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Guy Featherstone: Okay. Good morning, everyone. I'm Guy Featherstone, Investor Relations. Before we start, I'd like to remind you that any forward-looking statements or projections made by Hikma during this call are made in good faith based on information currently available and are subject to risks and uncertainties that may cause actual results to differ materially from those projected. For further information, please see the Principal Risks and Uncertainties section in Hikma's annual report. Thank you for joining this Q&A meeting for Hikma's 2025 full year results. Our pre-recorded presentation is available on our website, and this will be a Q&A session. We're joined today by Said Darwazah, CEO; Mazen Darwazah, Executive Vice Chairman and Deputy CEO; Khalid Nabilsi, Deputy CEO, North America and Europe; Hafrun Fridriksdottir, President, U.S. and Global Head of R&D. We're also joined by Jon Kafer, who heads up the U.S. Injectables Commercial Business. And we have Areb Kurdi recently appointed acting CFO; and Susan Ringdal, Investor Relations, also in the room. And with that, I will hand over to Said. Said Darwazah: Thank you very much, and good morning, everybody, and to my old friends, hello again. The decision for me to take over as CEO again was not really a very easy decision, giving up the beach and the sun and the good life was difficult. But I really felt very strongly compelled to do this, okay? I remember before we IPO-ed, we were discussing the ideas of IPOing and not IPOing and my father saying my worry is that one day, the team we lose sight of the long term and start looking at short-term and short-term wins. This is the only thing that I'm worried about. And frankly, in many ways, this is what happened. I think the company had sort of started looking at short-term wins and fixation on modules of the injectable and so on and really lost track. So that's why I felt very, very strongly about coming back again. And as you know also, I had to -- I decided to give up the Chair position to concentrate 100% for the next 2 years on the CEO role. I want to also remind you that last time when I came in, we had a similar situation with Rx business, the generic business was also doing not very well when I had to step in back again. And for a long -- for a period of a year or so, everybody was on us saying get rid of this division, it's weighing you down. Why are you keeping it? But we said we will do what's required. We set reasonable targets of GBP 100 million to GBP 130 million in EBIT, and we said we will fix it. And here we are, a few years later, we're looking at that business, and it has margins of close to 20% and EBIT of GBP 200 million or so. So we've done this before. And we feel -- I feel, we feel that we know exactly what needs to be done. It really is not a complicated formula. It's a simple formula. You need to do the right investments. You need to get the right people, the right talent, and take quick decisions. So as I've said this morning, my focus is very clear. So number one, you want stability. We want this 2 years where people can relax and focus on what is required for them rather than worry who is going to come in and what's going to happen. So we're reassuring our people, our stakeholders, our investors. This is -- Hikma is a very, very strong company, and we have a slide that shows the CAGR of the last 5-year growth. This company has consistently delivered growth and quite good growth. Also, I'd like to remind you all that we have EBITDA margins of 25% while many of our competitors are striving to get to 22%. The second thing is agility. We want to implement a structure of quick decision-making and to allow people across the Board to take these decisions. We don't want the decision-making to be centralized with one or a few people or the executive committee. Rather, we need to empower people across the Board to take decisions. I've always said companies that empower their youngsters, their under 40 crowd are the ones that will be here tomorrow, those that do not will disappear. So we'll be focusing on empowering everybody across the business so that we take these decisions. And the investment, we have to accelerate the investment. We have to take the investments that we need to do. So one of the first things we've done is we've taken the R&D budget out of the segment. So the segment heads cannot play with R&D budget to achieve their targets. It's now a corporate decision. We have a budget for it, which is an aggressive budget. We have spent last year building the team. As you remember, we acquired a great team in Croatia. Hafrun joined the company 2 years ago now and Hafrun has a long, long track record in R&D, and she is directly in charge of the R&D team. So the other things we need to do is hire the right people. Again, Jon took over as Commercial Head of North America or U.S. injectables and immediately said we need to hire so many people. Well, what are you doing? We need to -- somebody said, Jon, go ahead and do it, and he has already hired so many people and added to the team. We also hired a supply chain. We have now a fantastic supply chain team in place that will be working to make sure that we don't have bottlenecks across the group. And we are still looking to hire some more people like ahead of CMO. We are interviewing now. We want to hire somebody that has a lot of experience in CMO because we feel very strongly that Hikma is well primed to be a major CMO supplier. And finally, what I started by saying the fear of my father when we went IPO-ed, long-term growth, focus on the long term, and that's what we are doing now. We are focused on the long term. We are doing the right investments. We are adding, as we said, the R&D budget is much higher than it was before. I think we're targeting 5% to 6% now to spend on R&D. Hiring the right people. Giving the plant managers the decision to buy the right equipment when they needed, not waiting for central engineering to come before they can buy that. So all these changes that we are taking, all these changes we are implementing, I think, will be excellent for the future. Then I think we have to look at the structure that we are saying, why this new structure? Some people have said it looks too complex. In my opinion, for me at least and for the team, it's a very simple structure. The MENA team is a fantastic team, strong team that has been doing an excellent job for the last 40 years. Hikma this year was #1 company in MENA among all companies, this is a big deal. And it's the MENA team that has delivered this. Mazen and his team have been doing this. So it was a no-brainer that the injectables and the MENA report to them instead of being a distraction for the whole team. And then Europe and, let's say, North America, U.S.A., they share many plants, and they share the products. So although doing businesses in Europe is different, but it's the same products and the same manufacturing teams. Khalid has been with us for quite some time now, and he has shown to be doing a great job. He understands this business, and we believe that it was time for him to step up and take a strong P&L position. I am very comfortable that he will do a great job. And Hafrun since she joined the company, has just [indiscernible] us all. She has done such an incredible job with Rx, such an incredible job with the R&D team and hiring the right people and getting the right things in place and at some point, we will be sharing a clear R&D strategy for everybody. We are more than comfortable that with the help of Jon and his team and the Rx team that has already proven to be an extremely effective team, we are very confident that this is the right way to go. So we believe it's an extremely good company. We're in a very good position. We have a strong track record, a very strong record of growth. We will be investing heavily in the next 2 years. And we know that we will go back to the -- moving forward, we will go back to much stronger growth than what we have shown. Although what we have done is still quite good. We believe that we will do much better than that. James Gordon: It's James Gordon from Barclays. Maybe first question, just on the organizational structure you mentioned, and I do follow the logic about having people in each geography running the geography. But then at least your reporting, I believe, is still injectables, Rx and branded. So might you actually just change the company and make it by the 3 geographies rather than the 3 types of division. Because ultimately, who is ultimately responsible for injectables now because it seems like lots of people have got responsibilities is the first question, maybe if I break them up. Said Darwazah: Well, we said that for this year and maybe for the foreseeable future, we'll continue to report the injectable results because we didn't want to say, why are you running away from that? But reality from a management point of view, when you look at Europe and the U.S.A., it's 90% of the injectable business. And as I said, it is very different from the MENA injectables. The MENA injectables, there's a lot of products that are in-licensed and brought up from outside while the U.S. is much more focused than Europe on manufacturing. So Khalid, Hafrun, obviously, but ultimately Khalid is in charge of the U.S. and Europe and will be in charge. And of course, myself, I will be working very, very closely with them. So I think this gives us the opportunity to really focus on the business rather than -- I think just forget the tail end, which is the MENA injectables. And as I said, I'm very comfortable that the MENA team will do a much better job than before. So the bulk of the business now, there is a clear focus on it. And we will be reporting geographically as well as segmentally for the foreseeable future. James Gordon: Maybe just the second question would be, so what is the outlook now for injectables as in what's going to make it grow faster? And is the idea that now you've reset the margin to the level of this year, but you'd have a similar growth rate on the top line as you were previously hoping for? Said Darwazah: First of all, as we said, the amount -- the budget for the R&D is much bigger than it was the year before. So actually, if R&D growth was similar to the years before, then the results will be much better. But we said, no, we have to do this. We have to take this decision now. We have to invest. So again, it's investing. There's really -- it's not -- you have to invest in the right people. And as I said, we have hired many, many people and there's still more to come. The R&D team, and we will be sharing more about R&D moving forward. And we believe that Hikma is extremely well positioned for CMO business. And we are in the process of recruiting a Head of CMO in addition to the CMO team we have. So all these things will be working together to achieve, let me say, growth in the midterm to long term for the injectables. Khalid Nabilsi: So James, just on the outlook for the injectable business. We know that this is not something that we would like to be growing. It's we have challenges at '25, and this is something that we know that and '26. There are different reasons for this. It's -- as I said in my presentation, is reduced CMO. One of our main customers want to do a domestic manufacturing in the U.S. So we have a reduced contribution from that. This is something that we cannot offer until we have Xellia up and running in 2028. We are less optimistic on, let's say, the biosimilar that we have, although it's a very small part of our business and liraglutide. And one of the product launches -- main product launches has been pushed. So of course, going forward, we are going to go back to return to very good growth for the injectable on top line and in terms of the EBIT. So any company, any business goes into challenges, '25, '26 was a challenging year. I think from here, from '27, we are going to see a different outlook for the injectable business, as we used to see in the past. Susan Ringdal: And just some examples. So of course, TYZAVAN is an important product for us. That will drive some of the growth that we achieved this year, but we expect that to do even better in 2027. So that will be an important growth driver. Some of the products that we expected to launch this year push to next year. So that will be, again, another growth driver for '27. We've got, of course, continued expansion in Europe. That's been an important growth driver for us. That will continue. MENA has been also a good business. We signed 6 new biosimilars in MENA. So there is -- there are a lot of opportunities to grow, but I think as Khalid said, this is sort of a reset. Said Darwazah: So the challenge is, obviously, as you right point out with the injectables and what we're doing with it. But I'd also like to remind everybody, this is a much bigger company than just the injectables, right? We have 3 very strong divisions. Two of them that are doing extremely well. The MENA is growing at a very fast rate with very good margins. And the Rx as I said, has done much better than anybody anticipated 2 years ago, if I told you we'd be doing 20% margins and this kind of EBITDA, people -- why did we keep on pushing you to sell it? So we -- there will be a lot of focus. There will be a lot of investment and we feel very, very strongly that in the medium to long term, this business will -- it is already, in my opinion, one of the best businesses. If you compare our margins to our competitors yesterday who upgraded from 18% to 19%. We are way ahead of them. Again, other competitors saying we want to be at 22% EBITDA, we are at 25% EBITDA. So this is a very good business. It's driven by 3 engines. And as we said, the focus is on long-term cost and total profitability growth in earnings per share rather than just focus on -- keep on focusing. And I think this is what really hurt us the last few years. The over focus on the margins of the injectables where people are saying, don't sell anything less than 32, don't accept anything. If I can get $300 million worth of orders opportunity and 28%, I shouldn't take them. Of course, we need. So that's why the focus will be on top line growth and bottom line growth rather than margin. Hafrun Fridriksdottir: If I may add a little bit about that, how we are going to grow the injectable business moving forward. I don't know if you had the opportunity to listen to our presentation this morning. But I mean we talked -- at least talked a lot about the ready-to-use platform. And even though, of course, the first product is TYZAVAN, as Susan mentioned, but we have multiple others in the pipeline and -- but those products that will be launched probably in early '28. So do you not see short-term, I mean, growth because of those products, but we have multiple products in the pipeline and I talked about, I think, 15 ready-to-use product in our pipeline. And so of course, moving forward, we will see the revenue and we will see the growth from this platform, which I'm very excited about. So I just to revisit, I think it's a really good business. Zain Ebrahim: Zain Ebrahim, JPMorgan. So the first question would just be a follow-up on the previous answer in terms of what you described on the CMO challenges from one of your customers wanting to switch the manufacturing from Europe to the U.S. So how do you see that risk going forward for the rest of the injectables CMO business? And just broadly, how do you see outlook for CMO overall from here, I know you've got the -- there's the small molecule contract in Rx contributing this year, ramping next year. So just to remind us how you're seeing that outlook? Said Darwazah: Well, the first thing we did, we looked at our plants in the U.S.A., for instance, we looked at the Cherry Hill plant. And see -- so what were the bottlenecks, what was needed. Many times, it's a small thing that you need to do to increase capacity. So working on increasing capacity significantly at Cherry Hill and that will help us with the CMO business as more and more companies want to manufacture in the U.S.A. Of course, we'll talk about the Rx later CMO because they already have a lot of orders in business. And then we acquired the Bedford site specifically for this. And it's a big site. It has a lot of equipment in it. It needs to be reengineered in a more modern way. We're working on that diligently, sometimes new lines take a bit long to get -- you need to order them it takes 1.5 years to 2 years for the lines to be again. After they come in, you have to install, qualify and get FDA approval. So it's a bit of a long process, long-winded. That's why we're guiding to '28. But with most of the CMO, the big business you get the order and the expectation as you deliver 2 to 3 years down the road. They don't expect to deliver tomorrow because it's a process of moving products and so on. So that's why we feel very strongly about hiring ahead of CMO, somebody that has already strong experience, has well good knowledge of the industry and has good contacts with the companies that want to have CMO business. So we're very confident like in '28 and forward for the injectables will have a very strong CMO business. For now, we will be showing that the Rx already has very strong CMO business. So overall, it will become a quite significant part of our business, let's say, 3 years down the road. Zain Ebrahim: Very helpful. And second question is on R&D. So an increase of 5% to 6% of group sales. Are you now comfortable with that as a ratio in terms of thinking about that level going forward? And I... Said Darwazah: You ask me or you ask her? If you ask her, she says, no, we need more. If you ask me, it's enough. Zain Ebrahim: And when do we say pay off from those investments? Because I know you mentioned '28 for the ready-to-use but you started something increase in R&D last year. So just to... Hafrun Fridriksdottir: Yes, of course, we slightly increased the investment in R&D last year, but that was I mean, really a slight increase. But we also reorganized R&D organization. So now we have a global R&D organization. And we also moved activity from U.S. into Croatia. So of course, that is clearly helping significantly on the injectable business, but we also have a very strong team focusing on inhalation, semisolid and liquids in Columbus in Ohio and then, of course, our team in Jordan is focusing on solid oral. So I strongly believe that we have the right team in place. Would always like more money for R&D, yes, of course, I would, so Said is correct there, but I feel very confident with 5% to 6% of the revenue in spent of R&D. I think that's just in line with what our competitors are doing. Khalid Nabilsi: And we are going to see these returns coming into the coming years. Some of it will come in '27, some of it to come in '28 or '29 onwards. Hafrun Fridriksdottir: Yes. Of course. R&D takes time, everyone knows that. Beatrice Fairbairn: Beatrice Fairbairn at Berenberg. You discussed the focus on long-term growth. I mean one of the targets out there is this kind of GBP 5 billion 2030 revenue target. My question really was does it still stand? And would you be able to give some color in terms of what is needed to get there and how that looks like over the coming years? And then just on your delay systems timing of some of the product launches and injectables, do you feel like the new time line that you've got are realistic and kind of how confident you that you're going to be able to launch these products on time. Said Darwazah: Why don't you take this first part about the GBP 5 billion? Susan Ringdal: Yes. So the GBP 5 billion, when we set the GBP 5 billion target, we said that this was -- it was an aspirational target, but we felt that it was very achievable with the business plan that we had and our business model, which has been to do bolt-on acquisitions as a matter, of course. So we still do feel comfortable that GBP 5 billion is within reach. It is -- we have -- we definitely see an acceleration of growth after 2026. And I think today, it would require a bit of inorganic growth, but yes, it is very much within the reach. Khalid Nabilsi: [indiscernible] organic growth. It's not like we are talking about transformation, like more of a product acquisition. So we are very close to the aspirational target of GBP 5 billion. And if you look into the 3 businesses, like the branded is delivering very good growth and acceleration. If you look into the past, it was 5%, 6%. Today, we are guiding more at 7% to 8%. This is driving growth, high-value products that we are getting into the MENA region. If you look into the number of licensing deals that we've been signing over the past 5 years has increased significantly. And now we are becoming more and more the partner of choice. So this is going to be a key driver. Rx has grown with the CMO business. We are going to see more contribution coming in '27, '28, '29. So this is as well going to drive the growth. And injectable, of course, with all these RTUs and the products that we are working on, it's going to accelerate the growth for the injectable business. Remember, the injectable business has a large portfolio. So there will be always opportunities. There will always be shortages. Europe, we are seeing a very good growth. Great potential, especially that the market is lacking products. So we are being the, I would say, most reliable hospital supplier in Europe now. All hospitals are coming to us and governments coming to us, say, we want this product. The agility that we have in Europe, providing the products on time is differentiating us versus others. And this is why we've seen 23% growth this year in the injectable in Europe. Same for MENA. It's not just like the 6 biosimilar. We have many products that we have that we are going to launch in MENA for biosimilars. So this is going to be the growth driver and we are very confident of our ability to continue growing the business. As said, '25, '26 might look challenging for the business, but this is a business cycle. But from here, we are going to continue growing. Said Darwazah: The short answer is yes, the GBP 5 billion is very achievable. We are extremely confident in our '26 guidance. And yes, the injectable launches that we'll be seeing in '28 and further will deliver the kind of growth that we need to be there. Victor Floch: Victor Floch, BNP Paribas. Maybe just 1 question on Rx. That one seems to be -- to go pretty well. And it looks like you have like even some room in terms of margin. You've been investing even like more than what you're using -- actively investing for injectables. So can you discuss like the different moving parts this year? I mean the base business, I mean, I think there might be some competition on certain products. On the other -- on the flip side, you have some service payment from your CMO partner. And are you expecting at some point to be able to update the market on was that CMO? What kind of -- what is the product? And what are the economics behind that? I mean, just have a bit more visibility on the CMO because it's a huge moving plant for Rx for sure. Hafrun Fridriksdottir: Yes. So this year, the revenue from the CMO business will probably be around 10% of our business, but our target in 2030 is up to 20%, at least my target. So we are not going to share the name of our customers, but we are working with not only 1 big customer, but actually multiple and some of them were talking about contracts which have not been signed but are in negotiation phase and we will be signing within the next, let's say, next few months. So that's going very well. And you also asked about the base business. For example, a product like Advil has been doing very well last year, and we expect the same this year. Fluticasone, we are the biggest volume driver in U.S. for fluticasone, as an example or for nasals, so -- and that is a business which continues to do very well. And all our base business has been doing really well last year, and we haven't really seen any change at least for the first 2 months of the year. So it's quite -- it's more stable than maybe most people believe it is. Susan Ringdal: And I can just remind people that we have Jon who's the Commercial Head of Injectables on the line; and Mazen, Deputy CEO for MENA. So don't hesitate to address questions to them as well. Hafrun Fridriksdottir: Certainly for Jon. You should really ask him questions now because he woke up very early for you. Christian Glennie: Christian Glennie, Stifel. Again, not to belabor the point, but on injectables and the margin, just to be clear around it's been quite a dramatic shift, right, from mid-30s to high 20s now. There isn't something sort of -- well, combination, one is you talked about the extra investments needed implication potentially maybe that you were underinvested before to some extent. So the margin was sort of where it was at -- and/or is that fair? And then the second part is, is there something more structural around the market from a sort of pricing and competition issue that means margin has -- the direction of travel has gone. Said Darwazah: Okay. So first one, as I said, I mean, clearly, we said we're taking the R&D budgets out of the divisions and putting as a corporate. So clearly indicating that at some point, division heads were sort of reducing R&D expenditure to get higher margins. So by taking that out and having it as a corporate with a fixed number that we agree on, I think that will -- there will be lower margins a little bit to start with. But we are very confident that with the investments they are making in R&D, the new pipeline, the expansion in the manufacturing and the CMO that we will be achieving higher margins mid- to long-term. Okay. The second question was? Christian Glennie: Structural something in the market because you've got [indiscernible]. Said Darwazah: There's always competition. There's always people coming in. You lose a few products. We lost 2 or 3 products that not lost. We have competition coming in 2 or 3 products that we're doing extremely well. And that's why when you have such a well-diversified portfolio and you have so many products, other products can pick up and the new launches can pick up. So the market has always been competitive. It's always been competition is coming in. Do we feel that there's more competition in some areas, yes, in some areas, no. But we are confident that with all the changes we're making, we are fine. Khalid Nabilsi: It's not like structural change in the market. It's the pricing is around, let's say, if we exclude the 2 top products that we have, it's 4% or almost less. So low to mid-single digit plus erosion that we've seen in this business. So nothing is abnormal. Hafrun Fridriksdottir: And maybe if I may add. So I think over the last few years, the supply from third party has increased significantly. And third party, of course, is not as profitable as if you're making the product internally. So I think it has been going from 20% to 30% over the last few years. So that's, of course, affecting the profitability. But also, I mean, there are different part of the business, which has higher profit than other parts. Of course, while you are building the business -- injectable business in MENA, which is less profitable than the business in U.S. and in Europe, of course, that will affect the overall injectable profitability, and that business has clearly been growing as well. So those are at least 2 reasons in addition to... Khalid Nabilsi: If you exclude the MENA margins, both for the Europe and North America injectable business, the margin is not 30%. Christian Glennie: Maybe the natural follow-up, I know you're probably reluctant to guide beyond kind of '26, but just to get a sense for that margin and is '27 to '28 the floor? And then maybe that's similar until you really get into Xellia and then margins to improve? Or is this... Said Darwazah: And again, we're saying we're very comfortable that '28 and further margins improve. I think once we assess everything and we have the plan, the right plan in place. Are we going to be giving... Khalid Nabilsi: May I take this one. In a way we'll be guided to '27, '28. And I said in my presentation this morning, you can assume this is for the coming few years, but it's not like if we have an opportunity that is top 30, we are going to say no to it. So we don't want to be strictly held on these margins because we are going to focus on growing the profits and the EPS rather than just focusing on the margin, as I mentioned. So you can't consider like this '27 or '28 to the next 3 years. But what has changed, just repeating to what I said earlier this morning. From the November, when we said the floor is 30% is literally increased investments in R&D. We are increasing GBP 15 million this year versus last year in injectable. You look into the investments that we are having, as I mentioned, fitting in sales and marketing, so -- and the CMO. This is why we are going down like 2 to 3 percentage points. It's not something structural in the business, but it's more investing for the future. Guy Featherstone: Just going to jump to the line for a quick question. Operator: [Operator Instructions] Our first question comes from the line of Kane Slutzkin of Deutsche Bank -- Deutsche Numis. Kane Slutzkin: Just -- sorry, could you just clarify, I missed the last point on the higher R&D in injectables. But could you just sort of clarify sort of lower guide as sort of those moving factors between higher R&D versus the lower CMO work like in terms of which has moved the needle more there? I assume it's the R&D, but if you could just clarify that. And then just -- you're obviously spending some time doing the strategic review. I'm just wondering at what point do you think you will be able to sort of reinstate a midterm or a new midterm guide? And then just finally, on the buyback, just I guess, why has it sort of taken so long to do it? And could we see a more permanent feature going forward if shares sort of remain where they are? Hafrun Fridriksdottir: I think I can maybe take the R&D question. If I could hear him correctly. I think he was asking for the spending for R&D and the overall increase in spending for R&D this year compared to last year is around $45 million year-over-year. I think that was your question, but I'm not really. Guy Featherstone: Kane, could you just repeat your last question? Kane Slutzkin: Yes, I was just wondering sort of in that lower guide, how much of it is sort of the lower CMO work you referred to versus R&D in terms of what's impacting the guide down? Guy Featherstone: Injectables margin guide, how much is CMO versus [indiscernible]. Susan Ringdal: I think, Kane, it's more evenly split across R&D, sales and marketing and CMO. I would say those are the 3 biggest factors there of more or less the same magnitude. Said Darwazah: And the buyback, I agree with you, is taking too long, but we have taken the decision to do that GBP 250 million this year. Susan Ringdal: In terms of the medium-term guide, I think we'll get back to you on that. We know that it's important for the market. We want to get it right. And so yes, I think we'll come back to you. Operator: Thank you. There are no further questions. I'd now like to hand the call back to the Hikma team. Unknown Analyst: Julie Simmons, Panmure Liberum. Just on a more product-specific basis. I'm wondering with TYZAVAN. Clearly, you've just launched it. It feels like the sort of momentum is pushed out a little bit to '27. Are you noticing anything from the first sales in the market there? Unknown Executive: This is Jon. Said Darwazah: You're on mute Jon. Unknown Executive: No, I am not on mute. Okay, great. Good morning, everybody. So we are an active launch mode for TYZAVAN. Let me just frame the market because this is important to understand because the RTU bag platform will follow a similar pattern. Vancomycin is a widely used product within the U.S., there's about 41 million grams of the product used in multiple forms from a very lyophilized powder to a frozen bag to obviously our ready-to-use bag. What we are selling is a system and a process change, which in large hospital systems and large hospital groups that by default, TYZAVAN would become the vancomycin of choice. So it is really more of a process change. Now to put it in perspective, we have already converted 13% of the entire gram market with our existing vancomycin ready-to-use bag. So we have a platform. We will expand that. Within that network, there's about 22,000 sites of care that use vancomycin within the U.S., all forms, long-term care, hospitals and such. Our existing customer base on the existing bag product represents about 15% of those sites. So there is a very large universe of hospitals and health systems that have not used our historical bag. So there is a large opportunity there. So you have to think in terms of it as a process progression. So we're going to expand our existing base by expanding the usage of the product without restriction, and then we're also penetrating the customer bases that have been -- that have not used our bag in the past. So yes, this is going to be a progression into the back half of the year. But the momentum that we're seeing right now is very active and very encouraging. Unknown Analyst: And just following up on that from a sort of RTU perspective longer term. Do you think once a site has switched over to 1 RTU, it makes it easier to switching to another for a different product? Unknown Executive: Yes. And that's exactly why the way we're approaching this first one is extremely important. We want to make sure we have the processes in place. Hospitals and groups, they have to reprogram medical -- electronic medical record systems, infusion pumps, SOPs, ordering patterns, storage platforms because you're bringing in a new form. So as we work with TYZAVAN as the foundational product, we want to make sure we fully integrate it properly. And I do believe that, that will help us going forward with the additional bags as they come to market. Charlie Haywood: Charlie Haywood, Bank of America. First one is just in our models, would it be reasonable to assume that a I guess, at this stage, mid -- 30% midterm injectable margin is off the table, given focus on profitable growth. And then I'll get to the second one in a sec. Susan Ringdal: Yes. Charlie Haywood: Okay. And then the second one is just on the midterm guide, which obviously since giving you, we've seen 2 cuts too. So first is, I guess, talk through the decision to issue the midterm guide if there were some underlying concerns on the spending, the short-term focus to give that? And then secondly, sort of how can you reassure us and the market that this is sort of the last of the big cuts and we're back to something profitable. We can be returning some in growth from here. Said Darwazah: Again, as I said before, it's not a complicated formula. You do -- you have the right people. You have the right equipment, you have the right facilities, you have the right R&D. All of these things, when you invest properly, you take timely decisions to take -- to move the business forward. This is a formula for success, and we've got this formula for 40 years. So we sort of slowed down decision-making. It became too centralized. We were not investing properly in the right places, and now we're reversing that. So that's why we feel very confident that midterm, we will deliver what we're talking about. Khalid Nabilsi: And this is why, as well, '27 is going to be a year where we -- '27 is going to be as well a year that we'll see a growth. So it's the bottom on the injectable. And from here, we are going to grow the top line and in bottom line. In addition to the other 2 businesses, they continue to grow, as I said earlier. Charlie Haywood: Just a third one if I may. You talked to obviously heavy investment in the next 2 years. How confident are you that this is a 2-year journey of heavy investment, and that won't spill into 3 or 4 as the investments start continuing? Said Darwazah: The investment is -- it's not a short term. It will continue to be, but we will see that -- we'll start seeing the results of what we're doing now, 3 years down the road and will it further, but when we look at our 5-year CapEx, our 5-year R&D orders, all this will continue to grow. Khalid Nabilsi: Maybe just to add to what Said just mentioned. In terms of the R&D, it takes time to see results, as Hafrun said, in terms of sales and marketing, these are quick wins. So you invest today, it's not like going to take so much time till you get the returns. And this is what Jon is focusing on. So you will have these investments and at the same time, give you an example on the supply chain, having somebody now focusing on the global supply chain would reduce our inventory levels will reduce the slow-moving items, which it was very big this year, failure to supply, so the immediate impact will be significant improvement to margins. So this is why we are saying that we are moving in the right direction. And I think the results of this will come in the coming years, and we are confident about our medium-term outlook. Unknown Analyst: Christopher Richardson from Jefferies. A couple if I may. You lowered CDMO or CMO expectations, sorry, for the year as some customers require domestic production, which you said you can't offer. I was just wondering if there are any reasons for that. Khalid Nabilsi: It's -- as we said, in Xellia, our Bedford acquisition is going to be up and running towards 2028. So it's the same machinery, the same lines. It's replicate to what we have in Portugal. Now we couldn't offer because we don't have that facility up and running. So once we have that facility up and running, towards the end of '27, early '28, we'll be able to offer. Said Darwazah: And as I said, again, the Cherry Hill plant and the other plants we looked at optimizing the capacity there looking at the bottlenecks, bringing in the lines that are required to up the manufacturing capacity. Hafrun Fridriksdottir: And if I can add something about the Rx business because we are only talking about injectables and as I mentioned, I mean, we have this huge, I mean, of course, manufacturing site in Ohio, both for solid orals, for nasals, for inhalations. And that site has been getting a lot of attraction over the last year or so since all this discussion about domestic manufacturing started to happen in U.S. So there's a lot of interest in us in producing products for different clients. So I think this is going to be a big opportunity for us moving forward, both in the Rx and also in the injectable business. Said Darwazah: Many times clients come in, let's say, for the solid oil, then they feel you're very comfortable with you and they open up and move injectables and other things to for you. Unknown Analyst: Great. And just the guide cut in November was due to equipment delays. I was just wondering what the situation is now and what caused you to walk away from '27 and whether the timing for Bedford has changed at all? Khalid Nabilsi: There's no change to the guide that we had in late November. So all what we said that we are going to ramp up -- start ramping up towards the end of '27 and the commercialization will start '28. So no change to our plans. Unknown Analyst: Great. And maybe just a quick follow-on. I was wondering if you could comment on the oral generics pipeline and the margins in U.S. Rx excluding any Xyrem impact. Hafrun Fridriksdottir: Excluding, sorry? Unknown Analyst: The impact of Xyrem? Hafrun Fridriksdottir: Sodium oxybate. Okay. So last year, sodium oxybate was dragging down our profitability so the rest of the business was actually compensating for the low profit of that product. We managed to negotiate a better deal, at least for this year and for next year. So we will have slightly better profit on that product. But -- so it will not be dragging down the overall profit for the Rx business. Is it helping this year? It potentially will. Said Darwazah: Zain, some more. Zain Ebrahim: Zain Ebrahim from JPMorgan. Thanks for the follow-up. So on CMO, you mentioned you're looking for a new head of CMO. So just the characteristics you're looking for in the Head of CMO in terms of the type of -- the kind of the profile that you're looking at and when we could expect the appointment? And does this mark a potential shift to making CMO like a fourth division that we source also about in the past in terms of strategically. So integrating the Rx and injectable team. Said Darwazah: Historically, we used to the CMO as a fill-up. So we focus -- this is extra capacity, let's get products to fill it up. And then when we were approached or we found a client to come in and use the Rx side it was more of a long-term agreement. So long-term agreements require dedicated facilities, they require dedicated lines and sometimes dedicated teams, and it's a lot of investment to do that. And it takes time to come in and -- but it's a long term. So this is the right -- this is what we want to do, not just bringing in short-term fixes. So to do that, you need somebody that has been doing that for a very long time that knows which companies require CMO business. And also, I think more importantly, when you do the contract, when you're looking at, let's say, 5 billion tablets or something, $0.05 per tablet extra gives you $50 million in profitability. So having the right negotiation skills, the right contract skills all these things. So this is what we're looking at. Now we have this but we think that getting a very senior person that has done this successfully is the right way to go. And as I said, we are interviewing, there are several people out there that are available with this kind of talent. And yes, it could be a fourth division very much so. Zain Ebrahim: Just a question on the CMO headwind for '26. Is that -- was that 1 customer you lost, that's gone from Europe to U.S. I guess how is that conversation and how are conversations with the remaining customers to ensure that won't happen with someone else before the '28? Khalid Nabilsi: It was 1 of our customers. It's not like they are shying away completely. They still have business with us, but they decided to -- some of their manufacturing for their own benefits. They wanted to have it in the U.S. So it's not like the business is going down. It's to replace, it's going to take some time to get a new customer, but we are confident of our ability to continue growing the CMO business. So it's a matter of time. But when we have the Xellia, of course, up and running, and we will have much more clients, much more capacity to offer as well. Said Darwazah: There's a lot of demand for U.S. manufacturing and I think the Bedford acquisition and what we're doing now although it's going to take a little time. But like I said, if you want to get a client that will work with you long term, anyway, it will take 2 years before you can move in the product. So now is the right time to get the clients and get the orders so you can put the processes in and do the submissions and all these things, the tech transfers and so on and so by '28 and more, you'll be ready to launch. So it's the demand is there, and we are talking to a lot of companies. Hafrun Fridriksdottir: So what they are saying is that if we would have that capacity in U.S. to take on those products in U.S., we could probably potentially have kept that customer. So -- but we didn't have the capacity at that time. So I think that's -- but now we are building that. So moving forward, we are. Susan Ringdal: And if you remember as well, when we did this acquisition and we took the Bedford site on, it was because we were reasonably capacity constrained in our existing facilities. And so we weren't really very actively selling CMO business at the moment because we're pretty much and we don't have a lot of spare capacity for CMO without the Bedford site. Christian Glennie: Christian Glennie. Thanks for the follow-up. Just maybe on Rx and just a couple of ones there on the I think you've alluded to a couple of other things around the moving -- the margin to 20% just to clarify the step-up this year to 20%? And is the 20%, again, another kind of the base for the business going forward, do you think? And then just finally on nasal epinephrine, what's the update there? And obviously, it's been delayed. So what's the expectation around that? I think it had been seen as potentially quite a significant product for you. So just an update there. Hafrun Fridriksdottir: So maybe first on the margin. Is 20% the best we can do? No, I think probably you will probably see some improvement moving forward as, I mean, in '27, even '28 as well. I'm not going to give you any numbers, but I think -- I don't think that's necessarily the top of the pie. With regards to epinephrine as I think we -- I talked about last time when they had this conversation, we -- there were some requirements from FDA to run some additional study. That study is ongoing and we are planning to submit in U.S. in, let's say, after a few months now. And we did file a product in U.K. last year, we will be filing in Europe as well. And we are actively discussing our licensing product in Europe. So that's -- yes, so that's the update. But because we have been working so closely with FDA over the last year or so on the product, I strongly believe that the review time will potentially be shorter than and maybe we thought in the beginning. So it will be an exciting product for us. Said Darwazah: Somebody asked Mazen a question about the MENA. He's bored. James Gordon: James from Barclays again. Just we're talking about margins, and we're talking about generic margin and an injectable margin? Hafrun Fridriksdottir: Rx. Unknown Analyst: Rx, apologies. But then I've also heard effectively, you're going to centralize R&D spend and that we could think of the divisions as being a bit ex R&D. You're going to think about what that ex R&D performance is. So if we're rebuilding our models of today, is that how we should be thinking about Hikma now? And are you going to start giving us then what the margins are for these 3 divisions without R&D and then the central R&D line? What do we do with [indiscernible]? Khalid Nabilsi: Eventually, this year, we did not want to -- too much changes to you -- changing your model. But eventually, next year, you'll start seeing the margin without the R&D. With and without. James Gordon: Bridge this year and then we do a rebuild for our next year. Yes. Susan Ringdal: Mazen, I think it would be great. Maybe I think 1 of the strengths for the business in the MENA in the past year has been all of the partnerships that we've signed. We have excellent momentum in terms of signing new partnerships. Maybe you could just talk a bit about why Hikma seems to be the partner of choice and MENA. Said Darwazah: You are on mute. Mazen, mute. Susan Ringdal: No, he's not. The sound is just very low. Said Darwazah: Looks like he's on mute. Hafrun Fridriksdottir: Luckily, you didn't ask him any questions. Said Darwazah: Okay. Next question till he comes back. Guy Featherstone: [indiscernible] Said for closing remarks at this point. Said Darwazah: Sorry? Khalid Nabilsi: Closing remarks. Said Darwazah: Well, again, it's -- first of all, it's good for me. I'm very happy to be back as CEO, and I'm very happy to give up the Chair position to be able to do this. We have an extremely good team. We work very, very well together. We have, I think, a very, very strong business. As we said, if you look at the last 5-year CAGR and the years before, you've seen how this business continues to grow. We will continue to grow. We are taking quick decisions. We are implementing a culture of quick decision-making. I also talked about the younger people in the company. So for instance, from now on, the executive committees and the leadership council and so on, we will have -- we will mix and match not only beyond seniority, we will be having more younger people join. There is obviously something we didn't talk about, a lot of focus on AI and seeing how AI can be implemented to move the business forward. So all in all, I feel very, very positive about this. This is a strong company that has been growing for a very long term, has very solid foundation as a strong leadership team and a lot of talent across the board. And I'm very confident that we will be delivering the kind of growth that we expect from ourselves and our shareholders expect from us. Thank you. Thank you, everyone. Appreciate you joining us.
Operator: Good day, and welcome to the Carlyle Credit Income Fund's First Quarter 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Joseph Castilla. Please go ahead. Joseph Castilla: Good morning, and welcome to Carlyle Credit Income Fund's First Quarter 2026 Earnings Call. With me on the call today is Nishil Mehta, CCIF Principal Executive Officer and President; Lauren Basmadjian, CCIF's Chair; and Carlyle's Global Head of Liquid Credit; and Nelson Joseph, CCIF's Principal Financial Officer. Last night, we issued our Q1 financial statements and a corresponding press release and earnings presentation discussing our results, which are available on the Investor Relations section of our website. Following our remarks today, we will hold a question-and-answer session for analysts and institutional investors. This call is being webcast, and a replay will be available on our website. Any forward-looking statements made today do not guarantee future performance and any undue reliance should not be placed on them. These statements are based on current management expectations and involve inherent risks and uncertainties, including those identified in the Risk Factors section of our annual report on the Form N-CSR. These risks and uncertainties could cause actual results to differ materially from those indicated. Carlyle Credit Income Fund assumes no obligation to update any forward-looking statements at any time. During the conference call, we may discuss adjusted net investment income per common share and core net investment income per common share, which are calculated and presented on a basis other than in accordance with GAAP. We use these non-GAAP financial measures internally to analyze and evaluate financial results and performance, and we believe these non-GAAP financial measures are useful to investors gauging the quality of the Fund's financial performance identifying trends in its results and providing meaningful period-to-period comparisons. The presentation of this non-GAAP measure is not intended to be a substitute for financial results prepared in accordance with GAAP and should not be considered in isolation. With that, I'll turn the call over to Nishil. Nishil Mehta: Thanks, Joe. Good morning, everyone, and thank you all for joining CCIF's quarterly earnings call. The CLO equity class faced challenges in 2025, including continued loan repricings and bear sentiment, which weighed on returns for both CLO equity market and CCIF. However, credit fundamentals remained strong and default rates continue to decline. To mitigate this market-wide weakness, we continue to focus on optimizing the portfolio, including completing accretive refinancings and resets and defensively positioning the portfolio with experienced CLO managers. I'd like to highlight the Fund's activities over the last quarter and key stats on the portfolio as of December 31. CCIF's underlying CLO investments generated an annualized cash-on-cash yield of 22.67% for the quarter, which resulted in $0.48 of recurring cash flows for the quarter at the fund level. New CLO investments during the quarter totaled $13.1 million with a weighted average GAAP yield of 13.6%. We rotated out of 2 CLOs investments for total proceeds of $4.4 million as part of our continued optimization process. Within CCIF's portfolio, we completed 3 resets in the first quarter of 2026, resulting in 26 refinancings and resets in calendar year 2025, reducing the cost of liabilities by 31 basis points on average. We expect refinancing and reset activity to continue taking advantage of historically tight CLO liability spreads. We refinanced $52 million of the Series A Term Preferred Shares with a coupon of 8.75% with lower cost preferred shares with a weighted average coupon of 7.33%. The weighted average years left in reinvestment increased slightly from 3.3 years to 3.4 years. This provides CLOs mangers the opportunity to capitalize on periods of volatility through active management. There are also 0 CLOs in the portfolio that are post reinvestment period. We believe a portfolio weighted average junior overcollateralization cushion of 4.48% is healthy and offsets potential default and losses in the underlying loan portfolios. The average percentage of loans rated CCC by S&P was 4.2%, below the 7.5% CCC limit in CLOs. And the percentage of loans trading below 80 is 3.8% below the market average. The weighted average spread of the underlying loan portfolio was 3.06%, a 6 basis point decline from the prior quarter. This decline is consistent with the broader market and is driven by a record repricing wave and the loan market over the past 2 years. This has significantly impacted the earnings power of CLO equity as CLO resets and refinancings have not been able to fully offset the spread compression. Within CCIF's portfolio, the excess spread and the underling CLOs has declined approximately 32% since December 31, 2023, resulting in GAAP yield to further decline to 13.6%. Following discussion with our Board of Directors, we have revised our monthly dividend to $0.06 per share. When revising the dividend level, our Board considered CCIF's current and expected GAAP yields while also focusing on our objective to support net asset value. The revised dividend level of $0.06 per share results in an annualized dividend of 20% based on the closing share price as of February 23, 2026. The loan spread compression has also resulted in a decline in demand for CLO equity, causing a decline in valuations across the market and CCIF. Notwithstanding the decline in loan spreads, CLO equity benefits from historically low funding costs secured during a period of tight liability spreads, which provides a strong foundation for forward returns. As discussed last quarter, loan spreads have historically followed multiyear cycles. Current levels are similar to those observed in 2018 and was followed by a meaningful spread widening in the following 2.5 years due to a better supply-demand balance and market volatility. We believe CLO equity today is positioned to benefit from potential spread widening. Loan supply increased in the fourth quarter of 2025, and we expect loan supply to remain elevated in the first half of 2026 based on the current pipeline and discussions we have with our internal capital markets and private equity teams. A sustained increase in volumes would help rebalance market technicals and support wider performing loan spreads. The recent volatility related to concerns on AI disintermediation may further dampen repricing volumes and conversely increase loan spreads. With funding costs locked in at attractive levels, any normalization of loan spreads could meaningfully enhance excess spread, particularly for deals with longer reinvestment runway. As a result, we expect equity outcomes to increasingly reflect vintage, structure and manager execution, reinforcing the importance of selectivity. With that, I will now hand the call over to Lauren to discuss the current market environment. Lauren Basmadjian: Thank you, Nishil. I'd now like to provide an update on the recent developments across both the loan and CLO markets. CLO issuance totaled $53 billion for the quarter, bringing 2025 issuance to a record $211 billion. Including resets and refinancings, total gross CLO activity reached an all-time high of $538 billion, surpassing the prior annual record set in 2024. CLO liability spreads tightened across the capital stack over the course of the year, approaching the post-great financial tight, we witnessed in the first quarter of 2025. This tightening only partially offset the impact of loan spread compression and CLOs that were in their non-call periods could not take advantage of tightening liability spreads. Reset and refinancing activity remained robust, with $52 billion of refinancings and $20 billion of resets pricing during the quarter, as managers extended reinvestment periods and lower financing costs. The share of U.S. CLOs out of their reinvestment period has declined to roughly 11%, down from about 40% in 2023, reflecting a market with expanded reinvestment capacity. Turning to the loan market. Leveraged loans delivered resilient performance in 2025 despite rate cuts and concerns related to tariff implementation. In 2025, the LSTA leveraged loan index returned 5.9%, and in the fourth quarter, the index returned approximately 1.2%. Similar to prior quarters, issuance activity was driven largely by repricing as borrowers took advantage of the lack of loan supply and lowered their interest expense. Credit fundamentals within Carlyle's U.S. loan portfolio of more than 550 borrowers remain encouraging based on the most recent quarter of reporting. Free cash flow generation continues to be a key focus, with over 70% of borrowers producing free cash flow in the third quarter, the highest level we've seen over the past year. Revenue and EBITDA growth remained healthy at 6% and 7% year-over-year. Overall, borrower performance and credit quality remains broadly resilient, though we are seeing pockets of fundamental weakness in building products and chemicals. While software companies have recently traded down on the fear of AI threats, we have not yet seen this result in worsening sales or earnings growth for most of these companies. The broadly syndicated loan default rate inclusive of LMEs has declined from a peak of 4.5% at the end of 2024 to 2.9% by year-end 2025, moving closer to historical averages. We could see this pickup during 2026 as more loans are trading under 80 due to recent fears around AI, but we don't expect it to hit the peak witnessed in the fourth quarter of 2024. CCIF's underlying loan portfolio experienced a default rate of 1.1%, inclusive of out-of-court restructuring. CCIF has been able to achieve a lower default rate by leveraging our in-house credit expertise from over 20 U.S. credit analysts to complete bottom-up fundamental analysis on underlying loan portfolio. We are increasingly focused on the evolving implications of AI-driven disruption across leveraged finance. We believe AI risk, specifically in software companies, it's currently less about near-term operating deterioration and more about compressing valuations, potentially slowing growth in sales, and the need to invest behind an AI solution to defend incumbent positions. We think it will take time to see who the winners and losers will be in the sector, but we view the fourth quarter 2025 earnings season as an important checkpoint to further evaluate AI's impact on demand trends, margins and business model resilience at the borrower level. I will now turn the call back to Nelson, our CFO, to discuss financial results. Nelson Joseph: Thank you, Lauren. Today, I will begin with a review of our first quarter earnings. Total investment income for the first quarter was $7.1 million or $0.34 per share. Total expenses for the quarter were $5.2 million. Total net investment income for the first quarter was $2 million or $0.09 per share, compared to $0.15 in the prior quarter, driven by $0.06 per share of interest expense from the amortization of deferred offering costs associated with the redemption of the Fund's Series A Term Preferred Shares. Adjusted net investment income for the first quarter was $3.7 million or $0.17 per share in line with the prior quarter. Adjusted NII adjusts for the $0.08 per share impact from the amortization of the OID and issuance costs for the Fund's preferred shares and credit facility. Core net investment income for the first quarter was $0.32 per share, also in line with the prior quarter. $0.32 of core net investment income provides dividend coverage of 178% on our revised monthly dividend of $0.06 per share. We believe core net investment income is a more accurate representation of CCIF distribution requirement. Net asset value as of December 31 was $5.17 per share. Our net asset value and valuations are based on bid side mark we received from a third party on 100% of the CLO portfolio. We continue to hold one legacy real estate asset in the portfolio. The fair market value of the loan is $2.2 million. The third-party we engage to sell our position continues to work through the sales process. Now turning to the funding side of CCIF. During the quarter, we refinanced $52 million 8.75% Series A Term Preferred Shares through the issuance of $30 million of 7.375% Series D Term Preferred Shares and a private placement of 5-year 7.25% Series E Convertible Preferred Shares that generated net proceeds before expenses of approximately $16.3 million. The Series B Term Preferred Shares are listed on the New York Stock Exchange under the symbol CCID. The holders of the Series E Convertible Preferred Shares have the option after 6 months to convert the shares into common stock at the greater of NAV or the average closing price of the 5 previous trading days. This resulted in a reduction in the cost of capital by approximately 1.42%. With that, I will turn it back to Nishil. Nishil Mehta: Thanks, Nelson. We remain confident in the fundamentals of CCIF's portfolio, which remains defensively positioned. We remain focused on experienced managers and transactions that demonstrate durable par build and disciplined credit underwriting. We are deploying capital selectively, prioritizing opportunities that offer attractive relative value across both new issue and seasoned transactions. We continue to leverage the depth of the Carlyle Liquid Credit platform and our collaborative One Carlyle platform to source and invest in high-quality CLO portfolios through a disciplined bottom-up 15-step investment process. I would like to now turn it over to the operator to answer any questions. Operator: [Operator Instructions] And our first question will come from the line of Gaurav Mehta with Alliance Global Partners. Gaurav Mehta: I wanted to maybe ask you on some of the trends that you're seeing in the market as far as loan repricing and the yields and the spreads. I know in the prepared remarks, you said you saw an increase in loan supply in 4Q '25, and it seems like it may remain high in Q1 '26. So just wondering if you could just comment on what you guys are expecting as far as demand and supply and where yields and spreads are heading? Lauren Basmadjian: Sure. So I'd say that, generally speaking, the repricings have stopped. The volatility in the market around AI fears have led to loan prices trading down and about 20% of the market now is trading over par which has stopped -- generally stopped the repricing. There is a decent sized backlog of announced deals that will come to market in the first quarter, maybe into the second quarter, though, I do worry or wonder if we'll see that slow down again after we get through all the announced deals, as there's been more uncertainty and volatility in the loan market, there may be a slowdown in M&A transactions. Gaurav Mehta: Okay. Maybe following up on your comments around AI-driven disruptions. How is that impacting your investment thesis and how you're approaching your investments in the CLO market? Nishil Mehta: Yes. Gaurav, it's Nishil. So maybe I'll talk about it in a couple of different ways. One, you're seeing more of an immediate impact, which is really just the volatility, Lauren just mentioned regarding loan prices. That is, as a result, creating some volatility in the valuations of CLOs. But that's really more of the near-term impact. I think longer term, the impact that AI will have on these companies and borrowers is kind of to be determined, given this is not a concern that's tomorrow or the next day. It's really a multiyear potential impact. But also to Lauren's point, the one positive is the volatility has really created a market where you're not seeing loan repricings. We saw a fairly large wave of loan repricing in January. That has definitely declined. And we are in the middle of fourth quarter earnings, which continue to remain strong. So as we mentioned in the prepared remarks, the fundamentals of the overall portfolio continues to remain strong. Operator: And that will come from the line of Erik Zwick with Lucid Capital Markets. Erik Zwick: In Nishil's prepared comments, he mentioned some optimism that maybe there are some factors that can contribute to spread widening here in 2026. And kind of maybe a two-part question. One, are you seeing any actual signs in the market that, that are starting to happen? And two, if they were to widen materially, how much does that impact your ability to have additional resets and refis in the portfolio? Lauren Basmadjian: Yes. So the discount margins have definitely widened over the last month in the loan market. Loan spreads don't reprice automatically as the risk premium changes. So really, the price adjustment is the loan price versus the spread. The way that we'll start to add spread back to portfolios and CLOs will be with new issues coming at wider spreads, which we do anticipate. There isn't a lot of new issue in market. But as I said, there is a real pipeline ahead of us. So I would expect those loans to come with higher spreads than what we've seen over the last couple of quarters. Nishil Mehta: And then just on the refinancing and resetting front when it comes to CLOs. Look, the market in January and even earlier this month, probably hit post GFC tights when it came to liability spreads. We are seeing some widening given the reflective of what's going on in the broader loan market and fixed income markets. But from -- on a historical basis, the liability spreads are still relatively tight. So our expectation, at least based on the market today, is there will still be opportunities to refinance -- to complete refinancings and resets within the portfolio. Erik Zwick: That's very helpful. And I guess, positive to hear that seeing some loan spread widening there, which would -- that's been a large driver of the impact to NAV over the past year. So it seems like there's some potential here that the majority of the kind of decline in NAV for this cycle has hopefully been realized at this point. I realize you don't have a crystal ball, but is that the right way to think about it? Nishil Mehta: Yes. Look, obviously, the market is dynamic, and it's hard to predict what's going to happen in the future. But as Lauren mentioned, with the repricings kind of fading away and the discount margin within loans increasing. If we start to see continued supply and M&A activity, that should result in an increase in loan spreads and overall widening. Lauren Basmadjian: And the one other thing, though, it's not a gigantic part of our market, but it's worth mentioning that there are still loans that are maturing in 2027, 2028. Even into 2029, where I would assume management teams want to push out maturities. When we had seen these extensions before, you were not seeing an increase in coupon. In fact, sometimes you were seeing a decrease in coupon. I would imagine that's another way to capture spread in this market is as we see borrowers come back to push out maturities, they may have to offer more spread on the loans. Erik Zwick: And one last one for me and then I'll step aside. Just given the impact on the fair value of the portfolio that the spread tightening has had. Just kind of give you our overall thoughts on leverage in the portfolio today and how you think to manage it from here? Nishil Mehta: Yes. So as you can see in our earnings presentation, leverage is at the high end of our target. And so that's something that we're mindful of. And so I think over time, we'll look to bring that back to kind of historical target. Operator: [Operator Instructions] Our next question comes from the line of Timothy D'Agostino with B. Riley. Timothy D'Agostino: I guess just one quick one for me. You've mentioned that loan repricings have pretty much kind of all been done, and you did see some in January. I guess, it'd be interesting to like hear a little bit more and just get a little more color on how the market for you all looks different in February than in January, just given everything around software. And I don't know, just maybe some color on what you're seeing. Lauren Basmadjian: Yes. I'd say that performing credit that doesn't have sort of an AI fear around it is down maybe 0.5 point to 0.75 point. And then names that have some AI fear could be down more significantly. We've seen some real volatility in software names. But it's also spread to other areas like asset managers, insurance brokers and anything that really you see an AI headline around. So it's created opportunity where there's finally volatility in the market, you could source loans and build par because most of the market is trading under par. Operator: I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. Castilla for any closing remarks. Joseph Castilla: Thank you all for joining. We look forward to speaking to everyone next quarter, if not sooner. Please feel free to reach out if you have any questions, and thank you all again for your support. Operator: This concludes today's program. Thank you all for participating. You may now disconnect.
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: Hello, and thank you for standing by for Baidu's Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Juan Lin, Baidu's Director of Investor Relations. Juan Lin: Hello, everyone, and welcome to Baidu's Fourth Quarter and Fiscal Year 2025 Earnings Conference Call. Baidu's earnings release was distributed earlier today, and you can find a copy on our website as well as on newswire services. On the call today, we have Robin Li, our Co-Founder and CEO; Julius Rong Luo, our EVP in charge of Baidu Mobile Ecosystem Group, MEG; Dou Shen, our EVP in charge of Baidu AI Cloud Group, ACG; and Henry Haijian Hu, our CFO. After our prepared remarks, we will hold a Q&A session. Please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. For detailed discussions of these risks and uncertainties, please refer to our latest annual report and other filings with the SEC and Hong Kong Stock Exchange. Baidu does not undertake any obligation to update any forward-looking statements, except as required under applicable law. Our earnings press release and this call includes discussions of certain unaudited non-GAAP financial measures. Our press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures and is available on our IR website at ir.baidu.com. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on Baidu's IR website. I will now turn the call over to our CEO, Robin. Yanhong Li: Hello, everyone. In Q4, Baidu General Business total revenue was RMB 26.1 billion. Revenue from our core AI-powered business exceeded RMB 11 billion, accounting for 43% of Baidu General Business revenue. In AI Cloud Infra, subscription-based revenue from AI accelerator infrastructure grew 143% year-over-year, accelerating further from 128% in Q3. Meanwhile, Apollo Go maintained its robust momentum, delivering 3.4 million fully driverless operational rides in the quarter. Total rides increased by over 200% year-over-year. 2025 marked the third year of our journey in Gen AI and a pivotal year where AI became the new core of our portfolio. In 2025, we made substantial progress in scaling AI across our businesses, accelerating AI cloud growth, expanding robotaxi operations with improved unit economics and deepening AI integration into our mobile ecosystem. Looking at our portfolio through an AI native lens, momentum across our core AI-powered businesses continue to build in 2025. AI Cloud Infra gained strong traction through its highly efficient and cost-effective training and inference capabilities. Revenue from AI Cloud Infra reached approximately RMB 20 billion in 2025, up 34% year-over-year, outpacing industry growth. Our AI application portfolio is among the most comprehensive in the industry, combining AI-empowered flagship products with AI native offerings that unlock entirely new use cases. For the full year 2025, revenue from AI applications exceeded RMB 10 billion. Apollo Go achieved a significant landmark. We delivered over 10 million fully driverless operational rides in 2025 alone. To date, we have provided a total of over 20 million rides to the public cumulatively. With our accelerated global expansion, Apollo Go's footprint has now reached 26 cities worldwide, reinforcing our leadership in autonomous ride-hailing services. Lastly, our AI native marketing services, including digital humans and agents, sustained strong growth with revenue up 110% year-over-year. Collectively, these results demonstrate AI's growing contribution to Baidu's value creation and our ability to translate AI capabilities into scalable commercial impact. Now let me share the key highlights of the quarter, starting with our proprietary AI chips. This quarter, we announced the proposed spin-off and separate listing of Kunlunxin. After more than a decade of steadfast investment in self-developed AI chips, we are proud to see the market increasingly recognize their value and proven performance. This milestone validates our long-term strategic vision and unlocks new opportunities for value creation. Our AI chips are built on a proprietary architecture developed in-house from day 1. They deliver stable, high-performance AI computing at scale with broad compatibility across different models and frameworks. This enables customers to deploy faster with lower integration costs. What distinguishes our AI chips is a proven track record of large-scale, real-world deployments with leading enterprises across diverse industries, spanning financial services, telecommunications, energy and Internet sectors. Customers choose our chips for reliable performance, stable supply at scale, exceptional software compatibility and strong efficiency, especially in inference workloads. Looking ahead, we see significant opportunities for both Baidu and Kunlunxin as AI infrastructure demand continues to accelerate. Next, I will turn to our AI cloud infrastructure. Our infrastructure is among the most advanced in China, powered by a diverse mix of domestic and international high-performance computing resources. In Q4, subscription-based revenue from AI accelerator infrastructure grew 143% year-over-year, achieving triple-digit growth for the full year 2025. Importantly, we saw a continued shift toward a more recurring, structurally healthier revenue model. The robust growth was fueled by rapidly expanding enterprise AI adoption. As customers integrate AI into core operations, the unique value of our full stack end-to-end AI architecture becomes increasingly evident. By owning and optimizing across all 4 layers, we achieved sustained advantages in stability and cost effectiveness, better addressing enterprises' needs for AI deployment. These advantages are translating into tangible market momentum, fueling accelerated adoption of our AI Cloud Infra. In Q4, we further broadened our client reach. Leading enterprise clients deepen their partnerships with us, driving increases in both usage and spending. We also saw healthy growth contribution from our mid-tier clients. We continue to strengthen our presence in diverse industries, like Internet services, gaming, autonomous driving and embedded AI, underscoring the versatility of our infrastructure. Embodied AI, in particular, showed notable momentum. Revenue from this vertical doubled quarter-over-quarter in Q4. We onboarded a new wave of leading humanoid robotics companies, cementing our position as the go-to cloud service provider for China's fast-growing embodied AI industry. Next, I'll cover our foundation model progress, which is a critical part of our AI capabilities. We remain fully committed to advancing our proprietary foundation model, ERNIE. Following the unveil of ERNIE 5.0 last quarter, we launched an updated version in January. As we advance ERNIE, we remain guided by a clear application-driven approach, making ERNIE strongest where it matters most for our portfolio. To execute this approach more effectively, we recently restructured our model development organization into 2 dedicated teams. One team advances ERNIE state-of-the-art foundation model capabilities, maintaining our technological edge in this fast-evolving space. The other team tailors models for specific business needs, reducing costs, improving response latency and optimizing model size and efficiency to ensure our technologies are not just cutting edge, but readily scalable across our businesses. Close collaboration between both teams ensures our technologies stay grounded in real-world needs while our applications benefit from continuous technological advancement. Now turning to AI applications. This is where we believe AI's greatest value will ultimately reside. We are pioneering AI applications to solve complex real-world problems for both individuals and enterprises. Let me share our progress across multiple key areas, starting with AI-powered search. In Q4, we continued our AI search transformation, pursuing one of the most comprehensive and ambitious transformations globally. Our focus remains on continuously improving the quality of AI search results while expanding what users can accomplish directly within search. This quarter, for example, we introduced AI-generated infographics into our search results, utilizing text-based information where appropriate to make key insights immediately clear and digestible. We've also integrated more MCP capabilities across key scenarios, including e-commerce, health care and local services. This enables actions such as shopping, booking and health care consultation to be completed seamlessly within the search experience. During the Chinese New Year, we moved quickly to embrace the latest AI agent innovation by integrating OpenClaw, a recently popular open source agent framework directly into Baidu app with one-click access, enabling our users to immediately benefit from cutting-edge agentic AI capabilities with an MAU of around 700 million. We provide easy access to OpenClaw for almost half of the Chinese population. For ERNIE Assistant, which is the AI chatbot integrated across our platform, we enhanced the user experience by introducing broader multimodal capabilities. This improvement have been well received by users, driving ERNIE Assistant's MAU to exceed 200 million in December. We are also scaling our AI search API. Adoption has accelerated in Q4 with call volume up over 110% quarter-over-quarter. With industry-leading authority, comprehensiveness and newly added multilingual capabilities, our AI search API is now opening up broader possibilities for the international market. Next is digital humans, which represent a compelling form of AI application. They combine visual presence, voice and real-time interaction to create more engaging and effective experiences. In December 2025, the number of digital humans live streaming on our platform increased nearly 200% year-over-year. Beyond Baidu's own platforms, our digital human technology is expanding to empower the broader industry. Leading companies have partnered with us, including Jingdong, Zuoyebang and TikTok, validating the performance and efficiency of our digital humans. On the technology front, we believe our hyperrealistic digital human represents the next generation of capabilities. This quarter, production costs declined to roughly 1/3 of previous quarter levels, bring industry-leading cost performance and positioning this technology for broader adoption. Another area of progress is Miaoda, our vibe coding platform, which enables users without coding experience to build applications through natural language, including WeChat Mini Programs, websites, mini games and more. Following the Q4 launch of Miaoda's international version, MeDo, users globally have created over 1 million AI applications as of early February, all without writing a single line of code. Looking ahead, we see meaningful opportunities to unlock even greater possibilities in AI application development. Lastly, we are using AI to solve operational problems and drive efficiency gains across industries. One example is Yijian, our advanced visual intelligence platform. Yijian enables enterprises to automate operational compliance and safety checks through intelligent visual analysis. While known brands across coffee chains, quick service restaurants and fine dining are now using Yijian to ensure high standard operations across their thousands of locations. Another example is FM Agent, our self-evolving agent, designed to solve complex operational challenges. By autonomously reasoning across data, rules and real-world constraints, it simulates countless scenarios to identify best solutions. We've seen strong validation both internally through our own cloud resource optimization and externally across industries like manufacturing, energy, finance and logistics, where efficiency improvement is a universal priority. On the organizational front, we recently established the Personal Super Intelligence Business Group, or PSIG. PSIG unifies Baidu Wenku and Baidu Drive, our 2 flagship consumer-facing AI applications. Even before this organizational integration, the 2 teams have already collaborated at the product level to deliver innovations like Free Canvas and GenFlow. This new group enables even deeper collaboration going forward as we accelerate the rollout of new applications to foster a robust growth curve driven by application layer innovation. Shifting to physical AI. Apollo Go represents our largest AI application in the physical world. 2025 was a year of accelerated scaling for Apollo Go, where we reinforced our leadership in operational scale and achieved significant progress in global expansion. We continue to expand fully driverless operations at pace, delivering 3.4 million fully driverless operational rides in Q4 with weekly rides peaking at over 300,000. Total rides grew by over 200% year-over-year. Cumulative rides provided to the public have surpassed 20 million as of February 2026, firmly cementing our position as the world's leading autonomous ride-hailing service provider. We entered 2026 with momentum across key international markets. In the U.K., we advanced our partnerships with Uber and Lyft moving forward with plans to pilot autonomous vehicles in London with testing expected to begin in the first half of 2026. This represents an important step in Apollo Go's international expansion, extending our right-hand drive robotaxi capabilities from Hong Kong to another strategically important market. In Switzerland, we initiated testing in St. Gallen following our market entry last quarter. In the Middle East, we achieved progress in both Abu Dhabi and Dubai. In Abu Dhabi, we launched a fully autonomous ride-hailing services on Yas Island in January with AutoGo. In Dubai, we secured the city's first fully driverless testing permit from the Roads and Transport Authority. We also announced the next phase of our global partnership with Uber to bring our fully autonomous ride-hailing services to Dubai via the Uber platform. These are critical milestones that accelerate our progress across the Emirates. In Asia, we entered a new market, South Korea, starting with the Seoul metropolitan area, further expanding our presence across the Asian region. Meanwhile, in Hong Kong, we expanded our open road testing into Tsuen Wan and initiated cross-district testing between Airport Island and Tung Chung, bringing us closer to commercial readiness there. As of February 2026, Apollo Go's global footprint reached 26 cities, demonstrating the scalability of our autonomous driving technology across diverse regulatory and operational environments. Looking ahead, we are focused on accelerating expansion to more cities globally while continuously improving operational excellence and unit economics. Our growing experience across diverse markets gives us confidence in our ability to scale further, and we expect more cities to achieve positive unit economics over time. Underpinning this expansion, safety remains our top priority and the foundation of everything we do. Our autonomous ride-hailing service is the safest globally with our fully driverless vehicles experience an airbag deployment accident only once every over 12 million kilometers. As we scale, we will continue strengthening safety standards and ensure sustained reliability. Ultimately, our mission is to harness AI to transform mobility, making it fundamentally safer, more affordable and more comfortable and improving how millions of people move, work and live. In summary, with AI now firmly integrated across our portfolio, we believe we are well positioned to deliver sustainable value and shape the next phase of the AI era. With that, let me turn the call over to Henry to go through the financial results. Haijian He: Thank you, Robin, and hello, everyone. We are making progress on our key focus areas. Over the recent quarters, we've enhanced disclosure for greater transparency and driven operational efficiency improvements. This quarter, we took a significant step to unlock value from our strategic AI chip investments through the proposed Kunlunxin spin-off and a separate listing, a milestone we are particularly pleased with. We've also announced a new USD 5 billion share repurchase program and adopted a dividend policy for the first time. Additionally, we've sharpened our strategic focus on high-potential AI applications by forming a PSIG business group, integrating Baidu Wenku and Baidu Drive. These actions reflect our consistent execution and ongoing focus on creating shareholder value. Looking at Q4 results, we saw positive momentum. Baidu General Business total revenue increased 6% quarter-over-quarter with non-GAAP operating profit, expanding 28% sequentially to RMB 2.8 billion. Operating cash flow for Baidu turned positive in Q3 and remained positive in Q4, generating a combined RMB 3.9 billion across both quarters. In terms of our core AI-powered business, in Q4, revenue exceeded RMB 11 billion, accounting for 43% of Baidu General Business revenue. We are seeing strong momentum across several areas. AI Cloud Infra continues to gain market traction and outpace industry average. Our AI application portfolio is expanding rapidly with strong enterprise adoption. Combining AI Cloud Infra and AI applications, our cloud revenue reached RMB 30 billion for the full year 2025. Meanwhile, Apollo Go reinforces its position as a global leader in autonomous ride-hailing with one of the industry's largest footprints and the strongest growth momentum. And AI native marketing services is growing fast. These results demonstrate our progress, and we believe this is just the beginning. We have a robust pipeline of initiatives ahead, and we are confident in our ability to create lasting shareholder value. Now let me walk through the details of our fourth quarter and full year 2025 financial results. Total revenues in Q4 were RMB 32.7 billion, increasing 5% quarter-over-quarter, primarily due to an increase in Baidu core AI-powered business. Total revenues for the full year 2025 were RMB 129.1 billion, decreasing 3% year-over-year, primarily due to a decrease in legacy business, partially offset by an increase in Baidu core AI-powered business. Cost of revenues was RMB 18.3 billion in Q4, which remained flat quarter-over-quarter. Cost of revenues was RMB 72.4 billion in 2025, increasing 10% year-over-year, primarily due to an increase in costs related to Baidu core AI-powered business. Operating expenses were RMB 13.0 billion in Q4, increasing 10% quarter-over-quarter, primarily due to an increase in expected credit losses and a onetime employee severance costs to improve efficiency. Operating expenses were RMB 46.3 billion in 2025, increasing 1% year-over-year. Impairment of long-lived assets was RMB 16.2 billion in 2025, attributable to an impairment loss of core asset group. Operating income was RMB 1.5 billion in Q4, and operating margin was 5%. Operating loss was RMB 5.8 billion in 2025 and operating loss margin was 5%. Excluding impairment of long-lived assets, operating income was RMB 10.4 billion in 2025. Non-GAAP operating income was RMB 3.0 billion in Q4, and non-GAAP operating margin was 9%. Non-GAAP operating income was RMB 15.0 billion in 2025, and non-GAAP operating margin was 12%. In Q4, total other income net was RMB 1.2 billion compared to RMB 1.9 billion last quarter. Income tax expense was RMB 1.0 billion compared to income tax benefit of RMB 1.8 billion of the quarter. In 2025, total other income net was RMB 12.5 billion compared to RMB 7.4 billion in the same period last year. Income tax expense was RMB 1.3 billion compared to RMB 4.4 billion in the same period last year. In Q4, net income attributable to Baidu was RMB 1.8 billion, net margin for Baidu was 5% and diluted earnings per ADS was RMB 3.71. Non-GAAP net income attributable to Baidu was RMB 3.9 billion, non-GAAP net margin for Baidu was 12%, and non-GAAP diluted earnings per ADS was RMB 10.62. In 2025, net income attributable to Baidu was RMB 5.6 billion, net margin for Baidu was 4% and diluted earnings per ADS was RMB 11.78. Excluding the impact of impairment of long-lived assets, net income attributable to Baidu was RMB 19.4 billion. Non-GAAP net income attributable to Baidu was RMB 18.9 billion, non-GAAP net margin for Baidu was 15% and non-GAAP diluted earnings per ADS was RMB 53.41. We define total cash and investments as cash, cash equivalents, restricted cash short-term investments, net, long-term time deposits and held-to-maturity investments and adjusted long-term investments. As of December 31, 2025, total cash and investments were RMB 294.1 billion. In Q4, operating cash flow was RMB 2.6 billion. In 2025, operating cash flow was negative RMB 3.0 billion, which remained positive for the past 2 consecutive quarters. Baidu General business had approximately 29,000 employees as of December 31, 2025. With that, operator, let's now open the call for questions. Operator: [Operator Instructions] Your first question comes from Alicia Yap with Citigroup. Alicis a Yap: I have questions related to the model. So we have noticed very active model iteration recently. How does management view the current competitive landscape? And then Baidu recently also released updated ERNIE 5.0 and also make some organizational adjustments. So could management discuss the strategic rationale behind these moves and also how the company thinks about the relationship between the model evolution and also the application in your overall AI strategy? Yanhong Li: Alicia, this is Robin. We did see very active model releases recently. The market is highly competitive and moving fast. But amid all the competition, we've always believed that applications matter more than models because models ultimately create value through applications. That is why we always take an application-driven approach with ERNIE. Model improvements are guided by the most valuable and promising use cases. And this has been consistent across every iteration of ERNIE. As I just mentioned, recently, we released the updated version of ERNIE 5.0. At the same time, we've been proactively making organizational changes to stay agile in the fast-moving market. We restructured our model team into different focus areas. One team continues pushing frontier capabilities at the foundation model level to maintain technical leadership. ERNIE has clear strength in several key areas, such as creative writing, omnimodel understanding and instruction following. We are confident we will keep improving ERNIE's performance across key application scenarios. Meanwhile, this high-value application scenarios continuously provide ERNIE with real data and feedback, driving model iteration and making ERNIE better and better. The other team works much closer to specific business needs and application scenarios focused on reducing costs, improving speed and increasing efficiency or leveraging the best available models for specific use cases, all aimed at helping businesses better leverage AI based on their actual needs. We recognize that model capabilities are broad and application scenarios can be highly diverse. And no single model can lead everywhere. So we fully leverage ERNIE where it has clear strengths, and we are open to using other models where they are better suited. The goal is always to achieve the best application outcomes. So to sum up, we will continue with our application-driven approach using real application needs to continuously iterate and optimize our models while also keep refining applications themselves to deliver better and better results, ultimately, creating tangible value for users and businesses. Operator: Your next question comes from Alex Yao with JPMorgan. Alex Yao: I have one question about the Baidu AI Cloud. We noticed that Baidu AI Cloud revenue delivered strong growth for the full year 2025. Can you elaborate and help us understand the key growth driver behind the robust revenue growth number? And how should we think about the AI cloud revenue growth outlook in 2026? Dou Shen: Thank you, Alex. This is Dou. For 2025, our AI cloud revenue, which includes revenue from AI Cloud Infra and AI applications, reached RMB 30 billion. Revenue from AI Cloud Infra grew 34% year-over-year, outpacing the broader market. Within AI Cloud Infra, subscription-based revenue from AI accelerator infrastructure grew 143% year-over-year in Q4 and has become the primary growth driver, demonstrating strong momentum. We remain highly confident in sustaining strong growth momentum in 2026. Underpinning our growth is the accelerating enterprise AI adoption. We are seeing a demand growth in both training and inference workloads, and we expect the demand for AI computing to keep expanding, creating significant opportunities ahead. Baidu's full stack end-to-end AI architecture is a key differentiator in capturing such opportunity. Under the foundation of this architecture is our industry-leading AI infrastructure, which achieves an excellent balance across performance, efficiency and cost. Our AI infra is powered by a diverse mix of chips. We have built deep expertise in heterogeneous computing and unified scheduling, which enables us to efficiently manage computing resources from different chip vendors and achieve industry-leading performance and efficiency. In the meanwhile, our proprietary chip capabilities provide a significant competitive advantage. As Robin just mentioned, our self-developed Kunlunxin AI chips deliver strong performance, compatibility and cost efficiency. They have been deployed at scale with leading enterprise customers across financial services, telecom, energy and Internet sectors and the market feedback has been very positive. Kunlunxin serves as a key component of our own cloud platforms computing power, playing an important role in our overall AI infra. As AI demand grows, the advantages of our AI infra will become increasingly evident. Beyond AI infra we just discussed, we are continuously evolving our best-in-class agent infra to help enterprises rapidly build and deploy AI agents at scale. We keep bringing in the latest, most cutting-edge capabilities. For example, we recently launched simplified open cloud deployment on Baidu AI Cloud, which streamlines the process so that even users with no coding experience can quickly deploy their own open cloud agents. Then looking into 2026, as enterprise AI deployments deepen further, we are confident that our cloud business will continue to grow faster than the industry. We expect AI Cloud Infra to maintain strong momentum with AI accelerator infrastructure continuing to serve as a core driver, propelling our overall cloud business toward a more sustainable and high-quality growth mode. Operator: Your next question comes from Lincoln Kong with GS. Lincoln Kong: So actually, this quarter, we see this AI-powered business continue to deliver a pretty solid growth. So how does management view the current stage development for those AI-powered business? So when should we expect this share to exceed, say, 50% of the Baidu General Business? And what will be the key driver going forward for the AI-powered business? Yanhong Li: Okay. Let me start by sharing how we think about our core AI-powered business. This includes AI cloud infrastructure, AI applications like Baidu Wenku and Baidu Drive and our robotaxi business, Apollo Go, and our AI-native marketing services, including agents and digital humans. AI-powered business organizes our business according to the nature of our products and services, where AI is empowering each to create meaningful customer value and business impact. In Q4, AI-powered business revenue exceeded RMB 11 billion. That's like 43% of Baidu General Business revenue. This percentage has been rapidly increasing over the recent quarters, and AI-powered business is becoming the core driver of our overall revenue growth. Each of our AI-powered businesses has clear strategic positioning and competitive advantage. First, AI Cloud Infra. We see enterprises scale AI from pilots to production and our full stack end-to-end AI capabilities enable strong performance at competitive cost. AI Cloud Infra revenue grew faster than the industry average in 2025 with subscription-based AI accelerator infrastructure revenue accelerating sharply in Q4. And second, it's AI applications. We've always believed AI's ultimate value will settle at the application layer, and we built one of China's most comprehensive AI application portfolios. As AI capabilities continue to evolve and new use cases emerge, we see significant expansion potential in this business. And then third is the robotaxi business, Apollo Go. Apollo Go is scaling rapidly while expanding internationally. We lead globally in operating scale, safety record, efficiency and cost structure. And the fourth is AI native marketing services like agents and digital humans. They improved engagement and conversion, and we're seeing strong market adoption with great potential ahead. So looking to the mid- to long term, as enterprise AI deployment deepens, monetization capabilities of AI applications improve and physical AI applications such as autonomous driving continue to expand, and we're confident in the growth trajectory of our AI-powered business. This AI-powered business aren't isolated. They continuously reinforce each other through our full stack capabilities. And based on current visibility, we believe our core AI-powered business will become the majority of Baidu General Business in the foreseeable future. Operator: Your next question comes from Wei Xiong. Wei Xiong: Could management elaborate on the framework that you use to allocate capital, including shareholder returns, organic investment and potential strategic opportunities? And also, could management comment on the long-term strategic positioning of Kunlunxin within the Baidu Group? Haijian He: This is Henry. I believe many of you may have noticed our recent series of initiatives. These include enhancing our disclosures, improving operational efficiency, optimizing our organizational structure, advancing the proposed Kunlunxin spin-off and separate listing and also announcing our new share repurchase program and the first dividend policy. And recently, we're also reforming the PSIG, the Personal Super Intelligent Group business group, integrating Baidu Wenku and Baidu Drive. Altogether, these moves reflect a coherent execution framework, demonstrating our improved management execution and ongoing commitment to creating shareholder value. I think take our new share repurchase program as one example. We are very focused on providing clear and sustainable returns to shareholders. So in the recent, in February, the Board has approved a new USD 5 billion share repurchase program, which we plan to execute on a regular basis in a very disciplined and transparent manner. We are also introducing Baidu first dividend policy. We believe the introduction of the policy alongside with a sizable buyback program will further strengthen our shareholder return profile and attract a broader range of investors, thereby further diversifying our investor base. As we mentioned, the proposed spin-off and a separate listing of Kunlunxin is another good example. We are making very good progress of the listing process. Kunlunxin is a result of over a decade of investment and represents a critical infrastructure component of our full-stack AI capabilities. We believe this spin-off and a separate listing will receive strong market recognition and unlock significant value for Baidu as a group. So looking ahead, we firmly believe the company has tremendous value, and we will continue unlocking it through various initiatives. We remain committed to deliver sustainable and consistent returns to our shareholders. So more initiatives will follow in due course. So stay tuned with us. Thank you. Operator: Your next question comes from Gary Yu with Morgan Stanley. Gary Yu: My question is on robotaxi. First of all, congratulations on the robotaxi expansion into more countries, especially to my hometown Hong Kong. Can you share your overseas strategy in 2026? And what are your key competitive advantages there? And also with Waymo recently valued at $126 billion, how is management thinking about unlocking Apollo Go's value? Would you consider a spin-off? Yanhong Li: Gary, as I mentioned last quarter, I believe robotaxi has reached a tipping point globally. Through continuous delivery of safe autonomous drives and positive word of mouth, we're seeing more countries and regions creating supportive environment for robotaxi operations. We believe the industry will accelerate in 2026. Apollo Go is a clear global leader in this space. We've completed over 20 million cumulative rides. At peak period, our weekly fully driverless rides exceeded 300,000. To date, Apollo Go fleets have accumulated more than 300 million autonomous kilometers, including over 190 million fully driverless autonomous kilometers with an outstanding safety record. And we continue advancing our industry-leading technology to make rides safer and more comfortable. We're also accelerating international expansion to capture global opportunities. Today, our global footprint spans 26 cities across different continents, covering both left-hand and right-hand drive robotaxi market. Our autonomous driving system works reliably anywhere across different traffic patterns and different urban environments. Notably, very few players have entered right-hand drive robotaxi market, while we've already established a presence and are making rapid progress. Moreover, we have a fundamental cost advantage. RT6 is the world's first purpose-built production vehicle designed from the ground up for Level 4 autonomous driving. At under USD 30,000 per vehicle, RT6 offers the industry's best cost structure and combined with our leading operational efficiency, this enables us to achieve the lowest cost per mile globally while maintaining superior safety. We were the first to achieve UE breakeven in Wuhan in late 2024. And as you know, most major cities have higher ride-hailing prices than Wuhan. To accelerate global expansion, we are leveraging diverse strategic partnerships. For example, we are collaborating with Uber and Lyft in London to launch this year and in Dubai with Uber also. These partnerships drive faster, more efficient market expansion. We see Apollo Go as a strategic growth engine with significant long-term potential. Many major cities are short of human drivers. More supply via robotaxi service not only offer safer rides, but also stimulate ride-hailing demand, therefore, add tax revenue to the government. It also releases precious land from parking spaces and provide additional monetization opportunities for these real estate assets. Our focus is on 3 areas: first, aggressively scale up safe and comfortable operations by deploying more vehicles. Second, continuously improving unit economics with the goal of achieving UE breakeven in more cities this year. Third, expanding with flexible business models, both domestically and internationally. As for strategic options, we will remain flexible and evaluate the best path that maximizes long-term shareholder returns. And of course, our focus is always on execution and sustainable growth. We believe the autonomous ride-hailing sector as a whole remains undervalued. Over time, we expect valuations across the sector to better reflect the transformative potential of this technology, which creates meaningful upside opportunity for Apollo Go. Operator: Next question comes from Miranda Lang with Bank of America Securities. Xiaomeng Zhuang: Wish you a happy year of hope. So my question is about competition. We have seen that the consumer-facing AI competition is intensifying recently, especially during the Chinese New Year. How do you assess the current competitive dynamics? Where do you see Baidu's AI2C products such as the early assistance, differentiation and also positioning in this market? And lastly, how to think about the path to monetization? Rong Luo: This is Julius. The AI2C product market is highly competitive. We have seen some competitors about very aggressive market strategies to rapidly scale their user base in the past Chinese New Year. However, as technology and products evolve rapidly, we still believe our core strategy should remain grounded in actual user needs. We are highly committed to continuously enhancing our existing products and services capabilities through AI innovations to better serve our users. In our flagship consumer-facing products, like Baidu app today, we have built a ERNIE Assistant to strengthen our service capabilities across the entire user journey, from information thinking to providing solutions and completing tasks. On information thinking, we have significantly enhanced our users assess information through ERNIE Assistant. For example, we have improved the answer accuracy and relevance through RAG, and ERNIE Assistant maintains low error rates with minimal hallucinations, delivering the highly trustworthy content to users. We have also integrated the multilingual AI such as API capabilities that can enable the users to assess the broad information sources during conversations, improving the information richness and usability. And especially for scenarios like travel planning, which is quite helpful. And in December, ERNIE Assistant's MAU surpassed 200 million and with conversation rounds and engagements growing quite fast. For past complexion, we are integrating MCP agents to connect users with tools and real-word services. This quarter alone, we're adding nearly 100 service capabilities, especially in health care, travel, education and e-commerce. For example, through the Baidu Health MCP integrated into ERNIE Assistant, users can assess a range of health care capabilities, spending online to offline services. In e-commerce, our MCP module saw a very strong GMV growth quarter-over-quarter. Meanwhile, we are taking a different approach with the stand-alone ERNIE app, our positioning as a platform for innovation and experimentation. Our earlier multi-model AI features have gained good traction with the young audiences. And more recently, we have added AI capabilities focused on the workplace productivity, tapping into ERNIE's ability to handle the complex tasks in professional settings. We are seeing the promising early signals in these productivity scenarios. We take a measured approach to monetize the AI tools and products, prioritizing the product excellence and the user experiences. Monetization will follow naturally as the products mature. Thank you for your question. Operator: Your next question comes from Ellie Jiang with Macquarie. Ellie Jiang: My question is mostly focusing on the AI investment. How do you think about the AI-related CapEx over the next 12 to 24 months? How should we think about the return profile of these AI investments and the expected impact on the ROIC over time? Broadly speaking, where do you see further efficiency opportunities to support margin and cash flow improvements in the future? Haijian He: This is Henry. First of all, on CapEx and AI investment, since we have launched early in March of 2023, we have invested over RMB 100 billion in AI. Going forward, we will continue to maintain this level of investment density. Second, we are very conscious about returns and understand investors' focus on the return on capital invested. That's why we have work to improve our financial performance, and we have delivered good results on key metrics over the past few quarters. For example, in Q4, gross profit for Baidu grew double digits sequentially and non-GAAP operating income for Baidu increase about 35% quarter-over-quarter. We also performed better on the margin profile, both on gross margin and operating margin increasing sequentially. Importantly, operating cash flow for Baidu turned positive in Q3 and remained positive in Q4. With the second half, operating cash flow reached nearly RMB 4 billion. Free cash flow for Baidu also turned positive in Q4. Thirdly, we have also found and explored alternate ways of supporting our financial needs including, for example, operational and financing leasing as well as we have access to the low-cost interest banking borrowing. For example, some of these bank borrowings and the leasing facilities carry the interest rates as low as below 2%. Though these approaches help us maintain a healthy long-term financing structure while sustaining our AI investments and support our business growth. So in summary, we will continue to maintain our AI investment density, while balancing investor focus on profitability and return time lines. We believe that even with significant AI investment, our operating cash flow remain positive going forward as well. Thank you. Operator: Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.
Operator: Ladies and gentlemen, good day, everyone, and welcome to Vipshop Holdings Limited Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, I would like to turn the call to, Ms. Jessie Zheng, Vipshop's Head of Investor Relations. Please proceed. Jessie Fan: Thank you, operator. Hello, everyone, and thank you for joining Vipshop's Fourth Quarter and Full Year 2025 Earnings Conference Call. With us today are Eric Shen, our Co-Founder, Chairman, and CEO, and Mark Wang, our CFO. Before management begins their prepared remarks, I would like to remind you that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include, but are not limited to, those outlined in our safe harbor statement in our earnings release and public filings with the Securities and Exchange Commission, which also applies to this call to the extent any forward-looking statements may be made. Please note that certain financial measures used on this call, such as non-GAAP operating income, non-GAAP net income attributable to Vipshop's shareholders, and non-GAAP net income per ADS, are not presented in accordance with U.S. GAAP. Please refer to our earnings release for details relating to the reconciliations of our non-GAAP measures to GAAP measures. With that, I would now like to turn the call over to Mr. Eric Shen. Eric Shen: Good morning, and good evening, everyone. Welcome, and thank you for joining our fourth quarter and full year 2025 earnings conference call. This year has been defined by strategic realignment, operating resilience, and a firm commitment to high-quality growth in a dynamic market. While we entered 2025 facing a multi-consumer environment, I'm pleased to report that the agility of our off-price retail model has allowed us to stabilize our top-line performance and continue to deliver robust profitability for the full year. Our fourth quarter results came in slightly below our expectations. This was primarily due to a deceleration in December sales as customer activity slowed. We attributed it to the weak winter apparel demand alongside delayed holiday shopping due to a later spring festival. While we saw short-term pressure this quarter, our long-term road map remains unchanged. We continue to make solid progress that reinforces our flywheels from merchandising, customer engagement, to operations. In 2025, we implemented a strategic reorganization of our merchandising and customer engagement team to enhance agility and long-term competitiveness by enabling faster decision-making and breaking down internal silo. We have unlocked a strong foundation for long-term growth. Throughout the year, our merchandising strategy centered on 3 pillars: enhancing customer relevance, building differentiation, and deepening category expertise. Advancing these capabilities has been fundamentally allowed us to consistently and effectively align high-value brand supply with evolving customer demand. We are building a stronger, more connected portfolio of branded products. Last year, our merchandising team further deepened our supply network. This enabled us to acquire more quality deep discount inventory, driving sales growth steadily across our most valuable brands. Leveraging data-driven insights, we are proactively shaping a resilient assortment that wins in growth categories while keeping our supply chains responsive to shifts in customer needs. We are seeing an encouraging early signal of cross-sell from apparel into related categories like mother and baby, childcare, and lifestyle. We will remain focused on refining these synergies to better serve our customers' diverse needs. Our Made for VIP line has become a key driver of our differentiation, with sales in these exclusive categories growing by over 40% to account for 5% of online apparel sales in 2025. Having successfully built these foundations of scale, we are now in the position to evolve our approach for the next stage of growth. We are streamlining our exclusive products to build a clear identity and drive mind share when customers see an exclusive tech, which should instantly recognize a promise of high value and reliability. This is how we transfer the line into competitive differentiations, reliable courage, on-trend selection, and exceptional value. Our optimistic buying proactive is another key differentiator, allowing us to select a portfolio of high-demand items from top global and domestic partners. This delivers a compelling value proposition based on quality, price, and style. Combined with dynamic fresh sales and treasure hunt experience, it drives wild customer apparel, full excitement, and encourages repeat visits. We are moving faster to lock in more exclusive low-priced inventory to attract high-value shoppers and deepen the discovery drive of our platform. To enhance customer experience, one team now manages the entire journey from initial brand and acquisitions to value-driven growth and lifelong engagement. We have enhanced our capabilities to target and engage user efficiency, which serves as the core foundation of our full life cycle customer strategy. Early progress is promising, and we are focused on the sustainable runway ahead to build a more seamless cross-category experience that maximizes lifetime value. The Super VIP program remains the cornerstone of our growth. Active SVIP members sustained double-digit growth for the fourth quarter. For the full year 2025, active SVIPs grew by 11% to 9.8 million, contributing 52% of our online spending. Through exclusive upgrades such as providing sales and family benefits, SVIPs consistently demonstrate significantly higher retention and repeat purchase than those of regular customers. Their sustained loyalty and spending power provide a reliable revenue stream and increase our apparel to brand partners, seeking high-quality customer access. Turning to the operations. We have enhanced our capabilities to better think merchandise with customer intent, delivering measurable results. We implemented multi-objective optimization in our searching engine, directly improving conversion rate. We also prioritize diversity and freshness in our recommendation engine, which has enriched discovery and drive high browsing frequency and return visits. Look ahead, we are exploring generative search and recommendations to enable more dynamic, interactive, and integrate discovery experience. Lastly, we have made great strides in deploying AI across our business to drive tangible value with advanced AI applications in searching and recommendations, customer service, and marketing. We have enhanced the customer experience and empowering our brand partners, laying a strong foundation for deeper company-wide integration. Notably, our AI-powered customer service effectively automates routine interactions, improving the overall speed and relevance of customer support. The system now manages the majority of product inquiries and generate personalized recommendations with automated resolutions reach approaching 90%. AI-generated content is now widely used in marketing, driving efficiency and effectiveness, taking our own campaign, for example, by leveraging AIGC to automate creatives and placements. We have reduced production costs while optimize customer acquisition efficiency. Furthermore, we have used AIGC to generally summarize our customer reviews and product portfolio, helping brand partners boost their sales effectiveness. With its full-scale launch, our AI virtual try-on feature has proven to be an effective driven customer engagement. Initial data confirm its impact on loyalty, showing that engaged customer has a high rate of repeat visits. Our next phase is fundamentally integration of AI, moving beyond stand-alone workflows to embed it within our core operations, making it primary driver of growth and business-wide efficiency. As we're looking back on 2025, we have become a more agile, customer-central and technology-driven organizations. We have enhanced our leadership in the off-price sector as an indispensable gateway for brand navigation, China shifting consumption landscape, as value shopping become a structural trend. We are uniquely positioned to capture high-value customers and expand our share of wallet through merchandising and supply chain reliability. While the macro environment remains dynamic, our focused strategy and strength execution giving us great confidence in delivering sustainable profitability growth in 2026 and beyond. At this point, let me hand over the call to our CFO, Mark Wang, to go over our financial results. Mark Wang: Thanks, Eric, and hello, everyone. We concluded 2025 with resilient performance underpinned by solid profitability in a dynamic market. This financial strength stems from our disciplined approach to investing, ensuring the every dollar we deploy advance our core business and builds lasting momentum. Over the past year, we focused on enabling the business with agility, ensuring our investments in merchandising, consumer engagement, and operational upgrades, as well as AI enhancements, directly strengthen our business core. This discipline has translated into quality earnings and is building the foundation for durable competitive advantage. As Eric emphasized, we have seen tangible progress which has repositioned us for sustained momentum. Our focus remains on stewarding our capital to support its business priorities, ensuring we have both the flexibility and the financial foundation to execute our long-term growth strategy. Turning to capital returns. I'm pleased to confirm that we delivered on our 2025 commitment, returning a total of USD 944 million to shareholders through dividends and share repurchase. For 2026, we are maintaining this momentum. Consistent with our prior year's policy, we intend to distribute no less than 75% of our full year 2025 non-GAAP net income attributable to Vipshop's shareholders. This will be executed through an increased annual dividend of approximately USD 300 million as well as the continuation of our share repurchase program. These actions reflect our confidence in the company's cash-generating capability and our steadfast commitment to shareholder value creation. Now moving to our detailed quarterly financial highlights. Before I get started, I would like to clarify that all financial numbers presented below in renminbi and all the percentage change are year-over-year change, unless otherwise noted. Total net revenues for the fourth quarter of 2025 were RMB 32.5 billion compared with RMB 33.2 billion in the prior year period. Gross profit was RMB 7.4 billion compared with RMB 7.6 billion in the prior year period. Gross margin was 22.9% compared with 23.0% in the prior year period. Total operating expenses decreased by 3.7% year-over-year to RMB 4.9 billion from RMB 5.1 billion in the prior year period. As a percentage of total net revenues, total operating expenses decreased to 15.0% from 15.2% in the prior year period. Fulfillment expenses decreased by 1.0% year-over-year to RMB 2.4 billion from RMB 2.5 billion in the prior year period. As a percentage of total net revenues, fulfillment expenses were 7.5% compared with 7.4% in the prior year period. Marketing expenses decreased by 6.1% year-over-year to RMB 873.7 million from RMB 903.3 million in the prior year period. As a percentage of total net revenues, Marketing expenses decreased to 2.7% from 2.8% in the prior year period. Technology and content expenses decreased by 9.3% year-over-year to RMB 425.5 million from RMB 469.2 million in the prior year period. As a percentage of total net revenues, technology and content expenses decreased to 1.3% from 1.4% in the prior year period. General and administrative expenses decreased by 5.2% year-over-year to RMB 1.1 billion from RMB 1.2 billion in the prior year period. As a percentage of total net revenues, general and administrative expenses decreased to 3.5% from 3.6% in the prior year period. Income from operations increased by 1.7% year-over-year to RMB 2.90 billion from RMB 2.85 billion in the prior year period. Operating margin increased to 8.9% from 8.6% in the prior year period. Non-GAAP income from operations was RMB 3.2 billion compared with RMB 3.4 billion in the prior year period. Non-GAAP operating margin was 10.0% compared with 10.2% in the prior year period. Net income attributable to Vipshop's shareholders increased by 5.8% year-over-year to RMB 2.6 billion from RMB 2.4 billion in the prior year period. Net margin attributable to Vipshop shareholders increased to 8.0% from 7.4% in the prior year period. Net income attributable to Vipshop's shareholders per diluted ADS increased to RMB 5.12 from RMB 4.69 in the prior year period. Non-GAAP net income attributable to Vipshop's shareholders was RMB 2.9 billion compared with RMB 3.0 billion in the prior year period. Non-GAAP net margin attributable to Vipshop's shareholders was 8.8% compared with 9.0% in the prior year period. Non-GAAP net income attributable to Vipshop's shareholders per diluted ADS was RMB 5.66 compared with RMB 5.70 in the prior year period. As of December 31, 2025, we had cash and cash equivalents and restricted cash of RMB 24.1 billion and short-term investments of RMB 5.8 billion. Now I will briefly walk through the highlights of our full year results. Total net revenues were RMB 105.9 billion compared with RMB 108.4 billion in the prior year. Gross profit was RMB 24.5 billion compared with RMB 25.5 billion in the prior year. Gross margin was 23.1% compared with 23.5% in the prior year. Income from operations was RMB 8.1 billion compared with RMB 9.2 billion in the prior year. Operating margin was 7.7% compared with 8.5% in the prior year. Non-GAAP income from operations was RMB 9.9 billion compared with RMB 10.7 billion in the prior year. Non-GAAP operating margin was 9.3% compared with 9.9% in the prior year. Net income attributable to Vipshop shareholders was RMB 7.2 billion compared with RMB 7.7 billion in the prior year. Net margin attributable to Vipshop's shareholders was 6.8% compared with 7.1% in the prior year. Net income attributable to Vipshop shareholders per diluted ADS was RMB 14.15 compared with RMB 14.35 in the prior year. Non-GAAP net income attributable to Vipshop's shareholders was RMB 8.7 billion compared with RMB 9.0 billion in the prior year. Non-GAAP net margin attributable to Vipshop's shareholders was 8.3%, which remained stable as compared with that in the prior year period. Non-GAAP net income attributable to Vipshop shareholders per diluted ADS increased to RMB 17.08 compared with RMB 16.75 in the prior year. Looking forward to the first quarter of 2026, we expect our total net revenues to be between RMB 26.3 billion and RMB 27.6 billion, representing a year-over-year increase of approximately 0% to 5%. Please note that this forecast reflects our current and preliminary view of the market and operational conditions, which is subject to change. With that, I would now like to open the call to Q&A. Operator: [Operator Instructions] We will now take the first question coming from the line of Ronald Keung from Goldman Sachs. Ronald Keung: [Foreign Language] Jessie Fan: Ronald, would you please translate your question into English please? So maybe I'll just translate the question first and then let Eric respond to the question. [Interpreted] So, the first question is about the quarter-to-date business performance, whether the seasonality, especially late spring festival has impacted the business performance and have -- have we seen any recovery in the business? Based on the guidance, it seems like we are accelerating revenue growth a little bit. The second question is about the margin outlook for 2026 because we have seen that margins for 2025 seems to be under a little bit pressure in terms of GP margin and NP margin, whether we have new investments for 2026? And how do we think about gross margin cost and expenses and NP margin, whether we can stabilize our margin profile. Eric Shen: [Foreign Language] Jessie Fan: [Interpreted] So, on the first question regarding the Q1 guidance, let's take a look at the Q4 first. I think our online sales actually took a hit in Q4, especially in December. It was way too warm in China in most regions for people to buy winter clothes. And since Chinese New Year is late this year, nobody was actually in a rush to shop for the holiday. Because of that, apparel didn't nearly as well as our other categories. But as we head into the first quarter, Q1, actually, we have seen consumer activity has clearly picked up, largely driven by New Year shopping. And if we look at January and February combined, actually, we do see a nice recovery in our core business. So, this has kept us firm on track with our guidance of 0% to 5% top line growth, and we are confident that we can deliver that growth and for Q1 and for the rest of the year. Second on margins, I think our business philosophy has been very consistent. We remain focused on high-quality growth at sustainable profitable growth for the business, especially in a dynamic macro environment today. So, we expect margins will be stable, and we will make every effort to outperform in terms of margins for 2026 and beyond. Operator: [Operator Instructions] Our next question comes from the line of Alicia Yap from Citigroup. Alicis a Yap: [Foreign Language] I have 2 questions. First is that related to the user growth. I think management previously commented that we are hopeful to see the user growth momentum to sustain. So just wondering if management could share with us what is your expectation for the user growth for 2026? And then regarding the demand, how are you seeing the demand for the apparel versus the non-apparel growth? And second question is related to AI. Just wondering, does management believe the overstocked business model that we have for Vipshop, would that be actually more resilient against this Agentic commerce? And with that, will VIP actually invest more resources into growing the offline business such as the Shan Shan Outlet? Eric Shen: [Foreign Language] Jessie Fan: [Interpreted] So on the first question about customer growth. Customer growth is definitely our top priority. That's actually the foundation for sales growth and ultimately profitability. In Q4, we had thought we should have maintained the customer growth momentum. But due to expected slowdown in consumer activity, actually, customer growth is a little bit under pressure. We expect customer to regrow for 2026. And we ideally, we should see customer growth is actually faster than sales growth to offset the impact of a slightly rising return rate. So we are definitely going to make every effort to bring customer back to growth track in 2026. On the second question regarding category preferences, consumers are still, generally speaking, still cautious and selective and value conscious, but they continue to shop across different categories, including discretionary categories. They just need strong reasons to do so. So that's why we focus so much on providing the best value across the shopping carts, including apparel and non-apparel categories. And we are making changes in both categories, especially in standard categories to drive repeat business for our most valuable customers, including SVIP and high-value customers to increase their cross-category purchases for family shopping. Lastly, on AI. definitely, AI is fundamentally transforming many industries, including the e-commerce industry. And for an off-price retailer like Vipshop, we are definitely adapting to this trend to remain competitive. We believe fundamentally, our business model relies on merchandising on how well we can secure quality deep discount inventory, how well we can provide a best value for customers. We think as long as we make a difference in merchandising and supply chain reliability, we will not be left behind. Of course, the online business is a hypercompetitive business. That's why we look for -- we are constantly looking for opportunities offline, especially with the outlet business, which proves to be a very good business model in terms of stable revenue streams and profitability. So we are actually expanding our presence for Shan Shan outlets which are doing great in terms of sales and profit contribution. And we expect a mirrored pace of expansion into more cities and regions and geographies. We expect to see continued strong growth in terms of sales, revenue and profit from Shan Shan business. And we expect with a strong offline presence, we will be we will be able to offset any potential challenges from AI. Operator: There are no further questions at this time. At this time, I would like to turn the conference back to Jessie for any closing remarks. Jessie Fan: Thank you for taking time to join us today. If you have any questions, please don't hesitate to contact our IR team. We look forward to speaking with you next quarter. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Good morning, ladies and gentlemen, and welcome to the freenet AG Conference Call on the Preliminary Results for the Financial Year 2025. At this time, all participants are on a listen-only mode. The floor will be open for questions following the presentation. Let me now hand over to Robin Harries, CEO of freenet AG. Robin John Harries: Good morning, everyone, and welcome to our earnings call. I'm Robin Harries, the CEO of freenet. Overall, we are happy about the operational performance and the strong customer growth. We see many opportunities ahead of us, but we are not happy about agreement with the network provider that we have, which was closed in '24. This agreement might lead to a minus EUR 13 million impact in '25 and to up to EUR 50 million negative EBITDA impact for the year '26 to '28. We are at the moment in discussions with the management of the network operator and are negotiating, trying to negotiate a better deal. This is already -- so the risks that I mentioned are already reflected in our numbers. So we are in ongoing discussions and we'll provide an update as soon as we have something. Freenet becomes more lean, focused and effective. We did some nice strategic moves in the last years. One is that we streamlined the executive board. This made us faster, more efficient and we have a clear focus. We optimized a lot in terms of marketing and sales initiatives. We have a clear focus on KPIs and performance. I think we created a lot of transparency within the organization, streamlined the focus. Everybody is on board here and is delivering, and this is I think quite good. And then we acquired the mobilezone last year, and this was one of our competitors, and we are happy about that as well. Another strategic move was that we have started a customer value management project, and this is a really a high-impact project. At the moment, our conversion rates are not great yet, but I think we have a lot of potential here. So when we compare our churn rates with competitors, we are at the moment behind, and this is potential. Because if you think about reasons why customers leave network operators, companies, the top 2 reasons are: first, they find a better deal somewhere else, and the second one is that they are not happy about network performance. Both of these things, I think, doesn't make a lot of sense when you look at freenet, because we have really great deals and we are able to offer products on all networks. So our churn rate should be good. So that's why this project is really important. We made big progress. So we are working on over 50 initiatives. And this quarter or this month, we will bring live our first AI voice bot in the customer service, and we have another AI tool for our call center agents, which will facilitate the selling process. And we are quite confident that we will have -- that we will see better outcomes here in the near future. We have some really great operational highlights. We achieved an all-time high in terms of postpaid net adds. We achieved over 300,000 organic postpaid net adds. When it comes to waipu.tv, that's -- there we achieved over or around EUR 36 million adjusted EBITDA. This is also a big step forward. In the past, we could prove that we can achieve strong customer growth there. Now we also proved that we can become profitable and show nice EBITDA. And we have a record dividend proposal of EUR 2.07. Now let's dive deeper into the mobile segment. We have -- our strongest brand is Freenet and the second one is klarmobil. And we put now a lot of focus on freenet. This is our premium brand. We changed a lot over the last month. For example, we moved the freenet offerings from the domain freenet-mobilfunk.de to freenet.de in the end of January. And so we prepared it over the course of last year. And yes, so this will be our premium brand. We will put our money on freenet. So today starts a new TV campaign and we also invest into digital out-of-home. That's important. We also shifted our marketing budgets to performing channels. We stopped the stuff that doesn't really work and now invested where we have a direct sales impact. And we will invest into our brand and that's a nice opportunity when you look at unaided brand awareness and brand awareness -- aided brand awareness. You can see that many people in Germany know the brand freenet, but when it comes to unaided brand awareness, our numbers are still very low and far below the competition, and that's a huge opportunity. So by investing into brand marketing, so we will be able to increase this, and I think this is also a nice upside potential. Beside our premium brand, freenet, we also launched new branded shops, Unlimited Mobile and Mobilfunk.de. We have a nice portfolio of brands that we position on various platforms and target specific user groups. I think this works quite well. We also relaunched our freenet FUNK app. And what's also very interesting and important is that we started our partnership with 1&1. At the end of last year, we had the first tests in selected shops where we started to sell also 1&1 mobile plans, and this test was very successful. We could achieve incremental sales. That's important for us that we not just replace one partner with another. No, we were able to really generate incremental sales. The partnership with 1&1 I think is very good. We are in the process of scaling this partnership now and roll it out to more and more shops. We have very good relationship to them, also to our partners, Vodafone and Telekom. So I think that we are very well positioned in the market, we showed that we can grow where we're strong, and yes, now we are further optimizing it and scaling the things that work. And the acquisition of mobilezone was also one important step. We could add even more brands, and this will further strengthen our market position. We have -- we are very dominant now on certain channels, and we could also add more marketing channels. And we will grow together as one organization. This will lead to nice synergies, the mobilezone team, very smart, very dynamic, moving fast. So I think that's a very good and cultural fit. The teams already work together closely, and we expect further potential there. On the next slide, this is a really important slide because you know that there's a lot of price competition in the market, a lot of pressure. And what you can see here is the freenet and frontbook pricing over the course of the last 2 years. And you could see that beginning of '24, it went down a lot, also beginning of '25. However, in the end of '25, we were able to do -- to increase it again. This actually is I think very important for us and for the market, and we could already see it during the Cyber Week. This is always a period where it, in the previous years, it became even more aggressive. This was not the case this year. We even increased our prices. This is also what we are doing at the moment. So we keep increasing our prices. We see that this works. In the last 6 months, we tested a lot or we did a lot of elasticity tests on our marketing and sales channels, that we showed our models. We could see that we can achieve very, very strong growth in terms of customer growth, new customer growth. But for us, it's more important to actually do this on a really healthy basis. That's why we started -- in Q4 last year, we started to increase prices, and we'll keep doing this. So for us, it's -- and quality is more important than quantity, and we put a lot of focus on it. So the guidance for '25 was moderate decrease, and this will be still the case for '26, because even though we increase frontbook pricing, we still have impacts from our customer base, and this will take some time. But I think it's very important that we see a shift here and that we will keep focusing on quality and try to further increase prices. On the next slide, you can see that we really gained momentum in the end of last year, we achieved all-time high customer growth, 306,000 customers, this is really outstanding result. And on top of that, we also could add 240,000 net adds from the acquisition of mobilezone. So this led to 546,000 postpaid net adds. So we outperformed our guidance here, which is great. And on top of that, there are also still 95,000 subs from base and tariffs. So overall, I think in the mobile segment, strong growth, many opportunities through our customer value management and through AI, also the marketing channels, and we just started there. I mean, last year, the TV campaigns, we started with klarmobil, now with the move to freenet.de. We also switched our marketing campaigns to freenet, to our core brand. And this is what we are -- that we want to scale this year and also afterwards. Next slide. This is our TV and media business. Media Broadcast shifted to segment orders. In Q1 '26 onwards, here you can see the freenet TV subscribers. The decline continues. And however, we have some stabilization measures. So we increased prices, we introduced a Hybrid TV stick, we prolonged a content contract, so we are working on this side as well. This segment, we also have waipu.tv and the IPTV market grows continuously. It's a strong market. Also the position of waipu.tv is very strong in this market. It was 20% to 25%, and the market will continue to grow. I mean, we are very well positioned in the competition. The product is very strong. When you look at ratings, when you look at reviews, it's an outstanding product, and we believe that we will further grow here and the market will further grow. So this is I think a very good market to be in. On the next slide, you can see our organic growth. We did some cleanups during the last quarters. We always talked about the O2 impact. And so here in this view you can see that now we deducted it, so we cleaned it. And now we have with 1,755,000 customers. We have now a clean base, because we deducted the O2, the O2TV customers. I think the migration will be finalized during this quarter, but we already deducted them in order to have a clean base. And we also deducted further unprofitable subs. So this brought us to the new and clean base. Overall, I think the growth was 152,000, is healthy. And beside this, we could show that we increased the profitability a lot and reached EUR 36 million adjusted EBITDA besides this nice growth. So on the next slide, you can see our priorities and the guidance for full year '26. Our focus areas are to strengthen the freenet brand. We will keep investing into our brand, into performance-based brand marketing campaigns. We have experience with it. It's important to have a clear branding and messaging impact of our campaigns. And then we will further develop our customer base value management and work on our initiatives. We will further optimize the conversion rates on our website. At the moment, when you go to freenet.de, you can see that we moved the domain, but there's still also a lot of room for further improvements in terms of user experience and page speed, conversion rates. So we are working on this. There will be further updates in the next months, which will also lead to further sales potential. And we will keep integrating the mobile phone channels. We work closely together with the teams. We will also reaccelerate the waipu.tv growth and the customer base. So we are -- we see potential in the market. We see potential through the product very good product. And we -- our objective is to become the AI telco company in Germany. So we started our projects in the customer value management, but we will also roll out AI tools to all different areas. It's -- for us, it's really important. We see that this is a huge path. Our guidance for '26 in terms of postpaid subs and moderate growth. I said that we have many opportunities here. But here, for us, it's the ARPU, the quality is more important. So we -- I think we showed that we can grow. We can outgrow the market. But for us, quality is more important. And postpaid ARPU, we expect still a moderate decline because of the impact of the customer base. However, we believe that the pricing for new customers that we are quite confident. In waipu.tv, we expect noticeable growth. With that, I hand over to Mr. Arnold. Ingo Arnold: Yes. Thank you, Robin. So I'll start with the group financials. So yes, to be honest, at the beginning, I'm disappointed by the figures, especially because there's one effect. I think all the figures are quite fine. The performance was quite fine during the year. And a lot of initiatives, what Robin was talking about, they worked quite fine and quite well. And then there is one effect now, which is a little bit disturbing, the picture here, but coming to the details further on. So if we look into the revenues here, yes, I would say, it's nearly stable. What we see here, we sold this WiFi business, which was called the cloud. We sold it mid of the year '25. This was an effect, especially in the second half of the year. If we look into the Q4 revenues, we see the effect from the cloud, the missing revenues. On the other side, if you remember, last year, we sold these IP addresses in Q4 last year, which was a positive effect in revenue of nearly EUR 20 million last year. So more or less, the miss in the revenues in Q4 is explained by these 2 reasons. I think what is important that revenues from high-margin services continue to grow. Switching to the gross profit. Here, what we see, we see a miss in Q4, but we still see that the gross profit is stable. Even with the bad Q4, it is stable for the whole year. What are the effects in Q4? I already talked about the phasing of the sale of IP addresses, which took place in the third quarter in '25 and took place in the fourth quarter in 2024. On the other hand, from the sold business, there was a gross profit contribution last year of something like EUR 5 million. And then Robin was already talking about the effect out of one single MNO agreement, where we chose to be very conservative in our accounting. Robin already mentioned that we are in discussions here, especially about a totally new agreement. These discussions are ongoing. And as we are here, as you know us, we are conservative. We are cautious. Therefore, here in the actuals, we chose to be -- to build up a worst case, and this is what we also did in the figures starting with '26 into the future. Adjusted EBITDA, here again, the reason is this -- especially this MNO agreement, which is a negative effect of nearly EUR 13 million in Q4. What we also saw as a negative effect was this sold business. Again, the cloud, they generated an EBITDA of EUR 2.7 million in Q4 '24. And so if you deduct or if you normalize by these 2 effects, it would be a very good quarter, and it would be a very good full year deeply in the guided range. Moving to the next page, mobile business. We see these -- we see on the one hand, in the revenue in the quarter that we lost some revenues in the segment here, hardware other. It is again this disposal of the WiFi business. But on the other hand, we -- and Robin explained it, we focused or we had to focus in marketing -- in online business, we had to focus on our discount brand, klarmobil. And with the discount brand, klarmobil, I think this is as usual, you do not see a lot of bundles. You see a lot of SIM-Only. So what I do expect for '26 ongoing is that with the new brand, and we just started with the new website, freenet.de, where we can sell the more premium quality tariffs and where we can sell more bundles. I do expect these hardware/other line to increase again. The service revenues, here on this page, not separated the postpaid service revenues, which grew slightly during the year. The miss here in service revenues is based on a reduction in prepaid business. So I think there is still a number of something like 1.5 million prepaid customers, what we do have, but it is reduced step by step. And therefore, we see a reduction of revenues here, but unprofitable revenues. Gross profit in the mobile business, here, you see it even clearer the effect from the conservative accounting of the MNO agreement. So without it and without the effect from the sold WiFi business we would be in the quarter. But definitely, on a yearly basis, we would see at least a stable gross profit. Adjusted EBITDA, again, the same reasons here. I think without the special effect, we would be near to the level -- much nearer to the level what we saw last year, and we would be deeply in the guided range. So moving to some KPIs of the postpaid business. Robin already talked about the growth in the postpaid business. So I think it was a proof of concept in the fourth quarter, especially in the fourth quarter, where we generated this high figure of new customers, but I think also for the full year. So -- but just to make clear here, and I read it from also some of our competitors, but for us, definitely, this is a top priority here for generate customers and to have the priority value over volume. So in the first quarter, I do not expect a comparable figure to what we saw last -- the Q4. But I think this makes a lot of sense because in the middle of this chart we see the ARPU, and Robin already talked about the base effect. We still -- we are happy that the ARPU of the new customers could be stabilized and even increased in the last month. And this is also what we focus on in the first quarter. We try to increase the prices. We would like to have a turnaround here in the ARPU situation. But during '26, it will stay difficult because of the base effect. But I think we are so happy that on the new customer side it was possible to stabilize it now. Digital lifestyle revenues are stable compared to last year. TV and Media, yes, definitely a success story with waipu.tv. Here, this is a page which definitely makes the CFO happy. All figures could be increased, higher revenues, higher gross profit, higher EBITDA, everything inside the range what we guided, even at the upper end of the range, the EBITDA. So I think it's a very good picture. It was possible to prove that waipu could not only grow, but could also generate relevant EBITDA. And so I think it's really a success story what we see. On the next page, financial structure. I think it's no changes to what we had in the other quarters. Still a very low leverage, a very healthy balance sheet. Yes, if you see the debt maturities, it is obvious that we do have to do a refinancing in the first quarter. I think we postponed it to April. It's no reason by market or that it would be difficult, but we will place promissory notes. We just started the process with the banks. So there will -- a refinancing will take place. And I'm optimistic that it will be possible with similar margins what we saw before. Free cash flow, I think we came in -- I think, yes, the EBITDA was lower than expected in our last call because of the now known effect. But all the other buckets are near to what I forecasted during our last call. Net working capital, I think I forecasted minus EUR 45 million. We came in a little bit better. Taxes, I forecasted EUR 60 million. Now we -- EUR 4 million better, EUR 56 million. In the -- on the CapEx side, we instead invested, especially on the AI side, we decided to invest some additional CapEx at the end of the year. Lease, as forecasted. And also, interest nearly as forecasted. And then we have to deduct the EUR 12 million here from the sale of this WiFi business. As you know, we generated sales -- we generated a price of EUR 40 million. So this was the cash in. We are not allowed to show the cash in, in our free cash flow based on our definition. Out of this EUR 40 million, EUR 12 million was relevant for the EBITDA, but we reduced it here again, but the cash is in the company, definitely the EUR 40 million. What we also did to be fair to our shareholders, and we know that a lot of shareholders are shareholders because of our high dividend, and there were some payouts in the second half of the year because we reduced the number of Board members here. And then there were some compensation severance payments, which were necessary in the second half of the year. Yes, it was linked to LTIP programs. This is correct on the chart, but it were compensation payments. And in a normal world, these would not have -- we would not have to pay them in the second half of the year. So therefore, we corrected this figure. And after correcting it, we are on a free cash flow level above EUR 300 million. And on this level, the calculation of the dividend is based and we stick to our promise to pay 80% of our free cash flow as a dividend. This is a calculation now and this leads to EUR 2.07 and the EUR 2.07 will be also proposed to our AGM. And I'm of good mood that they will support it there. Then on the next page, the guidance for '26. I already said that what we built up here in the guidance and also in the ambition for the years, we built up a worst case from this agreement with the network operator where we do have a problem now, where we do have the discussions. And therefore, in the guidance '26 and also in the following years, there is a negative EBITDA effect of EUR 50 million, EUR 5-0 million from this topic. And this is -- and therefore, I think on the first view, the figures may look disappointing. But if you put this into consideration, I think it is clear that basically we believe in the business, we stick to what we promised and we are -- for the underlying business, we are still very optimistic. It is only this one problem what we do have at the moment. And so we had -- we showed in the actual EBITDA of EUR 515 million. You have to add EUR 25 million for mobilezone, then you would have EUR 540 million. But on the other hand, you have to reduce the difference from this network operator agreement. So we already had EUR 13 million in '25 in the figure of EUR 515 million. And so in addition, there is something like EUR 37 million. This is a negative impact. And so therefore, we see EUR 500 million to EUR 530 million on an EBITDA level and free cash flow is corresponding to this. As the free cash flow may be a little bit disappointing. We would like to give some certainty to our shareholders and to make very clear that we believe in the business and that we do not see any negative signs in the business and in the underlying business. And therefore, we decided to promise to pay at least EUR 2 as something like a minimum dividend for the years '26 to '28, payout '27 to '29. But definitely, if the 80% of the free cash flow, what I believe today, if it would be higher than the EUR 2, definitely, this rule is still valid. So maybe these explanations to the guidance here hopefully helpful. Then I would hand over to Robin again to discuss the ambition what we renewed. Robin John Harries: Yes. Thanks, Ingo. So we updated our ambition. We have -- our 2 pillars are the mobile business and the IPTV business. Mobile, I think we have a healthy market share. We have over 8 million postpaid customers. The big advantage is that we offer all networks. So now we also offer 1&1. I think that's a very good value proposition. We have a multi-brand strategy, and we have strong sales channels. We have our own shops around 500. We have exclusive partnership with MediaMarktSaturn. We start brand marketing in TV. We do connected TV. We have many affiliates, online partners, offline partners. We acquired mobilezone. So this really gives us a very, very strong footprint in the market, and I think it's a very strong position. So we will -- and I mentioned it before, it's not only the new customer growth or the new customer potential that we see through our strong offerings. It's also the improvements in our customer base, and we want to reduce churn. So all of that let us believe that we have a potential to grow here, a stable business. It's healthy. And in our second pillar, the IPTV business, we have a product that is really outperforming the market, very strong, very good reviews. So we have a nice market share there as well, highly recommended and we believe that the market will further grow. And so the customer base will grow. On the next page, yes, so you can see our plans to become a leading AI telco in Germany. Our big advantage is that we are the smallest. So we are much smaller than our big partners and big competitors. And so I think that's an advantage. So we have a flat hierarchy. So we can -- we are very strong in decision-making. We can make decisions very fast and we are doing this. So we did this in the customer value management. So this was started last year. So this month, we already bring the first AI tools and agents live. So we are very, very quick here. And we do this in all different areas in the company. So we have customer care, customer base management, then we also bring our AI tools to our shops. So as I mentioned, we have 500 -- around 500 shops in Germany and the tools that our salespeople there use, they will be -- they will get new tools so that they will get information, which are -- they will get AI information. And this will make the user experience within the shops and the experience for our salespeople much better and hopefully also increase conversions. We also keep investing into our staff. So we are -- we have our people here. They are able to adapt quickly. So they have -- I think we have many, many growth mindsets here. They are able to change. And yes, so this is, I think, whenever you do something like a transformational company, 70%, 80% is people. And here, we are, I think, very strong. So -- and besides these big lighthouse projects, we apply AI wherever we can do this. So for example, when you look about -- or when you think about creatives, how to produce creatives for your advertising campaigns, we want to use AI. And when you look into mobile, so I mentioned it, we have a strong customer base. We have strong offerings. All networks makes a lot of sense to come to freenet and to buy products there. And we improve our customer value management. We use AI. So -- and this will lead to a reduction in churn, and we will also increase our sales after service. So when people call our hotlines and they have a service request, we help them. After that, we will also start to do more sales after service and sell family cards, for example, or waipu.tv. Customer acquisition, so a premium strategy that's important for us. We will focus on Freenet, on our premium brand. And when you look into unaided brand awareness, there we are around 10%, which is very low where our competitors like 1&1, they are, I think, around 50 or even higher percent. So there, we have a lot of room to grow. And we will close this gap by investing into smart performance-based marketing campaigns. We know how to do this. We already tested this with klarmobil last year, and those campaigns were very successful. We really saw a nice sales impact and also -- and then that's important. So whenever we do brand marketing invest into TV, we do this with a clear sales approach. So we produce our creators always with a clear focus on a product, on a price, which drives sales. So this is a combination of performance and brand. And yes, so also when you look at our websites, so they are getting better step by step, but there's also a lot of room for improvements. Our conversion rates have become or we already have improved them a lot, but there's still a lot of room for further improvements. This will also help us to further increase performance here. So therefore, we see a potential to an uplift of EUR 30 million by '28. Next slide, IPTV. Waipu.tv is a success story, very strong customer base, strong offerings. And besides this, also the advertising business within waipu, it's growing very strong. We see further potential. We have strong partners here. And we believe that we will further grow our subscribers and we will further grow subscription revenues, advertising revenues. And all of that, I think, is really a huge opportunity, and we expect an uplift of EUR 85 million by '28. As I said, here, the market is healthy. Our customer base, we expect that we will grow very nice until '28. So this is reflected or this is due to our strong products, the outstanding product, but also through the market development. If the market itself will grow, we will grow. Therefore, we are quite confident that we can see nice subscriber growth. And we have strong advertising partnerships with RTL, [ ProSieben ]. And besides this, we will also grow in our advertising business. Ingo Arnold: Yes. Coming to Page 26, I think base information which is relevant when we published the financial ambition for '28, the first time 2 years ago, I think we based it on the EBITDA of '23. Now here, there is a new baseline. The baseline here for this financial ambition is the year 2025. In mobile, yes, we -- Robin already mentioned the plus EUR 30 million, what we see here compared to '25. Here again, we have this negative impact from this MNO agreement. On the other side, we have mobilezone. We have cost efficiency, especially from AI projects. So we see possibilities here to reduce our cost line by something like EUR 10 million. And then from all the initiatives, which we started here and what Robin already talked about, we expect something like EUR 30 million. And this seems possible. We also restarted freenet energy. We restarted freenet fixed net. So I think we -- there are a lot of initiatives. And so we are very confident to reach at least EUR 30 million out of these initiatives in the next years. In IPTV, we slightly increased our ambition compared to what we published 2 years ago. Because what we did that time was only to put into consideration the increase from the subscriber -- from the subscription and from the service revenues. This time, and Robin already showed this, the revenues from advertising, which are increased. So therefore, we increased it here compared to last time. And then in the other holding, there is also an increase compared to the last ambition '28, what we published because of the lower Board salaries. So all in, we increased our ambition from more than EUR 600 million to more than EUR 620 million. And yes, I think it's challenging, but I think especially if we get a solution with one network operator. And if you use it and if you would correct it by this and if we could solve it, then it would be even higher and definitely higher than what we published 2 years ago. Moving to the free cash flow ambition. Yes, I think we have the positive effect from the EBITDA, what I already described. The other items of the EBITDA to free cash flow bridge are more or less unchanged, but we have the negative effect from the taxes. I think everybody is prepared to it because the tax loss carryforward will be -- will fall away in '28, up to the end of '28. And therefore, there will be a higher tax what we will have to pay. So all in, a free cash flow of more than EUR 340 million, which implies a dividend of something like EUR 2.30. And this is still based on the promise that we will pay out 80% of the free cash flow with the addition now what I already mentioned that we pay a minimum dividend or we grant a minimum dividend of EUR 2. And dividend is still the first priority in capital allocation. So no changes here. Second pillar or second priority is growth. And third priority is to do any share buybacks in the future or to reduce the leverage further, but this would not make any sense from my point of view. So therefore, for the last page, I hand over again to Robin. Robin John Harries: So here, you can see what freenet will stand for in '28. Our 2 strong pillars, mobile pillar. We will -- we believe that we can grow our customer base by doing smart performance-based marketing, reducing churn. And we are implementing AI first and tools and want to have an AI first operating model. So we believe there will be steady profitability, and this will lead to highly cash generating -- this will be highly cash generating. In our IPTV business, so here, we see a very strong second -- core business is developing. We believe we will grow the business up to 3 million users. The advertising will be additional revenue stream, and we believe that there will be an EBITDA of at least EUR 120 million in '28. So all of this, I think it's -- we have very healthy financials, low leverage. We are growing free cash flow. We have a nice dividend policy, which I think is a very healthy and attractive business. Ingo Arnold: So therefore, we give back to the operator to start the Q&A, please. Operator: [Operator Instructions] And we have the first question from Polo Tang from UBS. Polo Tang: I have 3 questions. The first question is just about the MNO shortfall. So you highlighted a EUR 13 million profit shortfall with one MNO contract that could rise to EUR 50 million if you do not meet certain volume commitments. However, do your deals with the other MNOs have a similar structure? And is there a risk of further profit shortfalls if you do not achieve volume targets? Second question is really just about the impact of AI. Do you see a risk of the MNOs becoming more efficient at acquiring and retaining customers, meaning they will be less reliant on independent third-party channels like freenet going forward? Alternatively, if you look at it the other way around, do you see AI as an opportunity? Third question is just on waipu.tv. You indicated that your underlying net adds in 2025 were 150,000. Your mid-term guidance indicates that growth will pick up to 300,000 net adds per annum going forward. But can you remind us what caused the underlying slowdown in 2025? And why are you so confident that the net adds will rebound and improve going forward? And who do you think your main competitors are when you look at waipu.tv? And is Vodafone bundling cable TV for free with broadband having any impact on waipu.tv? Ingo Arnold: Yes, your first question, I think we have very favorable contracts with the other MNOs. I think it's only one partner where the agreement is as it is. This was done before Robin started. It was done in '24. So I think we -- and both partners now think that discussions do make sense. So also for the operator, it is not a healthy agreement. And I think we are on the same side there. And so with the other operators, no, we do not have comparable risks what we see at the moment. Then I take the third question about waipu. Yes, I think you linked your question to the 152,000. On the other side, what I would do in my calculation is I think we were free to clean up the unprofitable subs. We decided to clean it up by the 88,000. If you would not do so, then we would have something like 240,000, which is not that far away from what we guided and the 240,000 is something like 15% of growth. And this is something what we also see for the future, something like between 15% and 20%. So I think even in a year where we reduced our marketing spending, where we were not that aggressive, it was possible to grow the business by 15%. So therefore, we are optimistic here for the future. The IPTV market is growing. And I think you also asked about bundles. It is possible. We are in discussion here with different suppliers in the market for fiber, for broadband, etc. And so I think maybe -- and also in the mobile area, maybe there it will be possible in the -- maybe in the second quarter to another contract with one of the big players. But I think I do not want to promise anything today. Discussions, negotiations are ongoing. But I think we are -- basically, we are happy now with the waipu base because it is clean. I think we do not have to discuss in '26 about Telefonica customers. We just can show the growth, and we are very optimistic already for the first quarter to be on a relevant growth path again. And then we had this AI question. Robin John Harries: I'm happy to take it. So for us, AI is an opportunity, it's not a threat. And to be clear here, so when you talk about direct, freenet is direct. Freenet is no comparison website. Freenet is no intermediary. We are direct. People come to us, customers come to us, they book with us, they become our customers. And so we compete like with all the other direct players, the network operators. And when you look at our offering, so we offer all networks and we offer this to very nice prices. So -- and I mean, AI should be smart. And if you look at the benefit of companies and products, I think we are in a very good position to benefit from this. So I see this really as an opportunity because of the very attractive offerings. And we also have a multi-brand approach. It's not just one brand. So we have premium brands. We have brands for pricing. We have budget brands. So we are very well positioned through the offerings of our brands and through the massive footprint that we have in all marketing and sales channels and then through the attractive price and because we are direct, we are no intermediary, no comparison website. Operator: The next question comes from Ulrich Rathe from Bernstein. Ulrich Rathe: 3 questions for me as well, please. So again, on the MNO contract, could you talk a little bit about when this became apparent during 2025? It sounds like this became apparent only during the fourth quarter. How is that possible? I mean, the market trends have been unfolding throughout the year. So it's a bit difficult for us to understand how only in the fourth quarter you suddenly see something developing that costs you EUR 13 million this year and EUR 50 million next year. That will be -- and with regard to the mitigation for this issue, is there a precedence for such a contract renegotiation? Or are there any other reasons for confidence you can give us that the renegotiation would be successful? My second question is on the waipu outlook for 2028, which you have raised. Could you talk a little bit about your level of visibility here in terms of the customer revenue and margin outlook? I mean, there is -- it is very optimistic, but I suppose I'm trying to sort of gauge to what extent you're guiding for things that you feel are very achievable compared to sort of a little bit like a moonshot kind of guidance on waipu. And my third question, if I may, you pointed to a voice robot launch in the context of this better customer value management. Now my question on that is, why would be an AI robot, a voice robot be better at customer value management than engaging with a person? I understand why AI is cheaper. I also understand why it might help your sales force to put the right information in front of them when they deal with the customer. But do you actually believe that a voice robot has the ability to manage customer value better than a person? Ingo Arnold: Ulrich, from my side to the MNO topic, I think at the end of the third quarter, we were still optimistic to have no gap in '25. We already started some discussions with the network operator, but with the former management of it. And so yes -- and therefore -- and I think the conditions what we get for the tariff plans, the margins, this all was not sufficient to promote this network. And therefore, we reduced it during the fourth quarter, and therefore, we saw the effect. So it's -- and now we are in these discussions to make, but to make it clear. And you asked about some -- I cannot give you a confidence level to it, how -- what level -- how the success rate could be of these discussions, what we do have there. But what we -- what I can definitely say is if the discussions would not be possible, then we would also take legal actions against it because we think the behavior of the network was not fair to us here. Then about the waipu outlook, maybe I take it also, Robin, if you're fine. I think it is -- the increase versus the ambition what we gave 2 years ago. The increase is based on the advertising contract what we could close with the big TV channels here in Germany. And on the other side, and it refers to the question of Polo, we think that it is possible even on the reduced base what we see today to increase the customer base to 3 million customers up to the end of '28. And this is also -- this is another effect. If you have more customers, then your advertising revenues are also higher. And if you have more customers, definitely, your service revenues are higher. So I think we did the calculation. And yes, it works if we have the increase by something like 15% to 20% in the customer base year-by-year. And this looks for us -- and I think this is the key to the ambition here. But I think I tried to make clear already with Polo's question or with the answer to Polo's question that even in a year where we focused on EBITDA, it was possible to grow the base by something like 15%. And so I'm optimistic that this could also work in the future. Robin John Harries: And related to your question regarding the voice bot, so it will be an AI voice bot. We will start the first test this month in our service line. And you -- so normally in the service line, you get many requests that you could also answer if you go through the FAQ section. So at the beginning, we are building our knowledge base. This is important. So this is the fundament for the AI bot. And so the benefits of the AI bot is that it's available 24 hours, 7 days. It's very efficient in terms of cost. It has a huge knowledge base. So the knowledge is -- I mean, it's huge, so it can answer many, many questions. And it's continuously improving and learning. So calls will be transcripted, they go back into the machine, they will learn, they will develop. The AI bot will also do sales after service afterwards. So for example, if like by the way, her name is Ginnie. And if you, for example, have a service request, you talk to the very friendly Ginnie. So afterwards, she might ask you, okay, now that we've solved your problem, I see that you also have 2 kids. And may I also offer you like a family card for your kids, stuff like this. And I think this is -- that's the future, and we have made huge progress during the last weeks, months with also with the help of external consultants. And that's a huge workforce here internally is working on this. And I'm sure that we will make a big step forward this year. Operator: We have the next question from Florian Treisch from Kepler Cheuvreux. Florian Treisch: I have to ask a question on the MNO agreement. My one is on the EUR 50 million headwind you mentioned. I think in your remarks, you phrased it as a worst case. I just want to double check. Does it really mean EUR 50 million is the absolute worst case in a way it cannot get lower? And what is, to be fair, a base assumption we have -- we can make for '26, i.e., a lower number than the EUR 50 million you have mentioned? The second one is on mobilezone. Can you give us a feeling what is the implied EBITDA contribution in '26? And are you expecting already a net positive synergy effect, i.e., after the integration cost in '26 or is it something more likely for '27? And the last one, you just mentioned that you are restarting freenet energy, the broadband operations. I mean there was a reason to shut it down in the past. What has changed here? Ingo Arnold: Florian, your answer about the worst case, I think what is the worst case in the world? I think, yes, I would say from -- and I called it worst case and I mean it is a worst case. We do not know what happens in the world. But if the framework is as it is today, yes, it's definitely a worst case. I think there is only a possibility to optimize it. And therefore, definitely, it is a worst case, EUR 50 million. Mobilezone, I think for the year '26, we used an EBITDA of EUR 25 million. We have not calculated or put into consideration any synergy effect. I think the team is working hardly to get synergy effect. And so yes, there is an additional chance. But yes, I would support your idea that it makes more sense to show the synergies or to get the synergies then in '27. I think that we'll -- we will start in '26. We will -- there will be some low-hanging fruits. This is what we already saw. but we have not calculated these synergies. I think we have to get more knowledge of the business of mobilezone. We just started at the beginning of January to discuss with all the operating with the finance people. So I think it is too early to put any synergies in our forecast, but I'm optimistic that we will have some. And so there will be additional chances definitely compared to the plan for '25 and for our guidance. Robin John Harries: Yes. And related to the other products, broadband and energy, so we are on it. We are calculating cases. We are talking to partners. So for us, that I think it's obvious that it makes a lot of sense to sell broadband and fiber. So we have a strong footprint with our owned shops, almost 500 in very good areas. And if you want to sell broadband, it's important that you have a face to the customer, that you can talk to them, that you can explain them about the process, how to get fiber in your home. So that's the opportunity. And we are -- also there, we are in discussions with all the important players. They are all very interested in us supporting them. You can see that for all of them, fiber is, I would not say, a pain, but it's a top priority. And it's really difficult to do advertising and marketing and sales for broadband because you really have to talk to people, explain that to them. And we are there in a very good position. So this is -- it's not so easy to develop the product. So from the IT, from the technical side, yes, broadband is complicated. But -- and therefore, we are looking into solutions, how we can get there, external solutions, internal solutions, talking to partners. So -- but makes a lot of sense. We are quite confident that this will be an opportunity for us. In energy, it's the same. I think it's also obvious if you think about our shops and if customers come to our shop or to buy a mobile, so then it also makes sense to ask them, okay, where do you buy your energy? And if you have a good offer, so why would you or why shouldn't you try to sell this as well? So I think this is something where at the moment we are -- where we small, tiny, but we are working on changing this. Operator: The next question comes from Karsten Oblinger from DZ Bank. Karsten Oblinger: I have 2 questions. The first one is a follow-up question on the waipu outlook for '28. So how much of the advertising business with ProSieben and RTL is included in the guidance? So is it EUR 10 million, EUR 20 million? So could you give us a rough idea here? And the second question is related on the new business with 1&1. Could you give us an idea on the magnitude of the business so far? Ingo Arnold: Karsten, I would say, from the advertising side, as we had an EBITDA forecast or ambition in the last time of EUR 100 million without marketing revenues. Now it is without additional marketing revenues or advertising revenues. Now it is including advertising revenues. So it is something like the EUR 20 million. Robin John Harries: Yes. And related to the 1&1 partnership. So we started it in Q4. So we started it in the first shops. We selected some shops in order to have a test group. And I mean, for us, it makes sense to sell 1&1 if we get incremental sales. And yes, so the test was successful in the first stage. So that's why we scaled it. We are in the process of scaling this. Overall, I mean, we want to be the place where you get all networks, also 1&1. We want to have an offering for the customer, the best out of all worlds. And so therefore, 1&1 is important for us. But it's also -- I mean, they have attractive products. They have a strong brand. They do a lot of brand advertising as well. That's good. So people know the brand. If they see that they can get it also in our shops, they will come to our shops. This might further increase the frequency. And then on the other hand, Mr. Dommermuth, I mean, he's a smart guy, and it's always possible to make smart deals with him. So therefore, we are quite confident that this can become a fruitful partnership for the future. Operator: We have the next question from Joshua Mills from BNP Paribas. Joshua Mills: A few questions from me. I wanted to come back to the MNO shortfall and the rationale you have for how you could renegotiate that contract. So my understanding is that the freenet position is we're not being given the right kind of tariffs in order to meet the volume commitments with an operator, which would be necessary. So if that operator isn't giving you those tariffs and without them you can't hit the target, what levers and what legal backing or support do you have to demand access to those tariffs? I would assume that given you're accounting for the headwind now and you're putting into guidance, there's at least a degree of uncertainty to whether you do have any of those levers. And can you also confirm that beyond 2028, you'll roll on to a new contract with that MNO? And if so, should we expect to see a similar kind of setup or similar headwind? I just really want to understand what your negotiating position is on this if they decide that they don't want to use your services as much going forward? And secondly, you did mention that if the negotiations broke down, you could resort to legal action. Can you remind us what the legal backing for freenet's role as a reseller in the German market is today? I believe it is that MNOs must negotiate with freenet in good faith. But as far as I'm aware, there's no guarantee on paying a certain amount to freenet or giving them access to all tariffs. So if you could clarify that would be helpful. And then finally, on the waipu subscriber guidance, I think comparing to the 2024 guidance update, it looks like you have scaled back the subscriber target somewhat even with the 300,000 run rate, which you're looking for. Is that right? I know there's been some adjustments with the O2 sub base. And I just want to understand whether the better waipu TV EBITDA assumption is in part driven by the fact you expect to deliver fewer subscribers than previously under the old plan? Ingo Arnold: Maybe I'll start with the waipu question. I think it's still 3 million. I think in the last quarter, we already forecasted something like 3 million as a customer base for 2028. And so there's no relevant change. About the legal actions and possibilities, I do not want to talk about. I think this is something -- I think this is not what both parties want to have. We want to have a solution in the discussions and in the negotiations. But if these negotiations fail, then we have to think about legal possibilities and legal actions. And we see possibilities there, but I think it's -- you would understand that we do not want to talk about it. And I think first priority for all parties is to find a partnership solution. We want to have a good partnership with all networks. And I think we -- in the talks, we see a very good mood. We see that all -- both parties are interested in a solution. So we are very optimistic to find a solution. But I think we have to wait and see what happens. And after -- I think we have to wait what happens after '28. I think we give an ambition and an outlook up to the year '28 and then the other years have to be negotiated. So this is what I can comment on it or what we want to comment on it. I think we have discussed it in depth now. And I think I do not want to give further information about it from our point of view. I think we said what has to be said. And then I think we have -- action has to follow. Joshua Mills: And maybe just one follow-up. So if we assume that this particular MNO contract expires in 2028, could you just update us on when the other 2 MNO contracts expire? I think one -- another one is in 2028 as well and then one in 2030, but just to get some clarity on that. Ingo Arnold: I have not said that it ends in '28. Operator: And we have one question from Siyi He from Citi. Siyi He: I have 2, please. The first question, I just want to go back on the waipu.tv 2028 guidance. And it's just looking at your guidance for '26, and it seems that there will be a quite big step-up on EBITDA growth for '27 and '28. Just wondering if you can help me to understand why the acceleration? And I think you mentioned that advertising revenue would be EUR 20 million. Do you expect the full impact of that EUR 20 million to start hitting from '27 onwards? And my second question is on the synergies you talked about regarding mobilezone. I'm just wondering you can give us a little bit more details of where are the low-hanging fruit? And also what would be the ultimate situation for you when you're looking at potential synergies with mobilezone? Ingo Arnold: Yes, I think waipu, I already tried to explain that we saw on an adjusted base, we see already a growth of 15% we saw in '25. And so this is something what we do expect for the following years. The IPTV market hopefully grows again further, then we could grow further. We think a similar market share, stable market share is possible with a very good product what we offer. So I think we are -- it's -- yes, it's a forecast, it's an ambition, but we think this looks possible to us. With the synergies at mobilezone, yes, I think we -- what we did is we had a lot of meetings with the management first, but then we connected all the people who do similar jobs. And so we have a lot of small teams now and they are looking into their business. This is different thing. This is the HR department. This is the marketing department. All departments are talking with each other. And then you have some small low-hanging fruits, you have some bigger low-hanging fruits and then you have the operational business. And on the operations side, sometimes we have the same partners. So we -- it's like scaling the business with the partners. You talk with the partners, what could be possible. We talk with the MNOs, which could be possible, which is their interest, which is our interest. And so -- and also on the side, they have in an Apple contract to buy iPhones directly. This is something what we did not have in the past. So we can use this channel now to buy iPhones, to buy Apple products. And so I think there's a lot of fast development in all these conversations what we do have with all these discussions. And as I said, I do not want to -- I gave you some examples, but I think if we would talk to the teams now, you would have 50 examples where the synergies could be possible. And a lot of them could be get fast. But I think it's too early. I think we will keep you informed in the upcoming quarters. And then I think we will see how it develops. But I think we already have a lot of initiatives which are started. So we are on the way to generate it. Robin John Harries: Yes. So yes, thanks for your -- thanks for attending this call. I think we are happy about the operational progress. We have many, many initiatives. We have a very motivated team here, and we are working on this and try to deliver step by step. We are not happy about the current situation with the network provider, but we are working on this. And as Ingo said, we are in fruitful discussions. Both parties share the view that we have a sick agreement there that we need to change it, that we have to work on a new agreement. We are doing this. But yes, I see like many, many opportunities, and I'm really happy to be here in this company. It's a lot of fun. We are working on this. And yes, thanks for your time. Wish you a great day.
Operator: Good morning. My name is Rob, and I will be your conference operator today. I would like to welcome everyone to the call. [Operator Instructions] I'd now like to introduce Beth DelGiacco, Vice President of Corporate Affairs. You may now begin your conference. Beth DelGiacco: Thank you. Two press releases were issued earlier today, one sharing the positive results from our Phase III ADAPT OCULUS study and the other, which outlines our fourth quarter and full year 2025 financial results and business update. These can be found on our website along with the presentation for today's webcast. Before we begin on Slide 2, I'd like to remind you that forward-looking statements may be presented during this call. These may include statements about our future expectations, clinical developments, regulatory time lines, the potential success of our product candidates, financial projections and upcoming milestones. Actual results may differ materially from those indicated by these statements. argenx is not under any obligation to update statements regarding the future or to conform those statements in relation to actual results unless required by law. I'm joined on the call today by Karen Massey, Chief Operating Officer; Karl Gubitz, Chief Financial Officer; Luc Truyen, Chief Medical Officer; Sandrine Piret-Gerard, Chief Commercialization Officer; and Tim Van Hauwermeiren, Chief Executive Officer. I'll now turn the call over to Karen. Karen Massey: Thank you, Beth, and welcome, everyone. I'll begin on Slide 3. 2025 was an incredible year of execution for argenx. We reached 19,000 patients globally, driven in part by the successful launch of our prefilled syringe for self-injection. We also continue to advance our deep and differentiated immunology pipeline, including 4 new molecules from our IIP, positioning us for sustained long-term growth. This progress is grounded in our commitment to patients to innovate in ways that don't just improve care, but meaningfully change what patients can expect from their treatment. I'm speaking to you today from our U.S. national team meeting, where hearing directly from patients is a powerful reminder of why our work matters. One moment in particular, stayed with me. We recently received a handwritten note from a patient, thanking the team for the impact VYVGART has had on her life. We later learned that before starting treatment, she had been living with very severe MG symptoms that significantly limited her day-to-day activities. Today, at the meeting, we saw a video of the patient about a year into treatment with VYVGART Hytrulo, sharing an update from a hype she was on. She is thriving. It's one individual story, but it reinforces the real-world difference VYVGART can make. Slide 4. At the start of the year, we outlined our strategic priorities for 2026 that will guide our next chapter of growth towards Vision 2030. We want to impact more patients globally with VYVGART through broader patient adoption and label expansion. We're shaping the future of FcRn medicines with next-generation molecules, delivery modalities and combination approaches and delivering the next wave of immunology innovation, supported by a strong late-stage portfolio and a goal of at least one new pipeline candidate per year. Slide 5. VYVGART is leading the growth of biologics in both MG and CIDP, and we're confident that we have the right strategies and milestones ahead to sustain this momentum. Today marks an exciting moment for ocular MG patients with the positive ADAPT OCULUS results, which Luc will discuss shortly. Together with our progress in seronegative MG, we see a meaningful opportunity to broaden VYVGART's reach to patients who have historically had limited or no targeted treatment options. What's guided us here is a long-standing commitment to the MG community and to advancing our understanding of the underlying biology of the diseases we treat. Across MG populations, our data confirm that disease is driven by pathogenic IgGs regardless of antibody status. In seronegative MG, we demonstrated a clinically meaningful improvement in MG-ADL in the overall population with responses becoming more pronounced with subsequent treatment cycles across all subtypes. In ocular MG, we're seeing that same biology extend to another patient population with VYVGART meeting its primary endpoint and driving clear improvements in ptosis and diplopia. Our seronegative PDUFA date is May 10. And based on today's results, we see a clear path to expanding our label into ocular MG as well, positioning VYVGART to have the broadest MG label and to reach our target addressable population of approximately 60,000 patients in the U.S. In CIDP, we're also having a meaningful impact on patients with clinical data showing functional improvement and these benefits increasingly reflected in real-world experience. VYVGART is driving a paradigm shift in CIDP. While there remains significant opportunity within the initial 12,000 addressable patient population, we're also beginning to see expansion beyond that population, a core focus as we build leadership in CIDP. Sandrine will speak more to this later in the call. Slide 6. Over the next 12 to 18 months, we have multiple avenues for expansion beyond MG and CIDP, including autoimmune myositis and Sjogren's disease, which broaden VYVGART's footprint into rheumatology. In particular, our work in IMNM highlights a significant unmet need with an estimated 20,000 patients and no approved treatment options today. Meanwhile, our upcoming Q4 readout for empasiprubart in MMN marks an important milestone, positioning us to advance a second medicine to patients and extending our neurology footprint with a first-in-class C2 inhibitor. We have an opportunity to address a clear unmet need in MMN with IVIg as the only approved treatment and symptom progression in 60% of patients. Slide 7. Lastly, we continue to strengthen the pipeline that will shape our long-term future. VYVGART is just the beginning of FcRn leadership that we aim to establish for decades to come. As part of this, we're advancing 2 next-generation assets, ARGX-213 and ARGX-124. We're investing in efgartigimod anchored combination approaches and new delivery modalities like the auto-injector and oral peptide capabilities. At the same time, we're seeing real momentum across our broader innovation platform, progressing first-in-class molecules like ARGX-121 targeting IgA and ARGX-118 targeting Galectin-10. We are deliberately source agnostic in how we identify new biology drawing from both leading academic research and opportunities emerging within biopharma. In 2026, we expect to progress 3 Phase I programs, including a program from our Tensegrity collaboration, reinforcing our ability to bring forward high-quality science wherever it originates. We have an exciting year ahead of us with a strong foundation in place and exciting progress across the pipeline. Let's turn to the data that's shaping our next steps. Luc? Luc Truyen: Thank you, Karen. I'm excited to share the positive outcome of our Phase III ADAPT OCULUS study. Our second MG expansion milestone to hit just months after we shared positive seronegative data. Let's turn to Slide 8. Together with leading global experts, our team designed the first registrational study in ocular myasthenia gravis, filling a long-standing gap for the patient population that has historically been excluded from clinical trials. We leveraged the screening period to ensure patients had a confirmed diagnosis of ocular MG, defined as MGFA Class I, meaning patients had meaningful measurable eye symptoms without evidence of generalized disease. Patients were also required to be on stable background therapy. 141 patients were randomized 1:1 to VYVGART Hytrulo versus placebo. And in Part A, they received 4 weekly injections. In Part B, participants received multiple cycles of VYVGART Hytrulo. The primary endpoint of the study was a change in MGII patient-reported ocular score from baseline to day 29, a measure focused on the key ocular symptoms of myasthenia gravis, diplopia and ptosis. Slide 9. The study met its primary endpoints. Treatment with VYVGART Hytrulo led to a statistically significant improvement in MGII patient-reported ocular score at week 4 compared to placebo with a p-value of 0.012. VYVGART-treated patients experienced a mean 4.04 point improvement compared to a 1.99 point improvement on placebo, including clear improvements on diplopia and ptosis. VYVGART was well tolerated, upholding its consistently strong safety profile with no new safety signals. We will present a broader data set at an upcoming medical meeting. This is a big day for patients. Ocular MG strips people of independence. Many suffer from headaches and the persistent double vision and drooping eyelids don't just affect eyesight, they can take away the ability to drive, work and confidently engage in daily life, often with a heavy psychological burden and stigma. And today, too many patients are still relying on chronic steroids and symptomatic therapy, which comes with an unacceptable treatment burden over time. For the first time, we are bringing forward a therapy that specifically addresses the underlying pathological mechanism of ocular MG, and that is something we should all be excited about. Based on these results, we plan to file an sBLA with the FDA. Now before I turn the call over to Karl, I want to sincerely thank the investigator site teams and most importantly, the patients and families who made this study possible. Karl? Karl Gubitz: Thank you, Luc. Slide 10. The fourth quarter and full year 2025 financial results are detailed in this morning's press release. Product net sales are consistent with our preannouncement in January at $1.3 billion for the fourth quarter and $4.2 billion for the full year, which represents a year-over-year growth of 90%. Regional breakdown of product revenue in Q4 2025 reflects $1.1 billion in the U.S., $63 million in Japan, $110 million in the rest of the world and $26 million in product supplied to Zai Lab in China. The product net sales in the U.S. grew by 68% from the fourth quarter of the prior year, reflecting solid patient demand and prescriber confidence driven by PFS. The gross to net adjustments and the net pricing in the U.S. are in line with the prior quarter. Next slide, Slide 11. Total operating expenses in the fourth quarter are $955 million, representing an increase of $149 million compared to the third quarter. Cost of sales for the quarter is $150 million as our year-to-date gross margin remains consistent at 11%. The combined R&D and SG&A expenses totaled $2.7 billion for the full year, which is in line with our financial guidance for 2025 discussed in our most recent earnings call. Looking ahead into 2026, operating expenses will continue to grow at a similar percentage as in prior years. SG&A growth will support the significant revenue growth in our current markets as well as expansion into new patient populations. R&D expenses will increase due to our continued commitment to execute on our pipeline. Our operating profit for the quarter is $367 million and $1.1 billion for the year, which marks our first year of annual operating profitability. Tax for the quarter and full year reflects a net benefit. This is largely due to nonrecurring tax items and favorable foreign exchange movements. Going forward, you should continue to expect an effective tax rate in the low to mid-teens. This brings us to the profit for the fourth quarter of $533 million and $1.3 billion for the full year, respectively. Our cash balance represented by cash, cash equivalents and current financial assets is $4.4 billion at the end of the fourth quarter, which represents a more than $1 billion increase over the year. The strength of our balance sheet allows us to invest with confidence in growing our commercial business as well as our pipeline. I will now turn the call over to Sandrine, who will provide details on the commercial front. Sandrine Piret-Gerard: Thank you, Karl. Slide 12. I'm thrilled to be joining argenx at such a pivotal moment. What excites me most is the combination of bold science and a deeply patient-driven mission, what I often describe as science with purpose. I've spent time in the field already, met clinicians and seen firsthand the real impact our science is having on patients' lives. With Vision 2030 as a road map, we have a clear path to meaningfully improve the lives of more than 50,000 patients. Slide 13. Echoing Karen, we entered 2026 from a position of strength following a year of phenomenal execution. We closed 2025 with approximately 19,000 patients on treatment globally, reflecting consistent growth across all regions and all indications. We successfully launched the prefilled syringe, which has proven to be a key driver in increased overall VYVGART demand. At the end of the fourth quarter, we had more than 4,700 prescribers, including dozen new prescribers since the PFS launch. This momentum underscores the execution strength of our field teams, the added convenience the PFS brings to patients and the growing confidence in VYVGART among clinicians. As we highlighted at the start of the year, our next chapter is about applying a proven indication expansion playbook to reach even more patients. MG and CIDP remain the cornerstone of our commercial strength, and we are well positioned to build on that foundation as we scale. Slide 14. We entered the MG market with strong biology and a first-in-class therapy. Since then, we have redefined what patients and clinicians can expect with the highest MSE and a favorable safety and tolerability profile. As a result, VYVGART is the fastest-growing and #1 prescribed biologics in MG with continued momentum driven by earlier line adoption. 6 out of 10 MG patients starting on biologic start with VYVGART. 70% of VYVGART patients are already coming from orals, and we believe the PFS will continue to help drive near-term growth. We are now on track to reach 18,000 additional patients through 2 label expanding opportunities, seronegative and ocular MG. Seronegative MG alone has the potential to move us towards the broadest possible MG label with our May PDUFA just around the corner. And ocular MG gives us a chance to be the first to market in a patient group that has had no precision treatment options. What gives us confidence here is that these expansions build on strong relationships we have already established with neurologists, many of whom are confident in VYVGART through experience treating generalized MG. Slide 15. We are earlier in the CIDP launch trajectory, but are delivering on the same disciplined approach that has led to our successful market expansion in MG. Significant opportunity remains within the 12 dozen patients who are not well managed on current treatment, and our focus today is on continued evidence generation, patient activation and new prescriber adoption. Clinicians continue to respond to the meaningful functional benefit data and well-characterized safety shown in the ADHERE trial. The prefilled syringe is further driving uptake by reducing the administration burden and offering more flexibility to patients. Worth noting, we secured an important access win for PFS in Q4 with UnitedHealthcare, broadening our covered lives to over 90%. CIDP is a highly heterogeneous disease, and we are committed to advancing the science to expand our reach to broader set of patients. Our biomarker program is designed to better define responders and unlock earlier and broader use, and we are advancing empasiprubart in a head-to-head study against IVIg to further explore the bounds of efficacy. Together, these efforts position us to expand the CIDP population we can serve and continue shaping this market over the long term. Slide 16. Our clinical pipeline continues to broaden and deepen, providing a multiyear runway for commercial growth. I'm excited to join the company at this pivotal moment to help scale the organization thoughtfully and translate this pipeline into even greater patient impact. With that, I'll now turn the call over to Tim. Tim Van Hauwermeiren: Thank you, Sandrine. Reflecting on where we stand, argenx has never been better positioned, and our leadership transition comes at the right moment as we enter our next phase of growth. Karen is the right leader to take this forward. She understands our innovation playbook, leads with patients at the center of every decision and brings the operational discipline needed to continue executing against Vision 2030 and beyond. I have complete confidence that she will nurture what has always made argenx special while driving the next chapter of growth for the company. My dedication to argenx and to our mission remains as strong as ever. I look forward to supporting Karen and the entire leadership team as we continue to advance meaningful innovation and deliver for patients and shareholders alike. With that, operator, we will open the call up to questions. Operator: [Operator Instructions] Your first question today comes from the line of Tazeen Ahmad from Bank of America. Tazeen Ahmad: First off, Karen, congratulations on the new role. We're looking forward to continuing to work with you. And Tim, what else can I say, but thank you. You've set the example for everyone to follow, and we wish you the best in your new upcoming role as well. So my first question is going to be on the addition of both seronegative as well as based on today's results, assuming ocular MG to the revenue stream for VYVGART. How should we think about, number one, what the average price would be for each of these subindications? And can you talk to us about what proportion -- you talked to us about how many patients there are. But have you done any market data research to indicate what proportion of those patients are more likely to seek this type of treatment? Karen Massey: Well, thank you, Tazeen, for your comments and also for your question. It's a really exciting day for ocular MG patients and certainly for argenx, as you call out. It's important to think about the fact that we are now the first and only -- or VYVGART is the first and only to have positive data for patients with ocular MG. So a really exciting day for patients. And as you called out, that, combined with the seronegative data that just read out a few months ago, and we have the PDUFA date in May, really positions us well for continued sustained growth in MG and I think an expansion even further of our leadership position in MG. So we're very excited to share that data today. I'll let Karl talk to the price in a moment. But just on the second part of your question around the addressable market, we obviously have done quite a bit of market research, and we'll continue to do so to prepare for how best to go to market. But the best numbers to look at are those that we've provided with the seronegative expanding the addressable market by 11,000 patients and ocular by 7,000 patients that we've provided before. That 7,000 patients in ocular MG, that's not the total ocular MG patient population. That's actually the portion that when we've done the research before, we thought would be eligible for VYVGART. So that's the number that I would stick with. And obviously, as we get closer to -- as we unpack the data more, as we get closer to submission and hopefully approval, we'll be able to provide more color on that. And then maybe, Karl, you could comment on the price. Karl Gubitz: Thank you, Karen and Tazeen, thank you for the question. Yes, we still have to have the discussions with the players, of course. But I do want to mention that we have a strong capability and market access. It is an enabler of our launch, not a hurdle, and the value proposition of VYVGART is well understood and appreciated by all stakeholders. At this stage, I will say that we would expect to have broad access also for seronegative and ocular, and we can assume a similar price as MG, i.e., $225,000 the net benefit or a net price to argenx. Thank you for the question. Operator: Your next question comes from the line of Danielle Brill from Truist Securities. Danielle Brill Bongero: I think I'll ask a question on the CIDP opportunity. Karen, you mentioned in your prepared remarks that you're beginning to see expansion beyond the initial 12,000 patients that you were targeting. Can you elaborate a bit? Are you seeing a step-up in frontline use? And then I think you also mentioned that you secured additional coverage, broadening coverage for PFS to over 90% of covered lives. What impact do you expect this to have on adoption rates in the setting going forward? Karen Massey: Thanks, Danielle, for the question and the interest in CIDP, we're really pleased with the continued growth in CIDP. So, yes, we laid out that the strategy was first to focus on that 12,000 patients that are treated -- that are already treated, but continue to have symptoms. And that is -- continues to be where we see the majority of our patients and the majority of our growth. But you'll recall that our label does allow us to be used in a broader patient population. And there are some payer policies actually that also allow that. So we are starting to see some use of VYVGART beyond just the switch from IVIg. In general, it's still about at 85% of our patients are being switched from IVIg, but there are some that are coming directly. I think as prescribers and neurologists get more experience with VYVGART and see the impact in the real world, then over time, we'll start to see that expansion even more. And as you said, continuing to expand access with the recent UnitedHealthcare decision and having 90% coverage, that also helps to contribute to our growth. So I would say what to expect in CIDP is that continued steady momentum. We're still early in the launch. And so I think we still have some quite a bit of growth ahead of us. Operator: Your next question comes from the line of Derek Archila from Wells Fargo. Derek Archila: Congrats on the progress in the Phase III win today. So I had a question on, do you think approval in ocular MG will drive more utilization in the less advanced MG patients? And I guess, is there anything in the data set that you'll present in the future that could demonstrate prevention of progression to more generalized disease? Karen Massey: Yes. Thanks for the question, Derek. I'll comment on the first and then maybe, Luc, I can hand it to you for the data. So certainly, I think that our hypothesis, I mean, we know that in MG, the majority of patients first do present with ocular symptoms and then the majority of those ocular MG patients do transition into gMG. So a big part of our strategy is expanding the use of biologics to earlier line uses of MG. We are already seeing that. Biologic use is growing in generalized MG. We are driving -- we get 6 out of 10 of those patients that are first use biologics. So we're driving a lot of that earlier use and a lot of that growth. As you say, I think the ocular MG data will help us with that strategy and will provide a halo to that strategy. And then maybe, Luc, you could comment on the data and progression. Luc Truyen: Yes. Thanks, Karen, and thanks, Derek, for the question, which is close to my heart. So with the data in hand, we show that we can meaningfully impact the current symptomatology of ocular MG, which is not MG like. It's a significantly debilitating state to be in. But of course, the excitement of continuing to collect long-term data as we are planning to do and compare that to what is known with the natural progression, which, as Karen said, is a high percentage up to 80% will allow us to make some statements on do we delay progression to generalized MG. So I would say stay tuned. Operator: Your next question comes from the line of Yatin Suneja from Guggenheim. Yatin Suneja: Just with regard to the Q1 dynamics, could you point to us if there are any particular consideration that we should have for Q1 in particular? Karen Massey: Yes. Thanks for the question. And it's important as we're in Q1. So obviously, across the industry, we can see the pattern that there always are Q1 dynamics around reverifications and winter storms, of which we've had quite a few in the last couple of weeks. So argenx and VYVGART are, of course, privy to the same, those same seasonal dynamics. And we saw that last year as well. If you recall, we did have a slowdown in Q1. And then in the end of the year, we delivered 90% full year growth. So I think you can recognize the pattern and expect that. But maybe, Sandrine, you could comment on the underlying dynamics that we're seeing since you've joined. Sandrine Piret-Gerard: Yes. Thank you, Karen. And this is something that I looked at before joining argenx, what is the growth we are seeing. And year-after-year, we have been delivering consistent growth, and this is a pattern you can expect this year, full year because the underlying dynamic are very healthy. I mean when you look at the new patient starts, the provider and the prescriber expansion. When you look at our access, we just mentioned that, but also how strong we are and VYVGART is in leading the growth of the overall biologic market. These are all amazing underlying factors that will help us continue that growth. And then you have the PFS that was launched less than a year ago that drove a lot of momentum last year, plus the expansion of the labels that we are expecting both for seronegative and later for ocular. So all are good underlying factors that will help us continue that growth, as Karen mentioned. Operator: Your next question comes from the line of James Gordon from Barclays. James Gordon: James Gordon from Barclays. The question was on VYVGART for myositis. And my question was, what is the efficacy bar you're looking to exceed in the Phase III in myositis in Q3? What's a good result? Is there hope to be more efficacious than [ brepo ] or JAK/TYK and what they did in the VALOR trial? Or is it more -- a good result would be if you had a similar efficacy and you are better tolerated as well? So what's good and what's really good? And could I also just squeeze in a clarification, not a question, but just normally, there's an OpEx guide, but I didn't see a formal guide this year. Should we assume a similar pace of OpEx growth this year as last year, so '25 similar pace of '26 and maybe more R&D and less SG&A? How do we think about spend this year, please? Karen Massey: Yes. Thanks for the questions there, James. And so I'll open. I'll hand over to Luc to provide some more color on myositis and then Karl on OpEx. But the first thing that I just wanted to frame is when you think about myositis, it's right out of the argenx playbook. I mean there is so little options available to patients here, really limited innovation in the market. And so what we're looking for is a statistical significant benefit coming out of this study. In the DM, in IMNM, there are no approved therapies available. And you heard in the script that there are 20,000 patients with IMNM. So for them, any benefit, I think, is clinically meaningful. But maybe, Luc, you could talk about how we're thinking about the study. Luc Truyen: Yes. Thanks and also for laying it up that this is not a singular indication. So this is a constellation of indications that each have somewhat different pathological drivers. We continued our Phase III program based on the strength of a robust Phase II, which gave us the confidence that we could provide meaningful benefit across the 3 subsets. Ultimately, the data will speak once we complete Phase III. With respect to relative benefit compared to others, of course, studies are hard to compare. And the DM result of brepo certainly is encouraging for the DM patients. But we believe that in DM, multiple modes of actions could play a role. And therefore, we will go on the strength of our own data. In any event, positive data in these diseases is always good for the patient. Karen Massey: Thank you, Luc. And maybe, Karl, a comment on the OpEx. Karl Gubitz: James, thank you for the question. Yes, in 2025, we spent around $2.7 billion on combined R&D and SG&A. That is around 30%, 3-0 percent increase over 2024. Looking ahead, you can expect the combined R&D and SG&A to grow at a similar rate with most of the growth in R&D because that is where we're going to invest to set the company up for the long run, investing in our very exciting pipeline. So thank you for the question, James. Operator: Your next question comes from the line of Alex Thompson from Stifel. Alexander Thompson: Maybe on Graves, I was wondering if you could comment on where you're at from a regulatory discussion perspective on starting the pivotal and whether you think that a single pivotal could be sufficient for an sBLA or whether you might need 2 studies. Karen Massey: Yes. Thanks for the question. We're excited about our Graves program, and it's well underway. Luc, do you want to comment on our strategy around the single study? Luc Truyen: Well, I mean, the ability to run a single study has sufficient evidence of efficacy and be able to define a benefit risk is actually not new. That always existed, but it was at the discretion of the individual divisions as to how much they accepted that or not. This particular division has asked us at this moment for 2 trials, which we are executing on. Karen Massey: Your next question comes from the line of Matt Phipps from William Blair. Matthew Phipps: Congrats on the quarter and progress here. Just wondering if you might be able to give us any more details on the auto-injector, how you can position that versus the PFS and maybe if that can just continue the continued expansion you're seeing from that PFS launch across indications. Karen Massey: Yes. Thanks for the question. We're excited about the auto-injector, and I think it just reinforces our innovation playbook, right, just continually bringing more and more innovation as we drive leadership in the MG market. So auto-injector is on track. We have planned for 2027. And the way we've talked about it is it won't be such a step forward in the way that PFS was because if you recall, the big step forward for prefilled syringe was that we moved from HCP administration to patient administration, and that was a meaningful and important step forward for many patients, giving them the freedom to self-inject. So auto-injector doesn't provide that step change, but it does provide an important step, for patients that provides a better experience for those patients and especially those that are needle phobic. Actually, we mentioned earlier, we're here at the U.S. National Field Meeting. We had a patient just yesterday that was talking to our team, and she was sharing that she wanted to wait for auto-injector because the prefilled syringe needle was something that she was a little nervous about. So it does provide value to patients, but it's not such a step forward that you should think of it as an accelerator in the way that the prefilled syringe was. Operator: Your next question comes from the line of Akash Tewari from Jefferies. Amy Li: This is Amy on for Akash. Maybe just a quick one on your 2 next-gen FcRns 124 and 213. Are you seeing an accelerated path to registrational study? And can you give us a sense of how you're thinking about the indication and then the size of these trials? Karen Massey: Yes. Thanks for the question and the interest in our future portfolio. Maybe I can start. The way that we think about our leadership of FcRn over the coming decades is that we know there is a lot of opportunity for FcRn, in fact, probably more than we can explore with VYVGART alone. And so we see the opportunity of having 2 next-generation molecules as opening up the opportunity to provide a better patient experience in some of the indications we're already in, but also start to push the biology even further and expand the indications that we can -- that an FcRn is making a difference to patients. So I think that's the strategy that we're planning. We think each of the next-generation molecules brings -- will bring that benefit to patients. Thanks for the question. Operator: Your next question comes from the line of Yaron Werber from TD Cowen. Yaron Werber: Congrats on the ocular study. If you don't mind, maybe a couple of questions. For EMPASSION, you switched the primary endpoint to grip strength. In the previous study in ARDA, you gave us sort of the ranges of grip strength. So maybe help us understand how is it powered? Is it superiority sort of head-to-head? What's clinically meaningful? And then secondly, Karen, we have a huge confidence in you, and congrats on the role. Tim, we're just -- we continue to get questions on the timing. I know, obviously, Peter is retiring as Chair. So maybe give us a little bit of a sense what drove your decision to kind of step up the chair. Karen Massey: Thanks for the questions, Yaron. I'll hand it over to Luc first to talk about EMPASSION. And then, Tim, maybe you can take the follow-up question. Luc Truyen: Yes. So in fact, this is a story of growing insights in data as they matured. As we looked at ARDA and ARDA plus, so the Phase IIs, the signal we saw in grip strength gave us increasing confidence that this is really a real and patient-relevant outcome with an increasing separation over time or improvement over time, which in these patients was not seen before. And that's ultimately why in discussion with agency, we started utilizing this endpoint as the primary. You asked about superiority. The study is set up as a non-inferiority study, but with a prespecified option that if noninferiority is met, that we can formally test superiority. The data will ultimately drive that [ tree ]. Karen Massey: Thank you, Luc. And Tim? Tim Van Hauwermeiren: Thank you for the question. I think we're doing this transition out of a position of strength. I think now is the time to do the transition because the business and the organization is in a very healthy and a very strong state. You have seen the pipeline. You know the profitability, which we achieved during the course of last year, very strong foundation of the business. Also from an internal candidate point of view, we are ready. Karen knows the innovation playbook. She's a very strong carrier of the culture of the company, and she's ready to help us scale into our future because she know new therapeutic areas will come on back relatively soon. So consider this as a proactive move based on a position of strength. Thanks for the question. Operator: Your next question comes from the line of Thomas Smith from Leerink Partners. Thomas Smith: I was just wondering if you could provide a bit more color on the Phase IIa results for adimanebart in ALS. Obviously, really difficult indication, very complex biology. But just wondering if there are any learnings from this study that could be applied to the Phase III CMS program or potentially other indications. Karen Massey: Yes, I'll let Luc comment on the data. Luc Truyen: Yes. Thanks for that question. Evidently not an outcome we were hoping for. We felt we had the moral obligation to explore ALS as an indication given our mode of action, trying to -- in this disease where there's very, very limited treatment options to see if we could move the dial. From our POC, the data, unfortunately, don't supports progressing, but we learned a lot, not in the least about how novel endpoints could be used, and we hope to share that knowledge with the field. With respect to impact and learnings on CMS, the context of treatment is fundamentally different. And CMS is directly in the biology of this molecule with the DOK-7 and other mutations affecting the mask receptor. And so that's a much more direct application of this molecule. So we don't think there's a read-through. And on our SMA program, likewise, there is a backdrop of approved treatments. The gene therapies are very well established. And we are going to evaluate whether we can have an add-on efficacy there, which is a different situation than ALS altogether. Operator: Your next question comes from the line of Rajan Sharma from Goldman Sachs. Rajan Sharma: I had just a question on VYVGART growth dynamics through 2026. So just thinking about kind of the underlying growth outside of potential new indications, how should we think about growth across the various formulations of the drug? And if you could maybe just comment on competitive dynamics. I realize there's been a recent new approval in myasthenia gravis. Could you just talk to your confidence in the VYVGART profile and to what extent you think you may be impacted by that emerging competition? Karen Massey: Great. Thanks for the question. What -- I'll provide just one comment, which is one of the things that I think is incredible 5 years out from launch for VYVGART is that what we're seeing is continued growth across all indications, all geographies and all product presentations. And I think that's a sign that there's space for all of the different product presentations, and it's important that we're bringing those innovations. But Sandrine, maybe I can hand over to you to talk about the growth outlook for MG and CIDP. Sandrine Piret-Gerard: Yes. Thank you, Karen. And I can maybe also help answer the question on the competition but that was a second question. So I think for MG, I mean, we have seen an amazing growth year-on-year. And we have, as I mentioned earlier, healthy fundamentals. I mean, our product, VYVGART is being used earlier and earlier. I mean, as I mentioned in the opening, 70% actually are coming from orals. And then on VYVGART, when you have 10 patients coming on biologics, 6 of them are actually starting with VYVGART. So this shows that this is the molecule that patients start on when they are starting on biologics. PFS is the one that has been driving and helping us drive strong growth last year. And as Karen just mentioned, we expect to continue to grow across all mode of administration, including PFS. And then the label expansion, of course, is going to help us this year, starting with seronegative. If you look at CIDP, I mean, we have -- we are still early in launch. So we have launched roughly 1.5 years ago, and we are still have a lot of room within the 12,000 patients that are not fully well managed. And beyond that, we are working very, very hard to lift any challenges either with payers or the inertia of prescribers to start earlier with VYVGART. So overall, very strong dynamics expected for this year like we had in the prior years. So now going to your question on the competition. Actually, we welcome competition. For me, this is -- and for us, this is a sign of progress, and this is a sign of innovation, and that's great for patients to have multiple options. This expands the overall market and VYVGART benefits from a market expansions. I just mentioned that 6 out of 10 patients starting on biologics go on VYVGART. So the more the market expands, the better it is for us. And as we are a data-driven company, all the data we have generated support our confidence that VYVGART profile will help us continue leading that category and remain the #1 prescribed biologics in MG from an efficacy viewpoint, and we are the only one that can really show the strong MSE, the robust safety that fosters earlier use, the ability to meaningfully reduce steroids and then as we mentioned, multiple flexibility on either IV subcutaneous or PFS. So when you take that all together, I mean, we believe that we have a very, very strong profile for continuing our leadership there. Karen Massey: Great. Thanks, Sandrine. Operator: [Operator Instructions] Your next question comes from the line of Sean Laaman from Morgan Stanley. Morgan Gryga: This is Morgan on for Sean. Maybe one on the financials. So with VYVGART delivering $4.2 billion this year in net sales and 90% year-over-year growth resulting in the first year of operating profitability. How should we think about the sustainability of this growth profile as penetration deepens in MG and CIDP throughout this year and next year? Karen Massey: Yes. Thanks for the question. Karl, maybe you want to talk about the growth profile? Karl Gubitz: Yes. I think what we're building here is a long-term sustainable business, as Sandrine already mentioned, we see a lot of growth in MG and CIDP going forward. And the way we look at the financials long term is that revenue growth should exceed OpEx growth, which basically will return operating margins, which will increase over time. That in itself, of course, is not the objective of the company. We have very clear capital allocation priorities, and we're executing on those priorities. But what we should see is that we're going to build on our very strong balance sheet. We currently have $4.4 billion of cash in the bank. And going forward, that number should increase. So I think you can look forward to a long-term sustainable and profitable business. Thank you for your question, Morgan. Operator: Your next question comes from the line of Sophia Graeff Buhl Nielsen from JPMorgan. Sophia Graeff Buhl Nielsen: So just on the Phase III readout for VYVGART in myositis, could you clarify, would you have data to support approval by subgroup? Or will this largely be dependent on the overall data? I think you've been very clear on that the high unmet need within IMNM and the large patient population that could be addressed there and also the heterogeneity within DM. Given these dynamics, would you see these as relatively equally sized commercial opportunities despite the differences in addressable TAMs you've highlighted? Karen Massey: Yes. Thanks for the question. Maybe, Luc, you can talk to the basket trial and our approach, and then I can comment on the commercial opportunity. Luc Truyen: Yes. So the Phase III setup is indeed that we can make statements on all 3 subsets. And of course, the ultimate reflection of that in label will be connecting the data with the regulatory discussion. But in principle, all 3 could be in scope. Karen Massey: Thank you, Luc. And then in terms of the commercial opportunity, the way I think about it, I mean, the total myositis population that we're studying, we think about in terms of it being an MG-like opportunity. But obviously, there are other subtypes. And I like to think about the 2 bookends of the subtypes. So we talked -- you mentioned IMNM. So IMNM, there are no other approved treatment options. There's about 20,000 IMNM patients. So what you can imagine there is that from a commercial perspective, you could imagine that we'll be able to gain a high portion of those patients because there are no other treatment options and the biology is so clear. On the other end of the spectrum, you can think of DM. There are more patients in DM, but it's also more heterogeneous in dermatomyositis. There's also more innovation coming to the dermatomyositis space. So that will grow that patient population. Innovation is good for patients. And I think let's see the data, how it reads out, but I think we should have a good value proposition to be able to compete in that population if the data reads out. So overall, total population MG-like, but the subgroups provide quite different dynamics from a commercial perspective. Thanks for the question. Operator: Your next question comes from the line of Suzanne van Voorthuizen from Kempen. Suzanne van Voorthuizen: It's one on empa and MMN in particular. There was a change in the dosing regimen between the Phase II and III and the Phase III is also head-to-head. Could you elaborate on how you navigate the potential risks that these 2 changes introduce? What gives you comfort that the study can confirm empa's non-inferiority? And I'm also wondering if you can give some color on how you went about setting the non-inferiority margin in this progressive disease? Karen Massey: Thank you. I think that's for you, Luc. Luc Truyen: Yes. Thanks for that question. And I can tell you a lot of thought went into that based on the data again from ARDA, where we tested multiple regimens, and we're able to model and look at an exposure response relationship, which ultimately made us choose the dose regimen we went for. In terms of then choosing or choosing to go head-to-head, here, the thinking was if we were taking placebo-controlled study, we could have a lot of events because people on placebo in this progressive disease, as you say, will need rescue. And therefore, we said, well, why not just do them straight head-to-head? So that was that decision. The second one, how do you determine a non-inferiority margin? And this is actually also where the data on grip strength come in because the only available data on IVIg are on grip strength. So that's why we use that measure to determine the non-inferiority margin. Given the data we see from ARDA, one of the features that is different is that we continuously seem to improve grip strength, something which is not seen in the experience with IVIg. And that gives us confidence that we can at least meet but hopefully beat IVIg. Karen Massey: That's great. Thanks, Luc. And when you zoom out, I think what you can see with your answer is the approach that we take for -- with our programs, strong biology rationale, derisking with a Phase II. And I think we're well positioned for success commercially with this head-to-head data that in the way that you've laid it out. So look forward to that data in Q4. Thanks, Luc. Operator: Your next question comes from the line of Allison Bratzel from Piper Sandler. Allison Bratzel: Just a follow-up on ocular MG and the potential for early treatment with VYVGART to prevent progression to generalized disease. Is that something you're able to capture in Part B of the oculus trial? Or just how long of a follow-up do you need to confidently be able to make that claim? Just any more color there would be appreciated. Luc Truyen: Yes. Thanks for that question to allow me again to go on one of my favorite topics, which is can we slow MG progression. So the open-label extension following Stage B, which we call Stage B, is going to give us over 2 years of data, which if you look at extent epidemiological data, et cetera, should give us enough window to capture these people progressing and whether or not it's to the rate that's there in the outside world. The caveat, of course, is this is noncontrolled data. So any expression of this delaying might have to be in a publication or if the real-world evidence is deemed strong enough in a discussion with the agency. Karen Massey: Yes. I think that's what's exciting about this data, along with some of the other evidence generation that we're doing, a Phase IV study in early disease to be able to see that progression. But I think regardless, one thing that's important is with ocular MG is the symptom burden is significant and the opportunity to transform lives of patients suffering from ocular MG is significant even without the disease progression. So I think we can demonstrate that benefit in the short and the long term. Thanks, Luc. Operator: Your next question comes from the line of Luca Issi from RBC Capital. Luca Issi: Congrats on the progress. Maybe, Luc, if I could circle back on ocular myasthenia gravis here. Again, I appreciate this is a fresh off the press, but how should we think about the kind of clinical significance of the data here, again, in the context of the p-value of 0.012. And then maybe related to it, can you confirm the use of steroids or other therapy was relatively well balanced between the 2 arms, so we can kind of definitively say that the benefit here is coming from VYVGART and is not confounded by any other therapies? Luc Truyen: Yes. Thanks for that question. And of course, we don't share too many detailed data because we want to make sure that the representation in an external conference isn't impacted by doing so. But to come back to the -- yes, we have significant p-value, but that was driven by, in our mind, a very relevant treatment difference between active and placebo. Remember, these endpoints range is between 0 to 18 and to show an active 4-point difference for that individual patient is certainly a relevant outcome. So we feel that in totality, this is a meaningful signal that we have shown. And with respect to balancing on steroids, steroids were allowed but had to be stable. And we are confident that there's no imbalance in the outcome based on anything there. Karen Massey: And maybe just to add to your question on clinical significance. I mean, Luc mentioned in the script, what -- when you think about what the impact that ocular MG has, what patients will tell you is that it strips them of their independence. They lose -- because of the double vision, they lose the ability to drive, they lose the ability to work. And so it has a real impact on their quality of life. So there's no other treatments available other than steroids. So any benefit that we can provide and certainly this a 4-point benefit that we've seen is demonstrable benefit for patients and I think clinically very meaningful. Operator: Your next question comes from the line of Justin Smith from Bernstein. Justin Steven Smith: Just a very quick one, if you could talk about the commentary with regards to switching off subcutaneous Ig on to VYVGART and how that's changed over the last 3 months? Karen Massey: Yes, I'm happy to. Well, I think what you're asking about is there was an -- FDA looking into real-world evidence around switching and CIDP worsening. Actually, we had good news that we have completed that review and the label has been updated with some helpful guidance to HCPs around when switching from IVIg to VYVGART. So I think we're well positioned moving forward. That label update reinforces what we knew from ADHERE and reinforces the risk-benefit profile of VYVGART. Thanks for the question. Operator: Your next question comes from the line of Samantha Semenkow from Citi. Samantha Semenkow: Just one on the ocular MG opportunity. I'm wondering, can you speak to the mix of treating physicians that you're expecting for this patient population? Are they mainly managed by neurologists, ophthalmologists or even neuro-ophthalmologists? And I'm wondering how much education you think you need on the opportunity to drive VYVGART utilization in this segment? Karen Massey: Yes. Thanks for the question. Maybe, Sandrine, you can talk about that and also related to seronegative because we have the PDUFA date coming up in May. And just is there -- are there any changes for our field or the targeting strategy with this label -- with these potential label expansions? Sandrine Piret-Gerard: That's a great question. Actually, we have a big overlap between the current prescribers and the target group we are visiting and the people that will be prescribing for MG in both seronegative and ocular. So it's mostly a neurologist-driven disease. So we don't expect to have to change our footprint. And actually, we increased our footprint early 2024. If you remember, we doubled our footprint to be able to not only target academic medical centers, but then to also be able to visit the community neurologists where we feel the majority of the patients are being taken care of. So you won't see a change of our approach there. And with the big overlap, we're confident we can target the majority of the potential and the prescribers. Operator: Your next question comes from the line of Victor Floch from BNP Paribas. Victor Floch: One question on ARGX-213. So I believe the last time you've updated us on time lines where you were pointing out Phase I results sometimes in H1 this year. So I was just wondering whether we should expect you to discuss those data or to a broader extent, your -- like the development program of that product later this year. Karen Massey: Yes. Thanks for the question. And again, the interest in our next-gen. We are excited. So we're moving forward with 213, and we've shared that update previously, and it is in the clinic. We're working on the indication strategy at the moment and our path forward, and we'll certainly share that when we have an update to share. Thanks for the question. Operator: And our final question today comes from the line of Douglas Tsao from H.C. Wainwright. Douglas Tsao: Just on oMG as a follow-up, we have heard from clinicians who have tried to use it in patients presenting with ocular symptoms, but they've had pushback from payers just given the fact it wasn't sort of on label. I'm just curious if you could provide some perspective on when you think it might start to become a contributor? Will it be sort of getting it added to the label? Or will there be a process where you need to also then talk to payers? Just sort of trying to understand the sequencing when we should think about this because it does seem to be a fairly meaningful commercial opportunity for you. Karen Massey: Yes. Thank you. And I agree it is a meaningful opportunity and a meaningful benefit for patients. So what you can expect, I mean, we'll file as soon as we can based on this data, and I think we have a well-oiled machine. So we'll do that as soon as possible, and then we'll see when the PDUFA date is, assuming the submission is accepted by the FDA. What we normally guide to is because we will need to have conversations with payers, and we will need to change those contracts. What we usually guide to is that it takes about 2 quarters after approval to get those payer policies in place and to really start to see the impact of the opportunity. So we'll take it step by step. And step number one will be preparing the filing as quickly as possible. Thank you. Operator: And this concludes today's conference call. We thank you for your participation. You may now disconnect.
Alexander Saverys: Good afternoon, and welcome to the CMB.TECH Earnings Conference Call for the Fourth Quarter of 2025. My name is Alexander Saverys, and I'm joined here by my colleagues, Joris, Enya and Ludovic. We will touch upon our classic topics. We'll start with our financial highlights. We will then give you a market update and finish with a conclusion and a Q&A. And for the financial highlights, I'd like to hand it over to Ludovic. Ludovic Saverys: Thanks, Alex, and good afternoon, everybody. As usual, we start with a snapshot of our company, where here, we've shown you the key metrics of the fleet, roughly 40 ships with about a $10.7 billion fair market value. This is excluding the vessels we have sold already. Our market cap sits today at $4.2 billion after a nice run-up on the share. We have $1.5 billion CapEx remaining as from end of January and operate a modern fleet of 5.9 years. Dry bulk today is predominantly 60% of our total fair market value with the other divisions showing the rest of the value of the fleet. Zooming in on the highlights of the Q4, we had a net profit of $90 million bringing the full year profit to $140 million. And the EBITDA of this quarter was $322 million to end the year on a $943 million EBITDA. Our liquidity sits at a pretty strong $560 million and our covenants for the bonds on the equity on total assets sits at 31% and for the rest of our loan agreements at 44%. We've had a pretty remarkable Q4 where we were able to delever the company, at the same time, pay dividends again, which we'll discuss later and strengthen the balance sheet with a couple of actions that we've performed in the company. Running through it, the result, I mentioned $90 million. We had some nonrecurring one-off and sometimes even noncash impact on the results, which are mostly related to the finalization of the integration of the merger with Golden Ocean. There's IT costs, but there was also, I would say, refinancing costs that we had to take as a one-off on arrangement fees, success fees in Q4. On top of that, we had roughly $15 million, 1-5 of nonrecurring costs on the SG&A, which is tax reversals and other, again, integration fees from the Golden Ocean merger. The liquidity stands at $560 million, which is quite strong with the good markets, with the sale of assets, and we'll discuss later, gives us a lot of capabilities to further strengthen the balance sheet in 2026. The acquisition, if you recall, the first 50%, 49% of Golden Ocean, we bought through a bridge facility. Happy to inform that it was fully paid back end of January. There was also some costs related to that of acceleration of arrangement fees. But this will give an interest saving of roughly $42 million for 2026. So quite happy to say that we were able to do this, but that also we were able to repay it out of own cash, but also some releveraging on other dry bulk ships. The contract backlog sits at $3.05 billion. Alex will go in further detail, but we added in Q4 roughly $304 million, primarily on Capesizes and on one CSOV. Happy to tell that there an interim dividend declared of $0.16. This is roughly $45 million of dividend being paid later in April. We feel that the balance sheet has strengthened good enough to increase from the $0.05 we previously paid in the quarters to a somewhat higher dividend. This dividend is not yet the dividend that we announced in the press release on the sale of the 6 VLCCs of 50%. So this -- the capital gain on those ships will be taken in Q1 and Q2, and the Board will decide on the dividends at that moment. We've had a very active delivery schedule in Q4, 6 newbuildings, but Alex will talk about it later. But more importantly, for our balance sheet, we were able to, in Q4, Q1 and Q2 already secured more than $420 million in capital gains. That's profit that is locked in. $50 million was booked in Q4. But in Q2 and in Q1, we have already a guaranteed $370 million profit, which gives us a lot of opportunities for the rest of the year. We have a large spot exposure still on tankers, but predominantly on dry bulk. If you look at 2026, we have roughly 53,000 shipping days from which 44,000 are spots. And if we zoom in into dry bulk, where we have a pretty strong feeling that there will be a good market in 2026. We have 36,000 days from which 27,000 on Capesizes and Newcastlemaxes. This means $10,000 up on our breakevens brings in $270 million in cash flow. When we look on the right side, we always like to position on the segments we are active in compared to the order book to fleet ratio. The bottom segments are compared to some of the other shipping segments on the relatively low side on the order book. When we look at Capesize and Panamax, I think we're very well positioned to look for better markets in 2026. Looking at the CapEx program. It's a recurring slide we like to show. As of end of January, we have roughly $1.5 billion remaining CapEx from which $216 million will come from our own cash. You can see in this slide, which is quite interesting is that the next 12 months will be a heavy delivery schedule, roughly $1.2 billion will be paid to the yards. All the financing has been secured. And if we look at the cash from the sale of the VLCCs and Capesize we've already done, the whole CapEx has been taken care of. This also shows that within 12 months, every sale, every cash flow generation we'll have will give us an opportunity again to look at dividends, delever further in an even more accelerated way. The free cash flow, we've given an estimation based on hypothetical rates that you see on the bottom right. I think we're still pretty conservative if you look at today's markets. But should we have the estimated rates even with 20% where we're already in today, this would create a $700 million free cash flow on top of the normal debt repayments. This gives us ample capability to pay back the Nordic bonds, which we anticipate just to pay out of own cash, continue to fund the CapEx and delever the company in an accelerated way. This was the financial highlights. I'll move on to the market update and give the floor to Alex. Alexander Saverys: Thank you, Ludovic. I want to update you on the various markets where CMB.TECH is active. You see our overview sheet where we put all our markets and zoom in on the demand side, supply side and where we see the balance. This slide has fundamentally not really changed compared to 3 months ago. We are still positive on dry bulk tankers and offshore. We are cautious on the container side and on the chemical side. If you look at dry bulk specifically, you see that we see very nice ton-mile growth for iron ore and bauxite in 2026, which is a positive. On the supply side, the order book to fleet has grown a bit. There's been some more orders for Capesizes and Newcastlemaxes for delivery in 2028 and 2029, but we still believe it's a manageable 12.4%. The fleet growth this year in Capes specifically will only be 2.3%, and we see the trade growing by more than that. So all in all, the balance is positive. On our dry bulk side in Bocimar, we have 87 spot vessels. There's another 9 vessels that will be delivered to us that will also be traded spot unless we have fixed the charter. And with the addition of the recent charters that we concluded, we have now 16 ships on charter, and that's another 3 newbuildings on charter as well coming later this year, beginning 2027. On the tanker side, the figure in pure supply/demand is a little bit more muted. There is more fleet growth than demand growth at least on paper, but there's a big element of sentiment, and I'll zoom into that when we speak about Euronav that has propelled the market to very, very high levels. All in all, sentiment is good. Earnings are good. The tanker market is still very positive. Our tanker fleet with the sales of the 8 vessels recently has reduced a bit. We still have 12 vessels on the spot, another 3 newbuildings coming. And then we have 10 vessels on time charter with another 2 newbuildings that will also be on charter, but I'll talk about that when we talk about Euronav. Containers and chemicals, I'll handle a bit later. And then just on the offshore energy, which is both on the offshore wind and the offshore oil and gas. Specifically on the wind, we are seeing a slight acceleration again of the installation of capacity, which should support our CTV and CSOV markets. And on the supply side, we have seen basically a slowing down of ordering new vessels. The order book to fleet for CTV stands at 13%, which we think is very manageable. Order book to fleet for the CSOVs is much higher. But again, there is also a lot more demand for that type of vessels, specifically from the offshore oil and gas markets. I want to run you through a couple of slides for Bocimar and dry bulk, starting with the overview of what Bocimar has done in Q4 and Q1. We have 36 Newcastlemaxes on the water. We have another 10 newbuilding Newcastlemaxes that will all be delivered by the first quarter of 2027. In Q4, we achieved actuals of close to $35,000. Q1 quarter-to-date, we are at slightly more than $30,000 a day. We have 37 Capes on the water. There, the results in Q4 were $30,000 and Q1 to date, we are at $26,000. These are strong rates Definitely, for the first quarter of the year, we are seeing rates that have not been as strong over the last 15 years. So we are seeing a very strong Q1. We have sold the Golden Magnum and the Belgravia and we'll record a capital gain of $8 million in the first quarter. Our 30 Kamsarmaxes and Panamaxes are all on the water. We achieved rates of $17,300 in Q4 and $13,200 so far in this quarter. You can see the breakeven levels and what we have achieved on the right side. Just a couple of important indicators on the right side. We see that there's a lot of green indicators, a lot of support for dry bulk demand. Just the inventories on iron ore in China are up. The coal imports in China are down. These are slightly more negative indicators. But all in all, we see more positive signs than negatives for dry bulk. Here on this slide, we look at the order book to fleet ratio for Capesizes and why we believe that vessel values could well be supported for the next 2 or 3 years. We basically have put on the right side of the slide, the recent number of vessels that have been delivered, including the newbuilding prices that are being quoted by brokers and compare that to the last time we were in a dry bulk boom. Here, basically, we want to say that as long as the order book is around the levels that we see, this market still will be supported on asset values. We don't see an oversupply coming. The fleet profile for Capes and for Panamaxes, again, it's a recurring theme. There's very little scrapping going on. We see that vessels are aging, aging rapidly. We are now at close to 150 Capes that are over 20 years of age, close to 600 Capes over 15 years of age, and the numbers on Panamaxes are even more important. So if the market one day would correct and scrapping would start, this would definitely be something that can balance the market. When we look at Q4 and Q1, the 2 big themes for us, definitely for our Capes and NUCs have been iron ore and bauxite. You can see on these graphs, the rainfall and then the volume of iron ore and bauxite that's being loaded in the Atlantic, in West Africa and in the Pacific. What we have seen specifically with West Africa on the bauxite side, but now also the iron ore will start playing a very important role is that it is a bit counter seasonal compared to the weaker seasons that we have used to be seeing in the Pacific for Australia predominantly and the Atlantic for Brazil. So it is helping our market. It is balancing the market. There are more opportunities for large bulkers to load cargo even in the first quarter of the year. And as you can see, the rates have reacted very positively to these volumes. Capesize market fundamentals this year are positive. I mentioned it when we spoke about the overview. We see a ton-mile increase in demand of 2.7% and a fleet growth of 2.3%. So we expect the utilization to creep up. We are already around the 90% utilization mark. This could go to 91%, 92% in the coming months. The big market moves in dry bulk and then specifically for iron ore is -- well, you can see them on this slide, all the volumes coming out of West Africa, Brazil, Australia. We see that iron ore, according to the forecast will continue to grow. So seaborne iron ore will continue to grow. It will come from areas that are far away from the main customer for these goods, which is China, which is good for ton-mile demand. And you can see that the same story can go for bauxite. We have been very surprised by volumes of bauxite in January. So the number of 184 million tons could well go higher if this trend continues this year. So very supportive of these 2 commodities, both in volume and in ton-mile for 2026. I will say a few words about Euronav and the crude oil tanker market. Starting with our fleet of VLCCs. So the fleet has been reduced. We have sold 8 of our older vessels as we have announced last month. We are left with 3 VLCCs on the water. That's one 2016 built ship and 2 newbuildings. And then we have another 3 eco VLCCs coming in the next couple of months. So our fleet of VLCCs is 6 ships in total. You can see what we have achieved in terms of rates, around $75,000, both in Q4 and in Q1 quarter-to-date. The Suezmaxes, we have 17 Suezmaxes on the water. We have another 2 vessels delivering very soon. These 2 vessels, these 2 newbuildings have been fixed on long-term time charters. But for the spot fleet, we achieved rates around the $60,000 to $65,000 mark, both in Q4 and in Q1. The markets there are very, very supportive, watch the space because the numbers that we have been seeing over the last couple of weeks are way higher than the numbers that we are reporting here. If you look at the key indicators, a lot of green indicators, the market is supported. We are seeing the tanker fleet growing a bit. But all in all, both in sentiment and in fundamentals, we see that the tanker market right now is very supportive, and that's probably the understatement. It is more than supported is actually very high. The sustainability of the expanding crude tanker order book will depend a lot on the durability and the potential uptick in scrapping. The order book has risen. We are seeing more orders for VLCCs and Suezmaxes. These orders will not come through this year or next year. But as from 2028, this is something to watch because the market balance will depend a lot on how many vessels we can scrap to make sure that the amount of newbuildings that are coming to the market will not distort the market to the downside. Demand durability of crude tankers, all the different agencies have different numbers. It's not always easy to follow. It looks like we are producing more oil in the world today than we are actually using. And so the only big explanation for that can be that someone and particularly the Chinese are probably stockpiling oil in great numbers. That as long as this continues, it is, of course, very supportive for the oil tanker markets. Depending on what will happen in the next 6 months, both with the oil price and on geopolitics, of course, all these scenarios can be rewritten. But for the time being, what we're seeing is an oversupplied oil market, whereby the oversupply is absorbed in stockpiling. Sanctions remain a very important theme, the Russia-Ukraine conflict, what's happening or what will happen in Iran and of course, Venezuela. We just wanted to highlight one interesting graph on the right side, whereas we see that the Indian crude imports from Russia have gone down after the sanctions that the U.S. imposed in December. We see actually that probably China has picked up some of that slack, as you can see on the graphs to the right. A few words about Delphis and our container vessels. As you know, our 4 container vessels on the water have been fixed on long-term charters for 10 years. We have one more newbuilding delivering this year, which will be under a 15-year time charter contract. So we are not really exposed to the spot market. If you look at the spot freight market, it's a downhill slope. We see that the SCFI is actually trending downwards. So spot freight rates are down. Interestingly, the charter market is still quite supported. So not a lot of charter vessels available. Some big liners still fighting for market share and chartering vessels. We expect this actually to go down going forward because there is still a very significant order book to be delivered both this year in '27 and in '28. Bochem and our chemical tankers, we have 8 ships on the water. You can see the performance in Q4 on the right side. So there's a mix of time charters mostly, but we also have 2 vessels operating in a spot pool. Bochem still has an order book of 8 vessels. We have 2 product tankers coming this year. We then have another 6 chemical tankers in '28 and '29. All these vessels have been fixed on long-term time charters. So our spot exposure is relatively limited. And what we see on the spot market is a slightly declining market, nothing dramatic, but definitely, the rates are not what they were in 2024. So still seeing okay rates, but definitely, things are going down a little bit. And then I want to end with a very good performing business unit recently. That's Windcat. We have taken delivery of 2 of our CSOVs last year. One CSOV has been trading for the last 4 to 6 months on the spot market, but earning very good rates, as you can see on the right side, the equivalent in Q4 of $108,000 a day. The other one has been fixed on a 3-year agreement for work in the North Sea. We still have another 4 CSOVs coming and one larger CSOV is CSOV XL this year and next, but the market is very supportive. And it's supported because the oil and gas market requires good modern offshore supply vessels. And these good modern offshore supply vessels, in some instances, were earmarked for the wind business but actually can now earn better rates in oil and gas, and that is where they are going. On the wind market, we're actually seeing some positive evolutions as well. Last year was a bit slow in terms of delivery of new projects. But in North Sea and Europe, we are seeing new projects coming on stream this year and next, which will necessitate demand for CSOVs and CTVs. CTVs, we have a large fleet of close to 60 vessels on the water. You can see the rates that we achieved. We definitely are satisfied with the rates that we achieved and are looking forward for probably a better 2026 than 2025. So this ends our market update. I'd now like to hand it over to Enya for the Q&A. Enya Derkinderen: [Operator Instructions] So we will now start taking the first question. Frode Morkedal, you can now unmute and ask your question, please. Frode Morkedal: Yes. Can you hear me? Alexander Saverys: Yes. Perfect. Frode Morkedal: Okay. Perfect. On this Golden Ocean bridge repayment, is it fair to assume that the strong tanker market helped you with this? And specifically, obviously, the sale of the 8 VLCCs must have been instrumental in being able to repay this way ahead of schedule, right? So that's -- and also you could just remind us the numbers we're talking about, how large was the bridge facility? And what's the net proceeds of these 8 plus 2 Capes, I guess, you sold? Ludovic Saverys: Yes. If it's okay, Alex, I'll take that one. So just to remind, we had a $1.4 billion acquisition facility given by the banks. We only drew upon $1.3 billion. So that was the actual exposure we had fully drawn to buying the first 40% and then another 9% of the market. Of that $1.3 billion, quite quickly after the merger in August, we re-levered the ships of Golden Ocean with a $2 billion facility. And we used $750 million of cash of the releveraging to pay down to $550 million. And that $550 million was what we carried since, I would say, September until 2 weeks ago, $550 million, which half of it has been paid with operational cash flow and cash from sale of vessels with a little bit of the Q3 vessels we sold delivered in Q4, but also some of the tankers, as you mentioned. And then there is roughly half of it, $270 million, which we shifted from the "expensive $2 billion facility with Golden Ocean with some Chinese leasing that we did execute last December." And that was -- so roughly $260 million that we did. So own cash, only about $260 million, $270 million on that. And I think the sale of the tankers, especially the 6 plus 2 Capes and then the remaining 2 has even further strengthened, I think, the belief on the Board to pay more dividends, delever more and then also get a comfort on the Nordic bonds for the remaining of the year that the cash out of the 8 tankers was roughly $420 million cash. So that obviously gives good opportunities to do all of the above that we mentioned. Frode Morkedal: Right. So is it still that the target is to bring down the LTV -- net LTV to around 50%? And at that point, you could... Ludovic Saverys: At that point, Frode, I think the target -- the long-term target is at 50% LTV. The LTV today end of December was roughly 55%. Now with the increase in tanker rates -- in tanker value, sorry, as everybody has seen in the market, we're probably already at those levels. But that is the target. I think it's more important to say what are the opportunities with every dollar that comes in from sale of operational cash. And then we stick to the point that it can be dividends, it can be further deleveraging. It can be accelerating the payments on some of the revolvers that we have to reduce the interest costs. Because one thing, when you do M&A, there is a cost of it, especially when you leverage buyouts. And we have seen that in 2025, the SG&A was higher because of lawyer, success fees, refinancing. And hopefully, going forward, our interest costs in '25 should go much lower, that is because there's no more bridge because we are changing expensive or more expensive bank debt sometimes with Chinese leasing and other cheaper, I would say, instruments. Frode Morkedal: Right. So is it fair to assume that you would probably wait for the bond maturity or some type of refinancing before you step up the dividend payments, even if you are probably approaching 50% earlier than this, right? Ludovic Saverys: I think the decision of the Board of the $0.16 that we paid today is testimony that I think we can do both paying dividends, both delevering and both continuing to delivering all the newbuilds. Frode Morkedal: Great. Final question is on NAV. What do you see about investment opportunities, specifically newbuilds, I guess. For example, in tankers, I mean, I'm hearing it's starting to get tempting to start ordering VLCCs, right, because you can order at $120-something million and the prompt resale is $40 million to $50 million higher. So that type of, let's say, [ arm ] is opening up and maybe that is interesting. What's your view? Alexander Saverys: Our view is that the ship you ordered today at $120 million, delivers in 2029. So today, it might look cheap. In 2029, it might look very expensive. Right now, Frode, we are not actively pursuing tanker newbuilding plans. We are, of course, opportunistic. We will look at any possibility that comes across. But right now, right now, we'd rather enjoy the spot market and not order any tankers. Enya Derkinderen: The next one is Petter Haugen. You may now unmute and ask your question, please. Petter Haugen: In terms of -- well, I suppose then turning through this question upside down. You still have tankers, although now it's predominantly Suezmax tankers, obviously. Would you consider to sell some of those in order to, well, do the combination of further paying down debt and dividends? Alexander Saverys: Yes, Petter. Look, the first thing we wanted to do over the last 1.5 years is to sell our older vessels. I think we've done a good job at that so far. So obviously, we still maybe have 1 or 2 older vessels that could be up for sale. The second thing is if we see an exceptionally high price for any asset, we will always look at it. Look, trading ships, buying and selling ships is part of our business. And where we like to keep our younger vessels, we will never say no to a very high price. Do we need it to deliver? No. That I would say, I think the heavy lifting on delevering has been done. I think operational cash flows can bring us to a very comfortable leverage over the next 9 months. But we will always be ship traders. If someone comes with a very high price on any assets, we will look at it. Petter Haugen: Understood. And in terms of your dry bulk fleet, sort of the same question there. I suppose we've seen how the market has appreciated your -- yes, your sales and the communicated increase in dividends. So on the Capesize fleet, there are, I suppose, more opportunities still to sell older ships. But is that done now? Or is that still on the table? I know that you say that you sell at the right price. That's true to all of us, I would say. But in light of the very strong tanker market and increasingly strong dry bulk markets. I would -- well, in interpretation of your earlier statements, I would think that you were contemplating to sell more rather than the opposite. Alexander Saverys: No, I think that is not really correct. I think on the dry bulk side, we believe we are not yet where the tanker market is right now. We think this market has a lot more in it, and we would like to let it run. So stay spot exposed unless we find some good charter parties. And as you've seen, we fixed 5 of our Capes for 5 years at what we believe are very good rates or unless, again, an exceptional price comes along. But I don't think we're there yet. So we're very happy with the dry bulk fleet we have now. We have sold some of our older vessels. And now we really want to just enjoy the market for the next couple of quarters. Enya Derkinderen: Now, Kristof Samoy, you can now unmute and ask your question, please. Kristof Samoy: I have 2. One on long-term charters. You've concluded these 5-year charters for your Capesizes. Could you disclose the counterparty? And then secondly, we've also seen in the market that Vale has been ordering quite some newbuild VLOCs. Would your Newcastlemaxes have been competitive for the trade? Or were they particularly looking for 400,000 deadweight ton plus vessels for the transportation? That's the first bulk of my question. And then secondly, on the U.S. Maritime Action Plan proposal. I recall when we discussed USTR and the impact or the potential impact of USTR in previous calls that you indicated that the impact would be fairly limited because you have little port calls in the U.S. Does this logic still apply to the now proposed U.S. Maritime Action Plan? Or are there like substantial differences there that you see for CMB? Alexander Saverys: Okay. Thanks, Kristof. So first, the counterpart of the charters, that's confidential. So we are not disclosing that, but it's a very good counterpart. On Vale and their large ore Valemaxes, typically, what they like is to do very, very long-term deal at very, very low returns. That's not something we like. Could our Newcastlemaxes have completed, of course, but then we would have accepted a very, very low return. That's usually these large projects, and we leave that to some of the specialists in Asia. And our relationship with Vale on the spot market is still there. We do business with them with our Newcastlemaxes. On what is happening in the U.S., Kristof, you will agree with me that the only thing we know is that we don't know. Things are changing by the day. When you say that we don't have a lot of port calls in the U.S., that's actually not true on the tanker side. Don't forget, we do quite a lot of business with our tankers in the United States. But under the USTR and all the other regulations, we would have been exempt anyway because energy was going to be exempt. The new package that is there, it's too early to assess what the impact would be on our business. Enya Derkinderen: Climent Molins, you can now unmute and ask your question. Climent Molins: I wanted to follow up on Kristof's question on the Capesize charters. Could you disclose the rate on the contracts? Or is it confidential as well? And secondly, what's your current stance on potentially adding more coverage based on your forward outlook on the dry bulk side? Alexander Saverys: Yes. Thank you, Climent. So no, again, we can't disclose the rate. But I think if you look into broker reports, how they quote a 5-year Cape rate, and add a little bit to that because our vessels are more modern and better than what brokers are quoting, then you're probably in the ballpark. But so unfortunately, we cannot disclose the rate. Would we look at taking more coverage? Yes. Answer is yes. We have said this in this call many times. We think that, ultimately, we want to create stable cash flows in our company. We will not do it at any price. But when markets move in the kind of zones we are now, we will actively engage with our customers to see whether we can take more long-term cover. Climent Molins: Makes sense. And I also wanted to ask about the dividends on the gains on sales. I assumed a few minutes late, and you may have already touched upon this, but is it fair to assume you'll declare a dividend on that front on both Q1 and Q2 based on the reported gains? Alexander Saverys: The answer is definitely on Q1. And again, if you take back full discretionary dividend policy, I think every quarter, we look at it. We had a very good Q4 quarter. We were able to achieve a lot of the internal check the boxes to reinstate, I would say, a somewhat higher dividend than before. So the $0.16 was purely on Q4. Q1, we have already $270 million profit, which we announced our intention to pay a dividend on it. So that will be decided and confirmed, I would say, on that part in the May earnings release for Q1. And as the market continues, as we continue probably to shift from sales to really operational cash flow and take out the remaining parts of the new build program and the bonds, it frees up a lot more capacity for dividends. But again, we're not going to commit to a fixed percentage. I think it will be quarter-by-quarter that we look at, but it's fair to say that it all looks pretty good. Enya Derkinderen: We have 2 more questions in the Q&A. So the first one is, do you expect Sinokor?behavior to trigger a regulatory reaction? Alexander Saverys: I don't know. You should ask Sinokor. Enya Derkinderen: And then the second one is, what are your expectations on framework changes after the European Industry Summit? Alexander Saverys: I think the theme of that summit was more the industry based on land and not specifically on the maritime side. But I do think it's great that our politicians are aware that if we want to make sure that prosperity continues in Europe, we need to change certain things. And that can only help our vibrant maritime industry, which, as you know, is very strong here in Europe. Enya Derkinderen: We have one more question live. [ Victor ], you may now unmute and ask your question. Unknown Analyst: I had a quick question regarding your leverage. Do you intend to lower it back to pre-2025? Or do you have a figure in mind on the leverage you're looking for? Also on the equity ratio, you haven't moved a lot on this part. And just wondering how far you are within your covenants? And last question, can you give us more flavor on the recent cooperation you signed with China for your new project there? Ludovic Saverys: Yes. [ Victor ], thanks for the questions. On the leverage, we have a target of 50% loan-to-value. I think we're not far off. If you would take today's value, especially with the increase in tankers, we're there or thereabouts. I think it's about making sure that combined with the long-term cash flows that you have, but also the opportunities you see. I just recall, we did increase our leverage quite dramatically with the Golden Ocean opportunity. But I think as shareholders, we're all pretty happy that we did. That leverage has reduced. and we're now positioned with another 90 dry bulk ships in what is seemingly a strong market. So we do justify that increase in leverage tactically. The equity ratio, just to remind, we have a pretty low book value, which is, I would say, taking a long success because we buy or order quite cheaply, and we don't re-rate our assets in book values. If you look more towards the value-adjusted equity, which we showed on slide -- on the overview slide, that has, I would say, equity ratio increased quite dramatically with the adjustment on fair market value. The bond covenant of 31% in Q4, you don't have to be a mathematician to see that if you add another $370 million of profit in Q1, Q2 on fixed sales. I think that covenant is high and dry definitely until the maturity of the bonds in September. And so we mentioned that we will probably not issue a new bond to just pay back at maturity. So we're good in all covenants, by the way, and you'll see that in the audited financials end of March. Alexander Saverys: And then Victor, to answer your question on our investments and our joint venture in China. You know that we are building ammonia-powered vessels that will deliver this year. We have secured an offtake of green ammonia in China. And we have also invested in a company that provides the logistics for that ammonia, bringing the ammonia from the factory where it is produced to the tank and from the tank with a bunker barge to our ship. So that is the nature of our investment there. Ludovic Saverys: And for everybody, we mentioned this, this is quite a small investment. We took a stake to better understand, to better control that logistics and to see how that is developing. But we we're talking a couple of tens of millions, but definitely not a huge investment. Unknown Analyst: And last question, if you allow me this. Do you have a target on the EU ETS price? Alexander Saverys: That I want to pay or that I want the market to go to. Unknown Analyst: That you want the market to go to for your investments to be more interesting for our customers. Alexander Saverys: It's a very good question, Victor. Of course, the higher, the better because then there will be more incentive for people to use our assets in European waters. Okay. Thank you, Victor. Enya Derkinderen: Okay. Then Quirijn want to ask a question. You can now unmute. Quirijn Mulder: Quirijn Mulder from ING. You sound quite optimistic about the wind offshore market. Can you maybe give some idea about the utilization and let me say, the future prospects? Let me say, is it more what you see from your order book? Or is it more what you see in the market happening? Maybe you can elaborate a little bit on that. Alexander Saverys: Yes. So I think the optimism comes from 2 sides. The first side is purely related to the wind and the new parks that will be developed in the next 3 to 4 years. As you know, a lot of projects over the last 2, 3 years have been either halted or delayed. What we do see is that certain projects are still coming through in the North Sea, which will create additional demand for offshore wind supply vessels. But we're also optimistic Quirijn because our assets that we are deploying for wind parks can also be deployed in offshore oil and gas markets. There, the fleet has been aging, has not been renewed sufficiently. The quality and the comfort of the assets in the oil and gas markets is much less than the ones in the wind markets. So our assets that are suited for wind are actually in very high demand to serve the oil and gas markets. And what we're trying to do over the last 6 to 9 months is basically to make sure that our ships can earn good money in oil and gas. And then once they have done their job, their transition to better wind markets. Quirijn Mulder: Okay. But let me say the contract size is very different in wind compared to oil and gas, as you might know. So wind in general is longer, more -- let me say, more -- takes longer time, especially. And oil and gas short time, short time contracts, et cetera. So... Alexander Saverys: That's not really true. You see long-term contracts in oil and gas and you see spot contracts in wind. Our CSOVs have been ordered to operate on the spot market first. And as and when we see longer-term contracts, then we go for it. What we have not done, unlike some of our competitors is order these vessels with a charter attached because there the charters were very, very low paying. Ludovic Saverys: It's a little bit the similar analogy with the Vale contracts that, yes, there are certain peers that accept not the IRRs we would accept. And hence, with the balance sheet that we have, the strength we have, the knowledge in the market, we order speculatively spot based on long-term fundamentals and then wait a little bit until, as Alex mentioned, we see good long-term contracts as we've done on the second CSOV, which is actually quite profitable contracts over 3 years. Enya Derkinderen: I think this concludes the questions. Alexander Saverys: Okay. So I'd like to thank everyone for dialing in today. Thank you for your questions. Thank you for your attention. You know that if you have any other questions, we are here to answer them. Do reach out to us if you have any further questions. And I look forward to speaking to you on our next call. Thank you very much. Bye-bye.
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 day, and welcome to the Integra LifeSciences Fourth Quarter 2025 Financial Results. [Operator Instructions] This call may be recorded. I would now like to turn the call over to Chris Ward, Senior Director of Investor Relations. Please go ahead. Christopher Ward: Good morning, and thank you for joining the Integra LifeSciences Fourth Quarter 2025 Earnings Conference Call. With me on the call are Mojdeh Poul, President and Chief Executive Officer; and Lea Knight, Chief Financial Officer. Earlier this morning, we issued a press release announcing our fourth quarter 2025 financial results. The release and corresponding earnings presentation, which we will reference during the call, are available at integralife.com under Investors, Events and Presentations in the following fourth quarter 2025 earnings call presentation. Before we begin, I want to remind you that many of the statements made during this call may be considered forward-looking. Factors that could cause actual results to differ materially are discussed in the company's Exchange Act reports that are filed with the SEC and in the release. Also in our prepared remarks, we will reference reported and organic revenue growth. Organic revenue growth excludes the effects of foreign currency, acquisitions and divestitures. Unless otherwise stated, all disaggregated and franchise level revenue growth rates are based on organic performance. Lastly, in our comments today, we will reference certain non-GAAP financial measures. Reconciliations of non-GAAP financial measures can be found in today's press release, which is an exhibit to Integra's current report on Form 8-K filed today with the SEC. And with that, I will now turn the call over to Mojdeh. Mojdeh Poul: Good morning, everyone, and thank you for joining us for our Fourth Quarter 2025 Earnings Call. Before I review our 2025 performance and outline our priorities for 2026, I want to briefly acknowledge the recent Supreme Court decision and the administration's announcement regarding new Section 122 tariffs. While these are meaningful developments, there remains substantial uncertainty around the implementation and timing. As a result, our 2026 full year and first quarter guidance do not incorporate these tariff changes. We are actively monitoring the situation, and Lea will provide more details and context in her remarks. In the fourth quarter, we advanced our transformation, continued to deliver for our customers and patients and met our financial commitments with revenue of $435 million and adjusted earnings per share of $0.83, both above the midpoint of our guidance range. This performance builds on a year of meaningful operational and strategic progress. During the year, we further strengthened our quality management system, advanced our compliance master plan and progressed execution of our risk-based remediation plan while maintaining constructive engagement with the FDA on our warning letter commitments and routine inspections. We also improved supply reliability, enhanced our execution capabilities and delivered significant outcomes in key supply chain resiliency efforts. Additionally, we advanced our in China for China strategy, completing submission of our initial regulatory requirements. These accomplishments supported by our portfolio prioritization and disciplined capital allocation are reinforcing the foundation for future growth and innovation. I want to thank our employees for their significant contributions throughout 2025. Their efforts and steadfast focus on our purpose and our customers have been instrumental in solidifying our foundation and positioning us well for the opportunities ahead. Throughout 2025, we took several important steps to strengthen our company. We welcomed 6 new leaders to our executive leadership team, adding depth and capabilities that collectively represent decades of global med tech experience, supporting our focus on quality, execution and long-term growth. We improved our quality and manufacturing organizations and established operating mechanisms that are driving disciplined execution. We created a transformation and program management office that is focusing the organization on our most important priorities and driving greater accountability across the company. We also launched a supply chain control tower, providing daily visibility into key operational metrics and performance across our global network. These mechanisms are already translating into improved operational performance. Our manufacturing resiliency efforts are delivering meaningful yield and supply improvements in Integra Skin and in rebuilding safety stock across critical product lines. We also completed the early relaunch of PriMatrix and Durepair through a dual sourcing strategy with strong reception from our customers. In parallel, we continued our investment and progress in innovation and clinical evidence. We launched the MAYFIELD Ghost in the U.S. and received an expanded indication for CUSA Clarity in cardiac surgery. We also advanced key clinical evidence programs in support of our wound care portfolio growth and are seeing a meaningful early start in the AERA pediatric registry part of our ENT business. As part of the next phase of our transformation, we have put in place a new operating model to reduce complexity and improve efficiency, alignment and accountability. Some of the changes associated with the implementation of this new model have impacted our team members. We care deeply about our people and do not take these decisions lightly. These changes are necessary to deliver consistently for our customers and their patients while ensuring the long-term growth, profitability and success of our company. We remain disciplined in balancing the investments required to strengthen our foundation with improved profitability and cash flow, enabling us to reduce our balance sheet leverage in 2026. If you turn to Slide 5, you'll see how our long-term value creation model is defined by 2 parallel reinforcing horizons. As we look to 2026, we are focused on 4 strategic imperatives that guide our priorities, actions and resource allocation. These are delivering best-in-class quality, driving supply chain reliability, accelerating growth and igniting innovation. Delivering quality and supply chain reliability have been and will continue to be the focus of the first horizon of our transformation while accelerating growth and innovation define Horizon 2. Both horizons are critically important for our longer-term sustainable growth, profitability and value creation. Importantly, these 2 horizons are not binary. We are executing priority programs that support both horizons. While Horizon 1 remains focused on strengthening quality, supply chain reliability and execution discipline, we are also selectively investing in targeted growth and innovation initiatives that support our growth acceleration in Horizon 2. We will accelerate growth in Horizon 2 by innovating and expanding category leadership where we have clear differentiation and by investing in opportunities that are aligned with our portfolio prioritization. We will continue to build our new product pipeline, advance clinical evidence and pursue category expansion to drive sustainable growth into the future. A growth priority for us this year is to bring our key products back to the market. We remain on track to have the new Braintree manufacturing facility online by the end of June with equivalent qualification and validation progressing as planned. Once operational, Braintree will support the build-out of the inventory to enable the return of SurgiMend to the market in the fourth quarter of 2026. Further, upon receipt of PMA approvals for both SurgiMend and DuraSorb, we will have a compelling portfolio of biologic and synthetic products that can capture a meaningful share of the large and growing market for implant-based breast reconstruction. We have additional growth opportunities in outpatient wound care following the CMS reimbursement changes that went into effect on January 1 of this year. These changes have created a level and economically rational playing field in the outpatient setting. Our portfolio was already aligned to the new reimbursement levels and along with our strong clinical evidence and presence in hospital-based care, we are now uniquely well positioned to broaden our reach across all sites of care. Lastly, but importantly, impactful innovation and clinical evidence generation remains central to our growth strategy. We are strengthening R&D processes, program management and execution discipline. Portfolio prioritization is directing investments towards a focused set of high-growth, high-margin opportunities where we have a clear right to win. To accelerate innovation with greater focus, speed and impact, we recently added a Chief Technology Officer role to our executive leadership team. Teshtar Elavia joined Integra in February as the Chief Technology Officer and brings us more than 20 years of med tech R&D experience, most recently as Vice President of R&D at Becton Dickinson. Looking ahead, we see continued demand for our products and our future innovations. As we further strengthen our quality management system, supply reliability remains the main driver of performance predictability for us. The progress achieved in 2025 gives us confidence for the year ahead, and we are excited about Integra's long-term growth and value creation prospects. With that, I will now turn the call over to Lea. Lea Knight: Thanks, Mojdeh. We'll begin with our full year financial results, starting with Slide 6. Full year 2025 revenue was $1.635 billion, representing 1.5% growth on a reported basis and a 0.7% organic decline. The full year contribution from the Acclarent acquisition was a key contributor to reported growth while we manage quality remediation work and supply constraints that affected organic growth performance throughout the year. Despite these operational impacts, demand across the portfolio remains strong. For the full year 2025, we delivered double-digit growth in CereLink, MAYFIELD Capital, Aurora, DuraSorb programmable valves and 6 pressure valves. We also achieved above-market growth in DuraGen and Jarit instruments, demonstrating the meaningful value our technologies bring to customers and the effectiveness of our commercial teams. Full year gross margin was 61.9%, down 260 basis points year-over-year, reflecting tariffs, supply pressures and incremental costs associated with our compliance master plan. These same factors weighed on profitability with adjusted EBITDA margin of 19.4%, down 60 basis points and adjusted EPS of $2.23 compared to $2.56 in 2024. Disciplined cost management actions helped mitigate some of the impact on both adjusted EBITDA and adjusted EPS. Cash flow from operations for the full year was $50.4 million. Capital expenditures totaled $81.4 million. During the year, we invested in manufacturing infrastructure to improve supply reliability. We also continued funding 2 major initiatives, construction of the Braintree facility and supporting EU MDR compliance. These projects accounted for about $97 million in cash outlays. As investments in these programs wind down and we see improved working capital and adjusted EBITDA, we expect to see a meaningful improvement in free cash flow beginning in 2026. On Slide 7, I will cover our fourth quarter financial results. Our fourth quarter revenues were $435 million, representing a decrease of 1.7% on a reported basis and an organic decline of 2.5%, reflecting a particularly strong prior year comparison that was factored in our guidance. We saw a $33 million sequential increase in revenue from the third quarter due to improved supply and seasonality. Adjusted EPS for the quarter was $0.83 compared to $0.97 in the prior year, which benefited from lower net interest expense and absence of tariffs and a more favorable adjusted effective tax rate in Q4 2024. Gross margin for the quarter was 61.7%, down 350 basis points from the prior year, reflecting increased costs associated with remediation and our compliance master plan, tariffs and an unfavorable product mix. Adjusted EBITDA margin was 24%, up 30 basis points versus Q4 2024, with the above-name factors impacting gross margins being offset by disciplined cost management. Cash flows from operations totaled $11.8 million in the fourth quarter and capital expenditures were $17.2 million. Turning to Slide 8. We'll take a deeper dive into our CSS revenue highlights for the fourth quarter. Global Neurosurgery delivered 1.4% organic growth, supported by broad demand across the portfolio and strong performance in international. Growth was led by double-digit performance in CereLink, MAYFIELD Capital and Aurora with above-market contributions from BactiSeal, DuraGen and CUSA. Our capital business grew in the low double digits, benefiting from strong pipelines and disciplined commercial execution. Instruments posted low single-digit growth, consistent with market trends. In ENT, revenue grew 2.2%. AERA and TruDi navigated disposables experienced double-digit growth, while MicroFrance ENT instruments saw mid-single-digit gains. However, these positive results were partly offset by continued reimbursement headwinds affecting sinuplasty balloons. International markets remained a meaningful contributor to the CSS business with high single-digit growth led by double-digit performance in China and Canada. Overall demand indicators across our global markets remain strong. Moving to our Tissue Technologies segment on Slide 9. Tissue Technologies revenues were $111.6 million, down 12.8% on both a reported and organic basis compared to the prior year. Fourth quarter sales in our wound reconstruction franchise declined 21.4%, reflecting the previously communicated remediation efforts for MediHoney and a tough comparison with last year's record Integra Skin revenue, which benefited from significant backorder clearance in the fourth quarter of 2024. In private label, sales were up 20.1% year-over-year due in part to improved partner orders and timing. Finally, international sales in Tissue Technologies declined by low double digits, reflecting Integra Skin lapping its strongest revenue quarter last year following backorder clearance and the impact of MediHoney. If you turn to Slide 10, I will provide a brief update on our balance sheet, capital structure and cash flow. During the quarter, operating cash flow was $11.8 million, driven by restructuring costs and an increase in working capital due to revenue collection timing in the period. Free cash flow was negative $5.4 million and free cash flow conversion was minus 8.5% for the quarter. As of December 31, net debt was $1.6 billion, and our consolidated total leverage ratio was 4.5x within our current maximum allowable leverage of 5x. We expect to remain within our allowable leverage through 2026. We expect to see meaningful deleveraging, which will allow us to approach the upper end of our target leverage range of 2.5x to 3.5x by the end of 2026. The company had total liquidity of approximately $516 million, including approximately $264 million in cash and short-term investments, with the remainder available under our revolving credit facility. Turning to Slide 11. I will provide our consolidated revenue and adjusted earnings per share guidance for the first quarter and full year 2026. I will also provide perspective on the treatment of tariffs in our guidance considering the recent Supreme Court ruling and subsequent response from the administration. For the first quarter, we expect revenues to be in the range of $375 million to $390 million, representing reported growth of minus 2% to positive 1.9%. This includes an approximate 140 basis point tailwind from foreign exchange. We expect organic growth to range from minus 3.4% to positive 0.5%. First quarter revenue guidance reflects an approximate $10 million headwind, primarily due to MediHoney and order timing. Turning to the full year 2026. We expect revenues to be in the range of $1.66 billion to $1.7 billion, reflecting modest top line growth expectations. This equates to reported revenue growth of 1.6% to 4.1%, reflecting an approximate 80 basis point foreign exchange tailwind and organic growth of 0.8% to 3.3%. Regarding the quarterly revenue progression through 2026, the sequential step down from the fourth quarter into the first quarter reflects a quarterly cadence that is consistent with what we've experienced in recent years, particularly following a strong fourth quarter growth. We continue to see solid underlying demand across the portfolio, while organic growth is still impacted by supply. As the year progresses, we expect revenue to build supported by normal seasonality, continued share recapture and supply recovery. Turning to adjusted earnings per share and tariff treatment in our guidance. On Friday, the U.S. Supreme Court ruled that the tariffs imposed under the International Emergency Economic Powers Act, IEEPA, were unlawful. For context, the company paid approximately $20 million in tariffs in 2025, of which an estimated $16 million was imposed under IEEPA authority. Following the ruling, the administration announced that it is imposing a new global tariff under Section 122 of the Trade Act. Given the continued uncertainty regarding implementation details, potential exemptions and any subsequent trade actions, the ultimate impact of these measures remains unclear. Accordingly, the company's guidance continues to reflect the tariff assumptions in place prior to developments this past week and does not contemplate the recovery of any amounts paid prior to the Supreme Court ruling. We expect first quarter adjusted earnings per share of $0.37 to $0.45. This includes an approximate $0.07 impact from tariffs. Also worth noting that we expect the benefits of the operating model changes to materialize beginning in the second quarter. For the full year, we expect adjusted earnings per share in the range of $2.30 to $2.40. Full year earnings per share reflect an approximate $0.32 impact of tariffs, offset by the execution of our margin improvement initiatives and ongoing operational improvements, resulting in gross margins that are expected to be approximately flat with the prior year and EBITDA margin improvement of approximately 40 basis points. For your reference, we have included the key assumptions underlying our first quarter and full year guidance as well as key modeling inputs on Slide 12. With that, I will turn the call back to Mojdeh. Mojdeh Poul: Thank you, Lea. In closing, as we look ahead in 2026, our focus remains on continuing to strengthen the foundation of the business. We will continue to advance quality, improve supply reliability and drive consistent execution across the organization. At the same time, we are being deliberate in positioning the company for what comes next. As we return key products to the market, recapture share and sharpen our approach to innovation and portfolio prioritization, we are laying the groundwork to support accelerated growth over time. With strong positions in attractive end markets, our focus in 2026 will remain on delivering quarter-to-quarter consistency while building the foundation for sustainable growth and value creation. With that, operator, please open the lines for questions. Operator: [Operator Instructions] Our first question comes from Ravi Misra with Truist Securities. Ravi Misra: I guess 2 questions for me upfront. First, just on the free cash flow generation and improvement. It's a little bit weaker than I think we thought what we were looking for on kind of the prior expectations. Can you just help tease that out a little bit and what you're kind of contemplating in 2026? And then secondly, just on the Tissue Technologies business, a lot of stuff just going on, still lingering in the air here around CMS changes and how companies are reacting to that. Can you maybe talk about what you're seeing in the field here early on in the first quarter? Lea Knight: So I'll start, and thank you for the question, Ravi. In terms of free cash flow for the quarter, to your point, free cash flow was negative $5 million. A lot of that driven by timing of collections in the period. So that explains about 2/3 of that. The other 1/3 is driven by restructuring costs associated with the transformation and the model changes that Mojdeh referenced in her remarks. Perhaps more importantly, though, as we move into 2026, we do expect to see a much improved cash flow profile. We're going to experience reduced cash outlays associated with some of our key initiatives that I talked about, namely EU MDR compliance along with Braintree. And for reference, to put it in context, for 2026, we're expecting operating cash flow to be north of $200 million, which is about $150 million improvement over 2025 landed, about half of that $150 million is driven by EU MDR and Braintree cost reductions. And then the other half is driven by improved working capital profile, lower CapEx and better EBITDA for the year. Mojdeh Poul: Yes, Ravi, this is Mojdeh, and thanks for your question. To answer your second question, the changes, the reimbursement changes, yes, there are changes that are happening in the market and where they actually are going to land remains to be seen. We're continuing to monitor. But suffice it to say that, again, a reminder, our business is 90% in the acute care setting. And also one thing to keep in mind is the pricing that we have for our products are well within the new reimbursement range. So we do not expect to see any negative impact on our business as a result of the changes. One of the things that we're hearing though from the market, and we're seeing in the market is that the customers are really curious about better understanding the dynamics and the changes and our health economics teams are being asked by some of our major customers to actually sit down and educate them on what the changes are, which is a great opportunity for us because, if anything, the changes are very much aligned with the strategy that we've had for this product category, which is investment in clinical evidence, health economics as well as then being able to represent our full portfolio across the entire sites of care. So obviously, the anticipation is that this market is going to shrink because of the reimbursement pricing significantly being reduced. And who are the players that are going to remain in the market remains to be seen as to how much they can economically absorb because of this significant reduction in the reimbursement rate. Operator: Our next question comes from Robbie Marcus with JPMorgan. K. Gong: This is Allen on for Robbie. Just to start off, I wanted to ask on your assumptions behind growth for both CSS and Tissue Tech, both for the fourth quarter and for the full year, just how you're thinking about that in the context of the full company guide. Lea Knight: Yes, certainly. So from a Q4 standpoint, let me first start by saying how excited we are about the performance of the business in Q4. As I mentioned in my remarks, we delivered a sequential step-up of about $33 million versus Q3, which we believe is evidence of the strength of the underlying demand for our portfolio. Within that, as you look at CSS and Tissue, both delivered revenue that were largely in line with our expectations. CSS delivered a low single-digit growth, which is on top of a very tough comp from the prior year. If you recall, in Q3 of 2024, we experienced a supply interruption. Q4 benefited from strong backorder clearance. And so we were lapping that on that business. And despite that, we saw double-digit growth across parts of the CSS portfolio, namely CereLink, MAYFIELD Capital and Aurora and high single-digit growth in CUSA. So strong performance within and overall, given the comp that we saw versus 2024. In Tissue, similarly, we saw declines in that business in Q4, again, not unanticipated. Once again, we were facing a MediHoney remediation headwind for Q4 of 2025, coupled with Integra Skin facing a very strong comp again. So we saw a strong backorder clearance on Integra Skin in Q4 of 2024 and in '25, we comped that, which describes the performance for tissue. As we move into 2026, I think as we talk about kind of growth expectations across both of those businesses, I think it's important for me to kind of ground you in how we approach guidance for this year. We're very intentionally -- our guide intentionally reflects the demonstrated progress that we've made in terms of the remediation work that we've conducted all year long. It assumes a measured ramp for any products that -- as we return them back to market. And it assumes that supply from products not already in market will be layered in over time. And it, quite frankly, allows for prudence, right, as we continue to improve our capability, improve overall visibility. With that, the growth expectations for both CSS and Tissue are below market, but not driven by demand, definitely a reflection of supply. So for CSS, we're expecting a low -- flat to low single-digit growth on that business. And for Tissue Tech, we're expecting low to mid-single-digit growth during the course of 2026. K. Gong: Got it. And you kind of touched upon my follow-up question there, but just the health of the underlying markets and the demand you're seeing both from a procedure and capital standpoint just to kick off the year, has it remained relatively healthy? And what are you assuming for the balance of the year? Lea Knight: Yes. So to that end, exactly, the growth expectations aren't a reflection of demand. We do continue to see strong demand across both parts of the business as evidence of what we saw in our performance in Q4. And then even on Tissue Tech, as we exited Q4, we continue to see strong momentum on that business specific to Integra Skin that we expect to drive kind of the full year growth expectation that I articulated. Operator: [Operator Instructions] Our next question comes from Vik Chopra with Wells Fargo. Unknown Analyst: This is Namrata on for Vik. I have 2 questions. So first, with Braintree expected to resume mid-2026, and SurgiMend relaunching in Q4. What are some of the key milestones you're focused on to ensure a strong return to market? Lea Knight: Thank you for your question. We remain on track with the operationalization of the Braintree by the end of June of this year. And the milestones that are remaining is mainly process validations that are required before we get to the inventory build. So we remain on track for that. And those are going to continue until the plant is going to get operationalized. Unknown Analyst: That's helpful. I have one other question. So for PriMatrix and Durepair, these have been historically very solid contributors. So what's your outlook for the recovery and ramp in 2026? Lea Knight: So to your point, we relaunched Durepair and PriMatrix early, about 12 months ahead of plan. So we relaunched them in Q4 of 2025. Early read on both are -- they're performing really well in terms of customer reception as we're getting back into market. So we're looking at that and continuing to build on that as we move throughout the year. And as part of our guidance strategy, assuming kind of a measured ramp as we build back, but using the learnings coming from that relaunch as we plan for the SurgiMend relaunch that will happen in Q4 of this year. So excited about the early read and the opportunity to make both of those products a strong contributor to our overall performance this year. Operator: Our next question comes from Travis Steed with BofA Securities. Unknown Analyst: This is Ray on for Travis. Just a follow up on Allen's question. What is the status of the MediHoney remediation efforts? Is it still excluded from the guide? Or has it been baked in for Q1 and 2026? Mojdeh Poul: Yes. Thank you for your question. We do not have -- we haven't accounted for any revenues for MediHoney for this year in our numbers. We have been remediating that product. It's one of those products that the remediation has continued into 2026. We obviously love to have these things go a lot faster, but we're taking our time to do it right. We want to make sure when we bring the product back to the market, we have a safe and quality product for our customers. So we are diligently working on that. If we get to pull the time line up, that would be upside for us. But we don't have anything accounted for it in our guide at this point in 2026. Unknown Analyst: Makes sense. And then just one on the Tissue Technology organic growth. How much did the low double-digit decline internationally contribute to the decline there? I know you mentioned it's partly due to MediHoney, but is there any additional color you can give? Has there been any material change in international market dynamics? And how should we be thinking about China going forward? Lea Knight: Yes. So in terms of the international component of Tissue Tech, not as significant a driver. Our international business is primarily CSS. As you look within the Tissue Tech performance, the decline of 12.8%. Absent MediHoney, the decline would have been about 6%, and that's largely driven by Integra Skin. And again, that driver was the prior year comp, right, strong backorder clearance in Q4 of 2025. Going forward, right, as we exit Q4, we continue to see strong growth on Integra Skin, consistent with the expectations that we have for performance on the brand for the full year. So not concerned about that as we move forward. To your second question about, I think, China and as part of the international portfolio, we saw strong performance in double-digit performance in China and Canada for our international business, and we expect that to continue to be a strong growth contributor in 2026 and as we move forward. Operator: Thank you. That concludes the question-and-answer session, and you may now disconnect. Everyone, have a great day.
Operator: Greetings, and welcome to TopBuild's Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to P.I. Aquino, Vice President of Investor Relations. Thank you. You may begin. P.I. Aquino: Good morning and thanks for joining us. With me today are Robert Buck, our President and CEO; John Achille, our COO; and Rob Kuhns, our CFO. Our earnings release, senior management's formal remarks and a deck summarizing our comments can be found on our website at topbuild.com. Many of our remarks today will include forward-looking statements which are subject to known and unknown risks and uncertainties, including those set forth in this morning's press release and in the company's SEC filings. The company assumes no obligation to update any forward-looking statements because of new information, future events or otherwise. Please note that some of the financial measures to be discussed during this call will be on a non-GAAP basis. These non-GAAP measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. We have provided a reconciliation of these financial measures to the most comparable GAAP measures in today's press release and in our presentation, both of which are available on our website. Let me now turn the call over to our President and CEO, Robert Buck. Robert Buck: Thanks, and good morning, everyone. We appreciate you being with us. As P.I. mentioned, Rob and I are joined by John Achille, our COO. I've asked John to start joining us so he can share his business insights, including our ongoing efforts to drive operational excellence across the organization. Many of you will remember meeting John at our Investor Day a few months ago. We were really pleased to see many of you at our Investor Day in December, and if you weren't able to attend in person, I hope you've taken the opportunity to watch the replay on our website. I'd like to start my comments today by reiterating a couple of the key themes and messages that we shared in December. First, we have a clear, profitable growth strategy and a proven track record of delivering compounded growth and strong shareholder returns. Second, we have significant growth opportunities across our $95 billion total addressable market, which has increased non-cyclical and non-discretionary revenue drivers. We generate very strong free cash flow and we're disciplined in deploying capital both organically and through M&A. Third, we have a differentiated business model and we will continue to leverage our connected technology platform to continue driving growth and operational excellence to improve the customer experience. Finally, we have a cycle-tested leadership team. We're proud of the people-first culture we've built at TopBuild and we're grateful for the commitment of our nearly 15,000 employees to growing our business and to working safely every day. Let me now transition to discussing the operating environment at a high level. In the fourth quarter, weakness in the residential and light commercial end markets persisted. Consumer confidence remains low, interest rates are still elevated, and affordability continues to be an issue, all drivers of muted demand in the current environment. We continue to believe the underlying fundamentals are strong, supported by household formations and an underbuilt housing market, and this means there is great long-term opportunity for new residential construction. The commercial and industrial end markets remain solid. We continue to see expansion across a variety of verticals. Bidding and backlogs are healthy, and we're well positioned to capitalize on that growth both in the insulation and commercial roofing space. Turning now to our results, fourth quarter sales rose 13.2% to $1.49 billion, fueled by the 7 acquisitions we completed last year including SPI in the fourth quarter. We finished the year with over $5.4 billion in revenue and adjusted EBITDA of $1.04 billion, or margin of 19.2%. Rob will discuss the financials in more detail later in todays call. Acquisitions continue to be our top priority for capital allocation. Last year, we deployed $1.9 billion in capital across the business, adding approximately $1.2 billion in annual revenue. Our M&A pipeline continues to be very healthy; the environment is active and we're off to a solid start this year, having recently closed the acquisitions of Applied Coatings and Upstate Spray Foam. We also announced our second commercial roofing acquisition earlier this week, Johnson Roofing. Last year, we returned approximately $434 million to shareholders through our share repurchase program, demonstrating our ongoing confidence in our business and long-term strategy. Now let me hand it over to John to cover operations and Rob will follow to discuss the results and guidance, and I'll come back at the end with some closing thoughts. John Achille: Thanks, Robert. I'm glad to be here with you today. I'd like to cover two key areas, the supply chain environment and our ongoing efforts to drive operational excellence across the business. As housing demand has softened, we've seen the supply of building insulation and more specifically fiberglass loosen and become more available. In the second half of 2025, we saw a couple of fiberglass lines come down for extended maintenance as manufacturers work to balance supply with demand and stabilize pricing. We have strong relationships with our suppliers and our conversations are ongoing. Importantly we are leveraging our tools and technology platform to manage inventory across the branch network. On the spray foam side, we continue to see plenty of availability. For mechanical insulation, fiberglass pipe insulation remains on allocation, and we continue to work closely with our supplier partners to ensure that we receive our fair share of existing supply. Turning to operational excellence, we have great control of our business. You'll remember that in the first quarter of 2025, we were able to quickly take actions to align our cost structure with the demand outlook. Our work here continues as we navigate changes in the macro environment. We talked at Investor Day about how we leverage technology and take information from our businesses to share best practices, be more efficient and further optimize the network, everything from installer productivity to job site routing to shipments. Our field teams are doing a great job managing profitability. As soft demand has persisted, we are responding appropriately and making disciplined pricing and volume decisions at the local level. Our efforts to optimize our cost structure across the business are ongoing, and ops leadership continues to focus on the bottom quartile of our branches to improve performance. On the Specialty Distribution side of the business, we are making great progress on integrating SPI. Late last year, we realigned Specialty Distribution field leadership to better serve our customers, and we've identified several cross-selling opportunities we expect to realize over time. On the supply chain side, we're capturing rebates and building on existing supplier relationships. Finally, our teams are working diligently to transition the SPI business to our technology platform and importantly, do so in a way that is seamless for our customers. We expect the IT integration to be completed by the end of the second quarter. As we move forward, we're confident that we'll meet or exceed our original synergy targets. Let me also say a few words about our commercial roofing business. Nick Hadden and the team continue to do a great job. As Robert mentioned, we announced the acquisition of Johnson Roofing this week and expect it to close later in the first quarter. Johnson Roofing generates about $29 million in annual sales and is based in Waco, serving the Texas, Louisiana and Oklahoma markets. The acquisition will enable us to maximize many of our relationships with general contractors in the area that serve the technology, industrial manufacturing and education verticals. We're really excited to continue expanding our commercial roofing platform in a very large and highly fragmented space, which looks a lot like insulation did 20 years ago. Finally, I want to echo my thanks to our employees across the network. We appreciate your hard work to lead your business, work safely and drive operational excellence in everything you do. With that, I'll turn it over to Rob. Robert Kuhns: Thanks, John. 2025 marked our 10th year as a standalone public company and so I thought I would take a quick second to reflect back on our growth. Over the past decade, we have grown our sales and adjusted earnings per share at compounded annual rates of 13% and 31% respectively. This extraordinary growth has been the result of our unique business model that is driven by our people and culture. I want to take this opportunity to thank our teams in the field and at our branch support center for their efforts in delivering these results. And while we are proud of TopBuild's past successes, we are even more excited about the growth opportunities that lie ahead, which we detailed at our Investor Day in December. Before I dive into the numbers, I wanted to point out that we've provided a little more detail in our presentation this quarter to split out our same branch results versus M&A results. Given the sizable impact of the Progressive and SPI acquisitions that we closed last year, we thought that would be useful. Shifting to our fourth quarter results, total net sales were $1.49 billion, up 13.2% to prior year. Acquisitions contributed 23.0%, as both Progressive and SPI had solid quarters and exceeded our expectations. Pricing added 0.7% as positive price on gutters and mechanical insulation was partially offset by lower pricing on residential insulation products. Volume declined 10.5% driven by ongoing weakness in the residential and light commercial end markets. Turning to our segments, Installation Services sales of $798 million rose 1.2% compared to last year. The M&A contribution of 16.3% more than offset the volume decline of 14.5% and pricing decline of 0.5%. Specialty Distribution sales totaled $755 million in the quarter, up 25.5% versus last year. Acquisitions added 28.9% and pricing rose 2.2%. This was partially offset by a volume decline of 5.5%. Fourth quarter adjusted gross profit was $416 million with a margin of 28%, down 190 basis points to prior year. 100 basis points of the decline in margin was driven by a higher mix of distribution versus installation sales as a result of the SPI acquisition and weaker sales volumes in the legacy Installation Services segment. The remainder of the gross margin decline was driven by price/cost pressure and deleveraging on lower sales volumes. Adjusted SG&A as a percentage of sales in the fourth quarter was 14.1%, compared to 13.2% last year. The increase in SG&A was driven by acquisitions, including amortization of customer lists and trade names. On a same branch basis, SG&A was down $19 million or 20 basis points due to cost reduction actions taken during the year. TopBuild adjusted EBITDA in the quarter totaled $265 million, or a margin of 17.9%, down 180 basis points compared to prior year. The drivers of the EBITDA decline were the same as discussed with gross margin. Installation Services adjusted EBITDA margin was 21% in the fourth quarter, down 40 basis points year-over-year. Specialty Distribution adjusted EBITDA margin was 15.4%, down 230 basis points to last year's fourth quarter. Excluding the impact of M&A, EBITDA margins were down 80 basis points to prior year. Fourth quarter interest and other expense rose to $36 million due to the expansion of our credit facilities and the addition of the $750 million bonds due in 2034. Fourth quarter adjusted earnings totaled $4.50 per diluted share as compared to $5.13 in 2024. Moving to our balance sheet and cash flow, total liquidity was $1.1 billion at the end of the year. Cash was $185 million and availability under our revolver totaled $934 million. We ended the quarter with net debt of $2.7 billion, and our net debt leverage was 2.35x trailing 12 months adjusted EBITDA. Working capital was $959 million or 15.4% of sales. For the full year 2025 we generated $697 million in free cash flow. We deployed $1.9 billion for acquisitions and returned $434 million to shareholders via share buybacks. Turning now to our 2026 guidance, while there are signs for cautious optimism in our end markets, significant near-term uncertainty remains as the residential market continues to deal with challenges from consumer confidence and affordability. We remain highly confident around the long-term demand fundamentals and the 2030 projections we shared at our Investor Day in December. As we worked through our guidance for 2026, our overall philosophy at the midpoint was to assume no significant change in end market conditions. Under that lens, our 2026 guidance is for sales of $5.925 billion to $6.225 billion and adjusted EBITDA of $1.005 billion to $1.155 billion. The midpoint of our revenue guidance at $6.075 billion is based on the following key assumptions: Overall, we expect volume and price to each be down low-single digits in 2026. From an end market perspective, residential sales, which account for roughly 52% of our total sales, will be down mid-single digits, inclusive of both volume and price. Commercial and industrial, approximately 48% of our total sales, is expected to grow low single digits, inclusive of volume and price. We expect M&A, which we have closed in the last 12 months, to contribute $800 million to $850 million of revenue. The midpoint of our adjusted EBITDA guidance at $1.08 billion assumes the following: an EBITDA decremental of approximately 27% on lower volumes; $55 million of price/cost headwinds; and EBITDA margin on M&A in the mid-teens, inclusive of $15 million of Progressive and SPI synergies that will impact 2026. Those synergies are in line with our initial projections, and we remain highly confident in delivering at or above the high-end of our 2-year synergies targets. With regard to the quarters, we expect quarterly sales to range between $1.4 billion and $1.6 billion and our EBITDA margins to range between 16.5% and 18.5%, with the first quarter being the weakest and the third quarter being the strongest. Finally, let me give you a few additional inputs for your models. We expect the combination of interest and other will be $143 million to $149 million. Our tax rate will be approximately 26%. CapEx will be between 1% and 2% and we expect working capital to be in the range of 15% to 17% of sales. With that, I'll turn it back over to Robert. Robert Buck: Thanks, Rob. Let me close with a couple of thoughts on our outlook. On the residential side of the business, external forecasts vary with some optimism for the back half of the year. And while we expect demand will improve, its not yet clear what that timing will be and it is too early in the year to bank on a second half recovery. This uncertainty is baked into our guidance as Rob discussed. Should the environment improve over the course of the year, we are very well positioned to capitalize. On the commercial and industrial front, bidding activity and backlog are solid and we are poised to capture growth in those verticals that are expanding. So, while near-term uncertainty exists, we remain bullish about the underlying fundamentals of our industry, our $95 billion total addressable market and our ability to capitalize on both organic and inorganic growth opportunities. We have a proven track record of success fueled by our unique, flexible and capital-efficient business model. We are well diversified between residential and commercial/industrial, between Installation Services and Distribution, as well as between cyclical and non-cyclical revenue. We have great control over our business, and we have demonstrated the ability to adapt quickly and navigate broader changes in the environment. Finally, we're disciplined stewards of capital. We have an active and robust M&A pipeline, and we'll continue to focus on compounding returns and delivering increased shareholder value. With that, operator, let's open up the line for questions. Operator: [Operator Instructions] And our first question comes from the line of Sam Reid with Wells Fargo. Richard Reid: Maybe starting off with a big picture question. I wanted to dig a little bit deeper into the guide path for single-family starts as we move through the year. It sounds like you're rightfully embedding really no recovery here, which I think is probably the right call. We obviously do have a lot of detail from the public builders, especially on the production side on their outlook for starts. But just curious kind of what you're hearing from the private builders and perhaps any differences in what those private builder conversations sound like versus what the public sound like? Robert Buck: Sam, this is Robert. So you're right. You get a lot of color from the public builders, which I'm sure you've seen in their guides as well as discussions came out of the Builders' Show last week. I'd say the regional builders, the private regional builders are keeping very cost competitive there, pushing to make sure that they get their volumes and maintain their own compared to the publics. And then I'd say on the smaller custom builders, they're probably the least impacted. So they seem to definitely be holding their own relative to demand when you think about their customer base as well. That's some of the color we see regional privates as well as the custom privates. Richard Reid: All helpful color there. And then maybe switching gears. It does sound like you're seeing some relatively solid backlogs on the commercial industrial side. But I did perhaps pick up on a little bit of a delineation between light versus heavy commercial. Would just love to hear kind of where we are on the light commercial side and maybe just talk through kind of how a recovery on the light side could potentially work. Robert Buck: Yes. I think we typically see the light follow residential. I think we see some positive trending in some of our backlogs on the light side. As we talk about backlogs relative to commercial industrial, as we think about mechanical insulation, as we think about roofing, we see those probably trending at a faster clip. But typically, lighter commercial does follow residential. But we see some trending there in the right direction, we believe. But again, more optimism on the mechanical and the commercial roofing side. Operator: And our next question comes from the line of Michael Rehaut with JPMorgan. Michael Rehaut: First wanted to also kind of delve in a little bit to the outlook and really focusing around the pricing trends. You mentioned that embedded in your outlook is $55 million in price/cost headwinds and also that your mid-single-digit decline for resi is inclusive of pricing. So I guess it's more of a revenue type of number. Just wanted to get a better sense for when you think about the $55 million, how much of that is negative price or if all of that is negative price? And how you would expect that to flow through and impact the results throughout the year, if it's going to be more first quarter or first half weighted? Just trying to get a sense of the degree of impact, particularly as we start out the year. Robert Kuhns: Yes, Mike, this is Rob. So similar to last year, we started talking about these price cost headwinds, definitely something we started seeing pockets of in different markets as certain markets slowed, pressure picks up around that side of things. We obviously were pretty successful last year doing a lot to take cost out, both through negotiations with our suppliers, but also a lot of costs we took out in the business to help maintain margins. And certainly, that's going to be the focus and the things that we can control in 2026. But since the main tenet of our guidance was really around, hey, the environment here from a macro standpoint, we're not going to forecast it improving dramatically. We do think we'll continue to see those headwinds similar to what we saw last year. It pops up in different pockets and different markets as you go through the year. I'd say, just like we said last year, it probably progressively gets a little worse as the year goes on. But we definitely saw some of that pressure in the fourth quarter, not quite as much as we had thought in our guidance, but we thought it was prudent to continue that given the macro environment we're in right now. [Audio Gap] We did some branch rationalization in the first quarter that's helped take cost out. We have realigned our headcount given the volumes we're seeing right now. And we continue to do all the same things we've done in the past around focus on bottom quartile and focus on operational excellence, and those things have helped offset some of the price cost headwinds we've seen in the markets. Robert Buck: I would say, Mike, this is Robert. I'd say the teams in the field did a nice job. I mean they remain very disciplined. They were driving where they could the operational excellence piece that Rob talked about. But they did a nice job staying very disciplined during the year and to announce Johnson Roofing earlier this week. So we spent time in the first 6 months with Progressive, working the M&A process, working the integration of the M&A process. So we're in a really good space there relative to how our process works and even front end of identifying deals to diligence to the back-end integration. So we've made a lot of progress there. Very active on the front, I would say, smaller deals to bigger chunkier deals. And I would say, given the relationships that the Progressive team have on some of the smaller deals and some of the relationships we have in the industry, I'd say we're not competing right now in those [Audio Gap] be disciplined. We're looking for good quality companies, and we're definitely building some relationships and evaluating several right now. Michael Rehaut: Great. That's super helpful. And then switching topics here a little bit. On the prepared remarks, I think you mentioned the realignment in the specialty distribution field leadership. Can you talk about that a little bit more and kind of what the intention was there? John Achille: Yes. This is John. As far as the changes that we made, when you think of 3 distinct businesses that we have on the specialty distribution side, just making sure we have the right leadership in place. And I think coming off the SPI acquisition, we got some nice talent there that was able to accent with our existing talent. So just really good experience that we have leading those businesses today, driving the operational excellence that we expect of those teams. So that was really the biggest change there. Robert Buck: I think its really speaks to the pace at which John and the team have really worked the integration piece. So really quickly getting the right leadership team in place, which, by the way, some of that was SPI folks from the SPI side, some of our folks from the DI side. So a nice mix of the team, which we think is driving buy-in and integration pretty aggressively here. And I think we said in our prepared remarks, highly confident in the top end or exceeding our synergy number that we talked about whenever we announced that deal. Robert Kuhns: Yes. And just one more comment on that just around guidance, right? In terms of we've included the run rate that we signed up for, for year 1 around synergies. And if there's anything we see opportunity in this year in terms of overachieving the midpoint of our guidance, it's definitely around the synergies, right? And so that's why when we think about what we can do, we're about controlling the controllables. The macro is going to be what it's going to be, but we're focused 100% on driving these synergies and getting the results that we can control there. Operator: And the next question comes from the line of Susan Maklari with Goldman Sachs. Susan Maklari: My first question is on the cross-selling opportunities that you highlighted in your prepared remarks as you're working on the integration of SPI. Can you give a bit more color on what those are and how we should think about them coming through? John Achille: Yes, Susan, this is John. Yes, so I would say today, cross-selling for us is very -- it's very much just people talking to other people within our business, right? So we could have a DI customer that we have a great relationship with that happens to be working on a job where we can also offer that customer an installed service. So today, it's really just connecting our sales teams and our managers. But we do plan on putting some digital resources behind that in the future and really making that kind of just leveraging another one of our strengths where we touch all these different types of projects through different businesses that we have. So it's an exciting opportunity for us, and we plan on investing to make it even seamless for our internal staff. Susan Maklari: Okay. That's helpful. And then as we do enter another year that seems like it could be fairly challenged as we think about the outlook for housing and the macro. Can you talk a bit about the cost structure across the business? How you're thinking about your positioning? Are there opportunities to perhaps make further adjustments in there? And what you're watching to determine if that needs to happen? Robert Kuhns: Yes. I mean, Susan, this is Rob. That's something we're constantly monitoring, certainly something we have an advantage given a common ERP across our footprint, our ability to see activity going on in the business on a daily basis and make adjustments. Last year was a great example as we saw things begin to slow early in the year, we quickly took action. And we'll be doing the same thing this year, right? We're going to continue to monitor the macro situation, continue to monitor what's going on. More than 70% of our costs are variable. So we can adjust quickly and make changes where we need to. Operator: And our next question comes from the line of Phil Ng with Jefferies. Margaret Grady: This is Maggie on for Phil. First, I wanted to dig into the pricing outlook. I mean pricing held up pretty well in the quarter and even stepped up in distribution, maybe a function of the end market exposure. But how should we think about that guide for down low single-digit pricing in the outlook between the 2 segments and how the $55 million price/cost headwind is split? And I think you also said 4Q or maybe it was 2025 total, you saw some inflation in gutters and spray foam and fiberglass saw some pressure. Any color on how that's trending into 2026? Robert Kuhns: Yes, Maggie, this is Rob. So that price cost bucket, it's obviously a mixed bag of products, some with price inflation, some with price pressure and price deflation. And it's one of the good things about the diversification we have in our model now, right? And you can see that coming through on the -- particularly on the specialty distribution side, where, as you pointed out, pricing actually increased in the fourth quarter on the distribution side, and that's because of the heavier exposure to the commercial products on that side, the mechanical insulation and also a heavier concentration of gutters on distribution than what we have on the install side. So when you think about that mixed bag of products, we -- throughout last year, I'd say we started the year with some carryover pricing in fiberglass that was favorable, but definitely as the year progressed, saw that get pressured and saw prices go down a bit in the back half of the year. Pretty similar on spray foam. Mechanical, we saw good price increases throughout the year. Commercial projects were strong, particularly on the mechanical side and had really good pricing there. Gutters because of tariffs saw some pricing. So when you put that all together for the year, we netted out to positive sales price. I'd say it was still a drag on margins when you netted everything out from a cost perspective, roughly about 10 basis points when you net everything we were able to do from a cost perspective, so not terribly impactful. But -- as we look out, like I said earlier, we expect a similar environment. We expect pricing on mechanical to be strong given the strong demand there. The pricing on fiberglass and spray foam, we continue to -- we think we'll continue to see pressure as we did the back half of this year, and that's really the biggest driver of the price pressure that we're talking about in 2026. Margaret Grady: Okay. Got it. That was all really helpful. And next, on the margin guidance, the pressure makes sense with volume deleverage and the price cost headwinds you've outlined. But -- you're always doing stuff on the bottom quintile branches and the special ops teams to drive margins. Wondering if the outlook incorporates any of those productivity initiatives or if that could be upside to the guide? And then maybe just walk us through some different levers you have if demand is weaker than the outlook currently. Robert Kuhns: Yes, Maggie, this is Rob. So in the prepared remarks, we tried to give you some bookends around where EBITDA margins will be throughout the year. I'd say like we said in the prepared remarks, the strongest quarter will be Q3, probably in the neighborhood of 18.5% or call it, 18% to 19% and Q1 more in that 16.5%. And so we're definitely seeing the -- we've talked a lot already about kind of some of the price cost pressure. And we -- like we've said, we've done a really good job of offsetting a lot of that with cost reductions, and we plan to continue to do that. But the other thing that's really impacting margins, too, is M&A, particularly the SPI transaction with that being a 10% EBITDA business that we acquired in the fourth quarter, still running around 10% today. But obviously, like we talked about, we see a lot of opportunities on the synergy side. We're moving quickly there. And with synergies, the goal would be to get that to the mid-teens this year. So we'll see that improve as the year goes on, on that piece. So that's definitely a big lever in terms of what we can do this year. And then like I said earlier, I mean, the other levers are around our cost structure, and we're going to continue to monitor the environment. We feel like we made the adjustments necessary for the current volume environment we're in, but we'll make -- if that does get worse from here, we'll adjust and take more action. So that volume guide we talked about and saying, hey, we expect volume down low single digits for the year, but talked about a decremental of 27%. I mean that includes us taking cost out to get to that 27%. So definitely something we're -- we've done in the past and something we're comfortable we'll be able to do this year. Operator: And our next question comes from the line of Ken Zener with Seaport Research. Kenneth Zener: Can you guys talk to -- it is going to be more residential focused. The guidance for res is down mid-single digit. Can you bridge the dynamics between kind of on the install side, the 15% decline we see, realizing some res is rolling through specialty distribution, which is down 6%. And then talk to the persistence or the dynamics why on the install side, the volume down. And if you see an equivalent decline, I guess, in the same residential products that you're not installing. Robert Kuhns: Yes, Ken, this is Rob. So from a volume perspective, on the install side in the fourth quarter, we definitely saw residential down single-family and multifamily as we've seen throughout the year, we would definitely say particularly December slowed down significantly. We were well ahead of our expectations at the end of November and then December slowed significantly on the resi side. And on the install side, our commercial business, as we've talked about throughout the year, about half of that business on the install insulation side is light commercial work. That's been slow throughout the year. So that also has been a drag on volumes on that side. So that's -- the resi side and light commercial side, really driven by the slower starts environment. On the specialty distribution side, because of the diversification of our end markets there, right, and now that being a much heavier commercial focused business, you're not seeing as big an impact. We definitely have the resi products down, and that's why volumes overall were down, but we were able to offset a good portion of that with a really good year in mechanical insulation and also on some of the other commercial products we move through the Service Partners side of things and through our metal building business. Kenneth Zener: Okay. And then given that you guys have a very -- probably the best -- amongst the best visibility on what builders -- what you're bidding on, the mid-single-digit decline, could you comment on Florida, Texas, if you would feel comfortable kind of talking about the dynamics you're seeing given that those markets were certainly impacted by COVID. It seems like we're kind of coming through that more in Florida versus Texas. But could you talk to how that is impacting your business, if you would? John Achille: Yes, Ken, it's John. So on the resi side, Florida, you hit on it. It's a bit optimistic down there. We're seeing things start to recover. I would say there's a good story coming there versus Texas, probably still a little flat to slow. So we're seeing a little mixed bag between those 2. But maybe just take the opportunity to take you around the country a little bit. The Northeast off to a bit of a flat start, but I would say there's a good story coming there, probably impacted by weather as that area just got hammered again this past week. So nothing surprising there. Midwest, a bit flat. But really down the middle of the country, we see some good optimism through Arkansas, Missouri, Iowa, some probably nice story going to shape up there. And then as you work out west a little bit, Colorado is still a little slow out of the gate. Just west of that, some of the Northwestern -- the Pacific Northwest, we've got probably a good story coming there, Montana, Utah. And really, the only one that's not showing signs of improvement is more around California. So that's the only one that I've marked as probably hasn't necessarily bottomed out yet. Operator: And our next question comes from the line of Mike Dahl with RBC Capital Markets. Michael Dahl: Sorry to belabor the pricing point. I just want to make sure we understand kind of the out-the-door pricing versus the cost you're taking. Our sense has been that on the resi fiberglass side, there is kind of low single-digit price pressure that the OEMs are also seeing. So if you're looking for down low singles on price out the door, is that worse for you in the resi insulation and that's why you're seeing the price cost pressure? Or just maybe a little more color on that kind of differential and what's actually driving that? And I think, Maggie you asked this, but also maybe just another clarification on how much is assumed within the install versus distribution side? Robert Kuhns: Yes. So this is Rob, Mike. So we don't break out the guidance by segment. But to give you -- try to give a little more color on the pricing. I mean, we have seen -- there is price pressure, obviously, in the market. The builders are dealing with affordability challenges, demand challenges. So there's been price pressure on that side. Like you said, the manufacturers are definitely feeling that as well. And so there have been price reductions. I mean, for us, what I have to always remind folks is, I mean, pricing is a local decision in our business, right? It's a local -- the builders are making local decisions. So it's literally thousands of decisions being made around pricing. And so we think we do a really good job of adjusting to local markets and controlling that and putting guardrails around it with our ERP system. But just given the macro environment, we saw it in the fourth quarter. We do see markets where things are getting more competitive, prices are picking up. We're going to do what we can to recover that. But even if we recover dollar for dollar with what we're seeing there, that can be a margin headwind for us as well. So we're going to do our best to offset it. But like we said in the midpoint of our guidance, we've got a headwind baked in there. Robert Buck: Mike, this is Robert. Just to build upon that. I mean, I think we've done exactly what we said, right? We talked about being disciplined in 2025, but volumes have stayed slower for longer. And so as they stay slower for longer, you get the things that John talked about in his prepared remarks where we're making some good disciplined decisions at the local level, which is what Rob just talked about. So disciplined. And then as things stay slower for longer, then we appropriately stay disciplined but pivot appropriately as well. Michael Dahl: Okay. Got it. Yes, that's helpful. I appreciate it. My second question, just on the commercial roofing dynamics. Can you -- I appreciate some of the high-level commentary. Since that business has some today pretty concentrated geographic exposures, can you help us understand at a market level, what you're seeing on the commercial roofing kind of end market volume growth and then maybe then the outgrowth that Progressive is seeing and what you're assuming versus the market in '26? Robert Buck: Yes. So maybe I'll -- this is Robert. So I'll start looking backwards a little bit. Progressive had a great 2025, some nice organic growth in the business, really strong execution in Q4. And if we look at back half of the year, our ownership of Progressive. So great job in '25. As we look at '26, I think I mentioned a while ago, those backlogs are growing at a steeper clip. And you're right, I mean, great footprint in the Southwest in Arizona, Texas, those areas. Johnson, obviously, we just purchased is focused Texas, but also did some work in Oklahoma and Louisiana as well. So we've got a nice footprint down there. But we do quite a bit of travel in that work. I know we just picked up a major project in Idaho. We're doing some projects up in Utah as well. So we'll travel for some of the bigger projects. But as we do M&A, as you think about the future, we'll build out that footprint. And that's part of -- as we're looking at companies, looking at where we want to be, that type of thing, part of it is building out that footprint. So we think a great 2026 coming on the commercial roofing side and the leading indicator of that is backlogs and obviously staying close to the Progressive team. And as John said, they're doing a fabulous job. And again, a platform that we see building upon here with a high level of confidence. Operator: And our next question comes from the line of Trey Grooms with Stephens Inc. Trey Grooms: So you guys have been realigning headcount and some other actions you've taken. When we get back into an eventual kind of recovery mode, I guess the question is, how much of these cost outs do you see as sustainable versus kind of what you need to bring back pretty quickly as you look at the different levers you guys have been pulling? Robert Kuhns: Yes, Trey, this is Rob. I'll start. From a cost perspective, there's definitely a portion of what we did last year that we think will stick, right? I mean some of the facility consolidations, that rent cost isn't going to come back on us. Some of the back office fixed costs, we like to try to move on. We're trying to do things in the back office to automate and do things more efficiently. So our hope there would be to not have to add back as much on that side. And then obviously, the installer side, we're going to need to add back to adjust to the volumes as they go. But that's where our recruiting practices and our skill at doing that comes into play, and we've always outperformed at that. So we're confident we'll be able to adjust and get labor back as volume comes back. Trey Grooms: All right. And then I know you touched on this a little bit. But as we're looking at the guide on the margins, the puts and takes there, you mentioned synergies as an area where there may could possibly be some upside there. You seem pretty confident in that. But as we think about the high end of the margin range versus the low end, again, we're specifically asking about the margins. So where -- what would be the other swing factors there, in your opinion, to get us to the high end versus the low end outside of the synergies? Is that going to be more volume related? Or could there be some swings in price cost? Or where are the more likely kind of swing factors there? Robert Kuhns: Yes. I mean you kind of hit on the 2 key ones there. I mean, for sure, the higher end of our range assumes higher volumes. And if that comes, we'll definitely -- like we typically say, we expect our incrementals to be in that 22% to 27% type range, and we're going to increase margins by putting volume in at that level. If demand is stronger, we would expect the price/cost situation to improve as well. So that's the second piece of that. So those are really the 2 other things. I mean the other piece is what we can do with the cost structure, which is like what I referenced earlier in terms of our focus, we're focused on what we can control there. And so we're doing all the things we always do around operational excellence. And this year, we have the unique opportunity with the synergies to outperform on that piece as well. Operator: And our next question comes from the line of Adam Baumgarten with Vertical Research Partners. Adam Baumgarten: Just back to the price/cost outlook. I guess is it fair to headwinds, you noted that $55 million will be felt more acutely in installation than specialty distribution given the competitive behavior that you guys mentioned earlier? Robert Kuhns: It will -- so I'd say, I mean, the price cost pressure on the residential products, we've seen more of it in distribution, right? Because of the labor component on install, it's less pressure there. It doesn't mean we don't have any pressure there, but we've seen less. But the distribution side, it doesn't show up as much in the P&L because of the diversification of the business on that side. So from a pure impact of what you'll see, yes, more than likely, I'd say more of it would be on the install side just because of the business mix piece of it. Adam Baumgarten: Okay. Got it. And then just since John brought it up when he was through the markets, just any kind of sizing you could do on the weather impact you've seen in 1Q so far given the couple of storms... Robert Kuhns: Yes, really hard at this point, given we're still shoveling out in certain parts of the country. So it's definitely significant and definitely baked into kind of that -- or at least what we know as of today baked into kind of that bookend we gave around quarterly revenue. Operator: And our next question comes from the line of Reuben Garner with Benchmark Company. Reuben Garner: Most of my questions have been answered. I just have one on the commercial business and outlook. I was wondering, data centers have been a pretty big focus of late, but I was wondering if you could go into a little more detail on some of the other areas that you're seeing that are driving growth in your mechanical and commercial segment. And what kind of -- if you had to pick, is this -- is the mechanical side where you see the most upside to your outlook at this point this year? Robert Buck: Yes. This is Robert, Reuben. So I would say, as we think about some of the other verticals here, so obviously, data centers is -- you hear everybody talking about that. But I think the one thing is we look across the verticals, make sure we're bidding across the verticals, so you don't become too heavily reliant on one. So I would say education is big right now. Health care for sure. We're seeing manufacturing as well. So we're seeing it really across the board, even some things, food and beverage on the mechanical side. So really diverse, several of them growing there, and we're making sure that we're bidding across all the different verticals from that. And that's why we talk about -- we do think there's upside there. There's going to be growth. Rob talked about in the guidance of commercial industrial growth. So we do see upside potential there. We think both top line and bottom line. We talked about how we're going to lean in on the synergies, highly confident in our synergy number around the SPI [indiscernible] but also the Progressive synergies. It was a smaller number, but we're highly confident in that. And then I talked about how the outlook is on commercial roofing for '26 as we look at backlogs and work that we're securing there. So definitely commercial, industrial, mechanical and roofing, we would say those are upsides and really across the different verticals. Operator: And our next question comes from the line of Collin Verron with Deutsche Bank. Collin Verron: Just one for me. You talked about pricing in some of your categories, but I don't think you mentioned commercial roofing. I know it's a smaller piece of the pie right now, but it's growing. So I'd just be curious as to how prices are tracking there and if the price cost expectations differ from the consolidated company at all in 2026. Robert Kuhns: Yes. So obviously, for -- in our guide right now, any pricing related to roofing or at least for half of the year is baked into the M&A number. But overall, I'd say, in general, pricing is flattish on the commercial roofing side from what we're seeing. They can get a little bit different pricing depending on their mix of business from new roof to reroof -- and depending on new roofs, what end market it goes into. So there's a little bit of a mix element there. But from an overall pricing perspective with the suppliers, I'd say it's an overall flattish environment right now. P.I. Aquino: Operator, do we have anyone else in the queue? Operator: No. With that, that was the last question. So I would like to pass the floor back to Robert Buck for any closing comments. Robert Buck: Okay. Thanks, everyone, for joining us today. We look forward to seeing many of you at the upcoming conferences. Thank you. Operator: Thank you. And with that, ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation, and you may disconnect your lines at this time, and have a wonderful day.
Operator: Ladies and gentlemen, welcome to the Clariant Fourth Quarter Full Year Results 2025 Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Andreas Schwarzwaelder, Head of Investor Relations. Please go ahead, sir. Andreas Schwarzwaelder: Thank you, Valentina, and ladies and gentlemen, good afternoon. My name is Andreas Schwarzwaelder, and it's my pleasure to welcome you to this call. Joining me today are Conrad Keijzer, Clariant's CEO; and Oliver Rittgen, Clariant's CFO. Conrad will start today's call by providing an update on the progress we have made on our purpose-led growth strategy and a summary of the full year 2025 financial highlights and savings programs; followed by Oliver, who will guide us through the Q4 and business unit results; Conrad will then conclude with the outlook for the full year 2026. There will be a Q&A session following our presentation. At this time, all participants are in listen-only mode. I would like to remind all participants that the presentation includes forward-looking statements, which are subject to risks and uncertainties. Listeners and readers are therefore encouraged to refer to the disclaimer on Slide 2 of today's presentation. As a reminder, this conference call is being recorded. A replay and transcript of the call will be made available on the Investor Relations section of the Clariant website. Let me now hand over to Conrad to begin the presentation. Conrad Keijzer: Thank you, Andreas. 2025 was a year that demonstrated the success of our transformation journey. The progress we've made over recent years is bearing fruit, with our purpose-led growth strategy proving its strength through effective execution. Built on 4 strategic pillars: customer focus, innovative chemistry, leading in sustainability and people engagement, the strategy reflects our integrated approach to creating value for all stakeholders. On our first pillar, customer focus. The execution of our commercial excellence programs delivered further improvement in customer satisfaction as indicated by the Net customer Promoter Score, cNPS. In 2025, this cNPS increased to 50 versus 45 in 2024, with the company receiving outstanding scores for product quality, technical support and customer service. Overall, this score placed Clariant in the top quartile amongst peers. Our local-for-local strategy has continued to help us to weather geopolitical challenges and tariffs. We serve our customers to a very high degree based on local manufacturing and local raw material sourcing. We successfully accelerated the rollout of CLARITY, a cloud-based service platform designed to optimize catalyst management and performance monitoring. It offers 24/7 real-time operations data so that customers can manage their plants more efficiently. By the end of 2025, CLARITY utilization has almost doubled to over 220 customer plants and over 800 users in 38 countries. And finally, differentiated steering, which ensures that we allocate resources strategically. Each business segment has its own strategic mandate to optimize value creation. The restructuring and capacity expansion actions taken in our Additives segment resulted in successful turnaround with improved sales growth and better margins. In our second pillar, innovative chemistry, we demonstrated a strong improvement in innovation sales, reaching 18.8%, marking a significant step-up from the 16.9% recorded in 2024. This trajectory reflects the strength of Clariant's innovation portfolio and execution. We maintain our commitment to research and development with sustained investment at 3% of revenue in 2025. The products from our innovation pipeline are growing faster than the rest of our portfolio. We will continue to intensify supplier partnerships to co-develop innovations meeting the highest environmental standards. This dedication to innovation resulted in over 30 awards and recognitions received throughout the year from customers like L'Oreal, Unilever and Schneider Electric and various industry associations. 2025 marked another year of great progress in sustainability leadership. Clariant's greenhouse gas emissions reduction targets that were originally announced at our Investor Day in November 2024 were reviewed and approved by The Science Based Targets initiative in 2025. By 2030, Clariant is committed to reducing absolute Scope 1 and 2 greenhouse gas emissions by 47% and absolute Scope 3 greenhouse gas emissions by 28% from the 2019 base year. In 2025, Scope 1 and 2 total greenhouse gas emissions fell to 0.43 million metric tons in 2025, a decline of 11%. The main driver for the greenhouse gas reduction in 2025 was a further switch to green electricity. The share of renewable electricity increased from 69% to 76%. The total indirect greenhouse gas emissions for purchased goods and services, Scope 3.1, were 6% lower to 2.4 million metric tons in the last 12 months. As a result of consistent progress over time, credible targets, verified data and clear accountability, we achieved top leadership level scores across all environmental categories of the Carbon Disclosure Project, CDP, the most widely used environmental disclosure platform globally. Ranking in the top 1% of all companies evaluated worldwide, Clariant was awarded A in climate change and forests and A- in water security. We are convinced that the transformation towards more sustainable business models will not reverse. Companies that stay on the course will shape the future and gain enduring competitive advantage. And finally, people engagement, where we increased our employee Net Promoter Score, eNPS, to 37 in 2025, up from 34 in the prior year. I'm particularly pleased that participation rate of our employees further increased to 88% and our employee engagement came in at 87%, which positions us in the top quartile compared to industry peers. Our safety performance also was top quartile of the chemical industry globally. Clariant recorded a Days Away, Restricted, or Transferred rate of 0.13, down from 0.17 in 2024. This reflects our high awareness and continued commitment to safety, training and accountability. These achievements are thanks to the hard work of over 10,000 Clariant colleagues across the globe who are committed to our purpose-led growth strategy and who delivered strong results in 2025. We delivered sales of CHF 3.9 billion, representing a flat performance in a challenging macroeconomic environment. We improved our EBITDA margin before exceptional items by 180 basis points to 17.8%, driven by the successful execution of our performance improvement programs. This is the third year in a row where we have delivered strong EBITDA improvement, both in absolute and in margins. I'm particularly pleased with the 42% cash conversion rate we achieved in 2025. This represents a 10 percentage point improvement compared to 2024, already exceeding our medium-term target of 40%. Our performance in 2025 enables us to propose a stable distribution to shareholders of CHF 0.42 per share. Now, moving on to more details relating to our financial performance for the full year 2025. We delivered sales of CHF 3.9 billion. This represents a flat performance in local currency, with the reported figure impacted by a 6% negative currency translation effect. We maintained pricing discipline across our portfolio in a slightly deflationary raw material environment with a year-on-year increase in Adsorbents & Additives and flat pricing in Care Chemicals and Catalysts. Organic volumes decreased by 1% across the business units. The acquisition of Lucas Meyer Cosmetics had a positive scope impact of 1%. Turning to profitability. We had a strong overall performance with 180 basis point improvement in EBITDA margin before exceptional items versus the full year 2024, driven by our performance improvement programs and cost productivity across all business units and the corporate functions. In absolute terms, EBITDA before exceptional items increased by 5% to CHF 679 million. As I mentioned earlier, we recorded a free cash flow conversion rate of 42% in 2025. This represents a 10 percentage point increase versus 2024 and delivers on our medium-term target of 40% ahead of schedule. We were able to achieve this through effective cost and margin management, which drove an increase in operating cash flow. Higher net working capital and phasing effects were offset by disciplined CapEx management. In absolute terms, free cash flow increased by 31% to CHF 273 million. Now turning to our Investor Day savings program. As a reminder, we expect full run rate savings of CHF 80 million from business units and corporate actions to be delivered by the end of 2027. In Q4, we achieved savings of CHF 19 million, which brings the total to CHF 50 million for 2025. This represents 63% of the total savings target with the remainder largely expected in 2026. The key measures include a headcount reduction of approximately 470 full-time equivalents across the business and corporate functions and the closure of 2 production lines and 2 sites as part of our footprint optimization. Procurement added another CHF 22 million savings related to structural changes in qualifying alternative suppliers and implementing best practice contract management. Cost-efficient execution of the programs and phasing led to restructuring charges of CHF 63 million. This was below the CHF 75 million restructuring charges originally expected for the year. With that, I now hand over to Oliver for further details on our business performance in the fourth quarter. Oliver Rittgen: Thank you, Conrad, and good afternoon, everyone. In the fourth quarter, we delivered sales of CHF 1 billion, representing an increase of 1% in local currency versus the prior year period. Pricing was overall flat as formula-based price adjustments linked to raw material costs in Care Chemicals were offset by a 1% increase in Adsorbents & Additives and flat pricing in Catalysts. Volume increased by 1% as growth in Catalysts and Care Chemicals offset a decline in Adsorbents & Additives. The reported figure was affected by a 7% currency headwind. Turning to profitability. Our Q4 EBITDA, before exceptional items, increased by 10%, corresponding to a margin of 17.1%. This represents a 240 basis point improvement versus the fourth quarter of 2024. Key contributions came from continued strong execution of the performance improvement program in all business units, effective cost management, a positive mix due to strong growth in Catalysts and operating leverage. Let us now dive into the fourth quarter development by business unit, starting with Care Chemicals. Sales increased by 1% in local currency as 2% volume growth recorded in the quarter more than offset the 1% decline in pricing due to formula-based price adjustments linked to raw material costs. The reported figure was negatively affected by a 7% currency headwind. We recorded low double-digit organic growth in Mining Solutions, driven entirely by volumes; and in Oil Services, where higher volumes were supported by slightly positive pricing. Sales in Personal & Home Care increased at a low single-digit rate, also driven by volume growth and including a continued positive contribution from Lucas Meyer Cosmetics. Base Chemicals declined slightly despite volume growth in the seasonal aviation business as pricing declined due to formula-based price adjustments. Sales in Industrial Applications declined due to lower pricing and volumes. Crop Solutions declined, driven by lower volumes versus the prior year period when a restocking effect led to strong growth. We recorded an EBITDA before exceptional items of CHF 96 million, representing a 7% increase compared to the prior year. This translated into an EBITDA margin of 18.3%, a 220 basis points improvement, driven by increased operating leverage and a strong contribution from the performance improvement program. In Catalysts, sales increased by 5% in local currency, a result of materially higher volumes in Ethylene versus the prior year period. The reported figure was negatively affected by a 7% currency headwind. Sales in ethylene catalysts recorded the strongest growth at a high double-digit percentage rate with some first fill business coming on top of the regular refill cycle, followed by Syngas & Fuels. This more than offset lower sales in Specialties and Propylene, which both declined at a double-digit percentage rate against a strong comparison base in the prior year. EBITDA before exceptional items increased by 22% to CHF 62 million, representing an EBITDA margin of 23.4% versus 18.8% in the prior year. This was driven by effective price and cost management and the contribution from our performance improvement program. Moving to Adsorbents & Additives. Sales decreased by 3% in local currency and by 8% in Swiss francs as slightly higher pricing was more than offset by lower volumes. In the Adsorbents segment, sales decreased at a low single-digit percentage rate as stable volumes in APAC and EMEA were more than offset by a decline in the Americas, which were impacted by delayed U.S. renewable fuel regulation. In the Additives segment, sales decreased at a mid-single-digit percentage rate as growth in Polymer Solutions was more than offset by lower volumes in Coating & Adhesives, mainly attributable to the construction market. EBITDA before exceptional items decreased by 9% to CHF 30 million with an EBITDA margin of 12.6% at a similar level to the prior year. The positive contributions from the performance improvement programs partly offset the impact of low volumes. And with this, I close my remarks and hand it back to Conrad. Conrad Keijzer: Thank you, Oliver. Let me conclude with our outlook for 2026. For 2026, we expect macroeconomic challenges, uncertainties and risks to remain. According to the latest assessment of Oxford's economics, the global GDP growth projection for 2026 has increased slightly to 2.8%, driven by AI investments. The chemicals industry forecasts predict a reduction of chemical output growth from 2.9% in '25 to 1.9% in '26, driven by slower growth in China from 7.4% to 2.7% and the U.S. turning negative to minus 0.6% compared to a positive 0.6% in 2025, while Europe expects some improvement to positive 0.5% after negative 0.4% in 2025. Looking at our addressable market, we expect 2026 market growth for Clariant of around 1%, considering our geographic footprint. We remain focused on delivering profitable growth and executing our self-help actions. That said, there are some positive signals in certain end markets. Growth in mining and electric vehicles is expected to continue. We also see continued growth in data centers, a recovery in consumer electronics supporting our Additives business and an improvement in renewable fuels demand supporting our Adsorbents products. We, therefore, expect sales in local currency to be around flat as we look to offset a negative top line impact for the group of 1% from portfolio pruning in the prior year. We expect slight growth in Care Chemicals on an underlying basis. And in Adsorbents & Additives, while sales in Catalysts are expected to be at levels similar to those in 2025, we expect to further improve our EBITDA margin before exceptional items to around 18% in 2026 with the CHF 80 million performance improvement program expected to deliver most of the remaining cost savings during the year. Clariant expects to continue to achieve a free cash flow conversion of around 40% in 2026. We remain committed to delivering our medium-term targets, assuming a recovery to normalized trading conditions in 2027. With that, I turn the call back over to Andreas. Andreas Schwarzwaelder: Thank you. Thank you, Conrad and Oliver. Ladies and gentlemen, we are now opening the floor for questions. To ensure everyone has a chance to participate, please ask no more than 2 question per person. Thank you for your cooperation. And Valentina, please go ahead. Operator: [Operator Instructions] The first question comes from Thea Badaro from BNP Paribas. Thea Badaro: Two from me, please. We are seeing positive data points in both chemical specific and industrial surveys. So, I'm curious to know if that optimism is also being reflected in your conversations with customers? And if so, are there any end market in particular? And then my second question is on Care Chemicals. You're guiding for slight growth for the division in 2026, while many peers are expecting actually a flattish year overall due to tough comps. Can you elaborate on where exactly you're getting more positive? Conrad Keijzer: Okay, sure. Yes. So, your second question was on Care Chemicals, where you say that many peers are guiding flat growth is what you say, right? Thea Badaro: Yes. Conrad Keijzer: Yes. Okay. Clear. Yes. So, first on the overall market outlook. So, what you actually see overall is less growth in chemical production rates globally than last year. I mentioned them in our speech, where actually markets are expected to slow down, particularly in China, where we had strong growth last year that really will be significantly slower this year. And in the U.S., where we had positive growth -- slightly positive growth this year, markets will turn negative next year, amongst others, also due to trade actions. In Europe, we were slightly negative this year. We may turn slightly positive. But overall, I wouldn't characterize this as an optimistic outlook in chemicals. So, if you look, what we have in the industry is operating rates typically between 70% and 80%. That's still historically low. And a recovery is typically not expected for this year yet, but more 2027. So, in '27, there is actually a general consensus that there should be a recovery. So, if you look at recent years, consumer spending has not been sufficiently on durable goods or semi-durable goods. There was more spending on services and recently on AI. So, this switch back to durable goods spending and semi-durable goods spending that is really expected at some point in time. There's a natural replacement cycle to products. But for this to happen, we first need better consumer confidence levels, which still are generally low considering geopolitical and trade tensions. More specifically to Care Chemicals, what we say here is actually that in our outlook overall around flat, there's underlying growth because last year, we had a fair amount of pruning in Care Chemicals, which had an effect of roughly 2% of revenue in Care Chemicals. As you are aware, we closed a site in Argentina. We also shut down a plant in Europe for EO derivatives. And with that, when we're giving an outlook of around flat for Care Chemicals, underlying, that means actually that there's growth also in our outlook. Operator: The next question comes from Christian Faitz from Kepler Cheuvreux. Christian Faitz: Congrats on the results. Two questions, please. First of all, if I look at weather conditions, both in Europe as well as in North America in Q1 so far, I would figure your de-icing business must have been rather robust. Can you confirm this? And if so, possibly put a number on this? And my second question is on Catalysts. You seem to be a bit less optimistic on your Catalysts performance for '26 after a rather robust Q4, particularly on the ethylene side. Why is this the case? Would you see a sequential slowdown again? Conrad Keijzer: Yes. Thank you very much, Christian, for the question. So, on Care Chemicals and de-icing, we had a strong start. You saw that also, I think, in the press, also one of the airports in Europe almost running out of de-icing material. But it is too early to call it. It really also depends on how March will come in. So we can't really give numbers yet. As far as Catalysts and our outlook for this year, yes, we basically signal that we are bottoming out. I think the recovery in Catalysts really requires a recovery in new build. So, if you look right now at our order book and also what we basically saw last year is still of the orders, it's by and large, a refill business. So, the new build has dropped to roughly 10% of our orders. For us to really see a big recovery in Catalysts, we should see the new build coming back in. That is visible in the order book, not this year. But if you look at '27, '28, '29, we are seeing actually a pickup in new builds, particularly in China. There is, let's say, a small wave of new build coming in there ahead of their peak carbon year in 2030. So, we're not seeing a recovery yet this year, Christian, we are bottoming out, but we are actually quite optimistic for the years after that, then we should see a recovery in Catalysts. Operator: The next question comes from Christian Bell from UBS. Christian Bell: I've got 2 questions, please. My first one is, how should we think about the earnings phasing in 2026? Are you sort of expecting a softer first quarter, then a stronger second half as savings and volumes build? If you could provide a loose guide for first quarter '26, that would be really useful. And then the second question, if you could just help me, I'm a little bit confused on your 2026 guidance. So, you're basically guiding to top line down 3% to 5% on currency, which is similar to the outcome in 2025. But last year, you still expanded EBITDA margins by 180 basis points with CHF 50 million of cost out with another CHF 30 million planned for 2026 and a similar top line result. What's preventing any margin improvement this time around? Like what's the difference from 2026 versus 2025 that stops you repeating that same margin progression? Conrad Keijzer: Okay. Christian, I'll take the first question on phasing, and Oliver will provide some more granularity on your second question. As far as the phasing throughout the year, I think we should keep in mind that we had last year actually a strong first quarter. Other than that, if you sort of ignore the year-on-year comp, we are seeing a fairly normal pattern throughout the year. It's not that we see a significant recovery in H2 versus H1, like we sometimes have in other years in the outlook. What is important, maybe some specific comments in Care Chemicals, we see at the moment, nothing unusual. De-icing is obviously playing a role there in how Q1 will come in. In Catalysts, we are comparing against a strong quarter last year. But normally, we always see a weak Q1 as we also saw last year after a strong Q4. So, there is that sequential effect. In Adsorbents & Additives, we are seeing a somewhat weaker start in Adsorbents where we still are waiting for the regulation for renewables to kick in. The EPA has set ambitious targets for renewable diesel and SAF, but these need to be still endorsed by Congress. And because of the government shutdowns, there's a delay in that. You see that the market expects these increased targets to kick in because RINs prices are going up, but we're not seeing that in our numbers yet. Other than that, I think there's nothing here to comment. Yes, Oliver, to you. Oliver Rittgen: Christian, yes, let me comment on your second question on margin progression year-over-year. I mean, first of all, as you have seen, there's a strong progression from '24 to '25 with 180 basis points of improvement, which brought us now to 17.8%. And that was driven by the performance improvement programs, the cost productivity and effective price management, as we said. So of course, when you -- and we had a flat top line at this. For '26, we are guiding for now a second year of flat top line with the effects that we alluded to before, the pruning that needs to be compensated and the soft market environment. And again, we are executing now on the performance program and delivering further savings in '26. At the same time, of course, in '26, like in '25, we need to compensate for the inflation that is happening in the cost structures that we do have. And we guided for '26 that we have 3% to 4% inflation in the cost structure. We have the savings from the savings programs plus other productivity measures that we're taking. And hence, we guided for around 18%. So -- of course, the ambition here is to make further progress also towards our medium-term targets. But as we alluded to, for '27 that it requires also a bit of a rebound of growth that we then bring it really in. Christian Bell: Okay. It just seemed like a similar setup in 2026 with a similar level of cost out. So, you're basically saying that your underlying inflation -- your underlying cost inflation this year is much stronger than it was -- or you're expecting it to be much stronger this year than it was in 2025? Oliver Rittgen: No. I mean, there is another year of inflation. I think, Christian, the point is more -- we did 180 basis points last year where we set the organization on a leaner base. And obviously, the savings were also a bit higher in '25 versus '26, and that's partially driving that effect. Operator: The next question comes from Katie Richards from Barclays. Katie Richards: I had a question on the use of capital and the balance sheet. You were on Bloomberg this morning, Conrad, and mentioned that Clariant would be open for bolt-on acquisitions potentially on the scale of Lucas Meyer. But you're also, at the same time, targeting CapEx potentially as low as CHF 150 million. So, a few questions on this then. With leverage coming down and proceeds also coming from Stahl, which end markets would you be interested in exploring further? Could you also remind us how much you're spending annually for maintenance purposes, please? And finally, how are you looking to balance organic growth versus paying a premium to grow these? Conrad Keijzer: Yes. Katie, maybe first to clarify on comments made this morning on the calls. Yes, there's nothing new. So, we're always open for bolt-on acquisitions. But we also said this morning that our first priority is always organic growth and margin improvement. And then if we can complement that with the right bolt-on acquisitions, we're very open to that. And we defined as the right ones, acquisitions that really fit to our core segments and that provide real synergy. And then I mentioned Lucas Meyer as a great example of an acquisition that basically fits those criteria in the past. But that's not to say that there is right now a target of that size available. So just to be clear about that. But overall, people do expect with limited growth perspectives right now in the chemical industry that there should be an increased level of potential consolidation ahead of us. And what I said this morning is it's important that we obviously participate in industry consolidation if and when that happens. As far as CapEx, maintenance, that's fairly steady at roughly a level of CHF 100 million a year. You see the big reduction in CapEx for us from the fact that we haven't actually added to our footprint, particularly in China in recent years. And now actually, we're very well set up there. So, keep in mind, in recent years, we invested CHF 80 million in a new catalyst plant that came up on stream. We invested CHF 80 million last year in a new surfactant plant in Daya Bay that came up on stream we invested last year. We completed actually the investment of 2 lines for flame retardants. That was another CHF 100 million. So, if you look at those items alone, that explains why the CapEx envelope is structurally lower than it was in the past. So, we haven't cut any corners on maintenance CapEx. So, no worries there. That's at a fairly steady level around roughly CHF 100 million per year. Operator: The next question comes from Michael Schaefer from ODDO BHF. Michael Schaefer: On one hand -- first one, I want to come back to your Catalysts outlook for '26. So, as you said, you guide for flat local currency sales into '26. So, nevertheless, you also reported on some greenfield projects helping you to record what we haven't seen for quite some time, this kind of EBITDA level in the fourth quarter. And I think also on the full year, the 20.8% margin was rather unique over the past 4, 5 years, so to say. So, I wonder how should we think about mix effect into '26 and how margin is progressing in the Catalysts segment? This would be my first question. And the second one is on the cash flow in '26. You built up some working capital, quite sizable, in 2025, maybe a bit as a surprise here, talking also about phasing effects. So how should we think about the measures you are implementing and what you expect in '26 in terms of working capital? Conrad Keijzer: Yes. I will answer the question on margins and mix outlook for Catalysts and Oliver will provide some clarity on working capital movements. If you look at Catalysts and the performance that we saw, we're very pleased that indeed, new build that is out there that we're getting it. So that is, I think, very positive. So particularly on ethylene, there is actually a large project in Europe that is starting up actually early next year. And we see actually the first fill order for that coming in. So that's very positive. We also saw -- if you look at Syngas & Ethylene, we saw actually that both of these segments are performing well on refill. So, we have a full share on new builds. And if it's about refill, we think that on -- particularly on Syngas, we've gained some share. So, if you look at our margins, they are reflecting that as well. So, there is the very positive effects from the cost-outs also in Catalysts, but there's also underlying a structural improvement in mix. And what you see is in Catalysts with rising prices for metals, it is not an easy environment. You may have seen the profitability reports of some of our competitors that show EBITDA margins significantly down. So, we're actually very pleased with the results in Catalysts with a 21% EBITDA margin for the year. But to further step up the margin in a significant way in the year ahead of us, that is still requires a pickup -- that still would require a pickup in new builds. And that is not yet what we see for this year. We see that more for '27. Oliver Rittgen: Michael, on working capital and cash, let me first start from the broader picture, cash. I mean, we are very satisfied with the cash performance overall that we had in '25, 10 percentage points of cash conversion, up versus previous year. CHF 80 million better operational cash flow performance. And then indeed, we had a bit of a buildup in net working capital that we then also compensated with very disciplined CapEx management. So, that buildup in net working capital in the fourth quarter is also a bit related to the phasing of the sales pattern that we have seen in the fourth quarter. We had a very, very strong December in Catalysts, but also in Care with the aviation business. And I mean, obviously, with the payment terms that you have then on these sales, you have a bit of a buildup of accounts receivables. We also have slowed down on inventory buildup in A&A, which had an impact on accounts payable. So, we had a couple of effects at the end of Q4. What we have done independent of that particular quarter is that we initiated a cash program in Clariant, where we structurally will look into the different net working capital levers. It's an integrated approach across the business units. It's ingrained in the target setting that we have on a segment level. So, it's a clear focus area. You have seen it also with our triangle and to say growth, margin, cash. That's what we focus on. That is what drives our differentiated steering. So, there's a focus on net working capital and to drive that down in '26. Operator: The next question comes from Julia Winkelmann from Bank of America. Unknown Analyst: I was wondering, you finished the year ahead of schedule on your cost savings target and also achieved your cash conversion target already. Given this progress, do you plan to update your mid-term targets and perhaps also give an update on how to think about your capital allocation going forward given the stronger cash generation? Conrad Keijzer: Yes, Julia, that's a great question. And we are obviously very happy with and pleased with how we finished the year in terms of our EBITDA margin being up 180 basis points and our cash conversion being up 10 points to slightly over 40% conversion now. So, where we are versus the midterm targets is that indeed, for cash conversion, we have achieved these targets already. But it's fair to say that we still have a bridge from 17.8% to the bottom range, which was 19% to 21% EBITDA margin. I will say, we look at 3 years in a row now of improvements, annual improvement in EBITDA margins as well as absolute EBITDA. We came from 14.6%. We're now at 17.8%. That was certainly in a challenging market environment for us now to revisit the midterm targets, that's not on the agenda. We're very much focused on delivering them. So, we are very much focused to have all the levers in place to bridge towards the 19% to 21% EBITDA margin, and that is the differentiated growth strategy. It's repositioning the businesses to more profitable segments. It is finishing the cost-out program, as Oliver has alluded to. It is -- maintain pricing discipline. And with that, we think we have the levers in place in addition to a pickup in markets that we do anticipate for '27. So, we have all the levers in place to deliver the 19% to 21%. But yes, that is -- those are actually quite ambitious targets in the current environment. Operator: The next question comes from Tristan Lamotte from Deutsche Bank. Tristan Lamotte: Two questions, please. The first is, could you maybe just run through your end markets and the trends and outlook that you see in those, so in agriculture, autos, construction, electronics, et cetera? And then, can I ask a general question about your views on the threat to European specialty chemicals companies from China? Do you still think that European chemical companies have sustainable moats in specialty chemicals? And to what extent are you seeing Chinese competition moving into specialties so far? And to what extent do you expect that to accelerate over the next 10 years? Conrad Keijzer: Yes, sure. These are important questions. So, first on end markets, what we are seeing. Well, first of all, let me start with Care Chemicals. We see, in general, the consumer-facing segments with a robust demand. So, if you look at Personal Care, Home Care, that is basically low to mid-single-digit growth with a bit more growth in Personal Care in the premium segments like skin care, hair care, but then really the premium, premium products, the level just under that, there is actually some downtrading, the so-called aspirational buyers. Home Care, very, very solid and robust; laundry, things like that. Crop Protection, we've had interesting years behind us. Last year, we had a strong year in Crop Protection, but that was really very much because the year before, we had still the destocking. So, it was also, let's say, some of the year-on-year comparisons. I think now we have a much cleaner comparison, and we should more trade in line with historic levels where we sort of slightly outperform GDP levels. Oil and gas, it's basically a relatively modest outlook right now. And oil prices, now they're up to $70 because of the geopolitical turmoil in the Middle East. But in reality, there's plenty of supply and more so than demand. So, it's not an environment with high oil prices or a lot of investments that we are seeing there. Mining continues to be positive, especially for items like copper and still lithium. Catalysts, yes, we still globally run 70% to 80% util rates. And for us, really to see new builds kicking in, we need to go first to higher utilization levels. I did mention China as one where '27, '28, '29, we are seeing new builds coming back in. But for this year, it is really a bottoming out year in Catalysts in our forecast. And finally, Additives and Adsorbents, what we see actually is relatively weak demand if you look at electronics and particularly smartphones, but that was already the case last year. So, actually, there's a certain level of maturity here with very low single-digit rates for growth for smartphones. PC production was actually quite nicely up last year. And we think that will continue to be relatively okay. And finally, if you look at our Additives business, end markets like furniture, we had expected a big recovery there last year already as consumers at some point should spend on durable goods again or semi-durables, but it hasn't happened yet. And for this year, so far, we are not seeing that either. And to finish it all off with Adsorbents, this is very much for us driven by renewable diesel now, sustainable aviation fuel. In Europe, there are the mandates in place. But in the U.S., we're still waiting for the endorsement by Congress for the new increased EPA targets, but that should come at some point in the year. So, overall, if you summarize it, it's a very modest sort of growth environment overall and with some differences by region. Maybe specifically on your second question on China and how is this impacting Specialty Chemicals. I think there is a big difference between commodity and petrochemicals on the one hand and specialty chemicals on the other side. In China, there is significant capacity being built up in local -- in recent years for commodity chemicals for petrochemicals. In specialty chemicals, we are not seeing that level of competition in China. I mean, this is based on IP that took decades to develop. And actually, what we see is that for our business, we make good margins in China, but there is a shift where we increasingly supply to local Chinese companies. And I think high level, the other big impact that China has is historically, Europe was exporting a significant part of its production into China, the same with the U.S. That has come down significantly, and China has become an exporter for some items, but not so much in specialty chemicals again. It's much more on the commodity side. Operator: The next question comes from Chetan Udeshi from JPMorgan. Chetan Udeshi: I just wanted to follow up, Conrad, on your comment on industry consolidation. And I'm a bit puzzled and also curious that we've not seen much happen already. For Clariant, and you've signaled openness to participate in any consolidation, but you have a very different business structure in the sense like you've got Catalysts business, you've got Care Chemicals, which is comprised of industrial plus consumer. And then, of course, you have Adsorbents & Additives. It just feels like the structure of the business is probably too complicated to see Clariant as an obvious candidate or initiator of any consolidation? I'm just curious how you think about that. Conrad Keijzer: Was it a question or an opinion that you were voicing, Chetan? Chetan Udeshi: It's a both. I mean, a bit of both. I think it's not just for Clariant. I'm just curious, is this a problem for the industry overall that there is no like pure-play company that is easy to buy or easy to sell, and that makes it quite complex for industry to consolidate. Conrad Keijzer: Yes. No, it's an important question that you're raising. So, if you look big picture where we came from is we were a hybrid. So, Clariant was both active in commodity businesses and in specialty businesses. And if you look at the recent years, we've really repositioned the business to become fully specialty. So, if you look at the recent, let's say, 5 years, what we did is in '22, we divested our pigment business, which we clearly saw that was commoditizing. By the way, it has indeed even further commoditized. So, I'm glad that we divested that in 2022. Actually, a year later, we divested our North America Land Oil business, which also was very much a commodity business. And if you look now, what we also did was we divested a part of our Care Chemical business, the commodity surfactants to Wilmar, and we put it in a joint venture there. So, we've done actually quite a bit in recent years to, first of all, get out of our commodity business, but at the same time, to strengthen our specialty chemical business. So, we did a number of smaller bolt-on acquisitions. We bought the cosmetic ingredients business in Brazil with Actives. We bought the green surfactant business in India. We did the purification business from BASF for renewable diesel, Attapulgite in the United States. And last but not least, the Lucas Meyer business, which really strengthens our position in Personal Care. So, what you see now is that we have leading positions in specialty chemicals in the segments where we compete. At the same token, what you also see, Chetan, is that we have year-on-year improved the profitability of these businesses. So, we rarely get the question asked, are you the right owner for this business as long as we just continue to improve the profitability and in fact, achieve leading profitability, both in terms of growth, in terms of margins, we have very sustainable positions in each of these segments because we are having significant market shares in the individual businesses. So, yes, that's, I think, sort of the summary from a sort of an M&A perspective where we are, and we remain interested to continue to do bolt-on acquisitions in these businesses, but only if they bring real synergy. Operator: The next question comes from Jaideep Pandya from On Field Research. Jaideep Pandya: First question is on Catalysts actually. What do you think is the longer-term outlook like when you look at the next 3 years, considering so many capacity shutdowns that have been announced in Europe and also sort of asset rationalization in China as well. So, what do you see as a longer-term outlook in Catalysts? That's my first question. And then the second question sort of is on the legal -- I apologize if you have answered this before or if you cannot go in details, but if you can give us some color at least on the legal situation around the ethylene cartel case. What sort of provision have you booked already? And any time line in terms of result that we could hear around this? And then, finally, just on the consolidation point, Conrad, I mean, from -- on paper, if I just sort of ask the question differently, what Chetan was, I guess, trying to ask, the obvious candidate for increasing your size would be in Care Chemicals. So, if there is a case to be presented, are you saying you could be aggressive enough to further pursue divestments of some of the other areas to pursue increasing size in Care Chemicals? Conrad Keijzer: Yes. Thank you, Jaideep. Yes. First, on your question on Catalysts and the long-term outlook, I think what is important to realize is that there has been a shift in production. So, Europe is -- has actually significantly come down in chemical production. CEFIC issued an interesting recent study that since 2022, a total of 37 million tons of capacity has been taken out of the market in Europe. That's roughly 10% of the overall capacity. Now at the same token, you have seen a buildup of capacity in China and to a lesser extent, in the Middle East. So yes, so there is a shift. If you look at the global outlook for Catalysts, it is actually a fairly robust business, even regardless of these shifts, these regional shifts. And if you look at the long-term outlook, petrochemicals historically, globally, has always performed at or above GDP. So that is still intact. The change is actually that there are some regional shifts. And therefore, it was for us extremely important to invest in China in Catalysts in our footprint, and we're very happy with that footprint now that we also have in China to support the local growth. So, in terms of long-term outlooks, the fundamentals are still intact at a global level. But yes, there have been regional shifts for sure. In terms of your second question on legal, yes, in terms of ethylene claims, at this stage, we cannot publicly comment any further than what we've already said. Clariant firmly rejects the allegations and will adamantly defend its position in the proceedings. And we do have substantiated economic evidence that the conduct of the parties did not produce any effect on the market. And yes, we are in litigation, so we cannot comment further on that other than your question on the provisions, we haven't taken any. And this obviously has been reviewed with our auditor, KPMG, and they are obviously of the same opinion, and you will see that in our integrated report also explained. Operator: The last question for today is a follow-up coming from the line of Thea Badaro, BNP Paribas. Thea Badaro: Just a quick follow-up for me. Specifically on the flame retardant business, can you quantify the size of the data center market opportunity for your flame retardant business? Conrad Keijzer: Yes. This is a very interesting question, and we just made a deep dive actually on data centers and to make sure that we capture all of the share that is out there when it's about our products. And what we are seeing is indeed that our flame retardants are benefiting from this. This is about the -- yes, our flame retardants for connectors, for switchgears, cable jackets. That is a part of it. There's also a part of it which sits in fire-resistant coatings actually, that are applied to the infrastructure of these buildings. But finally, and this is also quite important, our Catalysts business, we are really targeting data centers here as well. And this is first from a development perspective, but we're very happy that we also commercialized now the first application where we basically have a fuel cell technology. So, we have methane. We have basically gas, then we convert it to hydrogen. And then the hydrogen basically gets converted into water and electricity. And this is a climate-neutral, if it's biomethane, a climate-neutral solution actually, for decentralized and distributed electricity generation in the right -- high quantities that are necessary. So, there's other solutions. Nuclear is also mentioned. But particularly with the limited grid capacity, the solution will be power plants, small power plants in the United States and Europe has the same challenge. And with Catalysts, we're talking about a very interesting opportunity here, which already the first -- what we now commercialize is a few tens of millions already in revenue in the outlook that we have. The size for flame retardants combined right now globally is also in that order of magnitude. So, it is not moving the goalpost for the company as a whole, but we are seeing a nice upside from data centers. Andreas Schwarzwaelder: So, thank you very much. This is Andreas speaking. This concludes today's conference call. A transcript of the call will be available on the Clariant website in due course. The Investor Relations team is available for any further questions you may have. Once again, thank you for joining the call today, and have a good afternoon. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Ladies and gentlemen, welcome to the Clariant Fourth Quarter Full Year Results 2025 Conference Call and Live Webcast. I am Valentina, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Andreas Schwarzwaelder, Head of Investor Relations. Please go ahead, sir. Andreas Schwarzwaelder: Thank you, Valentina, and ladies and gentlemen, good afternoon. My name is Andreas Schwarzwaelder, and it's my pleasure to welcome you to this call. Joining me today are Conrad Keijzer, Clariant's CEO; and Oliver Rittgen, Clariant's CFO. Conrad will start today's call by providing an update on the progress we have made on our purpose-led growth strategy and a summary of the full year 2025 financial highlights and savings programs; followed by Oliver, who will guide us through the Q4 and business unit results; Conrad will then conclude with the outlook for the full year 2026. There will be a Q&A session following our presentation. At this time, all participants are in listen-only mode. I would like to remind all participants that the presentation includes forward-looking statements, which are subject to risks and uncertainties. Listeners and readers are therefore encouraged to refer to the disclaimer on Slide 2 of today's presentation. As a reminder, this conference call is being recorded. A replay and transcript of the call will be made available on the Investor Relations section of the Clariant website. Let me now hand over to Conrad to begin the presentation. Conrad Keijzer: Thank you, Andreas. 2025 was a year that demonstrated the success of our transformation journey. The progress we've made over recent years is bearing fruit, with our purpose-led growth strategy proving its strength through effective execution. Built on 4 strategic pillars: customer focus, innovative chemistry, leading in sustainability and people engagement, the strategy reflects our integrated approach to creating value for all stakeholders. On our first pillar, customer focus. The execution of our commercial excellence programs delivered further improvement in customer satisfaction as indicated by the Net customer Promoter Score, cNPS. In 2025, this cNPS increased to 50 versus 45 in 2024, with the company receiving outstanding scores for product quality, technical support and customer service. Overall, this score placed Clariant in the top quartile amongst peers. Our local-for-local strategy has continued to help us to weather geopolitical challenges and tariffs. We serve our customers to a very high degree based on local manufacturing and local raw material sourcing. We successfully accelerated the rollout of CLARITY, a cloud-based service platform designed to optimize catalyst management and performance monitoring. It offers 24/7 real-time operations data so that customers can manage their plants more efficiently. By the end of 2025, CLARITY utilization has almost doubled to over 220 customer plants and over 800 users in 38 countries. And finally, differentiated steering, which ensures that we allocate resources strategically. Each business segment has its own strategic mandate to optimize value creation. The restructuring and capacity expansion actions taken in our Additives segment resulted in successful turnaround with improved sales growth and better margins. In our second pillar, innovative chemistry, we demonstrated a strong improvement in innovation sales, reaching 18.8%, marking a significant step-up from the 16.9% recorded in 2024. This trajectory reflects the strength of Clariant's innovation portfolio and execution. We maintain our commitment to research and development with sustained investment at 3% of revenue in 2025. The products from our innovation pipeline are growing faster than the rest of our portfolio. We will continue to intensify supplier partnerships to co-develop innovations meeting the highest environmental standards. This dedication to innovation resulted in over 30 awards and recognitions received throughout the year from customers like L'Oreal, Unilever and Schneider Electric and various industry associations. 2025 marked another year of great progress in sustainability leadership. Clariant's greenhouse gas emissions reduction targets that were originally announced at our Investor Day in November 2024 were reviewed and approved by The Science Based Targets initiative in 2025. By 2030, Clariant is committed to reducing absolute Scope 1 and 2 greenhouse gas emissions by 47% and absolute Scope 3 greenhouse gas emissions by 28% from the 2019 base year. In 2025, Scope 1 and 2 total greenhouse gas emissions fell to 0.43 million metric tons in 2025, a decline of 11%. The main driver for the greenhouse gas reduction in 2025 was a further switch to green electricity. The share of renewable electricity increased from 69% to 76%. The total indirect greenhouse gas emissions for purchased goods and services, Scope 3.1, were 6% lower to 2.4 million metric tons in the last 12 months. As a result of consistent progress over time, credible targets, verified data and clear accountability, we achieved top leadership level scores across all environmental categories of the Carbon Disclosure Project, CDP, the most widely used environmental disclosure platform globally. Ranking in the top 1% of all companies evaluated worldwide, Clariant was awarded A in climate change and forests and A- in water security. We are convinced that the transformation towards more sustainable business models will not reverse. Companies that stay on the course will shape the future and gain enduring competitive advantage. And finally, people engagement, where we increased our employee Net Promoter Score, eNPS, to 37 in 2025, up from 34 in the prior year. I'm particularly pleased that participation rate of our employees further increased to 88% and our employee engagement came in at 87%, which positions us in the top quartile compared to industry peers. Our safety performance also was top quartile of the chemical industry globally. Clariant recorded a Days Away, Restricted, or Transferred rate of 0.13, down from 0.17 in 2024. This reflects our high awareness and continued commitment to safety, training and accountability. These achievements are thanks to the hard work of over 10,000 Clariant colleagues across the globe who are committed to our purpose-led growth strategy and who delivered strong results in 2025. We delivered sales of CHF 3.9 billion, representing a flat performance in a challenging macroeconomic environment. We improved our EBITDA margin before exceptional items by 180 basis points to 17.8%, driven by the successful execution of our performance improvement programs. This is the third year in a row where we have delivered strong EBITDA improvement, both in absolute and in margins. I'm particularly pleased with the 42% cash conversion rate we achieved in 2025. This represents a 10 percentage point improvement compared to 2024, already exceeding our medium-term target of 40%. Our performance in 2025 enables us to propose a stable distribution to shareholders of CHF 0.42 per share. Now, moving on to more details relating to our financial performance for the full year 2025. We delivered sales of CHF 3.9 billion. This represents a flat performance in local currency, with the reported figure impacted by a 6% negative currency translation effect. We maintained pricing discipline across our portfolio in a slightly deflationary raw material environment with a year-on-year increase in Adsorbents & Additives and flat pricing in Care Chemicals and Catalysts. Organic volumes decreased by 1% across the business units. The acquisition of Lucas Meyer Cosmetics had a positive scope impact of 1%. Turning to profitability. We had a strong overall performance with 180 basis point improvement in EBITDA margin before exceptional items versus the full year 2024, driven by our performance improvement programs and cost productivity across all business units and the corporate functions. In absolute terms, EBITDA before exceptional items increased by 5% to CHF 679 million. As I mentioned earlier, we recorded a free cash flow conversion rate of 42% in 2025. This represents a 10 percentage point increase versus 2024 and delivers on our medium-term target of 40% ahead of schedule. We were able to achieve this through effective cost and margin management, which drove an increase in operating cash flow. Higher net working capital and phasing effects were offset by disciplined CapEx management. In absolute terms, free cash flow increased by 31% to CHF 273 million. Now turning to our Investor Day savings program. As a reminder, we expect full run rate savings of CHF 80 million from business units and corporate actions to be delivered by the end of 2027. In Q4, we achieved savings of CHF 19 million, which brings the total to CHF 50 million for 2025. This represents 63% of the total savings target with the remainder largely expected in 2026. The key measures include a headcount reduction of approximately 470 full-time equivalents across the business and corporate functions and the closure of 2 production lines and 2 sites as part of our footprint optimization. Procurement added another CHF 22 million savings related to structural changes in qualifying alternative suppliers and implementing best practice contract management. Cost-efficient execution of the programs and phasing led to restructuring charges of CHF 63 million. This was below the CHF 75 million restructuring charges originally expected for the year. With that, I now hand over to Oliver for further details on our business performance in the fourth quarter. Oliver Rittgen: Thank you, Conrad, and good afternoon, everyone. In the fourth quarter, we delivered sales of CHF 1 billion, representing an increase of 1% in local currency versus the prior year period. Pricing was overall flat as formula-based price adjustments linked to raw material costs in Care Chemicals were offset by a 1% increase in Adsorbents & Additives and flat pricing in Catalysts. Volume increased by 1% as growth in Catalysts and Care Chemicals offset a decline in Adsorbents & Additives. The reported figure was affected by a 7% currency headwind. Turning to profitability. Our Q4 EBITDA, before exceptional items, increased by 10%, corresponding to a margin of 17.1%. This represents a 240 basis point improvement versus the fourth quarter of 2024. Key contributions came from continued strong execution of the performance improvement program in all business units, effective cost management, a positive mix due to strong growth in Catalysts and operating leverage. Let us now dive into the fourth quarter development by business unit, starting with Care Chemicals. Sales increased by 1% in local currency as 2% volume growth recorded in the quarter more than offset the 1% decline in pricing due to formula-based price adjustments linked to raw material costs. The reported figure was negatively affected by a 7% currency headwind. We recorded low double-digit organic growth in Mining Solutions, driven entirely by volumes; and in Oil Services, where higher volumes were supported by slightly positive pricing. Sales in Personal & Home Care increased at a low single-digit rate, also driven by volume growth and including a continued positive contribution from Lucas Meyer Cosmetics. Base Chemicals declined slightly despite volume growth in the seasonal aviation business as pricing declined due to formula-based price adjustments. Sales in Industrial Applications declined due to lower pricing and volumes. Crop Solutions declined, driven by lower volumes versus the prior year period when a restocking effect led to strong growth. We recorded an EBITDA before exceptional items of CHF 96 million, representing a 7% increase compared to the prior year. This translated into an EBITDA margin of 18.3%, a 220 basis points improvement, driven by increased operating leverage and a strong contribution from the performance improvement program. In Catalysts, sales increased by 5% in local currency, a result of materially higher volumes in Ethylene versus the prior year period. The reported figure was negatively affected by a 7% currency headwind. Sales in ethylene catalysts recorded the strongest growth at a high double-digit percentage rate with some first fill business coming on top of the regular refill cycle, followed by Syngas & Fuels. This more than offset lower sales in Specialties and Propylene, which both declined at a double-digit percentage rate against a strong comparison base in the prior year. EBITDA before exceptional items increased by 22% to CHF 62 million, representing an EBITDA margin of 23.4% versus 18.8% in the prior year. This was driven by effective price and cost management and the contribution from our performance improvement program. Moving to Adsorbents & Additives. Sales decreased by 3% in local currency and by 8% in Swiss francs as slightly higher pricing was more than offset by lower volumes. In the Adsorbents segment, sales decreased at a low single-digit percentage rate as stable volumes in APAC and EMEA were more than offset by a decline in the Americas, which were impacted by delayed U.S. renewable fuel regulation. In the Additives segment, sales decreased at a mid-single-digit percentage rate as growth in Polymer Solutions was more than offset by lower volumes in Coating & Adhesives, mainly attributable to the construction market. EBITDA before exceptional items decreased by 9% to CHF 30 million with an EBITDA margin of 12.6% at a similar level to the prior year. The positive contributions from the performance improvement programs partly offset the impact of low volumes. And with this, I close my remarks and hand it back to Conrad. Conrad Keijzer: Thank you, Oliver. Let me conclude with our outlook for 2026. For 2026, we expect macroeconomic challenges, uncertainties and risks to remain. According to the latest assessment of Oxford's economics, the global GDP growth projection for 2026 has increased slightly to 2.8%, driven by AI investments. The chemicals industry forecasts predict a reduction of chemical output growth from 2.9% in '25 to 1.9% in '26, driven by slower growth in China from 7.4% to 2.7% and the U.S. turning negative to minus 0.6% compared to a positive 0.6% in 2025, while Europe expects some improvement to positive 0.5% after negative 0.4% in 2025. Looking at our addressable market, we expect 2026 market growth for Clariant of around 1%, considering our geographic footprint. We remain focused on delivering profitable growth and executing our self-help actions. That said, there are some positive signals in certain end markets. Growth in mining and electric vehicles is expected to continue. We also see continued growth in data centers, a recovery in consumer electronics supporting our Additives business and an improvement in renewable fuels demand supporting our Adsorbents products. We, therefore, expect sales in local currency to be around flat as we look to offset a negative top line impact for the group of 1% from portfolio pruning in the prior year. We expect slight growth in Care Chemicals on an underlying basis. And in Adsorbents & Additives, while sales in Catalysts are expected to be at levels similar to those in 2025, we expect to further improve our EBITDA margin before exceptional items to around 18% in 2026 with the CHF 80 million performance improvement program expected to deliver most of the remaining cost savings during the year. Clariant expects to continue to achieve a free cash flow conversion of around 40% in 2026. We remain committed to delivering our medium-term targets, assuming a recovery to normalized trading conditions in 2027. With that, I turn the call back over to Andreas. Andreas Schwarzwaelder: Thank you. Thank you, Conrad and Oliver. Ladies and gentlemen, we are now opening the floor for questions. To ensure everyone has a chance to participate, please ask no more than 2 question per person. Thank you for your cooperation. And Valentina, please go ahead. Operator: [Operator Instructions] The first question comes from Thea Badaro from BNP Paribas. Thea Badaro: Two from me, please. We are seeing positive data points in both chemical specific and industrial surveys. So, I'm curious to know if that optimism is also being reflected in your conversations with customers? And if so, are there any end market in particular? And then my second question is on Care Chemicals. You're guiding for slight growth for the division in 2026, while many peers are expecting actually a flattish year overall due to tough comps. Can you elaborate on where exactly you're getting more positive? Conrad Keijzer: Okay, sure. Yes. So, your second question was on Care Chemicals, where you say that many peers are guiding flat growth is what you say, right? Thea Badaro: Yes. Conrad Keijzer: Yes. Okay. Clear. Yes. So, first on the overall market outlook. So, what you actually see overall is less growth in chemical production rates globally than last year. I mentioned them in our speech, where actually markets are expected to slow down, particularly in China, where we had strong growth last year that really will be significantly slower this year. And in the U.S., where we had positive growth -- slightly positive growth this year, markets will turn negative next year, amongst others, also due to trade actions. In Europe, we were slightly negative this year. We may turn slightly positive. But overall, I wouldn't characterize this as an optimistic outlook in chemicals. So, if you look, what we have in the industry is operating rates typically between 70% and 80%. That's still historically low. And a recovery is typically not expected for this year yet, but more 2027. So, in '27, there is actually a general consensus that there should be a recovery. So, if you look at recent years, consumer spending has not been sufficiently on durable goods or semi-durable goods. There was more spending on services and recently on AI. So, this switch back to durable goods spending and semi-durable goods spending that is really expected at some point in time. There's a natural replacement cycle to products. But for this to happen, we first need better consumer confidence levels, which still are generally low considering geopolitical and trade tensions. More specifically to Care Chemicals, what we say here is actually that in our outlook overall around flat, there's underlying growth because last year, we had a fair amount of pruning in Care Chemicals, which had an effect of roughly 2% of revenue in Care Chemicals. As you are aware, we closed a site in Argentina. We also shut down a plant in Europe for EO derivatives. And with that, when we're giving an outlook of around flat for Care Chemicals, underlying, that means actually that there's growth also in our outlook. Operator: The next question comes from Christian Faitz from Kepler Cheuvreux. Christian Faitz: Congrats on the results. Two questions, please. First of all, if I look at weather conditions, both in Europe as well as in North America in Q1 so far, I would figure your de-icing business must have been rather robust. Can you confirm this? And if so, possibly put a number on this? And my second question is on Catalysts. You seem to be a bit less optimistic on your Catalysts performance for '26 after a rather robust Q4, particularly on the ethylene side. Why is this the case? Would you see a sequential slowdown again? Conrad Keijzer: Yes. Thank you very much, Christian, for the question. So, on Care Chemicals and de-icing, we had a strong start. You saw that also, I think, in the press, also one of the airports in Europe almost running out of de-icing material. But it is too early to call it. It really also depends on how March will come in. So we can't really give numbers yet. As far as Catalysts and our outlook for this year, yes, we basically signal that we are bottoming out. I think the recovery in Catalysts really requires a recovery in new build. So, if you look right now at our order book and also what we basically saw last year is still of the orders, it's by and large, a refill business. So, the new build has dropped to roughly 10% of our orders. For us to really see a big recovery in Catalysts, we should see the new build coming back in. That is visible in the order book, not this year. But if you look at '27, '28, '29, we are seeing actually a pickup in new builds, particularly in China. There is, let's say, a small wave of new build coming in there ahead of their peak carbon year in 2030. So, we're not seeing a recovery yet this year, Christian, we are bottoming out, but we are actually quite optimistic for the years after that, then we should see a recovery in Catalysts. Operator: The next question comes from Christian Bell from UBS. Christian Bell: I've got 2 questions, please. My first one is, how should we think about the earnings phasing in 2026? Are you sort of expecting a softer first quarter, then a stronger second half as savings and volumes build? If you could provide a loose guide for first quarter '26, that would be really useful. And then the second question, if you could just help me, I'm a little bit confused on your 2026 guidance. So, you're basically guiding to top line down 3% to 5% on currency, which is similar to the outcome in 2025. But last year, you still expanded EBITDA margins by 180 basis points with CHF 50 million of cost out with another CHF 30 million planned for 2026 and a similar top line result. What's preventing any margin improvement this time around? Like what's the difference from 2026 versus 2025 that stops you repeating that same margin progression? Conrad Keijzer: Okay. Christian, I'll take the first question on phasing, and Oliver will provide some more granularity on your second question. As far as the phasing throughout the year, I think we should keep in mind that we had last year actually a strong first quarter. Other than that, if you sort of ignore the year-on-year comp, we are seeing a fairly normal pattern throughout the year. It's not that we see a significant recovery in H2 versus H1, like we sometimes have in other years in the outlook. What is important, maybe some specific comments in Care Chemicals, we see at the moment, nothing unusual. De-icing is obviously playing a role there in how Q1 will come in. In Catalysts, we are comparing against a strong quarter last year. But normally, we always see a weak Q1 as we also saw last year after a strong Q4. So, there is that sequential effect. In Adsorbents & Additives, we are seeing a somewhat weaker start in Adsorbents where we still are waiting for the regulation for renewables to kick in. The EPA has set ambitious targets for renewable diesel and SAF, but these need to be still endorsed by Congress. And because of the government shutdowns, there's a delay in that. You see that the market expects these increased targets to kick in because RINs prices are going up, but we're not seeing that in our numbers yet. Other than that, I think there's nothing here to comment. Yes, Oliver, to you. Oliver Rittgen: Christian, yes, let me comment on your second question on margin progression year-over-year. I mean, first of all, as you have seen, there's a strong progression from '24 to '25 with 180 basis points of improvement, which brought us now to 17.8%. And that was driven by the performance improvement programs, the cost productivity and effective price management, as we said. So of course, when you -- and we had a flat top line at this. For '26, we are guiding for now a second year of flat top line with the effects that we alluded to before, the pruning that needs to be compensated and the soft market environment. And again, we are executing now on the performance program and delivering further savings in '26. At the same time, of course, in '26, like in '25, we need to compensate for the inflation that is happening in the cost structures that we do have. And we guided for '26 that we have 3% to 4% inflation in the cost structure. We have the savings from the savings programs plus other productivity measures that we're taking. And hence, we guided for around 18%. So -- of course, the ambition here is to make further progress also towards our medium-term targets. But as we alluded to, for '27 that it requires also a bit of a rebound of growth that we then bring it really in. Christian Bell: Okay. It just seemed like a similar setup in 2026 with a similar level of cost out. So, you're basically saying that your underlying inflation -- your underlying cost inflation this year is much stronger than it was -- or you're expecting it to be much stronger this year than it was in 2025? Oliver Rittgen: No. I mean, there is another year of inflation. I think, Christian, the point is more -- we did 180 basis points last year where we set the organization on a leaner base. And obviously, the savings were also a bit higher in '25 versus '26, and that's partially driving that effect. Operator: The next question comes from Katie Richards from Barclays. Katie Richards: I had a question on the use of capital and the balance sheet. You were on Bloomberg this morning, Conrad, and mentioned that Clariant would be open for bolt-on acquisitions potentially on the scale of Lucas Meyer. But you're also, at the same time, targeting CapEx potentially as low as CHF 150 million. So, a few questions on this then. With leverage coming down and proceeds also coming from Stahl, which end markets would you be interested in exploring further? Could you also remind us how much you're spending annually for maintenance purposes, please? And finally, how are you looking to balance organic growth versus paying a premium to grow these? Conrad Keijzer: Yes. Katie, maybe first to clarify on comments made this morning on the calls. Yes, there's nothing new. So, we're always open for bolt-on acquisitions. But we also said this morning that our first priority is always organic growth and margin improvement. And then if we can complement that with the right bolt-on acquisitions, we're very open to that. And we defined as the right ones, acquisitions that really fit to our core segments and that provide real synergy. And then I mentioned Lucas Meyer as a great example of an acquisition that basically fits those criteria in the past. But that's not to say that there is right now a target of that size available. So just to be clear about that. But overall, people do expect with limited growth perspectives right now in the chemical industry that there should be an increased level of potential consolidation ahead of us. And what I said this morning is it's important that we obviously participate in industry consolidation if and when that happens. As far as CapEx, maintenance, that's fairly steady at roughly a level of CHF 100 million a year. You see the big reduction in CapEx for us from the fact that we haven't actually added to our footprint, particularly in China in recent years. And now actually, we're very well set up there. So, keep in mind, in recent years, we invested CHF 80 million in a new catalyst plant that came up on stream. We invested CHF 80 million last year in a new surfactant plant in Daya Bay that came up on stream we invested last year. We completed actually the investment of 2 lines for flame retardants. That was another CHF 100 million. So, if you look at those items alone, that explains why the CapEx envelope is structurally lower than it was in the past. So, we haven't cut any corners on maintenance CapEx. So, no worries there. That's at a fairly steady level around roughly CHF 100 million per year. Operator: The next question comes from Michael Schaefer from ODDO BHF. Michael Schaefer: On one hand -- first one, I want to come back to your Catalysts outlook for '26. So, as you said, you guide for flat local currency sales into '26. So, nevertheless, you also reported on some greenfield projects helping you to record what we haven't seen for quite some time, this kind of EBITDA level in the fourth quarter. And I think also on the full year, the 20.8% margin was rather unique over the past 4, 5 years, so to say. So, I wonder how should we think about mix effect into '26 and how margin is progressing in the Catalysts segment? This would be my first question. And the second one is on the cash flow in '26. You built up some working capital, quite sizable, in 2025, maybe a bit as a surprise here, talking also about phasing effects. So how should we think about the measures you are implementing and what you expect in '26 in terms of working capital? Conrad Keijzer: Yes. I will answer the question on margins and mix outlook for Catalysts and Oliver will provide some clarity on working capital movements. If you look at Catalysts and the performance that we saw, we're very pleased that indeed, new build that is out there that we're getting it. So that is, I think, very positive. So particularly on ethylene, there is actually a large project in Europe that is starting up actually early next year. And we see actually the first fill order for that coming in. So that's very positive. We also saw -- if you look at Syngas & Ethylene, we saw actually that both of these segments are performing well on refill. So, we have a full share on new builds. And if it's about refill, we think that on -- particularly on Syngas, we've gained some share. So, if you look at our margins, they are reflecting that as well. So, there is the very positive effects from the cost-outs also in Catalysts, but there's also underlying a structural improvement in mix. And what you see is in Catalysts with rising prices for metals, it is not an easy environment. You may have seen the profitability reports of some of our competitors that show EBITDA margins significantly down. So, we're actually very pleased with the results in Catalysts with a 21% EBITDA margin for the year. But to further step up the margin in a significant way in the year ahead of us, that is still requires a pickup -- that still would require a pickup in new builds. And that is not yet what we see for this year. We see that more for '27. Oliver Rittgen: Michael, on working capital and cash, let me first start from the broader picture, cash. I mean, we are very satisfied with the cash performance overall that we had in '25, 10 percentage points of cash conversion, up versus previous year. CHF 80 million better operational cash flow performance. And then indeed, we had a bit of a buildup in net working capital that we then also compensated with very disciplined CapEx management. So, that buildup in net working capital in the fourth quarter is also a bit related to the phasing of the sales pattern that we have seen in the fourth quarter. We had a very, very strong December in Catalysts, but also in Care with the aviation business. And I mean, obviously, with the payment terms that you have then on these sales, you have a bit of a buildup of accounts receivables. We also have slowed down on inventory buildup in A&A, which had an impact on accounts payable. So, we had a couple of effects at the end of Q4. What we have done independent of that particular quarter is that we initiated a cash program in Clariant, where we structurally will look into the different net working capital levers. It's an integrated approach across the business units. It's ingrained in the target setting that we have on a segment level. So, it's a clear focus area. You have seen it also with our triangle and to say growth, margin, cash. That's what we focus on. That is what drives our differentiated steering. So, there's a focus on net working capital and to drive that down in '26. Operator: The next question comes from Julia Winkelmann from Bank of America. Unknown Analyst: I was wondering, you finished the year ahead of schedule on your cost savings target and also achieved your cash conversion target already. Given this progress, do you plan to update your mid-term targets and perhaps also give an update on how to think about your capital allocation going forward given the stronger cash generation? Conrad Keijzer: Yes, Julia, that's a great question. And we are obviously very happy with and pleased with how we finished the year in terms of our EBITDA margin being up 180 basis points and our cash conversion being up 10 points to slightly over 40% conversion now. So, where we are versus the midterm targets is that indeed, for cash conversion, we have achieved these targets already. But it's fair to say that we still have a bridge from 17.8% to the bottom range, which was 19% to 21% EBITDA margin. I will say, we look at 3 years in a row now of improvements, annual improvement in EBITDA margins as well as absolute EBITDA. We came from 14.6%. We're now at 17.8%. That was certainly in a challenging market environment for us now to revisit the midterm targets, that's not on the agenda. We're very much focused on delivering them. So, we are very much focused to have all the levers in place to bridge towards the 19% to 21% EBITDA margin, and that is the differentiated growth strategy. It's repositioning the businesses to more profitable segments. It is finishing the cost-out program, as Oliver has alluded to. It is -- maintain pricing discipline. And with that, we think we have the levers in place in addition to a pickup in markets that we do anticipate for '27. So, we have all the levers in place to deliver the 19% to 21%. But yes, that is -- those are actually quite ambitious targets in the current environment. Operator: The next question comes from Tristan Lamotte from Deutsche Bank. Tristan Lamotte: Two questions, please. The first is, could you maybe just run through your end markets and the trends and outlook that you see in those, so in agriculture, autos, construction, electronics, et cetera? And then, can I ask a general question about your views on the threat to European specialty chemicals companies from China? Do you still think that European chemical companies have sustainable moats in specialty chemicals? And to what extent are you seeing Chinese competition moving into specialties so far? And to what extent do you expect that to accelerate over the next 10 years? Conrad Keijzer: Yes, sure. These are important questions. So, first on end markets, what we are seeing. Well, first of all, let me start with Care Chemicals. We see, in general, the consumer-facing segments with a robust demand. So, if you look at Personal Care, Home Care, that is basically low to mid-single-digit growth with a bit more growth in Personal Care in the premium segments like skin care, hair care, but then really the premium, premium products, the level just under that, there is actually some downtrading, the so-called aspirational buyers. Home Care, very, very solid and robust; laundry, things like that. Crop Protection, we've had interesting years behind us. Last year, we had a strong year in Crop Protection, but that was really very much because the year before, we had still the destocking. So, it was also, let's say, some of the year-on-year comparisons. I think now we have a much cleaner comparison, and we should more trade in line with historic levels where we sort of slightly outperform GDP levels. Oil and gas, it's basically a relatively modest outlook right now. And oil prices, now they're up to $70 because of the geopolitical turmoil in the Middle East. But in reality, there's plenty of supply and more so than demand. So, it's not an environment with high oil prices or a lot of investments that we are seeing there. Mining continues to be positive, especially for items like copper and still lithium. Catalysts, yes, we still globally run 70% to 80% util rates. And for us, really to see new builds kicking in, we need to go first to higher utilization levels. I did mention China as one where '27, '28, '29, we are seeing new builds coming back in. But for this year, it is really a bottoming out year in Catalysts in our forecast. And finally, Additives and Adsorbents, what we see actually is relatively weak demand if you look at electronics and particularly smartphones, but that was already the case last year. So, actually, there's a certain level of maturity here with very low single-digit rates for growth for smartphones. PC production was actually quite nicely up last year. And we think that will continue to be relatively okay. And finally, if you look at our Additives business, end markets like furniture, we had expected a big recovery there last year already as consumers at some point should spend on durable goods again or semi-durables, but it hasn't happened yet. And for this year, so far, we are not seeing that either. And to finish it all off with Adsorbents, this is very much for us driven by renewable diesel now, sustainable aviation fuel. In Europe, there are the mandates in place. But in the U.S., we're still waiting for the endorsement by Congress for the new increased EPA targets, but that should come at some point in the year. So, overall, if you summarize it, it's a very modest sort of growth environment overall and with some differences by region. Maybe specifically on your second question on China and how is this impacting Specialty Chemicals. I think there is a big difference between commodity and petrochemicals on the one hand and specialty chemicals on the other side. In China, there is significant capacity being built up in local -- in recent years for commodity chemicals for petrochemicals. In specialty chemicals, we are not seeing that level of competition in China. I mean, this is based on IP that took decades to develop. And actually, what we see is that for our business, we make good margins in China, but there is a shift where we increasingly supply to local Chinese companies. And I think high level, the other big impact that China has is historically, Europe was exporting a significant part of its production into China, the same with the U.S. That has come down significantly, and China has become an exporter for some items, but not so much in specialty chemicals again. It's much more on the commodity side. Operator: The next question comes from Chetan Udeshi from JPMorgan. Chetan Udeshi: I just wanted to follow up, Conrad, on your comment on industry consolidation. And I'm a bit puzzled and also curious that we've not seen much happen already. For Clariant, and you've signaled openness to participate in any consolidation, but you have a very different business structure in the sense like you've got Catalysts business, you've got Care Chemicals, which is comprised of industrial plus consumer. And then, of course, you have Adsorbents & Additives. It just feels like the structure of the business is probably too complicated to see Clariant as an obvious candidate or initiator of any consolidation? I'm just curious how you think about that. Conrad Keijzer: Was it a question or an opinion that you were voicing, Chetan? Chetan Udeshi: It's a both. I mean, a bit of both. I think it's not just for Clariant. I'm just curious, is this a problem for the industry overall that there is no like pure-play company that is easy to buy or easy to sell, and that makes it quite complex for industry to consolidate. Conrad Keijzer: Yes. No, it's an important question that you're raising. So, if you look big picture where we came from is we were a hybrid. So, Clariant was both active in commodity businesses and in specialty businesses. And if you look at the recent years, we've really repositioned the business to become fully specialty. So, if you look at the recent, let's say, 5 years, what we did is in '22, we divested our pigment business, which we clearly saw that was commoditizing. By the way, it has indeed even further commoditized. So, I'm glad that we divested that in 2022. Actually, a year later, we divested our North America Land Oil business, which also was very much a commodity business. And if you look now, what we also did was we divested a part of our Care Chemical business, the commodity surfactants to Wilmar, and we put it in a joint venture there. So, we've done actually quite a bit in recent years to, first of all, get out of our commodity business, but at the same time, to strengthen our specialty chemical business. So, we did a number of smaller bolt-on acquisitions. We bought the cosmetic ingredients business in Brazil with Actives. We bought the green surfactant business in India. We did the purification business from BASF for renewable diesel, Attapulgite in the United States. And last but not least, the Lucas Meyer business, which really strengthens our position in Personal Care. So, what you see now is that we have leading positions in specialty chemicals in the segments where we compete. At the same token, what you also see, Chetan, is that we have year-on-year improved the profitability of these businesses. So, we rarely get the question asked, are you the right owner for this business as long as we just continue to improve the profitability and in fact, achieve leading profitability, both in terms of growth, in terms of margins, we have very sustainable positions in each of these segments because we are having significant market shares in the individual businesses. So, yes, that's, I think, sort of the summary from a sort of an M&A perspective where we are, and we remain interested to continue to do bolt-on acquisitions in these businesses, but only if they bring real synergy. Operator: The next question comes from Jaideep Pandya from On Field Research. Jaideep Pandya: First question is on Catalysts actually. What do you think is the longer-term outlook like when you look at the next 3 years, considering so many capacity shutdowns that have been announced in Europe and also sort of asset rationalization in China as well. So, what do you see as a longer-term outlook in Catalysts? That's my first question. And then the second question sort of is on the legal -- I apologize if you have answered this before or if you cannot go in details, but if you can give us some color at least on the legal situation around the ethylene cartel case. What sort of provision have you booked already? And any time line in terms of result that we could hear around this? And then, finally, just on the consolidation point, Conrad, I mean, from -- on paper, if I just sort of ask the question differently, what Chetan was, I guess, trying to ask, the obvious candidate for increasing your size would be in Care Chemicals. So, if there is a case to be presented, are you saying you could be aggressive enough to further pursue divestments of some of the other areas to pursue increasing size in Care Chemicals? Conrad Keijzer: Yes. Thank you, Jaideep. Yes. First, on your question on Catalysts and the long-term outlook, I think what is important to realize is that there has been a shift in production. So, Europe is -- has actually significantly come down in chemical production. CEFIC issued an interesting recent study that since 2022, a total of 37 million tons of capacity has been taken out of the market in Europe. That's roughly 10% of the overall capacity. Now at the same token, you have seen a buildup of capacity in China and to a lesser extent, in the Middle East. So yes, so there is a shift. If you look at the global outlook for Catalysts, it is actually a fairly robust business, even regardless of these shifts, these regional shifts. And if you look at the long-term outlook, petrochemicals historically, globally, has always performed at or above GDP. So that is still intact. The change is actually that there are some regional shifts. And therefore, it was for us extremely important to invest in China in Catalysts in our footprint, and we're very happy with that footprint now that we also have in China to support the local growth. So, in terms of long-term outlooks, the fundamentals are still intact at a global level. But yes, there have been regional shifts for sure. In terms of your second question on legal, yes, in terms of ethylene claims, at this stage, we cannot publicly comment any further than what we've already said. Clariant firmly rejects the allegations and will adamantly defend its position in the proceedings. And we do have substantiated economic evidence that the conduct of the parties did not produce any effect on the market. And yes, we are in litigation, so we cannot comment further on that other than your question on the provisions, we haven't taken any. And this obviously has been reviewed with our auditor, KPMG, and they are obviously of the same opinion, and you will see that in our integrated report also explained. Operator: The last question for today is a follow-up coming from the line of Thea Badaro, BNP Paribas. Thea Badaro: Just a quick follow-up for me. Specifically on the flame retardant business, can you quantify the size of the data center market opportunity for your flame retardant business? Conrad Keijzer: Yes. This is a very interesting question, and we just made a deep dive actually on data centers and to make sure that we capture all of the share that is out there when it's about our products. And what we are seeing is indeed that our flame retardants are benefiting from this. This is about the -- yes, our flame retardants for connectors, for switchgears, cable jackets. That is a part of it. There's also a part of it which sits in fire-resistant coatings actually, that are applied to the infrastructure of these buildings. But finally, and this is also quite important, our Catalysts business, we are really targeting data centers here as well. And this is first from a development perspective, but we're very happy that we also commercialized now the first application where we basically have a fuel cell technology. So, we have methane. We have basically gas, then we convert it to hydrogen. And then the hydrogen basically gets converted into water and electricity. And this is a climate-neutral, if it's biomethane, a climate-neutral solution actually, for decentralized and distributed electricity generation in the right -- high quantities that are necessary. So, there's other solutions. Nuclear is also mentioned. But particularly with the limited grid capacity, the solution will be power plants, small power plants in the United States and Europe has the same challenge. And with Catalysts, we're talking about a very interesting opportunity here, which already the first -- what we now commercialize is a few tens of millions already in revenue in the outlook that we have. The size for flame retardants combined right now globally is also in that order of magnitude. So, it is not moving the goalpost for the company as a whole, but we are seeing a nice upside from data centers. Andreas Schwarzwaelder: So, thank you very much. This is Andreas speaking. This concludes today's conference call. A transcript of the call will be available on the Clariant website in due course. The Investor Relations team is available for any further questions you may have. Once again, thank you for joining the call today, and have a good afternoon. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Good day, and welcome to the Middleby Corporation's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] On today's call are Tim FitzGerald, CEO; Mark Salman, President of Middleby Food Processing Group; Bryan Mittelman, CFO; James Pool, CTO and COO; and Steve Spittle, Chief Commercial Officer. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Tim FitzGerald. Please go ahead. Timothy FitzGerald: Good morning, and thank you for joining today's call. Over the past year, we have executed decisive actions to unlock significant value for our shareholders through the strategic optimization of our portfolio of industry-leading businesses across Commercial Foodservice, Food Processing and what was formerly our Residential Kitchen segment. Before we dive into our results for the quarter, let me start with our strategic accomplishments. In February, we announced the completion of the sale of a 51% stake in our Residential Kitchen business to 26North at $885 million total enterprise valuation, delivering approximately $565 million in immediate cash proceeds subject to future closing adjustments. This transaction represents a premium valuation while allowing us to retain meaningful upside through our 49% ownership stake. Following the close of the transaction, Middleby operates 2 highly focused industry-leading platforms, Commercial Foodservice and Food Processing. While we retain a 49% stake in the Residential JV, we are treating this as a non-core part of our operations, which is why you'll see it in discontinued operations in the fourth quarter and going forward will be excluded from our adjusted results. In anticipation of the proceeds from the deal, we will immediately put this capital to work for our shareholders. Combined with our ongoing share repurchase program, we reduced our overall share count in 2025 by approximately 9% through $710 million in buybacks, one of the most aggressive capital return programs in our industry. This reflects our conviction that Middleby shares remain significantly undervalued relative to our earnings power and growth prospects. In the second quarter, we plan to complete the separation of our Food Processing business, creating 2 independent pure-play industry leaders. Each business will emerge with enhanced focus, optimized capital structures and the resources to maximize growth in their respective markets. The financial impact is compelling. Following these transactions, Middleby will operate as a focused Commercial Foodservice leader with industry-leading 27% segment level EBITDA margins, while Food Processing becomes an independent growth platform with segment level EBITDA margins over 20% and significant expansion opportunities through both organic and acquisition growth initiatives. Turning to our fourth quarter results. Our total revenue of approximately $866 million for our remaining 2 segments exceeded our expectations. This strong top line performance drove adjusted EBITDA of approximately $197 million. Through a combination of these operational results and the substantial share repurchases we made in 2025. This translated to adjusted EPS of $2.14 for the quarter and $8.39 for the full year. For today's discussion on segment level results and trends, I will be discussing the Commercial Foodservice results and outlook, and I have asked Mark Salman, the current President of our Food Processing segment, and as we announced today, the CEO of Food Processing SpinCo upon completion of the spin-off, to discuss the Food Processing segment performance. Starting with Commercial Foodservice, we generated revenue of approximately $602 million, which exceeded our expectations during the fourth quarter. The outperformance was driven primarily by the general market with our dealer partners, which had double-digit growth in the quarter. We attribute the second half momentum to improve demand with independents and in the institutional market, along with continued growth with emerging chains. We are gaining share with our dealer partners as a result of investments to strategically align those relationships over the past several years. The broad-based strength we saw in the general market was offset by continued declines among our large QSRs and C-store customers who faced lower traffic and cost pressures throughout 2025. While the QSR market conditions remain challenging, we are encouraged by actions taken by our larger chain customers to better position themselves setting into 2026. We've seen our customers address menu pricing, returned to limited time offers and launch new beverage programs to reposition against the challenging backdrop with a focus to drive customer traffic. We are encouraged by the early traction we have with some of our largest customers with our new ice and beverage innovations. This is a targeted area of expansion for our Commercial Foodservice business and we are well positioned with exciting new solutions. As we think about the year ahead for Commercial Foodservice, we remain focused on building our business for long-term success, but are optimistic that the chain restaurant environment will stabilize and improve as we move through the upcoming year. Bryan will provide additional color, but our guidance assumes a relatively consistent environment relative to what we are currently experiencing as we await larger chain customers to firm up their plans for the year, particularly in the second half. More specifically, we have clear catalysts for accelerated growth with restaurant industry fundamentals stabilizing with early signs of traffic improvement. With our dealer partnerships generating strong momentum in the general market and institutional segments, in our ice and beverage platform, representing a significant growth opportunity that we're uniquely positioned to capture. As we think longer term, the investments we have made position us with unmatched competitive advantages, both now and in the future, with the industry's broadest portfolio of leading brands, the strongest innovation pipeline and leadership in automation and IoT capabilities that will drive market share gains for years to come. We still have work to do, but I'm excited for what the future holds for Middleby Commercial Foodservice. I would now like to turn the call over to Mark to discuss Food Processing. Mark Salman: Thanks, Tim. Before I discuss the segment results, I want to thank the Board of Directors for entrusting me with leading Food Processing SpinCo. Leading this company is the honor of a lifetime and I am excited for the opportunity ahead. I also want to thank you, Tim, for the partnership you've shown me over the past 10 years here at Middleby. I look forward to working with you even more closely through this process. Turning to the Food Processing segment. In the fourth quarter, we generated revenue of approximately $265 million, which outperformed our expectations. As I look at the business, I am proud of what we have accomplished in the fourth quarter, particularly our extreme strong order rate, but more excited about the strong foundation it creates as we enter 2026. 2025 was challenged with disruption from tariffs and high food costs, which delayed our customers' purchasing and investment in solutions in the first half. However, the latter part of the year, we saw our customers moving ahead. We had very strong orders in both the third and fourth quarters with a record backlog as we finish the year. This was driven by continued success with our Total Line Solution offering along with strategic expansion in international markets. We have a strong sales pipeline and continuing strong order intake. This all gives me great confidence in our position for not only next year, but the longer term. Taking a step what sets Middleby Food Processing a part is our comprehensive approach to serve individual protein, bakery and snack processors. Rather than creating a portfolio of disconnected brands, we have created a portfolio designed to deliver complete end-to-end total line solution offerings that optimize our customers' entire production lines and are committed to delivering the lowest total cost of ownership. Our success reflects a year of strategic investment in building these comprehensive customer solutions, and we are gaining momentum in the marketplace with a growing competitive advantage. Our decentralized culture promotes agility, innovation and speed. We have state-of-the-art innovation centers with the most recent one opened this fourth quarter outside Venice, Italy, where we can showcase our know-how in the most innovative and collaborative environment. This strategy is one of the key foundations that will drive our organic growth in the years to come. I am also very excited about the continued opportunities that exist as we expand the platform through targeted strategic acquisitions. We have built the Food Processing business through additions of brands and products, very specific to the food applications that we have targeted and that complement our Total Line Solutions. This has proven to be a very successful acquisition strategy, providing significant revenue and operating synergies. We have a consistent and proven track record of executing on our acquisition strategy over many years with our strategic approach and financial discipline. Although we have been executing our strategy for some time, we are still in early innings, and it's the right time for the separation into an independent company. We now have the proper scale, we can accelerate what has proven to be our unique and successful business model. I am excited for what lies ahead. With that, I'll turn the call back over to Tim. Timothy FitzGerald: Thanks, Mark. I'm looking forward to what is ahead for Food Processing. As you've already heard, we have 2 well-positioned segments for growth in 2026 and beyond. On top of this, at a corporate level, our capital allocation strategy remains aggressive and focused. We'll continue our share repurchasing program having allocated over $700 million in 2025, reducing our shares outstanding by approximately 9%. We continued this share buyback activity into the first quarter, expecting to repurchase approximately another $300 million in the first quarter of 2026. We plan to allocate the substantial portion of our free cash flow again to repurchases this year. But most importantly, we have a world-class team around the globe, whose commitment and execution continue to drive our success. 2026 represents a defining year for Middleby as we execute this strategic portfolio optimization and position both businesses for accelerated growth. We are planning an Investor Day on May 12 in New York City, ahead of the Food Processing Spin and look forward to providing greater level of information on profiles and growth strategies for each stand-alone company ahead of the separation in the second quarter. With that, now I'll turn it over to Bryan to discuss our financial performance in greater detail and guidance for the first quarter and 2026. Bryan Mittelman: Thanks, Tim. Our fourth quarter results showcased the strength of our execution and the quality of our business model. Let me walk through the key financial highlights and our outlook. For Commercial Foodservice, positive impacts we're seeing from general market, institutional and emerging chain customer segments. We delivered $602 million of revenue and a solid EBITDA margin of over 26%. This would have exceeded 27%, if not for tariff impacts. Customer engagement and interest in our leading technologies remain strong, especially in beverage dispense and ice products. At Food Processing, Q4 revenues were approximately $265 million, and our organic EBITDA margin was 23%. Organic revenue growth of 1.3% benefited from improvements in international markets. Margins were impacted by tariffs with higher costs and disruption in order timing impacting production efficiencies. We are experiencing a strengthening order rate and growing backlog. Q4 orders reached $322 million and backlog grew to $410 million with growth across most of our served markets and in our Total Line Solutions. Turning to Residential Kitchen. Our transaction to sell a 51% stake to 26North closed on February 2. Prior to the close of the sale, Residential Kitchen was treated as a discontinued operation. Following the close of the sale, our future balance sheets will include a minority interest investment reflecting our 49% ownership stake and a note receivable. Our income statement will reflect the impact from our noncontrolling interest on a quarter in arrears basis. Residential results are not included in our non-GAAP adjusted earnings and adjusted EPS calculations as they are no longer part of core operations. On a consolidated basis, total company adjusted EBITDA for Q4 was approximately $197 million and adjusted EPS was $2.14. Regarding tariffs, the adverse net impact to EBITDA in Q4 was approximately $7 million. We expect benefits of pricing and operational actions implemented in 2025 to offset the cost of tariffs in 2026, although we will continue to have margin dilution in the first half of the year. Q4 operating cash flow was approximately $178 million and free cash flow was approximately $165 million. Our leverage ratio per our credit agreement at year's end was 2.5x. Regarding capital allocation, last year, we communicated the decision to deploy the vast majority of our free cash flow to share repurchases. For the full year 2025, we repurchased 4.9 million shares for $710 million or an average purchase price of approximately $144.50 per share. In total, these repurchases reduced our share count by 9% during 2025. To start 2026, we have repurchased an additional 1.7 million shares for approximately $250 million at an average price of approximately $154 per share. I would like to provide some commentary on our capital structure overall. Our 1% convertible notes matured in Q3 of 2025, which now results in a higher interest expense of approximately $6 million a quarter. This is a $0.12 headwind to the fourth quarter earnings. For full year 2026, the interest rate headwind from the higher cost of debt is approximately $0.34. The 2026 EPS guidance reflects the benefit of share buybacks from the proceeds of the sale of the 51% of the Residential Kitchen business. We retain future upside through our ownership of the 49% of the business and the $135 million senior note. Turning to the rest of our outlook for 2026. For ease of communication, we provide this outlook on a current company basis, assuming that both Commercial Foodservice and Food Processing remain together for the full year. With that said, we still anticipate the separation of the 2 segments into separate public companies in the second quarter of the year, and we expect to provide updated guidance for the stand-alone companies at our Investor Day in advance of the separation of the divisions. For Q1, we expect to achieve the following: Total company revenue of $760 million to $788 million, which is comprised of Commercial Foodservice at $560 million to $578 million and Food Processing at $200 million to $210 million. Adjusted EBITDA is forecasted to be between $161 million and $173 million, which is comprised of Commercial Foodservice at $142 million to $152 million and Food Processing at $37 million to $41 million. Adjusted EPS is projected to be in the range of $1.90 to $2.02, assuming approximately 47.7 million weighted average shares outstanding. For the full year, we expect to achieve the following: Total revenues of $3.27 billion to $3.36 billion, which is comprised of Commercial Foodservice at $2.37 billion to $2.43 billion and Food Processing at $895 million to $925 million. Adjusted EBITDA of $745 million to $780 million is comprised of Commercial Foodservice at $632 million to $658 million and Food Processing at $186 million to $208 million. Adjusted EPS will be in a range of $9.20 to $9.36. Please refer to the presentation we have posted online at our Investor Relations website for full details. Please note this guidance does not include onetime costs associated with the completion of the Spin transaction, nor does it include a stand-alone public company costs for the Food Processing business. We will provide estimates and detail on stand-alone costs we expect to incur along with additional materials in connection with the upcoming Baird Food Processing Symposium in New York on March 5. I also want to provide some additional color on the shape of the year for Food Processing revenue. As a reminder, we typically see Q1 is our weakest quarter and Q4 is our strongest with Q2 and Q3 relatively equal in between. We expect 2026 to follow this general pattern. However, in 2026, we expect the sequential increase from Q1 to Q2 to be smaller than the $48 million step-up we saw in 2025. This reflects our expectation that Q1 2026 will be stronger relative to the rest of the year than Q1 2025 was, essentially returning to more normal seasonal patterns after an unusually weak Q1 of 2025. Before we conclude our prepared remarks and begin Q&A, I want to provide an update on the Food Processing spinoff. We remain confident in our ability to execute the necessary actions to have a successful transaction. Activities to ensure the spin company will be operating effectively, efficiently and independently at inception remain on track. We continue to expect to complete the spin-off by the end of the second quarter. Ahead of the joint Investor Day on May 12, we expect to file a publicly available registration statement, which will include annual audited financial statements in April. That concludes our prepared remarks, and we are now ready to take your questions. Operator: [Operator Instructions] The first question today comes from Mig Dobre with Baird. Mircea Dobre: I guess where I would like to start is with maybe a little more context on what you're seeing in the CFS segment. You talked about the quarter being better than guided and anticipated that it clearly was. And you mentioned improved activity from the general market and the dealers. And I guess, I'm sort of wondering here how much of that was just a return to sort of the normal behavior that we typically see in the fourth quarter from the dealers in the general market? Going back to the prior call, we are talking about how your guidance at the time didn't seem to reflect kind of the more normal stocking dynamics. I'm wondering if that's really what surprised here? And as you think about your outlook for 2026, how do you think about this general market specifically? Can it actually build some ongoing momentum? And -- we're really waiting for here is for the large QSR customers to sort of find bottom? Or is there something else that you're contemplating here? Timothy FitzGerald: Mig, I think I'll kick it off and then Steve will probably pick up. Yes, I mean, I think we've been -- we saw continued strength in the dealer market, as I mentioned, in the initial comments. I think some of that's fundamentally us gaining market share there, I think, to a certain extent, and then I would say kind of broad-based, we've seen improved replacement demand in the market. I think we -- that exceeded expectations in the fourth quarter because it was very strong in the third. So we didn't want to kind of bake that into an expectation of that continuing. But I think we feel pretty good about the backdrop of that continuing into next year. So really kind of the inflection is what happens with the change as we go through the year. They have -- we've seen improvement with the larger chains as we kind of went through the year. I think they've reset as they reacted to market dynamics and we've seen traffic improve, and that kind of gives us some level of improving confidence in that category of the market as we go through next year. And I think that's kind of the pivot point to move back into organic growth for the year. Steve Spittle: Mig, I would just add, this is Steve. Specific to the fourth quarter and dealer activity, we commented on prior calls that I don't believe this is the historical, hey, it's the fourth quarter, we're bringing in inventory chase year-end incentives, that is not what I believe happened. One of the big areas we've spent a lot of time leaning in with our dealer partners, whether it's training to the [ MIC ], online digital training has really been to get them to think outside of core Middleby products. So all our dealers historically know the Pitcos, the blocks, the South [ Bend ], where we're gaining market share specifically the back half of last year has been getting those dealer partners to start thinking of us for ice, right, pulling out follower at ice or pulling in Invoq combi, pulling in TurboChef, pulling in coffee and then starting to really package and wrap a full Middleby solution together. And that's more where I think we saw the positive impact in the fourth quarter, not necessarily the historical norm of stocking up in the fourth quarter. We just don't see that bringing in inventory to chase a year-end or chase -- or beat a price increase, it's just not the way the dealer market is operating right now. So we're very happy with, I think, the increased share we're taking in some of those new product categories for us. Mircea Dobre: Okay. Very helpful. And then my follow-up is related to your tariff comments on Slide 20 of your deck. If I understand this correctly, at least the way I read it, it looks like there's about $74 million at the midpoint of incremental tariff drag in '26 relative to '25, hopefully, I have that correct. I am wondering how that splits between the two remaining segments. And it appears that you're saying you're going to offset this with pricing, but there's a bit of a timing issue in terms of how that flows through. So I guess the question, how confident are you that you'll be able to offset this fully for the year? And is this the primary factor that is accounting for the margin ramp implied in the full year guidance relative to Q1? Steve Spittle: Mig, it's Steve again. So the split on the tariff impact between the two remaining companies in broad terms is, I'll say, 2/3 to 70% of the impact is coming from Commercial Foodservice, obviously, the remaining impact from Food Processing. The main split difference there is Food Processing doesn't quite have as large of a supply chain base coming from markets like Asia as we do in Commercial. So that's the reason for a little bit of a difference. We have said that pricing that we took in the back half of last year, specifically on July 1. And then we took another small to mid single-digit increase to start the year on January 1 this year that would cover the impact of the tariffs as we sit here today. We still believe that to be true. There is some vicious timing of when tariffs are hitting, when that pricing starts to or has been flowing through, and that's where you see a little bit of a drag in the first quarter, specifically in commercial and obviously improving as that pricing comes through and then you start to overlap the tariff impact in the back half of last year, which is why you see -- or one of the reasons you see margins improve throughout the year. So we do feel confident we've taken pricing. Again, July pricing has been in place already and now obviously, putting forth another increase to start the year and believe that, that will stick as the year unfolds. Operator: The next question comes from Jeff Hammond with KeyBanc. Jeffrey Hammond: Just wanted to come back on the QSR dynamic. One, I think you had some larger QSRs kind of take a CapEx strike in 4Q. I wondered if that played out? And what the -- was that kind of a one quarter event or does that linger? Two, what are they kind of telling you about store openings? It seems like the last couple of years, there was optimism and then deferrals and what's kind of the update there? And then just any -- as you see some of this value pricing, better traffic, some of the stimulus coming into the market like what's -- how is the dialogue changing or not changing around CapEx for your QSR customers? Timothy FitzGerald: So I think one of the things that we've seen is increasing confidence in the operators as we've come into the year. So I mean, I think there was a high level of uncertainty and certainly a lot of cost pressures, which caused them to hold up. So I mean I think one of the dynamics that we're seeing is people have a lot more visibility, they're in a better situation in terms of where they're at with menu pricing, profitability, et cetera. So I think that's a much better dynamic and I think that's going to start spurring the replacement cycle, which we saw some early signs of that in the fourth quarter. So I think that's part of the dynamic. We do still have chains that are on, I'll say, CapEx strike, so to speak, as you said. So as we kind of went through the fourth quarter, there were some that were still holding up plans. And I think that is still the case in the early part of the year, but I think we have some good decent visibility that, that probably will pick up as we go through the year, and I think that's reflected in our guidance. And then with the new store, Steve, maybe if you want to touch on that? Steve Spittle: Yes, Jeff. So you're exactly right. I mean, as we saw -- as we went through last year specifically, the new store plans for the bigger, say, top 25 chains definitely pushed out for a number of different reasons. It was slow traffic. It was being thoughtful around costs. I think as we move into this year, Tim said it correctly, I still think there is some pushout that is happening on new builds. And the positive side of that is I actually think it's causing them to go back and really look at their current operations, both from a replacement standpoint. But also, I talked about in prior calls, just making sure that they have a plan of attack to increase traffic through their current footprint, which comes back to increasing day parts. So again, that's been a big theme that we've really seen with the QSRs, which I think will continue through this year is, "Hey, how do I get more traffic through my existing footprint?" And a big trend has been obviously beverage. And you've seen that with some predominant QSRs coming out with beverage programs that they're launching that we're a big part of. And I think why we've been successful just in that aspect, Jeff, is just that they can come to us as a holistic solution, the full breadth of our beverage product, but also comes with the support globally to do installation, to do after sales, service and support. And I think as those chains start to take action on those beverage programs. Again, we're very well positioned. So to answer the question, new stores, I think there's still some push out as this year goes is focusing more back on the replacement cycle, and that's also adding in those day parts as the year progresses. Jeffrey Hammond: Okay. Very helpful. The Food Processing, I just want to go to this kind of eye-popping 66% order growth. And just kind of understand how much is just people pausing and now kind of coming back in? Is there some good lumpiness in there? And then just with the order strength against 4% to 6% growth, like why not -- why don't we see more of this order growth drop through to revenue? Mark Salman: Thanks for the question. This is Mark. So a number of factors has affected positively our order intake. The first hour strategy around Total Line Solutions customers are going that route, and we see it in the order intake. Another is what you mentioned. Some of the prior slowness of order intakes, especially in the first half of the year, balance itself with an increasing order intake in the second half of the year. And then the second part of your question is about the why don't we see that in the 2026 numbers, was that the question? Jeffrey Hammond: Yes. Bryan Mittelman: Yes, Mark, I'll jump in there on the growth. Jeff, let me know if I'm not -- this is Bryan, addressing your question. Obviously, we had a strong fourth quarter in orders. And as Mark noted, a lot of that is Total Line Solutions. Some of that has a little longer of a delivery tail on it. But we're excited that we're entering the year with a confident view on delivering growth after what's been a little bit of a slow period here. So based on the order trends, again, we're looking forward to being a growth year for us. Operator: The next question comes from Tami Zakaria with JPMorgan. Tami Zakaria: I wanted to ask about the backlog growth, which is quite impressive, I think, up 36% for Food Processing. Just curious, how much of that is deliverable this year? Bryan Mittelman: Yes, Tami, this is Bryan. A significant majority of it is deliverable this year, but there certainly is a minority portion of it that rolls out into the beginning of '27 as well. Tami Zakaria: Understood. Very helpful. And if you could comment about your thoughts on broader capital allocation and M&A, in particular, for the core CFS segment once the food processing split is done? Timothy FitzGerald: Yes. Tami, this is Tim. So reason for the split, obviously, as we said, there's quite a bit of M&A opportunity within Food Processing. Within Commercial Foodservice, I mean, I think the focus is going to continue to be on share repurchases, certainly in the near term. We're really focused on organic growth. We've made significant initiatives or investments over the last several years on innovation. Go-to-market strategies, a lot of that we're starting to see play out now, and we also expect it to take increasing traction as we go through next year. So that's really going to continue to be the focus. There is opportunities there. So I mean I think as you kind of look over the last few years, we focused on beverage, and we focused on technology, automation, IoT and areas like that. So -- there continues to be opportunities, so we'll be focused and kind of targeted in that -- those areas, which we think will help us accelerate some of the organic growth, but largely, the focus is going to be on organic growth kind of immediately after the separation. Operator: [Operator Instructions] The next question comes from Brian McNamara with Canaccord Genuity. Brian McNamara: First on Commercial Foodservice. Great to see the segment guided positively to both the quarter and the full year 2026 here. I was wondering if you could peel the onion back another layer a bit. To me, it sounds like this will be predominantly pricing-driven. And if so, what's the expectation to kind of get volumes moving in the right direction again? Timothy FitzGerald: Yes. Certainly, we'll have pricing benefit going into the year, but I don't necessarily think all of our expectation going forward is pricing driven. I mean, I think there are opportunities as the market stabilizes and recovers. I think we're very well positioned in our core cooking segment. And I think as we think about ice and beverage. And as Steve commented, there's really significant market share opportunities. So I mean, I think -- although it's a meaningful part of our platform today, we really are a new player. There's a lot of new products that have been launched. There's a lot that's in the pipeline. So I mean, I think we're anticipating some organic growth even without a big market turn up in the ice and beverage segment. So I think it's kind of a match of some pricing as well as some organic growth opportunities with volume. Steve Spittle: I mean, Brian, I would just add, as we think about the 3 or 4 big buckets of customers to piggyback on Tim's comments is we've commented already on the momentum. We feel like in the U.S. dealer general market institutional and emerging chain business, which I think that continues through the year. The fast casual segment, which I think has outpaced and certainly done better than the QSR segment in the last year or 2, which we're well positioned. We've talked a little bit more about international growth. I think, again, we're well positioned with a lot of the initiatives we've undertaken in the Europe -- in Europe and the Middle East. Asia had a better finish to the year for us, but obviously, still has some, I'll call geopolitical headwinds as we do in Latin America. But still, I think we're well positioned in those markets. So it really does come back to the QSR segment as to where the year potentially does inflect. And I think our approach to the guidance for the year has been to keep a conservative nature based on where that market is today. But also knowing we're well positioned in QSRs, especially when traffic picks up and things turn both with our core business and as we've talked about with the additional products around beverage and ice. Brian McNamara: Great. Just a follow-up on the QSR piece specifically. You had mentioned you're kind of waiting for some of the bigger players to firm up their plans, but they do have the big players that have reported so far, obviously, have CapEx plans, unit growth plans out there. So I'm assuming there's some give and take, I guess, as it relates to the equipment spend. Is that how we should think about it? And when do you -- would you expect clarity on that front? Steve Spittle: So what we're referencing there, Brian, really, I think of 2 things specifically is how do new builds progress throughout the year. And I think it is, yes, they all put out their projections that they're pretty open with us and obviously, what they share themselves. I think the concern there has just been the pushouts we've seen. So I think the firming up is when do we really see those stop being pushed out and actually turn into real builds. I think the bigger thing that we're waiting for is we have a number of exciting initiatives and projects with these big QSRs, again, around beverage, around new products that, again, I think we need to see traffic improve. We need to -- which, I think, trends to CapEx being freed up, which then, I think, greenlights a lot of the projects that we have in the work. So when we talk about, hey, firming up plans back half of the year, it's really those 2 areas, new store builds and just some of these key projects, getting the official green light to move forward. For us, it's not a matter of -- yes, they're moving forward and are we well positioned, but it's just -- it's a timing of when it actually starts to move forward. Operator: [Operator Instructions] The next question comes from Mig Dobre with Baird. Mircea Dobre: Just very quickly here. So the Investor Day on May 12, can you maybe give us a general framework in terms of what we should be expecting? It sounds like you're going to have both Food Processing and Commercial Foodservice present in this event. I'm kind of curious for Commercial Foodservice, maybe more specifically. Strategically, are you contemplating any portfolio simplification, 80/20, those kinds of actions? I mean over the years, you really acquired a lot of different brands? And I don't know if that you're reaching kind of the point of the stage, if you would, where simplification does make some sense. Or is there something else from a structural growth standpoint that we should be prepared to be hearing about? Timothy FitzGerald: Yes. Thanks, Mig. So it's still a ways off. So I think we'll provide a little bit more lead into what to expect on May 12 as we get closer. Certainly, we'll do a deeper dive into kind of the strategic initiatives, our portfolio, some of the operational execution that we've got planned. But certainly, there's a lot of exciting things going on in Commercial. So I mean, I think there's a great story to tell. And as we get closer to May 12 and certainly at May 12, we'll do a deeper dive into it. Yes, it will be both Commercial and Food Processing, presenting kind of adjacent to each other. Operator: The next question comes from Brian McNamara with Canaccord Genuity. Brian McNamara: Just a quick one on Food Processing. Can you remind us how long it typically takes in order to convert to revenues and what the typical range is? It's great to see the quantification on both there. You mentioned most being converted in 2026. Steve Spittle: Yes, Brian, it depends on the type of equipment and the type of solution the customer is buying. But by and large, I would say somewhere between 6 to 12 months. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Tim FitzGerald for any closing remarks. Timothy FitzGerald: No. Thank you, everybody, for joining us today. So we've got an exciting year ahead. Looking forward to speaking to everybody on the next call. I also just mentioned -- as we said on the call, we're going to be at the Baird Food Processing Symposium next week. So looking forward to that. I'll let everybody know that we will be posting some materials publicly as well in conjunction with that to give a little bit more further information on our Food Processing segment. So thank you. Look forward to speaking to everybody next quarter. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Guy Featherstone: Okay. Good morning, everyone. I'm Guy Featherstone, Investor Relations. Before we start, I'd like to remind you that any forward-looking statements or projections made by Hikma during this call are made in good faith based on information currently available and are subject to risks and uncertainties that may cause actual results to differ materially from those projected. For further information, please see the Principal Risks and Uncertainties section in Hikma's annual report. Thank you for joining this Q&A meeting for Hikma's 2025 full year results. Our pre-recorded presentation is available on our website, and this will be a Q&A session. We're joined today by Said Darwazah, CEO; Mazen Darwazah, Executive Vice Chairman and Deputy CEO; Khalid Nabilsi, Deputy CEO, North America and Europe; Hafrun Fridriksdottir, President, U.S. and Global Head of R&D. We're also joined by Jon Kafer, who heads up the U.S. Injectables Commercial Business. And we have Areb Kurdi recently appointed acting CFO; and Susan Ringdal, Investor Relations, also in the room. And with that, I will hand over to Said. Said Darwazah: Thank you very much, and good morning, everybody, and to my old friends, hello again. The decision for me to take over as CEO again was not really a very easy decision, giving up the beach and the sun and the good life was difficult. But I really felt very strongly compelled to do this, okay? I remember before we IPO-ed, we were discussing the ideas of IPOing and not IPOing and my father saying my worry is that one day, the team we lose sight of the long term and start looking at short-term and short-term wins. This is the only thing that I'm worried about. And frankly, in many ways, this is what happened. I think the company had sort of started looking at short-term wins and fixation on modules of the injectable and so on and really lost track. So that's why I felt very, very strongly about coming back again. And as you know also, I had to -- I decided to give up the Chair position to concentrate 100% for the next 2 years on the CEO role. I want to also remind you that last time when I came in, we had a similar situation with Rx business, the generic business was also doing not very well when I had to step in back again. And for a long -- for a period of a year or so, everybody was on us saying get rid of this division, it's weighing you down. Why are you keeping it? But we said we will do what's required. We set reasonable targets of GBP 100 million to GBP 130 million in EBIT, and we said we will fix it. And here we are, a few years later, we're looking at that business, and it has margins of close to 20% and EBIT of GBP 200 million or so. So we've done this before. And we feel -- I feel, we feel that we know exactly what needs to be done. It really is not a complicated formula. It's a simple formula. You need to do the right investments. You need to get the right people, the right talent, and take quick decisions. So as I've said this morning, my focus is very clear. So number one, you want stability. We want this 2 years where people can relax and focus on what is required for them rather than worry who is going to come in and what's going to happen. So we're reassuring our people, our stakeholders, our investors. This is -- Hikma is a very, very strong company, and we have a slide that shows the CAGR of the last 5-year growth. This company has consistently delivered growth and quite good growth. Also, I'd like to remind you all that we have EBITDA margins of 25% while many of our competitors are striving to get to 22%. The second thing is agility. We want to implement a structure of quick decision-making and to allow people across the Board to take these decisions. We don't want the decision-making to be centralized with one or a few people or the executive committee. Rather, we need to empower people across the Board to take decisions. I've always said companies that empower their youngsters, their under 40 crowd are the ones that will be here tomorrow, those that do not will disappear. So we'll be focusing on empowering everybody across the business so that we take these decisions. And the investment, we have to accelerate the investment. We have to take the investments that we need to do. So one of the first things we've done is we've taken the R&D budget out of the segment. So the segment heads cannot play with R&D budget to achieve their targets. It's now a corporate decision. We have a budget for it, which is an aggressive budget. We have spent last year building the team. As you remember, we acquired a great team in Croatia. Hafrun joined the company 2 years ago now and Hafrun has a long, long track record in R&D, and she is directly in charge of the R&D team. So the other things we need to do is hire the right people. Again, Jon took over as Commercial Head of North America or U.S. injectables and immediately said we need to hire so many people. Well, what are you doing? We need to -- somebody said, Jon, go ahead and do it, and he has already hired so many people and added to the team. We also hired a supply chain. We have now a fantastic supply chain team in place that will be working to make sure that we don't have bottlenecks across the group. And we are still looking to hire some more people like ahead of CMO. We are interviewing now. We want to hire somebody that has a lot of experience in CMO because we feel very strongly that Hikma is well primed to be a major CMO supplier. And finally, what I started by saying the fear of my father when we went IPO-ed, long-term growth, focus on the long term, and that's what we are doing now. We are focused on the long term. We are doing the right investments. We are adding, as we said, the R&D budget is much higher than it was before. I think we're targeting 5% to 6% now to spend on R&D. Hiring the right people. Giving the plant managers the decision to buy the right equipment when they needed, not waiting for central engineering to come before they can buy that. So all these changes that we are taking, all these changes we are implementing, I think, will be excellent for the future. Then I think we have to look at the structure that we are saying, why this new structure? Some people have said it looks too complex. In my opinion, for me at least and for the team, it's a very simple structure. The MENA team is a fantastic team, strong team that has been doing an excellent job for the last 40 years. Hikma this year was #1 company in MENA among all companies, this is a big deal. And it's the MENA team that has delivered this. Mazen and his team have been doing this. So it was a no-brainer that the injectables and the MENA report to them instead of being a distraction for the whole team. And then Europe and, let's say, North America, U.S.A., they share many plants, and they share the products. So although doing businesses in Europe is different, but it's the same products and the same manufacturing teams. Khalid has been with us for quite some time now, and he has shown to be doing a great job. He understands this business, and we believe that it was time for him to step up and take a strong P&L position. I am very comfortable that he will do a great job. And Hafrun since she joined the company, has just [indiscernible] us all. She has done such an incredible job with Rx, such an incredible job with the R&D team and hiring the right people and getting the right things in place and at some point, we will be sharing a clear R&D strategy for everybody. We are more than comfortable that with the help of Jon and his team and the Rx team that has already proven to be an extremely effective team, we are very confident that this is the right way to go. So we believe it's an extremely good company. We're in a very good position. We have a strong track record, a very strong record of growth. We will be investing heavily in the next 2 years. And we know that we will go back to the -- moving forward, we will go back to much stronger growth than what we have shown. Although what we have done is still quite good. We believe that we will do much better than that. James Gordon: It's James Gordon from Barclays. Maybe first question, just on the organizational structure you mentioned, and I do follow the logic about having people in each geography running the geography. But then at least your reporting, I believe, is still injectables, Rx and branded. So might you actually just change the company and make it by the 3 geographies rather than the 3 types of division. Because ultimately, who is ultimately responsible for injectables now because it seems like lots of people have got responsibilities is the first question, maybe if I break them up. Said Darwazah: Well, we said that for this year and maybe for the foreseeable future, we'll continue to report the injectable results because we didn't want to say, why are you running away from that? But reality from a management point of view, when you look at Europe and the U.S.A., it's 90% of the injectable business. And as I said, it is very different from the MENA injectables. The MENA injectables, there's a lot of products that are in-licensed and brought up from outside while the U.S. is much more focused than Europe on manufacturing. So Khalid, Hafrun, obviously, but ultimately Khalid is in charge of the U.S. and Europe and will be in charge. And of course, myself, I will be working very, very closely with them. So I think this gives us the opportunity to really focus on the business rather than -- I think just forget the tail end, which is the MENA injectables. And as I said, I'm very comfortable that the MENA team will do a much better job than before. So the bulk of the business now, there is a clear focus on it. And we will be reporting geographically as well as segmentally for the foreseeable future. James Gordon: Maybe just the second question would be, so what is the outlook now for injectables as in what's going to make it grow faster? And is the idea that now you've reset the margin to the level of this year, but you'd have a similar growth rate on the top line as you were previously hoping for? Said Darwazah: First of all, as we said, the amount -- the budget for the R&D is much bigger than it was the year before. So actually, if R&D growth was similar to the years before, then the results will be much better. But we said, no, we have to do this. We have to take this decision now. We have to invest. So again, it's investing. There's really -- it's not -- you have to invest in the right people. And as I said, we have hired many, many people and there's still more to come. The R&D team, and we will be sharing more about R&D moving forward. And we believe that Hikma is extremely well positioned for CMO business. And we are in the process of recruiting a Head of CMO in addition to the CMO team we have. So all these things will be working together to achieve, let me say, growth in the midterm to long term for the injectables. Khalid Nabilsi: So James, just on the outlook for the injectable business. We know that this is not something that we would like to be growing. It's we have challenges at '25, and this is something that we know that and '26. There are different reasons for this. It's -- as I said in my presentation, is reduced CMO. One of our main customers want to do a domestic manufacturing in the U.S. So we have a reduced contribution from that. This is something that we cannot offer until we have Xellia up and running in 2028. We are less optimistic on, let's say, the biosimilar that we have, although it's a very small part of our business and liraglutide. And one of the product launches -- main product launches has been pushed. So of course, going forward, we are going to go back to return to very good growth for the injectable on top line and in terms of the EBIT. So any company, any business goes into challenges, '25, '26 was a challenging year. I think from here, from '27, we are going to see a different outlook for the injectable business, as we used to see in the past. Susan Ringdal: And just some examples. So of course, TYZAVAN is an important product for us. That will drive some of the growth that we achieved this year, but we expect that to do even better in 2027. So that will be an important growth driver. Some of the products that we expected to launch this year push to next year. So that will be, again, another growth driver for '27. We've got, of course, continued expansion in Europe. That's been an important growth driver for us. That will continue. MENA has been also a good business. We signed 6 new biosimilars in MENA. So there is -- there are a lot of opportunities to grow, but I think as Khalid said, this is sort of a reset. Said Darwazah: So the challenge is, obviously, as you right point out with the injectables and what we're doing with it. But I'd also like to remind everybody, this is a much bigger company than just the injectables, right? We have 3 very strong divisions. Two of them that are doing extremely well. The MENA is growing at a very fast rate with very good margins. And the Rx as I said, has done much better than anybody anticipated 2 years ago, if I told you we'd be doing 20% margins and this kind of EBITDA, people -- why did we keep on pushing you to sell it? So we -- there will be a lot of focus. There will be a lot of investment and we feel very, very strongly that in the medium to long term, this business will -- it is already, in my opinion, one of the best businesses. If you compare our margins to our competitors yesterday who upgraded from 18% to 19%. We are way ahead of them. Again, other competitors saying we want to be at 22% EBITDA, we are at 25% EBITDA. So this is a very good business. It's driven by 3 engines. And as we said, the focus is on long-term cost and total profitability growth in earnings per share rather than just focus on -- keep on focusing. And I think this is what really hurt us the last few years. The over focus on the margins of the injectables where people are saying, don't sell anything less than 32, don't accept anything. If I can get $300 million worth of orders opportunity and 28%, I shouldn't take them. Of course, we need. So that's why the focus will be on top line growth and bottom line growth rather than margin. Hafrun Fridriksdottir: If I may add a little bit about that, how we are going to grow the injectable business moving forward. I don't know if you had the opportunity to listen to our presentation this morning. But I mean we talked -- at least talked a lot about the ready-to-use platform. And even though, of course, the first product is TYZAVAN, as Susan mentioned, but we have multiple others in the pipeline and -- but those products that will be launched probably in early '28. So do you not see short-term, I mean, growth because of those products, but we have multiple products in the pipeline and I talked about, I think, 15 ready-to-use product in our pipeline. And so of course, moving forward, we will see the revenue and we will see the growth from this platform, which I'm very excited about. So I just to revisit, I think it's a really good business. Zain Ebrahim: Zain Ebrahim, JPMorgan. So the first question would just be a follow-up on the previous answer in terms of what you described on the CMO challenges from one of your customers wanting to switch the manufacturing from Europe to the U.S. So how do you see that risk going forward for the rest of the injectables CMO business? And just broadly, how do you see outlook for CMO overall from here, I know you've got the -- there's the small molecule contract in Rx contributing this year, ramping next year. So just to remind us how you're seeing that outlook? Said Darwazah: Well, the first thing we did, we looked at our plants in the U.S.A., for instance, we looked at the Cherry Hill plant. And see -- so what were the bottlenecks, what was needed. Many times, it's a small thing that you need to do to increase capacity. So working on increasing capacity significantly at Cherry Hill and that will help us with the CMO business as more and more companies want to manufacture in the U.S.A. Of course, we'll talk about the Rx later CMO because they already have a lot of orders in business. And then we acquired the Bedford site specifically for this. And it's a big site. It has a lot of equipment in it. It needs to be reengineered in a more modern way. We're working on that diligently, sometimes new lines take a bit long to get -- you need to order them it takes 1.5 years to 2 years for the lines to be again. After they come in, you have to install, qualify and get FDA approval. So it's a bit of a long process, long-winded. That's why we're guiding to '28. But with most of the CMO, the big business you get the order and the expectation as you deliver 2 to 3 years down the road. They don't expect to deliver tomorrow because it's a process of moving products and so on. So that's why we feel very strongly about hiring ahead of CMO, somebody that has already strong experience, has well good knowledge of the industry and has good contacts with the companies that want to have CMO business. So we're very confident like in '28 and forward for the injectables will have a very strong CMO business. For now, we will be showing that the Rx already has very strong CMO business. So overall, it will become a quite significant part of our business, let's say, 3 years down the road. Zain Ebrahim: Very helpful. And second question is on R&D. So an increase of 5% to 6% of group sales. Are you now comfortable with that as a ratio in terms of thinking about that level going forward? And I... Said Darwazah: You ask me or you ask her? If you ask her, she says, no, we need more. If you ask me, it's enough. Zain Ebrahim: And when do we say pay off from those investments? Because I know you mentioned '28 for the ready-to-use but you started something increase in R&D last year. So just to... Hafrun Fridriksdottir: Yes, of course, we slightly increased the investment in R&D last year, but that was I mean, really a slight increase. But we also reorganized R&D organization. So now we have a global R&D organization. And we also moved activity from U.S. into Croatia. So of course, that is clearly helping significantly on the injectable business, but we also have a very strong team focusing on inhalation, semisolid and liquids in Columbus in Ohio and then, of course, our team in Jordan is focusing on solid oral. So I strongly believe that we have the right team in place. Would always like more money for R&D, yes, of course, I would, so Said is correct there, but I feel very confident with 5% to 6% of the revenue in spent of R&D. I think that's just in line with what our competitors are doing. Khalid Nabilsi: And we are going to see these returns coming into the coming years. Some of it will come in '27, some of it to come in '28 or '29 onwards. Hafrun Fridriksdottir: Yes. Of course. R&D takes time, everyone knows that. Beatrice Fairbairn: Beatrice Fairbairn at Berenberg. You discussed the focus on long-term growth. I mean one of the targets out there is this kind of GBP 5 billion 2030 revenue target. My question really was does it still stand? And would you be able to give some color in terms of what is needed to get there and how that looks like over the coming years? And then just on your delay systems timing of some of the product launches and injectables, do you feel like the new time line that you've got are realistic and kind of how confident you that you're going to be able to launch these products on time. Said Darwazah: Why don't you take this first part about the GBP 5 billion? Susan Ringdal: Yes. So the GBP 5 billion, when we set the GBP 5 billion target, we said that this was -- it was an aspirational target, but we felt that it was very achievable with the business plan that we had and our business model, which has been to do bolt-on acquisitions as a matter, of course. So we still do feel comfortable that GBP 5 billion is within reach. It is -- we have -- we definitely see an acceleration of growth after 2026. And I think today, it would require a bit of inorganic growth, but yes, it is very much within the reach. Khalid Nabilsi: [indiscernible] organic growth. It's not like we are talking about transformation, like more of a product acquisition. So we are very close to the aspirational target of GBP 5 billion. And if you look into the 3 businesses, like the branded is delivering very good growth and acceleration. If you look into the past, it was 5%, 6%. Today, we are guiding more at 7% to 8%. This is driving growth, high-value products that we are getting into the MENA region. If you look into the number of licensing deals that we've been signing over the past 5 years has increased significantly. And now we are becoming more and more the partner of choice. So this is going to be a key driver. Rx has grown with the CMO business. We are going to see more contribution coming in '27, '28, '29. So this is as well going to drive the growth. And injectable, of course, with all these RTUs and the products that we are working on, it's going to accelerate the growth for the injectable business. Remember, the injectable business has a large portfolio. So there will be always opportunities. There will always be shortages. Europe, we are seeing a very good growth. Great potential, especially that the market is lacking products. So we are being the, I would say, most reliable hospital supplier in Europe now. All hospitals are coming to us and governments coming to us, say, we want this product. The agility that we have in Europe, providing the products on time is differentiating us versus others. And this is why we've seen 23% growth this year in the injectable in Europe. Same for MENA. It's not just like the 6 biosimilar. We have many products that we have that we are going to launch in MENA for biosimilars. So this is going to be the growth driver and we are very confident of our ability to continue growing the business. As said, '25, '26 might look challenging for the business, but this is a business cycle. But from here, we are going to continue growing. Said Darwazah: The short answer is yes, the GBP 5 billion is very achievable. We are extremely confident in our '26 guidance. And yes, the injectable launches that we'll be seeing in '28 and further will deliver the kind of growth that we need to be there. Victor Floch: Victor Floch, BNP Paribas. Maybe just 1 question on Rx. That one seems to be -- to go pretty well. And it looks like you have like even some room in terms of margin. You've been investing even like more than what you're using -- actively investing for injectables. So can you discuss like the different moving parts this year? I mean the base business, I mean, I think there might be some competition on certain products. On the other -- on the flip side, you have some service payment from your CMO partner. And are you expecting at some point to be able to update the market on was that CMO? What kind of -- what is the product? And what are the economics behind that? I mean, just have a bit more visibility on the CMO because it's a huge moving plant for Rx for sure. Hafrun Fridriksdottir: Yes. So this year, the revenue from the CMO business will probably be around 10% of our business, but our target in 2030 is up to 20%, at least my target. So we are not going to share the name of our customers, but we are working with not only 1 big customer, but actually multiple and some of them were talking about contracts which have not been signed but are in negotiation phase and we will be signing within the next, let's say, next few months. So that's going very well. And you also asked about the base business. For example, a product like Advil has been doing very well last year, and we expect the same this year. Fluticasone, we are the biggest volume driver in U.S. for fluticasone, as an example or for nasals, so -- and that is a business which continues to do very well. And all our base business has been doing really well last year, and we haven't really seen any change at least for the first 2 months of the year. So it's quite -- it's more stable than maybe most people believe it is. Susan Ringdal: And I can just remind people that we have Jon who's the Commercial Head of Injectables on the line; and Mazen, Deputy CEO for MENA. So don't hesitate to address questions to them as well. Hafrun Fridriksdottir: Certainly for Jon. You should really ask him questions now because he woke up very early for you. Christian Glennie: Christian Glennie, Stifel. Again, not to belabor the point, but on injectables and the margin, just to be clear around it's been quite a dramatic shift, right, from mid-30s to high 20s now. There isn't something sort of -- well, combination, one is you talked about the extra investments needed implication potentially maybe that you were underinvested before to some extent. So the margin was sort of where it was at -- and/or is that fair? And then the second part is, is there something more structural around the market from a sort of pricing and competition issue that means margin has -- the direction of travel has gone. Said Darwazah: Okay. So first one, as I said, I mean, clearly, we said we're taking the R&D budgets out of the divisions and putting as a corporate. So clearly indicating that at some point, division heads were sort of reducing R&D expenditure to get higher margins. So by taking that out and having it as a corporate with a fixed number that we agree on, I think that will -- there will be lower margins a little bit to start with. But we are very confident that with the investments they are making in R&D, the new pipeline, the expansion in the manufacturing and the CMO that we will be achieving higher margins mid- to long-term. Okay. The second question was? Christian Glennie: Structural something in the market because you've got [indiscernible]. Said Darwazah: There's always competition. There's always people coming in. You lose a few products. We lost 2 or 3 products that not lost. We have competition coming in 2 or 3 products that we're doing extremely well. And that's why when you have such a well-diversified portfolio and you have so many products, other products can pick up and the new launches can pick up. So the market has always been competitive. It's always been competition is coming in. Do we feel that there's more competition in some areas, yes, in some areas, no. But we are confident that with all the changes we're making, we are fine. Khalid Nabilsi: It's not like structural change in the market. It's the pricing is around, let's say, if we exclude the 2 top products that we have, it's 4% or almost less. So low to mid-single digit plus erosion that we've seen in this business. So nothing is abnormal. Hafrun Fridriksdottir: And maybe if I may add. So I think over the last few years, the supply from third party has increased significantly. And third party, of course, is not as profitable as if you're making the product internally. So I think it has been going from 20% to 30% over the last few years. So that's, of course, affecting the profitability. But also, I mean, there are different part of the business, which has higher profit than other parts. Of course, while you are building the business -- injectable business in MENA, which is less profitable than the business in U.S. and in Europe, of course, that will affect the overall injectable profitability, and that business has clearly been growing as well. So those are at least 2 reasons in addition to... Khalid Nabilsi: If you exclude the MENA margins, both for the Europe and North America injectable business, the margin is not 30%. Christian Glennie: Maybe the natural follow-up, I know you're probably reluctant to guide beyond kind of '26, but just to get a sense for that margin and is '27 to '28 the floor? And then maybe that's similar until you really get into Xellia and then margins to improve? Or is this... Said Darwazah: And again, we're saying we're very comfortable that '28 and further margins improve. I think once we assess everything and we have the plan, the right plan in place. Are we going to be giving... Khalid Nabilsi: May I take this one. In a way we'll be guided to '27, '28. And I said in my presentation this morning, you can assume this is for the coming few years, but it's not like if we have an opportunity that is top 30, we are going to say no to it. So we don't want to be strictly held on these margins because we are going to focus on growing the profits and the EPS rather than just focusing on the margin, as I mentioned. So you can't consider like this '27 or '28 to the next 3 years. But what has changed, just repeating to what I said earlier this morning. From the November, when we said the floor is 30% is literally increased investments in R&D. We are increasing GBP 15 million this year versus last year in injectable. You look into the investments that we are having, as I mentioned, fitting in sales and marketing, so -- and the CMO. This is why we are going down like 2 to 3 percentage points. It's not something structural in the business, but it's more investing for the future. Guy Featherstone: Just going to jump to the line for a quick question. Operator: [Operator Instructions] Our first question comes from the line of Kane Slutzkin of Deutsche Bank -- Deutsche Numis. Kane Slutzkin: Just -- sorry, could you just clarify, I missed the last point on the higher R&D in injectables. But could you just sort of clarify sort of lower guide as sort of those moving factors between higher R&D versus the lower CMO work like in terms of which has moved the needle more there? I assume it's the R&D, but if you could just clarify that. And then just -- you're obviously spending some time doing the strategic review. I'm just wondering at what point do you think you will be able to sort of reinstate a midterm or a new midterm guide? And then just finally, on the buyback, just I guess, why has it sort of taken so long to do it? And could we see a more permanent feature going forward if shares sort of remain where they are? Hafrun Fridriksdottir: I think I can maybe take the R&D question. If I could hear him correctly. I think he was asking for the spending for R&D and the overall increase in spending for R&D this year compared to last year is around $45 million year-over-year. I think that was your question, but I'm not really. Guy Featherstone: Kane, could you just repeat your last question? Kane Slutzkin: Yes, I was just wondering sort of in that lower guide, how much of it is sort of the lower CMO work you referred to versus R&D in terms of what's impacting the guide down? Guy Featherstone: Injectables margin guide, how much is CMO versus [indiscernible]. Susan Ringdal: I think, Kane, it's more evenly split across R&D, sales and marketing and CMO. I would say those are the 3 biggest factors there of more or less the same magnitude. Said Darwazah: And the buyback, I agree with you, is taking too long, but we have taken the decision to do that GBP 250 million this year. Susan Ringdal: In terms of the medium-term guide, I think we'll get back to you on that. We know that it's important for the market. We want to get it right. And so yes, I think we'll come back to you. Operator: Thank you. There are no further questions. I'd now like to hand the call back to the Hikma team. Unknown Analyst: Julie Simmons, Panmure Liberum. Just on a more product-specific basis. I'm wondering with TYZAVAN. Clearly, you've just launched it. It feels like the sort of momentum is pushed out a little bit to '27. Are you noticing anything from the first sales in the market there? Unknown Executive: This is Jon. Said Darwazah: You're on mute Jon. Unknown Executive: No, I am not on mute. Okay, great. Good morning, everybody. So we are an active launch mode for TYZAVAN. Let me just frame the market because this is important to understand because the RTU bag platform will follow a similar pattern. Vancomycin is a widely used product within the U.S., there's about 41 million grams of the product used in multiple forms from a very lyophilized powder to a frozen bag to obviously our ready-to-use bag. What we are selling is a system and a process change, which in large hospital systems and large hospital groups that by default, TYZAVAN would become the vancomycin of choice. So it is really more of a process change. Now to put it in perspective, we have already converted 13% of the entire gram market with our existing vancomycin ready-to-use bag. So we have a platform. We will expand that. Within that network, there's about 22,000 sites of care that use vancomycin within the U.S., all forms, long-term care, hospitals and such. Our existing customer base on the existing bag product represents about 15% of those sites. So there is a very large universe of hospitals and health systems that have not used our historical bag. So there is a large opportunity there. So you have to think in terms of it as a process progression. So we're going to expand our existing base by expanding the usage of the product without restriction, and then we're also penetrating the customer bases that have been -- that have not used our bag in the past. So yes, this is going to be a progression into the back half of the year. But the momentum that we're seeing right now is very active and very encouraging. Unknown Analyst: And just following up on that from a sort of RTU perspective longer term. Do you think once a site has switched over to 1 RTU, it makes it easier to switching to another for a different product? Unknown Executive: Yes. And that's exactly why the way we're approaching this first one is extremely important. We want to make sure we have the processes in place. Hospitals and groups, they have to reprogram medical -- electronic medical record systems, infusion pumps, SOPs, ordering patterns, storage platforms because you're bringing in a new form. So as we work with TYZAVAN as the foundational product, we want to make sure we fully integrate it properly. And I do believe that, that will help us going forward with the additional bags as they come to market. Charlie Haywood: Charlie Haywood, Bank of America. First one is just in our models, would it be reasonable to assume that a I guess, at this stage, mid -- 30% midterm injectable margin is off the table, given focus on profitable growth. And then I'll get to the second one in a sec. Susan Ringdal: Yes. Charlie Haywood: Okay. And then the second one is just on the midterm guide, which obviously since giving you, we've seen 2 cuts too. So first is, I guess, talk through the decision to issue the midterm guide if there were some underlying concerns on the spending, the short-term focus to give that? And then secondly, sort of how can you reassure us and the market that this is sort of the last of the big cuts and we're back to something profitable. We can be returning some in growth from here. Said Darwazah: Again, as I said before, it's not a complicated formula. You do -- you have the right people. You have the right equipment, you have the right facilities, you have the right R&D. All of these things, when you invest properly, you take timely decisions to take -- to move the business forward. This is a formula for success, and we've got this formula for 40 years. So we sort of slowed down decision-making. It became too centralized. We were not investing properly in the right places, and now we're reversing that. So that's why we feel very confident that midterm, we will deliver what we're talking about. Khalid Nabilsi: And this is why, as well, '27 is going to be a year where we -- '27 is going to be as well a year that we'll see a growth. So it's the bottom on the injectable. And from here, we are going to grow the top line and in bottom line. In addition to the other 2 businesses, they continue to grow, as I said earlier. Charlie Haywood: Just a third one if I may. You talked to obviously heavy investment in the next 2 years. How confident are you that this is a 2-year journey of heavy investment, and that won't spill into 3 or 4 as the investments start continuing? Said Darwazah: The investment is -- it's not a short term. It will continue to be, but we will see that -- we'll start seeing the results of what we're doing now, 3 years down the road and will it further, but when we look at our 5-year CapEx, our 5-year R&D orders, all this will continue to grow. Khalid Nabilsi: Maybe just to add to what Said just mentioned. In terms of the R&D, it takes time to see results, as Hafrun said, in terms of sales and marketing, these are quick wins. So you invest today, it's not like going to take so much time till you get the returns. And this is what Jon is focusing on. So you will have these investments and at the same time, give you an example on the supply chain, having somebody now focusing on the global supply chain would reduce our inventory levels will reduce the slow-moving items, which it was very big this year, failure to supply, so the immediate impact will be significant improvement to margins. So this is why we are saying that we are moving in the right direction. And I think the results of this will come in the coming years, and we are confident about our medium-term outlook. Unknown Analyst: Christopher Richardson from Jefferies. A couple if I may. You lowered CDMO or CMO expectations, sorry, for the year as some customers require domestic production, which you said you can't offer. I was just wondering if there are any reasons for that. Khalid Nabilsi: It's -- as we said, in Xellia, our Bedford acquisition is going to be up and running towards 2028. So it's the same machinery, the same lines. It's replicate to what we have in Portugal. Now we couldn't offer because we don't have that facility up and running. So once we have that facility up and running, towards the end of '27, early '28, we'll be able to offer. Said Darwazah: And as I said, again, the Cherry Hill plant and the other plants we looked at optimizing the capacity there looking at the bottlenecks, bringing in the lines that are required to up the manufacturing capacity. Hafrun Fridriksdottir: And if I can add something about the Rx business because we are only talking about injectables and as I mentioned, I mean, we have this huge, I mean, of course, manufacturing site in Ohio, both for solid orals, for nasals, for inhalations. And that site has been getting a lot of attraction over the last year or so since all this discussion about domestic manufacturing started to happen in U.S. So there's a lot of interest in us in producing products for different clients. So I think this is going to be a big opportunity for us moving forward, both in the Rx and also in the injectable business. Said Darwazah: Many times clients come in, let's say, for the solid oil, then they feel you're very comfortable with you and they open up and move injectables and other things to for you. Unknown Analyst: Great. And just the guide cut in November was due to equipment delays. I was just wondering what the situation is now and what caused you to walk away from '27 and whether the timing for Bedford has changed at all? Khalid Nabilsi: There's no change to the guide that we had in late November. So all what we said that we are going to ramp up -- start ramping up towards the end of '27 and the commercialization will start '28. So no change to our plans. Unknown Analyst: Great. And maybe just a quick follow-on. I was wondering if you could comment on the oral generics pipeline and the margins in U.S. Rx excluding any Xyrem impact. Hafrun Fridriksdottir: Excluding, sorry? Unknown Analyst: The impact of Xyrem? Hafrun Fridriksdottir: Sodium oxybate. Okay. So last year, sodium oxybate was dragging down our profitability so the rest of the business was actually compensating for the low profit of that product. We managed to negotiate a better deal, at least for this year and for next year. So we will have slightly better profit on that product. But -- so it will not be dragging down the overall profit for the Rx business. Is it helping this year? It potentially will. Said Darwazah: Zain, some more. Zain Ebrahim: Zain Ebrahim from JPMorgan. Thanks for the follow-up. So on CMO, you mentioned you're looking for a new head of CMO. So just the characteristics you're looking for in the Head of CMO in terms of the type of -- the kind of the profile that you're looking at and when we could expect the appointment? And does this mark a potential shift to making CMO like a fourth division that we source also about in the past in terms of strategically. So integrating the Rx and injectable team. Said Darwazah: Historically, we used to the CMO as a fill-up. So we focus -- this is extra capacity, let's get products to fill it up. And then when we were approached or we found a client to come in and use the Rx side it was more of a long-term agreement. So long-term agreements require dedicated facilities, they require dedicated lines and sometimes dedicated teams, and it's a lot of investment to do that. And it takes time to come in and -- but it's a long term. So this is the right -- this is what we want to do, not just bringing in short-term fixes. So to do that, you need somebody that has been doing that for a very long time that knows which companies require CMO business. And also, I think more importantly, when you do the contract, when you're looking at, let's say, 5 billion tablets or something, $0.05 per tablet extra gives you $50 million in profitability. So having the right negotiation skills, the right contract skills all these things. So this is what we're looking at. Now we have this but we think that getting a very senior person that has done this successfully is the right way to go. And as I said, we are interviewing, there are several people out there that are available with this kind of talent. And yes, it could be a fourth division very much so. Zain Ebrahim: Just a question on the CMO headwind for '26. Is that -- was that 1 customer you lost, that's gone from Europe to U.S. I guess how is that conversation and how are conversations with the remaining customers to ensure that won't happen with someone else before the '28? Khalid Nabilsi: It was 1 of our customers. It's not like they are shying away completely. They still have business with us, but they decided to -- some of their manufacturing for their own benefits. They wanted to have it in the U.S. So it's not like the business is going down. It's to replace, it's going to take some time to get a new customer, but we are confident of our ability to continue growing the CMO business. So it's a matter of time. But when we have the Xellia, of course, up and running, and we will have much more clients, much more capacity to offer as well. Said Darwazah: There's a lot of demand for U.S. manufacturing and I think the Bedford acquisition and what we're doing now although it's going to take a little time. But like I said, if you want to get a client that will work with you long term, anyway, it will take 2 years before you can move in the product. So now is the right time to get the clients and get the orders so you can put the processes in and do the submissions and all these things, the tech transfers and so on and so by '28 and more, you'll be ready to launch. So it's the demand is there, and we are talking to a lot of companies. Hafrun Fridriksdottir: So what they are saying is that if we would have that capacity in U.S. to take on those products in U.S., we could probably potentially have kept that customer. So -- but we didn't have the capacity at that time. So I think that's -- but now we are building that. So moving forward, we are. Susan Ringdal: And if you remember as well, when we did this acquisition and we took the Bedford site on, it was because we were reasonably capacity constrained in our existing facilities. And so we weren't really very actively selling CMO business at the moment because we're pretty much and we don't have a lot of spare capacity for CMO without the Bedford site. Christian Glennie: Christian Glennie. Thanks for the follow-up. Just maybe on Rx and just a couple of ones there on the I think you've alluded to a couple of other things around the moving -- the margin to 20% just to clarify the step-up this year to 20%? And is the 20%, again, another kind of the base for the business going forward, do you think? And then just finally on nasal epinephrine, what's the update there? And obviously, it's been delayed. So what's the expectation around that? I think it had been seen as potentially quite a significant product for you. So just an update there. Hafrun Fridriksdottir: So maybe first on the margin. Is 20% the best we can do? No, I think probably you will probably see some improvement moving forward as, I mean, in '27, even '28 as well. I'm not going to give you any numbers, but I think -- I don't think that's necessarily the top of the pie. With regards to epinephrine as I think we -- I talked about last time when they had this conversation, we -- there were some requirements from FDA to run some additional study. That study is ongoing and we are planning to submit in U.S. in, let's say, after a few months now. And we did file a product in U.K. last year, we will be filing in Europe as well. And we are actively discussing our licensing product in Europe. So that's -- yes, so that's the update. But because we have been working so closely with FDA over the last year or so on the product, I strongly believe that the review time will potentially be shorter than and maybe we thought in the beginning. So it will be an exciting product for us. Said Darwazah: Somebody asked Mazen a question about the MENA. He's bored. James Gordon: James from Barclays again. Just we're talking about margins, and we're talking about generic margin and an injectable margin? Hafrun Fridriksdottir: Rx. Unknown Analyst: Rx, apologies. But then I've also heard effectively, you're going to centralize R&D spend and that we could think of the divisions as being a bit ex R&D. You're going to think about what that ex R&D performance is. So if we're rebuilding our models of today, is that how we should be thinking about Hikma now? And are you going to start giving us then what the margins are for these 3 divisions without R&D and then the central R&D line? What do we do with [indiscernible]? Khalid Nabilsi: Eventually, this year, we did not want to -- too much changes to you -- changing your model. But eventually, next year, you'll start seeing the margin without the R&D. With and without. James Gordon: Bridge this year and then we do a rebuild for our next year. Yes. Susan Ringdal: Mazen, I think it would be great. Maybe I think 1 of the strengths for the business in the MENA in the past year has been all of the partnerships that we've signed. We have excellent momentum in terms of signing new partnerships. Maybe you could just talk a bit about why Hikma seems to be the partner of choice and MENA. Said Darwazah: You are on mute. Mazen, mute. Susan Ringdal: No, he's not. The sound is just very low. Said Darwazah: Looks like he's on mute. Hafrun Fridriksdottir: Luckily, you didn't ask him any questions. Said Darwazah: Okay. Next question till he comes back. Guy Featherstone: [indiscernible] Said for closing remarks at this point. Said Darwazah: Sorry? Khalid Nabilsi: Closing remarks. Said Darwazah: Well, again, it's -- first of all, it's good for me. I'm very happy to be back as CEO, and I'm very happy to give up the Chair position to be able to do this. We have an extremely good team. We work very, very well together. We have, I think, a very, very strong business. As we said, if you look at the last 5-year CAGR and the years before, you've seen how this business continues to grow. We will continue to grow. We are taking quick decisions. We are implementing a culture of quick decision-making. I also talked about the younger people in the company. So for instance, from now on, the executive committees and the leadership council and so on, we will have -- we will mix and match not only beyond seniority, we will be having more younger people join. There is obviously something we didn't talk about, a lot of focus on AI and seeing how AI can be implemented to move the business forward. So all in all, I feel very, very positive about this. This is a strong company that has been growing for a very long term, has very solid foundation as a strong leadership team and a lot of talent across the board. And I'm very confident that we will be delivering the kind of growth that we expect from ourselves and our shareholders expect from us. Thank you. Thank you, everyone. Appreciate you joining us.
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.
Philip White: Good morning, everyone. Welcome to our 12 months unaudited results presentation. As you know, I'm Phil White. I'm Executive Chair of Mobico. Introducing to my colleagues. We've got Brian Egan, who is our CFO; and Paco, who is our COO. You met all 3 of us before at our half year results. And you can remember at that time, we weren't really in the best of places. And at that time, you will recall that only 1 of our 5 divisions, as said, was really making any real money. Today, we are here to talk to you about the stability we brought to the business as well as the momentum being gradually built up as we implement our Simplify for Success program. And apology first. I'm sorry that the results we are presenting today are unaudited. But as you know, we were left without an auditor late in the day last year, but I'm really pleased to say that we now have KPMG on board. That's a big win, believe it or not getting an auditor. I know I'll probably be counseled by our advisers for saying this, but please forgive me, I will only use the word unaudited once because I could use it in every sentence as we go along. So -- and I think the same applies to the word adjusted. So forgive me on that, because I don't want to be here all day, and I'm sure you don't want to be here whole day, too. The reporting schedule again for this year is quite complex, and we'll spend most of 2026, would you believe, in close periods. But Brian will explain the schedule in more detail. As is usual, I'll start with the highlights. Brian will follow on the financial review, and then Paco will do all the operational stuff. But let's start with the highlights first, guys. As you can see, we've delivered significant progress in 2025. Revenue increased by 6% to GBP 2.8 billion, while adjusted operating profit increased by 9% to nearly GBP 200 million. Operationally, we achieved nearly 25 (sic) [ 24 ] billion passenger [ kms ] secured new contracts worth over GBP 1 billion. Our German rail business provided a full service in December, would you believe for the first time in 2 years. And importantly, as you've seen, we've reached an agreement with the 5 German PTAs in North Rhine-Westphalia on the restructuring of all our rail contracts. This derisks the business and ensures that our rail operations are sustainable in the long term. All of this has been achieved while making solid progress on safety across the whole business, something, as you know, is absolutely integral to the way we operate. In business, we all know that not all contracts are perfect, and we've inherited a few difficult ones. But in business, you also have to deal with the unexpected. When this happens, I always believe it's better to be totally transparent and to be very open. Too open, some people will say, but that's my style. In 2025, as you know, we experienced some issues with certain contracts, and we fully recognized this in the year, whilst at the same time, demonstrating the strength of our underlying business. Honestly, we would prefer the scale of the adjusted items to be much smaller, and that certainly is our ambition going forward. Before we dive into the numbers, I just want to remind you of our strategy that we announced at our H1 results for '25. Our road map is unchanged, and we remain focused on stripping away complexity to reveal the high-performing businesses that we know are there. While continuing to cut through the noise, it means really streamlining our management structure and aggressively attacking overheads. We are removing as what I call the corporate glue, the surge of large and listed companies, the duplication of functions and processes going through procedures, waiting for yes and nos. It takes a hell of amount of time to do this and slows us down in the past. By being smarter and integrating our operations where it makes sense, we are becoming a leaner, faster and more effective organization. Our financial health is absolutely paramount. We are very focused on generating cash, improving liquidity and reducing debt. Every pound of CapEx is now being scrutinized to ensure maximum value, and we are leveraging Alsa's operational excellence to unlock synergies group-wide. Through simplifying and strengthening, we are putting the business back on the path to success, just like where we used to be. The financial impact of actions across the group are already visible with operating profit H2 performance of GBP 138 million. And I'm pleased to say that in H2, all our divisions were profitable. In Germany, we've taken the necessary steps to make our rail business sustainable for the long term by eliminating the significant cash flows over the remaining life of the contracts. Once the agreement is formally signed, we'll be able to provide you guys with a more detailed breakdown of the figures. Until then, I would ask you to please bear with us in respect to the amount of detail we can give you today. We're aggressively reducing costs with some savings delivered in '25, and we're announcing today that we will deliver GBP 75 million of cost savings in '26 with an annual run rate of GBP 100 million by the end of the year. We have largely integrated UK Coach into Alsa to create a more robust business, one that will meet the challenges of increased competition. We have also completed our exit of loss-making businesses in NXTS in our Coach division and the loss-making CARTA contract in WeDriveU. Despite the progress to date, we do recognize the challenges ahead. Our priorities for '26 are very clear. As I said, our strategy is indeed simple: simplify, strengthen and succeed. Whilst our operational story today is one of transition, this should not take away the fact that Alsa has delivered another record year. This was driven by growth in Spain and further revenue diversification. In Morocco, we have faced and resolved several challenges, and this has led us to a reduced operating footprint in the country. WeDriveU completed its first year as a stand-alone entity, and we are applying lessons learned there to improve operational and financial performance. We exited early the loss-making CARTA contract at the start of this year, '26. This contract had lost over [ $303 million ] in 2025. You'll see from our RNS that we've provisioned GBP 52 million for WMATA. We aren't waiting for a miracle there. As I said, we want to be open and transparent. We are pursuing legal redress with our client, but we are ensuring this no longer distracts from our profitable core business. In the U.K., the integration of UK Coach into Alsa is now largely complete with operational and functional benefits starting to be seen from the start of this year. And in Bus, preparations continue for franchising. In Germany, as mentioned previously, we are now operating a full service. This result was achieved through our investment in driver training and increased recruitment. It sounds pretty easy, really. It's pretty obvious anyway. Across the group, we have maintained strong momentum, securing 25 new contracts with a total value of GBP 450 million, whilst maintaining a disciplined conversion rate of 28% on new deals. This compared to 23% last year. It's really worth noting that these contracts exclude nonconsolidated stuff like joint ventures and joint operations. Most notably, the project of Qiddiya in Saudi Arabia and the Guadalajara Health bid will bring the total value of new contracts secured in '25 in excess of GBP 1 billion. We also expect to be awarded 2 key contracts in Spain shortly. These include a retention of one of Alsa's largest regional contracts and the expansion of our business in Ibiza, where we'll become the largest operator in the island. A key highlight is the ongoing growth in Alsa passenger volumes, which reached a new milestone of 640 million passengers. This was largely driven by a growth of 10% in Spanish domestic demand, mainly regional and urban resorts. As you can see from the charts, we're witnessing consistent upward growth in passenger numbers across Spain. This isn't merely a seasonal trend. It's a fundamental shift towards public transport and one that is being supported and driven by the Spanish government across the whole country. We do expect this momentum to continue in 2026 as a Spanish single ticket, which offers unlimited travel for a flat monthly rate becomes embedded in consumer behavior. I will now hand over to Brian, who will take you through the numbers in more detail. Brian Egan: Okay. Thank you very much, Phil, for that, and good morning, everyone. Before going into the 2025 figures, I want to mention the 2024 numbers have been restated for a GBP 0.8 of a million EBIT impact in Germany. They also reflect the discontinued operations of NASB and NXTS. This ensures a clean and like-for-like comparison for the performance we are discussing today. Revenue of GBP 2.8 billion represents a 6.2% increase from 2024, driven primarily by Alsa's strong growth at 12.8% and Alsa has now reached GBP 1.5 billion in revenue, reflecting the continued diversification in addition to a great performance in both regional and urban. We've also enjoyed good revenue growth in WeDriveU of 4.7% from new contracts wins both in shuttle and in transit business. Revenue growth helped deliver a 9.3% increase in operating profit, noting second half performance was significantly better at GBP 138 million versus GBP 60 million in the first half. It also, if you look on the very right-hand side, shows the improvement in performance this year versus the same period for last year. This reflects the improved underlying operational performance and the benefit of cost savings arising from the restructuring and efficiency improvements that we've been making. Free cash flow was GBP 77.3 million. This was lower than last year, but that was mainly caused by cash outflows related to the school bus business, which were made prior to its sale in July, so in the first half of the year. Covenant gearing improved by 0.1x from the end of 2024. And again, this has been helped by the proceeds from the school bus sale. In terms of statutory results, operating profit from continuing operations decreased from GBP 12 million to GBP 21.9 million. To understand the bridge between our adjusted statutory operating profit, there are several nonoperating charges that I'll walk you through. There were no charges to the German rail onerous contract provisions in the period. However, we did utilize GBP 56 million in the provision during the year, leaving the remaining provision at GBP 133 million. This provision will be reviewed in detail for the 15-month audited results. So it's reviewed in detail once a year. Moving to WeDriveU. We have made a GBP 52 million onerous contract provision in respect of the WMATA contract. And we are seeking legal address, which Phil as mentioned, for -- in order to recover ongoing losses. We expect the outcome of these legal proceedings to be successful and the contract losses significantly reduced. However, the benefit of this legal settlement is not included in the provision calculation. We are confident of a favorable outcome. However, the process is expected to take 18 to 24 months. It's a long process. In the year, the utilization of the provision was just over GBP 4 million. It's worth also taking a moment to say that we have learned from the WMATA contract. We have overhauled our North American bidding process to include vigorous review procedures. A GBP 38.5 million charge has been recognized in the income statement for retained legal liabilities tied to the open insurance claims from the NASB sale, the school bus sale. The charge stems largely from material adverse developments in more significant individual cases. The year-end cash impact from settled claims was just under GBP 19 million. In Morocco, following a rapid change in local operating environment, we have taken a GBP 27 million charge. This reflects a combination of price concessions we made in Casablanca, which enabled outstanding debts to be settled and also a noncash impairment charge following the abrupt transfer of Marrakech and Tangier contracts in December. To put this adjustment in perspective, on an adjusted basis, Morocco contributed an operating profit of EUR 8 million compared to just under EUR 13 million in 2024. Amortization of intangibles with acquired businesses from continuing operations increased by GBP 2.8 million during the period. This represents the annual charge for intangibles such as acquired brands and customer contracts. This happens every year. Finally, as part of our strategic initiatives to stabilize and improve the group's performance, we invested GBP 35 million on restructuring and streamlining costs and also some transaction fees related to the school bus disposal. The year-end cash impact for restructuring was GBP 29.8 million. Overall, there was a cash outflow due to adjusting items in the period. This figure includes adjusting items for discontinued operations. So now turning to our balance sheet provisions at the bottom of the slide. We currently have GBP 133 million remaining on the German OCP. We will reevaluate the provision for our 15-month audited results as it will be dependent upon the finalization of the legally binding agreements with the PTAs, which are due to be signed before the 30th of June. Of the GBP 47 million remaining provision for WeDriveU, we expect to utilize GBP 8 million in 2026. And again, as I mentioned, this is still subject to the legal process. Moving to our divisional breakdown. Alsa was our most significant growth driver with revenue increasing by just under 13% to reach the GBP 1.5 billion mark. And operating profit increased by 14% to GBP 212 million. As I've already mentioned, underpinning these numbers is strong underlying demand in Spain. Both regional and long-distance sectors are performing well, supported by a better expected trading environment, particularly towards the end of the year. In WeDriveU, revenue increased by just under 5% to GBP 432 million, driven by new contract wins. And as again, as I mentioned, both in shuttle and in transit businesses. However, the full year profit remained below 2024 levels due to challenges with WMATA contract and the CARTA contract, which has now been exited, which Phil mentioned in his presentation. We saw a meaningful change in the second half of the WMATA performance with WeDriveU improving to a GBP 17.6 million profit in H2. This recovery is expected to continue in 2026. On the other hand, the U.K. business continues to face a very challenging environment, but has shown great resilience with revenue decreasing only 4.6% to GBP 587 million despite intense competition in the Coach business. Breaking this down, UK Coach contributed GBP 315 million revenue, while U.K. Bus delivered GBP 272 million. Given the separation of the U.K. Coach as it has moved under Alsa, a profit split isn't available in these financial results. However, a breakdown will be provided in the full 15-month results ending 31st of March. With ongoing competition in key routes, it has been a very difficult year for UK Coach with revenues declining by 6.2%. However, passenger numbers only fell by 3.8%. And on a positive note, the market appears to be growing and growing quite strongly. Within U.K. Bus, revenues rose by 2.4%, and this is largely due to the fare increases that we implemented towards the end of June. The decline in passenger numbers reflects the wider problem right across the industry in the U.K. During the period, we also sold Acocks Green depot and Oak Road. This resulted in a GBP 4.3 million increase in the adjusted operating profit for the 12 months. Overall, the U.K. reported a GBP 4.6 million operating loss, as I said, largely due to the competitive pressures in U.K. Coach, also combined with rise in employer national insurance costs. We expect to see this performance improve as we move into 2026, along with the benefits of integration into Alsa. In Germany, revenue decreased by 1.6% (sic) [ 1.4% ] to GBP 253 million. And whilst the -- the adjusted operating profit increased to GBP 15.6 million due to improved operational performance, and this actually was very significant. We recovered from the loss to a profit-making position. The in-year losses on the RRX contract were GBP 56 million, and this is a cash outflow, which -- this is the significance of the German contracts that we're in the process of finalizing. Central Function costs increased by GBP 2.3 million, principally due to higher costs in relation to professional services and include a higher audit fee. However, this sort of hides the underlying cost savings that have been made during the year. Looking forward to 2026, we expect Alsa to maintain current levels of performance. For WeDriveU, we expect continued underlying recovery, whilst we continue to redress WMATA through the legal process. By integrating UK Coach into Alsa, the business is becoming more competitive. Nevertheless, we expect 2026 to be a challenging year. U.K. Bus is expected to be at breakeven, subject to finalization of funding discussions with Transport for the West Midlands. And in Germany, our rail business is benefiting from operational improvements and will be derisked once we have the PTA agreement signed by the 30th of June. By the way, that's important to mention that the revised contracts will be backdated and effective from the 1st of January 2026. In respect of Central Functions, we expect further cost reductions. Moving to our cash flow performance for the period. The most important point to highlight is the impact of school bus, which is shown in the middle column. In 2025, school bus was a significant drag on group liquidity prior to its disposal. The school bus cash outflow was driven by substantial investment in CapEx and working capital requirements that were committed in 2024. Excluding school bus, the group free cash flow was GBP 76 million. Key year-on-year movements include a working capital net inflow due to the timing of cash collections in Alsa. The increase in tax is due to a one-off refund because of the change in tax law, which significantly reduced our cash tax payments in 2024. And we are looking -- we have an ongoing project to look at managing our tax burden. As one of the problems we have is that our debt is sitting in the U.K., most of our profits are in Spain, and therefore, we don't have an offset for interest. We are targeting a total CapEx of GBP 120 million for 2026. This reflects our commitment to disciplined spending, maximizing cash conversion as we move forward. And Phil has mentioned this in his presentation and Phil has -- or Paco is also going to mention there is very, very strict CapEx control now in the organization. However, despite the strong CapEx control, we are able to pursue new growth opportunities, focusing on CapEx-light contracts. In terms of net debt, we saw a GBP 286 million inflow, reflecting the cash proceeds from the school bus disposal. We recorded a cash outflow of GBP 118 million related to items excluded from our adjusted results, and I talked through these earlier in the presentation. It should be noted that we have paid the hybrid on coupon for 2025, which is the last payment at GBP 21 million. The next payment due is GBP 40 million, which is in February 2027. There was a GBP 9.6 million outflow from other items, primarily driven by exchange movements and derivative settlements. This is partly offset by the sale of an investment. When we pull all of this together, the group achieved net -- total net funds inflow of GBP 127 million for the period. The funds inflow was offset -- has offset the loss of school bus EBITDA, resulting in a covenant gearing improving to 2.7x. I should mention that the covenant gearing for the 15 months would be dependent on a number of factors, including the German rail agreement, which has quite complicated accounting implications. However, we can confirm that we will be within the covenant requirement. In terms of debt maturity, at the 31st of December 2025, the RCFs were all undrawn, and we had nearly EUR 900 million in total between cash and undrawn committed facilities available to us. The majority of our RCF will only expire in 2029. Notably, the interest rates on our instruments are relatively attractive, and we have significantly reduced our exposure to interest rate volatility with over 90% of our debt now at fixed rates, in fact, 94%. We have sufficient liquidity to meet our debt maturities arising in 2027. And then finally, just to talk through -- sorry, almost finally, I want to briefly walk through our financial calendar for 2026. As you may have noted, we have adjusted our 2025 and '26 accounting periods following the appointment of KPMG as our new auditor, which took place in November. These changes are designed to provide KPMG with sufficient time to complete their audit work. However, we do plan to return to a December 31 year-end in 2026. Our current financial year will be for a period of 15 months to the 31st of March 2026, and we expect to release our audited results in late June, early July. Looking into the second half, we will report 6-month interim results for the period ending September 30 and expect to release those in late November. And finally, to bring us back into alignment with the standard calendar year, the final accounting period for 2026 will be a shortened 9-month period ending the 31st of December '26. Results for the period are expected to be released in March of 2027, making a return to a normal 12-month December year-end. In terms of financial imperatives, the focus remains on ensuring our strong top line growth translates to sustainable value creation. As such, we've implemented a disciplined approach to cost control. Specifically, we are implementing controls over capital expenditure and working capital to maximize cash generation and reduce debt. As Phil mentioned, the mission is simply to succeed -- to simplify to succeed. Behind this, we have our Simplify for Success cost program, which is currently targeting GBP 75 million of cost savings in 2026 with a run rate of GBP 100 million from the end of 2026. We are targeting an adjusted operating profit of GBP 195 million to GBP 210 million in 2026. I note, and this is quite important that this does not include the positive impact of the revised contract changes from the German rail businesses. Once these agreements become legally binding, which we expect will happen by 30th of June of this year, we will update our guidance. In summary, Alsa remains an engine of growth. WeDriveU is on a recovery path, and our U.K. and German businesses are leaner and more resilient with GBP 75 million in targeted savings and an operating profit guidance of GBP 195 million to GBP 210 million and positive net cash in 2026. I will now hand over to Paco, who will go through the operational review. Francisco Iglesias: Hello. Good morning. Thank you, Brian. Thank you, Phil. Thank you all of you for being here. For me, it's the first time I'm in the floor, and it's an honor to share some words with you. Just to -- as you have noticed, I'm Spanish, but you probably don't know is I'm from the South of Spain, that means that my accent is a little bit poor. So apologies for that, but I hope you can understand me better. I'll try to give you a more view on the operational side after all the numbers that Brian and the strategy from Phil, I would like to say something a little bit different on that well, this is Alsa, you know that I know Alsa a little bit. I've been working for Alsa for 34 years, and I'm very proud in the last 10 years as CEO. But I would like to explain what is behind the figures of Alsa. And I think it's important to know what's the portfolio of the business that Alsa maintains at the moment that you probably know that Long Haul is like a jewel of the crowd, long haul is 17% of the company. It's just 17%. Where we are growing more at the moment, what we are growing a lot in international that was almost 0, 5 years ago. because Morocco is there. And also in the diversification area that we are also improving. And the largest part of the company right now is the regional one that is also under a concession under franchisees process. But if you see the figures, we have managed to keep growing in 2 digits in terms of revenue and also in terms of profit. And the margin, to be honest, is unbelievable. I think it's to achieve 14% margin is challenging for the future. But I would like to convey that it's been a record year for Alsa, but not only in terms of revenue or profit or margin, but also number of passengers, customer satisfaction index, safety target, digital sales. So it's a mix, a combination of all the factors that we are working in to get the strategy and the numbers done. And a couple of points regarding the environment that Alsa, especially in Spain are now involved. One is very important is there is no direct impact in the figures, that is the approval of the mobility law in Spain. Just for you to know that the former mobility law took place in, if I'm not wrong, '87. So that means that it is a new law after 40 years. And why it's important that this mobility is now a right for the citizens in Spain. It's not only a word. It's something that is like a new pillar of the well-being of the society in Spain as the healthy or the pensions, we have also now mobility on the top of the priorities of the government, and this is very important. And also this new law secure the system of franchising and concession for long haul in Spain. So I think it's very important. It's something that has been very controversial in the past regarding if it's going to be regulated or liberalized now with the new law is secure. And the other point is the strong support from the government, from this government to the public transport, not only by the law, but also for the -- it's not subsidy. It's like because it's not subsidies to the companies is to reduce price for the passengers to use more public transport. And I think it's -- the current government has put on the table million of euros to support all kind of transport, rail, coach, buses and the rest. So I think it's important you to know. And my view on '26 is very positive. And the first 2 months, I cannot show you the figures, but the starting of the year '26 is going -- is performing very well. Let me give you an example of growth. This is Qiddiya, the Saudi city on that. How can we -- growth in that contract is EUR 500 million contract in 8-year plus a potential extension of 2 more. And it fits exactly with the strategy of Alsa. It's asset-light, is low risk and it's a project that is absolutely scalable because this is one of the -- it's the first mega project that the Saudi government is building in the country, but the plan is to have 10 projects like Qiddiya, in the next year. So we have been awarded in the first one. So we are well positioned for the rest of the tendering process that will take place. And it's also remarkable that we have won this contract competing in the, what I call the Champion League because we were competing there with the state owned -- French state-owned company, the Italian one, the Singaporean one. Well, the top of the, company and Alsa that is -- the size of Alsa is not that high as you can imagine as some of our competitors, and we won the contract through technology and through innovation. For example, you cannot see very well, but this is one of the main -- of the strong points in our offer is to build what we call the station for the future. That is a new concept of how people are going to move in the country. And I think it's key that it's not a question of price, not only price, it's a question of technology where we are the technical support for the government as well. If we move to WeDriveU, as Brian mentioned, I think despite the total figures, the figure from H2 has been very, very positive. We have managed to change the trend that we had in the past. You know that from the H1, we have the separation process with the school bus that has some cost. And now we are focused on -- once the separation has been made, we are focused on the strategy of cost and also to improve operation and to have better margins on that. So -- and also, as Brian and Phil mentioned, one of the main points is to get rid of the loss-making contract. We don't have much. We're managing in the States almost 100 contracts, but there are 3, 4 of them that are negative. And we are in the process of avoiding all this risk for the future because that will make directly an improvement in the final figures. Also to say that the states I passed a lot of times in the last year, there is a lot of room for improvement. Our market share in the state is very, very little. For example, one of our competitors have 10x the size of WeDriveU. That means we have a lot of place. And we are now entering some new areas of the industry like universities where I see very interesting through technology and through good performance. And I'm quite happy about the future as well in 2026. If we go to U.K., I think it's -- we cannot share the figures from bus and coach, but I can give you some light on that. On the bus, we are -- a slight increase on revenue, but it's true that the passengers are going down, not that much, but I think it is in the same trend that all the urban industry in U.K. are doing and are suffering right now. But I think positive news is we have managed with the authority to secure the fundings in order to have at least, I would say, breakeven in '25 and of course, in '26. Also very important in the coach that I would define that the integration of U.K. Coach and Alsa is completely success. Now here, I can see Javier, who is in charge of U.K. Coach in Birmingham. And we are in just less than 6 months, we have changed a lot of things. And again, if we go to the numbers, the decline on passengers in long haul has been less than 4%. But if you consider that our competitor, our main competitor in long haul has doubled the size of the flights and the routes that they are operating, our less in passenger is very, very little. And we still have the majority market share in long haul by far to our competitor. And we have also a very clear strategy on focusing on specific routes with the new pricing tool on technology that we have completely changed a new structure that we have put in place leaner, more close to the ground to have -- to know the problems and to have several areas depending on the different products that Javier is running there. For example, we have a clear vision that we need to grow in airports that we are -- in the overall figures, we are growing a lot. And of course, we are tackling with massive savings with no impact on safety, not impact at all in the operational excellence. So I'm also very optimistic regarding '26 that we can manage to reverse the situation that we have. Finally, Germany, I think as Phil mentioned, I think it's several milestones. For the first time, we have -- we are running 100% of the services after years. And what is even more important, we have achieved the number of drivers that we need that you know that we have a shortfall in drivers in the last year that made us some penalties with the PTA. Now we have all the drivers. And what is more important, we have all the drivers with a lower cost because you know that part of the driver that we were using in the past came from third parties for agencies now and with a higher cost. Now we are running all the operation with our own drivers. And for '26, I think it's very important because it's the year not only because of the agreement with the PTA that they are doing extremely well, but also because they are going to start the new process of bidding there. So -- and I think we are now in a very good position after the agreement with the drivers with good KPIs in operation to try to keep growing in that market that I see also very interesting for the future. And this is my final slide. I would like to say that this is after 1 year working on the -- throughout the group, 5 things that I have identified that we are working in the same page. This is -- these are facts. This is not only narrative. This is -- there is fact behind all this statement. First, all the divisions are performing better than last year, these numbers. Second is we have huge opportunities of all around the world. I mentioned Saudi. I mentioned states, but we have also some other opportunities in some other places. The massive cost reduction that we are implementing all around the divisions, including Alsa, but also the rest of the divisions. So we are going to work in the future. In the present -- we are right now working in the present with a leaner and more efficiency base of cost. So that gives us the opportunity to be more profitable that is linked with the next point that we are improving the margin on every single contract. We are avoiding totally loss-making contracts. This is a process that we're going to finish in the next months, and we are trying to get a little bit more of every single contract to gain 1% in every single contract, you can imagine that it has a huge impact on profit. And finally, probably this is not a real -- it's a fact, but it's not a number behind that I've been working, as I said, with National Express in the past for the last 20 years. And for the first time, and thanks to these guys, we are working as a group. Now it's not -- there are 4 CEOs or Vice President or whatever. We have the same protocols. We have the same CapEx view. We have the same procedure for safety. We have everything. So I think it's very important in order to get synergies from one part of the world to the other. For example, U.K. Coach, we are using the pricing technology of Alsa or -- but we have also exported some from the states in terms of Chatel to the business -- or France in the business that we have started in Spain, for example. So -- that's all. I would like to end thanking all of you. Any question after Phil's conclusion, but I want to convey that we as a team are strong. We are excited with the present and the future and myself are very, very optimistic with '26. We will see you in the next month again for your presentation. So you can check if I was right or wrong. I hope I was right. Thank you. Philip White: Just to conclude, special thanks to my buddies over here, Paco and Brian. Let me say, Paco. You have no need at all to apologize for your English. People can probably understand. I'm not mentioning you. But Paco, your accent from the south of Spain, it's much easier for people to understand than my accent from the north of England, but well done. That was a great presentation. Let's conclude. We're not going to keep you much longer over the presentations. But I suppose to conclude the first half of the year, compared to that, we're in a much better position in the H2, and there's been a significant turnaround throughout the business, especially coming up in 2026. We've streamlined our business by getting rid of the corporate glue, as I say, and exited loss-making operations. No point in running them if you're not making money. We are streamlining and simplifying, removing unnecessary layers and complexity. We're working smarter, becoming leaner, more agile and better able to respond positively to market trends and opportunities. And there's still lots and lots of opportunities out there for us. As Brian mentioned, cost and cash flow are now the key priorities for strengthening the business. And of course, we continue to seek every opportunity to deleverage. Everything we've discussed today is about creating a sustainable business. I spent the first 6 months of my tenure looking backwards, trying to fix things that had happened probably years ago. We're now no longer just looking backwards to manage challenges, we are rewiring and rebuilding our business to deliver long-term profitable growth for our shareholders. And for our millions of customers, we are committed to delivering what they deserve, and that's the best possible service we can provide. We are here for them. They are not here for us, and that's important. So in summary, we're fixing the businesses that need our focus. We are simplifying and integrating where it counts. Importantly, we are taking our people with us on this journey, returning the brilliant talent that we have in our business, and I can tell you, we have some brilliant talent. I'm not just saying, that's easy to say. But working with these guys since I've joined, very young, and they make me feel young, too, and I love that. But from the Board up to the guys who turn out every day to run our buses to run our coaches and run our trains, whose jobs can be both very difficult and dangerous, we owe a hell of a lot to these guys. Thousands of them who do this on a regular basis. A couple of thank yous. Thank you for coming along today, and thanks for the patience you've given us over the last 12 months-or-so. A very special thanks to our advisors over there who support us all the time. Yes, give us a nudge when we need it, pull us back when we need it and stop us for saying silly things, which is mainly me when I'm feeling a bit crazy. Now we couldn't do it without you guys really, really appreciate it. But thanks for turning up today. I can tell you, I'm very looking forward to a number of site visits in Ibiza, right? Where I can show you our late night and early morning service, and I'm sure you'll enjoy it. So thanks very much for everything. Thank you. Philip White: And over to Q&A. Are you going to manage this? Gerald, do you want to kick off? Gerald, be nice. Gerald Khoo: Gerald Khoo from Panmure Liberum. I'll start with 3, if I can. Morocco, can you talk us through what's gone wrong? When did it go wrong? And why has it led to such a large exceptional charge? And on the topic of exceptionals, can you talk through how much of those turn into cash? And let's assume WMATA does, I know you're all confident that it won't. And then, again, on the exceptionals, you talked about sort of more cost reductions, what exceptional should we expect associated with that? And finally, on U.K. Bus asset monetization, I think you sold 2 depots. You gave us the game. Are you able to give us the proceeds from those 2 sales and how many depots have you got left? Philip White: Can you do the operational stuff in Morocco first explaining what happened there? And Brian, can you deal with exceptional stuff? Francisco Iglesias: Okay. Morocco, we started just to put you in context, we started Morocco in 1999. So it's 27 years ago. And we reached 6 operations in Morocco in 5 years ago. So until more than 20 years, we didn't reach the size of the business that we have. Now we are running 4 cities, and we are running the first and the second cities in Morocco, that is Casablanca and Rabat, as you know. So I think it's part of our bidding process. Sometimes you win, sometimes you lose. This is nothing to be at fault. And we are still the largest urban operator in Morocco. And what we have done with the exception is just to all the assets we have and the staff that we need to be out of the company because of the process of losing Tangier and Marrakech. This is the cost. But if you ask me, are you optimistic in Morocco? We are making money in Morocco. We will make money in Morocco '26. We have some opportunities in the future to keep growing. But as the largest operator there, it will be more difficult because now there are more big companies competing with us that we don't have in the past. But we have also some areas that I cannot say, but some areas of diversification that we can enter in the Morocco market. So my view is it's been -- of course, I prefer to win rather than to lose, but I think it's part of the normal business, and I'm not especially worried and I'm optimistic for the future in Morocco. Philip White: I think when you're operating a successful business, you grow it to the extent that we did. There's always a lot of people, a lot of competitors who want a share of it. They'll come in and take it, whatever business you're in, whatever profits you're making. And I think that's what's happened to us in Morocco. But on the numbers, Brian? Brian Egan: Yes. Morocco, we had a provision of just roughly GBP 20 million at the half year. So this -- then in the second half of the year, we had this issue where the authorities ended a contract and we had to impair some of the assets. In terms of the other questions, the sales of the depots, we sold 2 depots, just over GBP 4 million, the proceeds from those. And then we look to monetize the rest of the U.K. Bus business. That was all that we had at the end of the year. On the exceptionals for the cost restructuring, we don't have a number for this year at the moment. We're working through more cost takeout. We'll give more guidance on that for the -- at the 15-month stage. We have a better handle on that. And then the final one was the adjustments. So I can very quickly go through them. I mean, obviously, the -- we drive new contract provision, which you mentioned, I mean, we do absolutely expect to be successful in litigation. But -- that is -- that won't be a cash cost if we were unsuccessful, but that certainly is not what we expect. And the legal advice is very solid. On the legal claims, that will end up being cash because it's a provision for settlements. On the intangibles, that's noncash write-down and the restructuring cost is mainly -- that is mainly cash. That is mainly cash. And Morocco going forward, that is really -- in terms of a go forward, that isn't an impact because that's a provision against -- in other words, we're not going to recover that debt. That debt has now gone. It's not a cash -- it's not -- the debt has disappeared effectively. Philip White: And Gerald, on the West Midlands depots. One is a depot Acocks Green, it's very old, in need of a lot of maintenance and the other property was a bit of car parking land. So it's one garage and a bit of land. Gerald Khoo: It sounds like it was in the books [indiscernible]. Philip White: Yes. Francisco Iglesias: Yes. A little bit more than that. But... Philip White: There was no write-down was there? Brian Egan: No, no. We made a profit of [ GBP 4 million ]. I think it was in the books, it was about [ GBP 7 million ] was in the books. Muneeba Kayani: Muneeba Kayani, Bank of America. So firstly, just on your guidance, the low end implies a decline in profits and EBIT. So can you explain how you've thought about that in the range like the bottom and top end scenarios? Secondly, on Alsa. So if I understand your outlook, you are saying kind of maintain profitability. Is that a comment on the margin, given the strong margin that you saw last year. So you still expect top line growth? If you could just clarify kind of the moving parts between the top line and the margin outlook on Alsa for '26 as you've thought about it? Brian Egan: Yes. I'll give -- I might ask Paco for some help on the second one. But for the first question, we've taken a view on the guidance for next year. We felt it was right to start at the more or less where we entered this year, I guess, very slightly below. I mean we certainly hope to do better than the minimum, but that is where we felt being sensible about guidance was the right place to be. What we don't want to do, which has been a constant theme in the past is where we give guidance and then miss it. So we want to give content that we're very firmly believe that we can achieve. And then on the margins. On the margins, Alsa had an extraordinarily strong performance this year. And again, maintaining that performance, and there are some challenges, for example, in Morocco, we've just discussed. So making sure that we can maintain that level of profitability going forward, I think, is what we believe is achievable. I mean there are quite a lot of challenges within the mix of Alsa. I don't know whether you have anything to add? Francisco Iglesias: Yes. Yes. Okay. Of course, I said in the presentation that 14% is unbelievable. It's something that even if you have asked me 1 year ago, I would say that's very, very difficult to achieve 14%. What I can say is the trend in Alsa that we are growing in terms of revenue through business as usual, passengers that are growing even 2 digits, thanks to a lot of things. But also because we are winning new contracts, for example, that figure is not included the contract or it's not included in the new contract that we are going to start in Ibiza or some other places or Guadalajara. So I don't -- to be honest, I don't know if we can reach 14% of margin. But I can say is that we are still growing. There is room for improvement in terms of revenue, in terms of passengers, even in terms of profit if you are not obsessed that I need to reach 14% of margin, I'm obsessed that we need to keep growing in all the opportunities we have. If the margin is 12%, it's fine for me. If the margin is 20% much with it. Philip White: I think you might think we're a bit cautious. I think -- we think by being open and realistic we've got to rebuild a lot of trust with you guys and with our shareholders. And I think by being open and realistic, then putting figures out that end up to be meaningless is the best way to go rather than totally failing and failing to hit guidance year-on-year. I don't think that's the best way to go. Muneeba Kayani: And if I may ask a third question on the Qiddiya project in Saudi Arabia. We've heard in other projects there, there have been many delays. So kind of as you think about this project and other projects in Saudi, how do you factor in kind of timing of these projects and impacts from your perspective? Francisco Iglesias: Well, my experience you know that we run the 3 contracts in Middle East, 2 in Saudi and 1 in Bahrain. This Qiddiya project, this is a fact we were awarded, and we need to start in 45 days after the sign of the contract. So my experience is they are doing very quickly because they know they need to have these cities running. And for example, they are now launching a project with rail that we are not in. But -- and we have been asked the time line day to ask that we can manage a second project there. So I'm not worried about that. And also to say that in the first month of operation, it was like a wide operation. We made profits from the day #1 because it's not a risk contract. It's a gross cost. So it's -- so if I have to bet, I would say that it's something that is going to happen quite quickly. Jack Cummings: Jack Cummings at Berenberg. Three questions, please. The first one is just on cost savings program. I was wondering if you could just flesh out a little bit more. I know you mentioned kind of corporate glue, but what specifically you are taking out the business in what divisions? And the second is on the pipeline. Obviously, you won a decent amount of revenue and contracts both outside of the joint venture and including it. What's the pipeline looking like for full year '26? And then just finally on covenant leverage, I think 2.7x at year-end. How should we think about how that's going to trend over the next 12 months? Will it tick up a little bit in the next 3 to 6 when North America School Bus comes out and then full? Just any more color there would be great. Philip White: I'll do the corporate glue one because it's my theme this one. It's quite easy really. And it's what Paco said, it's the first time we've been really operating as a team probably since I left a long time ago. We work together. We've got a strong GEC, our group executives. But importantly, it's how you deal with requests either for approvals or for help. We deal with them quickly. If it's a no, we tell them no straight away. We don't just ask them, can you give me more information? Can you give me more information and then tell them no. And if it's a yes, we're pretty positive about that. It's all about the speed of things. Attending these big corporates where we've all worked before, they lose -- their nimbleness goes. And the slower they are on making decisions and getting bogged down, more chance that opportunities disappear. And we've had one already. I mean, an acquisition in another country in Europe. We've delayed it and deferred it and messed about with it in the past, and it's gone away. And this is danger, by being so pretty slow, you can miss such a lot by being too careful. We've got this governance. I know you guys think governance is important, and I appreciate that. But governance doesn't make you any money. It makes you do things right, and you know the difference between right and wrong. But there's a balance between good governance and good and quick decision-making, and that's getting rid of that glue that's sticking us everywhere. Francisco Iglesias: Let me add something that we are now, as Mobico running 12 countries. If you compare 12 countries with our main competitors in the Champion League, they are running in 40, 50 countries. So that means that there is a lot of room for places to go. Let me not releasing the exact pipeline. But it also is a fact that we submit roughly 30, 3-0, bidding process in a year. I would say less than half in Spain. This is the line of their share, but more than 50% out of Spain in the other 11 countries that we run, we are preparing something too. But not only that, we are also having a look or -- not footprint, but some researches and some ongoing negotiations with at least 5 more countries where we are not in at the moment. So let me say that I'm not going to say you the opportunity because they are competitors. But I can assure you that we have a lot of opportunity. I'm not sharing -- I'm not sure that we're going to win all of them. You know that the ratio of winning contract is about 30%, but you can imagine that if we have this size of opportunities, I don't know, 1, 2, 3, we will win, I hope. If not, it has to fire me. Philip White: Brian, can you do the cost stuff? Brian Egan: Just in terms of cost savings, so GBP 75 million, that is spread right across the group. Head office is -- I mean, just in very rough terms, there's around GBP 15 million at head office. The big focus, as we've mentioned in really all the presentations has been on U.K. Coach, which is about [ GBP 25 million ] and then it's [ GBP 10 million ] out of the other divisions. So Germany, Alsa and WeDriveU. So -- but it really is right across the business. On the covenant, it's a little bit complicated because of the German settlement because that's going to influence the ratios very significantly. And in fact, the accounting is quite complicated. In fact, even KPMG are getting technical advice as to how it's treated. But it will be -- without Germany, it will be in -- it will obviously, the covenant ratio, but probably in the 3s. But I'm probably getting stared now, I'm not supposed to say. So it will be in 3 excluding Germany, with Germany, and that again, depends on accounting, it would be lower. And by the year-end, it will be below 3. Philip White: Questions, guys? Ruairi Cullinane: Ruairi Cullinane, RBC. The first question on Alsa concession renewal. So what percentage of Alsa's revenues are up for renewal in full year '27? Is there anything else coming in the years after that? If you could even give us an indicator of what percentage of earnings that would be even better. Then secondly, on provisions on the balance sheet, you've hopefully quantified that there will be GBP 8 million of utilization from the WeDriveU onerous contract provision. You may not be able to comment on German rail, but if you can, that would be appreciated. And then is there anything else we should be thinking about? Yes, I'll leave it at that. Philip White: Okay. Thanks, Ruairi. Can you talk a bit about concessions coming up, Paco, well, this year and next year? Francisco Iglesias: Yes. Well, the franchise process is ongoing. This -- it's true that it has been a general delay but it's something, for example, right now, there is 1 or 2 contracts on the table. We are not incumbent, but in Spain, we have -- in March, it's -- we need to submit at least 2 offers in the process. So we will have the process. I don't expect that we will have in all -- of course, not all of them because if I'm not wrong, we manage 21 contracts in long haul in Spain. So probably it's a process that will take at least a couple of years to finish. And after that, you know that there is a process of mobilization, claims and so on. So I don't have the crystal ball, but I think it's something that for sure is not going to impact '26. It's strange that could impact in '27 or at least in the first half of '27, but it's something that is happening. And of course, we haven't lost a single contract in long haul in the history in Spain. And as I show the revenue of long haul is 17% of the company is a good margin. And of course, after a bidding process you usually lose a bit of margins, but because you have to reduce price. But after that, there is a recovery coming from the increase on passengers. So it's a process like a peak on that. So I don't know if that answers your question or not, but this is my expectation. Philip White: On German rail, I'm sorry, I can't give you any more because that's a commitment we've made to the local authorities there until we get the contract signed. They're a different organization to us, political organization and they have got a lot of people who they report to, including their elected members and offices and also central government. But we did say in the announcement that we're reducing the length of our loss-making contract. We're increasing the length of our profit profit-making contract. And we're also changing the basis of our profit-making contract to gross costs rather than net cost, and that takes away a lot of revenue risk. All, I can say there have been long negotiations, and we're very happy with the outcome. There's a lot of tricky accounting, I can't understand, but as Brian says, we're seeking help there, but we are very satisfied with the outcome. Brian Egan: I think the important one is when you put the 3 contracts together, the cash leakage is going to stop. That's the intention. Philip White: And Brian, on provisions and stuff? Brian Egan: Well, I think only the 2 provisions. So on WMATA, it can be GBP 8 million be released next year. And then on the German one, we just have to finalize the contracts and we disclose that. So hopefully, again, with the full year results. We just have to finalize the contracts and we disclose that. So hopefully, again, with the full year results. Philip White: Okay. Any more questions, guys? Are we done? I think we are. Thank you very much for coming along. Really enjoyed meeting as usual. We'll be seeing a lot of you in the future, particularly in this year. Please don't get too bored with us. I know we're not the most exciting people, but we do our best. Thank you very much. Brian Egan: Thank you.
Philip White: Good morning, everyone. Welcome to our 12 months unaudited results presentation. As you know, I'm Phil White. I'm Executive Chair of Mobico. Introducing to my colleagues. We've got Brian Egan, who is our CFO; and Paco, who is our COO. You met all 3 of us before at our half year results. And you can remember at that time, we weren't really in the best of places. And at that time, you will recall that only 1 of our 5 divisions, as said, was really making any real money. Today, we are here to talk to you about the stability we brought to the business as well as the momentum being gradually built up as we implement our Simplify for Success program. And apology first. I'm sorry that the results we are presenting today are unaudited. But as you know, we were left without an auditor late in the day last year, but I'm really pleased to say that we now have KPMG on board. That's a big win, believe it or not getting an auditor. I know I'll probably be counseled by our advisers for saying this, but please forgive me, I will only use the word unaudited once because I could use it in every sentence as we go along. So -- and I think the same applies to the word adjusted. So forgive me on that, because I don't want to be here all day, and I'm sure you don't want to be here whole day, too. The reporting schedule again for this year is quite complex, and we'll spend most of 2026, would you believe, in close periods. But Brian will explain the schedule in more detail. As is usual, I'll start with the highlights. Brian will follow on the financial review, and then Paco will do all the operational stuff. But let's start with the highlights first, guys. As you can see, we've delivered significant progress in 2025. Revenue increased by 6% to GBP 2.8 billion, while adjusted operating profit increased by 9% to nearly GBP 200 million. Operationally, we achieved nearly 25 (sic) [ 24 ] billion passenger [ kms ] secured new contracts worth over GBP 1 billion. Our German rail business provided a full service in December, would you believe for the first time in 2 years. And importantly, as you've seen, we've reached an agreement with the 5 German PTAs in North Rhine-Westphalia on the restructuring of all our rail contracts. This derisks the business and ensures that our rail operations are sustainable in the long term. All of this has been achieved while making solid progress on safety across the whole business, something, as you know, is absolutely integral to the way we operate. In business, we all know that not all contracts are perfect, and we've inherited a few difficult ones. But in business, you also have to deal with the unexpected. When this happens, I always believe it's better to be totally transparent and to be very open. Too open, some people will say, but that's my style. In 2025, as you know, we experienced some issues with certain contracts, and we fully recognized this in the year, whilst at the same time, demonstrating the strength of our underlying business. Honestly, we would prefer the scale of the adjusted items to be much smaller, and that certainly is our ambition going forward. Before we dive into the numbers, I just want to remind you of our strategy that we announced at our H1 results for '25. Our road map is unchanged, and we remain focused on stripping away complexity to reveal the high-performing businesses that we know are there. While continuing to cut through the noise, it means really streamlining our management structure and aggressively attacking overheads. We are removing as what I call the corporate glue, the surge of large and listed companies, the duplication of functions and processes going through procedures, waiting for yes and nos. It takes a hell of amount of time to do this and slows us down in the past. By being smarter and integrating our operations where it makes sense, we are becoming a leaner, faster and more effective organization. Our financial health is absolutely paramount. We are very focused on generating cash, improving liquidity and reducing debt. Every pound of CapEx is now being scrutinized to ensure maximum value, and we are leveraging Alsa's operational excellence to unlock synergies group-wide. Through simplifying and strengthening, we are putting the business back on the path to success, just like where we used to be. The financial impact of actions across the group are already visible with operating profit H2 performance of GBP 138 million. And I'm pleased to say that in H2, all our divisions were profitable. In Germany, we've taken the necessary steps to make our rail business sustainable for the long term by eliminating the significant cash flows over the remaining life of the contracts. Once the agreement is formally signed, we'll be able to provide you guys with a more detailed breakdown of the figures. Until then, I would ask you to please bear with us in respect to the amount of detail we can give you today. We're aggressively reducing costs with some savings delivered in '25, and we're announcing today that we will deliver GBP 75 million of cost savings in '26 with an annual run rate of GBP 100 million by the end of the year. We have largely integrated UK Coach into Alsa to create a more robust business, one that will meet the challenges of increased competition. We have also completed our exit of loss-making businesses in NXTS in our Coach division and the loss-making CARTA contract in WeDriveU. Despite the progress to date, we do recognize the challenges ahead. Our priorities for '26 are very clear. As I said, our strategy is indeed simple: simplify, strengthen and succeed. Whilst our operational story today is one of transition, this should not take away the fact that Alsa has delivered another record year. This was driven by growth in Spain and further revenue diversification. In Morocco, we have faced and resolved several challenges, and this has led us to a reduced operating footprint in the country. WeDriveU completed its first year as a stand-alone entity, and we are applying lessons learned there to improve operational and financial performance. We exited early the loss-making CARTA contract at the start of this year, '26. This contract had lost over [ $303 million ] in 2025. You'll see from our RNS that we've provisioned GBP 52 million for WMATA. We aren't waiting for a miracle there. As I said, we want to be open and transparent. We are pursuing legal redress with our client, but we are ensuring this no longer distracts from our profitable core business. In the U.K., the integration of UK Coach into Alsa is now largely complete with operational and functional benefits starting to be seen from the start of this year. And in Bus, preparations continue for franchising. In Germany, as mentioned previously, we are now operating a full service. This result was achieved through our investment in driver training and increased recruitment. It sounds pretty easy, really. It's pretty obvious anyway. Across the group, we have maintained strong momentum, securing 25 new contracts with a total value of GBP 450 million, whilst maintaining a disciplined conversion rate of 28% on new deals. This compared to 23% last year. It's really worth noting that these contracts exclude nonconsolidated stuff like joint ventures and joint operations. Most notably, the project of Qiddiya in Saudi Arabia and the Guadalajara Health bid will bring the total value of new contracts secured in '25 in excess of GBP 1 billion. We also expect to be awarded 2 key contracts in Spain shortly. These include a retention of one of Alsa's largest regional contracts and the expansion of our business in Ibiza, where we'll become the largest operator in the island. A key highlight is the ongoing growth in Alsa passenger volumes, which reached a new milestone of 640 million passengers. This was largely driven by a growth of 10% in Spanish domestic demand, mainly regional and urban resorts. As you can see from the charts, we're witnessing consistent upward growth in passenger numbers across Spain. This isn't merely a seasonal trend. It's a fundamental shift towards public transport and one that is being supported and driven by the Spanish government across the whole country. We do expect this momentum to continue in 2026 as a Spanish single ticket, which offers unlimited travel for a flat monthly rate becomes embedded in consumer behavior. I will now hand over to Brian, who will take you through the numbers in more detail. Brian Egan: Okay. Thank you very much, Phil, for that, and good morning, everyone. Before going into the 2025 figures, I want to mention the 2024 numbers have been restated for a GBP 0.8 of a million EBIT impact in Germany. They also reflect the discontinued operations of NASB and NXTS. This ensures a clean and like-for-like comparison for the performance we are discussing today. Revenue of GBP 2.8 billion represents a 6.2% increase from 2024, driven primarily by Alsa's strong growth at 12.8% and Alsa has now reached GBP 1.5 billion in revenue, reflecting the continued diversification in addition to a great performance in both regional and urban. We've also enjoyed good revenue growth in WeDriveU of 4.7% from new contracts wins both in shuttle and in transit business. Revenue growth helped deliver a 9.3% increase in operating profit, noting second half performance was significantly better at GBP 138 million versus GBP 60 million in the first half. It also, if you look on the very right-hand side, shows the improvement in performance this year versus the same period for last year. This reflects the improved underlying operational performance and the benefit of cost savings arising from the restructuring and efficiency improvements that we've been making. Free cash flow was GBP 77.3 million. This was lower than last year, but that was mainly caused by cash outflows related to the school bus business, which were made prior to its sale in July, so in the first half of the year. Covenant gearing improved by 0.1x from the end of 2024. And again, this has been helped by the proceeds from the school bus sale. In terms of statutory results, operating profit from continuing operations decreased from GBP 12 million to GBP 21.9 million. To understand the bridge between our adjusted statutory operating profit, there are several nonoperating charges that I'll walk you through. There were no charges to the German rail onerous contract provisions in the period. However, we did utilize GBP 56 million in the provision during the year, leaving the remaining provision at GBP 133 million. This provision will be reviewed in detail for the 15-month audited results. So it's reviewed in detail once a year. Moving to WeDriveU. We have made a GBP 52 million onerous contract provision in respect of the WMATA contract. And we are seeking legal address, which Phil as mentioned, for -- in order to recover ongoing losses. We expect the outcome of these legal proceedings to be successful and the contract losses significantly reduced. However, the benefit of this legal settlement is not included in the provision calculation. We are confident of a favorable outcome. However, the process is expected to take 18 to 24 months. It's a long process. In the year, the utilization of the provision was just over GBP 4 million. It's worth also taking a moment to say that we have learned from the WMATA contract. We have overhauled our North American bidding process to include vigorous review procedures. A GBP 38.5 million charge has been recognized in the income statement for retained legal liabilities tied to the open insurance claims from the NASB sale, the school bus sale. The charge stems largely from material adverse developments in more significant individual cases. The year-end cash impact from settled claims was just under GBP 19 million. In Morocco, following a rapid change in local operating environment, we have taken a GBP 27 million charge. This reflects a combination of price concessions we made in Casablanca, which enabled outstanding debts to be settled and also a noncash impairment charge following the abrupt transfer of Marrakech and Tangier contracts in December. To put this adjustment in perspective, on an adjusted basis, Morocco contributed an operating profit of EUR 8 million compared to just under EUR 13 million in 2024. Amortization of intangibles with acquired businesses from continuing operations increased by GBP 2.8 million during the period. This represents the annual charge for intangibles such as acquired brands and customer contracts. This happens every year. Finally, as part of our strategic initiatives to stabilize and improve the group's performance, we invested GBP 35 million on restructuring and streamlining costs and also some transaction fees related to the school bus disposal. The year-end cash impact for restructuring was GBP 29.8 million. Overall, there was a cash outflow due to adjusting items in the period. This figure includes adjusting items for discontinued operations. So now turning to our balance sheet provisions at the bottom of the slide. We currently have GBP 133 million remaining on the German OCP. We will reevaluate the provision for our 15-month audited results as it will be dependent upon the finalization of the legally binding agreements with the PTAs, which are due to be signed before the 30th of June. Of the GBP 47 million remaining provision for WeDriveU, we expect to utilize GBP 8 million in 2026. And again, as I mentioned, this is still subject to the legal process. Moving to our divisional breakdown. Alsa was our most significant growth driver with revenue increasing by just under 13% to reach the GBP 1.5 billion mark. And operating profit increased by 14% to GBP 212 million. As I've already mentioned, underpinning these numbers is strong underlying demand in Spain. Both regional and long-distance sectors are performing well, supported by a better expected trading environment, particularly towards the end of the year. In WeDriveU, revenue increased by just under 5% to GBP 432 million, driven by new contract wins. And as again, as I mentioned, both in shuttle and in transit businesses. However, the full year profit remained below 2024 levels due to challenges with WMATA contract and the CARTA contract, which has now been exited, which Phil mentioned in his presentation. We saw a meaningful change in the second half of the WMATA performance with WeDriveU improving to a GBP 17.6 million profit in H2. This recovery is expected to continue in 2026. On the other hand, the U.K. business continues to face a very challenging environment, but has shown great resilience with revenue decreasing only 4.6% to GBP 587 million despite intense competition in the Coach business. Breaking this down, UK Coach contributed GBP 315 million revenue, while U.K. Bus delivered GBP 272 million. Given the separation of the U.K. Coach as it has moved under Alsa, a profit split isn't available in these financial results. However, a breakdown will be provided in the full 15-month results ending 31st of March. With ongoing competition in key routes, it has been a very difficult year for UK Coach with revenues declining by 6.2%. However, passenger numbers only fell by 3.8%. And on a positive note, the market appears to be growing and growing quite strongly. Within U.K. Bus, revenues rose by 2.4%, and this is largely due to the fare increases that we implemented towards the end of June. The decline in passenger numbers reflects the wider problem right across the industry in the U.K. During the period, we also sold Acocks Green depot and Oak Road. This resulted in a GBP 4.3 million increase in the adjusted operating profit for the 12 months. Overall, the U.K. reported a GBP 4.6 million operating loss, as I said, largely due to the competitive pressures in U.K. Coach, also combined with rise in employer national insurance costs. We expect to see this performance improve as we move into 2026, along with the benefits of integration into Alsa. In Germany, revenue decreased by 1.6% (sic) [ 1.4% ] to GBP 253 million. And whilst the -- the adjusted operating profit increased to GBP 15.6 million due to improved operational performance, and this actually was very significant. We recovered from the loss to a profit-making position. The in-year losses on the RRX contract were GBP 56 million, and this is a cash outflow, which -- this is the significance of the German contracts that we're in the process of finalizing. Central Function costs increased by GBP 2.3 million, principally due to higher costs in relation to professional services and include a higher audit fee. However, this sort of hides the underlying cost savings that have been made during the year. Looking forward to 2026, we expect Alsa to maintain current levels of performance. For WeDriveU, we expect continued underlying recovery, whilst we continue to redress WMATA through the legal process. By integrating UK Coach into Alsa, the business is becoming more competitive. Nevertheless, we expect 2026 to be a challenging year. U.K. Bus is expected to be at breakeven, subject to finalization of funding discussions with Transport for the West Midlands. And in Germany, our rail business is benefiting from operational improvements and will be derisked once we have the PTA agreement signed by the 30th of June. By the way, that's important to mention that the revised contracts will be backdated and effective from the 1st of January 2026. In respect of Central Functions, we expect further cost reductions. Moving to our cash flow performance for the period. The most important point to highlight is the impact of school bus, which is shown in the middle column. In 2025, school bus was a significant drag on group liquidity prior to its disposal. The school bus cash outflow was driven by substantial investment in CapEx and working capital requirements that were committed in 2024. Excluding school bus, the group free cash flow was GBP 76 million. Key year-on-year movements include a working capital net inflow due to the timing of cash collections in Alsa. The increase in tax is due to a one-off refund because of the change in tax law, which significantly reduced our cash tax payments in 2024. And we are looking -- we have an ongoing project to look at managing our tax burden. As one of the problems we have is that our debt is sitting in the U.K., most of our profits are in Spain, and therefore, we don't have an offset for interest. We are targeting a total CapEx of GBP 120 million for 2026. This reflects our commitment to disciplined spending, maximizing cash conversion as we move forward. And Phil has mentioned this in his presentation and Phil has -- or Paco is also going to mention there is very, very strict CapEx control now in the organization. However, despite the strong CapEx control, we are able to pursue new growth opportunities, focusing on CapEx-light contracts. In terms of net debt, we saw a GBP 286 million inflow, reflecting the cash proceeds from the school bus disposal. We recorded a cash outflow of GBP 118 million related to items excluded from our adjusted results, and I talked through these earlier in the presentation. It should be noted that we have paid the hybrid on coupon for 2025, which is the last payment at GBP 21 million. The next payment due is GBP 40 million, which is in February 2027. There was a GBP 9.6 million outflow from other items, primarily driven by exchange movements and derivative settlements. This is partly offset by the sale of an investment. When we pull all of this together, the group achieved net -- total net funds inflow of GBP 127 million for the period. The funds inflow was offset -- has offset the loss of school bus EBITDA, resulting in a covenant gearing improving to 2.7x. I should mention that the covenant gearing for the 15 months would be dependent on a number of factors, including the German rail agreement, which has quite complicated accounting implications. However, we can confirm that we will be within the covenant requirement. In terms of debt maturity, at the 31st of December 2025, the RCFs were all undrawn, and we had nearly EUR 900 million in total between cash and undrawn committed facilities available to us. The majority of our RCF will only expire in 2029. Notably, the interest rates on our instruments are relatively attractive, and we have significantly reduced our exposure to interest rate volatility with over 90% of our debt now at fixed rates, in fact, 94%. We have sufficient liquidity to meet our debt maturities arising in 2027. And then finally, just to talk through -- sorry, almost finally, I want to briefly walk through our financial calendar for 2026. As you may have noted, we have adjusted our 2025 and '26 accounting periods following the appointment of KPMG as our new auditor, which took place in November. These changes are designed to provide KPMG with sufficient time to complete their audit work. However, we do plan to return to a December 31 year-end in 2026. Our current financial year will be for a period of 15 months to the 31st of March 2026, and we expect to release our audited results in late June, early July. Looking into the second half, we will report 6-month interim results for the period ending September 30 and expect to release those in late November. And finally, to bring us back into alignment with the standard calendar year, the final accounting period for 2026 will be a shortened 9-month period ending the 31st of December '26. Results for the period are expected to be released in March of 2027, making a return to a normal 12-month December year-end. In terms of financial imperatives, the focus remains on ensuring our strong top line growth translates to sustainable value creation. As such, we've implemented a disciplined approach to cost control. Specifically, we are implementing controls over capital expenditure and working capital to maximize cash generation and reduce debt. As Phil mentioned, the mission is simply to succeed -- to simplify to succeed. Behind this, we have our Simplify for Success cost program, which is currently targeting GBP 75 million of cost savings in 2026 with a run rate of GBP 100 million from the end of 2026. We are targeting an adjusted operating profit of GBP 195 million to GBP 210 million in 2026. I note, and this is quite important that this does not include the positive impact of the revised contract changes from the German rail businesses. Once these agreements become legally binding, which we expect will happen by 30th of June of this year, we will update our guidance. In summary, Alsa remains an engine of growth. WeDriveU is on a recovery path, and our U.K. and German businesses are leaner and more resilient with GBP 75 million in targeted savings and an operating profit guidance of GBP 195 million to GBP 210 million and positive net cash in 2026. I will now hand over to Paco, who will go through the operational review. Francisco Iglesias: Hello. Good morning. Thank you, Brian. Thank you, Phil. Thank you all of you for being here. For me, it's the first time I'm in the floor, and it's an honor to share some words with you. Just to -- as you have noticed, I'm Spanish, but you probably don't know is I'm from the South of Spain, that means that my accent is a little bit poor. So apologies for that, but I hope you can understand me better. I'll try to give you a more view on the operational side after all the numbers that Brian and the strategy from Phil, I would like to say something a little bit different on that well, this is Alsa, you know that I know Alsa a little bit. I've been working for Alsa for 34 years, and I'm very proud in the last 10 years as CEO. But I would like to explain what is behind the figures of Alsa. And I think it's important to know what's the portfolio of the business that Alsa maintains at the moment that you probably know that Long Haul is like a jewel of the crowd, long haul is 17% of the company. It's just 17%. Where we are growing more at the moment, what we are growing a lot in international that was almost 0, 5 years ago. because Morocco is there. And also in the diversification area that we are also improving. And the largest part of the company right now is the regional one that is also under a concession under franchisees process. But if you see the figures, we have managed to keep growing in 2 digits in terms of revenue and also in terms of profit. And the margin, to be honest, is unbelievable. I think it's to achieve 14% margin is challenging for the future. But I would like to convey that it's been a record year for Alsa, but not only in terms of revenue or profit or margin, but also number of passengers, customer satisfaction index, safety target, digital sales. So it's a mix, a combination of all the factors that we are working in to get the strategy and the numbers done. And a couple of points regarding the environment that Alsa, especially in Spain are now involved. One is very important is there is no direct impact in the figures, that is the approval of the mobility law in Spain. Just for you to know that the former mobility law took place in, if I'm not wrong, '87. So that means that it is a new law after 40 years. And why it's important that this mobility is now a right for the citizens in Spain. It's not only a word. It's something that is like a new pillar of the well-being of the society in Spain as the healthy or the pensions, we have also now mobility on the top of the priorities of the government, and this is very important. And also this new law secure the system of franchising and concession for long haul in Spain. So I think it's very important. It's something that has been very controversial in the past regarding if it's going to be regulated or liberalized now with the new law is secure. And the other point is the strong support from the government, from this government to the public transport, not only by the law, but also for the -- it's not subsidy. It's like because it's not subsidies to the companies is to reduce price for the passengers to use more public transport. And I think it's -- the current government has put on the table million of euros to support all kind of transport, rail, coach, buses and the rest. So I think it's important you to know. And my view on '26 is very positive. And the first 2 months, I cannot show you the figures, but the starting of the year '26 is going -- is performing very well. Let me give you an example of growth. This is Qiddiya, the Saudi city on that. How can we -- growth in that contract is EUR 500 million contract in 8-year plus a potential extension of 2 more. And it fits exactly with the strategy of Alsa. It's asset-light, is low risk and it's a project that is absolutely scalable because this is one of the -- it's the first mega project that the Saudi government is building in the country, but the plan is to have 10 projects like Qiddiya, in the next year. So we have been awarded in the first one. So we are well positioned for the rest of the tendering process that will take place. And it's also remarkable that we have won this contract competing in the, what I call the Champion League because we were competing there with the state owned -- French state-owned company, the Italian one, the Singaporean one. Well, the top of the, company and Alsa that is -- the size of Alsa is not that high as you can imagine as some of our competitors, and we won the contract through technology and through innovation. For example, you cannot see very well, but this is one of the main -- of the strong points in our offer is to build what we call the station for the future. That is a new concept of how people are going to move in the country. And I think it's key that it's not a question of price, not only price, it's a question of technology where we are the technical support for the government as well. If we move to WeDriveU, as Brian mentioned, I think despite the total figures, the figure from H2 has been very, very positive. We have managed to change the trend that we had in the past. You know that from the H1, we have the separation process with the school bus that has some cost. And now we are focused on -- once the separation has been made, we are focused on the strategy of cost and also to improve operation and to have better margins on that. So -- and also, as Brian and Phil mentioned, one of the main points is to get rid of the loss-making contract. We don't have much. We're managing in the States almost 100 contracts, but there are 3, 4 of them that are negative. And we are in the process of avoiding all this risk for the future because that will make directly an improvement in the final figures. Also to say that the states I passed a lot of times in the last year, there is a lot of room for improvement. Our market share in the state is very, very little. For example, one of our competitors have 10x the size of WeDriveU. That means we have a lot of place. And we are now entering some new areas of the industry like universities where I see very interesting through technology and through good performance. And I'm quite happy about the future as well in 2026. If we go to U.K., I think it's -- we cannot share the figures from bus and coach, but I can give you some light on that. On the bus, we are -- a slight increase on revenue, but it's true that the passengers are going down, not that much, but I think it is in the same trend that all the urban industry in U.K. are doing and are suffering right now. But I think positive news is we have managed with the authority to secure the fundings in order to have at least, I would say, breakeven in '25 and of course, in '26. Also very important in the coach that I would define that the integration of U.K. Coach and Alsa is completely success. Now here, I can see Javier, who is in charge of U.K. Coach in Birmingham. And we are in just less than 6 months, we have changed a lot of things. And again, if we go to the numbers, the decline on passengers in long haul has been less than 4%. But if you consider that our competitor, our main competitor in long haul has doubled the size of the flights and the routes that they are operating, our less in passenger is very, very little. And we still have the majority market share in long haul by far to our competitor. And we have also a very clear strategy on focusing on specific routes with the new pricing tool on technology that we have completely changed a new structure that we have put in place leaner, more close to the ground to have -- to know the problems and to have several areas depending on the different products that Javier is running there. For example, we have a clear vision that we need to grow in airports that we are -- in the overall figures, we are growing a lot. And of course, we are tackling with massive savings with no impact on safety, not impact at all in the operational excellence. So I'm also very optimistic regarding '26 that we can manage to reverse the situation that we have. Finally, Germany, I think as Phil mentioned, I think it's several milestones. For the first time, we have -- we are running 100% of the services after years. And what is even more important, we have achieved the number of drivers that we need that you know that we have a shortfall in drivers in the last year that made us some penalties with the PTA. Now we have all the drivers. And what is more important, we have all the drivers with a lower cost because you know that part of the driver that we were using in the past came from third parties for agencies now and with a higher cost. Now we are running all the operation with our own drivers. And for '26, I think it's very important because it's the year not only because of the agreement with the PTA that they are doing extremely well, but also because they are going to start the new process of bidding there. So -- and I think we are now in a very good position after the agreement with the drivers with good KPIs in operation to try to keep growing in that market that I see also very interesting for the future. And this is my final slide. I would like to say that this is after 1 year working on the -- throughout the group, 5 things that I have identified that we are working in the same page. This is -- these are facts. This is not only narrative. This is -- there is fact behind all this statement. First, all the divisions are performing better than last year, these numbers. Second is we have huge opportunities of all around the world. I mentioned Saudi. I mentioned states, but we have also some other opportunities in some other places. The massive cost reduction that we are implementing all around the divisions, including Alsa, but also the rest of the divisions. So we are going to work in the future. In the present -- we are right now working in the present with a leaner and more efficiency base of cost. So that gives us the opportunity to be more profitable that is linked with the next point that we are improving the margin on every single contract. We are avoiding totally loss-making contracts. This is a process that we're going to finish in the next months, and we are trying to get a little bit more of every single contract to gain 1% in every single contract, you can imagine that it has a huge impact on profit. And finally, probably this is not a real -- it's a fact, but it's not a number behind that I've been working, as I said, with National Express in the past for the last 20 years. And for the first time, and thanks to these guys, we are working as a group. Now it's not -- there are 4 CEOs or Vice President or whatever. We have the same protocols. We have the same CapEx view. We have the same procedure for safety. We have everything. So I think it's very important in order to get synergies from one part of the world to the other. For example, U.K. Coach, we are using the pricing technology of Alsa or -- but we have also exported some from the states in terms of Chatel to the business -- or France in the business that we have started in Spain, for example. So -- that's all. I would like to end thanking all of you. Any question after Phil's conclusion, but I want to convey that we as a team are strong. We are excited with the present and the future and myself are very, very optimistic with '26. We will see you in the next month again for your presentation. So you can check if I was right or wrong. I hope I was right. Thank you. Philip White: Just to conclude, special thanks to my buddies over here, Paco and Brian. Let me say, Paco. You have no need at all to apologize for your English. People can probably understand. I'm not mentioning you. But Paco, your accent from the south of Spain, it's much easier for people to understand than my accent from the north of England, but well done. That was a great presentation. Let's conclude. We're not going to keep you much longer over the presentations. But I suppose to conclude the first half of the year, compared to that, we're in a much better position in the H2, and there's been a significant turnaround throughout the business, especially coming up in 2026. We've streamlined our business by getting rid of the corporate glue, as I say, and exited loss-making operations. No point in running them if you're not making money. We are streamlining and simplifying, removing unnecessary layers and complexity. We're working smarter, becoming leaner, more agile and better able to respond positively to market trends and opportunities. And there's still lots and lots of opportunities out there for us. As Brian mentioned, cost and cash flow are now the key priorities for strengthening the business. And of course, we continue to seek every opportunity to deleverage. Everything we've discussed today is about creating a sustainable business. I spent the first 6 months of my tenure looking backwards, trying to fix things that had happened probably years ago. We're now no longer just looking backwards to manage challenges, we are rewiring and rebuilding our business to deliver long-term profitable growth for our shareholders. And for our millions of customers, we are committed to delivering what they deserve, and that's the best possible service we can provide. We are here for them. They are not here for us, and that's important. So in summary, we're fixing the businesses that need our focus. We are simplifying and integrating where it counts. Importantly, we are taking our people with us on this journey, returning the brilliant talent that we have in our business, and I can tell you, we have some brilliant talent. I'm not just saying, that's easy to say. But working with these guys since I've joined, very young, and they make me feel young, too, and I love that. But from the Board up to the guys who turn out every day to run our buses to run our coaches and run our trains, whose jobs can be both very difficult and dangerous, we owe a hell of a lot to these guys. Thousands of them who do this on a regular basis. A couple of thank yous. Thank you for coming along today, and thanks for the patience you've given us over the last 12 months-or-so. A very special thanks to our advisors over there who support us all the time. Yes, give us a nudge when we need it, pull us back when we need it and stop us for saying silly things, which is mainly me when I'm feeling a bit crazy. Now we couldn't do it without you guys really, really appreciate it. But thanks for turning up today. I can tell you, I'm very looking forward to a number of site visits in Ibiza, right? Where I can show you our late night and early morning service, and I'm sure you'll enjoy it. So thanks very much for everything. Thank you. Philip White: And over to Q&A. Are you going to manage this? Gerald, do you want to kick off? Gerald, be nice. Gerald Khoo: Gerald Khoo from Panmure Liberum. I'll start with 3, if I can. Morocco, can you talk us through what's gone wrong? When did it go wrong? And why has it led to such a large exceptional charge? And on the topic of exceptionals, can you talk through how much of those turn into cash? And let's assume WMATA does, I know you're all confident that it won't. And then, again, on the exceptionals, you talked about sort of more cost reductions, what exceptional should we expect associated with that? And finally, on U.K. Bus asset monetization, I think you sold 2 depots. You gave us the game. Are you able to give us the proceeds from those 2 sales and how many depots have you got left? Philip White: Can you do the operational stuff in Morocco first explaining what happened there? And Brian, can you deal with exceptional stuff? Francisco Iglesias: Okay. Morocco, we started just to put you in context, we started Morocco in 1999. So it's 27 years ago. And we reached 6 operations in Morocco in 5 years ago. So until more than 20 years, we didn't reach the size of the business that we have. Now we are running 4 cities, and we are running the first and the second cities in Morocco, that is Casablanca and Rabat, as you know. So I think it's part of our bidding process. Sometimes you win, sometimes you lose. This is nothing to be at fault. And we are still the largest urban operator in Morocco. And what we have done with the exception is just to all the assets we have and the staff that we need to be out of the company because of the process of losing Tangier and Marrakech. This is the cost. But if you ask me, are you optimistic in Morocco? We are making money in Morocco. We will make money in Morocco '26. We have some opportunities in the future to keep growing. But as the largest operator there, it will be more difficult because now there are more big companies competing with us that we don't have in the past. But we have also some areas that I cannot say, but some areas of diversification that we can enter in the Morocco market. So my view is it's been -- of course, I prefer to win rather than to lose, but I think it's part of the normal business, and I'm not especially worried and I'm optimistic for the future in Morocco. Philip White: I think when you're operating a successful business, you grow it to the extent that we did. There's always a lot of people, a lot of competitors who want a share of it. They'll come in and take it, whatever business you're in, whatever profits you're making. And I think that's what's happened to us in Morocco. But on the numbers, Brian? Brian Egan: Yes. Morocco, we had a provision of just roughly GBP 20 million at the half year. So this -- then in the second half of the year, we had this issue where the authorities ended a contract and we had to impair some of the assets. In terms of the other questions, the sales of the depots, we sold 2 depots, just over GBP 4 million, the proceeds from those. And then we look to monetize the rest of the U.K. Bus business. That was all that we had at the end of the year. On the exceptionals for the cost restructuring, we don't have a number for this year at the moment. We're working through more cost takeout. We'll give more guidance on that for the -- at the 15-month stage. We have a better handle on that. And then the final one was the adjustments. So I can very quickly go through them. I mean, obviously, the -- we drive new contract provision, which you mentioned, I mean, we do absolutely expect to be successful in litigation. But -- that is -- that won't be a cash cost if we were unsuccessful, but that certainly is not what we expect. And the legal advice is very solid. On the legal claims, that will end up being cash because it's a provision for settlements. On the intangibles, that's noncash write-down and the restructuring cost is mainly -- that is mainly cash. That is mainly cash. And Morocco going forward, that is really -- in terms of a go forward, that isn't an impact because that's a provision against -- in other words, we're not going to recover that debt. That debt has now gone. It's not a cash -- it's not -- the debt has disappeared effectively. Philip White: And Gerald, on the West Midlands depots. One is a depot Acocks Green, it's very old, in need of a lot of maintenance and the other property was a bit of car parking land. So it's one garage and a bit of land. Gerald Khoo: It sounds like it was in the books [indiscernible]. Philip White: Yes. Francisco Iglesias: Yes. A little bit more than that. But... Philip White: There was no write-down was there? Brian Egan: No, no. We made a profit of [ GBP 4 million ]. I think it was in the books, it was about [ GBP 7 million ] was in the books. Muneeba Kayani: Muneeba Kayani, Bank of America. So firstly, just on your guidance, the low end implies a decline in profits and EBIT. So can you explain how you've thought about that in the range like the bottom and top end scenarios? Secondly, on Alsa. So if I understand your outlook, you are saying kind of maintain profitability. Is that a comment on the margin, given the strong margin that you saw last year. So you still expect top line growth? If you could just clarify kind of the moving parts between the top line and the margin outlook on Alsa for '26 as you've thought about it? Brian Egan: Yes. I'll give -- I might ask Paco for some help on the second one. But for the first question, we've taken a view on the guidance for next year. We felt it was right to start at the more or less where we entered this year, I guess, very slightly below. I mean we certainly hope to do better than the minimum, but that is where we felt being sensible about guidance was the right place to be. What we don't want to do, which has been a constant theme in the past is where we give guidance and then miss it. So we want to give content that we're very firmly believe that we can achieve. And then on the margins. On the margins, Alsa had an extraordinarily strong performance this year. And again, maintaining that performance, and there are some challenges, for example, in Morocco, we've just discussed. So making sure that we can maintain that level of profitability going forward, I think, is what we believe is achievable. I mean there are quite a lot of challenges within the mix of Alsa. I don't know whether you have anything to add? Francisco Iglesias: Yes. Yes. Okay. Of course, I said in the presentation that 14% is unbelievable. It's something that even if you have asked me 1 year ago, I would say that's very, very difficult to achieve 14%. What I can say is the trend in Alsa that we are growing in terms of revenue through business as usual, passengers that are growing even 2 digits, thanks to a lot of things. But also because we are winning new contracts, for example, that figure is not included the contract or it's not included in the new contract that we are going to start in Ibiza or some other places or Guadalajara. So I don't -- to be honest, I don't know if we can reach 14% of margin. But I can say is that we are still growing. There is room for improvement in terms of revenue, in terms of passengers, even in terms of profit if you are not obsessed that I need to reach 14% of margin, I'm obsessed that we need to keep growing in all the opportunities we have. If the margin is 12%, it's fine for me. If the margin is 20% much with it. Philip White: I think you might think we're a bit cautious. I think -- we think by being open and realistic we've got to rebuild a lot of trust with you guys and with our shareholders. And I think by being open and realistic, then putting figures out that end up to be meaningless is the best way to go rather than totally failing and failing to hit guidance year-on-year. I don't think that's the best way to go. Muneeba Kayani: And if I may ask a third question on the Qiddiya project in Saudi Arabia. We've heard in other projects there, there have been many delays. So kind of as you think about this project and other projects in Saudi, how do you factor in kind of timing of these projects and impacts from your perspective? Francisco Iglesias: Well, my experience you know that we run the 3 contracts in Middle East, 2 in Saudi and 1 in Bahrain. This Qiddiya project, this is a fact we were awarded, and we need to start in 45 days after the sign of the contract. So my experience is they are doing very quickly because they know they need to have these cities running. And for example, they are now launching a project with rail that we are not in. But -- and we have been asked the time line day to ask that we can manage a second project there. So I'm not worried about that. And also to say that in the first month of operation, it was like a wide operation. We made profits from the day #1 because it's not a risk contract. It's a gross cost. So it's -- so if I have to bet, I would say that it's something that is going to happen quite quickly. Jack Cummings: Jack Cummings at Berenberg. Three questions, please. The first one is just on cost savings program. I was wondering if you could just flesh out a little bit more. I know you mentioned kind of corporate glue, but what specifically you are taking out the business in what divisions? And the second is on the pipeline. Obviously, you won a decent amount of revenue and contracts both outside of the joint venture and including it. What's the pipeline looking like for full year '26? And then just finally on covenant leverage, I think 2.7x at year-end. How should we think about how that's going to trend over the next 12 months? Will it tick up a little bit in the next 3 to 6 when North America School Bus comes out and then full? Just any more color there would be great. Philip White: I'll do the corporate glue one because it's my theme this one. It's quite easy really. And it's what Paco said, it's the first time we've been really operating as a team probably since I left a long time ago. We work together. We've got a strong GEC, our group executives. But importantly, it's how you deal with requests either for approvals or for help. We deal with them quickly. If it's a no, we tell them no straight away. We don't just ask them, can you give me more information? Can you give me more information and then tell them no. And if it's a yes, we're pretty positive about that. It's all about the speed of things. Attending these big corporates where we've all worked before, they lose -- their nimbleness goes. And the slower they are on making decisions and getting bogged down, more chance that opportunities disappear. And we've had one already. I mean, an acquisition in another country in Europe. We've delayed it and deferred it and messed about with it in the past, and it's gone away. And this is danger, by being so pretty slow, you can miss such a lot by being too careful. We've got this governance. I know you guys think governance is important, and I appreciate that. But governance doesn't make you any money. It makes you do things right, and you know the difference between right and wrong. But there's a balance between good governance and good and quick decision-making, and that's getting rid of that glue that's sticking us everywhere. Francisco Iglesias: Let me add something that we are now, as Mobico running 12 countries. If you compare 12 countries with our main competitors in the Champion League, they are running in 40, 50 countries. So that means that there is a lot of room for places to go. Let me not releasing the exact pipeline. But it also is a fact that we submit roughly 30, 3-0, bidding process in a year. I would say less than half in Spain. This is the line of their share, but more than 50% out of Spain in the other 11 countries that we run, we are preparing something too. But not only that, we are also having a look or -- not footprint, but some researches and some ongoing negotiations with at least 5 more countries where we are not in at the moment. So let me say that I'm not going to say you the opportunity because they are competitors. But I can assure you that we have a lot of opportunity. I'm not sharing -- I'm not sure that we're going to win all of them. You know that the ratio of winning contract is about 30%, but you can imagine that if we have this size of opportunities, I don't know, 1, 2, 3, we will win, I hope. If not, it has to fire me. Philip White: Brian, can you do the cost stuff? Brian Egan: Just in terms of cost savings, so GBP 75 million, that is spread right across the group. Head office is -- I mean, just in very rough terms, there's around GBP 15 million at head office. The big focus, as we've mentioned in really all the presentations has been on U.K. Coach, which is about [ GBP 25 million ] and then it's [ GBP 10 million ] out of the other divisions. So Germany, Alsa and WeDriveU. So -- but it really is right across the business. On the covenant, it's a little bit complicated because of the German settlement because that's going to influence the ratios very significantly. And in fact, the accounting is quite complicated. In fact, even KPMG are getting technical advice as to how it's treated. But it will be -- without Germany, it will be in -- it will obviously, the covenant ratio, but probably in the 3s. But I'm probably getting stared now, I'm not supposed to say. So it will be in 3 excluding Germany, with Germany, and that again, depends on accounting, it would be lower. And by the year-end, it will be below 3. Philip White: Questions, guys? Ruairi Cullinane: Ruairi Cullinane, RBC. The first question on Alsa concession renewal. So what percentage of Alsa's revenues are up for renewal in full year '27? Is there anything else coming in the years after that? If you could even give us an indicator of what percentage of earnings that would be even better. Then secondly, on provisions on the balance sheet, you've hopefully quantified that there will be GBP 8 million of utilization from the WeDriveU onerous contract provision. You may not be able to comment on German rail, but if you can, that would be appreciated. And then is there anything else we should be thinking about? Yes, I'll leave it at that. Philip White: Okay. Thanks, Ruairi. Can you talk a bit about concessions coming up, Paco, well, this year and next year? Francisco Iglesias: Yes. Well, the franchise process is ongoing. This -- it's true that it has been a general delay but it's something, for example, right now, there is 1 or 2 contracts on the table. We are not incumbent, but in Spain, we have -- in March, it's -- we need to submit at least 2 offers in the process. So we will have the process. I don't expect that we will have in all -- of course, not all of them because if I'm not wrong, we manage 21 contracts in long haul in Spain. So probably it's a process that will take at least a couple of years to finish. And after that, you know that there is a process of mobilization, claims and so on. So I don't have the crystal ball, but I think it's something that for sure is not going to impact '26. It's strange that could impact in '27 or at least in the first half of '27, but it's something that is happening. And of course, we haven't lost a single contract in long haul in the history in Spain. And as I show the revenue of long haul is 17% of the company is a good margin. And of course, after a bidding process you usually lose a bit of margins, but because you have to reduce price. But after that, there is a recovery coming from the increase on passengers. So it's a process like a peak on that. So I don't know if that answers your question or not, but this is my expectation. Philip White: On German rail, I'm sorry, I can't give you any more because that's a commitment we've made to the local authorities there until we get the contract signed. They're a different organization to us, political organization and they have got a lot of people who they report to, including their elected members and offices and also central government. But we did say in the announcement that we're reducing the length of our loss-making contract. We're increasing the length of our profit profit-making contract. And we're also changing the basis of our profit-making contract to gross costs rather than net cost, and that takes away a lot of revenue risk. All, I can say there have been long negotiations, and we're very happy with the outcome. There's a lot of tricky accounting, I can't understand, but as Brian says, we're seeking help there, but we are very satisfied with the outcome. Brian Egan: I think the important one is when you put the 3 contracts together, the cash leakage is going to stop. That's the intention. Philip White: And Brian, on provisions and stuff? Brian Egan: Well, I think only the 2 provisions. So on WMATA, it can be GBP 8 million be released next year. And then on the German one, we just have to finalize the contracts and we disclose that. So hopefully, again, with the full year results. We just have to finalize the contracts and we disclose that. So hopefully, again, with the full year results. Philip White: Okay. Any more questions, guys? Are we done? I think we are. Thank you very much for coming along. Really enjoyed meeting as usual. We'll be seeing a lot of you in the future, particularly in this year. Please don't get too bored with us. I know we're not the most exciting people, but we do our best. Thank you very much. Brian Egan: Thank you.
Operator: Good day, and thank you for standing by. Welcome to DIRTT's 2025 Q4 Financial Results Conference Call. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Adrian Zarate, Chief Transformation Officer. Please go ahead. Adrian Zarate: Thank you, operator, and good morning, everyone. Welcome to today's call to discuss DIRTT's Fourth Quarter 2025 Results. Joining me on the call today will be Benjamin Urban, CEO; and Fareeha Khan, CFO. Today's call will include forward-looking statements within the meaning of applicable Canadian and United States securities laws. These statements are based on the company's current intent, expectations and projections. They are not guarantees of future performance. In addition, this call will reference non-GAAP results, excluding special items. Please reference our Form 10-K as filed on February 25, 2026 with the Securities and Exchange Commission, or SEC, and other reports and filings with the SEC for information regarding forward-looking statements and reconciliations of non-GAAP results to GAAP results. I will also remind you that this webcast is being recorded, and a replay will be available early next week. I will now turn the call over to Benjamin. Benjamin Urban: Thank you, Adrian, and good morning, everyone. As noted in our outlook, Q4 reflected a return to normal theme in terms of sales and earnings power or adjusted EBITDA. Our transformation initiatives continue to gain traction, and we believe they will drive a structural improvement in our long-term revenue and earnings capacity. I will expound upon this later in the call, but first, we'll ask Fareeha to walk us through our Q4 financial results and next 12 months or fiscal year '26 guidance. Fareeha Khan: Thank you, Benjamin, and good morning, all. Please note that we have issued a press release discussing our fourth quarter 2025 results and fiscal year 2026 guidance. We have also provided additional analysis in a supplemental presentation. Both documents are available on our website. Revenues for the fourth quarter were $50.9 million, an increase of 4% compared to the same period in 2024. Gross profit margin increased from 35.9% of revenue in the fourth quarter of 2024 to 36.6% of revenue in the fourth quarter of 2025. And sequentially compared to Q3 2025 grew from 30.4% to 36.6% due to the realization of tariff mitigation synergies. Operating expenses for the fourth quarter, excluding reorganization costs, stock-based compensation, impairment charges, legal provision and other nonrecurring operating expenses were $14.1 million, consistent with the same quarter last year. Increases in professional fees and operating support expenses offset lower general and administrative and technology and development expenses. Our net loss after tax for the fourth quarter of 2025 was $3.7 million compared to net income after tax of $4 million for the same period of 2024. Net loss after tax was primarily impacted by $7.6 million of increased general and administrative reorganization expenses and impairment charges as well as a $0.9 million noncash gain on the disposal of the Rock Hill facility lease and a $0.3 million foreign exchange loss due to the strengthening of the Canadian dollar relative to the U.S. dollar. Adjusted EBITDA for the fourth quarter of 2025 was $6.2 million, an increase of $0.7 million from $5.5 million during the fourth quarter of 2024. With respect to our balance sheet, the quarter finished with $20.3 million in unrestricted cash, a decrease of $5.8 million from September 30, 2025. Cash used in operations was $4.3 million, while cash used in investing activities was $1.2 million. Cash used in financing activities was $0.3 million and primarily consisted of repayment of long-term debt, employee tax payments related to vested RSUs and common share repurchases under the company's normal course issuer bid. Our working capital continues to improve with DIO decreasing from 61.4 days to 53.7 days and trailing 3-month average cash conversion cycle stepping down to 47.2 days from 49 days in September 2025. Liquidity was $32.1 million as of December 31, 2025, including $11.8 million of availability under our ABL credit facility. We have not drawn on this facility to date. This quarter, we had minimal activity in our debentures NCIB and shares NCIB program, but we repaid our January debentures with balance sheet cash in January 2026. Additionally, in the fourth quarter of 2025, we executed a letter of offer with BDC for up to CAD 15 million of total funds, of which the first tranche of CAD 5.5 million was received earlier this month. Looking forward to 2026, we are encouraged by the anticipated conversion of our pipeline into revenue. For fiscal year 2026, we are expecting revenue between $194 million and $209 million and adjusted EBITDA between $26 million and $31 million. Our guidance range reflects our current assessment of tariff impacts. Guidance does not reflect the potential impact of unforeseen tariffs or trade policy changes. We will update guidance if and when the impact becomes quantifiable. Benjamin Urban: Thank you, Fareeha. While 2025 presented a myriad of macroeconomic challenges, we transcended adversity and advanced strategic priorities via our transformation efforts. In fact, we are coming off our highest revenue grossing month in 2 years, culminating in $50.9 million of revenue and $6.2 million of adjusted EBITDA for the fourth quarter compared to guidance of $48 million to $52 million of revenue and $5 million to $7 million of adjusted EBITDA. We believe recent commercial wins, the scaling of our new distribution channel, and optimized partner network and our new operating model collectively provide proof of concept for substantially improved revenue growth and earnings quality. Regarding commercial, we recently announced another project with a 10-year-plus legacy client, Google, for their Toronto office, in addition to a major new contract with U-Haul. These engagements reflect the caliber of repeat and new enterprise relationships we continue to prioritize and expand. As for distribution channels, we have evolved how we pursue and deliver projects. Last year, we established a team called Integrated Solutions to explore expanded revenue opportunities. During Q3, we formalized this team as DIRTT Construction Services to better reflect their full scope and capabilities. They provide preconstruction, design build assistance, targeted estimating, self-perform installation and more, elevating DIRTT from manufacturing to a multi-trade prefabricated interior construction company. Construction services complements our existing partner distribution channel by allowing us to: one, provide more technical capabilities to help select partners bid and win larger projects; two, help fill gaps a partner may have on their team; and three, pursue projects in markets without partner coverage in sectors that require specific expertise or for our existing national account strategy. We have also optimized our partner network to support future growth through greater stratification and targeted resource allocation. We remain committed to this channel strategy and have identified our highest potential partners and increased our investments in those relationships to drive pipeline expansion and improved conversion to revenue. As part of our transformation, we introduced a new operating model focused on process standardization and operational discipline. This approach is intended to reduce complexity and unlock capacity across the enterprise. Collectively, these actions are designed to expand our addressable market, augment operating leverage and support structurally higher earnings power. With respect to the Falkbuilt litigation, the 8-week trial covering multiple allegations began on February 2, 2026, and remains underway. DIRTT is pursuing damages it suffered in Canada, the United States and abroad. In closing, I would like to thank our entire DIRTT team for their dedication to continuous improvement and transformation, which requires reimagining how we do business and innovating to be steps ahead of the market and competition. This takes a highly strategic collaborative process, and our team has risen to the challenge. Thank you for joining us today. I will now open the call to questions. Operator: At this time, we will conduct a question and answer session. CEO, Benjamin Urban; CFO, Fareeha Khan; and Chief Transformation Officer, Adrian Zarate, are available for Q&A. [Operator Instructions]. I'm showing no questions at this time. I would now like to turn it back to Benjamin Urban for closing remarks. Benjamin Urban: I have no further closing remarks. Thank you, everyone, for joining us today. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good morning, and welcome to the Hilton Grand Vacations Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to Mark Melnyk, Senior Vice President of Investor Relations. Please go ahead, sir. Mark Melnyk: Thank you, operator, and welcome to Hilton Grand Vacations Fourth Quarter 2025 Earnings Call. Our discussions this morning will include forward-looking statements. Actual results could differ materially from those indicated by these forward-looking statements and the statements are effective only as of today. We undertake no obligation to publicly update or revise these statements. For a discussion of some of the factors that could cause actual results to differ, please see the Risk Factors section of our SEC filings. Our reported results for all periods reflect accounting rules under ASC 606, which we adopted in 2018. Under ASC 606, we're required to defer certain revenues and expenses related to sales made in the period when a project is under construction and then hold off on recognizing those revenues and expenses to the period when projects construction is completed. The aggregate of these potentially overlapping deferrals and recognitions from various projects in any given period are known as net deferrals. Please note that in our prepared remarks today, we'll only be referring to metrics that remove the impact of net deferrals, which more accurately reflects the cash flow dynamics of our financial performance during the period. To simplify our discussion today, we've uploaded slides to our Investor Relations site showing these metrics, which we'll be referring to on today's call. I'd urge you to view these slides on our website on investors.hgv.com. On Slide 2 of these materials, you can see the deferral adjusted metrics that we'll be referring to. Reported results for the quarter do not reflect $61 million of contract sales deferrals under ASC 606, which had the effect of reducing reported GAAP revenue and were related to presales of our Ka Haku and Kyoto projects. Also as shown on Slide 2, we recorded deferred $29 million of direct expenses associated with these revenues. Adjusting for both of these items would increase the adjusted EBITDA to shareholders reported in our press release by a net $32 million to $324 million. With that, let me turn the call over to our CEO, Mark Wang. Mark? Mark Wang: Good morning, everyone, and welcome to our fourth quarter earnings call. Before we begin, I'd like to take a moment to thank our team members around the world for their hard work and dedication over the past year to create memorable vacation experiences for our members and guests. 2025 was a year of meaningful progress for HGV. We consistently delivered against our strategic initiatives during the year, driving material growth in package sales, significantly improving our execution and further enhancing our HGV Max offering. As a result, we grew contract sales 10%, representing the highest growth since 2022, with EBITDA above the midpoint of our guidance. We also made investments in our lead generation capabilities, opening 41 new marketing sites with our partners at Hilton, Bass Pro and Great Wolf to support our future tour flow. We grew HGV Max memberships by 35% through the recent introduction of Max to our Bluegreen members, along with the continued demand from new buyers and upgrades in our legacy member base; optimized our financing business to structurally improve our industry-leading cash flow generation, including opening a new low-cost financing market in Japan, the first of its kind for any U.S. timeshare operator. And it enabled us to return $600 million of capital to our shareholders, achieving the target we laid out. Over the past 2 years, we returned over $1 billion to investors through share repurchases, and we remain committed to capital returns as the primary use of our free cash flow. Our strong 2025 results not only demonstrate the progress we made in integrating our business but they also underscore the advantages of our business model, backed by the strength of the Hilton brand with nearly 60% recurring segment EBITDA, a highly engaged base of over 720,000 members, including 266,000 Max members with substantial embedded value and an established differentiated experience platform in our HGV Ultimate Access. As we look forward to the year ahead, we continue to see a stable consumer environment overall, one where travel remains a top priority within consumer discretionary spending. With that consistent backdrop and much of the integration work behind us, we're carrying significant momentum into '26, putting us further down the path to achieve our long-term algorithm of resilient, profitable growth and material recurring cash flow generation to enhance our shareholder value. Our guidance today represents another step toward that goal, reflecting low single-digit contract sales with mid-single-digit EBITDA growth, along with strong cash flow conversion, which Dan will get into shortly. Next, I'd like to provide an update on our strategic priorities and the progress we've made on our integration work. Our strong results were achieved through disciplined execution against our 4 strategic priorities, which continue to guide the organization as we've moved into the new year. First, attracting new customers in a cost-efficient manner; second, enhancing the lifetime value of our member base; third, product evolution and innovation; and finally, driving operational excellence. Starting with the first priority of cost-efficient new member growth. We drove strong tour growth in the fourth quarter while expanding margins and maintaining our sales and marketing cost ratios. Consolidated tours grew nearly 9%, supported by strong package sales over the last several quarters, along with strong local arrival. Importantly, we surpassed our pro forma consolidated 2019 tour flow levels, which is a nice milestone. We continue to focus on tour quality as we leverage the strength of the Hilton brand across our portfolio, added new lead gen partners like Bass Pro and executed against our acquisition, integration and efficiency initiatives. We also sharpened our data analytics and processes with a focus on optimizing cost per tour by customer segment and channel to maximize flow-through. And we continue to expect to drive new buyer growth in '26, which is embedded in our guidance. That new member focus ties directly into our second strategic priority, which is to grow the lifetime value of our member base. The introduction of HGV Max has exceeded our expectations with sustained adoption that has driven a greater than 20% increase in lifetime value of a Max member versus a non-Max member. In the fourth quarter, we saw material growth from Bluegreen new buyers and owner upgrades. And importantly, 4 years after our initial launch, we've also continued to see our legacy club members upgrade into Max as well. We expect that demand to continue as we introduce new guests to our offerings and further enhance the value proposition of Max membership. In addition, we strengthened our customer service and rolled out new AI-based tools to drive engagement and help members make the most of their ownership and vacation experiences. Our third strategic priority is product evolution and innovation to position our brand for sustainable growth. One area where we're continuing to evolve is our scaled differentiated experience platform, HGV Ultimate Access. 2025 was our biggest and most successful year of Ultimate Access. We hosted over 137,000 attendees, a more than 15% increase in participation from the prior year. In 2026, you'll see us introduce several innovations across new categories of events, enhanced booking options and new pricing tiers to broaden accessibility to the Ultimate Access platform. In addition, we'll continue to enhance our HGV offerings with new features and benefits throughout the year. The final strategic priority is driving operational excellence, which is at the core of everything we do at HGV. This focus was a driver of our performance in the fourth quarter and building upon that success to drive incremental operational and asset efficiencies will be a key focal point in '26 and beyond. Operational excellence also extends to our integration efforts. I'm happy to say we reached our $100 million in cost synergy target during the fourth quarter, several months ahead of schedule. It's a great achievement for our teams, and I'm proud of their hard work to hit that goal. And we remain committed to managing costs and further improving our efficiencies from here. Branding front, we've now rebranded our targeted Bass Pro locations, including more than 125 this past year. In addition, we're well underway with the rebranding process for our Bluegreen Resorts with 8 properties completed in '25. We're on track to have roughly 10 additional rebrands completed this year and the remaining 10 in '27. So in summary, I'm happy with our performance this past year. We continue to demonstrate the strength of our differentiated model, and we made a lot of progress on the path towards our long-term algorithm. Our teams are all executing well in the field. We continue to innovate and evolve our offerings, which is showing in our results. As I look forward to the year ahead, our focus is on growth, innovation and efficiency to drive additional progress this year. So with that, I'll turn it to Dan for more details on the numbers. Dan? Daniel Mathewes: Thank you, Mark, and good morning, everyone. 2025 was a year of strong progress for Hilton Grand Vacations. Contract sales grew by 10% for the full year with both our owner and new buyer channels contributing to a positive sales growth. Additionally, the growth was driven by a mix of both strong VPGs and tour flow growth, driving 140 basis points of margin expansion in our real estate business. We achieved our goal of realizing $100 million of run rate cost synergies associated with the Bluegreen acquisition, slightly ahead of our 24-month post-close target. These factors, coupled with a strong fourth quarter performance, put us well into the upper half of our guidance range with adjusted EBITDA of $1.15 billion, growing 4% over the prior year. In addition to our operating performance, we augmented the long-term cash flow generation of the business by executing on our finance business optimization. We ended the year with 73% of our current receivables securitized within our target range of 70% to 80% and compared to a 55% run rate prior to the program's inception. As part of our optimization, we introduced timeshare ABS to the Japanese market, unlocking a new funding source at an attractive cost of capital. For the year, we generated adjusted free cash flow of $756 million or more than $8.25 per share, and we returned $600 million or 79% of that cash flow to our shareholders, repurchasing nearly 15 million shares to reduce our float by over 20%. Turning to our results for the quarter. Total revenue before cost reimbursements in the quarter grew 1% to $1.3 billion. Adjusted EBITDA to shareholders grew 12% to $324 million with margins, excluding reimbursements of 26%, up 250 basis points over the prior year. Within our real estate business, contract sales grew 2% to $852 million. We did a great job during the quarter of converting the package pipeline that we have built over the course of the year. Tours were up 9% year-over-year to 225,000, driven by growth in our new buyer as well as our owner channels. Our strong fourth quarter tour performance also enabled us to surpass our pro forma 2019 tour flow levels for the first time. So I'm really pleased with the result of our efforts. New buyers represented 24% of contract sales mix in the quarter. As we anticipated, VPG of nearly $3,800 declined against the prior year, owing to a difficult comparison from the launch of HGV Max to Bluegreen owners as well as the strong performance of our Ka Haku project during the initial introduction. Cost of product was 12% of net VOI sales in the quarter, down 290 basis points from the prior year, but consistent with levels we've seen throughout 2025. Real estate sales and marketing expense was 46% of contract sales, which improved slightly against the prior year. This reflects the monetization of some of the tour flow pipeline investments we made earlier this year as a portion of that expense was recognized when packages were actually sold in prior periods, but it also reflects the efficiency efforts the team has made during the quarter. Given the increased contribution from tours this quarter, which carries higher marginal expense, I'm really proud that the teams were able to manage costs so effectively to maintain our cost ratio against the prior year. Real estate profit was $177 million in the quarter with margins of 28%, up 150 basis points over the prior year to the highest level we achieved since 2023. In our financing business, fourth quarter revenues were $134 million and profit was $81 million with margins of 60%. Excluding the amortization items associated with our acquired receivables portfolio, financing margins were 63%. Looking at our portfolio metrics, our weighted average interest rate for originated loans was 14.6%. Combined gross receivables for the quarter were $4.3 billion. Our total allowance for bad debt was $1.2 billion on that $4.3 billion receivables balance or 28.6% of the portfolio. The portfolio remains in great shape overall. Our annualized default rate for our consolidated portfolios was 9.86% for the quarter, reflecting another 24 basis points of improvement from the third quarter and marking our third straight quarter of sequential improvement in our default rate. And as of year-end, our legacy HGV and DRI 31- to 60-day delinquencies are level with prior year, and our Bluegreen delinquencies are actually 28 basis points lower than the prior year, continuing the trend of credit outperformance on our originated platform. In late summer, we made meaningful changes to strengthen and streamline our underwriting processes, focusing more on equity at the point of sale, which we see as the primary driver of defaults. The result has significantly increased the equity and cash from both new buyer and upgrades, which should further improve our loan portfolio performance as we look into 2026. Fourth quarter provision of 18.1% of contract sales was slightly above our long-term target for a mid-teens rate and sequentially higher than Q3's level of just under 17%. This was largely a function of fourth quarter seasonally strong owner upgrade trends, particularly on the Bluegreen portfolio, where upgrades accounted for 76% of sales during the quarter. As owners upgrade out of the acquired portfolio, the provision release for the old loan shows up in the financing segment, which was the primary driver of margins in the finance segment being up over 700 basis points year-over-year despite an interest headwind from our previously disclosed financing business optimization program. Assuming similar mix and economic backdrop, we expect the provision to be down sequentially in the first quarter of this year and feel good about the provision in mid-teens as a percent of contract sales for the full year of 2026. As a reminder, our expectations for the financing optimization program was that it would drive an increase in our consumer interest expense during both 2025 and 2026 as we achieve our run rate securitization target of 70% to 80%. We have several ABS deals slated for the first half of this year, including another offering in the Japanese market, which will help us achieve our full targeted run rate of term securitization receivables on an annualized basis. In our resort and club business, our consolidated member count was over 720,000. Revenue grew 6% to $219 million for the quarter, and segment profit was $160 million with margins of 73%, growing 170 basis points versus the prior year, reflecting the consistency of our recurring resort and club business. Rental and ancillary revenues were up 2% versus the prior year to $178 million with a loss of $8 million driven by developer maintenance fees. Revenue growth in the period was driven by higher available room nights and an increase in our overall portfolio RevPAR. While we continue to see solid demand from our stand-alone rental business, developer maintenance fees remain the largest driver of our rental ancillary business segment profitability trends. Inventory management is a priority for our teams this year. We're focused on reducing the burden of those developer maintenance fees by working down our inventory balance through a combination of organic as well as inorganic means. Bridging the gap between segment adjusted EBITDA and total adjusted EBITDA, JV EBITDA was $3 million, license fees were $57 million and EBITDA attributable to noncontrolling interest was $5 million. Corporate G&A was $42 million or 3% of pre-reimbursement revenue, down slightly from the prior year. Our adjusted free cash flow in the quarter was $414 million, which included inventory spending of $103 million, representing an adjusted EBITDA conversion rate of 128%. For the full year 2025, we converted 66% of our adjusted EBITDA into adjusted free cash flow or over $8.25 per share. As we discussed at this time last year, with the launch of our financing optimization, 2025's conversion rate would be above our target long-term rate of 55% to 65% before returning to that long-term range in 2026. During the quarter, the company repurchased 3.5 million shares of common stock for $150 million to achieve our targeted $600 million of repurchases in 2025. January 1 through February 9, 2026, we repurchased an additional 1.9 million shares for $89 million. As of February 19, we had $339 million of remaining availability under our current share repurchase plan. We remain committed to capital returns as the primary use of our free cash flow in 2026 and believe our shares continue to represent a compelling value. As we look at 2026, we expect to maintain a robust pace of repurchases of approximately $150 million per quarter with the aim of not increasing our leverage through those repurchases. This will enable us to continue to return capital to shareholders without adding additional corporate leverage to the business. Turning to our outlook. We are establishing 2026 guidance of adjusted EBITDA before deferrals to be between $1.185 billion and $1.225 billion. Two important expense headwinds are taken into consideration in our 2026 guidance. The first item is regarding our license fees. During 2026, we will experience the annualization of the final rate step-up on our Diamond business as well as our second rate step-up on our Bluegreen business. We estimate that these items combined will be approximately $15 million to $20 million for the full year. With the Diamond step-up being fully realized by August, the majority of the headwind will be realized in the first 3 quarters of the year. The second is the annualization of our finance business optimization. Consistent with our original expectations when we initiated the program, we expect that this will negatively impact the year by approximately $10 million to $15 million, with the majority of the impact being felt during the first half of the year. Our full year guidance also embeds low single-digit contract sales growth. As Mark mentioned, we expect this growth to be driven by tour flow this year. Specifically, our current expectation is that VPG for the full year will be down slightly as we lap the elevated growth rates from 2025. However, despite that increased mix of tours, which generally deliver lower flow-through than pure VPG changes, we still expect to maintain adjusted EBITDA margins consistent with where we ended 2025 due to continued execution against our efficiency initiatives. In regards to the cadence of the year, our current expectation is that contract sales and EBITDA in the first quarter will be flat to slightly down as we lap the near-record VPGs in Q1 of the prior year that were driven by the strong initial launch periods for HGV Max and Ka Haku, along with the anticipated expense headwinds associated with the expected step-up in rates for our license fees as well as consumer finance interest expense as we analyze the ramp of our finance optimization program. We expect EBITDA to improve sequentially in each successive quarters, consistent with sales growth, execution against our efficiency initiatives and as the expense headwinds subside. As I mentioned, our adjusted free cash flow conversion this year will fall within the long-term range of 55% to 65%. We expect that our 2026 conversion rate will be in the lower half of that range as we wrap up the spending on our Ka Haku project ahead of its anticipated opening later this year. But as our level of annual inventory spend trends towards a maintenance level in the upcoming years, we expect to move higher within that target range. Moving to our liquidity. As of December 31, our liquidity position was over $1 billion, consisting of $239 million of unrestricted cash and $809 million of availability under our revolving credit facility. Our debt balance at quarter end was comprised of corporate debt of $4.5 billion and nonrecourse debt balance of $2.7 billion. At quarter end, we had $235 million of remaining capacity in our warehouse facilities. We also had $943 million of notes that were current on payments but unsecuritized. Of that figure, approximately $374 million could be monetized through a combination of warehouse borrowing and securitization. While we anticipate another $388 million will become available following certain customary milestones such as first payment, deeding and recording. Turning to our credit metrics. At the end of the quarter and inclusive of all anticipated cost synergies, the company's total net leverage on a TTM basis was 3.78x. We will now turn the call over to the operator and look forward to your questions. Operator? Operator: [Operator Instructions] The first question is from Patrick Scholes from Truist Securities. Charles Scholes: Question, then I'll have a follow-up question here. You did briefly talk about quarterly cadence for 1Q, but I'm wondering if you could touch on, if possible, quarterly cadence expectations for the other quarters and also specifically within that expectations by quarter for tour growth and VPG. Mark Wang: Sure. Thanks, Patrick. Yes, let me kind of frame it up a little bit, and then I'll have Dan kind of jump into some of the details here. But I think, first, I'd say we made really good progress in '25 on both operational and from a financial perspective. When you think about the investments we made in our lead flow, that gives us a lot of confidence about our tour flow coming in this year, controlled our costs, especially you saw that in the second half of the third quarter and fourth quarter, grew both contract sales and EBITDA and grew both our tours and MVPGs and our real estate margins, which really led to this leading industry cash flow generation over $756 million. So -- and then as we've been talking about, we continue to buy back shares, and we had a record $600 million last year. So as I take just a step back here, as you look at how we're tracking against our targeted algorithm of consistent top line growth with EBITDA growing a bit faster and strong free cash flow, I think we're on a really good path. I'd say in '25, we were a bit below that algorithm with strong contract sales growth, but EBITDA growing more slowly due to the investments we put in the business. But as we look into '26, our guidance today really reflects us tracking better and closer to that algorithm with EBITDA that we expect to grow slightly ahead of sales for the year. So -- and that really is about the tour flow generation. And with that, we expect strong cash flow generation. So anyways, so I think we're tracking really well towards unlocking our earnings and cash flow power of the business and getting us set up on the right path toward that long-term algorithm we've been working on. I don't know, Dan, if you want to hit on some specifics on the VPG and EBITDA for the year. Daniel Mathewes: Yes. No, absolutely, Patrick. I know we talked about it a little bit in our prepared remarks. But when you think about Q1 specifically, we're looking at high single-digit growth on the tour flow side, mitigated by high single-digit decline on the VPG side, which is as expected and very consistent with what we saw in Q4 given the tough comps. As we look on the cost side, there are some pressures. I mentioned the license fee pressure as well as the financing business optimization. The one thing I'd also point out is from a provision perspective, we look to return to that mid-teens level for the full year of 2026. And if you look at year-over-year, Q1 was favorable to that last year. So there's a little pressure on that side. Those components really yield to that slightly down EBITDA in Q1. But when you think about it sequentially throughout the year, we're really going to capitalize on all the package pipeline work that we did last year. You'll recall, we saw some outsized package performance, in particular, in Q2 and Q3 last year. Those will be playing out this year. And we see strong tour flow growth, coupled with easier comps as we progress out the year. Clearly, Q1 being the toughest comp with the first full quarter launch of HGV Max to the Bluegreen owner base. And as we progress throughout the year, those headwinds, in particular, the license fee with the Diamond being fully ramped starts to fall away in Q3. And then the optimization of the financing business should be fully annualized by the time we hit midyear. So it helps sequential growth for EBITDA from quarter-to-quarter to quarter-to-quarter throughout the year. So that's how we see it playing out. So a lot of details in there. So if you have any follow-up, happy to address those. Charles Scholes: Okay. And then actually, my follow-up question is to you, Dan. Just with that uptick in the 4Q loan loss provision, you called out it having to do with upgrades to legacy existing Bluegreen owners. Can you -- there, I say, talk a little bit more about the sausage making into that. There's definitely a little bit of confusion out there of why such a step up. And if you could just help clear the air a little more color and detail around that. Daniel Mathewes: Yes. No, absolutely. Very important question. And it's one of those scenarios where purchase accounting still is coming into play since that acquisition is relatively recent. First, though, what I would like to say is the portfolio in general is performing extremely well. I talked about in my prepared remarks, about us making meaningful changes from the underwriting process. A little bit of an oversimplification, but a key aspect of that was eliminating a program that Bluegreen had in place. We've accomplished this about midyear in 2025, where we're now requiring additional capital down -- additional deposits down from the consumer as they upgrade in particular. Previously, Bluegreen allowed for a no cash upgrade option. And what we've seen is material upticks in the deposits, especially in the Bluegreen side that have yielded strong performance on those originated loans. So those are -- that performance is improving. We talked about the 31- to 60-day delinquency rates. On the HGV and the Diamond side, they're holding steady year-over-year, even sequentially, and the Bluegreen has actually improved by 20 basis points, which is good to see. And we expect that improvement to continue, especially with the change in the underwriting. Now from just a geography purchase accounting item and how you saw an uptick in Q4, the -- how it works from an accounting perspective is when someone in the acquired portfolio upgrades into an originated portfolio, the release of the reserve associated with that original loan actually goes through financing to the extent there's not already a reserve in place. And then you fully reserve the new loan into the real estate business, and that goes into the percentage count. So you're effectively reserving a full balance on the new loan even though you're only recognizing incremental contract sales, which yielded an optic -- uptick to that provision rate. But just to avoid any confusion, we're very happy where our portfolio sits and fully expect to be in that mid-teens range in 2026. So we'll see that tick down in Q1 and remain lower throughout the year in 2026, obviously, assuming no material deterioration in the macro environment. Operator: The next question is from Ben Chaiken from Mizuho. Benjamin Chaiken: I think maybe stepping back a little bit, excess inventory has been a headwind on the rental side for you guys, but also the entire industry broadly driven by the developer maintenances. If I caught you correctly, I think you mentioned there were -- and maybe I'm conflating 2 comments you made, but I think you were referencing some organic and inorganic ways to bring down that inventory again, if I caught you. One of your peers recently took some strategic action. Would it make sense to streamline some of your assets and locations? Why or why not? And then again, did I hear you correctly? Mark Wang: Yes. No, I think you heard us correctly. we've got through a very thorough financial brand and market analysis on the properties that we have in our portfolio. And we picked up a lot of really good inventory in the acquisitions and a lot of great markets. But ultimately, we're looking to try to optimize the portfolio for both our members and our shareholders. And as we've discussed in the past, some of the inventory that we acquired just doesn't align with our long-term vision for the portfolio. So I think as we get closer to making a final decision on our plans, we'll provide a lot more detail. But I think you've heard it from our competitors and you're hearing it from us. This is really nothing related to legacy HGV. That product is in great shape, and we feel like we've put the best new product in the market within our sector over the last decade. So that's in great shape. It's just really when you acquire 2 companies like that, there are properties that just meet the portfolio requirements. So we're looking at it, and we'll give you an update as soon as we have a final plan. Benjamin Chaiken: Got it. And recognizing you may not want to bite on this one, but any way you could maybe ballpark a range of number of assets? Mark Wang: No, I think we're still in the middle of the analysis. Look, we've been working on this for a while, but I prefer to wait and give you the bigger picture and a more concise program that we're looking to move on. Benjamin Chaiken: Okay. And then just as a quick follow-up, just any thought process on -- or maybe more color on your philosophy around buybacks. Is $150 million a quarter kind of the right number? Why not more, just given kind of the amount of free cash flow generated and your valuation? Daniel Mathewes: That's definitely a fair question. It clearly is our primary directive when it comes to -- well, primary choice of use of capital these days as the stock is a compelling value at these levels. And we anticipate continuing at $150 million per quarter. What I would say from our mindset is we're not of the mindset that we want to increase our leverage ratio to repurchase shares. We're very comfortable with the leverage that we're operating at today, which is actually a downtick from where we were prior quarter and year-over-year. But at the same time, levering up the company to buy back shares, given the robust level of the share repurchase program that we currently have in place is not what we're looking to do. That's why we are very comfortable at the $150 million level per quarter. Operator: The next question is from Stephen Grambling from Morgan Stanley. Stephen Grambling: I may have missed this in some of the opening remarks, so apologies. But I think this is the first year where NOG turned slightly negative. And that was kind of like a hallmark, I think, of the story relative to some of the peers. Maybe if you could just shed some light on some of the underlying dynamics there. Obviously, on the last comment about maybe club management, does that have any impact on owner growth that we should be anticipating? And do you expect it to maybe stabilize at some point going forward? Mark Wang: Yes. No, Steve, this is Mark. First, I'd say that I think when you look at our business right now, and it got a lot mature with these acquisitions, right? With the Diamond acquisition, that was -- the strategy was a roll-up strategy, and they acquired 11 companies over time and some of those companies go way back and -- as far as 40, 45 years back. And so you have a situation where some of these owners, some of these members have been in the system for a long time. And we continue to work with them to exit them out appropriately based on a one-by-one analysis of that. So we have some pressure on that side. I'd say the good news is we have generated -- when you look at Max since we rolled out, we've got 266,000 new Max members in less than 4 years. And of that, 175,000 are new buyers, meaning they bought within the last 4 years. So we continue to bring new members in the system. And we've talked about it, I think, on the last call, a new member, the lifetime value is 6x what a member that's been in the system for 15 years. So -- and when you look at our Max membership base, 50% of that base is -- the tenure of ownership or membership with us is 5 years or less and nearly 70% are 10 years or less. So we continue to build lifetime value into the business and more recurring revenue. And so it's just part of the equation. It's part of the business. And for HGV, when we were stand-alone before the acquisitions, we were a younger company, I'd say, only in the business for around 30 years versus we acquired some of these companies that have owners that have been in the system longer. So look, our focus continues to be on driving new buyers on an absolute basis. We believe we've been driving more new buyers on an absolute basis into our system than anybody in our sector, and we'll continue to stay focused on that. Operator: The next question is from David Katz from Jefferies. David Katz: I wanted to just talk about the sales force a bit. Such an important driver in this business. Where are you, would you say, in terms of having the force where you want it? Are there any sort of strategic changes or personnel changes or anything like that, compensation structures, et cetera? Give us a kind of lay of the land there, please. Mark Wang: Yes. So first of all, a big shoutout to our sales force because they do an amazing job. If you think about 2024, we broke through a barrier, $3 billion barrier in contract sales, and that wasn't good enough. They grew at 10% last year, right? So I don't know of any other company that's ever hit $3 billion nor grew at 10% at that level. So we got a great sales force. Dusty Tonkin leads our team there. We've got great leadership with Mike Reilly under him, a great team out there. So we feel really good about our teams. It's -- are we exactly where we want to be? Absolutely not. You always want to be improving. One of the things that you have to think about for us, and we're still continuing to evolve is -- we went from a business back in 2019, where 85% of our business was generated out of 7 markets. Now we're in 40 markets. So we historically were very focused on large markets, and I think we continue to dominate in those large markets. But we also are now -- have developed a lot of mid and small markets. And so those are markets where we continue to build our teams and our capabilities, but I'm very, very pleased with the progress we're making. We've got a great team, and they continue to drive results. Operator: [Operator Instructions] There are no further questions at this time. Before we end, I will turn the call back over to Mark Wang for any closing remarks. Mr. Wang? Mark Wang: All right. Well, thank you for joining the call today and another thank you to our team members for the strong year of execution and, most importantly, for taking care of our members and guests. I'm extremely proud of what you've accomplished, and we look forward to updating you on our Q1 call. Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.