretty benign. It's relatively flat, okay? We've got underlying inflation, but we can recover that through efficiency. So at the moment, we don't foresee any particular headwinds. The only caution I would say is we don't know what Donald Trump may do next. So I guess -- but that's a concern for everybody. But everything else being equal, we see the raw material environment, the shipping environment as being pretty benign. Unknown Executive: Okay. And probably also for you, Mark, you've mentioned that in the half, there were more -- the mix saw more lower-value products. Is there any specific factor behind that? Or might we see that rolling into the second half as well? Mark Strickland: I shouldn't get overly concerned that it's a lower headline price because ultimately, we're interested in pound notes margin. And it will depend on which retailer, which product sets, what we've won, what we've lost -- sorry. So there will always be a natural ebb and flow in our mix going through. So no, I don't think there's anything -- there's certainly nothing concerning me about our mix at this stage. Unknown Executive: I suppose related, not necessarily a question from McBride, but someone has commented that is there an ongoing trend of end consumers effectively getting less volume in their product at a higher cost. I suppose that all weighs up in the battle for market share with brands. Christopher Ian Smith: Well, there's a trend a bit some sustainability driven even cost of transport and so forth to compaction. So I mean, it's even quite variable across Europe. If you buy a laundry liquid in Southern Spain, you might have to need weightlifting training to lift your 4-liter bottle home. The same number of washes in Germany or the U.K. will be in a 1-liter bottle. And there is a perception -- potential perception of value gap when you make that transition because what you're buying looks a lot smaller. So -- but I think it's the right thing to do, and we will continue to progress that on the grounds of sustainability and -- we got a lot more bottles of 1-liter laundry liquid in a lorry than 4-liter bottles, right, and value too. So I think the value position for consumers is perhaps more driven by quality of performance than it is around pure value position in price points on shelf because the reality is that the private label continues to outperform many of the brands in tests and wider and wider audiences are learning that. And I think understanding the value option does just as good a job, right? So I think we will continue to fly the flag for private label as a whole, not just for McBride, of course, around helping consumers understand the value. It's not just a product for expression for poor people. This is for smart people because why do you need to spend twice the price and have no improvement in your cleaning performance. And by the way, most of the things you buy, you put under the sink and never look at again. So it's not that you're buying something beautiful to look at. So I think the consumers are becoming more savvy and the retailers are supporting that with their proposition. Unknown Executive: Then perhaps just a couple of more strategic questions to finish with. Can you comment as much as you'd like to about what your various competitors in certain divisions are doing? And also the same question for contract manufacturing. Christopher Ian Smith: Look, I think the industry as a whole is relatively steady, I would say, in the private label space. I think we see quite an orderly setup at the moment. Look, we've all -- the private label industry -- the private label share chart I showed earlier, which went from around 31% up to 36%. You think that's only 5% or 6% growth. But actually, it's 5% or 6% on 30%, right? So the private label space, the majority of the big players in private label are still active in private label. They've all grown with that market, and I think we've all been going through that. And of course, it's helpful when you -- we're a manufacturing business, right, putting volumes through manufacturing plants is always helpful in terms of overhead costs and recoveries. So nothing particular to comment, I would say. The contract manufacturing space, there's obviously some publicity around the Reckitt's disposal of home essentials into private equity hands. That's going through a transition at the moment. That may create opportunity. And we are seeing on average across the European space, at least and some to Asia where there's optionality being considered on outsourcing more perhaps than we've seen for a while. So maybe I'll leave it at that, Andy. Unknown Executive: Okay. And then I think good notes on which to finish. You referred that consistently to very good progress against the Capital Markets Day targets that were set a couple of years ago. So there is a question is, given that rate of progress, might you be reassessing some of those targets and setting further medium-term objectives in the not-too-distant future. Christopher Ian Smith: Well, look, look, we look at strategy every year. We look at our targets every year. We're not going to reset them every year, of course, in the public domain. But we would, of course, look at some point to update that and refresh that. We haven't set a time on that at the moment. In fact, Mark and I were just talking about it yesterday as to when that might be. But look, we are -- I'm a big believer in being clear on the direction we're taking the business, the understanding of that within our teams and for our customers and suppliers, of course, is super important. And we remain vigilant on adapting, course correcting, filling in gaps that we think we've missed all the time. So we don't sit still with those ambitions and those strategic ambitions. Yes, there will be a point maybe in the next year where we will have to do that update and refresh. But look, we're very positive about the progress. We need to continue to progress our medium-term ambitions of getting revenues over GBP 1 billion and EBITDA up to 10%. And Mark and I've always said that we wanted to continue to move the EBITDA up double again, right? And -- but we will need a bigger train set probably to do that than we've got today. But we're also going to do that in the right judicious way when the time is right. Unknown Executive: Well said. Great. Well, can I thank our audience for their interest and the very interesting range of questions. You will receive a feedback format of this event, which the company would be delighted if you could share your thoughts over. As mentioned already, the deck use is on the McBride Investor Relations page, along with lots of other materials. In terms of looking forward, which the company can't be too specific about, there is, of course, a recent equity development research note after the interims with, I'm glad to say, an increased fair value of 245p per share that these 2 gentlemen are smiling at approvingly that I'd recommend you review for further detail. Last but not least, of course, many thanks to Chris and Mark, and congratulations not only to them, but the whole McBride team on many years now of very impressive progress, which we hope will continue through the second half and beyond. So thank you for your time, gentlemen. Christopher Ian Smith: Thank you, too. Thanks, everyone.
Robyn Grew: Good morning, everyone, and thank you for joining us today. I'm Robyn Grew, the CEO of Man Group, and I'm joined by our CFO, Antoine Forterre. I'll begin with a high-level overview of our investment performance and client engagement in 2025. Antoine will then walk you through the financial results, after which I'll update you on our multiyear priorities now 2 years on from when we first announced our strategy before providing longer-term context on the evolution and positioning of our business. 2025 was a year of pronounced peaks and troughs for markets where periods of volatility tested investor resolve before conditions eventually stabilized. We navigated shifting sentiment, and at times, unprecedented reversals, absorbing shocks from DeepSeek in January, tariff announcements in April, ongoing geopolitical tensions and debate over the sustainability of fiscal spending and AI infrastructure investment. Markets demonstrated a remarkable capacity to withstand stress, though the path was far from smooth. Given this environment, I'm pleased to report a set of results that shows just how resilient Man Group is. Antoine will go into more detail later, but I'll start with some headlines. Firstly, I'm delighted that we ended the year with AUM of $228 billion, driven by $21.4 billion of positive investment performance and $28.7 billion of net inflows. Through continued cost and capital discipline, we generated core earnings per share of $0.276. Along with this, we also executed against our strategic priorities, completing the Bardin Hill acquisition, simplifying our operating model and positioning the firm for long-term growth. These results underscore the continued demand for our differentiated offering, the depth of our client relationships, and crucially, the value of the diversified business we have built. On the topic of diversification, the benefits of having a diversified range of investment content were highlighted clearly in 2025. The first half of the year was undoubtedly testing for trend following strategies, continuing the run of underwhelming performance that began in Q2 of 2024. The reversal of the Trump trade in Q1, combined with the administration stop-start approach to tariffs, created whipsawing market conditions where sustained trends were incredibly hard to find. However, investor sentiment moved on from the lows of early April, and August proved to be the inflection point. As risk on sentiment took hold, several trends finally began to emerge and persist. Our strategy has adjusted positioning to capture these moves, delivering strong gains into year-end. In that context, it was great to see AHL Alpha and AHL Evolution finish the year up around 5%. The strength we saw across our strategic priorities enabled the firm as a whole to successfully navigate the significant period of stress for trend following. The results from a numeric range were particularly impressive. Over the past 3 years, these strategies have delivered returns averaging 4% over their respective benchmarks. Our liquid credit strategies also continued their strong run of outperformance, while our multistrat Man 1783 once again delivered outstanding returns. By dynamically allocating across our full range of uncorrelated strategies, it has delivered consistent, high-quality performance since launch in 2020. On an asset-weighted basis, relative investment performance was positive overall in 2025, driven primarily by our long-only strategies. Within alternatives, the overall relative underperformance was largely attributable to AHL Evolution's performance earlier in the year, which trades harder to access markets and differs significantly from the traditional trend followers in the index. Turning to clients. We prioritized being present with our clients in 2025, holding over 16,000 meetings to understand their evolving needs and help them navigate a complex environment. That focus drove exceptional client-led growth during the year. We delivered record gross and net inflows, nearly 20% ahead of the industry. We've taken market share for the sixth consecutive year, a very strong outcome in the context of a challenging fundraising environment. As you can see from the chart on the left, the strength was broad-based. It is well known that large allocators are seeking to do more with fewer managers, consolidating relationships around true strategic partnerships. That trend plays to our strengths, and the numbers reflect that. It was also a record year for new client additions with 36% of gross sales coming from relationships entirely new to the firm, while our top 50 clients remain invested in more than 4 strategies on average. Whether I'm speaking with a pension fund in North America or a sovereign wealth fund in the Middle East, the feedback I receive is clear. Our clients face increasingly complex challenges that require tailored solutions. With a broad range of uncorrelated strategies delivered through a technology-powered platform, we have the capability and the scale to meet that demand. From customized risk levels and access to new asset classes to the launch of new product structures, we are adapting to how our clients want to work with us. That agility is a competitive advantage. And now I'll hand over to Antoine, who will take you through the numbers. Antoine Hubert Joseph Forterre: Thank you, Robyn, and good morning, everyone. I'll begin with last year's financial highlights before providing further details on our AUM, P&L and balance sheet. As Robyn mentioned, we ended the year with AUM of $227.6 billion, up nearly $60 billion since the end of 2024. The increase was driven by positive investment performance of $21.4 billion and record net flows of $28.7 billion. On a relative basis, our net flows remained ahead of the industry for the sixth consecutive year with our sustained growth in market share further validating the relevance of our offering to clients. In 2025, we recorded net revenue of almost $1.4 billion, including performance fees of $281 million, mostly from non-AHL strategies. This demonstrates the progress we have made in diversifying our mix of revenue and performance fee generation in particular. We also recorded $38 million in investment gains. Fixed cash costs of $430 million reflect the actions we took earlier in the year to maintain cost discipline and to better align resources towards our strategic priorities. At 48%, the compensation ratio was within our guided range, reflecting lower net revenues in the year. As a result, core profit before tax was $407 million with $294 million of core management fee profit before tax, which equates to $0.196 of core management fee EPS. Lastly, we are proposing a final dividend of $0.115 per share, taking the total dividend for the year to $0.172 in line with 2024. We continue to maintain a strong and liquid balance sheet with net tangible assets of $723 million as at the end of December, supporting our disciplined capital allocation policy. Our overall asset-weighted relative investment outperformance was 1.3% compared to 1% in 2024. Investment performance was positive across all product categories with long-only strategies delivering particularly strong results. Our long-only offering contributed $34.5 billion in net flows, serving as a powerful endorsement of our differentiated proposition in this space. While alternative strategies faced some headwinds due to the poor performance from trend following strategies in the first half, engagement on liquid alternative, and crisis Sapphire remains robust as we head into 2026, reinforcing the continued relevance of our uncorrelated content. Other movements were $8.9 billion. This includes $6.7 billion of FX tailwinds owing to a weaker U.S. dollar as a significant proportion of our AUM is denominated in other currencies and $2.7 billion from the acquisition of Bardin Hill. Finally, in addition to fee-paying AUM, we also ended the year with $4.9 billion of uncalled committed capital, which provides a strong foundation for future AUM growth across our private markets business. Before moving on from AUM, I wanted to spend a moment on the new reporting categories we're introducing this year. This updated categorization, which you can see on the slide, reflects the growth and evolution of our business, provides greater transparency on our strategic priorities, such as credit, and aligns more closely with market practice to improve comparability with peers. As you'd expect, there is no material change at the long-only and alternative category level. We have simply reclassified the subcategories to make them easier to understand. More details, including information on fee margins, can be found in the investor data pack on our website. We will continue to provide the previous categorization in our materials up to Q3 of this year to ensure a smooth transition. And of course, we are available to answer any questions you might have. Our run-rate net management fees, which represent a point-in-time snapshot of the firm's management fee earning potential increased to $1.182 billion at end of December 2025 from $1.058 billion at the end of 2024. This was driven by the significantly higher AUM at the end of the year and the strong recovery in trend-following performance in the second half. This is the highest level in more than 10 years. The run-rate net management fee margin decreased from 63 basis points at the end of 2024 to 52 basis points at the end of '25, reflecting the shift in underlying AUM towards long-only strategies during the year. As I have emphasized many times before, we did not target a particular net management fee margin, but instead prioritized driving profitable growth across all our product categories. Moving on to performance fees. In a year where trend-following strategies struggled before recovering in the second half, core performance fees were $281 million compared with $310 million in 2024. This is a strong reflection of the progress we have made in diversifying our business and its performance fee earnings potential. It underscores our ability to deliver strong outcomes for our shareholders even in years of below average contribution from trend following. At the end of December 2025, we had $59.6 billion of performance fee eligible AUM, of which $36.6 billion was at high watermark compared to $21.1 billion at the beginning of the year. A further $17.4 billion was within 5%. An often overlooked feature of our business is a $13 billion of AUM from the long-only category is performance fee eligible, increasing our performance fee earning potential while providing valuable diversification. This slide provides further insight into how performance fee earnings potential has changed over time. If you have followed us for a while, you might recall a similar slide at our Investor Day in 2022. The dark blue line plots the distribution of a Monte Carlo simulation of the next 12 months' performance fee outcomes based on distances from our watermark, expected returns and volatility assumptions for our key performance fee-paying funds as at December 2025. The median simulated performance fee outcome for 2026 is $471 million. This is a 35% increase from $349 million at the end of December '21 and nearly 3x what we expected in December 2016. This improvement predominantly reflects the growth in performance fee eligible AUM and the progress we have made diversifying the underlying range of strategies that contribute to our performance fee earnings. As of the 20th of this month, we had accrued approximately $350 million of performance fees due to crystallize in 2026. As always, this figure is not a forecast or guidance, but rather the position at a specific point in time. The amounts that crystallize will fluctuate increasing or decreasing based on investment performance up to crystallization dates. Moving on to costs. Fixed cash costs of $430 million were 5% higher compared with 2024. This includes a $16 million impact due to the strengthening of sterling against the U.S. dollar and another $4 million from the Bardin Hill acquisition. These increases were partially offset by the cost control actions we took earlier in the year, as reflected in the decrease in headcount. The overall compensation ratio increased marginally to 48%, reflecting the decrease in management and performance fee revenue during the year. However, the recovery in trend-following performance in the second half meant that we were able to remain below the upper end of our guided range. From 2026, we will be changing the modeling framework, moving away from the fixed cash costs and comp ratio guidance to a core PBT margin range. Our previous guidance was established in 2013 during a period of significant restructuring when the business looked materially different. This approach, which focuses on a few specific line items within our P&L without allowing for fungibility of spend, is no longer fit for purpose. Our operating model has evolved and technology is ever more central to our business. Going forward, we will manage the business to a core PBT margin, typically between 30% and 40%, varying based on the quantum and mix of revenue. It may be outside this range in years with particularly high or low core performance fees as it has been in recent past in both directions. This range is calibrated around the average realized core PBT margin of 35% between 2020 and 2025. This change provides greater operational flexibility, which is critical to remaining agile given the pace of change. It should not change the way you think about and model the overall profitability of the business. Importantly, it also does not alter our commitment to cost and capital discipline or remove the ability to benefit from significant operating leverage in exceptional performance fee years. Core net management fee earnings per share were $0.196, 9% lower than 2024, while performance fee earnings per share decreased to $0.08, down from $0.106 in 2024. Total core earnings per share were $0.276. In summary, despite the challenging market conditions for trend following in the first half, 2025 was another year of resilient earnings for the firm. We continue to maintain a strong and liquid balance sheet, which gives us optionality and flexibility to pursue our long-term growth ambitions and return capital to shareholders. At the end of December, we had $723 million of net tangible assets, including $173 million in cash and cash equivalents. Our seed capital program continues to play an integral role in supporting the growth of our business. In 2025, we seeded 12 new strategies, including new private credit strategies and active ETFs in line with our strategic priorities. Gross seed investments at the end of December were $603 million. The portfolio remains well diversified across strategies and markets. This brings me to capital allocation. Our policy remains disciplined and intends to support the future growth of the business while delivering attractive returns to shareholders. It follows a clear waterfall with 4 categories. First, we aim to increase the annual dividend per share progressively over time, reflecting the firm's underlying earnings growth and free cash flow generation. In 2025, dividends to shareholders totaled approximately $200 million. Second, we deploy capital to support product development and technological innovation. We continue to actively manage our seed book considering the opportunities available. And in 2025, we redeployed $400 million of seed capital. We also continue to invest heavily in technology to ensure we remain at the forefront. Third, we evaluate M&A opportunities that align with our strategic priorities. In 2025, we completed the acquisition of Bardin Hill, bolting on opportunistic credit and performing loans capabilities to our credit business. Finally, any remaining available capital is returned over time through share buybacks. Last year, we repurchased $100 million of our share capital at an average price of 182p. Including the proposed final dividend and the $100 million share buyback I just mentioned, we returned approximately $300 million to shareholders in the year. Over the past 5 years, the total capital returned to shareholders via dividends and buybacks is $1.8 billion, over 50% of our market cap as of the end of December. Shareholders now receive an additional 23% of every dollar of earnings when compared with 2021. On that note, I'll hand over to Robyn to take you through the next section of the presentation. Robyn Grew: Thanks, Antoine. 2025 tested us at times, but we navigated the challenges to emerge stronger and finished the year with real momentum. That is a powerful validation of our strategy. We were able to deliver a resilient set of results because the diversification we have built over recent years is delivering. In a year where trend-following faced significant headwinds, it was the strength in quant equity, liquid credit and solutions on the investment side, combined with strong growth across client channels and geographies that delivered for us. That is our strategy working as intended. The benefits of diversification are clear, and this slide illustrates why. The capabilities we have scaled have near 0 or even negative correlation with trend following. The more high-quality uncorrelated content we offer, the more relevant and valuable we are as a strategic partner to clients. That relevance drives growth. And as you can see on the chart in the middle of the slide, the business today looks very different from just 4 years ago, both in terms of scale and business mix. That shift also matters for earnings. Not only does it grow and strengthen our management fee stream, but as Antoine mentioned earlier, it also improves our performance fee earnings potential. Non-AHL performance fees have grown significantly from $116 million in 2021 to $225 million in 2025. Diversification has reduced our reliance on any single investment strategy and has increased the stability of our overall earnings, providing new options for growth that ultimately drive value creation for shareholders. The strategy we outlined 2 years ago will enable us to continue to deliver this diversification. As many of you will recall, we outlined 3 priorities at our full-year results 2 years ago. They were to diversify our investment capabilities, to extend our reach with clients around the globe and to leverage our strength in talent and technology, all while continuing to invest in the core of our business. We set ambitious goals to drive the next chapter of growth for Man Group. Now, more than ever, we have conviction that we are targeting the right areas. Although not every initiative moves at the same pace, the prevailing trends in our industry remain largely unchanged. Client engagement is the strongest it's ever been, and we have good momentum across several pillars of our strategy. Let me take you through the progress we've made in more detail. Starting with our investment capabilities. Our credit platform continues to go from strength to strength. We now manage $53.1 billion across the liquid and private credit spectrum, up from $28.3 billion just 2 years ago. Organic growth in liquid credit has been exceptional with strong client demand for our high-yield and investment-grade strategies in particular. We also completed the acquisition of Bardin Hill in October, which adds opportunistic credit to our existing private credit offering and strengthens our CLO capabilities. I'm very pleased with where we stand. We are now a broad-based partner across the credit space. On quant equity, it was pleasing to see our long-only strategies had an exceptional year, growing AUM by 97% and continuing our track record of alpha generation. Alongside strong performance, it is the ability to offer a high degree of customization at scale that is also proving hugely valuable to clients. Mid-frequency is a complex space that requires significant investment in research and infrastructure, and there's a lot of work going on behind the scenes. We've developed 2 distinct strategies that take different approaches to idiosyncratic alpha generation, factor exposure, geographical focus and holding periods. Notably, our quant alpha capability delivered 21.3% net performance in 2025, which offers clear evidence of our progress in this high potential space. We continue to deliver complex solutions to help our clients solve their most significant challenges. That remains a real differentiator for us. More recently, our advisory offering in partnership with the Oxford-Man Institute has been in strong demand as we partner with clients to deliver thought leadership that helps them to navigate issues they face across their portfolios. A great example of this is the work we've done on timing the market in collaboration with one of our Nordic clients. The agility we have shown in adapting to client needs has served us well, and that will not change. Finally, I spoke about Man 1783 earlier today. After another strong year in 2025, we've delivered 10.5% net annualized performance over the last 3 years for our clients. That is a track record that puts us up there with the best in this space. We are continuously improving our investment processes, knowing that innovation is not just about launching the next flagship product, it's about making everything we do better every single day. We've also made strong progress extending our client reach, targeting the regions and channels where we are underweight relative to the size of the opportunity. North America is a great example of that. I'm delighted that we have nearly doubled annual gross flows from North America in 2 years, from $10 billion to nearly $20 billion. Growing our presence in the institutional channel has been a particular highlight with a 24% increase in North American pension plan clients. Given the sheer scale of that market, we see a significant runway for growth. In Wealth, we've seen a similar trajectory. We are bringing institutional quality liquid products to one of the fastest-growing segments in asset management, and the opportunity here is large. To strengthen our offering, we launched 4 active ETFs across discretionary and systematic styles in equity and public credit last year. Our strategic partnerships continue to deliver strong growth. The Asteria joint venture is a great example of that, where appetite for our credit products has been particularly strong. Finally, on insurance, I'm sure many of you are aware that this is a complex area that requires careful groundwork. We have laid those foundations globally, and our strategic partnership with Meiji Yasuda is an encouraging early step. Discussions with prospects continue, though it remains contingent on the ongoing build-out of our overall credit capabilities. Our third priority is to continue leveraging our strengths in talent and technology, both of which are underpinned by the culture of constant improvement that runs through our DNA. We're always looking ahead, positioning the business for future growth. A good example of this is the change we made last year in Systematic, bringing AHL and Numeric together under one division to drive innovation, product co-development and research collaboration. We approach technology with the same mindset. And as a result, we're not just keeping pace with change, we're leading it. We made significant advances in AI during the year, developing over 100 plug-ins across the firm using a range of AI platforms. For us, this isn't a peripheral initiative. It is truly embedded across our entire organization. And it's one of the reasons Anthropic has chosen to partner with us on the design and application of AI in investment management. I think that tells you something about where we stand. Our ambition is clear to become an AI-powered asset manager. We have the heritage, the expertise and the data to make that a reality. So across all 3 pillars, investment capabilities, client reach and talent and technology, we have made meaningful progress. The strategy is delivering, and the results speak for themselves. We entered this year in great shape and with good momentum. Our $87 billion liquid alternative business gives us a platform with an exceptional long-term track record of delivering for clients and shareholders. In an environment where clients are increasingly focused on uncorrelated returns, liquidity and crisis alpha, the relevance of that platform has never been greater. Alongside that, we now manage $17 billion in private credit with teams focused on underwriting discipline and the ability to capture dislocation when it arises. Our long-only business has scale, a clearly differentiated proposition and a proven ability to generate alpha. And finally, we've aligned resources with our strategic priorities, ensured cost and capital discipline and position the business for long-term success. The result is a firm with its highest run rate net management fees in over a decade and near record performance fee optionality. I feel very good about how we have started the year and our ability to capture the opportunities that lie ahead. It is not just our business that is well positioned, the market environment is supportive, too. After a decade defined by U.S. exceptionalism, we are seeing a more complex, dispersed landscape emerge. That is exactly the environment in which active management thrives and allocators are responding. The chart in the middle shows their plans for 2026, which favor many of the strategies where we have strength, hedge funds, portable alpha, active extension. Our ability to help clients navigate this environment with a broad range of alpha-focused strategies has never been more relevant. At the same time, demand for customization continues to grow. Capital allocated via customized structures has increased 61% since 2023, reflecting a clear shift towards strategic partnerships and tailored solutions. You've heard me talking about our strengths in that space time and time again. It is where we have a clear competitive advantage. So to close, 2025 tested us and our strategy delivered. Record inflows, AUM at all-time highs and a resilient set of earnings in a year that was far from straightforward. The diversification we have built proved its worth. I'm incredibly proud of what this team has achieved. None of this is possible without the exceptional talent across our firm. Their energy and commitment are what set us apart. We enter 2026 as a more diversified, structurally stronger business that is well positioned for growth. The landscape is shifting in our favor. Markets are more dispersed, allocators are demanding more from fewer partners and the value of our offering has rarely been clearer. We have the investment content, we have the client relationships and the technology platform to capture that opportunity. And I have absolute conviction that our strategy will deliver long-term value for our clients and our shareholders. With that, we'll open up for analyst Q&A. Robyn Grew: As a reminder, to ask a question, you need to have joined the presentation via the Webex link. Press the Raise Hand button and please unmute yourself when we can call your name. Thank you. Antoine Hubert Joseph Forterre: Thank you, Robyn. And we'll start with Nicholas. I'm going to send a request, and you should be able to unmute. Unknown Analyst: Can you hear me? Antoine Hubert Joseph Forterre: Yes, Nicholas. Unknown Analyst: Three questions from my side, if I may, please. One on AI one on absolute return and one on capital return. So on AI, I think the Anthropic partnership is super interesting. I appreciate it's early days, but do you have any ambitions or key milestones you can share with us from that partnership? And I guess just more broadly, if we think beyond yourselves, how do you expect AI to impact competition and alpha generation in the markets in which you operate? And which markets do you think could see the most significant impact, please? So that's the first one. On absolute returns, I appreciate the strong delivery in diversifying the business for sure. But if I focus on absolute return, could you just give us a sense of investor sentiment and engagement there given the shift from underperformance to recovery, but there's still a negative relative performance? And are there any further redemptions in the pipeline we should be aware of? And then finally, on capital return, I guess, following the repayment of the RCF, you have significant available net cash and equivalents. What was the rationale to keep the dividend stable and not declare any additional capital return? And should we see this as an indication of your M&A pipeline? Robyn Grew: Right. Do you want to... Antoine Hubert Joseph Forterre: I will go ahead and start with the last one. Robyn Grew: Yes. Antoine Hubert Joseph Forterre: Which is -- I'll start with the last one. So we have a clear, unchanged capital allocation policy, dividend first, which we aim to grow in line with earnings over the cycle. And if you look at earnings year-on-year, they were down, hence, keeping the dividend flat. Now, if you look over the last 5 years, we've increased the dividend, I think, to the tune of 10% per annum over that period. So we've delivered the growth over the cycle as intended with our policy. And then, we aim to invest in the business, both organically and inorganically. If you look at last year, we deployed investments in technology, but also did an acquisition. And then after that, we look at returning capital by way of buyback, which we executed last year to the tune of $100 million, so we returned $300 million to shareholders last year in addition to doing an acquisition, a bolt-on acquisition in a year that didn't see us generate huge amount of capital given the slightly softer performance fees. So very much in line with our policy, we're keeping dividend flat. Do not read anything into future M&A. The Board in due course will consider options and might return capital to shareholders as and when it sees fit. I can take the absolute return one going reverse order if you want and you can do AI. Robyn Grew: Yes, for sure. Yes. Antoine Hubert Joseph Forterre: So I would differentiate between trending following and the rest of offering. Trend following has indeed a soft -- let's be clear, a poor first half and then a tremendous recovery that extends into 2026. The rest of absolute return category, which I think is best represented by our Fund 73 performed well throughout. 73 was up in the first half and up in the second half to finish the year last year at 14%. In terms of investor sentiment, the outflows we saw last year were prominently driven by the trend following category as well as some of the risk parity category. Both have had a strong second half and start of the year. And eventually, performance is what leads to flow. We don't comment on future flow, as you know. So I'm not going to give you specific comments, but I think you can read in the confidence that we have, the way that we think of ourselves starting '26 in a strong position and the belief that we have in our client relationship. AI? Robyn Grew: AI. Fair to say we're excited about the opportunity set. No specific milestones that we've set with Anthropic, but this is a partnership where we believe we can add to their understanding of what the needs are, but also drive the solutions that we can put in play across the organization, be they at the front end and the research capability that we can look at and develop more or indeed through the entirety of the AI capabilities you see for efficiencies and effectiveness through the rest of the organization. For us, we've spent 35, 40 years being at the cutting edge of technology. This is no different. We believe we are in a terrific place to benefit from use, utilize and lead with some of the strongest players on the street, this extraordinary technology capability. So tremendously excited, no real milestones, but we think this partnership will help us, along with everything else we do, take full advantage of the full suite of technology. Antoine Hubert Joseph Forterre: With that, I'm going to go to Arnaud. Arnaud, you should get a request to unmute. Arnaud Giblat: I've got 3 quick questions, please. Firstly, going back to the buyback. So historically, when you tend to come back into performance fee territory and in a good position, usually, that does correlate with buybacks. I'm just wondering, why there hasn't been -- and particularly, if I'm looking at the cash flow statement, I noticed a big outflow in terms of working capital. So maybe if you could give us a bit more color there and what your thinking is in terms of the buyback. I mean, the net financial assets did improve. So I would have expected some nonetheless. Second question is on St. James's Place. There was some news flow around St. James reallocating mandate. I'm just wondering what was the quantum that might impact our flows and when that comes through? And my third question is on management fee margins. The run rate management fee margin looking forward has reduced. Clearly, there's a bit of a mix shift between categories, and I understand that. I understand that you don't manage the business given management fee margin and all business is good. But I'm just wondering, if I isolate each category, are we seeing -- at constant mix, are we seeing dilution margins, is my question? Robyn Grew: Yours, I think. Antoine Hubert Joseph Forterre: Yes, I'll take them in order, and thank you for the questions. Expand a bit on the buyback, performance fees is, obviously, one source of capital generation, and therefore, a correlation between performance fees and capital returns because it sort of follows a waterfall we outlined. I go back to what I mentioned earlier. Last year, we deployed $300 million of capital returning to shareholders plus an acquisition in a year where cash flow generation was still more subdued. There's a timing of cash flow point as well, and we start the year in a strong position. Do not read anything in that signal. We have not changed our capital policy. But at this point, the Board has not decided to announce a buyback. St. James's Place, we don't comment on future flows. We have had in the past commented on very large flows in and out when we felt it was relevant, but we're not commenting on future flows. The outlook remains the one that you can read, and we've outlined. And then, on management fee margin, we are seeing a mix shift both between categories and within categories. Between categories, we -- if you look at the year, we finished the year with a majority of our AUM on the long-only side, which is traditionally lower margin. I think 60% of our AUM is long-only. And that explains the overall the shift. Within categories, you're also seeing the same thing. If I pause on the absolute return category, what we saw last year was a slight relative underperformance evolution, and then, worse flows in the evolution because of higher-margin product than the other content within that category. And that explains why within that category, you also saw margin erosion. We are not seeing any kind of fee pressure that we call out here. So it is really a mix effect at the category level and within the category level. I'll go to David McCann. David McCann: Hope you can hear me. Antoine Hubert Joseph Forterre: Yes. David McCann: A couple of my questions have already been answered. So I've got just 2 left. The first one, on the new 30% to 40% PBT margin guidance, I mean, I guess reading into your comments, it sounds like there's some fresh investment that's going to go into things, including AI. But presumably, the reason you can keep the margin roughly where it has been is because you're intending to get some kind of efficiency and/or productivity savings from that. But maybe you could sort of give some color on that sort of those 2 forces, and how you're thinking about them in that mix? And then, I guess, delving a little bit deeper into sort of one of the previous questions, yes, clearly, you've had some strong recovery, as you've touched on as well in a number of your funds in the second half of last year and continuing into this year, which is good. I appreciate you're not giving color on flows as such. But, yes, historically, when you have seen sort of some recovery following a period of weakness, you have sometimes seen investors, I guess, take money out at that point. They kept during the period of underperformance, but then came out when it did recover. So are you seeing any signs of that happening? That would be the second question. Antoine Hubert Joseph Forterre: I will start with this one. No, I mean, nothing again that we call out that's already in the numbers. And you're right, performance and flows do correlate, although it's not like it's a sort of immediately identifiable correlation. It usually comes first on the wealth channels and then institute tend to have a kind of a longer horizon, and hence, the sort of lumpiness in flows that we often refer to. The PBT margin is really about, as I said, giving us more flexibility across the various lines compared to what we have. It is not intended to kind of change the profitability for shareholders. That's an important point I want to repeat. When it comes to AI and technology, we're not doing this because of specific efficiency that we've identified. This is not a way to kind of capture the efficiencies. This is about us being able to continue to invest in the business, benefit from those kind of very significant advances in technology and the strength that we have. So we continue to deliver growth. Key point, as I said, is this does not change anything to the ongoing profitability of the business. David McCann: Okay. It's more about the alpha that -- potential alpha that the strategy can develop rather than anything... Robyn Grew: Correct. Antoine Hubert Joseph Forterre: I will then go to Hubert. Hubert, you should be able to unmute. He says, hopefully. Hubert Lam: Yes. Hubert Lam from Bank of America. I've got 3 questions. Firstly, obviously, there's been a lot of focus recently on private credit. Can you talk about your software exposure within your U.S. private credit business, and any commentary about credit quality within that line? Second question is also on credit. Can you just also talk about the deployment within Varagon? How that's coming along? How much dry powder you have there currently? And last question is on 1783, another strong year of performance. Can you just talk about what you can do to scale up that product given that, that seems like a pretty big opportunity that you can exploit there just given the strong performance? Antoine Hubert Joseph Forterre: Thank you, Hubert. Which one you want to take? Robyn Grew: Well, why don't I start with 1783? Let's start there, and we'll split it up between us. Really pleased with the performance. You're right. Thank you for calling that out. I'm glad you're enjoying the performance as much as we are in that space. It's -- we continue to see and have really excellent conversations with clients. We have a strong belief in this product and its track record. And so this is about making sure that we can convert some of those conversations into investment. But we feel very good about it. The performance is robust. We continue to see strong engagement on it. And so that's -- the scale is there. We have the capability, and it has the capacity to operate. I'll take the, I am sure it is, private credit piece, just on our exposure. Let me do it slightly differently. We have very limited -- let me say it at the start, we have very limited exposure to software and technology across both of our direct lending and opportunistic credit books. For background, direct lending, software and tech exposure is sort of somewhere sub-6%. Think about it like that. But also think about it in a slightly different way. This is a middle market business where also it's been run with high discipline in underwriting and risk management. So this piece that we talked about through last year about being slower in deployment, because we valued the risk management approach and proper underwriting quality, was what we continue to believe is the right thing to do. Our exposure is far less than any of our peers, but also we're not facing retail markets. This is an institutional-facing business. So we also don't suffer or have to worry about liquidity mismatch, for example. So we believe this is a good strategy. Middle market provides good opportunity. We run our business with high discipline and high-risk focus. We're not exposed to the sector in the way that you might have been seeing others have been. We don't have liquidity mismatch issues, and we continue to have strong belief that this is an area for development. In terms of dry powder? Antoine Hubert Joseph Forterre: Still $4.9 billion is a number we mentioned. And underlying in the AUM categorization, and the direct lending category has deployed a bit more capital, so you don't see it, but it's the underlying AUM has actually increased. It's obviously increased more because of the acquisition of Bardin Hil we have made in the year. Before I go back to the screen, we still have a couple of questions, I'm going to read a question from Mike Werner, who seems to have issues probably dialing in Webex. We saw a significant increase in long-only performance fee-eligible AUM in 2025. Was this due to a large mandate? Or is this a trend we should expect to continue going forward? If you go to Slide 10 of our presentation, you see that at the end of '25, we have $13 billion of long-only AUM that was performance fee eligible. That's increased from $5.8 billion as of the end of 2024. That is a series of mandate. It is not a single mandate. Obviously, there are entity mandates, so they tend to be sizable by construction, but it's not just one, it's a series of mandates. And that in part explains why we generated $100 million of performance fees in long-only in 2025. Second question from Mike, is it possible to get a breakdown of seed capital between public and private markets given the delta in equity in those strategies? The answer is yes, you have it in Slide 14 at the bottom, liquid markets account for 79% of our seed investments and private markets 21% of our seed investments on a gross basis. I will then go to Isobel. Isobel, you should get the request to unmute. Isobel Hettrick: Can you hear me okay? Robyn Grew: Yes. We can. Antoine Hubert Joseph Forterre: Go ahead, Isobel. Isobel Hettrick: I just have one, please. So if you take a step back and look at the Man platform, holistically, where do you think there are potential capabilities you're missing or need to enhance inorganically going forward? Robyn Grew: Thanks, Isobel. I'll take that question. We have always been very clear we will always look for capabilities that are uncorrelated to that, that we have today, but still rhyme with the verbs announced that we understand. But let's be clear, that doesn't -- that comes from organic growth. We can demonstrate that as you think about, for example, the high-yield and investment-grade credit business we've built here organically. That is -- that speaks to the capability we have already to grow that capability. It's not just about M&A. We added 5 new teams into the discretionary space. So we're interested in capability that comes, again, in an uncorrelated content from that space. So we're not focused on a specific area. You know the strategy that we're trying to follow. We feel like we're making great strides in that space. But right now, we are very, very focused on the book of business we have in front of us, and we'll continue to look for capabilities that we don't currently have. But right now, we're feeling quite good. Antoine Hubert Joseph Forterre: And then we have 1 last question from -- or questions from Jacques-Henri. Jacques-Henri, I'm going to request you to unmute. We haven't had the chance to get acquainted. So if you could tell us which firm you're from as well. That would be great. Thank you. Jacques-Henri Gaulard: Can you hear me? Robyn Grew: Yes. Antoine Hubert Joseph Forterre: Yes. Jacques-Henri Gaulard: I'm Jacques-Henri Gaulard, Kepler Cheuvreux. I had 2 related to the updating model framework on the PBT. Getting the 30% to 40% now, is it a bit a reflection of the fact that 2025 was really, really tough, despite that, you more or less made it? And it's like if we can make it in that type of condition, then we'll definitely make it whatever happens almost, sorry about that. And the second question would be your non-core costs is actually a little bit lumpy, and the definition is effectively quite range. Would you consider probably reducing the range of those core costs to actually include some of them into the pretax margin definition? Some of your peers, for example, include the restructuring costs in there. That's it for me. Congrats for this morning. Antoine Hubert Joseph Forterre: Thank you, Jacques-Henri, for the questions. So the range is really a reflection of the evolution of the business over the last now 13 years. When the previous framework was put in place, the business was going through heavier restructuring with a very focused approach on costs, fixed costs in particular. And that's why previous management focused on kind of single-line item targets across the P&L. As we evolve the business, as we invest for growth, as we invest in technology, but also grow our teams, we feel that having the ability to use the cost P&L line more fungibly makes more sense with that importantly taking away from shareholders. So do not read anything into it. The second question is on non-core costs. You're right that last year, we had an increase in the non-core costs for really 3 specific reasons. Most of them really related to 2025. The first one is the court case, which is ongoing. That went to trial in March of last year. The trial will conclude in March of this year. So we incurred some legal costs. This relates to allegations made from the 1990s. So firmly not sort of related to the current core business, which is why they sit in non-core. The second was the kind of restructuring charge we took around the middle of last year, as we addressed difficult first half and realigned resources across the business. That's another around $30 million, of which $10 million is noncash, $20 million is cash. And then the third element in the non-core line, which is more in keeping with what you usually see is the noncash impact of reevaluation of liability in relation to Asteria partnership. Asteria, you might recall, is a joint venture that we have focusing on wealth in Italy in particular and continent in general. It's going very well. As a result, the implied valuation of the liability that we have remaining on our balance sheet has increased and also flows through the non-core. We're not proposing any change to our definition. Importantly, what you saw last year is not on the basis of a change either. It's just the same definition, in a year that's a bit exceptional. With that, I don't believe we have any more questions. So we'll finish here. Thank you all very much for your time. Robyn Grew: Thank you very much.
Operator: Good morning, and welcome to the Fiera Capital's earnings call to discuss financial results for the fourth quarter of 2025. I will now turn the conference over to Natalie Medak, Director, Investor Relations. You may begin your conference. Natalie Medak: Thank you, and good morning, everyone. Welcome to the Fiera Capital conference call to discuss our financial results for the fourth quarter and full year. A copy of today's presentation can be found in the Investor Relations section of our website. Comments made on today's call, including replies to certain questions, may deal with forward-looking statements, which are subject to risks and uncertainties that may cause actual results to differ from expectations. Please refer to the forward-looking statements on Page 2 of the presentation. Our speakers today are Maxime Ménard, Global President and CEO; and Lucas Pontillo, Executive Director, Global CFO and Head of Corporate Strategy. Also available to answer questions will be John Valentini, President and CEO, Private Markets. I will now turn the call over to Maxime. Maxime Ménard: Good morning, everyone. Thank you for joining us today as we report operating and financial results for the quarter, fourth quarter and full year. Our total assets under management ended the year at $164.1 billion. Excluding sub-advised strategies, assets under management increased 0.4% for the fourth quarter and increased by more than $7 billion or 5.7% for the year, driven by net inflows of approximately $1 billion and strong equity market growth in 2025. Including sub-advisory AUM, our total assets under management declined by 1.7% for the quarter and 1.8% for the year, reflecting net outflows from our sub-advisory strategies. In public markets, assets under management ended the year at $142.1 billion. Excluding sub-advised strategies, public markets AUM reached $108 billion, increasing 0.5% in the fourth quarter and 4.7% for the year. Assets in our private market platform ended the year at $22 billion, up 11.4% from the end of the prior year and reflect net inflows of approximately $900 million and acquisition of controlling interest in the real estate investment platform during the year. Private markets AUM was flat versus the prior quarter as net inflows and positive market action were offset by negative FX impact. Turning to highlights of our commercial and investment platform, starting with our public market platforms. For the quarter, new mandates totaled approximately $500 million with good demand for our Canadian large cap and U.S. growth equity strategies. Excluding sub-advised AUM, net outflows for the quarter were $450 million, largely reflected outflows from our U.S. fixed income. During the quarter, approximately $550 million of sub-advised assets within our balance mandate were reallocated into our U.S. equity strategy. Including this transfer, combined net inflows into our non-sub-advised AUM were $100 million for the quarter. For the year, public markets captured new mandates of $3.2 billion, reflecting strong interest in our Canadian large-cap U.S. and emerging market strategies. Several of these new mandates were the result of relationship established with new financial intermediaries clients during the year, which are expected to generate ongoing net inflows on a go-forward basis. Approximately $700 million of positive net contribution in 2025 were directly attributed to these new mandates. For the year, net inflows, excluding sub-advised assets were approximately $100 million. Our 4 largest core public market franchise consisting of Canadian equity, U.S. growth equity, active and strategic fixed income and integrated fixed income and representing more than 50% of our public market AUM captured net inflows of $2.8 billion for the year. These were largely offset by treasury and U.S. fixed income net outflows within our financial intermediary channel in the U.S. Net outflows in our U.S. fixed income business in 2025 were mostly related to structural changes at investment advisory partners and not related to performance. These advisory firms continue to view Fiera U.S. fixed income team as a value partner and have added funds year-over-year. Over the last year, we have seen very positive underlying momentum in our public market platform within our core Canadian business, excluding sub-advised strategy, we captured positive net contribution of $400 million in 2025, up from negative net contribution of $4.3 billion, a year-over-year improvement of $4.7 billion. We also saw year-over-year growth in gross mandate of better client retention. We lost mandates totaling approximately $200 million in 2025 compared to $2.2 billion in the prior year. Overall, net organic growth in our core Canadian public market increased from net outflows of more than $4 billion in 2024 to net inflows of $2.7 billion in 2025, an improvement of $6.8 billion year-over-year. We are pleased to note that a higher share of new mandates won in the past year have been through the financial intermediary channels where mandates are multiproducts in nature and flows from these mandates are expected to grow with greater adviser level strategy penetration. Turning to the investment performance in public markets. Our fixed income strategies continues to perform exceptionally well with nearly all strategies adding value for the quarter. Approximately 95% of our fixed income assets outperformed their benchmark over both the 1-year and 5-year periods and 97% of fixed income assets outperformed over the 3-year period. Most of our equity strategies delivered positive absolute returns in the quarter, but outperform remain a challenge as low-quality index continue to drive growth in benchmark index. In 2025, it was a challenge year for value and high conviction manager in general. But despite near-term challenges, absolute return for our strategies remain strong, have helped our clients achieve their overall objectives. We have seen minimal attrition related to performance over the year. Now turning to our private market platform. For the quarter, we captured new mandates of approximately $300 million, primarily into real estate strategies and saw net organic growth of $75 million. For the year, new subscription were $1.9 billion and net inflows were close to $900 million. Flows were mostly driven by demand for our real assets strategies, namely real estate, infrastructure and agriculture. Demand for these strategies reflect the strength of our expertise and secular demand as investors seek inflation and downside protection. Loss mandate within the private market platform remain limited, testament of the strength of our offering and stickiness of our clients. We returned capital of approximately $100 million for the quarter and $600 million for the year. We also deployed approximately $450 million of capital into new projects during the fourth quarter and close to $2 billion year-to-date. We maintain a robust pipeline of $2 billion in committed undeployed capital for future opportunities. Moving to the Investment Performance. Our private market strategies continue to perform well in the fourth quarter and for the year. Within Real Estate, our core and small-cap industrial strategies produced positive absolute returns for the quarter. We have generated returns of 8% and 13%, respectively, since inception. We see a more constructive backdrop and these strategies in 2026 given improvement in investor appetite and supportive industry tailwinds. In Infrastructure, returns were positive for the quarter and close to 8% for the year. And in Agriculture, we saw good returns for the quarter, supported by consistent income generation with primarily reports indicating that our full year performance is tracking ahead of industry benchmark. Within Private Credit, performance in our real estate debt and infrastructure debt strategies remained strong and absolute returns of 10% for the year and gross internal rates of return of 12%, 11%, respectively, since inception. Now turning to Private Wealth. Assets under management of $14 billion at the end of the fourth quarter declined by 2% for the quarter and down 6% for the end of the prior year. The quarter was impacted by negative net contribution largely out of treasuries and sub-advised strategies. I will now turn it over to Lucas for a review of our financial performance. Lucas Pontillo: Thank you, Maxime, and good morning, everyone. I will now review the financial results for the fourth quarter and full year. Beginning with earnings. On an adjusted basis, net earnings for the quarter were $30 million, up from $25 million in the prior quarter and $23 million in the same quarter last year. On a diluted per share basis, adjusted net earnings were $0.24 for the quarter, up $0.01 from the prior quarter and up $0.03 from the same quarter last year. This increase is in spite of the fact that adjusted EPS for the current quarter reflects share dilution from our 6% hybrid debenture, which was not the case in the prior quarter or the same quarter last year, which adversely impacted adjusted EPS by approximately $0.03. Adjusted net earnings were $108 million for the full year, up 5% from adjusted net earnings of $103 million for the prior year. On a per share basis, however, adjusted net earnings of $0.87 per diluted share when compared to the $0.94 of the prior year, with the decline being explained by the share dilution from our 6% hybrid debenture on a weighted average share count for the current year, whereas there was no dilution from hybrid debenture in the prior year weighted average share count during the year. The impact on dilution by including the 6% hybrid instrument in the weighted average share count reduced adjusted EPS by approximately $0.09 for the full year. Excluding this impact, our adjusted EPS would have increased by approximately $0.02 year-over-year. Turning to adjusted EBITDA and adjusted EBITDA margin. Our adjusted EBITDA was $55 million for the quarter, up $4 million or 9% for the prior quarter and up $1 million or 2% for the same quarter last year. We saw margin expansion both quarter-over-quarter and year-over-year as adjusted EBITDA margin of 30.4% in the fourth quarter increased from 30.1% in the prior quarter and increased from 29% in the same quarter last year. On a full year, adjusted EBITDA of $194 million was down by less than $2 million or 1% from the prior year despite a decline in revenues, primarily from lower sub-advised assets under management, share of earnings in joint ventures and public market performance fees. Hence, while total revenues were down year-over-year, we were still able to generate margin growth for the full year with adjusted EBITDA margin of 28.8%, up from 28.4% in the prior year. Focusing on total revenues. Total revenues were $180 million in the fourth quarter, up $13 million or 8% quarter-over-quarter, primarily due to higher performance fees and higher commitment and transaction fees. Year-over-year, total revenues declined $4 million or 2%, reflecting lower base management fees in public markets, which were partially offset by base management fees in private markets. On a full year basis, total revenues declined $16 million or 2%, largely from a decline in revenues from sub-advised mandates, share of earnings in joint ventures as well as lower performance fees in public markets. Base management fees across both platforms were $154 million in the fourth quarter, up $1 million or 1% from the previous quarter, but down $3 million or 2% from the same quarter last year. For the full year, base management fees declined by $3 million or 1% from the same period last year as the decline in fees in public market sub-advised assets was largely offset by higher base management fees from our private markets. Turning to private market revenues. Base management fees of $104 million in the fourth quarter increased $1 million from the prior quarter, reflecting average AUM growth. Base management fees declined $4 million or 4% from the same quarter last year, primarily due to lower sub-advised assets under management. For the year, base management fees of $410 million declined $14 million or 3% from the prior year due to lower sub-advised AUM. Performance fees were $5.2 million during the quarter compared with $5.5 million in the same quarter last year. For the year, performance fees of $5.4 million were down compared with $8 million in the prior year due to lower performance fees crystallized, and other revenue of $2.1 million in the quarter compared with other revenues of $1.6 million in the prior quarter and $2.8 million in the same quarter last year. For the year, other revenues of $7 million declined from $14 million in the prior year, largely due to revenues related to an insurance claim settled in the prior year. Moving on to private market revenues. Base management fees of $50 million in the fourth quarter were steady from the prior quarter. Year-over-year, fees increased $1 million or 2%. For the year, base management fees of $199 million increased $11 million or 6% from the prior year. Commitment and transaction fees of $8 million for the fourth quarter compared with fees of $2 million in the prior quarter and $7 million in the same quarter last year. For the year, commitment and transaction fees were $17 million or $1 million higher from the prior year. Performance fees of $8 million during the quarter were $1 million higher from the prior quarter and effectively flat year-over-year. For the year, performance fees were $18 million, up from $17 million in the prior year due to higher performance fees crystallized in our private equity strategy. Lastly, share of earnings in joint ventures related to our U.K. real estate business were approximately $600,000 in the quarter, down from $1.4 million in the prior quarter and $1.8 million in the same quarter last year. For the year, earnings from joint ventures were $7 million compared with the $12 million from the prior year, largely reflecting income earned from the completion of several large construction projects in the prior year and the fact that controlling interest in a joint venture on our U.K. real estate investment platform is now consolidated in our results and reported in base management fees. Other revenues were $2 million for the fourth quarter, flat from the prior quarter and the same quarter last year. For the year, other revenues were $9 million, up from $8 million from the prior year. Assets under management in our private market platform comprised 13% of total assets under management and generated 37% of our total revenues for the year. This compared to 35% in the prior year. The platform continues to deliver attractive AUM and revenue growth and provides diversification to our overall business. Now looking at expenses. SG&A expenses, excluding share-based compensation, were $125 million in the fourth quarter, up $9 million or 7% quarter-over-quarter, largely due to higher sub-advisory fees connected to the recognition of performance fees in the fourth quarter. Year-over-year, SG&A expenses, excluding share-based comp, declined $5 million or 4%, primarily due to lower compensation costs, sub-advisory fees and operating. For the full year, SG&A expenses, excluding share-based compensation, were $479 million, down $14 million or 3%, reflecting our ongoing cost containment initiatives and lower sub-advisory fees. Finally, a look at our last 12-month free cash flow of $79 million, which compares with $87 million for both the prior quarter and the same quarter last year. The decrease primarily reflects higher dividends paid to noncontrolling interests during the current 12-month trailing period as we harvested dividends from some of our operating platforms in order to reduce leverage. As such, net debt was $664 million at the end of the fourth quarter, down $16 million from the end of the prior quarter. Our net debt ratio also declined to 3.4x in the quarter from 3.5x at the end of the prior quarter. At the end of December, we also redeemed $67 million of our senior subordinated unsecured debentures using funds from our credit facility along with the cash generated during the period. As a result, funded debt, as defined by our credit facility agreement, increased by $35 million to $540 million, and our funded debt ratio increased 3x from 2.9x during the period. Delivering value to our shareholders remains a fundamental pillar of our strategy. During the year, we accretively repurchased 1.6 million shares for a total consideration of close to $10 million. Lastly, the Board has approved a quarterly dividend of $0.108 per share payable on April 9, 2026, to shareholders of record on March 11, 2026. I will now turn the call back to Maxime for his closing remarks. Maxime Ménard: Thank you, Lucas. 2025 was a year where we laid out the groundwork for the future of the growth of the organization. We rightsized our organization, streamlined our operation and reporting lines and setting us up to drive improvement in operating efficiency. We revised our capital allocation strategy, which reallocate free cash flow towards deleveraging and provides greater flexibility for share buybacks and opportunistic transaction. We continue to specialize our distribution teams in both public and private markets, an approach which has already yielded positive results. And we made improvement in our client service offering, putting more structure around our processes to ensure that regardless of geography, clients are being serviced in a consistent and a very efficient way. As a result, we have seen good momentum in our business during the year. We captured more than $5 billion of new subscription across both platforms, of which close to $4 billion went into higher fee U.S. growth, Canadian large cap global emerging markets and private market strategies. Excluding sub-advised strategies, we produced positive net organic growth of $1 billion, including net inflows of $2.8 billion into our 4 largest public market investment. As I touched on earlier, we saw very strong flows momentum within our core Canadian business in public markets, which saw net organic growth increase by $6.7 billion year-over-year. We established relationships with several new financial intermediary clients, which are expected to generate more consistent long-term flows. We also entered a new market with the Qatar equity strategies in partnership with the QIA, which we announced earlier this year. And we grew our private market platform by more than 11% through strong net organic growth and the strategic acquisition. Looking ahead to 2026 and beyond, we are well positioned to build on the momentum. Myself and the executive leadership team at Fiera have developed a 3-year plan, which executes on 5 strategic initiatives to accelerate growth in key areas where we believe we have significant growth potential and competitive edge. First, we are focusing on distribution efforts. We are investing in Canadian distribution to both maintain our market leadership and serve markets where we believe are untapped. We are putting greater focus on developing relationships within the financial intermediaries channels that are carrying long-term and more consistent flow profiles. The ATB relationship is an excellent example of our recent success in this area. Globally, we are strengthening our presence in core markets where our investment capabilities are well aligned with the needs of clients and ensuring our distribution teams have the right specialization and support while also bringing best practice from Canada to other geographies. Second, we are centering the organization around investment performance. We are strengthening performance management process tools and investing in attracting, developing and retaining some of the best talent in the business. Next, we are positioning private markets to be a growth driver. Across each geography, we are aligning our product shelf with areas of investment demand and investing in those areas with the highest growth potential. The momentum of our real asset strategies is expected to carry over in 2026 with tailwinds for growth given aging infrastructure and housing shortages. Next, in order to drive efficiency and scalability, we are optimizing our operations. This includes streamlining middle and back-office functions across platform and improving systems that support client service and investment teams. And lastly, we are creating more financial capacity for greater reinvestment in our business. Over the past year, we introduced a new capital allocation strategy, freeing up capital to future growth. We are also exploring initiatives like engaging with strategic partners who can provide long-term capital and help us accelerate growth of key platforms. These strategic initiatives will ultimately drive us in achieving our ambitions to lead the Canadian market as the top independent multi-strategy asset manager, grow globally in a disciplined and profitable way and deliver consistent and high-quality results for our clients. I will now turn the call over to the operator for questions. Operator: Your first question comes from Gary Ho from Desjardins Capital Markets. Gary Ho: Maybe just start off with maybe just on the private market side. Good to see 11% growth in your AUM. I'm not sure if John is around, but as you look out next few years, which strategies do you see the greatest opportunity there? And also, I just wanted to see or get an update on the infrastructure fund or funds or strategies, how those are tracking with the recent kind of PM changes? John Valentini: On the growth, I mean, we're going to continue to see growth, I think, in our real assets. I mean in our private markets, our strongest assets and platform really are in real assets. It's real estate, infrastructure, natural capital continue to be the strongest pillars of our business, our core competencies. I mean we still have credit. We do over $5 billion in credit. We have a private equity strategy. They will continue to grow. But I would say, Gary, our strongest part of our business is really our real assets, and we will continue to see growth in those, and we see the momentum in 2026 as well. With respect to infrastructure, your question is precisely -- could you repeat what your question was on infrastructure? Gary Ho: Yes. No, just on the recent kind of PM changes, kind of how that has... John Valentini: Stabilized. Yes, I mean the transition has been very good with the leadership change. There's been stability in the platform. On the major mandate we won last year, we expect to deploy capital this year on the SMA of $420 million. So the business is performing as expected. So that's the situation. Gary Ho: Okay. And then my second question, I wanted to kind of touch on the PineStone. So another sizable kind of redemption in the quarter. I think there were $12 billion of net outflows in the year. They still managed roughly $34 billion as of December. What's your outlook? And should those redemptions kind of stabilize as we look out to 2026? Lucas Pontillo: Yes, Gary, thanks for that, and I saw your report this morning. Look, just 2 points. Really, the outflows you saw in the fourth quarter were really sort of overall client losses, right? And they were performance-driven. So this is not a question of sort of the leakage or the transfer to PineStone that we sometimes talk about. So as such, it's tough to give any visibility there. As at this point, we have no indications from clients as we're heading into 2026. But I did just want to clarify that those outflows that you saw in Q4, and they were spread across the board. We had mandates redeemed in Canada, the U.S. and in Asia. But they -- as I say, that's not really -- not at all related to any transfers. So tough to give you any kind of guidance on what that looks like for next year. Gary Ho: Okay. And then maybe just to sneak one more in, Lucas, in since I have you there. Good to see a tick down in your leverage. Just wondering if you look out '26, '27, where do you see leverage going? Lucas Pontillo: I mean I think, look, we're -- over the 3-year plan period, we're targeting our target leverage to be down to 2.5x on the net debt side, okay? There's going to be ebb and flows in that over the 3-year period depending on how we're allocating capital. But as Max spoke to, it is one of the strategic pillars of our 3-year plan going forward. And it really is on focusing on deleveraging the balance sheet and creating balance sheet capacity to be able to reinvest in the business. Gary Ho: And how much of that decline is paying down debt versus kind of the EBITDA growing? Lucas Pontillo: I mean I think there's a combination of the 2 for sure. I think as you look at it, the other piece of this is -- don't forget, it's not only the increase in EBITDA that we're expecting, but it's also the reallocation of capital. So the decision we made to reduce the dividend this year. The intent behind that is to expressly have a large amount of that excess free cash flow that's coming from that going to debt repayment. So at the time, we've effectively said to ourselves that the excess capital would be used sort of you can think about half of that capital being earmarked for debt reduction, 1/4 of that capital being earmarked for reinvestment in the business and another 1/4 of that being opportunistically used for things like share buybacks. Particularly... Operator: Your next question comes from Graham Ryding from TD Securities. Graham Ryding: Lucas, just to clarify on that last piece, you're targeting 2.5x over a 3-year period. Does that imply end of 2027 as sort of the time line for that? Lucas Pontillo: No. I mean our 3-year plan is effectively starting this year, right? So you'd be end of 2028 in terms of that time line. Graham Ryding: Okay. Understood. Max, you made reference to -- when you're referring to your financial flexibility has been increased. It's one of your pillars of the strategy going forward. You said you're investigating strategic partnerships as part of that. Is there anything you can elaborate on what exactly you're referring to there? Maxime Ménard: Yes, it's a great question. So I think we've made a fair assessment of where we have like a very strong competitive edge in terms of our ability to deploy a full multi-asset strategy. Canada is certainly one of the market that we lead and dominate in terms of being able to deploy our entire strategies. When you start to look a little bit on the international, whether you go to Japan or even like the U.S. or even some larger, more competitive markets. we're looking for opportunities to partner up with some of the large multi-asset players to sort of fill in some of our strategies and add-on. It's not unlike the rest of the industry where we've seen some of the very big player in the world coming together with Blackstone, BlackRock going to others. I think there's a clear consolidation from a solution strategy standpoint. And I want to make sure that we capitulate on introducing these strategies and also have the ability to allow some of those perhaps to access the Canadian market. So one of our strengths when you look at it as a nonbank independent multi-asset asset manager or single-purpose organization -- we focus on adding value from an asset management and tactical asset allocation and multi-asset strategy. And there's very few left here in Canada. So we're trying to look at how we could partner throughout the world with whether it's insurers or large conglomerates that would benefit from our exposure and expertise. There's still a continued effort in growing organically in these different markets. But as we've seen over the last probably 2 to 3 years, there's been a heavy consolidation towards $1 trillion asset manager. And so I just want to make sure that we are aware and capitulate on those opportunities. Graham Ryding: So that would -- just to be clear, that would be more like a sub-advisory-type mandate within a multi-asset strategy from a larger institution? Is that where Fiera would fit into that? Maxime Ménard: It could take different fronts. It could take sub-advisory, it could be a product, it could be equity component. There's a number of things. I mean I think there's really 3 prongs when you look at it. It could be commercial driven strictly. It could be more strategic or it could be equity if we get to a point where we really feel that there's an absolute fit from a geographic and solution standpoint. Operator: Your next question comes from Jaeme Gloyn from National Bank Capital Markets. Jaeme Gloyn: First question, I just wanted to dig into the, I guess, distribution strategy over this 3-year plan. Maybe you can highlight some of the key shifts in the strategy for the next 3 years that we should expect to see relative to the business, I guess, as is and what has been tried in the past in terms of trying to drive stronger distribution penetration and flows as a result. Maxime Ménard: Yes. Good question. So in Canada, what we did over the last few years is we've really gone to a more specialty distribution model. So we have a team that does servicing, which means effectively they focus on our existing asset base and try to add value through complementing their offering, giving consultative approach and where and when possible, add cross-sell opportunities. And I also have a dedicated team of people who are split between private and public markets. I think the concept of being generalists in the market where it's becoming evenly complex and where platforms are more and more broad makes it very hard for someone to be able to add value at a certain level. So we in Canada have split sales in private and public markets, and we've seen a huge pickup in terms of appetite. Also the incentive in terms of how we get rewarded for success has been a huge driver. And I'm going to continue to deploy the strategy in the U.S. and other markets where I think that we may have a limited product shelf compared to what we have in Canada, but we want to make sure that we identify where we have an opportunity to win and we double down and put a lot of effort on this. So when you think about Canada, it's going to be continue to offer the full breadth of our offering, including tactical asset allocation, multi-asset base. And when you get into the U.S., the competitive and the speed of product development is so fast that we have to have dedicated individuals with really, really strong ties to the decision-makers to make sure that we have an ability to get some traction. So it could be through financial intermediaries. It could be through distribution. Like when we think about the U.S., a lot of the distribution is consolidated around very big consultants, very big intermediaries, wirehouses, insurers, and we have to make sure we have the right strategy to continue to push through this. We've had some success, but I think we have an opportunity to pick this up. When we think about Europe and EMEA, we've had some really, really good success in the Middle East. And I think we are in a great discussion with some of the very large players about insurance and whatnot. And then -- so in that sense, what you could expect to see is continued regionalization from a leadership standpoint. But from a distribution standpoint, we may split private and public markets to make sure we have the right level of sophistication of conversation when we get to the final or close to the final pitch. Lucas Pontillo: And if I can just add some numbers to that for context. I mean, if you think about sort of what the year 2025 looked like in terms of the focus of the model that Max was talking about in Canada, when you look at our gross flows for the year, we generated new business of just over $5.1 billion, while $3.8 billion of that came from Canada. So a high level of conviction that effectively exporting that same focused strategy to the other regions of the world should be able to yield the same type of results that we had in Canada this year. Operator: We have no further questions registered at this time. I will turn the call back over to Natalie for closing remarks. Natalie Medak: Thank you, everyone, for joining us this morning. Please feel free to reach out if you have any other questions. Operator, we can end the call now. Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect. Thank you.
Ian Michael McLaughlin: Good morning, everyone. Thank you for joining us for Vanquis Banking Group's Full Year 2025 Results. I'm Ian McLaughlin, the Chief Executive Officer of Vanquis, and I'm joined this morning by our Chief Financial Officer, Dave Watts. Dave, good morning. David Watts: Good morning. Ian Michael McLaughlin: I'll start with an overview of our performance in 2025. Dave will then take you through the financial results in more detail, and I will then come back to talk about the strategic priorities, and Dave will then end by covering our financial guidance through to full year 2027. After that, as usual, we'll be happy to take your questions. If I can take you to Slide 4. You can see how our full year performance compares against both the prior year and against the guidance that we set out at the start of 2025. And the headline here is simple. We delivered a performance that was at or better than all of our key commitments for the year. Most importantly, after the turnaround of the business in 2024, where we delivered a loss before tax of GBP 138 million, we returned to profitability in 2025 with a profit before tax of GBP 8.3 million. During the year, we also took the opportunity to deploy capital to accelerate balance growth, which will support our future profitability. And you can see that in our customer interest-earning balances, which ended the year at GBP 2.8 billion, ahead of our guidance of greater than GBP 2.7 billion and therefore, well ahead of our original 2025 goal of greater than GBP 2.6 billion. Net interest margin was 16.8%, reflecting a deliberate shift in mix towards lower-risk secured lending in Second Charge Mortgages, as we've signaled previously. Excluding this, NIM actually increased by 50 bps, reflecting our continued pricing discipline in Cards and Vehicle Finance. Our cost-to-income ratio was in the high 50s, so again, in line with guidance and reflecting our improving operating efficiency. And return on tangible equity was 2.3%, so consistent with our guidance for a low-single digit return. Following the AT1 capital issuance in the second half of the year, our Tier 1 ratio increased to 19.3%, putting us in a strong position to support the next phase of our strategy. So while there's always more to do, we have delivered what we said we would in 2025, growing in a resilient and sustainable manner with margins and costs under tight control. After what is now 5 quarters of consecutive book growth and 4 quarters of consecutive profitability, you can see that the actions that we've been taking over the past 2 years are translating into more predictable and sustainable financial outcomes. Slide 5 sets out the underlying actions we've taken to deliver the results that I've just discussed. Now I'll step through a few of these. Firstly, as I've already mentioned, we accelerated our balance growth, but we did so with discipline, actively managing mix to maximize returns on deployed capital. Secondly, we continue to make strong progress on Gateway, our technology transformation program. The fundamentals of Gateway are now substantively delivered and the program will complete this year. We also delivered further transformation cost savings with efficiency gains creating positive operating leverage as the business continued to scale. Credit quality remains robust, reflecting continued customer resilience and responsible lending across all our portfolios. And we continued to develop our customer proposition, a bit more on that in a moment. Taken together, these actions will allow us to continue to transform the bank. Slide 6 then highlights the progress we made across our customer proposition and on risk management during 2025. We continue to strengthen all our product offerings, balancing growth, risk discipline and good customer outcomes, and we got busy. In Credit Cards, for example, we launched 66 new product variants, including credit builder, balance transfer and other promotional offers. We also expanded our retail savings range, including new ISAs and the Snoop-branded easy access account, strengthening deposit growth, product flexibility and cost-efficient funding. And Snoop continues to play an increasingly important role in our ecosystem, helping customers with their money management. Active users were up 12%, to 328,000, including 43,000 Vanquis customers. We also grew our partnership with Fair Finance. In 2025, this helped 20,000 applicants to identify around GBP 34 million in potential annual benefit entitlements. That's an average of over GBP 1,750 per annum per person. So genuinely helping people transform their financial lives for the better. We also delivered a profile raising campaign to refresh and relaunch the Vanquis brand with our target customers, including our successful partnership with the Professional Darts Corporation. We also introduced a new consistent customer satisfaction measure across the group during the year, giving us a more data-driven view of customer experience. And our overall CSI customer satisfaction score averaged 83.7 in 2025, and this is supported by consistently excellent Trustpilot ratings across both Vanquis and Moneybarn brands. Fundamentally, of course, Vanquis is a risk management business. We have, therefore, prioritized making meaningful improvements to our risk management capabilities. In Vehicle Finance, we developed a new credit decisioning platform, improving the speed, consistency, and quality of our lending decisions, and this contributed to the improved risk-adjusted margin performance in the business. In Credit Cards, we made many improvements to our credit risk scorecards through the year and to our affordability assessments. And we are upgrading the decisioning platform alongside other technology improvements, which I'll turn to in more detail on Slide 7. We launched our new mobile app as part of an enhanced digital onboarding journey, underpinning our clear focus on improving customer engagement, conversion and retention. Last February, we centralized around 30 billion rows of customer product and decisioning data onto a single modern platform, significantly strengthening analytics, insight, and decision-making capabilities. In Operations, we expanded the use of digital tools, AI and self-service functionality across key processes, again, significantly improving efficiency. And the impact here is tangible. Complaint handling costs, for example, were down 10% and fraud losses fell by 25% in 2025, as a result of these improved processes. And we're applying this disciplined approach across every aspect of our business. A good example, we've reviewed our property footprint and reduced space at our Bradford headquarters by over 70%, 7-0 percent, as we modernize and right-size to align with current and future workplace needs. Finally, all we have delivered is down to the engagement and efforts of our fantastic people, and we were pleased to see that colleague engagement improved significantly through the year, up 13 points, to 73%. And that improvement reflects growing confidence in the direction and performance of our business and resulted in Vanquis being certified as a Great Place to Work, for the first time ever. As I said earlier, there's more to do, and we are not finished yet. But hopefully, you can see that the progress made in 2025 is tangible, and we are seeing a positive response from colleagues and from customers. Alongside this internal progress, I should note that the external headwinds of 2024 and 2025 have also largely receded, for example, elevated FOS fees from unmerited CMC complaints, Dave will touch on that shortly. And I'd remind you that our exposure to motor finance commissions is differentiated and any potential liability remains limited for Vanquis. Overall, the 2 words I've used most to describe 2025 are discipline and delivery. Both of these will serve us well as we take this business forward from here. With that, I'll now hand over to Dave to take you through the financials in more detail. Dave, over to you. David Watts: Thank you, Ian. I'm pleased to present our results today, given the significant progress we have made in 2025. Slide 9 summarizes our headlines before I go into more detail. Our return to profitability was achieved by growing income, reducing costs, and importantly, the nonrepeat of the notable items that we reported in 2024. This is evidence that the financial impact of the business turnaround is firmly behind us, and we were able to focus on sustainable, profitable growth in 2025. With this backdrop, we accelerated balanced growth to build scale and drive long-term profitability. This was aided by our first AT1 issuance in October last year, which freed up additional capital to redeploy for growth. This growth comes with upfront IFRS 9 impairment charges, although credit quality remained strong and write-offs decreased. We maintained our cost discipline, delivering ongoing cost savings in excess of our commitment for the year. At the same time, we continue to invest in improving the fundamentals of the business, including our technology capabilities by the Gateway transformation program. Following the new FOS fee charging structure implemented in April last year, we saw a material reduction in CMC claims to FOS, resulting in much lower complaint costs in 2025. We also continue to dynamically manage liquidity and funding. We diversified our liquid asset buffer investments to generate higher returns. We introduced new savings products to provide more stability and flexibility while lowering our cost of funds. As a reminder, our exposure to motor finance commissions is differentiated and any potential liability is limited. While the final scope and mechanics of the FCA compensation scheme remains subject to change, we did recognize a GBP 3 million provision in 3Q '25. You can find further details on why our exposure is differentiated in the appendix. Going into more detail, Slide 10 summarizes the group's performance for 2025. We generated a profit from continuing operations of GBP 8.3 million, supported by a 5% growth in risk-adjusted income and a 33% reduction in operating costs. Excluding notable items, costs were down 9%, meaning the group generated 11% positive cost/income jaws. After factoring in tax, the profit from discontinued operations related to the sale of personal loans business and AT1 coupon costs, profit attributable to shareholders was GBP 8.2 million. At the same time, we grew customer interest-earning balances by 22%, to over GBP 2.8 billion. On Slide 11, you can see what this meant for our financial KPIs. GBP 8.2 million of bottom line profits translated into a return on tangible equity of 2.3%, in line with our guidance. This was driven by an improvement in the cost/income ratio to 58.4%, again, in line with guidance. As we previously guided to, asset yield, NIM and total income margin, all reduced, driven by the deliberate growth in lower margin, lower risk Second Charge Mortgages. Reduction in risk-adjusted margin to 11% was smaller, only 80 basis points, reflecting 110 basis points reduction in the cost of risk. With greater clarity on the cost of risk across our products, we intend to focus on risk-adjusted margin as a core metric going forward. The NIM drivers are set out on Slide 12. A small 20 basis points reduction in asset yield was more than offset by 50 basis points improvement from lower funding costs. This net positive outcome was more than offset by 170 basis points dilution due to a shift in mix towards Second Charge Mortgages and a 30 basis points reduction from a larger liquid asset buffer. As a result, NIM decreased at 16.8%. However, to highlight the group's pricing discipline, excluding Second Charge Mortgages, NIM increased 50 basis points year-on-year, to 19.4%. After factoring balance growth, net interest income rose by 3% in 2025. And importantly, it rose by 6% in the second half of the year. Slide 13 details our customer interest-earning balances, which increased to over GBP 2.8 billion. Credit Card balances increased 19%. This reflected both new customer acquisitions and increased card utilization by existing customers. Vehicle Finance balances reduced by 8% as we manage new business growth while we develop the new onboarding and servicing platform. Second Charge Mortgages continue to grow strongly, increasing by over GBP 380 million. Gross and net receivables increased by 21% and 25%, respectively. Importantly, we now have established debt sale programs in both Credit Cards and Vehicle Finance with the Vehicle Finance post charge-off asset continuing to reduce following the completion of a number of debt sales. Further details are set out in the appendix. Slide 14 summarizes the year-on-year impairment charge movement. Bottom line, impairment reduced by 2%, driven by a 5% reduction in gross charge-offs. Within this, Credit Card gross charge-offs reduced by 19% to a gross charge-off rate of 12.7%. This highlights the improving quality of the portfolio. Back-book credit risk improved with fewer negative stage migrations and lower impairment releases from write-offs and debt sales. In summary, the overall group cost of risk has reduced to 7.3% with all products coming within guided expectations, reflecting our responsible approach to lending. As you would expect, we anticipate impairment will increase in 2026, in line with balanced growth and have slightly refined the cost of risk guidance by product on this slide. In the appendix, we have included a slide on expected credit losses and coverage ratios. ECLs reduced 7% despite a 21% increase in gross receivables, reflecting increased Stage 1 and Stage 2 balances and a reduction in Stage 3. As a result of this improving credit quality, the group coverage ratio reduced to 8.4%. We remain comfortable with the current coverage ratio based on a clear understanding of the credit risk of our portfolios. Turning to operating costs on Slide 15. Total operating costs fell 33%, primarily due to the absence of 2024's notable items. Costs, excluding notable items, reduced 9% with transformation savings and lower complaint costs more than offsetting growth and inflation rate increases. We delivered GBP 28.8 million of transformation cost savings in 2025, well above the GBP 15 million we committed to. This included an acceleration of some Gateway technology-driven savings into 2025. Complaint costs reduced 44%, to GBP 26.6 million. This amount includes a GBP 3 million provision for motor finance redress. Excluding this provision, total complaint costs reduced to GBP 7.5 million in the second half, a much lower run rate than previously. As set out in the appendix, the material drop in FOS referrals from CMCs from the introduction of the new FOS charging structure in April was the main driver of the reduction. We did accrue discretionary staff costs, having not paid bonuses to colleagues for the last 2 years. This, alongside a 10% increase in customer-focused FTE drove a 2% increase in staff and outsourced people costs, albeit outsourced FTE reduced by 28% in the year. We have embedded cost discipline across the business. We expect operating costs to reduce further in 2026 and in 2027, driven by both Gateway and broader operating efficiency enhancements. Let me now touch upon the performance of each of the lending products, starting with Credit Cards on Slide 16. The business delivered a profit of GBP 38.2 million, up 27%. This is while growing interest-earning balances by 19%, which drove a 13% increase in impairment charges due to the expected IFRS 9 impairment provision on origination. At 10.2%, the cost of risk was at the lower end of the guided range, with 19% lower gross charge-offs as mentioned earlier, highlighting the improved quality of the book. With the portfolio having reduced 10% in 2024, balances at the end of 2025 were 7% higher than 2 years ago. The improved quality has been driven by the actions taken by the new experienced Cards management team, following the granular vintage analysis review. Asset yield declined 80 basis points, to 27.1%. This was driven by the weighted average APR of the portfolio reducing to 33.7% due to the increased take-up of balance transfers and 0% promotional offers, which increased to 15% of the portfolio. These offers are effective acquisition tools that are expected to drive further interest income over time. Excluding these offers, the weighted average APR increased to 39.6%, reflecting our disciplined risk-based pricing strategy. Combined with lower funding costs, NIM only reduced 50 basis points to 23.3%, while risk-adjusted margin was 15.6%. Overall, we are well positioned for continued profitable growth. We would, however, expect balances to grow at more moderate levels in 2026 and beyond. Slide 17 covers Vehicle Finance. Balances reduced by 8% as we manage new business volumes ahead of the new platform launch, which will be delivered by Gateway in the second half of 2026. The business remained loss-making, although the loss reduced materially year-on-year to GBP 12.7 million. Repricing actions lifted the weighted average APR to 29.1%, boosting both asset yield and NIM by 0.7%. Combined with a reduction in the cost of risk to 5.6%, risk-adjusted margin increased to 7.4%, driving a 31% increase in risk-adjusted income to GBP 54.2 million. Operating costs reduced by 17% to GBP 66.9 million. However, the resulting cost/income ratio of 69.9% remains far too high. Post the launch of the new platform, building scale and automated processes will be the key to improving efficiency. Second Charge Mortgages continued their strong growth as shown on Slide 18. Balances reached just under GBP 600 million. Risk-adjusted margin increased to 2.8%, and the business delivered a profit of GBP 5.4 million. With a weighted average loan-to-value on the combined First and Second Charge Mortgages of just over 70%, the cost of risk remains low. As a secured product, Second Charge Mortgages have a low RWA density, driving attractive returns on capital. We have rapidly become a market leader in this space. Through strong origination partnerships, we remain excited about its growth potential with the overall market originations growing annually at mid-teens percentages in recent years. Slide 19 shows the streamlined corporate center following the reallocation of both funding and operating costs of product lines. Excluding notable items, the corporate center has reported a loss of circa GBP 20 million in each of the last 2 years. It includes returns on the liquid asset buffer, interest costs on unallocated Tier 2 capital, and operating costs from retail savings and Snoop. Liquidity and funding remain core strengths, as shown on Slide 20. At year-end, we held GBP 653 million of excess high-quality liquid assets over the regulatory minimum. We continue to improve returns from the liquid asset buffer with GBP 250 million now invested in U.K. gilts. Retail deposits have grown to nearly GBP 3 billion, representing close to 90% of total funding. We have diversified our deposit mix, introducing both fixed and easy-access ISAs, as well as Snoop branded easy-access accounts. The former provides increased stability in the retail funding base, while the growth in easy-access accounts provides more pricing flexibility and has contributed to the reduction in the cost of funds over the last 12 months. We also tendered GBP 58.5 million of our outstanding Tier 2 capital. This further reduced funding costs and was part of a broader capital optimization transaction, which is summarized on Slide 21. At the end of the third quarter, we successfully issued GBP 60 million of AT1 capital and concurrently executed a Tier 2 tender. This transaction had no impact on the total capital ratio as the Tier 2 capital was replaced with AT1. The group retains a significant total capital surplus above its regulatory minimum. The key to the transaction was that we were able to improve the efficiency of our Tier 1 capital stack, increasing the surplus above the regulatory minimum, which is previously all held in CET1 capital. With this transaction, the binding capital measure for the group is now the CET1 ratio. With the regulatory minimum 230 basis points lower than the Tier 1 minimum, this transaction has freed up additional capital to deploy for profitable growth, which we accelerated in 2025 as can be seen on Slide 22. The CET1 capital ratio reduced by 2.3%, to 16.5%, as a 25% increase in net receivables equated to GBP 304 million of RWA growth. This was partially offset by the capital benefit from the statutory profit in 2025 and the personal loan sale. We expect profits to become a more significant positive contributor to the ratio in future years. At 16.5%, the group retains a surplus of 5.2% above our 11.3% regulatory minimum. This equates to GBP 107 million of surplus CET1 capital. The group's disclosed and undisclosed capital requirements were also reviewed by the regulator in the second half of last year, which gives us confidence to reduce our target ratio to greater than 14.5%, which I will cover later. Ultimately, our capital strength and the expectation of increased future profits supports our continued growth plans and the execution of our strategy. Finally, before I hand you back to Ian, given that bank is now a cleaner, more stable and predictable business, I would expect the level of detail required in our content to reduce in future presentations. Ian will now take you through our strategic priorities before I return to summarize our financial guidance. Ian Michael McLaughlin: Dave, thank you. I'd now like to take you through the market opportunity and how we will complete what is years 3 of our current strategic plan that will take us through to 2027. So Slide 24 shows how we frame our strategy in terms of our purpose and our ambition. Vanquis, as you know, is a specialist bank with a clear social purpose, focused on serving customers who are underserved by mainstream lenders. Our purpose is to deliver caring banking so our customers can make the most of life's opportunities. Now that means different things to different people. It might be accessing credit when it matters most, improving your credit profile to unlock better options or simply feeling more in control of your money. Caring banking is about how we show up for our customers whatever stage of their financial journey that they happen to be at. And it means understanding customers' needs, earning their trust, supporting them to make healthy financial choices, and being there for them when it matters most and when they need us most. Our ambition then builds upon that purpose. We aim to be the U.K.'s most trusted and inclusive specialist bank, unlocking financial opportunity for underserved customers and helping them thrive. And that ambition is very deliberate. It recognizes the scale of the market we serve and the responsibility that comes with serving these customers. This brings me to our strategy on Slide 25. And this is deliberately simple and practical, built around a new 3-pillar framework: serve more, serve responsibly, and scale profitably. And this is not a change in direction for us. It's just a clearer articulation of how we run and grow the business as we continue to move from turnaround towards sustainable growth. To give some more depth to these 3 pillars, serve more is about widening access to responsible affordable credit and deepening long-term customer relationships. Serve responsibly ensures that growth is predictable, well controlled with strong affordability, disciplined risk decisions and consistently good customer outcomes delivered. And scale profitably is how we turn that growth into returns through the disciplined cost control, capital allocation, and margin management that you are seeing us to deliver, and as Dave has just discussed in detail. Gateway underpins all 3 of these pillars by providing a modern, efficient technology platform to grow on and supports a lower run rate cost base. And together, these pillars link growth, control, and returns, and provide the framework that guides the decisions that we make and execute day by day. Looking now at Slide 26. This addresses one of the questions that I'm most regularly asked, which is what is the total market opportunity that Vanquis is focused on delivering to? And what this shows you is the U.K. has a large and persistent underserved adult population. Our research indicates that over 24 million U.K. adults face barriers to accessing mainstream credit. This is, therefore, not a niche segment. It represents more than half of the adult population who have an active credit profile. And importantly, this is a structural feature of the U.K. market rather than a cyclical one. At Vanquis, we exist to serve this segment responsibly, providing access to credit where it's affordable, appropriate and introducing customers to other solutions if we can't immediately serve them. Our existing product set allows us to address a large proportion of this market within our current risk appetite within Credit Cards, Vehicle Finance and Second Charge Mortgages, as Dave has just described. On Slide 27, you can see how we think about the market opportunity through to 2027 and how importantly we will grow within it in a disciplined way. We plan to grow balances across all our asset products, but that growth will be deliberate and phased. Credit Cards will continue to grow, but at a moderated pace compared to the 19% in 2025. Vehicle Finance growth is more back-ended, linked to the completion of our new onboarding and servicing platform under Gateway. From the second half of 2026, Vehicle Finance will become an increasingly cost-efficient line of growth, facilitated through the strong broker relationship that we have retained. Second Charge Mortgages plays a different role in our mix. As you know, this is a secured product with a lower risk weight density. It's become very successful for us, and we expect the rate of growth to continue at broadly similar levels. As this drives a mix shift over time, our group risk-adjusted margins will naturally change to reflect this, but the business we are writing remains attractive across all products and consistent with our return targets. Overall, what you're seeing us do is about balance, growing but managing mix and quality carefully so that we convert that growth into sustainable returns. Slide 28 is where serve responsibly underpins our ability to deliver the strategy with that discipline. And responsible lending is not a constraint on growth for us. It's actually what ensures that our growth is sustainable and predictable. In Credit Cards, more granular risk-based pricing allows us to widen access to credit while ensuring pricing accurately reflects individual risk and affordability, and that allows us to grow the book while maintaining credit quality and customer outcomes. In Vehicle Finance, you can see we've rebalanced the APR mix and tightened alignment between risk, pricing, and returns. And again, this will support controlled growth as the platform scales. And the Second Charge Mortgage product is primarily used for debt consolidation, enabling customers who have lower monthly outgoings and resulting in improved financial resilience for them. Loan-to-value ratios remain well controlled, as Dave mentioned, and that underpins the strong returns as this portfolio continues to grow. And these disciplines support responsible growth, protect customer outcomes and deliver predictable performance across credit cycles. Slide 29 shows how we support customers to improve their financial health, and Snoop is central to this, as I've mentioned. It acts as a key enabler of our inclusion strategy and long-term growth model. Using open banking data and AI, Snoop helps customers manage everyday money, helps them build confidence, and develop healthier financial behaviors. And for many users, this translates into meaningful savings over time through better bill management, smarter spending, and easier supplier switching. For those customers who are not yet ready, or we're able to offer credit right now, the program we've delivered with Fair Finance provides a responsible alternative for them. And the Vanquis Foundation and our community partners extend this support, investing in financial education, inclusion initiatives, and accessible debt advice to build capability with customers earlier and reduce long-term financial exclusion. Turning to Slide 30, and again, building on Dave's earlier comments, our banking license gives us a clear and durable funding advantage. Retail deposits provide a stable, low-cost funding that many specialist lenders do not have access to. And through 2025, as you've seen, our deposit costs reduced steadily. This reflects a combination of lower interest rates and the shift towards lower cost savings products. You can see this clearly in the funding mix on the slide. This has allowed us to price competitively, protecting margins and improving overall funding efficiency. We will continue to diversify and optimize our deposit base as we look ahead, expanding flexible savings products, and using Snoop as a scalable distribution channel to support efficient, low-cost deposit-led growth. In short, our funding advantage strengthens our margins, improves resilience across the cycle, and underpins our ability to grow profitably over time. Now coming back to Gateway on Slide 31. It's been an underlying theme of my remarks as it is the catalyst that underpins our long-term growth and innovation agenda. It's a fundamental reset to address the previous underinvestment in technology, which this business was suffering from. It will enable us to operate as a modern, efficient and digital-first bank and to scale. Importantly, as you can see on the left-hand side of the slide, the majority of Gateway's core capabilities have already been delivered with clear progress across customer experience, control, and resilience. Gateway is now an operational platform with regular feature releases and improvements. For example, we've already launched a chat channel for customers and are deploying agentic AI agents to improve service quality and to reduce our costs. Looking ahead, the last major components of Gateway complete in 2026, and the benefits then become structural through fewer systems, streamlined processes, and improved automation, which in turn means improved resilience, lower run rate costs, and better operating leverage. In short, Gateway is the strategic enabler of our business, allowing us to complete those 3 pillars of serve more, serve responsibly, and scale profitably. Let me pause there as we'll come back to expand further on our next 3-year strategic cycle at a future date. Our focus for now remains on disciplined execution and delivering 2026 as planned. With that, I'll now hand back to Dave to talk through our guidance. David Watts: Thanks, Ian. Slide 33 summarizes the guidance we have laid out this morning. Importantly, we remain on track to deliver our statutory ROTE guidance of low double-digits for 2026 and mid-teens for 2027. However, we expect profit to be higher in the second half of the year compared to the first half as balances mature and interest income builds. We now expect balances in 2026 to exceed GBP 3.3 billion and to increase to greater than GBP 3.7 billion by the end of 2027, as we balance growth with the improved profits required to deliver the higher ROTEs we are targeting. The balanced base and the deliberate change in product mix that Ian has talked about, including a greater proportion of Second Charge Mortgages, is expected to result in a continued reduction in NIM, to around 15.5% in 2026 and 14.5% in 2027. Now that we have a greater clarity on the cost of risk across our products and to better align to how we assess the performance of the respective products, we've also introduced risk-adjusted margin guidance. This is expected to reduce both in 2026 and in 2027, but remain above 9.5% and 9% in the respective years. Again, this is driven by the increasing proportion of Second Charge Mortgages. Alongside income growth, continued cost discipline will be a key lever of the improving profit trajectory over the next 2 years. This will drive cost/income ratio down from the high 50s in 2025 to the high 40s in 2026 and the mid-40s in 2027. Turning to Slide 34. The bridge on the left-hand side provides an indicative view of how we expect to deliver mid-teens ROTE by 2027. As you can see, risk-adjusted income growth is a meaningful contributor, but continued cost takeout is also a significant lever. This will be achieved through ongoing transformation savings, including an additional GBP 23 million to GBP 28 million from the completion of Gateway and an ongoing focus on cost discipline, driving further operational efficiencies across the group. At the same time, we will continue to invest in our business. As set out on Slide 35, we will continue to deploy capital for growth near term. As I have mentioned, we are now comfortable operating with a CET1 ratio guidance of greater than 14.5%. This follows the capital optimization transaction that we executed last year, the reducing risk profile of the business and the outcome of the recent regulatory review of the group's capital requirements. The existing capital capacity alongside the capital accretion we expect to generate from increased profits over the next 2 years means that we are well positioned to deliver the growth we are targeting. Having achieved what we said we'd do in 2025, we remain laser-focused on the execution of our plan and are fully committed to delivering sustainable long-term value for our shareholders. And with that, I'll hand you back to Ian. Ian Michael McLaughlin: Thank you, Dave. Turning to Slide 37. Let me close by bringing together our key messages from today. Vanquis is built on a set of clear and durable strengths. We operate in a large and structurally underserved U.K. market with persistent demand for responsible credit. We have a customer proposition designed to help them to build better financial resilience. Our banking license provides a cost-effective, deposit-led funding model and Gateway gives us a modern, efficient, and scalable technology platform. And these strengths are brought together through a clear and practical strategy, as I've described, with serve more, serve responsibly, and scale profitably. The strategic framework that we now have in place will allow us to build on the progress that you can see in these 2025 results. We can continue to grow sustainably, strengthening our franchise and delivering attractive long-term returns. That is how we will create long-term value for customers, colleagues, and our shareholders. Thank you for listening. I will now hand back to the operator to open the line for questions. Operator: [Operator Instructions] Our first question is from Gary Greenwood from Shore Capital. Gary Greenwood: I've got 3, hopefully not too long ones. So the first one was on 2CM and the sort of strong growth you put in on there. So just trying to get a better understanding of what your secret sauce there is in terms of how you're taking market share? Are you just pricing more aggressively? Or is there something else that's allowing you to grow faster than the market? Second one on Vehicle Finance is, when you're expecting that business to move into profit, I presume, when sort of Gateway is being fully delivered, but does that mean profitability full year '26? Or are we looking at full year '27? And then lastly, on costs, I think you said costs would come down in each of the next 2 years, just looking at consensus that's got costs coming down in '26, but going up in '27. So it looks like costs forecasting to come down in 2027. I'm just wondering where you think the sort of absolute base the costs will be, because I'm guessing they'll probably grow beyond 2027. I'm just trying to get an idea of the trough level. Ian Michael McLaughlin: All right, thanks Gary. First out of door with a question as always, so much appreciated. Let me take the first one on Second Charge Mortgages. As you said, it's been a really good growth story for us, and we expect that to continue. We've got 2 forward flow agreements in place that are covering nearly 20% of the market now, and it's a growing market. So we're being very careful about pricing. So we're not pricing to win business. In fact, we're quite -- we monitor that on a very regular basis, and we're holding that very firm. But it is a growing market. There are some new competitors coming in that create a bit of price pressure. But overall, we are growing in a growing market, and we're very happy with the way that's going for us. And about 75% of the customers that we've taken on are using it for some proportion of debt consolidation. So it fits really nicely with the purpose that I've just talked about. So Dave, anything you want to add on Second Charge? David Watts: Nothing else really. Ian Michael McLaughlin: Yes. So we're onwards and upwards with that. But there is a really important point here. We'll allocate our capital to where we think we're going to get the best return. So it's a balance between the asset products on an ongoing basis. And that then brings me to Vehicle Finance. As you've seen, we've moderated our growth quite carefully through 2025 in advance of that Gateway platform build that I talked about in my remarks a little while ago. That will really be the catalyst for scalable profitable growth, but we are looking -- you can see in our numbers that we did price up a little bit in that market even through 2025. So we're looking at how quickly can we get it to profitability through this year. And then there's a real step-up that happens when the cost to serve those customers and process that business through our lovely brokers comes down as we get Gateway's Vehicle Finance platform in place. But again, Dave, anything you want to add on that one? David Watts: Yes. Couple of things to add there, Ian. You've seen balances came down by 8% in 2025 as we managed our new customer business. That will continue that same sort of rate in the first half of this year, 2026, but that should stop at that point and start as the new Gateway application comes on board, start growing towards the tail end of 2026 and grow further into 2027, which will be the real catalyst for growth in our profitability in the Vehicle Finance business. Ian Michael McLaughlin: But, Gary, there's a really important point here that all of our products should be profitable on a standalone individual basis. So that's what we're aiming for. So if we're not actually there already as we are with Cards and Second Charge Mortgages, we've certainly got a plan to get there as soon as possible. So I think that probably covers that one. Dave, do you want to do costs? Obviously, that's been a big feature of our results over the last couple of years. David Watts: Yes. So as we covered in the presentation in 2025, we delivered over GBP 28.8 million worth of cost savings, which exceeded our GBP 15 million of commitment in 2025. Now part of that's going to roll through into '26 numbers. We're also committed to delivering another GBP 23 million to GBP 28 million of Gateway savings in 2026. The complaints numbers you saw have come down in the second half year to GBP 7.5 million. We'd like that to be at that level or slightly lower as we go through into 2026. There's other aspects of operational efficiency we're still looking at. whilst at the same time, we are still continuing to invest in the business as we go further forward. So as we've laid out, we expect '26 cost to come down from '25. '27 also be lower than '26, but we're not going to guide on an absolute amount of cost. Ian Michael McLaughlin: And all I'd add to that one, Gary, is, look, there's that old adage about you can't cut yourself to greatness. So there is definitely opportunity for us to take some costs out of the business, and we've done that and done that in a very disciplined way. I think we've beaten every single cost objective that we've put out since Dave and I started. And so you can -- that's something that we're good at, but it's not something we particularly enjoy. We want to get into a cycle where we're investing into the business. But how we invest will be much more around areas like data, like credit risk and into technology with benefits from AI will flow through over the next couple of years as well. So I think we're in a good place on costs, but we will continue that discipline of making sure we're investing where it generates a return. Gary Greenwood: Just to clarify, will '27 be the sort of trough for costs and costs will grow thereafter? David Watts: Gary, I'm going to stick to what we said so far, at '27 will be lower than '26. It comes down to what our forward-looking strategy would be. So I think we'll come back to the market probably next year. Ian Michael McLaughlin: Thank you, Gary. [ Gabriel ], have we other questions? Operator: Our next question is from Rae Maile from Panmure Liberum. Rae Maile: Rae Maile from Panmure Liberum. Two rather bigger-natured questions. Firstly, can you talk a little bit about the regulatory environment these days? Obviously, shareholders will know that regulation has been the bugbear of the non-standard market for many years. I wonder how has the regulatory environment developed over a period of time? And certainly, how has the company's relationship with the regulator changed over the last couple of years? And then secondly, Ian, you touched on the question of competition in Second Charge Mortgages. Could you talk more generally about the competitive environment that the business is facing, please? Ian Michael McLaughlin: Thank you, Rae. Two really good questions. Let me take the regulatory one first, as I probably with our Chief Risk Officer and Dave, again, who spend more time in front of regulators than anyone else in the business and rightly so. Look, my view is we've got a very supportive relationship. It's challenging, as you'd expect. I'm a firm believer and I've said this for decades of my career that you get the regulation that you deserve in the end. And I think regulators are seeing that what we're doing is well grounded in good customer outcomes, that we're trying to serve a market that we define. As you've just seen the numbers that we presented, there's a big underserved base out there that need help and that supply/demand equation is out of whack at the minute. There's more customer demand for less standard credit than there is supply into that market. So that's what underpins our investment thesis. And our purpose, which as I've described, is grounded in helping those customers when they often struggle to get help from other places. I would comment on as well as FCA, it's PRA and then Treasury have been incredibly supportive as well. So there's a big government agenda, obviously, behind this, which I think is in our favor, too. And you've seen tangible outcomes from those relationships. They're not just a nice fluffy thing in itself. It's actually about what changes as a result. Dave might want to comment on PRA and the Prudential Regulation in a second. But we certainly saw FOS changes and CMC charging changes, which were, I think, a very tangible outcome of very constructive conversations that we and other banks had been having with Treasury. So I'm very pleased about that as well. So I think so far, so good. It's -- but the relationships are incredibly important to us going forward, hence, I guess, your question. And we'll continue to invest in them and be open and transparent and do the right things for customers, as you'd expect. Dave, do you want to comment on PRA? David Watts: Yes. Look, we have a good working relationship with PRA over the last 2 years. I think you get some productive outcomes from opening up to your regulators and be clear with great clarity of how the business is operating, what it's doing. I think that was recognized in terms of a sort of positive triennial C-SREP review with PRA at the tail end of 2025, which I commented on earlier on. So yes, I expect to have a good productive relationship with them going forward. Ian Michael McLaughlin: Rae, if I could turn then to your question on competition, and thank you, as you described it for the 2 sort of higher-level questions. I mean, back to my point about supply and demand, we've got less than 2 million customers, and there's an opportunity pool of over 20 million, say, 24 million, as we've just described. So there's a lot of room here. So there is a really good target addressable market available to us. In Cards, if I just take the product, it's pretty stable. We haven't seen anything dramatic in terms of new competitors coming in. We watch that on a daily basis. And obviously, our pricing reflects what other activity is going on around us too. But you've seen in our NIM numbers and our risk-adjusted NIM, in particular, that we're very disciplined on our pricing, and there are times that we will pull back a little bit if we do believe we're getting squeezed. 2CM, I mentioned earlier on that. But broadly, we see that there's plenty of room for us to grow. Vehicle Finance is probably the watch one because, obviously, we've got the FCA redress scheme. We'll get the details on that towards the end of March based on current plans. And we'll see what happens to that market. I would expect there to be some people will choose not to participate. As that market gets through redress and cleans up, then there may be other people that will choose to come in. We'll keep an eye on that. But as I said, the key message for us is we've got a sort of 10x customer demand opportunity for Vanquis, and that's very exciting, and that's what we're focused on delivering to. Operator: Our next question is from James Allen from Berenberg. James Allen: Three questions for me, if I can. First one, you're clearly making good strides on improving return on tangible equity. I was just wondering where you would like to get to on a steady-state basis on that metric beyond FY '27. Second question, the rationale for the AT1 being excluded in the ROTE calc. Presumably, that's just to preserve the focus on returns for common equity shareholders when looking at that metric. And then final question, my understanding is you can't necessarily promote Vanquis products over other banks on Snoop at the moment. But is there any kind of potential change in regulation that may be coming in at some point that maybe would allow you to direct more customers into Vanquis products via Snoop? Ian Michael McLaughlin: James, thank you. I'll leave the AT1 ROTE calculation one to Dave in a second, but if I start with what's our ROTE trajectory. I think what you're seeing with Dave and I and the Board and our management teams is when we commit to something, we really commit to it. So we committed to getting to low-single digit ROTE in 2025. That's exactly what we've done. We've got a clear commitment for low double-digit ROTE for this year. And then we've got a mid-teens ROTE commitment for 2027. So that's as far as we're going in terms of our commitments. Underneath that, of course, we're looking at, as we go through every day, week and month quarter of this business, we're learning as we go and we're spotting new opportunities. So we will keep that all under review. And we, as Dave mentioned earlier, I think to Gary's question, we'll come back sort of this time or early in 2027 to talk about that next strategic cycle, that next sort of 3-year phase, and we'll update on ROTE and that. But what you can expect from us for this year is an absolute focus on delivering what we've committed in terms of our ROTE guidance. And Dave, anything you want to add on that one? David Watts: No, I think you've covered it in detail, Ian. Ian Michael McLaughlin: Do you want to do the AT1 calculations, ROTE... David Watts: So James, you're correct on your understanding that part there. So I'm glad that the character we've given in the presentation has enabled you to get to that position. Yes, it's the focus on the equity shareholders. Ian Michael McLaughlin: I wouldn't add anything to that. Then on Snoop and Vanquis. Look, Snoop has been a fantastic acquisition for us on a range of levels, but the quality of the customer proposition and how we're tangibly able to show customers how to manage their money better is perfect for Vanquis, and we're seeing that penetration into our customer base grow very nicely. Snoop itself is continuing to grow, as you can see from our numbers as well. So that works well. I think your question is a very good one about what more can we do to combine those 2 things. We are in the midst of rolling out a new mobile app for our customers at the minute. And what that will allow us to do is take some of those facilities and functionality that live in Snoop at the minute and begin to get that through into the wider Vanquis customer base, which we're very excited about. Now there's all sorts of things about Ts and Cs and permissions and so on that sit behind that, that are more complicated than anyone could imagine, but we are working our way through that very well. And that -- Snoop remains as a great example of how we help customers even if they can't access credit for us. So very similar to what we're doing with Fair Finance, it sits in that "Not Yet" proposition bucket that I talked about earlier and is critical. We also brought in an amazing management team with Snoop, who we've deployed across many senior roles over the -- across the bank rather than just in Snoop, and also a fantastic data insight engine where we're able to package up insights to our customers and present them as we do quarterly. But actually, they're very useful to other businesses as to what the buying habits of this customer base look like. So Snoop continues to be a very important part of our proposition. Again, Dave, anything that you want to add? David Watts: Yes. I think as you said, Ian, the integration of the staff has been excellent for Vanquis Group. As a whole as we go further forward in the near term and the medium-term greater integration of Snoop into the Vanquis banking app is going to be one of our priorities as we look forward. Ian Michael McLaughlin: Thank you, James. Hopefully that answer your questions. James Allen: That's very clear. Operator: Our next question is from Edward Firth from Keefe, Bruyette, & Woods. Edward Hugo Firth: [Technical Difficulty] if I looked on, I think it was Slide 15, you talked -- I think last year, there were around GBP 26 million of costs related to complaint handling. I mean, over time, is that like a 0 number? Or can you give us some idea of where you think that number will fall to on a sort of annualized basis, what you think is a reasonable number? That would be my first question. The second question was -- and I guess it's slightly a Snoop related question, but a lot of the growth at the moment is coming through from Second Charge Mortgages, which is a new product that you introduced, and that sort of massively exceeded expectations or certainly my expectations anyway. Do you still look for other products? Are you still looking at other areas that you could see potential for a sort of similar startup product line? And I guess that's particularly related to Snoop, where I guess you must have very good visibility on Snoop customers and the sort of products that they may or may not need. And I'm just wondering, are you still looking at other areas where we can perhaps get a similar performance that we've seen on the Second Charge Mortgages? And then I guess the final question, and they're all sort of broadly related. I mean Snoop is doing well [Technical Difficulty] looks like it got still GBP 15 million to GBP 20 million a year, something like that. You didn't give us precisely, but I guess that's the biggest driver of centrals. Can you give us [Technical Difficulty] at some point? Or what would be needed to get us to profitability for that business? Ian Michael McLaughlin: Ed, thank you. Your line cut in and out a little bit there. So let me just repeat the questions to make sure that everyone heard them. I think I caught them. First one, costs on complaints and what's the steady state. So I'll maybe let Dave pick that up. Second one, on Second Charge Mortgages and are there other products like that? We've obviously shown that we can launch a new product into a new market and do very well very quickly. So what else are we thinking about? And then I think the third one, if I caught it right, was about Snoop costs and central costs and Snoop profitability. So I'll maybe come to Dave on that one as well. But Dave, do you want to start with the complaints? David Watts: Yes. So Ed, thanks for the question. So on Slide 43 gives a more in-depth viewpoint looking at complaints in place there. And what you will see -- I think you asked the question specifically about resource handling costs. And Ian touched earlier on in his presentation about a 10% reduction from some of the technology we've introduced through the Gateway program there. So we're making progress. We talked about the second half of the year having an overall cost of complaints, excluding the Vehicle Finance FCA commission provision in place of about GBP 7.5 million. And with better customer outcomes delivered as part of our technology upgrades, we hope that number to come down, but that will be a number we'd hope to beat in the first half of next year and the second half of next year, so that's complaint costs there. Hopefully, that's covered. Anything else to add on that, Ian? Ian Michael McLaughlin: No. I think obviously, you want every customer to be completely happy all the time. Any good business would aim for that, but there is a practical reality that there will always be a level of customer interaction, and we will always stand up and do that as well as we possibly can. So that's part of our customer focus and our proposition. So nothing more on that from me. If we take the Second Charge Mortgage example, Ed, of -- there's a market that we weren't in a couple of years ago that we're now with those 2 forward flow arrangements I mentioned, if not market-leading, certainly in the top 3. So that has gone very well for us. We've learned a lot from that. We are always looking at what our customers spend or our analysis of what their needs may be and what does that mean for other things that we could expand our proposition into. You've seen us expand into "Not Yet" as we describe it. So where do we hit our credit -- our ability to offer credit that limit and then how do we help the customers if they sit at that point in time outside that limit, so hence, the Fair Finance and Snoop conversations that we've already had. But yes, we are looking at a range of other things. We've got plenty of room to grow though in the current product set as it stands. So don't expect anything immediate in terms of next steps. This is about maturing and settling our tech platform and our new operating model that we've spent the last sort of year or 2 building and growing where we can see the demand is today as well as understanding where we might expand to in the future. So I'll not say any more on that. I don't think there's anything from you, Dave? David Watts: Just to reiterate, there is significant market opportunity in the products we actually offer to our customers at this point in time. Ian Michael McLaughlin: Agreed. And then the Snoop costs and central costs, Dave, do you want to take that? David Watts: So we've got the corporate center, which contains a number of items. You know at half year, we did a sort of recutting of our product portfolio profitability, which did move some costs from the corporate center to give a greater clarity of our Vehicle Finance, Second Charge Mortgages and Credit Cards profitability, which I think it's landed quite well. What we've got this in the corporate center is not just Snoop income and costs. It's got the -- some unallocated Treasury results. It's got the costs associated with our retail savings business and some other sort of almost immaterial central items in place there. So I wouldn't just read that as pure Snoop. It's got a bundle of items in there. As Ian covered it on the previous question, Snoop has delivered more than just purely the revenues that come with the actual business per se as a management team and how they're helping out drive the overall bank further forwards on its digitization. So hope that's helpful. But Ed, if you've got any further questions, I'm happy to take them offline with you at a later date. Operator: Our next question is from Jackie Ineke from Spring Investments. Jackie Ineke: So I'm from the credit side. We're very happy holders of your AT1s and Tier 2s, and thanks for the good results. I have a couple of questions. First of all, just in terms of capital management, you have your Tier 2 outstanding. It's got an October call date. I understand from the change in regulations that you can tender those Tier 2s before the call date. I was just wondering if you're giving that any consideration. Obviously, it's trading well above par, so it might not work in terms of economics. But if you could give me your thoughts on that, that would be great. The second question is very much bigger picture, and you've talked about the competitive environment and the opportunities. But comparing you guys to the bigger U.K. banks, you have a very differentiated strategy. And I was just wondering if there had been any approaches or any talks with any of the larger banks? I know that's not what you want to do now and you're in the middle of a very strongly performing strategy. But have you been approached? And what's going on there? Ian Michael McLaughlin: I will let you cover the Tier 2, Dave, while I think about the second question. David Watts: Thanks, Ian. Jackie, thanks for your question. You'd understand we can't speculate on such tender offers at this point in time. We do note the call date. I think what's worthwhile bringing out is we did a big capital optimization transaction at the end of last year, where we issued GBP 60 million of AT1 and bought back GBP 58.5 million of Tier 2, bringing down the level down to GBP 141.5 million. That is dealt with quite a lot of the excess Tier 2 capital we had issued in the marketplace. We still have some excess at this time, which obviously will be considered as part of what we may do later on this year. I can't add any more at this stage. Ian Michael McLaughlin: But I'm glad you're a happy holder, Jackie. That's very good to hear. On the what's going on around us in the market, we don't spend a huge amount of time sort of thinking about this really, Jackie. I mean our job, and I think hopefully, it's been very clear from previous presentations and this one is to make Vanquis into the very best entity that we can make it for our customers and our colleagues and our investors, and that's what we're absolutely focused on. Do conversations come around every now and then? Yes, if there's anything reportable at any stage, obviously, we know our responsibilities. But for now, our absolute focus is delivering to the opportunity that we've got right in front of us. Operator: I will now hand over to James Cranstoun, Head of Investor Relations. James Cranstoun: There's actually no further questions on the webcast. So I think we can hand back to Ian and Dave to close. Ian Michael McLaughlin: Okay. Well, look, thank you, everybody, for your attention this morning and for your very good questions. We always enjoy that. I know we'll see many of you over the next couple of days, so we look forward to those conversations as well. Just as I end, I'll go back to what I said in my remarks earlier, I'd really like to just thank our customers for their -- enjoying the support that we're trying to give them, and they are the lifeblood of our business, as I described. I would also like to thank everyone in the organization. It has been a torrid couple of years. We are definitely back on the path that we wanted to be on now, and that's down to the efforts of our colleagues, the support of our Board. And I'd like to thank our investors as well. Their patience, understanding, and support has been fantastic through this. And to the question earlier also to our regulators and Treasury, who've also been very helpful. So look, we're on a good path now. There's a lot of work still to do, but it's a much better position than this business was in previously. So I'm delighted about that and very grateful for the hard work. On that basis, Gabriel, I think we will end the call there. Operator: Thank you, everyone. This concludes today's Vanquis Banking Group full year results 2025. Thank you for joining. You may now disconnect your lines.
Rutger Relker: Good morning, everybody. Welcome at our full year 2025 results presentation. It's good to see so many of you joining today's webcast. I'm happy to introduce to you our CEO, Stephane Simonetta; and our CFO, Frans den Houter. Stephane will kick off the presentation with some business highlights, followed by Frans, who will give an update on our financial developments. Stephane will then share some insights on strategy in action and provide an outlook for the year 2026. After the presentation, we will give you the opportunity to engage directly with us via the Q&A session. Later today, we will make both the presentation and the recording of today's webcast available via our website. Please welcome Stephane to start the presentation. Stephane Simonetta: Thank you, Rutger, and good morning, everyone. Let's start this presentation with a few key messages about our 2025 results. First of all, it is no secret that our performance has been impacted by the continuous short-term end market softness. And during the year, we have been focusing at Aalberts in what is within our control where we could still take action, and we did some good progress in our operational excellence initiative in order to protect our margin. Very good progress in free cash flow improvement with lower inventory, lower CapEx. Very good progress. This is for me one of the key highlights in '25 with our portfolio optimization with great acquisitions and also progress in our divestment. But '25 was also the first year of the deployment of our Thrive 2030 strategy, a foundation for future growth. So in a year when on one hand, we celebrated our 50th anniversary at Aalberts, we took a lot of action to strengthen our portfolio, improve our position and navigate through the end market challenges. The results going into the numbers, and Frans will give you a more details in the financial development. So EUR 3.1 billion revenue with a negative organic growth of 2.5%, EUR 410 million EBITDA equivalent to 13.2% of revenue and sustaining good added value margin of 63%, more than EUR 360 million free cash flow, CapEx at EUR 189 million and as a consequence, an earnings per share at EUR 2.61. In terms of shareholder returns, we are proposing a stable return with a stable dividend at EUR 1.15 and starting a new share buyback program of EUR 75 million. Many of you know us. Let me just remind you the value proposition in our 3 segment. In our building, we are engineering solutions in heating, in cooling, in sanitary system, mostly in residential and commercial building. In industry, we are providing services to all the global industrial OEM in Europe, in U.S.A. with heat treatment, with surface treatment, and we are helping our customers to improve their energy consumption. And on semicon, offering system solution to all the global OEM, not only in the front-end, but now also on the backend side of the value chain. So definitely, we want to continue to engineer mission-critical technologies, enabling a clean, smart and responsible future. And when we look at the long term, why Aalberts is still very well positioned for the long-term growth driver because we are very well exposed to 4 global trends. These 4 global tailwinds, which are urbanization, technology acceleration, reshoring and decarbonization. Long-term value creation is still very well promising. Now let's go to our operational development in 2025. How did we do in building? How did we do in industry? How did we do in segment? Starting with the global revenue. The breakdown of our revenue by segment, by end market, by geography and by SDG goal. So on the geographical side, no major change compared to last year, same on the SDG exposure. And you can see that building is still 50% of our revenue, industry 35% and semicon 15%. I'll come back to the exposure by end market during the next slide. Our strategy is the same. We want to have leadership position, and we want to be aligned with attractive end market. And so where we are investing is definitely aligned with some of these megatrends. Our performance by segment, a mixed picture. We will not repeat again what I said earlier, but we are back to growth on building with 1.3%, still a moderate organic growth. But of course, the margin has been challenging with 11.7%. Industry, better organic growth than last year, but still minus 2.8%. And this is where also we sustain very solid margin at 17.2%. And in semicon, as you remember, it started in the last quarter of 2024, and we have seen quarter after quarter still the destocking ongoing from our customers. Now it is coming to an end, but '24 was still -- '25 was still minus 13.8%. And our margin as a consequence, down to 11.9%, but also with a conscious decision for us to sustain our capability for the long term and not go too low in our cost optimization. Now let me go through each segment and tell you some of the highlights and some of the low light. So in building, on the good side, on the market, continued growth in commercial building in our key prioritized verticals like data center, like hospitalization, like district energies, and this is where we continue to optimize. Very good solid growth also in the U.S.A., in our overall segment and more challenge in France and Germany, more challenge in our connection system, some of the highlight on the market side. And on the performance side, we continue to optimize our footprint, continue to drive operational efficiency and are now also accelerating purchasing initiative to get back to a more robust margin in the coming years. Looking at the market trend, you see what we face in '25 and what is our view about 2026. So more stable trend on 2026 in residential building more positive on commercial building and also on infrastructure industry and utility building. So we continue to have very good position in residential building, but we don't expect major growth on the market side, and we actually see many growth opportunity where we are also pushing organic growth initiative in commercial building and in infrastructure. That's our view about the 2026 market. Now if I go to the other segment with industry. So -- where did we do well in '25 with a good growth with good organic growth in aerospace, in defense, in power generation and where we face the most challenge has been definitely in automotive, in the machine build and that's also what we continue to see in '26. Solid margin, we continue to drive operational efficiency, further footprint optimization and have the success to continue to deliver such a good performance. And the market trend, a bit similar to 2025. Actually, we see automotive now coming to a plateau with a flattish organic growth. Same for machine being and other industrials, but more positive, and we continue to see more order, more positive growth on aerospace, power gen and defense, where our order book in some part of the business is really increasing. So positive momentum, some more stable. And semicon, I mentioned it already, challenging on the front-end with the destocking from our customers, but we start to enjoy the growth of backend only two months since the acquisition of GVT. Very good also progress in defense in this segment where we have some of our technologies, some of our factories also supplying a major OEM in the defense area. And as you can see now in our breakdown by technologies, you have a new segment called system build and qualification, which is actually what we do in GVT. I'll come back later about our backend exposure and why we are so excited about the future growth opportunity. And here for '26, it's actually more positive, right? We see growth in the front-end, even higher growth, growth in the backend and growth in other industries. So more positive based on what we see on the market trend, based on what we see on our customer order book and all the requests we are getting. So a positive momentum going forward. And to conclude the 2025 operational performance, very pleased, very happy to report that we are still on track with our sustainable commitments, still with more than 70% of our revenue linked to sustainable development goal. We are reporting 71%. And year after year, continuing to reduce our CO2 emission in Scope 1 and Scope 2 absolute emission also based on the portfolio, acquiring company, divesting companies. So good progress, aligned with our targets. So pleased with the performance on the environmental side. And that's what I wanted to share for our 2025 operational performance. Let me now hand it over to Frans that will give you an update about the financial development of the year. Frans den Houter: Thank you, Stephane, and good morning, everybody. And indeed, let me talk you through the financial developments of 2025. First of all, on the revenue, you see on the left here, the challenging market circumstances resulted in a negative organic growth of minus 2.5% and the year ended with a total of EUR 3.09 billion. On that revenue, we delivered 13.2% EBITA margin, which is 1.8% lower than 2024 and translates into EUR 410 million of EBITDA. The net profit landed at EUR 284 million. We have been focusing on finding the right CapEx balance, and we aim to be below EUR 200 million by year-end, and we landed the number for CapEx on EUR 189 million, still investing in the future of the company in organic expansions, in innovation, but also being mindful of the cash impact. As such, free cash flow number is really strong, EUR 361 million, 64% conversion, really a good number, of course, reflecting the CapEx that I just discussed, but also inventory, net working capital, and I will come back on that in a bit more detail in a slide to come. So 30.2% margin as a conclusion in a challenging market for the year 2025. Let me give you a breakdown of our revenue impact. And first of all, corrections for the M&A. In the acquisitions, you see EUR 105 million plus, basically driven by the acquisition of SGP in 2024, and we did 3 acquisitions that we completed in 2025. Geo-Flo, Paulo and GVT were added to the portfolio and delivered, as I said, EUR 105 million. On the divestment side, in 2024, we divested EPC and December '25, we announced divestment of Metalis and also confirmed that we have reduced our shareholding in KAN to 45%. With that, that company is now accounted for as an associate and no longer fully consolidated in our books. EUR 59.6 million minus on the divestment in terms of revenue. ForEx did not work in our favor in the revenue side, specifically the U.S. dollar, minus EUR 26 million. And the organic decline translation of the minus 2.5% total EUR 77 million, bringing it to EUR 3.09 billion on the revenue. If we then go to the EBITDA breakdown, again, of course, the M&A impact, and you see for the acquisitions that we've done, really a good contribution to the EBITA margin, EUR 18.7 million in the first year of integration. And on the divestment side, as we have progressed our portfolio also there, the minus EUR 4 million is the impact on the EBITDA. Of course, also a small currency effect, minus EUR 3 million, basically also predominantly the U.S. dollar. And then the organic decline on EBITDA is EUR 73 million. And that requires a bit of context because there are a few elements in there, I would like to highlight. First of all, minus EUR 20 million on inventory, a noncash one-off correction as we have revised the group accounting policy for inventories to make it more robust and aligned throughout the company. That again, resulted in a minus EUR 20 million noncash correction. On holding elimination, we see a year-on-year deterioration of EUR 10 million. I will come back on that in the next slide. And then the remainder is really the drop-through of the lower revenue that we saw in the previous slide. Also, please bear in mind that on semicon, we have been careful in flexing our costs as we see and want to be prepared for the growth in this segment in the short future. Totaling EUR 409 million, 30.2%, basically most important driver, the lower organic decline. Coming to free cash flow. I already mentioned we're very happy with this number, EUR 361 million. That's a healthy free cash flow. We have a 64% conversion, which is 10% higher than the previous year. And we -- in the waterfall, you see, first of all, of course, the negative impact of the lower performance, almost EUR 60 million of EBITDA impact on the cash flow in a negative way and that we knew to compensate with CapEx and net working capital. In the line item other, there's a cash out on the provisions that explains this item. On a earnings per share bridge, yes, you, of course, see here the translation of the lower organic performance also in the EPS impact, EUR 0.3 the biggest one in this list, but also be very mindful of the financing costs that have gone up with EUR 0.13 as we have increased our debt level in the company with EUR 300 million to support the acquisitions that we have done. Yes, acquisitions and nice to see also that the acquisitions contributed positively and were value accretive from an earnings per share point of view. Small impact positive from the share buyback and then totaling the earnings per share on EUR 2.61 for 2025. On the segment reporting, yes, Stephane already showed the revenue and the profitability, but here, you see also the CapEx that we added. If you look in the building segment, be very mindful in the 11.7% EBITDA margin, there's also the impact of the one-off noncash inventory correction of EUR 20 million that I just explained. But also please be mindful of the CapEx, where you see really almost 50% reduction. As we have been investing also in '24, in preparing for growth, you see this year that is more a modest number. In industry and in semicon, CapEx numbers are in both segments comparable with the previous year. Well, in industry, we keep investing, of course, in our footprint and in expansion and also good to see 17.2% EBITDA margin in a challenging market. I think still earmarks a resilient performance in that segment. In semicon, markets have been tough, but still, we are fully confident in the long term. We have invested in an acquisition in a nice company called GVT, but also you see here that the CapEx is still of a high level, EUR 53 million. As we also invest in our new factory in Dronten, which will come into operation early 2027. So you see still there a lot of assets that we are having under construction in this segment. As I said, holding elimination in the last column requires a bit of context. We see a minus EUR 4 million in 2024 as a comparable number. Please be mindful that there was an insurance claim proceed in that number. So that number was really lower than it normally is. For this year, 2025, minus EUR 14.8 million, which basically translates the normal run rate of holding cost. We earmarked that between EUR 10 million and EUR 50 million, and that number is in this range and comparable with last year. On top, the movements in '25, there were significant additional M&A costs. You already saw some of that in the first half, but we have been able to compensate that with the book profits on the divestments that we have done. So that netted out. That was circa EUR 30 million of book result compensating the additional M&A costs and bringing this to basically reflecting the normal run rate on holding cost. In the tech line, you see at the bottom here, low profitability due to challenging end markets. I think that summarizes from a P&L point of view. If we go to the balance sheet, on the left top, net debt increased with EUR 300 million, I already mentioned, which translates into a leverage ratio of 1.8. Yes, we target always to be below 2.5, and we're comfortably below that number. We already deleveraged a little bit, of course, additional year-end because of the proceeds from the divestments that we have done. And then with that, a leverage of 1.8x. On the equity side, we see, of course, the impact of the lower result, but also, again, the dividend that has been paid and the share buyback had impact and yes, a small step down in solvency, but still 56.1% earmarks a resilient company and also has the balance sheet to support the Thrive 2030 agenda in the coming years. The capital employed and the ROCE at the left bottom, yes, ROCE has come down with 2% to 12.7%, partly because of the majority is explained by the lower profit from the P&L. And the other part is because of the increased capital employed, which is driven by the higher debt that we also just touched on. A bit more context on net working capital because there, yes, we see really an important step from 80 to 71 days, EUR 563 million net working capital, reflecting lower inventories. We improved our inventory position with 12 days to 82 days DIO which is a good number. We had a three day improvement on accounts receivable and a six day lower accounts payable, which then compensates the other two parts because the lower payable position is a cash out, of course. And with that, on balance, a nine day improvement. If we go into a deep dive a little bit on the 12 improvement days on the inventories, there are a few elements to mention. Roughly half of it is really hard work by many people in the organization, managing our stocks, managing our supply chain and really understanding well what the forecast requires from our inventories. That is half of the progress. The other part, we were also supported with some tailwinds. Two days of ForEx, for example, in our favor. The whole M&A mix and the impact on inventory was also another two days, and the inventory item, the noncash EUR 20 million correction that I've discussed earlier translated in a two working day improvement. So six days of one-offs and the rest is really because of progress on inventory management, which was absolutely in a good step in 2025. Then let's go to the exceptional costs. Three items in there totaling EUR 84 million. First of all, operational excellence, EUR 40.8 million. Yes, we keep making our -- progressing on our efficiency programs and drive operational excellence into the organization. And with this EUR 40.8 million, we target a yearly reduction of EUR 50 million as a benefit. Then EUR 28.9 million as an impact from the write-off on investments. The majority of this is explained by semicon innovation where we have been investing money. But yes, we do not see the perspective on how to commercialize this. So it's a nice technology, but we have no -- not sufficient confidence and perspective on commercialization, resulting in a write-off of EUR 28.9 million. In 2024, the company has already decided to exit Russia, which is a lengthy and complex process. Again, in 2025, we made progress on this and EUR 14.5 million as a result in the exceptional cost for, yes, the Russian exit that we are working on. And with that, let's also take a little bit of a wider perspective into capital allocation. And you can see in this slide, we keep, of course, investing in our company. In CapEx we just discussed how it was for 2025. In M&A, we also touched on this and here you see over the past five years, how we have been investing in the profitable growth agenda. Next to that, we value shareholder returns, and we think it's important. And you see here a perspective on the past five years, where we allocated almost EUR 700 million to the shareholders, normally in dividends, but in 2025, also complemented by a share buyback program. And that is a nice bridge to the proposed shareholder return for this year. As my last slide, and as Stephane already mentioned, we proposed a dividend of EUR 1.15 over the year, and we announced a share buyback program that will start tomorrow of again, EUR 75 million. And with that, 2025, we deliver a stable return to our shareholders. And with that, I would like to hand over back to Stephane to update you on our strategy. Stephane Simonetta: So let's talk now how did we do progress in our Thrive 2030 strategy. First of all, let me say that while I'm not satisfied with the performance and the lack of organic growth in '25, I'm actually quite pleased with the progress we did deploying our four strategic action. And you know our Thrive 2030 strategy. I mentioned already, we still see positive long-term trend with the four global tailwind, and we still have the same four priorities. So let me now just give you an update for these four strategic actions on profitable growth, on leadership position, the Aalberts way and sustainable commitment. And let's start with growth. And you see that we are not pleased with the progress. On one hand, we continue to see good traction on many end market, on many -- of our initiatives. But on the other hand, we are still reporting negative organic growth because of many of our end markets, which have not been growing. I already mentioned it, exposure to residential, exposure to automotive and destocking in the semicon. So we need to do better on profitable growth. Leadership position, very good progress. I'm really pleased about the shaping of our portfolio, making 3 acquisitions, making 3 transaction in our divestment program, aligned with our strategy, right, progressing in the U.S., entering backend and Southeast Asia in semicon and making a divestment program, mostly in our European footprint for industry and building segment. So good progress for the first year of our strategy. The Aalberts way, a lot of progress in all our functional excellence, driving synergy across our businesses, but also making progress on productivities and synergies. I will show you a few examples later today because I think we've start to see the impact either in our balance sheet or in our P&L. And on sustainable commitment, another year where we made progress, so well aligned with our 2030 and 2050 target. Let me now go through one by one and give you a few highlight about the progress in this four strategic action. So organic growth, this is where we are investing. There was limited impact in '25, but we are more positive about '26 and '27. In building, going from component to system to solution, working on to be able to offer also digital offering linked to connectivity. And this is where the One Aalberts building segment portfolio makes sense. When you put everything we do in our connection system, in our valve, in our prefab solution, in our boiler room technology, we have a unique proposition. Industry, it's continued our geographical expansion. Like Frans mentioned, our greenfield are coming to an end. We have now additional capacity in East Europe, additional capacity in Europe and the U.S. also to support the growth of aerospace. We have also entered Mexico, so all ready to capture the growth. And semicon I mentioned already front-end, we see now potential recovery later on and now also we are exposed to the backend. So global footprint, synergy between all the technologies that we have unique value proposition for our customers. And one example of data center, which is still today quite small when you look at the numbers, only 2% of our building segment revenue is exposed to data center, but it's a $1.5 billion addressable market. And this is where we see double-digit organic growth in the coming years. It's about offering cooling solution. It's about reliability, it's about connectivity. And this is where, as I mentioned before, offering all solution together in term of valve, in term of system, in term of engineering system, prefab solutions, our packing and connection system, we have a unique proposition. And we are working with the big data center OEM, helping them to drive energy efficiency or helping them to have better cooling solutions. So more to come. We will be reporting in our half year result the progress we are making. Of course, the organic growth, it's not only with the geographical expansion, it's not only with capacity expansion, it's also with innovation. And I'm quite pleased actually that we have delivered another year with 20% of our revenue coming from innovation done during the last four years. So at the end, delivering what we call innovation rate at 20%. Even if, as you know, innovating in building, innovating in industry or innovating in semicon is actually quite different. And that's what we continue to do. So good traction also, good progress here. Of course, this is more long term. And once again, we have now to do better on this strategic action to get back to positive organic growth. Portfolio, I mentioned it. We started in '24, fantastic progress in '25 and committed to do more progress in '26 and 2030. So our strategy is the same, our three priority is the same, Good progress in industry with the acquisition of Paulo, and now we want to make further progress in '26 and '27 in aerospace in the U.S.A. Good progress in semicon with the acquisition of GVT. So of course, now the full prioritization is on the integration, on the driving synergies. Good progress in building in the U.S. with the acquisition of Geo-Flo, but this is where we need to accelerate. And this is, of course, top of our mind to continue to drive growth in what we call the source to emitter scope in the U.S.A. We have also water treatment as a key focus area. So this is where we are prioritizing and to do further progress in our building segment in terms of inorganic growth. And divestment, fantastic progress. We are basically halfway with our 2030 target. So still some opportunity to make further progress in our divestment program, especially in our building and industry segment. And just as a nutshell, why I'm so positive, why I'm so excited by the transformation acquisition we did with GVT. Not only we are entering a new part of the semicon value chain, but also we are now entering a new geographical area, and we have now a global footprint between our footprint in Europe, our footprint in Southeast Asia. Having both technology altogether, we are able to provide to all the global OEM exposed in front-end and backend, a unique value proposition. And as you can see in front, in back and also now being exposed to life science with some of the technology, so not only in lithography, but also in advanced packaging, in measuring, in metering and in other key equipment, we are ready for the growth. We have seen already positive momentum in '25 with GVT in only two months, and we are excited by the further progress in 2026. If I go to the third priority, operational excellence, a lot of effort deploying all the lean toolbox, implementing our Aalberts production system, but I'm pleased that we start to see the impact, and it is just the beginning, continuing to optimize our footprint, four site were closed in 2025, and we will continue to optimize major progress in inventory, like Frans mentioned, driving lower days on hand, especially in our building segment. This is where we have the further opportunities. And driving operational productivity to align our capacity, to align our cost based on the customer demand. So a lot of initiatives to reduce fixed cost, secure our added value margin and do better job to do sometimes the same with less or to be ready to do more with the same cost and at the end, support our margin expansion. That's very high for our building segment, industry doing quite well and some opportunities in semicon. And to conclude, on the last strategic action, delivering our sustainable commitment, good progress on Scope 1 and Scope 2, as you can see with our CO2 intensity reduction, where here we have a baseline compared to 2018. And now also doing further progress on Scope 3, where on one hand, we continue to make progress on the purchasing good CO2 intensity. So going down, but also making progress in reporting on the waste, but also here, not so pleased because we have actually an increase in our waste, and this is where also we need to do better, mostly linked to portfolio change, but also because now we have better reporting, so more transparency, which give us opportunity to improve. So well aligned with our 2030 target and definitely on track still to reach our long-term 2050 to be net zero or earlier. That was the update about 2025. You have seen how did we do on operational side. You have seen how did we do on the financial side. So let me tell you how do we see 2026. I mentioned some of the market trend, but let me repeat some of the element segment by segment. It's actually a mixed picture. On building, we continue to see the same trend in 2026. Expect commercial building to continue to grow, expect to continue to see positive momentum in the U.S., but also not yet expecting a recovery in residential and French and Germany market. Still a lot of uncertainty about the U.S. trade, that's what we see for '26 on the building market. In industry, a bit continuation as '25, positive aerospace, power generation, defense, more flattish market trend in automotive and also in the French and German industrial and many uncertainty again in the U.S. But in semicon, it's now very clear. We see growth. We see our order book increasing. We see the customer destocking coming to an end. So backend has been growing very well and I think the growth is not an issue. But now also front-end, we really see an opportunity to have a recovery in the second half of '26. So being more positive. Long term was never an issue in semicon, but now we do see an opportunity to have a recovery in the second half. So based on this market trend, our outlook is actually quite simple, is to improve organic growth and improve EBITDA margin in 2026, improve organic growth, improve EBITDA margin. And on the other hand, continue to deploy our four strategic actions. So in a summary, 2026, we have a key priority is to get back to growth, driving organic growth in our attractive end market with our business development, geographical expansion and innovation. Like I mentioned earlier, you can count on us to continue to drive operational excellence, to improve margins, and should the market increase and improve better than we expect, it will automatically drive even better margins. On the other hand, continue to manage the short-term dynamics. So something I think we have done quite well in '25 is to manage both low case and high case, and we will continue to do that in '26. Be ready for a potential higher growth, but also be ready in case the growth is not that high. Continue to do a good job on free cash flow. After such a good year and always optimize our working capital. And at the end, continue to do what we did very well in '25 to optimize our portfolio, rebalancing between Europe and U.S., rebalancing the end market and divesting when we believe we are not the best owner. So in a nutshell, continuing to strive for the long term, but also now perform and perform for us is what we put in our outlook, better growth and better margins. That's the end of the presentation. Now let's open the Q&A session. Rutger Relker: [Operator Instructions] And I would now like to give the word to David Kerstens from Jefferies. David Kerstens: I've got three questions, please. Maybe first question on semicon. Organic revenues were down 13.8% last year. Yes, the slide shows much more positive outlook for 2026. But did I hear you say you only expect a recovery in the second half of the year? And how should we see that recovery in the light of the much better-than-expected order intake and guidance from your largest customer, ASML? Stephane Simonetta: Yes. Thank you, David. You're absolutely right that we are more positive for 2026 because during the last three, four months, our order book have been increasing month after month. Also, we are getting a lot of requests for additional capacity simulation. So you should expect better numbers also in the first half. But talking about recovery, we see it more in the second half. Also in the second half, we will also have the further organic growth coming from GVT in the backend. So better number in the first half, but the major impact will be more in the second half because it simply take times for the order to go through a customer order book to their customers and then finally to us. So Q1, you should expect, I think, a moderate improvement. Q2 a bit better and definitely second half much positive. David Kerstens: All right. That's clear. That sounds good. And then second question on the margin. I mean, a lot of moving parts in impacting the margin this year with last year's acquisitions of Paulo and GVT and GVT towards the end of the year and then all the divestments announced in December. How will that portfolio optimization impact your EBITDA margin this year? Frans den Houter: Frans here. Yes, we haven't given specific guidance on an EBITDA margin impact for the year '26. But obviously, also visible in the waterfalls that we just showed that these are at the lower margin end of the range, but also the revenue impact totaling EUR 400 million. That was the number that we gave year-on-year with already then the first EUR 60 million in the waterfall you saw in the presentation. So no specific guidance on the exact margin impact, but we did give some numbers there. David Kerstens: Yes. Okay. And maybe finally, on the one-offs in EBITDA before exceptionals. You highlighted the EUR 20 million inventory write-down and a EUR 30 million book gain. Were those all booked in the fourth quarter? Frans den Houter: Yes. Both items were booked. So the EUR 30 million book gain following the divestments we've completed in December, and the inventory correction also a Q4 event in the closing process. Rutger Relker: Thank you, David. Now I'd like to give the word to Chase -- Chase Coughlan from Van Lanschot Kempen. Chase Coughlan: My first question, just regarding the guidance, and I suppose it's more to do with semantics. But when you say you expect improving organic growth, is that an improvement versus what we saw in 2025? Or is that really implying actual organic revenue growth? Stephane Simonetta: It's actually improving compared to what we saw in 2025, and we also mean it for our 3 segment. So we expect better organic growth in our 3 segment compared to 2025. Chase Coughlan: Okay. Yes, that's clear. And I wanted to ask a little bit about your raw material prices. So copper obviously inflated quite a bit alongside some other metals. And I understand you're planning to protect your gross margin and pass that through. What do you think will be the net effect on volumes or the competitive positioning of Aalberts products throughout the course of 2026? Stephane Simonetta: We see a continuation. I think -- 2025 is the best evidence about how well did we manage the situation with our price increase and the added value margin that we sustained at a high level. So we are confident to do it again in 2026. We see definitely an opportunity to have price increase in 2026 and without having an impact to our margin. So monitoring very closely, but we have a good, I think, operator model to manage that and sometimes it gives actually an additional opportunity to improve margin based on the good work we are doing on the purchasing side on the raw material. Rutger Relker: I'd like to give the word to Tijs Hollestelle, ING. Tijs Hollestelle: My first question is about the semicon business that there was an organic decline of about 10% in the fourth quarter and quite a substantial impact already from the Grand Venture Technology acquisition. What is the annual expected euro number from the Grand Venture Technology business in 2026? And is there any seasonality in that business? That's the first question. Stephane Simonetta: You are right that Q4 was around 9%, 10% negative organic growth. But let me remind you that when we report organic growth percentage, it is still excluding GVT, right? So you will see the impact of GVT in our revenue top line increase and I can tell you it's going to be very good in 2026. But the organic growth of GVT, you will see only the impact in Q4 2026 when we have own GVT a full year. So just to manage that. So the number you see in Q4 are pure with the former scope of advanced mechatronics. Tijs Hollestelle: Yes. And let me rephrase it. I understand that the acquisition is not in the organic growth number, but it seems that the Grand Venture Technology already generated almost EUR 30 million of turnover in the fourth quarter based on two months. Is that a fair assumption that it includes the December month, which in my view, a light one. Frans den Houter: So maybe Tijs, the number we put out there, SGD 160 million equaling more than SGD 120 million annual revenue in GVT and it was in our books in the fourth quarter. And then Stephane already mentioned that we see good growth in this company. So that also helps already in Q4, in the top line. But you don't see that, of course, as Stephane explained, in the organic revenue number as a percentage until Q4 next year. Does that clarify? Tijs Hollestelle: Yes. Stephane Simonetta: And coming back to the seasonality to make sure we answer your question. We see more seasonality actually in the front-end with a better second half than first half, like I explained earlier, compared to GVT in the backend, which is actually quite more balanced. Tijs Hollestelle: Okay. Yes. And then I appreciate your additional comments you just made on the recovery in the second half of the semi business. But can you give us a bit more feel for the, let's say, the potential magnitude? What kind of scenarios can we expect there because we have seen massive, let's say, organic declines in some of the quarters earlier in 2025. Is that something we can also expect for, let's say, that recovery? It is not impossible that, for instance, in the third or fourth quarter, organically, the business is coming up by 20%? Or would you say it's more moderate? Stephane Simonetta: I can only repeat what I said that we see second half will be much better than in the first half. And we have decided not to give a specific organic growth outlook by segment. But you are right that Q3, Q4 should be much better because we also see much higher number in 2027. We just need to have more time to see all the orders coming in the value chain, but we don't disclose number by segment. Tijs Hollestelle: Okay. No, that's fine for now. And then if I may, I also have a question about the building division. I was also -- I mean, I think you mentioned back to organic growth, but that was indeed on the full year basis. So there's also a small organic decline again in the fourth quarter. I think underscoring that market conditions remain very volatile, difficult to predict. But what was the impact of the write-downs because I saw a EUR 3.4 million write-down somewhere in the press release. And if I, let's say, apply that to the fourth quarter EBITDA of the building business, it explains, let's say, a more normal margin. But you also mentioned EUR 20 million. So where is the EUR 20 million showing up throughout the year in the building business? Frans den Houter: Yes, that's reported in the inventory line item in the balance sheet and then taken as a cost in our margin. So you don't see it as a separate line item, not as a write-off, Tijs. It's an inventory revaluation. Tijs Hollestelle: But the EUR 38.1 million EBITDA in the building division seems to be very low. Is that -- these write-downs or not? Frans den Houter: Tijs, could you repeat your last question because the line was bad. Tijs Hollestelle: Is the -- let's say, the EUR 38.1 million EBITDA in the building division in the fourth quarter, is that negatively impacted by some inventory write-downs and how much? Frans den Houter: Yes, the EUR 20 million is in there. Yes. Sorry, Tijs, I misunderstood your question -- The EUR 20 million inventory correction is impacting the 11.7% margin in building and has been taken in the fourth quarter. I thought you were asking where -- fully, yes. I thought you were asking where to pinpoint it in the press release, but you don't see it in the numbers on the P&L as a separate line item, of course, I thought that was your question. But it's in the books, in Q4 impacting the building performance. So EUR 20 million one-off noncash if you do your calculations. Tijs Hollestelle: And then the [indiscernible] the 15.5% EBITDA margin, is that kind of the level we should take into account going into 2026? Frans den Houter: Again, sorry, Tijs, the first part is you are -- we lost you and that probably was the most important part of the question. Can you repeat? Tijs Hollestelle: I asked that the fourth quarter, 15.5% margin then adjusted for that, is that also the margin underlying to take with us going into 2026? Frans den Houter: Yes. So that's -- we don't give guidance per quarter per segment, but -- and I think you have to see this in the light of the whole year. There are always quarterly swings, pluses and minuses. But yes, there's no denying that the fourth quarter for building was really strong if you take this one-off out. But I think you should look over the overall picture, 11.7% and put the EUR 20 million as a one-off correction in doing your numbers. Rutger Relker: I'm happy to give the word to Kristof Samoy from KBC in Belgium. Kristof Samoy: Just I want to come back again on semicon and you're quite firm in terms of the anticipated recovery in the second year half. But if you look at the numbers of your largest front-end customer, ASML, from a high-level perspective, you see that their new system sales drop, yes? So they're selling more expensive products. How -- in such an environment, how can this have positive volume impact for a subcontractor such as Aalberts? This is the first question. And then on the portfolio review, you have been very active in the strategy execution in terms of disposals and acquisitions. Can we assume that for 2026, management has enough on its hands and focus will be on post-merger integration, and we should not expect major transformational M&A this year? Stephane Simonetta: Thank you, Kristof. Two great questions. The first one, I would like to say that, first of all, we are not a subcontractor, right? We are a strategic partner of ASML. We are a strategic partner in the whole semicon ecosystem, so much more than a subcontractor, right, just to clarify this point. And you're absolutely right. I think you have a very good point looking at the numbers. That's what also we have been explained in 2025, the link between the number of system shipped and the link to what we produce, right? And then you have, of course, the inventory in the middle. But where we see the highest growth is definitely all the growth expected by our key customers and what they see from their customer on the EUV. And on the EUV, we have unique positioning. This is where also we have the capacity ready. And this is where the AI push would require more and more of this technology. And we will benefit from this growth, and that's why we expect it in the second half, not in the first half because the whole value chain need to ramp up. So we're actually quite bullish for 2027. And like I mentioned earlier, that's what we expect every quarter to improve so that the whole value chain ramp up. So that's why we see it. Even when you look at the last quarter, you are right, there was a mix change between what they ship on high value, between what they do in terms also of services and refurbishment, where we are not exposed, but EUV is definitely more promising in 2026. And on the second point, I will say, definitely, yes, on semicon, you are right that our top priority is post-merger integration, right? Now utilizing our global footprint that we have between Europe and Southeast Asia, now the broadening portfolio that we have with all the technologies that we have from our advanced mechatronic and now from GVT and supporting the customers in their technology road map with this full offering. But on the industry, we still see opportunity to continue to make bolt-on acquisition, especially in aerospace and in the U.S.A. So we have a strong funnel, and we are still active in this segment. And in building, this is where also we see opportunity to make further progress either in our water treatment source to emitter and also in the U.S.A. So you should expect us to be more active in building and industry, but less active in semicon. Rutger Relker: [Operator Instructions] I would like to now already touch two questions which have been sent in via the Q&A form. And the first one is for you, Frans. That's about guidance for CapEx for the year 2026. Could you give us a bit of a comment there? Frans den Houter: Yes. But before I do that, maybe a small correction. I just mentioned for GVT, the Singapore dollar revenue, SGD 160 million, which is correct. The exchange rate would translate into SGD 207 million of revenue, just to make sure that number is accurate out there. Maybe on CapEx, so EUR 189 million this year, which is a good number. I already mentioned in the -- when discussing the slides, assets under construction is quite high, EUR 226 million. And also there, you see a bit of a step-up versus our depreciation, which is EUR 170 million. As we are investing in our business in organic growth in -- also in the new company, GVT that we acquired. So you need to correct, of course, for M&A. If you do all that, based on the current portfolio for the coming year, we are still -- will be around the same level that we spent this year. So circa EUR 190 million as a first number for 2026. Rutger Relker: Okay. Thank you. There's another question I want to -- is coming in now, which I think it's a relevant one for I think for you, Stephane, about the write-off on the semiconductor innovation part of the exceptional. Perhaps you could give a bit of a color on that topic. Stephane Simonetta: Yes. So let me remind you that, first of all, I see the question. It has nothing to do with GVT, right? It's really something we started four, five years ago, right? And when you start to innovate, when you start a new technology, so it was linked to a deposition technology, which was very promising at that time with a lot of opportunity to further commercialize. But after four, five years, we came to the conclusion that there is still not a path to commercialize, and that's why we are putting this cost as an exceptional cost. So not linked with our current business and not linked with GVT. Rutger Relker: Okay. Thank you. I'd like to -- it's a very long question. I can see whether I can summarize it a little bit. Yes, there's a question on the data centers. I think you already gave quite a bit of a color on what we do there. So I think that -- I think that answer -- that question has been answered. Then I find another question on CapEx for you, Stephane, whether you could give a bit of color where you spend the CapEx? Would it be mostly growth, innovation, ESG, capacity? Well, you have a lot of options, I see. If you can give a bit of color there. Stephane Simonetta: Absolutely. I think you have seen in the number that Frans presented, first of all, that our CapEx intensity is quite different by segment due to the nature of the industry, right? Definitely, in semicon, this is where we have been investing a lot for capacity for the long-term growth. So most of the investment we have been doing of the CapEx we have been doing in semicon, it's for capacity, it's for technology. When you look at industry, a big part of the CapEx we do is for repair, it's for maintenance, but also for geographical expansion with new footprints because it's a very local and -- local and local-for-local business. So we follow our customers when there is a need. So a lot of capacity expansion, repair and maintenance. And when you look at building, this is more for efficiency. This is more for productivities because we already have the good footprint, and this is also where we are driving more automation in order to improve the utilization of our assets. And then across the three segment, we continue to invest for our people, working condition, sustainable environment. So quite balanced overall at Aalberts between ESG, between capacity, between operational efficiency and also now more and more on innovation. As I mentioned, I think, already last year, our weight linked to new building and capacity expansion is coming to an end. So we are going to spend more on R&D and on innovation. Rutger Relker: Thank you very much, Stephane. I see also that somebody has joined the queue, which is Philippe Lorrain from Bernstein. Philippe Lorrain: I'm quite new to the case, but I wanted just to ask a question on earnings adjustments. Because I see in the press release and also from what you say that there's a bunch of things that you flagged in the text, which are actually not adjusted from the earnings, i.e., this inventory write-down in Q4 and also the insurance proceeds. But at the same time, you have many different adjustments that you flagged at the back of the press release. So what's your policy on that? And what should we expect going forward? Frans den Houter: Yes. So thank you for the question. Yes, be very clear. So there are -- indeed, there are three items that we earmark as exceptionals. And those we report in a separate section in the press release and also in a separate slide in my presentation. Basically, all the numbers that we see are excluding the impact of the exceptionals. So with that, we want to make sure that the numbers of the company are well comparable year-on-year. So you can do also the underlying performance evaluation in a better way. And that's why we put them in a separate bucket, if you like. We label them exceptionals. And of course, we explained very well what's in there. And then -- there's an operational excellence element in there. There is the innovation in semicon that Stephane just discussed, and we're in an exit of our Russian businesses, yes, which are three very specific one-off items that we label as exceptionals -- And they are not reflected in all the other numbers that you've seen. Is that clear? Philippe Lorrain: Okay. Perfect. Yes, that's clear on that front. And just to follow up on that. So the write-down in innovation in semicon, is it related actually to fixed assets like in terms of PP&E? Or is it more intangible assets? Frans den Houter: It's a combination. So it's intangibles because there's absolutely also development and innovation, intellectual property in there, but also, yes, some other balance sheet items. So it's a combination. We didn't give the breakdown, the total impact. There are also some other elements in there, we said the majority is the semicon items and the total that we disclosed is EUR 28.9 million. Rutger Relker: Then I think there's a follow-up question from Chase coming in. Chase Coughlan: I just wanted to come back quickly on the guidance, particularly to do with the margin. I think it was asked a little bit earlier as well, but I'm trying to understand sort of a large portion of this margin improvement you expect in '26 is probably a result of the divestments, of course. Could you also talk a little bit about what you expect sort of from an organic standpoint as well from a margin level? Stephane Simonetta: Yes. I understand, I think, the question. So we actually see four enabler and why we are confident to say we will improve margins. So let me go through the four points, which we believe will help to have a better margin. First of all, we are planning to get better organic growth. And automatically, that will generate better margin because where we are growing also, this is where we have been investing and all the key verticals we are growing have also better margin profile on commercial building, in aerospace, power generation, defense and semicon. So first, organic growth. Second, you will have indeed the benefit of all the operational excellence program that we did in the previous year of footprint optimization so that you will have the benefit -- the in-year benefit in '25. Third, you have definitely the impact of the divestment that we did, right? So that also will help us to improve the margin. So some -- three elements that will definitely help us. And then -- the last one is that we don't expect another one-off in our building segment. The one we took in Q4, like Frans mentioned, the EUR 20 million, that also will not happen in 2026. So these 4 elements give us confidence that we will improve our EBITDA margin in 2026. Rutger Relker: And then I think the last question of this today Q&A, I'd like to give to Tijs again, also a follow-up. Tijs Hollestelle: Yes. Stephane, I was thinking about what you said on the semi recovery. And I think you also mentioned visibility for 2027. So is it fair to assume that you are very busy with the current planning of the shipment schedules of your clients, and that makes it difficult for you to pinpoint, let's say, an exact recovery trajectory, but you have the orders and you have the client activity. Is that a fair assumption? Stephane Simonetta: Yes and no because I -- we already have some good orders, and that's why we are confident it will be better, but we expect even more order to come, right? So I think '26 looks very promising. Now the question is how will be the ramp-up? I think we have always said over the last year that long term, the growth was never an issue. The only question was when it will be coming. And now we see definitely coming in '27. We are actually quite exciting by 2027. And the question is how much will be already happening in the second half of the year. So we are, of course, now very confident based on the current order book. So we know '26 will be better. We are not getting a lot of capacity simulation request, and that we don't know yet how much of this simulation will become a real order or not. And that's why answering your question, we cannot confirm yet because there are different scenario. But in all scenario, it's a growth scenario. Tijs Hollestelle: Yes. And the current existing capacity of Aalberts is sufficient that you can handle much higher revenue levels? Stephane Simonetta: Again, that's why it's such a good news because it just confirms the strategic investment we did. Our factory in Dronten in the Netherlands has always been there for the growth of EUV. So we see now very good utilization potentially in '27. So perfectly in line. Of course, we will have hoped to have it earlier. But now '27, it will be there. So the question is how big will be the utilization, but we have invested capacity, if you remember, for the '27 2032 growth. So we have -- we are ready for the growth. And now on top of that, you have the backend growth and our footprint in Southeast Asia, so we can also support our current customer, we have also access to all the new customers we didn't have before. And now we can also do load balancing depending on their need. Do they want deliveries in Europe or do they want us to supply from Southeast Asia, we are ready to support them. Rutger Relker: Thank you, Stephane and Frans, for the answers. Yes. As we conclude today's webcast, I would like to thank everybody to join us today. And also please remind that both the presentation and today's recording will be available on the website later today. Thank you.
Operator: Good day, everyone, and welcome to the Bristow Group's Fourth Quarter 2025 Earnings Call. Today's call is being recorded. [Operator Instructions] At this time, I'd like to turn the call over to Red Tilahun, Senior Manager of Investor Relations and Financial Reporting. Redeate Tilahun: Thank you, Luke. Good morning, everyone, and welcome to Bristow Group's Fourth Quarter and Full Year 2025 Earnings Call. I'm joined on the call today with our President and Chief Executive Officer, Chris Bradshaw; and Senior Vice President and Chief Financial Officer, Jennifer Whalen. Before we begin, I'd like to take this opportunity to remind everyone that during the course of this call, management may make forward-looking statements that are subject to risks and uncertainties that are described in more detail on Slide 3 of the investor presentation. You may access the investor presentation on our website. We will also reference certain non-GAAP financial measures such as EBITDA and free cash flow. A reconciliation of such measures to GAAP is included in the earnings release and the investor presentation. I'll now turn the call over to our President and CEO. Chris? Christopher Bradshaw: Thank you, Red. I will begin with a note on safety, which is Bristow's #1 core value and our highest operational priority. We experienced fewer lost workdays in 2025, the second consecutive year of improvement in this metric. The Bristow team remains committed to our Target Zero Safety culture and the belief that we each own safety every day. By maintaining situational awareness and always looking out for one another, we can deliver on Bristow's commitment, zero accidents and zero harm. We are also pleased to report strong financial performance in 2025. Full year adjusted EBITDA of $246 million was in line with guidance for 2025, and we are affirming our financial guidance range of $295 million to $325 million for 2026, which reflects adjusted EBITDA growth of approximately 25% year-over-year. We expect strong cash flow conversion, which Jennifer will further detail in her commentary. For now, I will refer you to Slide #15 in our earnings presentation, which summarizes the transformative growth in Bristow's business over the last few years. Since the pandemic era trough in 2022, we have experienced significant year-over-year growth in revenues, adjusted operating income, adjusted EBITDA and margins. With the continued growth and diversification of our Government Services business, Bristow has evolved into a scaled, multi-mission aviation services provider with leading market positions in our core markets. As reflected in our affirmed financial outlook, we expect adjusted operating income in our Government Services business to double in 2026. And the high-quality infrastructure-like cash flows from these contracts provide a durable cash flow foundation for the company. In addition, we expect adjusted operating income in our offshore energy services business to increase by approximately 15% in 2026, primarily due to improved terms on contract renewals. In January, Bristow completed a successful refinancing of our senior notes, with an upsized $500 million transaction at a lower coupon rate of 6.75% and an extended maturity into 2033. Bristow's positive financial outlook, robust balance sheet and strong liquidity position, support the initiation of the company's cash dividend program, confirmed by yesterday's announcement of a $0.125 per share dividend payable on March 26, 2026. I will now hand it over to our CFO for a more detailed discussion of 2025 results and our financial outlook. Jennifer? Jennifer Whalen: Thank you, Chris, and good morning, everyone. Today, I will begin with a review of Bristow's sequential quarter and full year financial results on a consolidated basis before covering the financial results and 2026 guidance ranges for each of our segments. Total revenues and adjusted EBITDA were $9 million and $7 million lower in Q4 compared to Q3, respectively. Primarily due to lower seasonal activity in our other services and Offshore Energy Services segment. As Chris noted, we are pleased to report another year of strong financial results with total revenues in 2025, up $75 million compared to 2024 and adjusted EBITDA of $246 million, which is approximately 4% higher than last year and in line with our previously published outlook. At this time, we are affirming our 2026 guidance ranges of $1.6 billion to $1.7 billion for total revenues and $295 million to $325 million for adjusted EBITDA. Turning now to our segment financial results. Revenues in our Offshore Energy Services, or OES segment, were $3 million lower in Q4, primarily due to the end of fixed wing services in Africa and lower utilization in the U.S. Adjusted operating income was consistent with the preceding quarter as the lower revenues were partially offset by higher earnings from unconsolidated affiliates coupled with lower net operating expenses, largely due to lower subcontractor and repair maintenance costs. Year-over-year, OES revenues were $24.4 million higher, primarily due to increased utilization and additional aircraft capacity in Africa of $21.7 million and higher utilization in the Americas of $19.2 million, primarily driven by the U.S. and Brazil. Revenues in Europe were $16.5 million lower due to lower utilization. Adjusted operating income was $30 million higher in the current year primarily due to the higher revenues, coupled with lower general and administrative expenses of $5.9 million and lower operating expenses of $3.6 million. The decrease in G&A costs was attributable to lower professional service fees, insurance and lease costs, while operating expenses benefited from lower R&M costs, lower fuel prices and lower insurance premiums, which were partially offset by higher personnel and other operating costs related to increased activity. Our 2026 OES revenues guidance range is between $1 billion and $1.1 billion compared to $990 million reported for 2025. And our 2026 adjusted operating income guidance range is $225 million to $235 million compared to $203 million in 2025. Moving on to Government Services. Revenues were $0.8 million lower primarily due to lower seasonal activity in the U.K. but were partially offset by the commencement of operations at an additional base in Ireland. Adjusted operating income was $3.2 million lower in Q4, impacted by higher repairs and maintenance of $2.9 million, resulting from lower vendor credit and the timing of repairs, coupled with higher personnel costs of $1.6 million related to contract transitions, which were partially offset by lower other operating expenses. Full year revenues from Government Services were $49.8 million higher in the current year with the commencement of the Irish Coast Guard contract and higher U.K. SAR revenues, largely resulting from favorable FX impact and the commencement of fixed-wing services. Adjusted operating income was $12.6 million lower in the current year primarily due to higher expenses attributable to the commencement of new contracts in Ireland and the U.K., partially offset by the higher revenue. The outlook for our government services business is positive. As illustrated by the 2026 revenues guidance range of $440 million to $460 million and adjusted operating income guidance range of $70 million to $80 million, which is roughly double that of 2025, as shown on Slides 14 and 15. With strong margins and earnings potential of this business will continue to improve as the operations and revenues for these contracts continue to ramp and certain cost of side as transitions to the new contracts conclude in 2026. And finally, revenues from our other services were $5.2 million lower in Q4, primarily due to lower seasonal activity in Australia and adjusted operating income was $4.1 million lower due to the lower revenue partially offset by lower operating expenses of $1.2 million related to lower seasonal activity. On a full year basis, revenues from other services were $0.8 million higher in the current year as a result of higher activity, partially offset by lower revenues due to the conclusion of certain dry lease contracts. Adjusted operating income was $5.4 million lower in the current year, primarily due to higher operating expenses of $5.9 million, offsetting the higher revenues of $0.8 million. The increase in operating expenses was due to higher activity in Australia. We expect the improved economics in our regional airline in Australia to continue for this segment to remain consistent and cash flow accretive. In our 2026 revenues and adjusted operating income guidance for this segment is between $130 million and $150 million and $225 million, respectively. Moving on to cash flows and liquidity. As of December 2025, our unrestricted cash balance was approximately $286 million with total available liquidity of approximately $347 million. In recent years, working capital has been impacted by increases in our various other assets, primarily related to start-up costs for new government services contracts and inventory to support new contracts and mitigate risks related to supply chain constraints. Despite these impacts, the business has continued to generate strong operating cash flows. In 2025, Cash flow from our operations generated $198 million compared to $177 million in the prior year, and adjusted free cash flow was approximately $26 million higher in the current year. We expect the business to continue generating strong free cash flows into 2026 and working capital to improve over time as supply chain constraints subside and our new contracts include their transition period, reaching their full operational run rate. Lastly, as Chris noted, in January, Bristow closed a private offering of $500 million senior secured notes due in 2033, with a coupon of 6.75%. The company used a portion of the net proceeds redeemed the 6, 7, 8 senior notes, with the remaining net proceeds to be used for general corporate purposes. This refinancing has increased the pro forma cash balance and liquidity of the company. Today, Bristow has no near-term debt maturities, attractive financing with lower coupon rate and improved terms, amortizing equipment financing that include flexible prepayment terms and growth and net leverage ratios that have continued to reduce each year. In summary, we are pleased with Bristow's financial performance this year and with the outcome of this transaction and remain committed to protecting and maintaining a strong balance sheet and liquidity position, while furthering shareholder return initiatives with the commencement of our new cash dividend program. At this time, I'll turn the call back to Chris for further remarks. Chris? Christopher Bradshaw: Thank you. I will now refer you to Slide #21 in our earnings presentation, which summarizes Bristow's annual net asset value or NAV disclosure. As a reminder, we provide this NAV presentation annually in compliance with certain covenants and other disclosure obligations. The helicopter fair market values are based on a desktop appraisal performed by a third-party expert as of December 31, 2025. The NAV calculation takes this estimated fair market value of Bristow's owned aircraft, plus the book value of other tangible assets, less total debt and deferred taxes, to arrive at an aggregate NAV of approximately $1.8 billion or $60 per share. Thus far in the call, we have discussed Bristow's financial outlook for 2026 and outlook supported by the growth and stability of our government services business, the heavy weighting of our offshore energy services business, the more stable production support activities and the breadth and diversity of the geographic markets we serve. Looking forward, we would now like to share some perspectives beyond the confines of calendar year 2026. Bristow continues to have a positive long-term outlook for offshore energy services activity. Deepwater projects are favorably positioned, offering attractive relative returns within the asset portfolios of oil and gas companies. And we believe offshore projects will receive an increasing share of future upstream capital investment. This positive demand outlook is paired with a tight supply dynamic. The fleet status for offshore configured heavy and super medium helicopters remains tight, and the ability to bring in new capacity remains constrained with long manufacturing lead times on production line that must be shared with military aircraft orders. We believe this constructive supply/demand balance supports a positive outlook for the offshore helicopter sector. As noted earlier, with the continued growth and diversification of our government services business, Bristow has evolved into a scale, multi-mission aviation services provider. We see additional growth opportunities in our core government search and rescue business as well as a broader spectrum of aviation services to government and military customers. In the context of a complicated geopolitical landscape, and expectations for significant increases in defense spending. We believe there will be compelling organic and inorganic growth opportunities for a specialized aviation services provider with Bristow's track record, operational expertise, and financial flexibility. Finally, as summarized on Slide #5 of the earnings presentation. We have continued to advance Bristow's position as an early leader in advanced air mobility. We recently completed Bristow's first electric aviation project conducted as an international test arena in Norway in partnership with the local regulator and our partners at Beta technologies, where we flew over 100 missions and 6 months of operational testing. In addition, we recently secured some of the first delivery slots, including slot number one, for the hybrid electric, highly versatile Electra EL9 Ulta short take-off and landing aircraft. Bristow also recently announced an expanded role and advancing the U.K.'s first electric air travel network through a new collaboration with vertical Aerospace and Skyport infrastructure with initial service targeted for early 2029. We believe that Bristow has created significant option value with minimal capital commitment to date and what is expected to be a large and rapidly growing addressable market for these new generation aircraft. With that, let's open the line for questions. Luke? Operator: [Operator Instructions] The first question will come from Jason Bandel with Evercore ISI. Jason Bandel: So you affirmed your '26 OES guidance and noted improved terms on contract renewals. Can you talk about how far into the renewal cycle you currently are? Has there been any kind of changes to rates as these contracts renew and how much of this is reflected in your guidance? Christopher Bradshaw: Yes. As of our last disclosure, we were about 50% through rolling over our Offshore Energy Services customer contract portfolio, and we expect to be substantially complete with that conversion by the end of this calendar year. So by December of this year, effectively all of the OES customer contract portfolio, we'll have reset. The impact is reflected in our guidance for 2026 and most of the 15% uplift in the adjusted operating income for that segment is due to those improved contract terms. On average, globally, the rate uplift for leading-edge contracts compared to the legacy contract rates they're replacing is about 25%. There are some regional differences, some higher and some lower, but on average, it's been about 25%, and that's holding pretty consistent. Jason Bandel: Got it. And then next, can you highlight, I guess, the regions here that are going to be driving your growth in '26 and where you are most likely to mobilize additional capacity, whether it's taken from other markets or just from a new aircraft deliveries? Christopher Bradshaw: Yes, happy to do that. The regions where we're seeing more demand and growth and where we're mobilizing additional aircraft capacity include Africa, which has been a strong region for us for the last couple of years, and we expect it to remain that way in 2026 as well as Brazil, which has been one of the fastest-growing deepwater basins. And again, we expect that to continue. Those are probably two of the faster-growing ones that I would highlight in terms of where additional capacity is moving into. Jason Bandel: Got it. And last one for me, just on a popular topic this quarter in terms of the discussion around Venezuela. We generally think about the entree opportunities there, but there has been some offshore gas development in the past. How do you view potential opportunities for Bristow in Venezuela? And just given your presence in the Caribbean, would you have any kind of advantages if you decide to enter that market? Christopher Bradshaw: Yes, there could be. We're not expecting near-term opportunities to materialize for offshore helicopters. Though we will be supporting some work out of Trinidad into joint basins that overlap with Venezuela, which are more likely to go forward now. But as you noted, we do have a large presence in the Americas. That includes a long time presence in Trinidad, where we do both crew change and search and rescue work as well as the Suriname and including [ Curacao ]. So given our presence in the region, I think if and when opportunities do materialize, we're as well positioned as anyone to take advantage of them. Operator: The next question comes from Josh Sullivan with Jones Trading. Josh Sullivan: Just wanted to ask on UKSAR2G, just on the transition, how is that coming along? Supply chain issues or otherwise state of the world? Any delays or risks to aircraft delivery time lines we should be thinking about? Christopher Bradshaw: Thank you for the question, Josh. I'd say, overall, the transition from the current UKSARH contract to the new UKSAR2G contract is going well. And I want to extend my gratitude to the whole team, everyone on the Bristow team as well as Matachy's Coast Guard team that are working on that. There have been some aircraft delays, consistent with the supply chain issues that have plagued the aviation industry and certainly the civilian helicopter industry over the last few years. I think Leonardo is having some of those with their suppliers and vendors as well. So we have had some aircraft delivery delays, which is complicated the time line, but we're working closely in collaboration with our customer at the Marine and Coast Guard Agency to manage through those issues. And the communication is going well. And again, overall, the contract transitions UKSAR2G is progressing along. Josh Sullivan: Got it. And then I guess on the Irish side, now you have the full suit of bases online and the costs you mentioned in the prepared comments there, Jennifer, can you just talk about what costs are going to be subsiding through '26 and how that ramps down? Jennifer Whalen: Sure. So there are still transition costs for the Irish contract into 2026 as we took the new over the last phase in February. There's still training that needs to occur. These pilots are moving from one aircraft type to a new aircraft type. So it's primarily that training and getting everyone up to speed and ready to go on the new contract. Josh Sullivan: Then maybe just switching over to advance air mobility. Congrats on Norway Sandbox and getting that done. But curious if you could give us any insights into findings or how significant that initiative was towards your future plans, but you guys are on the tip of the spear there. So it's always interesting to hear your perspective. Christopher Bradshaw: I would say very significant. This was really a first-of-its-kind project globally, and we were able to operate the aircraft really on a daily basis in partnership with the local regulator and beta technologies and get some valuable real-world insights. There will be a formal report published in a couple of months. I don't want to preempt that. But I would say at a high level, there are some learnings related to the battery storage, battery charging as well as radar position and communication of the aircraft. There'll be more to say on that when the full report comes out. But again, we were really excited to complete that project, which is one of the first of its kind globally. Josh Sullivan: And then just one last one. Chris, your comments on just the defense market, given geopolitically what's going on and your interest there. But then combining it with the reality that you guys are at the tip of the spear and the advanced mobility market and the interest the defense market has in those applications. Are you looking at your combined capabilities here? Is that going to be an advantage? Or are you thinking more traditional kind of defense sort of orientation? Christopher Bradshaw: We're thinking both. We're thinking traditional defense orientation, and we're already doing work today with the U.K. MOD, and we've done some work historically with the U.S. military, but we think that opportunity set will be a big one for us going forward. But also, I think you're spot on, Josh, in mentioning that our early leader position and advance air mobility should be a strong interplay with government and militaries, which are expected to be some of the biggest customers globally for those new generation aircraft. Operator: The next question comes from Savi Syth with Raymond James. Savanthi Syth: I wonder if you could talk a little bit about the thinking and the shift in your debt strategy here and how you're thinking about kind of balance sheet targets going forward? Jennifer Whalen: Sure. We were happy to execute the transaction that we did in January and we were able to upsize that with an attractive coupon in terms and really dramatically better credit spreads than the last issuance that we had. We did state that we plan to pay down debt by the end of 2026, and that would likely be our UKSAR2G equipment financing and all things being equal, that will still be the case. In the meantime, we will plan to evaluate other opportunities so we still feel comfortable where we're at on that and we're happy to get that refi done. Savanthi Syth: Got it. And then just on the aircraft deliveries that are expected here in '26. Could you remind me kind of the plan on the financing front on that, Jennifer? Jennifer Whalen: So we do have orders for 7 AW189 this year. We do plan to either pay for those with cash on hand or lease them or do something else around that, but no significant financing needed based on what we did in the bond deal. We did pledge a couple of those in that bond deal. Savanthi Syth: Got it. And then just finally, if I might ask one last question just on the Electra announcement that came. It sounded like this included some agreements on PDPs. Just could you talk about or provide a little bit more detail on kind of the timing and level of investment in that area? Christopher Bradshaw: Yes. Thank you for the question, and happy to address that. To date, we only have a few million dollars of capital commitments that have been made. The agreements that we have in place are subject to certain milestones around certification and aircraft performance. If those are met. And if we see the compelling market opportunities we have the option to bring those aircraft in. And specifically to the Electra that would be up to $30 million for the ones that have been ordered thus far and the financing for anything that we would do around advanced air mobility. We think we have the ability to execute given the financial flexibility that Bristow has built today with our balance sheet and liquidity position. Operator: [Operator Instructions] Our next question will come from [indiscernible] with Texas Capital. Unknown Analyst: As it relates to your guidance, can you talk to some of the variables that could either surprise you on the upside or the downside? Jennifer Whalen: Sure. Happy to answer that. So there are a few items that would bias either to the high side or the low side of the range, really the macro environment price of oil, stability of prices could -- about 15% of our revenues do come from exploration, which would be the most affected by those. Foreign exchange rates, particularly the British pound and the euro in our search and rescue contracts in Ireland and the U.K. We do get paid in those currencies and so they could bias us one way or the other depending on what happens with the dollar to those currencies. And then further, either supply chain constraints or improvements could also affect that bias one way or the other. Unknown Analyst: That's very helpful. And then can you also help us to sort of understand where the next kind of notable government contracts might develop? And what that timeline might look like? Christopher Bradshaw: Yes. There's not a published tangible timeline for a lot of the search and rescue projects to date. But I would note that there are a lot of conversations that are going on now, particularly with European governments A lot of them have made commitments to spend more on defense over the next several years. And one of the ways, from a budgetary standpoint, they may look to balance that is potentially outsourcing some of the non combatant services like a civilian Coast Guard. So we are having encouraging conversations with a few different countries in Europe today about outsourced coast guard opportunity similar to what we're already doing for countries like the U.K., Netherlands, Ireland, et cetera. So we remain optimistic about the pipeline for additional government search and rescue work. And then beyond that, we do see a broader set of opportunities for an aviation service partner to work in public-private type partnerships with militaries and governments in both Europe and the Americas to meet some of the defense -- increased defense spending objectives that they have. Operator: Our final question will come from Steve Silver with Argus Research. Steven Silver: First, referencing the NAV slide, does the cited $1.6 billion in fair market value of the owned aircraft reflect any of the new aircraft that have been committed for purchased but not yet delivered or does that just apply to the current fleet? Jennifer Whalen: Steve, thanks for the question. No, the fair market value of the aircraft on the NAV side reflects the third-party appraisal of the aircraft that Bristow has in the fleet today and does not include the anticipated new delivery. However, there are deposits in the -- towards the new aircraft and the other PPE line on that NAV slide. Steven Silver: Great. And so even though commercialization is still a few years out now, but as AAM gets closer to the market and Bristow now secured initial delivery slots, is there any early view that you guys have on the supply dynamics that you envision for that market that could help define the pace of an eventual commercial rollout? Christopher Bradshaw: It will start small as those companies mature their manufacturing capabilities. So it could be single digits to low double digits in the first year ramping up pretty quickly after that. But I think it will be a measured pace within this decade. But likely scaling to a much larger hundreds of units across the different manufacturers as we roll the calendar into the next decade. Steven Silver: Great. And one last one, if I may. Earlier, you discussed the improved terms on the 2026 contract renewals for OES supporting adjusted operating income growth. Can you provide any details on the percentage of the total contract book that was up for renewal this year? And any parameters around contracts coming up for renewal over the next couple of years that you're envisioning? Christopher Bradshaw: So about 50% of the OES customer contracts had renewed prior to the end of 2025 and most of the rest of potentially all will have renewed by the end of this calendar year. The benefits of that within calendar 2026 are reflected in the guidance range that you provided and future years will include the full year benefit of those. It's been a healthy rate uplift, again, about 25% on average globally for leading-edge rates compared to the legacy contract rates that they're replacing. And most of the 15% increase in our adjusted operating income from our OES segment in 2026 is due to those improved contract terms. Operator: This concludes our question-and-answer session. I will now turn the call over to Chris Bradshaw for closing remarks. Christopher Bradshaw: Yes. Thank you, Luke, and thanks, everyone, for joining the call. We look forward to updating you again next quarter. In the meantime, stay safe and well. Operator: This concludes today's call. You may now disconnect at any time.
Operator: Good day, ladies and gentlemen. Thank you for standing by. Welcome to the VICI Properties Fourth Quarter and Full Year 2025 Earnings Conference call. [Operator Instructions] Please note that this conference call is being recorded today, February 26, 2026. I will now turn the call over to Samantha Gallagher, General Counsel with VICI Properties. Samantha Gallagher: Thank you, operator, and good morning. Everyone should have access to the company's fourth quarter and full year 2025 earnings release and supplemental information. The release and supplemental information can be found in the Investors section of the VICI Properties website at www.viciproperties.com. Some of our comments today will be forward-looking statements within the meaning of the federal securities laws. Forward-looking statements, which are usually identified by the use of words such as will, believe, expect, should, guidance, intends, outlook, projects or other similar phrases are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Therefore, you should exercise caution in interpreting and relying on them. I refer you to the company's SEC filings for a more detailed discussion of the risks that could impact future operating results and financial condition. During the call, we will discuss certain non-GAAP measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measure is available on our website, in our fourth quarter and full year 2025 earnings release, our supplemental information and our filings with the SEC. For additional information with respect to non-GAAP measures of certain tenants and/or counterparties discussed on this call, please refer to the respective company's public filings with the SEC. Hosting the call today, we have Ed Pitoniak, Chief Executive Officer; John Payne, President and Chief Operating Officer; David Kieske, Chief Financial Officer; Gabe Wasserman, Chief Accounting Officer; and Moira McCloskey, Senior Vice President of Capital Markets. Ed and team will provide some opening remarks, and then we'll open the call to questions. With that, I'll turn the call over to Ed. Edward Pitoniak: Thank you, Samantha, and good morning, everyone. In the next few minutes, you'll hear from John Payne on our growth outlook and David Kieske on our financial results and our 2026 guidance. To start, I would like to thank the members of the VICI team for their hard work and dedication. Their contributions are the foundation of our success, and we're grateful for everything they do for our company and our shareholders. I'd also like to thank our operating partners for all that they do in bringing our buildings to life each and every day. Our leases are triple net. We don't get involved in how our tenants operate their businesses, but that doesn't mean we don't pay attention. We pay attention, of course, to what they produce, that is their operating results, but we also pay attention to how they produce results because how they operate today can impact the results they produce in future quarters and years. How gaming, leisure and hospitality companies produce results isn't usually captured in financial statements. And that's because financial statements don't directly tell you much, if anything, about one of the key factors that drives financial results and that key factor is people, namely employees and customers. When I entered leisure and hospitality in the mid-1990s through Ski resort operations, I had the good fortune to be introduced right away to the model that I believe best captures how value is created and sustained in a service-based business, including leisure and hospitality businesses like gaming and other experiential categories. That model was the service profit chain authored by a group of Harvard Business School professors that included Gary Loveman. Here's the essential dynamic of the service profit chain as described in the original Harvard Business Review article published in 1994, "the service profit chain establishes relationships between profitability, customer loyalty and employee satisfaction, loyalty and productivity. The links in the chain are as follows. Profit and growth are stimulated primarily by customer loyalty. Loyalty is a direct result of customer satisfaction. Satisfaction is largely influenced by the value of services provided to customers. Value is created by satisfied, loyal and productive employees. Employee satisfaction, in turn, results primarily from high-quality support services and policies that enable employees to deliver results to customers." This sounds simple and logical. Why wouldn't every service business operate this way? Well, there are lots of reasons, starting with creating and sustaining this chain is hard, ceaseless work, especially in operationally intense businesses like gaming, which operate 24 hours a day, 365 days a year with multiple guest experience, service and profit units within a single operation. Because putting the service profit chain into full effect is hard to achieve, it's worth recognizing and celebrating when it is achieved. Last year, Harvard Business School, yes, back to them again, recognized such an achievement when it published a case study entitled: The Venetian Resort: Frontline Engagement as Value Driver. It's almost exactly 5 years ago that we announced our acquisition of The Venetian together with our partners at Apollo. The time was winter 2021 and the COVID pandemic was still severely impacting Las Vegas. As Apollo and VICI collectively underwrote that acquisition, our hope and our stated intention on announcement was that the asset could recover to 2019 levels of profitability by 2026. We'll let Harvard Business School tell you how we collectively fared, and I quote, "to bring Apollo's investment thesis to life, the Venetian's Board of Directors made 3 decisions. First, they appointed Patrick Nichols to lead the transformation. Second, they committed over $1 billion in capital to enhance the guest experience from room renovations to convention center upgrades. And third, they implemented a broad-based equity-like program called the Venetian Las Vegas Appreciation Award, grounded in the belief that employee ownership could drive both cultural and operational change. Continuing to quote, 3 years later, the results were strong. Employee engagement increased materially above historic levels, signaling that cultural change was taking root. Guest satisfaction scores rebounded from pandemic lows of 56% to 61% and the EBITDAR of the property had increased from $487 million pre-pandemic to $777 million in 2024." From VICI's perspective, since Patrick Nichols took over leadership of The Venetian in early 2022, we've been privileged to witness the transformation that ensues when an experiential management team is attentive and responsive every single day to employee effectiveness and morale and its impact on guest behavior, satisfaction and loyalty. I strongly encourage you to read the HBS case study on The Venetian. You can find a link to a PDF of the case study on our website, www.viciproperties.com. To reiterate, given our triple net leases, we don't operate anything that goes on within our real estate, but we pay attention to operations and greatly appreciate all that our operators do every day to make our real estate relevant to their end customers. And it's those end customers after all, who produce the revenue that eventually funds our rent. With that, I'll now turn the call over to John Payne. John? John W. Payne: Thanks, Ed. Good morning to everyone. As Ed highlighted, the operating prowess of our tenants is important. When we underwrite new transactions, not only are we assessing the financial profile and projections of these operating businesses, but we're also intentional about deeply understanding the partners with whom we are doing business. As Ed points out, it is an operator's managerial style and ability to retain and attract consumers that filters down to the bottom line. Over the course of 2025, we formed and announced several new partnerships that we believe are emblematic of the energized, experienced and effective operators we seek. Last February, we established a long-term strategic relationship with Cain and Eldridge Industries, 2 companies highly aligned with VICI-owned experiential real estate through a $450 million mezzanine loan investment related to One Beverly Hills. In May, we initiated our first partnership with Red Rock Resorts, one of the premier gaming operators through a $510 million delayed draw term loan for the development of North Fork. Red Rock's fourth quarter results demonstrate how their thoughtful and creative operating model is leading to superior results. In October, we welcomed Clairvest as our future 14th tenant following the announcement of their pending acquisition of operations at MGM Northfield Park. And finally, in November, we announced a $1.16 billion sale leaseback of 7 casino properties in Nevada with Golden Entertainment and Blake Sartini, a highly seasoned gaming operator, which will add our 15th tenant when the transaction closes, which is expected later this year. These announcements combined represents $2.1 billion of committed capital in 2025 at a weighted average initial yield of 8.9%. This volume of commitment and quality of partnership is what differentiates VICI. I'd like to take a moment to focus on the Golden transaction. We're very proud to have announced a $1.16 billion fee simple real estate deal in the gaming sector involving 7 properties located in Nevada, a state that is very protective in land-based brick-and-mortar gaming. We also look forward to our future partnership with Blake Sartini, current Chairman and CEO of Golden Entertainment, who we will own and control a newly formed entity that will acquire the operating business of Golden in connection with the closing of the transaction, subject to Golden shareholder vote as well as customary closing conditions and regulatory approvals. Blake has a long tenured history of over 30 years in casino operations and has established reputation as an effective operator with a strategic focus on Nevada gaming landscape. We hope to grow together in the coming years. At VICI, we've talked about investing in the local -- the Las Vegas locals market for years, and Golden has allowed us the opportunity to do so. The market is demographically attractive. Median household income in the locals Las Vegas market has a 10-year CAGR of 5.5% compared to the national median household income 10-year CAGR of 1.9%. The Las Vegas locals market has also maintained incredible resiliency as demonstrated by most recent market results. We acknowledge that the Las Vegas strip had a relatively softer 2025 compared to prior years. But as we've discussed over the last few quarters, we view 2025 as more of a normalization than a pullback. For instance, though the number of passengers traveling through Harry Reid Airport was down on a year-over-year basis, largely due to a dip in Canadian visitation, it was still the third busiest year in the airport's history. But as John DeCree astutely noted in a recent research report, despite many domestic casino stocks being out of favor at present, credit spreads for casino companies remain tighter than ever. We agree with John that these spreads are the more appropriate barometer for the health and durability of the casino operating model. Looking ahead to 2026 in Las Vegas, the strong convention calendar has already started to have an impact with the highly attended CES in January and with CON/AGG CONEXPO approaching in March, the group segment that has historically been a pillar of strip demand should provide meaningful support through the first half of 2026. Our operators' ability to react and respond to changes in the macroeconomic picture and shifting consumer demand contributes to the longevity of the experiential sectors in which we've invested and we'll seek to continue to diversify our partnerships across best-in-class experiential operators just as we did in 2025. Now I will turn the call over to David, who will discuss our financial results and guidance. David? David Kieske: Great. Thank you, John. In terms of financial results, for the quarter, AFFO increased 6.8% year-over-year to $642.5 million and on a per share basis, increased 5.6% year-over-year to $0.60. For the full year 2025, AFFO increased 6.6% year-over-year to $2.5 billion and on a per share basis increased 5.1% year-over-year to $2.38. This compelling growth in AFFO on a per share basis for both the fourth quarter and full year 2025 was delivered primarily through the reinvestment of our free cash flow. We only increased our share count by 1% in 2025, highlighting VICI's ability to deliver sustainable per share returns as our portfolio continues to scale. Our results once again highlight our highly efficient triple net model. Our G&A was $19.3 million for the quarter, $65.1 million for the year and as a percentage of total revenues was only 1.9% and 1.6%, respectively. Our net income margin for the year was approximately 69%, one of the highest net income margins in the S&P 500. Touching on the balance sheet and liquidity. Our total debt is $17.1 billion, and our net debt to annualized fourth quarter adjusted EBITDA is approximately 5x at the low end of our target leverage range of 5 to 5.5x. We have a weighted average interest rate of 4.46% as adjusted for our hedge activity and a weighted average 6 years to maturity. As of December 31, we have approximately $3.2 billion in total liquidity comprised of approximately $608 million in cash, $243 million of proceeds available under our outstanding forwards and $2.4 billion of availability under our revolver. And turning to guidance. As you saw in our press release last night, we are initiating AFFO guidance for 2026 in both absolute dollars as well as on a per share basis. AFFO for the year ended December 31, 2026, is expected to be between $2.59 billion and $2.625 billion or between $2.42 and $2.45 per diluted common share. And just as a reminder, our guidance does not include any transactions that have not closed, interest income from any loans that do not yet have final draw structures, possible future acquisitions or dispositions and related capital markets activity or other nonrecurring transactions or items. With that, Adam, please open the line for questions. Operator: [Operator Instructions] And our first question comes from Caitlin Burrows from Goldman Sachs. Caitlin Burrows: I guess it seems like you guys have had some preliminary discussions with Caesars regarding the master lease. So wondering if you could give any updates on what has been discussed, potential update -- potential outcomes and timing. And to the extent you don't want to discuss those, perhaps you could say maybe what's off the table or that an announcement before X date is probably not reasonable. Edward Pitoniak: Yes, Caitlin, good to talk to you. Yes, we're obviously not going to get into any kind of detail on what we might have discussed already with Caesars or more importantly, what we will be discussing. But what I want to emphasize, Caitlin, is that as we address lease issues with Caesars, we're going to do so within the context of our overall approach to portfolio and risk management. So that any solutions that we develop and agree to with Caesars help further our larger portfolio goals of optimizing our exposure to any single tenant to any single category to any single geography. And that's the way in which we will evaluate any possible solutions that get shared at the table. We can't obviously and won't specify any single date by which an agreement is made or arrived at. But I would reemphasize the degree to which our history over 8 years has been a history in which we've continually used our strategies to achieve our goal of getting better. I would remind everyone, not that probably anyone needs reminding that we started out with 100% exposure to Caesars and only Caesars. Today, we're in the high 30s as a percentage of our annual rent roll. But what we undertake with Caesars again, will be a solution that we believe can and will be a win-win, but win-win for us insofar as it also helps further our portfolio optimization goals. Caitlin Burrows: Got it. Okay. And then I guess I saw in the 10-K that it mentioned you had placed a senior loan collateralized by golf development on nonaccrual status. So wondering, can you give more color on this, maybe what visibility you had, what's going on at the property and any assumed impact to AFFO in 2026 guidance? Edward Pitoniak: Yes. So this -- one of the benefits for us, Caitlin, of having so small partner roster, whether it be on the asset investment side or on the lending side is that when issues do arise, we are able to get all over them. In this particular case, it became clear that our partner, in this case, the borrower was facing a working capital issue, and we made what we think is a very sound tactical decision in relation to this tactical issue of making sure that they would have the working capital to continue to operate and develop in a way that preserves the value of the property so that during that time, they could also focus on recapitalization on their side, and they are working very intensely on that, and we are tracking that with them day by day. In terms of any impact on earnings for 2026, again, this is a de minimis part of both our loan book and, of course, our overall asset base. But Gabe, I don't know if you want to offer any thoughts in regard to Caitlin's question around earnings impact. Gabriel Wasserman: Yes. I'd just reiterate, it is de minimis and it's not included in guidance for 2026. Caitlin Burrows: By not included, you mean there's not a headwind included. Gabriel Wasserman: Correct. There's no income related to that loan included in 2026 guidance. Operator: The next question comes from Barry Jonas from Truist. Barry Jonas: I mean, I guess, just broadly speaking, can you talk about the deal environment, what you're seeing out there between sale leaseback or increasing loan book discussions. Samantha Gallagher: John? John W. Payne: Yes. Barry, it's nice to speak with you. And I know we've talked before. I can't tell you exactly what's in our pipeline, but I will take a moment. I do think it's important to remind everyone what we at VICI, we get paid for. On the short-term incentive, it's 100% based on a rolling 2-year AFFO per share growth and our long-term incentive is based on an absolute relative total return. And we aim for 8% to 10% total return annually. And I simply bring that up to orient you on how we approach the pipeline and external growth. We're all very clear here, and we have been since we started the company that we need to line up sustainable external growth. So with that said, we continue to prioritize real estate ownership while also using our loan book and we've talked about to develop new relationships. So we continue to be active. I'll remind you, Barry, from -- at this point last year, I think we had only announced our partnership with Cain and Eldridge. We had not even announced our partnership with Red Rock Resorts or Golden this time last year. So we continue to do our work. We're aware of -- we'll continue to employ our relationship-based approach to future transactions, and we feel good about what's out there. Barry Jonas: Got it. And then maybe related, maybe not, but I noticed there's a change in your accounting leadership with Mr. Wasserman moving to an expanded role for biz dev and experiential credit solutions. So just wondering if any ramifications to Gabe's shift there as you think about VICI's strategy or focus? Unknown Executive: Well, Gabe is on the call right now. So I don't want this to go to his head a little bit, Barry, but I couldn't be more excited to have Gabe shift over and help me and help us grow our business development. He's going to be a great resource. He's already been working with me for the past couple of months primarily on nongaming and experiential. But I know the whole company, but particular me is excited to have him be working on business development. He is on the call. He can weigh in as well if he'd like. Gabriel Wasserman: Barry, thanks for the shout out. And I also want to give a shout out to Jeremy Waxman, the new Chief Accounting Officer. Jeremy has been part of the team for 8 years, joined at the same time as I did, and we're all incredibly excited for his promotion here, and he'll continue to do a great job on the accounting side. Operator: The next question comes from Greg McGinniss from Scotiabank. Greg McGinniss: I was just hoping you could talk about the rationale between -- on the Greektown Margaritaville combination, lease adjustment there and the genesis of how that deal actually happened, who approached who. So any color would be appreciated. Edward Pitoniak: John? John W. Payne: Greg, it's nice to hear from you. Just about who approaches who. Remember, because we only have 13, 14, 15 tenants, we're always talking about a variety of things, whether that's with Penn or with any of the others. Regarding the combination of the leases, we really saw the opportunity to combine 2 leases, simplify the escalation structure, remove the volatility by eliminating the percentage of rent. This combination clearly enhances our credit protection by cross-collateralizing 2 of our assets in a master lease with a corporate guarantee. While at the same time, it did not change the amount of rent collected by VICI this year. So we saw it as a really good opportunity. Both sides came together and we negotiated. And obviously, we announced it when we put out our earnings last night. Greg McGinniss: Okay. And speaking of the kind of limited tenancy and the relationships that you're building on the debt side, how do the debt investments like with Red Rock as the builder out of the tribal casino impact your relationship with them and the discussions that you have with them or how frequently you're communicating with them, right? So like how do you view kind of the long-term benefit of that transaction versus just stepping in as bank adjacent, someone that has a pocket book as opposed to someone that's a long-term partner. Samantha Gallagher: David? David Kieske: Yes, Greg, it's a good question because we approach all of our investments from a fundamental relationship-based position. And particularly Red Rock, as we talked about when we announced that last year, I mean John and Ed and team and I have been meeting with Frank, Lorenzo and Steve and team for years and just getting to know them, getting to know their business. And when they called us last fall to come into that syndicate, it was very much -- this is a way to continue to grow that relationship and develop that relationship, and we still have frequent dialogue with them, even though they are the developer and the tribe will operate the asset, but it's via Red Rock relationship that we did that investment with their credibility and expertise around development. If you've been out or seen any renderings of the North Fork asset, it's on time and slightly under budget, and we'll open here in the fall. So we are not just a lend and stick the credit on the shelf and walk away. It's everything is relationship-based and who's our partner and is there strategic merits to the capital that we deploy, whether it be through equity investments or the debt investments. Operator: The next question comes from Haendel St. Juste from Mizuho. Haendel St. Juste: First question is on the guidance. I understand a large majority of the growth you have is locked in through your bumps. So I guess I'm curious on some of the variables that could drive us to the upper and lower end of the range. I know it's not a wide range, but it also doesn't assume transactions or capital markets. So some thoughts there and maybe also some thoughts on the debt coming due later this year. I think it's $1.75 billion in the low 4% range. Edward Pitoniak: Yes. Haendel, I'll start, and then I'm going to hand it over to David. Yes, we obviously do not guide to investment activity that has not yet been announced or even to loan draws that haven't been formally calendarized. And that's obviously -- that sets us apart somewhat. And when we boil down the key reasons as to why we don't give investment guidance like many of our net lease peers do, there's really, I think, 2 key reasons. The first one is, obviously, visibility and predictability would be hard to achieve. Secondly, I, as a risk manager, I'm a little hesitant around the whole idea of investment guidance because if you give an investment target, and you don't know exactly with certainty how you're going to achieve it, it can, in some cases, I'm not saying all, can, in some cases, lead investment teams to make investments for the sake of making damn sure they hit the target, and that can often be a road to trouble. But I will now turn it over to David to answer the back half of your question. David Kieske: Yes. Just in terms of the range, Haendel, I mean, we have some draw schedules for Kalahari North Fork that we just talked about and a few others. So we bake in some flexibility around that in terms of percentages that they may draw each month. There's obviously -- you got on our income statement, there's not a lot of other lines. There's a little bit of fluctuation around G&A. There's a little bit of fluctuation around interest income. And then we do bake in some conservatism, not specificity around the refis, which you've mentioned that we have upcoming at the end of this year, maturity in September of $500 million and a maturity in December of $1.25 billion and then you roll into the first part of '27, and we have another $1.5 billion coming due. So we'll look to access the -- it wasn't exactly your question, we'll look to access the bond market later this year, obviously, ahead of those maturities to continue to term out our debt wall, debt ladder as we have been doing since inception. Haendel St. Juste: Would your preference be to do term? And just curious on kind of where you see the ballpark estimated cost of new unsecured debt? David Kieske: Yes. We're getting close kind of on a 10-year is how we look at it, 125, 130 over the 10-year right now. So I don't know what the 10 year is exactly this morning, but low 5s all-in coupon. So as we've done last year, a mix of -- we'd love to do 10s, 30s if the market is there, but we've got optionality in a very deep fixed income investor base that we're very grateful for and we'll come to the market at the right time for the company. Haendel St. Juste: Got it. Got it. My second question is on Golden. I wanted to go back to the pricing on that transaction for a moment. I appreciate the stats on the Las Vegas local market, certainly some encouraging things we heard there. But the mid-7 cap rates inside of where we've seen other regional deals trade largely in the 8% plus range. So I was curious how we should think about -- and how you're think about cap rates for regional versus strip assets going forward? And if this is a new pricing level you think or expecting in the market? Edward Pitoniak: John? David? John W. Payne: Yes. Look, we felt very good about the pricing, being able to get 7 assets with the team at Golden and then being able to operate them and understand them and then also be able to grow with them, we felt that, that was the appropriate price at the time. We are obviously getting more exposure to Nevada, which we're excited about. So it's easy to kind of lump everything into regional assets, but there's no question there's a big difference between middle market regional assets as well as what we describe as Nevada regional or local assets. So we think the price was appropriate for getting a whole portfolio of assets and helping the team grow their business. And I think over the years, we would hope that we do more with the Golden team. David, anything to add? David Kieske: No, you covered it well. There is a difference between regional assets in the locals market and the regulatory environment that Nevada or the importance of the regulatory environment in Nevada and the bricks and mortar and the income and the taxes that they generate and the employment base that they support through that state and their economy. Operator: The next question comes from Jim Kammert from Evercore. James Kammert: It seems like Sphere Entertainment is pretty likely to go forward on their deal down National Harbor. I was just curious, does VICI had any talks with the Sphere or their Peterson company partners about participating in that deal? Edward Pitoniak: Well, Jim, good to talk to you. Obviously, we don't really -- we never talk about deals in progress of any kind or whether or not any kind of conversations are in progress. But I guess I will say that we've been obviously able to have a ringside seat on Sphere's success at The Venetian. And from what we have seen and heard and witnessed through the results, Sphere has created, obviously, a very compelling offering. Sphere is run by a very strong management team, not only on the entertainment programming side, but on the construction and development and risk management side. So we're obviously paying attention and perhaps I'll leave it in there unless any of my colleagues want to offer anything more. John W. Payne: The only thing I would add, Ed, is that where we're seeing this potentially could go. Obviously, we are the owners of National Harbor and MGM runs it. And what we've seen, as Ed mentioned, in Las Vegas for the Sphere is the amount of new customers that get attracted to that. So it could only help our business and MGM's business should the Sphere -- the next Sphere be built on that campus. James Kammert: That's helpful. I appreciate the caveats. And then I know, Ed, again, you can't really speak to the Caesars discussions. But given the strong report between the 2 companies, I mean, can you say, is there just sort of like a regular -- to use your term, calendarized sort of series of discussions? I mean is this ongoing? Or is this sporadic? I'm just trying to understand kind of what the interaction feels like? Edward Pitoniak: Yes. Yes. It's obviously -- it's regular by nature of us needing, obviously, to have a regular dialogue with the single biggest tenant on our rent roll. And again, there's conversations that obviously have to take place around issues that are not necessarily specific to the regional lease. But John, I don't know if you want to add any more than that? John W. Payne: No. Look, I mean, we -- if the question was just about the lease, that's a different question than are we talking to Caesars and our tenants about their business to understand the trends. And the latter we do all the time, and it's, again, one of the benefits of our model where we don't have 500 or 1,000 tenants where you can't understand the business and trends. By having 14, 15 tenants, we can talk to them and understand specifics about our assets. So I speak frequently, Danny, the lawyer works and our group speaks frequently, not only with Caesars, but really all our operators. Edward Pitoniak: Yes. And yes, let me just reiterate, Jim, what I said in response to Caitlin's question at the outset. For both Caesars and for us, I really believe the ultimate best solutions will be solutions that simply do not only address issues of lease coverage, but solutions that enhance both portfolios, which is to say, I think there's going to be multiple levers, multiple strategies to achieve portfolio optimization for both parties. Operator: The next question comes from Anthony Paolone from JPMorgan. Anthony Paolone: Maybe for John, can you go through some of the bigger buckets of investments and give us a sense as to where you're more or less active in terms of seeing things these days, whether it's sports, wellness, gaming, international and so forth? John W. Payne: I'd just say yes. But let me just give you some really -- I'll talk about experiential. Obviously, we'll continue to grow our gaming portfolio, and I feel that we're well aware of potential opportunities in that space really all over the world, obviously, here in the U.S. When we turn to experiential or non-gaming, there's a couple of areas I'll just touch on. And don't assume that's all we're looking at, but we only have 35 seconds here for me to talk about this. So a little bit about -- you mentioned sports, and this has been really interesting for me, and you hear Gabe's in a new role, he's spending a lot of time on this. And we are in discussions with a variety of sports operators, teams, leagues. And frankly, it just takes time, just like it did when we started the company, taking time to learn all the gaming operators, we're needing to take time to introduce ourselves to sports operators, teams and leagues. And frankly, the sports financing world is changing rapidly. You can pick up your news, however you get your news, I almost said newspaper, no one does that anymore. But pick up your news and look and you'll see there's always something happening in the sports finance world. And really, whether it's a university, whether it's a pro team, they want to understand their options before moving forward. What I'd tell you about the VICI team is we're getting in front of the right people. We're staying patient because we really do believe there's an opportunity for great growth in the sports infrastructure space. And the other area we're spending time with because we really like the data we see is in live entertainment. If you look at the data from millennials and Gen Z, there seems to be a large appetite and willingness to spend a great amount of money on live entertainment. So we continue to spend time understanding is there an opportunity for our capital in those type of infrastructure developments. So Tony, I'll hit on those and see what else you got. Anthony Paolone: Okay. My only other one maybe for David. Just I think one of the Cain loans has an initial maturity that's perhaps next month, if I recall. Like what's the likelihood of getting paid back on that? Or does that just get extended out? David Kieske: Yes, Tony, you're right. There's an initial maturity next March -- or this March, sorry, next month. The likelihood is it gets rolled -- unlikely it gets repaid, but it gets rolled into a broader construction syndicate that the Cain team is working on and timing of that is TBD. It's hard to predict. It's a big construction loan, but it's something they're very focused on and ensuring that they get that done in a timely manner. Operator: The next question comes from David Katz at Jefferies. David Katz: John, I wanted to -- I was hoping to just go back to the sports opportunity because we have been talking about it for a while, and I understand the answer about patience and persistence. Have you talked about any TAM or sizing that opportunity? Just a little something more that we can chew on while we're waiting. John W. Payne: We don't have an exact number. I'll let Dave weigh in a little bit. What I would tell you, David, is that we have approached 50, 60, 70 universities to date. There is clearly a need for capital to build sports infrastructure. And because we've not announced the deal yet, we're trying to see how our capital can work in that environment. So what I do know is there's a large TAM, and that's just in universities, we're not even talking about professional sports teams, mixed-use facilities around new arenas, new stadiums as well. So David, I can't give you an exact number, but what I do know when I meet with these groups is that there is a need for capital and there are projects that are on the board. Now how they ultimately get financed is something that we continue to be, as I mentioned, being patient discussion about how our capital can work. Gabe, anything else you'd add to answer David's question? Gabriel Wasserman: Yes. I think just to, everyone we've talked about really has almost like a 9-figure need for athletic infrastructure on campus. Time line is shorter for some and more immediate. Others, it's part of a long-term plan. And hopefully, our capital can be a good fit and can help with their future development goals and opportunities. David Katz: Perfect. And then just to follow that up, when we look at, John, noting some of your commentary about live entertainment venues, which is certainly relevant in our coverage as well as the sports opportunity that's a little bit new. How can we think about the duration or durability of that real estate in comparison to your initial core, which was casinos. I know we've talked about we know what the strip is essentially going to be in 20, 30 years. How do we feel about that in those other types of real estate venues? John W. Payne: Dave, do you want to take that since you've been leading this charge? David Kieske: Yes. I think, David, as I'm sure you're seeing in your meetings, a lot of these sports anchored mixed entertainment districts are popping up all over the country, and they're trying to get some live entertainment to anchor them and to drive visitation, which really activates the site and increases the value of the surrounding real estate. I think if you talk to any operators that would operate these venues, they see them as a 25-year plus investment, 25- to 50-year horizon, which really aligns really well with our investment horizon and looking at these as permanent capital investments. So we see these as really kind of core infrastructure that are part of the development and is a really good fit for our capital and our long-term outlook. Edward Pitoniak: Yes, David Katz, I'm really glad you asked that question because it's not only timely, it's also a perpetual question. And you've probably heard David Katz, the kind of acronym of the week, Halo, H-A-L-O, which is to say in the last couple of weeks, as software stocks have self-immolated, suddenly, there's a focus on heavy assets, low obsolescence, halo. And yet one thing we can never be smug about is obsolescence risk because it is the key value destruction risk in every category of real estate. So it is something we very much focus on category by category, location by location, use by use. And I think, Gabe answered well how we would look, for instance, at sport assets and their likely both useful life, but moreover their relevant life. But certainly, as we look across experiential categories, that is probably, at least for me, the #1 risk factor, which is to say how relevant will this real estate be 20 or 30 years from now. John, I don't know if you wanted to add something more. John W. Payne: No, you got it, Ed. Operator: The next question comes from Wes Golladay from Baird. Wesley Golladay: I just got a question for you on the cost of capital. Your 10-K highlighted that sometimes it falls out of favor. I'm just curious if you're looking at different ways to diversify your equity source, whether it's joint ventures, maybe even start to fund business at some point, but is that becoming a bigger priority? Edward Pitoniak: David and Samantha, do you want to talk about that? David Kieske: Yes. Wes, it's a good question. And we have the benefit of those that have come before us. Obviously, Prologis has a very robust and high-quality fund business. We're watching and seeing what Realty Income does with their fund business. Welltower is diversified. And it's something more broadly we think about what is the evolution of the REIT market. And is it becoming more of an asset management market or more of an asset management model, excuse me, because obviously, fund flows over the last 5, 10, 15 years have been very, very anemic with in the REIT world. So it's something that we're watching and learning and thinking about. There's nothing imminent on the horizon, but it's like any good stewards of capital. We want to make sure that we're forward thinking and putting the best practices forward. Samantha Gallagher: David said it, my job is to make sure we can basically structure anything we need to structure to accomplish our objectives. Operator: The next question comes from John DeCree from CBRE. John DeCree: I know we've talked about New York casinos in prior calls, but with 3 licenses awarded, Ed, John, Dave, whoever wants to take this, how are you thinking about New York development opportunities and your appetite to get involved in financing in whole or part. Can you kind of walk us through your view on the New York City development opportunity right now? Edward Pitoniak: John and David. John W. Payne: I'll start and then David can jump in. John, good to talk to you this morning. Obviously, it's a very large developments that are going to happen with these licenses. We do already have a partnership, as you know, with Hard Rock organization that are rebuilding the Mirage in Las Vegas. We also have a partnership with them in Cincinnati. So we're watching to see where there are opportunities for us to be part of a capital stack, so to speak, in New York. So it's still a wait and see, still seeing what's going on and where our capital could be productive and the projections of these businesses as well, we're getting a better handle on. David? David Kieske: I think you covered it well, John. Obviously, we've got 2 ground-up developments that will be further out. And obviously, Resorts World has a bit of a head start given the existing facility. So John DeCree, timing and amount and magnitude and what partners is a bit TBD still at this point. John DeCree: David, John, I appreciate that. And I wanted to circle back to your prepared remarks as it relates to The Venetian and the case study that you've referenced and the success that Pat had there and the development capital. I'm curious to get your views on opportunities where that could be replicated, where there's large assets, great assets in great locations, casino assets that with the right focus and capital could earn significantly more. And I mean an asset like The Strat is coming into your portfolio that's a fantastic asset that could maybe have a lot more potential. So it was such a unique opportunity for The Venetian, but can you see that being replicated anywhere. Edward Pitoniak: Yes, John, very much so. And then obviously, it is -- the fundamental approach that Patrick and The Venetian team have taken is an approach that I believe you fundamentally see across the street at The Wynn. You see it in many other assets up and down the strip. And if I was going to distill what I think is essential to increasing the vitality and relevance of an asset, it's that the management team has really strong, really broad, really deep cultural insights into how people want to experience the world and how much of those consumer desires they can capitalize on in terms of how they program the asset. Because at The Venetian, as at so many other places, what you're seeing is acting on really strong cultural insights on how people want to be entertained, how people want to dine, how people want to socially gather, how people want to shop, how people want to pursue wellness. And that, I think, is the key ingredient. An old friend of ours -- and David, I don't know if John or Raabe coined the term relevant real estate. But at any rate, we stole it from him. And that's what we fundamentally believe in, John, is making the real estate as relevant as it can possibly be to consumer desires. And I think that is an opportunity that can be realized on the Las Vegas Strip. It can be realized in regional assets, and it can be realized in so many different experiential categories. And again, it really takes having a really profound feel for where not only the culture is, but where it can or should go. John W. Payne: And John, before you drop off, I'll just say, if Patrick was on the phone, I don't think he'd say they're done at The Venetian. I think they still think that, yes, they've grown, but they are a management team that continues to look for opportunities to grow the business in a variety of ways there. Operator: The next question comes from Smedes Rose from Citi. Bennett Rose: I know you've covered a lot of ground here, but I just -- I wanted to circle back on something, maybe just a little bit of a clarification. The combination of the 2 PENN leases, you mentioned there's no change in rent this year to VICI. But if I -- maybe I'm not reading this right, but it looks like the escalators going forward were reduced? Or is that -- or is the rent going forward the same as well? John W. Payne: We simplified -- yes, Smedes, we simplified the escalation structure there. If you remember, there was a percentage rent in these leases. We removed the volatility by eliminating the percentage rent. I think that's important to see. David, do you want to jump in as well? David Kieske: No. I mean creating a master lease with a much simpler structure going forward, the aggregate rent does not change. There is a change in the potential escalation going forward, but it's a much cleaner, simpler structure going forward. Bennett Rose: Yes. No, that makes sense. I just -- so less upside, but I guess, less downside, too. I wanted to ask you on the loan book, are there -- I mean, just in general, I mean, I know you can't name names, but I mean, is there anything kind of on your watch list or things that you're concerned about coverage going forward given that you had one that obviously moved to nonaccrual. I realize it's small, but these are the kinds of things that people care about. And I'm just sort of wondering if you can give any color on that. Edward Pitoniak: Sure. Gabe, do you want to talk about our approach? Gabriel Wasserman: Yes. Thank you. So all the other loans in our portfolio are performing and are current on their obligations. But we have an active asset management approach where we review every single lease and loan investment in our portfolio on a quarterly basis. So as John Payne has been emphasizing, I have really great insight into all of our partners, all of our tenants, all of our borrowers and their underlying financial performance and business plan. So continue to stay close to them and understand future forward-looking performance. Edward Pitoniak: And I'm just going to add that Gabe came to us from the Blackstone mortgage REIT. So Gabe has done this before. Have you not Gabe. Gabriel Wasserman: Yes. Operator: The next question comes from Rich Hightower of Barclays. Richard Hightower: I know we've covered quite a lot of ground this morning, but I think I want to piggyback off of -- I think it was Wes Golladay's question earlier and also referring to, Ed, you said VICI has sort of a target total return annually of 8% to 10%. And if I look at current dividend yield plus AFFO growth is embedded in guidance, you're essentially already there without really investing another dollar in anything that hasn't been announced. And so I guess in that context, where do share repurchases fit into the capital allocation framework. I know that's unusual for a REIT, but sometimes circumstances are unusual. Edward Pitoniak: Yes. Well, Samantha would justifiably smack me if I said we would never do share buybacks. So I'm not going to say we would never do share buybacks, but I would consider them highly unlikely, Rich, given what we fundamentally believe is the better use of our cash, retained cash resources and any other incremental capital that we were able to source to invest in experiential assets that we think will give our investors better long-term returns than would the repurchase of shares. I mean you're right, the math as it is, certainly adds up to what should be a compelling total return. If we've learned anything, though, Rich, in the last few years, and you've lived this right alongside us, you never want to make assumptions about where multiples are going to go in any given cycle and what that is going to mean for the capitalization of earnings growth or frankly, the capitalization of base earnings. But as we look out over the course of this year, I think you've heard from John and the team, the energy that they are bringing to growth activities. And I would reiterate that while we do not obviously give investment guidance, we have a track record of working hard to produce growth within a given year, both for the year and for the following year. And so we start the year with the guidance that we do, but I would also encourage everybody to look at our track record over our history of where we end up in relation to where we started. In other words, where do we end up with year-end earnings in relation to where we started at the beginning of the year with our initial guidance. And I think you'll see a pretty strong track record of the team working hard to produce results in the year for the year. Operator: Our final question today comes from Chad Beynon from Macquarie. Chad Beynon: Just one for me. I just wanted to go back to the Golden transaction. I know you guys hit on the cap rate and the opportunities in that region. Just wanted to focus on the coverage of 1.9. Can you talk about kind of how you thought about that level at this time in the cycle maybe versus prior negotiations? And then more importantly, does this portend for future negotiations in terms of the -- how you're thinking about the coverage? Or is every deal a different snowflake, so to speak? Edward Pitoniak: John? John W. Payne: Yes. I'll take the last part of your question, which is every deal we have is just so different, whether it's a portfolio of assets, whether it's a single asset. So as it pertains to your question about coverage, every time we look at something, we go through what is the appropriate coverage to start with. Regarding Golden, it's a belief, these deals, they're real estate deals, but we're really, as I said in my opening remarks, underwriting the management team and understanding their plans for the assets and where the markets are and how these assets can perform. So as we put it all together and we're looking at a portfolio deal of the Golden assets, our team and our investment committee took a look and believe that, that was the appropriate way to start at that coverage. And we believe that the operating team will be successful running the business based on their future plans. Operator: Thank you. I'll now hand the call back to Ed for any closing comments. Edward Pitoniak: Yes. Adam, thank you. I will just close out by thanking everybody for dialing in today at the end of what I know has been for all of you, both on the sell and buy side, a very long earnings season. We look forward to seeing many of you at the conferences over the next few weeks and then, of course, again in about 2 months for our Q1 call. And Adam, that will conclude the call. Operator: This does indeed conclude today's call. Thank you all very much for your attendance. You may now disconnect your lines.
Operator: Good day, and welcome to the Nexstar Media Group's Fourth Quarter 2025 Conference Call. Today's call is being recorded. I will now turn the conference over to Joe Jaffoni, Investor Relations. Please go ahead, sir. Joseph Jaffoni: Thank you, Rochelle, and good morning, everyone. Let me read the safe harbor language, and then we'll get right into the call. All statements and comments made by management during this conference call other than statements of historical fact, may be deemed forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. Nexstar cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those reflected by the forward-looking statements made during today's call. For additional details on these risks and uncertainties, please see Nexstar's annual report on Form 10-K for the year ended December 31, 2024, as filed with the U.S. Securities and Exchange Commission and Nexstar's subsequent public filings with the SEC. Nexstar undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. It's now my pleasure to turn the conference over to your host, Nexstar Founder, Chairman and Chief Executive Officer, Perry Sook. Perry, please go ahead. Perry Sook: Thank you, Joseph, and good morning, everyone. Thank you for joining us today. Mike Biard, our Chief Operating Officer; and Lee Ann Gliha, our Chief Financial Officer, are with me on the call, as always. Nexstar's fourth quarter financial results capped a year marked by strong execution and bold strategic action to shape our future of the business. We delivered on all key operational priorities in 2025, including successfully reviewing and renewing distribution agreements representing over 60% of our subscriber base, further elevating The CW and NewsNation to top-tier networks, extending our affiliation agreements with both ABC and MyNetworkTV and pursuing regulatory reform through our landmark agreement to acquire TEGNA. These achievements, together with the return of midterm election political advertising in 2026, all set the stage for a very exciting year of growth ahead for Nexstar as reflected in our stand-alone Nexstar pre-TEGNA full year adjusted EBITDA guidance of $1.95 billion to $2.05 billion. The rationale for the Nexstar-TEGNA combination is becoming increasingly clear. Consolidation is accelerating across the broader media industry from the Hulu-Fubo transaction to the proposed Charter-Cox merger to the upcoming sale of Warner Bros. Discovery. Against this backdrop, our transaction represents a pivotal and critical opportunity to establish a framework for local television broadcasters to more effectively compete with big tech and with big media while strengthening our ability to deliver high-quality local journalism to our communities. I'm pleased to report that we remain on track and are making great progress on our path to closing. Our HSR filings and our FCC license transfer applications have all been submitted. We have responded to all inquiries from the DOJ, the FCC and the state attorneys general, and we continue to work with all regulatory and legal bodies to fulfill any remaining requests. Our explanation for close is by the end of second quarter of 2026, and that remains unchanged. If we look at recent industry strategic activity, broadcast has been a consistently coveted asset because of the scale, reach and results it delivers to premium programming, especially sports. The numbers speak for themselves. This past season, the NFL delivered its highest viewership in 16 seasons, up 7% year-over-year, largely driven by broadcast. In home and away markets, broadcast still delivers the majority of the NFL Thursday Night Football audience versus Amazon Prime. The NBAs return to broadcast fueled a 16% year-over-year increase in regular season viewership through mid-February, and that marks the highest average NBA audience at this point in the season since 2018. The NBA All-Star Game also benefited with the highest ratings in 15 years in its first year back on NBC. And finally, the Winter Olympics also delivered their strongest viewership in years. The data is clear when it comes to delivering scaled audiences for premium live sports and events, broadcast remains unmatched. In this regard, Nexstar's own sports-focused programming strategy is delivering excellent results and enabled The CW to exceed our financial expectations in 2025. The CW finished the year as the tenth most watched ad-supported network and the second fastest-growing network overall, delivering a 19% year-over-year increase in viewership. In 2025, we improved the network's cash flow by an impressive 32%, and we anticipate continued financial improvement for the network as we move through 2026 with profitability expected by the fourth quarter of this year. The continued success of our long-term strategic focus on high-impact news and sports programming is further validated by the performance of NewsNation, which posted its strongest year ever in total day, primetime and daytime viewership and in 2025 was the fastest-growing cable news network in the adult 25-54 demographic. Consumer awareness of NewsNation has increased to over 40%, its highest level to date with over 50% awareness among viewers of news. These results reflect the fact that NewsNation's programming and unique fact-based reporting is resonating with viewers looking for a balanced and impartial take on the news. Looking ahead, as we had anticipated and discussed on prior calls, we're beginning to see more stable subscriber trends. Smaller DTC platforms are being integrated into multichannel pay TV packages and distributors continue to launch new value-priced skinny bundles, many focusing on broadcast and news programming. In Q4, Charter posted sequential quarterly growth in video subscribers, and overall, the data is encouraging to Nexstar's distribution outlook. While we are focused on closing our proposed acquisition of TEGNA, we remain equally disciplined in executing against Nexstar's core business. Beyond maximizing the political advertising opportunities presented by the midterm elections, our top 2 priorities in 2026 are digital optimization and expense rationalization. Digital is a key growth engine, and we continue to expand our audience reach, including local CTV apps now live in 108 markets, and broaden advertiser solutions across our owned and third-party inventory. Despite AI search headwinds, digital revenue grew high single digits in 2025 and double digits in our local business. And in 2026, we expect digital revenue to surpass our national advertising revenue, an important milestone that strengthens our long-term nonpolitical advertising trajectory. At the same time, we are further streamlining and centralizing our operations, automating select production functions, aligning incentive compensation closely with performance, actions which we expect will drive additional operating expense reductions and enhanced execution across the company. Touching briefly on political. Ad impact projects about $10.8 billion in total political advertising for the '25, '26 election cycle, a record amount for the midterms, with broadcasting expected to capture nearly 50% of that total or about $5.28 billion. We expect to capture a low double-digit share of total broadcast political advertising spend for the current cycle as our positioning remains excellent with a presence in more than 80% of the contested election markets. In summary, our assets generate consistently strong free cash flow, which we've used to create the clean balance sheet that we have today to return capital to shareholders and pursue highly accretive M&A like TEGNA and have executed with our proven playbook and grounded in our steadfast community to localism. We are energized by the significant prospects before us, and we remain laser-focused on executing our 2026 objectives, including closing our acquisition of TEGNA, capitalizing on the midterm election political advertising opportunity and continuing to optimize our business operations, all of which we anticipate will contribute to shareholder value creation. So now with all that said, let me turn the call over to Mike Biard. Michael? Michael Biard: Thanks, Perry, and good morning, everyone. Nexstar delivered fourth quarter net revenue of $1.29 billion, a decline of 13.4% compared to the prior year, primarily reflecting the year-over-year reduction in political advertising, offset by better-than-expected growth in nonpolitical advertising revenues. Fourth quarter distribution revenue of $720 million increased $6 million or 0.8% compared to the prior year quarter and primarily reflects increased rates, growth in vMVPD subscribers and the addition of CW affiliations on certain of our stations, offset in part by MVPD subscriber attrition. In 2025, we renewed distribution agreements covering more than 60% of our subscribers, extended our network affiliation agreements with ABC and MyNetworkTV to 2027 and renegotiated affiliation and vMVPD agreements for The CW covering about 2/3 of its subscribers. Looking ahead, we have approximately 30% of subscribers up for renewal this year. In 2026, on a stand-alone Nexstar-only basis, we are projecting distribution revenue growth to be in the low single digits on a gross basis and in the mid-single digits on a net basis for the full year. Our projections are based on our current and expected contract terms and an improvement in the rate of subscriber attrition. Turning back to our results for Q4 2025. Advertising revenue of $549 million decreased $209 million or 27.6% over the comparable prior year, primarily reflecting $233 million year-over-year decrease in political advertising to $21 million. However, nonpolitical advertising was up 4.5% in the quarter, better than the expectation of a low single-digit decrease we mentioned in our last earnings call. We saw later-than-anticipated spending last quarter, driving broad-based improvement across all advertising segments, including local, national, network and digital. Top advertising categories in the quarter were gaming, banking, attorneys and sports betting driven by the legalization of online sports betting in Missouri. Auto was once again our largest declining category, but our focus on developing new digital advertising products with auto dealers partially offset that decline. For the first quarter, nonpolitical advertising is currently forecast to be flattish on a year-over-year basis, primarily due to the negative relative impact of the Super Bowl airing on NBC this year compared to FOX last year where we have a stronger footprint. However, this negative comparison will be partially offset by the incremental advertising from the Winter Olympics on NBC. So far this year, we've seen strong viewership and advertiser demand for marquee sports content with more than a 20% increase in advertising for the 2026 Super Bowl and Milan Cortina Olympics compared to the comparable 2022 Super Bowl and Beijing Olympics. On the political side, we generated approximately $21 million in political advertising revenue during the quarter, primarily driven by Virginia's statewide general election and spending on -- general election spending and California's redistricting ballot proposition and early governor's race spending. With the return of the midterm election cycle in 2026, we look forward to once again demonstrating the value of broadcast television to candidates and campaigns looking to communicate to the electorate through political advertising on television. As Perry mentioned, we expect to generate a low double-digit percentage of total broadcast political advertising for the year. As a reminder, industry advertising forecasts are provided on a gross basis and Nexstar reports advertising revenue, including political, net of agency commissions. As in previous election years, we expect roughly 20% of our full year political advertising revenue to be earned in the first half of 2026, with the remaining 80% in the second half. Political advertising is also expected to impact nonpolitical advertising, driving displacement in the back half of the year. On the expense side, we remain focused on continuously improving the operational efficiency of our business. And in 2025, we reduced recurring cash operating expenses by 1.6% as a result of the operational restructuring we implemented in Q4 2024 and Q1 2025 and continued rationalization of programming costs at The CW. Looking ahead, as Perry mentioned, you can expect us to deliver additional cash operating expense savings across the business in 2026. Turning to The CW. Audiences are consistently showing up for our live sports lineup, and that momentum is translating into progress toward our financial targets. With its debut on CW Sports, the NASCAR O'Reilly Auto Parts Series, formerly the Xfinity Series, delivered its most watched season in 4 years, up 10% year-over-year, averaging over 1 million viewers across 33 races. College football also posted double-digit gains, averaging 456,000 viewers per week with ACC matchups on The CW, up 26%. ACC men's and women's basketball is also off to a strong start this season, with total viewers up 35% through the first 10 games. And NASCAR on The CW has returned strong with the O'Reilly Auto Parts Series season opener at Daytona delivering 2.3 million peak viewers, including more viewers in the 18 to 49 demo for any addition of this race since 2018. The momentum continued last week in Atlanta, where we've delivered 1.4 million average viewers, representing the best performance for this race since 2016. With 100 additional hours of sports program expected in 2026, nearly 47% of The CW schedule will be sports or sports adjacent. At the same time, we're strengthening our primetime lineup with premium entertainment, including Wild Cards, the final season of All American, Police 24/7 and refreshed game shows, Scrabble, hosted by Craig Ferguson and Trivial Pursuit, which will air not only on The CW, but will also be licensed for syndication downstream. Our overall programming strategy is delivering results with The CW outperforming Big 4 primetime telecasts 273 times across total viewers and key demos in the 2024-2025 season. That's up from just 45x a year ago. Similarly, NewsNation continues to hit consistent ratings milestones. In 2025, NewsNation remained the #1 fastest-growing cable news network in the 25 to 54 demo. For the year, NewsNation surpassed MS NOW 60x and CNN 40x in head-to-head telecasts across total viewers and in the 25 to 54 and 35 to 64 demos. This compares to the 2024 period when NewsNation surpassed MSNBC 4x and CNN 2x in head-to-head telecasts. So to close, I want to reiterate our confidence in our long-term outlook and the enduring strength of Nexstar's business model. Our programming strategy anchored by live news and sports continues to deliver results for The CW and NewsNation, and we remain committed to unlocking even greater value from these assets as our audiences grow. Our local programming strategy is similarly anchored by our unrivaled live news product and the proposed TEGNA acquisition will create a substantial and immediate value for shareholders while advancing the public interest by strengthening local broadcast journalism and providing an expanded range of competitive broadcast and digital advertising solutions across our portfolio of local and national assets. And with that, it's my pleasure to turn the call over to Lee Ann for the remainder of the financial review. Lee Ann? Lee Gliha: Thank you, Mike, and good morning, everyone. Mike gave you most of the details on the revenue side and on The CW. So I'll provide a review of expenses, adjusted EBITDA and adjusted free cash flow, along with a review of our capital allocation activities and our 2026 guidance. Combined fourth quarter direct operating and SG&A expenses, excluding depreciation and amortization and corporate expenses, decreased by $7 million or 0.9%, driven primarily by reduced commissions from sale of political advertising revenue in Q4 of '24, reduced news and production expenses, reduced promotions from our operational restructuring initiatives and lower administrative and onetime expenses. Q4 2025 total corporate expense was $65 million, including noncash compensation expense of $20 million compared to $48 million, including noncash compensation expense of $20 million in the fourth quarter of 2024. The increase of $17 million is primarily due to onetime costs associated with our proposed acquisition of TEGNA and the impact of a reduction in the bonus reserve in the fourth quarter of '24 that was larger than the fourth quarter of '25. Q4 2025, amortization of broadcast rights included in our definition of adjusted EBITDA was $75 million, a reduction of $23 million from $98 million in the fourth quarter of '24, primarily due to timing of programming at The CW. Q4 2025 income from equity method investments, which primarily reflects our 31% ownership in TV Food Network reduced by amortization of basis difference, declined by $12 million in the quarter or 67%, primarily related to TV Food Network lower revenue. We also wrote down our investment in TV Food Network consistent with other companies in the entertainment cable network space. Putting it all together, on a consolidated basis, fourth quarter adjusted EBITDA was $433 million, representing a 33.6% margin and a decrease of $195 million from the fourth quarter '24 of $628 million. Moving to the components of free cash flow and adjusted free cash flow. Fourth quarter CapEx was $54 million, an increase of $19 million from $35 million in the fourth quarter last year, primarily due to an investment in real estate at one of our properties. Fourth quarter net interest expense was $91 million, a reduction of $13 million from the fourth quarter of 2024. On a cash basis, this compares to $89 million in Q4 2025 versus $101 million in Q4 2024. The reduction in interest expense was primarily related to a reduction in SOFR and reduced debt balances. Fourth quarter operating cash taxes were $33 million compared to $67 million in 2024, a decrease of $34 million, primarily related to decreased pretax operating income in 2025 related to decreased nonelection political advertising. Payments for capitalized software obligations net of proceeds from disposal of assets and insurance recoveries were $6 million versus $4 million last year. In Q4, cash programming amortization costs were greater than cash payments by $19 million versus lower by $13 million in 2024 as certain programming payments were prepaid. Pulling this all together, consolidated fourth quarter 2025 adjusted free cash flow was $214 million as compared to $411 million last year. Now turning to our 2026 guidance. We believe Nexstar's stand-alone 2026 adjusted EBITDA will be in the range of $1.95 billion to $2.05 billion. Perry and Mike already provided some of the key assumptions that are embedded in that guidance, including: one, our expectation for gross and net distribution revenue growth to be up low and mid-single digits, respectively, based on contract renewals completed in 2025 and expected in 2026 and an improvement in subscriber attrition trends; two, political advertising revenue should be in an amount equal to a low double-digit market share of broadcast political advertising and will have a displacement impact on nonpolitical advertising in the back half of the year; three, total operating corporate expenses and amortization of broadcast rights, excluding onetime charges, will again decline year-over-year due to our continued plans to affect our business by focusing on efficiencies and reducing programming costs; and four, we expect The CW will continue to reduce its losses by another 30% in 2026 from 2025 levels and achieve profitability in the fourth quarter. Key factors differing from our current expectations, which could affect our outlook for adjusted EBITDA for 2026, either positively or negatively. Those factors include, among other things, the rate of growth or attrition of pay TV subscribers, the health of the local and national advertising markets, our renegotiation of certain distribution and affiliation agreements on terms favorable to the company and the attributable net income related to our 31.3% ownership stake in TV Food Network. We do not intend to update this guidance on a quarterly basis. As a few additional points of guidance with respect to adjusted free cash flow. We are currently projecting CapEx of $125 million to $130 million for the year and $30 million to $35 million in the first quarter. Based on the current yield curve, we anticipate full year 2025 cash interest expense to be in the $355 million to $365 million area, an improvement of $11 million versus 2025 levels at the midpoint. We project Nexstar's cash interest expense, including the spread on our floating rate debt instruments, the current SOFR forward curve and the coupons on our fixed rate debt, along with our expectations for debt repayments, which includes our mandatory amortization of approximately $111 million. Q1 interest expense is expected in the $85 million range. Full year 2026 cash taxes are expected to be approximately $315 million to $325 million range, an increase versus 2025 of $208 million due to an expected improved income, primarily a result of the election year. For cash taxes, we use a 26% tax rate when calculating our estimated tax before onetime and other adjustments. The first quarter includes only a very small amount of state income tax in the $2.6 million range. As a reminder, we will use the annualization method for tax, meaning tax related to the fourth quarter of '26 will be largely deferred to '27. In 2026, payments for programming are expected to be in excess of amortization by $25 million to $30 million due primarily to an investment in programming for future years with approximately $1 million of that in the first quarter. Turning to capital allocation and our balance sheet. Together with cash from operations generated in the quarter and cash on hand, we returned $56 million to shareholders comprised entirely of dividends as we are conserving cash for acquisition of TEGNA. For the year, we returned $351 million or 42% of our adjusted free cash flow to shareholders in the form of $226 million of dividends and $125 million of share repurchases, reducing our year-end shares outstanding by 1% to 30.3 million. Nexstar's outstanding debt at December 31, 2025, was $6.3 billion, a reduction of $26 million for the quarter as we made quarterly amortization payments. Our cash balance at quarter end was $280 million, including $13 million of cash related to The CW. Because we designated The CW as an unrestricted subsidiary, the losses associated with The CW are not accounted for in our calculation of leverage for purposes of our credit agreement. As such, our first lien covenant ratio for Nexstar as of December 31, 2025, for the last 8 quarters annualized was 1.71x, which is well below our first lien and only covenant of 4.25x. Our total net leverage for Nexstar was 3.09x at quarter end. Our 2026 cash flow will be deployed first to fulfill our mandatory obligations, including debt repayments of $111 million and $36 million of pension and defined benefit plan contributions, the anticipated 2026 dividend of approximately $228 million and to build cash balances to fund the acquisition of TEGNA. In January, we announced our dividend maintaining the same level as 2025 as excess cash will be used to fund the acquisition of TEGNA. Based on our stock price as of yesterday, our dividend represents a 3.2% yield, which puts us in the 73rd percentile of all dividend-paying stocks in the S&P 400 for dividend yield. With that, I'll open up the call for questions. Operator, can you go to our first question. Operator: [Operator Instructions] And we'll go on to our first question. We'll hear from Dan Kurnos with Benchmark StoneX. Daniel Kurnos: Great. Appreciate all the color as usual. Perry, as you might imagine, given the presidential tweet recently, I think investor anxiety around when we might get an FCC cap elimination has increased a little bit. So any color you can give us around wording, timing and how that process might play out would be helpful. And then separately on the expense side, all of you really super helpful like kind of walk through the pieces. I guess, since you guys called out digital optimization and expense rationalization as your 2 priorities. Given all of the AI tools that are out there, what we're hearing from peers, what we're hearing from kind of the broader tech landscape, I mean how much of that is sort of embedded in the guide you've given this year? How much is applicable on, say, like content cost reduction for things like CW or NewsNation? Just any way you can help us frame up kind of the opportunity set you see there to continue sort of this expense reduction momentum would be helpful. Perry Sook: Dan, I'll take the first part. I would hope to not characterize investor anxiety around the elimination of the cap and approval of our deal. I would hope that, that anxiety would turn into enthusiasm. We certainly appreciate the support of the President vis-a-vis his tweet and follow-on comments by the Chairman of the FCC and his support for the deal. And as to timing, that's really the purview of the regulatory agencies. We are working very diligently to complete all of the information requests. As things go, the FCC shot clock would technically expire on June 1 of this year. So we remain consistent in our belief that the transaction will close before the end of second quarter. We are hopeful that we can close sooner than that, but we'll obviously continue to engage with the regulatory agencies to try and get to the to the desired result, not only on the national ownership cap, but the approval of our transaction. Lee Gliha: On your questions about digital and expense, maybe I'll take digital first. I think that Nexstar has got a tremendous local sales force. We have over 1,500 sales folks across the country. Relationships with over 50,000 advertisers. Our advertisers really value our television products, but they also value our apps and our websites and they are also increasingly looking for audience extension opportunities. And because we have those great local relationships, we're able to sell more and sell a broader audience, not just including our local television audience, but if somebody wants more entertainment or they want more different demographics, we can sell that and add that on to the portfolio. So we've had good success with that, especially on our local side, and that really has been driving the growth. And as Perry mentioned, this will be a good year for us because we do expect our digital revenue to eclipse our national television advertising revenue, which digital has a different trajectory, which should actually really help our longer-term growth with respect to net revenue. On the expense side, we are continuing to just look at the business in ways to optimize the operations. And are there ways that we could do things in a different way that's more centralized or to use new technologies to help create efficiencies in our local operations and even more centrally. And so we are just continuing to reimagine that. And that's one of the benefits we have because of the scale of our business. We just have a good opportunity to be able to do some of those things. And you saw it in our 2025 results, and you'll see it again in our 2026 results. Operator: Our next question, we'll hear it from Benjamin Soff with Deutsche Bank. Benjamin Soff: Another one on the regulatory side. Now that you're a bit deeper into that process, have there been any surprises so far in your conversations with regulators? And in particular, do you have a sense for how the DOJ might plan to view in-market consolidation? And what could that mean in terms of requiring any divestitures or not? And then I'm curious what you're seeing as far as the macro environment so far in 2026 as it relates to advertising. Perry Sook: Sure. As it relates to the regulatory process, I mean, we continue to engage vigorously with the DOJ, and I think it provided some excellent material to them regarding the definition of market or redefinition of video, which is where we really compete. Obviously, they have yet to render a decision. So we will obviously defer to their judgment. But I think that the information that we provided has been strong and we're laser-focused on that. So we feel very good about where we are, the dialogue we've had, the progress we've made, the endorsements that we've received. But as to transaction particulars, we're just not there yet in terms of those expectations. But as we've reported historically, we expect that if there are any divestitures, they would be de minimis to the overall value of the deal. Lee Gliha: Yes. And then just on the overall macro environment, I think we're feeling decent about it. I think one of the things that we'd like to track is within our overall advertising categories is what percentage of the categories are increasing versus decreasing in terms of the revenue growth. And we're seeing in the first quarter versus the fourth quarter, a greater percentage that are increasing than we saw in the fourth quarter. So I think we're -- we had some guidance here of flattish in terms of our nonpolitical advertising in the first quarter. So we're feeling decent about the macro outlook. Operator: And next, we'll move to Aaron Watts with Deutsche Bank. Aaron Watts: Just 2 questions. Lee Ann, maybe one for you to start. Just based on your performance to close out '25 and your view into '26, any change in your outlook for pro forma leverage once you close the TEGNA deal? Lee Gliha: Not really, no. Aaron Watts: Okay. Great. And then secondly for me on the advertising side, Perry, this question is a bit of an offshoot of one I asked you at the time you announced the TEGNA deal. The programmatic buying marketplace continues to grow and gain influence, how do you see that impacting your ad sales overall over the near-term horizon? And how are you currently participating or planning to participate in that marketplace with your ad inventory? Perry Sook: Sure. Well, in terms of programmatic digital advertising, part of the acquisition of TEGNA will include the acquisition of Premion, which is their platform for programmatic digital advertising. We think there's some real opportunity there to overlay that technology and that sales force with our inventory, which currently is not on the Premion platform. So that is an upside in operating the business. I wouldn't necessarily characterize it as a synergy, but obviously, we think that will prove as time goes on. As to programmatic on linear, I mean, we already are in that business to a certain extent with companies like ITN and Cadent who basically are doing a very manual version of programmatic in linear. We are working internally and with external partners to develop a programmatic linear solution that we're in the early, early stages of trying to develop with other partners. We need to reduce the frictional cost of buying linear inventory. And I think technology is a way to do that. And I think that we'd like to get to the point where we have a single seamless system from pitch to pay regardless of where the impressions are located that you're attempting to access. And so that's my vision and where I would like us to get to. Obviously, When people ask me what we're going to do on day 2 of the TEGNA acquisition closing, it's to work on that project. And work has started already, and we've got pretty good task force together and I'm doing another update here in a couple of weeks. So we intend to try -- and obviously, as one of the largest purveyors of advertising in the world, I think that we were ranked by one analyst as the 18th largest purveyor advertising in the world. We have a lot to gain by getting that right and removing the frictional costs of buying linear television, trying to make it more akin to the buy-sell process of digital inventory. And at the end of the day, it's really should be one set of inventory, one process, seamless, as I said, from pitch to pay, and that's the gold standard that we're going to try and work to achieve. Operator: And next, we'll move to Patrick Sholl with Barrington Research. Patrick Sholl: I guess maybe just a quick follow-up on advertising. Could you provide just a little bit more detail on some of the categories that were increasing or decreasing? And as we start to lap the initial tariff headwinds, if you're kind of seeing any greater enthusiasm from the Supreme Court ruling? Lee Gliha: So with respect to just the categories, auto was our biggest decliner but not by like any sort of outstanding amount. But we did see the rate of decline being offset within that category by good growth on the digital side. And we're actually seeing a pretty nice improvement in that auto trend into the first quarter. So we're feeling good about that. With respect to the other top categories, we had gaming and sports betting that was a great category in the fourth quarter. That was mostly due to the Missouri legalization. And then anything kind of other than that, even on the downside, nothing really was distinguished. I think I mentioned earlier that we did see more categories increasing than decreasing overall, and we're seeing that trend continue into the first quarter and be even a little bit better in the first quarter. So things are looking okay, I would say. And but there's nothing really like to read into the various categories, no outliers that are driving the transaction or driving the outcome one way or the other. With respect to the tariffs, I don't know that we've seen anything in particular there. I would remind you, I think one of the points that we always like to make is it's about 60% of our advertising revenue comes from services categories versus good service -- goods categories. So we do have a little bit of a natural hedge there because we are much more service-focused than goods-focused. But I wouldn't say that there's been anything that people have been talking about with respect to tariffs as of yet, but we'll keep you posted. Operator: And next, we'll go on to Craig Huber with Huber Research Partners. Craig Huber: I've got a broad question here. The uses of AI in your operations, can you just give us some examples of things that are moving the needle that you're excited about that AI is helping you, whether it be on the cost savings front or enhancing your product to speed up things, et cetera? Just some examples there would be helpful first. Michael Biard: Sure, Craig, I'll take that. We've actually deployed some AI tools across the organization inside our local newsrooms really to help us just on the workflow front, make the process a little bit more efficient. It allows us to take a story and optimize it for multi-platform, for instance, it allows us to efficiently find sources of information and leads across multiple places all at one time. So I think looking forward, we're in the middle of deploying some AI for our sales team that we expect will help with prospecting, sales development and also with workflow and operations in that front as well. So we -- early days yet, but we're optimistic about some of the potential that's out there as that technology starts to flow down into our industry. Craig Huber: And then my -- sorry, do you want to go ahead? Go ahead. Lee Gliha: No, no, go ahead. Sorry, Craig. Craig Huber: Sorry, I wanted to also ask, just maybe an update on alternative uses of spectrum. I don't think we've heard about that lately. Maybe just sort of update us on what's happened in the last year and what maybe the plans are this coming year. I know it's a long way out to be meaningful for your company and your peers, but just sort of update on alternative uses of the spectrum, please. Michael Biard: Sure. I think to underscore what you said it is a long way out before it's meaningful for us or our peers. So in the last year, as you know, we formed a joint venture with 3 of our fellow broadcasters EdgeBeam Wireless. That organization is really just at the early stages of formulating its management team and its go-to-market strategy. I think you'll see them in the coming year be in the market with products. They're out there right now talking with customers. I think, again, early days, but we're starting to see some early orders flow. Some of that is proof of concept. Some of it is actual revenue. But we're optimistic that, that business will take off and really demonstrate to the market the unique the unique broadcast or benefits of a broadcast spectrum for high-speed data transmission. Operator: And Steven Cahall with Wells Fargo will have our next question. Steven Cahall: And I joined a little late, so I apologize if I ask anything that causes you to repeat yourself. On the regulatory process around TEGNA, the press has had a lot of information about the direction of the FCC. I think that one seems increasingly clear at least of the conclusion we're going to get. The DOJ is a little more of a black box, and I think the initial commentary is you expect minimal divestitures. I was just wondering if you could give us the latest and greatest on what your perception is as to how the DOJ is now looking at markets and what sort of a precedent this transaction could be kind of the future of how the DOJ looks at broadcast ownership within markets. And then also just a question on synergies. TEGNA has some good digital advertising businesses. I'm guessing that scale helps in political cycles. I don't think any of those benefits are in your synergy guidance. Do you have any experience with these from deals like Tribune or even CW that you could share in terms of where there could be some opportunities for kind of 1 plus 1 equals more than 2 in some of those revenues over time? Perry Sook: Craig -- I'm sorry, Steven, on the regulatory front, as I said earlier, we have provided reams of information to DOJ and studies from economists that we've hired that talk about the definition of the marketplace and the need for a redefinition of video, which is where we compete. And obviously, we provided that information, but we, at this point, have not had any definitive feedback as to how they're interpreting that information. As to the topic of divestitures, we have had no conversations about divestitures at all at this point in the process. Not to say that it won't come up later in the process. But again, we continue to maintain that if there were divestitures, it would be a minimal percentage and not meaningful to the deal. And so I think the agencies -- the DOJ is meant to be a black box, disclosures there are not required to be public. But I have read the information that we provided and the economic studies that I think are highly, highly credible and very, very convincing. But it is obviously up to the folks at the DOJ, and there's been some change in personnel there. And so other folks are getting up to speed, but it's up to the DOJ and to the FCC to render their opinion and ultimately to come to a decision. But we feel very good about the work that's been done, the information that's been provided, the endorsements we've had and the stage at which we are in the process. So we're very confident that we will get to a finish line in the time frame that we outlined. Lee Gliha: And then on the synergies, I would just say, Steve, on the digital side, as Perry mentioned earlier, TEGNA has this business, Premion, which is really focused on the CTV end market, which we know is growing very nicely. And so we're excited about the opportunity to bring our stations to bear in that market in a little bit of a bigger way. So we're feeling positive about that. But you're correct. We have not put any revenue synergies other than the retrans synergies that we've talked about previously into our synergy number. And then with respect to political, I think we -- it all -- as you know, that all comes down to what market is it, where there's a contested election and where do the dollars need to go. And so to the -- one of the things that we thought was going to be beneficial about this transaction is it does give us more exposure to some of those political markets. We have a presence in Georgia, but we didn't have a presence in Atlanta. They've got some great stations in Maine that is a contested election market. They've got a station in Toledo, Ohio, which could also be a good political market for us. So -- and Phoenix, Arizona is the other one where they have a larger market or a larger station than we do there. So all of those things, we think, should accrue to the political picture going forward, and we're optimistic on getting this deal closed in advance of the cycle this year. Operator: And next, we'll hear from Jason Bazinet with Citi. Jason Bazinet: Okay. At risk of sharing my own ignorance, I'm going to ask this question. I think you said on the call that you think that digital ads will exceed your national ad revenues. And I think the last time you disclosed digital ad revenues is around $400 million. And I sort of think of your national ad revenues as being at The CW network and would have said it's already bigger than your national ads. So what am I missing? Lee Gliha: Yes. So I think all you're really missing there is that CW is national advertising, but it's really like a subsegment of that, right, network national advertising. We also have significant national advertising at our stations, which are national buyers that then look to place their ads in local markets. So those are -- that's the other piece that we refer to as national. Operator: That will conclude the question-and-answer session. I would now like to turn the floor back to Perry Sook for closing remarks. Perry Sook: Thank you, operator. I appreciate everyone joining us today, and we're very pleased at the results that we were able to post for 2025, strong financial results solidly in line with our expectations that we set last year at this time. Despite the changing media landscape, our performance demonstrates that we have both durability and stability in our broadcast model and the operational execution expertise of this management team. We look forward to closing our pending acquisition of TEGNA and bringing that operational expertise to bear on our synergy plan and reinforcing our position as the largest local broadcast company in the United States. Thank you for your continued support over the last 22 years of quarterly earnings calls, and we look forward to updating you on our next earnings call in about 90 days' time. Thank you. Have a great day. Operator: Thank you. This does conclude today's teleconference. You may now disconnect your lines.
Alberto Valdes: Good morning, everyone. I'm Alberto Valdes, Head of Investor Relations. Welcome to our full year 2025 results presentation. Before we begin, I would like to draw your attention to the disclaimer regarding forward-looking statements on Slide 2. Today's discussion will include certain projections and non-IFRS metrics that provide a clear view of our underlying performance. Today's presentation will be led by Martin Tolcachir, our Group CEO; and Guillaume Gras, our Group CFO. After their remarks, we'll open the floor for a Q&A session. I'll now hand things over to Martin. Martin, the floor is yours. Martin Tolcachir: Thank you, Alberto, and good morning, everyone. I am proud to present what I believe are truly excellent results achieved in the first year of our Growing every day strategic plan. Looking at the outline on Slide 4, our story today rests on 5 key pillars. Dia Spain is not just on track, it is accelerating the delivery of our strategic plan, and we are now significantly outperforming the market. Dia Argentina has stabilized. After a resilient second half, we are now well positioned to capitalize on the recovery in food consumption expect from 2026 onwards. Dia Spain remains the engine of the Group's financial results, driving substantial margin expansion, multiplying net profits and generating robust cash flow. Our exceptional stock performance in 2025 validates our strong operating performance and solid prospect for profitable growth. 2025 marked a pivotal year for Dia. It was the year in which we successfully transitioned from a turnaround phase to one of sustained profitable growth. Now let's talk at this in greater detail. Let's start with Dia Spain and the accelerate delivery of our strategic plan on Slide 6. One year ago, we presented our Growing every day strategic plan, which set out 4 clear targets for leading the market in profitable growth. Our performance in the first year clearly demonstrates that we are not only on track, but exceeding delivery on these targets. We opened 94 new proximity stores, boosting total sales growth to an impressive 8.6%, more than doubling the guidance average rate and increased our adjusted EBITDA margin by 54 basis points to an impressive 6.8%. At the same time, we added to the average capital expended budget, resulting in increased returns on robust deleveraging. As you can see in the next slide, this rigorous delivery is spread across the 4 dimensions of our strategic plan. Our strong like-for-like sales growth, our expanding customer base and improving NPS score is evidence of the positive response by our customers to our improved value proposition. Meanwhile, our franchisee excellent NPS score and our inclusion among Spain's most reputable companies are more than just a source of pride. This enhanced satisfaction and reputation enables us to recruit the best talent to support our operations. Finally, our exceptional share price performance and our surge in liquidity are both powerful market endorsement of our strong results and of our enhanced investor relationship outreach. Let's now move on the main highlights of Dia Spain's operating performance, starting on Slide 8. The rate of sales growth has surged from 5.5% in 2024 to an impressive 8.6% in 2025. Our total sales in Spain reached EUR 5.5 billion. Like-for-like growth reached 7.4%, driven primarily by market-leading volume growth of 5.7%, fueled by an expanding customer base and higher frequency rates. Price inflation was just 1.6%, strategically remaining below general food and beverage inflation and highlighting our commitment to affordability. Finally, despite being in the ramp-up phase, new store contribute an additional 1.2 percentage points to our sales growth. As a result, our total sales growth strongly outperformed the market, enabling us to increase our market share by 12 basis points and consolidate our position as the fourth largest national player and absolute leader in the Proximity segment. Moving to Slide 9. You can see how our customer-centric strategy is promoting loyalty and as a result, sales growth. Our value proposition centers on quality, convenience and affordability, offering a comprehensive and innovative assortment of product and the freedom to choose from leading brands. Thanks to our commitment to quality and local sourcing, sales of fresh product increased by an impressive 15% and now represent 28% of total sales, a significant 160 basis point increase year-on-year. Similarly, our commitment to offering high-quality Dia brand product at affordable price has driven a 10% growth in this category. These products now account for 59% of our fast-moving consumer goods basket, an impressive 170 basis point increase on 2024 and is evidence of a growing base of loyal customers. Continuing on Slide 10. Loyalty sales account for an impressive 56% of gross sales in 2025, marking a 9% increase. This was driven by an increase in the number of loyalty customers and the frequency of their purchases. It is worth noting that the average purchase frequency and basket size of loyal customers is double that of the non-loyalty customers. In this context, the additional of 200,000 loyalty customers in 2025 is of a great value, bringing to -- the total to 5.8 million. The digitalization of our loyalty base continued to progress rapidly, fostered by our gamification initiatives and exclusive promotions. Currently, 58% of our loyal customers who account for 1/3 of our sales interact with us via the application. This channel is growing exceptionally well. It grew by 13% last year. This growth has been driven by double-digit growth on both our own platform and those of third-parties despite the temporary slowdown experienced by delivery platform while they adapt to the recent riders law. Our digital platform complement our proximity network perfectly, reaching 84% of the population and offering the best service level. Over 90% of the orders are delivered on the same day within a 1-hour time slot. Our digital ecosystem combines the unparalleled speed and convenience of our e-commerce platform with the intelligence of our Club Dia loyalty program. This provides customers with a personalized omnichannel experience and us an outstanding Net Promoter Score of 60 points. Turning now to Slide 11, you can see the progress of our store expansion plan. Our goal is to open 300 new proximity stores by 2029. These stores have been selected from a pool of 1,500 high potential locations identified through our proprietary analytic tool. We are giving priority to areas where we already have a strong presence, such as Madrid, Andalusia, and Castilla y Leon, to further increase our store density and improve our logistic efficiency. By focusing not only on large urban hubs, but also on smaller multi-municipalities, we can capitalize on our capital-light format and thrive in areas where large competitors are less efficient. We are now leveraging our scalable franchise model to accelerate the rollout of these select stores, boosting organic growth and share profitability. In 2025, we opened 94 proximity stores, more than offsetting 38 strategic closure and achieving a net expansion of 56 stores. Our aim is to double net openings in 2026. With over 100 net store opening, we will drive organic growth and further consolidate our position as the market leader in Proximity segment. Most of these new stores, 73% are managed by franchisees who currently represent 67% of our network. These hard-working, experienced entrepreneurs help us to bring Dia value proposition to every neighborhood. They manage the store, growing on their local knowledge while we provide infrastructure, product, logistics and service standards. This specialization ensures complete alignment of interest, maximizing productivity and profitability for both parties. The success of this model is reflected in our franchise impressive Net Promoter Score of 75 points. As shown on Slide 12, the expansion of our store is being supported by the modernization of our logistics network. By 2029, we aim to resize and renovate 6 of our 12 logistics platform, improving their service level and capturing significant operational savings. This follows the successful model of our first renovate platform in Illescas, Toledo. In 2025, we opened a second logistics center in Dos Hermanas, Sevilla and start construction of a third Leon scheduled to open in the coming months. A further 3 logistics platforms are planned for Malaga, Levante and Catalunya in 2027, '28 and 2029, respectively. These new platforms are built to the highest standard of efficiency, productivity and sustainability and enable us to optimize our operating margins. Renovating refrigeration equipment is also helping us to improve our energy efficiency and reduce our carbon footprint. To date, 68% of the logistics network and 24% of our store have been decarbonized. The next slide #13, shows our continued progress on ESG. Here, I am pleased to announce our new sustainability plan to 2029, named The Value in Every Day, which will positively impact all our stakeholders. Having successfully complete all the initiatives proposed under our previous sustainability plan by 2025, we have defined 84 new actions for the next 4 years grouped into 5 categories. Firstly, actions to improve our customer awareness of quality nutrition through strategic alliances with suppliers and nutritional experts. Secondly, action to extend our ESG training programs to all employees and strengthen our inclusive hiring and diversity targets within our meritocratic culture. Thirdly, action we will contribute to the development of urban and rural communities by sourcing locally, creating new jobs, improving accessibility and taking social actions. Fourthly, action to accelerate our decarbonization plan, lift our 0 waste and food waste prevention targets, consolidate our responsible sourcing standards and implement the DRS scheme for packaging recycling. Finally, we will further improve our reporting and disclose enhancing our ESG rating visibility and fostering customer perception and trust. Now let's turn to Argentina's operating performance on Slide 15. Dia has demonstrated resilient management by successfully navigating a challenging macroeconomic environment. The strategic measures implemented in 2025 were instrumental in stabilizing sales volume, delivering positive adjusted EBITDA and free cash flow and maintaining a robust net cash position. Firstly, we refine our product assortment to increase shelf productivity, and we implement a high-return promotion strategy supported by enhanced communication to stabilize sales volumes. Secondly, we optimize our network by closing underperforming stores, streamline in-store operation and reducing our logistic footprint to cut secondary distribution costs and restore profitability. Finally, in terms of finance, we optimize our inventory levels to free up cash and only invest in maintenance to preserve the business self-financing capacity. The success of these measures is clearly evident in our second half performance metric. Firstly, we achieved 2% like-for-like sales volume growth in the second half of the year, gaining 31 basis points in market share. Secondly, we successfully turned the margin around, moving from minus 0.5% in the first half to plus 1.3% in the second. And most importantly, we moved from a negative cash position to generating EUR 12 million in free cash flow in the second half of the year, ending with robust liquidity. As you can see on Slide 16, we believe the worst is already behind us. While the year-on-year comparison still shows a decline in like-for-like sales volumes, the sequential quarterly trend indicates clear stabilization in the second half of the year. 2026 is set to be a pivotal year for the Argentina, as you can see on the next Slide 17. The Argentinian economy is already showing positive signs with more moderate inflation, a stabilized exchange rate and a solid growth prospect for the coming years. The consolidation of Argentina macroeconomic framework and relative price stability with the bulk of fiscal adjustment now complete, should allow for a gradual but sustained recovery in the household disposable income. This will enable consumers to return to more normal food consumption patterns. In this scenario, our leading position, operational efficiency and financial discipline provide a solid foundation on which to capitalize on the expected recovery in food consumption from 2026 onwards. As you can see in the next Slide 18, our leading market position in Buenos Aires gives us a solid base from which to rebuild growth and profitability. We are the leading proximity food retailer and top-of-mind brand in the Buenos Aires region, thanks to our competitive prices, high-quality products and successful loyalty program. Our balanced assortment includes a high-quality private label, generating close to 30% of gross sales, well ahead of the market average. We offer a high-quality fresh product assortment, combined with guaranteed product availability to meet essential customer needs. Our strong value proposition results in best-in-class consumer satisfaction, as reflected by an impressive Net Promoter Score of 78 points. I will now hand you over to Guillaume, who will briefly explain our financial results. Guillaume Gras: Thank you, Martin. Let's start with Spain's strong financial results on Slide 20, which demonstrate the effectiveness of our strategy. As mentioned earlier, gross sales increased by 8.6% to reach EUR 5.5 billion, while net sales, excluding the franchise margin and value-added tax, grew by 8.2% to reach EUR 4.6 billion. The slight difference in terms of gross and net sales growth reflects a stronger growth rate from franchise-operated stores. Our adjusted EBITDA margin increased by an impressive 54 basis points to reach 6.8%, one of the highest in our sector. This was driven by operational leverage and rigorous cost management, resulting in an 18% increase in adjusted EBITDA to reach EUR 313 million. Finally, I would like to highlight the threefold increase in our net income to EUR 166 million, including EUR 52 million from the recognition of deferred tax assets in the second half of the year. Given the positive net income achieved in the last 2 years and our robust profit forecast, we are well positioned to activate tax assets. Dia Spain still has over EUR 660 million in tax loss carryforwards pending activation. This equates to over EUR 165 million in potential future tax savings, meaning that Dia Spain's effective tax rate will remain below 20% in the medium to long-term. Excluding this tax effect, our net income would have reached EUR 114 million in 2025, doubling that to previous year. Our high profitability also led to strong free cash flow generation, totaling EUR 140 million. This resulted in a significant reduction in net debt, as you can see on Slide 21. Cash flow from operations reached EUR 301 million. This figure includes the recovery of EUR 33 million in tax refunds during the first half of the year, following the official removal of the regulatory cap on certain tax deductions. Net CapEx totaled EUR 161 million during the period, representing a 60% year-on-year increase linked to the execution of our store expansion plan. Following the refinancing of our debt in December '24, which provided the stable framework needed to execute our 5-year strategic plan, net financial payments totaled EUR 61 million. As a result, we achieved a net debt reduction of EUR 79 million. This represents a 24% decrease compared to the end of 2024, bringing the total down to EUR 251 million. You can see this on the next Slide #22. The company boasts a set of solid credit metrics. Firstly, it has a low financial leverage with an adjusted net debt-to-EBITDA ratio of just 0.8. Secondly, it has a long-term financing structure with no significant debt repayments until 2029. And thirdly, it has a solid net cash position of EUR 295 million at the end of 2025. These robust credit metrics offer ample flexibility to support accelerated growth while maintaining a low leverage profile. Now let's turn to the financial results of Dia Argentina on Slide 23. As previously mentioned, gross sales in Argentina decreased by 15% to EUR 1.5 billion, affected by a 10% decline in like-for-like sales volume and above all, by the translation effects of the 40% depreciation of the Argentine peso in 2025. Net sales mirrored the performance of gross sales, declining by 15% to EUR 1.2 billion before the application of IAS 29 accounting rules for hyperinflationary economies. These rules had negative noncash impact of EUR 104 million. It is important to reiterate that our decisive cost control and financial discipline enabled our adjusted EBITDA margin to recover by 180 basis points to reach 1.3% in the second half of the year. This resulted in a positive adjusted EBITDA and free cash flow of EUR 4 million and EUR 3 million, respectively. As you can see on Slide 24, rigorous working capital management and targeted maintenance CapEx protected our cash position throughout a challenging year. The EUR 27 million working capital inflow was driven by optimizing stock levels, unlocking trapped cash and covering targeting maintenance CapEx, which preserved Dia Argentina's net cash position, almost intact before the foreign exchange took effect. The depreciation of the Argentine peso by 40% in 2025 had a translation effect of EUR 25 million on its net cash position, which closed the year at EUR 61 million. This solid net cash position, together with our rigorous financial discipline, ensures that the business remains self-funded and ready to capitalize on Argentina's expected macroeconomic recovery. Finally, let's conclude the review of the financial results with a brief summary of the Dia Group's consolidated results from continuing operations, on Slide 25. Dia Spain continued to be the driving force behind the Group's growth and profitability. It achieved a 3% increase in consolidated gross sales, reaching EUR 7.1 billion as well as an 8% increase in adjusted EBITDA, reaching EUR 316 million. This resulted in a 30 basis point improvement in the consolidated adjusted EBITDA margin, reaching 5.4%. Notably, our consolidated net income for continued operations more than doubled to a robust EUR 115 million, excluding a EUR 14 million profit contribution from discontinued operations. This relates to the reversal of unapplied contingencies regarding the sale of the Portuguese business in 2024. Conversely, in 2024, discontinued operations contributed a loss of EUR 107 million linked to our exit from Brazil. The company is thus returning to profitability following a successful transformation process that has established its position as Spain's leading supermarket chain in the Proximity segment. It now boasts a robust and profitable business with promising prospects for growth. Finally, the Group's free cash flow reached a robust EUR 143 million. This resulted in a net debt reduction of EUR 51 million, bringing it down to EUR 190 million at the end of the year. Now I would like to draw your attention to our exceptional stock performance in 2025, as shown on Slide 27. This powerful market endorsement is a testament to our strong achievements and solid prospects for profitable growth. Dia's share price has made an extraordinary recovery, rising by 140%, while our average daily liquidity has surged fivefold and is now consistently above EUR 2 million. Our market cap grew from EUR 0.9 billion at the end of 2024 to over EUR 2.1 billion at the end of 2025, releasing EUR 1.2 billion of shareholder value. Despite this impressive performance, Dia is still trading at a discount compared to our peers. Closing this gap should increase our market cap to over EUR 2.7 billion, in line with the current analyst consensus valuation. Our share price recovery and surging liquidity reflects renewed and growing confidence from institutional investors, underpinned by our proactive investor relations outreach. Last year, we executed 14 targeted roadshows in major financial hubs and participated in 10 investor conferences, effectively presenting our new equity story to over 190 high-quality investors. We have added 2 new brokers to our sell-side coverage, and we are actively encouraging new coverage from pan-European brokers to further increase our visibility among institutional investors. We are committed to broadening our investor base and building deeper, long-standing relationships with investors, ensuring that we fulfill our value creation commitments. Now I hand you back to Martin, who will deliver his closing remarks and outlook for 2026. Martin Tolcachir: Thank you, Guillaume. I will now conclude this presentation with some closing remarks on Slide 30 before moving on the Q&A session. The excellent results achieved in the first year of our Growing every day strategic plan validate the success of our proximity model and the strength of our customer-centric strategy. We are delivering robust volume-led like-for-like growth, significantly outperforming the market, while accelerating the rollout of our expansion plan ahead of the schedule. This operational excellence is driving a substantial expansion of margins, a twofold increase in the net income and strong cash flow generation. Looking ahead to 2026, our goals are threefold. Firstly, to maintain our position as the market leader in like-for-like growth. Secondly, to accelerate the rollout of our expansion plan with over 100 net store openings this year. And thirdly, to continue to increase our adjusted EBITDA margin. We will also continue to monitor strategic opportunities in Spain's fragmented market that could generate additional shareholder value. In any case, please note that we only view these opportunities as strictly supplementary to our core organic growth road map, and we won't allow any distraction from it. Meanwhile, Dia Argentina has demonstrated resilient management by successfully navigating a challenging macroeconomic environment. The strategic measures implemented in 2025 were instrumental in stabilizing sales volume and delivering positive adjusted EBITDA and improving free cash flow in 2025, while maintaining a robust net cash position. Our leading position, operational efficiency and financial discipline give us a solid foundation on which to capitalize on the recovery in consumption expected from this year as the macroeconomic environment normalizes. 2025 marked a pivotal year for Dia. It was the year in which we successfully transitioned from a turnaround phase to one of sustained profitable growth. With a significantly strengthened balance sheet and proven proximity strategy, we are now well placed to deliver long-term value. This transition is being increasingly validated by the financial market, as reflected in our exceptional share price performance and enhanced stock liquidity. Thank you for your attention. We are now open to your questions. Alberto Valdes: Thank you for your attention. The Q&A session is now about to begin. To ask a question over the phone, please press the asterisk, then the number 5 on your telephone keypad. As a shareholder, you may also submit questions through the red button on your webcast screen. Once we have verified your ownership, we will answer your question. If we are unable to do so during the session, we will respond directly to your e-mail address. Questions received from analyst covering our stock will be addressed first. Thank you. All right. Here comes our first question from Alvaro Bernal at Alantra. Alvaro Bernal: I have 3 questions, if I may, all related to the 2026 guidance. The first one is regarding sales growth. You have grown at 9% in Spain in 2025, ahead of the 4% to 6% guidance. What do you expect for 2026? If you can provide a mix on volume, price, store opening, it would be very helpful. Second one is regarding margins. You delivered a solid 6.8% margin in Spain. What do you expect for 2026? And what are the drivers of this improvement? And the last one is regarding CapEx in Spain, having in mind that you're accelerating your store opening plan to a targeted 100 net openings in 2026, what can we expect in terms of spend? That's all. Congratulations on the results. Alberto Valdes: Thank you. Very clear questions, Alvaro. I think the first 2 are for Martin. The last one on CapEx, maybe is more suitable for Guillaume. Martin, if you're ready. Martin Tolcachir: Sure. Thank you, Alvaro, for your question. Clearly, 2025, our sales delivered an impressive 8.6% increase, as you mentioned. This performance was built on a robust 7.4% like-for-like, basically supported by volume growth and also an initial contribution of our expansion plan that added 1.2% to the top line. So going to your question on '26, what we can share is that, what we expect is to maintain our market leadership in like-for-like growth. We really think that the value proposition that we are proposing is clearly the one is choose by customers, and we are going to keep our rhythm of like-for-like ahead of the market. On the expansion, what we expect is also overperform the growth of square meters of the Spanish market. We are targeting 100 net openings for the year, and that will also allow us to accelerate the growth again in 2026. This acceleration means that in total growth, 2026 is projected to again outperform our guidance range of 4% to 6%. On the margins, what I can share with you is that clearly, Spain again reached 6.8% in 2025, that this is 54 basis point expansion. That was driven basically by this strong operational leverage and rigorous cost discipline, as was already presented by Guillaume. Outlook for '26, our focus is clearly on accelerating our organic growth. We expect, based on that, a fixed cost dilution and rigorous cost management to offset wage and transport inflation, again, enabling us a further improvement in margins this year. However, this -- there will be a more, let's say, normalized pace compared to the extraordinary jump seen in 2025. Perhaps for the CapEx, I can give to Guillaume. Guillaume Gras: Thank you, Martin. First, to remind, in 2025, Dia Spain net CapEx totaled EUR 161 million, in line with the guidance provided and 60% above the EUR 99 million invested last year in 2024. So the year-on-year increase is mainly related to our store expansion plan. Looking ahead to 2026, we expect to double our rollout speed with more than 100 net store openings. Consequently, we should expect around EUR 50 million higher CapEx than in 2025, pointing to over EUR 210 million. Remember that this CapEx is fully financed by our operating cash flow. This enables us to maintain low financial leverage throughout our strategic plan. Alberto Valdes: Thank you very much, Martin and Guillaume. The next question comes from Luis Colaco at JB Capital. Luis Colaco: I have 4 questions on my side. The first one would be regarding the breakdown in terms of sales growth for 2026. We saw an exit rate of like-for-like of circa 7.7%. You guided before -- last year for 2% to 3% like-for-like. And we are seeing the inflation in Spain still in the food sector already at 3%. Do you think that this guidance that you provided last year between 2% and 3% isn't conservative at this stage? Second question would be on the expansion of stores that you project. You said that you expect 100 net new stores for 2026. You opened 54 already in 2025. So I wanted to understand if the 300 net new stores that you projected from 2025 to 2029, also, does it look conservative at this stage? And I assume that the 300 is net new stores. That wasn't clear for me, in the past. And the third question would be on the debt. You've been deleveraging in a very fast way. We know that you refinanced your debt in 2024 at a very high rate. Bearing in mind your current net debt-to-EBITDA, do you think that you will be able to refinance your debt at the end of this year? And what type -- if this is -- if you agree with me, do you think that -- can you provide us some color on what type of spread should we be assuming for debt refinancing? And the fourth question would be also on the market in general in Spain. We've been seeing the nominal food retail sales growing -- accelerating the growth. What do you attribute this to, immigration, higher purchasing power from consumers? If you could give us some color would be great. Alberto Valdes: All right. Very clear questions. Thank you very much, Luis. I think the first pool of questions regarding the sales growth in Spain, also our store expansion and the macroenvironment, could be very good questions for Martin and the one regarding our financials is more suitable for Guillaume. Martin, are you ready? Martin Tolcachir: Thank you, Luis, for your questions. What we are seeing in -- for Spain in terms of growth -- the drivers of growth, we expect now inflation position between, say, 1% to 2% this year. We still have some pressure, especially in fresh product. But then we have also a mix effect that will offset partially this pressure, so again, between 1% to 2%. In volume like-for-like, what we expect, or what we are expecting is a consistent growth between 3% and 4%, which is a robust growth in this market. And in terms of expansion, what we are assuming now is a contribution of around 3% coming from this plan. In terms of our acceleration in expansion, but more broadly, the acceleration that we are seeing in the execution of our plan in 2025 and our solid prospect for 2026, we really think that while we are delivering ahead of the schedule and accelerating in general, it may be premature to review our strategic targets only 1 year after its launch. However, given, again, this positive trends, I wouldn't rule out revising our targets plan next year, let's say, in 2027. Concretely, concerning the opening stores, you can assume that, yes, the 300 additional stores openings are net -- in the framework of our plan. Then some comments on the macroenvironment, as you pointed. We expect in Spain a solid growth in terms of GDP. 2025 was at 2.8%, which is a real strong performance, especially when we compare with the rest of biggest economy in Europe, Germany, France. So really, really strong support of this growth. We consider as we see in the -- all the available information that 2026 will remain a strong year for Spain. We project this growth around 2.4%, again, driven by a strong domestic demand and all the external sector. In terms of inflation, 2025 was already a year of the moderation, and we expect 2026 with a number of around 2% in terms of inflation. We really are -- appreciate seeing a clear improvement of the disposable income from household, which is really important for our business. Last year was already a positive year and all the information we are gathering confirm that 2026, again will be a positive year in terms of recovery of this real disposable income, which, again, it's key for our business. So last element that we can share is that in terms of population and tourists, we are still seeing solid numbers that will sustain this trend looking forward. Guillaume Gras: And regarding the refinancing, today -- the lockup period of the current financing expires at year-end, paving the way for a potential refinancing from 2027 onwards. As this time approaches, we intend to leverage our strengthened credit profile, reduced leverage and proven operating track record to optimize our cost of debt. And this should reduce financing costs and unlock our current capital allocation constraint, providing us with greater flexibility to remunerate our shareholders. How much do we expect? It's too early to say, but we expect a relevant reduction cost of debt. Luis Colaco: Just a follow-up question on what you said. You mentioned before the like-for-like between 1% and 2% in terms of prices, if I'm not wrong, 3% to 4% in terms of volumes. But that already surpasses the 4% to 6% total sales growth that you guided for. Is that correct? Martin Tolcachir: With the prospect we are having today for 2026, clearly, we expect to outperform our range, the range of growth that we give as guidance in 2026, clearly. Alberto Valdes: Yes, that is very clear. Thank you, Martin. The next question comes from Jose from CaixaBank. José Rito: So I have 3 questions. The first one is on net debt evolution at the consolidated level in 2026. If -- based on the fact that you should expect to accelerate store openings and also CapEx, if you expect to reduce net debt by 2026 versus 2025? That will be the first question. The second question related with the tax credit. So the activation of the tax losses were carried forward, I think that you had around EUR 1 billion in the balance sheet at least last year. There was some activation this year. Can we assume that the company will activate a similar amount in 2026? And how should we assume the phasing of this? If you can provide a little bit more details on this, I think it will be helpful. And finally, the third question on the working capital evolution in Spain. There were slight cash outflows in 2025, reason for this? And also how do you expect this to evolve in 2026? Alberto Valdes: All right. Thank you, Jose. If I understood you well, you're asking about our net debt prospects for the coming years and if we are going to be reducing our net debt position again in 2026. That is a good question for Guillaume. You also ask about our income tax in 2025 in the second half, which was significant. If you can give Guillaume a little bit more color on that and also on our prospects? And finally, I think you ask about the working capital change in Spain in 2025 and also your views, Guillaume, regarding next year, 2026. So when you're ready. Guillaume Gras: Thank you, Alberto. Regarding net debt projection for this year, as we increase our CapEx, we expect to maintain our current net debt. So that's the first point. Second, regarding income tax, in light of our positive performance and strong future profit expectations, we had EUR 52 million out of a total deferred tax asset balance of EUR 217 million, that was activated in the second half of the year. This, together with the one-off reversal of a fiscal provision totaling EUR 9 million registered in the first half, this more than offset the corresponding annual corporate tax resulting in positive tax income of EUR 47 million in 2025. So regarding 2026, Dia Spain still has deferred tax assets totaling EUR 165 million pending activation, which will not expire. We plan to activate these assets progressively over the coming years, which will result in an effective tax rate below 20% in the medium to long-term. Regarding the working capital change in Spain, the outflow you mentioned of EUR 10 million, if I'm not mistaken, is linked to a calendar effect here in our supplier payments. So it's just something punctual. Looking ahead to 2026, we expect a positive working capital inflow driven by our projected sales growth and expansion plan. Alberto Valdes: Thank you, Jose, for your questions. We've got another one coming from Pablo Fernandez from Renta 4. Pablo Fernandez: Congrats on these solid numbers. Just 3 on my side. The first one is just a follow-up on growth and margins, in this case about Argentina. Could you provide some color about the [indiscernible] picture and maybe offer some guidance on your expectations about sales and margin expansion in '26? And the second one, do you keep considering the business in this contract as a strategic or maybe this first green shot could be a good opportunity to divest in the country? And the final one is regarding the EUR 10 million of assets held for sale in your balance sheet. Maybe you could provide some color about it? Alberto Valdes: Thank you, Pablo, who is now shifting to Argentina. He's asking about how we see the macroenvironment and our prospects for 2026? Also, if we consider this as a strategic business or we could consider its divestment? And finally, a question regarding assets held for sale, that is more suitable for Guillaume. So Martin, the floor is yours when you're ready. Martin Tolcachir: Thank you, Pablo, for your question. On Argentina, in terms of GDP, following the sharp contraction in 2024, GDP is estimated to have a recovery of, let's say, 4% in 2025, driven mainly by a rebound in the agriculture sector and the gradual recovery of the energy and the mining sector. The economic forecast suggests this recovery will continue in '26 with the GDP growth expected to remain between 3% to 5%, but with an increased contribution from private investment and consumption in addition to the primary sector. In terms of inflation, as you know, inflation has significantly decelerated from the inflationary peak of '23 and '24 to a single-digit monthly rates at the end of last year. In this context, the real disposable income began to recover in '25 amid rising wages and more moderate inflation. Still, it remains at a very low level and following 20% cut in 2024 due to measure implemented to eliminate the fiscal deficit. So looking ahead, what we expect -- the consolidation of Argentina's macroeconomic framework and relative price stability are expected to enable the sustained normalization of household disposable income and the gradual recovery of food consumption from this year onward. As you know, we have a strong position in Argentina. We have a leading position in Buenos Aires. We have a strong brand, a loved brand in the country and a brand that is perceived as the -- more competitive in terms of prices and the leader also in terms of own brand quality and loyalty program. We have an operational and supply chain solution that is really competitive in that market, and that means a real value for us. We have a value proposition that also combines this own brand, fresh products and national brands that differentiate our value proposition from the other players. In this context, the -- we consider that the consumption is now bottoming, and we expect a gradual recovery from this year onward. So in this context, again, we are not considering the sale of the Argentina at the moment. Selling the business now will fail to capture the value we really think this operation have and this strong position that we have in the country and more particularly in our leadership in Buenos Aires. And again, all the potential recovery that we are foreseeing based on the healthy and the strengthening of our value proposition. What we expect in terms of sales growth is, again, this gradual recovery during 2026, although the sequential quarterly trend should continue to improve. The positive year-on-year comparison will be more evident, especially as the year progress. Last question on also margins for Argentina. As you know, we have put in place decisive cost control and financial discipline that allows us to get to a positive adjusted EBITDA in the year. The second half of the year we have been already capturing the benefits of all that strategic decisions. And again, the full year, we finally closed a positive 0.3% of adjusted EBITDA margin. This year will be a year where we are capturing -- we are going to capture fully all this -- the benefits of all that decision, and we expect to improve our adjusted EBITDA margins in Argentina. Guillaume Gras: And regarding the question about assets held for sale, the EUR 10 million you are seeing, corresponds to real estate assets belonging to Dia Argentina. We talk about one warehouse and 14 stores. These assets are up for sale in 2026 with the aim of reinforcing the company's net cash position. As you know, and just to remind, Dia Argentina had a net cash position of EUR 61 million at the end of the year. This, together with our rigorous financial discipline and the monetization of real estate, will ensure that the business remains self-funded and ready to capitalize on Argentina's expected economic recovery. Alberto Valdes: Very clear, Guillaume. Thank you, and Martin. We have a final question from Marisa Mazo from GVC Gaesco. Marisa Luisa Mazo Fajardo: Alberto, congratulations for the results. I have 3 questions. The first one is in logistics. Can you remind us how may be impacting costs when you continue opening your new warehouses? And how much is the annual investment? The second issue is on the financial debt and the repayment. If I'm not wrong, you have to pay penalty on the -- if you repay the debt from year 2027 onwards. And also, you're still accounting for the opening fee. How we -- may we think about which will be the trade-off between renegotiating the debt and all the other impacts it has? Alberto Valdes: All right. Marisa, thank you for your questions. If I understood you well, you're asking about your logistic optimization plan, specifically how much we think it could contribute to improve our adjusted EBITDA margin by 2029 and how much we are -- we expect to invest in each of these platforms and throughout the plan. That is a good question from -- for Guillaume. And you also asked about our -- if I understand you well, the potential refinancing of our debt as from 2027 and how much it could contribute to reduce our financial costs, both questions for Guillaume. The floor is yours when you're ready. Guillaume Gras: Yes, Alberto. Regarding logistics, the gain we expect from this optimization plan by the end of 2029 is 30 bps and requires yearly investment by 20 -- sorry, EUR 10 million to EUR 15 million per year. Regarding debt, as I said, we have a strong penalty until the end of 2026 if we repay now the -- our current debt. So that's the reason why we are waiting for 2027. And today, it's too early to know how much we can save, but we believe that it will be a relevant saving. Alberto Valdes: All right. There are no more questions from our analysts over the phone. Let's now review the written questions received from our shareholders who are following us through the webcast. Some of them have already been answered. Fernando was asking about our plans regarding the business in Argentina and a potential divestment. I think that has already been addressed very clearly by Martin. Then Luis and Jose are asking about the share price potential and also about potential M&A in Spain. I think the first one could be a good question for Guillaume and the one regarding M&A, maybe for Martin. So if you're ready, we can answer these ones. Guillaume Gras: So regarding the share price potential, it's -- of course, we cannot provide any guidance regarding our share price. We know that our stock price has made an extraordinary recovery last year, validating our successful business transformation. However, we see that we are still trading at a significant discount to our European peers on 2026 consensus numbers. According to the latest analyst consensus average, target price is EUR 46 per share. So there is still a significant upside potential. This fundamental upside is based on, let's say, 5 points: one, our unique business model which gives us strong competitive advantages. Our strong -- two, our strong organic growth that significantly outperformed the market; three, the profitability that is above the average of the sector; and also our strong cash flow generation and low leverage profile. That's the main element for the share price potential. Martin Tolcachir: Thank you for this question on M&A. And I would like to start by first saying that our focus and our full priority is to deliver on our strategic plan, the plan that we have shared with you last year and that we are executing rigorously, and any other consideration has to be considered, again, with no possibility to distract us from the execution and delivery of this plan. And this plan is based on customer experience improvement, like-for-like growth and our organic expansion. However, our robust financial position enable us to evaluate potential M&A opportunities within Spain. Spain is still a fragmented market. And we consider that they can be with opportunities that could create additional value for our shareholders and our responsibility is to analyze and consider these options. In any case, not that we -- again, we only consider these opportunities as supplementary to our core organic growth road map, and we will not allow anything to distract us from it. Also important to share with you that we already defined clear criteria for evaluating any M&A opportunity in Spain to ensure that any potential transaction will really create long-term value for our shareholders. In that regard, we only consider assets that are profitable and generate cash flow that are complement to our business model and national footprint, that create clear opportunities of quantifiable synergies, have limited integration cost and offer a real attractive returns. In any case, any event of this nature materialize -- if in any case an event of this nature materialize, we will disclose it to the market swiftly in accordance with the applicable regulations. Alberto Valdes: That is super clear, Martin. Thank you very much. We have another question from [ Alvira ] and Jose. They are both asking for potential dividends or shareholder remuneration in the context, again, of a potential refinancing as from 2027? That maybe is a good question for you, Guillaume. Guillaume Gras: Yes, Alberto. So as you know, dividend payments are not permitted under the current refinancing agreement, but this is not definitive. Delivering -- we think delivering our strategic plan and fulfilling our financial commitments will give us the flexibility to reconsider our capital allocation priorities in due course. And of course, an early refinancing of our current debt facilities from 2027 onwards could remove our current capital allocation constraints. Alberto Valdes: Thank you, Guillaume. The last question comes from Mohanty. He is asking about our store closures in Spain and our prospects? Maybe Martin, if you can answer this last one? Martin Tolcachir: Sure. No problem. You have seen that in 2025, Dia Spain closed 38 stores. This is twice the natural rhythm of annual turnover, as we didn't close any store in 2024 that will be incompatible with the redundancy program that was in place. Looking ahead to the coming years, what you should expect is a natural turnover of around 15 to 20 stores per year. And these closures are mainly based on the change to the rental conditions, store relocations or the closure of underperforming stores. But we will come back to this historical average rhythm -- natural rhythm, I would say, of around 20 stores per year. Alberto Valdes: Super clear. And there are no more questions from the webcast. Thank you very much, Martin and Guillaume. If you require further clarifications, please contact us, the Investor Relations department. And you will find the contact details on this presentation or on our web page. Thank you very much, again, for your attention and look forward to connecting with you at our first half results presentation. Have a nice day.
Operator: Hello, and welcome to FEMSA Fourth Quarter 2025 Conference Call. My name is Augier, and I'll be your moderator for today's event. Please note that this conference is being recorded. [Operator Instructions] I would now like to hand the call over to Mr. Juan Fonseca, Investor Relations Director at FEMSA. Please go ahead, Juan. Juan Fonseca: Good morning, everyone, and welcome to FEMSA's Fourth Quarter and Full Year 2025 Results Conference Call. Today, we are joined by Jose Antonio Fernandez Garza, FEMSA's CEO; Martin Arias, our CFO; and Jorge Collazo, who heads Coca-Cola FEMSA's Investor Relations team. The plan is for Jose Antonio to open the conversation with some high-level comments on performance, followed by a strategic overview and an update on our priorities. Next, Martin will provide more details on the results. And finally, we will open the call for your questions. Jose Antonio, please go ahead. Jose Antonio Garza-Laguera: Thank you, Juan. Good morning, everyone. Today, I would like to split my remarks in two. First, we will focus on operational results and trends, highlighting some important points and takeaways. Then we will address more strategic topics, including an update on our priorities as well as some relevant structural changes we are putting in place as we prepare for the next stage of growth. Let me begin with the performance of our business during the fourth quarter, particularly at OXXO Mexico. Back in October, during our previous quarterly call, we mentioned we had observed what seemed to be an inflection point in the same-store sales and traffic trends that made us optimistic about the fourth quarter and beyond. As you saw in the numbers, this improved trend indeed continued through the end of the year and allowed us to close 2025 on a positive note with same-store sales for Proximity Americas approaching the mid-single-digit growth range at 4.4% and traffic that while still negative, 0.6% was markedly better than what we saw earlier in the year. While we are not satisfied with the year's performance, as we look back at 2025, we have gained many lessons, and we can also take some encouragement from the fact that initiatives put in place in the second half of 2025 have begun to show results. We began 2025 with a challenge. Traffic at OXXO Mexico was falling by mid-single digits, and it was not following the cyclical recovery we had expected. Initially, we attribute it to the economy and the typical post-election hangover. Accordingly, it took us a little while to diagnose the causes. But once it became clear to us that we had a competitiveness issue versus the traditional trade around some of our core categories, the team designed and put in place a broad set of tactical affordability-focused initiatives. This including growing our mix of returnable beverage packages, increasing multi-serve presentations, seeking from suppliers more competitive promotions and packaging architectures as well as agreeing with suppliers on adding low price point SKUs in core categories like snacks and tobacco. The strategy worked as designed. We quickly began to recover market share. And as we saw in today's results, our numbers are now trending closer to our long-term expectations. Obviously, we do not operate in a vacuum. Earlier in the year, we mentioned abnormally poor and wet weather in most of the country as a relevant factor in our traffic underperformance and weather was more normal during the fourth quarter. That helped. We also talked about a soft consumer environment and generally lackluster macro sentiment around investment and economic activity in Mexico. Those have not really improved in recent months, but they seem to have stabilized. However, by focusing on the variables and drivers that we could control, our efforts delivered the desired results. That is an encouraging reminder of the strength and resilience of the OXXO platform. Having said all that, 2025 also highlighted the fact that the core consumer occasions that we serve best, trust, impulse and gathering still have significant opportunities to expand the number of consumer occasions where OXXO can be more relevant and create value. 2025 also highlighted the need to prioritize and focus on a few bold initiatives that will create significant new waves of value. Furthermore, as we already mentioned in our last call, in 2025, we began to address the need for a leaner fit-for-purpose organizational structure, which has now been fully implemented at OXXO Mexico and is currently being implemented at Proximity Americas as well as FEMSA Corporate. More details on that later. As we look at 2026, we aim to regain OXXO Mexico's growth and relevance with a clear focus on recovering traffic and same-store sales through a sharper value proposition and improved customer experience and strong operational execution. In the short to medium term, the team is working hard to take our core categories to their full potential, which means enhancing our already strong competitive position on impulse while also prioritizing and focusing on improving our position in food premiums with a focus on our coffee and breakfast offerings. On this front, we have a number of tests in place and are already seeing some compelling results from initiatives such as increasing the affordability of our regular coffee offering, while we learn from our successful food propositions in Colombia and Brazil and adjust them for the Mexican consumer, aspiring to be a go-to solution for a convenient and value compelling breakfast alternative. Further down the road, we believe we can also pursue and capture new missions like the daily replenishment occasion by improving our offering of pantry essentials at great value while continuing to strengthen our beyond trade opportunity with incremental payments and financial solutions. In the future and in various forums, I will begin to share more details and updates on some of these long-term initiatives. Considering that we currently only represent around 10% of all the categories in which we participate, we continue to see an enormous opportunity to keep growing our business in Mexico by capturing a broader share of consumer spending, increasing our store base by more than 1/3 over the next decade and leveraging that incremental scale to deliver growth while sustaining high returns. In fact, if we look at the whole of FEMSA during 2025, we deployed over $1 billion of CapEx in organic growth in Mexico across our business units for the third year in a row, despite the fact that at the consolidated level, you see a reduction versus 2024, reflecting our ability and willingness to adjust the pace of investment in challenging environments. I want to briefly highlight some of the operations delivering standout performances during the quarter, beginning with OXXO Colombia, where our value proposition has finally come of age, and we generated positive EBITDA for the first time for the full year and nearly breakeven EBIT in the fourth quarter. For its part, Bara showed strong momentum in the discount space, also growing its same-store sales by double digits, while we continue to fine-tune its value proposition and increase the mix of private label offerings now approaching 30% of the mix for all of BADA. And in Europe, Valora generated record operating income in 2025 on the back of strong retail results in Switzerland and solid expense containment. For Coca-Cola FEMSA, as Juan mentioned in more detail during their call, we remain focused on three clear priorities: first, driving volume by growing the core, strengthening execution and reinforcing our portfolio; second, take Juntos+ to the next level, leveraging AI and advanced analytics to create more value for our customers and improve decision-making; and third, continue fostering a customer-centric culture of empowerment. However, just like we point your attention to the successes, we must acknowledge when things do not go as intended. In particular, during the fourth quarter, our Health division again registered a provision for uncollectible accounts for MXN 487 million from the institutional side of the Colombian business, in line with similar provisions registered in 2023 as that segment of the market continues to struggle. This comes as the business in Mexico only begins to stabilize after significant downsizing, combining for an underwhelming result for the quarter. Our new management team at the Health division has completed its initial assessment and has launched a series of initiatives focused on more disciplined use of capital and commercial practices with a focus on cash flow generation and returns. This will be a tough year in terms of results for this division, particularly as it relates to our institutional business in Colombia and the need to stabilize the Mexico operations. Martin will get more into the details in a minute. Now let me get to the second part of my remarks. Beyond the quarterly results and operating trends, I want to provide you with a broad update on our strategic priorities as well as some of the changes we are making to our organizational structure to better align with those strategic priorities and with a focus on increasing efficiency and effectiveness. As we have said in the past, we strive to create value by generating returns in excess of our cost of capital. This means focusing our investment capacity with precision and purpose on those initiatives that can create the most value as well as putting the strongest possible team together and deploying our best people to where they are most needed. At the same time, together with Martin and the finance team across our business units, we are putting in place a renewed focus on cash flow rigor, pushing the teams to think about cash with an owner's mentality and exerting full control over the levers that drive cash, including an obsessive focus on managing working capital and highly disciplined investment in CapEx. Let me briefly touch on expansion, which remains a key pillar of our long-term growth strategy. During 2025, we instilled a more rigorous approach to store base growth across the portfolio, particularly in Colombia and Brazil. We have closed early cohort and underperforming stores as we keep refining our value proposition, resulting in a more measured number of net additions. This was a deliberate adjustment, not a structural shift in our ambition, and we are well positioned to accelerate growth going forward. Our top priorities remain consistent with what we have discussed in the past. As I just mentioned, the Mexican market will continue to be at the top of our list. OXXO Mexico remains our first priority as we continue to capitalize on the white space opportunity while we strengthen and expand our value proposition by consistently adding incremental layers of value to ensure we increase our relevance for an evolving Mexican consumer. Mexico is also Coca-Cola FEMSA's largest market, and we continue to develop and deploy the right market and portfolio strategies to grow our core and successfully navigate a challenging regulatory environment. At Bara, we now have two growth engines, having just opened our second distribution center in Monterrey. Together with our Bajio and Jalisco growth sale, we will continue to fine-tune our value proposition and raise our mix of private label beyond the current levels. 2026 should also be the year that we increase our pace of store expansion with plans to grow our store base by approximately 1/3 during this year. Moving to Brazil, our second largest market, we now have full strategic control of OXXO, and we will continue to fine-tune our value proposition while we also accelerate growth within the State of Sao Paulo. In particular, we will continue to develop our successful prepared food offerings, while we also increase our operational focus and execution. For 2026, our target for store expansion is approximately 100 net new stores, representing slightly more than 15% growth as we continue to build scale in this high potential market. Brazil is also a very high priority for KOF, where they see a compelling opportunity to keep growing the business, enhanced by cutting-edge digital capabilities with Juntos+. In Colombia, we have achieved strong unit economics at the OXXO store level anchored in a successful value proposition for prepared food. As a result, we are ready to further scale the operation in a disciplined manner with plans to increase our store base by 20% in 2026. Beyond Latin America, we are excited about our operations in the U.S. and Europe. In the U.S., we remain focused on fine-tuning our value proposition with a focus on prepared food, testing different alternatives and continuing with the conversion of the store base to the OXXO banner with positive results. For its part, Valora has exceeded expectations, particularly through the strength of our Swiss retail platform and the management team's proven ability to operate with increasing levels of efficiency. To better support these priorities and to prepare us for sustained long-term profitable growth, we have redesigned our organizational structure, integrating the leadership teams that existed at FEMSA corporate and at the Proximity and Health division, consolidating them at the FEMSA corporate level. As a result, in addition to Coca-Cola FEMSA, we will have the four large retail divisions reporting to me: OXXO Mexico through Carlos Arroyo, Proximity Americas and Mobility through Constantino Spas, Health and Multi-Formats through [indiscernible] and Europe through Michael Mueller. All corporate functions such as finance, strategic planning, human resources, corporate affairs and sustainability will also be consolidated at the FEMSA level. This consolidation will allow us to run a leaner, more streamlined organization while realizing meaningful synergies and efficiencies. Another critical component of this restructure effort involves Spin and OXXO Mexico. As we have continued to develop the value proposition of Spin during the past 5 years, we have come to understand that the physical growth path of OXXO and the digital growth path of Spin not only are not divergent, but they actually converge and intersect. Digital does not replace the store. It amplifies it. And the store is not a constraint on digital. It is its greatest competitive advantage. As a result, we have redefined our ecosystem 2.0 as a model focused on OXXO Mexico, creating greater alignment between Spin and OXXO. The principle is straightforward, one client, one strategy and one aligned P&L. This implies narrowing our focus and emphasizing the role of Spin within the OXXO store network, for example, by postponing the application for a full banking license and instead giving us the time to clarify the lending opportunity through the right partnership. This increased alignment of the Spin and OXXO platforms will allow us to merge digital and physical talent, capabilities and ways of working to reinforce our omnichannel value proposition where payments, services, loyalty and data are embedded into the store experience while creating important savings and efficiencies. Spin already reduced its negative EBIT for the full year 2025 by almost 30%, and we are estimating a further improvement of close to 20% in 2026. In the context of this important strategic adjustment, today, we want to recognize Juan Carlos Guillermety's leadership in building digital capabilities that are critical for FEMSA. Under his guidance, our ecosystem strengthened its value proposition, consolidated strategic partnerships and defined our financial ambition, setting the foundation for this new stage of integration. Juan Carlos will transition into an advisory role and Rodrigo Garcia Jacques will assume the leadership of Spin with a clear mandate, consolidate execution, ensure a permanent alignment with OXXO Mexico and maintain operating discipline. We expect the combined effect of all these restructuring efforts and the sustained improvement in performance from Spin to result in a positive impact on our bottom line of approximately MXN 1 billion on an annualized basis, which will show up in our results mainly at the corporate level. The efficiencies will ramp up during 2026 and reach their full impact in 2027 and beyond. Martin will also elaborate on some of the ground level implication of these changes. And with that, let me turn it over to Martin to go over the numbers in more detail. Martin Arias Yaniz: Thank you, Jose Antonio. Good morning, everyone. Let me begin by walking you through FEMSA's consolidated financial results for the fourth quarter of 2025. During the fourth quarter, total revenues increased by 5.7% year-over-year, reflecting a combination of improved trends in Proximity Americas and continued growth outside of Mexico, particularly in Coca-Cola FEMSA and Valora. Operating income increased by 8.5% as cost containment initiatives offset gross margin pressure. These results reflect, for the most part, a recovery in the fourth quarter relative to the first 3 quarters. Net consolidated income for the quarter amounted to MXN 12.7 billion, representing a 33.6% increase compared to the fourth quarter of last year, driven mainly by an increase in income from operations of 8.5%, nonoperating expenses that fell by 62.7% and a decline of 26.6% in income taxes due to nonrecurring items, which were partially offset by MXN 830 million of foreign exchange loss from our U.S. dollar-denominated cash position compared to a gain of MXN 2.7 billion in the comparable period and lower interest income as a result of a reduced cash position during the period. Turning to our operating results. Starting with Proximity Americas. During the fourth quarter, total revenues increased by 5.3% or 6.3% on a comparable basis, mostly driven by same-store sales growth in Mexico as well as top line growth in OXXO Colombia and Peru. Gross margin stood at 48.1%, reflecting a 40 basis point expansion as a result of an improvement in OXXO LatAm, driven by increased scale and more disciplined commercial negotiations with suppliers. Operating income increased by 7.7%, while operating margin was 12%, reflecting the initial benefits of our overhead reduction and productivity initiatives, along with disciplined expense management, which allowed us to translate most of the gross margin expansion all the way to the operating level. During the quarter, Proximity Americas added 209 net new stores, closing the year with a total of 1,125 stores. At the same time, we have been prioritizing a rigorous evaluation of our entire store base. And as part of this process, we closed the number of underperforming stores in LatAm, particularly in Colombia. These actions allow us to enter 2026 refocusing growth on profitability and strong unit economics at the store level. Moving on to OXXO USA. We ended the year with 50 converted stores under the OXXO banner. We continue to make progress in our foodservice strategy, expanding our hot food and coffee offerings as well as assortment expansion. All these initiatives are part of a learning process as we continue to refine the value proposition in the region. Finally, at Bara, we added 63 net new stores during the quarter and 157 during the full year, remaining on track with our long-term growth ambitions while continuing to optimize the discount offering. In Europe, Valora delivered revenue growth of 2.5% in pesos in the fourth quarter. Gross margin was 37.9% and operating income increased by 10.8%, reflecting continued cost discipline and a favorable mix in Swiss retail while navigating a challenging macro environment in Germany and a softer performance in foodservice B2B. The decline in gross margin of 550 basis points is a result of the reclassification of full year 2025 distribution expenses from SG&A to cost of sales, all in the fourth quarter. On a comparable year-over-year quarterly basis, the fourth quarter 2025 gross margin would have expanded by 70 basis points. There is no impact on operating income as a result of this reclassification. Moving to the Health division. Fourth quarter revenues increased by 4.6% or 6.7% on a comparable basis, driven by strong growth in Colombia and Ecuador, complemented by flat performance in Chile, while Mexico remained under pressure, primarily due to lower store base compared to last year, following the closure of underperforming locations as part of our restructuring efforts. Additionally, during the quarter, we reclassified the full year 2025 distribution expenses from SG&A to cost of sales, all in the fourth quarter. This change was made purely for accounting presentation purposes to better align the classification of distribution costs with the nature of the expense. There is no impact on operating income because of this reclassification. However, as a mechanical effect of this change, gross margin was impacted by approximately MXN 1.8 billion, reflecting the proportional shift of those expenses into cost of sales. This is the full amount for the year 2025, which we are recording in the fourth quarter. If we only recorded the amount corresponding to the fourth quarter, the impact to gross margin would have been a reduction of 110 basis points relative to the comparable period. Additionally, during the fourth quarter, we reclassified certain administrative expenses into selling expenses for the full year. For comparability purposes, we suggest focusing on the sum of selling and administrative expenses. Operating income from the quarter was MXN 573 million with an operating margin of 2.5%, largely reflecting a deteriorating environment in the Colombian institutional business, where we took a charge of MXN 487 million for uncollectible accounts. Excluding this effect, operating income would have been MXN 1 billion with an operating margin of 4.6%. At OXXO GAS, same-station sales increased by 8.7% during the quarter, supported by higher wholesale volumes, which is allowing us to leverage our scale and optimize logistics. Operating margin stood at 4.8%, maintaining profitability levels compared to last year, reflecting disciplined cost management and operational efficiency. Turning briefly to Coca-Cola FEMSA. During the fourth quarter, the company delivered revenue growth of 2.9%, supported by growth across geographies, particularly outside Mexico. Operating income increased by 13.3%, reflecting continued focus on efficiency and disciplined execution. As always, we encourage you to refer to Coca-Cola FEMSA's earnings call for a more detailed discussion of the results. As Jose Antonio mentioned in his remarks, we continued advancing our restructuring process. The initial phase began late last year with the fit-for-purpose initiative, which was focused on OXXO Mexico and Health, and we expect to generate more than MXN 800 million on an annualized basis and has recently been put into place. We are now extending that discipline across Proximity and Health, FEMSA Corporate and Spin, including the consolidation of overlapping structures between the Proximity and Health division and FEMSA Corporate and between OXO Mexico and Spin to generate additional savings. These initiatives will generate approximately an additional MXN 1 billion on an annual run rate basis beginning in 2027, most of which will be reflected at the FEMSA corporate level. Due to the timing of the transition and the implementation of the new structure, we will not begin to see the full run rate benefit until the end of 2026. These efficiencies are primarily driven by headcount optimization, the simplification of the organizational structure as well as improving results at spin, supported by underlying business momentum and an organizational restructure in that business. Importantly, in the fourth quarter of 2025, we recorded provisions related to this restructuring process, which will temporarily offset a portion of the savings before the full benefits are reflected in our results. Before closing, let me briefly address capital allocation. During the fourth quarter, we deployed MXN 14.2 billion in CapEx, bringing full year CapEx to MXN 45.3 billion, focused primarily on store expansion, manufacturing, supply chain infrastructure and strategic capabilities across the company. That said, full year CapEx came in below 2024 levels, mainly driven by three factors. First, in Mexico, a softer macro environment allowed us to prudently postpone certain capacity and infrastructure investments without compromising service levels or long-term growth plans. Second, as we just mentioned, we implemented a measured slowdown in expansion in selected markets, particularly in OXXO LatAm, where we prioritize profitability and unit economics or pace of growth. Third, this outcome also reflects a renewed discipline in capital allocation, ensuring that every peso deployed meets our return thresholds and strategic priorities. On this point, we are increasingly linking expansion decisions to clear visibility on traffic recovery, margin sustainability and cash generation. Importantly, none of these adjustments alter our long-term growth runway. Instead, they demonstrate our ability to be flexible on investment timing in response to market conditions while preserving financial strength and return discipline. In terms of shareholder remuneration, for the full year from March 2025 to March 2026, total capital returned to shareholders through ordinary and extraordinary dividends and share buybacks amounted to $3.1 billion at the exchange rates at the time of payment. Importantly, this past January, we completed the deployment of our extraordinary dividend for 2025, totaling $1.7 billion at the exchange rates at the time of payment. Regarding our previously announced $900 million share repurchase objective, we executed approximately $600 million with the remaining $300 million pending execution. This delay was primarily driven by blackout periods during most of the second half of last year, which limited our ability to execute buybacks. Consistent with the road map we presented a year ago, our plans from March 2026 to March 2027 include extraordinary returns of approximately $1.3 billion. Tomorrow, we will present our recommendation to the Board of Directors regarding both ordinary and extraordinary returns of capital, and we will communicate the Board's resolutions accordingly. We expect that by the end of this year, we will be slightly below our target of 2x net debt to EBITDA, excluding Coca-Cola FEMSA, which will require us to consider additional returns. However, given how close we will be to the target and the potential inorganic projects that we are currently evaluating, we want to retain the flexibility to execute on such projects or to announce extraordinary capital returns, including buybacks later this year. It goes without saying that the performance of our business this year will also inform any additional extraordinary decisions. As we look at the year that begins, we are confident in the resilience of our portfolio, the actions we have taken to unlock further value across each of our divisions and our ability to continue executing with discipline. Our focus is clear: improving returns on capital, strengthening the fundamentals of our core businesses and allocating capital thoughtfully to continue to create value for our shareholders. And with that, we can open the call for your questions. Operator: [Operator Instructions] Our first question comes from Thiago Bortoluci from Goldman Sachs. Thiago Bortoluci: Antonio, congrats for the results. Martin, thank you very much for your time. I have two questions here, right? The first one is on the balance between growth and profitability, particularly in OXXO Mexico, right? I remember last earnings call, Jose Antonio, you mentioned a number of initiatives to improve traffic and protect demand. Obviously, a lot of this has been already playing out. But still in this quarter, you had better gross margins and lower traffic at OXXO Mexico, right? So my question is, going forward, how ready do you think the assortment and the value proposition in Mexico is already set? And if there is any low-hanging fruit or any clear initiatives yet to be done, if you could help us just understanding particularly in which category that might come from? And then my second question, maybe for you both on the initiatives and restructurings, right? Obviously, we understand directionally what you're trying to do here. But just on the magnitude, right, this is relevant. Martin mentioned like MXN 800 million plus another MXN 1 billion from the fit for purpose and Spin. This is like almost 3% of your net income, right? So I think the question here is, what are those low-hanging fruits and how possible this kind of efficiencies can exist in a company so efficiencies can exist in a company so efficient as FEMSA. Why hasn't this been done before? And what makes you confident that going forward, this could be fully executed on track? Those are the questions. Jose Antonio Garza-Laguera: Thiago, thank you. Very complete and full questions. I'm happy to address them. Both, I will address the first one, and then I will let -- I will address a brief thing on the second one, but I will let Martin complement me. On growth and profitability, if you look at the full year of 2025, to me, it was a year that left me disappointed. It was much better the second half of the year. So I am very happy with the turnaround that we were able to implement, but I am much more obsessed with bringing profitable traffic and growing market share in our core consumer occasions than on short-term profitability. And obviously, I am much happy of how the year ended on the fourth quarter because it looks like we're turning -- taking a turn. And I am very happy with how the year started. I don't want to give any spoilers, but we see the trend continues upwards in terms of traffic, and that keeps me optimistic. But our obsession is not profitability -- just for profitability per se. Our obsession is we are about 10% of the consumer occasions we address. The total addressable market is huge and OXXO -- should remain the favorite part of the Mexican consumer for not only our core categories like impulse, like tobacco, like beer, like soft drinks, but more and more other consumer occasions like breakfast and coffee, like daily replenishment, which we are already playing there, but we are not playing to win as much as we want. And that's what's going to be our obsession. To be able to give you a number, it's tough. What I do see is that there's still a lot of margin expansion to be gained from our core supplier partners. A lot of -- some of that has to be given back to the consumer to bring them on a profitable way more and more into the store. And so for us, a year with same-store sales traffic decline is a year that we -- that's a miss. We need to gain traffic on a same-store sales basis, and we're going to be obsessed with that. However, obviously, it has to be profitable growth. I hope that answers you the first question. For the second question, we began even my tenure in proximity with an obsession of trying to get leaner and meaner, and we were able to do that in Health and in OXXO Mexico. We've now instituted some efficiency opportunities in Spain, and we have just finished the same thing with FEMSA. On an FTE basis, I think we are done. We are not seeing a need for more restructuring. We have the team that we need in place to accomplish our goals. But there are still opportunities to do non-FTE restructuring. There's -- we are looking at every little expense that we make and everything that we think is redundant, not necessary or not bringing those traffic to the store should go. And so we're reviewing every consultant, every law firm, everything, every expense that we think may not be necessary going forward. And there should be even more opportunities that Martin mentioned, but it's too early for me to promise you a number. And with that, I'll open it to Martin. Martin Arias Yaniz: Yes. I mean, as to your broader question of this, why now? And look, I've been around the block a long time with different types of companies. This tends to happen like this in terms of waves. You go through phases where you're making best and you're expanding and you're building capabilities. And as you begin to see the results of that, you naturally prune. And with Jose arriving to the seat of the CEO, he wanted to give us a renewed focus on this issue that he had already started at Proximity. Also with his arrival and given that the structure we ultimately decided to implement, which was to collapse the P&H division with FEMSA Servicios, that also created a new opportunity that didn't exist before when we had decided to maintain that division. As to the figures and the numbers, it's just very important to note, there's two numbers. There's one that will tend to be reflected more in Proximity Americas, which has to do with the fit for purpose, which was announced and we discussed for the first time last year. And then that should be impacting in Proximity Americas generally throughout this year as it gets implemented and rolled out. And some of that also gets reflected in Salud because I also mentioned it was in Salud, so some of that will be seen in the overhead expenses of Salud. The part that is at FEMSA Corporate is a combination of two things. It's a combination of reduction in costs. Definitely, there has been a net reduction in FTEs throughout the organization, particularly relating to the merger of P&H and FEMSA Corporate. Some of this has to do with Spin. So it will be reflected also at FEMSA Corporate because FEMSA Corporate is the one that consolidates the results of Spin. And in the case of Spin, it's not only a significant tightening of costs, which is directly related to the narrowing and focusing of the strategy and the ambition of Spin. As we mentioned on the call and in the press release, we're postponing the license. Premia will no longer be offered to third parties outside of the OXXO ecosystem and... Jose Antonio Garza-Laguera: For the FEMSA ecosystem. Martin Arias Yaniz: The FEMSA ecosystem. And we've also narrowed some of our efforts on payment platforms in small mom-and-pop stores. Some of these things have been delayed or postponed for the foreseeable future until we have greater visibility about the payment platform in the store, the credit initiatives. So also part of what's included in that figure is our expectation that the losses at Spin should be coming down. because of all these cost reductions, but also because we expect the momentum of the business with this renewed focus and alignment to improve. Obviously, that is a sort of a view about what will be the improvement in the top line performance of Spin. So it's a little bit harder to rely on because it depends on a lot of external things going right as well. Operator: Our next question comes from Ricardo Alves from Morgan Stanley. Ricardo Alves: My first question on OXXO. I think that another impressive performance on the gross margin. It's great to see that. In our conversations, we've seen some people more concerned about financial services in the long term. So I wanted to think about your gross margin performance and financial services in taking advantage of all these long-term strategic initiatives. I wanted to think about that in the long term. Are there main initiatives that you're already working for 2026 as we speak to kind of defend your position and to remain relevant. The two main components of the gross margin that we always discuss, commercial income and financial services, I think that commercial income is easier for us to understand given your physical presence, given the World Cup this year and et cetera. But -- so perhaps my question is more directed to your strategy around cash in and cash out. We've been talking about remittances for the past couple of quarters. So an update here would be great. And then I'll ask my second question later. Jose Antonio Garza-Laguera: So as you say, commercial income is still early and growing, and it's a huge source of growth. And I think we're just scratching the surface in terms of what we can do with retail media and other commercial income projects. In terms of financial services, look, it's still -- it's growing on traffic or if you blend that all together and if you put even top-ups for cell phone, this thing is driving growth. It's growing traffic at same-store sales level. It's accelerating. We just put Banorte as part of the [indiscernible] network, and it's driving tremendous growth. We see the need and the consumer demand needs for payments, being able to use the OXXO network as an ATM is still -- and I think it's going to be for the foreseeable future. If you ask me long, long term, that's in a way, and I would say we haven't even scratched the surface on what we can do with remittances. But we've been -- we keep installing the cash machines in more and more stores. And I think there's still a huge opportunity for us to capture market share in remittances. Long, long term, it is obvious that as people go more and more into digital, some of these services will fade or will reduce as we are seeing with cell phone top-ups reducing and going more into digital payments. And I think that's where Spin plays a huge, a critical central role within OXXO, and that's why the decision to turn it back into the OXXO ecosystem. If you look at Spin, Spin is a phenomenal fintech, but we've underdelivered in [indiscernible] making it a useful tool to bring people into the store. And I think Spin's value really does not come from choosing between OXXO or being a fintech. It comes from really bringing both together. Spin -- OXXO is really the best competitive advantage that Spin has, and you can use. There's a lot of things that we have not been promoting well that you can do with a Spin QR. You can take a picture of a Spin QR and you can tip your waiter, your gardener, your whatever or you can send/give money to a colleague and you can make it go to the OXXO store and with a QR scan really very quickly deliver it or pick the cash up. So I think we're just scratching the surface of what you can do when you combine a digital application and a physical network of over 25,000 stores. We have a lot of things on the pipeline, things in like PUDO, working with some of the e-commerce players. But I think we are just scratching the surface of the services that will come and replace the wave of services that will go entirely digital. So I'm optimistic that the pace of change will allow us to adapt, and we will come up on top on the long term. But obviously, there will be pluses and minuses throughout the coming years. Does that answer you, Ricardo? Ricardo Alves: It does, [indiscernible]. Should I ask my follow-up now or go back to the question queue? Jose Antonio Garza-Laguera: Yes. Please go ahead. Ricardo Alves: Yes. Yes. The other one is probably for Martin. I think that a helpful summary, Martin, that you gave on shareholder distribution, strong year in 2025. Congrats on the execution there. As we're thinking about 2026, however, we've ran a couple of sensitivities and we get easily to a potential excess cash beyond $3 billion. I'm not saying that this is the number that FEMSA is going to be distributing to shareholders, but it seems to us that the excess cash balance by the end of this year could be significantly higher unless some of the basic assumptions that we saw in 2024 and 2025 could have changed. For instance, I don't know if maybe the potential ticket for M&A is higher than before or maybe if the 2x target of leverage, maybe if we stay below 1.5, 1.7, that would be okay in the longer term. So I just wanted to provoke you a little bit more here. We seem -- it seems to us that the excess cash position could be significantly higher. So I just wanted to hear your thoughts on that. Martin Arias Yaniz: Sure. I mean without trying to understand your number on this call in real time, which would probably not be prudent or helpful, I would remind you that given the extraordinary $1.3 billion that we've already committed to distribute, the $300 million in buybacks -- and let's just assume the Board approves, which I don't think is a difficult assumption to make, that the dividend -- ordinary dividend will be consistent with what we paid last year. We're talking about easily $2.4 billion, $2.5 billion being paid out this year, March to March. That's nothing else happening. So if for some reason, we do spectacularly -- so my estimate of excess cash is less than yours. And number two, if for any reason, it is what I expect and/or even better than I expect, and we will reserve the right during the year to do more buybacks, announce another extraordinary dividend. So we're not foreclosing the possibility. It just seemed given how close I expect to get to the 2x net debt to EBITDA that now we're just really, to be honest, playing with some decimal book points as opposed to -- and I don't need to be that precise because I have the flexibility and the company has the flexibility during the year to buy back more shares or call a special meeting -- shareholders' meeting and declare another extraordinary dividend. But I'd be happy offline to talk through numbers and try to understand where your $3 billion comes from. Operator: Our next question comes from Rodrigo Alcantara from UBS. Rodrigo Alcantara: Congratulations on the results. So two questions. The first one on the fit for purpose, amazing what you are doing there. Just for the sake of the conversation, I know that you of course have been in the road talking to investors. And as a frequent answer that you have -- a frequent question that you have received is in relation on how KOF fits into this new structure that you are envisaging. So my question is precisely to hear from you now in the call like what you are answering when you received this question about KOF within this fit for purpose. And my other question would be, very quickly, do you have any early comments on the unfortunate events that we have seen in terms of security arising to from what happened 2 days ago in Jalisco, right? We have seen some news flow there about x number of stores being affected. So any commentary on that would be helpful. Jose Antonio Garza-Laguera: Thank you, Rodrigo. These are, as you say, very relevant question. The first one being very frequent one. The second one, I hope it's not -- it's never asked again. But on the Coca-Cola FEMSA side, as you know, we are always evaluating possibilities for all of our businesses. And we do not see ourselves as a conglomerate. We are very focused on what we bring value. We love these two -- our businesses, our main businesses where we are, and we see huge future ahead of them. And we've proven to you guys that we are pragmatic. We are a 135-year-old company, or that we started with beer. And we don't -- other than the huge amounts of beer we sell from many brewers in OXXO, we are not into beer anymore, and we will remain ourselves very pragmatic going forward. If these 2 companies, Coca-Cola FEMSA and Proximity or retail were 2 separate companies, would you consider merging them? The answer is absolutely no. Now the possibilities of separating has a lot of implications, a lot of things that we're going through, a lot of analysis that has gone through our minds. So I would let the comments there. For now, the structure that we have works great for us. And if something changes, we would address it at the appropriate level. On the second thing, Rodrigo, obviously, it was a very sudden and unfortunate event in the last couple of days. I do want to take a minute first to recognize the heroic and incredible work done by many of our employees and frankly, customers. We've received dozens of videos, comments, memories of people filming, protecting our stores, protecting our collaborators. We have a heroic employee that basically tried to put her life at risk to save one of the stores. I just want to say, first, no customer at all was even injured during these disruptions by organized crime. Our employees suffered minor injuries. All of them are out of danger. And I was incredibly moved and touched by the amount of customers and employees that through themselves to save some of the stores that we were in danger. On the great scheme of things, we were not as harmed as much. We had to close for 1 day up to 6,000 of our stores. Yes, precautionary -- precautionary, but a day after we had opened over 90% of them. And today, only about 300 stores remain closed. If you look at the amount of damage that the country received, it's -- I mean, we had about 200 stores with some level of affection. It could be a loading or all the way to a store burn. But I would say most of those stores in a week or so will be up and running. But the fact is that we are everywhere. We are in every town in Mexico. We are -- and so it's not -- that we haven't seen anything that's against us. It's just that given that we are all over the place, we tend to be the first ones targeted, but there were other supermarkets, other convenience stores, other pharmacy chains affected. It's just that we tend to get the most coverage. I also do want to recognize the incredible closeness and collaboration with the security personnel, Army officers, Guardia Nacional, the authorities have been incredibly close to us and helpful in monitoring the situation and giving us feedback, and we've been able to give feedback. So I am very impressed by the security authorities, both Army, Marines and Guardia Nacional and the response has been tremendous. So I was also very thankful for that incredible back to normal that came quickly. So I really hope these things don't happen again. And we have protocols in place that have made my team very proud of how we were able to respond and have no incident on customers and some minor injuries on employees that are out of danger. Thankfully for addressing that question and thankfully, thanks for letting me give these comments. Operator: Our next question comes from Alvaro Garcia from BTG Pactual. Alvaro Garcia: I have two questions. The first one on the restructuring. Martin, I know you've run through it. I just kind of wanted to walk through the numbers. In the past, you've mentioned a cash burn at the corporate level of almost $200 million, a cash burn at the Spin level of around $150 million. So -- and then today, you mentioned the MXN 1 billion and the MXN 800 million. So I was wondering if you could just clarify if it's MXN 1 billion -- if it's MXN 1 billion plus MXN 800 million. I know some of that might be at Proximity Americas. But I guess at the corporate level specifically, how should we think of what used to be that cash burn? What might that look like on a pro forma basis into 2027? That would be very helpful. And then will Spin formally be merged into OXXO? I know that has relevant sort of fiscal implications. So that's my first question. And then I have a very, very quick follow-up, which I can ask after very quickly. Martin Arias Yaniz: Sure. Let me -- Spin will not be merged into OXXO. There will be activities that were undertaken at OXXO and Spin that will be centralized in one of the 2 businesses. But Spin will remain as a separate distinct operating unit with its own budget, its own routines for management and its own support functions in order to ideally protect the unique capabilities that have been built around that business. Number two, as to the cash burn of Spin, in effect, there are -- the way we account for the cash burn of Spin is in a very conservative fashion. So that $200 million figure coming down to $150 million is a figure, which is Spin stand-alone. And what does that mean? Given our -- the transfer pricing rules and allocation of revenues and so on, there is a formula pursuant to which Spin has to share the revenues that are generated from certain service offerings that Spin provides that use the store. And it has to pay for certain services that are executed in the store by the store employee. So that number, just to put it in its context, is a very conservative way of measuring the cash burn of Spin on a stand-alone basis. On an ecosystem basis, it's significantly lower than that. And I'll give you a prime example. Spin by OXXO is -- generates a cash burn at Spin. But when you look at the ecosystem of all the payments that are executed in the store through Spin by OXXO, which arguably might never be executed had not Spin by OXXO existed. When you look at it, that business, for example, is breakeven, is easily breakeven. We do expect that cash burn to decline. So from the $200 million to $250 million, you should continue to see it come down. Some of this will be difficult to account because when you see it in others, there will be eliminations, accounting eliminations, which will counteract some of the effects. And we will do everything we can to give visibility and transparency on this as we progress throughout the year, and you ask us the follow-up question, how we're undergoing on this. And yes, the 2 figures are complementary of each other. In other words, there are some. There's MXN 800 million at P&H -- I'm sorry, Proximity Americas, which relates primarily to OXXO Mexico, but also includes -- and I should have been maybe a little bit clear, it does include an amount for Salud, which is basically cost reductions across the businesses, but very focused on overhead, but it also included savings within the operations. And the MXN 1 billion refers primarily to savings at FEMSA Servicios, FEMSA Corporate from the collapse of the 2 structures, P&H division and FEMSA Servicios. It also includes the momentum we expect from Spin at its top line. It includes also significant savings at Spin from the narrowing and focusing of our ambition. Alvaro Garcia: And it includes -- I'd imagine it also includes additional head count from -- that you're moving towards the corporate level. That's also included in that MXN 1 billion figure. Martin Arias Yaniz: Yes. Yes. Well, again, it's the net savings from moving some of those people over here plus the people here and then the net savings book we will execute. Alvaro Garcia: Awesome. And then just one very quick one on OXXO. Now it's super helpful. Really appreciate the color, and I will be asking that going forward. On revenue growth at Proximity Americas, it grew 5.3%. Same-store sales was 4.4%, sort of the lowest gap we've seen between same-store sales growth and total revenue growth in quite some time, that productivity factor. If you could comment on that, that would be very helpful. Juan Fonseca: Alvaro, this is Juan. Yes, I think there's a number of things at play there, but a couple of them are some of the growth is actually also happening now outside of Mexico. So we saw a really good quarter from LatAm, and we had some currency headwinds there. So if you look at the comparable number, as you can see in the table, it's a little bit higher. But there's another factor, which has to do with the openings and closings. And we mentioned we are closing a fair number of stores in different markets because they are, for lack of a better word, mediocre. But they're selling, and we're replacing them with hopefully better stores, but that are brand new, right, or much newer. And so I think in some ways, we're exchanging potentially better stores, replacing stores that clearly kind of exhausted their potential and never really reached what we expected. And so I think that's also playing into that number. I think we're going to do a deeper dive. I'm happy to take this offline because you're right. Normally, you would have expected something perhaps in the order of 8 as opposed to the 6 that we're showing. Operator: Our next question comes from Bob Ford from Bank of America. Robert Ford: Jose, how should we think about the strategy in Brazil? And how does it change following the separation from Raizen? And did your current same-store trajectory in Brazil, how long will it take you to cover all the central administrative and overhead expenses? And where do you see the most promising category SKU and service opportunities in Brazil for OXXO? Jose Antonio Garza-Laguera: Great question, Bob. Thank you. To be honest, we're very excited for what we have been able to achieve in Brazil. We -- it was great to have a partner for the first few years. It gave us confidence, security. It gave us some training into how to build and gain permits and stuff. But now we're very excited that we're ready to go on it alone. And the potential we see is still enormous. We keep -- I think it's the third year in a row that we grow same-store sales on double digits. I'm pretty sure that number is right. And this -- and 2026 also began very, very strong. I mean we've had good weather. We've had carnival, but we see huge potential. To give you a precise number of how many stores do we need to get to pay for its overhead, I don't have the number, but it's still maybe -- it's going to be probably around 1,000 stores, which I have full confidence that we will be over 1,000 stores in Brazil. I think our huge challenges in Brazil are twofold. One, we need to continue growing the same-store sales business to a level that allows us to really absorb all the costs within the store. The cost structure in Brazil still has opportunities vis-a-vis Colombia, turnover-wise, cost to hire, cost to fire, et cetera, all these operational things, but they've been improving dramatically month-over-month. So at the moment -- and this number will -- as soon as we are able to stabilize and if we are able to have 7 net employees per store, gross margin of around 38% and around MXN 1 million per month, which all of them are 5% to 10% off. That's when we will know this will be a 10,000 store business or a 5,000 store business. It's that dramatic that turnaround. In terms of categories that we are excited, we are impressed by the food offerings. We have very strong margins on food and coffee, and we play a strong game there. We sell phenomenal Pao de Queijo, coxinhas, empanadas. All these things are -- our customers love them and are eating them frequently. Our coffee offerings is amazing. It's obviously pure Brazilian premium coffee, and we sell at a good price. And the other great thing is the consumer occasion, the impulse occasion of beer gathering plays a humongous role in Brazil. Obviously, you don't have the service component that we have in Mexico, but there are other services that we're beginning to try in terms of gaming, and other gift cards and other things that are part of the landscape in Mexico and could play a significant role in Brazil that we are trying to implement. So overall, it's too early, but I am very passionate about our Brazilian business, and I will not rest until we have 10,000 stores in Brazil, hopefully not far into the future. Does that answer you, Bob or... Robert Ford: No, it does. Very helpful, Jose. And just with respect to the Mexican drugstore business, what are the next moves? Jose Antonio Garza-Laguera: That's a tough one. Thank you, Bob. Martin Arias Yaniz: Bob, you're going from the best to... Jose Antonio Garza-Laguera: From a darling to a tough one. We haven't nailed pharmacy in Mexico. It's been a tough business. We are not experts at it. We are -- we have a phenomenal business in Chile. Our pharmacy business in Colombia getting -- discarding the institutional side is great. In Ecuador, we're growing. We're growing share. We're growing profits. So our South American business is great. Mexico, I think we don't play with the league against the real good players. There is a future for pharmacy in Mexico, maybe more closely related to OXXO in over-the-counters. And on digital -- so if I see a future for us in pharmacy has more to do with helping doing an omnichannel type of pharmacy. And I think there are certain corners of Mexico where we can be profitable in the Pacifico region and in the Southeast. But overall, it's -- we're not winning in that. And unless we do something different or we exit that business, I don't see a foreseeable change in our Health Mexico business, being very honest. Juan Fonseca: And I think just -- I think this is somewhat obvious, but if you look at the competitive position that we have in all the -- in the other 3 countries were either the main player or the #2 player moving towards #1. And in Mexico, we never really were able to get to that critical mass and really take away from the couple of large incumbents. So that -- this being a scale business, that was a tough one to break. And so that's, I guess, where OXXO comes in, in terms of can we do something disruptive than use OXXO, but that's still very much in the drawing board. Jose Antonio Garza-Laguera: I would just add, I mean, we have now a great CEO of our pharmacy in Mexico. He's doing wonderful things with the tools he has. I think the business is stabilizing, and it will not burn cash this year, hopefully, but it's not winning. That's for sure. Operator: Our next question comes from Antonio Hernandez from Actinver. Antonio Hernandez: Congrats on your results, and thanks for that asked that difficult question before me. But another question that I have is regarding Bara and OXXO. What about maybe cross-selling across the different private labels, different SKUs? I know it's a different value proposition. But still, I mean, you're growing Bara, you're facing competition at OXXO. So any findings that you have there or anything that you could provide would be helpful. Jose Antonio Garza-Laguera: Can you clarify, you're saying we are facing competition between Bara and OXXO... Antonio Hernandez: No, no, no. OXXO in terms of affordability, what was mentioned earlier in the call. So maybe some findings or any learnings that you found in Bara and that you can apply to OXXO as well cross-selling... Martin Arias Yaniz: Okay. And that's like a bunch of reflection... Jose Antonio Garza-Laguera: Very, very interesting question. Thank you, Antonio. So I think the worst thing you can do is try to change your positioning just based on your competitor. We have a phenomenal competitors in the discount space. That's obvious. They're growing, they're doing well, and they play a good game in their current discount space. And I think Bara has, in my opinion, a stronger value proposition for the long term against other discounters. It needs to grow its private label offering. But I like our odds in competing against the discount space. The discount space is going to grow dramatically in Mexico over the next couple of decades. And Bara has a real chance of becoming one of the leading players there. And I like what we have, and we are very -- our value proposition for Bara is very much adapted for the Bajio and Jalisco region and our stores we're opening in Monterrey are to me the perfect mix of what the Norteno needs. You see beer, you see assortment of beer, you see -- but you also see private label of food and daily replenishment and snacks and supermarket or grocery. So I love our concept, and that's where we're going to compete against those players. OXXO has a great role to play in getting into affordability in beer, in soft drinks, in tobacco, in snacks. And then for the daily replenishment, where we have a role to play that's different from the discounters is that daily replenishment. I need something urgently. I don't need a pack size. I don't need -- I need the brand I know, the brand I love, the brand I recognize in a smaller format for my daily things because I forgot shampoo and I need something for the gym or whatever. That consumer occasion OXXO will be where it competes more similar assortment to what you see on the traditional trade, where it's still 50% of the consumer basket, by the way. So I think OXXO has a lot of room to grow on the daily replenishment more similar to the traditional trade and Bara and whoever wants a very private label, very low pricing, they could go to a Bara or one of our competitors for that. Having said that, we do see private label becoming more relevant in OXXO and complementing the offering that we have. We already have a lot of private label in OXXO in our cooking oil, in our coffee, in some snacks. And we see that even in diapers and some housing products. And so I think OXXO can also develop some powerful brands around private label, especially where in some categories where commercial income is not as significant, and we can play a bigger role. But I think each one will have its place. And I see a lot of growth for OXXO, and I see a lot of growth for discount, hopefully more Baras than other ones. Juan Fonseca: And I suppose some suppliers from Bara could be... Jose Antonio Garza-Laguera: Definitely, some of the suppliers in Bara. And even some of the private label suppliers of our pharmacy business in South America are interested in coming over and doing some things that we can sell in OXXO and in Bara. Does that answer you? Antonio Hernandez: Okay. Okay. That's very clear. And just a quick follow-up. Do you have any white space potential number for Baras in Mexico? Jose Antonio Garza-Laguera: Tens of thousands. They're slapping me here for saying that, but I think there's a room for many thousands. Antonio Hernandez: Many thousands... Jose Antonio Garza-Laguera: Yes, that business is here to stay. It will be huge. I don't want to sound Donald Trump huge, but it's going to be big. Operator: Our next question comes from Hector Maya from Scotiabank. Héctor Maya López: Congrats on the results. Jose Antonio, Martin, I just wanted to understand from the excess cash right now and the planned deployments, the cash deployments, about $1.5 billion might be set aside still for M&A, correct? And on this, how has the appetite for M&A changed in the U.S.? I mean, has it changed a bit due to political uncertainty or the current immigration policies may be affecting traffic in states close to the Mexican border? And on the ongoing work to adapt the value proposition in the U.S., how long do you think you would still need to reach a point in which you feel comfortable enough to now go on a more aggressive growth path by organic expansion or more M&A in the U.S.? Jose Antonio Garza-Laguera: I will address it briefly and I'll let Martin and Juan complement. Thank you, Hector. So we are not saving that money exclusively for inorganic M&A. I think Martin expressed it very well. We want to be -- we are evaluating a lot of opportunities throughout FEMSA. Not all of them are inorganic M&A. There are other things. And all those things are put into the equation, and we want to be cautious before we pronounce whether we give this cash in either buybacks or other opportunities to even considering another extraordinary dividend. So it's not exclusively that we are hunting for inorganic M&A. Having said that, we have a lot of things coming our way, some of them in the U.S. for convenience stores. But to be honest, none, we have been surprised by the expectations of the sellers, and we want to be very cautious. We are not concerned about traffic in the Texas region for immigration or stuff. We have a very long-term view for the U.S. The U.S. still has a long way to go to consolidate. And we are learning a lot from our little operation in Texas. We're getting more and more relevant in the El Paso region. We want to be the winners and win share and gain the confidence of the El Paso one, the Midland citizen, the Odessa. So that's where we're concentrated. When we see we can gain share against the QuickTrips and the other local players, we will become more aggressive in growing our footprint. We are already -- we bought a couple of stores here and there in El Paso, and we're very happy with that. So we're looking more at tuck-ins, small chains, the bigger chains. I'm very surprised about their expectations for multiples that are outrageous. Some of it has to do that everyone wants to think that they're the next Casey's. And to be honest, not all of them deserve those valuations. But credit to Casey's that they've done a tremendous job. But no, we have a long-term view, and we're still looking at opportunities in U.S., but we're being very cautious with our returns. Martin Arias Yaniz: Yes. I mean very little to add. We have -- our interest has not diminished. It's been -- we have been unable to find an entry point with the right risk reward in a reasonable period of time that made us willing to pull the trigger. So as we have said, the entry into the United States is a function of finding the right opportunity. It's not an unconditional need that we have. It has to be based on being able to find value-creating opportunities. Operator: Our next question comes from Renata Cabral from Citi. Renata Fonseca Cabral Sturani: I have two follow-ups here, one on Brazil and Bara. My question is, are Brazil and Bara already seen as scalable platforms. I know it was already discussed here as a great opportunities. But just to understand from your view today that's durable -- there's durable economics or they are seeing a proof of concept in terms of proposition that they can offer to the clients compared to OXXO, obviously, already consolidated and very clear for everyone. And in terms of capital allocation, timing allocation, especially, we are seeing the company much focused on the strategy. Now you have just discussed about the Health business that the company are working towards that. So we see the company much more focused, and we discussed it here 3 and more really important opportunities such as opportunities to grow in the U.S., Brazil, Bara. We have a top 2 that maybe in the next 5 years, you see more opportunity than the others. If you can shed some light qualitatively, I would really appreciate. Jose Antonio Garza-Laguera: I got your question on Bara and OXXO Brazil very clearly, and I'm happy to add some comments, but I didn't understand very well the second question. Can you repeat it? Renata? Renata Fonseca Cabral Sturani: Sure. Yes. In terms of the big opportunities that we already discussed it here in the call, for instance, Bara, OXXO, expansion in the U.S. Can we have one of them should be bigger in the next 5 years? Or the company today is allocating more time in which of those initiatives? Jose Antonio Garza-Laguera: Okay. Okay. I think I get it. Okay. obviously, Bara and Brazil are -- our obsession is OXXO Mexico and Coca-Cola FEMSA Mexico. Those are the motors and have huge growth opportunities that are our priorities. Then what keeps me very excited and frankly, come with a smile to work every day is OXXO Brazil and Bara. OXXO -- Bara is much more advanced in readiness to hyperscale. We've been tailoring the value proposition for the last probably 5 years. And today, we have a value proposition that we love, we are happy. We opened a distribution center in Monterrey, and we are ready for hyperscaling. And in Mexico is where it's easier to transfer capabilities of hyper growth. So you should expect a faster growth in unit numbers in Bara than in OXXO Brazil. OXXO Brazil first is a Sao Paulo bet. It's still very much Sao Paulo bet. It still has a lot of room to cover in Sao Paulo. And we've focused much more in quality versus quantity. So we are ready to open about 100 stores in 2026. That is a low number to what we would love to, but we much rather mature the right processes in place, the category management in place, the commercial income capabilities in place, the categories that really are going to move the needle and the process control that would allow us for OXXO Brazil to become a very valuable bet. If you do the DCF type of OXXO Brazil growing around 100 stores a year versus growing 1,000 stores a year moves exponentially the value of OXXO Brazil going forward. So 100 stores a year is not enough for us to call OXXO Brazil the second wave of FEMSA. But we're working hard on solving the operational things that we need to solve so that OXXO Brazil can grow at, I don't know if 1,000, but a store a day. That's still a few years down the line. So I think it's behind us. In terms of other bets, I think we have our plate full with OXXO Mexico, OXXO Brazil. But I would say we are incredibly surprised, and I don't want to scare you guys, but we're incredibly surprised about what we are beginning to see as opportunities for growth in Europe, mostly organic. But it's Europe -- the management team in Europe has done a tremendous job in getting more value. And we are still in very early stages of OXXO USA. And we think -- I think we shouldn't call it OXXO USA. We should call it OXXO Texas, New Mexico and that region, and we see huge opportunities for growth there as soon as we are able to refine our value proposition. That's where we are right now. I think those things are further down the road and not in the near future. Juan Fonseca: Yes, I would add to what Jose just said. I mean if you just look at the numbers that we provided you in this call about how many stores we're going to be opening this year. Obviously, this is just 1 year, and it doesn't speak too much about the future. But we said for Bara, we are aspiring to grow it by 1/3 in 2026. For OXXO Brazil, we spoke about 15%. OXXO Mexico is less than 5%, right? Obviously, this is -- it has to do with how big the base already is, but it also has to do with how -- what is our conviction about the value proposition and how many incremental tweaks we need to make. I do think that in Brazil, it feels like we've been in Brazil for just a little bit of time compared to how long we've been working on Bara. Never mind how long we've been working on OXXO, right? So there's nothing magical about this. It's -- you just get to the point where you step on the gas at different points in time. But also to Jose's earlier comments where you begin to think about eventually thousands of stores in a way that is actually somewhat literal as opposed to just hypotheticals. Operator: Our next question comes from Ulises Argote from Santander. Ulises Argote Bolio: And all the details that you have shared this has been extremely helpful. So Jose, I actually had one for you and kind of taking advantage there as you kind of ramp up into the CEO chair. But on your opening remarks, you said you were not satisfied with the results that we saw in the year, right? I know there's always room to grow and always room to improve. But if we are here 1 year from now and specifically maybe 2 or 3 key things, but what has to change from where the company is today for you to start next year's remarks saying you see a successful 2026 in the books? Jose Antonio Garza-Laguera: Great question, Ulises. I would love to see hitting our top line growth of mid-single digits in OXXO with profitable traffic growth in same-store sales, at least -- I mean, for me, at least same-store sales growth of traffic, which is a tough, tough challenge because we have IEPS in soft drinks or taxes in soft drinks, added taxes in tobacco, the beer category with some struggles. But with the World Cup, with all of that we are doing with food, with all that we're doing in affordability and coffee, I should -- for me, success should mean same-store sales growth in the OXXO Mexico level. That should be added with market share growth. And then obviously, I would love to see Colombia in an -- at least EBIT breakeven and then Brazil hitting its targets of getting closer to a nice gross margin, opening 100 net new stores successfully. To me, that's what I would qualify as success. Europe should give us another strong year more because of efficiencies that they're still pulling out of the business, hopefully, with a couple of interesting deals that we're looking with partnering with some service stations. And then Coca-Cola FEMSA taking advantage of the World Cup and being able to transfer most of the price of the IEPS without any share loss gains, even with some gains in share and then gaining ROIC. All of them should be able to be gaining return on invested capital. Finally, if we are able to open a store a day in Bara, 1 store a day in Bara profitably, I will celebrate with champagne. That's success for me next year -- I mean, this year, sorry. Ulises Argote Bolio: Amazing. That's great to hear and super clear. And if you reach that Bara per day target, I'll send you the champagne myself, Jose. Jose Antonio Garza-Laguera: Thank you. I will send you a selfie or invite you for a toast. Operator: Our next question comes from Henrique Brustolin from Bradesco BBI. Henrique Brustolin: Jose Antonio, I wanted to circle back to your comments on OXXO Mexico about the opportunities you have for the new consumption occasions, right, or the large opportunity you see in breakfast, coffee, daily replenishment, which you're already present. But as you mentioned, you can effectively start to play to win on them. I just wanted to hear a little more what needs to change operationally in terms of assortment, pricing or even store execution for this to start to gain more traction? And how do you see the transition in terms of timing and implementing all these initiatives taking place to reflect in the performance of OXXO stores in Mexico? That would be my question. Jose Antonio Garza-Laguera: Great. Just to be clear -- thank you, Henrique. But just to be clear, on regards to food or in general? Henrique Brustolin: The question was in general, if there is anything specific that you can move the needle more or you are more focused at, it would be great to hear as well. But it was a category on food and the daily replenishment that you mentioned you can play to win. Jose Antonio Garza-Laguera: Yes. So we've tried everything -- I mean, we've really tried a lot of things on food over our history. And it always has been a struggle because of the huge level of complexity that it brought into the OXXO store. And we were able to simplify complexity first when we did this partnership with Caffenio and we brought the coffee, these Japanese thermos that were a huge advantage and simplify the store operations many years. Now we're moving beyond that towards automated coffee machines. I just -- we all just came from a trip to Japan and now our coffee machines look like 10-year-old coffee machines. So it's impressive how the coffee store infrastructure has evolved in developed markets. There's huge potential for us to bring coffee into our stores. Just to give you an example or just to give you some thoughts -- some guidance on coffee. We sell about 28 cups per store per day in Mexico. Japan's convenience stores sell over 100. Colombia or Colombian stores, which, by the way, Colombia, Mexico has similar per capita on coffee are about 90 coffee per day per store. So we have a long way to go in becoming and we have very good coffee. It's 100% Mexican coffee from Hidalgo, Oaxaca, and from Veracruz. And I think we need to really win the narrative on why the best coffee to start your morning is the coffee at OXXO. It's high quality. It's really affordable at a very convenient price, and we're considering even lowering the price. Now people do not go to OXXO just for the coffee. They want a good feeling, hot breakfast option, and we are trying many different things, but we haven't delivered something that we can turn it national. We are looking at this hero product and we're trying a few things. But I think that also brings a lot of complexity to the store. How do you bring freshly baked product with some protein on it to start your morning in a fulfilling way. We are doing it incredibly well in Colombia, where over 25% of our revenue is full. In Brazil, it's almost 20%. In Mexico, we have a long way to go to get to those numbers. But I am continuously impressed by what the OXXO team is bringing to the table in terms of evolution. And then we're also trying a lot of little things like that pizza program in Monterrey, which has been a huge success. I don't know if it's going to scale so much, but it's incredibly successful. The batch things we're trying. So I think there's a lot of things to develop on that. That will be just part of the story. The other one is we need to be more competitive on daily and replenishment. And we need to continue to gain share in our impulse categories. So a lot of things moving on, but I think if we are able to win on the breakfast occasion and start moving the needle on daily replenishment, we should have a strong 2026. Operator: This does conclude the Q&A section. At this time, I would like to turn the floor back to Mr. Juan Fonseca for any closing remarks. Juan Fonseca: Thanks, everyone, for attending today. Obviously, you know what to find us. The IR team is always around to double-click on questions that maybe were not raised during the call. Thanks, and have a great rest of the week. Jose Antonio Garza-Laguera: Thank you, everyone. Operator: Thank you. This does conclude today's presentation. You may disconnect now, and have a nice day.
Operator: Good morning, and welcome to the SM Energy's Fourth Quarter and Full Year 2025 Financial and Operating Results and 2026 Outlook Live session. [Operator Instructions]. Please note today's event is being recorded. I would now like to turn the call over to Pat Lytle, SM Energy's Senior Vice President, Finance. Please go ahead. Patrick Lytle: Good morning, and welcome to today's call. I'm joined today by our President and CEO, Beth McDonald; and Executive Vice President and CFO, Wade Pursell. We're looking forward to sharing our latest results and our 2026 plan with you and answering your questions. Our discussion today includes forward-looking statements. Please see Slide 2 of our earnings presentation, Page 2 of the earnings release, Page 3 of our 2026 outlook release and the Risk Factors section of our most recent 10-K, which was filed earlier this morning for risks associated with these statements that could cause actual results to differ. We will also discuss non-GAAP measures and metrics. Definitions and reconciliations to the most directly comparable GAAP measures can be found in both the earnings release, outlook release and slide deck. Now I'll turn the call over to Beth. Beth? Elizabeth McDonald: Thanks, Pat, and good morning, everyone. It's an exciting day as we provide our first release of the new SM Energy. 2025 was a pivotal year for our company, and it set the stage for 2026 in this transformational moment. We improved on every part of our investment thesis, including returns to stockholders, operational execution, financial strength and increasing the scale and quality of our portfolio. With the full details in our posted materials, I will quickly hit some highlights from 2025. We delivered record operating cash flow, adjusted EBITDAX, production and oil volumes. Importantly, oil was 53% of the total. Our teams found new ways to rapidly apply best practices and increase operational efficiencies through longer laterals and development of deeper zones. We integrated our oil-weighted Uinta assets. Since late 2024, we have applied our proven technical capabilities to unlock greater value from this high-quality oil basin and its multiple stack pays. We strengthened our financial position by reducing net debt by $437 million, ending the year at roughly 1x leverage. As a result, we returned capital to stockholders distributing $104 million through dividends and share repurchases. Lastly, we expanded our scale and inventory across the top U.S. basins through organic reserve growth and our announced merger with Civitas. Now let's turn to 2026. We have 3 strategic objectives that you will continue to hear throughout the year: integrate, execute, bolster. First, Integrate. We are focused on integrating Civitas and capturing $200 million to $300 million in synergies. To date, we have already actioned $185 million of our target, which is close to $1 billion in present value and just under 20% of our market cap. Total synergies could unlock up to $1.5 billion in present value or nearly 30% of our market cap. Next, Execute. Our plan maximize sustainable free cash flow. By investing in our high-return opportunities, we can continue to strengthen the balance sheet while accelerating the return of capital to stockholders. We will execute with a safety-first mindset and seek new ways to efficiently develop our assets to maximize free cash flow through disciplined capital allocation. We have reset and optimized our activity levels to accomplish this. Here are the key takeaways from the 2026 outlook. Our plan was developed to maximize free cash flow in a $60 oil and $3.50 gas environment. Capital investments will total $2.65 billion to $2.85 billion with our high-margin Permian activities receiving about 45% of the total. Total expected CapEx is about 14% lower than pro forma 2025. With lower capital, we reset activity levels to 11 rigs, down 3 rigs from a pro forma average of 14. We have prioritized value over volume. First quarter estimates reflect only 2 months of Civitas. Looking forward, volumes in the second half of the year are expected to range between 420,000 and 430,000 BOE per day at 55% oil, more indicative of our go-forward run rate. There are a few slides in the presentation that provide more detail and a reconciliation of production for your reference. Ultimately, our plan reflects greater capital efficiency to maximize free cash flow, strengthen the balance sheet and accelerate return to capital. Lastly, our final objective is to Bolster. This relates to our balance sheet and our return of capital framework. I'll now turn the call over to Wade to cover this important catalyst for us. Wade? A. Pursell: Thanks, Beth. Good morning, everyone. So let's talk about Bolster now and how we'll strengthen an already strong capital structure. Starting with the balance sheet on Slide 15. This reflects the impact of the Civitas merger. I believe the 3 categories for measuring balance sheet strength are #1, liquidity; #2, maturities profile; and #3, total leverage multiple of annual EBITDAX. So first, liquidity. As we announced in late January, and our secured bank facility, the borrowing base was increased to $5 billion, with lender commitments increased to $2.5 billion. The maturity date was extended to January 30, 2031. Therefore, we currently have nearly $3 billion of liquidity. In addition, last week, we announced the sale of a select natural gas weighted South Texas assets totaling $950 million, which we expect to close in the second quarter. The metrics behind this deal are very favorable to where SM stock trades today. This will further strengthen our significant liquidity position, which leads me to #2, maturities. We anticipate using some of this liquidity to take out all of the 2026 bond maturities this year and the $417 million bond due in 2027 at some point as well. The remaining maturities are staggered nicely. We'll continue to delever with our free cash flow. We may also look to term out some of the earlier maturities should the bond market terms look compelling. I should also mention that we recently received credit upgrades by S&P and Fitch. Now number three, total leverage multiple. Our total pro forma leverage is in the mid-1s area. We are comfortable with this area given the liquidity and maturities profile just discussed. However, our goal is to drive it down into the low 1s area, further strengthening our position, which is a perfect segue to return of capital on Slide 16. The increased scale and quality of our assets, combined with our strong balance sheet, give us confidence to increase the fixed dividend by 10% to $0.88 per share annually. Our base fixed dividend remains a core component and with this increase provides a current yield of just under 4%. Remaining free cash flow will be allocated between debt reduction and stock buybacks, enabling us to delever from increased post-merger debt levels while continuing to take advantage of the compelling value we see in our equity. Today, our plan is to allocate 80% of our quarterly free cash flow after dividends to debt reduction and 20% to stock repurchases. Looking forward, as we reduce debt, we would expect to increase our allocation to share buybacks. And on that note, I'll turn the call back to Beth for closing remarks. Beth? Elizabeth McDonald: Thanks, Wade. As our results and plan demonstrate, we are relentlessly focused on maximizing free cash flow, reducing debt and accelerating returns to stockholders. We have new flexibility in how we allocate capital across our expanded portfolio, where our inventory now spans more than 8 years. As such, we are able to prioritize value over volume. We look forward to reporting on our progress throughout the year. Joe, this concludes our prepared remarks, and now we're ready to take questions. Operator: [Operator Instructions] And our first question comes from the line of Brian Velie with Capital One Securities. Brian Velie: I thought I could maybe dive in here real quick. In terms of total production guidance for this year that you put out your initial numbers last night there, you pointed out in the release that a portion of the decline year-over-year is the result of the 3-stream conversion to 2-stream conversions. I wondered if you could talk through where those conversions are happening to help give us an idea of the magnitude of that piece of the impact. And then maybe after that, how we can think about modeling or anticipating price realizations that go with those NGL and gas streams on those assets? Elizabeth McDonald: Yes. Thanks, Brian, for that question. The plan is really focused on prioritizing value over volumes. We're maximizing free cash flow to bolster the balance sheet and enhance our return on capital framework. We have a lot of confidence in this plan, and we understand there's a lot of movement going on within the production itself. If you turn to Slide 9, you can see a reconciliation for your reference. And when you normalize for all those moving items, the production change is not that different. Let's speak specifically to the question that you had on the 3-stream to 2-stream conversion. If you look at it by basin, there's really no change for SM South Texas or Uinta Basin clearly. For the DJ, we would exit about 20% of DJ BOEs to be allocated to NGLs. So when you're modeling that, you can continue to use Civi historical gas and NGL realizations as estimates. When you turn to the Permian, the value is really small. We really only expect about 5% of the BOE to be reported as NGLs going forward there. And you can use Civi's historical NGL realizations. And for Permian gas, you could use SM's realizations. So within that reconciliation, I think it's important that most of you guys kind of focus on the right-hand side of that slide, the second half '26 volumes, which are expected to be the 420 to 430 MBOE per day at 55% oil and that's really where we start to see our capital efficiency increase as we have our go-forward run rate. A. Pursell: Yes, if you look at total capital, Brian, about 45% will be in the second half. So if you think about what that run rate looks like, I think it's going to look pretty capital efficient. Brian Velie: Okay. That's great. That's a good segue maybe to my follow-up, if I can. I did notice your 1Q CapEx, it's a little bit of a heavier spend versus a straight ratable through the year. I guess would it be fair to assume that a piece of that is just the pro forma 14-rig total that Beth mentioned in the prepared remarks there, that that's kind of your starting point and you -- in that presentation, you're shedding down to about 11 rigs by year-end. So is that kind of what's driving that front half spending? Or is there anything else at play that I should maybe be thinking about? Elizabeth McDonald: Yes, I'll start and then let Wade finish on that. First of all, we just love the strength of our combined portfolio. And this transaction really provides us some optionality and really, frankly, optimization beyond what either company could do individually. With that, we come into the year with 15 rigs. So we started with a high CapEx spend and then it will lower throughout the year to average out around 11%. And so yes, there is that optimization of the program on the back half of the year. And we really look forward to our technical team, seeing them in action on this new portfolio and seeing that continued optimization on the back half of the year. Wade, do you want to add anything? A. Pursell: No, that covered it well. Operator: Next question comes from the line of Tim Rezvan with KeyBanc Capital Markets. Timothy Rezvan: I want to follow up. Wade, we had we had a quick chat last night. You mentioned you're not going to have a formal debt or leverage target in place going forward. Our modeling, which is a work in process, shows a path to sub-$5 billion in 2027. And I know you highlighted the liquidity. But we're also looking at the other side of things where we see -- we appreciate your honesty on that 8-year inventory life. So given that's maybe shorter than some peers or maybe where you want to be, how do you think about the appropriate leverage profile given you're not really where you want to be with inventory life? I'm just trying to kind of weigh those 2 topics? A. Pursell: Yes. That's a great question, Tim. By the way, we love our inventory. But on the leverage side, I mentioned we're in the mid-1s area, which is not -- we're very comfortable in that area. I said that in my remarks, and I'll say it again, especially given all of our liquidity and the maturities profile and the fact that that's being calculated at an oil price that we believe is mid-cycle or below. I think that's really important. Our desire is to get leverage into that low 1s area. I'll just call it that without getting too precise. And as we move down into that low 1s area, when I say that, 1.2, 1.3, then assuming the liquidity position is similar to what it is, assuming the maturity profile is manageable, assuming that's at a reasonable commodity price assumptions, then you'll see us increase that stock buyback percentage. Elizabeth McDonald: Yes. And then I'll just -- Tim, I'll just hit on the inventory real quick since you brought it up. The inventory was run at $60 and $3. So that's quite different than last year where we had it at $70 and $3.25. And our inventory really is 3P high-confidence locations rather than sticks on a map or acreage math. And so we're very confident in these high-quality, low breakeven inventory that we have on here. It's resulting in longer laterals and greater capital efficiency. Timothy Rezvan: Okay. I appreciate the context. And then as a follow-up, this is sort of a related theme, Beth. That the Permian assets you're acquiring from Civitas, on the Midland, you've operated there obviously many years. Civitas had commented in the past, about really focusing on the Wolfcamp A and B for their inventory. They didn't talk about the Jo Mill, the CRD or even the deeper intervals. So I know it's early days, but that's probably the easiest asset to sort of integrate given your skill level there. Can you talk about what's sort of baked into that 8-year number? Are you using those same assumptions that Civitas had? Or maybe broadly speaking, do you anticipate organic additions as you do more work on the Civitas Midland assets? Elizabeth McDonald: Yes, good question, Tim. The first thing I would say is that we love the strength and position of our portfolio, especially as it relates to the Midland Basin and our technical team is jumping right in and combining with the prior team from Civitas which we now just call those people our teammates at SM Energy. But we're very happy with what we've done so far. We're 4 weeks in, but we'll continue to use are high-quality, multivariate analysis, our geomechanical modeling that we have going on in the Southern Midland Basin as we optimize that stacked pay development. And we'll continue to see those optimizations in the back half of this year and into '27. So is the work done? No. We have a lot of work to do, but we have the best people and the best processes, along with the best technical data to get us there. Operator: The next question comes from the line of [indiscernible] with ROTH Capital Partners. Unknown Analyst: So my first question is going to be like can you please walk us through the capital cadence of the 2026 and also the production cadence. I knew that you said it's going to be front half weighted and also the production is going to be around 420,000 to 430,000 BOE per day in the second half of the year. But I just -- what I'm thinking right now is like is the first quarter's capital is going to be the highest of the year and also the production will be peaked in second quarter of '26? Elizabeth McDonald: Yes. So I'll start on that. And again, we're prioritizing value over volume in our plan to maximize free cash flow. And we understand that the first quarter and even into the second quarter, have some variables and things changing in there, which we've highlighted on Slide 9. One of the things that's really important to take into account is the legacy Civitas assets. Those were front loaded on their CapEx side, and we -- from September into kind of January of this year, there was a significant decline on those assets, about 14%. And so we have inherited that and pulled it into our program. And so that's a result also of the underlying decline that you're not seeing in this reconciliation. So that's one piece that's not shown on the slide here. But I think the important piece is as you move past this and you look at the second half of the year, that second half '26 run rate is clean. We have 45% of our capital in the second half of the year, and it's a 55% oil mix. And so that's really where you should focus where there's less changes going on in the front 2 quarters. A. Pursell: And it's built to where it rolls right into 2027 at that level. Unknown Analyst: That's very helpful. So maybe my second question would just about the cash tax. Do you -- I don't expect to pay any cash tax for 2026? A. Pursell: Yes, pretty minimal this year. I'm pleased to report, and that's just due to the benefit of IDCs, some of the benefits from the Big Beautiful Bill. Even with the divestiture and the gain on that, we're not -- we're projecting minimal cash taxes this year. Operator: The next question comes from the line of Oliver Huang with Tudor Pickering & Holt. Hsu-Lei Huang: For my first question, just when you're thinking about the Permian program that you all have laid out for this year, any sort of color you can provide around the composition of the program, just how much of that activity is expected to come out of the Delaware? And then when we're looking at the Midland, any sort of split on your traditional oilier RockStar area versus the southern part of the basin where assets carry a higher GOR mix? Elizabeth McDonald: Yes. So let me just dive in. We -- just like I just told Tim, we really love our strength in inventory position, especially as it relates to the Permian Basin. We think this is a cornerstone asset for us, and we'll continue to optimize it over time. When you look at the program having most allocation going to the Permian because it has great returns and great margins. The composition of that program is about 1/3 Delaware, 2/3 Midland Basin. And then within the Midland Basin, we're still optimizing on kind of the allocation between the overall program. And we'll continue to do that and increase our returns and capital efficiency late through this year and into '27. Hsu-Lei Huang: Okay. That's helpful color. And maybe just for a follow-up question. I know you all mentioned earlier that back half of the year run rate seems like a good starting point to carry forward. Just given all the moving pieces for A&D, the conversion to 2 stream on certain volumes, any sort of color on where maintenance CapEx for you all sits on a pro forma basis at that run rate? A. Pursell: Well, I think looking into 2027, and we -- look, we haven't gone to the detailed level that we will do eventually. But if you're assuming a CapEx in the area of this year's CapEx or slightly less, you're going to be -- you're definitely going to be in the ballpark. Hsu-Lei Huang: Okay. Perfect. And just to clarify, when you say this year's CapEx, is that assuming 12 months for both Civi and SM or what you all have kind of rolled out for the 11 months of Civi and 12 months of SM? A. Pursell: I'm assuming the guided number there when I say that. Elizabeth McDonald: That's one time cost. Operator: [Operator Instructions] Next question comes from Michael Scialla with Stephens. Michael Scialla: I wanted to ask -- when I look at Slide 4 and compare the percent production from each of your 4 core areas with the CapEx going into each on Slide 8. They look I guess, somewhat similar? I know production is an output, not really something you're targeting. But I guess, as you look at those, do you anticipate production growing in any area? Is it may be growing in the Uinta and declining in the DJ and Permian a bit? Or anything we can deduce from how much you're spending versus what you anticipate the production profile to be for each of those areas? Elizabeth McDonald: Yes. Thanks, Mike. I'll just start and then I'll let Wade add any color to what I'm saying. If you look on Slide 4, those are really the 2025 production volumes, and where that stands kind of on a pro forma basis? And then as we roll into 2026, just like you said, we're prioritizing value over volume specifically. When we looked at the capital allocation across all of the basins, we're really focused on maximizing free cash flow. That's why on Slide 8 in the bottom right, you see the capital allocation by basin. And I think that really addresses most of where the production is as well as kind of the split there in the Permian of 1/3 to Delaware and 2/3 to the Midland Basin. Do you want to add anything? A. Pursell: No, that's good. I mean it's -- as you know, Mike, it's that we built the plan with a desire for sustaining free cash flow through the years here with efficient operations in the areas. So that's all I would add. Michael Scialla: Okay. I guess I was just trying to think of, is one area of sort of looked at as more of a free cash flow generator or cash cow, while you're trying to grow any of the areas. It looks like Uinta maybe has some ability to grow? Is that a fair assumption? Elizabeth McDonald: I'd say, when you look at the combined portfolio, we've known that Uinta and South Texas, both are growth areas for us. We have multi-stack pay there with great returns. And I think as we look at the combined portfolio and the strengthened position that we have in the Permian Basin, we'll continue to evaluate that with our technical teams to see how we can continue to grow that area because it has such great returns and great margins as well. Michael Scialla: Appreciate that. I wanted to ask about the decision to increase the dividend. Your stocks lagged over the past year, and it's one of the cheapest in the sector on the EBITDA multiple. Just your thoughts around that decision? Was there pressure from investors, you feel like you need to increase the dividend to be competitive with the rest of the group. I just wanted to get some more color on that? A. Pursell: Yes, I would say it was not due to pressure from investors. I would say it was more due to our confidence in the combined company going forward, strengthen the balance sheet, quality of the assets, visibility. We set that fixed dividend back in late 2022 at a level that we feel comfortable with, but we expressed the desire as things develop and the company grows to increase it over time modestly. And I think this is the third time we've done that now. So it was really nothing more than that. It was just to express our confidence in the company going forward. Operator: The next question comes from the line of Kevin MacCurdy with Pickering Energy Partners. Kevin MacCurdy: It looks like the biggest difference between maybe the combined companies last year and your pro forma plan is in the DJ. And so maybe you can talk about what you saw in the DJ and what Civitas was doing and how you wanted to approach that plan differently this year in 2026? Elizabeth McDonald: We really like the DJ program that we have. Let's start there that it's great returns, and it's very capitally efficient when you're looking at new wells going forward. One of the things that's slowing down enables us to do is strengthen our position as far as optionality and flexibility to where we go within the basin in order to maximize free cash flow and optimize really the plan and what the returns are coming out of there. And so slowing down a little bit gives us the ability to take time since our technical teams haven't worked that. And so we're basically integrating with the broader Civitas technical team. Looking at the broader portfolio, slowing down a little bit, allows us to optimize and strengthen our position there. Kevin MacCurdy: Great. And as a follow-up, and I apologize if this is already addressed on the call, but the -- if I look at Slide 19, it appears that you're turning in line more wells than you're drilling in 2026. And I just want to kind of confirm that this is like -- are you drawing down DUCs in 2026? And if so, is that happening in the first part of the year versus the second part of the year? And is that kind of -- I assume that's not sustainable in 2027. But maybe if you can just kind of address that and unpack that a little bit? Elizabeth McDonald: Yes, I'll just start that. Again, our capital allocation and our plan was really built on maximizing free cash flow. And as a result, we have the options to basically slow down and do that. Our DUC count really is related to the timing of our active development. We don't manage to that. We have a level and a balance that just really depends on the pad size, how many rigs we're running and the activity levels that we're carrying. So the DUC count is really just an artifact or an output of that planned activity slowdown, right? So we remain focused on capital efficiency. And basically, going in there with the fleet right after the rigs are finished in order to build a plan and deliver results that are maximizing free cash flow. Operator: There are no further questions at this time. I'd like to hand the call back to Beth McDonald for closing remarks. Elizabeth McDonald: Thanks, Joe. Thank you all for your time today and your questions. As we close, I want to reiterate our 3 strategic priorities of integrate, execute and bolster. First, integrate. The Civitas integration is progressing well, and we are really pleased and proud with the strong performance of our team. We've already actioned $185 million of our $200 million to $300 million target which represents under $1 billion of present value or nearly 20% of our market cap. For execute, we're focused on execution across our scaled strengthened portfolio to maximize free cash flow and deliver differential stockholder value. And bolster, we recently announced our $950 million divestiture that will strengthen our balance sheet and accelerate return of capital to stockholders under our new return of capital program. We look forward to seeing many of you guys in the coming weeks. Have a great day. Operator: Thank you. This concludes today's conference. You may disconnect your lines at this time, and enjoy the rest of your day.
Luca Pfeifer: Hello, everyone, and welcome to our fourth quarter 2025 results call. This event is being recorded. Our speakers today will be our CEO, Marcelo Benitez; and Bart Vanhaeren, CFO of the company. The slides for today's presentation are available on our website, along with the earnings release and our financial statements. Now please turn to Slide 2 for the safe harbor disclosure. We will be making forward-looking statements, which involve risks and uncertainties, which could have a material impact on our results. On Slide 3, we define the non-IFRS metrics that we will reference throughout this presentation, and you can find reconciliation tables in the back of our earnings release and on our website. With those disclaimers out of the way, let me turn the call over to our CEO, Marcelo Benitez. Marcelo? Marcelo Benitez: Thank you, Luca, and good day to everyone. We closed 2025 with strong operational and financial performance and a clear top line acceleration. During the year, we successfully integrated Ecuador and Uruguay, expanding to 11 countries. This footprint diversifies our revenue base and supported robust sustainable free cash flow generation going forward. Two weeks ago, alongside NJJ, we expanded further to Chile, our 12 markets, which we will address further in the sections that follow. In addition to the expansion to Chile, we have moved quickly to stabilize and integrate the newly acquired business in Uruguay and Ecuador. On the first day of the acquisition, we appointed a new General Manager, a new CFO and a new CTO. Within the first week, we redesigned the executive team and their direct reports. And within the first month, we applied our playbook with discipline, including 30% reduction in headcount. I'm pleased to share that today, we already consider these operations business as usual, reflecting the speed and effectiveness of our integration approach. Turning to our operations. Our pre-to-post strategy continues to deliver. We added more than 200,000 postpaid customers in the quarter and 1.8 million customers if we include Ecuador and Uruguay. This is not just growth. It's a structural upgrade of our postpaid base. We also made meaningful progress in Home, adding 40,000 net new homes, reinforcing our ambition to be a full mobile and fixed operator across the region. Financially, execution translated into results. Adjusted EBITDA reached $778 million for the year. EBITDA margin stood at a strong 47%. We delivered $278 million of equity free cash flow in Q4, taking full year eFCF to $916 million or $864 million, excluding tower sales proceeds. This performance exceeded our guidance even after absorbing onetime impact such as DOJ and other legal settlements. As we close 2025, I want to recognize our Tigo team. Thank you for an exceptional year. This was not easy. We integrated new markets, accelerated growth, strengthened cash flow, all while maintaining financial discipline. This combination only happens with focus, teamwork and ownership across the organization. Because of your work, we entered 2026 stronger, more diversified and with a real momentum. Thank you. Now let's move to our Mobile business. The engine is strengthening, and Mobile delivered another strong quarter. Service revenue totaled $954 million, including $112 million from Ecuador and Uruguay. Excluding perimeter effects, mobile service revenue grew 5.7% or $43 million year-over-year, a clear acceleration. This performance reflects disciplined execution across 3 core strategies: network investment. We continue to deliver the best connectivity experience through a disciplined deleveraging strategy and highly granular return-focused CapEx allocation. Our investments are targeted where they create measurable impact to customers and drive long-term value. Second, pre- to post migration. Postpaid customers reached 9.1 million, up 12.6% year-over-year when excluding the perimeter expansion. Only 22% of our 49 million customers are postpaid. The runway remains long. Third, prepaid base management. Revenue grew 3%. We are preserving scale through strong commercial execution and increasing ARPU with a simple, easy-to-understand more-for-more value proposition. Now let's move to our Home business. During the quarter, we added 40,000 home customers, and our Home customer base increased 5.1% year-over-year. We are focused on expanding high-speed broadband to low penetrated areas while accelerated fixed mobile convergence, which delivers materially lower churn versus non-FMC customers. As a result, Home service revenues declined a marginal 0.3% year-over-year, marking a second consecutive quarter of essentially flat performance. Given our ongoing commercial efforts and simplified pricing strategy, we are confident in a return to home revenue growth in 2026. Next, I will review our B2B business. Digital service revenues increased 40.7% year-over-year to $79 million in the quarter, excluding the perimeter expansion. This growth reflects a combination of onetime government projects in Colombia and Panama, alongside strong underlying momentum in our digital portfolio. Beyond digital, we continue to see solid performance across the broader B2B segment. Mobile service revenues growth in B2B was 7%, while the SME segment is accelerating, reaching 5% growth after starting the year with low single-digit growth. Overall, this demonstrates improving execution, stronger commercial traction and increasing relevance of our digital solutions across enterprise customers. Let's turn to Guatemala, our best-in-class operation. Postpaid grew 20% year-over-year. Mobile service revenue increased 5.9%. Operating cash flow grew over 17% in the quarter. Full year operating cash flow reached a record of $791 million. Even from a leadership position, the team continues to excel in performance, outstanding execution. Congratulations to the Guatemala team. Colombia is another clear success story. We delivered strong results across all business lines with postpaid mobile and home customer bases, both expanding 10% year-on-year. Our value proposition of best-in-class mobile coverage and broadband speeds continue to drive share gains and monetization. In line with this momentum, service revenue growth increased 6.9% year-on-year and adjusted EBITDA reached a record quarterly margin of 44%. This is a remarkable outcome given the fragmented nature of the Colombian telecom market. My thanks go to the Colombia team for delivering such strong results. As recently announced, we have acquired EPM 50% stake in Tigo UNE and now own 100% of our Colombia operation. With full ownership, we are well positioned to consolidate our market presence and further optimize our operations. This also places us in an excellent position to begin the integration of Coltel, a strategic initiative on which I will share more in a moment. Turning to Panama. We see encouraging signs of top line acceleration. Our postpaid customer base expanded 14.6% year-on-year and mobile service revenue grew 4.5% year-on-year, reaching $84 million in the quarter. On the right side of the slide, you will note that adjusted EBITDA reached $94 million or 49.8%, primarily due to several onetime items that impacted Q4 profitability. Panama remains in our Club 50 in full year performance, and we are confident that they will remain so in 2026. Before handling the call over to Bart, let me update you on our key strategic projects. As noted earlier, our Colombia operation is performing at its best, setting a strong foundation for market consolidation. As announced in February 5, we acquired 2/3 stake of Coltel from Telefonica, gaining operational control. Our management teams are already on the ground, taking initial steps to strengthen the business. Regarding the 33% stake from La Nacion, as you know, there is a formal privatization process with a time line that sets the potential closing of the transaction for La Nacion stake in April 2026. On February 10, we announced a transaction with NJJ to acquire Telefonica operations in Chile, a strategically important balance sheet protected move for Millicom. Together with NJJ, we are acquiring 100% of Telefonica stake in its Chilean business through a joint venture vehicle with NJJ acquiring 51% and Millicom, the remaining 49%. The upfront payment is $50 million. Telefonica may receive up to $150 million in earn-out considerations, fully funded by the acquired company's own cash. None of the transactions obligations, including existing debt, are recourse to Millicom. At closing, Telefonica also contributed approximately $92 million to ensure balance sheet stability. This structure allows us to strengthen the business from day 1 and provides a clear path to full ownership. In years 5 and 6, we have the option to acquire NJJ's stake at a valuation based on Millicom trading multiples less a 10% discount. If we do not exercise, NJJ can acquire our stake on the same terms. This creates a meaningful long-term upside with limited upfront risk. Chile is a sophisticated market with clear operational upside. Applying our proven playbook, we see a path to stabilization and performance improvement. This transaction expands our South America presence while preserving flexibility and leverage discipline. With that, let me turn the call over to Bart. Bart Vanhaeren: Thank you, Marcelo. Let's now take a deeper look at our financial performance for the quarter and the full year. Service revenues for the quarter reached $1.55 billion, up 15.9% year-on-year. Excluding $131 million contributions from our newly acquired operations in Ecuador and Uruguay, service revenues increased 5.2% year-on-year organically. We are very pleased with this performance. It's a direct result of our strategy, delivering the best network experience, maintaining a commercial focus on the pre to post migration and fixed mobile convergence. These efforts continue to reduce churn and support healthy ARPU expansion. At the same time, a little word of caution. We have $16 million in B2B government projects in Panama and Colombia, boosting revenues this quarter but are not necessarily recurring in nature. Adjusted EBITDA for the quarter increased 25.9% year-on-year, reaching $778 million, representing an EBITDA margin of 47.1%. Here again, Ecuador and Uruguay contributed meaningfully, adding approximately $45 million to adjusted EBITDA. Excluding this effect, adjusted EBITDA still grew 18% year-on-year to $732 million. Three key factors drove this robust year-on-year improvement. One, outstanding operational performance, particularly in Colombia, Guatemala and Paraguay; two, relentless focus on margin enhancement, both in our local operations and across HQ expenditures. three, positive FX impacts, which for the first time in 2025 supported EBITDA growth. Finally, equity free cash flow grew $139 million or 17.9% over the last 12 months, reaching $916 million. Excluding infrastructure sales, we reached $864 million equity free cash flow this year, which is a number we measure ourselves against. As Marcelo highlighted earlier, we are proud to have exceeded both our own guidance and market expectations despite currency headwinds for much of the year, particularly in Bolivia alongside $118 million DOJ settlement and other cleanups as disclosed in our Q3 results. With favorable currency evolution, including in Bolivia, this positions us very well for the entry point of 2026. Let me now turn to service revenue performance by country. I will briefly reference Guatemala, Colombia and Panama, as Marcelo already addressed the main dynamics. Guatemala delivered solid growth with stable market share in our strongest market. Colombia, exceptional commercial execution and favorable FX tailwinds produced an outstanding year with Home business now contributing to growth. We are excited and ready to execute on the upcoming in-market consolidation opportunity. Panama returned to solid growth, up 4.9% year-on-year, supported by an expanding postpaid base as well as some one-off governmental projects mentioned earlier. Paraguay, revenue growth was flat year-on-year in constant currency but reached $154 million for the quarter in real USD. Underlying, though, we have real growth driven by postpaid subscriber growth and ARPU increases, which were offset by one-offs that benefited Q4 2024, without which we would have seen a 2% organic growth. Bolivia service revenue returned to triple-digit territory for the first time in 2025, up 5.5% year-on-year to $105 million. The Boliviano has strengthened significantly since the elections and shows signs of stabilization in Q4 of this year. We are now converting Bolivianos to USD around 9 Boliviano per USD. In the other countries, which includes Ecuador and Uruguay for this quarter, in addition to Costa Rica, Nicaragua and El Salvador grew 6% organically or 69%, including inorganic growth. Let's now turn to the next slide, reviewing EBITDA. As highlighted in my opening remarks, we are very pleased with the strong profitability delivered this quarter with group adjusted EBITDA reaching a robust margin of 47.1%, including below average margins coming from Ecuador and Uruguay that include restructuring costs. As shown on Slide 16, all of our major operations contributed to this performance, each delivering meaningful year-over-year margin expansion. Let's now review the performance of each country in more detail. Our strongest operation, Guatemala, reached $241 million in adjusted EBITDA for the quarter, up 11.3% year-on-year in local currency, driven by improved revenue performance, particularly in postpaid and continued disciplined cost control. Colombia delivered another exceptional quarter with adjusted EBITDA reaching a record $174 million, up 24.6% year-on-year. Strong postpaid ARPU and disciplined cost management leave this operation in an excellent shape as we assume control of Coltel. Two points of attention here. One, we expect the margin to come down in Q1 due to material increase in minimum wages by the government; and two, although having control over Coltel, we expect to run the company a couple of months independently until we buy out the government. This is expected for April, assuming the time lines of the privatization process doesn't change. In Panama, adjusted EBITDA grew 4.5% year-on-year, reaching $94 million, benefiting from the revenue momentum mentioned earlier. Paraguay reported another strong quarter with adjusted EBITDA up 11.8% in local currency to $83 million and a margin of 52.1% we are encouraged by this margin expansion as we keep costs in check while our customer base continues to grow. In Bolivia, FX rates stabilized during the fourth quarter, combined with disciplined ARPU growth and strong cost control, leading to a margin of 53%. This places Bolivia as our newest and sixth member of our Club 50, which is our countries with an EBITDA margin above 50%. Congratulations to the team for this outstanding result. And as Marcelo says, a very exclusive club where you can get in but never get out. Turning to other countries. Excluding the new operations in Uruguay and Ecuador, adjusted EBITDA in Nicaragua, El Salvador and Costa Rica increased 13.1% to $106 million. The new operations contributed $45 million to our EBITDA even as we began initial headcount-related efficiency programs. In Q3, we told you that we focused on solving a lot of the corporate matters with settlements with DOJ, Telefonica, getting our 2026 budget so that in Q4, we could concentrate on the business, the entry point of 2026 and the integration of Uruguay and Ecuador. As Marcelo mentioned in his opening remarks, we hit the ground running and captured efficiencies from day 1. Are there more low-hanging fruit compared to other countries? Sure. But I was just looking at preliminary unaudited adjusted EBITDA numbers for January and was very pleased to see both countries already achieving mid-40s adjusted EBITDA margin levels. Let's now turn to Slide 17 for a review of our fourth quarter equity free cash flow. We began the quarter with strong operational momentum, resulting in a $163 million year-over-year uplift in adjusted EBITDA. This was the single largest contributor to our equity free cash flow expansion for the period. Working capital and other payments decreased by $94 million year-on-year, largely driven by $180 million DOJ settlement we disclosed during our Q3 results in November. This extraordinary impact was partially offset by favorable timing in payables. Taxes paid increased $33 million consistent with higher profitability across the group and the settlement of certain tax litigations during the quarter. As expected, lease payments increased $48 million year-on-year, reflecting the full quarter impact of our tower sale and leaseback transaction as well as the incremental leases from our newly acquired operations in Ecuador and Uruguay. Finally, we recorded a $30 million increase in repatriation from our joint venture in Honduras following the infrastructure transaction. Putting all these items together, equity free cash flow increased by $42 million year-on-year, reaching $278 million. Now please turn to the next slide for a look at our equity free cash flow and leverage for the full year 2025. I won't go over each of these points individually, and I will simply highlight that most of the improvement came from a mix of higher EBITDA for $284 million, lower spectrum charges for $63 million and about $74 million in finance charges. These effects were partly offset by an increase in taxes paid of $96 million that included settlements, cash CapEx increase of $82 million and working capital and other charges of $75 million. In summary, for the year, equity free cash flow increased $139 million to $916 million or $864 million, excluding Lati, our strongest performance to date. Let me now walk you through the net debt bridge and resulting leverage at year-end. We began the quarter with $4.6 billion in net debt, corresponding to 2.09 leverage as disclosed in Q3. We generated $278 million equity free cash flow in the quarter, and we received the cash proceeds of $236 million from tower sales executed at the end of Q3. During the quarter, we distributed $0.75 per share in ordinary dividends and $1.25 per share in extraordinary dividends tied to the tower sale proceeds. In total, we distributed $334 million to our shareholders, increasing leverage by 0.14. Adding the operations of Ecuador and Uruguay increased our leverage by approximately 0.35. Bringing these factors together, quarter end leverage was 2.31, comfortably below our target of below 2.5. even after absorbing the additional perimeter. This is a remarkable achievement. Lastly, on a pro forma basis, including last 12 months adjusted EBITDA from Uruguay and Ecuador, leverage would have been 2.17. This reinforces our confidence that we will reduce leverage further as we enhance profitability in the acquired operations. Let's now have a look at our financial targets. We are extremely proud of our 2025 results, which reflect both operational excellence and disciplined financial management. Our regional footprint continues to provide important diversification benefits, enabling us to offset volatility in individual markets, such as the FX devaluation in Bolivia this year through the performance of the broader portfolio. That said, we operate in Latin America, a region known for macro volatility, and we must factor in stabilization needs of Ecuador, Uruguay and the Coltel acquisition in Colombia. For 2026, we project an equity free cash flow of at least $900 million. Regarding leverage, we expect our leverage to increase a bit on the back of the different acquisitions in Colombia. We had about $570 million for the 50% stake in Tigo Colombia acquired from EPM. This is about $170 million more than anticipated due to FX, with about $220 million from the acquisitions of Telefonica shares in Coltel, and we expect another $220 million from the acquisition of La Nacion shares in Coltel. With all that, we see our leverage increase a little more than anticipated in the first half of 2026. But then in the second half of the year, we expect to bring leverage down again to around 2.5 by year-end to then land within our guided range of 2.0 to 2.5 in 2027. With that, let me turn the call back to Luca. Luca Pfeifer: We'll now begin our question-and-answer session. As a reminder, if you would like to ask a question, please let us know by e-mailing us at investors@millicom.com and we will add you to the queue. Our first question of the day comes from Leonardo Olmos from UBS. I think Leonardo has some technological issues. Since Leonardo has been able to ask his question, please continue with Livea Mizobata from JPMorgan. Leonardo? Leonardo Olmos: So 2 on our end. So the first one, regarding the acquisition of the operations in Chile, I just wanted to know your view on the current competitive environment and how you assess the operational and balance sheet conditions of the asset that you bought from Telefonica. That's the first one. And the second one, just a quick -- maybe more color on what is embedded in this equity free cash flow guidance for this year, especially regarding the impacts from the ongoing integrations. Marcelo Benitez: I will take the first one, Leonardo, and I will let Bart answer the second one. First of all, it's a luxury for us to be in Chile. Chile has a very strong macroeconomics, dollar stability -- currency stability and also it's an investment-grade country. So we do believe in the long-term prospect of Chile. If we go to the competitive environment, yes, it is a very fragmented market. We are nevertheless #1 in Home subscribers and our position in Mobile is #2. So we do believe that there is we can forecast long-term or midterm market consolidation but that is not the main reason why we got in Chile. Our playbook fits very well to the Chilean operation, and we are getting very good at executing it. In just 2 weeks, we appointed a new CEO, a new CTO and a new CFO. Then we -- in the first week, we appointed the [indiscernible]. And as we speak today, we are executing the downsize of the Chilean operation. So despite the fact that we are losing money every day in Chile today, we do think we can bring the operation this year to equity free cash flow neutral and from then, start looking and receiving the benefits of a new run rate with a new operating model. So that will be Chile. Bart? Bart Vanhaeren: For the equity free cash flow, Leonardo [indiscernible]. So we have, on an organic basis, $864 million equity free cash flow, right? So many people will add the $180 million for the DOJ that is embedded in those costs, $980 million, right, the 2 combined. And then going into 2026, we have Uruguay and Ecuador contributing a little bit to the equity free cash flow starting in the year. You can estimate low to mid-double-digit equity free cash flow from the 2 countries combined. So with that, you get to $1 billion starting the year but then you have to put a number of risks next year. The big one is Coltel. And also we did acquire Coltel now just a couple of weeks ago, which is on a negative run rate equity free cash flow, right? So we know how to turn around that business. We have done it in Colombia with our own Tigo business. But then you also have the restructuring costs and the acquisition that -- so all that together should be close to zero but there are risk on the execution if you go into the negatives. Besides Coltel, you get currency risk and macro risk in Lat Am, it's inherent to our region. Look where we started the year, where we are now, it's -- the good thing is we have now a platform that is diversified and can weather some storms. But it's risk that we need to take into account political risk, tax risk, legal risk but also upsides. We're starting the year with a very favorable currency. Will it sustain during the year? We don't know, but it's a good start, and then we could have extra growth. So all that together is how we get to this $900 million balanced view on equity free cash flow for 2026. Maybe in the same trend, we're not giving guidance beyond 2026, if you look in the medium term, we do hope that Uruguay, Ecuador and Colombia will align to the average equity free cash flow to revenue and profitability, which is this year around 15%. And so in run rate, that's why they all should converge to. That's our ambition, right? So on the $2.2 billion acquired revenue, 15% equity free cash flow would be a good ambition to have. Leonardo Olmos: Just a quick follow-up, if I may. You mentioned the equity cash flow impact expected for Colombia -- from Coltel, I'm sorry. What about the operations in Uruguay and Ecuador, if you could comment on that. Bart Vanhaeren: I mentioned at the beginning. So for 2026, low to mid-double-digit equity free cash flow. Operator: Thank you. Our next question comes from Livea Mizobata from JPMorgan. Livea? Livea Mizobata: So I have 2 topics that I would like to explore. The first one is, of course, margins. You have had consistently raising margins, have been consistently raising margins. And I feel like fourth quarter was like remarkable on that front. So congrats on that. The first thing that comes into our mind is how sustainable is that? And particularly, I would like to touch upon some operations. So the first one is Colombian operation. This has been particularly strong. So it was way above our expectations. And what we would like to know is like what have been done in this operation, particularly this quarter and what we can expect in 2026, given the deal process? And I would also like to know a little bit about your expectations for Ecuador and Uruguay, if the fourth quarter level is a good proxy for 2026. And then the second topic that I would like to ask you about is M&A, of course. So 2025 was an intense year. Something that we often receive as a question from investors is if Tigo would be willing to go to new countries and the ones that they always ask us about is particularly Brazil, Mexico, Venezuela and even Argentina now. So can you comment a little bit about your appetite for acquisitions? How are you thinking about capital allocation for this year given the recent moves? Marcelo Benitez: Thank you, Livea, for your questions, and thanks for your kind comments about our results. I will start with the margins question. So basically, the margins increase or expansion that we see that is consistent during the quarters has to do with 2 things. Number one is because our efficiencies programs are not onetime. These are part of our operating business. Still, we review every purchase order from $1. Still, we challenge each and -- every and each new contract. So our battle is against the inertia, and that's how we operate on a day-to-day basis. We can add that now -- we can add to that now the top line growth. As you can -- as you -- maybe you recall, we started the year with 0 top line growth, and we ended the year around 5%, a bit more than 5% growth. So that is bringing us more scale and also that scale is translated in a better operating leverage. If I -- when going to Colombia, when we talk about margins in Colombia, it's more or less the same story but in a larger volume. We are growing our mobile base and our home base by 10% year-over-year. So this expansion of our top line -- our customer base and top line growth is bringing us new scale, combined with the efficiency program that I already mentioned is what is translating into better margins. Where do we see Colombia is this sustainable and increasing in the future? The answer is yes. Of course, during the merger, you have some -- you need to transition through the integration and that brings some extra cost. But there is no reason why in Colombia, we cannot -- that Colombia cannot be part of our Club 50. And finally, Ecuador and Uruguay, we already are operating Ecuador and Uruguay as business as usual, and we already did a lot of the efficiencies that we call the efficiencies Phase 1, the one that we need to do the first 60, 90 days. We already did that last year. We start -- we took these operations with around 30% margin. We are above 40% already in these 2 countries. So we do believe this is absolutely sustainable. There is still a lot to do in the Phase 2 of these efficiency programs, and we should start looking at top line growth at the end of this year. So in 2027, we will have the full benefit of our playbook. But the Phase 1 that has to do with efficiency, we are looking at it right now. Bart Vanhaeren: And I think on the back of what Marcelo said, you see that quarter-on-quarter, the growth has been accelerating. So hence as well the operational leverage that comes from that through the margins down to the equity free cash flow. If we look at the M&A, so bigger picture, right, what's our M&A strategy? What are we looking at? Now first of all, we're focused on turning around the businesses that we acquired, right? So it went really quick. In Q4, we already did Uruguay and Ecuador, as Marcelo said, they're now on run rate in business as usual. We have now Coltel and Chile to deal with. So that's our main priority. If we look at the M&A strategy, first has always been in-market consolidation, right? And over the last few years, we did Panama, Nicaragua and now Colombia. And many of our markets are not 2-player markets with not a lot of immediate consolidation targets in the remaining. There are still 3 or 4 players in Costa Rica, but has been difficult to do something as our last transaction got canceled. Salvador, Paraguay and Uruguay, which are still 3 or 4 player markets. Adjacent markets, right? So we did Uruguay, Ecuador and now Chile. And what are the main sizable markets that remain would be Venezuela and Peru, basically, right, on the continent. I'm deliberately excluding Mexico and Brazil. It's not market for us. It's too big, too complicated. It's not something that we have immediately on the radar to enter. And as well Argentina, where the dice are already thrown, right? So the M&A already happened last year. There's nothing to go and do there. So the focus on adjacencies would then be mainly Peru and Venezuela should they when they come to the market. And then obviously, minorities. We did already Guatemala. We did already Panama. We did now Colombia. So what is remaining is Honduras. In Honduras, I kind of like to have a partner. It hedges us a little bit against the currency. Honduras, the lempira is one of our most volatile currencies this year next to the Boliviano. And then in Chile, we just did a JV. So we're thinking there more longer term. As you know, we have this option in year 5 and 6. So that's more a longer-term discussion to have. Livea Mizobata: That's very clear. And just back on the point of margins, I think soon we will stop discussing the 50 clubs and it will be the 60 clubs, right? Like from the level that you are delivering, this is totally achievable, I guess. Let's see. Luca Pfeifer: Thank you, Livea. The next question comes from Andreas Joelsson. I see he just dropped. Maybe let's give him another second if he reconnects. There he is. So next question from Andreas Joelsson from DNB. We cannot hear you, Andreas. Let's see. No, we -- unfortunately, we don't have any audio on your side, Andreas. Maybe let's give it another try later on. If we can then continue with Phani Kanumuri from HSBC, please. Phani Kumar Kanumuri: So my questions are on your shareholder remuneration. How are you looking at it in the light of the acquisition charges that you have? The second one is on Guatemala. We are seeing a strong increase in subscribers as well as accelerating revenue growth. What is driving that? Are you able to increase the prices in Guatemala in specific? And probably the third question is on the appetite for postpaid in your region. I mean the countries that you operate in are still very highly prepaid. So what is driving the increase and upgrade to postpaid in these regions? So those are the 3 questions. Bart Vanhaeren: You take the second one. Sorry, first question revenue growth, appetite for postpaid. Marcelo Benitez: I can take that and you take the dividend. So Revenue growth in Guatemala was the first question, Phani. Guatemala is our most, I would say, it's the example we have of excellent execution, brilliant execution. Guatemala started the process of pushing customers from prepaid to postpaid. They are growing that at a 20% month-over-month. They have only 12% of postpaid customers over the total customers. So the run rate -- the opportunity to expand is big. The other dimension is we invested in the network. So we have a very, very strong mobile network in Guatemala. And also, we expanded coverage. We have more than 200 sites with a vision of having at least 500 aggregated new sites in Guatemala. And finally, there is a very, very sharp base management in prepaid. So prepaid for the first time, we are being able to increase ARPU by increasing allowances and the size of the ticket. So in that combination, yes, the foundation is a solid network with a very granular dimensioning and way to allocate CapEx, migration from prepaid to postpaid at a rate of 20% quarter-over-quarter. And finally, prepaid base management. And this is brilliant execution from the Guatemala team. And congrats again, Guatemala. You are our north in terms of how to operate and become and open the Club 60 in the very near future. What is behind the migration from prepaid to postpaid? And this is very simple to understand, Phani, when you think -- when you see that the prepaid customer is only connected 15 days per month. Who wants to be connected only 15 days per month? So what are the drivers that makes this migration to accelerate in the group, I would say, in all the operations and has to do, number one, with the network investment and with this granular view on where to put the money is where the demand is. Number two, has to do with a very simple migration process, and that has 2 key elements. One is a very simple value proposition. We have no more than 3 to 4 plans to migrate prepaid customers to postpaid customers. And the second part is it has to be easy. Now you can migrate from your phone from prepaid to postpaid with 2 clicks. That's it. We are already profiled you. We already know that you are -- you have -- I mean, you are using -- your demand for data is higher than the allowance that the prepaid gives you. So they just need to put their names, names, some data and then you are activated. So these are the things that are making this migration a machinery to increase customer satisfaction, more days connected and more ARPU. So Bart on dividends? Bart Vanhaeren: Yes. So we are not giving guidance on dividends. So that's maybe an unfortunate question. But let me give some color on how we're thinking about this. I think I mentioned before that I'd like to distribute 2/3 of the equity free cash flow to shareholders. In 2025, this has been in the form of dividends and extraordinary dividends. And so yes, we go from $750 million guidance to $900 million guidance equity free cash flow. There is 20% uplift. But at the same time, I'm also triangulating with our net debt, right? And so on the back of these acquisitions, we're going to appear through temporarily through this 2.5x leverage. So ideally, I want to see the leverage come down again before really touching too much on the dividend. So sustain yes, grow is the question. So sustain yes, grow maybe. So give us a few more weeks until we get better views on the risk regarding to Coltel, how do we land, how do we executing against the current guidance? And then within our Q1 results, we'll give more color. There will also be around the time we have to call for the AGM. And so it will be more clearer in a few more weeks. So a little bit of patience on that. Luca Pfeifer: Thank you very much, Phani. Let's see if we can give Andreas another shot on his questions. If the audio doesn't work, I believe I have a good idea... Andreas Joelsson: Yes, we test. Can you hear me? Luca Pfeifer: Yes, loud and clear. Andreas Joelsson: Perfect. Two quite easy questions from my side. First of all, how much restructuring are you planning to do in 2026 in terms of costs? And secondly, if you can explain a little bit the quite good growth -- sequential growth in mobile ARPU during the quarter. I guess there is some FX element, but also there must be something else underlying. So it would be interesting to hear that and your thoughts on that going forward as well. Marcelo Benitez: Thank you, Andreas, for your question. I will take the second one, and Bart will take the first one. So on the second one, what's behind the ARPU increase? 50% of the ARPU increase comes from the positive or the currency appreciation of our countries. 50% of that comes from 2 things. One is pre to post migrations. So that is an uplift of ARPU more or less of 50% and ARPU price increases in prepaid through a very simple value proposition of more for more and give you more days connected or more allowances for a higher ticket. So those are the 2 things that organically are making the ARPU growth. Bart Vanhaeren: Yes. Regarding the restructuring costs, so far in Uruguay and Ecuador combined, we did about $20 million in 2025, and that then mostly relates to ERC restructuring. In 2026, I'm then looking more towards Coltel rather than Uruguay and Ecuador. And there, we probably are looking towards -- with all the restructuring that needs to be done there, more towards a triple-digit number to really to get the business back to a run rate that we are used to. Andreas Joelsson: Perfect. And just a follow-up on the ARPU. That growth that you related to, was that sequential or year-on-year? Marcelo Benitez: No, no. The growth is year-on-year. But also, you can see a sequential growth quarter-over-quarter but it's not 5%, 4.7%, I think it's ARPU growth. Luca Pfeifer: Thank you very much, Andreas. And our final question of the day will come from Eduardo Nieto from JPMorgan. Eduardo Nieto Leal: Just a quick one from my side. Thinking about the pending payments for M&A, it seems like most of it will be 1Q but I'm just curious where you see leverage peaking this year? And at what level kind of related to the question that Phani asked, at what level would you be comfortable stopping dividend payments if leverage gets a little bit higher than you would expect? Bart Vanhaeren: So payments on M&A. So Q4, we did Ecuador and Uruguay done, right? In Q1, we have the $570 million from the purchase of the EPM held shares in our Tigo operation. And we also have $220 million out of which about $60 million is deferred for the acquisition of the Telefonica shares in Coltel. So that's all done in Q1. And then as you saw, the minimum price in the privatization process done by La Nacion for their stake in Coltel is also about $220 million and that we expect in Q4, okay? Remember that we also have extraordinary dividends coming into Q4 of another $1.25 per share, which was part of the $2.50 that was announced last year payable in October and [indiscernible] 50%. So with that, yes, our leverage is going to increase in the first half of the year. So we're going to pierce through that 2.5x leverage. But then in line with the guidance, we hope by end of the year to be back around 2.5. And then in 2027, again, comfortably within the 2.0 to 2.5 range, in line with our policy. cutting dividend is not on the radar at all. We've been quite accurate with our forecasting. So at this moment, it's not even on the table. We're looking at sustaining it and potentially growing over time as our leverage comes back below the 2.5. Eduardo Nieto Leal: Got it. And just maybe a quick follow-up. You asked, is there a level at which leverage would make you uncomfortable as CFO here? Bart Vanhaeren: Well, any leverage makes me uncomfortable if you ask me but not uncomfortable but you want to have a strong balance sheet to be able to do things. And we have now been able to do things, thanks to our strong balance sheet. We add 4 operations in 1 year and also Uruguay, Ecuador, Colombia. And as you saw, we did some structuring around Chile exactly to protect the balance sheet. Do I believe we're going to do really good in Chile? Yes, absolutely. But I also don't want to bet the house on that. And so we said, okay, let's put a nonrecourse structure, 49%, we don't consolidate, let us do our work. And hopefully, we're talking about upsides in the future and not about risks on the balance sheet. So I think we're at the leverage where we feel comfortable, including the Coltel acquisition. And from there, I want to see deleveraging before doing other stuff on balance sheet. Luca Pfeifer: Thank you very much, Eduardo. That was our final question for today and concludes the question-and-answer session. Thank you so much for your time and for connecting, and we see you all for our first quarter results in May. Marcelo Benitez: Thank you.