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Operator: Good day, and welcome to the Realty Income Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Ms. Lauren Flaming, Manager, Capital Markets and Investor Relations. Please go ahead, ma'am. Lauren Flaming: Thank you for joining Realty Income's Fourth Quarter and Full Year 2025 Operating Results Conference Call. Discussing our results are Sumit Roy, President and Chief Executive Officer; Jonathan Pong, Chief Financial Officer and Treasurer; Neil Abraham, President, Realty Income International; and Mark Hagan, Chief Investment Officer. During this conference call, we will make statements that may be considered forward-looking statements under federal securities laws. The company's actual future results may differ significantly from the matters discussed in any forward-looking statements. We will disclose in greater detail the factors that may cause such differences in the company's filing on Form 10-K. [Operator Instructions] I will now turn the call over to our CEO, Sumit Roy. Sumit Roy: Thank you, Lauren. Welcome, everyone. 2025 was a year in which our platform, discipline and global reach came together to deliver steady results and position Realty Income for its next chapter of growth. We delivered AFFO per share of $1.08 for the fourth quarter and $4.28 for the full year, supported by 98.9% occupancy and 103.9% rent recapture, reinforcing the stability and diversity of our cash flows. In the fourth quarter, we invested approximately $2.4 billion or $2.3 billion pro rata for our ownership interest at a 7.1% initial cash yield, driven by strong opportunities in Europe and the closing of our $800 million perpetual preferred investment in the Las Vegas CityCenter real estate assets with Blackstone. For the full year, we deployed approximately $6.3 billion or $6.2 billion pro rata at a 7.3% initial cash yield with 30% of acquisition cash income from investment-grade clients. We also sold 425 properties for approximately $744 million, enhancing portfolio quality and redeploying capital into higher return opportunities. As part of our disciplined approach, we proactively address client-specific risks. With At Home, we used early visibility into store-level trends to begin selling select assets ahead of its Chapter 11 filing. Over 18 months preceding the filing, we sold 8 properties for nearly $80 million, significantly reducing exposure. Across the remaining 31 stores, our blended recapture rate was just over 80%, consistent with our historical experience for bankruptcy outcomes. We only experienced one rejection, which was resolved in the fourth quarter. With the company now operating with what we believe to be a stronger financial position, we believe that our early action, disciplined underwriting and active asset management have preserved long-term value. The At Home experience also illustrates how our proprietary predictive analytics platform informs proactive decision-making. Store-level visibility gave us an early read on operating performance, but by using broader predictive analytics to assess closure risk, rents, sustainability and real estate fungibility, we can determine which assets carried elevated long-term risks. In partnership with asset management, that work allowed us to selectively dispose of higher-risk locations at attractive valuations and materially reduce exposure ahead of the filing. And when the filing ultimately occurred, our analysis validated the durability of the remaining locations. That same discipline carries through to how we manage the broader portfolio. We recognized $18.9 million of lease termination income during the fourth quarter, reflecting our proactive approach to resolving potential credit and renewal risk. We also continue to pursue terminations where we see a clear path to higher and better uses. These steps help us preserve long-term value while managing our exposure thoughtfully across the portfolio. Internationally, our established platform remains a competitive advantage. As we have previously discussed, Europe continues to offer compelling risk-adjusted opportunities, and we regularly evaluate the viability of other markets where we can further leverage the strength of our competitive moat. Last month, we expanded into Mexico as part of our broader strategic partnership with GIC, providing the majority of build-to-suit development financing and a $200 million takeout commitment for a high-quality U.S. dollar-denominated industrial portfolio, another example of how our scale, cross-border capabilities and balance sheet open new swim lanes of growth in a disciplined and repeatable way. As part of our international strategy, we are entering Mexico in a disciplined, partnership-led manner alongside GIC and Hines. This structure allows us to finance build-to-suit developments at attractive effective yield with forward commitments at cap rates that compare favorably to U.S. assets while maintaining our target risk-adjusted returns. Our initial focus is narrow and paced, centered on Mexico City and Guadalajara, core logistics markets with tight fundamentals, consistent rent growth and investment-grade tenants. We are investing in mission-critical build-to-suit facilities with institutional quality and U.S. dollar-denominated leases. Over the long term, we view Mexico as a strategic beneficiary of near shoring and expect to expand selectively as fundamentals continue to mature. Our approach also reflects current developments on the ground, including increased coordination between Mexican and U.S. authorities, that may support a more stable operating environment over time. While near-term conditions remain fluid and market sentiment can be volatile, we believe this reinforces the importance of our phased partnership-led entry and long-term conviction in Mexico's industrial fundamentals. Concurrent with our expansion into Mexico, the U.S. component of our previously announced joint venture with GIC is now executing a similar structure. Through this partnership, Realty Income and GIC will programmatically develop approximately $1.5 billion of primarily industrial build-to-suit properties. Last month, the joint venture closed its first transaction, a $58.5 million investment alongside a forward acquisition agreement for a modern industrial property in Dallas leased to a Fortune 500 service-based logistics client. This initial transaction demonstrates how the build-to-suit and financing components of this relationship function in practice, supporting mission-critical clients, earning interest income during development and creating a clear path to high-quality ownership split between a like-minded, long-term investor in GIC. A defining feature of Realty Income's evolution is pairing our operating platform with diversified partnership-oriented capital. This relationship orientation continues to shape our sourcing engine. Approximately 89% of our fourth quarter transactions originated through relationship-driven channels, underscoring the depth of our client and partner network. In addition to our GIC partnership, we furthered our relationship with Blackstone through an $800 million perpetual preferred equity interest in Las Vegas City Center, which becomes the second joint venture we have entered into with Blackstone for a high-quality Las Vegas Strip casino transaction. The structure provides attractive risk-adjusted returns with downside protection, given the strategic importance of this asset to MGM and a right of first offer on an iconic Las Vegas Strip asset, demonstrating our ability to execute large, structured relationship-driven transactions. Looking ahead to 2026, we see a steady core business supported by disciplined capital allocation, healthy occupancy and a pipeline that reflects both the depth of our sourcing engine and the flexibility of our multiproduct platform. With the benefit of global relationships, strategic partnerships and private capital channels, we expect to pursue high-quality opportunities across geographies and capital structures. Strategically, 3 priorities guide our capital deployment in 2026: first, deepen client relationships where we can act as a solution provider, particularly in mission-critical retail and industrial and increasingly through development in structured solutions, including via the GIC platform; second, broaden the investable universe by pursuing repeatable high-quality adjacencies that align with our underwriting discipline and generate resilient contractual income. As a one-stop shop net lease solution provider, our platform is well positioned to originate and structure these opportunities; third, optimize capital efficiency by diversifying equity sources and maintaining balance sheet flexibility, which Jonathan will outline in more detail. Bringing it together, Realty Income today is a full-service real estate capital provider with global reach, multiproduct capabilities and a more diversified set of capital channels supporting our growth engine, anchored by a high-quality portfolio that generates stable and growing cash flows. The momentum we saw exiting 2025, combined with the partnerships and platforms we have assembled, underscores the strength of our flywheel and ability to compound long-term value. With that, I'll turn it over to Jonathan. Jonathan Pong: Thanks, Sumit, and good afternoon, everyone. 2025 was a foundational year for us from a capital diversification perspective. We proudly launched our debut open-end fund in the U.S., successfully raising over $1.5 billion in third-party equity from over 40 institutional investors spanning state, city, county and employee pension funds, sovereign wealth funds, asset managers, foundations and consultants. We established this open-end perpetual life vehicle because this format was the most strategic, valuable and appropriate structure for our long-duration net lease business, which is known for its consistency and lack of volatility. We're humbled by the investor reception to our values, performance track record as a public company, the best-in-class human capital and unmatched access to proprietary data and insights across a seasoned real estate portfolio of over 15,500 properties globally. As Sumit previously mentioned, we were also pleased to establish a programmatic strategic relationship with GIC, which pairs our operating platform with a long-term and disciplined capital partner. While the focus of the partnership will be on build-to-suit industrial development, we expect to partner on a variety of large-scale opportunities given our combined focus on deploying capital at scale, where we can create superior value for our respective stakeholders. I want to briefly take a moment to highlight the broader design behind these initiatives. Our partnership with GIC and the launch of our fund business are not intended to be mere single-period contributors. They are programmatic vehicles that expand our opportunity set today while creating embedded pathways for recurring compounding growth over time. Turning to highlights from the fourth quarter. We ended the year with over $4.1 billion of liquidity on a pro rata basis with a net debt to pro forma adjusted EBITDA ratio of 5.4x, squarely within our long-term target range. Subsequent to year-end, we issued our first convertible note offering, raising gross proceeds just north of $862 million for a 3-year convertible note at 3.5%. We used $102 million of proceeds to repurchase 1.8 million shares of common stock, which reduced potential share dilution and allowed us to minimize the impact of the stock price as we price the transaction. The remainder of the proceeds were used to repay a $500 million note maturity in January, which had a rate of 5.05%, thus, representing immediate earnings accretion through the exercise. Our balance sheet is positioned to play offense on the investment front in 2026. We ended the year with cash and unsettled forward equity totaling approximately $1.1 billion. When combined with an annualized run rate of over $900 million in free cash flow, we have over $2 billion of equity or $3 billion fully levered dry powder to address an active deal pipeline. In addition, we have approximately $400 million of undrawn third-party equity capital committed to our open-end fund that adds further liquidity to deploy accretive capital at scale. Operational efficiency remains a priority. We finished the year with a cash G&A margin of just 3.2% while adding talented team members across our global organization, which ended the year at nearly 550 individuals throughout our vertically integrated platform. We are proud of our ability to invest in top talent at all levels of the organization while maintaining one of the most efficient cost margins in the industry. Turning to 2026 guidance. We are introducing AFFO per share guidance of $4.38 to $4.42, representing an acceleration in AFFO per share growth versus 2025. In addition to the $8 billion investment guidance for the year, key assumptions in our model reflect healthy underlying portfolio fundamentals and in particular, includes credit-related loss of 40 to 50 basis points of revenue, a meaningful decline versus the 70 basis points we experienced in 2025. We expect lease termination income to once again be a meaningful contributor to earnings in 2026 as we forecast $30 million to $40 million based on our current visibility. As Sumit mentioned, this income is driven by our proactive asset management efforts, and we expect this income to remain a recurring part of our business. Our expense margins continue to reflect the efficiency of our business. And for 2026, we are guiding to unreimbursed property expense margin to approximately 1.5% of revenue, and we expect cash G&A expenses to be just 20 to 23 basis points of gross asset value. Finally, we expect to generate approximately $10 million of base management fees from our open-end fund during 2026, which may fluctuate slightly depending on the pace of capital calls for investments made in the fund. Now to close out our prepared remarks, I'll pass it back to Sumit. Sumit Roy: Thanks, Jonathan. Before we open the line for questions, let me briefly summarize. Realty Income enters 2026 with a resilient core business, a broader set of capital partners and a deeper global pipeline that at any point in our history. Our partnership with GIC, our CityCenter investment with Blackstone and our successful cornerstone capital raise for our debut private fund all reflect the evolution of our business and the expansion of our investment buy box. We remained disciplined in underwriting, selective in deployment and focused on compounding long-term per share value. We're looking forward to continuing to demonstrate that our proven operating platform and unrelenting focus on generating durable income is highly valued in the marketplace. Operator, we are ready for questions. Operator: [Operator Instructions] And the first question will come from Linda Tsai with Jefferies. Linda Yu Tsai: As Realty Income has expanded into different capital raising and yield-generating capabilities, new channels, including private capital, new JV partners, build-to-suit initiatives, diverse geographies and loans, how different do you think Realty Income will look over the next 3 to 5 years? Sumit Roy: That's a great question, Linda. Obviously, all of these various different things that you're seeing now in some of the recent announcements that we've made, et cetera, has been part of our strategy going back several years. If you think about how Realty Income has evolved, we used to be 100% retail-only U.S.-centric business. That, over time, has created, first, new channels of investments that were adjacent to what our core competency was. Thus, we included the international business. We included other asset types, and then started to focus on making credit investments with our existing client base with the attempt to be viewed as that one-stop solution provider to our clients. The second part of this puzzle was on how we financed our business. And obviously, on the fixed income side, as we grew into multiple geographies, we were able to diversify our fixed income sources of capital. But on the equity side of the business, it was always our public markets here in the U.S. which has held us very well in our 31-year history as a public company. But what these last couple of years has shown is the volatility that could exist at points in time in economic cycles. That sort of impedes our ability to completely utilize a platform that is capable of doing circa $10 billion of investment per year, which we've shown in years past. And so that was the question that we posed to ourselves internally about how do we start to diversify our sources of equity capital, how do we create partnerships that can allow us to fully utilize the platform that was built for scale and size. And what you're seeing more recently and what you will continue to see is us leaning into these various different sources of capital, forming partnerships with like-minded long-term investors like GIC, working very closely with existing partners and enhancing those relationships, like with Blackstone, who view us as real estate partners that could potentially be a solution for them at points in time. And 3 to 5 years from now, all of these different avenues, including the open-ended fund, the Core Plus Fund that we've put into place, I believe, will be much more mature and will allow us to generate this growth profile that is much more commensurate with what our average growth profile has been over the last 30, 31 years. That is what I see manifesting over the next 3 to 5 years from now. Look, we've always been viewed as a company with the following 2 brands. It's trust and reliability. And growth for the longest time has been also part and parcel of Realty Income, this 5% growth rate that we have historically achieved. But in 2025, it was closer to 2%. And so the question that we are trying to answer, and I believe we have -- the market is now starting to see how we can use our size and scale to effectively differentiate ourselves and be a company that has a very unique investable mousetrap as well as sources of capital that will allow us to achieve that third element of growth. And so trust, reliability and growth, those are the reasons why we are doing everything that we are doing. And I believe in the next 3 to 5 years, all of these avenues will have matured and will allow us to be the company that we have been historically for the last 31 years. Linda Yu Tsai: One for Jonathan. On acquisitions guidance of $8 billion in '26, what's the cap rate you expect? And what are some of the assumptions that feed into your expectations? Jonathan Pong: Linda, rather than giving a cap rate guidance, I would say that we're expecting spreads to be fairly similar on a leverage-neutral basis to where we were in 2025 and where we've been historically, so call it 150 to 160 basis points relative to that weighted average cost of capital, short-term weighted average cost of capital. Operator: The next question will come from Michael Goldsmith with UBS. Michael Goldsmith: Maybe just following up on that last question but from a different perspective. Your acquisition cap rate ticked down in the fourth quarter sequentially. So can you just talk about like what the cap rate environment is looking like? Is that a reflection of what you're buying? Or is that a reflection of competition? Just trying to get a sense of if that acquisition cap rate is trending lower here. Sumit Roy: Yes. Good question, Michael. Look, I don't think quarter-over-quarter, a 10, 20 basis point movement in cap rates really is indicative of the overall market. What ends up closing in a quarter is a function of so many different things. And when you're sharing an average cap rate on all investments made, it sort of doesn't highlight the diversity of products that we are pursuing. Obviously, there are assets that we are buying that is inside of that average cap rate, and then there are some that are above that cap rate. And it's really a function more of what ends up closing in a given quarter, what gets moved to the next quarter that drives these 10 to 20 basis points of movement on average cap rates. But I can step back and share with you our perspective that, look, if you think about the last few quarters, I would say, 3, 4, 5 quarters, the cap rate has been in this low 7% ZIP code. And it is largely reflective of what you're seeing in the cost of capital environment and what you're seeing on the competitive side of the equation. And look, if the cost of capital continues to improve, I believe that cap rates are going to reflect that. And the competition today on the private side has largely been fairly muted, again, because of the higher cost of debt that is there in the market. But if that were to change, which -- I'm not saying it will, but if that were to change, then you'd have more competition coming from the private side of the equation as well. So those are the variables that I would be looking out for to see the direction of cap rates over the next 12 months. But I'll tell you that, over the last 6 quarters, the cap rate environment has been fairly stable. Michael Goldsmith: Got it. And just as a follow-up, maybe you can talk a little bit about the G&A guidance. It was 21 basis points. In 2025, for 2026, you provided a range, which at the midpoint implies it to go up a little bit. So can you just walk through kind of like why G&A may move higher in a material way? And then just also maybe that reflects some investments that the company is making. So maybe where are you investing in the business today? Jonathan Pong: Yes. Thanks, Mike. First of all, I would say the G&A methodology that we're giving for guidance now is percentage of GAV. And the reason for that is because we have consolidated vehicles, we have unconsolidated vehicles when you start to utilize the revenue and the income statement, and it doesn't give the full picture. So I would say if you look at 2025 apples to apples based off of that GAV methodology, we're about 21 basis points in cash G&A. Our guidance is for 20 to 23, so not really a material move. The one thing I'll say is that we've added a lot of really good talent to the team. We ended 2024 at about 468 employees. End of 2025, we're about 544, so about 76 employees hired. It was back-end loaded to the back half of the year. And we feel like we've got a very strong competitive moat across the globe, and a lot of the headcount has been abroad in Europe. And you can see how meaningful Europe has been to our growth, and so that is something that we're very happy about. I think when you look at 2026 as well, we do have a few heads that we are adding. And when you're talking about a platform today that's generating $5.3 billion, $5.4 billion in annual base revenue with over 15,500 assets and plans for it to grow significantly, we definitely believe that we have the ability to hire the best talent to scale the business and to still have one of the most efficient G&A margins in the industry. Operator: Your next question will come from John Kilichowski with Wells Fargo. William John Kilichowski: Just for my first one, maybe could you help me bridge this AFFO guide? It's a really healthy acquisition guide at $8 billion. Surprised with the upside. But I feel like the AFFO guide was maybe below what the Street was expecting. I'm curious, where are the sources of conservatism in your guide? Or what is the Street missing here? Jonathan Pong: Yes, John, I would say it really comes down to the credit loss guidance, credit loss guidance of 40 to 50 basis points of rental revenue, something that has a fair amount of conservatism. We're sitting here in late February, and I think, as is per usual, we want to have a little bit more visibility in terms of how things are playing out before we tighten and lower that guide. So I think if you kind of back into what that represents on a dollar amount, over half of what that represents is for unidentified credits that we don't really see much in the way of high risk of that being utilized, but I think that's probably the #1 thing that we would point out. William John Kilichowski: Okay. That's very helpful. And then for my second one, just to kind of go back on what you were talking to earlier on yields, how do we think about this incremental $2 billion that you're doing maybe above the [ $6 billion ], let's call it? Is that you moving into new verticals? Or -- and then how should we think about the yields on those? Like is that just -- it's a better acquisition environment but maybe tighter cap rates on those incremental deals? Like what allows you to kind of lever up there? Sumit Roy: The way I would think about investments is not necessarily in terms of yield but in terms of spread because ultimately, that's what drives our AFFO per share growth. And I would just underwrite to what we have traditionally achieved, which is that 150, 155 basis points of spread on that $8 billion. There are so many things that go into that mix, John. What is the timing of that $8 billion. Obviously, the reason why we've come out with a fairly large number is because we have a very good pipeline. We feel very good about what is happening here in the U.S. and what's happening in Europe and now what we are seeing in some of the other geographies that we've gone into. It gives us a lot of confidence that, finally, we are at a point where we can lean into the market. And we have all these different channels of financing our business that gives us this confidence. So that's how I would think about this $8 billion, is it's a testament to our level of confidence in the products that we invest in. There are no new products that we are going to be sharing with the market in the near future. It's -- these are products that we've already invested in, and we will continue to sort of lean into it, and that's what's going to constitute the majority of the $8 billion. Operator: The next question will come from Jana Galan with Bank of America. Jana Galan: Sorry, again on the kind of $8 billion investment volume guidance. If you could please clarify, it looks like that's at 100%. And so maybe help us think about how much is wholly owned. How much is in the private fund? Should we assume the full amount of the private fund is deployed near term and maybe mix between the development and acquisitions and whether you also expect it to be an elevated disposition year? Sumit Roy: That's a great question, Jana. We'll give you some level of insight, but obviously, it's an evolving year, and we'll see how things play out. In our fund, we have already deployed $1.1 billion. And so assuming that we hit our $1.7 billion, which we are on track to do by the end of March, we have about $600 million of dry powder of equity that needs to be put to work. And obviously, we can lever this instrument up a bit, and that will be what goes towards the fund. What is unknown is how much more capital can be raised. Both the cornerstone and time will tell. So that -- we set that aside. The rest of it is all going to be balance sheet is how you should think about modeling our investment numbers. Does that make sense? Jana Galan: Yes. And any color on kind of dispositions? Sumit Roy: The dispositions, as you know, we were right around $740 million in 2025. You should expect a similar number in 2026. And this is, again, something that we are starting to lean into much more heavily, and you've seen the run rate over the last few years. And yes. And that's the goal for 2026. Operator: The next question will come from Brad Heffern with RBC Capital Markets. Brad Heffern: Sumit, a lot of concerns about the impact of AI on almost everything in the economy at this point. Acknowledging that everything is very uncertain, how do you view the potential for AI disruption through the lens of your current portfolio? And does it change at all how you plan to invest going forward? Sumit Roy: Brad, that's a great question. We think of AI as an amazing tool to help us do our business even better going forward. We were one of the first adopters of AI, AI-type tools going back to 2019, and we've created proprietary machine learning tools that actually is part and parcel of every element of our business that we do today. We are restructuring internally how we think about how all of the data that is produced by the company, that is accessed by the company, how all of that is going to get organized, et cetera, in data lakes, which will then allow us to further accelerate adoption of AI in various different vertical, functional areas of our business to continue to separate ourselves from the rest of the business -- from the rest of the companies that we run into. This is not something that is scary to us. A lot of us within the company are -- we are very comfortable with technology. Some of our previous lives were within the technology sphere, and so we welcome the innovation that is occurring. And you're 100% right, Brad. Things are moving very quickly. Stuff like lease abstraction that had an 80%, 82% success rate literally 4 months ago is closer to 90% today. But those evolutions are going to continue, and the biggest challenge that companies are going to face is how do you create the infrastructure that will then allow you to embrace AI to create the scale benefits. But that's where the world is moving. We are very well positioned to adopt this innovation, and I believe that from a maturity perspective, we are well ahead of the curve. So bring it on. Brad Heffern: Okay. And then, Jonathan, obviously, you just completed the convertible notes offering. Can you talk about how you view that as a part of the toolkit? And is it something that was sort of specific to the point in time that we were in? Or is it something that you would expect to be more regular going forward? Jonathan Pong: Yes, Brad, I would say, to your point, the way we viewed it was exactly another tool in the toolkit. We believe in flexibility. We believe in availing ourselves of the entire menu of capital options available to us. And so we are known to be a very active issuer of capital, and a lot of that is equity. And so when you think about the conversion premium that we were able to structure, 20%, which takes you to the high $60 range, thinking about issuing that on the ATM at spot versus effectively at a 20% premium, we were okay with that possibility within 3 years. But I think I would also highlight, we have a U.S. dollar cost of debt on a 10-year basis of 5%, and the debt that we are repaying was north of 5%. And so at 3.5%, we view that as an accretive use of proceeds relative to what we had otherwise have done. So something that we'll look at from time to time, probably not to a significant degree, but when circumstances warrant, we now have established ourselves in this market. Operator: Your next question will come from Smedes Rose with Citi. Bennett Rose: I just want to ask you a couple of more questions on your guidance. It looks like your occupancy expectations come down a little bit for the year as well as same-store rent assumptions come down a little bit, just using the midpoint. So I was just wondering if you could talk a little bit about what assumptions you're making behind those 2 pieces of the guidance. Sumit Roy: Yes. With regards to the occupancy number, it's a physical occupancy number that we share, Smedes. And when you have a bunch of smaller concepts that basically have vacancies, they could move the occupancy number by these basis point movements that we have shared. Look, we feel pretty confident about the 98.5%. We -- and it is largely going to be a function of the type of expirations that we see, the size of these assets that are going to be expiring in 2026, which tend to be a lot more smaller assets with fewer rents. I believe the expiration schedule for 2026 is about 3% of our rent. So it's really a function of what kind of assets are expiring in a given year that dictates what the physical occupancy is going to look like in any given year. And I believe if you look at what our 2025 guidance was, it was in a similar range, perhaps even slightly lower, and we ended up at 98.9%. So this is our guidance. We feel very comfortable with it. And maybe there is a level of conservatism, but we'd rather be conservative than wrong. Jonathan Pong: And Smedes, I'll just add on the same-store side. Look, the portfolio overall has about a 1.5% CAGR just on a contractual basis. And so with guidance at 1% to 1.3%, that's really just to capture any type of credit-related loss that we may or may not have in 2026. And a lot of it is associated with just an identified credit loss that may or may not happen with a sense of conservatism. So that's the biggest contributor of that. I would also say there are 1 or 2 tenants where we did have some restructuring in the fourth quarter, and you're seeing the annualized impact of that through the 2026 guidance number. Operator: The next question will come from Ronald Kamdem with Morgan Stanley. Ronald Kamdem: Just 2 quick ones. On the sort of the investment guidance, is it still fair to say that Europe versus the U.S. is where you've seen the most sort of compelling incremental investment spread opportunities? Just if you could talk about where the incremental dollars are best spent across sort of geographies and even capital structure would be helpful. Sumit Roy: Sure, Ron. If you look at what happened in the fourth quarter, it sort of reversed in terms of where the volume came from. 60% -- almost 60% of it was U.S. centric. 40% was the rest of the world. And -- but prior to that, Europe was driving so much of the volume. And if you look at the year, 2025, $6 billion of acquisitions, it was dominated by what we did in Europe versus the U.S. But the point I want you to take away is in the fourth quarter and now going into 2026, we are starting to see momentum in the U.S. as well. Europe continues to be where there's a lot of visibility. And our core differentiators in terms of what we bring to the table vis-a-vis our competitors continues to lead to disproportionate amount of volume for us. And I believe that in 2026, we will continue to see that. And now that we've added here Mexico as well to the mix, I believe you're going to continue to see us looking for opportunities, et cetera. And by sheer math, I mean, the more geographies we're going to start adding, the reason and the rationale behind adding all of these geographies is because we feel like there's a -- it's helping us increase our TAM and our ability to source transactions. This shift is a natural occurrence of our ever-evolving business. So that's the other piece I'm going to leave you with. But the good news that I see and both Mark and Neil are sharing with me is that the momentum is strong in all of the geographies that we are playing in today, and we expect 2026 to be a banner year for us. Ronald Kamdem: Great. And then my second one is just we've talked a lot about, over the last 12, 18 months, whether it would be sort of gaming or some of the data centers or some of the retail parks. Just trying to get a sense of a pulse of like how sort of those opportunities are evolving. Is one playing out more or better than the other? Is one falling back? Just how are those initiatives coming? Sumit Roy: Yes. That's a very good question, Ron, and I'm going to try to be very succinct. Look, we said we were going to be super selective on the gaming side. I believe you can see that we've been super selective in terms of where we've invested in gaming. It's -- and the underlying asset that we have exposure to are the -- one could argue, some of the best assets in the gaming industry. So that's a check mark. They're all performing very well. No surprises. And in fact, I would go so far as to say that the Boston asset, when we started, had a particular coverage, which was very healthy. But if you look at the coverage today, it is 100 basis points north of where we originally underwrote the asset. So again, that's been very good. The retail park strategy is really starting to bear fruit. If you look at what our re-leasing spreads have been, we bought some vacancy. Some of the strategic conversations that Neil and team are having with clients who have aggressive expansion agendas for 2026 and beyond, that is starting to manifest in value creation that we had underwritten to, but I believe that most of the plans that are being executed are well ahead of where we had originally underwritten. So that's a double check mark. And we are the most established name on the retail park in the U.K. And we are well established in Ireland, and we are now starting to see if that same strategy can play out in the rest of Europe. So that's a strategy that has double clicked as well. Data center continues to be an area that we are very focused in trying to grow. But again, we've said that we are going to be very selective. We're going to make sure that we are partnering with the best-in-class developers and that the ultimate exposure that we have to assets have the fundamentals that gives us the confidence that they are going to continue to perform beyond that initial lease term. And so if you look at where we've invested, what we've announced to date, I think you will -- you can safely say that that's a double check mark as well. And look, we want to accelerate the data center investment piece, but we are not going to do it at the expense of taking on additional risk. So all 3 of those areas that you mentioned, Ron, continue to be very core to our strategy, and you will and you should continue to expect us to make investments. Operator: The next question will come from Jay Kornreich with Cantor Fitzgerald. Jay Kornreich: First off, just as you think about your cost of capital, the stock has performed very well year-to-date. And so I guess I'm curious, as you've seen your equity cost of capital improve, does that change how you're thinking about your investment outlook at all and maybe allow you to be more aggressive in acquiring real estate at slightly lower cap rates while maintaining healthy deal spreads? Just curious of your thoughts on that. Sumit Roy: Yes. So look, we are very blessed that the market is starting to recognize the value proposition that we bring to the table. The fact that our cost of capital has improved is an added lever that we can sort of lean on. But in terms of how we think about underwriting, how we think about risk-adjusted returns, that's on a asset-by-asset basis. And the fact that we can finance those assets at lower cost, I think, just lends itself to higher spreads. It is also true that we can pursue assets that are a little bit lower in the cap rate scale and still be able to get our historical spreads, and that is something that we will look into. But I wouldn't think, Jay, that it changes the way we think about underwriting assets. We are very focused on day 1 accretion. That is what our investors are looking for, along with making sure that the overall return profile of that investment is meeting our long-term hurdle rates. And so none of that changes. Jay Kornreich: Okay. I appreciate that. And then just following up on the private capital fund, which has the $1.5 billion of commitments so far. Should we expect any meaningful bottom line earnings contribution in 2026 from the private fund? Or is the AFFO earnings contribution more pickup in 2027? Jonathan Pong: Jay, in 2026, there will be accretion. The $10-plus million in base management fees is pretty good margin. The costs that accrue to Realty Income to generate that is really the dedicated team that we have, which today is around 7 individuals and some other costs that we bear at the Realty level. So you're still seeing margins that are kind of in the 70-plus percent area on a flow-through basis to Realty. And that's because, for us, we've got a platform that has 550 employees. And so we don't have to build from scratch the same way other subscale players would have to. Operator: Your next question will come from Bill St. Juste with Mizuho. Haendel St. Juste: Sorry. Bill, that's a first one. It's Haendel St. Juste from Mizuho. Sumit, I wanted to go back to a comment you made earlier. I mean, you're talking about another 3 to 5 years for all the changes you're making to manifest itself into real growth. So I guess I'm curious if you're suggesting that we should expect a similar growth profile from Realty Income for the next few years as you're forecasting this year given your commentary about spreads, dispositions, lease term fees? And maybe some thoughts on levers that you could pull to perhaps enhance that growth over the near term. Sumit Roy: Yes. Haendel, when I saw the name, I was going to ask you if you had officially changed your name, but I think I'll leave it at that. Look, everything that we do is to make sure that those 3 words that I said out loud, trust, reliability and growth, continue to be associated with Realty Income. The last couple of years has been a bit of an aberration on that third element. And so we started to cultivate channels to basically go back to a company that can grow at a level that continues to make us one of the most attractive companies to invest in on the real estate spectrum. So that's the goal, Haendel. And I believe that what you're starting to see now are those channels that have gotten over the finish line, and we can talk about it much more. And each one of those has been deliberately thought through to see how can it contribute to the earnings growth for the business. So that's why we're doing what we're doing. And I think Linda's question was around a 3- to 5-year horizon. That's my expectation, is that we -- within that time frame, not only will these channels have matured, but they're going to start to add meaningful contribution to our growth profile and get us to levels that we've achieved in the past and hopefully even supersede it in certain years where we have outsized growth. It's just like we have done historically. And so that's the goal. Operator: And the next question will come from Spenser Glimcher with Green Street Advisors. Spenser Allaway: Can you talk about how the dollar value of deals sourced for the parameters of the private fund compared to that sourced for the parameters of the public vehicle? I'm just curious, I'm like trying to get a sense of the opportunity set and what that looks like for each vehicle. Sumit Roy: Yes. I don't know, Spenser, if I am going to answer your question accurately. If I don't, please just help me understand what precisely you're looking for. Look, I think what lends itself to the fund is products that don't necessarily meet the public company's day 1 spread requirements. So they tend to be lower cap rate transactions but with very healthy growth that more than meets the long-term return profile that our fund business is looking for. But one of the reasons why we sort of wanted to create this perpetual life Core Plus Fund was to take advantage of transactions that we were seeing in the market that basically checked every element of our underwriting standard outside of that day 1 spread. And so that's the kind of product that you should expect to see going in to the fund. Having said that, if you think about the pure math of transactions that we do, being able to enhance -- because Realty Income will continue to be a significant owner of the fund, our 20% investment, co-investment in any of these vehicles, in any of these investments with the benefit of the management fees that we get on the 80%, that allows us to actually enhance our 20% investment. And so deals that we may not have been able to meet on a stand-alone basis, with the management fee on our 20%, it allows us to meet those spreads. So this is a flywheel. It's a -- however you want to think about it, a setup that we've created that would allow us to do so much more. Having these different pockets of capital available to us priced differently with different expectations and obviously, scale a platform that is built to do so much more. So hopefully, that answers your question, but not sure if I got your question 100% right. Spenser Allaway: Yes. Maybe to clarify, so per the parameters you outlined, which is obviously very helpful, how would you say that the deal volume that Realty Income looks at or looked at last year, how would you say that, that is split between what would be appropriate per those parameters for the private funds? So those low initial yield but longer-term growth opportunities, how much of the overall pie that Realty Income looked at, how much would fit the private fund versus the public vehicle? Sumit Roy: Yes. So obviously, what we ended up buying on the public side would sit on the public side. We forgo a lot of transactions that did not meet our year 1 spread requirement, which would have otherwise been purchased had the fund been up and running. And I think in quarters past, we've shared that number with you. I think in the third quarter, I shared a number that was circa $1.7 billion or $2 billion. I don't quite remember the number. But that was what we forgo, what we did not pursue because we didn't have the fund up and running and we didn't have that capital available. I think it was $2.2 billion if I remember correctly -- or $2 billion. And so if you look at what we sourced in 2025 -- it was, by the way, the single largest year of sourcing. It was circa $120 billion. There was quite a bit in that mix that could have lent itself to the fund investing, which we had to pass on because we didn't have this vehicle up and running. So there's plenty to do. And obviously, not all of that $120 billion was U.S. I think 55% of that volume was in the U.S. and 45% was Europe. So our fund is only U.S. centric, so we can -- you can make the adjustments appropriately. But it is absolutely true that there was a lot of stuff that we forgo on that we would have pursued had we had the fund up and running, yes. Spenser Allaway: Okay. Great. And then is there any cost associated with raising capital for this fund as of yet? Just curious if you are using or intend to use a marketing team, like an outside marketing team or a consultant as you continue to raise capital. Jonathan Pong: Spenser, so we have discussed in 8-Ks and press releases past that we do use a placement agent. I don't want to share the exact percentage of the fee, but I will share that it's inside of what we would pay on the ATM and certainly inside of what we pay on a public equity overnight. So much more efficient to raise capital via this channel. Sumit Roy: And beyond October, Spenser, this will be something that we're going to bring in-house, and so this will become part and parcel of our continuous fundraising given that it's an open-ended perpetual life fund. Operator: Your next question will come from Wes Golladay with Baird. Wesley Golladay: Maybe just following up on that last question. You're going to be able to source the cost of equity a little bit cheaper. I guess maybe could you put a parameter around how much the incremental spread could be where you're investing? Sumit Roy: Did we not have that in the investor presentation? Jonathan Pong: Wes, it's Jonathan. One thing that I'll share, we do have this in our investor presentation, where if you kind of do the math and if you assume that Realty Income is a 20% co-investor in the fund, utilizing our same 35% LTV ratio when we go out and finance transactions, and let's just assume, for round numbers, we're getting about 1 point from the 80% of equity we're managing on someone else's behalf, would otherwise be a fixed cap would be closer to 8.5%. And so this is all about amplifying our return on invested public shareholder capital. And that's how the math plays out, and so that's a way for us to generate more bang for the buck if you will. Wesley Golladay: Okay. Fantastic. And then you have the U.S. open-end Core Fund. Is there another opportunistic fund you can do later on? Sumit Roy: It's -- that's a forward-looking comment, Wes. We are not in a position to answer that right now. But we are very happy about the U.S. open-ended Core Plus Fund that we have in place. We feel super excited about that. Our goal right now is to make that as big as we possibly can. Operator: Your next question will come from Jim Kammert with Evercore. James Kammert: Does Realty Income have a sense of GIC's annual dollar investment appetite for net lease investments, whether owned or credit structured? Sumit Roy: It's big. James Kammert: Well, I guess then my second question, really, the related question is, is Realty Income prohibited from pursuing other programmatic co-invest programs away from GIC with other sovereign wealth funds, insurance companies, you name it. I'm just trying to get a sense of the scale of that sort of TAM or opportunity for you as you think about it. Sumit Roy: We are not prohibited from pursuing partnerships with other sovereigns or other sources of capital, but there is no need for us to look for other sources within the build-to-suit industrial development that we have in place with GIC. Like I said, they are -- they're very positively inclined towards the net lease space. If you recall, Jim, they ended up buying STORE. And this is a continuation of their overall strategy. And I don't want to speak on behalf of GIC. That's a question that's best answered by them. But we are very excited about this programmatic JV that we've put in place. And I believe Jonathan already mentioned this, but it's worth repeating. This is not a one-and-done deal. The $1.5 billion is the initial commitment. It's programmatic in nature. And the hope is that we can grow that co-investment thesis because there's value creation for both parties. They have certain requirements given FIRPTA, and we have the ability to help recognize earnings during the development phase. This works. And we are able to both lean into our own sourcing channels to make this as big as possible. I think that's what is so appealing about this particular relationship. Operator: Your next question will come from Jason Wayne with Barclays. Jason Wayne: You said a portion of credit loss assumed in guidance comes from identified properties. So can you give us some color on which tenants or industries are known today? Maybe which are risk to bring to the high end of the range for the rest of the year? Jonathan Pong: Yes. So on the identified side, I'm not going to name clients or tenants, but I think on the -- from an industry perspective, there's a couple of restaurants, restaurant chains that will be part of that. More broadly speaking, again, that's the minority of the 40 to 50 basis points. And so the unidentified piece is considerably larger. And of course, we don't have any type of color by definition given that it is unidentified. Jason Wayne: Okay. And then just does lower year-over-year occupancy guidance include any lease terms so far in the first quarter? And what's a good run rate for quarterly lease termination fees? Jonathan Pong: Answer to the first question is no, nothing material. From a quarterly run rate standpoint, look, this is very opportunistic, episodic. It's very difficult to say that this is going to be something recurring. But I think given just the proactiveness of our team, as I said in the prepared remarks, it is something that you expect to be, of course, over a 12-month period, something in line with this, call it, $30 million to $40 million that we discussed but obviously, subject to change as conversations are ongoing and the analysis continues to be done by several different functions within the organization. Operator: The next question will come from Upal Rana with KeyBanc. Upal Rana: Sumit, I appreciate all the comments on the potential to raise equity. Could you talk through your ATM strategy today given the improved cost of capital? There was no ATM issuance subsequent to quarter end, and the share price has had a nice run recently. So just wondering what it would take to issue equity to the ATM today. Jonathan Pong: Upal, this is Jonathan. I'll say this, over the last 30 days, we've averaged about $400 million a day in trading volume in our stock. If you look back a year ago, that was around $250 million. And so for us, we've got multiple ways where we can raise equity. A lot of it, we already have in place, over $700 million of unsettled equity right now. We had $400 million of cash as of the end of the year. We have over $900 million in free cash flow that we're generating on an annual basis now. We talked about the disposition activity, and that could easily be something very similar to this past year, over $700 million of equity-like proceeds. We've got $400-or-so million of uncalled capital for the fund. So when you start to take away all of that and when you look at an $8 billion investment guidance number, on a leverage-neutral basis, that will require roughly $5 billion of equity. But what I just highlighted was around $3 billion. And so you can do the math. If the delta is 2 and we're averaging $400 million a day in trading volume in the stock, we can be a very, very small percentage of a day's trading volume, barely impact the stock price at all and raise more than enough to that $8 billion and then some. Upal Rana: Okay. Great. That was really helpful. And then maybe you could update us on your watch list today. And could you update us on your Red Lobster exposure given they're back in the headlines that potentially shut down some locations? Sumit Roy: Yes. So Upal, our watch list is right around -- credit watch list is 4.8%. With regards to Red Lobster, it's certainly not in our top 20, and so it's not significant enough for us to really have much of a comment around them. We are watching them closely. They are trying a few different things, but it's not a significant piece of our business anymore. And so all I can say is they are trying a few different things. I believe they've rationalized their menu. They've reduced that by 20%. Lobsterfest is coming up, along with a few other promotions. So we'll see. And I think we are following this company closely, but like I said, it's not a significant portion of our registry. Operator: Your next question will come from Greg McGinniss with Deutsche Bank. Greg McGinniss: This is Greg McGinniss with Scotiabank. Haven't moved. Sumit, I wanted to go back to your comments regarding the other investment avenues maturing and getting back to a more historical level of growth in 3 to 5 years, especially considering many investors are not necessarily looking for a long-term wait-and-see story, which could pressure the equity cost of capital. And what does success or maturity look like with regard to those new avenues? And should we expect to see that 3% growth in the interim or a more modest ratable improvement back to the 5% over time? Sumit Roy: Greg, what I'd like to do is just show what we are capable of doing. We've come out with an earnings guidance at the beginning of the year. And we have all these avenues that we've talked about and allow these avenues to mature, and let's see how that manifests in a higher growth rate. For me to give you a blow by blow in terms of what my expectation is over the next 3 months, 6 months in terms of how this growth rate is going to accelerate, I don't think is something that I'd be able -- I'd be viewed as a prognosticator if I can do that. But my long-term view is that all of these channels will manifest in a growth rate that is much more commensurate with what we've achieved historically. How long does it take? I hope sooner than later. But I can't give you an answer more precise than that. Greg McGinniss: Okay. That's fair. And then just a follow-up. You mentioned that the platform is capable of around $10 billion investments a year, close to what it's achieved before. Is that enough to achieve these growth goals, especially as the company has gotten larger? Or are you anticipating investing in G&A and growing how much the platform is capable of? Sumit Roy: Yes. That's a good question, Greg. And by the way, when we talk about growth rates and earnings, we shouldn't forget that we are the monthly dividend company, and our dividend as of the end of last year, beginning of this year was still 5.7%. And so that's the dividend yield, and that continues to be something that we distribute on a monthly basis. So it's very much part and parcel of the total return story that's associated with Realty Income. With regards to what is this platform capable of, I think it's capable of a lot more. What I was pointing out to was if you looked at what we did on an organic basis in terms of investments in 2022 and 2023 or thereabouts was in that $9 billion, $9.5 billion ZIP code, and it was with a much smaller team with fewer geographies, and we still had fewer asset types that we were investing in at that point in time. So we have scaled the team. We are in more geographies today. Our cost of capital is improving. I believe that our team is capable of doing a lot more investments, just having created a much larger TAM for ourselves today vis-a-vis where we were 3 years ago. And that's where the scale benefit comes in. But what I'm saying is not mutually exclusive from what Jonathan said, which is, selectively, we will continue to look for the right people to drive certain areas of our business. And that is an investment we feel very comfortable making as we become a company that has defined all of these different channels of growth. So you should expect both us to do more and us to continue to invest very selectively in talent that can help us drive our business. Operator: Your next question will come from Eric Borden with BMO Capital Markets. Eric Borden: Great. How should we be thinking about the recapture rate on the 3% of ABR expiring in '26 relative to your long-term average? And should we see an acceleration over time from your re-leasing efforts across your retail park exposure? Sumit Roy: Eric, I -- again, every year is different. It's a function of what type of assets are expiring. Some assets lend themselves to higher growth rates in their option -- exercising of the options versus others. But look, if you look at, historically, what we've achieved over the last 4, 5, 6 years, it has been north of 100%, closer to 103%, 104%, 105%. And my expectation is that the team will continue to meet, if not exceed those numbers. But it is very difficult to compare 1 year over another just given the makeup of the expirations that are taking place. So I'll just leave it at that. Eric Borden: Okay. And then you currently have 173 properties available for lease. Could you just provide a little bit more detail on what percentage is slated for disposition versus the portion that you believe can be re-leased today? Sumit Roy: Yes. Eric, obviously, if you looked at that same number at the beginning of last year, that was closer to 220 or 230 assets. So capital recycling, making sure that we get to resolutions quicker so that the holding costs are much lower, those are all elements of a very proactive asset management team that we have in place today. Having said that, we are very comfortable holding on to a certain number of vacant assets because we are either trying to reposition it or we are trying to find the right client who can enhance the ability to recapture rents, et cetera. So in a company that has north of 15,200 assets, having 170 assets vacant, I think you could view that as what the natural rate of vacancy ought to look like. That's circa 1%. And I'm going to go a little bit more and say we are comfortable with this 1.5% to 2% of assets that we have that we are working on either to dispose of or to reposition. And so I think this 170 is a smaller number than if you were to compare it over the last couple of years, what you have seen in our portfolio. But I view that as a natural rate of vacancy. Operator: The next question will come from Tayo Okusanya with Deutsche Bank. Omotayo Okusanya: So again, just looking at the portfolio today, again, thousands of assets across hundreds of companies across several regions. It just feels to me like, again, given the nature of what you guys are doing, AI somehow should be able to create much more efficiencies in the overall business, whether that's on the underwriting side, asset management side. Just kind of curious how you guys are thinking through the use of AI in the business and how, if I may use the word, AI competency or supremacy could create additional competitive advantages versus your peers. Sumit Roy: That's -- it's in line with the question that was asked, Tayo. And I intentionally try to keep it brief because this is an entire discussion in its own right. What I will share with you is we are a very highly literate, technology-driven, data-driven organization. And so AI absolutely is going to be part and parcel of every element of our business. It already is on proprietary tools that we've created. It helps us on the sourcing front. It helps us on the underwriting front. It helps us on making asset management decisions, et cetera. And that's just one piece of it. But when you think about an organization and you think about the direction of drift, where is AI really going to sort of make monumental positive scale benefits for organizations, it doesn't start on the front end with the tools. It starts with the data. And it starts with creating an organization that has data that is very clearly defined. The interrelationship between those data is very well established, then data that gets created by this input data is also very well established. Then, you can start to come up with tools that you can overlay on top of this very structured data lake to create those various different scale benefits. But Tayo, you're 100% right. I mean, AI is and will become an even more integral part of every function within a real estate company. There is no doubt in my mind. And we, I believe in my heart, are best positioned to take advantage of that, given when we started on this journey and the level of sophistication from a technology standpoint and how this company and the management team thinks about technology as an enabler and creator of scale within our business model. So I'm just touching on things. Each one of these areas that I've talked about, we can spend 2 hours just having a detailed discussion. But we are well on our way, and there are certain tools that's very much part and parcel across the entire business that we already have, such as Copilot, et cetera. And then there are other very specific tools that are being used by vertical elements of our business to help drive scale. But that is still just scratching the surface of what AI will do 3 to 5 years from now for a company like Realty Income. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Sumit Roy for any closing remarks. Please go ahead. Sumit Roy: Thank you, Chuck, for helping facilitate this conference, and thank you, everyone, for participating. Look forward to seeing you at some of the upcoming conferences. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Wolters Kluwer Full Year 2025 Results Webcast. My name is Lauren, and I will be your coordinator for today's event. [Operator Instructions] Please be advised today's call is being recorded. I will now hand over to your host, Meg Geldens, Vice President, Investor Relations, to begin today's call. Please go ahead. Margaret Helene Geldens: Hello, everyone, and welcome to our full year 2025 results presentation. Today's earnings release and the presentation slides are available on the Investors section of our website, wolterskluwer.com. On the call today are Nancy McKinstry, our CEO; Stacey Caywood, our Designated CEO; and Kevin Entricken, our CFO. Nancy, Stacey and Kevin will present the important aspects of our results. After the presentation, we will take your questions. Before we start, I'll remind you that some statements we make today will be forward-looking. We caution that these statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in these statements. Factors that could affect Wolters Kluwer's future financial results are disclosed in Note 2 of today's earnings release and in our annual reports. As usual, we refer to adjusted profits, which exclude non-benchmark items. We also refer to growth in constant currencies, which excludes the effect of exchange rate movements. And we refer to organic growth, which excludes both the effect of currency and the effect of acquisitions and divestments. Reconciliations to IFRS numbers can be found in Note 3 of today's release. At this time, I'd like to hand over to our CEO, Nancy McKinstry. Nancy McKinstry: Thank you, Meg. Hello, everyone, and thank you for joining today's call. I'll start with a brief introduction, summarizing the highlights of 2025. Next, Kevin will take you through the financial results in detail. After that, I'll return to cover the divisional performance, and then hand off to Stacey, who will provide an update on our strategy and her near-term priorities as she takes over as CEO. She will finish with an outlook for 2026. So let's begin with the highlights on Slide 4. We delivered another year of good organic growth and an improvement in our adjusted operating profit margin. Recurring revenues, which account for 83% of total revenues grew 7% organically. We've made significant progress in adding important Generative and Agentic AI capabilities into our integrated productivity platforms, leveraging our trusted proprietary content, our deep domain expertise and our advanced AI technology. Today, nearly 70% of our digital revenues are from AI-powered solutions. Among our many innovations last year were UpToDate Expert AI and CCH Axcess Expert AI, which embed our AI technology and provide significant productivity benefits while keeping experts in the loop. Last year's acquisitions, RASi, Brightflag and Libra are all performing strongly and are offering new growth opportunities. All-in-all, it was a good year financially during which we made significant progress on our AI strategy. I'll now hand to Kevin to cover the financials. Kevin Entricken: Thank you, Nancy. Let me start with a summary on Slide 6. Full year 2025 revenues were EUR 6.125 billion, an increase of 7% in constant currencies. Organic growth was 6%, in line with the prior year. Adjusted operating profit was EUR 1.687 billion, up 9% in constant currencies. The adjusted operating profit margin increased 40 basis points to 27.5%, which was at the top end of our guidance range. Diluted adjusted earnings per share increased 9% in constant currencies, in line with our guidance, which we raised in July of 2025. Adjusted free cash flow was EUR 1.348 billion, an increase of 10% in constant currencies. This was above our expectation and reflects strong year-end collections. We continue to have a robust balance sheet, ending the year with a net debt-to-EBITDA ratio of 2.0x. Return on invested capital was 18.0%. Now let's look at revenues by division on the next slide. Health grew 5% organically, in line with our guidance. Within Health, Clinical Solutions sustained 7% organic growth. Tax & Accounting delivered 7% organic growth, in line with the prior year. This was supported by strong double-digit organic growth in cloud solutions in North America and Europe. Financial & Corporate Compliance grew 3% organically. As we had guided, this was slower than the prior year due to a more subdued environment for transactions and the suspended enforcement of the Corporate Transparency Act in the United States. Legal & Regulatory grew 5% organically, in line with the prior year and supported by strong 7% organic growth in digital and service subscriptions in Europe and the United States. Finally, Corporate Performance & ESG grew 7% organically ahead of the prior year. This was driven by continued double-digit growth in cloud software solutions. Let's turn to Slide 8 to review revenues by type. The chart on the left shows our recurring revenue streams, which account for 83% of total revenues, while the chart on the right shows our non-recurring revenues. Let me first address Print, which is shown in both charts. Print makes up under 5% of group revenues. The long-term trend is still one of decline. In 2025, the Print decline reduced group organic growth by 50 basis points. The largest and most important component of our revenues, digital and service subscriptions, shown by the blue line, grew 7% organically. It slowed slightly in 2025 due primarily to the slowdown in financial and corporate compliance. Other recurring revenues grew 8% organically, a slight improvement on the prior year. Turning to non-organic revenues, which can be volatile. We experienced an overall decline of 1% last year. FCC transactional revenues shown in red were up 2% for the year, driven by improvement in the second half. The backdrop for U.S. M&A and lending volumes remained subdued last year. Legal & Regulatory transactional revenues are volume-linked fees in the ELM solutions unit. These grew 9% organically, in line with the prior year. Other non-recurring revenues, which are mainly on-premise software licenses and implementation services declined 5% organically. Our customers are continuing to opt for cloud subscription offerings. Turning to the divisional margins on Slide 9. As mentioned earlier, the adjusted operating profit margin increased 40 basis points to 27.5%, reaching the top of our guidance range. Health and Tax & Accounting drove this performance. This reflects operational gearing, the mix shift of revenues, scaling of expert solutions and operational excellence programs. Investment in product development, including capitalized spend was broadly stable to last year at 11% of revenues. We are realizing the benefit of internal use of AI and the completion of several large projects. Adjusted operating profit included EUR 37 million of restructuring spend, an increase as compared to the prior year. Moving to the rest of the income statement on Slide 10. Adjusted net financing costs increased to EUR 86 million. This reflects lower interest income on cash balances and higher coupon rates on euro bonds issued in 2025. Adjusted financing costs also included a EUR 10 million net foreign exchange gain, mainly related to the currency translation of intercompany balances. The prior year included a EUR 9 million net foreign exchange loss. As a result, adjusted profit before tax increased 7% in constant currencies. The benchmark effective tax rate increased to 23.6%, reflecting unfavorable movements in our deferred tax positions. In 2026, we are guiding to an effective benchmark tax rate range of 23.5% to 24.5%. Adjusted operating profit was EUR 1.225 billion, up 6% in constant currencies. Diluted adjusted EPS was EUR 5.29, a 9% increase in constant currencies. The increases in net financing and tax were offset by a 3% reduction in the weighted average number of shares outstanding. Turning to cash flow on Slide 11. Adjusted operating cash flow increased 12% in constant currencies, and the cash conversion ratio was 103%. This was ahead of our expectations due to year-end collections, which were largely timing related. Capital expenditures were EUR 303 million, a slight decrease compared to the prior year due to the completion of large projects in financial and corporate compliance. Net interest paid, excluding lease interest, increased to EUR 72 million. This reflects the higher coupon interest paid and lower interest income on cash balances. Cash taxes increased to EUR 358 million, reflecting higher income. All-in-all, adjusted free cash flow increased 10% in constant currencies to reach over EUR 1.3 billion. Now let's turn to uses of our cash on Slide 12. Acquisition spend was EUR 896 million, reflecting the acquisitions of RASi in Financial & Corporate Compliance and Brightflag and Libra in Legal & Regulatory. All three acquisitions are performing ahead of initial expectations. The divestment of FRR generated cash proceeds of nearly EUR 400 million. Dividends paid increased 8% to EUR 563 million. Cash deployed towards share repurchases amounted to EUR 1.096 billion as we completed the 2025 buyback and brought forward EUR 100 million from our envisioned 2026 buyback program. Together, dividends and share repurchases totaled EUR 1.7 billion. We returned more than 120% of our free cash flow to shareholders last year. We ended the year with net debt of just over EUR 4 billion. Our net debt-to-EBITDA ratio increased to 1.0x and remains within our targeted range for leverage. We remain in solid financial position with sufficient room to support our organic investments in the business and make select acquisitions. At the same time, we are committed to our progressive dividend while continuing to execute on share repurchases. Moving to the next slide. We are proposing to increase the total 2025 dividend per share by 8% to EUR 2.52 per share. This would result in a final dividend of EUR 1.59 per share to be paid in June of this year, conditional on shareholder approval at our Annual General Meeting in May. As indicated in our release, we announced our intention to repurchase up to EUR 500 million in shares in 2026. Of this amount, EUR 100 million has already been repurchased in the months of January and February. Starting this Friday through the end of May, we have a third-party mandate in place to repurchase shares for EUR 60 million. Let me sum up results on the next slide. We delivered organic growth of 6% with recurring revenues up 7%. The adjusted operating profit margin increased 40 basis points to 27.5%. Diluted adjusted EPS increased 9% in constant currencies. Adjusted free cash flow increased 10% in constant currencies. We remain in a solid financial position with net debt-to-EBITDA ratio of 2.0x. Return on invested capital was 18.0%. I'd now like to turn the call back to Nancy. Nancy McKinstry: Thank you, Kevin. I'd now like to begin the divisional review, starting with Health. Health delivered 5% organic growth led by Clinical Solutions. The adjusted operating margin increased by 180 basis points, reflecting operational gearing, ongoing mix shift, efficiencies and the absence of prior year write-offs. Clinical Solutions grew 7% organically in line with the prior year. Growth was driven by good renewal rates at UpToDate clinical decision support and drug data solutions globally. Most of our large U.S. institutional customers are now on the UpToDate enterprise platform, and we are rapidly rolling out our conversational AI interface UpToDate Expert AI. Learning, Research & Practice delivered 3% organic growth. Excluding Print, organic growth would have been 7%. Medical Research recorded steady 3% organic growth while Learning & Practice grew 5%, driven by continued strong growth from our nursing education solutions. Now let's turn to Tax & Accounting on Slide 17. Tax & Accounting delivered 7% organic growth with continued strong performance across North America and Europe. The adjusted operating margin increased by 200 basis points driven by operational gearing and cost efficiencies. In North America, revenues grew 8% organically led by 19% growth in cloud software as customers continue to move to the CCH Axcess cloud platform and adopt more modules. In 2025, we launched several agentic AI modules integrated into the CCH Axcess platform that provides significant productivity benefits to customers. We also made major enhancements to our cloud-based audit suite, CCH Axcess Audit, adding expert AI capabilities. In Europe, revenues also grew 8% organically, driven by 17% growth in cloud software solutions with all regions performing well. Moving now to the next slide on Page 18. Financial & Corporate Compliance delivered 3% organic growth led by legal services. The adjusted operating margin was broadly stable, supported by cost efficiencies. Legal services delivered 4% organic growth, driven by 5% growth in recurring service subscriptions. As expected, the slowdown was partly due to the suspension of the Corporate Transparency Act and subdued corporate transactions. Recently acquired RASi performed very well and brings opportunities to grow in the midsized U.S. corporate market. Financial Services grew 1% organically, supported by a 3% increase in recurring revenues while lending related transactional revenues remain subdued. Turning now to Legal & Regulatory on Slide 19. Legal & Regulatory delivered 5% organic growth with strong 8% organic growth in digital and service subscriptions in Europe and in the U.S. The adjusted operating margin eased slightly due to the absence of last year's onetime pension gain, which was, to a large extent, compensated by strong underlying margin improvement. Legal & Regulatory Information Solutions grew 5% organically supported by 8% organic growth in digital and services subscriptions. We continue to enhance our legal research platforms with AI embedded functionality throughout the year. In November, we acquired Libra Technology and are now integrated the Libra AI Assistants into our trusted proprietary legal content across Europe. Legal & Regulatory software delivered 5% organic growth. ELM Solutions sustained mid-single-digit organic growth, supported by 9% growth in transactional volumes. In June, we acquired Brightflag, a provider of ELM Software serving midsized and large corporations globally. Brightflag delivered strong revenue growth ahead of expectations. Now let's finish up with Corporate Performance & ESG. This division delivered 7% organic growth, supported by 18% growth in recurring cloud software revenues. On-premise license fees declined as customers continue to prefer subscription-based cloud solutions. The adjusted operating margin decline, reflecting the decline in licenses and a higher proportion of services provided by third parties. In EHS and ESG, the Enablon suite grew 10% organically, driven by 19% growth in recurring cloud revenues through new customer wins and upsell activity. Within corporate performance, CCH Tagetik delivered 5% organic growth, driven by 19% organic growth in recurring cloud revenues as a result of new customer additions and upgrades. Audit and assurance delivered robust organic growth, also driven by recurring cloud revenues. Last month, TeamMate acquired StandardFusion, which extends the platform into risk and control management. With that, I'd now like to hand it over to Stacey to discuss the strategic opportunities for Wolters Kluwer and her near-term priorities. Stacey Caywood: Thank you, Nancy and Kevin. As I take over as CEO, I've never been more excited about what's ahead for Wolters Kluwer. We are seeing the fastest technology adoption in history and the opportunities for creating value for our customers and shareholders are tremendous. Wolters Kluwer is built on a strong foundation, a foundation that we are extending to drive growth and profitability. The business is diversified with strong market positions and high-quality recurring organic revenue growth. We see opportunities across the portfolio to leverage these strengths to create additional value. 85% of our revenues come from digital solutions, and the majority of that revenue approaching 70% comes from products that are powered by AI. But our ambitions go much further. We are launching products with advanced AI functionality, which leverage our proprietary content, our deep domain expertise, our workflow expertise and our advanced technology platforms, all to deliver enhanced value to our customers. Embedding advanced AI capabilities into our solutions is one of our most important growth opportunities, and our customers who have placed their trust in us for decades are telling us that's exactly what they need and we are uniquely positioned to deliver it. Let's turn to the next slide. The strategic plan we set out a year ago is the right one, and I plan to accelerate it in a few areas to capture the incredible opportunities we see. This will require some additional investment, taking our product development spend to between 12% and 13% of revenues this year and beyond. And we will fund this investment while increasing our operating profit margin. The increased investment and focus will help us accelerate the pace at which we are capturing the AI opportunities we have to deliver improved productivity and outcomes for our customers. My immediate priorities are, one, to accelerate our pace of innovation to capture strong market demand. We all know that AI will fundamentally change how professionals work. We have the opportunity to scale our current AI solutions while driving more new products into the market. Our proprietary FAB AI enablement platform enables us to accelerate development cycles and improve customer integration. Two, we will foster and scale our expanding list of strategic partnerships. These relationships allow us to be fully embedded in our customers' workflows and ecosystems, extending our markets and the value to customers. And three, we will optimize value capture by using data-driven, scalable sales, marketing and revenue processes that intensify our go-to-market approach. Moving to the next slide. We bring four unique advantages to the table that in combination no LLM or AI-native disruptor can replicate. This is our moat. First, trusted proprietary content, a foundational strength that supports our customers in their daily mission-critical and high stakes decision-making. Second, customer-centric modular software platforms, which deliver productivity benefits and data-rich insights, while providing audit and traceability capabilities as the system of record. Third, market-leading validated AI that builds on our 190 years of domain expertise. We ground our AI models and proprietary content and data, and we also apply expert reasoning layers, deploy our deep expert network to validate and tune outputs and operate with enterprise-grade security and compliance. This is a scalable AI designed for high stakes regulated professions where our customers cannot afford to get it wrong, and it is already deployed and being used daily across our markets. And lastly, we have deep ecosystem integration. It's not just about being right. It's also about being so embedded that we are present at the moment decisions are made, both inside and alongside the customer ecosystem. These advantages power our strong brand, our deep customer relationships and position us to lead in the age of AI. So let's look at some examples. Our CCH Axcess software suite for U.S. accounting firms is a cloud-native modular platform that leverages our proprietary content and domain expertise and integrates with the accounting firms data and the end clients' data. Our expert AI technology amplifies this foundation with agentic capabilities that drive significant efficiencies for firms. We have recently launched six Expert AI-powered modules that cut across the workflow, from document intake and analysis to faster collaboration to conversational intelligence and to provide proactive advisory and insights. Feedback from accounting firms on these new AI modules has been very positive. They love the seamless integration with their own data and the security that our solutions offer. With these launches, we are also evolving our pricing models from tiers of users for our classic desktop offering to hybrid approaches that factor in firm characteristics, usage or outputs such as the number of returns or engagements. Turning to the next slide. Let's move to legal. We are the leader in proprietary legal research in Europe and offer deep expertise in specialty areas such as securities law in the U.S. Our position is grounded in the unmatched depth and authority of our legal content. And just a few weeks after closing the acquisition of Libra, we have launched the Libra legal AI workspace in the Netherlands, Germany, Italy and Poland, a significant expansion of our capabilities. The workspace provides lawyers with an integrated working environment that combines Libra's powerful AI capabilities with our proprietary content. It is also connected to our workflow tools such as Kleos practice management. Our corporate legal software tools such as ELM, Legisway and Brightflag are not shown in this wheel, but we are actively deploying Expert AI capabilities across these as well. What differentiates us from other players in the market, including stand-alone AI assistance is a single platform for research, analysis and document creation seamlessly integrated into existing workflows and customers' data. Trusted AI output based on current, curated and country-specific legal content, including legislation, commentaries, specialist literature and practical guides, and comprehensive transparency and traceability of sources. Customer feedback is very strong and leading law firms have signed up. They appreciate the unified workspace, the way the output is presented, the integration with outlook and the quick time to market. In Health, UpToDate has evolved from product to platform from its original focus of providing clinical decision support. Today, UpToDate Enterprise offers an integrated modular platform that drives clinical outcomes for the enterprise. Our harmonized content and tools provide value across the continuum of care, from diagnosis to treatment to drug dosing and patient level education. 75% of our enterprise customers today purchased additional modules beyond core UpToDate. It is also embedded directly into the clinical workflow. API connectivity with all the major EMRs, partnerships with leading ambient scribe vendors, integrations with local hospital guidelines and connections to pharmacy and other systems. Last year, enterprise was enhanced with UpToDate Expert AI, the conversational interface that gives clinicians fast, accurate answers grounded in our own proprietary content. We also recently launched Medi-Span Expert AI, which provides medication intelligence for hospital pharmacies and third-party developers for a range of use cases, including Agentic workflows like AI-driven prescription renewals and medication verification. Let's dive into UpToDate. UpToDate is long focused on supporting clinicians within healthcare institutions. Over 80% of UpToDate revenues and usage are from institutional customers. The UpToDate user base has grown to reach over 3 million currently. Our user base is strong and enduring. We have been driving growth by upselling across our solution suite, adding new functionalities and launching new offerings for care areas. In terms of usage, the metric we track for UpToDate is clinical content interactions. Each year, UpToDate supports between 600 million and 700 million clinical content interactions. Importantly, public web traffic is not a reliable proxy for engagement as it excludes usage outside the public web, such as EMRs. And what matters most is that retention remains very strong. NPS is world-class and the core value proposition of evidence-based clinical decision support at the point of care remains highly resilient. We take our competitive edge seriously and continue to innovate with our customers. With a large loyal institution base and sustained engagement across workflows, the next phase of growth is about expanding the enterprise platform while driving rapid adoption of UpToDate Expert AI. UpToDate Expert AI is the market-leading solution for health enterprises. Our customers rely on us for our trusted foundational content and our triple layered expert in the loop process. Also important for our clinicians is that UpToDate Expert AI is the only leading clinical solution with accreditation for continuing medical education. Moving to the next slide. You can see the strong demand for our solutions and the trust advantage we have in response to the rollout of UpToDate Expert AI. As of this week, we've signed on about 1/3 of our enterprise customers across the largest and most prominent health systems in the U.S., representing approximately 1,600 hospitals. These include health systems that are piloting tools from other LLMs or medical AI vendors. Before going live, Expert AI has to go through rigorous governance process and security reviews and activation is also accompanied by training for clinicians. Feedback is positive, thumbs-up rating to answers is high, and we are in active engagement with customers to expand capabilities, including dosing and local content. The individual offering, UpToDate Pros Plus is also making progress. This is a premium bundle with Expert AI and other value-added features, and we are also seeing strong usage trends by those who have chosen to upgrade. This is available at discounted rates for students and trainees to encourage early career adoption. I am very excited about the momentum of Expert AI, and we are laser-focused on continuing to improve and expand the capabilities of our platform. As I said at the start, we see opportunities for growth across all parts of the business, both in enhancing the core and extending our addressable markets. So let's turn to the next slide. AI is powering growth across both levers. On the core side, AI takes capabilities customers already rely on and makes them meaningfully better. These use cases drive growth by increasing the value and stickiness of our core products, supporting higher retention, consistent annual price increase, and in some cases, upsell. On the market expansion side, AI powers entirely new use cases that we do not address in the workflow today such as drafting and review in our legal workspace and proactive insights scenario modeling and advisory in CCH Axcess and Tagetik. It also allows us to build offerings for new segments such as Ovid Guidelines for medical societies to streamline development of clinical practice guidelines. Here, we monetize through premium packages, add-ons or new offerings, but always tied to clear customer value, and many of our premium packages are tied to tiers of usage, productivity or outcome improvements. This is a transformational opportunity, and our competitive position has never been stronger. We will increase our investments to deliver more AI solutions, while also increasing operating margins and expanding our innovation capacity. As we scale AI-powered expert solutions, we benefit from operating margin leverage driven by stronger retention and higher customer lifetime value. The deployment of AI internally is driving margin improvements as well. It is already raising our development team's productivity and increasing our developers' capacity, allowing us to do more with the same number of engineers. Similarly, in customer support and other functions, we are seeing significant savings from the use of dedicated AI agents that can handle routine calls, allowing us to not replace natural turnover and staffing levels. The combination of these actions allows us to increase investment in our AI road maps and deliver growth while increasing our margin. Now let me turn to the outlook. As noted in our release this morning, we expect another year of good organic growth with all divisions contributing. While there will be some quarterly phasing to take into account as detailed in our release, for the full year, we expect Health and Tax & Accounting to deliver organic growth in line with 2025. We expect Financial & Corporate Compliance, Legal & Regulatory and Corporate Performance & ESG to deliver organic growth ahead of the 2025 levels. The outlook for the group as a whole, as shown on the next slide, is for good organic growth, a further margin increase and high single-digit growth in diluted adjusted EPS in constant currencies. Importantly, we expect to increase the margin while we simultaneously increase product development spending to between 12% and 13% of revenues in 2026 to further advance our AI strategy. Let me wrap up on the next slide. We are well positioned as a market leader in growing markets with a track record of driving growth through innovation and of creating value for shareholders. We are excited about the opportunities ahead of us, and we look forward to executing on our priorities. Operator, we can now turn to questions. Operator: [Operator Instructions] Our first question today comes from Nick Dempsey from Barclays. Nick Dempsey: I've got three questions, if possible. So just first of all, you've got that chart on Slide 34, showing your margins going up over time. I guess some people will say that in 2026, the sale of FRR and some lower restructuring accounts for at least all of the guided margin improvement. So excluding those factors is kind of sideways. As at the same time, you've moved your product development spend up to 12% to 13%, and that's permanent. So can we get some reassurance that margin improvement of a similar rate to that chart is what you expect beyond '26? And what kind of savings can you put in place to continue achieving that? So that was just one question. Second one, can you talk a bit more about customer reaction to your AI offerings, UpToDate and in tax as you've been collecting those up in the last few months? And then third question, given where your shares are, I guess, it seems like it would make sense to do a higher buyback than you are doing. Do you consider slightly changing your thinking on gearing, given that the share price is at a low level and how accretive it would be to buy back your shares? Stacey Caywood: Okay. Thanks very much. Why don't I take the first question, Kevin, and then I'll hand over the margin and other question to you. So yes, in terms of the customer reaction, we're seeing very strong positive reaction to all of our AI and Agentic solutions that we've been launching. With respect to our Expert AI solution within Health, feedback is terrific. We hear from our Chief Medical Officers that the expert clinician in the loop approach, which I described earlier, gives them confidence in our product as opposed to training on raw medical literature. They love the interface. They like the quick summary, along with the underlying assumptions, the nudges that we include in the interface as well as the seamless platform that we provide to them when they also include patient-oriented content on the enterprise solution, drug dosing, guidelines. And very importantly now is the integration with the ambient players, which allow for a much more efficient clinical note taking and our partnerships that we are expanding are very well received by our customers. And one of the things that's really important in these high stakes environments is that they trust both the precision that they get from our solution as well as the protection in terms of data privacy and safety. So they're rolling out the systems quickly. We're very pleased that we have 30% of our enterprise base already signed up, and we expect that number to rise to about 70% by the half year. So very strong feedback. We're seeing also very good adoption of our AI solutions within our tax business. As you saw earlier, we recently launched AI and Agentic solutions. We are seeing a very positive reactions. They love the fact that they drive significant productivity gains. In one of the solutions we've been testing, there's about 3 to 4 hours of savings per week for our professionals. So again, they feel that combination of trust that we have in our solutions that are very much embedded in their overall enterprise. So a strong reaction so far. So with that, I'll hand over to you, Kevin. Kevin Entricken: Great. Thanks, Stacey. Nick, I'm going to address your margin question first. Yes, you're right, the FRR business unit was below the group average. But I'll remind you, it's relatively small, just over EUR 100 million. So while it does improve the margin, not by a whole lot in the grand scheme of things. You were asking questions about beyond 2026, what margin development will be. While we're not giving guidance beyond '26 today, I can tell you that you've seen a good improvement in the margin over the years due to a couple of reasons. First, mix shift in revenue. As we scale our expert solutions, they tend to have better margins overall. Another thing I would point to is operational excellence is embedded in the DNA of Wolters Kluwer. And every year, we're looking to work more efficiently. And certainly, internal use of AI tools is also helping on that grade. So the improvement in margin you've seen over the last several years, we're certainly guiding to that for 2026. But based on the reason I've given you, I do expect that, that trend would continue. The next question you had was on the share buyback. And on the share buyback, one of the priorities we have or we try to balance our priorities in capital allocation. First, investing in the business, both organically and through bolt-on M&A. Secondly, pay down debt. And thirdly, we want to make sure we reward our shareholders with our progressive dividend and share buyback program. So that is what we are constantly looking at, striking the right balance. And we believe the EUR 500 million share buyback that we're announcing today for 2026 is at that right balance. We've considered acquisitions of the past. I think in the last 18 months, you've seen us spend EUR 1.3 billion on acquisitions, most notably, [ Firmcheck, ] RASi, Brightflag. And those have all been very strong acquisitions. In fact, they're performing ahead of our initial expectations. So we're delighted about that. Our leverage right now, our leverage is at 2.0x. We are in the good middle of our leverage range. The buybacks we've done in the past were EPS accretive. We expect this buyback will be EPS accretive. And finally, I want to remind you, we'll be returning close to 100% of our free cash flow to investors through our dividend, through our share buyback program. So I hope that gives you a little bit of insight into our thinking as we announced the share buyback program today. Operator: Our next question today comes from Ciaran Donnelly from Citi. Ciaran Donnelly: A few for myself. Firstly, on the increase in product development spend. Can you help us understand why the 12% to 13% is the right range and how you've landed on that? And just in terms of your comments around the increase in spend to capture the AI opportunity, how should we think about the time line to see that translate to accelerated organic revenue growth? And maybe secondly, just going back to that margin question from Nick. Could you quantify the contribution from the FRR disposal, just to understand that like-for-like margin progression in 2026, that would be great. And then just lastly. On the dynamics around deferred income, I'd say it hasn't increased year-on-year, perhaps it is a timing factor, but if you can help us understand the dynamics around that, that would be helpful. Stacey Caywood: Yes. So why don't I start with the question around the increase in product development. And let me just start by kind of giving a little bit more detail on the foundation and beyond, platform that I briefly mentioned earlier. The foundation and beyond platform is a platform that we built to allow all of our product and engineering teams to rapidly develop and integrate AI and agentic capabilities into both our content and software products. And it leverages our proprietary content and deep domain expertise. So this is the internal model that we use to be able to deploy solutions quickly. And the key strength of the platform is that it's model agnostic, so the teams can switch between different LLM models to select the best model for their use case. It also gives us the guardrails that allow us to give the trusted and very protected content that our customers rely on us for. So because we created that offering and really deployed it across the enterprise, midyear last year, our teams are able to develop our AI and Agentic solutions more quickly. That's why you've seen six of the releases that we were able to do in CCH Axcess for example, and the solutions across our portfolio. So what we're able to do is to increase the resources, product leads, our subject matter experts to be able to leverage that platform and deploy more quickly. So we have this great combination of having an efficient way of building our Agentic solutions, and we're able to move our road map up more quickly. So we got all of our teams focused on our Horizon 1 launches and now the investments can support the kind of Horizon 2 and 3 work to begin. So we think it's a great way for us to balance the -- our ability to get our launch done more quickly. And we also have increased investments to improve and accelerate our development. And maybe, Kevin, you could hit on the other question. Kevin Entricken: Sure. Yes, coming back on FRR, Ciaran. As I mentioned, the business unit was a smaller business unit, just over EUR 100 million. The margin was below our group average. In fact, margin was like mid-single-digit margins. So you can use that to factor into your modeling going forward. So the exit of that business will be a positive for margin. But again, probably a smaller impact as compared to the more important mix shift of revenue and continued operational excellence programs throughout the business. So I hope that helps you. On the deferred income, I may ask you to repeat your question, but I think it was about the deferred income increase on the balance sheet. And yes, indeed, with the growth of our subscription revenue portfolio, signing contracts for longer-term periods, you do see an improvement in deferred income. But I'd also remind you that on the balance sheet, the face of our balance sheet, you will also have to consider the deterioration in the U.S. dollar as compared to year-end 2024. Stacey Caywood: And let me just go back to the question earlier, where you also were curious about how the investment turns into -- shows up in the revenue. So as you know, the vast majority of our revenue is subscription based. And as we roll out our solutions and adoption increases, you'll start to see that flow through into our revenues in the midterm. Operator: Our next question comes from Christophe Cherblanc from Bernstein. Christophe Cherblanc: I had two questions. The first one was on Tax & Accounting. The operating leverage was super impressive in '25 with a drop above 60%. Is that a level we should expect again in '26? And the second question was just on the buyback. Because of the buyback, you've been shrinking equity. So is there a need to retain positive book equity? And is that the reason why you cannot buy more than -- buy back more than EUR 500 million or EUR 600 million given the level at which book equity is at the end of '25? Stacey Caywood: Okay. Thanks, Kevin, why don't you take these? Kevin Entricken: I did not quite get the first question on TAA, Christophe, but I will say -- okay, I will say. Stacey Caywood: He's asking about the operating leverage, why a drop? Yes. Kevin Entricken: Okay. I will say. Let me start with the share buyback. Obviously, we consider a lot of things when we consider the allocation of capital. Obviously, we do have to consider equity as part of that. But as I said, we're trying to balance the priorities of this allocation between investing in the business organically and through bolt-on M&A leverage and finally, rewarding our shareholders. Obviously, we want to have a robust balance sheet, so we can take opportunities as they come. So all of these go into our thinking when we are thinking about dividends, share buybacks and other capital allocation considerations. Also on Tax & Accounting, I think you were saying the leverage, the improvement in the margin in Tax & Accounting. Well, certainly, we are seeing good throughput on the revenue growth in that business. Revenue growth at 7% certainly gives us the ability to improve margins. Tax & Accounting, just like every other business, you do see a positive impact of the mix shift in revenues, the more and more that business moves to software and SaaS software. We do see an improvement as these products mature. And again, operational excellence is key throughout Wolters Kluwer. So that does underpin what you see in the improvement in the margin. Christophe Cherblanc: And just sorry to insist on this, but is it by low legal constraints that you have to maintain positive book equity? Kevin Entricken: We absolutely take equity into account as we do other priorities I've mentioned. Christophe Cherblanc: So you cannot go into negative equity, correct? Kevin Entricken: Like I say, Christophe, this one part of our capital allocation criteria, we consider that amongst other things. Operator: Our next question today comes from George Webb from Morgan Stanley. George Webb: Thanks for taking my questions, And just before I go into those, I guess one final congratulations from my side, Nancy, on your extensive career achievements, and I wish you the very best in your future endeavors. On the question specifically, I think there's three areas I'd like to get -- yes, no worries at all. I think there are three areas I'd like to go into some of the questions. Firstly, you mentioned partnerships being a priority for you, Stacey. Could you maybe elaborate a little bit on what partnerships those might include? Are we sticking to the, I guess, more traditional playbook of SaaS vendor partnerships and other areas you can get your content and product in front of people? I think more recently, we've seen some players out there decide to do more specific partnerships with certain AI labs. Would that be something you consider or would you prefer to keep a more multimodal approach? Secondly, on the Health division, I guess within that mix, you're talking to the kind of growth rate being steady year-over-year. UpToDate is an important part of that. You mentioned the retention remains very strong. You mentioned the number of clinical content interactions that move to the system being pretty consistent. Could you kind of add any color on where your gross retention runs at for UpToDate, I believe it's low 90s, but anything over that and how that's been evolving would be helpful. And also if you're seeing any specific usage pattern differences between users that now have the conversational Expert AI front end versus those that are not using that or don't have access yet. And just lastly, maybe one for you, Kevin, on the product development increase of 1 to 2 points. How much of that do you expect to come through CapEx versus OpEx this year? Stacey Caywood: Yes. Thanks, George. I'll take the first two. With regard to partnerships, we are very focused on making sure that we can be deeply embedded in our customers' workflow. So as I mentioned, in Health, we're all very focused on extending the partnerships, many of which we've announced, but we will continue to move in that direction to make sure we've got strong partnerships. So this is all about making sure we're embedded in our customers' ecosystem. Similarly, in Tax, we've always -- over the last many years, we've had a Tax marketplace with the API connectors. We're looking at how do we enhance that as we think about the Agentic capabilities. In terms of our use of the foundational models, our FAB platform, which I mentioned earlier, includes all the core foundational models. So we make sure that we are using those capabilities that are the right ones for the right use cases. So that's our approach for now. In terms of our Health business, as I mentioned, our business is very strong. Our enterprise customer base, as you know, has high renewals and continue to have very strong renewals and up-selling last year. In fact, we signed more multiyear contracts for longer durations with higher annual contract value last year than we had in prior years. So what's happening is that our customers are -- certainly, we're very focused on the adoption of Expert AI. But we're also very engaged with our customers to extend the value along the full platform that we offer. So expanding with drug information, drug dosing, patient education, guidelines and so on. So again, the health of the business is very strong. And in terms of usage patterns, yes, in fact, we see that when our customers move to Expert AI, they do very deep conversational interfaces. They're much faster in their ability to get to their answer. So we see strength there. And you see that across the portfolio, strong productivity improvements when our customers are adopting our AI and Agentic solutions. And I think the last question, Kevin, for you. Kevin Entricken: Yes. On product development, the mix between CapEx and OpEx, I would expect it to be very similar, George, to what you see today. Usually, our CapEx is about 5% of our revenues or so. Going forward, even though we're going to invest more, I think the balance between those two will be similar. It really all depends on IFRS requires us to capitalize costs once we reach technical feasibility. So we'll evaluate this on each product and each investment idea going forward. But my thinking is it's going to be very similar to what you see today. Operator: [Operator Instructions] Our next question comes from Thymen Rundberg from ING. Thymen Rundberg: Two from my side. So looking across the business, are there parts of the portfolio where customer needs or market dynamics are evolving or perhaps have evolved faster than you expected? And where that might lead to you to perhaps adjust your priorities over, let's say, the next 1 or 2 years? And then the second is on pricing. So as your products continue to add a lot more functionality and support more workflows for your customers, so you're consistently adding more value to them. How do you think about your pricing over the next few years? And in particular, how do you approach, let's say, this more value-based pricing model so that's a greater impact that your solutions deliver or will deliver is just more systematically reflected in monetization? Stacey Caywood: Yes, I'll take those. In terms of the approach for where -- how we make sure that we are at pace in terms of the customer demand for our solutions, our -- the relationships we've had with our customers stands decades. And so we are with our customers daily and really helping them to understand the productivity gains that can be created when they deploy our solutions. And in fact, I was talking to the leader of our tax business who just came off of his sales meeting. And he was saying that the difference between last year and this year in terms of customer interest and recognition that these solutions can really deliver value has increased a lot. So we feel like we're at the right time now with the solutions we've launched. And as I mentioned earlier, we're just really excited to be able to launch even more of our capabilities because I think the customers recognize now that there are really nice opportunities for them, particularly with many of our customers, they have challenges with just having enough supply of professionals. So they see the benefits of this. And we're -- again, we're moving quick. What I would say around pricing is that our core strategy is to price on value, and we have a variety of pricing metrics across our products today. We don't use a single metric. For example, CCH Axcess is based on the firm size plus the number of returns. The UpToDate enterprise is based on institutions. And with our new AI solutions, we're really using those to -- in some cases, particularly for the AI solutions launched in '23 and '24, it was more about supporting our renewal rates with price increases and upselling that reflects the value. But with some of the newer AI solutions, we are discretely monetizing those solutions, and again, always focused on price to value. And I'd say the unit of value varies based on the benefit we provide for our legal content businesses. Expert AI is embedded with our content. We typically sell that with kind of an upsell model for Libra, which is the solution that moves us into new addressable market with the legal workspace. We are -- the average price is about 2x the value of the content offering that we would sell to a law firm. And what we do is we get the benefit of combining the trusted deep proprietary content into the legal workspace, Libra solution, which provides an extension to do contract drafting and contract review. So the value is evident. In CCH Axcess, for example, for the client collaboration AI tool, we tie it to request lists that are sent out, which is a measure of output. And then in intelligence, we have consumption tiers. That's also a solution within the CCH Axcess suite. And so we're really looking at the value we're offering and reflecting that in the value and the way that we deliver our pricing. Operator: We have no further questions. So Stacey, would you like to have any closing remarks? Stacey Caywood: Yes. Thank you so much. I really appreciate all the questions. We're excited to build on our momentum and to accelerate our strategy to deliver more value for customers while delivering continued good growth in 2026. Thanks so much for joining us today. Operator: This concludes today's call. Thank you for joining, everyone. You may now disconnect your lines.
Operator: Thank you for standing by, and welcome to the Centuria Capital Group HY '26 results. [Operator Instructions] I would now like to hand the conference over to Mr. John McBain, Centuria Capital Group's Joint CEO. Please go ahead. John McBain: Good morning, everyone, and thank you for joining us. I'm John McBain, Joint Chief Executive. With me today is my fellow joint CEO, Jason Huljich; and our Chief Financial Officer, Simon Holt; also Tim Mitchell and Peter Ho from our Investor Relations and Corporate Strategy team. Today, we'll cover group performance for the half, divisional execution, our financial position and our strategy and outlook. The group delivered repeatable earnings growth for the half, underpinned by both contracted and recurring revenue streams and conservative balance sheet settings. Execution during the half has improved forward earnings visibility, supporting our decision to upgrade FY '26 operating earnings guidance to $0.136 per security. I'll begin with an overview of the group's performance and our through-cycle approach to growth. Jason will cover divisional performance across property funds management, investment, real estate finance and data centers. Simon will cover the financial results before I comment on strategy and outlook. Key outcomes for the half are summarized on Slide 4. Group assets under management increased by 6% to $21.8 billion, supported by strong contributions across property funds management and real estate finance. Across the property platform, we executed approximately $500 million of real estate acquisitions during the half and are on track to exceed our $1 billion full year target. We also completed the acquisition of the Arrow funds management platform, adding $440 billion of agriculture AUM and further strengthening our private investor and family office networks. Taken together, this execution and improved earnings visibility underpins our decision to upgrade FY '26 earnings to $0.136, representing an 11.5% uplift on FY '25. This upgrade reflects underlying run rate momentum rather than one-off items. Moving to the platform overview on Slide 5, which highlights the scale and diversification of Centuria today and what matters for earnings quality and capital allocation. Virtually all verticals now exceed $1 billion in assets under management, supporting operating leverage, while preserving flexibility in how and where we deploy capital. We operate across listed and unlisted vehicles, real estate and credit and span most -- major property sectors across Australia and New Zealand. Diversification is not just about earnings volatility reduction. It allows us to allocate capital based on risk-adjusted returns and investor demand rather than being forced to pursue growth in any single product, sector or market. In the current volatile environment, that flexibility is vital. As the platform continues to scale, we see opportunities for margin expansion over time without reliance on any single product sector or capital source. Slide 6 demonstrates how diversification has supported earnings and AUM resilience through the sharpest rate hiking cycle in decades, with group AUM achieving a new record in this half. While performance fees can introduce period-to-period volatility, the underlying base of management fees, property income and credit earnings, continue to grow. This reinforces our conviction that the platform is designed to perform through the cycle, not just in support of market conditions. Turning briefly to the broader environment on Slide 7. Despite higher rates, the Centuria platform weighted average cap rate and product returns remain significantly above term deposit rates, and we continue to capture opportunities across real estate and transaction markets, many of which are showing signs of constrained supply and improving rental growth. Structural capital flows also remain supportive. These include ongoing superannuation inflows, continued SMSF growth and approximately $30 billion of capital expected to be repatriated from expiring bank hybrids over coming years. Turning to Slide 8. Private credit remains a strategic priority for Centuria and a good example of disciplined growth in a structurally expanded segment. We have been active in real estate credit since 2016, partnered with Bass Credit in 2018 and following a strong track record, we acquired a 50% interest in 2021, with the platform growing at a compound rate of approximately 36% per annum since that time. We increased our stake to 80% in 2024. And this morning, as previously forecast, we announced we have exercised our option to increase our interest to 100%. During the half, this business executed approximately $1.4 billion of total loan origination, restructuring and exit activity. Market share remains modest at around 1%, highlighting significant runway for the group within a large and growing market. Importantly, the previously announced succession and integration plan for Centuria Bass remains in place with David Giffin and Yehuda Gottlieb being promoted from within the business to CEO and Deputy CEO, respectively. We believe steps such as this support continuity and long-term sustainable growth. I'll now hand over to Jason to go through the divisional performance in more detail. Jason Huljich: Thank you, John, and good morning, everyone. Half year '26 was another consistent period of execution for the property platform, as illustrated on Slide 10. Property funds management AUM increased by 5% to $18.3 billion during the half. We executed approximately $700 million of real estate acquisitions and divestments, supported by strong engagement from unlisted investors, which has underpinned transaction execution as other sources of capital have tightened. Property fundamentals remained supportive with limited forward supply and improving rental growth across most sectors underpinning earnings visibility. Turning to Slide 11. The half was a period focused on integration and value creation. We established Australia's largest unlisted single asset industrial fund at Port Adelaide with strong participation across our investor base and significant oversubscriptions. In agriculture, we secured Australia's largest hydroponic glasshouse by an off-market acquisition and commenced capital raising ahead of settlement. Listed REITs continue to selectively recycle capital, demonstrating the ability to divest assets at premiums to book value as well as generate strong leasing outcomes to improve the income profiles of each portfolio. Slide 12. Distribution remains one of Centuria's most important competitive advantages. Calendar year '25 was a strong period for new investors joining the platform, including more than 460 investors and family offices acquired through the Arrow transaction. Early engagement with these investors is already translating into interest across additional Centuria products, consistent with the proven integration blueprint applied across our M&A activity. We saw a similar outcome following the Primewest merger where 5 years on, strong integration and ongoing engagement has resulted in approximately 50% of Primewest investors committing to other Centuria products beyond their original investment. This behavior reflects the strength of Centuria's unlisted real estate platform where investors can self-diversify across multiple strategies within a single platform. Today, we have over 15,500 unlisted investors with more than 1,600 invested in 3 or more Centuria funds and almost 10% of these invested in 10 or more funds. This depth of engagement supports capital recycling as funds mature and position Centuria to consistently repatriate and redeploy private capital. We believe this distribution capability is difficult to replicate and represents a durable competitive moat for Centuria. Turning to Property and Development Finance on Slide 13. Property and Development Finance AUM increased by approximately 9% to $2.5 billion during the half. During the half, Centuria Bass Credit executed approximately $1.4 billion of loan origination, restructuring exit activity, while also raising $200 million of gross unlisted investor inflows. The business remains well positioned for further growth beyond its current market share of around 1% of Australia's private credit market. Turning to Slide 14. We can see that growth has been achieved alongside high-volume origination, restructuring and loan repayment activity. This has been paired with a strong focus on managing the book's composition, which remains largely exposed to residential asset-backed lending. Growth has not come from stretching average LVRs or loan structures across the overall book. Centuria Bass Credit is highly operational hands-on business within Centuria, underpinned by deep in-house expertise. Since the JV commenced in 2021, we have made targeted investments in systems, processes and people to support scalable growth, while maintaining disciplined risk management. In addition, Centuria Bass benefits from Centuria's broader platform with access to specialist expertise across valuation, governance, distribution and development as required. Slide 15 highlights Centuria's track record of progressively building the platform over time, primarily through organic growth, selectively supplemented by inorganic opportunities. From a data center perspective, the key takeaway is that this represents the early stages of a long-dated disciplined strategy aligned with durable long-term demand drivers. Slide 16. To further emphasize this evolving strategy, Slide 16 highlights that data centers and sovereign AI represent long-dated strategic optionality within a market characterized by sustained demand and significant capacity constraints. Accordingly, our current focus is on progressing planning and power outcomes to maximize development optionality across identified sites. As tangible milestones are achieved, we will assess the most appropriate value realization pathways on a site-by-site basis. ResetData remains at an early stage of this strategy. Since acquiring an interest in the business, we have partnered with leading global operators, successfully launched Australia's first public sovereign AI factory and scaled internal capability following initial integration. The business is now transitioning into an early commercialization phase as customer onboarding progresses, which is expected to support improving profitability over time. Importantly, capital deployment remains return-driven, fully considers balance sheet integrity and short-term profitability is not required to meet FY '26 earnings guidance. I'll now hand over to Simon to cover the financial results. Simon Holt: Thanks, Jason, and good morning, everyone. Before stepping through the numbers, it's important to revisit the segment changes introduced at the full year '25 and carried through into these half year accounts. These changes were made to better align reported performance with Centuria's underlying economic exposure and how the platform is managed. We restructured our operating segments and adopted a proportionate consolidation approach for co-invested property assets, providing a clearer view of underlying economics. Financing costs attributable to these investments are disclosed separately as nonrecourse loans. Now turning to the result. FY '26 was another period of disciplined execution. Statutory NPAT was higher, reflecting fair value movements on co-invested property assets and operating EBITDA of $89.3 million was delivered for the half. From a quality perspective, what's important here is not just the headline result, but the mix of earnings underpinning it. The majority of operating earnings continue to be generated from recurring and contracted sources with performance fees remaining a secondary contributor rather than a dependency. This provides confidence in the sustainability of the run rate as we move through to the second half. Property funds management earnings reflects -- reflected strong activity, increased transaction volumes and performance fee contributions. Investment earnings moderated as expected due to asset recycling rather than any deterioration in asset quality or returns. Real estate and Development Finance earnings were stable across the halves. ResetData impacted earnings and our share of Centuria's share was $2.8 million at 50% and this happened during the period and is expected to be a net negative contributor to full year earnings, reflecting its current investment and early commercialization phase. Importantly, this reflects a deliberate and disciplined approach. Capital is being deployed against long-dated strategic optionality rather than short-term earnings contribution. As customer onboarding progresses, we expect this impact to moderate over time. Cost savings remained contained across the platform, reflecting disciplined balance sheet management and access to lower cost of funding. As a result, operating profit after tax increased to $54.6 million, delivering operating earnings per security of $0.066, up 6.5% on the prior period. A distribution of $0.052 per security was declared. Turning to Slide 19 highlights. This page highlights the quality and sustainability of funds management earnings. Property Funds Management is considered a core segment for the group, and as such, the majority of the business resources are dedicated to this segment. Centuria's focus on accelerating operating leverage from this segment forms part of the group's overall growth strategy, and we anticipate that margins will continue to expand as the platform scales through time. Recurring management fees remain the dominant contributor to this segment. Performance fees were booked where funds formed part of their respective testing thresholds adopted by the group. Centuria's underlying funds also retain additional latent fees, which remained unrecognized. These are expected to fluctuate in line with prevailing valuations from period to period as well as when newer vintage funds mature through the cycle. Turning to Slide 20. During the half, the group realized $133 million of cash through the sale and recycling of balance sheet assets. And gearing remains steady. Liquidity is strong, and there are no near-term debt maturities. From a capital management perspective, the balance sheet is doing exactly what we want it to do, funding growth, supporting selective investment and preserving flexibility. Asset recycling continues to be a key lever, allowing us to redeploy capital without increasing balance sheet risk. Also, the average cost of debt reduced during the half following the repayment of our listed notes, lowering our all-in margin from approximately 325 basis points to approximately 275 basis points. This supports self-funded growth while maintaining a conservative and flexible funding profile. Turning to Slide 21 and talking about the platform. Beyond the corporate balance sheet, Centuria has access to $8.3 billion of diverse lending facilities across listed and unlisted funds provided by a broad group of 24 lenders. This diversity reduces reliance on a single capital source and allows us to manage funding proactively across market cycles. Average margins improved to 1.5% -- 1.57% in the half, highlighting the benefit of stronger lender engagement and an active funding strategy. The funding profile and covenants shown reflect a conservative and flexible balance sheet position with funding cost and risk setting actively monitored across the cycles. I will now hand you back to John for strategy and outlook. John McBain: Thanks, Simon. To conclude on Slide 23, our focus remains on scaling core property funds management, progressing targeted acquisitions and continuing to build Centuria Bass Credit. Data center, [ certain ] AI initiatives will be progressed selectively and only where returns are compelling and customer demand is locked in. These initiatives provide the group with long-term strategic optionality as we go through the buildup of this business. The group balance sheet remains a strong asset and strategic asset. Our platform and deep distribution networks are unique competitive advantages, which can generate a diversified and predominantly recurring earnings base. Factors such as these provide a degree of visibility into earnings underpinning the guidance upgrade and allowing Centuria to build through cycle momentum while remaining nimble as markets evolve. Thank you. That concludes the formal presentation. I'll now hand back to the operator to commence Q&A. Operator: [Operator Instructions] The first question comes from the line of Cody Shield from UBS. Cody Shield: Firstly, just on second half drivers, can you maybe talk a little bit to what you're expecting out of ResetData and performance fees in the second half? Simon Holt: Yes. So on the performance fees, we're expecting pretty much half-on-half to be about the same and consistent with what we said at the full year results back in August at around $20 million. In relation to ResetData, our expectation is that we probably will still make a loss, albeit smaller than this half in the second half. So obviously, setting us up for future tailwinds, but slight improvement. John McBain: I think there's quite a good pipeline of demand now for our capability. But the timing of it, of locking in that demand just has to be finalized. And as those people slot in, then we'll get more visibility. But this is a very, very young business, and we've got a measured approach to it. Cody Shield: Yes. Okay. Maybe if you could just provide a little bit more detail on what was causing the flip, because it wasn't '26, I think you're going to get a positive contribution from ResetData? Simon Holt: It's just timing of signing up customers. Cody Shield: Okay. That's clear. Maybe just turning to acquisitions that are in DD or secured. Can you just provide a read on maybe what type of assets are falling into that? And also what level of divestments you're expecting in the second half? Jason Huljich: Sure. It's Jason here. On the acquisition side, look, we obviously can't go into too much detail on some of them as we're still in due diligence. But it's a mix across industrial, data center, retail and office, both in Australia and New Zealand. So it's a nice mix of geographies and asset classes. Some of that has been secured and some is in DD. But it's nice to have a really good pipeline there. On the divestments, I think we had just under $200 million for the first 6 months. As I think I said at results, we'll probably end up somewhere around $500 million full year. Operator: Your next question comes from the line of Andrew Dodds from Jefferies. Andrew Dodds: Just following on from Cody's question around ResetData. I mean, you've called out that the lease-up is expected to sort of strengthen in the second half. But I mean the drag on earnings is pretty significant. So given that you've said that you sort of expect this to be a net negative contributor this year, I mean, when can we realistically expect this segment to become at least breakeven? John McBain: I mean, Simon, perhaps go through how significant it is. It's -- our half is 2-point-something million out of a $50 million after-tax profit. Is that right, $3 or $4 million? Simon Holt: Yes, $2 million or $3 million. John McBain: So I think -- Andrew, I think we've tested that comment up to where you think that's significant. And yes, we would prefer it not to be a drag -- but of course, like all things, when it goes away, when these customers sign up, and they could sign up sooner than we think, there's a very strong pipeline of significant clients. I guess that will help us not be on -- not have these conversations. Andrew Dodds: Right. Okay. Maybe just on Centuria Bass then. Are you able just to talk around the level of bad debt you're seeing across the book? And I sort of asked this just in the context of -- I mean, there's been some recent press around your exposure to a troubled developer in Western Sydney and if that's having any impact on the business? Jason Huljich: No. Look, that's basically nothing at the moment. The portfolio is in very good shape. We deal with a lot of different counterparties in this business. We're very comfortable with the book. In particular, relationships we have with some customers, we steer more towards things like residual stock, which are very liquid and a lot lower risk than obviously development finance. But yes, look, the book is in very, very good shape. It's probably as good as it's ever been. Operator: The next question comes from the line of Tom Bodor from Jarden. Tom Bodor: I'd just be interested in seeing your comfort with look-through gearing, it's ticking up to almost 38% now. And just noting that around 1/3 of your asset base is intangibles. And what level starts to cause this comfort from a gearing perspective? John McBain: Simon, [indiscernible] [ go ahead ]. Simon Holt: Look, I think the first comment I'd make, Tom, is all of that debt that sits in property investments is nonrecourse. So it doesn't actually flow up to the head stock and vice versa, doesn't us -- require us investing back down if there is anything challenged. So look through gearing moves around from time to time. Mainly the big 2 investments that we have are CIP and cost on our balance sheet and cost gearing has moved down a little bit. So that does have an impact to our look-through gearing. But I think what's important, we use operating gearing as a measure and supports looking at the intangible value as an important part of our business. We buy organic assets through funds management and we from time to time buy inorganic transactions. So we are sitting at around that 12.5% on that operating gearing level for which it's consistent with the half year and has been consistently in that target band that we've been quoting for, I'm going to say, 2 to 3 years now, that 10% to 15%. John McBain: Yes, Tom, I know it's a metric that a lot of you guys look at, and we understand that. But I think the other submission, I think Simon touched on it, we think the intangibles on our balance sheet are worth something. We think Centuria Bass is worth something. Centuria New Zealand is worth something. Jason Huljich: Primewest. John McBain: Primewest is worth something. So it's easier to just -- the word intangible has a connotation about it that could be negative, whereas we're very proud of those businesses, and we think they're highly valued. And in some cases -- well, a lot of cases were far more than we paid for them. But look, we get the question, Tom, we understand it, respect it. Tom Bodor: Okay. And then just on ResetData, just going back to that. I mean, has any leasing actually occurred to date? And what is the revenue from that leasing on a per annum basis? Jason Huljich: Yes. Look, we have leased part of the facility. I won't go into numbers, but we've leased a chunk of the facility. We have got strong demand over the rest of the current capacity as well which we... Tom Bodor: [indiscernible] that you are talking about? Jason Huljich: Correct. Correct. So we do expect that to lease up over the shorter term, as Simon talked about. So yes, probably the big thing that we've realized it is a longer decision process, a longer sales cycle to get both enterprise and government committed. There has definitely been increased demand over the last 4 or 5 months. And we have got, as I said, a very strong pipeline. So we've done a chunk of it and demand over the rest of it, good pipeline over the rest. Tom Bodor: And is there a point at which we can think of this business as breakeven? I don't know if it's 40% of the capacity or some number that as a guide will get the business to be breakeven? Jason Huljich: Yes. Look, it obviously depends on terms, and it depends on a lot of things. The revenues can fluctuate depending on lease -- on the terms of the customer commitment, on term. So it's a hard one to actually give you a number on that. John McBain: Yes. I think -- Tom, I think if we just looked at the Melbourne facility and looked at just leasing that up, the GPU capacity, and looked at our capital and looked at our return on capital there, I think that can come to profit quite easily. It's, ResetData is a very young start-up business, and it will go -- it will require further expenditure as time goes on to grow it. And that's no different than Centuria Bass, no different than Augusta, [ no different ] than all the other businesses we've built. We do think -- we're just trying to be measured about making predictions about when that point happens, but we're certain that it will occur. And look, we do think it's a huge opportunity in the space we're in and being an NVIDIA cloud partner in Australia. But it will take time to play out. But we are excited about it. Operator: Your next question comes from the line of James Druce from CLSA. James Druce: Apologies. Another question on ResetData. I'm just curious, from an industry perspective, single-phase direct-to-chip cooling technology seems to be preferred over immersion cooling even as we move down the track from [ Ruben ] to finement chips. It just seems to be easier to handle with equipment when it's not liquid. How do you think about the 2 technologies? Why would a customer necessarily prefer immersion? Or is it more about just getting access to some compute? Jason Huljich: Look, I think it is about access. We've got something built there ready to go. It doesn't necessarily affect the customer at all. They're after compute and those high-performance chips. So as we've seen with NVIDIA and others are doing and where they're going and what's happening in the chip space and the densities, it is going to go to a sort of combined unit of direct-to-chip as the next stage. But liquid emission works very well as well. So for our existing facility that we've now built, I think it's very fit for purpose. It suits customers, and we've got a wide range of customers looking at it all the way from large enterprise to government. So they seem very comfortable with it. Future facilities, assuming we build out further ResetData facilities, may go towards more the new version of direct-to-chip. John McBain: Reset guys are very close to NVIDIA. I think we'll follow what technology they spearhead really. Jason Huljich: All the facilities -- the facilities we build are built on the NVIDIA architecture. So they have to be happy with it, and we use their design protocols. John McBain: Well, the interesting part is the sovereign nature of -- there are 3 Neo cloud partners, NVIDIA partners in the country. We're one of them. And we're the only one that's purely sovereign. And I think particularly when you're talking to state and federal government, and universities, for example, that sovereign initiative or a capability or mandate is becoming more and more important. So that's another thing that we're really looking forward to unfolding where we have a competitive advantage, but very early days. James Druce: Yes. No, on the sovereign AI. Just a follow-up. Just remind me how the chip finance works? Are you on the hook if you don't have a tenant? What are the terms there? John McBain: Yes. It really is a P&I asset finance lend that we have at the moment on 818 in particular. So it's a P&I and if you have a tenant, you're generating revenue. If you don't, you still have the cost. James Druce: Yes. Okay. That's clear. And then just on the $0.8 billion of acquisitions and DD post balance date. Can we just get a -- you might have provided this on the call, I'm sorry if I've missed it, but can you just provide some color on what sectors they're in and where the momentum is coming from? John McBain: Yes. Look, I think I said earlier, it's a mix of geographies being Australia and New Zealand and sectors. And it's got a bit of everything. So we've got industrial, we've got data center, we've got retail and we've got office. So it is a nice range of asset classes and all opportunities that we think will be well received by our investors, both in New Zealand and Australia. James Druce: Yes. Okay. That's clear. And one more, if I may. Just on the performance fees coming through, which -- and just a bit of color on the funds where they're coming from, please? John McBain: Coming -- a lot of what's coming through this year is coming through from Primewest assets. Jason Huljich: Mainly retail and industrial. John McBain: Mainly retail and industrial, yes. That would be the 2 main ones. Operator: Your next question comes from the line of Richard Jones from JPMorgan. Richard Jones: Just wondering if you can discuss the Arrow Funds Management acquisition, just maybe perhaps how that came about? And I guess how you think about organic growth versus bolt-ons? Jason Huljich: Sure. I'm happy to take. On your first question, look, Arrow, we've been talking to them for a number of years. I think Primewest we've been talking to them before we merged that business in, sort of came to a hit last year, where we worked with the owners of that business. Why we liked it? Our ag strategy is quite focused. What it does allow, we like the portfolio of 26 assets, and it got us some very strong tenant relationships in some other subsectors in ag that we like, such as poultry. I think Bard is about half their tenant exposure, a very strong company. And there are a few other subsectors in there as well. So I think it gave us a bit more diversification into ag, but into ag subsectors that we'd like. On the investor base, there's just under 500 investors. Another thing we liked was the makeup of those investors, a lot of high net worth and a lot of family offices. It's sort of been owned out of Melbourne. And a lot of the investors, substantial individuals and family offices out of Victoria, which would strengthen our investor base down in that state. So I think we've got a number of benefits out of it. Obviously, the financial stacked up, too, with synergies. We're picking up for about 5.5 multiple, which I think screens pretty well. And it's something that we think we can grow. And as we said in the presentation, we're already talking to some of the larger groups about investing into other asset class -- other products. Obviously, CAP, we've built organically, which is the other large ag vehicle. And your second part of the question, organic versus nonorganic. Look, obviously, we like to grow organically and with $800 million of acquisitions in the pipe, that part of the business is going strong. Inorganic growth, we like buying platforms that really add value to us, be it a new sector that we like, that we can scale up. Also, we like, obviously, things that are very accretive as well. But this sort of did help us scale up that ag vertical and get us through that $1 billion mark -- well through the $1 billion mark and get us into those other subsectors. Richard Jones: Okay. And then just a second question. Just a second question just on -- sorry, half on the ResetData. Just what is the likely capital deployment that business needs over the next, call it, 2 years? And can you discuss the options from a funding perspective that you guys are thinking about? Jason Huljich: Look, it really depends where we take it. As John said, we're being very measured. I think we think it's a huge opportunity. You're seeing what others are doing, some of our peers are doing at the moment and some are scaling up pretty quickly. We have chosen really to, as I said, take a measured approach, work out how it plays out in the sort of subsector of AI and data centers -- the relationship with NVIDIA is definitely a huge asset. We are very close to them. And I think it helps the other play, which is our real estate ownership of data centers as well, and does give us some optionality there. So I think it's something that we don't necessarily have to commit a lot of capital to, unless we want to, unless it makes sense. But at this stage, we're just doing the sort of measured approach and scaling up in that sort of fashion. John McBain: Yes. I think to add to what Jason said, I completely agree. It's nice to make it clear, Richard, look, we started buying data centers in 2020. Am I correct, Jason, but the Telstra one for $400 million. Back at that time, no one heard the word data center, right? And we've been adding to that. There's about just over $500 million of just real estate investments, just data center but -- with data center operators as tenants or Telstra or someone [indiscernible]. That's fine. So -- but as Jason said, that gives us -- so we're going to have an involvement in data centers whatever happens. ResetData came along, that just gave us an opportunity just to be at the leading edge. And I think some of the important things about ResetData are the NVIDIA relationship. And if we can build out where I think we're different to other people and your balance sheet question, the answer to it is probably this. We want customers to be locked in before we go out and secure some sort of debt that Simon described before. It's unlikely that we're going to try and attempt to raise a lot of debt and then hope customers arrive. So a little bit of build as they come. We are actually the only ones that have built such a big [ data ] so far outside government. And -- but less hope, more measure, more locking in clients. Once that happens, I think we can find outside sources to fund progress as we make it. Richard Jones: Just one more quick one. John McBain: Yes, sorry. Richard Jones: No, you keep going. I don't want to cut you off. John McBain: No, just -- we don't want anyone to be surprised. This space is dominated by flash releases, quick -- we just don't want any of it. This is slow -- I hope it's not too slow, but measured and deliberate and based on customer demand. And we -- it's exciting because it's a big pipeline, but we want that pipeline to be cemented and then we want to come back and tell you we've done it. Richard Jones: Just a quick one for Simon. Just the second half cost of debt, just can you tell us where you think that heads and any capacity for further margin reduction on balance sheet? Simon Holt: So obviously, this first half had the list of notes being repaid. So the weighted average cost came down about 60 bps from last full year, and it will probably come down another 60-odd bps in terms of the full second half. Sorry, what was the second part of your question? Richard Jones: So that will be 7% for second half is what you're saying? And I just... Simon Holt: Yes. Richard Jones: And the other question was any further capacity for margin reduction on the rest of the book, whether you can bring any of that forward? Simon Holt: No. Look, we've got to a point that we've got -- we've refinanced all of our corporate notes out. So at the corporate level, I think at 2.75 or 275 bps is about where we're going to land for the moment. Some of the shorter term debt may roll off, it might come in slightly, but that's where we're kind of sitting on the margin side. Operator: Your next question comes from the line of Ben Brayshaw from Barrenjoey. Benjamin Brayshaw: You previously flagged the potential for the IPO of a couple of listed entities. Just wondering if you could provide an update on that? And is that something you're still considering? Jason Huljich: Yes. Look, we are. It's subject to obviously market conditions. Obviously, the market is a little over the shop at the moment. So that window isn't there. We have done a lot of preparations. So if that window does open, we're ready to go on certain vehicles. But yes, it's totally at the mercy of the market at the moment. And look, we don't need those particular vehicles to be launched over the next 4 months to hit our guidance either. Benjamin Brayshaw: And just a question on the financials. I was wondering if there's been any development operating earnings recognized from the inventory on the balance sheet for this period? And if so, if you could just quantify those roughly, please? Simon Holt: No, there's no profit coming through from that activity. I'm just trying to remember what was in my list of inventory. Yes. So most of what was in inventory were properties held for sale as opposed to development properties. So it's just more of a classification thing under accounting standards as to why they call inventory. So yes, no, not a lot of profit coming through on this period, was 0 profit coming through from any developments on balance sheet. Operator: Your next question comes from the line of Simon Chan from Morgan Stanley. Simon Chan: Performance fee is pretty good, and you've reiterated $20 million for the year. Just the way I'm thinking about it, you started booking performance fees. That suggests to me that there are probably some funds or some AUM that's coming towards the end of their set periods, right? Am I right? And if I am right, like how big is that chunk? How much of your unlisted platform have funds coming to the end of their lives over the next, I guess, 18 months? Simon Holt: Yes. The majority still is in '28, '29, which has been there since we've purchased Primewest. And a lot of what is the unbooked performance fees relates to that particular period of time. These are just some other funds that are inside that 2-year window, that have come into that 2-year window. Some of that will because the funds expiring, some of it will because there's opportunities with investors to do different things with that particular asset that create that outcome of something likely to happen within -- in the next year. In addition, in many cases, as has been the case the last couple of years, investors choosing to extend those funds as well, even though they come into that 2-year window. So it's a mix of things that are going on. But in essence, there's a number of funds, as we said earlier, around industrial and retail that are coming into that 2-year window. Simon Chan: How big is that bucket, Simon? Simon Holt: Well, the latent performance fees of -- that are in there, it's about $70 million, isn't it? Simon Chan: No, no, I'm not talking about fee. I'm talking about the funds bucket that you're referring to? Jason Huljich: A few hundred million. Simon Chan: Yes. Sorry, Jason, did you say a few hundred? Jason Huljich: Yes, a few hundred million roughly. Simon Chan: Okay. Okay. Fair enough. And that excludes the Primewest, right, Simon? Simon Holt: No, no. That would include the Primewest assets. Simon Chan: Okay. Simon Holt: Most of what's been booked through this period is off the Primewest assets. John McBain: A big chunk of the Primewest assets got extended out to '29 upon their listing, but there was a big -- it was also a part that didn't. So they did expire earlier. Simon Chan: Okay. Cool. How is fundraising at Two Wells going? Simon Holt: It's good. So that vehicle has got a large cornerstone investor. We expect them to take a significant chunk of the equity required for that purchase, which is positive as well as new investors coming into the fund. Simon Chan: Okay. Which sector would you say was -- I mean, over the last, I guess, 12 months, you've done Logan, you've done -- well you're doing Two Wells and you've done Port Adelaide. Simon Holt: Yes. Simon Chan: Which of those 3 sectors was the easiest to get money? Jason Huljich: The Port Adelaide raise is probably the best I've ever seen, to raise sort of circa $300 million for $116 million raise, which we thought was reasonably large at that time for an Adelaide asset. We got bought over. Everyone got scaled back over 50%. We also said no to a number of offshore institutions that wanted minority stakes as well. So yes, that was definitely the most demand I've seen. Logan went well as well. That was oversubscribed. But yes, I think we've got pretty good demand across the book, particularly retail and industrial. Ag is good, but that one cornerstone is a big chunk of the demand into that fund, which they keep supporting, which is great. Simon Chan: Great. And just one last one. Can I check in on Allendale? Are you guys still holding on to some units there? Or have you managed to get it the way now? Jason Huljich: We do have a holding. It's been coming down over time, but there is a holding at this stage. Simon Chan: How big is it? That's [ alright ]. You can get back to me. That's fine. Simon Holt: We'll come back to you. Simon Chan: Yes, of course. Operator: Your next question comes from the line of Andy MacFarlane from Bell Porto. Andrew MacFarlane: Just a couple from me. Can you just talk about the level of redemptions, if any, across the various funds at the moment? Jason Huljich: Yes. Look, we only have the 3 funds that have redemptions, the -- which are the open-ended funds. So CDPF, which our diversified fund, it's a small fund, our health care fund and our ag fund. We have quarterly redemption -- limited quarterly redemption features. Now both the health care fund and the CDPF came up with their 5-year liquidity events where we go out to investors and -- we go out to investors and give them the opportunity to let us know if they do want to redeem out the fund. We then have a period of time to raise more equity, sell assets and so forth to satisfy that. CHPF, I think we reported last results, we were at over 30% of investors, put their hand up there, and we're just going through the process of satisfying those. The latest was CDPF diversified fund. Again, around 30-odd percent, put their hand up for redemptions. We've already satisfied about 25% of them, and the rest will be sorted out pretty quickly with some assets that are going through the sale process at the moment. It's not a lot. It's sort of less than $120-odd million across the board. Andrew MacFarlane: Just in the pack, you got a chart on bank hybrids rolling off and some of your peers looking at doing things as product replacements. How do you think either Bass and Centuria could play a role in finding products here, if so? Jason Huljich: Look, we think these investors are looking for yield. Our products can supply that across either the credit or equity side of things. So we think it will be a tailwind for us and obviously other managers as well. As I said earlier, we have been pretty surprised on some of our raises and the amount of demand out there. As these hybrids roll off year-on-year over time, I think that will help support demand for our sorts of products. So yes, as long as we can keep up an attractive yield and a buffer over term deposit rates, which is looking like we can do on both sides of the Tasman, our products should be pretty well received. Andrew MacFarlane: So last one, if I may. LVR, it's creeping up a little bit in the debt book. Just wondering kind of where you're happy with that sitting? Jason Huljich: On the -- in the funds? Andrew MacFarlane: Yes. Jason Huljich: Look, our funds hasn't -- I don't think it's moved too much. We sort of sit normally around that for a new fund in that 45% to 50% range. Andrew MacFarlane: Sorry, Jason, I meant, Centuria Bass, apologies. Centuria Bass. Jason Huljich: Centuria Bass. Look, a couple of percent on LVRs. But look, we put that graph on there to show it hasn't moved that much. It's been pretty stable. We stuck to about, I think, just over about 92% first mortgage. It's about 90% residential. Look, where the LVRs around where it is now is where we're comfortable. Each deal is obviously diligence on its merits on the counterparty, on the quality of the asset, but how we look at it is it's an asset [ lead ] and what is the value of what we're lending against and having the teams in-house that can really have a close look at it, a large development team, a large valves team. I think it really gives us a bit of a point of difference compared to most of the other managers out there. Operator: There are no further questions at this time. I will now hand back to Mr. Bain for closing remarks. John McBain: Yes. I'd like to thank everyone for attending this morning and for the questions. We enjoy it and send out thanks to Tim and Peter, in particular, for helping put a really nice set of documents together. Thank you. Operator: Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Robert Barrie: Hello, and welcome to the Freelancer Limited Full Year of 2025 Financial Results. Apologies for the half an hour delay in getting going. We had some technical difficulties here in the conference room. Not sure what happened. We had a Board meeting here last night and overnight, the machine fried itself. So we've managed to sort that out, and I do apologize for the waiting, and we'll get going now. With me in the room today, I have Chief Financial Officer, Neil Katz; Vice President of Product, Andrew Bateman; August Piao from Escrow.com; and Mas from Loadshift. Today, this is the full year of 2025 financial results as we operate in the calendar year, and I'll get going. Financial highlights. The group gross marketplace volume, which is cash to the business, was $881.5 million, which is down 7.1% in FY '24. The Freelancer GMV was up 2.3% at $133.4 million. Escrow was $748.1 million, down 8.6%. Group revenue was up 4.1% versus the full year 2024 at $55.3 million. Freelancer revenue was up slightly at $40.9 million, and Escrow.com set an all-time record of $12.3 million, up 18.8%. We recorded an all-time record net profit after tax of $2.2 million, which is up from a small loss of -- in the prior year. Escrow just completed its fifth year of consecutive profitability and is paying tax and going to its sixth year of profitability. And with Loadshift, we also achieved a maiden full year profit. We also achieved an all-time record operating profit, excluding unrealized FX of $2 million, which is up 162%. Operating cash flow was a positive $7.7 million, up 32% on PCP. Cash flow was $0.5 million versus $0.8 million on PCP, but also included a net of $1.5 million in buyback of Loadshift shares, which increased our shareholding to 73.4%. Cash and cash equivalents was $22.9 million, down 11.9% on the half year, but flat on the prior year and so forth. So we achieved a significant turnaround in profitability. I've said previously in the last quarterly calls that my goal was to do $0.5 million a month of operating profit consistently. We're about 2/3 of the way there. We have a little way to go, but we're working hard on both the revenue side of the business and also on the cost side of the business. We got -- had a pretty decent cash flow of the business at $7.7 million, I said before, up 33%. And we decided to increase our stake in Loadshift. I think this year for Loadshift is going to be a pretty transformational year as I'll describe a bit later on. So our ownership has been increased to 73.4%. Freelancer is working hard to build the Amazon services. There are many companies out there that are global marketplaces of products that are very large in terms of scale and scope, the likes of the Amazons, the Alibabas and to an extent, Shopify, which is a marketplace of marketplace of products. We're trying to do that for services, and we are in the fields of labor payments and freight. We have over 90 million registered users across all our portfolio of businesses. Freelancer is the largest cloud workforce in the world. Escrow is the world's largest online escrow company, which facilitates the secure large value payments. And Loadshift is Australia's largest heavy haulage freight marketplace. And so we have services that meet the needs of consumers right up to very, very large organizations. For the core marketplace in FY '25, we onboarded 7.32 million new users and 666,000 new projects were added to the marketplace. The average project size continued to climb and averaged at USD 413, up 19.4%. And the sustained expansion in average project size reflects ongoing shift towards higher value, more complex work across the platform and also our targeting of our customer acquisition programs. Liquidity is very strong. And in fact, in many areas, we're doing some work, which we'll explain a bit later to 10% of the liquidity because it is very, very high and nowhere else in the world is as liquid as we are for getting work done. On average, you get 54 people bidding on your project, which is up 8% on PCP and contests have exploded to a fairly ridiculous 761 entries per contest, which is up 50%. So you can see here that really since 2020, we've had a trend up in average project size and that's across both the Freelancer and the Loadshift business. In terms of acquisition, in the fourth quarter, we saw a slight decline in year-on-year performance driven by a decrease in the SEO channel. We've actually rectified that, and it's bounced back down in Q1. Volume from SEM is at record levels as of writing the report and a relatively stable return on investment. We're starting to see a lift in AI-related jobs in the marketplace, and it's still at an early stage, but it is lifting. It's starting to meaningfully contribute to GMV. It's about 5% of total marketplace volume in the marketplace. As I said before, I think we're in probably the third phase of transition of businesses, thanks to the Internet or transformation, thanks to the Internet. In 1994 to 1995, you had the Internet go mainstream in Western economies, and that led to businesses going online for that. They got web development done as they wanted their presences built out on the Internet. We then had mobile phones get deployed and you had app development. And now with AI, you have AI development. And there's a whole range of features and functionality, not the least of which being AI agents, but also using AI to personalize workflows and accelerate productivity. And we do think, as I've foreshadowed in previous quarterly results that this is going to be a very, very big category in the time to come. You get over to the same place to get your AI developed that you get your website developed and your app developed; which is small individual freelancers, small agencies, large agencies and very, very large service providing organizations; and we aggregate all of them on Freelancer. The shift with AI is creating a powerful 2-sided effect in the marketplace. We're getting an increase in new AI-related jobs from clients, but also freelancers have lifted their skills quite dramatically through using AI tooling. We think the killer combination is humans with AI. And certainly, the freelancers are probably one of the largest -- on our site are probably one of the largest and most active users of AI out there with that 90 million people rapidly adopting tooling and lifting in speed, quality and output. And so we think this is a great structural enhancement to the value of our marketplace, the competitiveness of the freelancers and the scalability of our model. We're seeing work coming quicker. We're seeing higher quality work, and we're seeing that across the whole breadth of skills that we have available in the marketplace. In early January, we successfully launched, as we talked about in previous quarters, not just audio and video calling, but client-initiated audio and video calling now before you award the job to a freelancer, so you can post your job, get your bids in and talk to some of the top freelancers over audio and video prior to awarding. We've managed to do that successfully because we have a real-time data science pipeline, which does real-time analysis on those conversations to ensure that we don't have off siding, et cetera. And so as a result, this functionality is great, not just for clients to interact with the freelancers before they make the selection, but also for freelancers to win business. And so that's also led to an increase in membership revenue there on the Freelancer side. We've also managed to automate our project review using both AI and our data science pipeline called Iris. We used to have all the listings on both Freelancer and Loadshift go through human review before they went live in the marketplace. We've now managed to pretty much almost fully automate that, which has led to a lift in conversion as projects go live quicker and don't go through delays. Our focus in the first quarter will be continuous introducing AI into the primary job posting the funnel. We're focusing not on the very top of funnel at this point in time, we're focusing more on the bidding process and to match talent more effectively and counter bid spam. Because we're in the world of AI now, any form of user-generated content out there can be enhanced through AI submissions. And so we're really now focusing on ensuring that the bids that are coming in are true representations of freelancer skills and experience and that very, very quickly, we can make recommendations. We can annotate the bids coming in to provide what freelancers or platform thinks about the freelancers and to ensure that the bids are accurate on the freelancer side. We're also working on improving our payments infrastructure. In the first quarter as well, we've also now launched a Prototyper. This is our AI-powered collaborative whiteboard enables clients and freelancers to basically prototype ideas in real time and also what we call Make It Real and generate code to interpret those drawings and turn them into software with one click. So you start with a blank canvas, you sketch the concepts using whiteboard tools, traditional things like sticky notes, annotations, images and more. And then with click to Make It Real button, we transform those white frames into clickable interactive prototypes with no coding required. And so we can replace lengthy text briefs or conversations with actual visual collaboration, and it provides freelancers clarity early on and clients clarity in terms of where their build is going. So I think that's pretty cool, and there are a lot of different directions that this can head in the future. And of course, all of this stuff is powered by the mainstream foundational models. So we plug into OpenAI and Core, et cetera, powering this back end as well. So that we always keep up to date with all the latest advances in model technology. We remain to be the #1 [ site ] building platform in the world in terms of freelancing and cloud work. We're rated now 4.5 excellent on Trustpilot from 18,000 reviews; 4.7 on SiteJabber, 20,000 reviews. Yet again, we maintain our #1 position, and we've won awards that have celebrated that from those review sites. Our Enterprise division continues to work to expand its client base and operational infrastructure. We launched Concierge services for premium customers and established a Bangalore office to drive sales and operations in that region. It's very clear to us that India is the body shop to the world and every BPO there and every large major tech company has operations there, and that's the place that they source talent. And all those BPOs don't have breadth and the depth of talent that we have across geographies and niche skill sets. So our engagements spanned technology, business services, financial services and education verticals. And we're doing some pretty exciting things where we're marshaling very large fleets of people to work in everything from AI to field services to sales to so forth. And over the course of this year, we'll probably be making a couple of announcements about that. And so we are really focusing in FY '26 on deep pools of repeatable work and workflows. And I think we're pretty excited to hand-in-hand with our office be building out some features in the enterprise product over the course of this year to enable it to happen at scale. Now second half of last year, the Bangalore office started as a sales office and operational office to service enterprise demand and global fleet across India. We've got good momentum and a good pipeline. We're pretty excited about the pipeline of opportunities we've got, and that's headed up by Gerard Christopher, who has worked for us for a couple of years on engagements such as the GitHub Packard engagement. Generative AI work continued throughout the year with projects across a variety of different languages, transcriptions, image collection, going to locations, collecting data for surveys, collecting data for -- going into foundational model training, et cetera. We've also got a new company, where we're doing field service repairs of laptops. There's a picture there of a new brand of laptop that we're repairing in Kolkata. And the project for FY '26 is to really double down in the office, scale up the delivery volumes and scale into the North American markets. On the innovation front, over the course of FY '25, we've announced previously that we were a joint winner of NASA's upscale 10-year USD 475 million NOIS3 contract. That contract is a big upscaling of NOIS2, which we were also a winner of, which went from $75 million to $125 million, now it's $475 million. There has been, over the course of the second half of last year, some delays in task orders being awarded and funded due to various government shutdowns and restarts and shutdowns task orders have started flowing recently again, and we're bidding on them, et cetera. And we're doing some pretty exciting things, everything from genome edited delivery for the NIH. We did some work for the Orion spacecraft in the compiler technology for software testing, lunar south pole navigation concept, zero gravity indicators, et cetera, and so on. We currently have a challenge live for detecting underwater explosive ordinance for the United Nations. We've also got another challenge being launched shortly to model the particle distribution of explosive devices using AI and ML techniques. In addition, our government division is progressing. We've got now, I think, a solid program that can be appealed to both state and national governments around the world around helping people come up unemployment benefits and go to the workforce. We're pioneering that. We pioneered with a few countries and now with Bahrain with the Tamkeen accelerator. I think we've got a pretty robust program that we can scale up and reapply all around the world. In FY '26, the key focus will continue to be, one, to enhance marketplace engagement, continue to improve the user experience and matching capabilities to attract activate and retain high-quality freelancers and clients. I'm pretty excited about the work we're doing here. I mean, obviously, you can address questions at the end to any of the people in the room. But Andrew Bateman, who's here, VP of Product and myself, we're pretty excited last night talking through the range of capabilities that are literally over the next 2 weeks going live to allow you to very, very effectively find great freelancers, have recommendations from the platform in real time on those freelancers, do natural language search to find those freelancers and to curate the bidding lists, the directories and notify the freelancers and so forth. In addition, we have a whole bunch of trust and safety measures cracking down on bad actors. We're also accelerating AI-driven innovation, expanding our integration of advanced AI solutions across products and services, allowing efficiency, automation, and new opportunities for enterprise growth. Our vision here is basically that we provide access to all the tooling of all the major AI tools through the platform to the freelancers. So we act as a distribution channel. As I said before, we have a very large network of users of AI. The freelancers are very active in adopting latest tooling across a range of different areas, and we think we can be a place that can really distribute those products and services to those freelancers to lift their skills and lift their earnings. And we're also expanding our financial service offerings. We're really streamlining our payments infrastructure. We're doing that in a global way to ensure that we have excellent acceptance and excellent native payment methods no matter what geography we're interacting in. And hand-in-hand with that is we have -- we're building out quite a sophisticated capability in our ability to levy taxation. Governments around the world are pretty much broke and they are looking towards platforms to, at minimum, provide reporting of earnings, but also to start collecting taxes in various jurisdictions around the world. And we're quite advanced with that in many jurisdictions. And I do think that in the future, this is going to be a great regulatory shield for us. We've already had some of the biggest $1 trillion tech companies in the world come to us who while they may be able to solve this problem, don't want to solve this problem or find it very hard when they do product innovation to solve this problem. And so they've come to us to basically solve it for them. So I think as we build a more robust offering there, that could be very, very attractive to some very, very large companies. We're also focusing on driving operational excellence strengthen platform reliability, quality and performance through rigorous internal processes. Andrew Bateman leading to a complete overhaul in the way we develop product, the way we ship product, the way we think about product and the way we think about product quality. We're also enhancing customer satisfaction and market leadership. And I've said before, I want to get sustainably $500,000 a month of operating profit every month on an ongoing basis and trend that up over time. And we've made some significant progress you see with our record profit this year in the FY '25 period, and I expect to do even better this year, doubling down on that. In terms of awards, we are recognized for our 13th Webby Awards, which is really the Emmy or the Grammys of the Internet. So we're very pleased to receive our 13th Webby and our 26th Gold Stevie. And I think it's just a testament to the hard work the team is putting in. Escrow.com has a GPV of AUD 195.8 million in the fourth quarter, up 3.8% on PCP, slightly down in U.S. dollars. Full year 2025 GPV came in at $760.4 million, 8.2% down primarily due to the lapping of a large IPV4 transaction in 2024. I'm pleased to report the Q1 numbers as well. I don't want to present them too much, but they're up a bit from here in Q1. So we're seeing a good entry into 2026. Revenue for the full year was up 18.8% to $12.3 million. As I said before, it's our fifth year of profitability entering into our sixth year of profitability, and we've used up all our tax -- deferred tax assets. So we're paying tax now, which is a good first real problem to have. So I think we've got the business into a pretty robust state. As you can see, there's a long-term trend line, which has been continuing through the business, and we hope now to not just continue that trend line, but also to start really kicking in and accelerating that. And as I said before, punching out 5 years of profit and going to a 6-year of profit now, this is a very solid and strong business and also very unique and very strategic in the fact that there has a licensing for 55 jurisdictions for payments. We're also positioned for strong sustainable growth with various e-commerce partnerships. Our pipeline is actually the best it's ever been, both for high-value transactions and also for sales. We were just actually going through the high-value transaction over the last couple of weeks. We're pretty amazed by the quality of things that we're seeing in from our broker network, but also in additionally, we have quite a wide range of new verticals that we're going into. And I think we're going to have pretty significant merchant adoption in 2026, so much so that we're building a go-to-market team as we speak. We've got heads up and in our North American sales hub, which is in Vancouver. We're building out the account management team under Tony Yan, who's been just promoted to Director of Operations as well as building out our go-to-market and our activation team. So we're really trying to -- we're really trying to copy here what Afterpay did. They had a very aggressive team going after merchants and platforms on the sales front and then they had an activation team, which really took you to market once you became a partner and integrated the Afterpay checkout solution. So we really want to use that as inspiration for how we see building out our checkout product. We continue to see strong interest from digital asset marketplaces seeking trust, fraud protection and cross-border transactions. Partnerships include Dynadot and Connexly, market leaders in domain and IPV4 transactions. We're also continuing to invest in new verticals and providing customized experiences through the flow for those verticals. We've got some great B2B electronics marketplaces and broker networks being on board. Some of these guys do very, very big volumes. One of them is over $900 million of GMV per month that they do in entirety. Now we're not going to get anywhere near that number from them, but I think we could, if we execute well, get a substantial volume from these partners. And obviously, when you're selling things like B2B electronics, you've got all sorts of trust and safety issues. Are you getting what you think you're getting? Is it the equipment in good condition? Is it not stolen? Is it not damaged, et cetera and so forth? We have also got key broker marketplaces offering escrow payments through integrated and nonintegrated solutions, sites like BrokerBin, which is the world's largest B2B electronics database broker site, secondhand electronics, BrokerForum, TradeLoop, all wholesale markets. We're doing interesting things in other international trade markets. We've got a very large agricultural transaction that's currently being set up that they should go through shortly. We've got premium luxury goods marketplace in advanced stages of integration and all sorts of other marketplaces, including regulatory marketplaces that are coming on board. And we've got some work also kicking on in automotive. New partnerships for in 2025, increased our visibility and reputation, quite a number of U.S. sort of businesses. This is for WatchFacts, a luxury marketplace that we did some partnership work with that do fine jewelry, handbags, luxury watches, et cetera. Grit Brokerage and domains Immobilium with real estate agents. We're starting to tiptoe into real estate, which is obviously the holy grail. Acquired.com, we really doubled down our relationship there in the M&A of businesses and businesses from the digital side up to medium-sized businesses. And we also just brought on Pitch Capital, which is a capital raising platform, which has secured more than USD 370 million funding for start-ups and now those transactions will start to go through Escrow for fundraising for ventures. We also presented our top Master of Domains award. We published a quarterly report on domain pricing. We're actually, I think, next week, publishing our first IPV4 pricing index, which will be a quarterly pricing index and so forth. We're also releasing next week our quarterly domain report. We did see an uplift in domain volumes. We saw a tripling into AI domains over the course of FY '25. And then while second cousin to dotcom, we are seeing a very, very big lift in volumes. It was up 189%. Is that right, Austin? Is that right, August? Almost a tripling in the volume getting to about $27 million. So we are seeing a contender come in, and we're just seeing where that continues. The other thing we did, I should mention is we completed our first transaction for straight-through financing through our Funding.com subsidiary. We've done over $670 million of vendor financing through Escrow to date in the domain space, and we've actually just completed our first straight-through financing transaction with a third-party financier. We believe Domains offer a premium form of security well and above the assets of the business because you can flick off someone's website or payments or e-mail in 5 minutes and flick it back on again. So we think that as a security for lending, it's a premium asset. We have a custody service where we hold things like domains for lease to purchase options, and we've now got financiers financing, taking advantage of that custody service. We've also now 24/7 with our customer support. That was a very important thing we wanted to do for Shopify. We've got the go-to-market team is being built out for Shopify specifically. We're onboarding more and more merchants. It's still very early days. We're not visible because we haven't crossed the 50 merchant platform threshold yet for that. But over the course of this year, we will be moving that quite rapidly. We needed to make sure we got all our ducks in a row in terms of our operational and service capabilities before we could really pump a lot of volume through this business. So we've really been working on that, and we've been making some changes in terms of the management team to be able to support that. We're also in the process of migrating the front-end technology -- it's 189% I think it's close to 189% [indiscernible]. We're also in the process to migrate the front end of Escrow to the freelancer technology stack. That's the stack that runs Loadshift, it's the stack that obviously runs the Freelancer platform. That allows some very modern features. It's a single page architecture, so it's very quick and very lovely to use. You've got real-time chat and messaging capabilities, obviously, audio and video calling capabilities, which are not available currently on Escrow. We've got AI agent capabilities, we've got whole framework there. We've got AI agents doing support and doing sales and doing operational sort of work. That will become available on Escrow as a result of doing this and a range of other features. And additionally, it also allow Escrow transactions to be available on Freelancer and on Loadshift. So we start extracting more synergies between all of those businesses. And down the track, that will also allow us to do things like upsell freight off the back end of -- sales through Escrow of products, something that's been a long time coming, but with a unified front end it will allow us to do that more easily. The other thing we'll be able to do is have a unified payments infrastructure and a unified identity service. So what that will mean is if you KYC once with any one of our platforms, you're KYC'd everywhere. So you don't have to do [ first ] in Freelancer and Loadshift potentially separately. You can just do it once and it will be done everywhere. So that's some of the synergies we look to extract this year through this unification process. The other advantage is that allow us to be a lot more nimble. We'll be able to move engineering and product and design between the businesses a lot more easily and fluidly. And so we will see a real, I think, acceleration in the product development of all 3 platforms as a result of unification of all on the same technology stack. Loadshift, I think, is starting -- is going to have a breakout year in 2026. We're obviously Australia's largest heavy haulage freight marketplace. Midweek, we get somewhere between 300,000 to 400,000 [indiscernible] on the site, which is the Earth to the Moon. And it's basically the Freelancer stack or heavy haulage freight currently, and it's currently also in Australia only, but we are looking to broaden that out and take that global and that we're starting to do some things in the back end to enable that in the later -- of this year. We had record performance in FY '25, our strongest operational and financial results to date. Revenue and GMV increased year-on-year through improved ops team, marketplace efficiency, conversion and other innovation. Revenue was up 12.4% on PCP. GMV was up 7.7% on PCP. We had an all-time record quarterly revenue consecutively in the third and fourth quarter, up 15% on PCP in the fifth fourth quarter. So you can see it's lifting. 2026, I think, will be a breakout year for us. Job postings are up, award rate was up, total jobs awarded up, delivered workloads are up. So we're starting to see that take off. The big thing that was holding back Loadshift last year was audio and video calling. The big use case difference between Freelancer and Loadshift is that the majority of the work in the heavy haulage freight business happens over the phone and not through a desktop website, for example. So we had to build out the audio and video calling capabilities. And this year, in addition to that, we'll be building out audio capabilities to interface with the app, et cetera. We're pretty excited about where this goes. Not only do we have audio and video calling now fully deployed, but we've got in real time, the conversation is being transcripted, and so we can assist with project management or trust and safety purposes. In addition to all of that, you'll be able to interact in the future with the app through voice. So you have -- if you're driving a vehicle, you don't -- you can't interact with your handset with your hands. So you'll be able to talk to your -- to Loadshift. Obviously, all the capabilities we make available for Loadshift will be available for Freelancer and vice versa. So we're pretty excited about the future of that and being able to have a fully agentic version of Loadshift in the future and where that's going to go. So yes, key innovation is obviously getting that audio and video calling app, which is an app. We also made it -- we polished it with several rounds of improvements, which allows you to use the app very nicely once you're in a call, et cetera and so forth. We're also now focusing on enhanced GPS tracking capabilities. We're pretty excited about the features and functionality there. We're going to not just have real-time tracking of all of our fleet, no matter where in the world that will be, but there's a whole bunch of features that are rolling out hand-in-hand with that around compliance, around delivery notifications, pick-up notifications, tracking of the state of any cargo to ensure that hasn't been damaged in transit. And really, it's going to be a pretty comprehensive suite of functionality over the course of this year, which I think is going to be pretty, pretty exciting. We've also got a number of enterprise -- large enterprise clients now starting to come and talk to us wanting this technology. And that ranges from companies that do equipment hire, that do auctions of automotive and storage and so forth. So we're pretty excited to see where some of those conversations go. And we're engaged with some of the largest mining companies in the country. So we've got some pretty solid client base here. So overall, at group level, we had NPAT of $2.2 million positive, which is an all-time record. There was a small loss of last year. Additionally, we had a positive cash flow of $0.5 million, operating cash flow of $7.7 million, up 33%. We had outflows of $6.9 million, primarily related to lease payments for office premises. Across offices, the costs are coming down. In fact, I think it's next weekend, we're moving into our new office in Manila. We've got some improvements. Neil Katz has done a phenomenal job. Every time we do a lease renewal of chipping down the leasing costs in pretty much every office location we've got around the world. And I will say in Sydney in 2027, we'll be moving office as well, and we'll also get a reduction in our lease costs. So that's a line item that continue to tick down. As of 31st of December, we held $22.9 million in cash and cash equivalents. It's down a bit because we did a buyback of Loadshift shares primarily. We now own 73.4% of Loadshift shares. So that's fantastic. In terms of group management, we strengthened our management team with several key appointments and promotions. Andrew Bateman was promoted to VP of Product for the group, bringing over 2 decades of technology and product leadership experience. He sits to my right. And after this call, you can in the Q&A, ask any question of Andrew, if you wish. Owen Smith is the Director of Legal Compliance and expert in regulatory affairs. He heads up our compliance team, and he's doing a great job of kind of building that out and building our capability for world's best compliance and AML. Brent O'Halloran joined us as Director of Communications. He ran the foreign news desk for Sky News. He's been a pretty serious foreign correspondent for quite a number of news organizations, and he's really lifting our communications capability across the business. Tony Yan is Director of Operations for Escrow, he is overseeing partnerships, account management, the global support team under Dean and parts of payments, and he's a scientist by background. And Trisha Epp, who runs innovation was promoted to Director of Innovation for NASA. Gerard Christopher runs our India office. And we wound down the Buenos Aires office at the end of last year on the 31st of December, which was no longer fit for function. It was supposed to be a second 24/7 premium support team for a very, very high-end account management. We've moved that to Vancouver now primarily. Instead, it was a bit hard to communicate with the time zones between Sydney and BA, as well -- they were fit for purpose. And particularly a number of the functions now we've managed to automate with AI or move to Manila as well at the back end. So instead, what we've done is we opened up an office in Bangalore, and it's a sales office and operational office that's on the front end, pointy end of working with enterprise customers. I will also say another notice went out today this morning. Neil Katz, our Chief Financial Officer, has announced his retirement. We've had a very, very good run with Neil. He's with the business for 16 years. He took us from startup to a listed entity. He was very instrumental in many parts of the business that are very, very complex on the financial side. The 55 jurisdictions we're licensed in, Neil pretty much spearheaded most of that. We took from 8 licenses in 2015 when we bought it to 55. That is a very, very, very complex thing to do. And in fact, I could not do that again from scratch if I tried. And it takes 5 to 7 years for jurisdiction to get a license. You are then audited every 2 years on average by the regulators. We've managed to go through that very smoothly, albeit it did take time because it does take time, but he did that very, very well. He went through the IPO with us. He's been through the expansion of the businesses. I don't know how long his dongle chain of bank account access tokens is, but we've got bank accounts in currencies all around the world that he controls and manages and all the treasury function and so forth, the modeling and so on. And in fact, Neil and I have obviously worked together, not just at Freelancer, but also in my prior company, where he was chief financial officer. There's been about a 20-or-so year history of this. So it's been a long track record. And I do thank Neil very much from not just the management team, but also the Board last night and the Board of Directors for his service. It's a very orderly transition. It's been well flagged for the last couple of years. We have been out there looking for -- it's a 2IC under study for some time for Neil's group. As of today, we'll be upgrading the job listing to a Chief Financial Officer search, that we are kind of well advanced in kind of succession planning and have been for many years here. Neil's notice period is 6 months. So he's going to be with us to August 2026. And he's also very graciously in the Board meeting last night, offered to potentially stay on past that and potentially in a part-time capability should the new CFO wishes and so forth. So from all the company and myself and the Board, a heartfelt thank you for Neil for his service. It's a very, very long and track record for achievement. But we're out there and we're active in the process of searching for a replacement, and we'll make notifications to the market in due course when we select the final candidate. Now I apologize again for starting half an hour late on this call. We had some technical difficulties that I'll ensure does not happen again. You may now direct questions to anyone in the room. To remind everyone of who's in the room, you obviously have myself, Matt Barrie, the Chief Executive Chairman of the business. You have Neil Katz, Chief Financial Officer; you have Andrew Bateman, who is VP of Products; August Piao from Escrow and Mas from Loadshift. We'll now open it up for questions from the audience. And if Oscar, if you could read them out if any are in the chat. Operator: Yes. First question from Ray Johnson. Have there been any tangible outcomes from the expansion of the Board? Robert Barrie: Ray asked, has there been any tangible outcomes from the expansion of the Board? The answer is absolutely yes. Over the course of last year, we added Craig Scroggie, who's the Chief Executive of NEXTDC and also Patrick Grove, who is the founder of many businesses from ICar Asia to iProperty Group and is Chairman of Catcha Group. Yes, they have certainly -- there's a whole spectrum of things we've done. One is we've improved how the Board functions in terms of just generally how we run meetings and how we -- what we talk about and the strategy and so forth. Patrick has been pretty [ inspiring ] in pitching a few ideas that we're currently evaluating. Craig has been very instrumental in the execution and thinking about the execution of those ideas and how we can actually go about organizationally implementing them. And I think the discussion has really lifted to the strategy and even the governance. We obviously had our Board meeting last night with the Audit Committee, meeting, et cetera, Craig's already led quite a number of questions of the orders, et cetera. So I think we've really lifted the capability of the Board to the next level. I'm very pleased to attract -- be able to attract to the business such world-class entrepreneurs. Craig, for example, is probably one of the hottest CEOs in town right now, obviously, running NEXTDC and building data centers pretty much anywhere there's a square meter of real estate in a city in Asia Pac. He's building data centers. And then Patrick, obviously, one of the greatest entrepreneurs that Australia has produced, having built marketplaces in property, in automotive and in media, he's got marketplaces in Latin America. Last night, he was in Panama with his latest business, et cetera. So no, it's been a phenomenal step up, I think, in the Board's sophistication and capability. Operator: Next question from Katherine Thompson. Within the enterprise part of Freelancer, could you rank the contribution to revenue from the various areas, e.g., NASA, field services, GenAI in full year '25 and '23? Robert Barrie: Yes. So we don't break them out in the financial results. They are currently fairly de minimis to be frank. We do expect a big uptick to be coming from NASA, for example, very shortly. There's been some government shutdowns that have kind of held up the deployment of capital from the NOIS3 program, but that it should start to flow. We're starting to see task orders coming in now. We are the largest company that is a winner of NOIS3. It is a joint tender, for example, but we are the largest cloud workforce capability, and that's represented in all of NASA's presentations. On the enterprise side, the focus -- we think we have a lot of work happening in terms of activity on the AI services side. We had a whole call last night with a very large major BPO that is using us actively on some small-scale stuff. The trick we have figured out is we have to build a bigger product so that we can effectively scale these workflows up to very, very large scale. The company to look at is Scale.AI. That's a company that's only a few years old that Meta bought half of, for about a $14 billion purchase. We can do everything Scale AI does and better. We have a deeper network of workers with more skills and more capabilities and greater geographic reach. And in fact, I would not be surprised if actually Scale AI. I got a bunch of freelancers from our site, to be honest, through various means. But we have to build the workflows. What -- where I think we have somewhat been misdirected with the enterprise work we've done with Freelancer is we've had pretty much every major Fortune 500 come to us looking for a contingent labor solution. They're saying, okay, what you do. We've got full-time staff in our office. We've got service providers that provide us with contractors. We've got various HR technology infrastructure that can manage those fleets of people. But what we don't have is we don't have a contingent labor capability with gig or cloud. The -- and that's the approach we have been taking is really to really react to that demand, whether it's a Deloitte or whether it's Arrow Electronics and literally all the Fortune 500 in there and try and build them like this generic contingent labor capability. Now the challenges we run into when we've discovered is even though those customers pay us, I think Deloitte paid us about USD 5 million to build their capability. It's quite complex and it's quite custom. You have to integrate with their vendor management systems. You have to integrate with their single sign-on system so that all the staff can log in and it's got the same look and feel. You've got to potentially integrate with their time tracking system, active directory, this, that, the other. And then you have to do quite a large amount of customization. While we are chipping away at the product capability to make that easier and easier and simpler and simpler to be able to deploy that for any large enterprise, really what we've come to discover is you've got to find where the deep pools of repeatable work are and really build workflows and then automate those workflows with freelancers. And I come back to my comment about Scale.AI. I think they did that very, very well and very, very efficiently in a very, very narrow niche area where they built very effective workflows, a very small number of workflows, but they did that very effectively and then they managed to rip through there with huge volumes of work. And that's really the focus we're taking now moving forward with enterprise with Freelancer is we really -- we know the pieces we need to build. We've put together a whole product plan. In fact, there's probably 8 iterations of that product plan in terms of that capability. We've got quite a number of partners that potentially might be interested in building that capability with us and financing that capability. We know what needs to be done. We're building some of the building blocks. And I'm pretty confident when we get up and running, we have a workforce that ultimately is more capable and deeper and more sophisticated and more skilled to be able to rip through that work better than anyone out there that has done it before. So there are some examples of people who have done this with workflows. They've got very big businesses quickly because it becomes very pump work through. We know what to do, and we're going to do it. At the moment, the contribution is fairly small. And -- but we are learning a lot. We're bidding on some big stuff for field services right now. There's a big satellite installation DISH capability we're bidding on. We've got another partner that we started up with field services laptop repairs. I think over -- and we've got some big things happening in field sales. I've got some big expectations, for example, with the India office and kind of what they're doing. Contribution right now is fairly small. We have learned a lot with enterprise, trying a lot of different things. No one has really figured it out globally out there. But -- and I think we have the inherent innate advantage with the largest cloud workforce in the world to be able to do it very, very well. No one's done it yet. We're working towards it. There's a $1 trillion problem to solve both at the consumer level and the enterprise level, and we're chipping away at it, but not big. With Escrow, I have said this repeatedly before, and I can feel it getting closer and closer. One of the customers we're going to onboard or partners want to onboard will do the entirety of Escrow GMV times by some multiple. There's some very, very, very big volumes that are out there in the global payment space at the high end. We had to build our capability to be able to service that. We -- for example, we have a Shopify solution to go into the Shopify ecosystem. And I do get asked by investors, well, why isn't that fully guns blazing just yet and turned on. I have purposely slowed that down because we need to make sure that the support, the compliance, the back-end systems, the payment processing, everything is as slick as possible so that we can really scale and do so reliably. So we now have 24/7 support. We now have done a complete review of all our AML controls and are in the process of automating quite a number of them. We have done a couple of team restructures in terms of making sure we've got the best structure for servicing high volumes. And we're just getting our ducks in a row. So while that business is ticking up fairly well, I do think we're going to have some really blowout years soon with Escrow, but we need to get just all our ducks in a row in terms of the capabilities and processes of the systems to be able to cater for that. But we're getting there, and it's getting closer and closer. And with Loadshift, the good thing about Loadshift is, I mean, that -- the frame industry that we focus on is extremely chunky. It's high-value loads. It's the big end of town, and we are starting to see some pretty good enterprise interest coming in. We've got a couple of proposals out for a multimillion dollar integrations that would lead to pretty significant volumes. They are relatively early days in terms of progressing, but we are now at the point where we are focusing more on enterprise in our sales process, and we are out there actively pitching proposals. We've built an enterprise dashboard, for example, which is being very well received. And I do think that very soon, we're going to have a pretty robust enterprise capability. So I know it's been a long time coming across these businesses, and I will be very open and honest about that. We have learned a lot from dealing with enterprises. We know what works. We know what doesn't work. We kind of know how to think about now structuring and building the product and the operational teams and support to be able to service these organizations. And I do think that we are chipping away the problem across all 3 businesses. Thank you for your question. Operator: Katherine asks again, in the Loadshift business, are you able to say which country you would like to enter next? And how high do you think you could get the award? Robert Barrie: Next country will be Canada. It will be Canada because it's very similar to the freight we do in Australia. We're well advanced in our planning for that, and we also have an office in Canada able to service that region. But the next location will be Canada. Operator: And how high do you think you could get the award for? Robert Barrie: For Loadshift? Operator: Yes. Robert Barrie: Yes. So I literally had a conversation about this morning. Mas is smiling. I literally went to his desk and discussed it with him. Look, I personally think -- so when you have a marketplace of whether it's Freelancer or Loadshift and to an extent when you have an account managed transaction on the Escrow, if you leave transactions alone and self-serve, and obviously, you can chip away at this over time with better product and features and so forth, particularly with AI, you can do a lot. Transactions will close will match at a certain percentage, right? And across the labor space, and you look at any of the marketplaces that are out there, so I'm just talking about -- and I've looked about 200 or so financials of marketplaces because we bought about 35 businesses over the life of this company. So I've looked at a lot of these things. The labor matching in these marketplaces match around plus or minus, they're at 30%, right? So all the jobs being posted about 30% get matched and paid and so forth. If you put a human in there and that human chaperones the transaction, so it gets on the phone and talks to the client and talks to the freelancer and you do it a market making or you kind of do it of recruiting, et cetera. And you can bump that number by plus 20% pretty much across the board. With the peak performing human doing the matchmaking and the market making and so forth, you can get up to about 65% or so in terms of the conversion on the award rate. You can burst a little bit, maybe a little bit above that, but that's kind of the peak. Above that, you have clients that just lose interest. You have -- which makes up the other 35%. You've got people posting jobs for time machines, wanting to get things done for $0.99, completely unrealistic or nonfirm, just trying get an idea or maybe in the shower, they want to be an entrepreneur one day and they put the job and the next day, they kind of get busy or whatever it may be. And so that gives you a feeling for adding a human. The same is in Escrow. When you put an account manager in an Escrow transaction, they lift it by a 20% absolute the conversion rate of a transaction closing because there's handholding. And you got to remember, Escrow plays with complex high value end of deals -- so some of these deals, there's a lot of complex negotiations [ breaking ship ]. There might be multiple sellers, multiple brokers involved in the transactions, et cetera, and so forth. But you can usually bump by plus 20% if you put a human in there. On Loadshift, I think we're doing somewhere between 27% and 31%, I think, award rate at the moment. The primary thing holding back Loadshift award rate has been the fact that most of the transactions happen by audio that happen over the phone. And so we still, to this day, still hand out all the phone numbers to the drivers because historically, when we bought the Loadshift bulletin board business, it was the bulletin board you pay $69 a month and you kind of, if someone posted a job, you saw the phone number. So that business, traditionally, that's how it operated. We managed to transform that successfully into a marketplace model, have the payments flow through us. We cleaned up the trust and safety in the marketplace. There are a lot of cowboy operators, et cetera, people that are not licensed properly, not insured properly. We cleaned all of that up. We now have feedback. We have reviews. We have a whole compliance function that we provide as a layer on top. We provided more enhanced functionality, et cetera, and so forth. But we still hand out the phone numbers. With the in-app calling, which is live, you can do audio video calling, et cetera. It currently does not bridge to the PSTN or the packet switch telephone network. So it's -- if you've got the app installed on both sides or if you're on the desktop experience and you've got the app on side, we now connect. And very shortly, we've literally got in testing, we'll be connecting to the phone network. So it will be like an Uber where the driver can call you on your phone number rather than on the app. Once we have that, we think we will be a big leg up in the award rate just simply because we've just been easy, easy as it goes in terms of transforming the business model from a model primarily to a marketplace model. I personally think that the award rate on Loadshift should be higher than on Freelancer simply because if you've got an excavator and you're posting a load to move it from Kalgoorlie to [ Whoopu ] you have the excavator or you are looking at a price check because you want to buy it. They're basically the 2 scenarios. I personally believe that the ultimate peak award rate of Loadshift should be around 85%. So I think there's a significant way to go in terms of where we can lift that, but it should be significantly north of where it is now. We've been just very gentle. We obviously took it from 0% to somewhere between 27% and 31% now. The next leg up will happen with the PSTN calling because we've obviously got to control the marketplace a little bit better, and we've got to clamp down off siding and so forth, which we've really started to do on the Freelancer side recently and -- through the audio and so forth that we've deployed. So I think we've got a big leg up there just even on existing volumes we have right now, there's significant potential for very, very large revenue growth just on the volumes we have through looking at award rate. So it is actually a great question. There is a debate kind of how high we think we can get it to. But I think that -- if you're posting a load and you want to move something, the thing that you're posting load for exists and you either own it or you're about to own it or you do a price check on it. And as opposed to on Freelancer, somebody will wake up in the morning and they want to be an entrepreneur and they post a job and then realize how hard it is to actually start a business and they kind of flake out. So I personally think the award rate on Loadshift should be higher than Freelancer in the countries. Thanks for your question. Any other questions from the audience? Apologies again for starting a bit late. I'll ensure that next time we do this, it doesn't happen. But we do have an old Cisco machine here in the conference room and sometimes it's got a mind of its own, whether the cameras are working, et cetera and so forth. But we will endeavor to ensure that, that starts on time at 9:00 next time. I'll leave it open for another 30 seconds if someone has asked a question. Normally, there's a few people who are a bit shy who've got their microphone on mute that take a little bit of time to get one in. But otherwise, if there is nothing coming in, I will shut the call down. As always, you may direct questions to myself or any of the management team at any time. If you send an e-mail to matt@freelance.com, matt@freelance.com or investor@freelance.com, we'll be happy to arrange a one-on-one with any of the team. Okay. There is another question that just came in on? Operator: Yes. From [ Doug ]. Robert Barrie: Doug you are on audio. You are on mute. Unknown Analyst: I just want to know how each of the divisions have done year-to-date. Robert Barrie: Okay. You are off mute but I can't hear you. Maybe if you want to type your question. Operator: He did ask it in the chat as well. Robert Barrie: He did. Operator: How has each division performed in Jan and February compared to last year? Robert Barrie: Yes. So we've had a -- I don't want to preempt a little bit. I think Escrow and Loadshift have been the standouts in Jan and Freelancer is lagging a little bit, and that's traditionally, I think, what we've been kind of really focusing on, and that's continued into 2026. I do think however, pretty soon, we should have a good uplift in the Freelancer numbers. We've got some very, very enhanced functionality on, I think what I think is the core thing to focus on right now to maximize the lift in revenue, which is that bidding matching experience. And I know that we've had conversations before about that, Doug. I'll be happy to go through in a one-on-one the sorts of things we're doing there. But there's a massive focus on us to really bridge that uncanny valley where it's very easy to post a job on Freelancer. It's very easy to get the bids in. And there's a moment where you kind of get all these bids in and you kind of a bit confused about who's actually good, who can actually do my work, who's using an auto bidder, who's using ChatGPT to write their bids. And we've got some -- a whole suite of measures coming in to kind of bridge that gap because once you kind of get through that and you find a great freelancer, the work is done efficiently, it gets done cheaply. It's mind-blowing and very addictive. And we see that sort of in the long-term retention curves. Once you kind of cross that valley, you kind of stick, but we've got to cross that valley. And that valley, the chasm has been widening a little bit over the last few years through automation, right? So what's been happening over the last few years is there's been auto bidding software. You've got people generating ChatGPT generated bids using that auto bidding software. Sometimes those bids misrepresent the skills and experience of the freelancer and create a negative effect. Firstly, sometimes the bids come in too quickly and you don't think they actually wrote their brief. Secondly, you kind of go, well, these bids are too good to be true and then you browse their profiles and you realize they're not. So we know how to solve that problem. I think at least make major inroads into that problem. We literally have 7 things we have going up in the next 2 weeks, something like that, both on -- give you an idea, we are going to annotate the bids on what we think the bids should say, so give you a high signal to noise ratio there. We've got a classifier looking for the people who are misrepresenting their skills and we're penalizing them. We have LLM search. We have a prefiltering step where we're separating the people we think are likely to be able to do the job from the people who are not likely, and we're surfacing relevant reviews for items, et cetera, and so forth very, very quickly. And all the testing we've done, it's a huge step forward and it should test very, very, very positive. And then on top of that, we've got some stuff that we wanted to get out last year, and we struggled to get through the AB testing through, I think, 4 different attempts, but really smoothing out the whole sign-up experience, e-mail verification, phone verification, what have you. Down funnel, it tested very positive, plus 10% on the financial metrics up funnel, it was causing some issues. We split it into 2, and we should be able to chaperone that out in the next quarter. So we could see a big lift there. But it's basically in terms of the ranking is sort of Escrow, Loadshift, Freelancer in terms of performance this year, same as last year. Any other questions? Operator: Doug says, Thanks, Matt. You've preempted my other questions already. Robert Barrie: No problem. Okay. Well, thank you, everyone. As I said before, happy to arrange one-on-ones, please send it into either matt@freelance.com or investor@freelance.com and we'll arrange for either with myself or anyone with the management team, and you're welcome at any time to come talk to us physically or online. So thank you for your time, and apologies again for the late start today.
Operator: Greetings, and welcome to The Boston Beer Company Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to Mike Andrews, Associate General Counsel and Corporate Secretary. Thank you, Mike. You may begin. Michael Andrews: Thank you. Good afternoon, and welcome. This is Mike Andrews, Associate General Counsel and Corporate Secretary of The Boston Beer Company. I'm pleased to kick off our 2025 Fourth Quarter Earnings Call. Joining the call from Boston Beer are Jim Koch, Founder, CEO and Chairman; and Diego Reynoso, our CFO. Before we discuss our business, I'll start with our disclaimer. As we stated in our earnings release, some of the information we discuss and that may come up on this call reflects the company's or management's expectations or predictions of the future. Such predictions are forward-looking statements. It's important to note that the company's actual results could differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in the company's most recent 10-Q and 10-K. The company does not undertake to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. I will now pass it over to Jim to share his comments. C. Koch: Thanks, Mike. I'll begin my remarks this afternoon with an overview of our strategy and operating results before turning the call over to Diego to discuss our supply chain, fourth quarter results and 2026 financial outlook. Immediately following Diego's comments, we'll open the line for questions. As I look back on 2025, I'm pleased with how our operational discipline enabled us to deliver on our financial commitments in a challenging industry volume environment. Our 2025 depletions were down 4%, in line with the overall beer industry. Our disciplined Fewer Things Better Innovation approach drove a successful national launch of Sun Cruiser, which is both revenue and margin accretive. Efficiency improvements across our breweries and our productivity agenda drove 410 basis points of gross margin expansion allowing us to increase brand investment meaningfully. Our business continued to be highly cash generative with 2025 free cash flow of $216 million or $19.72 per share, which allowed us to repurchase $200 million in shares in 2025. Looking ahead into 2026, we expect industry volume headwinds to continue. As I previously discussed, consumers are tightly managing their budgets given economic uncertainty and there is pressure on the Hispanic consumer. Moderation trends are also having an impact on demand. And in certain states, hemp-derived beverages are competing for shelf space and drinkers despite recent federal regulations, which restrict their availability after November 2026. We continue to see long-term growth opportunities in the Beyond Beer category, which is 85% of our total company volume and where we are the industry's second largest player. From 2019 to 2025, driven by growth in hard tea and hard seltzer, the Beyond Beer category has doubled in volume and now represents 9% of total U.S. alcohol consumption. We expect that Beyond Beer's volume and share of the category will continue to grow as the drinker is younger and more diverse than traditional beer. We believe beer companies are the best positioned to service the Beyond Beer category as they have the production capabilities to produce these beverages and beer wholesalers have the infrastructure to service them. The Boston Beer Company's innovation capabilities, manufacturing infrastructure, best-in-class sales force and strong wholesaler relations provide a meaningful competitive advantage. This is reflected in the performance of Sun Cruiser, which was among the top volume gainers in RTD spirits in 2025 and quickly scaled into a top 5 RTD spirits brand. However, we have seen greater competition in Beyond Beer as consumers seek variety and more players enter the category. Combined with economic uncertainty, this has been a headwind for our volume performance. We continue to believe that the macroeconomic environment is a significant driver of weaker alcohol consumption trends and the deceleration in our leading brand Twisted Tea's performance. Our 2026 volume outlook of flat to down mid-single digits assumes that macroeconomic headwinds persist. We are highly focused on controlling what we can, maintaining or growing market share and investing behind our brands to position us well for when the environment improves. Our priorities for the year will be supporting our full portfolio of brands through advertising and local in-market execution investments developing margin-accretive innovation and driving margin improvement through productivity. We continue to believe that sustained brand investment is the right strategy to drive volume improvement over time. Building on our initiatives we began in 2025, we will continue reinvesting in our brands with new creative, additional compelling partnerships, activation around key events, including the World Cup and investing alongside our wholesalers in local market activation. We are partnering with some of our wholesalers to increase local brand building capabilities and improve execution on the shelf. This includes shared development of grassroots marketing plans and on-premise promotions, sampling local radio and billboard advertising. With respect to innovation, we continue to prioritize high-growth, margin-accretive opportunities. In 2026, we are focused on scaling Sun Cruiser in its second year of national availability while expanding the distribution of Sinless vodka cocktails to additional states following a successful test launch in 2025. Sinless is a very lightly carbonated vodka-based RTD cocktail with 0 sugar, 0 carbs and less than 100 calories per can. It is positioned as guilty of flavor free of sugar and carbs and targets incremental consumer segments that complement our core brand portfolio. We've made strong progress across our margin enhancement initiatives, which Diego will discuss further in his remarks. This has been a multiyear effort across the organization, and I'm pleased that we delivered margin improvement faster than we expected in this difficult operating environment. In addition to margin improvement, these initiatives have enabled us to achieve record high customer service levels in 2025 and lower our inventory days on hand. Our efforts across procurement savings, brewery efficiency and waste and network optimization will continue in 2026, and we're also in the early stages of adding revenue management capabilities to provide further long-term margin benefit. I'll now provide an overview of our brand performance and plans for 2026. In terms of depletions, we're encouraged by the strong consumer reception to Sun Cruiser, a third consecutive quarter of growth in Angry Orchard and Dogfish Head and positive drinker reception to our higher ABV offerings. Our larger brands continue to be impacted by the headwinds I discussed earlier, particularly Twisted Tea that overindexes with lower-income households and Hispanic drinkers. After starting the 2025 year with growth, Twisted Tea was down 6% in dollar sales in measured off-premise channels for the full year 2025 in an F&B category that was down 4%. The brand gained distribution in 2025, but declined in velocities, driven by category headwinds, a decline in features and displays and some interaction with Sun Cruiser and its competitors. Single-serve continues to perform much better than large packs, which tells us that consumer interest in the brand remains strong. We are working hard to ensure Twisted Tea maintains its fair share of display space. Numerator data shows approximately 20% of the drop in Twisted Tea is due to the Vodka Tea category, which includes Sun Cruiser. To the extent that Sun Cruiser sources volume from Twisted Tea, this is revenue and margin accretive for us. Despite some headwinds, Twisted Tea is the #10 brand family in the overall beer market and remains the clear leader in malt-based hard tea with over 85% market share. We're encouraged by the performance of Twisted Tea Light and the high ABV Twisted Tea Extreme, which have seen growth in velocities and have room to gain additional shelf space. Our 2026 plans include increased advertising investment with strong creative and local activation, adding new partnerships and launching new pack sizes and Twisted Tea Extreme flavor innovation. Twisted Tea has unique and clear brand voice and attitude, and our advertising plans include continuing to run our high-performing key drop national ads across many category entry points, including sports, ski slopes, beaches, lake and pool, complemented with in-store display programs. We'll also be adding always-on media for Twisted Tea Light and Twisted Tea Extreme. In 2026, we are expanding our partnerships that are most relevant to our drinkers such as Barstool's Pardon My Take, the #1 sports podcast, DraftKings, WWE Wrestling, country music's Chase Matthew, NASCAR, AMA Supercross and Motocross racing and Realtree Camo. Lastly, we continue to increase our investment in Hispanic and Spanish language brand content, including new media and digital content to widen the brand's appeal. With respect to pack sizes, we're expanding the rollout of our entry-level price point 4-pack, launching a 16-ounce can for C-stores to add a lower price point in addition to the current 24-ounce can and adding a 24 can value pack. Building on the success of our high ABV offerings, we've added a Twisted Tea Extreme variety pack that was launched in early 2026. Twisted Tea Extreme Lemon and Blue Raz are the #1 and #2 largest FMB growth SKUs in convenience and to further capitalize on the high ABV trend, we'll be launching new extreme singles flavors, Long Island Iced Tea, Fruit Punch and Tropical Punch. Our goal for 2026 is to improve share and grow volume in the overall hard tea category through showing progress in Twisted Tea and growing Sun Cruiser. We're very excited about the outlook for Sun Cruiser, which grew volumes over 300% from 2024 to 2025 and is expected to make a strong contribution to our hard tea portfolio this year. Sun Cruiser is built in the on-premise channel, where in some markets, it represents over 40% of the brand's volume. We believe this is the right way to drive trial and build the brand and are pleased that Sun Cruiser is the leading RTD spirits and lemonade brand in on-premise bars and restaurants according to Nielsen. Bartenders have been and continue to be a very important influencer group for Sun Cruiser. Sun Cruiser continues to expand its off-premise distribution, but given its strong presence in on-premise and independents, measured off-premise data still only reflects a portion of the brand's total volume. Advertising support for Sun Cruiser includes building an organic following through social media as well as more traditional content around the Let the Good Times Cruise media campaign, which includes television, paid social and digital advertising and key influencers. We'll be present where Sun Cruiser fits into our drinkers' lifestyles across sports and music. Sun Cruiser will have committed media presence in MLB, the NFL and the sponsorship of the AEG music concert series. And in 2026, we'll add exciting golf and ski partnerships. Golf programming includes tournament activations, golf media influencers and experiential marketing programs as well as wholesaler incentives. Additionally, Sun Cruiser is a key sponsor of Teton Gravity ski film festival along with ski resort sponsorships and samplings that help reinforce its position as a brand for all 4 seasons. From a product innovation perspective, we intend to keep a disciplined number of tea and lemonade styles while continuing to expand package options. In the first quarter of 2026, we added new single-serve 12.2-ounce packages and new tea and lemonade sampler 12-packs, which we expect will help expand drinker occasions and drive further growth in 2026. Turning to hard seltzer. The overall hard seltzer category declined 5% in dollars in measured off-premise channels for the full year 2025 as consumer preferences continue to shift towards more premium RTD spirits-based beverages. Our brand strategy for 2026 is to invest in new equity building creative, capitalize on the World Cup, launch new pack sizes and varieties and continue to expand Truly Unruly. Our advertising plans include leveraging our sponsorships of U.S. soccer as its Beyond Beer sponsor with targeted World Cup activation, along with our new creative platform that we recently launched called Make Your Dreams Come Truly. The 2026 World Cup, which will take place in North America for the first time in more than 3 decades, includes 11 cities, over 100 matches and 4 billion global viewers. Our Truly World Cup plans, which have been well received by major retailers include driving visibility and displays and launching a U.S. soccer collector set of singles along with the World Cup themed rotator variety 12 pack. In addition, we have significant local investments in the 11 host cities, including local media and retail program. High ABV offerings continue to be a bright spot in hard seltzer and Truly Unruly has grown to a 3% volume share of hard seltzer. Based upon drinker demand, we added a new Truly Unruly variety 24-pack in 2026. In cider, Angry Orchard has returned to growth behind a combination of new positioning and creative and a strong Halloween program, which included Friday the 13th movie-themed advertising, promotions, packaging and displays. Importantly, Angry Orchard's success comes from driving growth of the core offering. Our beer brands, Samuel Adams and Dogfish Head have combined to hold share in a challenging craft beer category. During the first quarter, we are excited that Samuel Adams will begin programs and promotions as well as launch limited edition packaging to help celebrate America's 250th anniversary. For Dogfish Head, we're particularly pleased that Dogfish Head's Grateful Dead beer collaboration and the brand's Minute Series IPAs have helped fuel Dogfish Head's return to growth. In summary, I'd like to thank our Boston Beer team and our distributors and retailers for their continued support. I'm encouraged by the progress we made in 2025 amid a dynamic environment. While consumers remain cautious and the near-term outlook is still challenging, I'm confident in our operating plans for 2026. We're continuing to invest in our brands. We're building a strong innovation pipeline, and we're highly focused on our multiyear productivity initiatives. Importantly, we're focused on controlling what we can control. We're executing in the marketplace to improve share trends and expand our margins. These efforts, along with our innovation capabilities, strong sales force and unique culture position us well for a successful long-term future. I'll now pass the call to Diego for a detailed review of the fourth quarter and our 2026 guidance. Diego Reynoso: Thank you, Jim. Good afternoon, everyone. 2025 was a year of continued progress for Boston Beer in a dynamic industry environment. Disciplined execution and supply chain efficiencies enabled us to meet or exceed our financial commitments, including very strong gross margin outperformance. This margin upside enabled increased investment in advertising support for all our brands while still delivering EPS ahead of our guidance. Cash conversion was strong with $270 million in operating cash flow, and we ended the year with $223 million in cash and no debt. 2025 revenue was down 2.4% year-over-year, driven by shipments down 4.7% and 2.3 percentage points of positive price and mix. Price realization for the year was within our prior guidance of 1% to 2%, with the remainder being positive mix. We delivered 410 basis points of gross margin expansion with gross margin reaching 48.5%, inclusive of $10.1 million in tariff costs. Excluding contractual prepayments and shortfall fees, the gross margin was 50%. This is the highest full year gross margin rate since 2019. EPS of $9.89 was up 4.7% year-over-year, excluding prior year impairment and onetime contract settlement charges. This EPS growth was inclusive of a $61 million increase in advertising spend, while general and administrative expenses were flat. Turning to the fourth quarter results. Depletions decreased 6% and shipments decreased 7.5% year-over-year, primarily driven by declines in our Twisted Tea, Truly Hard Seltzer and Sam Adams brands that were partially offset by growth in the Sun Cruiser, Angry Orchard and Dogfish Head brands. As we expected, volumes slowed sequentially in the fourth quarter from the third quarter. Twisted Tea volumes continue to be soft and Sun Cruiser continues to show strength, but had a lower contribution in the fourth quarter due to seasonality. We believe distributor inventory of 4 weeks on hand as of December 27, 2025, is an appropriate level for each of our brands. Revenue for the quarter decreased 4.1% due to lower volumes, partially offset by increased pricing and favorable product mix. Gross margin of 43.5% increased 360 basis points year-over-year. Gross margin primarily benefited from improved brewery efficiencies, procurement savings, price increases and product mix as well as lower inventory obsolescence. These factors were partially offset by inflationary and tariff costs and increased shortfall fees. Advertising, promotional and selling expenses increased $8.4 million or 6.0% year-over-year, primarily due to incremental brand, media and local marketing investments of $8.0 million, with the remainder driven by higher freight costs. General and administrative expenses for the fourth quarter increased $4.5 million or 9.4% year-over-year, primarily due to increased salaries and benefits costs. We are continuing to execute on our 3 buckets of multiyear savings projects ahead of our initial timing expectations. We saw significant benefit in 2025 and have more savings to come in 2026, albeit at a lower rate. To be specific, in brewery performance, we continue to see improvements in OEE driven by process improvements, which helped to increase our internal production capacity. In the fourth quarter, we produced 99% of our domestic volumes internally compared to 85% in the fourth quarter of last year. Full year 2025 domestic internal production increased to 86% of our volume compared to 74% last year. In 2026, we expect to continue increasing the rate of in-sourced production, but at a smaller year-over-year benefit due to achieving a high in-source percentage in 2025. In procurement savings, our fourth quarter results benefited from lower negotiated pricing on certain packaging and ingredients. As discussed previously, procurement savings initiatives are the area where we have made the most progress over the last 2 years. While we expect some continued benefits in 2026, the impact is expected to be moderate. In waste and network optimization, we're continuing to enhance the customer ordering and trade inventory management system that we implemented last year. These efforts helped us achieve record high customer service levels that resulted in lower inventories internally and which helped improve our cash flow. In addition, we reduced obsolete inventory 71% in the fourth quarter and 48% for the full year. In addition to our 3 buckets of savings, we are beginning to add revenue management capabilities as part of our margin agenda. These efforts are in early stages in 2026 with a more meaningful contribution expected in 2027. Turning to our 2026 guidance. Our fiscal week depletion trends for the first 8 weeks of 2026 have declined 3% from 2025. We are currently planning 2026 depletions and shipments to be flat to down mid-single digits. Where we land within this range will be impacted by the pace of improvement in the overall consumer environment and the time it takes for our brand investment initiatives to drive market share improvement. We expect price increases of between 1% and 2% and some additional benefit mix. Full year 2026 reported gross margins are expected to be between 48% and 50%. Our outlook expects that we cover commodities and non-tariff-related inflation with pricing and that the lower shortfall fees and prepayment amortization broadly offset increased tariff costs. 2026 reflects a full year tariff cost estimate of $20 million to $30 million versus a partial year in 2025 of $11 million. These tariff cost estimates are based upon tariffs in place prior to the February 2026 Supreme Court ruling. We will continue to drive our savings initiatives to help buffer any volume deleverage. Our long-term gross margin target continues to be in the high 40s with any individual year dependent upon volumes, commodity inflation and tariff environment. As Jim discussed earlier, we expect to increase our advertising levels to support our brands. The investments in advertising, promotional and selling expenses are expected to increase between $20 million and $40 million. This does not include any changes in freight costs for the shipment of products to our distributors. We estimate our full year 2026 effective tax rate to be approximately 29% to 30%. We are currently targeting a full year 2026 earnings per diluted share of between $8.50 and $11. As you model out the year, please keep in mind the following factors. Our business is impacted by seasonal volume changes with the first quarter and the fourth quarter being lower absolute volume quarters and the fourth quarter typically our lowest absolute gross margin rate of the year. We have difficult shipment comparisons in the first quarter and the first half of the year as we shipped ahead of depletions in 2025 to build wholesale inventory of our product innovation, which included Sun Cruiser and Truly Unruly. We currently expect the first quarter and first half shipments to be down towards the lower end of our full year volume guidance, but with better shipment performance later in the year. During full year 2026, we estimate shortfall fees and noncash expenses of third-party production prepayments in total will negatively impact our gross margins by 40 to 60 basis points. We expect year-over-year gross margin rate improvement to be most meaningful in the fourth quarter. We typically expense the majority of our shortfall fees in the fourth quarter. We expect lower shortfall fees in 2026 and the timing of this benefit, together with the fact that the fourth quarter is a smaller dollar quarter has an outsized favorable impact on the gross margin rate. Incremental advertising investment is expected to be weighted to the second and third quarters to support the key summer selling season. Turning to capital allocation. We ended the quarter with a cash balance of $223 million and an unused credit line of $150 million, which provides us with ample flexibility to continue to invest in our base business, fund future growth initiatives and return cash to shareholders through our share buyback program. For the full year 2026, we expect capital expenditures of between $70 million and $90 million. These investments will be primarily related to our own breweries to build capabilities and to improve efficiency. We will continue to be disciplined in our capital spending as we monitor the dynamic industry environment over the long term. During the 52-week period ended December 27, 2025, and the period from December 29, 2025, through February 20, 2026, we repurchased shares in the amount of $200 million and $14 million, respectively, for a total of $214 million of repurchase since January 2025. As of February 20, 2026, we had approximately $215 million remaining on the $1.6 billion share repurchase authorization. This concludes our prepared remarks. And now we'll open the line for questions. Operator: [Operator Instructions] And the first question comes from the line of Peter Grom with UBS. Peter Grom: So 2 questions from my end. Maybe one on the gross margin outlook. I would love to understand what you're embedding or expecting as it relates to kind of underlying inflation. I'm sure you're aware of one of your competitors outlined as it relates to aluminum and the Midwest premium. So just curious what impact that may be having on your margin target looking ahead? Diego Reynoso: Yes. Thank you for the question. So as you probably know, we do not hedge in aluminum. We've seen the aluminum Midwest premium continue to grow. So we are expecting a little bit of inflation, but not as much as we've had in the past. And that's kind of what we built into next year's margins. Peter Grom: Okay. Great. And then I was hoping to get some perspective just on the year-to-date performance and just it's running a bit better than what you delivered last year as it relates to depletions, certainly better than what you saw in 4Q. So just as we -- just based on what we've seen, do you have a view on why the category seems to be doing better thus far? And maybe just as we think about the path forward, what are you expecting in terms of category growth from here? Diego Reynoso: Okay. So I'll start giving you our numbers, and then I'll hand it off for Jim for the category view. So in our case, the biggest difference at the beginning of the year is the improvement in trends for Twisted Tea. And we're continuing our support of the brand and our investments, and we feel pretty good about how we started the year. From a category point of view, I'll hand it over to Jim to give his perspective. C. Koch: Thank you. Peter, it's -- the category has clearly gotten better in the last, call it, 2 months, maybe it started in December. And we're basically seeing beer category trends maybe 2 or 3 points better than they were in 2025. 2025 was just, in some ways, kind of a black swan year. I don't think anybody in the industry expected beer to be down over 5%. And I think we all went into the year thinking it was kind of going to be down 2%, which would it be consistent with the previous 5 years of up and down through COVID, and then it turned out to be down a whole lot more without obvious, clear explanations for it. So I'd have to say that the improvement is certainly welcome. I wish I could tell you what was going on. I think there's been some moderation in the clamor around health and alcohol causes cancer. We had the government guidelines come out and be pretty much consistent with previously. It said it's okay to drink, just don't drink too much. I think that might have been helpful. Maybe the Hispanic community has adjusted to some of the new realities and found ways to come back and be visible and go to the stores and not send their kids to buy things. So there's some of that perhaps. I think the bloom is a little bit off the rose with hemp, partly because of what happened in November and the hemp loophole, so-called, being closed. So that might have contributed to it. So those are the best explanations I could come up with, but the numbers are the numbers. The category trends are down -- have improved by about 300 basis points. And I would like to tell you that our depletions are up -- have improved by that same amount, and it's all this great stuff that we did. But a lot of it is the whole category is healthier than it was 3 months ago. Operator: And the next question comes from the line of Rob Ottenstein with Evercore ISI. Robert Ottenstein: Terrific. Two questions. One, can you talk a little bit about the improvement at Twisted Tea? It sounds like what you're seeing there may be a little bit more due to your own interventions rather than the category. So just love to understand why Twisted Tea is doing a little bit better and if those particular actions are things that you expect to see follow through for the rest of the year? And then second, if you could talk about what's going on with shelf space, both at the kind of category or macro level, given all the declines that the industry has had, is the overall industry holding shelf space? And then how are you doing on the shelf space side, particularly in terms of both beer as well as the Beyond Beer area and the key brands? Diego Reynoso: Jim, would you like to take the first part of that? C. Koch: Absolutely. I think we do feel good about some of the actions that we started taking towards the end of last year with respect to Twisted Tea. We did some diagnosis, and we found that our pricing might have been too aggressive in certain markets, in certain packages, in certain channels, primarily 12 packs in supermarkets and maybe 20%, 25% of the markets, and we've worked with our wholesalers to fix those. Typically, it might be we were at $22 a 12-pack and $19.95 is a really significant price point reduction. So we addressed places where we were up at Stella Artois type pricing. And that does seem to have helped us in those places. We have also been more aggressive in pushing Twisted Tea Extreme and Twisted Tea Light, both of which are growing pretty nicely. And a little bit of just trying to get displays back because we lost some displays to RTDs, and we've been mildly successful in doing that. So there have been some direct actions, and those will continue in 2026 in addition to working with our wholesalers to do more local market support in terms of our sort of share the burden program with them where for every $3 we put into additional local marketing, they put $1 in. And so that's also been helpful both in terms of the actual spend itself and getting our wholesalers involved in making sure that Twisted Tea remains a strong and hopefully growing brand going forward. It's -- Twisted Tea is the #10 brand in beer. And for a lot of our wholesalers, it's in the top 5 or 6 brands. So it's important to them, and they've gotten engaged with that. In terms of your second question of shelf space, roughly -- well, for the industry, there has been some erosion of shelf space, though the erosion of beer shelf space has gone to RTDs. And while they are liquor-based, they kind of live and operate as beer, the same type of packages, same sort of price points. They're sold out of the cold box. So if beer loses some shelf space to RTDs, most of those are coming today from beer suppliers and beer distributors. So net-net-net, from all of that, there is not a -- to my -- from what I've seen, not a significant erosion of cooler space to beer. The possible exception would be in those states where hemp-based beverages have become really strong. They're not a lot of states, but you do have places like Louisiana, Tennessee, South Carolina, Minnesota, where they're reaching 5%, even 10% of beer dollars, and they're in the cooler. And they have taken some beer shelf space and in places like total wine, beer displays as well. And while the jury is still out, I think my betting is that the repeal of the hemp loophole will probably stand in Congress. And so the impact of the hemp-based beverages will diminish and won't go away. There's -- you can still have it at a state level. It just has some federal restrictions to it. But I believe we'll get some shelf space back from that in 2026. Operator: And the next question comes from the line of Filippo Falorni with Citi. Filippo Falorni: So maybe first, Jim, can you talk a bit about the plans for year 2 on Sun Cruiser and like what are the incremental distribution opportunities there? Obviously, you made a big push in 2025, but there's still quite a bit of white space. And then maybe some of the flavor innovation that you launched, what are the results, early results? And like is there potential to further expand into flavors? C. Koch: Sure. Sun Cruiser had a great 2025. It grew almost 400%, firmly established itself within the RTD category. It's about the #5 RTD from kind of nowhere 1.5 years ago. So we were very happy with the success of Sun Cruiser. And a lot of that success happened without getting chain authorizations. We really didn't kick in with Sun Cruiser until the last quarter of 2024, which means we missed the window of presenting it to the chain. So we didn't get shelf placements in many chains. We did very well in Walmart. They really got behind it. But most of the other chains were very limited, 1 SKU, no SKUs. And that's now changing in 2026. So we're getting strong distribution support from a lot of the big chains, Albertsons, Safeway, Kroger and on down that list. So we're going to be well represented in accordance with being the #5 RTD. So -- and we're going to continue very high level of support, even add to our spending on Sun Cruiser. Some of it is things like national advertising and national programs and sponsorships. A lot of it is more local sponsorships, local billboards, lots of sampling, brand ambassadors, a lot of really grassroots work, especially on-premise, something like 40% of Sun Cruiser's volume is on-premise, and we believe that's how brands are built. And so we're going to -- they may not deliver the same volume of off-premise, but the volume that they deliver is much more brand supporting, if you will, for having it in a bar than buying a 6-pack in a convenience store. So we are not slackening at all. We're actually putting more fuel on the fire for Sun Cruiser, and we're looking forward to -- it's not going to grow 300% or 400%, but we're looking for it to be a major contributor, hopefully, to overall company growth in 2026. In terms of flavor innovation and that kind of -- that pipeline, the -- I guess the big news is one of our flavor innovations in 2025 has proved very successful. And so we are rolling it out. It's not entirely national, but it's 30-plus states. So it's close to national. And that innovation is a vodka cocktail, very, very lightly carbonated. It's called Sinless. It's 100 calories. So it enables you to have a spirits cocktail and still have the sort of guilt-free, no carbs, no sugar that you would get from a seltzer, but get a much bigger flavor profile. So we will see how that does, but we're optimistic enough to roll it out in the majority of the country. And then further up in the pipeline, we have things like just Hard Squeeze, which is a 10% juice product. It's alcoholic. We have a Social Pop, which is a kind of new wave soda with alcohol and Wild Leaf, which is an upscale version of Twisted Tea with lower calories, lower sugar and more leaning into the quality of the tea in the product. Those are still just in a handful of test markets. So I really don't have anything significant to report. But I can say that from our pipeline in 2025, we have a new quasi national launch in Sinless. Filippo Falorni: Great. That's very helpful. And maybe a quick follow-up for Diego on Peter's question on the Midwest premium and aluminum. Can you give us a bit of sense of how you source aluminum, just given the big rise in the Midwest premium, it would imply that there's maybe a little bit more impact on the inflationary side in 2026, but maybe is there some sourcing, some hedging? Can you give us some sense of why it's not a big impact for you guys? Diego Reynoso: Yes. So what we have is we have contracts with our suppliers that have a pass-through of the Midwest premium as part of the price. So -- and since we don't hedge it, we will get the pass-through as the premium moves during the year. So again, to the question, our expectation is there's going to be a little bit of inflation on the premium, but not. If that is different, you'll see that going through our P&L given that we don't have a hedge in place. Operator: And the next question comes from the line of Kaumil Gajrawala with Jefferies. Kaumil Gajrawala: Diego can I just follow up on that because I'm confused. If it's a pass-through, wouldn't that mean you get hit with fully of the big spike that we've had in the increase already? Diego Reynoso: Yes. We -- like we get hit through the pass-through, and we did last year, and that was part of the reason that our costs went up in materials, but we were able to offset it by savings. So we do get hit by the premium as we go through the year. Kaumil Gajrawala: I see. Okay. Maybe it was implied that you have less of an impact, but okay, I get it now. Jim, I guess, as you talked about the marketing, you laid out a lot of things. And it's hard for us to perhaps get scope on, is this higher or lower than perhaps where you were last year? I believe ad spend might have been up double digits last year and it's expected to be up again this year. But when you put this all together, it seems like there's some big increases in investment. We haven't really seen volumes turn yet. So is that lack of idea? Do you feel like maybe you're investing in the wrong places? Is that course corrected for '26? Or maybe just trying to make that connection between the increases in investments and still having sort of declines on volumes? C. Koch: That's a really good question. Let me see if I can sort of clarify it, maybe simplify it. When we think of investing behind our brands, it's -- sometimes we use media as a term, but more appropriately, you should think of it as brand support, of which media is a component, but -- and probably the biggest, but there's a whole lot of other stuff that we have, which you could think of as more sort of local market execution including salespeople and including the point of sale that they put up and that accompanies them as an expense. It includes a lot of local sponsorships. It includes things like sampling teams, brand ambassadors, distributor incentives. It's a fairly long and diffuse list of things. And media is only, I don't know, depending on how you want to run the numbers, 25%, 30%, 35% of it. But the other is a whole bunch of little -- what is meaningful to us that drives local market execution. And that's -- our brands have kind of been built with a lot of grassroots efforts since day 1 when I was selling the beer from bar to bar. And to get to your second question, well, how come we're spending all this additional brand support money and we're still declining? I think it's a really good question. And believe me, it's one that I ask to make sure that we're not wasting a lot of money on this. I guess in total, we were down last year 4%. The overall beer category was down a little more like 5%, 5.5%. So I think some of it was spent to do that. And a significant amount of the increase in 2025 was spent behind Sun Cruiser and I view Sun Cruiser as it's a strong brand now in a category that's growing double digits. And in my world, that's kind of -- in the old BCG matrix, that's a star. That's a place where you overinvest to get growth and you keep doing that as long as the categories got high single digits, low double digits growth. So we definitely overinvested in Sun Cruiser. Did that pay off? I have to say, yes, it did. I mean we went from kind of nowhere to the #5 brand, kind of close to where NUTRL is, which is a really great brand from Anheuser-Busch that they've built over the last 4, 5 years, and we were able to do that in 1.5 years. Operator: And the next question comes from the line of Eric Serotta with Morgan Stanley. My apologies, Nadine Sarwat with Bernstein. Nadine Sarwat: Two for me. First one on tariffs. I know you guys guided to the $20 million to $30 million of costs for this year. Can you just remind us what items are driving this? And then how that impact is going to be phased throughout the year? And then second question on gross margins. If I remember correctly, I think you guys said to get to the 50% or above point would require top line growth. So it is a pleasant surprise to see that 50% included at the top end of the range here. Could you just give us the building blocks for the gross margin guidance in particular? Where -- what would you need to get to the high end of the range versus the low end? You guys went through a similar exercise for the top line for us, which was very helpful. So any color on that for gross margins would be appreciated. Diego Reynoso: Perfect. So let me start by tariffs. So we -- as we laid out, 20% to 30%, if you remember last year, we had bought a lot of products already. So the big impact of tariffs last year was in the back end of Q3 and Q4. So therefore, the year impact -- the year-over-year impact will be bigger at the beginning of the year, particularly in Q2, just given the size of the volume. if you break down what's included in that is aluminum is a big piece of that. And as of now, that's still in place. POS coming particularly from China is a piece of that. And we also have ingredients, sugar and for our RTD, for example, that are coming from other countries, specifically Canada that are part of it. So that's why we've decided to leave as the tariffs at the beginning of February until we see exactly what pieces might change. As I mentioned right now, the aluminum piece, for example, which is the biggest piece has not changed. So that's -- we will provide better guidance once we have more clarity on what's going to be the tariffs going forward. The second piece is you're correct. I think we're very happy with our performance in our savings agenda. I think the operations team have done an amazing job working in the buckets we laid out. As we included in our statement before, we are adding revenue management as another bucket. We are going to set it up in the back end of 2025, we started, but 2026 will -- we're really going to invest against it, and we believe we're going to get some benefits this year, but really for 2027. That will help our margin profile. The second piece, as you mentioned, tariffs is a big piece of it. So how those go forward will be the second part. And then the third piece is really being able to leverage volume. So right now, if we're in the top end of our guidance, that will help us get closer to the top end of our margin guidance because volume absorption is a big piece of where the opportunity lies going forward, given that we are producing a lot of it internal at this point in time. C. Koch: Nadine, yes, I'll add my two cents worth on that, which is probably literally two cents. I would just observe that in the past, our gross margin has been as high as 52%. So it was sort of pre the takeoff and the chaos of doubling our production during the Truly boom. And it's my aspiration to get back into that low 50%. It's not easy, but I believe we have the best supply chain team that we've ever had. We are still kind of in the middle, maybe in year 3 of a 5-year lean manufacturing journey, which is showing very good results. We continue to look for high ROI capital investments in the breweries. We obviously are not cash starved. So if there's -- we are actively looking for high ROI manufacturing investments. And then on the other side, in the sales, we are looking to have the majority of our growth come from margin-accretive products. So my aspiration is more than just the high 40s, and we've been there before. So I don't think it's unrealistic. Operator: And the next question comes from the line of Eric Serotta with Morgan Stanley. Eric Serotta: Nadine beat me to the punch on the detailed tariff question. One quick follow-up, housekeeping on that and then another question. On the tariff piece, are you including in tariffs only the direct impact from tariffs? Or would higher Midwest premium, which is kind of indirectly driven by tariffs be included in your tariff bucket? I know it's a little bit of semantics, but maybe it would help us get a handle around some of this confusion around your Midwest premium exposure? And the second question would be in terms of how you're thinking about sort of midterm growth potential for Sun Cruiser, perhaps learnings from other RTDs in the space. And clearly, Truly didn't grow to the moon, how you're thinking about sort of a maturation curve for Sun Cruiser and then, Jim, how you're thinking about what the next big thing is, which I think always tends to be on your mind or lots of little things that may become the next big thing. Diego Reynoso: Okay. I'll take the first one, and then I'll give Jim the second one. So it's hard to break out exactly which is tariffs versus the premium, but the approach we've taken to break it out is we know what the tariff percentage is. So we know right now, there's like a 50% tariff on aluminum. We'll take that tariff and count that as tariff. Any other movement in the Midwest premium, we'll take as inflation. So although they're both related one to each other, that's how you break it out as you quantify the tariff based on the actual tariff percentage and assume the rest of the movements in the Midwest premium are inflation-based. They both end up in cost of goods, but that's how we break them out when we give the tariff point of view. Jim, I'll hand it off for the second part. C. Koch: Great. Eric, you asked about midterm prospects for Sun Cruiser, and we believe that there is certainly 1 more year, maybe 2 more years, but 1 more year of really strong growth in Sun Cruiser. We got a late start in the category. And we believe that the category itself of vodka and lemon -- vodka tea and lemon-based products, that category has probably got another year of strong growth. And we were -- we started late, so we also believe that we're going to pick up share in 2026 in the category given that we're getting disproportionate increases in our shelf space. We're getting into chains that we weren't in at all last year. And the -- with respect to next big thing, honestly, if I knew what it was, we'd already be putting it into the market. But we do pride ourselves on being an innovative company. We're sort of built for that. We have a growth mindset. We're staffed for it. We have a very -- the largest sales force in the beer business. We have a very large product and flavor development team. So there's a lot of stuff that we come up with and we're generally putting things in the pipeline, 3 or 4 a year and hoping that something is going to come out. So this year, we're looking for Sinless to see if that can become the next Sun Cruiser, but it's hard to predict. And we're looking at some package innovation as well that we're not sure if we can make it work. So there is just this -- it's in our nature to innovate and approach things as the company we are, which is smaller and more entrepreneurial. Operator: And the next question comes from the line of Michael Lavery with Piper Sandler. Michael Lavery: Just wanted to dig into Truly a little bit. It still had some struggles even as White Claw's momentum has recovered and improved. Can you give a sense of maybe just what your hopes for that brand are? And can it also get back to growth? Is it just managing it kind of to moderate or to some of the declines? Or how do you see it positioned? And what's the opportunity for its -- any trajectory change there? C. Koch: I'll take that one. We look at Truly as having the potential of being a strong and viable #2 in the category, which it remains. There's really -- there's White Claw, which is the clear #1 in the category. We have been kind of, honestly, a weak #2. And so -- and I believe Hard Seltzer is a viable category. I believe it can be stable. White Claw's volume has actually grown. So they've done a great job, and you can see the payoff from that. We would like to get Truly to the point where it's no longer absorbing the category losses and where maybe it's growing low single digits a year and continues to remain a big enough product to be meaningful to our wholesalers and our retailers, which it certainly is today and off of that base, grow low single digits. So we're actually investing more in it this year than we did last year. The U.S. soccer team partnership is a very big deal. And we've got promotions around the 11 cities that are -- where the games are being played. They represent a big part of the U.S. population, those 11 metros. So we'd like to get it to be a stronger #2 than it is now with low single-digit growth. Michael Lavery: No, that's helpful. And just one more on some of the innovation, looking at the drift towards some higher ABV products, both in your portfolio and more broadly. Can you give a sense -- it's -- it typically appears -- it's a better value for the consumer, kind of more bang for the buck. If just hypothetically or assuming the consumer isn't looking to get more intoxicated, it would have a headwind to your volumes for the same amount of alcohol in the liquid even if the liquid is less. Is there enough of a mix benefit to offset that? Or like how do you manage that trade-off? And I realize there's competitive dynamics that drive a lot of it. But is there a way to make that trade-off work that's not as maybe apparent from a distance? C. Koch: I don't know of it. I think you raised a good point, but it's clearly -- our experience would say it's not a one-for-one trade-off as we get disproportionate growth with Twisted Tea Extreme, we are also growing the lower ABV Twisted Tea Light. So there is that trade-off. Do people drink more liquid because if they're drinking Twisted Tea Light because it's 4% ABV, Probably. Do they drink less with Twisted Tea Stream, which is 8% ABV? Probably. But -- so ultimately, I don't -- I can't give you a really good number, but it's certainly -- those trade-offs are manageable. And as we're going into vodka-based or liquor-based products, there is some expectation of maybe slightly higher ABVs. And hopefully, we are sourcing that volume from Spirits. So it's -- there's probably some -- you have to be right, there's some downward effect, but it's not really noticeable in the noise of the numbers. Operator: And the next question comes from the line of Bonnie Herzog with Goldman Sachs. Bonnie Herzog: I just have a couple of quick follow-up questions to some earlier points. I guess, Jim, I've talked to you about this in the past just about the cost of growth, which is increasing. So I guess in the context of that, I did want to ask about gross margin improvements. They've been impressive so far. So congratulations on that. But how should we think about the sustainability of your margins going forward, I guess, in the context of no volume growth. I mean you're guiding at the high end flat. So I'm just trying to think through that. And should we just think about, I don't know, last year, maybe this year still just big investment years as you kind of really invest in your business with the goal of returning to volume growth. I'm curious if you have a time line of when we could expect to see that. Diego Reynoso: Okay. So I'll take the first part of the margin question, and then I'll give Jim the volume part. So as we mentioned before, we had 3 buckets of savings. We've really kind of -- 2 of them are really far ahead. We still have some opportunities we're going after this year and next for our footprint. We're also adding revenue management. So we believe those pieces will be able to, in the short term, help us continue to improve our gross margin to be high 40s, close to 50% despite where volume goes. And I think I've always been straightforward in saying like we can get there without volume. To get past it, volume is important. Now below gross margin, we are investing last year in this and we're doing the same this year in our brands because we believe that gaining share like we did last year, and we're planning to do this year in the current market is the best way to set ourselves up for success and continue to innovate. And I think that's where we believe it's the right thing to do right now for the future. Now I will hand it off to Jim to give an idea of where he sees that going forward. C. Koch: To me, there is both onetime savings on the cost of goods sold which we're seeing those come in almost surprisingly strongly this year. And our plans for next year are not quite as big, but they're still pretty aggressive. And then -- but the onetime savings will -- eventually will exhaust those. But I believe the -- there should be significant, call it, 3% a year input productivity savings which I think you would find in most of the manufacturing sector, even in highly developed countries, there are just always more efficiencies to be gained. It's just productivity in the economy goes up every year and manufacturing productivity goes up faster than service productivity. So it's not out of the question to say we can take 3% out of our manufacturing costs forever. So that's how I would view that. It has given us fuel last year and this year, these onetime savings to increase our brand support. The rough numbers, you're talking maybe $50-plus million in 2025 and maybe $30 million in 2026, so $80 million or so. And that in some ways is the cost of growth. We are, as a company, just temperamentally and structurally oriented to try to drive growth. And you and I have talked about it. Growth is -- I guess, my view is growth is not cheap, but decline is really not cheap. So that's how I think about it. Diego Reynoso: Sorry, I was going to add at the end, Bonnie, is obviously, as we go forward in the next few years, how we see that trend, we have the ability to change that strategy, either double down or back off. So I would say it's the right thing that we believe for right now, and that's why we're guiding to where we're guiding. But it doesn't mean that as we go forward based on where the industry is and we are a company, we have the ability to go one way or the other. C. Koch: That's an important statement, actually, Bonnie, that Diego just made. If we came to believe that there was no possibility of growth in our category and our business, then a lot of costs come out. Operator: Okay. And at this point, there are no further questions. So that concludes our question-and-answer session, and I would like to turn the floor back over to Jim for any closing comments. C. Koch: Well, thank you to everybody for joining us this afternoon, and we look forward to talking to you in, I guess, it's about 2 more months. So thanks, and I hope everybody is dug out of the snow. Operator: Ladies and gentlemen, that does conclude our conference today. Thank you for your participation. You may disconnect your lines at this time.
Operator: Good morning. Thank you for attending today's Haleon's Fiscal Year 2025 Results question-and-answer. My name is Sarah, and I'll be your moderator today. [Operator Instructions] I would like to pass the conference over to our host, Jo Russell. Please go ahead. Joanne Russell: Good morning, everyone, and welcome to Haleon's Full Year 2025 Results Q&A Conference Call. I'm Jo Russell, Head of Investor Relations, and I'm joined this morning by Brian McNamara, our Chief Executive Officer; and Dawn Allen, our Chief Financial Officer. Just to remind listeners on the call that in the discussions today, the company may make certain forward-looking statements, including those that refer to our estimates, plans and expectations. Please refer to this morning's announcement and the company's U.K. and SEC filings for more details, including factors that could lead to actual results to differ materially from those expressed or implied by such forward-looking statements. We have posted today's presentation on the website this morning, along with a video running through the results in detail. So hopefully, you've all had a chance to see that ahead of this call. And with that, let's open the call for Q&A, and I'll hand back to the operator. Operator: [Operator Instructions] Our first question is from Guillaume Delmas with UBS. Guillaume Gerard Delmas: So one question. So my one question is on your organic sales growth guidance of 3% to 5% for 2026. I mean it does seem to signal some sequential acceleration relative to the 3% you posted last year. So wondering what will be the main drivers behind this sequential improvement? I mean, is it predicated on category growth accelerating and/or your level of outperformance gaining further momentum? And then related to this, Brian, you reiterated your medium-term ambition of 4% to 6%. I guess what underpins your confidence in the 4% to 6% when you may be delivering an organic sales growth below the bottom end of that range for now 2 consecutive years? Brian McNamara: Thanks, Guillaume. I appreciate the question. So maybe let me take the 3% to 5% guidance, and I'll go to medium-term view. So if you take a step back and let's look at 2025, we grew 3%. That clearly was below what we were expecting when we were at Q3 based on the cold and flu season. But the U.S. was down about 0.5%. APAC and EMEA, LatAm grew mid-single digits. Now we did experience a market slowdown. A vast majority of that was obviously what we've talked about in the U.S. market and then the cold and flu category, which I mentioned. Now remember, 70% of our cold and flu business is also outside the U.S. So in that context, we did deliver competitive performance. We outgrew the market overall and 60% of the business gained and maintained share. Looking at 2026, we're not planning on material improvement in the market. Consumers are likely to stay cautious. We're absolutely focused on driving category growth. I'm confident we will continue and improve on our competitiveness. And that's through investment in A&P, strong innovation plan, sharper commercial execution behind our new operating model. And listen, the U.S. will return to growth in 2026. And that's based on the progress we've had to date. We ended the year where we expected to with inventories at the right place. And that's -- part of that is we did have softer cold and flu, but we had stronger Oral Health business, which helped offset that. And we also have plans in place that we know is going to help us improve through the year. So for instance, in Q2, we have a lot of key customers doing shelving resets. We're gaining distribution. We're gaining shelf placement. On the profit side, the productivity program continues to deliver. You saw the 220 basis points of gross margin improvement. We feel great about that. That, combined with the efficiencies coming from the operating model, will allow us to deliver high single-digit operating growth at constant currency and still invest in growth, still invest in A&P, R&D and some key capabilities that we're continuing to build on. So now if we step back and think the medium-term guidance. I mean you said it, the guidance doesn't necessarily mean we're going to be outside the range. But obviously, part of the guidance is outside our medium-term range. I think it's an acknowledgment of the uncertain market we're dealing with. Based on what we know today, we'd expect to be in the middle of that range, based on what we know today. You also asked about the phasing. What we do know today is that Q1 cold and flu season is going to be below a year ago. We're now almost 2 months into the quarter. And the results, we saw a spike towards the end of the year, and then we saw it come down after that. So we're going to be below a year ago, and that's not only in the U.S., it's outside the U.S. My confidence, listen, these are still attractive categories. I still believe there's huge potential. Everything we've talked about in the past, closing the instant treatment gap, success of our premiumization continuing, the low-income consumer opportunity, which we're still only at the beginning at. And as we progress through 2026, I expect to see stronger performance in North America, as I said and continued strength in emerging markets. We feel good about China, and I expect an acceleration in India. Actually, India for us is performing extremely well. And then as we continue to drive that productivity agenda, again, we will be able to continue to invest in the business, which again underpins my confidence in getting back to that 4% to 6% growth. Operator: Our next question is from Warren Ackerman from Barclays. Warren Ackerman: It's Warren Ackerman here at Barclays. Outside of the numbers, Brian, could you talk about the new reorganization? You've got a new Chief Growth Officer, Chief Transformation Officer, new reporting structure, new hires in the U.S. other than Natalie I've seen. Can you maybe sort of walk us through how that's going to be a growth unlock and how you'll drive more volume growth in the U.S., more innovation? Anything you can say on sort of shelf resets and how the things are shaping up in the U.S. in what is clearly a tougher operating environment? Brian McNamara: Thanks, Warren. And I think you captured it. This is first and foremost about unlocking growth and agility. And I think about the journey we've been on as a company, we're now 3.5 years in as a company. The strategy we laid out is very clear. And there was still an opportunity for us to streamline and simplify the way we work and drive strategy to execution. So as you said, we created this Chief Growth Officer role that combines our category structure, our marketing effectiveness and capabilities, our business insights and analytics strategy and a new commercial excellence function. And then 6 operating units replacing our 3 regions. As you're aware, Latin America, India and Middle East, Africa will now have a seat around the leadership team table. So I think a couple of things. It's one on the commercial execution function that we've created. Centrally, we're driving AI-driven tools behind net revenue management, next best action. We're going to be able to drive this quicker and faster through the organization. This structure of CGO, the 6 operating units, is going to allow us to really, really much quicker drive our category strategies through to execution, better leverage scale, better be able to move resources around, react to, what I would say, as you said, a very uncertain environment. And then as a result of it, we're taking a layer out of the organization. So we're talking about a flatter, leaner organization, and that leads to the $175 million to $200 million in gross savings we talked about, which gives us incredible flexibility, frankly, to invest in those growth opportunities and to invest in innovation and drive the capabilities. Now your question on the U.S. -- specifically on the U.S., yes, well, first of all, overall in the team, we did, as part of those changes, bring new members of the team. We got a fantastic leader in India, a fantastic leader in Latin America that came from outside the company who know these markets extremely well. Our Middle East, Africa leader is now sitting on the leadership team, and she's an incredible talent. In the U.S., as part of all this, Natalie made a number of changes in our category heads or category general managers. So we have one of our top talents now on the OTC business. We brought external talent in Oral Health and in the Wellness category, which is a combination of VMS and Digestive Health. I mentioned it a bit earlier, Warren, but we know that in Q2, we will see across a number of key customers, some wins on distribution and shelving across Oral Health, VMS and Pain Relief, and that's locked. That's going to happen in Q2, and we feel good about that commercial execution. We also feel good about the innovation. The one thing I will say, it's broadly across the business, specifically in the U.S., Oral Health is doing incredibly well. And it really did better in Q4 than we expected, which again helped us offset, land the U.S. where we wanted to despite the tough cold and flu season. Operator: Our next question is from David Hayes with Jefferies. David Hayes: So just on emerging markets, there was a sequential slowdown in the fourth quarter. So just trying to dig a little bit deeper into whether the emerging is performing as you would expect it to be, like it to be at the moment. And then which areas specifically maybe are not doing as well? And I guess in that context, Oral Care continues to be amazing and impressive, obviously, still in this difficult consumer environment. So is there something different about Oral Care and the dynamics there versus some of the other categories ex Respiratory because of the cold and flu? But it feels like Oral Care could ride the consumer dynamic whereas the other brands can't. Is there something you point to that says that this is what's going to change as the consumer maybe picks up in the other areas? Brian McNamara: Yes. Thanks, David. So listen, I will take the Oral Care question linking to other categories, and I'll pass it to Dawn to talk about what we're seeing more broadly in emerging markets. So first of all, we do feel really good, as you pointed about around Oral Care. And as we've been talking about now for a while, the clinical range in Sensodyne has really resonated well with consumers. And it's beyond clinical white, it's clinical repair, it's clinical enamel strength. Beyond that, we're seeing great progress in places like India with low-income consumer on Oral Health. And Parodontax is an amazing brand in gum health. We don't talk about it as much as Sensodyne. It's obviously not as big, but it's growing in the strong double digit in the mid-teens. We launched in China this past year. It's still quite early in our ramp-up for distribution, but we couldn't be happier with the progress that we're seeing there. So we feel great about Oral Health. And the Oral Health model is very, very clear. It's linked to the dental recommendation. It's linked to the innovation. And obviously, we compete on the therapeutic side of the business. Listen, in the other categories, quite -- listen, when we talk about the impact of cold and flu, to be clear, we talk about our cold and flu portfolio specifically, which are brands like Theraflu and Robitussin and Otrivin, which sit in that category. There is also impacts across other areas like Pain Relief and some VMS and things like that tend not to be as much but there does tend to be a little bit of that impact that happens, too. Fundamentally, I believe these are real strong categories that as we move forward, we can move ahead. I think we're just radically differentiated versus the competition in Oral Health in a way that's very, very unique. We're talking about now over 10 years of kind of high single-digit to double-digit growth in Sensodyne, and we continue to see that continuing to hum. And we're seeing good competitiveness in the other categories, but we're continuing to focus on innovation, things like our 12-hour patch launch on Voltaren in a number of European countries. Otrivin Nasal Mist continues to do well. We're growing aggressive share there. Our OptiSorb technology on Panadol, we're rolling out to another [indiscernible] market. So we feel like we have a good innovation plan that should underpin our -- certainly our medium-term guidance. Dawn? Dawn Allen: Yes. Good morning, David. Hi, everyone. So let me talk a bit about emerging markets because we feel really excited about our emerging markets business. If I look at Asia Pac, first of all, I mean, we continue to deliver strong performance in Asia Pac. We expected an acceleration in half 2 versus half 1, and that has come through. And when I look at the growth drivers in Asia Pac, 80% of our growth is coming from volume mix. And that is a factor of us driving penetration and expanding reach across lower-income consumer groups. If I look within Asia Pac, let me talk about India. I mean, an incredible performance in India, double-digit growth in the year, an acceleration in quarter 4 on the back of the macro changes around GST, but also on the fact of our activations. If I look at our INR 20 pack and Sensodyne is performing incredibly well. We continue to expand our reach across rural areas, across villages based on our investment in terms of bringing our sales force in-house. And actually, I was out in India the first week of this year, and it was great to be on the ground with the team, visiting stores and really seeing our brands come to life. So that was India. If I look at China, we're also really excited about China, mid-single-digit growth in the year. And just some pockets to talk about. If I look at our e-com business, it's around 40% of our business in China. And Douyin, we're growing more than 100%. And our online to offline business is also growing double digits. So actually, we feel really good about China. If I move on then to EMEA, LatAm. EMEA, LatAm, actually, we've seen a good performance, particularly across LatAm and EMEA, Middle East and Africa as well as Central Europe. But it is fair to say that whilst we've seen a good performance, particularly in LatAm and specifically Brazil, we are seeing a much more challenging macro backdrop, both in terms of the consumer behavior, but also in terms of retailer behavior as well. So we did see a slowdown in LatAm, particularly in quarter 4. And if I talk about kind of Middle East, Africa continues to perform well. Central Europe also has seen a good performance. But again, based on the soft cough, cold and flu season in quarter 4, we saw a slowdown in Central Europe because of that. But overall, as I said, we're really excited about emerging markets. It's a huge growth opportunity for us. When I look at our A&P investment, half of our increase in A&P investment in the year actually went to emerging markets, and you can see that coming through in the performance. Operator: Our next question is from Celine Pannuti with JPMorgan. Celine Pannuti: My question comes back on the overall guidance and how you manage top line performance versus margin improvement. Clearly, strong delivery in margin and your cost savings initiative augurs well for the years to come. At the same time, your top line has disappointed. And if I look at the past 3 years, volume has been 1%, which is quite low compared to the overall European staples, best-in-class are trying to achieve at least 2% and above. So in order to grow 4% to 6%, what kind of volume level do you think you need to have? And how do you -- like the discrepancy between margin progression and volume performance, does it mean that you may need to reinvest more or maybe look at your price positioning in order to grow volume faster? Brian McNamara: No, thanks for the question, Celine. So let me kick that off, and then I'll pass it to Dawn to give a bit more perspective. I think if you take a step back, I do think we're investing in the right places on the business. If you look at our A&P investment in the last year, we were over 7% ahead of a year ago, and R&D was over 7% ahead of a year ago. That is the absolute benefit of the gross margin improvement and the improvements we've seen in our supply chain and structure, giving us 220 basis points of operating -- of gross margin improvement, which is allowing us to invest in the business. We continue to focus on where is the best of that investment. By the way, a lot of that incremental investment this year went against Oral Health, and you see the results that have come out. And we understand that in a lower cold and flu season, also while we can gain share, we're going to have a very difficult time driving volume overall. But maybe, Dawn, you can talk a little bit about how we see the algorithm going forward and where we see the role of volume growth, which we're very focused on volume growth. So Dawn? Dawn Allen: Yes. Thanks for the question, Celine. And you're right, and Brian mentioned it, we are very focused on driving volume growth in 2026 and moving forward. We've always said that the right price volume mix split for this business is around 60-40, 40-60. I already talked about Asia Pac in terms of 80% of that growth is coming from volume on Asia Pac, and we feel really good about that. When I look at EMEA, LatAm, if I take out the two shoulders of the year, so if I take out Q1 and Q4 for 2025, where we had a soft cough, cold and flu season, actually, in Q2 and Q3, we did see a more balanced price volume mix profile. And that obviously should give us confidence moving forward that we can deliver that. And then if I look at North America, look, it's been a really challenging market in North America in 2025. But as Brian has talked about, we have put in place the key actions to drive volume growth in 2026, whether it's about us no longer doing destocking, whether it's about reducing the drag from smokers health, the distribution builds that we expect to get from shelf resets as well as the strong activations. These are all important drivers in terms of driving the volume growth. So whilst for '26, I'm not going to guide to specific volumes, I would expect us to be improving the split of price volume mix in '26. Operator: Our next question is from Olivier Nicolai with Goldman Sachs. Olivier Nicolai: I got one question first. Could you go back to the change you have implemented in the U.S. over the last 12 months and specifically also the incentive structure you put in place for the new management there? And just following up on the press release on Page 5 regarding the overall equipment effectiveness. It has improved by 7 points in 2025. It's a bit lower than what you expected at H1. Should we assume a stronger improvement in '26 compared to '25 on these metrics? Brian McNamara: Yes. So thanks for the question. Let me talk a bit about the U.S. As you know, we announced a new leader in the U.S. in May. As we looked at our operating model structure broadly, we worked very closely as an executive team to define that. I talked a little bit earlier when Warren asked the question about that and we worked that very closely with the U.S. So one of the things we've done is we've created [indiscernible] category General Manager role, which obviously report directly up to our President of the U.S. and also are connected to our global category heads, which is going to help us really drive kind of this strategy to execution even faster. We're making a number of changes around net revenue management and the tools that we're providing. We've made a number of changes in our sales force and our sales leadership and structure. And all of that was really pretty much done on January 8 when we announced the broader stuff in the U.S., you obviously move much faster on those kind of changes. So I feel really good about those changes and how they're going to drive growth. And as I said, we've seen progress to date. There's no question about it. We ended up again where we expected to. Inventories are kind of where we expected to. Oral Health has been extremely strong. Advil grew share in Q4. So that was a really important element. We're seeing -- we see these opportunities on the distribution and stuff that I talked about in Q2. So I feel like we're in a very good place to really drive those changes in the U.S. Dawn Allen: Yes. And I think, look, in terms of the productivity program, Brian talked about it, we're really pleased with our supply chain productivity program. It was even better than we expected. I mean, 220 basis points improvement in gross margin is incredible in the year, and it is a collective effort across the whole organization. And that's important because it helps to drive flexibility and agility in the P&L to be able to invest for growth. And if you remember, we talked about 3 drivers of how are we going to deliver that gross margin improvement and productivity benefit. The first one we talked about was immediate accelerators. So this was reducing complexity in our supply chain, whether it's around number of languages on pack, harmonizing packaging, formulations. And let me give you an example. So in Europe, in 2025, on our Aquafresh brand, we had 44 single language packs. And we've now reduced to 18 multi-language packs in the year. And that is a huge optimization piece in terms of supply chain. The second area that you referenced in your question was around operational efficiency. And this is all about debottlenecking upfront, process improvements, equipment optimization. And let me give you an example of that. In our Levice factory in Europe, we reduced formulations by 30%. So if you think about the impact of that, that reduces change over time, but it also increases the capacity, the available capacity on that line, which is really important. So I think, as I said, it's an incredible effort that is helping us to continue to invest in the business to drive growth. Moving forward, I wouldn't expect to see, it would be great if we had that level of improvement each year. But moving forward, 50 to 80 basis points is what we've built into our guidance. That will be a strong performance on supply chain productivity. Operator: Our next question is from Jeremy Fialko with HSBC. Jeremy Fialko: So the one for me is more on the U.S. market more generally. So the first element is just the pharma channel within the U.S. Do you see that continuing to be under pressure in 2026? Or do you think with some of the ownership changes there, there's the possibility that the channel could become a little bit better in some of the broader drops there, which have, I guess, led to pressure on inventories and overall sell-through could abate? And then maybe if you look at the U.S. more broadly, is it just a case of waiting for the consumer to get a bit better before the market growth can improve? Or are there some other elements that you think are kind of specific to the market getting a bit better, let's say, putting aside any cold and flu impacts? Brian McNamara: Thanks, Jeremy. Thanks for the question. Let me take that. I think as you talk pharmacy channel, really, what we've talked about is the 2 big retailers in the U.S., which is Walgreens and CVS. What I can say is we see the channel shift that we've seen for many years, which is drug channel and obviously, e-com. E-com growing quite aggressively and that's walmart.com or that's amazon.com, that will continue. The dynamic we saw in 2025 was lower inventory levels in those retailers as they were dealing with their own challenges. We believe we're where we need to be, and now we're just managing normal channel shift as we can. And by the way, that channel shift is not a bad thing for us. If we look at our Amazon shares, 18 brands on Amazon account for 90% of our business on Amazon and 16 of those 18 brands have higher share online than offline. So as that channel shift moves, it's something we can take advantage of. We have good capabilities there. So we feel good about that channel shift. Yet to be seen what happens under new ownership at Walgreens, if that's a positive or not a positive. But again, I don't feel like this is a situation that if gets worse, we baked it in. We proactively managed our inventory levels to try to be at a place where we felt good about so we can stop talking about it as we move forward. In the overall market, you said ex seasonality, so I will take that out because there's certainly a seasonality impact that we're kind of seeing. Listen, what we see in the dynamic is we see club channel doing a bit better, dollar channel doing a bit better as consumers are looking for more value. Some consumers looking for lower price points, some consumers looking for -- different consumer want value, higher price point, lower price per use. We're very focused on those 2 channels and increasing our offering to make sure that we're meeting the affordability issues of consumers in the U.S. And we believe we can also play a role, and we do play a role certainly in Oral Health in driving that category growth. So we're not sitting back and waiting for the categories to change. We're just acknowledging that we -- there are some things we can't control. We're focused on competitiveness, growing market share. We feel confident in that, and we're focused on driving that category growth where we can. Operator: Our next question is coming from Sarah Simon with Morgan Stanley. Sarah Simon: Just one question from me. How important is it in terms of securing shelf space and sort of with your retailer negotiations to have that cold and flu business? Because I think in your bit to become a sort of steady compounder with predictable top line, this is obviously the kind of bit that's causing the biggest issue. So I'm just wondering how much do you need to own that business? Brian McNamara: Okay. Sarah, thanks for the question. Let me take that. Listen, I think cold and flu plays an incredibly enormous role in consumer health and for consumers. And if you look over the history, I've been involved in the -- in consumer health now for over 20 years. So I've seen quite a few cold and flu seasons. This year, we're seeing kind of two seasons in a row that are down because if you remember last year, we were down. We know that Q1 is also going to be down. It doesn't happen that often, but it has happened in the past. We've experienced that in the past. I believe if you look over time, you're going to see growth in this category going forward. It's a bit exasperated this year because we are dealing with multiple headwinds in the U.S. environment, which this has compounded on. But I think it's a very important category. We feel good about our positions in the category and our portfolio. I think it's going to -- it plays a very important role for our customers, too, as you were saying, this is category management around pain and cold and flu. And frankly, cold and flu and pain have some common brands, Panadol Cold and Flu, Advil Cold and Flu. So we think it's an important part of the portfolio as we move forward. Operator: Our next question is come from Karel Zoete with Kepler. Karel Zoete: I'd like to go a bit deeper into 2 categories. The first one is the Digestive Health business. Historically, a good business for you, not so seasonal, but we've seen a slowdown in '25. What should we anticipate for '26? Why should things get better? And then coming back to pain, I know there's a bit of cold and flu impact in there. But if you zoom out, 2024, '25 have not been great years for pain despite of some of your strongest franchises such as Panadol in Asia are there. So what is needed for the pain franchise to start performing more in line with the anticipated growth rates? Brian McNamara: Okay. Thanks very much, Karel. I appreciate the questions. So let me start with Digestive Health. If you think about our Digestive Health business, just to get us grounded, it is -- over 80% of that business is focused in 3 countries: U.S., India and Brazil. In India and Brazil, it's ENO, which is a fantastic brand and does very well in both cases and is part of our strategy and our growth strategy, certainly in both those countries and certainly in India. So now you get to the U.S. where we have Tums, we have Nexium, brands like Gasx and XLax, Benefiber, which is a fantastic brand. We have seen a drag on Nexium in the U.S. There's no question that is one brand in one category, and we're not alone in this that has been impacted by private label. If I zoom out and look at the U.S. overall, we've gained share versus private label. But Nexium has been a bit of a challenge there. One of the opportunities we see in Digestive Health, and we feel really good about and we're now working is supporting consumers on GLP-1s because there's multiple side effects on GLP-1s that brands like Tums and brands like Benefiber address. There's also side effects like dry mouth, which we have a mouthwash brand. We don't talk about much in the U.S., Biotene, which is actually quite effective in dry mouth. And there's nutritional supplementation, and we've actually created the Centrum variant that's specifically focused to GLP-1 consumers. So we see an opportunity across our categories to drive that. Tums is a tremendously performing brand and so is Benefiber. We have dealt with a little bit of a drag from the Nexium side of the business. Listen, on Pain Relief, it's a great portfolio. I mean, Voltaren is #1 topical analgesic in the world. By the way, we talk about -- a lot about the topical. We also have a very strong patch business. I mentioned earlier, we're launching 24-hour patch in a number of markets around the world, and we're seeing quite a successful pickup of that. Panadol has done quite well in Asia. We don't have quite the same strength of a systemic pain relief business through Europe, and we're addressing that. We're launching there. And the big thing is on Advil. Like I said, we're growing Advil share in Q4. We're really confident that now with the new structure, with the new focus, our ability to invest and everything else that will get Advil back to a more consistent performer. That's going to be important for us. So that's one of the things we need to make sure that we drive and deliver on the business. But overall, listen, we've always said the OTC categories in general would be 2% to 3% growth categories, and we could outgrow that. They've seen a little bit of headwinds here and in the U.S. as all categories have been a bit muted, again, not super declines, but a bit muted. So we're addressing that, but we feel very good about that franchise and the global nature of that franchise. Operator: Our next question is from Edward Lewis with Rothschild & Co Redburn. Edward Lewis: Brian, just returning to the medium-term guidance. Should we think that getting back to that range is all about the U.S.? Or do you think you can deliver against that with a structurally slower U.S. market but greater contribution from the rest of the world, given the confidence you're obviously expressing about India and China? Brian McNamara: Yes. So listen, as I think about the medium-term guidance, I do expect that the U.S. will perform better. There's two things. We've outperformed the market, to be clear, in 2025. But do I feel like the performance is -- we're hitting it on all cylinders? We have not. We can do better. Just outperforming the market isn't enough, and I am confident we can do better. So we do expect an improvement in that U.S. environment. And I believe over the next couple of years, we'll get that U.S. environment, if not too close to the bottom end of our algorithm growth. Outside of that, we also expect that, again, over time, emerging markets will continue to be a strong contributor and the low-income consumer strategy we have, which is taking hold in certain places, and we're learning a lot, to be very clear. And that takes a bit of time to kind of build up to be significant, and we see those opportunities. So overall, I do feel the medium term of 4% to 6% that nothing has fundamentally changed versus what we have said and what we've said in the past about our strategy and our opportunities. What you're hearing from us this year is 3% to 5% because the market is still quite uncertain, and we want to make sure we're providing the proper context for everyone on where we see things are at. And again, where we sit now, knowing Q1 is going to be softer due to cold and flu, middle of the range is kind of where we're at on that, and we'll update as the year goes on. Operator: Our next question is from Tom Sykes with Deutsche Bank. Tom Sykes: One quick follow-up and one on A&P, please. Are you able to quantify the shelf space stocking benefit that you'll get in either Q1 or Q2 in North America, please? And then just on the A&P spend, I mean, there can't be many consumer companies that have increased A&P by almost 8% to 20% of sales and still running at negative volumes. So where is the A&P ineffective? And where is it effective? And does it make much of a difference in your non-oral care businesses at the moment? And can you talk about whether you're allocating more of that A&P increase to oral care or to non-oral care, please? Brian McNamara: Thanks, Tom. Thanks for the question. Let me take the U.S. stocking, and I'll pass it to Dawn on the A&P question. Listen, we're not going to guide to specific improvements on the shelving increases. But let's just say it's part of the thing that gives us the confidence as we progress through the year that we'll see stronger results because it's real. Consumers will see more of our brands. We will have a bigger shelf space and in a number of cases, we'll be at a better visibility point in some key resellers. Dawn, do you want to talk about A&P? Dawn Allen: Yes. Look, thanks for the question. And I think it also builds on one of the comments that Celine talked about in terms of the margin profile as well. So let me say a few words about that. I think, look, it's often easy for companies to cut A&P when the market is more challenging. We have not done that, and we haven't done that because we're really focused on ensuring the long-term sustainable growth for this business. So we -- you're right, we've increased A&P 7.5%. We've increased R&D 7.7% in the year. And we invest in our brands at a healthy and the right level to drive that sustainable growth. So if I kind of give a bit more color behind that. So what -- where has that increase in A&P, where has it gone? We've already talked about it. Half of that increase went to Oral Health. You've seen the growth momentum on that this year in terms of high single digit and acceleration in Q4 and the ROI on that Oral Health is incredibly strong. The other half, I referenced it earlier, went to emerging markets. So India, D-com in China, and that's really important. And the third area actually is around experts. So expert is a critical part of our business model in terms of the work that we're doing around the Haleon Health portal, where registrations have increased 27% in the year and on our field force engagement, which has also increased 16% in the year. So that's where the spend has gone. The other thing that we are particularly focused on as well as ensuring it's the right level is also around the return, the efficiency and the effectiveness. So in the year, we've improved our working, nonworking split, so 12% growth in working media. We've also increased our overall ROI mid-single digit, and we've increased the coverage, the global coverage to around 3/4 of our business. The other thing that we're focused on is also the mix. So 60% of our working media is allocated to digital. And that's an important balance for us as we think about the shift in the broader economy. So I would say, overall, look, it's an important focus area for us. We invest at a healthy level, 20.5%. I feel really good about that. And we also continue to focus on improving the efficiency and effectiveness of our spend as well as ensuring that we are shifting and having the right mix around digital versus legacy. Brian McNamara: Okay. Super. Thanks, Dawn. Listen, I think we are going to close the call now. So thanks, everyone. I appreciate you joining us today. Look forward to catching up with all of you in upcoming meetings and roadshows. And please feel free to reach out to the IR team if you have any further questions. Really appreciate your continued interest and support in Haleon. Thanks, everybody. Operator: Thank you. That concludes Haleon Fiscal Year 2025 Results Q&A. Thank you for your participation. You may now disconnect your lines.
Operator: Greetings. Welcome to the Atlanta Braves Holdings, Inc. Fourth Quarter and Year End 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question and answer session. As a reminder, this call is being recorded. At this time, I would like to turn the call over to Cameron Rudd, Vice President of Investor Relations. Before we begin, we would like to remind everyone that on today’s call, Cameron Rudd: management’s prepared remarks may contain forward-looking statements. Forward-looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today, including those set forth in the risk factors section of our annual and quarterly reports filed with the SEC. Forward-looking statements are based on current expectations, assumptions, and beliefs, as well as information available to us at this time, and speak only as of the date they are made, and management undertakes no obligation to update publicly any of them in light of new information or future events. During this call, we will discuss certain non-GAAP financial measures, including adjusted OIBDA. The full definition of non-GAAP financial measures and reconciliations to the comparable GAAP financial measures are contained in the Form 10-Ks and earnings press release available on the company’s website. Now I would like to turn the call over to Terence McGuirk, Chairman, President, and CEO of Atlanta Braves Holdings, Inc. Terence McGuirk: Welcome, everyone, and thank you for joining our fourth quarter and year end 2025 call today. With spring training underway, we are energized about the year ahead. I have been to our North Port, Florida spring training facility over the past two weeks, and I am pleased with the progress of the team and the pieces we have in place. Walt Weiss, our new manager, is working hard and building team momentum as we look toward opening day. We believe we are well positioned with a strong team and the organizational depth to be competitive this season. We continue to focus on improving our team with the ultimate goal of competing and winning another World Series for our fans. As I stated on our last call, we are driven to return to our long tradition of winning and championships, and Alex Anthopoulos, our President of Baseball Operations, has done an excellent job navigating this offseason and adding some key free agents to the team. To that end, we are excited about the addition of Robert Suarez, who was just named by ESPN as the number one reliever in baseball and will form one of the best back ends of a bullpen in the Majors when paired with Raisel Iglesias. We also have Jorge Mateo and Mauricio Dubon, who both can play anywhere on the diamond and will be anchoring the shortstop position until mid-May when Gold Glover and newly signed Ha-Seong Kim returns from a finger injury. Dubon has also won a Gold Glove as a utility infielder in two of the last three seasons. We were also pleased to strengthen our formidable bullpen with the signings of Tyler Kinley and Joel Payamps. We are adding these talented players to an already elite roster that includes reigning National League Rookie of the Year, Drake Baldwin, reigning Gold Glove winner, Matt Olson, former National League MVP, Ronald Acuña Jr., and former Cy Young winner Chris Sale, who we signed to an extension earlier this week, along with the standout players and fan favorites Austin Riley, Spencer Strider, and many, many more. Also, catcher Sean Murphy is recovering nicely from hip surgery last September and is making great strides toward rejoining the team in the early part of the season. We firmly believe we have all the pieces we need to make a postseason run this year and compete for a World Series title. We are not alone in that belief. FanGraphs picked us to compete for a World Series title and named us the number two preseason team in the entire Majors in their power rankings just behind the Dodgers. Now let me address one more important issue that emerged as we started this year: local media broadcasts. As you all know, the industry has been working through the ongoing saga of the decline of Main Street sports. With Main Street out of the way, the Braves now have our local TV rights back, and instead of going through a third-party regional sports network to monetize these rights, we will be stepping into the Main Street role and directly handling the distribution, production, and revenue generation of the full season of games ourselves. We are fortunate to have much of this expertise in-house at the Braves and are confident that we will be able to produce, distribute, and deliver our games and additional Braves content in a way that is compelling and serves our fans very well. We have one of the largest television territories in baseball, spanning multiple states, which affords us the opportunity to optimize our financial outcome, a factor that provides us an advantage that no other Main Street team has. Our goal is to be sure that every fan who wants to watch an Atlanta Braves game can do so. The demand for our product remains incredibly high, which makes the job of reengineering the distribution system much easier. Yesterday, we announced the launch of our new distribution and streaming platform, PraiseVision, introducing our fans to the new platform for Praise broadcasts. Before I turn the call over to Derek, I would like to thank our fans, our team, the entire organization for their continued support and efforts, and recognize that it is through hard work and dedication that we continue to be one of the elite franchises in all of Major League Baseball and across all professional sports. With that, I will turn it over to Derek to walk through our operating performance, ticketing trends, and outlook, including more detail on the local media rights topic. Derek G. Schiller: Thank you, Terry, and good morning, everyone. I will start with one of our most pressing topics as we head into the final weeks before the start of the regular season. For our organization, our priority throughout the whole process around media rights has been clear. We wanted to maximize reach and availability for fans while protecting our economics given the popularity and value of our team. As Terry mentioned, we are excited to launch Brave Vision, a multimedia platform owned and operated by the team, which will serve as the official home of our local television broadcast beginning this season. In bringing our broadcast back under control, our initial focus in 2026 will be our pregame show, our in-game presentation, and postgame content. Importantly, we will maintain full creative oversight of the production as well as the sales, marketing, and distribution of the venture. We have an experienced team that is talented and motivated, so we are confident in our ability to deliver for our fans and excited to see what our operating team can do. Ray’s vision will allow fans to watch us on multiple platforms, including many of the same television providers where fans are used to watching our games, with all games available on a streaming platform in partnership with MLB. Importantly, Gray Media will remain our partner. Starting already with spring training, Gray Media will broadcast 15 spring training games, a 50% increase after the successful partnership last year. In addition, Gray will partner with Gray Media to simulcast a selection of regular season games alongside Braves Vision. These free over-the-air telecasts will be available on Peachtree TV’s Atlanta CW and Peachtree Sports Network in Atlanta and throughout the Southeast through Gray’s network of broadcast stations. This broadcast partnership highlights the Braves’ commitment to engaging fans across Braves Country. In addition to local Braves television broadcasts, the team will appear in nationally televised games this season with various MLB broadcast partners, including Fox, FS1, ESPN, TBS, NBC, Peacock, and Apple TV. As we have said in the past, there is tremendous value in our expansive fan base, and serving our fans is our top priority. We believe this is also in the best long-term interest of our team and our shareholders. With this resolution in place, our focus now shifts to execution, optimizing outcomes across subscriber reach, distribution, advertising, and streaming options while continuing to ensure fan access. I would like to turn now to last season and what we are taking from it as we head into the new year. Despite the season on the field in 2025, we delivered record-breaking regular season ticket sales and sponsorship revenue, underscoring the enduring strength of the Braves brand and the unwavering passion of our fans and partners. We also sold the fourth-highest number of tickets in the past 25 years, which reinforces the tremendous loyalty we have from our Braves Country fan base. Heading into the 2026 season, we are encouraged by strong ticket demand, having already sold more than 1,900,000 tickets across seasons, groups, hospitality packages, and single-game inventory. Our premium clubs continue to be sold out, and there is a robust waitlist on all season product offerings, exemplifying one of the most sought-after season ticket memberships in MLB. Within ticketing, we have also been able to optimize our process through a combination of pricing strategy, product segmentation, and improved inventory management. We are continuing to invest in ticketing analytics so we can better measure demand elasticity by game, opponent, day of week, and seating category. That work is already improving marketing efficiency and conversion, helping us put the right offer in front of the right fan at the right time. Importantly, it also supports our premium and group strategy, which we view as meaningful levers for revenue quality. Looking ahead, we are focused on improving our on-field competitiveness while also building momentum in The Battery Atlanta as a multiuse destination that drives year-round engagement and revenue. We see our business and baseball strategies as aligned. A competitive team supports demand, and our broader development platform supports durability across cycles. The Battery also continues to perform as a multiuse destination, and our strategy centered on diversifying demand drivers and broadening our calendar to increase repeat business visitation is working. With over 380 total events and concerts held in 2025, we reinforced The Battery Atlanta and Truist Park as a premier destination in the Southeast even outside of the Braves’ home schedule. Of these 380, we hosted 144 events across the common areas of our campus, held 147 events at the Coca-Cola Roxy, and added another 95 game day and Truist Park events. This breadth of year-round events is another shining example of why we believe we operate with the most unique partnerships in professional sports. To that point, we continue to expand our non-game day schedule of events throughout the season. As an example, after a successful two-game series last year, we are excited to host the Savannah Bananas for three games this year, further expanding this unique experience at our ballpark. We also recently announced that we will be hosting Braves Country Fest on June 13 in partnership with Live Nation. This features performances by Cody Johnson, Bella Langley, Ernest, and Mackenzie Carpenter, among others. And in addition, Noah Kahan will be performing at Truist Park on July 27. These examples and more reiterate our ability to attract top-tier events to our ballpark and campus throughout the year, and we look forward to continuing our positive momentum with additional concerts, community events, and other activations. Looking forward to 2026, we are confident in our ability to deliver to our fans across Atlanta and across the entire Southeast. We continue to focus on improving our fan experience at the ballpark as well as the overall experience across our campus. The launch of Brave Vision is something that we believe will be a defining moment for our franchise and our fans. Our expansive television market territory is one of the largest in professional sports and gives our team options that few others do. With our media rights resolved ahead of the season, we are excited about the future this brings and focusing on creating the best possible product. With that, I will turn it over to Mike to provide updates on The Battery and our real estate strategy. Mike: Thank you, Derek, and good morning, everyone. Let me start by reinforcing Derek’s comments on our real estate strategy. We continue to view The Battery as a long-term platform that diversifies our business, broadens our audience, and supports durable growth over time. In 2025, we welcomed nearly 9,000,000 visitors to The Battery, mostly in line with our levels from 2024, even as baseball attendance was softer last season. For us, that is a strong indicator that our awareness is increasing given all the events we have hosted and other offerings we have added around The Battery, and that the destination value proposition is resonating beyond game days. From a tenant perspective in The Battery, 2025 was a record year. Our tenants collectively achieved a new annual sales milestone of approximately $137,000,000 across just 30 doors, which we believe ranks among the most successful mixed-use operations in the country. We also continue to strengthen our tenant lineup with the openings of the new Truist Securities building, Walk-On’s Sports Bistreaux, and Shake Shack, among others. We are excited about J. Alexander’s joining The Battery in 2026. From a portfolio standpoint, PennantPark was a key contributor this year. We successfully acquired and closed the property and ended the year at approximately 90% occupancy, an impressive increase from the low 80% range at closing in April. In the fourth quarter alone, we closed just under 50,000 square feet of new deals and have a very strong tenant pipeline into 2026. Across The Battery more broadly, we had a strong year of continued transformation, including meaningful capital investments aimed at improving the guest experience and long-term functionality of the campus. The pedestrian bridge connecting The Henry project to The Battery is nearing completion, which will further enhance connectivity, expand our parking operations, and improve overall flow throughout our growing footprint. We are still opportunistic as we evaluate future transactions and believe our record speaks for itself as we look to optimize the portfolio over time. Importantly, we continue to command rent premiums across our retail, office, and hotel assets with rates above market supported by demand, engagement, and performance. Tenant engagement also remained strong. We continue to secure early lease extensions and receive daily inbound interest from prospective tenants, which gives us confidence in the depth and quality of our pipeline. From a financial standpoint, I am pleased to report that mixed-use development revenue continues to perform well and represented approximately 13% of the company’s total revenue in 2025. We are currently generating over $100,000,000 in revenue on an annualized basis as our mixed-use development revenue continues to expand its role as a meaningful contributor to our team and franchise value. With that, I will now turn over the call to Jill to walk through our financials in detail. Jill L. Robinson: Thanks, Mike. Before I begin, I want to remind everyone that a majority of our revenue is seasonal and is aligned to the baseball season. Our final 2025 home game was in the third quarter. We are pleased to report that 2025 was a strong financial year for our organization. Total revenue in 2025 was $732,000,000. This is an increase of nearly $70,000,000 from $663,000,000 in 2024. As a reminder, the company manages its business based on the following reportable segments: baseball and mixed-use development. Baseball revenue was $635,000,000 in 2025, up from $595,000,000 in 2024. This revenue increase was driven by a combination of increased event, broadcasting, and other revenue. Baseball event revenue was $358,000,000 in 2025, up from $348,000,000 in 2024, primarily due to contractual rate increases on season tickets and existing sponsorship contracts, as well as new premium seating and sponsorship agreements, offset by attendance-related reductions in revenue. Broadcasting revenue, which includes national and regional revenue, was $189,000,000 in 2025, up from $166,000,000 in 2024. Other revenue was up by $8,000,000 to $42,000,000 in 2025 compared to $34,000,000 in 2024, primarily due to events held at Truist Park, including two Savannah Bananas games. Next, our mixed-use development revenue was $97,000,000 in 2025, a $30,000,000 increase from $67,000,000 in 2024. This was primarily driven by a $27,000,000 increase in rental income due to new lease commencements and in-place leases acquired with PennantPark and, to a lesser extent, sponsorship and parking revenue. Adjusted OIBDA was $108,000,000 in 2025, an increase of nearly $70,000,000 from $40,000,000 in 2024. This improvement was driven by an increase of $44,000,000 in baseball OIBDA and an increase of $23,000,000 in mixed-use development adjusted OIBDA due mainly to the increases in revenue in both segments and reduced baseball operating costs. Mixed-use development adjusted OIBDA serves as a proxy for net operating income. Additionally, we have invested in two Battery hotel properties as 50% joint ventures, which are accounted for as equity method investments. Our share of earnings in these investments is not included in mixed-use development adjusted OIBDA but still represents an important part of our operations. Our operating loss was $14,000,000 in 2025 compared to a loss of $40,000,000 in 2024. This improvement was primarily due to increased revenue, partially offset by a $30,000,000 noncash impairment expense associated with the termination of the long-term local broadcast agreement and increased depreciation and amortization. As of 12/31/2025, the company had $100,000,000 of cash and cash equivalents. Nearly all of our cash and cash equivalents are invested in U.S. Treasury securities, other government securities or government-guaranteed funds, AAA-rated money market funds, and other highly rated financial and corporate debt instruments. And with that, Operator, let us open the line for questions. Operator: Thank you. We will now begin the question and answer session. Your first question today comes from the line of David Joyce from Seaport Research Partners. Your line is open. David Carl Joyce: Thank you. Congratulations on standing up Brave’s vision. I was wondering what sort of OpEx or CapEx was reflected in your financials for getting that up and running, or is it more going to be reflected here in the first quarter? And then secondly, if you could remind us, please, on the blackout rules for the local TV. It is TV and streaming opportunities. I know that your press release mentioned that there were some no-blackout issues, but just remind us of that, please. Thanks. Jill L. Robinson: Hi, David. This is Jill. In response to your first question about OpEx and CapEx for the broadcasting business, historically, we have not shared information at that level in our financial statements. We do share with you broadcast revenue, so I really cannot speak to that at this time. Looking forward, as we launch Bravevision, you should expect to see more detail about the financial results of this new operation starting in Q2. Derek G. Schiller: Yeah. And I will take the second one. It is Derek. The blackout rules and the way that we reference them really pertain primarily to the streaming platform. So as we launch brave.tv, which is in partnership with Major League Baseball, in effect if you are a subscriber of graves.tv, you can watch anywhere inside of the territory as part of our local broadcast opportunities. And should you leave the home television territory outside of the Southeast or five, six state area, so long as you are a braves.tv subscriber, you will be able to watch the Braves games wherever you travel inside of the United States. If you are an MLB.tv subscriber, so you have an out-of-market package, you can watch both inside and outside the territory, which is why we referenced the blackout restrictions the way that we did. David Carl Joyce: Appreciate it. Thanks. And if I could kind of follow on to the media rights aspect, obviously, with the CBA coming up later this year and other leagues looking to redo their national rights deals, what are updated thoughts on how things are evolving? What is the probability that Major League Baseball would want to perhaps negotiate back these local media rights from you later on? They are handling a number of other teams. Thanks. Terence McGuirk: Hi. This is Terry responding. As you know, our next national media opportunity is 01/01/1929. That will be the next time all of our national rights come up. Rob Manfred, the Commissioner, has been quoted, I think, in saying that if, you know, our best, our best opportunity to possible best opportunity would be to aggregate all of our rights like the NBA, like the NFL, like hockey, and that is still a strategy that is not clear yet as to how we will play that. But the Commissioner will be leading that negotiation in that strategy discussion among the owners. And we will surely keep our shareholders and our analysts up to speed when that happens. Operator: Next question comes from the line of Barton Crockett from Rosenblatt Securities. Your line is open. Barton Evans Crockett: Okay. Great. Thanks for taking the question. Let me see. One of the things that I, you know, just stepping back, I am just kind of curious about in terms of the financial cash flow profile of the Braves this year versus years past. You know, in this year, you just reported, you know, the free cash flow was, I guess, a negative $25,000,000 or so if I have got that right. And, you know, when you look ahead to 2026, you know, there is $100,000,000-ish or so of local broadcast revenue that might, you know, be somewhat less as you go through this transition, maybe, maybe not. And then you have got some incremental tax impacts that could be coming up from the tax laws that, you know, limit kind of deductibility of salaries to high-paid employees like, you know, your star baseball players. And so I am just wondering if you could talk a little bit about how you see free cash flow trending going forward and if there is a deficit, how you see kind of financing that? And, you know, given your position as kind of a public company versus others, you know, where you have got the pockets of billionaires to kind of finance it, you know, does this put any pressure on you guys competitively, do you think? Jill L. Robinson: Yep. Thanks for the question. As we think about cash flows, we do tend to think about this in terms of our two businesses: baseball and the real estate business. On the baseball side, what we have said on a few occasions is that our goal is always to reinvest the profit from our team performance and from the operations of baseball into the team. We believe the team is the biggest asset we have that can drive top-line growth for the company, and that is generally what our focus is. Now that said, over the past couple of years, we have launched a master planning project across the stadium where we are adding increased offerings to the stadium, specifically in premium areas and other hospitality areas. We believe those things are already driving great returns and paying dividends for us. On the baseball side, we think of things a little bit differently as we are continuously evaluating opportunistic investments in real estate that we can add to our portfolio, similar to what we did last year on PennantPark. Now as you look forward, I think without disclosing too much here, you may see a difference in how the cash flow comes in with us running the business now as opposed to outsourcing the media business to FanDuel. Like I said earlier, you will begin to see a little bit more of how that plays out when the business really begins to operate in Q2. Barton Evans Crockett: Okay. But, you know, I guess I will leave some of that aside. Maybe just one more kind of detailed question. You know, I think there has been some discussion about the changes in tax laws around deductibility of high-salary kind of employees, and, you know, that being a new kind of tax impact for maybe a publicly traded sports franchise like the Braves that the private-owned franchises do not face? I was wondering if you could talk about the materiality of that for you guys and, you know, given that there is at least, you know, maybe another corporate enterprise out there that has some teams that is publicly traded, is there any possibility for you guys to get together with others to lobby for that law to be treating both private and public ownership more fairly? Derek G. Schiller: Burton, it is Derek. I will jump in on this one. You know, we are obviously aware of the 162(m) issue that you are referencing. We have looked into it. We understand, you know, what is out there, and we are working on that. I do not think it is appropriate at this point in time to comment on that, because we are still in the midst of those discussions and what we are trying to do with that. But certainly, certainly aware of what is out there and what we need to do to try to figure that out. Barton Evans Crockett: Okay. Alright. Well, I appreciate the answers. Thank you. Operator: And at this time, there are no more questions in queue. I will now turn the call back to management for closing remarks. Derek G. Schiller: So I will close it out. It is Derek. On behalf of the entire management team, I want to thank everybody for participating in today’s call, and we look forward to seeing you and hearing from you again soon. We are 30 days from opening day. Hope you are all paying attention. We are excited to get the season started and look forward to seeing you on March 27 for our opener. Operator: Bye-bye. This concludes today’s conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning. Thank you for attending today's Haleon's Fiscal Year 2025 Results question-and-answer. My name is Sarah, and I'll be your moderator today. [Operator Instructions] I would like to pass the conference over to our host, Jo Russell. Please go ahead. Joanne Russell: Good morning, everyone, and welcome to Haleon's Full Year 2025 Results Q&A Conference Call. I'm Jo Russell, Head of Investor Relations, and I'm joined this morning by Brian McNamara, our Chief Executive Officer; and Dawn Allen, our Chief Financial Officer. Just to remind listeners on the call that in the discussions today, the company may make certain forward-looking statements, including those that refer to our estimates, plans and expectations. Please refer to this morning's announcement and the company's U.K. and SEC filings for more details, including factors that could lead to actual results to differ materially from those expressed or implied by such forward-looking statements. We have posted today's presentation on the website this morning, along with a video running through the results in detail. So hopefully, you've all had a chance to see that ahead of this call. And with that, let's open the call for Q&A, and I'll hand back to the operator. Operator: [Operator Instructions] Our first question is from Guillaume Delmas with UBS. Guillaume Gerard Delmas: So one question. So my one question is on your organic sales growth guidance of 3% to 5% for 2026. I mean it does seem to signal some sequential acceleration relative to the 3% you posted last year. So wondering what will be the main drivers behind this sequential improvement? I mean, is it predicated on category growth accelerating and/or your level of outperformance gaining further momentum? And then related to this, Brian, you reiterated your medium-term ambition of 4% to 6%. I guess what underpins your confidence in the 4% to 6% when you may be delivering an organic sales growth below the bottom end of that range for now 2 consecutive years? Brian McNamara: Thanks, Guillaume. I appreciate the question. So maybe let me take the 3% to 5% guidance, and I'll go to medium-term view. So if you take a step back and let's look at 2025, we grew 3%. That clearly was below what we were expecting when we were at Q3 based on the cold and flu season. But the U.S. was down about 0.5%. APAC and EMEA, LatAm grew mid-single digits. Now we did experience a market slowdown. A vast majority of that was obviously what we've talked about in the U.S. market and then the cold and flu category, which I mentioned. Now remember, 70% of our cold and flu business is also outside the U.S. So in that context, we did deliver competitive performance. We outgrew the market overall and 60% of the business gained and maintained share. Looking at 2026, we're not planning on material improvement in the market. Consumers are likely to stay cautious. We're absolutely focused on driving category growth. I'm confident we will continue and improve on our competitiveness. And that's through investment in A&P, strong innovation plan, sharper commercial execution behind our new operating model. And listen, the U.S. will return to growth in 2026. And that's based on the progress we've had to date. We ended the year where we expected to with inventories at the right place. And that's -- part of that is we did have softer cold and flu, but we had stronger Oral Health business, which helped offset that. And we also have plans in place that we know is going to help us improve through the year. So for instance, in Q2, we have a lot of key customers doing shelving resets. We're gaining distribution. We're gaining shelf placement. On the profit side, the productivity program continues to deliver. You saw the 220 basis points of gross margin improvement. We feel great about that. That, combined with the efficiencies coming from the operating model, will allow us to deliver high single-digit operating growth at constant currency and still invest in growth, still invest in A&P, R&D and some key capabilities that we're continuing to build on. So now if we step back and think the medium-term guidance. I mean you said it, the guidance doesn't necessarily mean we're going to be outside the range. But obviously, part of the guidance is outside our medium-term range. I think it's an acknowledgment of the uncertain market we're dealing with. Based on what we know today, we'd expect to be in the middle of that range, based on what we know today. You also asked about the phasing. What we do know today is that Q1 cold and flu season is going to be below a year ago. We're now almost 2 months into the quarter. And the results, we saw a spike towards the end of the year, and then we saw it come down after that. So we're going to be below a year ago, and that's not only in the U.S., it's outside the U.S. My confidence, listen, these are still attractive categories. I still believe there's huge potential. Everything we've talked about in the past, closing the instant treatment gap, success of our premiumization continuing, the low-income consumer opportunity, which we're still only at the beginning at. And as we progress through 2026, I expect to see stronger performance in North America, as I said and continued strength in emerging markets. We feel good about China, and I expect an acceleration in India. Actually, India for us is performing extremely well. And then as we continue to drive that productivity agenda, again, we will be able to continue to invest in the business, which again underpins my confidence in getting back to that 4% to 6% growth. Operator: Our next question is from Warren Ackerman from Barclays. Warren Ackerman: It's Warren Ackerman here at Barclays. Outside of the numbers, Brian, could you talk about the new reorganization? You've got a new Chief Growth Officer, Chief Transformation Officer, new reporting structure, new hires in the U.S. other than Natalie I've seen. Can you maybe sort of walk us through how that's going to be a growth unlock and how you'll drive more volume growth in the U.S., more innovation? Anything you can say on sort of shelf resets and how the things are shaping up in the U.S. in what is clearly a tougher operating environment? Brian McNamara: Thanks, Warren. And I think you captured it. This is first and foremost about unlocking growth and agility. And I think about the journey we've been on as a company, we're now 3.5 years in as a company. The strategy we laid out is very clear. And there was still an opportunity for us to streamline and simplify the way we work and drive strategy to execution. So as you said, we created this Chief Growth Officer role that combines our category structure, our marketing effectiveness and capabilities, our business insights and analytics strategy and a new commercial excellence function. And then 6 operating units replacing our 3 regions. As you're aware, Latin America, India and Middle East, Africa will now have a seat around the leadership team table. So I think a couple of things. It's one on the commercial execution function that we've created. Centrally, we're driving AI-driven tools behind net revenue management, next best action. We're going to be able to drive this quicker and faster through the organization. This structure of CGO, the 6 operating units, is going to allow us to really, really much quicker drive our category strategies through to execution, better leverage scale, better be able to move resources around, react to, what I would say, as you said, a very uncertain environment. And then as a result of it, we're taking a layer out of the organization. So we're talking about a flatter, leaner organization, and that leads to the $175 million to $200 million in gross savings we talked about, which gives us incredible flexibility, frankly, to invest in those growth opportunities and to invest in innovation and drive the capabilities. Now your question on the U.S. -- specifically on the U.S., yes, well, first of all, overall in the team, we did, as part of those changes, bring new members of the team. We got a fantastic leader in India, a fantastic leader in Latin America that came from outside the company who know these markets extremely well. Our Middle East, Africa leader is now sitting on the leadership team, and she's an incredible talent. In the U.S., as part of all this, Natalie made a number of changes in our category heads or category general managers. So we have one of our top talents now on the OTC business. We brought external talent in Oral Health and in the Wellness category, which is a combination of VMS and Digestive Health. I mentioned it a bit earlier, Warren, but we know that in Q2, we will see across a number of key customers, some wins on distribution and shelving across Oral Health, VMS and Pain Relief, and that's locked. That's going to happen in Q2, and we feel good about that commercial execution. We also feel good about the innovation. The one thing I will say, it's broadly across the business, specifically in the U.S., Oral Health is doing incredibly well. And it really did better in Q4 than we expected, which again helped us offset, land the U.S. where we wanted to despite the tough cold and flu season. Operator: Our next question is from David Hayes with Jefferies. David Hayes: So just on emerging markets, there was a sequential slowdown in the fourth quarter. So just trying to dig a little bit deeper into whether the emerging is performing as you would expect it to be, like it to be at the moment. And then which areas specifically maybe are not doing as well? And I guess in that context, Oral Care continues to be amazing and impressive, obviously, still in this difficult consumer environment. So is there something different about Oral Care and the dynamics there versus some of the other categories ex Respiratory because of the cold and flu? But it feels like Oral Care could ride the consumer dynamic whereas the other brands can't. Is there something you point to that says that this is what's going to change as the consumer maybe picks up in the other areas? Brian McNamara: Yes. Thanks, David. So listen, I will take the Oral Care question linking to other categories, and I'll pass it to Dawn to talk about what we're seeing more broadly in emerging markets. So first of all, we do feel really good, as you pointed about around Oral Care. And as we've been talking about now for a while, the clinical range in Sensodyne has really resonated well with consumers. And it's beyond clinical white, it's clinical repair, it's clinical enamel strength. Beyond that, we're seeing great progress in places like India with low-income consumer on Oral Health. And Parodontax is an amazing brand in gum health. We don't talk about it as much as Sensodyne. It's obviously not as big, but it's growing in the strong double digit in the mid-teens. We launched in China this past year. It's still quite early in our ramp-up for distribution, but we couldn't be happier with the progress that we're seeing there. So we feel great about Oral Health. And the Oral Health model is very, very clear. It's linked to the dental recommendation. It's linked to the innovation. And obviously, we compete on the therapeutic side of the business. Listen, in the other categories, quite -- listen, when we talk about the impact of cold and flu, to be clear, we talk about our cold and flu portfolio specifically, which are brands like Theraflu and Robitussin and Otrivin, which sit in that category. There is also impacts across other areas like Pain Relief and some VMS and things like that tend not to be as much but there does tend to be a little bit of that impact that happens, too. Fundamentally, I believe these are real strong categories that as we move forward, we can move ahead. I think we're just radically differentiated versus the competition in Oral Health in a way that's very, very unique. We're talking about now over 10 years of kind of high single-digit to double-digit growth in Sensodyne, and we continue to see that continuing to hum. And we're seeing good competitiveness in the other categories, but we're continuing to focus on innovation, things like our 12-hour patch launch on Voltaren in a number of European countries. Otrivin Nasal Mist continues to do well. We're growing aggressive share there. Our OptiSorb technology on Panadol, we're rolling out to another [indiscernible] market. So we feel like we have a good innovation plan that should underpin our -- certainly our medium-term guidance. Dawn? Dawn Allen: Yes. Good morning, David. Hi, everyone. So let me talk a bit about emerging markets because we feel really excited about our emerging markets business. If I look at Asia Pac, first of all, I mean, we continue to deliver strong performance in Asia Pac. We expected an acceleration in half 2 versus half 1, and that has come through. And when I look at the growth drivers in Asia Pac, 80% of our growth is coming from volume mix. And that is a factor of us driving penetration and expanding reach across lower-income consumer groups. If I look within Asia Pac, let me talk about India. I mean, an incredible performance in India, double-digit growth in the year, an acceleration in quarter 4 on the back of the macro changes around GST, but also on the fact of our activations. If I look at our INR 20 pack and Sensodyne is performing incredibly well. We continue to expand our reach across rural areas, across villages based on our investment in terms of bringing our sales force in-house. And actually, I was out in India the first week of this year, and it was great to be on the ground with the team, visiting stores and really seeing our brands come to life. So that was India. If I look at China, we're also really excited about China, mid-single-digit growth in the year. And just some pockets to talk about. If I look at our e-com business, it's around 40% of our business in China. And Douyin, we're growing more than 100%. And our online to offline business is also growing double digits. So actually, we feel really good about China. If I move on then to EMEA, LatAm. EMEA, LatAm, actually, we've seen a good performance, particularly across LatAm and EMEA, Middle East and Africa as well as Central Europe. But it is fair to say that whilst we've seen a good performance, particularly in LatAm and specifically Brazil, we are seeing a much more challenging macro backdrop, both in terms of the consumer behavior, but also in terms of retailer behavior as well. So we did see a slowdown in LatAm, particularly in quarter 4. And if I talk about kind of Middle East, Africa continues to perform well. Central Europe also has seen a good performance. But again, based on the soft cough, cold and flu season in quarter 4, we saw a slowdown in Central Europe because of that. But overall, as I said, we're really excited about emerging markets. It's a huge growth opportunity for us. When I look at our A&P investment, half of our increase in A&P investment in the year actually went to emerging markets, and you can see that coming through in the performance. Operator: Our next question is from Celine Pannuti with JPMorgan. Celine Pannuti: My question comes back on the overall guidance and how you manage top line performance versus margin improvement. Clearly, strong delivery in margin and your cost savings initiative augurs well for the years to come. At the same time, your top line has disappointed. And if I look at the past 3 years, volume has been 1%, which is quite low compared to the overall European staples, best-in-class are trying to achieve at least 2% and above. So in order to grow 4% to 6%, what kind of volume level do you think you need to have? And how do you -- like the discrepancy between margin progression and volume performance, does it mean that you may need to reinvest more or maybe look at your price positioning in order to grow volume faster? Brian McNamara: No, thanks for the question, Celine. So let me kick that off, and then I'll pass it to Dawn to give a bit more perspective. I think if you take a step back, I do think we're investing in the right places on the business. If you look at our A&P investment in the last year, we were over 7% ahead of a year ago, and R&D was over 7% ahead of a year ago. That is the absolute benefit of the gross margin improvement and the improvements we've seen in our supply chain and structure, giving us 220 basis points of operating -- of gross margin improvement, which is allowing us to invest in the business. We continue to focus on where is the best of that investment. By the way, a lot of that incremental investment this year went against Oral Health, and you see the results that have come out. And we understand that in a lower cold and flu season, also while we can gain share, we're going to have a very difficult time driving volume overall. But maybe, Dawn, you can talk a little bit about how we see the algorithm going forward and where we see the role of volume growth, which we're very focused on volume growth. So Dawn? Dawn Allen: Yes. Thanks for the question, Celine. And you're right, and Brian mentioned it, we are very focused on driving volume growth in 2026 and moving forward. We've always said that the right price volume mix split for this business is around 60-40, 40-60. I already talked about Asia Pac in terms of 80% of that growth is coming from volume on Asia Pac, and we feel really good about that. When I look at EMEA, LatAm, if I take out the two shoulders of the year, so if I take out Q1 and Q4 for 2025, where we had a soft cough, cold and flu season, actually, in Q2 and Q3, we did see a more balanced price volume mix profile. And that obviously should give us confidence moving forward that we can deliver that. And then if I look at North America, look, it's been a really challenging market in North America in 2025. But as Brian has talked about, we have put in place the key actions to drive volume growth in 2026, whether it's about us no longer doing destocking, whether it's about reducing the drag from smokers health, the distribution builds that we expect to get from shelf resets as well as the strong activations. These are all important drivers in terms of driving the volume growth. So whilst for '26, I'm not going to guide to specific volumes, I would expect us to be improving the split of price volume mix in '26. Operator: Our next question is from Olivier Nicolai with Goldman Sachs. Olivier Nicolai: I got one question first. Could you go back to the change you have implemented in the U.S. over the last 12 months and specifically also the incentive structure you put in place for the new management there? And just following up on the press release on Page 5 regarding the overall equipment effectiveness. It has improved by 7 points in 2025. It's a bit lower than what you expected at H1. Should we assume a stronger improvement in '26 compared to '25 on these metrics? Brian McNamara: Yes. So thanks for the question. Let me talk a bit about the U.S. As you know, we announced a new leader in the U.S. in May. As we looked at our operating model structure broadly, we worked very closely as an executive team to define that. I talked a little bit earlier when Warren asked the question about that and we worked that very closely with the U.S. So one of the things we've done is we've created [indiscernible] category General Manager role, which obviously report directly up to our President of the U.S. and also are connected to our global category heads, which is going to help us really drive kind of this strategy to execution even faster. We're making a number of changes around net revenue management and the tools that we're providing. We've made a number of changes in our sales force and our sales leadership and structure. And all of that was really pretty much done on January 8 when we announced the broader stuff in the U.S., you obviously move much faster on those kind of changes. So I feel really good about those changes and how they're going to drive growth. And as I said, we've seen progress to date. There's no question about it. We ended up again where we expected to. Inventories are kind of where we expected to. Oral Health has been extremely strong. Advil grew share in Q4. So that was a really important element. We're seeing -- we see these opportunities on the distribution and stuff that I talked about in Q2. So I feel like we're in a very good place to really drive those changes in the U.S. Dawn Allen: Yes. And I think, look, in terms of the productivity program, Brian talked about it, we're really pleased with our supply chain productivity program. It was even better than we expected. I mean, 220 basis points improvement in gross margin is incredible in the year, and it is a collective effort across the whole organization. And that's important because it helps to drive flexibility and agility in the P&L to be able to invest for growth. And if you remember, we talked about 3 drivers of how are we going to deliver that gross margin improvement and productivity benefit. The first one we talked about was immediate accelerators. So this was reducing complexity in our supply chain, whether it's around number of languages on pack, harmonizing packaging, formulations. And let me give you an example. So in Europe, in 2025, on our Aquafresh brand, we had 44 single language packs. And we've now reduced to 18 multi-language packs in the year. And that is a huge optimization piece in terms of supply chain. The second area that you referenced in your question was around operational efficiency. And this is all about debottlenecking upfront, process improvements, equipment optimization. And let me give you an example of that. In our Levice factory in Europe, we reduced formulations by 30%. So if you think about the impact of that, that reduces change over time, but it also increases the capacity, the available capacity on that line, which is really important. So I think, as I said, it's an incredible effort that is helping us to continue to invest in the business to drive growth. Moving forward, I wouldn't expect to see, it would be great if we had that level of improvement each year. But moving forward, 50 to 80 basis points is what we've built into our guidance. That will be a strong performance on supply chain productivity. Operator: Our next question is from Jeremy Fialko with HSBC. Jeremy Fialko: So the one for me is more on the U.S. market more generally. So the first element is just the pharma channel within the U.S. Do you see that continuing to be under pressure in 2026? Or do you think with some of the ownership changes there, there's the possibility that the channel could become a little bit better in some of the broader drops there, which have, I guess, led to pressure on inventories and overall sell-through could abate? And then maybe if you look at the U.S. more broadly, is it just a case of waiting for the consumer to get a bit better before the market growth can improve? Or are there some other elements that you think are kind of specific to the market getting a bit better, let's say, putting aside any cold and flu impacts? Brian McNamara: Thanks, Jeremy. Thanks for the question. Let me take that. I think as you talk pharmacy channel, really, what we've talked about is the 2 big retailers in the U.S., which is Walgreens and CVS. What I can say is we see the channel shift that we've seen for many years, which is drug channel and obviously, e-com. E-com growing quite aggressively and that's walmart.com or that's amazon.com, that will continue. The dynamic we saw in 2025 was lower inventory levels in those retailers as they were dealing with their own challenges. We believe we're where we need to be, and now we're just managing normal channel shift as we can. And by the way, that channel shift is not a bad thing for us. If we look at our Amazon shares, 18 brands on Amazon account for 90% of our business on Amazon and 16 of those 18 brands have higher share online than offline. So as that channel shift moves, it's something we can take advantage of. We have good capabilities there. So we feel good about that channel shift. Yet to be seen what happens under new ownership at Walgreens, if that's a positive or not a positive. But again, I don't feel like this is a situation that if gets worse, we baked it in. We proactively managed our inventory levels to try to be at a place where we felt good about so we can stop talking about it as we move forward. In the overall market, you said ex seasonality, so I will take that out because there's certainly a seasonality impact that we're kind of seeing. Listen, what we see in the dynamic is we see club channel doing a bit better, dollar channel doing a bit better as consumers are looking for more value. Some consumers looking for lower price points, some consumers looking for -- different consumer want value, higher price point, lower price per use. We're very focused on those 2 channels and increasing our offering to make sure that we're meeting the affordability issues of consumers in the U.S. And we believe we can also play a role, and we do play a role certainly in Oral Health in driving that category growth. So we're not sitting back and waiting for the categories to change. We're just acknowledging that we -- there are some things we can't control. We're focused on competitiveness, growing market share. We feel confident in that, and we're focused on driving that category growth where we can. Operator: Our next question is coming from Sarah Simon with Morgan Stanley. Sarah Simon: Just one question from me. How important is it in terms of securing shelf space and sort of with your retailer negotiations to have that cold and flu business? Because I think in your bit to become a sort of steady compounder with predictable top line, this is obviously the kind of bit that's causing the biggest issue. So I'm just wondering how much do you need to own that business? Brian McNamara: Okay. Sarah, thanks for the question. Let me take that. Listen, I think cold and flu plays an incredibly enormous role in consumer health and for consumers. And if you look over the history, I've been involved in the -- in consumer health now for over 20 years. So I've seen quite a few cold and flu seasons. This year, we're seeing kind of two seasons in a row that are down because if you remember last year, we were down. We know that Q1 is also going to be down. It doesn't happen that often, but it has happened in the past. We've experienced that in the past. I believe if you look over time, you're going to see growth in this category going forward. It's a bit exasperated this year because we are dealing with multiple headwinds in the U.S. environment, which this has compounded on. But I think it's a very important category. We feel good about our positions in the category and our portfolio. I think it's going to -- it plays a very important role for our customers, too, as you were saying, this is category management around pain and cold and flu. And frankly, cold and flu and pain have some common brands, Panadol Cold and Flu, Advil Cold and Flu. So we think it's an important part of the portfolio as we move forward. Operator: Our next question is come from Karel Zoete with Kepler. Karel Zoete: I'd like to go a bit deeper into 2 categories. The first one is the Digestive Health business. Historically, a good business for you, not so seasonal, but we've seen a slowdown in '25. What should we anticipate for '26? Why should things get better? And then coming back to pain, I know there's a bit of cold and flu impact in there. But if you zoom out, 2024, '25 have not been great years for pain despite of some of your strongest franchises such as Panadol in Asia are there. So what is needed for the pain franchise to start performing more in line with the anticipated growth rates? Brian McNamara: Okay. Thanks very much, Karel. I appreciate the questions. So let me start with Digestive Health. If you think about our Digestive Health business, just to get us grounded, it is -- over 80% of that business is focused in 3 countries: U.S., India and Brazil. In India and Brazil, it's ENO, which is a fantastic brand and does very well in both cases and is part of our strategy and our growth strategy, certainly in both those countries and certainly in India. So now you get to the U.S. where we have Tums, we have Nexium, brands like Gasx and XLax, Benefiber, which is a fantastic brand. We have seen a drag on Nexium in the U.S. There's no question that is one brand in one category, and we're not alone in this that has been impacted by private label. If I zoom out and look at the U.S. overall, we've gained share versus private label. But Nexium has been a bit of a challenge there. One of the opportunities we see in Digestive Health, and we feel really good about and we're now working is supporting consumers on GLP-1s because there's multiple side effects on GLP-1s that brands like Tums and brands like Benefiber address. There's also side effects like dry mouth, which we have a mouthwash brand. We don't talk about much in the U.S., Biotene, which is actually quite effective in dry mouth. And there's nutritional supplementation, and we've actually created the Centrum variant that's specifically focused to GLP-1 consumers. So we see an opportunity across our categories to drive that. Tums is a tremendously performing brand and so is Benefiber. We have dealt with a little bit of a drag from the Nexium side of the business. Listen, on Pain Relief, it's a great portfolio. I mean, Voltaren is #1 topical analgesic in the world. By the way, we talk about -- a lot about the topical. We also have a very strong patch business. I mentioned earlier, we're launching 24-hour patch in a number of markets around the world, and we're seeing quite a successful pickup of that. Panadol has done quite well in Asia. We don't have quite the same strength of a systemic pain relief business through Europe, and we're addressing that. We're launching there. And the big thing is on Advil. Like I said, we're growing Advil share in Q4. We're really confident that now with the new structure, with the new focus, our ability to invest and everything else that will get Advil back to a more consistent performer. That's going to be important for us. So that's one of the things we need to make sure that we drive and deliver on the business. But overall, listen, we've always said the OTC categories in general would be 2% to 3% growth categories, and we could outgrow that. They've seen a little bit of headwinds here and in the U.S. as all categories have been a bit muted, again, not super declines, but a bit muted. So we're addressing that, but we feel very good about that franchise and the global nature of that franchise. Operator: Our next question is from Edward Lewis with Rothschild & Co Redburn. Edward Lewis: Brian, just returning to the medium-term guidance. Should we think that getting back to that range is all about the U.S.? Or do you think you can deliver against that with a structurally slower U.S. market but greater contribution from the rest of the world, given the confidence you're obviously expressing about India and China? Brian McNamara: Yes. So listen, as I think about the medium-term guidance, I do expect that the U.S. will perform better. There's two things. We've outperformed the market, to be clear, in 2025. But do I feel like the performance is -- we're hitting it on all cylinders? We have not. We can do better. Just outperforming the market isn't enough, and I am confident we can do better. So we do expect an improvement in that U.S. environment. And I believe over the next couple of years, we'll get that U.S. environment, if not too close to the bottom end of our algorithm growth. Outside of that, we also expect that, again, over time, emerging markets will continue to be a strong contributor and the low-income consumer strategy we have, which is taking hold in certain places, and we're learning a lot, to be very clear. And that takes a bit of time to kind of build up to be significant, and we see those opportunities. So overall, I do feel the medium term of 4% to 6% that nothing has fundamentally changed versus what we have said and what we've said in the past about our strategy and our opportunities. What you're hearing from us this year is 3% to 5% because the market is still quite uncertain, and we want to make sure we're providing the proper context for everyone on where we see things are at. And again, where we sit now, knowing Q1 is going to be softer due to cold and flu, middle of the range is kind of where we're at on that, and we'll update as the year goes on. Operator: Our next question is from Tom Sykes with Deutsche Bank. Tom Sykes: One quick follow-up and one on A&P, please. Are you able to quantify the shelf space stocking benefit that you'll get in either Q1 or Q2 in North America, please? And then just on the A&P spend, I mean, there can't be many consumer companies that have increased A&P by almost 8% to 20% of sales and still running at negative volumes. So where is the A&P ineffective? And where is it effective? And does it make much of a difference in your non-oral care businesses at the moment? And can you talk about whether you're allocating more of that A&P increase to oral care or to non-oral care, please? Brian McNamara: Thanks, Tom. Thanks for the question. Let me take the U.S. stocking, and I'll pass it to Dawn on the A&P question. Listen, we're not going to guide to specific improvements on the shelving increases. But let's just say it's part of the thing that gives us the confidence as we progress through the year that we'll see stronger results because it's real. Consumers will see more of our brands. We will have a bigger shelf space and in a number of cases, we'll be at a better visibility point in some key resellers. Dawn, do you want to talk about A&P? Dawn Allen: Yes. Look, thanks for the question. And I think it also builds on one of the comments that Celine talked about in terms of the margin profile as well. So let me say a few words about that. I think, look, it's often easy for companies to cut A&P when the market is more challenging. We have not done that, and we haven't done that because we're really focused on ensuring the long-term sustainable growth for this business. So we -- you're right, we've increased A&P 7.5%. We've increased R&D 7.7% in the year. And we invest in our brands at a healthy and the right level to drive that sustainable growth. So if I kind of give a bit more color behind that. So what -- where has that increase in A&P, where has it gone? We've already talked about it. Half of that increase went to Oral Health. You've seen the growth momentum on that this year in terms of high single digit and acceleration in Q4 and the ROI on that Oral Health is incredibly strong. The other half, I referenced it earlier, went to emerging markets. So India, D-com in China, and that's really important. And the third area actually is around experts. So expert is a critical part of our business model in terms of the work that we're doing around the Haleon Health portal, where registrations have increased 27% in the year and on our field force engagement, which has also increased 16% in the year. So that's where the spend has gone. The other thing that we are particularly focused on as well as ensuring it's the right level is also around the return, the efficiency and the effectiveness. So in the year, we've improved our working, nonworking split, so 12% growth in working media. We've also increased our overall ROI mid-single digit, and we've increased the coverage, the global coverage to around 3/4 of our business. The other thing that we're focused on is also the mix. So 60% of our working media is allocated to digital. And that's an important balance for us as we think about the shift in the broader economy. So I would say, overall, look, it's an important focus area for us. We invest at a healthy level, 20.5%. I feel really good about that. And we also continue to focus on improving the efficiency and effectiveness of our spend as well as ensuring that we are shifting and having the right mix around digital versus legacy. Brian McNamara: Okay. Super. Thanks, Dawn. Listen, I think we are going to close the call now. So thanks, everyone. I appreciate you joining us today. Look forward to catching up with all of you in upcoming meetings and roadshows. And please feel free to reach out to the IR team if you have any further questions. Really appreciate your continued interest and support in Haleon. Thanks, everybody. Operator: Thank you. That concludes Haleon Fiscal Year 2025 Results Q&A. Thank you for your participation. You may now disconnect your lines.
Operator: Good day, and welcome to the International General Insurance Holdings Fourth Quarter and Full Year 2025 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Robin Sidders, Head of Corporate Relations. Please go ahead. Robin Sidders: Thank you, Danielle, and good morning. Welcome to today's conference call. Today, we'll be discussing the financial results for the fourth quarter and full year 2025. We issued a press release after the close yesterday, and you can find that on our website in the Investor Relations section at iginsure.com. We've also posted a supplementary investor presentation, which can be found on our website as well on the Presentations page in the Investors section. On today's call are Executive Chairman of IGI, Wasef Jabsheh; President and CEO, Waleed Jabsheh; and Chief Financial Officer, Pervez Rizvi. As always, Wasef will begin the call with some high-level comments before handing over to Waleed to talk through the key drivers of our results for the fourth quarter and full year 2025 and finish up with our views on market conditions and our outlook for the remainder of 2026, and then we'll open the call up for Q&A. I'll begin with the customary safe harbor language. Our speakers' remarks may contain forward-looking statements. Some of the forward-looking statements can be identified by the use of forward-looking words. We caution you that such forward-looking statements should not be regarded as a representation by us that the future plans, estimates or expectations contemplated by us will, in fact, be achieved. Forward-looking statements involve risks, uncertainties and assumptions. Actual events or results may differ materially from those projected in the forward-looking statements due to a variety of factors, including the risk factors set forth in the company's annual report on Form 20-F for the year ended December 31, 2024, the company's reports on Form 6-K and other filings with the SEC as well as our press release issued last evening. We undertake no obligation to update or revise publicly any forward-looking statements which speak only as of the date they are made. During this call, we will use certain non-GAAP financial measures. For a reconciliation of non-GAAP measures to the nearest GAAP measure, please see our earnings release, which has been filed with the SEC and is available on our website, as I said. With that, I'll turn the call over to Executive Chairman, Wasef Jabsheh. Wasef Jabsheh: Thank you, Robin, and good day, everyone. Thank you for joining us on today's call. I'm very pleased with the outstanding results we achieved in 2025. Next year will be IGI's 25th anniversary year, which is quite a milestone for us. We have built a successful track record of consistently strong performance, generating significant value for our shareholders over this time. I'm delighted that in addition to our solid financial results, highlighted by roughly 14% growth in book value, plus the return of more than $108 million to shareholders through our capital management actions that we announced a special dividend of $1.15 per share this morning. This is the third consecutive year that we have taken decision to pay a special dividend in addition to our regular quarterly dividend. Our ability to do this really shows how our confidence in the strength of our balance sheet and our capital position is. And it rewards our shareholders for their trust and support of IGI over the years. I want to congratulate all of our people whose focus, dedication and loyalty not only produced these results, but who have helped to build our track record for over more than 2 decades. I'm very proud of the people we have at IGI. It is their passion for our business and their belief in what we have built and continue to build at IGI that continues to drive our success. With this excellent foundation, I'm confident that we will continue to serve as a stable market for our customers and generate strong value for our shareholders in '26 and beyond. I will now hand over to Waleed to discuss the numbers in more detail and talk about market conditions and our outlook, and I'll remain on the call for any questions at the end. Go ahead, Waleed. Waleed Jabsheh: Thank you, Wasef. Good morning, everyone, and thanks for joining us on the call today. As Wasef said, we had an excellent fourth quarter, capping off what was another exceptional year for IGI. Strong underwriting execution, strong investment performance, all of which leading to a very solid bottom line result. This adds a further set of data points to what is a very strong and consistent track record that we've built now over the past 24 years. To begin with, I'm just going to run through the key highlights of our performance for 2025 before delving into detail into the results. In the last 12 months, we delivered more than $161 million in underwriting income, leading to a combined ratio of just under 86% for the year. That's well below our 10-year average. Delivered a return on average equity of 18.6%, also well below our -- well above our 10-year average. Book value per share growth of almost 14% to $16.91. And finally, capital return to shareholders of more than $108 million in dividends and share repurchases. And as Wasef mentioned, we announced our ordinary common share dividend in our press release last night and declared another extraordinary special cash dividend this morning, this time, $1.15 per common share, marking the third consecutive year now that we've paid a special cash dividend. This level of performance is the result of a very well laid out, well-understood strategy that's executed at a very high level consistently year after year. And our history has shown that this strategy is what works for us and drives sustainable value to our business partners, shareholders and our employees. We have what we believe are strategic advantages and attributes that are unique to IGI and that underpin the results we are able to achieve. One, we have a high-performance profitability-driven culture underpinned by strict discipline in underwriting. Two, we've got deep specialist and technical expertise driven by years of experience and an on-the-ground presence in our core regions, allowing us to do business in a manner that is culturally compatible with our markets. Three, we're value-driven, we're long-term focused. And finally, four, our significant insider ownership and founder manager mindset aligns directly with shareholder interest. Our view of success, as we've said time and time again is not over a 1- or 2-year period, but a much longer-term period encompassing ever-changing conditions, dynamics in our market and more broadly, global social and economic environments that are constantly shifting. Now I'll move on to the results for the fourth quarter and full year of 2025. I'm going to do this just a little bit differently and really focus on the key points for the quarter and the year and what the drivers are behind the numbers. And then I'm happy to answer any questions any of you may have at the end. Starting with the top line, and as we said would be the case on prior calls, gross premiums written in the fourth quarter were down $33.4 million or just over 19%. Similarly, gross premiums for the full year were down by the same dollar amount, $33.4 million, and that's equivalent to about 4.8 percentage points. This predominantly relates to the nonrenewal of a large professional indemnity binder in our long-tail portfolio that we disclosed to you on our Q2 call last year. At that time, we said the impact would flow through 4 consecutive quarters starting with Q3 and that the largest portion, which is about half of the total, would be reflected in Q4. So that's what you're predominantly seeing in the top line movements for the quarter. Net premiums earned were $111.4 million for Q4 '25 versus $120.6 million for the same period in the year before. For the full year, net premiums earned were $453.8 million versus $483.1 million. For the full year, also net premiums earned included the impact of reinstatement premiums on loss-affected business amounting to $10.2 million. We've mentioned this on previous calls. And as I've said before, our reinsurance buying approach is very strategic, aiming really to help mitigate volatility in the high severity lines of business that we write. It's important to note that our reinsurance purchasing patterns vary depending on where we are in the market cycle. For example, we tend to buy more facultative coverage during periods of softer market conditions, and we retain more risk in harder market conditions. Now this is all part of our cycle management strategy, but it can definitely sometimes result in some distortion in the component parts of our combined ratio, and I'll talk more about that in a moment. Now the combined ratio for Q4 of '25 was 82%, and that included 18.1 points of accident year cat losses and 5.2 points of favorable reserve development. This compares to 77.8% for Q4 of '24, which included 6 points of accident year cat losses and 2.3 points of favorable reserve development. The Q4 2024 combined ratio also benefited from the impact of about 18.3 points of foreign currency revaluation. The full year ' 25 combined ratio was just under 86% and included 14.5 points of accident year cat losses and just under 8 points of favorable reserve development. The full year combined ratio was also negatively impacted by about 6 points of negative currency revaluation movement. Now this compares to a full year 2024 combined ratio of 79.9%, which included 9 points of accident year cat losses, 7.7 points of favorable reserve development and just under 2 points of positive currency revaluation. So if you're looking at it on an FX-neutral basis, we're comparing 79.9% combined ratio for the full year 2025 to 81.8% for 2024. Now during the fourth quarter of 2025, currency revaluation movements played very tiny miniscule part on our results. But for the full year, in line with the first 3 quarters' results and the commentary there, the volatility of the U.S. dollar during that -- those 3 quarters against our major transactional currencies impacted a number of line items in the results. Now just a few comments on the G&A expense ratio. For the fourth quarter and full year of '25 versus the same period in '24, we saw increases of 5.9 points or $4.8 million and 2.7 points or $6.6 billion, respectively. Now this is largely the result of new hires, systems costs and a number of other items, which are all part of the investments we've made in the build-out of our business and in our visibility in the market. So you're seeing a higher dollar expense load in the fourth quarter versus Q4 in 2024. The higher fourth quarter '25 expense ratio is then compounded by the lower level of period-over-period net premiums earned. I would also say that the fourth quarter 2024 G&A ratio -- expense ratio benefited from a reclassification of expenses from the G&A line to the acquisition cost line. So the Q4 year-over-year comparison isn't really on an apples-to-apples basis. For the full year, you're also seeing the effect of the strengthening of the pound versus our dollar reporting currency during '25. And this directly reflects and impacts the level of G&A expenses that are transacted in pounds, which for our business is fairly chunky. Generally speaking, the total expense ratio provides a true reflection of overall expenses as a component part. And I'm talking here about G&A combined with acquisition costs. And that would -- but that will move around a bit at this stage of the cycle depending upon the cycle management actions that we take. All in, we delivered net income of $32.3 million or $0.76 per share for Q4 of '25 versus $30 million or $0.65 per share for the same quarter in 2024. For the full year, in 2025, we generated net income of $127.2 million or $2.89 per share versus $135 million or $2.98 per share in 2024. Moving on to our segment results. In the Short-tail segment, conditions are somewhat mixed, but rates remain broadly adequate. Underwriting income in this segment improved by over 14% for the fourth quarter and declined a little over 7% for the full year, and that's largely due to a lower level of net premiums earned as well as a higher level of ceded premiums. As I mentioned a moment ago, part and parcel of our cycle management is taking advantage of reduced reinsurance pricing with the aim always to protect and mitigate the volatility in our portfolio. And this definitely becomes more pronounced as the cycle softens. In the Reinsurance segment, conditions generally remain strong and pricing more than adequate in the business that we write. Underwriting income was down about 4.5% in Q4, predominantly due to a lower level of net earned premiums. But for the full year, underwriting was up almost 30%, and this is a better measure of the true performance of this segment in 2025 and also reflects a shift in focus we made in late 2022 to the higher-margin reinsurance business as part of our cycle management actions, which we've spoken about previously. Now the Long-tail segment continued -- well, Long-tail segment has continued to be the area of our portfolio that has definitely been the most challenging for several years now. But it's also where we're hopeful for some improvement in 2026 or at least a bottoming out in pricing and conditions. This is the area where we also took action in the second quarter of the year when we've nonrenewed the large account, the PI binder that I mentioned -- we mentioned before, and that's what impacted the top line, both in Q4 and full year for this segment. Underwriting income for both the fourth quarter and full year of '25 was impacted by lower net earned premiums and more pronounced here is also by the currency valuation movements since this portfolio is primarily transacted in British pounds. Underwriting income of $10 million for Q4 '25. That compares to $14.3 million in Q4 '24. For the full year, we recorded underwriting income of $10.9 million versus $39.5 million for the full year in 2024. Now again, going back to the foreign exchange on an FX-neutral basis, that would have been $29.2 million for '25 versus $34.3 million for '24. If we turn to the balance sheet, total assets were $2.1 billion. Total investments, cash were $1.32 billion. The allocation to fixed income securities makes up a little over 80% of our investments and cash portfolio. That generated $14.2 million in investment income in Q4 and just under $55 million for the full year. That's a yield of about 4.2%. And we held the duration fairly steady at about 3.6 years. During the fourth quarter, we repurchased just under 344,000 common shares, average price per share $23.51. At the end of the year, we had about 4.65 million common shares remaining under the new $5 million common share repurchase authorization that we announced before last quarter's call. For us, share repurchases are a strong value generation lever for us, and we view them as highly accretive and excellent value for our shareholders. At the end of the year, total equity was $710 million, and that includes the share repurchases and common share dividends, including the special dividend of $0.85 that we distributed back in April. This compares to total equity of about $655 million at the end of 2024. Ultimately, we recorded a return on average shareholders' equity of 18.5% for Q4 and 18.6% for the full year. From a total return perspective, we grew book value per share by almost 14% in 2025, and we returned a total of about $62 million to shareholders in share repurchases and just over $46 million in common share dividends. So all in, an excellent quarter and full year for IGI. Now if I turn to our view on the market briefly, I mean, there isn't a whole lot more that is new or groundbreaking that you haven't really heard -- already heard from others. We've heard various iterations from across the market that things are getting more competitive, and that's entirely accurate. There's very clearly an elevated level of competitive pressure across much of the market, but it continues to be fairly disciplined, but I'll admit, a little less disciplined than anticipated at 1/1. Most important right now is context and the reality is that while rates are under pressure, they do remain adequate in many of the lines of business that we write. And just as an indication, we saw declines averaging around 10% at 1/1. Looking at specific segments of our portfolio, I'll start with the Reinsurance lines and segments. I mean, margins here are still very healthy. And because of this, this is also the area where we're seeing the greatest push for market share, particularly from the larger carriers. And -- but for us, this is where our S&P upgrade has definitely helped us raise our profile. And as a result, we're seeing more business that we may not have seen otherwise. Short-tail portfolio remains mixed. Our energy book and certain areas of our property book, which, as you're aware, are 2 of our largest lines, those continue to be tougher than a year ago, and I would say is the areas where we're seeing the most significant pressure. Having said that, I mean, we're continuing to see relatively healthy conditions in the more specialist lines such as construction and engineering. I mean, in that line, there's a strong pipeline of opportunities out there, particularly with the increase in infrastructure projects and also the number of data centers being built in various geographies around the world. Similarly, in the marine lines that we write, such as cargo and liability, in these areas, terms and conditions are still holding up reasonably well, and they continue to present new opportunities for us. As I've mentioned before as well, contingency is also still very much a bright spot for us. In our Long-tail segment, we're cautiously optimistic in our outlook as we're seeing some leveling off in the professional financial lines after several sequential quarters of pricing deterioration. Obviously, this is a little different to what you may be hearing from some U.S. carriers. But remember, we don't write any long-tail U.S. business. Now in our PI, Professional Indemnity portfolio, which is predominantly U.K.-based, the pace of decline appears to be leveling off. Our relationships across this business are providing us with some new opportunities and a good and healthy deal flow, especially in the more niche segments of the [ market ]. Similarly, in both FI, Financial Institutions, and D&O, we're still seeing some reductions, but the magnitude of decline is definitely narrowing and the pace is slowing. In our geographic markets, similar -- very similar commentary to what we said before, continued focus on the U.S. and specialty treaty and short-tail portfolios, and we're continuing to build up our profile and presence across various geographies, including Europe, MENA region and Asia-Pac. Now for IGI specifically, context is really critical here. Now for a company of our size, our global strategy and footprint are quite unique. Over the past several years, as is natural to do when market conditions are in your favor and conducive, we've invested heavily in growing our top line, and we've taken actions to strengthen and fortify our business in preparation for when conditions change and become less favorable. One of our most important achievements coming out of this has been our recent financial strength rating upgrade by S&P, which not only underscores the quality of our results and the strength of our balance sheet, but the confidence that S&P have in our ability to continue doing this consistently into the future. Our level of diversification and our strategy of having local talent with high levels of local knowledge positioned in our core regions means we've got much better chance of success in competing for business that isn't necessarily coming to London. I said on prior calls that domestic markets across the globe are becoming stronger, making our local operations even more important. Our people on the ground in these markets have specialist technical and marketing expertise. They've got strong network of relationships. And they've got the ability to interact face-to-face and understand the dynamics of how business is transacted in these local markets. For us, that is a clear benefit that provides a lot of leverage. In the context of our size, footprint and our financial strength, it's a little easier for us relative to our larger competitors to move the dial. That means -- what I mean by that is that we can still find profitable opportunities to write new business across many lines and many geographies within our portfolio whilst maintaining healthy margins. Now while it's perhaps a little harder in today's environment, we have given ourselves a lot more levers to work with in mitigating and managing these conditions better than even 18 months ago. Especially important is that all of our actions are aimed at protecting the book we've built while continuing to generate healthy margins and add to our value proposition. And that is, in essence, all part of the dynamic cycle management which we're constantly banging the drums of and is the nature of our business and something we have successfully navigated numerous times in our almost now 25-year history. Having said all that and given where we are in the cycle, it wouldn't be unreasonable to assume that we're likely to see some contraction in top line in certain areas of the portfolio where we decide to walk away from business that, as we've said before, simply doesn't meet our embedded profitability or coverage targets. We've seen this in our general aviation book, which over the last couple of years, we've virtually halved in size due to the tough market conditions. And we're seeing it today in some other lines. But it's this strict discipline that we always talk about that drives us to take these sorts of actions and puts us in a position of optimal strength to make the most of opportunities when they come without being encumbered by short-term thinking decisions of the past. Looking at 2026, the key focus remains the same: focus, consistency, discipline. This is exactly what underpins successful cycle management and leads to consistent high-quality results and value creation that is sustainable through all stages of the cycle. Just in closing, I mean, we have outstanding teams at IGI and our track record over almost now 25 years clearly demonstrates not only that we're not just a fair-weather company, but that we won't compromise our principles or values under pressure. We have the experience and we've built a level of resilience in IGI that has put us in a much stronger position than we were going into the last soft cycle, and that is what will continue to drive our success forward for the benefit of all stakeholders. So I'm going to pause there, and we'll turn it over for questions. Operator, we're ready to take the first question, please. Operator: [Operator Instructions] The first question comes from Michael Phillips from Oppenheimer. The next question comes from Rowland Mayor from RBC Capital Markets. Rowland Mayor: Could you maybe walk through the state of competition? And I heard all your comments on it, but I just wanted to understand, do you think the durability of maybe the pricing competition, particularly in property, are we reaching a sort of bottom here? Or do you expect to continue throughout 2026? Waleed Jabsheh: Rowland, thanks for the question. I mean, the competition is in line with what we've been really seeing now for many -- quite a few quarters. I mentioned earlier that energy and property lines seem to be the most pressured. I guess, at some point, I don't anticipate that pressure easing off, although there has been talk in the market about the refining aspect of the downstream book and how poorly the results were in 2025 in that area. The hunger seems to still be out there. That being said, I think there's a lot of hunger on the reinsurance side. And in part of the cycle management, it's not just a discipline on the inwards business, but trading in this environment and taking advantage of the opportunities that a soft market provides and leveraging those opportunities against that inwards business, making it attractive and adequate to get involved with. So do I see any sort of short-term let down in the competition? In all honesty, I don't. But we can deal with that. We can manage it. We've managed it on the long-tail lines now for quite a few years. And as I mentioned, on the aviation side as well. But yes, the competition is expected to remain at least in the near term. Rowland Mayor: Yes, that makes sense. And I'm wondering just on the type of insurers you're running into. Is it traditional capital that has always been in the market? Or is it new capital coming in with maybe alternative backing that is creating all the competition right now? Waleed Jabsheh: No, no, no. It's pretty much all traditional. And a lot of it is coming from the larger carriers, both within the short-tail lines, the property and energy lines that we were just talking about as well as the reinsurance lines. I think the market is in a state where it has performed well now for several years in a row, by and large. And the market is sitting on a lot of excess capital that they're potentially pressuring themselves to feed. We don't put ourselves in a position like that. As you know, we've got the buyback program, and we're returning capital via special dividends as well. It's just -- it's all about that discipline and writing the business that makes sense and not putting yourself under pressure to go -- to move with the herd. Rowland Mayor: That's super helpful. And then I did want to talk about the capital. So in the past few years, you've done some M&A to reach into new markets. Is there any opportunity to do that here or multiples just not making sense? Waleed Jabsheh: At this point in time, I would say there's nothing really strong on our radar for any of that. I think you've got to be mindful at the same time of the market that we are in and what that means from a capital management and M&A perspective. We're just focused on our business. We're focused on -- as you know, I mean, if you look at our history, we're pretty much almost entirely a story of organic growth. And that is honestly how we prefer to do it. We're always on the lookout for new opportunities, and I think there are growth opportunities for a company like IGI, both this year and in the years ahead despite the market being tougher. And we're out there fighting hard to find and capitalize on those opportunities. I'm confident we will. But the short answer to your question on the M&A side is nothing solid at the present time. Rowland Mayor: And then I did want to just try to squeeze one more in on the special dividend announcement this morning. Can you just walk through how you decide the size of the dividend versus buyback and your approach to capital management here? Waleed Jabsheh: I mean, by and large, the buyback is something that we're doing throughout the year, right? And a lot of it depends on what ability we have and how much of that we are able to buy. I mean in terms of the special dividend, I mean, when we announced our sort of new at the time capital strategy a few years ago, we said it was basically a focus on the business, underwriting first. Capital position was a lot weaker than what it is, of course, today. But we saw the opportunities at the time in the market. And we said that when we don't see those same opportunities and we don't feel we can feed that capital or need that capital, then we would return it to shareholders. And you started seeing that a couple of years ago from a dividend perspective. Essentially, we want to make sure we are in a comfortable place from a capital adequacy perspective. Obviously, we've got the upgrade from S&P. That's a huge asset for us that needs protection. We always will. But we've had another fantastic year, generating just under $130 million of profit, growing book value. And the business from a top line perspective has not grown. And as a result, the required amount of capital where we stand hasn't increased, yet you've managed to grow the balance sheet in that regard. So we tend to wait until the end of the year, see what the results are like, see what our capital position is like and then assess whether we are in a position to give back to shareholders. And if we are, then the amount that we are able to give back to ensure that our capital position remains strong, protecting all our interests, internal and external. Rowland Mayor: Best of luck in your 25th year. Operator: The next question comes from Michael Phillips from Oppenheimer. Michael Phillips: I apologize if any repeats, I was dropped for about 10 minutes here. So hopefully, no repeats. Congrats on the quarter. I guess, Waleed, I wanted to start with maybe just to what extent on the long-tail line business in the fourth quarter did you feel you had to walk away from business that didn't meet your hurdles more so than maybe you did earlier parts of the year? Waleed Jabsheh: To be totally honest... Michael Phillips: And by the way, let me say this, I apologize. I'm asking not so much on the margins because you -- I think there's lots of confidence in your ability to maintain margins as the soft market maybe continues. But just maybe more so if you consciously walk away, what impact that might have on top line. So if you've already done that, should that continue? Waleed Jabsheh: I mean if there's -- thanks, Mike, for the question. The long-tail business has now been in a downward trajectory for a good 3 years plus now. So a lot of that sort of walking away from business. I mentioned on the call that we're seeing a leveling off in a sense or indications of a leveling off in the softening or in the rate reductions. And hopefully, what we'll see in 2026 is a bottoming out of that. Most of that walking away, we're pretty much done. Now obviously, there's always going to be business here and there that you're going to walk away from. There's going to be new business that comes in. The impact that, that will have on the overall size of the portfolio, I don't think will be material in any shape or form, at least not negatively, once we're done with the PI portfolio that we walked away from. So you're going to continue to see in Q1 and Q2 of this year, the impact of the reduced premiums from the runoff of that portfolio. But we are replacing that with new business. As I said on the call, we've got a good deal flow with good partners, and we're working hard to make those or to get those materialized. So I think once we're done with the runoff of that PI portfolio and the lost income you'll see in Q1 and Q2 of this year, then you'll see a much more stable and potentially positive trajectory for the long-tail portfolio. Michael Phillips: Okay. And then -- I appreciate your comments on the G&A and your opening comments. I guess, some of the pressure on the quarter, obviously, was from the hires that you mentioned and the system build-out. Is that stuff done going forward? Are there any more additional pressure on the dollar amount in the next couple of quarters? Waleed Jabsheh: I would say that there will be, I think, more -- definitely more stability. Now this is a big chunk of our expenses are incurred in pounds, right? So if the pound does strengthen, there's nothing we can do about what that means and not a lot we can do about what that means and translates into dollars. So there are certain things that we've got to keep in mind. Now I think if there's going to be growth from an HR perspective in terms of teams, et cetera, it's going to be more on the underwriting side. If we find new opportunities, bring in new teams to develop new portfolios, build out -- bring in new business, then we will not hesitate to spend the money on that. I mean that being said, on the -- and I tried to address it and explain it in my own way on the call in my commentary. But I know I understand how, obviously, the combined ratio components of the G&A ratio, the acquisition cost ratio and then obviously, the loss ratio all come together, and we look at them individually, and we do very much so ourselves, 100%. The one thing I would say, though, is that as you -- depending on where you are in the market cycle, your strategy of underwriting, both underwriting the inwards business and then buying the reinsurance that you feel provides you with the optimum protection, right, is going to have an impact and distort some of these ratios depending on which stage you are in the cycle. So if you notice, we're -- as I mentioned earlier, for example, now, we're buying a lot more facultative reinsurance, offloading elements of risk and exposure that we're happy to offload. And ultimately, what that does is it impacts your net earned premium numbers. But we're doing that very much knowing that, okay, maybe that may result in a higher expense ratio, right? But if it keeps that loss ratio, most importantly, under wrap or under control and helps to reduce and control that loss ratio, then overall, your combined ratio is still going to be healthy and still going to be good. So it's pulling the different -- taking different actions at different times, pulling the different levers when you see you need to pull them that may distort a couple of numbers. But then overall, when it all comes together, which is the most important thing, when it all comes together, it still looks great. Michael Phillips: No, that's perfect. Last one for me. You mentioned the construction business and infrastructure and data centers around the world. One of the things that I think we're seeing here in the U.S. is some of that stuff has been delayed and impacting some insurance companies' top line business. And I wonder if you've seen that in any parts of your construction business at all? Any concerns there? Waleed Jabsheh: Do you mean delay in starting the projects or delays in completion of the projects? Michael Phillips: Well, both, probably more so on starting, but kind of both. Waleed Jabsheh: Yes. I think -- I mean, a lot of these projects, Mike, are quite chunky. The smallest projects in this area meaningfully is in the low single-digit billion sort of contract values. And we've seen projects upwards of $20 billion, depending on which part of the world we're talking about. And these types of projects always tend to take -- they'll come to the market and they take time to be finalized and completed. And you've got all stakeholders, bankers, financing sign off, and that does take time. We haven't -- I mean -- and so that's natural in our -- in the construction portfolio. What we haven't seen is projects being pulled, which -- so that's the positive sign. So it might take time for them to actually get finalized. But all in all, I mean, this is a big, big -- and you hear everybody talking about. I mean you've seen other carriers go in quite heavily in facilities being set up, et cetera, et cetera, because it's no doubt a big area for everybody going forward. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to management for closing remarks. Waleed Jabsheh: Just want to say thank you to everyone for joining us today, and thanks for your continued support of IGI. As always, any additional questions, please contact Robin. She'll be happy to assist. I wish you all a great day, and we look forward to speaking with you on next quarter's call. Thank you, everybody. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: This is our bankruptcy hold music. Greetings, and welcome to the Gulfport Energy Corporation fourth quarter and full year 2025 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Jessica Antle, Vice President of Investor Relations. Thank you. You may begin. Jessica Antle: Thank you, Melissa, and good morning. Welcome to Gulfport Energy Corporation fourth quarter and full year 2025 earnings conference call. Speakers on today's call include John Reinhart, President and Chief Executive Officer, and Michael Hodges, Executive Vice President and Chief Financial Officer. In addition, Matthew Rucker, Executive Vice President and Chief Operating Officer, will be available for the Q&A portion of today's call. I would like to remind everybody that during this conference call, the participants may make certain forward-looking statements, as actual results and future events could differ materially from those that are indicated in these forward statements due to a variety of factors. Information concerning these factors can be found in the company's filings with the SEC. In addition, we may reference non-GAAP measures. Please refer to our most recent earnings release and our investor presentation for important disclosures regarding such measures, including reconciliations to the most comparable GAAP financial measures. An updated Gulfport presentation was posted yesterday evening to our website in conjunction with the earnings announcement. Please review at your leisure. At this time, I would like to turn the call over to John Reinhart, President and CEO. John Reinhart: Thank you, Jessica, and thank you for joining our call today. I will begin my comments with a discussion of the 2026 development program we announced yesterday with our earnings release, followed by an overview of the 2025 results. Building on our consistent operational execution, successful discretionary acreage acquisition programs, and strong financial performance, our 2026 outlook is centered on prioritizing our most attractive opportunities and allocating capital to maximize value. This year's development program is focused on sustaining the company's exposure to a constructive natural gas environment, and as such, we plan to center the majority of our development efforts in the dry gas and wet gas windows of the Utica. These development areas represent our highest-return wells at today's commodity prices, and we forecast more than 75% of our 2026 turn-in-line program to be weighted to these two areas. As a reminder, the Utica wet gas, which ranks as the most economic development area in the company's portfolio, has been a key focus of our inventory adds over the past few years, and this planned development activity reinforces our success of adding high-quality, high-return inventory that supports near-term development. We remain consistent in our capital allocation framework and continue to believe the most attractive uses of our available free cash flow are discretionary acreage acquisitions, highlighted by today's announcement of the expected successful results of our existing program, and the continued repurchase of our undervalued equity. We expect to maintain an active repurchase program through 2026, and our strong financial position provides maximum flexibility as we intend to utilize both our adjusted free cash flow generation and available capacity on our revolving credit facility to opportunistically repurchase our equity while maintaining an attractive leverage ratio of approximately one times or below. This includes our announced plan to deploy more than $140,000,000 towards repurchases in 2026, reflecting our confidence in the value of our business and the upside we see in our equity today. Total capital spend for the year is projected to be in the range of $400,000,000 to $430,000,000, which includes $35,000,000 to $40,000,000 of maintenance land and seismic investment. Embedded in this program is approximately $15,000,000 targeting base production improvements across both basins, which includes highly accretive workovers aimed at enhancing long-term well performance and reducing natural production declines. In addition, we plan to invest an incremental $10,000,000 in the Marcellus North development area when compared to our 2025 full-year spend, directed at drilling two wells in Jefferson County, Ohio during 2026 and then to be carried as DUCs into 2027. This activity is aimed at confirming phase window and production mix, which will support future development planning and midstream evaluation across our substantial inventory positions in both Jefferson and Belmont Counties. With respect to our maintenance land and seismic investments, this spend includes approximately $5,000,000 directed towards acquiring proprietary 3D seismic in 2026 that will facilitate improved well planning in our targeted Monroe County discretionary buy area. The company currently forecasts approximately 60% of our drilling and completion capital will be deployed in 2026, with the activity trending slightly lower in the third and fourth quarters. We will continue to execute on our current discretionary acreage acquisition program, primarily in Belmont and Monroe Counties. Driven by our recent success, we now expect to achieve the high end of the previously provided range, investing approximately $100,000,000 in total, of which $62,900,000 was deployed at year-end 2025. We plan to conclude this program during 2026, and upon successful completion, we expect to add over two years of core drilling inventory at our current development pace. These acquisitions are being made at approximately $2,000,000 per net location, well below recent valuation metrics implied in larger inorganic transactions in the immediate area, and reinforce the significant value uplift we are capturing through these attractive organic leasing efforts. Since 2022, our targeted discretionary acreage acquisitions, successful execution of new development on our Utica position, and delineation and development efforts in the Marcellus have collectively unlocked substantial value across our core assets. The discretionary acreage acquisition and new development initiatives by the end of 2026 will have added over 5.5 years of high-quality net locations, in addition to the four years of delineated net Marcellus locations. In total, the company will have expanded our growth inventory by more than 40%, and we will continue to monitor opportunities to further expand our resource depth. Turning to production, we forecast our development program will deliver 1.03 to 1.055 billion cubic feet equivalent per day in 2026, relatively flat over our full-year 2025 average. This outlook incorporates several temporary factors, including known production downtime associated with simultaneous operations of an offsetting operator, as well as planned third-party midstream maintenance in 2026. In addition, winter storm Fern created weather-related downtime that modestly impacted full-year volumes and is incorporated in our full-year production guidance. Importantly, these impacts are short-lived, and as we move through 2026, we expect production levels to strengthen as new wells come online and these production impacts abate, positioning the company attractively for an improving commodity environment. Reflecting this momentum, we forecast fourth quarter 2026 production will increase approximately 5% compared to 2025. In our investor deck on Slide 11, we include a more detailed outlook on our expected 2026 capital and production cadence. Shifting to the company's 2025 performance, Gulfport delivered another year of strong operational and financial performance, strategically expanding our high-quality resource base and remaining consistent in our commitment to returning capital to shareholders. After adjusting for free cash flow utilized for discretionary acreage acquisitions, the company returned more than 100% of our adjusted free cash flow to shareholders through common stock repurchases during the year, all while maintaining a solid financial position with leverage below one times year end. Full-year 2025 capital expenditures, excluding discretionary acreage acquisitions, totaled approximately $463,000,000, including $354,000,000 of base operated D&C capital expenditures and $35,000,000 of maintenance land spending, with production for the full year averaging 1.040 billion cubic feet equivalent per day. In the fourth quarter, we completed the drilling and completion of our first U development wells in the Utica. These wells were successfully drilled, fracked, and recently brought online during the first quarter. Early results are encouraging, with the performance tracking in line with expectations and consistent with recent traditionally developed dry gas offsets. In closing, 2025 represented a solid year of execution for Gulfport, with operational performance supporting attractive adjusted free cash flow generation, inventory expansion, and consistent capital return through equity repurchases. As we move into 2026, our story remains the same: our highest-return opportunities deepen our high-quality resource base and grow sustainable free cash flow that can be used to continue delivering meaningful returns to our shareholders. I will now turn the call over to Michael to discuss our financial results. Michael Hodges: Thank you, John, and good morning everyone. I will start this morning by summarizing the key components of our fourth quarter financial results, which highlight the company's strong financial position as we closed out 2025 and began 2026 with considerable momentum that has translated to an excellent start to the year. Net cash provided by operating activities before changes in working capital totaled approximately $222,000,000 in the fourth quarter, more than double our capital expenditures for the quarter. We reported adjusted EBITDA of $235,000,000 and generated $120,000,000 of adjusted free cash flow during the quarter, with this strong cash flow generation supporting our significant common share repurchases and active discretionary acreage acquisition program, all while maintaining the strength of our balance sheet at year-end leverage of 0.9 times. Total cash operating costs for the fourth quarter totaled $1.25 per Mcfe, in line with our full-year 2025 guidance range and supporting our outstanding margins for the quarter. As John mentioned, we continue to prioritize development of our high-return Utica wet gas assets, which resulted in a higher weighting of NGLs in our production mix in late 2025 that we expect to continue into 2026. As a result, we are forecasting a slight increase to our 2026 per-unit LOE and midstream expenses, including gathering, processing, transportation, and compression costs, over the full year of 2025, from the continued development of our high-margin liquids-rich assets. We currently forecast per-unit operating costs to be in the range of $1.23 to $1.34 per Mcfe in 2026, with the top-line value contribution from increased NGL production and our improving gas price differentials, which I will highlight shortly, more than offsetting the slight change in operating costs and ultimately leading to rising cash flows. Our all-in realized price for the fourth quarter was $3.65 per Mcfe, including the impact of cash-settled derivatives, and a $0.10 premium to the NYMEX Henry Hub index price. While we have experienced significant volatility over the past several months, we continue to believe we are entering an exciting period for the natural gas market, supported by LNG export growth and increasing natural gas-fired power generation driven by rising power demand from the build-out of new data centers. These more permanent structural shifts, along with the recent price strength following winter storm Fern, are expected to drive meaningful improvements in our natural gas price realizations going forward. As such, based on our marketing portfolio for our natural gas and current forward markets, we have tightened our forecasted natural gas differential for full-year 2026 by 25% compared to 2025, and we currently forecast to realize $0.15 to $0.30 per Mcf below NYMEX Henry Hub for the full year 2026, further bolstering our free cash flow outlook for 2026. With respect to EBITDA and adjusted free cash flow generation, the rise in expected natural gas prices and our improving outlook for realizations, when combined with our returns-focused capital allocation, position 2026 to provide incremental growth for Gulfport from a cash flow perspective. Based on current strip pricing, we forecast our adjusted free cash flow has the potential to grow significantly when compared to 2025, providing substantial financial optionality and allowing us to allocate additional free cash flow to the most accretive opportunities and further strengthen our already top-tier free cash flow yield relative to our natural gas peers. Turning to the balance sheet, our financial position remains strong, with trailing twelve-month net leverage ending the year at below one time. As of 12/31/2025, our liquidity totaled $806,000,000, comprised of $1,800,000 of cash plus $804,300,000 of borrowing base availability. The strength of our balance sheet and our strong financial position today provide tremendous flexibility, as we are positioned to be opportunistic should situations arise that allow us to capture value for our stakeholders. When coupled with the meaningful growth in our expected free cash flow generation in 2026, we are well positioned to continue our track record of returning capital to shareholders through our equity repurchase program and investing in highly accretive discretionary acreage acquisition opportunities. During the fourth quarter, we repurchased 665,000 shares of common stock for approximately $135,000,000, ahead of our previously announced plans in November and inclusive of a direct repurchase of common stock from our largest shareholder, totaling approximately 46,000 shares, which allowed us to capture a larger block of unrecognized equity value at a discount to market prices without impacting our public float. As of December 31, and since the inception of the program, we have repurchased approximately 7,400,000 shares of common stock, including the preferred redemption in September 2025, at an average share price of $125.19, nearly 35% below our current share price. We believe our consistent and disciplined approach to repurchases has created substantial value for our shareholders, and we will continue to evaluate opportunities where the return profile is clearly compelling. Given our current valuation and the strength of our underlying fundamentals, we see continued share repurchases as an attractive allocation of capital. Accordingly, and despite our normal front-weighted capital cadence, we announced our plan to allocate more than $140,000,000 to repurchases in 2026, to be funded from adjusted free cash flow and available revolver capacity, all while maintaining leverage at or below approximately one times. Assuming successful repurchases during the first quarter, we will have repurchased approximately 7% of our current market capitalization in just the fourth and first quarters alone. In summary, Gulfport exited 2025 with strong operational momentum, a resilient balance sheet, and an asset portfolio that continues to improve in both quality and depth. Our disciplined approach to capital allocation, combined with an increasingly constructive natural gas backdrop, positions us to deliver meaningful adjusted free cash flow growth in 2026. This financial strength provides us significant flexibility to continue returning capital to shareholders and to invest in highly accretive opportunities and enhance long-term shareholder value. With that, I will turn the call back over to the operator to open up the line for questions. Operator: Thank you. We will now open for questions. Our first question comes from the line of Neal Dingmann with William Blair. Please proceed with your question. Neal Dingmann: Good morning, guys. Thanks for the time. Michael, maybe just something on the forecasted improved forecasted price realizations. Is this you just were talking about and was very positive. Are you locking in now some basis hedges? Are you doing other things now to these improved realizations? I guess that is kind of my first point. And then remind me again, make sure I understand what is giving you all the confidence for these improved realizations or these improved price realizations. Michael Hodges: Yes, Neal, thanks for the question. I will hit the first part. Certainly, we are active with our basis hedging program. I think we have got some disclosures out in our release that indicate, yes, we have been doing some basis hedging. I think that has been a part of our program over the last few years, and we have an idea of where we think there is value to capture there and tend to be opportunistic around those moves and certainly have seen some improving opportunities. I think that really leads into the second part of your question, which is what gives us confidence. I mean, it is a few things. Right? I mean, I think we have seen rising demand in those kind of local Northeastern basis markets. I think that is starting to flow through to some of the indexes. So if you think about where some of the most liquid Northeast indexes trade, we have seen those come in, and I am talking about kind of in the out years, we have seen those come in $0.15 or $0.20 over the last 30 to 60 days. I think that is an indication of that rising demand. So that is giving us additional confidence. I think the winter storm that we saw in the first quarter, I think a number of operators realized some benefit from that. I mean, I do think sometimes that we forget that those periods of volatility provide a lot of value when they occur. They are certainly unpredictable, but I think you will see that flowing through into our realizations. And then I think we are always on the lookout for ways to maximize value through our marketing team, and there have been some opportunities to do some smaller deals. I know some of our peers sometimes look for the big wins, but we have had some opportunities to do some smaller deals with some folks that aggregate gas in order to provide supply, and those typically provide an uplift to the index price as well. So I would say it is a combined effort from those things, but we do feel good that going into this year, we should see a meaningful improvement in our realizations. Neal Dingmann: Great. Great details. And then secondly, John, maybe for you or Matt, just question on sort of infrastructure and things you were talking about today. You mentioned, I guess, even again today, some potential downtime and know you have talked about sort of some third-party issues in the past. You know, what could you talk about, I forget that you say today, you will have some near-term production impact and then, you know, again, seems like you guys have been addressing a lot of these internally, things that you have been addressing. You know, so what gives you the confidence that that a lot of these issues will just be near term or, you know, what should we think about sort of those third-party issues? John Reinhart: Yes, Neal. Thanks for the question. I guess first of all, set out, it was discussed in the last quarter how we are going to plan to mitigate this out, you know, these kind of occurrences that have happened. Really, last year was the first initial meaningful one that happened. What I will say is outside of just close coordination with our contractors and vendors, we are really focused on just creating optionality within our development program in various areas in the dry gas areas and the wet gas areas. We cover a lot of ground over these areas, and I think just building in some flexibility with how you develop these wells and how the offset operators are developing, it also helps the midstream partners kind of plan around a flatter type growth profile, more manageable. So how you mitigate it long term is really just create more optionality, and we do that through planning and through our discretionary acreage program. I think overall, whenever we talk about the impacts to 2026, they are short term and they were planned. We forecast those out. We voiced what those generally would be in the first quarter, and that is just generally around midstream downtime maintenance, compression maintenance. It is substantial whenever you think about the duration of five to seven days at a time, and then you have to bring on wells, the volumes are pretty impactful, but it is only for a week or so given a couple of different maintenance items. The winter storm warning in combination with these planned maintenance and SIMOPS downtime, Neal, it is around approximately 10,000,000 cubic feet impact per day for '26. That is built into the budget. So it was a more meaningful impact in, certainly late Q1 and then into early Q2, but that is represented in our slides in our public deck when you look at production cadence. We certainly, as you look out through the year, expect those to abate. And then with additional turn-in-lines, you see a significant improvement in our production phase from Q4 to Q4 of about 5%, which really positions us for 2027 well for winter pricing and what we feel like is going to be a constructive environment. Neal Dingmann: Great details. Thanks, John. John Reinhart: Alright. Thanks a lot, Neal. Operator: Thank you. Our next question comes from the line of Carlos Escalante with Wolfe Research. Please proceed with your question. Carlos Escalante: Hey, good morning, team. Thank you for having me on. I wonder if we could take Neal's question a step further because, obviously, we all realize and commend you for your efforts on improving your differentials year on year. But it has been clear after a few weeks of listening to your peers that there is an overall unwillingness from them to take an improving basis at the back of growing local demand. It seems like most of them are positioning to grow with proactive discretionary capital ready to be deployed. So I was wondering if you can perhaps elaborate on your game plan on that context and maybe, on the basis of do you consider growing at some point in the future? Thank you. Michael Hodges: Yeah. Hey, Carlos. This is Michael. I will take the first part, John can certainly jump in. But I mean, I think it is a good question. Right? I think when we look at pricing and think about the right development cadence for Gulfport, we are thinking about, to your point, not just index pricing, but also differentials. And so the move that I have described this morning on the differential side, it is meaningful for us. On the other hand, I mean, for us to consider significant changes to our development cadence, we would be looking out the curve and probably for a more significant change that would incentivize some kind of growth. So if you look back at our history, we have traditionally been, call it, a flattish, low-single-digits type company that maximizes free cash flow. And I think that played out really well for us. I think that it helps us to kind of be consistent in our messaging, and I think that a lot of our investors like what they get from Gulfport. I think if you saw a structural shift that was, again, longer term and that was more meaningful, maybe you see some index price change beyond just what the strip shows out the curve. I think that is always an option to the company, but I think maybe why you are not hearing that from some other peers is that it has been a pretty subtle change to this point. I do feel bullish about it going forward, but I think we need to see more of that before we would likely adjust our strategy in the future. Carlos Escalante: Thank you. Appreciate the color, Mike. And then for my follow-up, a quick one. Housekeeping item. Can you, perhaps this for you, I think, Matt, give us an update on what you are seeing on the tail end of the type curve for the Hendershot and the Yankee pads? Just wondering how those are developing now a few months out of their first production. And maybe if you can provide any color on if you have seen any kind of similarities in your Northern Marcellus position relative to these. Thank you. Matthew Rucker: Sure. Yeah, Carlos, happy to take that. I think last quarter, we showed kind of the 60-, 90-day plus on those. Obviously, the cumulative plot looked very strong and attractive, and similar to the Hendershots, if not slightly better on initial cume. For us, it is really just confirming the type curve. These are both pads that are on decline. They are in their natural decline state. They mirror kind of the type curve that we built for that area as part of our development planning. And so no significant upside changes, obviously, in a decline environment, but also for us, they are holding in very strong. And so they support the long-term type curve on our well spacing and our development plan for that area. As you think about the Marcellus North, we think it approximates, we think, you know, that acreage is on par, obviously, with our south position and has been delineated by some other operators a little bit further to the north. And so leading into this kind of discretionary area spend this year will really just be, to John's point earlier, more for us to get a better handle on the well liquids mix, which will enable us to then look at our midstream contracts and negotiations where we can then deploy full-scale development there like we did in the South. Carlos Escalante: Terrific. Thank you, guys. Michael Hodges: Thanks, Carlos. Operator: Thank you. Our next question comes from the line of Zach Parham with JPMorgan. Please proceed with your question. Zach Parham: Hi. Thanks for taking my question. You mentioned buying more than $140,000,000 in shares during 1Q. That comes on the back of buying a lot of shares during 4Q. Can you just discuss that decision a little bit more? How did you decide on the amount of stock to buy during 1Q? And could you just comment on how much of that you have bought already quarter to date? Or have you been active in the market? Just trying to get a sense of how aggressive that buyback is going to be over the next month. Michael Hodges: Yeah. Hey, Zach. This is Michael. Happy to dive into that a little bit more. It is a great question. So I think from our perspective, we have been consistent buyers of the equity over a long period of time. I think we do have a bit of, I will call it, a changing cadence in our free cash flow. We have not been formulaic in our repurchase activity. So I think when we got to fourth quarter of last year and then again here in the first quarter of this year, we wanted to give a little bit more color around what our intentions might be, given that first quarter for us sometimes, with our capital cadence, is a little bit less free cash flow. And I think we want people to understand that we are not married to just the back quarter's cash flow and that we are going to be opportunistic when we see the ability to buy the equity at an attractive value. So winding back to last year, we announced that we would target around $125,000,000. We actually were able to do a little bit more than that, which was great. I mean, we saw an opportunity there to surpass that number slightly, and that is why we have done that again this quarter. Again, that is just a way to be a little bit more transparent about our intentions there. As for what we have done so far in the quarter, I will probably defer that question just given that we did not announce that yesterday and it is probably something that we will keep close to the vest. But we do feel really confident that we will succeed with the repurchases that we announced, and as we go forward, we are going to keep the balance sheet really healthy. So certainly, we will continue to monitor what the right way to think about it is and try to be clear when we communicate with the investment community. Zach Parham: Thanks, Michael. My follow-up is just on the production cadence. Based on your updated slides, production is going to bottom in 2Q and then peak in 4Q of 2026. That is a bit of a different trajectory than you have had in the last few years. Could you just talk about that shift and give a little color on how your volumes could trend headed into early 2027, given that you will exit 2026 at the highs for the year? Matthew Rucker: Yes, Zach, this is Matt. I can take that and let Michael and John hop in. That dip in 2Q, you are right, a little bit different than historical. The primary driver there is we have got the four-well Marcellus pad coming online in that quarter as part of our development cadence. And so think about that, that is lower IP on a relative basis than what a dry gas or wet gas would be. And then we kind of pick up towards the back end of 2Q into 3Q with more of our wet gas/dry gas turn-in-lines. That is really what is driving that. It is really the development cadence side of things with our Marcellus. Zach Parham: Any comment on what that can do as you enter into 2027 in the winter? Can you sustain that level of production? Or anything you could add there? Michael Hodges: Yeah. Hey, Zach, I am glad you followed up there because I think it is an important point. I think when you are leaving 2026 with, call it, 5% more production based on our expectations than you had in 2025, I think it sets you up really well for 2027. I mean, obviously, it is a little bit early to comment on, you know, what the well mix will be next year, what, you know, which pads will come on early in the year, later in the year. I think it is to our advantage to be exiting into what is typically a higher-price season with a really strong quarter. So you can see on the slides that we put out, we do think fourth quarter is going to be pretty strong for us. And yes, I think maybe where you are going with that is we feel really good with that momentum that will carry us forward. And then obviously, we will have to come back later with some more details around what 2027 really looks like. Zach Parham: Great. Thanks, Michael. Thanks, Matt. Operator: Thank you. Our next question comes from the line of Noah Hungness with Bank of America. Please proceed with your question. Noah Hungness: Good morning. For my first question here, you guys are increasing your drill lateral lengths this year to 16,900 feet from last year that was 13,500 feet. That is a pretty significant increase. Could you maybe talk about what is driving that and what that means for D&C efficiencies and costs? And then how can we think about average lateral length development in future years? Matthew Rucker: Yes, sure. Noah, this is Matt. You are right, yes, an increase year over year around that. I think primarily speaking, as we think about lateral lengths, for us, we try to optimize in that 15,000- to 18,000-foot lateral length as we plan out future development in areas where we have more of a blank canvas. As you know, Ohio starts to get more developed. We have existing PDP wellbores in and around us, and so a little bit of the decrease last year, the lower lateral lengths, was just in regards to the land position and some of the wells that we drilled in and around existing areas. Again, really highly economic wells, a little bit shorter in lateral. This year, we are getting into some more of our discretionary acreage programs in the wet gas area that kind of gives us that runway to optimize development. So we have got some longer lateral lengths in the program to be more efficient on the D&C side on a dollar per foot and realize those gains. So I think for us that 15,000 to 18,000 is a good spot to be. In some cases, may be longer than that. We have certainly drilled 20,000-footers and a little past, and sometimes we may be shorter just depending on the land position down in that 12,000-foot range. So really a mixed bag there from last year, a little bit more on the longer side this year, but that 15,000- to 18,000-foot range is kind of where we target now. Noah Hungness: Great, thanks. And then for my second question here is just on the reserves. Your guys’ year-end proved reserves PV-10 that you give the pricing sensitivity as well, it seems to be up year over year from 2025 versus 2024. Could you maybe talk about some of the moving parts there and what is driving the PV-10 increase? Michael Hodges: Yeah. Hey, Noah. It is a good question. So, I mean, if you think about the way the reserves are put together, you have got a component of PDP and some PUDs as well. And so as we are out converting PUDs into PDP and, you know, spending the capital to do that, you are certainly removing that cost out of the reserve base and converting those PUDs into PDP. So you will see that you have added value there even at the same deck, as you pointed out, just because of that conversion. So there are always other inputs in there, and keep in mind that is an SEC reserve base. We certainly have reserves that go well beyond that five-year rule that the SEC limits you to. But I think you picked up on something important there, that we are adding value, we feel like, year over year even at a consistent price deck. So I appreciate you pointing that out. Noah Hungness: Well, I guess also the question is, you know, it seems like your PDP number is increasing even though your production year over year here is flat. Does that mean that you are turning in line more productive wells than were turned in line before? Michael Hodges: Yeah. I think that you can read through to that. I mean, as you convert wells, you produce some of the reserves, you are certainly converting more reserves than just what you are producing. So that PDP volume does go up as you convert wells from PUD to PDP. But yes, I think to your point, we are, you know, continuing to improve with what we are developing. And I think you are seeing that flow through to the numbers. Noah Hungness: Great stuff, guys. Thanks. Operator: Our next question comes from the line of Peyton Dorne with UBS. Please proceed with your question. Peyton Dorne: Hey, good morning, everybody. Thanks for having me on. On the operating side, it looked like you had made some pretty solid gains on your drilling efficiency. If you could just maybe touch on what some of the drivers of those gains were. On the completion side, it looked like maybe 2025 took a slight step back. Are there any changes you have in store for 2026 to maybe get that metric back up a bit? Matthew Rucker: Yeah, sure, Peyton. On the drilling side, we continue to get incrementally better, to your point. I think where we made the most progress in 2025 was more on our top-hole drilling efficiencies and some slight improvement on our curve and lateral. So the team was able to shave down really a couple of days per well on our top-hole design, and then some incremental gains on just curve and lateral, higher ROPs on the wells we drilled. So great job by the team there on delivering and continuing to find ways to eke out some more days of reduction. On the frac side, we did have a dip this year, a lot of things playing into that for us. I think just to keep in mind, we averaged around 18 hours pumping per day, which is pretty impressive and, quite frankly, comparable to a lot of the best peers we have in the basin. The year prior, we were averaging 21 hours a day, and that was an incrementally great year for the company and a really hard bar to consistently achieve, I would tell you. But we are always striving to get there and maintain. So a little bit in the last year, started the year a little bit slow with a drought in Ohio that caused some water sourcing issues for us, kind of the first quarter and the second quarter. That was relative to everybody in the basin as well. And then throughout the year, utilizing more spot crew work, got off to a little bit of a slow start on some spot crews to help kind of keep our production cadence in line and take advantage of the short cycle time opportunities that we saw in our development program last year. So this year, we expect that to be at or above that 18 hours, and the team is already off to a good start in achieving that. Peyton Dorne: Great. Appreciate all that color. Then I just wonder if you could touch on some of that base improvement spending that you have budgeted for 2026. I know it is a smaller amount of CapEx, but I wonder just how this was different from normal workover spending and kind of how you see the base decline rate shaping up for Gulfport in 2026? Thank you. Matthew Rucker: Yes. So on the workover side, good point. We did start that program last year. So not as much, kind of more in the back end of the year. As a company, we have seen the opportunity set here just with increasing commodity prices to take advantage of really strong near-term economic attractiveness. And so identifying those with the production teams, the operations teams, to then go deploy that capital for the incremental flattening of the base production is a huge win for us. These projects are targeting kind of less than twelve months payout, if you can think about that. So they are really highly economic. They do help us support the base decline and increase that over time, which inevitably kind of flows through our flat to then kind of quarter-over-quarter exit growth throughout the year. And so it is a good program for us. It is $15,000,000 in the total year, so not crazy high, but incrementally has been more than 2025, and we will look to continue to find more of those projects kind of throughout 2026 and into 2027. Peyton Dorne: Great. Thank you very much. Operator: Thank you. Our next question comes from the line of Nicholas Pope with Roth Capital Partners. Please proceed with your question. Nicholas Pope: Good morning, everyone. John Reinhart: Good morning. Good morning. Nicholas Pope: Hoping you could talk a little bit on the acreage acquisitions. I think the discretionary acreage acquisitions, the program that was put in place, $100,000,000, the big push to kind of build inventory there. You know, it sounds like the expectation is that is going to run through first quarter. And as you complete kind of this portion of the program, curious how you are thinking about acreage going forward and kind of what Gulfport is thinking about, kind of the lay of the land and the potential of kind of re-upping a program or continuing acreage acquisitions beyond kind of 1Q once you kind of finish this big push? John Reinhart: Yes. So Nick, appreciate the question. I think this is a part of the program over the past three years we are really, really proud of. I mean, we have seen a substantial growth in our inventory, up 40% gross locations since 2023. This has been a mainstay every year because just inventory improvements, having a durable runway that we can call on, has a lot of optionality. But even what is more important outside of the 4.5 years of discretionary picks up, this is really high-quality acreage. And the fact that we are drilling in this wet gas area that we just bought a few years ago, this is our third pad this year. So it is very good to add that inventory, but just the low breakeven, high quality, we are picking it up in bulk where we can go out and develop and drill, and we can do it very quickly. And so this is a really high-value use of our free cash flow. So we really like it. So leading into that, we have had a lot of success with this program that has ended up in Q1. Clearly, we have a lot of confidence that that number is going to hit at the high end. Again, this is a continuation in Belmont and Monroe of just really good quality acreage. As we complete this program and look forward, I will tell you that we view this as a very favorable, again, investment for the company. So we are not certainly ready to guide to that, but I will tell you that as the land team is up in Q1, when we get line of sight on what is next in that particular realm for spend, we will come to the market, kind of roll it out. But we like the spend, we think the investors like it, and we like the optionality that the inventory brings, and especially inventory that we can jump on really quick from a development standpoint. So appreciate the question. Nicholas Pope: I appreciate it. That is great. Shifting a little bit towards the north. You highlighted that, you know, there is some data collection that you all are going to be working on kind of ahead of, you know, anticipated second half kind of drilling further north in the Marcellus. Just I would love to hear which, I guess, kind of what data is needed, where maybe you guys are, and I guess kind of what information is already kind of in hand as you kind of move and try to kind of de-risk some of that potential further up north in your acreage position. Matthew Rucker: Sure. Yeah. If you are talking about the Marcellus North, we will be drilling those wells. There will be some science collected during that process with some sidewall cores and some logging and some tests. Really, that is just geared around us ensuring that we have all the data necessary for us to properly design our fracs. We do not anticipate it being much different than the Southern Marcellus, but while we are there and have the opportunity, it is a cheap way to gather that data and make sure we are looking at it the right way as we go to complete those wells and kind of the ’27. So that is really the work that is going on there. Data that we have taken before, but more in our southern core area, and just an opportunity here to take some more while we are drilling this year in the Marcellus North. John Reinhart: Yes, Nick, I will add on to that too. This drilling is not a delineation effort. I mean, there are a lot of wells just to the east of us across the state. There are wells to the north, and we have got our own development down, you know, down in that Belmont and, you know, the southern area, what we call Southern Monroe. So for us, this is not a delineation effort. But what we do want to do before we go wholesale development is really get a handle on the production mix, a little bit more data on the production profile, what it might look like, what the pressures look like. So we will be blending this first pad into a dry gas line to be able to assess that. And that really helps us design and come up with our plans with regards to midstream infrastructure, processing agreements, what we need, what kind of capacity we need. So I would think about it more as a production mix test and less so as a delineation effort because we have all the confidence in the world that 50 wells, that is real. And we just need to set it up for full development. So this is the first step in that process. Nicholas Pope: Got it. That is very helpful. I appreciate it. Michael Hodges: Thanks, guys. Yep. Operator: Ladies and gentlemen, that concludes our question and answer session. I will turn the floor back to Mr. Reinhart for any final comments. John Reinhart: Thank you for taking the time to join our call today. Should you have any questions, please do not hesitate to reach out to our Investor Relations team. Have a great day. Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Thank you for standing by. You are on hold for the Blackstone Secured Lending Fund Fourth Quarter and Full Year 2025 Investor Call. At this time, we are gathering additional participants and should be underway shortly. We appreciate your patience and ask that you continue to hold. Good day, and welcome to the Blackstone Secured Lending Fund Fourth Quarter and Full Year 2025 Investor Call. Today’s conference is being recorded. For operator assistance, please press 0. If you would like to ask a question, please signal by pressing 1. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. At this time, I would like to turn the call over to Stacy Wang, Head of Stakeholder Relations. Please go ahead. Stacy Wang: Thank you, Katie. Good morning, and welcome to Blackstone Secured Lending Fund’s fourth quarter and full year results conference call. Joining me today are Brad Marshall, Co-Chief Executive Officer, and Teddy Desloge, Chief Financial Officer, along with other members of the management team available for Q&A, including Jonathan Bock, Co-Chief Executive Officer, and Carlos Whitaker, President. Earlier today, we issued a press release with the presentation of our results and filed our 10-Ks, both of which are available on the shareholder resource section of our website, www.bxsl.com. We will be referring to that presentation throughout today’s call. I would like to remind you that this call may include forward-looking statements, which are uncertain and outside of the firm’s control and may differ materially from actual results. We do not undertake any duty to update these statements. For some of the risks that could affect results, please see the risk section of our Form 10-K filed earlier today. This audiocast is copyright material of Blackstone and may not be duplicated without consent. With that, I will turn the call over to Brad Marshall. Brad Marshall: Thank you, and good morning, everyone. Before highlighting the results from the quarter, and some key observations, I would like to take a moment to share our macroeconomic views heading into 2026. Stepping back to the broader macro environment, despite periods of volatility over the past year, including tariff uncertainty, geopolitical instability, and elevated headline risk, we continue to see a fundamentally healthy economic backdrop. Overall, earnings growth has remained resilient, the consumer continues to demonstrate strength, and fiscal and monetary conditions remain supportive. Together, these factors are contributing to sustained economic momentum. A key driver of that momentum is the ongoing technology and AI-driven investment cycle, which I will provide more details on shortly. We believe we are in the early stages of the significant capital expenditure buildout focused on AI, digital infrastructure, and related technologies, providing a durable support to growth across multiple sectors. Particularly when you couple that with encouraging signs on inflation, we believe this macro and investment backdrop has translated into robust capital inflows into Blackstone’s private credit strategies over 2025, and particularly strong demand from the institutional channel most recently. We are coming off one of our most active quarters of investing for BXSL, and have over $5,040,000,000,000 of dry powder to invest in direct lending into a market that, in our view, remains highly receptive to direct private credit solutions. Looking ahead, we believe this combination of a constructive macro environment, improving credit fundamentals, and a defensive first-lien orientation positions the BXSL portfolio well from a performance and investing standpoint. On earnings, BXSL reported another strong quarter with our net investment income, or NII, of $0.80 per share, representing an 11.8% annualized return on equity made up overwhelmingly of interest income rather than income from PIK or dividends. Our distribution of $0.77 per share was 104% covered by our net investment income per share and represents an 11.4% annualized distribution yield on NAV. BXSL delivered a 9.6% net return for the year, outperforming the leveraged loan market by 360 basis points with an 11.2% annualized return since inception seven years ago. BXSL at the outset was designed to have a lower cost structure so that it could focus on what we believe is a higher-quality portfolio, and you are seeing that durability reflected in quarterly performance. A few core topics I will discuss from the quarter include a busy quarter of deployment, recent headlines around private credit, and related concerns around software companies and the impact that AI may have on them. On deployment, the fourth quarter was our second most active quarter of funding since 2021. We increased our overall portfolio to 316 companies, including 40 industries, funding 13 new credits, which had an average LTV at underwrite of 41% and an average spread near 500 basis points, and completed 15 add-ons to incumbent names. Some of the larger fundings during the quarter were to AmTrust, an insurance managing general agent focused on specialty programs, MannKind, a public biopharma business, IEM, an electrical equipment manufacturer supplying data centers, and Sabre Power, an engineering firm that is a provider of electrical infrastructure services. BXSL led all four of these senior secured transactions and was the sole lender in three of them. Additionally, another large investment during the quarter that BXSL co-led was for a digital aviation solutions business called Jefferson, sold by Boeing for $10,500,000,000. We believe this company has a dominant market position, is performing exceptionally well post-close, and is categorized by BXSL as being well positioned from AI risk given its deep entrenchment in the aerospace industry and high cost of failure. These deals highlight how we are investing around some of our core themes at Blackstone, including life science and AI infrastructure. Despite positive trends in deal activity as outlined during last quarter’s call as well, external narratives around bubbles in the credit market continue to percolate in the news. What we are seeing on the ground and across the over 300 credits we are invested in in BXSL is broadly inconsistent with this. In fact, if you look at the top 90% of our names in the portfolio, these companies are growing EBITDA at 9% over the past twelve months, have interest coverage over two times, and have an average mark of 99. This is consistent with my comments earlier about a healthy economic backdrop and the benefits of lower interest expenses for our portfolio companies. Meanwhile, there has been significant external focus on AI’s impact on the overall economy and on software companies specifically. It is helpful as a starting point to highlight that Blackstone has been at the forefront of AI and its impact for many years, with its deep technology vertical supporting and informing investment activity across the broader platform. This is one of the big advantages of being part of the world’s largest alternative asset manager and has helped drive our focus on deeply embedded high-retention businesses. Blackstone sees the AI revolution creating generational opportunities, and we want to stay ahead of this as leaders in the space. We receive real-time insights through our firmwide resources and use that to make us better investors. Additionally, Blackstone is one of the largest investors in the entire AI ecosystem, including the infrastructure around it, as the largest owner of data centers globally. Leaders across the firm focused on AI are in active dialogue with the AI market leaders such as OpenAI, Anthropic, Google, Meta, and others. These relationships help inform our perspective on where the industry is headed, and we believe that BXSL, with the help of the broader Blackstone platform, has an incredibly well-informed view on AI. It is also important to understand that you cannot paint software with a broad brush. There are sub-verticals of software with proprietary systems, huge data lakes, and incumbent long-term customer relationships that may be more protected or see tailwinds from AI adoption, while other areas will be more at risk of displacement. BXSL has typically avoided the less differentiated business models. Sub-verticals that we believe are likely to be protected are vertical software, ERP, data infrastructure, data management, and security. These account for the majority of BXSL’s software exposure where we have seen 40% EBITDA growth since underwrite, and today, these businesses generate over two times interest coverage. Importantly, the public market is differentiating in a similar way. While software valuations have compressed from 18x NTM EBITDA last September to 14x today, these sub-verticals that I mentioned earlier continue to trade in the 15x to 20x EBITDA range, implying well over two times enterprise value coverage of BXSL’s first-lien exposure. We also put significant value on partnering with larger companies, with sophisticated ownership and forward-leaning management teams to drive adoption of AI technology. As a reminder, 99% of our portfolio companies are private equity owned or large public companies with market caps exceeding $5,000,000,000. On Medallia, a name that we have discussed in previous quarters, we continue to mark the asset now at 77.75, which implies over a 70% reduction to its setup enterprise value due to a slower-than-expected turnaround. For background, BXSL led a first-lien term loan through 26% LTV at underwrite, supporting the $6,400,000,000 take-private acquisition of Medallia by the current sponsor, Thoma Bravo, who together with its co-investors have funded over $5,000,000,000 in cash equity for this deal today. The company has been underperforming not because of anything related to AI, but due to what we believe to be execution-driven issues, particularly in its go-to-market function. Early last year, Thoma Bravo installed a new leadership team, and they are working through a turnaround plan. We also expect there to be discussions around the capital structure. If I zoom in on the rest of the bottom 10% of performers in the portfolio, a common thread is operational challenges rather than any secular concerns. As such, these companies have been marked lower to an average mark of 82. On average, these companies have been modestly down from an EBITDA growth perspective since underwrite, and were set up at underwrite with an average 42% LTV. The good news with these names is that over half of them have seen further equity and junior capital commitments by the sponsor, or are experiencing improving performance overall. In fact, we saw the watch list decline this quarter compared to last quarter as a result of some of these trends. However, to provide some illustrative framing, if you take this bottom 10%, and just punitively assume the companies all defaulted—which, again, we do not, underscore, do not expect to see this happen—and BXSL recovers 65% over the next four years, in line with long-term recovery of first-lien public loans, and based on where they are marked today, this would only impact the equity by approximately 100 basis points per year. I state these numbers just to reinforce what I mentioned earlier. BXSL’s model was designed to be defensive by focusing on first lien larger private equity owned businesses across a portfolio with diversified industries. In reality, underperforming companies can recover. Just this quarter, for example, SelectQuote, Colony, and Alliance Ground were three underperformers and at their lows had a weighted average mark of 93. All have been paid or expected to repay this quarter at par, generating nearly $100,000,000 of liquidity. So putting it all together, we are encouraged by deal activity from the quarter as improved portfolio turnover and funding efficiency, which in turn should support ongoing earnings, and we remain very comfortable with the overall portfolio mix and positioning. We have seen similar market dislocations before, including during COVID, and even following the post-tariff news this time last year. And in periods like this, our focus is on providing as much transparency and clear facts as possible to help investors look through the headlines and assess the facts on the ground. For context, this is my twenty-first year of Blackstone’s credit business. Across multiple cycles and periods of volatility, BXSL has invested over $155,000,000,000 in our North American direct lending strategy with an annualized loss rate of less than 10 basis points. This is a result of focusing on investing defensively, as I just mentioned. But equally important is leveraging the advantage of Blackstone’s scale and expertise, all of which we believe will continue to support excellent long-term results for our investors. With that, I will turn it over to Teddy. Teddy Desloge: Thanks, Brad. I will cover BXSL’s performance, portfolio fundamentals, and liability profile for the fourth quarter. First, on performance, BXSL’s net investment income for the quarter was $186,000,000, or $0.80 per share, representing 104% coverage to our dividend on a per-share basis. Year-over-year fourth quarter total investment income was up over $5,000,000, or 1.5%, and interest income excluding payment-in-kind, fees, and dividends represented over 91% of our total investment income in the quarter. BXSL continued to out-earn its dividend in the fourth quarter with a predominantly first-lien portfolio and among the lowest operating and financing costs across our traded BDC peers compared to Q3 data. We will continue to assess our dividend with our Board as we do every quarter as lower base rates flow through our portfolio. As previewed on last quarter’s call, we experienced increased repayment activity in the fourth quarter, and with accelerating M&A and deal activity as Brad outlined earlier, we are expecting similar levels of turnover in the upcoming quarters. Moving to the balance sheet, we ended the quarter with over $14,200,000,000 total portfolio investments at fair value, $8,100,000,000 of outstanding debt, and $6,200,000,000 of total net assets. Net asset value per share at quarter end was $26.92, down from $27.15 in the third quarter, which was primarily impacted by $0.27 of net unrealized losses in the portfolio, partially offset by $0.01 of net unrealized gains and $0.03 of excess net investment income generated to our dividend. As Brad highlighted, we saw healthy fundamentals on average across our portfolio companies, demonstrated by high-single-digit percentage EBITDA growth, and stabilizing interest coverage ratios at two turns as rate resets are improving cash flow profiles of our borrowers. Non-accruals in the fourth quarter were just 0.6% at cost and 0.5% at fair market value, up from 0.3% at cost and 0.2% at fair market value in the fourth quarter of last year, as two smaller positions were added this quarter. Further, our Q4 amendment activity by issuer was down over 25% compared to the third quarter, with over 85% of amendments associated with add-ons, M&A, DDTL extensions, or immaterial technical matters. Only four issuers experienced material amendments, accounting for 0.8% of the portfolio by fair market value. Turning to activity, BXSL funded $1,000,000,000 for the second consecutive quarter, and committed over $900,000,000. Net funded investment activity was $400,000,000 after $629,000,000 of repayments and sales, up nearly 45% quarter over quarter. This represented an annualized repayment rate of 15% of the portfolio at fair value, up from 13% for the prior quarter and 6% for the same quarter in the prior year. As we sit here today, we are tracking over $550,000,000 of potential repayments for the first six months of the year, which could create additional balance sheet capacity if they materialize. Importantly, BXSL’s Board of Directors approved a discretionary share repurchase plan under which BXSL may repurchase up to $250,000,000 in the aggregate of its outstanding common shares in the open market at below its net asset value per share. As we see repayment activity create additional capacity, we will continuously evaluate capital allocation decisions between new opportunities and buying back shares. Our liability profile remains diverse across multiple financing markets, including $10,500,000,000 and $8,100,000,000 of committed and funded debt, respectively, as of the fourth quarter. This includes $2,400,000,000 committed to our corporate revolving credit facility, priced at SOFR plus 153 at its tightest levels, which we believe is the lowest-priced revolver across the traded peer set. We also have $2,700,000,000 committed to our asset-based facilities with multiple banks, which had a weighted average drawn spread of SOFR plus 187, down 23 basis points since Q4 2024, in addition to over $450,000,000 of CLO debt outstanding priced at SOFR plus 154. Lastly, we have nearly $5,000,000,000 of unsecured bonds outstanding as of the fourth quarter, $2,800,000,000 of which are not swapped and have an average coupon of 2.88%. This includes a $500,000,000 five-year bond we issued in October, priced at 155 basis points above the benchmark Treasury rate, or a 5.125% coupon, which was subsequently swapped at SOFR plus 166. In 2025, BXSL had the tightest public bond spread issuance amongst its traded BDC peers, and taking this all together, our all-in cost of debt for the fourth quarter was 4.93%, down from 5.24% in 2024. Total liquidity at the end of the fourth quarter was $2,500,000,000, including unrestricted cash and undrawn debt available to borrow, while ending leverage as of December 31 was 1.3 turns on a gross basis and 1.25 turns on a net basis, net of cash. Our balance sheet strength, portfolio composition, and long-term operating history all help support BXSL in achieving ratings among the top three when compared to our traded BDC peers, with a Baa2 and stable outlook by Moody’s, BBB- and positive outlook by S&P, and BBB and stable outlook by Fitch. With that, I will ask the operator to open it up for questions. Thank you. Operator: Thank you. To allow as many callers to join the queue as possible, we will take our first question from Finian Patrick O’Shea with Wells Fargo Securities. We will now open for questions. Brad Marshall: Hey, everyone. Good morning. Finian Patrick O’Shea: First question, big picture, we are looking at the potential scenario where the non-traded channel slows, I know you have your share of institutional capital, but that is, you know, perhaps less so than some of the other great houses of direct lending. So how do you how do we think about the impact where, for example, you have often talked about the importance of check size, larger companies, and so forth. Should we think about should we see it as a risk that you might have to go back down market on on new origination? In the event there are non-traded headwinds. Thanks. Brad Marshall: Thanks, Fan. Thanks for the question. Maybe just as a starting point, to frame the market. So the U.S. leveraged finance market is about a $5,000,000,000,000 market. You look at high yield, it is about $1,500,000,000,000. And if you look at leveraged loans, about $1,400,000,000,000. Private credit in the institutional non-BDC channel is actually about $1,500,000,000,000. The non-traded BDCs are about $275,000,000,000 and traded BDCs are about $235,000,000,000. So it remains very much, as you point out, an institutional-driven market. And and why? Because institutions see the asset class, I think, similar to how you view it, which is it is very defensive. We are driving a premium to what you can get in the public markets. And that is really important. If you look at kind of our business more broadly to to answer your question, our credit business is $520,000,000,000. We are in every crevice of the the credit market. We are invested in, I think you have heard us mention this before, 5,000 companies around the world, which gives us incredible insights into going on with what is going on in the world and helps back up some of our investment themes. So our business is broad and deep, in every channel. If I look at kind of corporate lending, specifically non-investment grade, we have about $40,000,000,000 of dry powder. So I expect us to remain fairly active in the remainder of 2026, similar to kind of how active we were in 2025, which was our busiest investment quarter since 2021. So our business will remain active. We have lots of pools of capital to draw from, and it really comes back down to performance. And I think that will continue to attract capital in this space to the managers that are performing well. Finian Patrick O’Shea: Great. Appreciate that. And I will on another sort of hypothetical, but also front and center question. You are a little below book. Still better than most. But we might be here for a little while. In that case, does it make sense to sit on spillover or should we expect you to revisit that in a potential special? Thanks. Brad Marshall: Great. Thanks, Fan. And I appreciate you actually pointing that out. We do have spillover income as a result of us out-earning our dividend over time, and and we have taken those over-earnings and invested it back into new loans to drive income for our investors. I think as maybe answer the question a little bit differently, as we get new cash proceeds into BXSL, either because of income or repayments—we mentioned we have a series of repayments coming over the next two quarters—we have options. We can reinvest in new loans. We can buy back, as you point out, discounted shares. We can delever. Those would be the the core kind of options. And and you are right. We could pay a a supplemental dividend. But as you know, our dividend at 11.4% being the very high end of the market. So our focus has been on these other options at this point. But of course, appreciate you highlighting the fact that we are in this enviable position of having out-earned the dividend. And I also appreciate the point that we are in an unusual time where we are trading below book. So we need to consider all these options. But at the end of the day, it is a discussion on how do we want to best use our cash on hand to deliver attractive options for our investors, and all options are on the table. Operator: We will take our next question from Robert James Dodd with Raymond James. Robert James Dodd: Hi, guys. On kind of related somewhat to Finn’s question, when when we look at the the the grand scheme of things, flows in the the BDC perpetuals, in my view, or the the private market, are not that significant to affecting pricing and spreads. Right? To your point, it is a $5,000,000,000,000 market and all the BDCs together have half a trillion. What do you think the potential is if flows do deteriorate across the whole market for for retail fundraising? What do you think the potential is that is actually going to have a discernible impact on spreads in the market? I mean, CLO formation still looks pretty healthy. A lot of the other areas of the market still look pretty healthy. The retail flows seem to be quite a small part of that. Is there any any reason why that would actually influence pricing out in the marketplace? Brad Marshall: I think it is a little early to tell, Robert. It is a good question. And I appreciate you highlighting the the liquid market, because they remain actually quite strong. I think 66% of the the liquid market is trading 99% or above. Spreads remain, you know, fairly tight in in the liquid markets. And so the the credit markets generally, again, despite what we read in the headlines, are actually pretty healthy. There is capital available. And and and as I mentioned, if you just look at our platform with, you know, $40,000,000,000 of dry powder, we will remain active in this market. And the overall credit quality of the deals that we are seeing, the credit quality of the deals that we are in, are not suggesting that spreads should widen at this point. So we will continue to watch the market evolve. But right now, things feel pretty stable. Robert James Dodd: Got it. Got it. Thank you. If I can kind of put that to, like, software, and I appreciate all the detail you you you gave and and and the framework to think about it. On, I mean, do you expect if if I was going to say, you know, three years from now, do you think the software mix in your portfolio would be higher or lower than it currently is or stable? I mean, do you is it there is more potentially uncertainty? I mean, obviously, the different business models, etcetera. But would would you are you looking to, you know, maybe not participate in the next time something gets refinanced, or would you prefer to shrink that exposure or keep keep it where it is? We will go it. Wow. Brad Marshall: The the three-year crystal ball, I I do not have, Robert. But what what what I would say is we are seeing very good investment opportunities in the infrastructure around AI. And you saw that in the fourth quarter. We made an investment in IEM. We made an investment in Sabre Power. And so that is definitely on theme for us. The picks and shovels kind of around this AI buildout, which I mentioned in our prepared comments, you could see us continue to to lean into those themes and those opportunities because we think they have very good tailwinds. Robert James Dodd: Got it. Thank you. Operator: Thank you, Robert. Thank you. We will take our next question from Arren Saul Cyganovich with Truist Securities. Brad Marshall: Thanks. Good morning. Arren Saul Cyganovich: Maybe you could just talk a little bit about what the sponsor conversations have been like over the last few weeks. You know, clearly, the public markets are are are very trigger happy. What what are the sponsors thinking, you know, given that this was supposed to be a big, you know, capital markets year in in in kind of reviving, you know, IPOs, etcetera. You know, maybe just your thoughts on on those conversations. Brad Marshall: It is a little bit like last year when the tariff noise came out, and there was a lot of volatility and uncertainty. Sponsors are kind of watching the markets and trying to see where they settle out before they, you know, bring assets to to market. So I I think like us, they are not terribly terribly disrupted, but they are, you know, holding back right now, bringing some of these assets to market. And but I I do expect for all the reasons we mentioned earlier, it will remain a fairly active year this year, because you do see growth in the economy. You do have lower cost of capital, which is positive for M&A activity. So all those tailwinds still exist. And we just need to work through a period of of heightened uncertainty and volatility, largely around the software space. Arren Saul Cyganovich: Got it. That is helpful. Thanks. And then, there is a follow-up on, we have seen a a couple of BDCs make some asset sales recently. One of them had already said they were going to do this last quarter, so it was not necessarily a surprise. Do you have a view on that? You know, you are you are trading below book, but not dramatically below book. Is there any benefit to selling assets at fair value and, you know, putting that back into the stock? Brad Marshall: So what I would say to that is is we are definitively long-term holders of assets. And we also have $2,500,000,000 of liquidity. Like we mentioned on the call, we have $550,000,000 of near-term repayments. I suspect there is another $1,000,000,000 or $2,000,000,000 that will occur over the balance of the year. So the the fund itself, you know, naturally generates liquidity because of the term nature of the investments that we make. And with those proceeds, we will look at all the options that I mentioned in answering Finn’s question, which is we will look at buybacks. We have approval to do that. We will look at new loans that that come through our system. We may look to to delever. So all those options will be on the table. And it is probably worth just just hitting on this turnover and and repayment dynamic, which actually can be quite positive for BDCs and BXSL in particular. I mentioned three assets that that will be repaid this quarter. You know, those assets were had been marked down to to 93 at their low, and now they are getting refinanced at at par. So that sort of activity, as we get those repayments, will be positive to on those underperforming assets to pull NAV up. And it will be positive to generate liquidity if which we can use to do one of many things, as I as I just highlighted. So lots of, you know, different, you know, options on the table for us. Operator: Thank you. We will take our next question from Kenneth Lee with RBC Capital Markets. Kenneth Lee: Hey, good morning. Thanks for taking my question. I think previously you talked about operating leverage perhaps closer to the higher end of the target range there. Given the potential opportunities to deploy into as well as the share repurchase, maybe just give us some thoughts about where leverage, you know, where could you could trend over the near term, where you are looking to operate near? Thanks. Teddy Desloge: Yeah. Thanks, Ken. This is Teddy. I am happy to take that. So just starting with the facts, as highlighted, 1.3x gross ending leverage, 1.27x average, 1.25x on a net basis. As Brad mentioned, we did have a very active end of the year. It was our second most active quarter on gross originations since 2021. We did have some deals, deal processes accelerated toward the end of the year. So we ended at slightly above the 1.25x range. We also do have $2,500,000,000 of immediate liquidity, $550,000,000 of repayments near term. So so really taking that altogether, Ken, no change. Long-term target remains 1.25x. Would expect to be able to manage near the high end of that range in the near term. Kenneth Lee: Gotcha. Very helpful there. And just one follow-up, if I may, and this is just on the the software book here, and really appreciate the the additional details and and color around there. How do you think about specifically recovery rates for software companies just given lack of tangible assets? How do you get confidence around the valuations and all sorts around that? Thanks. Brad Marshall: Yeah. I can I can take that. I think we when we look at our software business, businesses, we look at kind of how they are performing as a starting point. And and they are performing actually, they are the best performing part of our our our business. No doubt, the public market has rerated software companies. As I said in our remarks, even in that instance, you take the 25% kind of markdown or rerating of of public company software businesses and we are still two times covered. So we feel very good about our coverage on our software business. We do have a small subset, less than 5% of the portfolio, of assets that we think are more impacted by AI and and some operational challenges. Those are a little bit harder to pinpoint from a value standpoint. But they are set up with a lot of equity in the business, and and we suspect the sponsors will continue to support them. Kenneth Lee: Gotcha. Very helpful there. Thanks again. Operator: Thank you. We will take our next question from Douglas Harter with UBS. Brad Marshall: Thanks. Douglas Harter: You mentioned weighing the share repurchase, obviously, with the new authorization. Can you just walk through the thought process, how you will evaluate that? You know, and kind of how we should think about actually using that versus kind of having it there for, you know, kind of in case further declines. Teddy Desloge: Yeah. Doug, this is Teddy. I am I am happy to take that. I think the short answer is we are going to watch it and be very opportunistic. We do have $250,000,000 approved by the Board. We also have turnover increasing in the portfolio, as Brad mentioned. Historically, below a 10% discount to NAV can be quite accretive for buybacks. We have done this previously post-IPO. Announced a $250,000,000 repurchase that got done in 2022, and then we announced another plan in 2023. So we will be opportunistic with it. We will watch it. It will be a capital allocation decision between, as Brad said, paying down debt, new deals, and share repurchases. Douglas Harter: Great. Appreciate your time, Teddy. Operator: Thank you. We will take our next question from Ethan Kaye with Lucid Capital Markets. Ethan Kaye: Hey, guys. Quick question on some of the unrealized appreciation during the quarter. Maybe might have touched on it a bit in the prepared remarks, but I guess kind of specific to, you know, this quarter, it looks like the the depreciation was largely driven by maybe a handful of positions, you know, call it five to 10 positions with maybe single-digit percentage point markdowns. I guess my first question is, is this kind of consistent with with your read, or or do you see it as more of a broad kind of driven by broad market movement? And then, you know, second question, assuming it is, in fact, driven by, you know, a few names here, can you walk through any potential, like, common denominators? I know you mentioned the operational challenges, but, you know, do you see these as as a kind of idiosyncratic? Any, I guess, additional specificity here would be appreciated. Teddy Desloge: Yeah. Absolutely. Thanks, Ethan. I will I will start with just the facts. So you are right. NAV per share was $26.92. That is versus $27.15 prior quarter, so down $0.23 or less than 1%, about 85 basis points. When you dig into the $0.23, we had $0.26 of unrealized losses, about a penny of gains, and $0.03 of excess earnings. And within the unrealized losses, you are right. The marks were concentrated to a small handful of positions. Two accounted for about 50% of net unrealized gains and losses, and the top five accounted for over 60%. So taking a step back, what we see on the ground is stability. Earnings growth consistently high single digits, increasing interest coverage ratios and cash flow profiles. While you certainly can see some movement in marks tied to both performance and spreads over time, what we are seeing is around 85% of the portfolio seeing stable or improving trends based on fundamentals. Brad Marshall: Yeah. And maybe just add to that. Because I mentioned this in the remarks, the number of deals on our watch list actually declined during the quarter. If I look back over the past seven years, since we started BXSL, we have we have actually had zero net realized losses for investors. So it it does kind of get back to, we do mark the the portfolio quite actively, you know, but it is really really designed to be defensive. That is why we are first lien in the capital structure, why we are at large businesses, why they are largely sponsor backed, why we have picked some low-default sectors. So I just want to highlight that and the journeys that sometime assets take like the three I mentioned that just got repaid at par, you know, were all in the kind of low 90s at one point. So companies do not always go up to the right. We work through them. And I also mentioned this on on the call. I have been doing this twenty-one years, and and our direct lending business, our realized loss rate is 10 basis points a year over that twenty-one years, and that is obviously through a lot of different economic cycles. So this is just ordinary kind of marking of of assets, and we feel very, very good about the overall portfolio. Ethan Kaye: Okay. Great color. Thank you, guys. And then one quick, you know, unrelated question. You mentioned I just want to get these numbers right. You mentioned $550,000,000 of repayments over the first six months, kind of in the, you know, in sight. And then, John, I think you also mentioned an additional billion throughout the year. Can you just kind of flesh that out? Yeah. And those numbers for the timeline. Correct? Brad Marshall: Yeah. Ethan, this is Brad. So we have clear line of sight to $550,000,000 of repayments. These are committed deals that are have or will be refinanced. If you look at a a typical repayment cycle, it is somewhere between 15% to to 20% a year. So if you just use 20%, that is $2,800,000,000 of repayments this year. And that is where we give the range of an expectation that we will have another $1,000,000,000 or $2,000,000,000 behind that, just given the latter vintages of of our portfolio. Ethan Kaye: Excellent. Thank you, guys. Operator: Thank you. We will take our final question from Rich Shane with JPMorgan. Brad Marshall: Hey, guys. Thanks for taking my questions. Rich Shane: And most have been asked and answered. The the outlook on leverage is very helpful. Look. You guys have announced a repurchase. We just discussed the possibility of $2,000,000,000 of repayments this year. Leverage sounds like it is going to be flat. So you are going to be making some choices in terms of how to deploy capital. With where we sit today, is your best incremental investment deploying capital into new assets, or is it buying back stock? And it helps us sort of understand how you guys are thinking about that repurchase program. Brad Marshall: Thanks, Rick. It is it is Brad. And it is great to have you on the call. I think we are in a little bit of new territory for us. We have been trading at a premium for so long that trading at a discount is is, you know, more of a, you know, more recent issue. I think Teddy framed it well. We have bought back shares in the past. Quite a bit, actually. So we are not afraid to do so. We do have a lot of, you know, things that we need to manage, leverage levels, and and making sure that we can support our existing portfolio companies. But I will say that given where the stock is trading, you know, buying back shares is is it is a very interesting price to do so. But there are a lot of different, you know, factors that it is not as simple as as that. So we have done it in the past. We think it is attractive. There are lots of factors we will evaluate. Rich Shane: I appreciate that. And it is helpful. And, again, realizing it is a complex decision, yeah. Look. The other the other thing is and and, you know, it is interesting revisiting the space after all these years. You know, look. You guys are trading at a discount to NAV, but you are trading at a relative premium to most of your peers. Historically, we have seen in those environments, particularly where peers are trading at substantial discounts, some opportunities for strategic decisions that are actually accretive despite trading at a discount to NAV. Are there pools of assets out there right now that you find attractive, or do you feel like those opportunities are just taking on other people’s problems. Brad Marshall: Yeah. If if you are referencing buying, you know, secondary loans that that other investors are looking to sell, you know, we have we have looked at, you know, portfolios. We we do think that investing in new loans is the best use of capital for BXSL. The secondary credit sales remains to be a fairly kind of active market. And we look at that across our broader platform. But for BXSL specifically, I think we want to, you know, continue making kind of new primary loans where we have had the ability to do very deep underwritings. As you know, these take months and months of of detailed work. When you are buying a secondary portfolio, you are it is a little bit more of a tabletop analysis. So so BXSL will focus on on new loans. Rich Shane: Great. I appreciate the clarity of the answer. Thank you, guys. Operator: Thank you. That will conclude our question and answer session. At this time, I would like to turn the call back over to Stacy Wang for any additional or closing remarks. Stacy Wang: Thank you for joining us this morning. We appreciate your engagement and ongoing support of BXSL. Do not hesitate to reach out with any follow-up questions, and we look forward to continuing our dialogue next quarter.
Operator: Good morning, and welcome to the Par Pacific's Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Ashimi Patel, Vice President of Investor Relations. Please go ahead. Ashimi Patel: Thank you, Drew. Welcome to Par Pacific's Fourth Quarter Earnings Conference Call. Joining me today are Will Monteleone, President and Chief Executive Officer; Richard Creamer, EVP of Refining & Logistics; and Shawn Flores, SVP and Chief Financial Officer. Before we begin, note that our comments today may include forward-looking statements. Any forward-looking statements are subject to change and are not guarantees of future performance or events. They are subject to risks and uncertainties, and actual results may differ materially from these forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements, and we disclaim any obligation to update or revise them. I refer you to our investor presentation on our website and to our filings with the SEC for non-GAAP reconciliations and additional information. I'll now turn the call over to our President and Chief Executive Officer, Will Monteleone. William Monteleone: Thank you, Ashimi, and good morning, everyone. 2025 was a year of meaningful progress. We navigated challenges, advanced key strategic initiatives, and generated substantial profits along the way. Full year adjusted EBITDA was $634 million, and adjusted net income was $7.56 per share. 2025 represents an excellent year for the enterprise and further validates the structural improvements we've made to the business. At the beginning of 2025, we laid out clear priorities for the year: one, execute major turnaround activity safely and on schedule; two, minimize the impact from the Wyoming crude heater event; three, advance and start up our Hawaii Renewables unit; and four, deliver on our cost reduction commitments. Despite a volatile refining backdrop, we've largely achieved those objectives. We executed the Montana turnaround work safely and effectively, restored Wyoming to reliable operations, advanced the Hawaii Renewables project into commissioning, while forming a joint venture with world-class partners at an attractive valuation and strengthened our cost structure. While no year is without challenges, the consistency of our execution reinforces our organization's commitment to excellence. In our business, financial success starts with operational reliability and safety. Overall, we made strong progress during the year, achieving record annual refining throughput. However, the Wyoming event was a reminder to the organization that we are never finished when it comes to safely and reliably operating our facilities. One notable operational success was the sustained improvement in Hawaii throughput rates, following several years of focused effort by the team. Hawaii throughput averaged 84,000 barrels per day, approximately 4% above the prior 3-year average, reflecting sustained operational improvement by the team. The logistics organization progressed key initiatives throughout the year and generated record segment profits, and retail once again delivered growing results, setting new financial records in 2025. Full year adjusted EBITDA increased approximately 13% versus 2024. 2025 same-store fuel and in-store sales grew approximately 1.6% and 1.5%, respectively, reflecting continued traction in merchandising initiatives and food programs. In Hawaii, the renewable fuels project has progressed into commissioning and early start-up phases during the fourth quarter. We prioritized the readiness of the pretreatment unit and have successfully achieved on-specification feedstock with a range of inputs. We are in the final phases of operational readiness and expect to introduce post-treated feedstocks into the renewables unit in the next few weeks. While timing has extended modestly beyond original expectations, there have been no material operational issues. Our focus remains on safe start-up, operational stability and optimization towards steady-state performance. We are constructive on the medium-term economic outlook as the policy backdrop continues to improve. A significant highlight for the year was the strengthening of our balance sheet. During the fourth quarter, we received proceeds from the Hawaii Renewables joint venture and began monetizing excess RIN inventory. Combined with solid underlying cash generation, these actions materially improved liquidity. We ended the year with approximately $915 million in liquidity and 49.7 million shares outstanding, improving liquidity by 49% and reducing our share count by 10%, while competing -- completing key growth and reliability projects. A stronger balance sheet provides flexibility to invest through cycles, execute high-return internal projects and opportunistically repurchase shares when appropriate. We enter 2026 positioned to continue expanding the earnings power of the business and driving long-term shareholder value. Refining markets are cyclical, and our strategy is not to predict short-term movements, but to structurally improve our position within the cycle, increasing distillate yield, enhancing logistics integration, improving capture rates and lowering our cost structure. Over time, these efforts expand our mid-cycle earnings profile and strengthen durability. Our priorities for the year are clear and consistent with our long-term strategy. One, improve the mid-cycle earnings contribution of our Rocky Mountain assets through targeted high-return projects that enhance flexibility and capture; two, execute the Hawaii turnaround safely and on schedule; three, successfully start up and optimize the renewable fuels unit; and four, maintain disciplined and opportunistic capital allocation. I'll now turn the call over to Richard to discuss Refining and Logistics operations. Richard Creamer: Thank you, Will. 2025 reflected significant operational progress and improvement across Refining and Logistics business. Reliability is a cornerstone to success and last year's performance is representative of that. We were challenged early in the year by the heater outage in Wyoming, and the team there delivered an exceptional recovery. Throughout the year, we executed disciplined operating and capital spending across the system. The Refining and Logistics team delivered another record throughput year of 188,000 barrels per day, led by Hawaii's increased production rates. I want to commend the Montana team for the execution of their largest-ever turnaround. Following this event, we reported record quarterly throughput of 58,000 barrels per day, demonstrating the site's potential. We continue to see the benefits of our reliability investments, and the team has made great strides in improving OpEx per barrel. I'd like to recognize Wyoming team for safely restoring operations after the Q1 crude heater incident, more than 1 month ahead of schedule. Shifting to quarterly results. Fourth quarter combined throughput was 191,000 barrels per day. In Hawaii, throughput was strong at 87,000 barrels per day. This represents Hawaii's efforts to deliver at maximum capacity through the team's focus on high-reliability operations. Production costs were $4.15 per barrel. Washington throughput was 37,000 barrels per day, reflecting reduced rates ahead of the first quarter planned downtime and production costs were $4.57 per barrel. Maintenance activities are now complete, and the plant restart is underway. Shifting to Wyoming, throughput was 14,000 barrels per day, and production costs were elevated at $13.27 per barrel due to a third-party power outage in Northern Wyoming and lower seasonal throughput. Finally, in Montana, fourth quarter throughput was 52,000 barrels per day, and production costs were $11.74 per barrel, elevated by approximately $1.50 per barrel due to coker maintenance. Looking ahead to the first quarter, we expect Hawaii throughput between 85,000 and 89,000 barrels per day and Washington between 24,000 and 28,000 barrels per day, reflecting the Q1 planned outage. Wyoming is expected to operate between 13,000 and 16,000 barrels per day with Montana between 52,000 and 56,000 barrels per day, both reflective of Q1 seasonality. This results in a system-wide anticipated midpoint throughput of 182,000 barrels per day. I'll now turn the call over to Shawn to cover our financial results. Shawn Flores: Thank you, Richard. Fourth quarter adjusted EBITDA was $113 million, and adjusted net income was $60 million, or $1.17 per share. For the full year, adjusted EBITDA was $634 million and adjusted net income was $390 million or $7.56 per share. The Refining segment generated $88 million of adjusted EBITDA in the fourth quarter, compared to $135 million in the third quarter, excluding the SRE impact. Our combined Refining index averaged $13.13 per barrel in the fourth quarter, down approximately $1.60 from the prior quarter, reflecting seasonal conditions in the Rockies and the Pacific Northwest. System-wide Refining capture was 93% for the quarter and 94% for the full year. In Hawaii, the Singapore 3-1-2 averaged $21.43 per barrel during the fourth quarter, and our landed crude differential was $6.05, resulting in a Hawaii index of $15.38 per barrel. Hawaii capture was 104%, including a net $7 million loss from product crack hedging and price lag. Excluding these items, Hawaii capture was 110%. In Montana, the fourth quarter index averaged $11.14 per barrel with margin capture of 72%. Capture was impacted by elevated asphalt sales and a lighter, higher cost crude slate due to coker downtime, reducing margins by approximately $10 million. Montana production costs include approximately $7 million related to coker maintenance. In Wyoming, the fourth quarter index averaged $18.31 per barrel. Normalized capture was approximately 70%, excluding a $3 million FIFO impact from declining crude prices. As Richard mentioned, a regional power outage and subsequent maintenance activities reduced throughput and impacted both margins and production costs during the quarter. Lower diesel sales during the downtime impacted margins by approximately $4 million, while maintenance-related activity increased operating costs by $3 million. In Washington, our index averaged $8.60 per barrel. Margin capture was 97%, reflecting a normalization of jet to diesel spreads and favorable sales mix during the Olympic pipeline outage in November. Looking to the first quarter, our combined Refining index has averaged approximately $6.70 per barrel quarter-to-date with February month-to-date improving by $2 per barrel versus January. In both the Rockies and the Pacific Northwest, prompt distillate margins have strengthened by roughly $15 per barrel compared to January averages. On the West Coast, tighter jet balances have driven jet fuel to trade at a premium to diesel, supporting margin capture in Washington. In Hawaii, Singapore distillate cracks remain firm, and we expect our first quarter crude differential to be in the range of $4.75 and $5.25 per barrel, reflecting easing backwardation and favorable access to waterborne crude supply. Moving to the Logistics segment. Adjusted EBITDA was $30 million in the fourth quarter compared to $37 million in the third quarter. Full year logistics adjusted EBITDA reached a record $126 million, reflecting strong system utilization and a $6 million reduction in annual costs. Retail delivered $22 million of adjusted EBITDA in the fourth quarter, in line with the third quarter. For the full year. Retail achieved a record $86 million in adjusted EBITDA, up from $76 million in 2024, driven by favorable fuel and inside store margins and a $4 million reduction in operating costs. Turning to cash flow. Full year cash from operations was $568 million excluding working capital outflows of $21 million and deferred turnaround costs of $101 million. Cash from ops in the fourth quarter was $134 million, excluding working capital outflows of $40 million and deferred turnaround costs of $1 million. Q4 working capital outflows were primarily related to prepaid annual insurance premiums and trade credit timing in Hawaii, partially offset by RIN proceeds. At year-end, we had monetized less than half of the SRE-related excess RIN inventory, providing favorable working capital visibility into 2026. Full year accrued CapEx, including deferred turnaround costs totaled approximately $246 million, or $6 million above our prior guidance. Cash used in financing activities totaled $64 million, driven by an ABL paydown of $163 million, share repurchases of $28 million, partially offset by $100 million in proceeds from the Hawaii Renewables joint venture. For the full year, we repurchased 6.5 million shares, reducing shares outstanding by 10%, while lowering gross debt by $310 million. Total liquidity was a record $915 million at year-end. Gross term debt was approximately $640 million, positioning us at the low end of our leverage targets. During the quarter, we repriced our existing term loan, reducing the spread by 50 basis points and lowering our annual cash interest by over $3 million. With improving market conditions and reduced capital requirements, we are entering 2026 from a position of financial strength with the flexibility to invest in growth, maintain a strong balance sheet and opportunistically repurchase shares. This concludes our prepared remarks. Operator, we'll turn it back to you for Q&A. Operator: [Operator Instructions] The first question comes from Alexa Petrick with Goldman Sachs. Alexa Petrick: I wanted to start on capital allocation. You talked about starting to monetize the access RIN bank. How should we expect that cash to be used? And then how are you thinking about share repurchases, particularly with the stock at these levels? William Monteleone: Yes. I think, our capital allocation framework remains consistent with how we've approached it in the past. I think we are looking at a mix of both the opportunity to repurchase our shares as well as internal growth opportunities and even potentially external opportunities. So I think if you look at our past, you'll see that we've used really all of the above when appropriate, to try and generate shareholder returns. And I think, we'll continue to deploy a dynamic approach to that given our strong excess capital position, we have a lot of flexibility. Alexa Petrick: Okay. That's helpful. And then maybe just a follow-up. Can you talk a little about Q4 on captures? I think Rockies was a little softer than maybe what we think about mid-cycle captures. Can you kind of walk us through some of the moving pieces there? And then how 1Q is shaping up so far? Shawn Flores: Alexa, it's Shawn. Yes, I think in my prepared remarks, I touched on the softness that we saw in the Rockies. In Montana, we had 72% capture relative to our sort of annual guidance of 90% to 100%. And I think it's really driven by the coker downtime. We lightened up our crude slate while the coker was offline, and it also results in incremental asphalt sales. And we estimate about a $10 million margin impact. That translates to about 19% capture. So I think when you normalize for that, you're back within sort of that 90% to 100% range. And then I think a similar story in Wyoming, we -- as Richard referenced, we had the regional power outage that impacted most of the state for a few days and led to a multiple-week downtime. And ultimately, I think it impacted diesel sales, which was about $4 million. And I think adjusting for that margin loss, Wyoming Capture would have been in the high 80s. So I think that the story is as simple as that. Operator: The next question comes from Matthew Blair with Tudor, Pickering, Holt. Matthew Blair: Will, maybe to just follow up on your comment there about looking at external growth opportunities. Could you talk a little bit more about what opportunities could that might be? Would that include retail integration, additional retail integration? Or are you also open to refinery acquisitions or even corporate acquisitions? William Monteleone: Yes, Matthew, happy to talk a little bit more about it. I think the best way to think about our framework is probably to look at our track record and to think about how we've operated in the past is a pretty good indicator of how we'll approach the future. And so I think, from our perspective, I think we are focused on growing the scale of the business when it's accretive. And again, I think we're trying to find opportunities that are synergistic with our existing portfolio where we can really generate an edge. And so that's our focus. And I think we hold 2 things to be true at the same time. I mean if you look at our history, we've grown this business through M&A., but I think we also fully understand that if you pursue growth at any price, you can destroy shareholder value very quickly, so being disciplined is important. And I think what we found on the retail side is generally, we can be competitive in small acquisitions, 1 to 5 store and then we can be competitive on new builds and generate real returns in that area. Given the current market, larger-scale M&A and retail is less likely and more challenging given our competitors' cost of capital versus our own. Matthew Blair: Sounds good. And then, Will, you also mentioned the cash coming in from the RIN sales. Do you have any update on potentially monetizing the Hawaii land, the excess land out there or potentially monetizing the Laramie E&P investment? William Monteleone: Sure. So on the land position in Hawaii, we're continuing to progress the redevelopment of that. And again, I think, are nearing completing, getting the equipment to grade, and are again, working through the process to rehabilitate that and get it back into, I'll say, into commerce. And so I wouldn't plan on that being an immediate benefit. I think this is a long-term project for us, that's going to take us several years, but I do think it's an attractive asset. With respect to Laramie, I think the business there has continued to do well and has generated cash with its existing production, improved its balance sheet and has continued to improve, I would say, like I've mentioned in the past, we own 46% of Laramie, so we have influence, but we don't have control. And our view is that the best way to generate maximum value for our stake is to align with the other shareholders who have different time horizons than we do and ensure that we maximize the value of the business when they're ready to monetize. And so again, I think the gas business is noncore to us. At the end of the day, though, we need to, I think, ensure that we are aligned with our partners to maximize the value and aren't selling a minority noncontrolling position. Operator: [Operator Instructions] The next question comes from Manav Gupta with UBS. Manav Gupta: I had a very quick clarification. Can you remind us of your sensitivity to the WCS differential? I think it was about $14 million per $1 of widening, but if you could reflect on that and then your view on the WCS differential itself with more Venezuelan crude coming into the United States? William Monteleone: Sure, Manav. Yes, so I think kind of a mid-cycle, we're roughly running between 40,000 and 50,000 barrels a day of WCS. And so it's basically every dollar is worth around $15 million to $16 million a year. So that's, I think, the best way to think about our sensitivity on that. And I think at the end of the day, we are an indirect beneficiary of incremental Venezuelan barrels on the Gulf Coast, really as it cascades and pushes Canadian barrels back up into the Mid-Continent. And so we're seeing less volume flowing out of Vancouver and West Ridge to the Far East, more barrels in Canada and increasing apportionment on the lines, which is all favorable for crude differentials moving back out towards our mid-cycle range of, let's call it, $15 to $16 under WTI. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Will Monteleone for any closing remarks. William Monteleone: Thank you, Drew. 2025 was a year of meaningful progress. We set clear objectives, and we largely achieved them. We strengthened the balance sheet. We expanded the structural earnings power of the portfolio, and we continue to build a more diversified and durable business. Our objective remains constant to increase the mid-cycle earnings power and grow the free cash flow per share over time through disciplined execution. I want to thank all of our employees across the organization for their continued focus on safe and reliable execution. Thank you all, and have a great day. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Greetings, and welcome to Postal Realty Trust Fourth Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Jordan Cooperstein, Senior Vice President of Finance and Capital Market. Welcome, Jordan. Jordan Cooperstein: Thank you, and good morning, everyone. Welcome to Postal Realty Trust's Fourth Quarter 2025 Earnings Conference Call. On the call today, we have Andrew Spodek, Chief Executive Officer; Jeremy Garber, President; Steve Bakke, Chief Financial Officer; and Matt Brandwein, Chief Accounting Officer. Please note the company may use forward-looking statements on this conference call, which are statements that are not historical facts and are considered forward-looking. These forward-looking statements are covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those described in the forward-looking statements and will be affected by a variety of risks and factors that are beyond the company's control, including, but not limited to, those contained in the company's latest 10-K and its other regulatory filings. The company does not assume and specifically disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Additionally, on this conference call, the company may refer to certain non-GAAP financial measures such as funds from operations, adjusted funds from operations, adjusted EBITDA and net debt. You can find a tabular reconciliation of these non-GAAP financial measures to the most currently comparable GAAP measures in the company's earnings release and supplemental materials. With that, I will now turn the call over to Andrew Spodek, Chief Executive Officer of Postal Realty Trust. Andrew Spodek: Good morning, and thank you for joining us today. In 2025, we exceeded expectations on all fronts. Our results reflect the stability and growth inherent in our portfolio of critical logistics infrastructure leased to the U.S. Postal Service and our unique operating approach. It was the successful execution of our business plan, coupled with the strength of the Postal Service's tenancy that enabled us to exceed our 2025 guidance. We're building on these results with the strong 2026 guidance we issued yesterday. Our business is benefiting more than ever from economies of scale resulting from the growth of our portfolio and the technology and systems investments we've made in recent years. We grew our asset base by approximately 20% last year, increasing our gross real estate value by 10x since IPO. Our access to capital to fund growth is deeper than it's ever been, bolstered by a BBB investment-grade rating from Kroll, KBRA. Our year-end liquidity rises to $271 million, including the revolver upsize we announced yesterday as well as the successful equity raising activity we have completed to date in the first quarter. Looking to the future, we have a strong pipeline of acquisitions to fuel our value creation machine. We generate substantial value through acquisitions by applying our efficient operating approach, marking rents to market and extending lease terms to 10 years with annual rent escalators. Our acquisition strategy remains unchanged for volume to be day 1 accretive and furnish meaningful growth over time. Based on our robust pipeline, we are introducing initial guidance of $115 million to $125 million at a mid-7% weighted average cap rate, fully funded by recent capital markets activity. As our cost of capital continues to improve and our pipeline of deals continues to expand, we will revisit acquisition guidance as needed in future quarters. 2025 brought with it changes at the Postal Service. A new Postmaster General took the reins in July and has been vocal about the value of the last mile. The launch of the auction process to broaden last mile access only reinforces what we've been saying for years. These real estate locations are the backbone of the U.S. Postal Service's delivery network. This infrastructure enables universal service across more than 170 million delivery points nationwide and is utilized 6 days a week by logistics providers and online retailers. As we like to remind investors, through government shutdowns, recessions and pandemics, the Postal Service pays 100% of the monthly rent 100% of the time. Lease expenses represent 1.5% of the Postal Service's total operating expenses, and they have remained in our building 99% of the time. I believe that in uncertain times, the consistency of the Postal Service's tenancy can be of even more value. I'm proud of our progress and our strong position to start the year. I'll now turn the call over to Steve. Stephen Bakke: Thanks, Andrew. Yesterday, we reported AFFO per share of $0.33 for the fourth quarter of 2025, bringing full year AFFO per share to $1.32. This was at the high end of our most recent guidance and represents growth of 13.8% for the year. Reviewing 2025 guidance items, acquisitions totaled $123.1 million, slightly ahead of our December guidance and nearly $40 million above the midpoint of our guidance at the start of the year. Full year cash G&A of $10.9 million came in slightly better than the guidance midpoint of $11 million. As a share of total revenue, cash G&A declined by nearly 130 basis points in 2025, an indicator of the scale efficiencies we are experiencing. Lastly, our 2025 same-store cash NOI performance was 8.9%. For 2026, we are providing AFFO per share guidance of $1.39 to $1.41, which represents 6.1% growth from last year at the midpoint. This is above our annual growth rate since 2020 of 5.8% per year. Guidance assumptions include the following: acquisitions of $115 million to $125 million; same-store cash NOI growth of 6.0% to 7.0% and cash G&A of $11.5 million to $12.5 million. For the first quarter, we expect recurring capital expenditures of approximately $125,000 to $200,000. Lastly, guidance includes approximately $0.05 per share of dilutive impact from forward equity calculated in accordance with the treasury stock method since the company's stock price is above the net price of outstanding forwards. Turning to sources and uses of capital. In 2025, we raised $55 million via ATM and OP unit issuance, $40 million via term loans, borrowed on our revolver and utilized retained cash flow to fund acquisitions. For 2026, as Andrew mentioned, we have fully funded the entirety of our acquisition guidance at the high end on a leverage-neutral basis through equity and debt raise as well as growing retained free cash flow. In 2026, we've raised a total of $44 million of equity at an average gross price of $17.67 per share, of which $36 million was sold on a forward basis at a gross price of $17.88 per share. We executed via the forward ATM to match share issuance with future acquisition closings. As it relates to debt funding, on February 20, we closed on $115 million of new revolving credit facility commitments, welcoming Scotiabank as a new lender. The added liquidity puts our balance sheet in an even stronger position to support the growth of our business. Turning to balance sheet metrics. We ended the year with net debt to annualized adjusted EBITDA of 5.2x or 4.6x after giving effect to unsettled forward equity. Our philosophy as a public company and even before that, when we were private, has been to operate at a low leverage level. Our net debt to annualized adjusted EBITDA has averaged in the low to mid-5x range over the past 5 years. And going forward, we plan to continue operating in the same range. As such, we are updating our leverage target for net debt to adjusted EBITDA to below 6x from a prior target of below 7x. At year-end, our balance sheet consisted of 89% fixed rate debt, 91% unsecured debt and $113 million of liquidity, which rises to about $270 million, including capital raised in the first quarter. Going forward, we plan to borrow predominantly with fixed rate unsecured debt and to maintain ample liquidity. Finally, in January, we increased our dividend by 1% to $0.245 per quarter, continuing our track record of raising the dividend each year since our IPO. We are committed to growing the dividend while utilizing retained cash flow to reinvest in the business and maintain a strong financial position. With that, I'll turn it over to Jeremy. Jeremy Garber: Thank you, Steve. I will provide an update on our re-leasing efforts, followed by more detail on our fourth quarter acquisition activity. Starting with re-leasing. As of today, we have executed all new leases for properties that expired in 2025, except for 5 properties acquired during 2025 and 1 acquired in holdover status during 2026. The 5 properties acquired during 2025 have agreed upon rents and the leases are in lease production. As it relates to 2026 re-leasing, other than 4 recently acquired properties, all rents have been agreed upon and are currently in lease production. We are currently negotiating rents for the 2027 leases. All leases will have 3% escalators and the vast majority will have 10-year terms. Finally, as part of our shared goal with the USPS to get further ahead of expirations, we have already started discussions on the 2028, and we look forward to updating on our progress in the coming quarters. The rollout of 10-year terms and annual escalators in our leases continues to bolster the visibility and growth of our cash flow. 53% of our portfolio rent is subject to annual rent escalations and 37% consists of leases with 10-year terms based on executed and agreed-upon leases as of February 13. Inclusive of executed and agreed-upon rents for new leases through 2026, the weighted average lease term of our current portfolio will extend to over 5 years compared to 3 years when we went public. The company received no lump sum catch-up payments in the fourth quarter. As we look to 2026, aside from prospective acquisitions that are acquired in holdover status, lump sum catch-up payments should continue to diminish in frequency and value as we sign leases ahead of their expiration dates. Moving on to acquisitions. In 2025, we acquired 216 properties for $123 million, achieving our most recent 2025 guidance of over $120 million. The weighted average initial cash cap rate for last year's acquisitions was 7.7%. Unpacking fourth quarter acquisitions, we acquired 65 properties for approximately $29.1 million at a 7.5% weighted average initial cash cap rate, which added approximately 142,000 net leasable interior square feet to our portfolio. Fourth quarter acquisitions consisted of 55,000 square feet from 42 last mile post offices and 87,000 square feet from 23 flex properties. Our continued earnings momentum is driven by accretive acquisitions, a pipeline of near-term lease mark-to-market opportunities, a growing contribution from annual rent escalators and a disciplined approach to expenses. This concludes our prepared remarks. Operator, we would like to open the call for questions. Operator: [Operator Instructions] Your first question comes from Anthony Paolone with JPMorgan. Nahom Tesfazghi: You guys have Nahom on for Tony. I guess, could you guys expand on some of the color you guys gave on the transaction market and what's really stopping you guys from, I guess, turning the gas on, on this front? It seems that the midpoint of $120 million was more or less in line with what was completed in 2025. Andrew Spodek: Sure. I appreciate the question. So I feel very confident with where our pipeline is today. We -- our initial guidance for this year is over 40% higher than our initial guidance from last year. The pipeline is very strong. We are very confident in what this year is going to bring us. Happy to have our debt and equity accounted for. We're really at the strongest position that we've ever been in. And I'm hoping that as our cost of capital continues to get better, that our ability to grow our pipeline and our acquisitions will grow with it, and we'll keep you updated as the year progresses. Nahom Tesfazghi: Got it. Okay. And I guess the second one for me is in the investor deck, you guys gave some good color and background on the post office. But could you guys expand on what you meant when you said the USPS' revenue model is evolving and they're pursuing competitive bidding processes? Jeremy Garber: Sure. This is Jeremy. So as you heard in Andrew's comments, the new PMG joined the Postal Service in July and announced last month that they were going to be allowing access to their last mile. When you go through our presentation, historically, you'll see we referenced the ability for the big logistics providers like UPS, FedEx, Amazon, DHL to actually enter the last mile and achieve better pricing. And what the Postal Service has recognized is the value embedded in that last mile and the revenue opportunity in the last mile and they have now opened up a process for others to participate in entering the last mile. And so that's what they've referenced. There's a portal where they're now accepting potential customers to bid for access. And as of their last commentary, there were over 1,200 requests for participation. Operator: Next question, John Kim with BMO Capital Markets. John Kim: I was just wondering, your cost of capital has improved pretty meaningfully over the last few months, both on the equity side and with interest rates coming down as well. Does that change your investment strategy at all in terms of targeted yields and size of portfolios you may acquire? Andrew Spodek: So we're happy to see that our cost of capital has gotten better. And I've always stated that as our cost of capital gets better, our ability to acquire will get better with it. Our goal has been and continues to be to be day 1 accretive for our acquisition and our internal growth from there on. And that will continue to be our strategy going forward. As I said to -- in the previous question, I'm very excited about what this year is going to bring and where our cost of debt and equity are today and our ability to execute on our pipeline. John Kim: Okay. And then I wanted to ask about the '27 lease expirations. I think you mentioned you're still working through them and focusing on '28 as well. But what do you see is the most likely outcome in terms of how much of that rent will be renewed? Is there a upside or downside to that rent level of $59 million and anything else you could share in terms of likely outcome? Stephen Bakke: Yes. Thanks for the question. This is Steve. As it stands today, we expect all of that, all those leases to be renewed for the next couple of years. And looking at 2027, the setup is very similar to 2026. So I think that what you saw today from where we stand today should continue over 2027. John Kim: And how many -- just like how many different leases are there as part of the expirations? Stephen Bakke: I can pull up my supplemental, but it's in the sub -- it is 470 leases. Now it's important to note that a large portion of that, I think, 160 leases are a master lease that we're working through with the Postal Service at the current time. Operator: Next question, Jon Petersen with Jefferies. Jonathan Petersen: Okay. I was hoping on acquisitions. So when you guys acquire a property and then you apply your lease structure to it with the escalators and the 10-year term, can you quantify like what that unlocks for you on the underwriting side in terms of a higher IRR and how that makes you, I guess, more competitive in the acquisition market for underwriting deals? Andrew Spodek: Sure. So it's a great question. We haven't really articulated what the value of our rent spreads are or our mark-to-markets are. But they're substantial. And I would point you to our same-store numbers and where we are guiding our same-store for this coming year. Stephen Bakke: Yes. And just to add to Andrew's point, this is Steve. I think a shortcut you can use to back into an unlevered IRR is that initial yield we've been acquiring at the 7.5% cash cap rate. And then looking at our average trailing same-store NOI growth the last few years, which has been around 6%. It gets you to a 13% to 14% unlevered IRR. Jonathan Petersen: Okay. All right. That's helpful. And then in the past, you guys have purchased warehouses that are leased to the USPS. Is that something that you might consider again if your cost of capital improves to a level that allows that to make sense? Andrew Spodek: Yes, that's a great question. We are always looking at the industrial market. It's not something that is what I refer to as the bread and butter of the business. We really focus the majority of our attention on flex and last mile facilities. But as our cost of capital continues to improve, our opportunity to purchase some of those industrial facilities definitely improves with it. Jonathan Petersen: Okay. Maybe one last one for me for Jeremy. You mentioned earlier in response to another question about logistics providers entering the USPS' last mile. I guess, are there any real estate implications there that we should foresee with kind of more of the -- more supply chain going through the USPS last mile facilities? Jeremy Garber: In terms of the existing infrastructure and... Jonathan Petersen: Medium, larger stores or different types of stores or anything like that? Jeremy Garber: Right. So what they identify is their delivery units, that's 22,000 out of the 30-plus thousand facilities that are out there. So those facilities are already built and equipped to handle that type of logistics. Operator: I would like to turn the floor over to Andrew Spodek for closing remarks. Andrew Spodek: Thank you. With our debt and equity accounted for and a robust pipeline, we're in a stronger position than we have ever been as a public company to capitalize on the opportunity ahead. Looking forward to speaking to you all in the coming months. Thank you all for joining us. Operator: This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.
Operator: Good morning, ladies and gentlemen, and welcome to the Talos Energy Inc. Fourth Quarter and Full Year 2025 Earnings Conference Call. At this time, all lines are in a listen-only mode. If at any time during this call you require immediate assistance, please press 0 for the operator. This call is being recorded today, 02/25/2026. I will now turn the call over to Clay P. Jeansonne, VP, Investor Relations. Please go ahead. Clay P. Jeansonne: Thank you, operator. Good morning, everyone, and welcome to our fourth quarter and full year 2025 earnings conference call. Joining me today to discuss our results are Paul Goodfellow, President and Chief Executive Officer, and Zachary Dailey, Executive Vice President and Chief Financial Officer. For our prepared remarks, please refer to our fourth quarter 2025 earnings presentation that is available on Talos Energy Inc.’s website under the Investor Relations section for a more detailed look at our results and operations update. Before we start, I would like to remind you that our remarks will include forward-looking statements subject to various cautionary statements identified in our presentation and earnings release. Actual results may differ materially from those contemplated by the company. Factors that could cause these results to differ materially are set forth in yesterday’s press release and our Form 10-Ks for the period ending 12/31/2025 filed with the SEC. Forward-looking statements are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During this call, we may present GAAP and non-GAAP financial measures. A reconciliation of certain non-GAAP to GAAP measures is included in yesterday’s press release, which was furnished with our Form 8-Ks filed with the SEC and is available on our website. I will now turn the call over to Paul. Paul Goodfellow: Thank you, Clay. Good morning to everyone joining us on our call today. I would like to start by thanking the entire Talos team for their hard work dedication and unwavering commitment to safety and delivery of our business during 2025. The results we will discuss today are a direct result of their effort. First, we are pleased to report continued strong safety performance with no serious injuries in 2025, underscoring our steadfast commitment to the health and well-being of our employees and contractors. Additionally, our environmental stewardship remains a core focus with a spill rate significantly below industry averages, underscoring our commitment to protecting the communities and environment where we live and work. 2025 was the start of a transformation journey for Talos Energy Inc. The year was defined by a revamped strategy, operational excellence, and strong financial delivery supported by a new leadership team. High production, greater capital efficiency, and lower operating costs resulted in significant free cash flow generation, which led to meaningful return of capital via share repurchases. All of this was accomplished while navigating a weakening commodity price environment throughout the year. As we look ahead to 2026 and beyond, we intend to build on the momentum we have created, executing our strategy while balancing the inherently volatile business and long-cycle nature of offshore oil and gas. In June, we introduced a new corporate strategy. Our strategy is anchored on three core pillars built to deliver results now while also positioning Talos Energy Inc. for the medium and long term, and underpinned by a disciplined capital allocation framework. Since announcing this strategy, our team has been laser-focused on executing and building the foundation to be a leading pure-play offshore E&P company. Under the first pillar of the strategy, improving our business every day, the teams rose to the challenge to think creatively, and we realized approximately $72 million in free cash flow improvements in 2025, far exceeding our initial target of $25 million. These savings were generated through more than 80 initiatives spanning margin enhancement, capital efficiency, commercial opportunities, and organizational improvements. About half of that $72 million was a one-time benefit in 2025, while the other half is structural and recurring, which gives us solid momentum heading into 2026. The team has many initiatives in flight, and we look forward to updating you on our progress throughout the year. Our relentless focus on efficiency has strengthened our position as the low-cost E&P operator in the Gulf Of America, in addition to delivering top decile EBITDA margins across the sector. Over the past three years, while the industry trend for E&Ps in the Gulf Of America has been an increased cost structure, Talos Energy Inc.’s proactive management of its cost base and increasing production have resulted in a reduction in operating cost on a unit basis. In fact, for 2025, our operating costs are on average 30% lower than the offshore peer group average. This advantaged cost structure has helped us to generate top decile EBITDA margins in the E&P sector for 2025. These achievements reflect disciplined execution and a culture committed to continuous improvement. Within the second pillar of our strategy, growing production and profitability, we continue to advance organic growth throughout the year, achieving first production at Sunspear and Katmai West number two. Our teams continue to deliver outstanding operational results at our Katmai field, where production flows through three subsea completions tied back to the Talos Energy Inc.-owned Tarantula facility. Katmai West number one continues to be a standout performer, ranking among the top 10 producing wells in the Gulf Of America. In mid-2025, Tarantula’s gross processing capacity was expanded to 35,000 barrels of oil equivalent per day to accommodate higher volumes following the success of the Katmai West number two well. Most recently, targeted debottlenecking efforts have boosted throughput to approximately 38,000 barrels of oil equivalent per day. These recent debottlenecking efforts were achieved with minimal capital outlay, reflecting the team’s commitment to grow production and profitability and their ability to unlock value through creativity and ingenuity. Looking ahead, we expect production from the Katmai field to remain essentially flat throughout 2027. The production profile helps underscore our overall base decline rate in the mid to high teens, which is another differentiator for Talos Energy Inc. relative to onshore peers. We are also excited about the Katmai North prospect, which provides potential exploration upside to the field. The team continues to mature this prospect with new seismic data, and the recent blocks we strategically acquired in the lease sale near our Katmai complex further enhanced our prospectivity in the area. Under the third pillar, we continue to build a long-lived scale portfolio that supports long-term sustainable growth. The discovery of the Daenerys exploration prospect marks the potential for a significant addition to our resource base with appraisal activities set to begin in 2026. Additionally, Talos Energy Inc. was pleased to be named the apparent high bidder on 11 new leases, with eight being awarded to date, totaling approximately $15 million in last December’s big beautiful lease sale. These leases surround our Daenerys discovery, and new positions in the Neptune and Katmai areas further leverage our existing infrastructure. We significantly expanded our resource potential, adding eight prospects, some of which span multiple blocks with more than 300 million barrels of gross unrisked resource potential across amplitude-supported Miocene and Wilcox opportunities. This represents approximately two times our current proved reserve base. We increased our working interest in the Beacon-operated Monument project 21% to roughly 30%. Monument is a large Wilcox discovery expected to come online at the end of this year and is expected to provide a durable production profile in 2027 and beyond. Talos Energy Inc. continues to invest in state-of-the-art seismic technology and proprietary reprocessing supported by a broad multi-client seismic footprint across the Gulf Of America. Our modern imaging capabilities and technical expertise help de-risk prospects and improve success rates expected every year, which positions us well ahead of two federal Gulf Of America lease sales over the next decade. Now let me highlight the key projects we have planned for 2026. Talos Energy Inc. successfully drilled the Cardona well in late 2025, delivering the project under budget and ahead of schedule. Production commenced earlier this year with the well flowing to the Talos Energy Inc.-owned Pompano facility. Talos Energy Inc. also recently drilled the CPN well ahead of schedule with first production expected in 2026. The team continues to advance the Talos Energy Inc.-operated Brutus rig reactivation program with the first of four wells scheduled to begin drilling in quarter two and the remaining wells to follow in sequence. We expect that the majority of drilling activities will be completed this year and anticipate bringing three wells online by year end with the fourth well online in early 2027. The Monument Project operated by Beacon Offshore continues to advance towards a March spud, with the rig planned to operate continuously throughout the year. Both wells are expected to be completed in 2026, yielding first oil by year end. Beacon plans to develop it as a subsea tieback to the Shenandoah production facility in Walker Ridge, and the project has firm committed capacity of 20,000 barrels of oil per day. While 2026 is a year marked by investment and development in the project, we expect 2027 to benefit from a full year of production. The Daenerys discovery was a significant highlight in 2025. As we previously stated, the discovery well was temporarily suspended to preserve its future utility pending further appraisal. We plan to spud the appraisal well late in 2026. The appraisal program is designed to test the northern part of the prospect and is strategically planned to penetrate multiple prospective intervals, enabling a thorough assessment of the reservoir. Additionally, the well has been engineered to accommodate multiple future sidetracks, enabling further appraisal and development. We expect results in the 2025 was a great year where we accomplished tremendous results all across the business. In 2026, we will continue to execute safely and will remain guided by the disciplined capital allocation framework that underpins our strategy. We will stay true to our three strategic pillars as we advance the business, create long-term value, and achieve our clear vision for Talos Energy Inc. to become a leading pure-play offshore E&P. Now I would like to turn it over to Zach to cover our fourth quarter and full year financial results along with the 2026 budget and guidance. Thanks, Paul. Zachary Dailey: First, I will recap 2025 through the lens of our strategic framework, then I will discuss some fourth quarter specifics and end with the 2026 outlook before handing it over for Q&A. Underpinning our execution of the three strategic pillars, which Paul discussed, is a disciplined capital allocation framework designed to deliver strong financial outcomes. In 2025, that is exactly what Talos Energy Inc. did. We invested about $500 million of exploration and development capital and produced an average of 95,000 barrels of oil equivalent per day. This generated approximately $1.2 billion in adjusted EBITDA and $418 million of adjusted free cash flow, despite a steady decline in oil prices throughout the year. Our framework calls for returning up to 50% of annual free cash flow to shareholders, and that is what we did. Since announcing our capital allocation framework in Q2 of last year, we have returned approximately 44% of adjusted free cash flow to shareholders through share repurchases. Throughout 2025, we reduced our outstanding share count by about 7%, demonstrating consistent follow-through and clear focus on enhancing per share value. In the fourth quarter, we produced an average of 89 barrels of oil equivalent per day, including 65,000 barrels of oil per day. Fourth quarter volumes were impacted by about 3,000 barrels of oil equivalent per day due to the shut-in of our Genovese well following a failure of its surface-controlled subsurface safety valve. We are working diligently to accelerate the delivery of an insert safety valve, and we expect Genovese to return to production in 2026. Our fourth quarter oil cut was slightly higher than our 2025 average, and we expect that higher oil cut to continue through 2026, which will support our peer-leading margins. Another critical element of our financial framework is maintaining a strong balance sheet. We ended the year with low leverage of 0.7 times and approximately $1 billion in total liquidity, including a year-over-year increase in cash on hand. We have no near-term debt maturities, and recently we extended our credit facility to 2030 while reaffirming our borrowing base at $700 million. We believe this financial strength positions Talos Energy Inc. to navigate commodity cycles and support the strategic growth elements of pillars two and three. For example, last year we increased our working interest in the high-value Monument prospect and also increased our potential inventory with additional leases acquired in the big beautiful lease sale in December, as Paul mentioned. We believe we are well positioned to continue strengthening our portfolio within the Gulf Of America as well as in other conventional basins. Now I want to touch briefly on our year-end reserves. Talos Energy Inc.’s proved reserves were 175 million barrels of oil equivalent, of which approximately 75% is oil. The PV-10 of our proved reserves was approximately $3.2 billion, which is calculated at year-end SEC pricing. We also believe that Talos Energy Inc. has significant value beyond our proved reserves with estimated probable reserves of 103 million barrels, adding an additional PV-10 of $2.3 billion at year-end SEC prices, equating to approximately $5.5 billion in 2P value. Our reserve replacement ratio over a trailing three-year period is approximately 140% of Talos Energy Inc.’s production. During the fourth quarter, we recorded a non-cash impairment of $170 million related to the full cost ceiling test under the SEC guidelines. As a reminder, this test primarily compares the net capitalized cost of our oil and gas properties to the present value of future net cash flows from our proved reserves using trailing twelve-month pricing. Next, let me share a quick overview of our hedge positions. We view hedging as a risk management tool to help stabilize cash flow in a downside scenario while also maintaining attractive exposure to higher oil prices. For the first quarter 2026, we have hedged approximately 29,000 barrels of oil per day with a floor price of approximately $63 per barrel. That represents approximately 47% of our expected first quarter oil production at the midpoint of guidance. And for the year, we have hedged roughly 23,000 barrels of oil per day representing approximately 36% of our expected annual oil production at the midpoint of guidance, with floors above $61 per barrel. Turning to guidance, we expect our 2026 capital expenditures, excluding P&A, to range between $500 million and $550 million. We expect to focus on low-breakeven, high-margin oil projects with a balanced allocation across infrastructure-led development, exploration, and appraisal. Approximately 60% of the total CapEx is allocated towards Talos Energy Inc.-operated projects, while about 40% is allocated to non-operated projects. Our non-op spend is higher year-over-year, driven primarily by increased spending on the Beacon-operated Monument project. As we invest for the future and advance our strategy to build a long-lived scaled portfolio, approximately 10% of our 2026 budget is allocated to exploration, which includes the Daenerys appraisal well. Talos Energy Inc. also plans to allocate $100 to $130 million of capital towards P&A, similar to 2025 levels. We remain committed to meeting our obligations while continuing to pursue opportunities to optimize and more strategically execute these projects. In 2026, we expect production to average between 85,000 to 90,000 barrels of oil equivalent per day and 62,000 to 66,000 barrels of oil per day. As I mentioned, oil as a percentage of total production in 2026 is expected to increase a couple percentage points year-over-year to approximately 73%. Every year, we account for a few items in our production guidance that are unique to offshore operators. Our approach to 2026 guidance is consistent. For example, we have planned maintenance projects throughout the year designed to ensure safe operations, high uptime, and lower unit operating costs for the life of those assets, but these activities reduce our production while they occur. We estimate planned downtime will impact annual production by 6,000 barrels of oil equivalent per day, which includes the annual impact of approximately 2,000 barrels of oil equivalent per day from the Genovese well, which will be shut in for the first half of the year. We also account for weather-related downtime such as hurricanes, in addition to an estimate of unplanned downtime associated with third-party facilities and pipelines. We have included a contingency of an aggregate 4,000 barrels of oil equivalent per day for these unplanned downtime and weather-related factors into our 2026 guidance, consistent with last year’s approach. Two important items to note. First, when normalizing for weather and deferred production at Genovese, our 2026 oil guidance would have been higher year-over-year. Additionally, we expect our year-end 2026 exit rate to be higher than our 2025 year-end exit rate due to the timing of new projects coming online and the return of the Genovese well in the second half of the year. Additional guidance details can be found in our presentation posted on our website. To wrap up, 2025 was a phenomenal operational and financial year for Talos Energy Inc., and we are excited to build upon this success in 2026. We believe our vision, strategy, and strong financial delivery combine for an exciting value proposition to investors. We will now open for questions. Operator: Thank you. Please go ahead. Your first question comes from Greta Drefke from Goldman Sachs. Greta Drefke: Good morning all, and thank you for taking my questions. My first is just on the Monument project this year. Can you speak a little bit more about the key next operational steps for the project and the path to first oil by 2026? You mentioned March spud for the project. Is that spud timing just for the first well or for both of the wells? Paul Goodfellow: Good. Thanks, Greta. We expect Beacon to mobilize the rig, as we said, in March. They will have one rig working on the opportunity, and so they will drill both wells on a back-to-back basis and then complete the wells, which is why we expect both wells to be completed by the end of the year. The plan that we have at the moment is a continuous operation starting in March. Greta Drefke: Great. Thank you. And then just my second question is on the safety valve issues you experienced as part of the fourth quarter. Can you speak a little bit more about the next operational steps of remediation of the valve at Genovese? How long do you expect it will take to receive the equipment you need, and how much time would it take to procure or send a rig over to complete the fix? Paul Goodfellow: Yeah. Thanks, Greta. Let me maybe go back. We operate or have interest in about 120 subsea wells in the Gulf Of America, and so this is a fairly isolated incident. This well has been on production since 2018. It came as part of Fieldwood, and it has produced about 12 million barrels so far. The failure we have identified is a piston failure that meant that the flapper was closing. Importantly, there was no leak or environmental incident as a result of that. The teams have worked incredibly hard to not only identify the leak and the cause, but then to pull a remediation plan together, which, of course, means getting access to a vessel and access to the right type of equipment. What we are choosing to do here is to run an insert safety valve off an intervention vessel versus pulling and replacing the completion with a drill rig. We expect that to take place in the early part of the second half of the year. It is important to understand that whilst we operate the well, we do not operate the facility, and therefore we have to align timing with the operator of the facility. This well is tied back to the Nakika facility, and we are working very cooperatively with the operator of Nakika to line that up. Our plan is to bring an intervention vessel in to run an insert safety valve and to have the well back online in the early part of the second half of the year. It is also important to note that this failure, as disappointing as it was, is very different from the issue we had with a safety valve at Sunspear earlier in 2025. That happened during the completion activities. It was actually due to some proppant during flowback becoming embedded in the flapper, causing that flapper not to seal. In that case, we were on location, we had a rig under contract, and the best path and the only path there was to pull the completion and totally replace it, which is what we did, and we have seen great production and stability from that well ever since it came online. I hope that gives you both the color and the context, Greta. Greta Drefke: Thank you very much. Operator: Your next question comes from Timothy A. Rezvan from KeyBanc Capital Markets. Please go ahead. Timothy A. Rezvan: Good morning, folks. Thank you for taking our questions. As a start, if you can give us a little more detail on next steps at Daenerys. You mentioned late 2026 as the timing of appraisal results. You operated much quicker than expected with your first discovery well, so do not know if you could clarify what late 2026 means. And then if we do get positive appraisal results, I know you have to look at the results to get next steps, but how could things play out if things continue to trend positively there? Thanks. Paul Goodfellow: Yeah. Thanks, Tim. We expect to spud the well late in the second quarter. We have scoped the well, as we mentioned in our comments, in a way to give ourselves the maximum appraisal information in that secondary block, including the ability to have future utility of the well in terms of future sidetracks. We would expect that the well would be drilled and evaluated as we get to the end of the third quarter or start of the fourth quarter, and then it is a matter of exactly, as you said, what is the information and what does that then lead to in terms of a path forward. As we have always said, in a successful case where it looks like Daenerys may be a stand-alone, then we have already started the design basis of what that would look like. It may be less optimistic where it is maybe more of a tieback. We have also started looking at the optionality for that, and so we are working those in parallel. But it is just too early, Tim, to say in terms of exactly what the timeline would be. We will continue to update you throughout the year as we get back onto that well, execute, and get information. I would note, of course, that given we will be executing that well through the summer months, there is the risk of weather impact in terms of a delay, but that is always a risk within the Gulf. Timothy A. Rezvan: Okay. Okay. I appreciate the context. I guess we will stay tuned on that. Then as a second question, Paul, you are almost at your one-year anniversary of joining. I would like to go a little bigger picture here. The share price was about 9. I know it is selling off today on Genovese, but still, it has been pretty strong financial and operational traction overall. You did not take this job, I am assuming, to run a sort of maintenance program. At some point, Talos Energy Inc. needs to be a growth company to get more relevance. Can you just talk about—you hit at 2027 organic growth opportunities—as you think medium term, your inclination or the need to grow the business to get more scale? And where I am going, this organic growth coming, does that preclude you from seeking inorganic growth opportunities? Just kind of curious—I know it is a broad question—on the lay of the land from here after a year in the role. Thanks. Paul Goodfellow: Yeah. Thanks, Tim. I think it is described very well in the strategy that we laid out in June, and our focus has been on rigorous execution of the strategy. Now, clearly, the near-term actions are always more visible, and I am incredibly proud of the work that the teams have done to drive that culture of improvement and improving our business each and every day, as that gives us the ability to think more mid and long term. As we have spoken about in terms of the second and third pillars, we are actively working those. You have seen us be very active in the, let us say, organic space in terms of lease sale activity. We actually started looking at that in the middle of last year with seismic that we, or further seismic that we, acquired and interpreted that informed what we wanted to do in the lease sale. The fact that we brought in roughly 300 million barrels of gross unrisked resource that is operated, I think, is an important point along the journey. Clearly, as we have always said, we will look at continued bolt-on, but also inorganic activity outside the Gulf Of America, which fits into more of that pillar three that we have spoken about. That work continues to be undertaken and executed, but within the very disciplined capital allocation framework that we have laid out. We are not going to look to build the portfolio inorganically just to get bigger. We will look to do it to get better, and therefore any deal that we do will need to absolutely fit within the capital framework that we have. We also set an incredibly high bar in terms of the risk profile of projects, making sure that it ties into the core that we have—subsurface and operational skills—and that it clearly fits strategically where our skill set is. I am very pleased with where we are, as you say, almost a year into my tenure, with a great team here that we have amassed that has phenomenal breadth of industry experience I think is being brought to bear into not just thinking about how we drive culture, but how we drive and shape Talos Energy Inc. of the future. Timothy A. Rezvan: I appreciate the insight. Thank you. Operator: Your next question comes from Paul Diamond from Citi. Please go ahead. Paul Diamond: Thank you. Good morning all. Thanks for taking the call. Just wanted to touch quickly on the Tarantula facility. You talked about flow-through increasing up to 38 with relatively low capital intensity debottlenecking. I guess, question being, how much more meat is on that bone there, kind of extrapolatable? And talk to other assets—like, is that a process transferable to other assets, or is this more just having to do with Tarantula? Paul Goodfellow: Yeah. Thanks, Paul. The first thing to say is when we talk about improving our business each and every day, what Will and John Spath and the team have done at Tarantula embodies that and is a real visible example. As you know, we expanded the nameplate capacity of Tarantula in 2025 to take account of the Katmai West number two well up to 35,000 barrels a day. What the team has then done—as they do on every asset and opportunity—is really look for where the limiting factors are and can we remove those limiting factors to eke a few more barrels of continued consistent throughput through the facility. That is what Will and the team have done at Tarantula where they have taken that from 35,000 barrels a day to roughly 38,000 barrels a day. To use your words, I think that bone is pretty clean, and I do not think you will see any more optimization gains from Tarantula. We now shift our attention to more of the growth side in terms of looking at Katmai North, which is a potential opportunity for us as we come into 2027, and, dependent on the outcome of that and, of course, other strategic leases that we have just taken in the big beautiful lease sale, how we should prosecute those will then determine the next step of expansion potentially at Tarantula that will be more capital intensive and will most likely include the expansion of the pipeline connection that we have from the facility. Now, the second part of your question in terms of how transferable is what the teams are doing at Tarantula, I would say it is absolutely transferable, and in fact you see that working in practice today. The approach of can we get more production and can we get more reliable production is something that has underpinned part of the tremendous results that the team has delivered in terms of improving each and every day. We have seen it, for example, in terms of gas lift optimization studies that we have done across the totality of the portfolio. We have seen it through putting a dedicated flow assurance team together to really make sure that we are optimizing flow assurance. Whilst you may not see a facility expansion where we are limited by facilities relative to wells—which is a specific challenge at Tarantula—the idea of optimizing and increasing throughput is something that the teams are doing on every facility that we operate, Paul. Paul Diamond: Understood. I appreciate that. And just circling back a little bit to the 11 leases you talked about with the big beautiful auction. Can you provide a rough expectation of a timeline on those going forward and where they fit in the larger development program and from a priority perspective? Paul Goodfellow: Yeah. Thanks, Paul. The criteria with which we looked at what leases to go and bid on were very similar to the strategic frame that we have, which is it has to be complementary to the skill set that we have. There are key plays we want to exploit and explore. We wanted to look for prospectivity that raised the overall average size of prospects that we have as well as adding material potential volume to the portfolio, but we wanted to do that in a way that we could take those opportunities through to competing for capital in a fairly short cycle. The timeline that we are generally working on—all the teams are working on—is from lease award, which, of course, once we are named the apparent high bidder, you then have to go through the process of formally awarding those leases. As we mentioned, we have had eight of the 11 formally awarded as of today. From the point of lease award, we are looking at roughly plus or minus a year or so in terms of having an opportunity ready to compete on the drill schedule. I think we would be looking, as we build the 2027 capital plan, to be bringing those opportunities forward to compete for capital. What is also a really important point is, if you take it back a step in terms of from the ideation, getting the seismic, interpreting the seismic, going for the lease—that whole process up until being ready to compete on the drill schedule is probably somewhere less than two years, which I think is a significant achievement and toward the upper end of the norms within the industry. Paul Diamond: Understood. Appreciate the time. I will wait back. Thanks, Paul. Operator: Your next question comes from Michael Stephen Scialla from Stephens. Please go ahead. Michael Stephen Scialla: Hi, good morning. Paul, the Cardona and CPN were both drilled ahead of schedule and under budget. I guess Cardona has been online a little bit now. Can you say anything about the production expectations for those two wells? Maybe how Cardona compares to what you anticipated and what you expect from CPN? Paul Goodfellow: Yeah. I think the easiest comment to say is both of those are in line with the expectations that we had. Again, both were executed very well. The CPN well clearly needs a tie-in, and so the time for that should take place, and that well should come online in the second half of the year into the third quarter. Based on the flowback data we have, we are very pleased with that well and confident that it will be at the upper end of the expectation range that we have. Just to tie back to a point that Zach was making in his comments, one of the reasons that we see oil production rising towards the end of the year, of course, is because of those projects that will be coming on. Both the CPN well, the Brutus rig program, Genovese coming back, and then, of course, Monument, hopefully right at the very end of the year, will give us an oil exit rate that should be in the low double digits higher than where we were at the exit rate of 2025, also with a higher oil cut from a totality of a production point of view. We would expect the average oil cut in 2026 to be close to 73%. Of course, 90% plus of our margin comes from our oil production versus our gas production, and so the pivot that we have had has been very thoughtful, and we would expect to continue down that frame as we go through 2026 to 2027. Michael Stephen Scialla: Wanted to ask about the Katmai North. You said you have got new seismic data there that is maturing. I wanted to see what—I think at one point you had said that Greater Katmai area, the resource there, could be maybe double what the Katmai one and two suggested is right now. So I wanted to see if that is still the case or what the potential resource looks like with the Katmai North and what the timing of testing that prospect looks like. Paul Goodfellow: Yeah, Michael. I think we have said, and there is no real change, that Katmai North—assuming it comes successfully through the seismic interpretation process—will compete for capital in 2027. We are still extremely encouraged by the greater Katmai area, which is why we took more leases in the recent lease sale. We would see at least the resource size that we have mentioned before, but we will update you as we do that work on those opportunities as we go throughout the year. Michael Stephen Scialla: Sounds good. Thank you, Paul. Paul Goodfellow: Thank you, Michael. Operator: Your next question comes from Nathaniel Pendleton from Texas Capital. Please go ahead. Nathaniel Pendleton: Good morning. On Slide 14, you mentioned investing in state-of-the-art seismic and proprietary—can you talk about those investments? And have there been any tangible results from those campaigns yet? Paul Goodfellow: Yes. Thanks, Nate. The first tangible results in terms of first step, of course, is the lease sale success that we have just had. The areas that we were interested in actually went through advanced reprocessing, and we will continue to do that in other areas that we have an interest in. The other thing that is important is our use of OBN seismic, where we actually used that to pick the Katmai two West well, also used that on the current Brutus redevelopment program. We believe that seismic data, advanced interpretation, and grounding our decisions in the fundamentals of reservoir engineering and geology is absolutely critical to the success that we have had and will continue to have here at Talos Energy Inc. Nathaniel Pendleton: Got it. Thank you. As my follow-up, maybe regarding the capital program for next year, is that 10% exploration CapEx target what you see as a good long-term run rate? And how should we think about your preferred long-term allocation of operated versus non-operated activity given the dominance of Monument in the coming year? Paul Goodfellow: That is a short-term view in terms of it just happens to be the big development project that we have at the moment is operated by Beacon, and therefore there will be a higher proportion of non-operated capital in the Gulf Of America. I think our strength actually comes from being an operator. We show that in terms of the leading EBITDA margin results that we have, the operating scale and low cost that we have, and our ability to drill, complete, and tie in a very capital-efficient way. We are very happy to partner with companies like Beacon and others—it is a key part of our portfolio—but we bring a real strength from an operating point of view. We will continue to look for operating opportunities, but we will never turn away a non-operated opportunity where we see value and where we can help the operator improve that value. In terms of do we have a target for exploration spend, the answer is no. Ten percent happens to be where we are this year. I would expect as we get into 2027, given the fact that those lease sale opportunities are maturing through to compete for capital, you could see something slightly higher than that. But we will bring it always back to the capital allocation framework that we have, which talks about investing in high-margin production, making sure that we maintain the strength of the balance sheet, returning cash to shareholders, and then investing in accretive growth. Clearly, organic exploration falls into that fourth bucket. Nathaniel Pendleton: Understood. Thanks for taking my questions. Operator: And our last question comes from Noel Augustus Parks from Tuohy Brothers. Please go ahead. Noel Augustus Parks: Hi. Good morning. I wanted to ask a bit about the service environment. I just wonder if some of the optimism we have been hearing from the offshore drillers around 2027 and maybe even heading into 2028—there is sounding like there is some possibility of maybe producers all crowding through the same door at the same time as far as getting access to rigs. I just wondered how much that might be figuring in your planning these days. Paul Goodfellow: We always look at where we are within the market. Clearly, we plan many years ahead in terms of what slot opportunity sets could be, making sure that we are advancing the procurement strategy that we have along with the technical strategies such that when we are ready to take an investment decision, we have the supply chain lined up, and that is the approach that we will continue to take. Many things, of course, can change the outlook that any company has—certainly commodity price is one of those. As I mentioned before, our focus from a commodity price point of view is to make sure that we build and think about projects that have the lowest breakeven cost possible. That is what we are doing for 2026: driving forward projects that have breakevens in the $30 to $40 range. That gives us the resilience that we need. We clearly see opportunities in terms of capacity in the marketplace as we go into 2026 and through to 2027, but, of course, for us it is important to partner with the right type of providers that share the ethos around safety, environmental stewardship, and ultimately performance. I think you have seen us demonstrate that over the last twelve months or so in the partnership that we have had with the West Vela. Noel Augustus Parks: Great. Thanks. And I was wondering about the company’s historical strategy of favoring assets that feature or include underutilized infrastructure. I am just wondering what you are seeing in the sort of market for legacy infrastructure out there. As there is more capital heading to the deepwater, are other producers like-minded in terms of the strategic value of using current infrastructure as a starting point? Or is that sort of a finer point, say, for new or returning entrants who are looking to get a Gulf program rolling or ramped up? Paul Goodfellow: Thank you. I would offer maybe a couple of thoughts. We clearly see more interest in the deepwater in the Gulf Of America. I think I mentioned this when I first came into the role here in terms of, I believe—and we believe—that the low carbon intensity, high-margin deepwater barrel is vitally important in terms of supplying the energy that the country and the world need, and I think it will be here for many years and decades to come. I do think that the technical barrier to entry is maybe higher than some think. The ability to operate in deep water needs key skills and capabilities, which we have got, and therefore that leads to the ability to actually get access to infrastructure and manage infrastructure. Clearly, the infrastructure element will always be a consideration for ourselves as we think about what opportunities to drive within the deepwater, be it in the Gulf Of America or elsewhere. I cannot really comment on how others think about it, but that is certainly the lens through which we look at it. Noel Augustus Parks: Okay. Great. Thanks a lot. Operator: This is all the time we have for today’s questions. I will now turn the call back over to Paul for closing remarks. Paul Goodfellow: Thank you, Julie, and thank you all for joining today and for your interest in Talos Energy Inc. I would like to close by recognizing again our dedicated team and their commitment to providing safe, reliable, and responsive energy that really is vital to power our everyday lives and the world. We look forward to updating you as we execute the plans we have laid out today throughout the year. Thank you. Operator: Ladies and gentlemen, this concludes today’s conference call. You may now disconnect. Thank you.
Operator: Good morning, everyone, and welcome to BKV Corporation's fourth quarter and full year 2025 earnings conference call. As a reminder, today's call is being recorded. A brief question-and-answer session will follow the formal presentation. I would now like to turn the call over to Mr. Michael Hall, Vice President of Investor Relations. Please go ahead. Michael Hall: Thank you, Operator, and good morning, everyone. Thank you for joining BKV Corporation's fourth quarter and full year 2025 earnings conference call. With me today are Christopher Kalnin, Chief Executive Officer; Eric Jacobsen, President of Upstream; and David Tameron, Chief Financial Officer. Before we provide our prepared remarks, I would like to remind all participants that our comments today will include forward-looking statements, which are subject to certain risks, uncertainties, and assumptions. Actual results could differ materially from those in any forward-looking statements. In addition, we may refer to non-GAAP measures. For a more detailed discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements, including those associated with the recently completed power JV transaction or the integration of recently acquired upstream assets, as well as the reconciliations of non-GAAP financial measures, please see the company's public filings included in the Form 8-Ks filed today. I would also point listeners to the updated investor presentation posted this morning on our Investor Relations website. We encourage everyone listening to review those slides and our forthcoming annual report to be filed with the SEC for further information on our business, operations, results from the quarter and full year, and details on our 2026 guidance. I will now turn the call over to our CEO, Christopher Kalnin. Christopher Kalnin: Thank you, Michael, and thank you, everyone, for joining us to discuss our fourth quarter and full year 2025 results. As we close out 2025, I am proud to report that BKV Corporation delivered a transformational year that exemplifies our “said-did” culture and positions the company for sustained, long-term profitable growth. We generated strong earnings, maintained a fortress balance sheet, and delivered strong growth. 2025 marked our first full year as a public company, and we executed across each pillar of our closed-loop strategy. Our business lines of upstream natural gas, natural gas midstream, carbon capture, and power deliver premium, low-carbon energy solutions that are increasingly sought after in today's energy markets. In our upstream business, we exceeded expectations throughout the year, and our performance across the Barnett and Northeast Pennsylvania showcased the depth, durability, and competitiveness of our upstream assets with approximately 8% exit-to-exit organic production growth on upstream development capital well within cash flow and with top-tier F&D costs. The successful close of the Bedrock acquisition in the third quarter was executed in line with our plans. The transaction materially expanded our footprint in the Fort Worth Basin and added high-quality assets. We added more than 100 MMcfe/d of production and nearly 1 Tcfe of proved reserves to our leading position in the basin. Our upstream business remains foundational to our growth strategy. We believe we have built a scalable, repeatable, and disciplined operating model for extracting value from mid-tenured shale basins. Our team is at the forefront of driving efficiency by leveraging technology, data, and AI to optimize development and performance across our portfolio. This is a model that we believe wins in mid-tenured gas basins over the long term. In our carbon capture business, we had meaningful progress in 2025. Earlier in the year, we secured a transformative partnership with Copenhagen Infrastructure Partners (CIP), who committed up to $500 million for joint investment in carbon capture opportunities. We are working hand in hand with their team to scale this business profitably. Our flagship Barnett Zero facility continues to operate efficiently and has achieved cumulative injection of over 311,000 metric tons since first injection in November 2023. Further, we have announced multiple new projects during the year, including projects in Texas with a large midstream operator and Comstock Resources. We recently signed definitive agreements with Comstock Resources to sequester CO2 from their Bethel and Marquet facilities in the western Haynesville play. We expect to commence commercial operations in 2028. I would like to thank Jay and his team for their continued strong partnership in these projects. BKV Corporation has taken a clear leadership position in carbon capture and materially advanced the projects in our pipeline towards commerciality. On the back of that momentum, we are refreshing our near-term CCUS injection target to 1.5 million tons per annum within 2028. We believe this volume run rate will enable the business to contribute materially to our financials. Carbon capture remains a key growth driver in 2026 and beyond. We remain on track with the start-up of our Cotton Cove and Eagle Ford facilities in 2026 and are excited about the future opportunities in this business. Our power business is a core growth engine within our closed-loop strategy. On the back of our recent power JV transaction, which closed on January 30, we now hold a 75% majority ownership in the 1.5 gigawatts of low heat rate generation capacity at the Temple plants, which are located at the center of ERCOT's accelerating AI and data center boom. BKV Corporation’s power assets performed well during Winter Storm Fern. Within ERCOT, natural gas supplied nearly 60% of power generation through periods of peak load. This represents nearly four times the next closest source and reinforces the central role of natural gas in ensuring grid reliability. We are well positioned to deliver capital-efficient growth from these assets as we seek to secure long-term fixed offtake agreements in the form of power purchase agreements (PPAs). In 2025, we continued to advance our structured and competitive process to secure a long-term offtaker for our Temple Energy Complex. We are currently evaluating proposals from multiple counterparties which have shown strong interest in our offering. The broad participation in this process has reinforced our conviction that our Temple Energy Complex is uniquely positioned to provide near-term power solutions to some of the largest technology companies and infrastructure developers in the country. We remain confident in the timelines we previously outlined and continue to target a potential PPA in 2026 to early 2027. BKV Corporation’s position in the state of Texas is ideally situated to benefit from the confluence of some of the biggest megatrends in energy. The Barnett Shale in the Fort Worth Basin sits underneath one of the fastest-growing markets for power and industrial growth in the country. We believe Texas is set to attract significant investment dollars in data center and other infrastructure over the coming years. BKV Corporation is working closely with state regulators, policymakers, and stakeholders to ensure investments in power and other forms of energy generate win-win outcomes for the state. Our strategy is backed by a systematic investment approach, which combines the winning formula of gas, power, and carbon capture to generate premium margins from our energy portfolio. Our carbon sequestered gas product, which we expect to hit the market this year, is a prime example of the unique energy products that BKV Corporation’s closed-loop strategy can bring to the market. BKV Corporation is excited about the future as we believe our differentiated strategy will create leading risk-adjusted returns for our shareholders. With that, I would like to hand the call over to BKV Corporation’s President of Upstream, Eric Jacobsen, to discuss our upstream and CCUS operational performance for the quarter and full year. Eric Jacobsen: Thanks, Chris. 2025 was an outstanding year for our operations, capped by a strong fourth quarter that highlighted the depth and quality of our asset base, the strength of our team, and the disciplined, efficient approach we apply across the business. For the full year 2025, our upstream business delivered, and in many cases exceeded, the targets we previously set, including the following highlights. We delivered robust organic production growth of 8% exit-to-exit while spending well within upstream cash flow and driving continued cost efficiencies. We beat and raised our full year legacy production guidance twice in the year, by 4% at midyear and then by another 1%, all within our initial development capex and while maintaining LOE at the midpoint of guidance. We achieved a step change in completions efficiency, setting multiple internal records above 22 horsepower-hours per day. We drilled several company-record laterals, including the longest well in the history of the Barnett Shale. We delivered top-tier performing new Barnett wells, with three ranking among the highest in the entire history of the basin based on first-month production. We lowered D&C cost per lateral foot to a gas peer-leading $545 per foot. We achieved consistent and sustained positive offset well, or POW, production, a unique advantage in the Barnett, which we discuss further in our investor presentation. We delivered the lowest base decline amongst our peers, supported by our extensive dataset and application of AI technology. We seamlessly integrated our recently acquired Bedrock assets, adding scale and inventory to our leading Barnett position. And we ended the year with approximately 6 Tcfe of 1P reserves valued at 10% of $3.1 billion. The fourth quarter was a continuation of the results we had seen all year. We again outperformed guidance across key metrics, punctuated by zero reportable safety incidents; production that outperformed the upper end of our guidance range at 940 MMcfe/d; we delivered our first NEPA well to production for the year and drilled three additional wells with completions expected in 2026; and we had over $6 million invested in rapidly progressing Bedrock development, landing full year 2025 development capital spend at $245 million. To note, we invested $319 million all-in corporate capex, which was below the initial low end of full year guidance. And we executed our first post-acquisition completions on the Bedrock assets, including two DUCs and two refracs, with strong results. One more example of Barnett competitiveness and an important proof point in the continued optimization of the Barnett development is what we refer to as positive offset wells, or POW. In addition to new wells outperforming type curve expectations, we are consistently observing a material and sustained uplift in parent well performance across our DSUs following new completions. Based on early analysis across approximately 30 new wells and their offsets, we have seen an approximate 22% uplift above type curve on average through the first 150 days of production. Roughly half of this outperformance is due to POW. Whether POW, peer-leading D&C cost, structurally lowered operating costs, or applying big data and AI, these and more combined validate our comprehensive operating approach of delivering durable value over the long term. And there are more innings yet to go. It is a model that we believe wins in every mid-tenured gas basin. We are applying that model to our Bedrock acquisition, which has proven to be everything we anticipated and more, with integration progressing ahead of pace. The assets fit seamlessly with our existing acreage position, creating further opportunities for lateral extensions, inventory additions, and multiple optimization levers. As an example of further accreting value, or what we call torque, we are actively evaluating over 60 equivalent 10,000-foot Tier 1 locations compared to 50 underwritten, and over 100 refrac candidates compared to 80 underwritten. Importantly, value creation from the acquisition is exceeding our underwriting assumptions in development counts, early-time performance, day-one LOE reductions, and other areas, reflecting our ability to apply torque to the asset and unlock incremental synergies and value. These assets complement our low base decline, attractive economics, and highly competitive and accretive inventory opportunities, which are all trademarks of our dominant Barnett position. Our performance throughout 2025 confirms that the Barnett is not only alive and well, but highly attractive and ideally positioned relative to other shale plays with advantaged access to the heart of the Gulf Coast gas market. Looking ahead to 2026, we expect continued strong performance from our upstream operations enhanced by the full integration of our Bedrock assets. While the impacts of Winter Storm Fern resulted in significant and unanticipated downtime, we still expect strong production in the range of 900 to 930 MMcfe/d during Q1. Development capex spend in the first quarter, we anticipate to be in a range of $70 to $100 million. For the full year 2026, we are guiding to 935 MMcfe/d of production on $240 million of development capital spend, right in line with our 2025 development program. Our upstream business continues to serve as the backbone of our closed-loop operations model, generating the cash flow that enables growth across all our business lines while maintaining operational excellence and capital efficiency. Turning to carbon capture, 2025 was a year of strong, accelerating momentum for the business. Against the backdrop of growing market demand and supportive policy tailwinds, we advanced multiple projects across our portfolio, progressing them through critical stages of evaluation, development, and execution. Key highlights from the continued expansion and maturation of our development pipeline include our Eagle Ford and Cotton Cove projects, which continue to progress as planned with commencement of operations at both locations on track. At our East Texas project, where we are working with the same large midstream company as we are in the Eagle Ford, we have reached internal FID and are currently scheduled to begin drilling the injection well in the first half of this year. And we also plan to drill our High West stratigraphic test well in the first half of the year. In addition, as Chris mentioned, we have recently executed definitive agreements with Comstock to add CCUS to their Bethel and Marquet facilities in the western Haynesville play in East Texas. We continue to advance discussions on additional CCUS opportunities with new partners and emitters, with a focus on larger projects that offer greater economies of scale. Several of these opportunities are referenced in our updated investor presentation, and we look forward to providing updates as appropriate. Our flagship Barnett Zero facility continues to maintain exceptional reliability, providing the operating model that we will apply to our soon-to-be-commissioned projects. Given our continued execution and expanding project base, our path to achieving 1.5 million tons per year run-rate CO2 injection during 2028 is well within reach. In addition to the projects currently underway, we have commissioned several studies to evaluate the feasibility and cost profile of deploying post-combustion carbon capture technologies. Demand signals continue to strengthen across power and industrial markets as customers seek reliable, low-carbon energy solutions, and we are positioning the business to remain a leader in this space. I will now turn the call over to our CFO, David Tameron, for a review of our power business and financial results. David Tameron: Thank you, Eric. 2025 was a year of meaningful progress for BKV Corporation as we continued to execute and deliver on our promises. We had significant transactions in upstream, power, and CCUS. We strengthened our balance sheet and improved our capital structure, issuing our first-ever bond while also increasing float and improving liquidity in our stock. We entered 2026 with significant momentum and are well positioned to capitalize on our strategic initiatives. In our power business, we delivered consistent performance throughout 2025, with the Temple Energy Complex maintaining high availability factors, minimal unplanned downtime, and strong operational execution. The Temple plants achieved a combined average capacity factor of 57% during the fourth quarter of 2025 and 59% for full year 2025, generating over 7,600 gigawatt-hours. During the fourth quarter, power prices averaged $49.69 per MWh, with natural gas costs averaging $3.55 per MMBtu. This resulted in an average quarterly spark spread of $24.54 per MWh. For the full year, power prices averaged $48.86 per MWh with natural gas costs averaging $3.31 per MMBtu. This resulted in an average full-year spark spread of $25.36, underscoring the growing power demand in ERCOT. Average spark spreads for the full year were up over 15% versus the prior year. Power JV adjusted EBITDA was $31 million for the fourth quarter and $127 million for the full year, of which BKV Corporation had a 50% interest. Reflecting our new controlling ownership stake, beginning with our first-quarter 2026 results, we will consolidate the power JV. For the first quarter, we expect gross power JV EBITDA of $25 to $35 million, reflecting typical seasonal patterns, capture of storm-related power pricing, and strong operational performance thus far in the quarter. Importantly, we weathered Winter Storm Fern without any related downtime. This is an important proof point for the reliability of our Temple assets as we engage in PPA offtaker discussions. For full year 2026, we are guiding to a power JV EBITDA range of $135 to $175 million. This outlook reflects the strength of the platform we built, continued operational execution, and confidence in the earning power of our Temple assets. Turning to our 2025 corporate financial performance, these results clearly demonstrate our team's relentless focus on execution and ability to consistently deliver. Combined adjusted EBITDAX attributable to BKV Corporation was $109 million in the fourth quarter and $390 million for the full year. This represented a 19% increase quarter over quarter and a 47% increase year on year. For the fourth quarter, adjusted net income was $27 million, or $0.29 per diluted share. For full year 2025, adjusted net income totaled $120 million, or $1.40 per diluted share. Capital expenditures totaled $102 million for the fourth quarter and $319 million for the full year. This full year result is below the low end of our original guidance, reflecting highly competitive capital efficiency and our ongoing attention to capital discipline and cost optimization. Importantly, after fully funding all capital investments across our business lines, and excluding any cash contribution from our power JV, we generated positive free cash flow for the entire year, and we did this while further strengthening our balance sheet and improving our liquidity. At year-end, total debt was $500 million, with the only debt outstanding reflecting our recently issued senior notes. Net leverage ratio was 0.9x. Cash and cash equivalents totaled $199 million, and total liquidity stood at $984 million, more than double the prior year. Looking ahead, our 2026 capital investment program is structured to lay the foundation for a multiyear phase of disciplined growth. There are three key components of this program. First, total gross capital expenditures of $410 to $560 million, including an anticipated $135 million of gross strategic power capital. This power investment reflects the constructive conversations we are having with multiple potential PPA offtakers. Second, on a net basis and excluding our power growth capital, we are targeting a net capital investment midpoint of $324 million, effectively flat year on year. Third, and importantly, based on current strip pricing and just as we did in 2025, we expect our total full year net capital expenditures to be fully funded within cash flow. This approach reinforces our commitment to disciplined capital allocation while positioning the company for sustainable, long-term value creation. Regarding hedging, our program continues to provide downside protection while allowing participation in favorable market conditions. In our upstream business, our total 2026 hedge position protects just over 60% of forecasted production, with gas hedged at $3.85 per MMBtu and NGLs hedged at $22 per barrel. In our power business for 2026, we have hedged 40% of our ERCOT generation capacity through heat-rate call options, or HERCOs. These HERCOs include substantial premium revenues that help mitigate annual earnings volatility. We have also locked in fixed spark spreads on roughly 100 megawatts, while retaining meaningful merchant exposure across the balance of the platform. For the remainder of our 2026 guidance, please refer to our complete schedule, which can be found both in the press release and our latest investor deck. With that, I will turn the call back to Chris for his closing remarks. Christopher Kalnin: Thanks, David. As we conclude our discussion of 2025 and look ahead to 2026, I want to highlight what truly differentiates BKV Corporation. We have built a distinctive, winning strategy connecting natural gas production, power generation, and carbon capture into a virtual closed-loop platform uniquely positioned to serve the evolving needs of the energy market. This strategy is operating today, delivering results, and positions us to shape solutions for the evolving needs of hyperscalers, data center developers, and industrial customers. Looking ahead to 2026, we see clear growth vectors. Increased control of our power JV is expected to enhance earnings and cash flow while enabling tangible strides towards executing a PPA. Our CCUS business is accelerating momentum, with additional projects coming online soon and with an increasingly high-graded portfolio of attractive projects in development. Our upstream business remains a reliable, repeatable cash engine with leading corporate decline rates and F&D metrics. Finally, I want to thank our exceptional BKV Corporation team for their commitment to our values, our safety culture, and their focus on the execution of our strategy. We enter 2026 with strong momentum, clear line of sight to growth, and confidence in our ability to create long-term, risk-adjusted shareholder value. Operator, we are now ready to take questions. Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. We ask that analysts limit themselves to one question and a follow-up so that others have the opportunity to do so as well. One moment, please, while we poll for questions. Our first question comes from Betty Jiang with Barclays. Please proceed with your question. Betty Jiang: Hi. Good morning. Team, congrats on just strong execution across all segments in your first year. I want to start with a question on the strategic power growth capex. Can you, Chris, speak to what specifically is that spending on? Clearly, it is not maintenance, and it is aligned with the progress in the conversation that you are seeing. So can you just give us a bit more color on is it spending ahead of contract that you are expected to sign later this year or early next year? Thanks. Christopher Kalnin: Yes. Hey, Betty, thanks for the question. So you are correct. The power investments are strategic. As you can imagine right now, as you discuss long-term offtake agreements with potential customers, those designs are going to be in a private use network type setup. That is the assumption here. And so as part of a private use network, you need to invest in transformers, switches, power lines, generation equipment, earthworks, pipelines, water. And that infrastructure then gets recovered over the life of a contract. Right? And so what we are guiding here is that we have got designs and/or investments that need to be made to enable this, and that is really where you see that capital. When you think about the existing Temple 1, Temple 2 capex, you can imagine historically that has been in that sort of $5 million-ish per year level, and we expect that to continue. So the vast majority of what we are guiding here to is really for establishment of a private use network type setup, and that is, again, we think incredibly important to accreting value in a very capital-efficient manner for BKV Corporation. David Tameron: Yes, Betty, just if I could tack on one thing. Just keep in mind that all this is going to be funded within cash flow. Our entire 2026 program, including strategic power capital, is going to be within cash flow for 2026. Betty Jiang: Got it. And it also sounds like you recover this capex in that PPA contract down the line as well. Christopher Kalnin: Exactly. It works just like a lease, Betty. If you invest and a landlord puts in infrastructure, then they recover it in the rent. It is the same concept. In a PPA, you basically amortize the cost of your capital over the life of a contract as part of the investments you make. Betty Jiang: Got it. That makes sense. My follow-up is on the CCS business. It is really good to see that million-ton-per-annum target getting raised to 1.5. Clearly, momentum on that asset. Can you speak to the financial implication of that business going forward? Maybe help us with maybe dollar-per-ton margin on that business. And what are you seeing in the market to drive that confidence to raise that long-term target? Eric Jacobsen: Hi. Good morning, Betty. This is Eric. Thanks for the question on CCUS. It is a good one, and we have signaled before, on the back of the passage of the One Big Beautiful Bill Act, some expanded commercial interest. We continue to see that, and that commercial interest and the subsequent projects like Comstock that we were excited to announce definitive agreements reached upon, in total, has given us the confidence to raise that target to 1.5 million tons run rate within 2028. So we are stair-stepping into that already this year with two more projects coming on in the first half. We will be drilling another injection well, a High West stratigraphic well, and then advancing these commercial agreements like Comstock towards FID. You can think about the economics of these projects in the kind of $48-per-ton EBITDA range, and those are the kind of solid economics we use as we march forward towards that 1.5 million tons. Betty Jiang: That is great. Thank you. David Tameron: You bet. Operator: Our next question comes from Scott Gruber with Citigroup. Please proceed with your question. Scott Gruber: Yes. Good morning, and I will echo the congrats on a strong performance last year. Given multiple vectors of growth here, Chris, I wanted to come back to power. You are investing in a private use network. It sounds like that is separate from the grid, so just wanted to confirm that. And then there are discussions happening at ERCOT around alterations to their grid connect approval process. How is that impacting your discussions with potential customers for a longer-term PPA? Christopher Kalnin: Hey, Scott. Thanks. Good questions. On the private use network, the setup would be ultimately to connect it back into the grid. So you can imagine it is a behind-the-meter setup. You would hypothetically connect into a data center directly from your generation assets, but then you would have a switching yard that would feed a substation which is grid-connected. And those timelines may not match up one-to-one, and so, as we have mentioned, this is probably where you are going to see the market move with co-located power generation over the next few years. The reason for that is manyfold, but a lot of it has to do with transmission congestion. One of the biggest constraints in the market—this will get to your second question—is the ability to move electrons in sizable form in and out of localized areas. Having co-located power in a private use network setup really does solve a lot of the issues associated with that. It optimizes the amount of capex that needs to be incorporated in the grid. That is really where we see the market going. In terms of the regulation specific for Texas and ERCOT, I think it is overall bullish. Texas is going big on data center infrastructure. It is open for business. There is a very strong feeling here in the state to promote investments in the power grid. We think Texas is one of the states that is really going to figure this out quickly, and BKV Corporation is taking a leadership position in power in Texas. With regards to the regulations themselves, the major concerns of the grid operators are: one, we want to ensure grid reliability—so how are you considering that; two, we want to make sure rates are fair and equitable to existing customers across the state; and three, we need to make sure that new investments are built into the system or are encouraged. The regulations are orienting towards large load—that is the SB 6 regulation that everyone is talking about here—and we think it is incredibly constructive because what they are doing is creating a framework to high-grade projects that address all those three things: grid reliability, ability to ensure equitable rates to existing customers in the state, and then adding grid generation assets. Our designs that we have been describing, including the capex I mentioned, address those three key points. We think this is going to high-grade the projects that are real, that have real customers, that have real funding behind them, and weed out those projects which are speculative and not as real. Overall, we are active with the regulators and the stakeholders here in the state, and we think that Texas figures this out very quickly. A lot of customers have that same view. Scott Gruber: I appreciate all the color. I also want to turn to the Comstock deal. Good to see that across the finish line. Can you walk through the injection ramp at those facilities, as well as the timing of the associated capex? And is there capex associated with those projects in the second half of this year, for instance? Just some color there would be great. Christopher Kalnin: Yes. Thanks, Scott. It is a good question. I appreciate Jay and his team really working with us on this project. If you think about what we have guided to, we are expecting to be injecting in 2028. So that is when we are going to commercialize these projects. We did not guide to a volume ramp. Obviously, that is something that we are working with Comstock and we will figure out. You can think about the volume as multiples of our current injection amounts, so it is a significant amount of injection volume. If you think about the spend curve, most of these projects follow a typical construction S-curve. So within the last 12 months before injection, that is when you see a majority of the capex get spent. We have historically guided to a couple hundred dollars per ton of capital that has to go into investment. That is not a bad way to think about it. You should expect that spend to be more back-end loaded, and then the volumes themselves to be multiples of what we are currently injecting. Scott Gruber: Great. Exciting. I appreciate the color. Thank you. David Tameron: Thank you. Thanks, Scott. Operator: Our next question comes from Jonathan Martini with KeyBanc Capital Markets. Please proceed with your question. Jonathan Martini: Hi. Good morning. Thank you for taking our questions. On power, on slide seven, you referenced a potential PPA execution on 4.5 terawatt-hours of unutilized capacity. Can you just clarify whether this implies a PPA covering just a portion of the Temple plants' capacity, with the remainder being sold into merchant markets? Or just how you are seeing the structure of a PPA shaping up based on your latest discussions? Christopher Kalnin: Yes. Jonathan, it is Chris here. It is a good question. When you look at Temple today, we have two identical power plants in Temple 1 and 2, each 750 megawatts. Today, we hedge roughly half of the complex—so one power plant–equivalent worth of power. There are several reasons you do that. Oftentimes, you can sequence your maintenance to be down on one plant and be fulfilling your power obligations off the other, and so we see a PPA in a similar type structure. A PPA effectively is a long-term hedge on power prices. You could imagine that you are going to always be looking at about half your capacity being contracted and the other half being floated so that you can manage around your maintenance schedules and have resiliency as well. The balance of the volumes that are not contracted, you are absolutely right, from a behind-the-meter setup, you would be able to feed that into the grid and sell that, and you are able to load balance. If you have additional power that the customer is not using, you would theoretically sell that additional power into the grid as well. When you think about these agreements, they are structured like long-term offtake agreements that you would see potentially even for an LNG contract. They are substantive. You can imagine something like 750 megawatts over 10 to 20 years with a structured price, which is somewhat a capacity payment blended with an energy payment, and at a price that is typically about strip. These are the structures that we see in the market today and are good reference points. You are starting to see the announcements on the gas side for these. That is how you can envision something like this coming together. Jonathan Martini: Okay. That is great context. Appreciate that. Just moving on to CCUS, on the sequestration outlook for a 1.5 million ton annual run rate by 2028, it is an increase from the prior 1.0 million tons you saw by 2027. Just on that gradual ramp, can you help us understand how you see those volumes scaling throughout 2030? Eric Jacobsen: Sure. Hey, good morning, John. Eric here. For the ramp through 2030, I will start with the ramp into 2028—the 1.0 million tons, as you referenced, we have updated and upgraded that on the back of a lot of commercial interest, as I mentioned earlier, following the One Big Beautiful Bill. We have taken that commercial interest and translated it into projects like the Comstock project and others in the making that we are progressing towards FID. As I mentioned, we have the two this year, we are drilling some more wells, and we are really excited about this steady cadence of capex to get us to that 1.5 million tons by 2028. Then, as we ramp from there into 2030, the volumes start to ramp significantly on the back of some of this commercial interest in bigger projects that we are navigating now. On the back of the seven Class VI permits that we filed—six of which are in Louisiana, all of which are progressing nicely—you will remember in Louisiana, our High West project is surrounded by 30 million tons of CO2 emissions within a 30-mile radius. You can see the size and magnitude of projects that help us start to scale this business dramatically past 2028 on the back of these existing Class VI permits, roughly 50,000 acres we have under pore space lease, and a really nice platform to grow post-2028 as we deliver on the 1.5 million tons run rate within that year. Jonathan Martini: Understood. Appreciate the context. I will leave it there. Operator: Our next question comes from Michael Furrow with Pickering Energy Partners. Please proceed with your question. Michael Furrow: Hello, good morning. Thanks for taking my questions. It seems like the company's willingness to develop the Temple 3 plant, if it is underpinned by an offtake agreement, is a positive indicator for your outlook on the PPA market as a whole. So would you say that your confidence level has improved in signing a quality PPA, and therefore, the potential for a Temple 3 plant has improved? Christopher Kalnin: Yes. Hey, Michael, good question. Absolutely right. If you look at what I have just described in terms of the way the regulators are thinking about the large load applications and the overall SB 6 process, having additional generation assets co-located with additional data center infrastructure is, in our minds, very critical. You need to be able to show that you are going to not only take power from the grid, but you are also going to contribute power to the grid and add to grid resiliency. That enters the concept of Temple 3. We believe that Temple 3 does contribute to that. It adds additional resiliency to the Temple Energy Complex. Originally, Temple was designed for three power plants. There is sufficient space, water, gas infrastructure, etc. It makes a lot of sense that as you start to design a private use network, you would include the construction and development of additional generation assets in the form of a, hypothetically, Temple 3. We are excited about that. Again, it would be backed by commercial arrangements. In the same vein as the capital we are spending on the power side, you are looking for a return on that capital as part of an agreement, and we would not move forward without those agreements in place. As you have highlighted, the optimism around what is happening in Texas and the overall amount of data center infrastructure that we expect to be built is, I would say, really accelerating, and BKV Corporation is at the forefront of that. Michael Furrow: I appreciate that detail. As a follow-up, I would like to hear on the Upper Barnett appraisal program that is targeted for this year. The breakeven costs appear higher than the core Lower Barnett position. So what are the company's ultimate goals here with this program? And maybe you can provide us with a well count that the company plans to test this year. Eric Jacobsen: Yes, sure. Hi, Michael, it is Eric. Thanks for the good question on the Upper Barnett. We are excited about the future of the Upper Barnett as included in our inventory counts. We will be testing one well at least this year, possibly two. At the moment, our breakevens are slightly higher than our average for the Lower Barnett. But on the back of the success we have had in Lower Barnett—dramatically lowering dollar-per-foot cost by 30% over the last three years; enhancing and advancing completions; negotiating gathering, compression, processing, transport for the Upper Barnett; and our ability to execute—we have proven to execute in the high $0.40s per Mcfe F&D cost. We will translate all those learnings into the Upper Barnett this year. We will drill the one well, we will evaluate it, and we may drill a second by the end of the year. Then we will have a steady dose of Upper Barnett wells as part of our program going forward. We absolutely expect to delineate and confirm those 100 wells this year. We are excited about those on the back of the older vertical wells and some refracs we have had in the area. We really think the Upper Barnett is prospective, and we look forward to sharing some more results by midyear to the second half of the year. Thanks for your time. Operator: Our next question comes from Jacob Roberts with TPH and Company. Please proceed with your question. Jacob Roberts: Good morning. I wanted to start by circling back to the power capital, and I guess my question is maybe in context of slide 25. When we think about that guidance, is that a function of the number of potential PPAs? Is it a function of the scale of the agreement or even maybe the geographical distance from Temple? Christopher Kalnin: Morning, Jake. Yes. Thanks, Jake. Good question. I think the slide is meant to show the activity around Temple. If you think about where people are building massive amounts of data center infrastructure, they are looking for a few things. One is the ability to add generation assets and grid interconnect—that is critical. Number two, they are looking for proximity to existing fiber lines and/or data center clusters that are already in existence. Number three, they are looking for a buildable, friendly environment where licensing, contracting, and regulations are streamlined. Temple sits right between the Dallas–Fort Worth area and the San Antonio cluster, and this slide is meant to show the amount of activity in Temple. The city of Temple itself has been astronomical in the last, especially 24 months, around that, and it is for the reasons that I just mentioned. It is flat land, it is buildable, it is Texas, it is grid-connected, there are three 345 kV lines. That is the intention. In terms of how you would actually design, the closer to the generation assets, the better, as you build. You are going to see more and more of this co-located power design that I am describing here. That is critical because of what I mentioned around grid congestion. If you are pulling huge amounts of megawatts, the more localized you can match that demand and supply, the less taxing amount of infrastructure you rely on the grid. That is where you are seeing loads in the past in that 200 to 300 megawatt level for data centers—now folks are talking about gigawatt plus. When you are talking about a gigawatt interconnection, you really do need localized generation support. You can imagine the closer you are to generation assets, you optimize your capex more and you get better bang for buck in terms of the overall design. That is where this goes, and you are seeing that in this slide here on ’25 with 1.5 gigawatts of generation capacity. Jacob Roberts: Thanks, Chris. That is helpful. And then maybe taking a longer-term view on the gas marketing side of things, could you remind us on how your Barnett takeaway contracts are currently structured? And maybe in terms of the ability to eventually shift more of those volumes toward what could become more valuable hubs, specifically Katy and Ship Channel. Eric Jacobsen: Yes. Sure, Jake, this is Eric. Thanks for the question on the contractual nature of our marketing. As we show in our slide deck, right now from the Barnett anyway, roughly 40% of our gas goes to Houston Ship Channel, 30% to Katy, and 30% to Transco. We receive a very nice uplift from the Transco Station 85 on a typical run-rate basis. Over time, a lot of firm contracts are expiring over the next two or three years, enabling us opportunities to sell the gas into multiple markets, and this is exactly why we are so very excited to be positioned in the Gulf Coast. We can sell to our own power plants or other power plants. We can sell locally to the DFW area. We can expand some of our contracts to these existing hubs, directly to industrials in the Gulf Coast corridor, and then, of course, the big boom of all, the LNG expansion that is hitting to the tune of, in our estimation, multiple Bcf over the next four or five years. Being positioned in the Gulf Coast, having access to multiple points and hubs, as well as infrastructure that was built to handle far more than the Barnett is producing today as a basin, and the contractual nature of our expiries that allow us the flexibility, we are very excited for margin enhancement—what we call alpha margin—as a result of our marketing coming out of the Barnett and really increasing the commercial generation of cash flow and margin from our company. David Tameron: Yes, Jake, it is David. It is something we are actively managing. We spend a lot of time on that internally. You have heard Chris talk about it. At the end of the day, we want to be the highest dollar-per-molecule provider out there, and this is part of that. You will see us over the next six to nine months offer more color around our marketing efforts, and I think it will be well received by you and the Street. Jacob Roberts: Thanks, Eric. I appreciate your time. Operator: As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from Fu Fang with Roth Capital Partners. Please proceed with your question. Fu Fang: So I just have a question about the East Texas project. In the last quarter, you said that the target FID was going to be in first half 2026, but this quarter, you said it is going to be in the internal FID in December. So is that project still waiting for FID, or is it ready? That is one question. Eric Jacobsen: Yes. Thank you. This is Eric. Thank you for the question, Fu, about our East Texas project where we reached internal FID. Yes, we are very excited about that. That is stage one in our trajectory towards our final investment decision, which we have not put out a timeline on just yet. What I can say is we are progressing that project with the same major midstream operator for which we are doing the Eagle Ford project about to start. All of the documents and agreements are in place. We will be drilling the injection well this year, with an anticipated start-up sometime in 2027, as we have signaled. FID is forthcoming on that. We will be drilling the well. We are very excited for that here in the first half of the year, and we look at that as a continuation of our kind of sweet spot so far in these Class II natural gas processing projects, generating that $48 per ton in EBITDA margin and stair-stepping into additional projects in our ramp to 1.5 million tons. Fu Fang: Thank you. And just my second question about the M&A. After Bedrock acquisitions, what are the constraints on the M&A right now? Christopher Kalnin: Yes, Fu, it is Chris here. I think we have shown this is a company that knows how to do M&A. The Bedrock acquisition is going incredibly well in terms of just being able to integrate those assets and really absorb them into the Barnett. The Barnett remains our core M&A target. There is a natural roll-up on the upstream side. There are a number of players that we have shown in the past. There is over a Bcf of M&A opportunities in the basin, and we will continue to prioritize those. More broadly speaking, we are always looking in the M&A markets. We think this business model for mid-tenured gas basins is ideally positioned, and we really are mastering it. We manage some of the oldest shale wells in the entire country, and we understand how to manage them really, really well, and we have demonstrated that. As we look in the Gulf Coast at basins and evaluate the rise, we will be active evaluating and analyzing opportunities and looking for accretive, risk-adjusted transactions so that BKV Corporation can continue to scale our business model in line with the winning formula of gas, power, and carbon capture. Operator: Thank you. We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Christopher Kalnin for closing comments. Christopher Kalnin: Thank you, everyone. I appreciate your time. BKV Corporation is positioned for growth along all our three vectors. We are very excited about 2026, and we look forward to future announcements around that. Thank you, everyone. Michael Hall: Thank you, Maria.
Operator: Thank you for your continued patience. The meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. If you need assistance at any time, press 0, and a member of our team will be happy to help you. Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, press 0, and a member of our team will be happy to help you. Good morning, everyone. Welcome to today's SLR Investment Corp. fourth quarter 2025 earnings conference call. At this time, participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. Please note this call is being recorded. It is now my pleasure to turn the meeting over to Michael Gross, Chairman and Co-CEO. Please go ahead, sir. Michael Gross: Thank you very much, and good morning. Welcome to SLR Investment Corp.'s earnings call for the quarter and year ended 12/31/2025. I am joined today by my long-term partner, Bruce Spohler, our Co-Chief Executive Officer, as well as our Chief Financial Officer, Shiraz Kajee, and members of the SLR Investment Corp. Investor Relations team. Shiraz, before we begin, would you please start by covering the webcast and forward-looking statements? Shiraz Kajee: Thank you, Michael. Good morning, everyone. I would like to remind everyone that today's call and webcast are being recorded. Please note that they are the property of SLR Investment Corp., and that any unauthorized broadcast in any form is strictly prohibited. This conference call is also being webcast on the events calendar in the Investors section on our website at slrinvestmentcorp.com. Audio replays of this call will be made available later today as disclosed in our February 24 earnings press release. I would also like to call your attention to the customary disclosures in our press release regarding forward-looking statements. Today's conference call and webcast may include forward-looking statements and projections. These statements are not guarantees of our future performance or financial results and involve a number of risks and uncertainties. Past performance is not indicative of future results. Actual results may differ materially as a result of a number of factors, including those described from time to time in our filings with the SEC. We do not undertake to update any forward-looking statements unless required to do so by law. To obtain copies of our latest SEC filings, please visit our website or call us at (212) 993-1670. At this time, I would like to turn the call back to our Chairman and CEO, Michael Gross. Michael Gross: Thank you, Shiraz, and thank you to everyone for joining our earnings call this morning. We are pleased to report that SLR Investment Corp.'s fourth quarter results solidified a strong year for the company, showcasing another quarter of broad stability in our portfolio, slow but steady portfolio growth, and a shift to asset-based lending investments with primarily liquid current assets as collateral that are supported by actively monitored borrowing bases. For those who have been following us for the last two years, we have shared a cautious view with our stakeholders about the increasingly fierce conditions within sponsor finance from the oversupply of capital. The broader investor community and media are now signaling concern of these conditions, the potential risk to forward returns, and ultimately an expectation of a wide dispersion in manager performance. While 2025 can be characterized by a surprisingly resilient U.S. economy that withstood tariff uncertainty, geopolitical tensions, and a government shutdown, the year in hindsight can also be marked as the beginning of a sea change in the maturing private credit industry. Sitting here today, with investor concerns and skepticism running high, we feel relatively insulated from many of the risks facing many of our peers because of our deliberate decision to hold the line with our underwriting standards, particularly in the overcrowded sponsor finance market, to safeguard SLR Investment Corp.'s performance and capital. We attribute the stability in our fourth quarter and full-year results to our multi-strategy approach to private credit investing, discipline, and our tactical asset allocation framework, which enables us to maintain investment and diversification across asset classes. Importantly, we are able to say no and pass on investment opportunities that do not meet our conservative lending standards. As credit investors, we are obsessively focused on downside protection. Turning to our fourth quarter results, SLR Investment Corp. reported net investment income, or NII, of $0.40 per share and net income of $0.46 per share. Net investment income per share was flat quarter-over-quarter, and net asset value per share of $18.26 as of December 31 increased both quarter-over-quarter and year-over-year from both unrealized and realized gains. Our net income for the quarter equated to a 10.1% annualized return on average equity. For the full year 2025, we generated net income of $1.70 per share, representing a 9.3% return on average equity, which we anticipate should compare favorably to publicly traded BDC and non-listed BDC peers as well as the broadly syndicated loan markets. During the fourth quarter, we originated $462 million of new investments across a comprehensive portfolio and received repayments of $445 million for net funding of $70 million, resulting in a year-end comprehensive portfolio of $3.3 billion and annual growth of 7.2%. New originations were the second-highest level achieved on record, increasing 36% year-over-year and 3% quarter-over-quarter, continuing the strong origination momentum we have delivered throughout this year. Originations for the year totaled $1.84 billion. The primary driver of new originations continued to be led by our commercial finance strategies, which we believe currently offer more attractive risk-adjusted returns. The company's strong commercial finance originations furthered our portfolio mix shift to asset-based specialty finance strategies over the last couple of years, which we believe provide greater downside protection from strong credit agreements, borrowing bases, and underlying collateral. As of 12/31/2025, more than 83% of our portfolio investments were in senior secured specialty finance loans, which represents the highest percentage in our 20-year history. Our direct industry exposure to the software industry remains low. So low, in fact, that the approximate 2% exposure as of December 31 is among the lowest industry exposures among publicly traded BDCs. For investors concerned about the uncertainty of technology obsolescence risk, enterprise value destruction for the software industry, and the burgeoning threat of artificial intelligence, SLR Investment Corp.'s portfolio, with its lack of software exposure, can be viewed as a safe haven. Overall, we remain pleased with the steady expansion and further diversification of the portfolio, which has produced an annualized growth rate of 10.1% since 2020 and a risk profile that is highly differentiated from other middle market lenders. Direct corporate asset-based lending, or ABL, a strategy we have been in since 2012, contains high barriers to entry due to the complexity of both underwriting and collateral monitoring. This makes it difficult for private credit managers who are latecomers to the strategy to build a book of asset-based loans that can withstand the pressures of changing economic and borrower conditions. We believe this difficult-to-replicate expertise in our 20 offices spread across the country makes us the first call for both sponsors and non-sponsors who are seeking corporate financings for ABL solutions. For the fourth quarter, asset-based lending originations of $247 million were almost double the originations in the prior-year period. Our originations for the full year of $1.1 billion were close to double the originations in all of 2024. SLR Investment Corp.'s ABL strategies continue to offer all-in returns of SOFR plus 600. As a reminder, early in Q4, we hired a well-known, respected industry veteran as President of Asset Based Lending at SLR Investment Corp.'s investment advisor. Mac Fowl is focused on expanding SLR Investment Corp.'s asset-based lending capabilities beyond the platform of the existing ABL franchise. We believe our investment in people and infrastructure over the last couple of years has contributed to our expansion in investment opportunities and a greater recognition of SLR Investment Corp.'s leadership in the ABL marketplace. SLR Investment Corp.'s ABL platform provides the infrastructure and strategic growth capital to further grow our comprehensive investment portfolio, including through potential portfolio and business acquisitions as well as geographic and industry expansion. With sponsor finance conditions competitive and illiquidity premiums tight, we passed on the refinancings of several cash flow investments in our incumbent portfolio, allowing our sponsor finance portfolio to further shrink. With cash flow loans representing just 14.5% of the comprehensive portfolio, the allocation of cash flow loans remains at the lower bounds of our historical mix. We will, however, continue to approach the investments in cash flow lending opportunistically. Our deep industry expertise in the healthcare sector, along with trends in private equity fundraising at dedicated healthcare-focused sponsors and deal activity, should continue to present selective opportunities for us to be active in attractive cash flow lending during 2026. Moreover, our healthcare industry expertise in cash flow lending serves an important information resource and referral source for SLR Investment Corp.'s life science and healthcare ABL investment teams. Overall, we remain pleased with the composition, quality, and performance of our portfolio, a direct result of SLR Investment Corp.'s multi-strategy approach to private credit investing. At year-end, approximately 95% of our comprehensive investment portfolio was comprised of first lien senior secured loans, 100% of our investments at cost were performing with zero investments on non-accrual, and PIK income continued to comprise a de minimis percentage of total income. We believe these credit quality metrics compare very favorably to peer public BDCs. At December 31, including credit facility capacity at SSLP, and our specialty finance portfolio companies, we had over $850 million of available capital to deploy. Our liquidity profile puts us in position to take advantage of either stable economic conditions or a softening of the economy. I will now turn the call back over to Shiraz, our CFO, to take you through the fourth quarter highlights. Shiraz Kajee: Thank you, Michael. SLR Investment Corp.'s net asset value at 12/31/2025 was $996 million, or $18.26 per share, compared to $18.21 per share at 09/30/2025, and $18.20 per share at 12/31/2024. At year-end, SLR Investment Corp.'s on-balance-sheet investment portfolio had a fair value of approximately $2.1 billion in 100 portfolio companies across 31 industries, compared to a fair value of $2.1 billion in 109 portfolio companies across 31 industries at September 30. SLR Investment Corp.'s investment portfolio is funded by a combination of revolving credit facilities and the issuance of term debt in the unsecured debt markets to institutional investors. The company is investment grade rated by Fitch, Moody's, and DBRS, and more than 40% of the company's debt capital is comprised of unsecured debt at December 31. During the quarter, the company was active in the management of various credit facilities with multiple banks, including the closing of a new credit facility at the SSLP that enhanced the joint venture's borrowing flexibility and reduced the spread by 75 basis points. These actions, combined with others taken during the year, have improved borrowing flexibility via better advance rates, expanded the unsecured investor base, and extended maturities. The company does not have any near-term refinancing obligations, with the next unsecured note maturity occurring in December 2026. We expect to continue to prudently access the debt capital markets and issue unsecured debt as and when needed. At December 31, the company had approximately $1.2 billion of debt outstanding with a net debt-to-equity ratio of 1.14 times, which was within our target range. We believe we have ample liquidity to support our unfunded commitments. Moving to the P&L, for the three months ended December 31, gross investment income totaled $54.5 million versus $57.0 million for the three months ended September 30. Net expenses totaled $32.9 million for the three months ended December 31. This compares to $35.4 million for the prior quarter. Accordingly, the company's net investment income for the three months ended 12/31/2025 totaled $21.6 million, or $0.40 per average share, the same as the prior quarter. Below the line, the company had a net realized and unrealized gain for the fourth quarter totaling $3.5 million versus a net realized and unrealized gain of $1.7 million for the third quarter of 2025. As a result, the company had a net increase in net assets resulting from operations of $25.1 million for the three months ended December 31, compared to a net increase of $23.3 million for the three months ended September 30. On February 24, the Board of SLR Investment Corp. declared a Q1 2026 quarterly base distribution of $0.41 per share, payable on 03/27/2026 to holders of record as of 03/13/2026. I will now turn the call over to our Co-CEO, Bruce Spohler. Bruce Spohler: Thank you, Shiraz. As Michael shared, we have continued to shift the portfolio toward our specialty finance strategies throughout 2025 due to their more attractive risk-adjusted returns. Our pipeline also reflects this continued momentum. Our specialty finance strategies currently offer higher pricing than sponsor finance loans, and greater downside protection through their underlying collateral support and tight documentation. We view these more favorable terms as a complexity premium that we earn through investing in structures that require significant expertise and infrastructure that most private credit firms do not have. Turning to the portfolio, at year-end, the comprehensive investment portfolio consisted of approximately $3.3 billion with an average exposure per borrower of $3.8 million. Measured at fair value, approximately 98% of the portfolio consisted of senior secured loans, with 95% invested in first lien loans. The 3% of our portfolio invested in second lien loans consists entirely of asset-based loans with underlying borrowing bases and no second lien cash flow loans. At year-end, our weighted average yield on the portfolio was 11.6%, which was down from 12.2% in the third quarter and 12.1% at the end of 2024. The sequential decline in yield was primarily due to two factors: the decline in base rates in the fourth quarter that began to impact results as well as timing due to the funding of our new investments towards the end of the December month and receipt of repayments earlier in the quarter. Overall, we believe our portfolio has been less impacted by changes in base rates and spread compression compared to the BDC peer group because of our lower allocation to cash flow loans, made possible through our current focus on the less competitive specialty finance investment sectors. Based on our quantitative risk assessment scale, our portfolio continues to perform well. At year-end, the weighted average investment risk rating was under two based on our one-to-four risk rating scale, with one representing the least amount of risk. Just under 98% of our portfolio is rated two or higher at year-end. Importantly, 100% of the portfolio was performing with no investments on non-accrual. Now let me touch on each of our four investment verticals. Starting with our Specialty Finance segments, as a reminder, we dynamically allocate across our strategies based on market and economic conditions, which allows us to source attractive investments across market cycles. Let me first discuss asset-based lending. Given current market volatility as well as investor sentiment, I would like to take a moment to review the investor protections inherent in our ABL asset class that serves as the bedrock of our conservative investment philosophy. In old-school ABL lending, which we define as bilateral corporate lending by teams with significant infrastructure support as well as experience in evaluating and monitoring collateral, we are able to structure credit agreements and borrowing bases with terms that have not integrated in lockstep with the ballooning of private credit cash-flow-focused AUM. We are also able to maintain greater visibility and influence during the life of our investment. Simplistically, with cash flow lending, we are viewing portfolio companies through a quarterly rearview mirror, whereas in asset-based facilities with borrowing base requirements, we are essentially using binoculars. We can get to the table at the first sign of a problem. Our teams have decades of experience structuring our investments to ensure that the value in loan-to-value sufficiently covers our principal, even in severe downside scenarios. Old-school ABL requires significant investment in both people and infrastructure. We began this buildout in 2012 with our first control stake acquisition, which was then followed by eight additional tuck-in acquisitions. Our collaborative ABL and equipment finance strategies provide a moat that newer entrants cannot easily create. At year-end, our ABL portfolio totaled just under $1.5 billion across 252 issuers, representing approximately 45% of our comprehensive portfolio. For the fourth quarter, we originated approximately $250 million of new ABL investments and had repayments of approximately $235 million. In the fourth quarter, the weighted average asset-level yield of the ABL portfolio was 12.6%. Now let me touch on equipment finance. At quarter-end, this portfolio totaled just under $1.1 billion, representing approximately a third of our comprehensive portfolio. It was highly diversified across 585 borrowers. The credit profile was unchanged quarter-over-quarter. During the fourth quarter, we originated just over $150 million of assets, with the majority of them coming from our business that provides leases predominantly to investment grade corporate borrowers for their mission-critical equipment, and had repayments of just over $120 million. The weighted average asset-level yield for this asset class was just under 11%. We remain encouraged by some of the trends we are seeing in our equipment finance business. Our investment pipeline has expanded, and we are seeing demand from our borrowers and sponsors to extend existing leases on equipment rather than buy new equipment at higher tariff-adjusted prices. Now let me turn to Life Sciences. Over the last few years, the life sciences venture debt market has been characterized by fierce competition as asset managers look to make a splash in perceived adjacencies. As we see it, this influx of capital into life science lending has led to the prevalence of stretch deals where some market participants prioritize enterprise value methodology over credit discipline. Throughout this time, we have chosen to maintain a strict late-stage investment approach, with a focus on drug discovery and medical device companies that are in or approaching commercialization and that possess structural protections that have historically mitigated risk throughout market cycles and FDA risks. The broader life science industry has seen a surge in healthcare services IT transactions, which are predominantly software company loans to healthcare borrowers. We have intentionally avoided this segment. In contrast to the high FDA barriers that are present in drug discovery and medical devices, which entail several-year-long FDA approval processes, the barriers to entry in software are lower and IP protections are more limited. As a result, the reliance on software IP as collateral presents elevated risks of technological obsolescence and valuation volatility in life sciences that we have avoided. Given those market dynamics, we have consciously allowed our life science portfolio to shrink across the SLR platform. In 2025, we made first lien term loan commitments of approximately $500 million and partnered in the origination of $60 million of ABL facilities for life science borrowers issued by our healthcare ABL team. During that same period, we had over $400 million in repayments. Looking ahead, our pipeline of opportunities is notably larger than it was at the beginning of last year. We think the drug discovery pipeline is poised for reacceleration after a period of relative sluggishness in public market valuations. Despite ongoing uncertainty regarding the FDA's direction, a recent wave of high-profile acquisitions has significantly bolstered public market valuations for bioscience companies. Furthermore, the integration of AI technology holds the promise of shortening drug development timelines and creating a more dynamic investment opportunity set, although we acknowledge that this will take time to evolve. We will remain disciplined, leveraging our 25-year track record to identify late-stage development companies with robust clinical data and a clear path to commercialization. At year-end, our life science portfolio totaled approximately $180 million across seven borrowers. Importantly, 100% of these portfolio companies are revenue generating with at least one product in the commercialization stage, which significantly de-risks our investment. During the fourth quarter, the team funded $26 million to a new borrower and had just under $60 million of repayments. At quarter-end, the weighted average yield on our first lien life science portfolio, including success fees but excluding warrants, was 12.3%, consistent with the prior quarter. Now, finally, let me turn to our cash flow lending business. Middle market sponsor activity improved modestly in the fourth quarter, and the momentum appears to be carrying over into 2026. Yet competition for quality assets remains intense, and the looming 2026–2027 maturity wall continues to shape borrower behavior. In cash flow lending, all eyes are currently on software exposure. Michael has already provided specifics on our underweighting to that sector. I will touch on the why and how we avoided this sector. As the software sector was experiencing its heyday in the COVID economy era, and private credit leaned into the massive capital deployment opportunity, we, too, evaluated the potential for developing a core expertise in the software sector. However, we determined that loans to SaaS businesses do not offer the same downside protection as our existing investment strategies. For example, unlike in our life science strategy, where loans are backed by IP that takes typically 10 to 15 years to create and hundreds of millions of dollars of investment, the technology backing IP software faces a far greater risk of obsolescence. The risk-reward profile of software loans is less attractive also to our asset-based lending strategies, which are typically backed by accounts receivable or liquid inventory. Additionally, we viewed our existing healthcare expertise across cash flow lending, healthcare asset-based lending, and late-stage life sciences as a means of capitalizing on an investing edge that we possess in an essential sector. In short, our existing strategies have enabled us to avoid the software industry, while still delivering portfolio growth and steady income. If software leads to broader cash flow dislocation, we, too, will be opportunistic investors once again in the cash flow market. At quarter-end, our sponsor finance portfolio was just over $475 million across 27 borrowers, including the loans held in our SSLP, or just 15% of the total portfolio. With 100% of our cash flow loans invested in first lien loans, we believe that we are well positioned to withstand tariff or economic headwinds. Our borrowers have a weighted average EBITDA of just over $100 million and carry low LTVs of approximately 40%. Our borrower fundamentals are trending positive, with portfolio company average EBITDA and revenue growth in the mid-single digits year-over-year. Overall, our portfolio companies have successfully managed the transition to an environment with higher cost of capital as well as input prices. Weighted average interest coverage on our sponsor portfolio was 2.3 times, up from the prior quarter. Additionally, 1.1% of our fourth quarter gross investment income is in the form of capitalized PIK from our cash flow borrowers, resulting from amendments. During the quarter, we made new investments of $37 million in cash flow loans and experienced repayments of approximately $30 million. At quarter-end, the weighted average yield on the cash flow portfolio was just under 10% compared to just over 10% the prior quarter. Lastly, let me touch on our SSLP. During the quarter, the SSLP revolving credit facility was refinanced, lowering our interest rate from SOFR plus 2.90% to SOFR plus 2.15%. Adjusted for one-time credit facility charges associated with this refinancing, the company would have earned $1.5 million in the fourth quarter, representing an annualized yield of 12.6%. During the quarter, SSLP invested $13 million and had $19 million of repayments. Net leverage was just under 0.9 times. We expect to continue to rebuild this portfolio this year. At quarter-end, we had roughly $55 million of undrawn debt capacity. Now let me turn the call back to Michael. Michael Gross: Thank you, Bruce. With hindsight, we think 2025 has the appearance of being marked as a consequential year for the private credit industry and for the value proposition of SLR Investment Corp. Over the last couple of years, we have been vocal about how the seemingly limitless access to private credit for investors can lead to the unsatisfactory achievement of marketed outcomes, especially given that the two key drivers of outperformance in private credit investing come from avoiding and minimizing credit losses and the use of leverage. As we see it today, the markets are clearly demonstrating an understanding of the private credit market’s maturation and recalibrating expectations to a more normalized default loss experience. While the private credit landscape has shifted dramatically, our core philosophy remains unchanged. Stakeholder alignment drives every decision at both SLR Capital Partners and SLR Investment Corp. Last year, SLR Investment Corp. surpassed its 15-year history as a publicly traded company, and this year SLR Capital Partners will surpass 20 years of operating history. As co-founders of SLR and co-CEOs of SLR Investment Corp., Bruce and I continue to lead a team that has largely worked with us since the start and are now responsible for more than 300 employees, including professionals at the five specialty finance affiliates within SLR Investment Corp. Our platform's value proposition has attracted very high-quality senior talents such as Mac Fowl from JPMorgan and others. Based on our team’s investment experience through multiple cycles over the past 30-plus years and our multi-strategy approach to private credit investing, we believe we are well equipped to continue outperforming across shifting private credit markets. SLR Investment Corp. achieved a net income ROE of 9.3% in 2025 and a total economic return of 8.1% over the last three years, which we expect to be at least 200 basis points wide of the public BDC peer group average when results for year-end 2025 are fully released. We believe that the discipline we have exercised through SLR Investment Corp.'s history can be seen through the backward-looking lens of performance as well as a forward-looking lens of portfolio quality. With credit quality top of mind today, we remain pleased with our portfolio, which sits at the midpoint of our target leverage, is 100% performing, has exposure to software of approximately 2%, and has restructured PIK income of approximately 2% of total investment income. Moreover, our portfolio companies continue to experience both top-line and EBITDA growth and should benefit from recent reductions in SOFR. We continue to acknowledge that our results are not fully immune to the impact of recent reductions in base rates by the Federal Reserve in Q4, but we believe SLR Investment Corp.'s earnings sensitivity to changes in base rates is one, if not the lowest, amongst our peers. Fourth quarter 2025 originations and our pipeline in 2026 continue to reflect new investment opportunities at spreads that exceed our cost of capital. Our North Star continues to be protecting capital, avoiding losses, and not chasing higher spreads at the expense of structural protections. While maintaining dividend coverage is important as many of our investors rely on distribution of our income, we believe it must be done in a way that does not compromise credit quality. We have made significant investments and resources across the platform and continue to see some levers to pull at SLR Investment Corp. that can help offset base rate declines. Importantly, we have the available capital to be opportunistic in market dislocations. In closing, SLR Investment Corp. trades at approximately an 11.2% dividend yield as of yesterday's market close, which we believe presents an attractive investment for both income-seeking and value investors and offers a more diversified investment portfolio compared to direct-lending-only private credit strategies. Our investment advisor's alignment of interest with SLR Investment Corp. shareholders continues to be a hallmark principle. The SLR team owns over 8% of the company’s stock and has a significant portion of their annual incentive compensation invested in SLR Investment Corp. stock each year. The team's investment alongside fellow institutional and private wealth investors demonstrates our confidence in the company's profile, portfolio, stable funding, and earnings outlook. Thank you again for all your time today, and we hope to see you in person at a conference in 2026. Operator, will you please open the line for questions? Operator: Certainly, Mr. Gross. We will now open for questions. Once again, that is star one for questions. We will go first this morning to Erik Edward Zwick of Lucid Capital Markets. Erik Edward Zwick: Thanks. Good morning, all. Thank you for all the detailed comments on the individual lending verticals and outlooks there. A bit of a follow-up in terms of the pipeline within the ABL and equipment finance and more from the inorganic perspective. I know sometimes you review opportunities to acquire portfolios and/or lending teams. I am wondering if you could just update us on any recent activity or outlook for 2026 there. Bruce Spohler: Yes, great question. We have been very active. We do not win them all, because we are as disciplined in our acquisitions as we are in our individual investments. But I will say that the quality of potential opportunities is high, and as you may recall, one of the strategies that we have is to lend into some of these potential platforms as a way to get to know each other and see if there is an opportunity to bring them onto the SLR platform, rather than just lend them capital. So we have a number of those in the pipeline that are currently in portfolio that we have an active dialogue with. Those take time to germinate. So I would say that we do not see anything imminent, but we are very actively engaged in potential acquisitions. Erik Edward Zwick: Thanks for the update there. And then I am just curious, in terms of the tight spreads that are being witnessed in the public debt markets, are those impacting the spreads in the ABL and equipment finance opportunities you are seeing today, or because of some of the structural defense mechanisms you have in place, have you been able to maintain new spreads relative to the existing portfolio? Bruce Spohler: Yes. As Michael mentioned, the overall return has come down a little bit across all the strategies, but we still believe 11.5% or so compares extremely favorably to the market more broadly, and specifically the cash flow market. So we still like the opportunities. The structural protections help us on the risk side. Really, as we touched on, the lack of capital flows coming into these markets allows us to maintain our competitive position. Plus, the peer group here is smaller, but also extremely disciplined. Our peers share the same decades-long experience in asset-backed lending and appreciate that discipline is critical for their performance. So we find people to be very disciplined and not many new entrants. Erik Edward Zwick: And the last one for me, just your portfolio remains very clean from a credit perspective from almost any metric you would choose to look at it. I am curious, are you seeing anything that might be an early signal in terms of greater amendment requests or increased revolver usage, or anything noteworthy from that perspective? Bruce Spohler: The short answer is no. Private credit is a business of not sleeping at night, worrying about every name in your portfolio. As we mentioned, we do have a watch list; it is roughly 2%, and that is a constant. But what I would say is in our ABL strategies, and we touched on this in the comments, you have metrics that allow you to see more real-time the underlying performance of your borrowers and get a window into the broader economy domestically. Specifically, we get to see inventory turns, we get to see receivable collections, because we are monitoring those underlying pieces of collateral on a weekly and monthly basis. I would tell you that we are not seeing any themes coming out of that. It is very idiosyncratic—a one-off borrower here or there—but nothing that we can call a theme. Erik Edward Zwick: That is great to hear. Thanks for taking my question today. Bruce Spohler: Thank you. Operator: We will go next now to Rick Shane of JPMorgan. Rick Shane: Hey, guys, thanks for taking my questions. Look, one of the advantages that you guys have is that your leverage is relatively low and you have capacity to flex that as you choose. You also talked about being opportunistic during market dislocations. If we sort of stay in this environment right now, should we expect you to be opportunistic, or should we expect the portfolio and leverage to be roughly flat, and you would be waiting for a more severe environment to take advantage of that liquidity? Bruce Spohler: I am going to answer it two ways. Part of what we are doing, to Erik’s questioning, is we always try to have a little bit of dry powder for potential acquisitions, and so that does inform how we look at the leverage ratio at any moment in time based on what we are seeing out there on the acquisition front as well as individual investment opportunities. We are blessed that we have multiple strategies. We are seeing good opportunities in the specialty finance strategies, particularly ABL, although we did mention that we are seeing life science pick up, and we also could see, as we get deeper into 2026, cash flow dislocation create opportunity for us, as we took advantage of back in 2023 when there was a dislocation in the cash flow market. So we are happy to take leverage up either through acquisitions or individual investments throughout 2026 to the high end of our target range, which is 1.25 times. Whether that will happen or not, we will see, because the other side of that equation is obviously repayments. As a lender, we celebrate repayment—that generates a memo internally. We are not so focused on deployment; we are more focused on getting repaid. As you can see, we have had an elevated level of repayments, and that has been very intentional where we have the ability to make that decision—do we stay or do we get repaid. By and large, we have been choosing to get repaid because either terms or structures or pricing have been less attractive than we would like. So that is the unknown for this year, although our crystal ball says we probably will see less repayments because I do see less capital coming into the market and a bit more discipline. So, long-winded way of saying we would like to see that leverage ratio come up in this environment because of the very attractive opportunities. Rick Shane: Got it. Okay. Not long-winded—fine. I have asked a few long-winded questions in my time, so appreciate the answer. Bruce Spohler: Thanks, Rick. Operator: Thank you. We go next now to Heli Sheth at Raymond James. Heli Sheth: Good morning. Thanks for the question. You mentioned M&A opportunities in the ABL business remain high. Any sort of shift in sentiment or outlook there? Does it seem more or less likely that some players may be willing to sell with all of the recent market noise? Michael Gross: Dislocation always forces people to rethink their business and access to capital. So if we go through a period of time like this for quite some time, I think we will see more opportunities and at better pricing. We have a team that is actively looking at many situations all the time. So we are hopeful something happens in the relatively near term. Heli Sheth: Got it. Thank you. And then could you quantify how much spillover you have as of year-end? Michael Gross: We do not have any to speak of. Heli Sheth: Okay. Thank you. Operator: Thank you. And gentlemen, it appears we have no further questions today. Mr. Gross, I would like to turn things back to you, sir, for any closing comments. Michael Gross: No closing comments at this time other than to thank you for all your time today. We realize it is a busy earnings season, and with all the turmoil in private credit, it is quite busy. If anyone has any questions, or people who are listening to this call after the fact, please feel free to reach out to any of us to continue the dialogue. Thank you. Operator: Thank you, Mr. Gross. Again, ladies and gentlemen, that will conclude today's SLR Investment Corp. fourth quarter earnings conference call. Thanks so much for joining us, and we wish you all a great day. Goodbye.
Operator: Good morning. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the UWM Holdings Corporation fourth quarter 2025 and full year 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. Thank you. Blake Kolo, you may begin your conference. Blake Kolo: Good morning. This is Blake Kolo, Chief Business Officer and Head of Investor Relations. Thank you for joining us, and welcome to the fourth quarter and full year 2025 UWM Holdings Corporation earnings call. Before we start, I would like to remind everyone that this conference call includes forward-looking statements. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the earnings release that we issued this morning. Our commentary today will also include non-GAAP financial measures. For more information on our non-GAAP metrics and the reconciliation between the GAAP and non-GAAP metrics for the reported results, please refer to the earnings release issued earlier today, as well as our filings with the SEC. I will now turn the call over to Mathew Ishbia, Chairman, President, and CEO of UWM Holdings Corporation, United Wholesale Mortgage. Thanks, Blake, and thank you everyone for joining. Appreciate you guys being here. 2025 was an amazing year at UWM. You know, reflecting the strength and consistency of our business model, we executed a high level and delivered industry-leading results throughout the year, still investing in the long term. Mathew Ishbia: It was our fourth consecutive year as the number one overall lender in America, and our eleventh consecutive year as the number one wholesale lender. This has never been done in the history of the mortgage industry, and we are really proud of our success and our dominance across the industry in wholesale and overall. Now, for the year, we delivered $163.4 billion originations, which is up 17% from 2024; $244 million in net income, and that included a $435 million MSR write-down. Our adjusted EBITDA was over $697 million. So we delivered an amazing quarter, $49.6 billion originations, a phenomenal year across the board. Now turning to the fourth quarter, which is up 28% year over year. Our gain margin was 122 basis points, and our net income was $164.5 million. That included a $28.8 million write-down of MSRs. You know, on top of that, adjusted EBITDA was $232.8 million. It was just really strong across the board. An amazing fourth quarter. Really proud of what we did, and now we are going to continue to dominate going forward. Now, our process of bringing servicing in-house is on track. Our partnership with BUILT is going fantastic. We are so excited about what is going on right now. Going to deliver the best consumer experience in the industry just like we do on the mortgage side, on the lending side. We are going to do it on the servicing and also keep our brokers connected and engaged to their consumers’ lives going forward. So we are really excited about this. BUILT is going to allow our brokers to not only acquire consumers earlier and expand the volume, the top of our funnel for lead flow, but also keep the mortgage brokers top of mind through the whole process. So BUILT-UWM servicing process is off to an amazing start, and we are really excited to give you more information about that as it goes forward. Now, the pending Two Harbors acquisition and process of bringing servicing in-house are strategic inflection points, not just operational improvements. Together, these initiatives position us to expand our dominance, deliver high-quality leads to our brokers, increase the recapture rate while lowering cost per recaptured loan, and more data-driven personalization tools for our brokers. You can think about our servicing platform as both a growth and retention engine. We will continue to capitalize on where the market is going. More consumers are entering the broker channel, driven by rate shopping, optionality, speed, and a mortgage broker’s ability to guide them. Our 100% broker model at our scale is both unique and a tremendous advantage. We put our business in position in a more organic way to dominate than any of our competitors, and we are excited about the growth going forward. I will now turn the call over to our CFO, Rami Hasani. Thank you, Mathew. Q4 was a strong quarter. Rami Hasani: Reported total revenue of $945 million in Q4. Up from $843 million in Q3. Income was $164.5 million in Q4, up from $12.1 million in Q3. We also continue to maintain our MSR portfolio with a UPB of approximately $241 billion, a fair value of $4.1 billion, and net servicing income of $186 million in Q4, up from $169 million in Q3. For the full year, we reported total revenue of $3.2 billion in 2025, up from $2.7 billion in 2024. Net income was $244 million, down from net income of $329 million in 2024. We also delivered servicing income of $725 million in 2025, up from $637 million in 2024. As we have said consistently, supporting long-term growth means continuing to invest in our people, processes, and technology, and doing so in a way that strengthens our operating capacity. In 2025, we continued to focus on investing to be prepared for growth, as we have mentioned before. We remain firmly on strategy with our investments, including bringing servicing in-house, which positions us to capitalize on significant market opportunities as volumes continue to normalize and grow. From a capital and liquidity perspective, we remain well capitalized with total equity of $1.6 billion. We also continue to be in a strong liquidity position, with total available liquidity of $1.8 billion at the end of Q4. While our liquidity position was higher at the end of Q3, it was due to the timing of the $1 billion senior unsecured bond issuance in September and our proactive liability management with the use of proceeds prior to the mid-November bond maturity. Net available cash and our leverage ratios as of the end of Q4 remained relatively consistent with Q3. Going forward, we expect to continue to maintain our capital, liquidity, and leverage ratios within what we believe to be acceptable ranges. And upon completion of our acquisition of Two Harbors, we expect that our capital, liquidity, and leverage ratios will be further enhanced. In summary, Q4 and 2025 delivered strong performance, and we are excited for 2026, bringing servicing in-house and completing the Two Harbors acquisition to further strengthen our business for long-term growth and success. I will now turn things back over to our Chairman, President, and CEO, Mathew Ishbia, for closing remarks. Mathew Ishbia: Alright. Thanks, Rami. I will close with a few quick points. We are very optimistic on the mortgage and housing industry. You know, there is a big tailwind behind all of us. A lot of it is tied to the market, the administration, HUD, FHFA, Treasury, all these leaders in the country and in our industry are trying to find a way to help affordability and lowering rates, help more consumers. UWM Holdings Corporation will be the clear beneficiaries of all these changes, and we are excited about what is going on. Now, we expect to stay number one in the growing market, excited about how our AI implementation drives expenses lower while driving production much higher. The opportunity is there right now, and we are seeing it happen. Our model is unique. As with the lowest cost of energy, and with servicing in-house, the BUILT experience and pending Two Harbors acquisition, we now have a closed-loop platform that will help position us to accelerate broker channel growth and drive consumer retention for us and the channel. Now, on these calls, I have always taken questions. We have gone through the process, and we believe our industry’s superior business model that the short Q&A does not necessarily do it justice, really make it to explain the complexity of business. So I am not going to go through the question process today, but I do encourage you to read the SEC filings for more information about our business and strategy. UWM Holdings Corporation has had such a dominant 2025. We are going to have an even more dominant 2026, and I am really, really excited about it. So the year 2025 was about execution, disciplined investment, continued leadership. We are well positioned operationally, financially, and strategically for 2026 and beyond. We remain focused on the long-term focus of dominating this industry, taking care of our consumers, our team members, our brokers, our shareholders, and we are going to do just that going forward. Thanks for the time today. Have a great day, and we will talk soon. Operator: This concludes today’s conference call. You may now disconnect.
Operator: Good morning, and welcome to the Icahn Enterprises L.P. Fourth Quarter 2025 Earnings Call with Andrew Teno, President and Chief Executive Officer; Ted Papapostolou, Chief Financial Officer; and Robert Flint, Chief Accounting Officer. I would now like to hand the call over to Robert Flint, who will read the opening statement. Robert Flint: Thank you, operator. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements we make in this presentation, including statements regarding our future performance and plans for our businesses and potential acquisitions. Forward-looking statements may be identified by words such as expects, anticipates, intends, plans, believes, seeks, estimates, will, or words of similar meaning and include, but are not limited to, statements about the expected future business and financial performance of Icahn Enterprises L.P. and its subsidiaries. Actual events, results, and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties, and other factors that are discussed in our filings with the Securities and Exchange Commission, including economic, competitive, legal, and other factors. Accordingly, there is no assurance that our expectations will be realized. We assume no obligation to update or revise any forward-looking statements should circumstances change, except as otherwise required by law. This presentation also includes certain non-GAAP financial measures, including adjusted EBITDA. A reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures can be found on the back of this presentation. We also present indicative net asset value. Indicative net asset value includes, among other things, changes in the fair value of certain subsidiaries, which are not included in our GAAP earnings. All net income and EBITDA amounts we will discuss are attributable to Icahn Enterprises L.P. unless otherwise specified. I will now turn it over to Andrew Teno, our Chief Executive Officer. Andrew Teno: Thank you, Rob, and good morning to everyone on today's call. Fourth quarter NAV decreased by $654,000,000 compared to the third quarter. The excellent performance in our funds, up approximately 11% for the quarter, was offset by share price declines in CVI. Regarding CVI, we do not believe there are any material changes to CVI's outlook. Rather, we remain optimistic on the medium-term refining outlook. The two positive factors are: one, limited capacity expansions globally; and two, multiple new pipeline projects that will move Mid-Con and Gulf Coast barrels to the West Coast, which should help improve regional profitability for CVI. On a company-specific level, CVI is focused on improving its capture rates, which should drive improved profitability even if industry crack spreads remain constant. Now turning to the funds. In the fourth quarter, we were up approximately 11% including refining hedges and up approximately 9% excluding refining hedges. The big contributors for the quarter were EchoStar, the refining hedges, and Sentry. Our lone big detractor was Caesars. For the year, we are about flat including refining hedges and up 7% excluding refining hedges. In terms of our top positions, AEP is an electric utility that is benefiting from the AI infrastructure buildout and a new world-class management team. During their third quarter call, AEP disclosed a new $72,000,000,000 CapEx plan that would drive its asset base to grow at a 10% CAGR and its earnings per share to grow at a 9% CAGR through 2030. Already, after only a few months, the company is seeing opportunities to add an additional $5,000,000,000 to $8,000,000,000 of projects that would further grow its asset base and earnings per share. Southwest Gas is a gas utility that we exited subsequent to the quarter. I am proud of the work that we did in collaboration with the Board and management team. The company is in a much better position today than when we first invested given the Great Basin Pipeline Expansion Project, path to improve return on equity, and best-in-class balance sheet. Turning to EchoStar. The company sold additional spectrum to SpaceX in exchange for additional SpaceX common equity, further demonstrating the value of EchoStar's spectrum portfolio. We believe meaningful upside remains and that the IPO of SpaceX could serve as a meaningful positive catalyst. Sentry, a utility infrastructure services firm, is firing on all cylinders, reporting base revenue and EBITDA growth of 25–28% in Q3. The combination of the organic growth and a recent equity offering has led to leverage declining to mid 2x EBITDA, giving the company significant financial flexibility, further enabling it to continue capturing the tremendous growth in energy infrastructure investment. IFF is a high-quality consumer staple company where the refreshed management team continues to impress. IFF announced a formal sale process for its food ingredients business and gave 2026 guidance for mid-single-digit comparable EBITDA growth as portfolio optimization and investment in product innovation drive volume growth and performance. One name that fell off the top five list is Caesars, where the stock has underperformed our expectations. We continue to believe that Caesars is undervalued given the significant owned real estate portfolio and the growing digital business powered by iCasino. Using consensus estimates, Caesars trades at approximately a 20% free cash flow yield, which is expected to be used to repurchase shares and pay down debt. If I step back and speak a bit more broadly, we are taking a slightly more cautious view of the market. With all the wild swings in sectors that are deemed at risk of AI, we are happy to be in defensive names that should benefit from the AI buildout with a significant war chest to take advantage of opportunities as they arise. As of year-end, we had approximately $750,000,000 in cash at the funds. More recently, our cash balance at the funds has increased and is greater than $1.2 billion. Subsequent to the quarter end, we have taken steps to reduce our IEP corporate debt balance, and we called in the remaining balance of the 2026 maturities. Lastly, the Board declared an unchanged distribution at $0.50 per depositary unit. I will now pass it to Ted to talk about our controlled businesses. Ted Papapostolou: Thank you, Andrew. Energy segment's adjusted EBITDA was $51,000,000 for Q4 2025 compared to $99,000,000 in Q4 2024. The fertilizer business was negatively impacted by low utilization caused by the turnaround at the Coffeyville fertilizer facility and a three-week downtime event caused by the facility's third-party air separation plant. During December, CVI completed the reversion of the RDU at the Wynnewood refinery back to hydrocarbon processing. And now turning to our automotive segment. Q4 2025 automotive service revenues decreased by $1,000,000 compared to the prior year quarter. Same-store sales paint a better picture, having increased by 5% as compared to the prior year quarter. We are pleased with this positive revenue trajectory, but there is still a lot more work to be done. We continue to focus our efforts on product, pricing, labor, and distribution strategy. Now turning to our other operating segments. Real Estate's Q4 2025 adjusted EBITDA increased by $6,000,000 compared to the prior year quarter. The increase is primarily driven by income from the assets that were transferred from the auto segment, of which $9,000,000 is intercompany income from the auto segment and $3,000,000 from third-party tenants. Food Packaging's adjusted EBITDA decreased by $8,000,000 for Q4 2025 as compared to the prior year quarter. The decrease is primarily due to lower volume, higher manufacturing inefficiencies, and disruptive headwinds from the restructuring plan. During Q4, we made a change to the CEO position and brought back Tom Davis, who was the CEO of this case previously and has a successful track record with the company. With his knowledge of the industry and the business, we feel he is the right person to lead this case through this transformative period. Home Fashion's adjusted EBITDA decreased by $5,000,000 when compared to the prior year quarter, primarily due to softening demand in our U.S. retail and hospitality business. The tariff uncertainty has created opportunity for the company as new business has entered into the bidding pipeline, and we are hopeful this will have a positive impact for the segment in 2026. Pharma's adjusted EBITDA decreased by $4,000,000 when compared to the prior year quarter, primarily due to reduced sales resulting from the generic competition in the anti-obesity market. The TRANSCEND trial preparation for our PAH drug is on schedule, and the first patient will be dosed in the next 60 to 90 days. The physician community is excited by the potential for disease-modifying designation. And now turning to our liquidity. We maintain liquidity at the holding company and at our operating subsidiaries to take advantage of attractive opportunities. As of quarter end, the holding company had cash and investment in the funds of $3,500,000,000, and our subsidiaries had cash and revolver availability of $913,000,000. We continue to focus on building asset value and maintaining liquidity to enable us to capitalize on opportunities within and outside our existing operating segments. Thank you. Operator, can you please open up the call for questions? Thank you so much. Operator: And as a reminder, to ask a question, press *11 on your telephone and wait for your name to be announced. To remove yourself, press 11 again. Again, that is *11 if you have a question. All right. Thank you so much. This concludes our Q&A. I will pass it back to Andrew Teno for final comments. Andrew Teno: Right. Well, thank you, everyone, for joining today's call, and we will speak to you next quarter. Operator: Thank you. And this concludes our conference. Thank you for participating, and you may now disconnect.
Operator: Greetings, and welcome to Centuri Holdings, Inc.'s fourth quarter 2025 earnings call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Nate Tetlow, Vice President, Investor Relations. Please, you may begin. Nate Tetlow: Thank you, Angeline, and hello, everyone. This morning, we issued and posted to Centuri Holdings, Inc.’s website our year-end 2025 earnings press release and investor presentation. Please note that on today’s call, we will address certain factors that may impact this year’s earnings and provide some longer-term guidance. Some of the information that will be discussed today contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These statements are as of today’s date and based on management’s assumptions and are subject to several risks and uncertainties, including uncertainties surrounding the impacts of future economic conditions and regulatory approvals. A cautionary note, as well as a note regarding non-GAAP measures, is included in today’s press release and the investor presentation and in our filings with the Securities and Exchange Commission, which we encourage you to review. Also provided are reconciliations of our non-GAAP measures to related GAAP measures. These risks and uncertainties may cause actual results to differ materially from statements made today. We caution against placing undue reliance on any forward-looking statements, and we assume no obligation to update any such statement, except as required by law. Today’s call is also being webcast live and will be available for replay in the Investor Relations section of our website shortly after the completion of this call. On today’s call, we have Christian Brown, President and Chief Executive Officer, and Greg Izenstark, Chief Financial Officer. I will now turn the call over to Christian. Christian Brown: Thank you, Nate. Hello to all, and thank you for joining our call today. In 2025, we delivered $3.0 billion of revenue, a record for Centuri Holdings, Inc. We improved our base profitability and produced adjusted net income of $39 million, which was a 49% increase over the prior year. Christian Brown: As a reminder, when speaking of base revenue and base gross profit, we are referring to the measures that exclude the impact of storm restoration services. We believe that base results provide our stakeholders with information that is helpful in evaluating fundamental business performance and provide relevant period-over-period comparisons. In 2025, base revenue increased by 18% and our base gross profit increased by 35% year over year. This exceeded expectations and reflects the strength of our company, the dedication of our teams across the U.S. and Canada, and their unwavering commitment to safety, productivity, and delivering exceptional customer service. I will start with a commercial update. Coming into 2025, we set a goal to achieve a 1.1x book-to-bill ratio. We did not just exceed our goal; we shifted it, delivering a 1.5x book-to-bill for the year. In total, our bookings surpassed $4.5 billion. The mix of bookings included 34% bid work, 21% of new or expanded scope of work on our MSAs, and 45% MSA renewals. Our strong emphasis on business growth was evident with more than half of the bookings representing true incremental, accretive work to our business. We maintained our 100% MSA renewal rate and are actively working to secure new customers and add new work scopes and geographies with existing customers. In 2025, we added new MSAs across Texas, Oklahoma, Arizona, Georgia, Indiana, Wisconsin, and several other states. On the new bid work, we secured over 600 awards with an average size of $2.4 million. A few notable bid awards included a significant natural gas pipe replacement project, major substation upgrade work to strengthen grid reliability and increase capacity, a mechanical vapor recompression system for an ethanol plant, construction of a renewable natural gas facility, several projects to rebuild and construct utility-scale transmission lines, several data center awards with varying scopes of work, and additional scopes of work that include substations, transmission work, heat pump installation, compressor work, HVAC removals and installs, plus many others. We anticipate continued strong bookings due to the multiyear tailwinds within our end markets and our $13.0 billion opportunity pipeline. Christian Brown: Our renewal success and our consistent win rates support our desire for growth. Through February 2026, we have booked approximately $1.1 billion, which includes approximately $800 million of MSA renewals, nearly $150 million of new MSAs, and more than $150 million of bid work. So we are off to a very good start in 2026. For the year, we are targeting a book-to-bill ratio of 1.1x to 1.2x. Christian Brown: Our opportunity set includes about 580 bid opportunities, which collectively amount to $6.7 billion, or just over half of our current opportunity pipeline. At year-end, we had $2.8 billion of near-term opportunities, which are active proposals with award decisions expected by the end of the second quarter. These include about two-thirds of new bid work and one-third MSAs, with over 75% within our electrical segments and the remainder in gas. If we consider our year-to-date bookings, remaining active proposals, and prospects submitted in the new year, the current near-term opportunity sits around $1.3 billion. On data centers, we are actively executing several scopes of work at several data center sites. In our opportunity pipeline, we have more than 20 opportunities with an aggregate value of approximately $1.4 billion. We also have dozens of prospects that are not yet included in our planned pipeline figures because they are early in the evaluation process. We believe the total value of these prospects could reach as high as $2.0 billion. Data center opportunities offer a variety of work scopes for Centuri Holdings, Inc., including power delivery services like simple-cycle turbines, substations, compressors, or metering stations, plus core electric work like switchgear, transformers, UPS units, and generators. On the mechanical side, we handle chiller and HVAC system installs. Additionally, we will bid on traditional infrastructure work like gas, sewer, and water lines, plus telecom and fiber conduit. Now moving over to the backlog. At year-end, our backlog is approximately $5.9 billion, an increase of $2.2 billion, or 59%, from last year. This year-end backlog is forecast to provide over 85% of our 2026 base revenue guidance. Christian Brown: More details on bookings, backlog, and the opportunity pipeline are on slides eight and nine in the investor presentation we have posted. Now moving to margins. In 2025, we reported a base gross margin of 8%, an increase of approximately 100 basis points over 2024. We have several initiatives underway focused on further margin improvement. First, we have initiated a plan to address the first-quarter seasonality in our gas business. The focus is expanding the volume of work in warmer geographies and securing more indoor work. Our goal is to fully address the seasonality over three years, with 2026 year one. Halfway through this current quarter, we are on track to deliver year-over-year improvement, a good first step towards our three-year goal. Second, we are working to improve fleet efficiency through enhanced supplier pricing, improved utilization rates, and optimized allocation across our business units. Through these efforts, we are aiming for at least 20% improvement in the efficiency of our fleet. Third, we are driving improved crew efficiency in our nonunion electric segment, which has delivered significant growth over the last 12 months. As crews gain experience and jobs mature, we expect improved productivity. Base margins in this segment were up in the fourth quarter, and we expect to see more progress throughout 2026. Finally, given the growing number of bid opportunities and our current win rates, we expect our average weighted bid margin to expand over the very near term. Higher bid margins are the first part of the equation, and we will continue to drive operational execution to capture this favorable market dynamic and drive further margin growth. Beyond the commercial and financial success, 2025 also included several important milestones. In September, we became fully separated from our former parent after completing four successful follow-on offerings. In November, we closed the acquisition of Connect Atlantic Utility Services, giving us a Canadian electric service platform, which we can grow and expand our customer relationships. We also made significant strides reducing our leverage, ending the year with net debt to adjusted EBITDA of 2.5x. We are not only driving significant growth in our business, we are doing so on the foundation of a stronger balance sheet and our ownership base. We are extremely well positioned to execute in 2026 and look forward to delivering for our shareholders. I will now turn the call over to Greg to discuss the results. Greg Izenstark: Thank you, Christian, and thank you, everyone, for joining us today. Greg Izenstark: I will start with the fourth quarter, which included another company record for revenue and overall strong financial results. Revenues totaled $859 million, a 20% increase from the same quarter last year. Base revenue was $855 million, which was 28% higher than the fourth quarter 2024. Gross profit for the quarter was $80 million, compared to $71 million last year, and the gross profit margin was 9.4%. Base gross profit was $80 million, which was a 50% increase year over year. Net income attributable to common stock in the quarter was $30 million, or $0.32 per share, compared to $10 million, or $0.12 per share, last year. Fourth quarter net income was impacted by a $23.7 million income tax benefit related to deferred tax asset allocations from our former parent. Adjusted net income in the fourth quarter was $16 million, or $0.17 per share, compared to $18 million, or $0.21 per share, in the same quarter last year. Adjusted EBITDA for the quarter was $78 million, compared to $71 million last year. Our cash flow from operations was $84 million and free cash flow for the quarter was $106 million. The remainder of my comments will focus on full-year results. Greg Izenstark: Revenues totaled $3.0 billion, a record for Centuri Holdings, Inc., and a 13% increase from 2024. Greg Izenstark: Gross profit was $247 million, compared to $221 million last year, and gross profit margin was 8.3% in 2025. Base revenue was $2.9 billion, or 18% higher year over year. Base gross profit was $234 million, up 35% compared to 2024. Base gross profit margin was 8% in 2025, compared to 6.9% last year. Net income attributable to common stock in 2025 was $23 million, or $0.25 per share, compared to a loss of $7 million, or a loss of $0.08 per share, in 2024. Adjusted net income in 2025 was $39 million, or $0.43 per share, compared to $26 million, or $0.32 per share, in 2024. And finally, adjusted EBITDA for the year was $249 million, compared to $238 million last year. Now to our segments. Greg Izenstark: U.S. Gas revenue was $1.3 billion, an increase of 5% compared to 2024. Greg Izenstark: This reflects solid growth in MSA volumes and bid projects, demonstrating the underlying strength of our customer relationships and market position. Gross profit margin was 5.4% in 2025, consistent with prior year. We continue to focus on expanding MSA work and the seasonality initiative that Christian mentioned earlier. Canadian operations revenue was $247 million, up 25% over 2024. Operational performance in this segment remains strong against the solid demand backdrop. Gross profit margin was 18.6%, compared to 15.9% in the previous year. Union Electric base revenue was $800 million, an increase of 21% year over year, and base gross profit margin was 8.7% for the year, an increase of 110 basis points over the prior year. Growth has been fueled by robust activity and projects serving industrial end-user segments, substation infrastructure, and data center-related work. Our nonunion electric segment had base revenue in 2025 of $569 million, an increase of 51% over 2024. This growth reflects the significant expansion in MSA activity. Base gross profit margin was 8.5%, compared to 5.9% in the prior year. As Christian mentioned, in 2026 we are focused on performance management and improving crew efficiency. Now turning to fleet investments and CapEx. Greg Izenstark: In 2025, we began shifting away from the historic practice of purchasing all fleet equipment to a balanced approach that targets 50/50 buy versus lease. The new funding mix drives better free cash flow generation and more balance sheet flexibility. In 2025, we invested a total of $135 million in fleet assets and funded the investments through $55 million of operating leases, $38 million of sale-leasebacks, and $42 million of net CapEx. For 2026, we forecast fleet investments of $150 million to $180 million, with funding expected to be approximately 50/50 buy versus lease. Moving to the balance sheet. Greg Izenstark: In November, we executed an underwritten equity offering and concurrent private placement, raising net proceeds of approximately $251 million. We used $58 million of proceeds to fund the Connect acquisition, with the remainder used for net debt reduction. We ended the year with a net debt to adjusted EBITDA ratio of 2.5x, down from 3.6x at year-end 2024. In 2026, we plan to further delever and forecast net debt to adjusted EBITDA of around 2.0x by year-end. Last month, we repriced our Term Loan B, securing a 25 basis point rate reduction. Based on our current debt level and lower interest rates, we expect 2026 interest expense to be about 30% lower than it was in 2025. Finally, turning to our outlook. Greg Izenstark: Today, we initiated full-year 2026 financial guidance. As we have talked about, base revenue and base gross profit exclude impacts from storm restoration services. For 2026, we expect base revenue of $3.15 billion to $3.45 billion and base gross profit of $255 million to $285 million. Revenue, adjusted EBITDA, and adjusted net income are measures that include storm restoration services. Guidance to these measures includes storm restoration services using a three-year average of $88 million in revenue and $28 million in gross profit. For 2026, we expect revenue of $3.24 billion to $3.54 billion, adjusted EBITDA of $280 million to $310 million, adjusted net income of $55 million to $75 million, and lastly, net CapEx is expected to be between $75 million and $90 million. I will now turn it back to Christian to wrap up our prepared remarks. Christian? Christian Brown: Thank you, Greg. Christian Brown: 2025 was a pivotal year for Centuri Holdings, Inc. We demonstrated our ability to identify opportunities, to secure substantial bookings, to expand our footprint and capabilities, to deliver earnings growth, to grow base margins, and to strengthen the balance sheet. The hard work of 2025 has positioned Centuri Holdings, Inc. for continued success going into 2026. The market backdrop remains very strong across multiple years, with our end markets showing no sign of slowing. Centuri Holdings, Inc. offers top-tier growth while maintaining the low-risk profile you expect from us. Our growth has come and will continue to come by focusing on our core capabilities, delivering for our customers, and staying disciplined to who we are. We have a diverse, high-quality, large utility base across gas and electric, union and nonunion, and supported by a high percentage of long-term MSA contracts. In 2025, 78% of our revenue was generated under MSA contracts, and our year-end backlog included 82% MSA work. While we absolutely expect bid work revenue to grow at a faster rate than MSA revenue over the next few years, it is important to note that the scope of work under bid projects is consistent with the services that we deliver under MSAs. It is the same capabilities, only executed under a different type of agreement. Our bid work portfolio is also well diversified, with 285 different projects and an average remaining project value of $3.8 million. For further context, the largest 25 bid projects in the pipeline are expected to contribute about 15% of our total 2026 base revenue. We believe Centuri Holdings, Inc. represents a compelling investment opportunity carrying high growth in strong end markets with a notably low-risk profile, with further potential to drive margin expansion and capital efficiency through solid execution. Christian Brown: In closing, I want to commend our workforce who are executing day in and day out. Your dedication to operational excellence, to safety, and customer service is what earns our reputation as a leading provider of high-quality infrastructure services. I thank you all. We appreciate everybody’s time and interest today. I will hand to the operator so we can start Q&A. Thank you. Operator: In a moment, we will open the call to questions. If you would like to ask a question, you may press number 2. If you would like to remove your question from the queue, for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Kindly limit your participation to one question and one follow-up only. One moment, please, while we poll for questions. The first question comes from Sangita Jain with KeyBanc Capital Markets. Please go ahead. Sangita Jain: Good morning, Christian, Greg. Thank you for taking my questions. For the first question, I want to find out—you are including a three-year average storm revenue in your guidance. How much of that was already realized in the January storm? Christian Brown: Good morning. We did, when you refer to adjusted EBITDA and total revenue, include some level of storm. The storm impact thus far this year has been pretty minor. It is largely in line with what we did last year, so nothing unexpected or significant. Sangita Jain: Oh, you mean in the January winter storm? That was what I was referring to? Christian Brown: Yeah. And I would say that the deployment activity we have done thus far is largely in line with last year. Nothing of a significant nature. Last year had been a quiet year, Sangita. Sangita Jain: Okay. Got it. Thank you. And then on the guidance, if I look at the core guidance, if I exclude storms for a minute, then the gross margin seems to be lower versus this year. Am I reading too much into that? Is there a mix impact that I am misinterpreting? Can you help me understand? Greg Izenstark: No. The gross profit margin would be largely in line with this year, up a little bit on an annualized basis. Sangita Jain: Got it. Thank you. Operator: Thank you. The next question comes from Justin Hauke with Robert W. Baird. Please go ahead. Justin Hauke: Oh, great. First of all, thanks for all the color on the awards and the new disclosure. It is helpful for understanding things, so thank you for that. I wanted to follow up on the margin expectations and the guidance. Maybe you could talk a little bit about the seasonality. I know one of the things you talked about as an initiative is reducing that seasonality for the gas segment. I think you said you were expecting margins to be up year over year in 1Q, but I am just curious how much of a gap you are narrowing. I mean, last year there was a little bit of a loss. Are we more likely to breakeven this year? Or what is the expectation for how to think about the seasonality as we go through the year? Christian Brown: So, Justin, I will answer the question and then pass over to Greg for any additional commentary. We are striving to be predictable and consistent and then build continual improvement, and that should be reflected in everything that you have seen of us over the last few weeks and few months. So, when it comes to margins, it is like our confidence level. We feel very good about being able to deliver it. It reflects the current backlog. It does not assume that we have got lots of things to do to get to that margin. So there is an element of conservatism, just to be consistent, that we have in our margins. Then I will go specifically to the initiatives to improve margin. Where is the margin improvement going to come from? The seasonality, which you just mentioned, on the gas business, and where are we at? It is only one month in, but we see many positive signs in our ability to find work, to win work in the gas business, and push that through to the revenue and the income line, to the P&L. It is only January numbers. We are really just getting to February numbers now, but I think we are going to make a big dent in that three-year program to actually make the seasonality in the gas business not exist across the four quarters. I cannot give you much more than that at the moment for obvious reasons, but we are pleased as we close out the January results, and we are pleased with the volume of work that we are tracking. Then the bid work, which drives the margins upwards, we are very selective now in opportunities and the margin that those opportunities can deliver to us, and that is institutionalized across all of our individual businesses that tender work every day, and, as you see in the slides, we have got very good backlog, very good coverage to deliver our budget as well as the guidance this year. There is an opportunity, therefore, with any additional awards to drive margin improvement. It will take a little bit longer. And then the third thing is the efficiency throughout fleet and the indirect costs associated with it. We have mobilized the resources we need. Our priority was to get the funding of our fleet aligned with better industry practices so that we can generate more free cash flow to invest in the business. So we have done that last year, and that has followed through into 2026. And the focus of the team now is to actually figure out better ways to get more return on the existing asset fleet we have got across all of the businesses operated under Centuri Holdings, Inc. I guess the last comment, we did allude to it in the comments, is on the nonunion electric side. We had a massive growth year over year with pretty much a negligible amount of storms. There was a massive mobilization in the second quarter. In the third quarter, we saw, as we signaled to everybody, an improvement in margin. Those margins continued into Q4. The workforce now is really stable and functioning very efficiently, and I suspect we will see further improvement across the nonunion electric as we close out the first quarter and the way through 2026. Justin Hauke: Okay. Thank you. My second question before I turn it over would be on the awards front. Data centers are something, obviously, you guys highlighted as newer or tangential to what you were doing. Last quarter, you won $140 million in 2025. You talked about this pipeline, $1.4 billion. I think that is actually up a little bit for the data center versus what you called out last quarter, and I know that you had a fair amount of work that was currently out for bid at the time, and I am just curious on the status of the win rates and how those have come in 4Q and year to date, and the expectation for that pipeline, when those awards will come in over the next couple of quarters. Christian Brown: Just to answer your question, I do not typically look at the win rates just on a quarterly basis. It is more of a trend, and our win rates actually have continued to go up all the way through to where we sit today going into February. So if you go back to the 13 months that we have been really driving performance throughout the sales pipeline, we have seen an improvement. I think the win rates—we are happy where they are. Specifically to data centers, your observations are quite right. I think I have spoken about $2.0 billion of opportunity that we could see, of which we are very disciplined on what we will assume in our forecast and what we really put capital behind to go win and resources to go win, because you can chase a lot of work that actually does not conclude with an award that can pay the bills. So the overall focus on data centers remains very much targeted on those customers that we know have capital, that we know are going to award contracts, and that can deliver our returns and our margins. The wins in data centers so far this year are a little slower than expected, but we have a number—getting into commercial sensitivities—awards that are in our near-term pipeline of about $1.5 billion to $1.6 billion that we are negotiating or tendering now. Thank you. Operator: The next question comes from Joseph O'Dea with Wells Fargo. Please go ahead. Joseph O'Dea: Hi. Good morning. In the release, you talk about how the organization has proven its ability to identify and secure growth opportunities over the course of 2025 and certainly see it in terms of the backlog growth. But can you just outline—this happened pretty quickly—can you outline some of the key changes that were implemented in the business in 2025 to drive this, and how you think about the room and opportunity to further advance those in 2026? Any specific initiatives underway? Christian Brown: Joe, thank you for your question. I will take you all back to the beginning of 2025, and I talked about the block and tackling that was needed in the business. The block and tackling was we needed to get a very effective sales pipeline to predict in a more thoughtful way what work was in the pipeline, what was not in the pipeline, and where we need to find more work so that we could drive growth into the business. So the interaction around all of the opcos on a consistent basis, the pipeline, the institutional sales pipeline across the company is now part of what we do day to day without any hesitation. We speak about that daily, weekly, and monthly. That will continue, and that has driven the predictability in our revenue growth. It has driven the predictability on margins, and it has driven the predictability on what we speak about in forecasting as a business. The second thing we implemented was the business cadence on a weekly and monthly basis—really tight block-and-tackling oversight—and that has allowed us to not only drive accountability, it has also allowed us to identify opportunities to do better and create more returns. So those have been the two operational things which will continue into perpetuity with tweaks along the way. The third thing was capital efficiency. We were funding our fleet with all balance sheet cash year over year. We were cash negative, probably for our prior years. As you have seen from this year’s results, we have managed to fund growth in the fleet using leasing while still being able to improve margins in the base business. So those three block-and-tackling items have just become institutionalized in the last 12 months and will continue to drive growth. Now looking forward, if you look at slide nine in the deck, we have given more color around backlog and pending awards. You can see the shift in the amount of work we have got coming into the fiscal 2026 year, and that has continued to grow. You can add the blocks up. We were over $3.0 billion going into 2026, $2.0 billion of backlog going into 2025, and we are now higher. Our drive now is to capture these market tailwinds in our pipeline to build up more backlog to not only do more this year, but build a bigger backlog going into 2027. So the block and tackling is fundamental to being a predictable service provider, which is our desire and our commitment, and then using the pipeline to continue driving growth across all our opportunities and all of our businesses such that we have a greater backlog going into 2027, and we have committed to double-digit growth year over year, and we still stand by that. We believe the pipeline affords that opportunity without relying upon things we cannot control, like storms, and we will continue to drive the businesses to at least meet that obligation. Joseph O'Dea: That is great color. And maybe sticking with that last point, when you talk about 2025 backlog and the bookings you have had to date this year representing 85% of the 2026 base revenue, you think about how the organization is sized today relative to that 2026 base revenue. What kind of investments are you making, and if the demand backdrop supports something better than the base revenue guide, are you sized for that today, or what kind of additional investments will be required? Christian Brown: I think we have got—if you look at slide nine again and refer back to it, we are not sized to capacity. We have got more capacity that we build, we find, we add to the organization every day of every week. What probably goes unsaid is the work our resourcing teams across the nation do every year. We added over 12%—in fact, it is nearly 15%—headcount in the last 13 months, and our desire is to continue to hire at that rate or better. That is apprentices, that is veterans coming into our veterans program, it is resourcing from parts of the country where we can see people coming out of other adjacent industries, it is cross-training and cross-developing. So in terms of capacity, we will commit in our guidance a conservative level of performance that we know we can meet based upon the backlog we have, the resources we can see and have, and things we can control. We are constantly seeking to add capacity so that we can drive better margins and more volume through the business. So there is upward potential there as our teams continue to build capacity, mainly on the people side. I am less worried about fleet. We can add fleet as much as we need, and we can fund it efficiently, while still being able to generate positive cash flow. But on the people side, it is our focus, and we are doing a number of things, some of which I alluded to on the last call, to operate as one Centuri Holdings, Inc. and not as individual opcos, meaning that we can have a more longer-range plan, a more wholesome one-company approach to resourcing across the entire continent. We think we can, therefore, do better in terms of hiring more than 12% to 15% more headcount per year. Joseph O'Dea: Helpful detail. Christian Brown: Thank you. Operator: The next question comes from Manish Samaya with Cantor. Please go ahead. Manish Samaya: Good morning, Christian, Greg, Nate, thank you for getting me in the queue. Greg, I had a question for you on guidance. I just want to be very, very clear on this, that I understand this right. On the base guidance that you have given, the midpoint of the gross margin is 8.2%. And I guess including the storm, you have an EBITDA range, and I was hoping maybe if you can help us with apples-to-apples comparisons and maybe just tell us what that gross margin would be with storms, just like the way you showed it for the base guidance. Just to help us out, please. Greg Izenstark: Yeah. So we said in our earnings release that the gross profit we are assuming is about $28 million on storm revenue of about $88 million. So when you factor that in, on our midpoint, you would get something higher than 8.2%. I do not have that number handy—but at the midpoint, it is about 8.8%, so just shy of that. Manish Samaya: Okay. That is super helpful. That is the number I was guesstimating. I just wanted to confirm that. I appreciate that. The other question, maybe for Christian, is obviously we talked about this huge opportunity—I think $13 billion of opportunities is a fairly big number—through the end of the second quarter. I think $2 billion plus, closer to $3 billion. I know, Christian, you do not talk about win rates, but how should we think about what is baked into the full-year guidance when you look at these opportunities, when you look at this funnel? Thank you so much. Christian Brown: Manish, I could be probably a little bit more direct. If you look at slide nine—we told you within the slide the amount of backlog we have—and then there is a component in addition to that in the histogram of anticipated MSA renewals in 2026. If you add the three blocks up, that takes you to—we do not put the exact scale on it—but it takes you to about $3.2 billion of backlog for this year across the three categories, and that is exactly where we sit today. So how do we do more than the $3.2 billion of backlog? That secured backlog is very predictable. We have got a good handle on that forecast, so I would argue that is as certain and secure as any backlog could ever be. So where is the upside potential? The upside potential is going to come from winning new bids, and we have added within that histogram the work that we have currently bid in addition to awards expected in the first quarter. What is not in there are other opportunities that will pull up through the pipeline and into the bidding during the course of the remaining 10 months of this year. Manish Samaya: Okay. Thank you. Thank you. That is super helpful. Christian, thank you. Operator: Thank you. The next question comes from Sherif Al Sabahi with Bank of—please go ahead. Sherif Al Sabahi: Hi. Good morning. I just wanted to turn to free cash flow for a moment. I understand your attempt to be more capital efficient with your fleet, but what parts of working capital are limiting cash-from-operations flow-through currently? How do you plan to improve them? And then where do you think cash from ops can go in 2026 as a percent of sales? Greg Izenstark: Good morning. So from a free cash flow perspective, we have done a number of things to improve in 2025, from the fleet efficiency to the refinancing of the debt. We are still hyper-focused as a team on reducing our DSO and working with our customers to bill our revenue quicker and get collected quicker. And so that is the primary focus of 2026. From a free cash flow perspective, beyond the capital efficiency work that we have already discussed, we think we can make some pretty meaningful progress and improvement on that front. From a conversion perspective, we look at it on a free cash flow conversion of adjusted EBITDA. And we look at where our peers are, and we think on a longer-term basis, 50% conversion is where we can target. Thank you. Operator: The next question comes from Avi Haraldlowitz with UBS. Please go ahead. Avi Haraldlowitz: Hey. Good morning. Thank you. So I saw that you highlighted a fiber project for a data center in the slides. Can you remind us what the base of communications is for your business and what type of growth you are expecting to see from communications this year? Christian Brown: Avi, thank you for the question. I think we have tried to demonstrate in the illustrated diagrams in the deck and maybe some of the talking points that we are not actually bidding very much standalone fiber telecom work. There is a little bit actually north of the border in Canada, but what we are finding is that, as part of the data center scopes of work, customers are rolling in a number of discipline types of work, including fiber, gas connections, electrical connections, and all of the other scopes where you see them. We are not building out a telecom business within Centuri Holdings, Inc. at all. It is mainly complementary to what we already do for those customers. Avi Haraldlowitz: Okay. Understood. Appreciate that. And then, as we think about the bid work awards that you are thinking of for this year, would you expect it to have a similar revenue-burn phasing as the bid work that you were awarded last year, or could we see that timing differ materially this year? Christian Brown: It is a very good question. I think you will see—it will be exactly the same profile or very similar. Why is that? The average contract size is not changing. The size of the pipeline is mainly remaining very solid. Our teams are very much focused on booking through the four quarters and taking away booking seasonality. So I think the profile will look very similar to last year. I do not see any of the underlying inputs that will change it materially at all. You have got a couple of differences—the MSAs are slightly different, but not the bid work. I think we closed out the year with 30% of the bid work going to the revenue line. If you go back and look at the third quarter numbers—so really nine months of the year—it was a higher number. So clearly, we are booking work earlier in the year. We have to look at it. The big contracts we are booking in the fourth quarter typically are really for 2026, or the following year, which is why the percentage went down from 45% to 30%. Avi Haraldlowitz: Right. Okay. Makes sense. Christian Brown: Thank you. Operator: The next question comes from Chris Ellinghaus with Siebert Williams Shank. Please go ahead. Chris Ellinghaus: Hey. Good morning, guys. Christian Brown: Morning, Chris. Chris Ellinghaus: Christian, when you talk about reducing the Q1 seasonality, are you trying to get smoother across the year? And in general, is the goal to make Q1 look a lot more like a traditional Q2? Christian Brown: The answer to the question, Chris, is yes. Our desire is to deliver 7%+ gross profit margin in our gas business for four quarters of the year. We are currently doing it in three quarters. And that is the driver. We absolutely have had some successes on the bookings. You have seen them. We have announced them. We just need to do more. You cannot do it all in the six to seven months that we have been working at it. So the desire is, as you state, to get rid of seasonality across our gas business and deliver 7%+ gross profit each quarter for four quarters of the year. And that is the commitment. Chris Ellinghaus: Gotcha. What are you guys seeing—you did the acquisition towards the end of the year—what are you seeing in general in M&A, and what sort of aspirations for tuck-ins do you have at this point? Christian Brown: Again, I will be pretty consistent with what you have heard from me in the past. I think we really like our platform, where we are. We have got good scale. We have got good ability to grow organically. So we are not short of scale in the business. Tuck-in acquisitions, to which you refer, again, I will be consistent. I think we have got some white space in the Midwest. I think we could do with more capability there, and that lends itself to a possible acquisition. And I think on the electrical transmission and, to a lesser degree, the distribution, I think we do need a little bit more of a geographic presence in that end market. So that lends itself to some tuck-in acquisitions. So our focus would be on finding acquisitions that could fit into those two needs that support the business. Chris Ellinghaus: Okay. Great. Vis-à-vis the data center potential, what is in your pipeline? Have you got much visibility into timing, and do you expect to have some more tangible bookings throughout 2026? Christian Brown: Yeah. Chris, I will tell you—and I need to be a bit crisper in my commentary—we are very disciplined on what we put into our sales pipeline that forms the basis of our forecasting, and when it comes to data centers, we are hyper-disciplined because there are so many opportunities around that really do not have funding—just developers who are trying to create an option that may never lead to anything. So when I talk about data centers and the discipline, the only thing that goes into the pipeline that we follow are those data centers where we have got dialogue engaged with the developer or with the end user who has capital and is going to deploy capital, and it is a real project. And where we cannot get that confidence does not mean to say we walk away from it. It just remains as a lead within our sales pipeline with no value against it. So there are two numbers I have given out—three numbers, actually. There is about $2.0 billion that we see in the pipeline where we feel there is a high probability that that will get funded and there will be real projects which will allow us to generate revenue and good, solid, high profits from it. Of the $2.0 billion, $1.3 billion is real today where we have got comfort that the client has funding, all the permits are in place, and it is a real contract. We are tendering that $1.3 billion as we speak. We would expect our first share of bookings from that $1.3 billion in the first six months of the year. Chris Ellinghaus: Okay. That helps a lot. Lastly, in the guidance for potential storm work, that is kind of the historical norm. But you scaled the nonunion side significantly. So should there be a really good storm season in some year, is the way to think about it that the potential for storm revenues has increased proportionately with your capacity, or are you just going to try to stay within some kind of range? Christian Brown: Go back to principles of how we are explaining our business and how we are driving our business. We cannot control the weather, but we can control our base business—the work we do for our customers 365 days a year. The nonunion business has increased by over 50% year over year. The majority of those resources, almost all year, work on doing the day-to-day work for our customers. The fact that we have increased that headcount in the nonunion business doing the day-to-day services on-system for our T&D customers—if there is a weather event, that gives us more upside potential for the business to generate higher margins and higher revenue from storm. Yes. Chris Ellinghaus: Okay. That definitely is clear. Alright. I appreciate it. Thanks for the details, guys. Christian Brown: Thank you, Chris. Operator: Thank you. We have reached the end of the question-and-answer session. I will now turn the call over to Nate Tetlow for closing remarks. Please go ahead. Nate Tetlow: Thank you all for joining us today and for your interest in Centuri Holdings, Inc. Please feel free to reach out to me with any follow-up questions. This concludes today’s call. Operator: Ladies and gentlemen, this is now the operator. Today’s conference is concluded. You may now disconnect the call. Thank you.
Operator: Good day, everyone. And welcome to EOG Resources, Inc. Fourth Quarter and Full Year 2025 Earnings Results Conference Call. As a reminder, this call is being recorded. For opening remarks and introductions, I will turn the call over to EOG Resources, Inc. Vice President of Investor Relations, Mr. Pearce Hammond. Please go ahead, sir. Pearce Hammond: Good morning, and thank you for joining us for the EOG Resources, Inc. Fourth Quarter 2025 Earnings Conference Call. I'm Pearce Hammond, Vice President, Investor Relations. An updated investor presentation has been posted to the Investor Relations section of our website, and we will reference certain slides during today's discussion. A replay of this call will be available on our website beginning later today. As a reminder, this conference call includes forward-looking statements. Factors that could cause our actual results to differ materially from those in our forward-looking statements have been outlined in the earnings release and EOG Resources, Inc.'s SEC filings. This conference call may also contain certain historical and forward-looking non-GAAP financial measures. Definitions and reconciliation schedules for these non-GAAP measures and related discussion can be found on the Investor Relations section of EOG Resources, Inc.'s website. In addition, any reserve estimates on this conference call may include estimated potential reserves as well as estimated resource potential not necessarily calculated in accordance with the SEC's reserve reporting guidelines. Participating on the call this morning are Ezra Y. Yacob, Chairman and Chief Executive Officer; Jeffrey R. Leitzell, Chief Operating Officer; Ann D. Janssen, Chief Financial Officer; and Keith P. Trasko, Senior Vice President, Exploration and Production. Here is Ezra. Ezra Y. Yacob: Thanks, Pearce. Good morning and thank you for joining us. 2025 was a remarkable year for EOG Resources, Inc. Overall, our year was characterized by disciplined capital allocation, strong execution across our operations, and robust free cash flow generation. We did not just meet the targets set forth in our operational and capital plan, we exceeded them while expanding our business both domestically and internationally, laying a foundation for the future. We surpassed our original oil and total volume targets while delivering in-line capital expenditures. We continued driving down well costs through sustainable operating efficiency gains, and our differentiated marketing strategy delivered peer-leading U.S. price realizations. Combined with lower cash operating costs, we helped strengthen margins. Beyond extending our track record for excellent operational execution, 2025 was transformational. We completed the strategic Encino acquisition, entered exciting international exploration opportunities in the UAE and Bahrain, and brought online the Janus gas processing plant in the Delaware Basin. We also continued leading on sustainability, publishing new emissions targets after achieving our prior targets ahead of schedule. Each of these developments fundamentally improves our business and better positions EOG Resources, Inc. going forward as being among the highest return and lowest cost producers with strong environmental performance. Operational excellence in 2025 drove outstanding financial results and top-tier cash returns to shareholders. We generated $4.7 billion in free cash flow and returned 100% to shareholders through our regular dividend, which increased by 8%, and $2.5 billion in share repurchases. To put our 2025 financial performance in a broader perspective, EOG Resources, Inc. has generated annual free cash flow every year since 2016. We have never cut nor suspended our dividend in 28 years. Further, over the past three years, we have generated $15 billion in free cash flow and returned $14 billion to shareholders, generating an average 24% return on capital employed. We have done this all while maintaining a pristine balance sheet. This is not luck, it is the result of consistent execution of our resilient business model, and represents a fundamental differentiator versus peers. And we expect more of the same in 2026. Modest oil production growth as we maintain capital discipline, further integration and optimization of the Encino acquisition, and continued natural gas growth into emerging North American demand. Looking ahead, we have a disciplined plan for 2026. Our strategy prioritizes activity in the Delaware Basin, the Utica, and the Eagle Ford, while increasing activity in Dorado alongside continued international investment. Our Utica asset provides a compelling opportunity for value creation as we continue to identify additional upside from the Encino acquisition as well as advancing our technical understanding of the play. And in the Delaware Basin, after adjusting our development strategy in 2025, we expect consistent well performance year over year. At guidance midpoints, our 2026 plan is expected to generate approximately $4.5 billion in free cash flow using strip pricing, delivering growth, exploration, a competitive regular dividend, and excess cash returns. Our breakeven price to cover the 2026 capital program and regular dividend is $50 WTI. Overall, the 2026 capital program balances both short and long-term free cash flow generation while supporting future growth and maintaining our pristine balance sheet. Our 2026 plan is contemplated in our updated three-year scenario. The scenario reflects modest oil production growth aligned with current macro expectations. It maintains our current cost structure despite our persistent track record of driving costs lower through efficiency gains. Finally, the scenario is underpinned by our deep inventory of high-return assets across our multi-basin portfolio. Using WTI price ranges of $55 to $70 per barrel from 2026 through 2028, the updated three-year scenario delivers 5% cash flow and greater than 6% free cash flow compound annual growth rates, generating cumulative free cash flow of $10 billion to $18 billion and earning robust double-digit returns on capital employed. This updated three-year scenario demonstrates how EOG Resources, Inc.'s relentless focus on returns, our diverse multi-basin portfolio, and industry-leading exploration capabilities provide clear visibility to sustain high returns and durable free cash flow generation for years to come. Overall, the three-year scenario delivers approximately 20% higher free cash flow in 2026 through 2028 than the actual results for the prior three-year period assuming the same price deck. On commodity fundamentals, we expect total crude and product inventories to continue building over the next few quarters. However, increasing global demand, geopolitical factors, and stockpiling of petroleum reserves are providing price support. Beyond near-term dynamics, we remain constructive on medium to long-term oil prices being driven by steady demand growth and the need for additional supply. Importantly, global spare capacity is declining, which should provide an oil price floor while geopolitical events will continue to drive upside price volatility. On natural gas, our outlook remains positive. U.S. natural gas enjoys two structural bullish drivers: record LNG feed gas demand and growing electricity demand. We expect U.S. gas demand to grow at a 3% to 5% compound annual growth rate through the end of this decade. We are investing in building a premier gas business, positioning EOG Resources, Inc. to deliver supply into these expanding markets. We believe our premium gas business is an underappreciated asset, providing exposure to growing demand and with access to premium markets from geographically diverse sources. EOG Resources, Inc.'s value proposition is clear. We are guided by our strategic priorities: capital discipline, operational excellence, sustainability, and culture. Our 2025 results demonstrate consistent execution across our premier multi-basin portfolio, while our cash return performance reflects our unwavering commitment to disciplined value creation through the cycles. EOG Resources, Inc. is better positioned than ever to execute on our value proposition and create shareholder value. Now here is Ann with a detailed review of our financial performance. Ann D. Janssen: Thank you, Ezra. EOG Resources, Inc.'s financial strategy remains steadfast: invest capital in a disciplined manner, pay a sustainable and growing regular dividend, return significant cash to shareholders, and maintain a pristine balance sheet. The fourth quarter 2025 exemplifies this strategy in action. We generated adjusted earnings per share of $2.27 and adjusted cash flow from operations per share of $4.86, building free cash flow of nearly $1 billion. For 2025, EOG Resources, Inc. reported adjusted net income of $5.5 billion, or $10.16 per share, and free cash flow of $4.7 billion. For 2025, we delivered a 19% return on capital employed, maintaining our peer-leading ROCE. We continue to deliver on our commitment to return cash to shareholders. During the fourth quarter, we returned $1.2 billion to shareholders, $550 million through our robust regular dividend and $675 million in share repurchases. For the full year, we paid $2.2 billion in regular dividends, or $3.95 per share, representing an 8% increase over 2024, and we repurchased $2.5 billion in shares. Our 2025 cash return was 8.2% of our market cap, which led our peers. With $3.3 billion remaining under our current share repurchase authorization, we have ample flexibility for additional opportunistic buybacks. In today's dynamic energy environment, share repurchases are especially compelling. We expect to remain active on share buybacks, continuing to enhance returns through the cycles. Our peer-leading balance sheet provides an outstanding competitive advantage. We ended 2025 with $3.4 billion in cash and $7.9 billion in long-term debt. Combined with our undrawn $3.0 billion revolver, total liquidity stands at approximately $6.4 billion. Our leverage target of total debt at less than one time EBITDA at bottom cycle prices remains among the most stringent in the energy sector, providing both downside protection and the flexibility to invest strategically through cycles. Finally, we increased proved reserves by 16% to 5.5 billion barrels of oil equivalent, continuing our long track record of reserve growth. Net proved reserve additions from all sources, excluding price revisions, replaced 254% of 2025 total production. Turning to 2026, we expect capital spending of $6.5 billion at the midpoint of guidance. At current strip prices and using guidance midpoints, this plan generates $4.5 billion in free cash flow. In the current environment, we anticipate returning 90% to 100% of annual free cash flow to shareholders, consistent with recent years. In summary, EOG Resources, Inc. delivered another outstanding year. We strengthened our portfolio, maintained a pristine balance sheet, and positioned the company for sustainable value creation through commodity cycles. With that, I will turn it over to Jeff for our operating results. Jeffrey R. Leitzell: Thanks, Ann. I want to start by recognizing the exceptional dedication of the entire EOG Resources, Inc. team. Consistent, safe, and outstanding execution is what converts operational strength into shareholder value, and 2025 demonstrated that. Our teams met or exceeded expectations on nearly every operational metric. Production volumes outperformed guidance, driven largely by stronger performance in our foundational plays, while our disciplined capital investment remained in line with expectations, delivering strong free cash flow. Let me highlight several accomplishments throughout 2025 that have helped position EOG Resources, Inc. for long-term success. First, we made significant strides in lateral length optimization. Longer laterals mean fewer vertical wellbores to drill and more productive time both on surface and downhole, reducing surface footprint and improving capital efficiency. In addition, EOG Resources, Inc.'s internal drilling motor acts as a force multiplier on these longer laterals, improving downhole drilling performance and giving us the confidence to continue extending laterals across our portfolio. We are focused on drilling 2- to 3-mile laterals in the Delaware Basin and 3- to 4-mile laterals in the Utica and Eagle Ford plays. Second, extended laterals and sustainable efficiency improvements led to well cost reductions of 7% in 2025. Our focus on sustainable efficiency gains for drilling and completion operations creates meaningful value because they compound over time, leading to significant cost savings through the development of an asset. And third, cash operating costs came in under target, led by a meaningful reduction in LOE due in part to our proprietary production optimizers program, which leverages machine learning to optimize base production, delivering better run time and lower cost across the portfolio. Looking ahead, 2026 is positioned to be an outstanding year for EOG Resources, Inc. as we build on the strong momentum established in 2025. Given the macro environment, we are keeping oil production flat with fourth quarter 2025 levels, which results in annual oil production growth of 5% and total production growth of 13%. We can deliver this disciplined plan for a capital budget of $6.5 billion. Throughout the year, we plan to complete 585 net wells across our multi-basin portfolio of high-return inventory, with the majority of the capital being allocated to our foundational assets: the Delaware Basin, Utica, Eagle Ford, and our newest foundational asset, Dorado. We will also continue investment across our international portfolio. Capital cadence and activity should be relatively consistent through the year, with a roughly even capital split between the first and second half and activity averaging approximately 24 rigs and 10 completion crews. Looking at the service cost environment, despite lower industry activity in 2025, we are seeing a relatively stable market for high-spec equipment with minimal cost reduction. Support services have shown some softening and we will continue monitoring the market for savings opportunities through 2026. We have locked in approximately 45% of our total well costs this year, giving us flexibility to capture any additional market softening. For 2026, we are targeting a low single-digit reduction in well costs driven by sustainable efficiency gains. In the Delaware, our team has consistently delivered innovations, including our EOG motor program, Super Zipper operations, high-intensity completions, and production optimizers. From 2023 to 2025, we increased lateral lengths by nearly 30% while reducing well cost by approximately 20%. We have also strategically invested in infrastructure, including facilities, gathering systems, water transfer stations, and the Janus gas processing plant, all of which deliver lower operating costs that complement our well cost reductions. Over the past few years, we have fundamentally improved the cost structure of our Delaware Basin assets. Because of this, our development program now includes additional zones that previously did not meet our stringent return hurdles. While per-well productivity declined last year as we targeted these incremental opportunities, our economics did not. Our 2025 Delaware program continues to deliver over 100% direct after-tax returns at $55 WTI while improving capital efficiency by 4%. For 2026, we expect consistent year-over-year well productivity and strong economic performance while averaging 13 rigs and four completion crews in the Delaware. In the Utica, the Encino integration is ahead of schedule, has exceeded expectations, and remains a significant focus for 2026. We achieved our $150 million synergy target ahead of our original one-year timeline from close, and we continue capturing additional synergy opportunities. We have achieved several operational wins with the Encino asset since closing the acquisition in August. We have increased the drilled feet per day by over 35%. EOG Resources, Inc.'s scale and purchasing power has reduced casing cost over 30%. We have increased the completed feet per day over 10%, and our team has reduced on-site facility costs by 20%. These achievements have helped us to reduce our well cost below $600 a foot by year-end 2025. In addition, we are planning to have in-basin self-sourced sand in Ohio by the end of the year, which should further reduce completion costs. For 2026, we expect to run three rigs and three completion crews, completing 85 net wells. Our foundational Utica asset is positioned for continued improvement as we build upon the significant cost reductions achieved over the past few years. In the Eagle Ford, efficiency gains continue to improve economics. From 2023 to 2025, we increased drilled feet per day by 5% while boosting completed lateral feet per day by 30%, driving a 15% reduction in well cost. Last year, we extended lateral lengths, highlighted by the record 24,000-foot lateral on the Whistler E5H. For 2026, we expect to run four rigs and one completion crew, completing 115 net wells, continuing to leverage technology and efficiency gains. Turning to Dorado, we have made outstanding progress over the past few years and now have transitioned this world-class gas asset to our newest foundational asset. To be a foundational asset, the play must meet or exceed our high return hurdle, have significant running room, have a consistent level of activity which supports a full-time completions crew, and generate free cash flow. Dorado will meet these criteria this year and will stand beside our other foundational assets, the Delaware Basin, Utica, and Eagle Ford. In 2025, we met our exit gross production target of 750 million cubic feet per day and are targeting an exit rate of 1 Bcf per day gross production in 2026. We significantly lowered well cost to approximately $750 per foot through operational efficiencies. From 2023 to 2025, we increased drilled feet per day by 30% and completed lateral feet per day by 20%. With a low breakeven price of $1.40 per Mcf, Dorado is exceptionally well positioned to serve our growing LNG gas supply contracts and Gulf Coast gas demand. We will run two rigs there this year and one completion crew which will complete 40 net wells. Our Gulf States exploration programs are moving forward, and the teams are making exciting progress. We commenced operations in Bahrain and the UAE in 2025 and will continue to test and delineate these plays throughout 2026. We anticipate having initial well results in the second quarter of this year. These opportunities leverage our technical expertise and extensive data set from thousands of unconventional wells across diverse plays, prime examples of EOG Resources, Inc.'s commitment to organically expanding inventory through exploration. In closing, our 2025 performance demonstrates the strength of our multi-basin portfolio and operational excellence. As we execute our 2026 program, we are confident in our ability to deliver consistent results, maintain capital discipline, and generate strong returns for shareholders across all commodity price environments. With that, I will turn it back to Ezra. Ezra Y. Yacob: Thanks, Jeff. As we close, I want to highlight why EOG Resources, Inc. represents a compelling investment opportunity and how we are positioned to deliver sustained shareholder value. First, our asset base differentiates EOG Resources, Inc. versus peers. With approximately 12 billion barrels of equivalent of high-return, long-duration resources, we have diversified exposure across North American liquids, North American natural gas, and international conventional and unconventionals. This creates multiple pathways for value creation as each of these markets grows over the medium and long term. Second, our unconventional and exploration capabilities are a long-time hallmark of EOG Resources, Inc. This core competency does not just unlock significant upside in our current inventory, it allows us to build future inventory in a low-cost, high-return manner. Third, we are a low-cost, efficient operator with deep technical expertise. Our relentless focus on innovation in drilling and completion techniques continues to drive our cost structure lower. This reflects our decentralized model that effectively creates a portfolio of pure-play companies that can leverage knowledge and expertise across the entire company. Fourth, our disciplined capital allocation framework drives superior financial performance, generates robust free cash flow, and delivers peer-leading returns on capital employed. Finally, we remain committed to returning cash to shareholders through our regular dividend and opportunistic share buybacks, and our peer-leading balance sheet provides both protection and opportunity. We have the financial capacity and flexibility to invest opportunistically through any cycle. Thank you for your continued interest in EOG Resources, Inc. We will now open for questions. Operator: Thank you. The question and answer session will be conducted electronically. If you would like to ask a question, if you are using a speakerphone, please make sure your mute function is off. You are allowed one question and one follow-up. We will take as many questions as time permits. Our first question today is from Neil Singhvi Mehta with Goldman Sachs. Please go ahead. Neil Singhvi Mehta: Good morning, Ezra and team. Thanks for taking the time. Ezra, I want to start off on the composition of the wells this year and the activity. And year over year, there is a slowdown in the Delaware. I think you are going from 390 to closer to 300 in terms of wells that you are going to attack. And it looks like you are picking up in the Utica. Could you just talk a little bit about the composition? How do you think about the optimal level of activity in the Permian in particular, and the composition of activity over the course of the year? Ezra Y. Yacob: Yes, Neil, this is Ezra. Good morning. It is a great question. This year, the plan really takes a step towards optimizing investment across our high-return foundational plays. As you recall, we are really seeing pretty similar returns across all of our foundational plays now. Specific to the Delaware Basin, the activity level really optimizes utilization of existing infrastructure across our acreage position, and that really helps support better capital efficiency. We expect consistent Delaware Basin performance going forward. As Jeff talked about, our strategic shift in development strategy in 2025 has been an outgrowth of our dramatic cost savings the last few years combined with investment in that infrastructure to help lower operating costs. The cost savings have allowed us to capture some of these additional landing zones that exceed our economic hurdle rates, so we are now actively co-developing many of these targets. Some of the targets have lower productivity per foot, some have different GORs, but each, as Jeff highlighted, is delivering the high returns that our shareholders have come to expect. And we expect the consistent well results you have seen quarter over quarter throughout 2025 to really continue through 2026 and really through the entire three-year scenario that highlights the strong returns and increasing free cash flow going forward. So, at this year's activity levels in the Delaware Basin, we expect to deliver relatively flat production to Q4 2025 similar to the company level, maybe I think it is 3,000 to 5,000 barrels a day less due to really outperformance in the fourth quarter there in 2025 by the Delaware Basin asset. And really, I think the big takeaway is that at this level of activity in the Delaware Basin, we are confident we can maintain similar returns and free cash flows longer than 10 years. And it really comes back to the deep inventory of high-return assets we have across multiple basins, Neil. Neil Singhvi Mehta: Yes, and appreciate that. Maybe that is a good follow-up where you can address the Delaware question. It is something we get a lot from investors who look at some of the well results and are concerned that there is degradation in terms of quality of inventory and those well results, and I think you guys have a perspective on that. How do you address that case that has been out there? Jeffrey R. Leitzell: Yes, Neil, this is Jeff. Really, like we have talked about in the past, I will give you a little bit of details. It just has to do with all the progression we have made there. As we have said, there is not just one variable that goes into economics. It is not just production. Ultimately, you have to focus on rolling everything up to make sure you are maximizing returns, and that is what we are doing. So in the Delaware, just taking a look over the last three years, we have extended our laterals 30%. We have lowered the cost there by 20%, which has ultimately improved the capital efficiency by 4%. So when you take all that and you roll it up, our cost right now is at or below $725 a foot. And because of this, we have talked about being able to unlock those additional targets up through the strat column, and they meet our return hurdles now at bottom cycle pricing and deliver payouts much less than 12 months at current pricing. The other thing it also does is it really improves the overall recovery per acre and it maximizes the NPV per acre across the asset, which is really what we are looking for. And so, by design, we are obviously seeing a little bit lower productivity on those targets but not lower economics. They are matching any other target that we have, and they actually meet that hurdle. And now that we have fully implemented that new development approach, as Ezra said, we are not seeing any major changes in productivity. It should be relatively consistent moving forward from here. So, we are extremely excited about how the Delaware program has progressed and how our team has unlocked all this additional value there through the cost reductions. As Ezra said, we have set it up for an extremely successful year and many years to come. So thanks. Operator: The next question is from Stephen I. Richardson with Evercore. Please go ahead. Stephen I. Richardson: Hi, morning. Thanks for the time. I appreciate the update on Dorado and appreciate that the team has worked so hard to move it towards foundational. I was wondering if we could just talk about how you thought about increasing activity there versus some of your oilier basins. I appreciate the $1.40 breakeven, but just how do you think about the gas macro and how this play kind of fits into that? And I was wondering, as a follow-on to that, if you could kind of address how your LNG take contracts are going to change in 2026 and 2027? Ezra Y. Yacob: Yes, Steve. Good morning. This is Ezra. Listen, I appreciate the question about Dorado. As we have highlighted on Slide 18, we have had a fantastic couple of years. We have dropped our well cost down to $750 per foot, drilled feet per day by 30%, completed feet per day by 20%, and so it has really dropped our breakeven down to about $1.40 per Mcf, and that includes F&D, LOE, GP&T, G&A, and production tax. So, we are still highly confident that Dorado is the lowest cost gas supply in the U.S. with exceptional geographic location with its proximity to the Gulf Coast and premium markets. I think Jeff has talked about that we exited 2025 at about 750 million cubic feet per day, and we plan to exit 2026 at about 1 Bcf a day gross. Our cultural and measured pace of investment, Steve, continues along our approach to each of our plays. We are investing in it with two things. One, to make sure we do not outrun our pace of learnings so we can continue to drive down the costs. But the second thing is, associated with any of our plays, but especially here in Dorado being a gas play, we really are growing into not only the emerging North American natural gas demand that we see, but really some of the contracts that we have. As you brought up with our LNG, now we can supply many of our contracts from multiple basins. Specifically, as of Q1, we have actually increased our exposure to LNG by 140 MMBtu per day. So that is on top of the preexisting 140 MMBtu per day that is linked to JKM or Henry Hub. We also have another 300,000 MMBtu per day that has already been going to LNG that is linked to the Henry Hub. And so that leaves us one additional tranche of 140 MMBtu per day that we anticipate coming on later this year and will be linked again to JKM or Henry Hub. As we move into 2027, we have an additional contract, as you know, that is linked to Brent or U.S. Gulf Coast gas for a total of 180 MMBtu per day. Again, when we think about the first part of your question, Steve, how does Dorado compete for capital versus the liquids plays? That is one of the strengths of being a multi-basin company and having dedicated North American liquids plays and dedicated North American natural gas plays. We do not really see them competing against each other. They are really able to service different parts of the market. And what we see overall in the U.S. natural gas demand, much of it is coming from these longer-cycle projects. Certainly, there is an increase in U.S. electricity demand. When we think about data centers behind the meter or LNG, oftentimes when you sit across the table negotiating with the other stakeholders, they are really looking for the confidence in 10-, 15-, 20-year, multi-decade type of contracts. And that is really the strength of having a dedicated North American natural gas play as opposed to associated gas. Stephen I. Richardson: Really helpful. Great progress there and congrats to the team in Corpus. I was wondering, just a follow-up. The second year in a row that you have run more than 100% of free cash in terms of the buyback, or sorry, in terms of cash returns to shareholders. Can you maybe just talk about that? The target is unchanged, but you have had a, you know, we would probably say a pretty squishy commodity price environment, but you have been able to do that and bolt on a pretty significant acquisition. So how do you think about that going forward? Is this just best use of cash as cash comes in? And, you know, just remind us, you know, how does your view of value of the stock or relative performance, or how do you kind of all think about that buyback lever, which seems like you really like at the current time? Ann D. Janssen: Hi, Steve. Good morning. This is Ann. To address the free cash flow, of course, we are looking at the best ways to create value for the shareholders, and our pristine balance sheet places us in an excellent position to reward shareholders with robust returns of free cash flow. We have demonstrated, as you said, a commitment to return significant cash to our shareholders. We do expect this to continue as we really do not see a need to build cash on the balance sheet. The current environment, as you noted, is dynamic and could provide the opportunity to return cash at similar levels as we have over the past few years. We start our cash return anchored by our sustainable, growing regular dividend, then we will supplement that by share repurchases and/or special dividends. And recently, we have had a focus on the opportunistic buybacks as a primary mode of additional cash return. In the current environment, we are very comfortable returning that 90% to 100% of annual free cash flow that I outlined, and that is similar to what we have done over the past few years. Our focus just continues to invest our dollars to create long-term value for our shareholders. Operator: Next question is from Doug Leggate with Wolfe Research. Please go ahead. Doug Leggate: Good morning, everybody. Ezra, I think you may have partially answered this, but this is the first time you have given the new free cash flow visibility post Encino. Obviously, you have got a $6.5 billion capital budget. There is a lot in there that is not maintenance capital, but you have also, you know, put a $50 breakeven on this. Where I am going with this is, if I heard you right, did you say that on a sustaining basis, do you think you can hold your free cash flow flat for 10 years or sustainable for 10 years? I do not want to put words in your mouth, but if I take the $6 billion high end at $70 oil, that gets you to about two-thirds of your market cap, in other words, it is not enough. So can you just clarify what you were meaning there? And I have got a follow-up, please. Ezra Y. Yacob: Yes, Doug. This is Ezra. Good morning. Yes, my comments earlier were specific to the Delaware Basin. I am sorry, I think that is where the disconnect is. The Delaware Basin. That is correct. Yes, and so really what we have seen with the three-year plan, the three-year scenario quite frankly, is that, you know, the high-level takeaway, like I said, is comparing the past three years with the forward-looking three years at a similar price deck, we have actually increased the free cash flow potential there by 20%. And even with low single-digit oil growth and modeling a mid single-digit kind of total production growth, we are seeing 6%+ compound annual growth rate of that free cash flow year over year. Doug Leggate: So just my follow-up, I mean, just a clarification. So when you look at your sustaining capital, what do you think that level is for the post Encino portfolio and what do you believe the duration of that is post the three years? I mean, are we talking about 20 years of inventory? 20 years of sustainable free cash flow? How do you define it? And I will leave it there. Thanks. Ezra Y. Yacob: Yes, so there are kind of two different questions in there. Maybe I will address the first one as far as the inventory life, and I will let Jeff maybe follow up with the details on our maintenance capital number post Encino. So, Doug, when we think about the resource potential, the deep inventory of high-return assets that we have captured that I talked about, Slide 8 in our inventory in our deck is probably one of the best ways to look at it. And we presented that 12 billion barrels in a way that it is two different things on that slide. You can think of it as kind of a good old-fashioned R over P, which that 12 billion barrels, to your point, speaks to close to 20 years worth of production. And then you can also see on that, and you are welcome to apply any type of risk to that as you deem necessary, but the other thing you will notice on that slide is the returns as a proxy to free cash flow. And you can see that 12 billion barrels essentially generates greater than 55% return at $45 and $2.50, greater than 100% rate of return at $55 and $3 gas. And so what I would point out is as we develop a program every single year, it is not that we are force-ranking our rates of return inventory and drilling the highest 400 or 500 wells first. There is always a mix in there, which is why we present our inventory as kind of a kitchen sink effect on that rate of return, because at different times you are obviously drilling in different parts of the basins, you are trying to maximize infrastructure, you are trying to limit your indirects, so that is really the best way to look at it. I would say that we have great confidence being able to deliver similar free cash flow, similar returns at the company level, for many, many years to come based on that deep inventory of 12 billion barrels of equivalents. And then, Jeff, with the maintenance capital maybe? Jeffrey R. Leitzell: Good morning, Doug. Yes, this is Jeff. Yes, you are correct. It has been a handful of years since we have updated that maintenance capital. And with it updated, its current range right now is from $4.8 billion to $5.4 billion, so midpoint around $5.1 billion. And really what this range represents is the capital required to hold production flat for a period of three years, and it also assumes our current well costs right now. And that is consistent with our updated three-year scenario. The other thing I would say is the big changes that have really happened since the last update, as you hit on, obviously, the Encino acquisition we built into that. There is the increase in production of the base business since the time of the previous disclosure. And also there is the impact of the improvement across our portfolio since the time of the previous disclosure. And then lastly, I would just note that this maintenance capital really reflects a modest improvement in our base decline, which is now below 30% for oil and below 20% for BOE. Operator: The next question is from Scott Michael Hanold with RBC Capital. Please go ahead. Scott Michael Hanold: Yes, thanks. I was wondering if we could go back to Permian productivity. It seems like it has been a bit of a headwind for EOG Resources, Inc. share price, and I appreciate the context you guys have provided on those, we will call it, secondary zones. It is something, you know, other peers are talking more about that and surfactants and other things. And, you know, I am not, I do not want to lead your answer, but do you think some of the relative performance that people are being concerned about is because you all have been able to move faster to these secondary zones than peers? And if you could give us a sense of, on some of the primary kind of activity that you have done, is the productivity over the last few years fairly static? Ezra Y. Yacob: Yes, Scott. This is Ezra. Thanks for the question. Yes, over the primary targets, I would say we are seeing relatively consistent performance there. Of course, it is difficult to compare because even if you think about, say, an Upper Wolfcamp or a Wolfcamp A, you end up having multiple landing zones in there. So do not forget, we are a pretty technical bunch here, and so we look at the permeability, is it a little bit siltier, is it more of a mud rock, and those are the types of things that with just a little bit of savings on your cost side, all of a sudden, those targets really become more economic than what you had previously counted them on. So what I would say is, like for like, we are seeing pretty consistent well results in there. As far as pushback, I think from the peers, you know, I do not want to speak to the peers. What I would say, what I think is going on with us, is that we made this shift. I think we figured that we had pretty well highlighted this and externally talked about adding nine additional landing zones over the last few years. But in hindsight, Scott, I think we probably could have done a better job highlighting our change in development strategy heading into 2025, again, off of the really extreme cost reductions that we saw coming off of the relative highs there in 2023. Scott Michael Hanold: Appreciate the context. And, you know, as my follow-up, you know, if we can move to natural gas, and you all have increased exposure to pricing on the water with some of your LNG contracts. Could you give a sense of other things that you all may be working on or considering, supply decrements, industrial users, or power data center users? Ezra Y. Yacob: Yes, Scott. This is Ezra again. It is a good question. We have spent time looking at really how data center development may progress and what role EOG Resources, Inc. might play in it. I think there are a couple of different ways where we can benefit today and potentially benefit in the future. The diverse marketing strategy gives us exposure to regional pricing uplift associated with increased electrical demand in areas of data center development. Obviously, we have seen U.S. electricity demand grow last year just shy of about 2%. Electricity prices obviously grew more than that, about 6.5%. I think going forward, U.S. electricity demand overall is forecast to grow between 1% and 3% compound annual growth rates. So obviously, we can benefit from our diverse exposure across our basins from there. A good example also is the capacity that we capture along our Transco pipeline to deliver gas into that Southeast market, which is a big power pool demand center. But really, another way we think that EOG Resources, Inc. might be able to benefit much more directly, and we have had negotiations along this path, is if we begin seeing development of data centers closer to power generation or closer to natural gas fields. We see both, especially South Texas and Ohio, as having great potential to play a larger role in data center buildout. Obviously, the position that we have in Dorado and the Utica would benefit from that regional demand. I think when you think about South Texas, especially Dorado, there is open space, there is water, you are far enough inland from any storm threats, there is a phenomenal amount of gas there, and there is also a good amount of fiber already in the ground. And right now, I would say it is still surprisingly early on with a lot of the data center conversations. You see a lot of the construction is somewhat delayed or getting pushed out to the right a little bit as people, again, I think, really try to wrap their minds around a multi-decade contract. But that is where we think we have got a competitive advantage with Dorado, that we have got the gas supply, low-cost gas supply, to stand up and support one of those longer-term projects. Operator: The next question is Derrick Whitfield with Texas Capital. Please go ahead. Derrick Whitfield: Good morning, guys, and thanks for your time. Regarding your three-year outlook, I wanted to focus on the role international could play over that period and beyond that period. While onshore will undoubtedly carry the load in your financial performance, should we think about the increasing role international could play as we exit the three-year period? Ezra Y. Yacob: Yes, Derrick. I appreciate the question on the three-year scenario. The scenario does include capital for the Gulf States exploration and development. Beyond the capital that is really tied to the 2026 plan, we are basically forecasting a slight increase in the activity in the Gulf States. The associated production assumption is really minor. And we are doing that in the three-year scenario because those plays are still in the exploration phase right now. We do assume success and declaration of commerciality, but in the time frame of the three-year scenario, I would say that the specifics to the international assets are relatively minor. Now, with regards to Trinidad, we have got a bit more line of sight. Those are slightly longer-cycle projects, and we continue to have a pretty robust program there in Trinidad ongoing. Derrick Whitfield: Great. And then with regard to UAE and what you know about the subsurface today, how does that compare versus some of the premium U.S. unconventional oil basins? And how should we think about your delineation plans for that area in 2026? Keith P. Trasko: Good morning. This is Keith. Both in UAE and Bahrain, activity this year, we are going to continue our drilling program to evaluate those exploration concessions. We are expecting activity to be higher in the UAE than Bahrain just due to the relative size of the concessions. We are still in the early phases of that, so our plan for 2026 is a little bit dynamic. As Jeff mentioned, we expect to have production results in both countries in the second quarter of this year. So in Bahrain, we drilled our first few wells and we have started completing them. And in the UAE, we drilled the first couple of wells, those went very smoothly, and we plan to begin completing them here shortly. So we are very excited about the opportunity that we see in both countries. Both areas have positive production results from prior horizontals. As far as delineation in 2026, we are just really working to refine our subsurface understanding, to build off of ADNOC and BAPCO's progress and positive momentum on cost reductions, and help bring even more of the latest unconventional technology to the region. We think that there is a lot of technology and similarities between many of our domestic plays that we could borrow and apply to either country. Operator: The next question is from Charles Meade with Johnson Rice. Please go ahead. Charles Meade: Yes. Good morning to the whole EOG Resources, Inc. team there. Jeff and Keith, maybe I will just pick up on that thread and ask about in UAE and Bahrain, less about the well results, but how you guys are going to communicate there. And, you know, I think that at least in the Lower 48, the EOG Resources, Inc. MO is kind of, you know, to quietly try something in a play, and then based on success or failure, either quietly exit or quietly build a position. But that does not really, you know, it does not seem to be an option to just, you know, quietly exit in Bahrain and in UAE. And also at the same time, there are not the same competitive considerations there given the nature of these concessions. So can you, not looking to commit you to anything, but can you give a broad outline of how you guys plan to share results and what the consequent decisions to either ramp activity or curtail it would be? Ezra Y. Yacob: Yes, Charles. This is Ezra. I will take a shot at that question. So it has been something that we have had to get used to, kind of our international strategy. And we saw this, the best thing to do I think maybe is to take a look back at what we did in Oman. Again, it is a little bit different from our domestic exploration portfolios or projects where we can usually be a little bit stealthy and keep things quiet until we get material results or a material position in a play and can really start to discuss it. Typically, these days, internationally, when you sign an agreement, there happens to be a press release and things like that. So the first step is making sure that the agreement is something that checks the boxes for us for international, so that we have captured a sizable position, we have captured access to premium markets, of course, and we have been able to negotiate a contract to align the stakeholders and partner with folks that we think will be able to, if we have success, really have success and really have captured something that is going to be exceptionally competitive and additive to the corporate portfolio. Now, again, in Oman, you are right. There is no state data, there is no public reporting. I thought we were fairly transparent with the results that we had in Oman. When we exited, we did not try to, you know, sneak out the back door. We just made it known to everybody that we had drilled the wells. As you recall, we made kind of an undeveloped discovery there, a natural gas discovery. We were really focused on oil because of the lack of infrastructure in the area. And so we did end up exiting. Bahrain and UAE, to be perfectly honest, will be, you know, very, very similar to that. Both of these international opportunities, we are currently in an exploration phase. That lasts a certain amount of time, and then there will come a point where after we satisfy the terms of the exploration phase, there will be a decision on whether or not we go forward, casually called a declaration of commerciality, and that would then assign some sort of longer-term production license. And you can assume that that would obviously be something public. That being said, at this point in the game, we feel very confident in all the plays. We are very excited about the size of the prize that we have in both the UAE with our unconventional oil play and the unconventional gas play in Bahrain. Bahrain is onshore, so you can imagine it is a little bit, as Keith said, a little bit smaller in scope. But it is a gas play in a region where we see tremendous future gas demand. And so that probably is an area where we continue to look for the right partners. While we are very happy with what we have captured in the region, we would be interested in continuing to look for adding a potential additional gas project in the region under the right terms and with the right partners. Operator: The next question is from Phillip J. Jungwirth with BMO. Please go ahead. Phillip J. Jungwirth: Yes, thanks. Coming back to the multiyear scenario, recognizing it is not guidance, but the low single-digit oil growth is maybe a bit surprising since organic volumes have been flattish here since Liberation Day, and that is continuing into 2026. So could you help us understand how you would resume oil production growth? Which assets drive that? And just one of the qualifications in here is that it assumes current cost structure. So just wondering when you look back at 2023 through 2025 actuals, how much you actually outperformed here? And could you see similar runway over the next three years? Ezra Y. Yacob: Phillip, this is Ezra. That is a great question. So using current cost is just for line of sight. I do think with our consistent track record of lowering costs, that is the best data point that we have. But if you want to build in a little bit of conservatism, I could understand. What I would point out is that we have made tremendous strides over the past three years in the Delaware Basin. Part of that was with our sustainable operational efficiency gains. Some of that too, though, was in 2023, which was relatively kind of a high industry high watermark for costs across the industry. And then we made tremendous progress lowering well costs across our two emerging assets as well. And as you know, early in these assets, early in the play development, you have the opportunity to make greater strides there. As far as returning to low single-digit oil growth, outside of the Liberation Day announcements that caused, you know, really a little bit of concern on really the line of sight on what may happen with demand coupled with spare capacity reentering the market, we see that as a bit of an overhang for maybe the next couple of quarters. Certainly, there is a lot of commentary that the oil glut has been pushed to the right. We are seeing that as well. What we are also seeing is that when you look at total product, inventories have raised right to roughly in line with the five-year average. There is some additional spare capacity that is scheduled to come back to the market. That being said, we continue to see global demand growing, relatively strong and consistent at roughly that 1.0 to 1.2 million barrels per day, roughly maybe right at 1%, a little bit less than 1% compound annual growth rate. That is really what gives us confidence. Now, where that growth would come from in forecasting growth of low single-digit oil? In the three-year scenario, it contemplates a lot of growth out of the Utica, as a matter of fact. But quite frankly, we can grow from multiple basins if we needed to, if we wanted to. Really, the growth at the company level will be determined by optimizing across each of those basins the level of activity, the marketing agreements, where we have infrastructure, and things of that nature. Phillip J. Jungwirth: Great. And then you beat the $150 million Encino synergies ahead of schedule. I think you gave yourselves a year here. So could you just talk to the drivers, positive surprises now that you have operated the asset for six months? And I assume you are not done here in terms of driving improvement. You mentioned in-basin sand. Anything else you are working on to enhance returns? And if you could also just touch on marketing initiatives here to improve netbacks? Jeffrey R. Leitzell: Yes, Phillip, this is Jeff. Yes, as we have touched on in our opening remarks, obviously, we are extremely happy with how it has progressed with the synergies there. And you have heard kind of how much success we have had across the operational side with just drilling, completions, with our procurement side. Extremely happy, and we have driven that cost down to $600 a foot. In very short order, we really have only been developing there a handful of years. As I kind of look forward, I think there is a handful of things that we can really lean on. Full rollout of the EOG Resources, Inc. support services. I mean, you kind of touched on it there. Once we implement self-sourced local sand, that is going to be a big initiative to really drive down costs. Also tying together a lot of our water and infrastructure and maximizing reuse in the area, that is going to be a pretty big driver that we can use our technology from around the rest of the portfolio. Also, it will take a little while, we are in process, but implementing additional automation across all of the acquired operations. We will be able to remotely manage and monitor wells and really take advantage of our 24-hour control room that monitors everything up there. And what that will do is really improve a lot of our efficiencies and reduce man-hour times. And then lastly, as you talked about, continuing to focus really on utilizing the scale now of the asset to reduce the GP&T and work on the differentials. I think the big ways we are going to do that, as I stated, is first and foremost, we like to control in-field infrastructure and gathering. So we are going to focus on building that out, which should help bring our differentials down. And then, on the marketing agreements, obviously, just with the scale there, we have great relationships with the marketers. We are in contact with them regularly and continuing to look for options to be able to either extend out agreements and optimize those agreements to be able to lower the fees just because we have so much more volume and scale up there. So I really think, you know, we are just kind of the tip of the iceberg. We have got a lot of upside in the play. We have still got upside in synergies. Our team continues to uncover, you know, opportunities every single week. Operator: The next question is from Matthew Portillo with TPH. Please go ahead. Matthew Portillo: Good morning all. Just a quick follow-up question on the Permian. Great to see in the remarks that you are expecting stable productivity trends for the basin this year and also to hold production flat in 2026 on an exit-to-exit standpoint. I was just curious if you could maybe help us out a little bit on that last point for the outlook. Looking into 2025, I think you completed about 390 wells in the basin and drove about 10,000 barrels a day of growth. And obviously, you have highlighted a big drop in the well count this year down to about 300 wells. So I think the maybe missing piece around this might be the lateral length progression. So I was curious if you might be able to help us out on that front. Jeffrey R. Leitzell: Yes, Matthew. This is Jeff. We have made great progress across our whole portfolio from a lateral length aspect, not just even in the Permian. So last year alone we increased our lateral length by 18% across the portfolio. And it really was driven by, as you are talking about, the momentum that we had with three-mile laterals there in the Delaware Basin. So we had a substantial increase there and focused on that. We extended our laterals in the Eagle Ford where, in certain areas that were stranded, we were able to drill numerous four-plus-mile laterals with, obviously, the record lateral that we had there on that Whistler E5H. Then the same thing in the Utica. We have got a three-plus-mile full program basically there across the board that is really helping push. If you look at the Delaware Basin, it is basically fairly flat from 2025 to 2026. And the reason for that is just the huge jump that we had last year. But obviously, that has to do with a lot of our footprint and the leasehold that we have out there. But our team is always going to look for opportunities to go ahead and continue to make trades, bolt on additional acreage, and extend those laterals wherever we can, because I think we have proven with our drilling technology, with the EOG Resources, Inc. motor program, and our approach, that we are able to drill those longer laterals with great success. Matthew Portillo: Great. And then maybe just a follow-up on Dorado. Looking at the state data, I saw a really nice improvement in the productivity trends per foot in 2025. I was just curious if you might be able to comment on this improvement and what might be driving that. And then maybe a bigger picture question. With your exit rate approaching a Bcf a day of gross production in 2026, I know you have talked about compression potentially taking the Verde pipeline to 1.5 Bcf of egress. But I am curious if there is a need down the road for potentially more pipeline capacity just given the economics of the assets and the improving productivity trends we are seeing out of the basin in aggregate? Jeffrey R. Leitzell: Yes. Thanks for the question. We have been extremely excited with how Dorado has evolved down there and really it is kind of across the board from both drilling and completions and production, being able to increase the well performance there. So like everywhere else, we looked at our wellbore construction. We make sure that we are maximizing our high-intensity fracs and creating as much hydraulically created surface area downhole as possible with those things. And as stated, we are seeing about a 13% year-over-year increase, and that is a sustainable increase on a per-foot basis. So it is really a recovery increase, not just a lateral length increase. So extremely excited about that. We are continuing to work it. And then on the second part of your question, yes, we have the EOG Resources, Inc. Verde Pipeline in service. As you talked about, it provides 1 Bcf of transport over to Agua Dulce, and it is expandable up to about 1.5 to 1.75 Bcf with very minimal investment in booster compression. And, you know, that provides us an uplift that is very attractive of about $0.50 to $0.60 per Mcf, and that is just due to the lower GP&T and obviously the higher netbacks that we have there. And with that, that will be able to, along with our other third parties, we will not need any other egress out of there. We have got plenty of egress with that pipe right there. And as I said, we do not just necessarily transport all down that pipe. We do have other third parties that we can actually market to in that area. So we feel really comfortable for the long term there in Dorado with our takeaway. Operator: This concludes our question and answer session. I would like to turn the conference back over to Ezra Y. Yacob for any closing remarks. Ezra Y. Yacob: Yes, I would just like to say we appreciate everyone's time today. And thank you to our shareholders for your support and special thanks to our employees for delivering another exceptional quarter. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.