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Operator: Good morning, ladies and gentlemen, and thank you for standing by. My name is Kelvin and I will be your conference operator today. At this time, I would like to welcome everyone to the Circle Internet Group's Fourth Quarter and Full Year 2025 Earnings Call. [Operator Instructions] Thank you. I would now like to turn the call over to John Andrews, Vice President of Capital Markets and Investor Relations. Please go ahead. John Andrews: Thank you, operator, and good morning. I'd like to welcome you to Circle's Fourth Quarter and Full Year 2025 Earnings Conference Call. I'm joined by Jeremy Allaire, our Co-Founder, Chief Executive Officer and Chairman; and Jeremy Fox-Geen, our Chief Financial Officer. Earlier this morning, we posted our earnings press release and earnings presentation on the Circle Investor Relations website, investor.circle.com. A transcript of this call will be posted on that website once available. I do need to remind everyone that our earnings press release presentation and this call contain statements that are forward looking. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified and some of which are beyond our control, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Information concerning risks, uncertainties and other factors that could cause these results to differ is included in our SEC filings. We will also disclose non-GAAP financial measures on this call today. Definitions of those non-GAAP financial measures and reconciliations to the most comparable GAAP financial measures can be found in the earnings release and earnings presentation, which are posted on Circle's Investor Relations website at investor.circle.com. Non-GAAP financial measures should be considered in addition to, not as a substitute for GAAP measures. Now I'd like to turn the call over to Jeremy Allaire. Jeremy? Jeremy Allaire: Thank you, John, and good morning, everyone. I want to start this morning talking a little bit about what I'm seeing in terms of this extraordinary transformation that's underway. I'm speaking not just about the changes we're seeing from blockchains and stablecoins, but the broader backdrop of technology acceleration, software-powered technology acceleration and artificial intelligence. I believe we are in the earliest stages of a very deep and very fundamental transformation of the way the global economic system functions and works. Not only will our global economic system become more internet native, but it's also going to become dramatically more automated. We are entering a world where, in my view, likely tens or hundreds of billions of AI agents will interact and perform economic functions over the Internet. If we look at the past decades, we've seen this progression and this progression has been accelerating. This progression has been one where we build more and more software native infrastructure, more and more data and transactions on the Internet. The progression from the Internet of information into an Internet of software distribution, interactive media and commerce, all made possible to the adoption of web, cloud and mobile platforms has created extraordinary value over time. Beginning around 2013, we began to see another transition this time into the value era of the Internet where early blockchain platforms emerged. Later, through the innovation of fiat backed stablecoins, we saw the birth of a transformative Internet-native money layer. Now as we've achieved regulatory clarity, and as the technology has matured, we're now seeing these developments directly colliding with another major platform shift, which is the adoption of AI platforms. This value era, this combination of economic operating systems and an Internet native money layer with artificial intelligence, agentic economic activity and automation, seems likely to drive the greatest acceleration of economic activity we've ever seen in human history, and we're really just at the beginning. Our aim at Circle has always been to build a new Internet financial system to build the software infrastructure that powers it, and we're more excited than ever to have that opportunity today. Let's talk about our key highlights in Q4. Our stablecoin network continued to grow. We saw USDC end the year around $75 billion in circulation, up 72% year-on-year despite some of the declines that we saw in Q4 due to the crypto market correction. We also saw tremendous ongoing growth in the amount of transactions happening on our network with onchain USDC volume hitting nearly $12 trillion, representing 247% year-on-year growth. This continues to reflect the growing velocity and utility of digital dollars on the Internet. Q4 delivered very strong financial results. We realized $770 million in total revenue and reserve income in the quarter, up 77% year-on-year. Adjusted EBITDA for the quarter was $167 million, up 412% year-on-year, with an adjusted EBITDA margin of 54%. Overall, for the quarter, we had very strong yearly growth across the board. Importantly, our platform continues to expand. We launched the Testnet of Arc, our Layer 1 blockchain network, and we're on track to launch Mainnet this year. Circle Payments Network continues to see very strong volume growth and participant expansion as we continue to see traction in real-world payments and cross-border settlements. We're also adding new products. We introduced StableFX in beta, our new onchain FX app and xReserve, which supports continued expansion of USDC across a wide range of blockchain ecosystems. And we now support USDC on over 30 different blockchain networks with interoperability being a key piece of Circle's platform strategy. Mainstream adoption continues to deepen across a broad range of leading enterprises and institutions. Intuit and Circle are partnering for Intuit to bring low-cost programmable money through Circle's technology to its millions of consumers and businesses. Visa continues to expand its integration of Circle stablecoins, announcing the launch of USDC settlement that permits U.S. Visa card issuers and acquirers to settle outside of normal banking hours using USDC. And earlier this month, Circle and Polymarket, the largest prediction market in the world, announced a formal partnership where Polymarket will continue to advance its use of USDC as the core collateral and settlement asset for their markets, demonstrating our very strong position as the leading regulated stablecoin network. Now these are just the tip of the iceberg. Major enterprises and financial institutions continue to integrate and support USDC in their businesses. We saw firms as diverse as Cash App, Gusto, Deal, interactive brokers, JPMorgan and Mastercard launched products and offerings that took advantage of USDC. Right now, we are seeing more activity from start-ups, enterprises and financial firms than we've ever seen in our history. The stablecoin market continues to grow strongly, and our position in that market continues to strengthen as well. CFX stablecoins grew $85 billion in the year, with 46% year-on-year growth. Within that market, our competitive position remains strong, and we continue to maintain a significant share. Importantly, it's a market that, despite the efforts of many other firms to enter and compete is really a market of 2 major issuers. And this reflects the very durable network effects that we maintain that are significant barriers to entry and adoption. Looking at growth in actual transaction volumes, Circle's share of transaction volume grew from 39% in the third quarter to nearly 50% in the fourth quarter. This is based on Visa's published analysis, which works to eliminate internal transactions, exchange wallet rebalancing and bots to really capture the volume that better reflects real economic activity. You can also note that while there have been a number of other stablecoins entering the market over the past year, their usage in real transactions is effectively 0. As noted in my introductory comments, Circle's network grew strongly with 3.5x year-on-year growth in onchain transaction volume and notably, CCTP, a critical infrastructure for interoperable usage of USDC, grew 3.7x year-over-year to over $41 billion of volume in the fourth quarter. I know that competition is a major topic for many. So I want to talk again about the durable network effects that Circle maintains. Foundationally, Circle's competitive position has been built on trust, as an audited public company with a deep commitment to compliance, as a firm regulated across jurisdictions around the world and with the highest levels of transparency possible. We enjoy the trust of major financial institutions, payments companies, enterprises, developers and end users around the world. And that trust shows up in our fundamental liquidity with $75 billion of USDC in circulation an unmatched liquidity infrastructure that in Q4 supported $163 billion of minting and redemption volume. That minting and redemption, that promise to create and redeem a digital dollar one for one at scale and through banking systems around the world is completely unmatched by any other player in the market. In Q4 '25, we saw distribution and network usage grow as noted, to nearly $12 trillion of onchain transaction volume, continued growth in meaningful wallets using USDC and our product platform continuing to expand. The breadth of infrastructure we provide, the breadth of liquidity services that we provide and with new applications like CPN and StableFX, our whole product platform is not something others in our market are able to replicate. And crucially, acting as a market-neutral infrastructure, not competing with our customers and our partners and building widely accessible and usable technology across as many platforms as possible have been keys to our competitive success as well. Moving on to our platform expansion. Circle's platform has really evolved from being a stable coin network to being a comprehensive platform and infrastructure partner for on chain finance, spanning our 3 platform pillars. Arc and our developer infrastructure, which includes the tools, the operating systems and the onchain protocols and infrastructure to enable the Internet financial system to flourish. Our digital assets and services which includes USDC and EURC, the world's leading regulated digital dollar and digital euro, tokenized funds such as USYC and liquidity services such as Circle Mint and xReserve that ensure liquid and available stablecoins around the world. And our apps. CPN is a rapidly growing application service from Circle for payments. And in beta now, StableFX, an application service for FX. We continue to invest in our platform and our infrastructure to expand what we can provide to companies around the world. With Arc and our developer infrastructure, we're seeing very strong progress. Our Testnet launched in Q4 with over 100 companies in banking, capital markets, digital assets, technology, commerce and payments. All leading brands actively testing, evaluating and working with us to bring this into commercial production. We've had near 100% uptime since the launch of our Testnet with an average of 0.5 second for transaction settlement finality, over 166 million total transactions and we're now averaging around 2.3 million daily transactions in our testing environment. We're on track to launch Mainnet in 2026, and we're thrilled with the progress we're making. More exciting things to come in terms of technology, partnerships and our ultimate Mainnet launch. I also want to touch a little bit more on CCTP. Obviously, we have had very strong year-on-year growth, very strong growth in the number of transactions that are happening over this network. But I want to call your attention to the market share for CCTP. You can see here that for USDC, CCTP is nearly all of the traffic that flows from moving USDC across blockchains, but we also reached more than 50% of all bridge volume. Not just of USDC, but of all assets across chains that we track. And in fact, in January, that volume reached 62%. And CCTP is becoming a critical infrastructure for how value moves on the Internet, and we're excited with our advancements in CCTP and the advancements in our interoperability infrastructure through our acquisition of Interop Labs. Through these advancements, we're building new capabilities that are really aimed at helping asset issuers of all types, whether you're issuing tokenized stocks, tokenized funds, tokenized bank deposits and new stablecoins to be able to take advantage of this tremendous interoperability infrastructure, to enable your assets to travel on these highways that Circle has built to move value on the Internet more seamlessly. We view interoperability infrastructure as a huge opportunity for us. And we also saw a strong growth in Circle other digital assets. In the fourth quarter, EURC reached EUR 310 million, representing 3.8x year-on-year growth and has already grown 25% since quarter end to EUR 389 million as of February 20. This reflects the growing demand for regulated euro-denominated stable coins and EURC remains the largest euro stablecoin. USYC, our tokenized Money Market Fund has also grown strongly since Q3. We acquired USYC in January of last year. We integrated it into Circle and we developed a new product and distribution strategy around it, focused on tokenized collateral on digital asset exchanges. With the relaunch of USYC, we've seen accelerating growth driven by demand for USYC as collateral on leading exchanges like finance and others. USYC assets ended the year at approximately $1.5 billion and have continued to grow to now over $1.7 billion in assets since quarter end. In our apps pillar, Circle Payments Network continues to scale. We have 55 financial institutions enrolled, that's up from 29 in the third quarter. We have 74 financial institutions that are currently in eligibility reviews, and we continue to maintain a strong pipeline with interest from hundreds of banks, payment firms and others all around the world. We've continued to expand the markets where CPN is available with live flows now in 14 markets across the Americas, EMEA and APAC. And importantly, CPN volumes continue to ramp, with annualized volume based on a trailing 30-day period as of February 20, reaching $5.7 billion. That's growing approximately 68% from our third quarter earnings update. We are aggressively investing in product development for CPN and have a strong pipeline of upcoming country launches and anticipate adding 11 new markets in the coming months. We also launched StableFX in production beta. This extends our application layer by combining institutional-grade FX execution with onchain atomic settlement, enabling 24/7 cattle efficient currency conversion and simplified risk management. We have stablecoin issuers for many jurisdictions participating in this, and we are excited to bring this application online alongside Arc, which will benefit the entire digital asset ecosystem and provide key infrastructure as we continue to scale CPN as well. I want to talk specifically about AI at Circle. We are seeing an explosion of developer activity around AI and it's becoming an important driver for Circle's platform, and we believe an important and potentially significant driver for USDC adoption. We have a number of initiatives here. As many of you may have seen, when OpenClaw, the new open-source autonomous agent system came out. We quickly responded and ran an agent-only hackathon, where agents competed with each other to build innovative applications with USDC, and agents themselves voted on the winners, and we saw incredible engagement on this. We're also building systems to better support Agentic payments. In fact, we just went into Testnet release of a new capability with Circle Gateway that allows for agents to autonomously and programmatically automate cross chain USDC transactions with a transaction cost of [ $0.00001 ]. This is live on our test net, and we're thrilled with what this is going to enable in terms of genic payments and monetization models on the Internet. We believe that no other payment system in the world can do this. We're also investing in helping developers who are building AI agents and are using AI for their own development to build faster and smarter with Circle products. We're bringing our capabilities as an infrastructure provider in skills libraries and providing servers that allow developer tools and AI agents to directly use Circle products, and we're seeing great uptake on this. Now inside Circle, AI is also becoming foundational infrastructure across all of our functions. We began our work with AI like many companies over the last 2 years, and our investments there are accelerating. We are making core AI infrastructure and automation a critical component that's embedded into all of our operations, agenetic infrastructure, specialized tooling and specific AI playbooks. We're building the governance that will allow all of our employees to self-serve, develop, deploy and use AI agents across their functions. And we're deepening AI integration across every aspect of our product development, design, engineering and deployment life cycle and seeing very strong results. Our product velocity is accelerating and I anticipate that to continue alongside the exponential improvements we're seeing from AI coding agents. Now my own belief is that AI platforms, AI agents and blockchain-based economic operating systems will support trustworthy, automated, transparent and hyper-efficient infrastructures that are going to be the underpinnings of the future of the global economic system. And I believe that this is going to be one of the most accelerated periods of technology transformation in the history of the world, and it really is just thrilling to be here building core infrastructure that can help to underpin this new economic system. I've never been more excited about Circle's market position, platform stack and our growth opportunities. With that, let me turn it over to Jeremy Fox-Geen, our CFO, to take you through the financial results. Jeremy Fox-Geen: Thank you, Jeremy, and good morning, everyone. I'm pleased to report we delivered strong financial results in the fourth quarter and full fiscal year, closing out an exceptional year of growth and momentum for Circle. I'll start by reviewing the quarter and then provide our forward guidance. USDC in circulation was $75.3 billion at year-end, up 72% year-on-year and notably grew faster than the overall CFX stablecoin market. USDC held within Circle's platform infrastructure or on-platform USDC, grew 5.6x year-on-year to $12.5 billion at year-end, representing 17% of total circulation. The reserve return rate was 3.81% for the fourth quarter, down 68 basis points year-on-year, reflecting the decline in SOFR during this period. Total revenue and reserve income increased 77% year-on-year to $770 million for the quarter as growth in average USDC in circulation and other revenue was partially offset by the lower reserve return rate. Total distribution transaction and other costs increased 52% year-on-year to $461 million. I do want to remind you that distribution costs in the fourth quarter of 2024 included the previously disclosed onetime payments of $60 million to a large distribution partner. Revenue less distribution cost margin was 40.1% in the fourth quarter with a modest quarter-on-quarter increase of 0.6 percentage points, primarily reflecting the impact from growth in other revenue. Other revenue increased to $37 million in the fourth quarter. Subscription and services revenue was $24.7 million in the fourth quarter, primarily from revenue associated with our blockchain network partnerships. Transaction revenue was $12.2 million, primarily from blockchain rewards revenue, where our revenues from running a super valid data on the Canton Network increased substantially as Canton Coin began trading during the quarter. Total revenue and reserve income less distribution transaction and other costs grew 136% year-over-year to $309 million in the fourth quarter. Adjusted operating expenses grew 32% year-on-year to $144 million for the quarter as we continue to invest in growing our platform and distribution at this pivotal time for our industry. Adjusted operating expenses include payroll taxes, including payroll taxes related to stock-based compensation, which were $8.4 million in the fourth quarter while we had no such expense in the prior year period. Beginning in the first quarter of 2026, we have amended the definition of adjusted operating expenses. First, to exclude stock-based compensation, payroll tax expense, we aligned with our treatment of stock-based compensation expense. And second, to exclude certain onetime legal expenses, acquisition-related costs and were relevant restructuring expenses all of which totaled $2.9 million in the fourth quarter as they reflect the same adjustments as in our adjusted EBITDA measure. Based on this amended definition, adjusted operating expenses would have been $133 million in the fourth quarter and would have grown 28% year-on-year on a comparable basis. Adjusted EBITDA grew 412% year-on-year to $167 million, reflecting the operating leverage inherent in our model. The prior year adjusted EBITDA included the onetime distribution payment that I previously mentioned. Adjusted EBITDA margin was 54% in the fourth quarter. I want to take a moment to briefly recap our FY '25 guidance and results. First, our guidance philosophy. We are building our business for long-term success. And moreover, several of our most impactful performance drivers are visible to the market in real time. As such, we do not give detailed quarterly or full financial guidance, we guide only on certain metrics to help our investors better understand our expected performance trajectory. We will update this guidance when we expect our performance to materially deviate from guidance. USDC in circulation at year-end grew 72% year-on-year. FY '25 other revenue of $110 million exceeded our guidance of $90 million to $100 million. Fourth quarter results came in better than expected, largely driven by a $7 million benefit as Canton Coin began trading. FY '25 RLDC margin of 39.4% exceeded our guidance of approximately 38%. Fourth quarter margin came in better than expected, driven by the combination of other revenue outperformance as well as a sustained reserve margin. FY '25 adjusted operating expenses of $508 million was in line with guidance. Let me conclude with comments on our guidance for FY 2026. We do not give guidance on USDC circulation or growth. We are at the beginning of meaningful shifts in the global markets for money, and we expect both long-term growth and quarter-on-quarter variability. As previously noted, we would anticipate USDC to grow at a 40% CAGR over a multiyear through cycle. We anticipate FY '26 of the revenue to be between $150 million and $170 million. We anticipate the FY '26 RLDC margin to be between 38% and 40%. We anticipate the FY '26 adjusted operating expenses to be between $570 million and $585 million, reflecting growing investments in building our platform capabilities and global partnerships. As noted before, beginning in the first quarter of 2026, adjusted operating expenses will exclude payroll tax expense related to stock-based compensation, which totaled $20.6 million in FY '25, as well as certain onetime legal expenses, acquisition-related costs and where relevant restructuring expenses, all of which totaled $10 million in FY '25. Our 2026 guided range reflects this definitional change as does the FY '25 comparable figure on this slide of $478 million. Overall, we have delivered a strong close to a critical year for Circle with meaningful growth and strong profitability. We are only just beginning to attack the opportunity before us, and we remain excited about our future. I want to thank the team here at Circle for your continued hard work to thank our investors and analysts for your support and engagement. With that, operator, we can now start the Q&A portion of the call. Operator: [Operator Instructions] Your first question comes from the line of Devin Ryan of Citizens Bank. Devin Ryan: I want to start on kind of this agentic evolution. I think it's a compelling case. And just want to get a sense of how you think from a timing perspective this plays out? And does it start with trading liquidity and then progressing to payments and borrowing and lending or how do you see that? And then how do you make sure that USDC is in the middle of that? And can Arc perform relative to other Layer 1s technically to support this? Jeremy Allaire: Thank you. It's a great question, and it's something that we are spending a lot of time on. When we designed Arc and announced and rolled out the Testnet. We talked specifically about this agentic economic activity as a fundamental design center for how we saw autonomous software autonomous agents and others conducting economic activity on the Internet. And it kind of speaks to the bigger backdrop of the early vision of the company, which is programmable money and what that allows and machine intermediated money and what that allows. And we're really seeing this convergence happen as we speak. And so we started our journey, not just in the design of Arc, but with USDC, by making sure that we're participating in all of the key standards for agenetic payments and value movement helping contribute to what's called the x402 standard, the Agentic payment standard from Google. We're part of the AI agent consortium. So we've been engaged and involved. But something happened really a month ago, which is these -- this turning point with Claude, ClaudeCode, what's now called OpenClaw. And we really saw this kind of incredible leap in the ability for the average person, but also sophisticated developers to spin up agents to do an incredibly wide array of tests. And obviously, we're all seeing that out in the market. And what's been interesting to see is that there's been this direct and immediate pickup where AI agents are realizing and the developers of those AI agents are realizing that agent to agent transactions need a reliable, low-cost trusted medium of exchange. And so virtually all of the AI payments infrastructure that we're seeing, the agent type activity is happening with blockchains. It's happening with USDC. So that's been very, very encouraging, and we're doubling down on that in a pretty significant way. Now I think to other parts of your question, what's the ramp on this? I mean I think this is one of the great known unknowns or however you might want to put it, which is -- what is the -- are we having a kind of take off moment? The Collison Brothers yesterday talked about, Q1 '26 might be the takeoff moment for the singularity, we may look back at that. And I think the technology shifts that we've been experiencing are indicative of a kind of takeoff. And that leads to the uses, which is AI agents consuming work from other AI agents, the kind of collaboration amongst AI agents, AI agents distributing out work to humans, humans consuming from AI agents. All of these are happening. We've seen AI agent marketplaces launched just in the past weeks where AI agents can employ human workers to conduct tasks and be compensated in USDC, as the medium of exchange. We're seeing AI job boards where AIs can hire each other and use USDC as the way to make those payments. So this is happening very organically. And I think from our perspective, as businesses and start-ups build products around agentic economic activity, the natural place that they're going to do that is with stablecoins and on blockchains, which leads to part of your other question, which is really around Arc. Arc is purpose built for this moment. Arc is built with a validation and consensus model that can support scale. ARC is built with an economic model where we can drive the cost of transactions in high-performance kind of channels down to [ $0.00001 ]. And in fact, we just went in Testnet last week with a feature that is designed for autonomous agents called Circle Gateway, which is a feature that would allow autonomous agents to hold a balance and spend not just on Arc, but on other networks and have a transaction cost of [ $0.00001 ] and get that value moved in less than a second to all these other apps and services that are out on these networks. So we're building the primitives, we're building it at the operating system level, the infrastructure level, we're building the tooling. And we're really engaged in actually marketing to agents that are autonomously out there and want to build. So a lot more to come from us here, and we're really pleased. And I think we -- again, -- we talk about money velocity and how effectively networks and infrastructure like what we've built will lead to higher and higher amounts of money velocity. And my own view, which is in my opening comments as well is in a world of tens or even hundreds of billions of AI agents, the velocity of money is just going to be multiple orders of magnitude higher than it is today in the existing economic system. And so we're building a new economic infrastructure. We're building a new Internet financial system. And I think we're very optimistic that Circle can play a really key role in this convergence between AI and stablecoins and blockchains. Devin Ryan: Yes. Jeremy. A great response, and we'll be fascinating to follow this evolution. Maybe just a faster follow-up, but on just Arc token, any update on kind of the considerations there, how that's evolving? And then any sense of timing of when you might make a decision on whether you would launch a token for Arc? Jeremy Allaire: Yes. A couple of things I can say. I think we're continuing to explore the Arc token. It's, I think, a very good exploration. We're getting a very good understanding of how a token can play a key role in providing stakeholder incentives, governance, security, utility and other things on the Arc network. And so that exploration continues. We aren't communicating about any specific time line or other because we're still in that exploration. But as noted, we're making tremendous progress with Arc and we're making very strong progress towards Arc Mainnet, and we're very excited that come into play, and we expect to see some amazing companies participating in running the Arc infrastructure, deploying apps on the infrastructure and also providing foundational infrastructure to asset issuers and AI agents, a wide array of use cases on it. So we're pleased with the progress. And of course, as we have more to say about that, we'll share that publicly. Operator: Your next question comes from the line of Joseph Vafi of Canaccord Genuity. Joseph Vafi: Great progress. Just -- maybe we'll just regulatory backdrop a little bit, Jeremy and Jeremy. GENIUS has been in place now for a couple of quarters. Just wondering what kind of tangible signs of progress you've seen directly from GENIUS? And then the follow-up would be on CLARITY, where we sit now, your views on it. Clearly, the stablecoins are kind of in the middle of the compromise and discussion there. So your comments and thoughts there. Jeremy Allaire: Sure. So first on GENIUS, GENIUS has absolutely continued to be a tailwind for our business. And I think the sector as a whole. It has created this legal foundation for major institutions to come into this market. We've seen follow-on guidance from the likes of the SEC and the CFTC as they're clarifying how effectively what would be GENIUS compliant stablecoins can be used as collateral on CFTC markets, the recent SEC guidance in terms of the kind of haircut treatment on stablecoins for broker-dealers, which is a big breakthrough in terms of how stablecoins can be used in capital markets. And I would just say, broadly, banks, payments companies, tech firms, large enterprises around the world are leaning in and wanting to weave stablecoins into the product strategies. And so it's also spilling over into international markets where international regulators are also saying, okay, well, we now need to kind of acknowledge genius compliant stable coins as the sort of good, stablecoins that could be allowed in their markets, and that's really strong from our perspective. So we think it's been very positive and will continue to be positive as it goes effective and as some of these OCC licenses start to come through as well, which will impact large issuers like Circle. On CLARITY, I mean CLARITY is very close to the finish line right now. I know we're very close to the issues. There's a lot that's been reported. I think the most recent reporting seems accurate, which is that the crypto industry and the banking industry are working day over day, week over week at a staff level and with the White House to come up with some compromise language around the different kinds of rewards that people can get for holding stablecoins or using stablecoins and how they use them. And my sense is that everybody wants to figure this out. There's a lot in this for banks, capital markets, asset managers, the crypto industry as well. And so right now, I'm cautiously optimistic about it, but obviously, DC is DC and all the dynamics of the spring and everything else. It's not my job to handicap, there are probably analysts at some of your firms that can do that better. But we're cautiously optimistic, and we do think that with CLARITY Act, if it does come to pass on a bipartisan basis, is another significant unlock for building in this space. And we'll certainly talk about that in the future, but we think it's a very, very significant unlock for the development of this market and the use of blockchains in a far broader range of applications as well. Operator: Your next question comes from the line of John Todaro of Needham. John Todaro: I guess just going back to Arc and then maybe CCTP in there as well. It seems like the evolution of these could long term become kind of asset agnostic or could be just a broad asset tokenization platform for issuance of equity, some of these other assets. I guess just, Jeremy, what are your thoughts on kind of that evolution in the long term, if we could just grow a little bit more into the long-term vision park? Jeremy Allaire: Yes, absolutely. So the conceptual model for Arc for us is this is an economic operating system. It is a distributed economic operating system. That distributed economic operating system is going to be operated by a collection of known leading financial infrastructure companies, including Circle that will run the infrastructure to support the compute, the transactions, and the like and the data on these networks. And it's designed for prudentially sound financial activity and economic activity. We think that's necessary to build the real world economy on the Internet. Within that, though, we want to make sure that as a safe and sound and secure foundation that it has several things that are important to financial system actors. We want to make sure that it has the single best, most capital efficient liquidity for digital dollars in the world. And so marrying what we do with USDC to what we're able to do with the technology and arc, we believe we can create the most capital efficient and fast digital dollar kind of liquidity model in the world. The second, which is related to another part of it is we really think about Arc as a liquidity and distribution hub for other asset issuers. And so we're building technology and this technology builds on the incredible distribution we've already created with CCTP. We're building technology that would allow an asset issuer, whether it's a tokenized equity, a tokenized fund, a tokenized bank deposit, other stablecoin issuers and any kind of asset that can be imagined that can be tokenized to be able to be issued on Arc and then be able to turn on liquidity and distribution on other blockchain networks. So if I'm issuing a tokenized stock, and I want that tokenized stock to be able to run on Robinhood's L2 and on coin basis, onchain exchange and on some other tokenized environment that supports these assets. The people who are issuing assets really need to know that they can do it in a safe way, in a liquid way and have that kind of distribution and -- so we've built the highways. CCTP in January was over 60% of all traffic moving across these different networks. And with the new technologies that we're bringing into Arc around this, we believe that we can light up those highways for any asset issuer. And so again, back to the vision side, big picture, this is a general-purpose OS for economic activity on the Internet. As we come into the market in this environment where we have demands from people who want to build very, very cost-efficient, capital-efficient AI transactions, we have demand from people who want to build tokenization applications and get liquidity and distribution for those. We think Arc and our interoperability infrastructure will be very, very well suited for that environment. John Todaro: That's great. That's very helpful. And then I guess just as a follow-up, going back to the Agentic AI comments, I would agree with you. Just with the ways of the crypto equities have been trading and then just the crypto token market in general, is agenetic AI and payments and all that within those ecosystems? Do you see the excitement kind of extending beyond stablecoins in Arc? Could this be a general tailwind for the sector? Jeremy Allaire: I mean I think this is one of the most exciting -- obviously, I'm biased, but I think this is one of the most exciting kind of points of convergence out there. If I'm a developer building AI agents, and I want to build AI agents that can enter into contracts with other agents that can enter into contracts with humans that might have disputes that need proof of data or things that happen that need to execute those contracts and move money if I'm thinking about building an organization that is mostly consists of some humans and some AI agents, and I want to build the underlying governance mechanisms or how that's going to work, blockchain infrastructure is going to be how that happens. We need cryptographic proof. It's the only thing that will allow us to trust the activity and the data and the transactions of these agents. And so we're seeing that in our developer activity. We're seeing that in the Arc developer engagement where start-up founders who are coming in from the AI space are realizing like this is kind of a back plane that is really, really helpful. And if you go back and think about other big platform shift, there was sort of -- sometimes there's the sort of 2 sides of the coin and you had the rise of mobile, which was obviously the surface area for creating applications and that corresponded to the rise in cloud platforms, which could actually be the back end and scale the back end for mobile. And so they work kind of hand-in-hand. And so I very much believe starting now, really starting now in 2026 that AI platforms and these blockchain operating system platforms will be kind of hand in glove for people who want to build for this new AI-driven economic system. John Todaro: Congrats on a strong quarter, guys. Operator: Your next question comes from the line of Pete Christiansen of Citi. Peter Christiansen: Impressive and rapid progress on a number of fronts here. And the competitive mode looks stronger than ever. Jeremy, I was wondering if you could provide some underlying color on CPN onboarding and flows, perhaps initial use cases and some stickiness, growth per FI partner that sort of thing? And then as a follow-up regarding the conversation on [ Jeto ] commerce, which looks incredibly compelling, how should investors think about this opportunity transforming Circle's operating/financial model? Jeremy Allaire: Sure. So on CPN, as you saw from the results, we are seeing very steady and very strong growth in the kind of key things that we're focused on now, which is when we launch this last June, it was at sort of state 0 with no financial institutions or just a couple and the technology is just getting off the ground. We have been progressing through product iterations and then commercial iterations, as noted, we now have 55 financial institutions on the network. That's up sequentially considerably the number of financial institutions wanting to add to the network continues to grow and be robust. And then the flows, which I can characterize a little bit more about. The flows have grown as well. So from a standing start to an annualized TPV of about $5.7 billion as of last Friday, up I think, 68% since the last time we talked to you guys, we're very pleased with what we're seeing there. We are -- a couple of things I'd say is there are more and more larger types of firms that are -- can support larger flows that we're very focused on coming on to the network, and that's a key goal. From a product perspective, we want to increase the velocity of everything that happens, the velocity of how these members can join and implement and operationalize for a lot of financial institutions, they've never dealt with blockchains. They've never dealt with stablecoins. And so kind of streamlining how they can do that. and then making sure that the highest demand corridors have good redundancies, have good players in those. But what we're seeing in terms of use cases is this is very much B2B cross-border merchant settlement as major drivers. And we're seeing that in the markets that you would not be surprised to see businesses that are exporters out of Asia and importers in both other emerging markets and developed markets, we're seeing some application flows that are very clearly -- can be south to south and north to south remittance applications. So we're seeing the use cases we want to see. There's certainly a lot more to come there. And we're, again, very pleased with the success. I made the comment on the earnings call that we've got a lot of product investments here. We have ambitious goals here in terms of what this can scale to be. And ultimately, obviously, as this starts to get to more meaningful scale, we can start to monetize this, and our partners are already starting to monetize this. So that's a bit on CPN. And then on Agentic and kind of the impact for us. We think about this in a few ways. I think one is just as a major new demand driver for the utility of our stablecoin network. So AI agents as consumers of this as essentially end customers in a sense that are driving stablecoin transaction volume, driving balances of stablecoins, driving stablecoins out into more use cases and businesses that are not crypto-native but are kind of interacting with this new agentic economy. I think it's a way for us to kind of accelerate into other types of software-based institutions that see that they need to have their products be consumable by AI agents and maybe with different pricing and economics and where, again, the standards that we're building around Agentic payments could play a role. But also this can drive fundamentally traffic on Arc and growth on Arc. And over time, as we've noted, we believe that Arc can create new kind of transaction-based revenue streams. And so the velocity of that, the scale of that is, again, early, but we think could be very significant over time. And those are a few of the things. And I think we'll have more to say about this, obviously, as it progresses. But what we've seen literally just over the last 3 to 4 weeks has been really eye-opening, and we've been happy that we've had product and technology ready to go for -- and we have been working on some of the standards in this space now for some time and are ready to go for this kind of lift off moment that seems to be happening. Operator: Your next question comes from the line of Dan Dolev with Mizuho. Dan Dolev: Team Circle, Jeremy, great results here. Really nice to see that. Congrats. I wanted to ask you about the opportunity specifically in prediction markets and your partnership with Polymarket? Just in general, like why is USDC so critical to this very fast-growing segment? And what should we expect in the coming quarters and years from that very interesting partnership? Jeremy Allaire: It's a great question, Dan. I mean I think when we think about the adoption of our stablecoin network and our broader infrastructure, we're always kind of asked like, well, what are the killer apps and we have lots of different killer apps that are emerging. We see cross-border payments is one of those. Obviously, historically, crypto trading, we're seeing Agentic emerging, tokenization and so on. But prediction markets is absolutely one of those. We've been very fortunate that we made a big bet in the kind of on chain ecosystem early on. And so USDC is sort of systemic and critical to a lot of onchain applications that were built over the past 3, 4, 5 years, and Polymarket is one of those. And so with Poly market, we've been able to work closely with them to kind of advance how they use our technology to improve the experience for their customers, improve what they can offer to their users, make it a more seamless experience. But what something like USDC does and our infrastructure does for a prediction market like Polymarket is people want to be able to move quickly. The sort of essence of markets in general, but prediction markets, in particular, these are information markets and people want to be able to move quickly. And so stablecoins give end users and people who want to participate in these markets, the ability to basically provide collateral and settlement at the speed of the Internet and do that from lots of different wallets, from lots of different markets all around the world. So it opens up global access in a more seamless way and it gives a firm like Polymarket, a good infrastructure to kind of store that and surface that to users. Now USDC is now offered as a way to fund your [ cashy ] accounts. USDC underpins coin-based prediction markets. You can use USDC to get funds on [ crack ] and Robinhood. And obviously, they're offering prediction market. So there's more to see here. And we want to work with the leading players and make sure that the best digital dollars, whether for settlement or for collateral, are used in all the places and having the world's leading player kind of adopt this and build on this with us, we think, is a very positive win. And obviously, everyone has been tracking the growth and success of Polymarket, which has been pretty astounding and obviously, still early days in these markets. very impressive. Operator: Your next question comes from the line of Ken Worthington of JPMorgan. Kenneth Worthington: USDC on Circle platform rose to 17% in 4Q. As we think about 2026 and the new initiatives you have underway, what is a reasonable range of outcomes in terms of where that mix can go for Circle and what relationships or initiatives are likely to be the biggest drivers of incremental on-platform USDC, say, over the next 12 to 24 months? Jeremy Allaire: Thanks, Ken. We're very pleased with the 5x growth year-over-year in that a couple of things. I think the first is we are continuing to build infrastructure products that are valuable for kind of holding and using USDC, and we're doing that across our wallets products. We're doing that across products like Circle Gateway. We're doing that in Circle Mint and in many places that we interface with customers, developers and people building on us. And the fundamental premise here is that more and more major institutions, whether those are financial institutions or others are going to want to build on our infrastructure. And Arc, for example, is a driver because Arc is our infrastructure, and it will be wired really well into mint and wallets and gateway and these other infrastructures. And so these can all work together to drive more applications, more money flow and more money stock to use Circle technologies and that contributes to what can be on top from USDC. And so in many respects, it's just continuing to build these institutional partnerships with this wide diversity of companies that will continue to help us grow that. I would say that's sort of the high level on that. We're not guiding, obviously, anything on that. But I think you've seen the direction of travel. We continue to focus on building great infrastructure people want to build on. And one other note is we have received conditional approval for Circles National Trust Bank, First National Digital Currency Bank. That is obviously something that is important to USDC and USDC reserves and ultimately, how we work at the OCC under the GENIUS Act. It's also something that can strengthen the custody infrastructure that we provide to market participants. And so you can expect us to pursue that. And I think as we build that as a kind of fiduciary and security and operational apparatus that has some of the protections that come with the trust bank that we think that is additive to our on-platform capabilities as we go out into future quarters. Jeremy Fox-Geen: Yes. And I'd just add on to that, Jeremy talked about the expansion of our platform infrastructure and the products that we have that make it more attractive for all leading enterprises to build upon Circle's platform and technology. But I'd also add all of the rest of the infrastructure that we built that underpins what we do is part of that our broad-based global banking and liquidity infrastructure is unmatched in the stablecoin space. The broad network of users and developers and other enterprises building on USDC only makes it more attractive to any one additional major enterprise to choose to use USDC. And of course, we're positioned as new core market infrastructure. We're not competing with any of the enterprises and the developers who build on our infrastructure for their customers. Operator: Your next question comes from the line of Jeff Cantwell of Seaport Research. Jeffrey Cantwell: I'll ask both the [indiscernible] and upfront. I was wondering, first, if you can give us the building blocks for your other revenue guidance of $150 million to $170 million for this year. What is causing the step up? You mind just breaking that out for us versus 2025. And then again on Arc, just to kind of get a little more comfortable with the strategy and the rollout as you're getting closer to the Mainnet launch. Do you mind giving us maybe at a high level what the rollout plan is post go into Mainnet? And I guess I'm just curious, do you foresee a world where elements of Arc and elements of CPN mesh together to deliver more value for clients and your customers? Jeremy Allaire: Yes. Thank you. Maybe I'll take the second question and then Jeremy Fox-Geen can take the first question. So on Arc Mainnet, a few things. The first is we're making great progress. And as noted, the technology infrastructure through Testnet has been strong. The usage has been strong. The growth in transactions and activity and developer activity, we're very pleased with. When we think about that transition from Testnet to Mainnet, there's a couple of key things that we're looking at. So one is there are technologies that we still want to make sure are available to all of the users of Arc network before we go to Mainnet, and I alluded to some exciting technologies. So these relate to things that are valuable to institutions doing tokenization and are valuable to AI agents doing activity on these networks. So we've got some technology delivery. But importantly, we've said publicly that the first phase of Arc Mainnet is going to be what's called a proof of authority validation. And that's really bringing on that first wave of strategic partners that are going to be working with us to run the Arc network infrastructure. And we want to make sure that we have world-class financial infrastructure companies who are running the infrastructure with us. And so if you're a developer or you're an institution or you're an end user, you will understand that Arc network is run by some of the leading financial infrastructure companies of the world, which can -- which is really, really key to not just trust and reliability, but ultimately to governance and how we think about this going forward. So that's a key piece. The second is we are working closely with the entire digital asset ecosystem across enterprise tools, custody, wallets, exchanges, everything that's out there to make sure that everyone is ready for that day 1. And so we want to give everyone time to get all of their infrastructure ready. And that includes deep integration across Circle's existing product stack, so that, for example, on day 1, when we go Mainnet, USDC liquidity, for example, is the best in the world is the most capital efficient in the world and becomes an attractive way for value flowing on the Internet to kind of come through Arc. So there's work there. There's work with mainstream companies who are in that Testnet group that we announced who are looking to commit to launch products on Arc and making sure we have the right mix of use cases across capital markets, payments, FX, agentic and the like. And so that's a key thing in getting those already. And then to your last part of your question, Arc is going to be a key infrastructure for CPN. Arc will provide a very strong infrastructure for speed, reliability, prudential safety and soundness, efficiency. It simplifies flows because people only need to hold a stablecoin in order to use it, but it also has all the interoperability features built in. So Arc has best-in-class interoperability. And so if an endpoint on CPN needs to interact with a wallet that is on a different network, Arc actually gives those members on CPN, the ability to really easily get conversion into those other networks. And so Arc becomes a back plan for CPN and relatedly, StableFX, which is a key application that runs natively on Arc will also become the FX back plan to support Arc transactions. So a transaction between euro and a dollar or euro and a peso or dirham and a peso, you pick what it is, we're bringing other stable coins onto Arc, and we're bringing other stable coins and market makers onto StableFX, and that's going to allow us to provide real-time atomically swapped liquidity across currencies would shift speeds that conversion and settlement and settle them an assurances reduces the amount of capital people have to tie up and the like. And so ARC, StableFX, CPN and Circle Mint kind of working together are going to support, I think, key things as we go into Arc Mainnet. Jeremy Fox-Geen: And Jeff, I'll take the second -- the first part of that question. So the other revenue, that was $36.8 million in the quarter, and that was roughly $25 million from subscription and services revenue and $12 million from transaction revenue. Within those categories, within subscription and services revenue, the largest part of the revenue we own within that is revenues from our blockchain network partnerships, which have both upfront and recurring elements. We've talked about how the upfront depending upon the number of integrations and the number of partnerships we strike can be a little bit lumpy quarter-on-quarter and how the underlying recurring are building up over time as we bring more and more of those online and we execute against that pipeline, which is strong. Also within that our asset management fees on the USYC tokenized money market fund, which is relatively small today, but obviously have potential going forward. Within transaction revenues, there's -- as I think we said before, there's a number of different pieces in that. There's fees from value-added products like fast redemption for USDC for CCTP fast transfer. That's where you'll see fees over time from the Circle payments network. In addition, we also run validate our infrastructure, and we mentioned that in my opening remarks is that this quarter, in particular, because of the trading -- the listing of Canton Coin and the share price movement, we recognized unusually high revenue in this quarter, particularly for that. Now we're not guiding on those building blocks. All of these monetizing products and services only started in the monetizable form in really the fourth quarter of 2024 and the first quarter of 2025 and onwards. So it's very, very early days for these products. But given that, collectively, this revenue line is only 8 year old, we're very pleased with where we ended up with $110 million for the year. Operator: Your next question comes from the line of Ken Suchoski of Autonomous Research. Kenneth Suchoski: Circle has seen some nice leverage on distribution costs. I wanted to focus there. I mean the coin agreement is what it is, but wanted to get your latest thinking on what's happening outside of coin base in terms of distribution costs and how those conversations are going? Because those non coin-based distribution costs have been pretty stable like the last couple of quarters. So just any update there would be great. Jeremy Allaire: Yes. I can take part of that, and if Jeremy wants to add anything, he can as well. I think we are in a really strong position because USDC has the strength of its network effects, which is that if you're building a product or service, and you want to have a compliant liquid available, interoperable digital dollar, USDC is the top choice. And so what we see is just many, many products being built and launched that use USDC and connect to our stablecoin network and drive demand and drive liquidity and that's valuable for those products. Those products are tapping into essentially this globally available, nearly free dollar payment system. And so as that happens organically, that's kind of the organic developer-driven, institutionally-driven flywheels. That drives growth in USDC, and in those institutions, we don't need to go and do incentive deals or other things with. And so we're -- I think as we've said, we're disciplined about where we think it makes sense to have an incentive relationship where it makes sense, where we can see that the partner can actually drive growth and can drive meaningful growth. So we look at those as factors like where is the growth? Where is the meaningful growth? And I think that contributes to the kind of strength of the fundamental kind of unit economics that we've been able to maintain here. And that's sort of the big picture. Jeremy may have other comments to add? Jeremy Fox-Geen: Yes. I'd add a couple of things to that important strategic narrative, which is -- and we've said this, I think, before on these calls, which is growth in USDC distribution partners, some of which is incentivized. Also leads to a growth in the strength of the underlying network effects around USDC, which I spoke about the elements of that earlier in this call, right? And that makes it more attractive for other market participants to independently build and use USDC and provide USDC-based products and services to their customers. The underlying point of that, which is any distribution relationship we have also strengthens USDC that is not subject to any distribution relationship or indeed any incentive partnership. And that's a fundamental networks have network effects, strength to RLDC margin and our underlying economics. Operator: Your next question comes from the line of James Faucette of Morgan Stanley. James Faucette: I want to go back to the comments you made about the AI hackathon and the like. How do you think about the to-do-list for Circle to become integral to a lot of those evolving payment networks and that kind of thing, especially when obviously, there are other players or solutions like either Crypton more generally, just wondering kind of what the pluses and minuses are and how you establish a position in agentic world? Jeremy Allaire: Sure. Thank you for the question. I think a couple of things I'd note. The first is that Circle has invested heavily over the past 4 to 5 years to make sure that our stablecoin network and essentially, the pipes that support the distribution, liquidity and settlement of USDC are available on as many blockchain network platforms as possible. We're on over 30 blockchain networks. And that's key because developers who are building applications are going to build applications where their agents might anchor on Ethereum. As you know, they might anchor on Solana. They might anchor on Arc, they might anchor on a new chain that hasn't even come out. There's exciting new blockchains that are coming out. And I think we all believe that if you think about blockchain networks, these economic operating systems, like we're in the early innings of these scaling out and scaling out to the kind of velocity of transactions that AI is going to demand. And so one is we run across these networks today. And in fact, we've co-authored and participated in almost all of the key agentic payment standards. And the agentic payment standards like x402 and [ EURC 80004 ], it's a little jargon for those that aren't aware, but basically, these are sort of agent-related standards are almost all -- I think I saw a statistic and I may be wrong about this, but essentially 99% of Agentic payments that have been measured over this recent period have been in USDC. So we have a first-mover advantage by being on all of these networks by being involved in the standards by being deployed in these ways. We also make sure that all of our own APIs, all of our own protocols are surfaced directly as skills libraries to the agentic coding systems. And as MCP servers so that AI developer tools can like seamlessly integrate to this. And so those are all things that we started making investments in some time ago that are paying off now as we get to this kind of lift off moment. So we feel good about those pieces. And I think now -- I think a lot of companies are really realizing like, let's say, you're a SaaS company, and you realize, well, maybe we're not going to sell end user seats, but we're going to sell access to our capabilities as an API to AI agents, a lot of companies are trying to figure out, well, how do you market to swarms of AIs running around and are there marketplaces where AI can find things they can use. And so the sort of distribution in the AI agent world is like a new thing. And we chose, as you noted, right, right after [indiscernible] launched, we saw an opportunity to allow AI agents to compete in a hackathon amongst themselves to vote on things, and that was the first of its kind. And I think was a powerful marketing activity where that collection of AI agents are now well educated about USDC. And so there's more things like that, that you'll expect to see us do over time. And -- but at a technology level, just kind of coming back is we believe that Arc has an infrastructure, both because of the USDC centric capability, the capital efficiency, the interoperability and the kind of cost efficiency of transactions is going to be a very attractive high throughput infrastructure, and we're going to be leaning into that. Operator: There are no further questions at this time. And with that, I will now turn the call over to John Andrews for closing comments. Please go ahead. John Andrews: Yes. Great. Kelvin, thank you so much. And for those who couldn't get through on the Q&A line, we'll happily follow up with you over the course of the day. Again, we'd like to thank you for your attention and participation this morning and look forward to connecting you soon. Jeremy Allaire: Thanks, everyone. Jeremy Fox-Geen: Thank you. Operator: Ladies and gentlemen, this concludes today's call. We thank you for participating. You may now disconnect your lines.
Operator: Greetings, and welcome to the Starwood Property Trust, Inc. Fourth Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. It is now my pleasure to introduce your host, Zachary H. Tanenbaum, Director of Investor Relations. Thank you. You may begin. Zachary H. Tanenbaum: Thank you, Operator. Good morning, and welcome to Starwood Property Trust, Inc.'s earnings call. This morning, we filed our 10-Ks and issued a press release with a presentation of our results, which are available on our website and have been filed with the SEC. Before the call begins, I would like to remind everyone that certain statements made in the course of this call are forward-looking statements, which do not guarantee future events or performance. Please refer to our 10-Ks and press release for cautionary factors related to these statements. Additionally, certain non-GAAP financial measures will be discussed on this call. For a reconciliation of these non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP, please refer to our press release filed this morning. Joining me on the call today are Barry Stuart Sternlicht, the Company's Chairman and Chief Executive Officer; Jeffrey F. DiModica, the Company's President; and Rina Paniry, the Company's Chief Financial Officer. With that, I will now turn the call over to Rina. Rina Paniry: Thank you, Zach, and good morning, everyone. Today, we reported distributable earnings of $160 million, or $0.42 per share, for the fourth quarter. While our reported results reflect the timing of capital deployment and balance sheet optimization initiatives, our underlying earnings power continues to build. Importantly, we exited 2025 with enhanced liquidity and embedded earnings from this year's investments and unfunded commitments, all of which will increasingly contribute in 2026, with our dividend coverage expected to improve steadily throughout the year. Our quarterly results were impacted by temporary timing issues, adjusted for which DE would have been $0.49. The first is our newest net lease cylinder, which on a run-rate basis would have contributed $0.06 of incremental DE to the quarter, but instead contributed $0.03. We anticipated this dilution at acquisition knowing that we would have near-term carry from capital raised and there would be a timing gap while we ramped acquisitions and optimized the platform's capital structure. As Jeff will discuss further, we have made progress toward these initiatives and expect to see reduced dilution going forward. As a reminder, the weighted average lease term of this portfolio is 17.3 years with occupancy of 100% and 2.3% annual rent escalations. The second timing issue was higher-than-normal cash balances, which led to $0.04 of reduced earnings. We completed three securitizations in the quarter, one in each of commercial lending, infrastructure lending, and net lease, that combined created incremental proceeds of $290 million. We also continued to shift secured debt to unsecured debt, issuing $1.1 billion of high yield in the quarter and executed a takeout refinancing on part of our affordable multifamily portfolio, which generated cash of $240 million in late September and October. All of this cash will ultimately be a source of incremental DE as it gets deployed into new investments across our diversified cylinders. Stepping back to the full year, we reported DE of $616 million, or $1.69 per share. As we continued the theme of proactive capital repositioning, we had temporary reductions to earnings of $0.14 this year resulting from our $4.4 billion of equity, unsecured debt, and term loan issuances, along with our new $2.2 billion net lease acquisition. DE adjusted for these timing issues and the $0.12 realized loss we recorded upon sale of a foreclosed asset earlier this year was $1.95 versus our full-year dividend of $1.92. Given our enhanced earnings power as a result of this year's strategic transactions, and as we continue on our path to resolving our nonaccrual and REO assets, we see a clear line of sight to earnings that cover our dividend, a dividend that we have never cut. Our diversified lines of business continue to perform at scale, allowing us to deploy $12.7 billion in 2025, our second-largest investing year to date. This included $6.4 billion in commercial lending, a record $2.6 billion in infrastructure lending, and $2.4 billion in net lease. $2.5 billion of our deployment was in the fourth quarter, bringing total undepreciated assets to a record $30.7 billion at year end. As a testament to our continued diversification, commercial lending now makes up just 54% of our asset base. I will now take you through our individual segment results, beginning with commercial and residential lending, which contributed DE of $176 million to the quarter, or $0.46 per share. In commercial lending, we originated $1.7 billion of loans, of which we funded $1.2 billion, along with $223 million of preexisting loan commitments. After factoring in repayments of $670 million, we grew the funded loan portfolio by $823 million in the quarter to $16.6 billion, our second-highest level since inception. In addition, we have $1.9 billion of unfunded commitments, which will generate future earnings as these loans fund. We also completed our fourth actively managed CLO for $1.1 billion with a weighted average coupon of SOFR + 1.65%. On the topic of credit quality, our portfolio ended the year with a weighted average risk rating of 3.0, consistent with last quarter. We have $680 million of reserves—$480 million in CECL and $200 million of REO impairment. Together, these translate to $1.84 per share of book value, which is already reflected in today's undepreciated book value of $19.25. This quarter, we classified a $91 million, 5-rated first mortgage loan on a multifamily property in Phoenix as credit deteriorated. The loan already maintained an adequate general reserve, but based on a recent appraisal, we reclassified $20 million of our reserve from general to specific. Jeff will go into more detail on our credit migration and asset management initiatives. Turning to residential lending, our on-balance-sheet loan portfolio ended the year at $2.3 billion, consistent with last quarter, as $58 million of repayments were largely offset by $31 million of positive mark-to-market adjustments resulting from slightly tighter credit spreads. Our retained RMBS portfolio remained relatively steady at $405 million. Next is infrastructure lending. This segment contributed DE of $27 million, or $0.07 per share, to the quarter. Our strong investing pace continued with $386 million of new loan commitments in the quarter and a record $2.6 billion in the year. Repayments totaled $568 million during the quarter and $2.0 billion for the year, with the loan portfolio increasing $300 million this year to $2.9 billion. We also completed our sixth actively managed CLO for $500 million and priced our seventh for $600 million at record low spreads over SOFR of 1.72% and 1.68%, respectively. Nonrecourse, non-mark-to-market CLO financing now funds 75% of our infrastructure debt. In our property segment, we recognized $49 million of DE, or $0.13 per share, in the quarter. In our Woodstar fund, comprising our affordable multifamily portfolio, we recorded a net unrealized fair value increase of $17 million in the quarter for GAAP purposes. The value was determined by an independent appraisal, which we are required to obtain annually. Also during the quarter, we sold a 264-unit multifamily portfolio for a net DE gain of $24 million. The $56 million sales price was in line with our GAAP fair value. And finally, we completed the second part of our takeout refinancing that I discussed earlier. The independent appraisal, third-party sale at our carrying value, and takeout refinancings collectively provide market confirmation of our valuation. Also in this segment is our new net lease platform, which reported its first full quarter of DE totaling $12 million. We acquired 16 properties for $182 million during the quarter, bringing post-acquisition purchases to $221 million, in line with our underwriting but with the timing back-ended to the last month of the quarter. On the capital markets front, we completed our first ABS transaction since acquisition with $391 million of financing at a weighted average fixed rate of 5.26%, a record tight spread for this platform. Given the back-end acquisition timing and mid-quarter execution of accretive ABS financing, our reported DE understates the earnings power embedded in this platform. Concluding my business segment discussion is our investing and servicing segment. Collectively, the cylinders in this segment contributed DE of $46 million, or $0.12 per share, to the quarter. Our conduit, Starwood Mortgage Capital, completed three securitizations totaling $276 million at profit margins that were at or above historic levels. This brings our year-to-date total to 16 securitizations for $1.2 billion. In our special servicer, our active servicing portfolio rose to $11 billion with $1 billion of new transfers in. Our named servicing portfolio ended the year at $98 billion. As a result of near-record maturity defaults in CMBS, servicing fees increased to $38 million this quarter, bringing year-to-date fees to $107 million. This is up 47% from last year and the highest level they have been since 2017. We have always told you that our servicer is a positive-carry credit hedge that earns more money in times of real estate distress, and that hedge is once again proving itself this quarter. Our CMBS portfolio grew by $82 million during the quarter, primarily driven by new purchases of $101 million, offset by cash collections of $17 million. As a result of the maturity defaults noted above, we also recognized net DE impairments of $13 million. And lastly, on this segment's property portfolio, we sold a mixed-use property and retail center for a total of $36 million, resulting in a net GAAP gain of $10 million and a net DE gain of $3 million. Turning to liquidity and capitalization, we had our most active capital markets year in our history. We executed a record $4.4 billion of corporate debt and equity transactions, including $1.6 billion in unsecured notes, $1.6 billion in term loan repricings, a $700 million Term Loan B, and a $534 million equity raise that was accretive to GAAP book value. We continued our focus on conservative leverage, ending the year with a debt to undepreciated equity ratio of 2.4x, more than a full turn lower than our closest peer. With this year's continued shift away from repo, our unsecured debt now represents 18% of our total debt, up from 16% a year ago, and our off-balance-sheet debt stands at 22% of our debt, up from 17% a year ago. Our current liquidity is $1.4 billion, with availability across our financing lines of $11.9 billion. This, along with our ability to consistently access the unsecured and structured credit markets at attractive spreads and across multiple asset classes, reflects the strength of our platform and provides significant flexibility as we enter 2026. With that, I will turn the call over to Jeff. Jeffrey F. DiModica: Thanks, Rina. As we enter 2026, our priorities are clear: resolve legacy credit, maintain a conservative balance sheet, and selectively grow our highest returning businesses to restore full earnings power. We exited 2025 with continued stabilization in credit markets and improving transaction activity. Activity is still below peak levels but trending positively as liquidity returns and rates move lower, supporting originations, refinancings, and more constructive resolution outcomes. Real estate as an asset class has taken longer to normalize than many other parts of the economy, and performance remains uneven across sectors and geographies. We do not expect the volatility in corporate credit markets to have a large impact on CRE fundamentals, which have largely insulated and outperformed in the lower-rate environment. We built Starwood Property Trust, Inc. to operate through cycles, and this year reflected that. In 2025, we raised and repriced a record $4.4 billion of capital in corporate debt with our debt issued at the tightest spreads in our 16-year history, strengthening liquidity, preserving flexibility to deploy capital accretively while maintaining low leverage, and significantly extending corporate debt maturities. We continued to diversify our business in 2025, with the acquisition of our net lease business, which added over $2 billion of long-term accretive assets with 2.3% annual rent bumps that will add incremental future distributable earnings for years to come. Cap rates have come down since we closed, as have financing costs, which increases the value of the existing portfolio we purchased as we have optimized their financing structure, adding to the long-term tailwinds of the business. As Rina mentioned, we closed one securitization in Q4 and another after quarter end, both at a lower cost of funds than we underwrote, and we are in the process of significantly improving our bank line financing spreads. We continued to increase our pace of investing across businesses in 2025, investing $12.7 billion, including $2.5 billion in the fourth quarter alone. This was our second-largest investing year in our 16-year history, and notably, our global team achieved that volume in an environment where overall transaction and origination volumes remained well below historical averages. We anticipate another robust origination year in 2026, which will produce additional earnings along with the funding of the $1.9 billion of unfunded commitments Rina mentioned. In commercial lending, we originated $1.7 billion in the fourth quarter and $6.4 billion for the full year. Our portfolio is expected to grow to a record $17 billion in the first quarter, and we expect to continue this momentum in 2026. U.S. office loans represent only 8% of our diversified asset base, the lowest percentage in our history and well below that of our peers. We have done this by repositioning our loan book to more stable assets like multifamily and industrial, which accounted for 72% of 2025 originations. I will start my discussion on credit and asset management with some positive outcomes, starting with multifamily loans to undercapitalized borrowers who are unable to continue to fund through resolution. We have executed multiple sales of multifamily REO at our original basis and have more slated for sale at or near our original basis. We have intentionally avoided forced liquidation and, in doing so, have protected shareholder value—taking over management, executing unfinished business plans, increasing occupancy and property values. We are seeing tangible improvement across portions of our office portfolio, highlighted by approximately 800,000 square feet of leasing finalized during the fourth quarter, the highest quarterly leasing volume of the year. This total includes a 200,000-square-foot lease at a Brooklyn property that was previously risk-rated 5. That 630,000-square-foot asset was vacant coming out of COVID, and with the pending execution of a third substantial lease, will be 100% leased to three strong credits on a 32-year weighted average lease term with average annual rent escalations of 2.2%. This is a great outcome for shareholders, again reflecting our patience, active engagement, and improved leasing momentum. Sales activity has also improved, allowing $200 million of office loans to repay at par in 2025. Year to date in 2026, an additional $200 million of loans originated as office have sold or are in the process of closing, including $115 million related to a formerly risk-rated 5 asset also in Brooklyn. Patience has paid off for us in the past when managing foreclosed assets, and we present-value and probability-weight potential REO outcomes individually as we decide whether to liquidate or hold and reposition assets, bringing the full strength of the Starwood platform to bear on these situations. We ended the year with approximately $1 billion of commercial loans on nonaccrual and $624 million of foreclosures. That exposure is concentrated in a small number of assets, and each of those is in an active execution phase with defined business plans being managed by our in-house management team at Starwood. Turning to rating migrations, we had three assets migrate to 5 in the quarter. The first is a $108 million studio production asset in New York that we co-originated pari passu with two large U.S. banks and own 32% of the first mortgage. Utilization declined materially following the writers' and actors' strike. The sponsor has invested substantial equity since origination, but the property has not yet stabilized as originally underwritten. Second is the $269 million asset outside the Midtown Tunnel in New York. We increased the risk rating this quarter due to the sponsor's unwillingness to contribute additional capital. We have increased our involvement and are executing a revised plan with the sponsor, who is currently negotiating lease proposals representing a substantial portion of the vacant space. This newly constructed, well-located asset is positioned for potential near-term stabilization. We also downgraded a $33 million multifamily asset outside Dallas. We anticipate assuming ownership via foreclosure in the near term. Upon transition, we intend to implement a focused value-add plan, as we have successfully done on similar multifamily projects. Our basis is below replacement cost, and our captive asset management team expects to be able to execute on a value-add business plan in the coming quarters. We also downgraded one loan to a 4 rating—a $90 million mixed-use portfolio in Ireland that we restructured to extend term and provide flexibility while assets are sold down. While asset sales have taken longer than originally contemplated, transactions completed to date have been in line with underwriting, and our base case continues to support full repayment over time. These are active asset management situations with defined action plans, and while resolution timing may vary, we are highly focused on resolving nonearning assets. Redeployment of this capital will be a tailwind to earnings as we achieve resolution. Our energy infrastructure lending platform had its largest origination year ever in 2025, investing $2.6 billion across the segment. The portfolio now totals almost $3 billion and remains diversified across power and midstream assets and has one of the highest ROEs in our portfolio. These are senior secured, asset-backed investments supported by durable cash flows and long-term demand drivers in energy and power markets. Loan-to-values continue to fall in this segment as loan performance remains strong, power needs and capacity auction prices continue to increase, and returns remain attractive. Finally, with the pricing of our seventh CLO, 75% of our SIFT loans now benefit from term, non-mark-to-market financing, reducing funding volatility. Turning to our new net lease business, Fundamental Income, Rina mentioned our integration is on plan, and we currently have a large pipeline and expect to increase volumes over the course of this year, which, along with 2.3% annual rent escalations, will increase returns in this cylinder each quarter and year. Rina told you we completed our first ABS financing in Q4, and subsequent to quarter end, we executed our second securitization for $466 million, again at tighter-than-underwritten spreads, which will allow us to continue to accretively invest in this cylinder at today's cap rates. We view the net lease business, along with our other owned real estate, as adding duration and contractual cash flow to the platform, and over time we expect it to become a more meaningful contributor to run-rate earnings. We are a hybrid company with approximately $7.5 billion of owned real estate, or 24% of our balance sheet. We are different than other mortgage REITs in our peer group. In a period where our stock has significantly underperformed, the stocks of equity REITs and triple-net lease REITs have significantly outperformed STWD and other mortgage REITs, with the largest underperformance coming in the last few months. It is important to remember that we are no longer simply a mortgage REIT. We operate a diversified real estate finance platform with true scale, operating businesses, and a strong, well-capitalized balance sheet, with access to capital at the lowest spreads in our history. The diversity and stability across our portfolio continues to uniquely insulate us through periods of sector instability. Our leverage is significantly lower than our peer group at just 2.4 turns today. While we could enhance near-term earnings by increasing leverage, we have deliberately chosen not to do so, instead prioritizing a strong, durable balance sheet to support our generational vehicle. Insider ownership further reinforces that alignment, standing at approximately 6%, or $380 million today—greater than the insider ownership of all our peers combined. We continue to look internally for ways to improve how we operate. We are investing in tools and technology to streamline underwriting, asset management, and reporting processes, and we expect to increasingly leverage data analytics and AI-driven tools as part of that effort. The foundation is in place for STWD 2.0 to come out of this cycle successfully as the only CRE mortgage REIT that never cut its dividend. Looking ahead to 2026 and beyond, resolving our nonaccrual and REO, and increasing originations pace and volume, allow us to earn more than the $1.95 we earned this year excluding the temporary items that Rina noted. With that, I will turn the call to Barry. Barry Stuart Sternlicht: Thank you, Zach, Rina, and Jeff, and good morning, everyone. I am going to use a slightly different tack as I talk about our earnings and what is going on in our industry and the greater real estate markets this quarter. I think you can see that 2025 was a transition year for Starwood Property Trust, Inc. I am going to elaborate on them, take some comments out of the earnings release and talk about some of the points I made in it. The really good news is we built an incredible machine here. We have all the pieces in place to outperform for our shareholders in the long run, and some of our core businesses had exceptional years with a growing loan book, which has reached record highs, as well as the continued great performance of our multifamily book. Jeff mentioned that 24% or 25% of our assets are in real estate. Our affordable housing book is in some of the best markets in the United States—Orlando and Tampa—where rents remain roughly 40%–50% below market rates, and we are exceptionally full and have great pricing power. You can see that with the increase in value of the portfolio just in the quarter that Rina talked about. But in addition to our originations, which were strong throughout the year, our infrastructure lending business—heritage GE Capital, GE itself, I guess—had a great year. The conduit team had the second-best year in their history. It is rated one of the best conduits in the country. Our special servicing arm, formerly LNR, had a great year also, counterbalancing some of the weakness in some of the property lending earnings, and continues to be the number one or two special servicer in the country, with an ever-growing book of named servicing and active servicing in its belly. And those businesses delivered excellent results for the year, and even our residential lending businesses, which have been somewhat dormant, gained in value over the year as spreads and rates declined. Those are all really good news. So I tasked Rina with telling me, like, why are we not performing at the levels we have in the past with such good news in the portfolio? And what we saw are three real reasons for that. One, the lack of prepayment penalties that have always been part of our business, but as our borrowers stretched maturities and were not prepaying them, that disappeared. Equally important was we have taken into our earnings noncash losses, and they are used differently by some of our peers, but if you actually include them—because they are noncash—we would have covered our dividend. That also included in that statement the drag of having excess cash. We used to run this enterprise at 2.4x to 2.5x leverage. Beginning of the year, we started at 2.1x leverage, which is a turn to a turn and a half inside many of our peers, and it is really the nature of the composition of our business lines. And then with the Fundamental Investment we made in the third quarter of the year, we actually— that business, because of its stability and the duration of the cash flows, we leverage 3:1. That dragged our overall leverage levels back to 2.4x at the end of the year. But the bulk of our business, ex the Fundamental business, triple net lease business, still remains historically underlevered, and we have a lot of cash trapped in the business. We estimate the cash drag at something like $0.07 for the year. If you add them combined, it is almost $0.20 of earnings. I think it is $0.12, $0.07, and something else—Rina can give you specifics—and that will reliably cover our dividend. And then we look at our nonaccrual book, which many look at as a problem—and we kind of do—but we also look at it as an opportunity. It is future earnings power for us. When we have first mortgages, like Jeff said, along with two money center banks, it is inconceivable that the property is not valuable. It is just probably a borrower issue. In many cases, we find our borrowers are underwater. They do not want to put the money in for TIs. They do not want to put their money into repositioning or even fit out a space for a tenant. So we have to take it back. It takes a lot of time, and once we have control, we can re-tenant it, reposition it, and, in fact, then sell it. So we have chosen long vol. We have chosen the way to approach our company because we own roughly $400 million of stock along with our shareholders, as if your capital was our own, and we have chosen to do what is best for ourselves over the long run. A prime example would be an office building that was bought by a household-named firm for $400 million. Our loan was $200 million. We took it back. We could sell it, but it is an office building. We are converting it to a rental building. That is underway. It is going to be a great building in the center of Washington, D.C., and we are confident that we will return our investment—close to it—and maybe make some money, depending on how well we do with our renovation. But that is far more attractive to us than just dumping it and then moving on. So you are going to see these assets—because we are real estate players at heart—you are going to see us take back assets, reposition them, and then sell them, and Jeff mentioned in prior years we have made substantial earnings doing that. We did not intend to be loan-to-own. Let us not kid ourselves. But what has happened in the marketplace with the massive increase in rates and then the slowdown of the recovery of rents as the market had opened overbuilt, we know that going forward these assets will produce earnings for us in the future, albeit not at the pace that I might have hoped, but real estate is not really that kind of business, and we are very confident in the future earnings power of our business. I think especially next year as we continue to roll out capital we have committed but have not funded—loans we have made this year, which Jeff mentioned, almost $1.9 billion—our triple net lease business, which was dilutive—I think it was $0.06 in the year—should turn accretive next year, and we love that business. Fifteen-year-plus leases, never a default—ever. We actually underwrote it with defaults, but we have never had a default, and they are just getting to scale now with our capital. We have also found that with our expertise in capital markets, we have materially improved their financings, and so our ROEs are rising rapidly. We just have a lot of overhead for the last three or four years. I mean, real estate was not going anywhere. Rates were rising. Everything was outperforming. But I think it is safe to say, as we look forward, that we have tailwinds now. The decrease in supply in the multifamily market—dropping 60%, 70%—eventually we will see record absorptions of apartments. In the last year in the United States, record absorptions. So with supply down and people still being unable to buy homes, we expect the multifamily markets to turn around, and that will help our borrowers, and that will lower LTVs. And right now, where we get an asset back, we are kind of not sure we should sell it or fix it up and then sell it later. But we also think the second big tailwind is interest rates. They are going lower. The pace of which nobody quite can figure out—whether AI, how deflationary it is, how fast it will happen, will it be deflationary—but interest rates will be lower. The economy is bifurcated. I know the administration does not like to talk about a K-shaped economy, but you see it. You see it in the hotel industry. The only sector of the market that was up last year was luxury. Every other sector—upscale, upper-upscale, midscale, lower-scale economy—everything was down. And also, costs to build, replacement costs, have continued to stay high, and while they may have dropped a little bit, the cost of building a home still remains well above our basis in almost any of the assets in our book. So new supply will be hindered until rents begin to rise again. I guess the negative and the thing that gets us concerned, of course, is AI—what it will mean for wealth and potentially unemployment. I think this will be a little bit what the market is wrestling with right now. We are all watching it, deciding what we think. I think there is one other positive I should mention, which is as rates fall, our transaction volumes will pick up, and that will give us more opportunities to refinance other people and other deals or make new loans and new deals. And I think real estate, as it usually is, is usually a safe haven during times of tumult in the marketplace. So overall, I think we had a solid year, and we positioned ourselves really well for the future for the next couple of years. We are excited with our team. I also think we are going to make a strong effort to reduce our costs and use AI to do what we do, like everyone else, with higher productivity and less cost embedded in the structure. And that is unique to us. We have very large businesses tucked into our mortgage book that all of which are supported by the REIT, and we hope we can make our people more productive and do so in an efficient manner, and we are very excited about taking on those challenges. So with that, I want to thank the team, and thank you for your support, and we will take your questions. Operator: We will now open for questions. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Donald James Fandetti with Wells Fargo. Please proceed with your question. Donald James Fandetti: Hi. Good morning. It seems like you are increasing the CRE loan portfolio again in Q1. Can you talk about the pace throughout 2026 and also the return profile of these originations versus historical? Jeffrey F. DiModica: Thanks, Don. Good morning, by the way. I think I mentioned in my script that we expect the loan portfolio on the CRE side to go over $17 billion in the first quarter. That would be the first time we have been growing the loan book for every quarter since COVID, every quarter in COVID, every quarter since we started. I think we have made commercial real estate loans, so it is nothing new. We are obviously sitting on a little bit more liquidity after all of the cash-out refinancings and raises that we were able to do last year, so our pace has increased as we try to deploy that. Rina spoke a little bit about drag last year. I think we did $6.5 billion or so of CRE lending. We expect to do at least that this year. My gut is that you are going to have more maturities this year. You have people who have executed their business plans on post-COVID or post-rate-rise loans. You have a number of loans from before that period that simply need to move out of the pipe, and we also have lower rates, which will create more transaction volume. In 2021, you had high $600 billion of transactions in the market. You will have two-thirds of that this year. So as transactions move up, as rates move down, as maturities come, we expect more opportunities. We borrow inside most of our peer group. Our last term loan was at 1.75% over, I believe, on a new issue, which was incredible, and then the high yield markets were somewhere around 200 over. No one in our space—well, one person in our space can borrow there—but the rest cannot. I think we have a cost of funds advantage. Also, being the biggest, we have bigger relationships with the banks who we will tend to repo with. They pick up a cross from us. The cross is worth more with us than it is with anyone else because our lines are bigger and we have relationships. So I think it looks like a very good year for originations. Last year was our second biggest. I would hope that we would be able to beat that number this year. We have $2 billion closed or in closing in the quarter. So we are still pedal down. We know we have to originate more loans and thoughtfully work out of the REOs and nonaccruals to get back to the run rate that we keep talking about by late '26, where we are covering the dividend. Donald James Fandetti: Got it. And I guess, what is your expectation for credit migration near term? It sounds like you are playing the long game, which we appreciate. But I guess that also means that we will continue to see these sort of one-off type migrations. Jeffrey F. DiModica: Yeah. Barry, I will let you go after it. Maybe I will start. You know, on migration, there are people who sell things right away, and that is a business plan. There are people like us who will work on them. We do not have a business plan for what we do with a credit and putting it through a Python. We look at every one of them individually, try to present value what we think the value of getting the amount of cash we would get back in a distressed-ish sale today without working on the asset, then what is the present value of the cash we get back over the time that we would do it, and then against that we make assumptions of where we think the property could end up—positives, negatives. We look at our liquidity, our cost of capital, et cetera, and we look at what information can Starwood, the manager, bring to bear to make the asset better. We have a great history of making assets better than the next buyer. The next buyer is going to be a 20% return private equity guy who is going to buy from us at a 10% to 12% cost of capital, and then he is going to back up his bid a little bit because of the things that he does not know. We know the asset. We have a lower cost of capital. We can borrow against the assets significantly cheaper than corporate debt than he can. That all goes into our individual business plans as we look at each individual asset without having a business plan that we are a forced seller of assets. And when we look at those, we make the decision as a management team across our capital and our property trust to either stay in and ride it, which we have done successfully—Barry gave you an example of another one that we are redeveloping we expect to have successfully done. I gave you examples of a number of them. I think we resolved $300 million last year in actual resolutions—not foreclosures. We do not call foreclosures resolutions; some people do. We had $130 million more fall out, so it would have been $430 million. We hope to resolve—we have a sheet and we look quarterly at what we expect to resolve. Our goal is to resolve most of a billion dollars this year, and if we execute on that, great, and if we do not, it is going to be because we looked at the present value of the cash flows and the cash flow we get from that day, and we are going to make the best decision for shareholders on each bespoke asset. So we do not really have a plan. U.S. credit migration—you know, I think we have our arms around where we think the potential problems are. If you look at that, property types are going to make a difference. The market it is in is going to make a difference. Tenant movements are going to make a difference. It is all very bespoke, but we feel like we really have our arms around where the potential problems are going to be. Donald James Fandetti: Got it. Thank you. Barry Stuart Sternlicht: Should I add a few things? Can you hear me okay? Jeffrey F. DiModica: Yep. Go ahead, Barry. Go ahead, Barry. Yeah. Barry Stuart Sternlicht: I mean, just given all the plan, we have a bunch of individual assets. And it has been remarkable, the amount of money we had at one asset that the cap stack was $1 billion, we are below these $400 million, and the borrower lost. When they walk, you know, they really have not—obviously, tenants want to lease and know the building is in trouble. They are not going to go in the building. It is the one that says the TI. Jeffrey F. DiModica: The borrower has absolutely zero incentive to do anything. Barry Stuart Sternlicht: So in multiple cases in our pipe, we expect to have been—and, like, we are not supposed to be leasing our buildings for us. And if we are going to put the ads right here for the TI, we want to get the asset back. There is no reason to exercise their position. So, you know, we kind of—once you play hardball, we play fair ball, and we try to work with our borrowers if we can. I think the multi business is particularly interesting. I mean, it is one of these businesses you could all remember upon the go, we started iStar—what was Tallstar Financial—it changes into iStar, and wound up taking back a whole bunch of stuff in TFC, and turned themselves into a quasi equity REIT and made a fortune. Obviously, the best thing we can do in our loan is get our money back. Jeffrey F. DiModica: That is primarily our business, certainly—it is half our business—and we are happy to play in that ballgame. We are talking about real estate, but you know, long term, you make more money on the assets, and since we are comfortable on a great asset, although we are looking at what we can recycle once we stabilize the assets. And I would say, like, for the most part, it is mostly good news to get the assets back and find that there is great demand for it, and we expect to be able to move these properties. But I do not get to do this on a quarterly basis. Our clients do not march towards quarter-ends, and our borrowers do not give up the keys always willingly. In many cases, they do and work collaboratively, but in the exception they might move slower. I think people are surprised—I think in the real estate world today—borrowers are surprised with the slow pace of recovery of the multifamily market. And while you have some positives in closed lines and maybe some of the first cities that saw no supply, you have not seen the green shoots compared to the press reports of every public company, maybe save one. Remember, the growth rate of the Sunbelt markets is not great. The rental growth is not great. We are getting positives from renewals and negative from leases, pretty much across the board—maybe you are plus one or minus one or plus two—and I see that it is not robust, and expenses continue to march higher. So you have stressed P&Ls. I do not think—when we look at our attachment points where we are alone as opposed to, like, build-it or bought-it—in many cases, their loans are traditional, and that is something out of repositioning multi. I am kind of happy to get it back. We are able to move them. We probably have a dozen assets we have in our pipeline and are here today. But, you know, I have mixed emotions. If you really like the market, the Sunbelt may be overbuilt, but it is where all the jobs are. It is where all the companies are being. We are looking at our headquarters. It is where the factories are being built, and it is where the cost of living is generally less. It is where there are right-to-work states. They are attractive states and attractive markets, further reshoring of investment and nationalization of the country. So you know, when you know there is a new factory going up in a year and a half—let us say the year and a half to build the market—do you want to sell the multi now? Or do you want to be the guy—Jeff said—an opportunity fund is going to buy the asset, and we are not—it is funded to what we do in another part of our world. I always tell Jeff and Dennis, if you are changing—he is like, we will buy it. We do not do that, but we would. In this case, we already own it. So we will just keep it in the REIT. If we want to keep it, we will just hold it. So, you know, I think it is sloppy for you because we are a unicorn in our space. And if we really thought, you know, we had an issue, we—you know, we are not worried. It has been a bit—when you take out the noncash losses, take out some of the cash drag that we know we put into place, and we are pretty confident in the math. We will reach scale and leverage with our interface, and so once it reaches critical mass, it all—so we do not have a body or a dollar to go over that. So it becomes pretty positive and reliable and recurring and stable, which is exactly the metrics that we used to go public in 2009. Consistent level. We have had some potholes, but we are on the same field. To have this kind of destruction in our markets, including the pandemic and the office markets, it is inevitable. So I am fairly proud to see us this way. We are negotiating. I know it keeps my job on some of these audio assets, and we are looking at whether we should turn accruals back on in some asset cases, you know, because its performance has improved. So it is a mishmash. It is unfortunately a little hard to say. Thanks. Operator: Thank you. As a reminder, if anyone has any questions, you may press star 1 on your telephone keypad to join the queue. Our next question comes from the line of Gabe Foggy with Raymond James. Please proceed with your question. Gabe Foggy: Hey, good morning all. Thanks for taking the questions. I wanted to talk about the residential portfolio and then the infra book. So on resi, Jeff, is there a point where, I do not know, in the market where rates get to a certain level where you guys look holistically and say that maybe you can sell the portfolio to kind of unearth the capital that sits under that to go make more infra or CRE loans? And then, Barry, on the infra side, Barry and Jeff, just remind us, what is the total opportunity set for the infra lending business? Who are your true competitors and how big can that book get over time? Jeffrey F. DiModica: Thanks. Thanks, Gabe. Hey, Barry, again, I will start unless you want to start. But on your first question on resi, resi performance has been great. I think we had a markdown in our GAAP book value of $247 million back in '22 when the rate change happened. We are significantly below that today. I think it is $100 million and after hedge maybe a little bit higher than that, but we have got back a significant portion of that by holding on—the same strategy that we have used. And also the thing that would surprise you is because we have a lot of legacy RMBS in bonds that we have, I think our ROE on our resi portfolio—this is hard for you to see because you see loans marked at $96 or $97 that we paid $101 or $102 for—I think our run-rate ROE is around 11% today across the entire resi business. So, to your point, things that will make it get better: spread tightening or lower rates. Spread tightening has come our way. Securitization spreads have tightened 25 basis points since January 1 alone. We are at the tightest securitization spreads since 2022. Securitization issuance, I think, is $10 billion year to date versus $5.3 billion at this time last year. Insurance cares about these assets. They get great insurance treatment, and that—along with the street conduits and others—there is a great bid for the types of assets that we have historically liked. That has allowed us to mark them up. That has allowed us to reduce that GAAP book value loss significantly. From here, we cannot count on spreads being significantly tighter from here. They probably can tighten a bit, but they have made their move. So to get back from the $96 or $97 or $98 price to par or $101 or $102, rates are going to be the other piece. You mentioned that. Lower rates help us because it increases CPRs. We were running at 5% or 6% CPR in our non-QM the last couple of years. We are up to 8% or 9% CPR today. We get more back at par when that happens. That is good. I think in-house, although we never make bets on rates, we believe rates are probably headed lower. It certainly feels like the AI-driven productivity will match that of previous productivity gains that we have seen and drive rates lower. We do not make any real bets based on that. But if I am betting on that, and betting on rates going lower, that will certainly help that book. As you know, we hedge that book, and so always moving our hedge around a little bit. The only way we probably get back to getting that full write-down back is by reducing that hedge a bit and being correct on rates going lower—not something we historically do—and I think we will wait and see. You create a distributable earnings loss when you take that GAAP book value hit into earnings. We like the assets. They are returning 11%, so I do not think we are going to rush to sell. Barry, unless you have anything on rates, I would then wait to infra and ask Sean Murdock in the room. Barry, do you have anything you want to add on residential? Barry Stuart Sternlicht: Not really. I mean, we want to go back and forth adding value in there. We are going back into the business. So this is a business we have a team in place for following them. We are capable. We just have to make the numbers work. So if we can, we would go back, and then we can have that as well. One of the reasons you have to diversify business models is when some are not available, you have plenty to put in other verticals. I want to introduction to Sean because you precisely went into that business and to have another material lending for it also. Sean, all yours. Jeffrey F. DiModica: Yeah. Well, before we go, I will say we looked at, I think, 21 different resi originators last year. We have talked about getting back into resi originations. The combination of rate being a little bit low and spreads being a little bit tight make it a little bit hard to jump in today, but we are always looking. I cannot imagine we do not get back in the origination game on the resi side in the near future. We are just waiting for the right opportunity. On the infrastructure side, you asked about the potential size of the market, so I am going to turn it to Sean Murdock, who has done a great job of doing sole origination to kind of get off treadmill of what that market is. Sean runs that business for us. Sean Murdock: Sure. I mean, I think the best way to contextualize the opportunity is to just talk about energy consumption in the United States. A couple of great points: consumption over the next five years is supposed to grow at sort of a 5% annual CAGR. Another good statistic to look at is the LNG export boom we have had in the U.S. We are exporting roughly 50 Bcf a day of gas to consumers around the world. That is supposed to double over the next five years. So we feel like there is a big tailwind to growth, both from the obvious AI data center value chain as well as LNG exports and other new initiatives that create a bigger market for us in which to prosecute opportunity. You asked about our competitors. I think it is similar to Dennis’s business in CRE lending. We have commercial banks that still make loans in our space. We also compete with alternative debt funds. There are just maybe not as many as either, given ESG constraints around some participants in the market. The third issuer of infra CLOs did their first deal at the end of last year concurrent with our seventh deal—Barings Asset Management. So competition is growing a little bit, but I think the tailwinds on demand for energy are significant and inform a much larger opportunity set for us over time. Gabe Foggy: Thank you, guys. That is helpful. Jeffrey F. DiModica: Thanks, Gabe. Operator: Again, as a reminder, pressing star 1 on your telephone keypad will join you into the queue so you can ask your question. Our next question comes from the line of Jade Joseph Rahmani with KBW. Please proceed with your question. Jade Joseph Rahmani: Thank you very much. Just at a high level, follow-up to Don’s initial question. Do you think credit is getting better or worse? You know, it does seem to have deteriorated in the quarter. However, these could have been primarily problems you already knew about. And the new problems seem to be not in the office—I think that everyone has pored over the office exposure quite thoroughly—but in multifamily, where, as Barry noted, rents remain soft, and also industrial. So could you just comment on your overall view on credit trends? Jeffrey F. DiModica: Barry, I will go first and you can go after. You know, we had—hope you heard in the beginning of my discussion—we had a lot of leasing last year across a lot of assets that we may not have thought we would have. There are always some idiosyncratic things that might happen in the portfolio. As you mentioned, a couple of industrials—one of them that we moved to 5 that we are leasing on, but we felt it was right to move to 5 because the sponsor stepped away. One was a studio deal—not something that was really in our office purview. So I think where it comes from here, as we have seen green shoots—and I mentioned a number of green shoots—and the REO sales at our basis in multi. As I look at our multi book, even if you have a 4-cap asset from 2021 that you wrote a loan on expecting a 5% and a 5% debt yield, if you only achieved a 4.75% or 5% debt yield, you are not losing much money on those. They are very close, and it is just a matter of which side of par you are on. So I think the multi losses across most of our books should be paper unless someone made a really big mistake. Rates will help bail that out. If you end up with a 3% area SOFR—which is what the market is saying today—those losses should be completely immaterial for just about everybody. If forward SOFR backs up to 4%, then there might be a slightly different discussion. But you nailed it on a few bespoke industrial assets—whether it is the market or tenant or other reasons—that is where we are seeing a couple of things pop up. But I would say overall, the positives are better than the negatives. And when I say positives are better than the negatives, to your question, to me that means the credit cycle has turned a bit. Barry, do you have something to add to that? Barry Stuart Sternlicht: No. Real estate is going to catch a bid. I mentioned that whenever the equity markets rock or shake, people come back to the property sector—the largest asset class in the world. We are operating in Europe, the U.S., Australia, and in general, markets are better. We are all confused, I think, would be the rule. I do. It is sad and terrifying. It is—you know, it is how many of you talk about the world in this AI convulsing—all the question marks and the fear and the anxiety. And yet, you know, if you see the markets clear, they are behaving pretty well. And you can see the office market—even despite McDonald’s—has been pretty strong. Housing remains very strong. The West Coast continues to perform pretty well. You know, I mean—and I think the political class and political interactions is something to watch. You know, I think we have to be careful about both the union cost in assets we went against and also cities like close-in near the city. Property taxes, 95%. I mean, that takes the value of an office down materially, if we can actually do it. So we are blessed with not that big of a portfolio of stuff in the city, and we have avoided most of those loans, but that is going to be an earthquake. If he passes that and then sends it through—and then you will see—the interesting thing is sometimes the tenant will pick up the real estate taxes, and if you do not, you do. What you do on the rent roll of the other tenants. So let us see. I do not know. But it is really just kind of uncertainty. It is a strange world. In general, we are definitely not selling. I think what you are seeing—we see it in our special servicer—because some borrowers are just giving up. I mean, they planned for things to get better. They were sailing after '25. '25 has passed. You know, the insurance fell, but the line did not go up. And what is ours—they kept rates up. Immigration—we did not have many people leaving, like, this last year. Growth was actually negative growth in U.S. population for the first time in—I think—ever. I think, like, fifty years later than ever—so we might have to check that one. But, I mean, that has definitely affected apartment markets. You know, with those things out—so deportation to the lack of not only people immigrating voluntarily, but we used to get a million skilled immigrants a year. And the U.S., just as you see in the national travel, is not the most hospitable place at the moment to— for the better people’s assumptions. And so, you know, they are not traveling here, and then their work—when people leave the country—that actually has been almost broken. I think some of the weakness in GDP is the fact that we have no contribution from immigration. So we want—I think most of us want to shovel toward lowering the amount of illegal immigrants—to shutter completely—but legal immigrants, I think, going to this would be very much favorable, and we need to get our act together and let people in the country. It will be good for the economy and for real estate markets. Jade Joseph Rahmani: Thank you very much. Just on the earnings path to covering the dividend, over what time frame is reasonable to expect? Is it your expectation that by the fourth quarter of this year, DE will be in line to potentially greater than the dividend? And are there any outsized gains you are expecting in 2026? Jeffrey F. DiModica: Barry, you want to start? Barry Stuart Sternlicht: Oh, sorry. Sorry. I am on an airplane while I do this call. Sorry. I muted it. I think you will see us get a little better before. We have a lot of things. It is hard to say because there are some things we are considering. I mentioned turning on nonaccrual loans that we are still evaluating. And we have some really good things in the pipe, but we have to get them done. So I would say that, again, if you take out the noncash loss of the fee—it is accounted for different, you know, some of it five years—but we have the earnings power. We can have it anytime we want it. We can sell assets with our multifamily book. There are 56 of them, Jeff. Jeffrey F. DiModica: Yep. Good evening, Jeff. No. I know. I am—we, you know, we are just trying to—we are, like I said, we are playing long ball. And the asset is great and contributing meaningfully and should have virtually no real serious competition. I have to say, if you do not know how hard it is to build affordable housing in this country, it is ridiculous. And we are in the business. I sort of entered it in the equity side. And with all the—what I will call—the drifters along the way that you pay off: the consult, the branch you need, and the not-for-profit you have to get involved, it costs almost twice as much now to build an affordable building as a market-rate building. So the way to do this is not the current structure. You basically should build a market-rate apartment and then just donate it to a not-for-profit, and we would have more affordable housing. It was an eye-opening experience for me. And it takes, you know, 14 different grants of 13 different associations, and you have to do the tax credit equity. It is quite a weird business. And it does not really work very well. They need to do something about this, but they should trash the whole structure and try something else. Because we need affordable housing in all these markets, and we have it done. It is the patience done. So it is—you know, Miami, where I live—it is the most unaffordable city in the United States. Half the population makes less than $50,000 a year. Occupancy in affordable housing is 99.5%. And do not remember—affordable housing rents are not going to go down. They come up or down. So what we are finding, though, is that the calculation of the rent growth is strong, but our ability to pass it on gets a little tough sometimes because, you know, you feel bad—the people have nowhere to go. So it is a very odd corner of the world in real estate that—well, I think with the Mason’s large affordable housing owned—I think it is 62,000 units across our portfolio. So it is a fascinating business. And we look at markets where rents approach market rents, which is, like, Austin is an excess. You cannot raise your own, but you can just move out. But in Orlando and Tampa, where the REIT owns its properties, we are, as I mentioned, 30% below market rent. So we are pretty protected and have runway, and they are also high-cost cities by the federal government. So we always wind up—what is the role of the ones that—I think what is the number, you know, that rolled over from 2025 into 2026, that we could not take last year? Rina Paniry: Yeah. It is about 9%, Barry, that is carryover. Barry Stuart Sternlicht: I mean, 9%. Right. So we were allowed to take, like, eight or nine in seven individual markets, and then the rest of it—calculation. Orlando, I think last year, was 15% rent growth they gave us. They would not let us pass it on, but we paid five or six points in the notes here. So it is, as I said, a gift that keeps on giving. And when we bought those—you know, I think you know me—I said I want to buy things in a REIT that we will never have to sell and that I want my kids’ estates to have and their grandkids and their kids. And that is that book. It is shameful to sell it, but it does have—we have no equity in the portfolio. We have refinanced all of our equity. Rina Paniry: Yes. We just got $2.3 billion out. Barry Stuart Sternlicht: Thank you. And we have a $2 billion gain—something like that. So that is even more on that. Rina Paniry: One and a half there. Barry Stuart Sternlicht: Yeah. Okay. Well, there we go. Okay. Thanks, Barry. Jeffrey F. DiModica: Yeah. So, Jade, I think the earnings trend is improving. I think Barry just said our Woodstar $1.5 billion of gains give us unique staying power, and we will continue to work the year to maximize shareholder value. To Barry’s other point—and I made it in my opening remarks, but I do not want it to be lost on people—the equity REITs are doing really well. Owning real estate, long-term assets, like Barry said, has been a pretty good trade. For whatever reason, our stock is not trading very well, but we are 24% owned real estate with long duration and large gains. Barry Stuart Sternlicht: Can I—Jeff, can I go ahead and interrupt? This is something we did not say, and I think we should say. You know, our triple net lease business in the market would be valued at, I think Jeff said, a 6%–6.5% dividend yield. That is the comp, so you take the high end. There are some trading even higher than that. So if it gets to scale and we are not getting the performance of our stock and it continues to just be a junk credit, we will spin it out. Because, you know, we have a big gain in that business, and we will have a big gain in the business. And it is obvious to us that a 6% dividend stream trading, and a 10.8% dividend stock is ridiculous. So we are not idiots. But we will grow the book, and then we will spin it and create—like we did long ago when we spun out our residential housing business and started Waypoint—we will do the same thing. I mean, we have to get recognized for the value of the portfolio and the stability of the income stream. And, you know, our credit markets actually appreciate it. I mean, we have the tightest spreads in our sector. But the equity markets do not. So I think it is confusion over some of the different accounting methods between the different firms in our space. And also I think, you know, some do not have diversification. They do not have the kind of company we put together, by purpose. We continue to look at other things, too. We just lost a very large deal—well, maybe we lost it. We are hoping to get it back—but there are other things that we have up our sleeve which could deploy capital really rapidly and get us the earnings power we need faster. So that is why it is hard to answer that question that was asked earlier. Jeffrey F. DiModica: Thank you, Operator. Are there any more in the queue? Operator: There are no further questions at this time. Jeffrey F. DiModica: Thank you, Barry. Any other questions? Barry Stuart Sternlicht: Thank you. No. Thanks, everyone, and we will be with you next quarter. Operator: Thank you. And this concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a great day.
Operator: Greetings, and welcome to the Federal Signal Corporation fourth quarter earnings call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded. It is now my pleasure to introduce Felix M. Boeschen, Vice President of Corporate Strategy and Investor Relations. Please go ahead. Felix M. Boeschen: Good morning, and welcome to Federal Signal Corporation's fourth quarter 2025 conference call. I am Felix M. Boeschen, the company's Vice President of Corporate Strategy and Investor Relations. Also with me on the call today are Jennifer L. Sherman, our President and Chief Executive Officer, and Ian A. Hudson, our Chief Financial Officer. We will refer to some presentation slides today as well as to the earnings release, which we issued this morning. The slides can be followed online by going to our website, investors.federalsignal.com, clicking on the investor call icon, and signing in to the webcast. We have also posted the slide presentation and the earnings release under the Investor tab on our website. Before I turn the call over to Ian, I would like to remind you some of our comments made today may contain forward-looking statements that are subject to the safe harbor language found in today's news release and in Federal Signal Corporation's filings with the Securities and Exchange Commission. These documents are available on our website. Our presentation also contains some measures that are not in accordance with U.S. generally accepted accounting principles. In our earnings release and filings, we reconcile these non-GAAP measures to GAAP measures. In addition, we will file our Form 10-K later today. Ian will start today with more detail on our fourth quarter and full year financial results. Jennifer will then provide her perspective on our performance, current market conditions, our multiyear growth initiatives, and go over our outlook for 2026 before we open the line for any questions. With that, I would now like to turn the call over to Ian. Ian A. Hudson: Thank you, Felix. Our financial results for the fourth quarter and full year of 2025 are provided in today's earnings report. Before I talk about the fourth quarter, let me highlight some of our full year consolidated results for 2025. Net sales for the year were $2,180,000,000, a record high for the company and an increase of $319,000,000, or 17%, compared to last year. Organic net sales growth for the year was $205,000,000, or 11%. Operating income for the year was $340,900,000, an increase of $59,500,000, or 21%, from last year. Net income for the year was $246,600,000, an increase of $30,300,000, or 14%, from last year. Adjusted EBITDA for the year was $438,900,000, up $88,300,000, or 25%, compared to last year. That translates to a margin of 20.1% this year, up 130 basis points from last year. GAAP diluted EPS for the year equated to $4.10 per share, up $0.51 per share, or 15%, from last year. On an adjusted basis, we reported record full year earnings of $4.23 per share, up $0.89 per share, or 27% from last year. Orders for the year were $2,220,000,000, an increase of $374,000,000, or 20%, from last year. Backlog at the end of the year was $1,040,000,000, an increase of $45,000,000, or 5%, from last year. For the rest of my comments, I will focus mostly on comparisons of 2025 to 2024. Consolidated net sales for the quarter were $597,000,000, an increase of 27% compared to last year. Organic net sales growth for the quarter was $85,000,000, or 18%. Consolidated operating income in Q4 this year was $83,500,000, up $13,400,000, or 19%, compared to last year. Net income for the quarter was $60,800,000, an increase of $10,800,000, or 22%, from last year. Consolidated adjusted EBITDA for the quarter was $119,400,000, up $30,100,000, or 34%, compared to last year. That translates to a margin of 20%, an increase of 110 basis points from last year. GAAP diluted EPS for the quarter was $0.99 per share, up $0.18 per share, or 22%, from last year. On an adjusted basis, EPS for Q4 this year was $1.10 per share, an increase of $0.29 per share, or 36%, compared to last year. Orders for the quarter were $647,000,000, up $201,000,000, or 45%, from last year. Orders in Q4 this year included $132,000,000 of acquired backlog. In terms of our fourth quarter group results, ESG's net sales were $504,000,000, an increase of $108,000,000, or 27%, compared to last year. ESG's adjusted EBITDA for the quarter was $109,000,000, up $26,100,000, or 31%, compared to last year. That translates to an adjusted EBITDA margin of 21.6% in Q4 this year, up 70 basis points from Q4 last year. ESG reported total orders of $566,000,000 in Q4 this year, an increase of $201,000,000, or 55%, from last year. SSG's fourth quarter sales were $93,000,000, up $17,000,000, or 23%, compared to last year. SSG's adjusted EBITDA for the quarter was $23,400,000, up $7,000,000, or 43%, from last year. SSG's adjusted EBITDA margin for the quarter was 25.2%, up 360 basis points from last year. SSG's orders for the quarter were generally in line with last year at approximately $82,000,000. Corporate operating expenses in Q4 this year were $26,500,000, compared to $10,500,000 last year, with the increase primarily due to a $13,000,000 increase in acquisition and integration-related expenses. Turning now to the consolidated statement of operations, the increase in net sales was largely driven by a $36,700,000 improvement in gross profit. Consolidated gross margin for the quarter was 28.4%, up 30 basis points compared to last year. As a percentage of net sales, our selling, engineering, general, and administrative expenses for the quarter were down 110 basis points from Q4 last year. During the fourth quarter of this year, we recognized $13,300,000 of acquisition-related expenses, up from $300,000 in Q4 last year. The increase included an aggregate expense of $6,800,000 to increase the fair value of contingent consideration associated with the acquisitions of Hog and Standard, as well as expenses incurred in connection with the acquisition of New Way. Other items affecting the quarterly results included a $1,300,000 increase in amortization expense, a $1,700,000 increase in interest expense, a $200,000 reduction in other expense, and the nonrecurrence of a $3,800,000 pretax non-cash pension settlement charge recognized in the prior-year quarter. Income tax expense for the quarter was $17,800,000, an increase of $4,900,000 from last year, with the year-over-year change largely due to higher pretax income levels and the recognition of fewer discrete tax benefits in the current-year quarter compared to the prior year. Our GAAP effective tax rate for full year 2025 was 24%, including discrete tax benefits. For 2026, we currently expect a tax rate of approximately 25%, excluding any discrete tax benefits. On an overall GAAP basis, we therefore earned $0.99 per diluted share in Q4 this year, compared with $0.81 per share in Q4 last year. To facilitate comparison of GAAP earnings per share for unusual items recorded in the current or prior periods, in the current-year quarter, we made adjustments to GAAP earnings per share to exclude acquisition and integration-related expenses, debt settlement charges, and purchase accounting expense effects. In the prior-year quarter, we also excluded the pension settlement charge that I just noted. On this basis, our adjusted earnings in Q4 this year were $1.16 per share, compared with $0.87 per share in Q4 last year. Looking now at cash flow, we generated $97,000,000 of cash from operations during the quarter, an increase of $7,000,000, or 7%, from Q4 last year. That brings our full year operating cash generation to $255,000,000, an increase of $23,000,000, or 10%, compared to last year. Early in the fourth quarter, we executed a new five-year credit facility, replacing the $800,000,000 credit facility that was previously in place. During the fourth quarter, we completed the acquisition of New Way for an initial payment of approximately $413,000,000, and in early January, we completed the acquisition of MEGA for an initial payment of approximately $45,000,000. Our current net debt leverage ratio remains at a comfortable level even after factoring in recent acquisitions. We ended the quarter with $501,000,000 of net debt and availability under our credit facility of $925,000,000. With the increased borrowing capacity under our new credit facility and our improved cash generation, we have significant flexibility to invest in organic growth initiatives, pursue additional strategic acquisitions like MEGA, pay down debt, and return cash to stockholders through dividends and opportunistic share repurchases. On that note, we paid dividends of $8,500,000 during the quarter, reflecting a dividend of $0.14 per share. That concludes my comments, and I would now like to turn the call over to Jennifer. Jennifer L. Sherman: Thank you, Ian. We are proud of our record-setting fourth quarter performance, which included new quarterly records across net sales, adjusted EPS, and adjusted EBITDA, thanks to the outstanding results from both of our operating groups. Within our Environmental Solutions Group, we delivered 27% year-over-year net sales growth, a 31% increase in adjusted EBITDA, and a 70 basis point improvement in adjusted EBITDA margin. Contributions from acquisitions, higher production levels, and continued price realization were all meaningful year-over-year contributors. Given continued strong order levels and an extensive pipeline of internal market share expansion initiatives, we remain focused on building more trucks across our family of specialty vehicle businesses and reducing lead times for sewer cleaners and four-wheel sweepers. These efforts to increase throughput across our manufacturing sites contributed to double-digit percent increases in net sales across several ESG product verticals, including sewer cleaners, safe-digging trucks, street sweepers, metal extraction support equipment, and road marking and line removal trucks. From a capacity perspective, the combination of large-scale capacity expansions that we completed between 2019 and 2022, good access to labor, and continued investments in several productivity-enhancing projects position us well to profitably absorb more volume into our existing footprint. As in recent years, we expect approximately half of our annual CapEx expenditures in 2026 focused on various growth initiatives, with the other half focused on maintenance investments. Shifting to aftermarkets, where demand remains strong, aided by contributions from acquisitions. For the quarter, aftermarket revenue increased 20% year over year, primarily driven by higher demand for aftermarket parts, increased service activity, and rental income growth. We are identifying new attractive aftermarket parts growth opportunities across the enterprise and are highly energized by the long-term prospects of our internal build-more-parts initiative, whereby we are vertically integrating certain parts production. Over a multiyear timeline, this initiative will allow our teams to drive increased recurring parts revenue streams while expanding margins. Additionally, our aftermarket teams are working diligently to integrate our most recent acquisitions. Shifting to our Safety and Security Systems Group, the team delivered another excellent quarter with 23% top-line growth, a 43% increase in adjusted EBITDA, and a 360 basis point improvement in adjusted EBITDA margin. This improvement was primarily driven by a combination of volume increases for public safety equipment in the U.S. and in Europe, proactive price-cost management, and realization of certain cost savings. Our SSG teams are laser-focused on new product development initiatives while surgically targeting underserved customer cohorts and regions, a strategy that is yielding share gains. Additionally, we expect the recent addition of a fourth printed circuit board manufacturing line at our University Park facility to drive additional efficiency improvements in 2026. Lastly, we had another strong year of cash, with $255,000,000 of cash generated from operations. For the full year, our cash conversion was 103%, slightly ahead of our annual target of 100%. Before I shift to current market conditions, I would like to spend a moment to update you on our refuse truck distribution strategy in Canada now that we have completed the acquisition of New Way. As many of you know, we have extensive internal experience in the refuse market, as we have been distributing third-party refuse trucks through our Joe Johnson Equipment sales channel for more than 20 years, primarily in Canada. This existing internal refuse service infrastructure and sales expertise was an important synergy consideration as part of the New Way transaction. Prior to the acquisition, New Way had not penetrated the Canadian market at scale, creating unique market share growth opportunities for us starting in 2026. As such, beginning in 2025, we stopped taking orders for third-party refuse trucks and instead began selling New Way through our Joe Johnson Equipment network in Canada. Given these dynamics, we have provided additional disclosures in this morning's earnings presentation outlining our historical third-party refuse orders and sales levels to facilitate more appropriate comparisons. We will continue to provide this reconciliation as we move through 2026. From a financial perspective, we expect to deliver the remaining $80,000,000 of third-party refuse backlog over the next four quarters and eventually wind that backlog down to zero. As we wind down the sale of these lower-margin third-party refuse trucks and increase New Way sales in Canada, we expect to realize margin tailwinds in 2027 and 2028. Shifting to current market conditions, on an underlying basis, excluding the impact of acquired backlog and third-party refuse orders, Q4 orders increased $64,000,000, or 14%, year over year, with improved demand across both our publicly funded and industrial product lines. Within product lines, we experienced particular strength in sewer cleaners, safe-digging, and vacuum trucks, fueled by continued demand for infrastructure and water projects in North America and rising safe-digging adoption within the U.S. Similarly, we are seeing especially constructive demand environments for our metal extraction support equipment and road marking and line removal products. Lastly, I wanted to provide some context around our backlog, which stood at $1,040,000,000 at the end of the fourth quarter, up approximately 5% year over year. When I first became CEO, I put in place a multiyear growth strategy aimed at building a best-in-class specialty vehicle and industrial equipment growth company while decreasing the cyclicality of our earnings stream. As we have executed this strategy both organically and through M&A, the composition of our product portfolio has changed over time. Consequently, our business has become less backlog-intensive compared to historical periods. In fact, many of our least cyclical and fastest-growing product lines, such as aftermarket parts, are not really backlog-relevant at all. To illustrate this impact, in 2025, net sales of our backlog-intensive products—which include vacuum trucks, street sweepers, metal extraction support equipment, refuse trucks, and road marking and line removal trucks—comprised approximately 45% of our sales compared to more than 50% in 2015. While we internally continue to view backlog as an important metric and our current backlog provides excellent visibility for certain product lines throughout the next six to twelve months, the overall importance of backlog relative to enterprise-wide forward sales has decreased over time as we have decreased the cyclicality of the business. As a reminder, consistent with our long-term growth strategy, through cycles, we target annual low double-digit top-line growth split roughly evenly between inorganic and organic growth. Looking ahead to 2026, we are laser-focused on driving three critical multiyear growth initiatives forward that will benefit the company for years to come: first, the successful integration of our recently acquired businesses; second, new product development; and third, continuing to strengthen the power of our platform. Let me share a couple of highlights. First, our teams are moving full steam ahead with the integration of New Way. As a reminder, we remain committed to achieving our targeted $15,000,000 to $20,000,000 in annual synergies by 2028, with approximately half of those synergies tied to cost savings and the other half tied to various sales synergies, including the increased penetration of the Canadian market, dealer development, aftermarket parts optimization, sales channel alignment, and new product development. Consistent with the outlook we provided in our September acquisition announcement call, we are expecting the acquisition of New Way to be approximately adjusted EPS neutral in 2026, inclusive of a preliminary estimate of intangible asset amortization expense. Second, we were pleased to close the acquisition of MEGA Equipment last month. MEGA is a manufacturer of parts and equipment for the metal extraction support equipment sector. We have been following them for a number of years, having identified the company as a highly complementary asset to our Ground Force and TowHaul businesses. We believe MEGA can accelerate several of our strategic growth initiatives within this space. As an example, MEGA will substantially increase our reach into certain underpenetrated geographic regions such as South America. As we optimize our combined sales channel between Ground Force, TowHaul, and MEGA, we see important cross-selling opportunities, similar to the playbook we have been deploying since 2022. We also see incremental opportunities to accelerate MEGA's aftermarket parts business, which has historically represented about 25% of MEGA's net sales, and we have identified several operational benefits, including production savings and freight cost opportunities. From a financial perspective, MEGA generated approximately $40,000,000 in net sales over the last twelve months, and we expect the acquisition to be modestly accretive to cash flow and EPS in 2026. Third, we continue to invest in our internal centers of excellence to widen our competitive advantage within the niche markets that we operate. In 2026, we see specific opportunities to drive several sales, new product development, and dealer optimization initiatives forward across our vacuum trucks, street sweepers, multipurpose maintenance vehicle, refuse collection, road marking, and safety and security systems verticals. As part of this strategy, we acquired certain assets and territory rights in Texas in the fourth quarter, which we think will allow us to increase market share for several key product lines. Turning now to our outlook. With the ongoing execution against our strategic initiatives and the current demand backdrop, we are confident that we will have another record year in 2026. For the full year, we are anticipating net sales of between $2,550,000,000 and $2,650,000,000 and adjusted EPS between $4.50 and $4.80 per share, notwithstanding an aggregate $0.16 per share headwind from higher acquisition-related intangible asset amortization expense and the normalization of our tax rate. At the midpoint, this outlook would represent another year of double-digit growth and the highest adjusted EPS level in the company's history. In line with our typical seasonal patterns, we expect Q1 net sales and earnings to be lower than subsequent quarters due to less aftermarket revenue capture. Lastly, we expect CapEx to be between $45,000,000 and $55,000,000 for the year, which includes productivity-enhancing projects. In closing, I want to express my profound thanks to all of our employees, suppliers, dealer partners, customers, and stakeholders for a tremendous 2025. With that, we are ready to open the lines for questions. Operator? Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment while we poll for questions. Our first question is from Timothy W. Thein with Raymond James. Timothy W. Thein: Hi, good morning. Can you hear me okay? Jennifer L. Sherman: Yes. Good morning, Tim. Timothy W. Thein: First question, just on the call at the midpoint of $2.6 billion in revenues. Apologize if I missed this. Is there a way to parse out—I am not sure if you updated what you are expecting in terms of New Way and MEGA and other acquisition impacts. Just trying to parse out organic versus relative to that $2.6 billion number? Ian A. Hudson: Yes, sure, Tim. I will take this. So, if you think of the guide—the revenue guide—obviously, in the aggregate, 17% to 22% year-over-year growth, that is about 5% to 9% as organic, and the rest would be contributions from New Way and MEGA. So that is how it breaks down. And then the midpoint—that is squarely in line with what we have delivered really since 2015. Our organic growth has been a CAGR of about 7%, so that is squarely in line with the guide. Timothy W. Thein: Yep. Okay. Excellent. And then just on the order trends—and I am sure you have far from perfect visibility as to every order placed and what the motivation is behind it—but I am just curious, maybe what feedback, if any, you hear from dealers in terms of or maybe how you are seeing that order board fill out, meaning are there any signs of maybe customers wanting to get ahead of a prebuy, meaning more of those orders may be coming later in the year, or just curious as to what, if any, impact you think that is having in terms of order activity. Thank you. Jennifer L. Sherman: Yes, I will start with the prebuy discussion. There has been a lot of discussion around this. We have not baked any meaningful prebuy into our guidance. We are going to continue to monitor it, and we will be prepared to respond to it. The other thing I would add there is publicly funded customers do not materially engage in prebuying, so with respect to that part of the business, we do not think it would be a significant driver. Where we would see traction would be on those non-publicly funded customers. Timothy W. Thein: Understood. Thank you. Operator: Our next question is from Steve Barger with KeyBanc Capital Markets. Steve Barger: Hey, good morning. Thanks. Jennifer L. Sherman: Morning, Steve. Steve Barger: For the 5% to 9% organic for the consolidated guide, is that similar—got it. And thanks for the reminder on how the mix of backlog-dependent business is changing. So maybe a two-parter. First, is it safe to say that you expect book-to-bill above one for the business units that still depend on backlog for forward visibility? Ian A. Hudson: So, a couple of comments there. As we previously talked about, our lead times are still extended for sewer cleaners and four-wheel street sweepers. So we have been focused on build more trucks. I am pleased to report that we made some really good progress during Q4. If you look at unit production combined at both Elgin and Vactor, it was up versus 2024, and up 13% for the full year. So we were pleased with that progress. For those particular businesses, we are very focused on getting those lead times in that six- to eight-month range. We provided some additional information in the slides today regarding the impact of the $80,000,000 third-party refuse trucks. We will not be taking orders for third-party refuse trucks in 2026, and we will be delivering those throughout the year. So we tried to separate that out for everybody so they understand the impact that will have. We will be taking orders for New Way, but it will take us some time to build up to those particular rates over a multiyear period. So, outside of those particular things, we would expect over a twelve-month period that book-to-bill would be around 1.0, a little bit better. But we wanted to call out those two particular issues as we move forward. Steve Barger: Yes, that is great detail. Thank you. And then the second part, just a clarification. Do you book-and-ship orders within any given quarter—does book-and-ship business, I should say, in a given quarter get reported in orders? And how do we think about rental and used equipment, and how that flows through, just for clarification? Ian A. Hudson: Yes, the short answer, Steve, is yes. They do get reported in both orders and sales within the quarter. And we typically do not have much backlog for rentals, if any, because typically you will receive the request to rent and fulfill it quickly, so that is probably an in-and-out within the quarter. So not a whole lot of backlog in the rental business. Steve Barger: Yes, but rental would still show in orders, or is that just kind of a— Ian A. Hudson: Correct. Steve Barger: Okay. Got it. Yes. Thank you. Operator: Our next question is from Ross Sparenblek with William Blair. Jennifer L. Sherman: Good morning, Ross. Ross Sparenblek: Nice quarter here. Maybe just starting with a housekeeping item. Can you help parse out the $132,000,000 inorganic contribution to orders in the quarter? I understand some is backlog; some is going to be incremental orders that were secured once you owned the asset. Ian A. Hudson: Yes, Ross. That is just the backlog that we acquired on the date of the acquisition. Ross Sparenblek: Okay. Can you give us a sense of what the inorganic order flow looked like to try to parse out the organic orders for the year? Ian A. Hudson: Yes. I mean, the difference was not really material from what we have reported. If you strip out the acquired backlog, that delta was not material. Ross Sparenblek: Okay. I mean, how should I think about that, though, since you guys did start stocking inventory in Canada for New Way, and presumably the rest of the United States? Ian A. Hudson: We did not do anything meaningful in the one month that we owned them. Ross Sparenblek: Okay. Well, just based on early discussions, do you get the sense that you are going to have a strong adoption rate with existing dealers that might be selling other third-party refuse trucks? Ian A. Hudson: You know, right now, New Way has a number of strong dealers, and we are working with them. And the JJE sales arm—we have hired a number of people. We are leveraging the existing infrastructure that is in place. We are training them on the New Way equipment. So they are still in early stages. We are excited about some of the opportunities that are out there. And then in certain areas, we plan on strengthening that dealer network through either the JJE team or other additions to the network. Ross Sparenblek: Okay. So, I mean, probably first quarter, though? Like, timeline on when we should start seeing a more meaningful contribution? It just seems a little odd that you would let the LaBrie phase out. I guess you do have a backlog there. We should not expect until the end of the year for the overlap of replacing LaBrie with New Way inventory. Correct? Ian A. Hudson: Yes, we are taking orders since closing, and New Way has a number of strong dealers in place. There are a number of opportunities, and we are continuing to take orders. And our view on New Way's contribution to the 2026 earnings has not changed. Including the amortization, we expect it to be neutral. Ross Sparenblek: Okay. Alright. Well, thanks again, guys. I will hop back in queue. Ian A. Hudson: Thank you. Operator: Our next question is from Walter Scott Liptak with Seaport. Walter Scott Liptak: Hi. Thanks. Good morning. So I want to ask—I did not catch it—Jennifer, in your remarks. You talked about the first quarter. I wonder if you could talk a little bit about what you are expecting seasonally and from production schedules so we can get our modeling right? Ian A. Hudson: Sure. We expect, in terms of earnings, the cadence to be similar to the past in terms of 19% to 20%. With respect to orders, there could be—this year, obviously, New Way in part of first quarter, Hog, and MEGA will be new—so there could be some change to the seasonality of orders. But in general, what I said in my prepared remarks is we would expect the cadence of earnings to be similar to the past. Walter Scott Liptak: Okay. Great. And I wanted to ask you about New Way and just the cost synergies now that you have had a chance to do a full financial review and look at the operations. Are you going to be able to do more with the cost synergies? And I wonder about 80/20—if that is something that you give them time to integrate first and then start 80/20, or do you start doing that right away with the New Way business strategies? Ian A. Hudson: Yes. So, we identified the $15,000,000 to $20,000,000 by 2028. That is about half cost and half revenue synergies. We have various teams that have been in place since we announced the acquisition in September that are working on those cost synergies and revenue synergies. 80/20 and operational optimization is absolutely a critical synergy. We have transferred one of our best 80/20 people. Our facility—the general manager of that facility—is now working directly with the New Way team on 80/20 opportunities. Walter Scott Liptak: Okay. Great. Thanks for that. And just the last one for me, I was curious about the University Park—the fourth PCB line that went in. You guys have been really successful with vertically integrating, and I wonder if this one is for demand that you already have, or is this room to grow? Why did you have to add a fourth PCB line? Ian A. Hudson: There are a couple drivers. First of all, the team did a super job, and we installed that line—we are actually a little bit ahead of schedule—in Q4. We look at it as driving a couple things: continued growth, it really accelerates new product development, and it allows us to attract customer needs, particularly within both our police and our signaling businesses. So, the short answer is accelerating new product development—the team is a star in that particular area—and, number two, it facilitates additional growth opportunities. Walter Scott Liptak: Okay. Great. Okay. Thank you. Ian A. Hudson: Thank you. Operator: Our next question is from Michael Shlisky with D.A. Davidson. Jennifer L. Sherman: Good morning, Mike. Michael Shlisky: Good morning. Thanks for taking my questions. Wanted to start off asking about MEGA and about New Way. Can you share first how 2025 fared within their own four walls as far as organic growth in those businesses? Were those both growth businesses in 2025? And do you expect them, organically, to be for themselves growth businesses in 2026? Ian A. Hudson: Yes. I think with respect to MEGA, we are obviously very excited about the combination of MEGA with the Ground Force and TowHaul businesses. In Jennifer's remarks, she commented on how MEGA brings some things to the table that we did not necessarily have before in terms of geographic expansion. So MEGA has had some nice organic growth in 2025. We are expecting that to continue as we go into 2026. They had revenues of about $40,000,000 in 2025, and as we go into 2026, we are expecting that to grow a little bit. As it relates to New Way, they were in the middle of a sale process during 2025, so we did not necessarily have audited financials, but the last audited financials that we had, they did $36,000,000 of EBITDA and about $250,000,000 of sales in 2024. As we talked about in September, we are expecting them to be slightly lower in 2026 just because there is some normalization of trends within that industry. So that is what we have implied in our guide for 2026. Michael Shlisky: Got it. Thank you so much. And then your comment earlier about expanding a little bit into South America was also very interesting. Was that just a comment about Ground Force and TowHaul, or are there other lines of business that you think could actually work as well in South America? Just any comments on local sourcing, whether you have to have engine changeover to make that happen. Because there are often some rules around locally sourced content when you try to get into South America. Ian A. Hudson: Yes. So my comments were focused on MEGA and TowHaul/Ground Force. We have partners that we work with in South America. MEGA has a very strong brand, and they manufacture tanks and water trucks on locally sourced chassis where needed. With respect to the chassis for TowHaul, we export, and for other Ground Force and TowHaul products, given the strong brand recognition of MEGA, the teams are excited about the synergies for both those other products. Michael Shlisky: Great. Just one last one for me. You had a busy 2025 for M&A. Just a sense as to the pipeline you think for 2026 and what areas you are looking to grow through inorganic means ahead here? Ian A. Hudson: Yes. Our pipeline continues to be full. We are very focused on identifying companies, purchasing, integrating, delevering, and then repeating. With that being said, different teams work on different opportunities. We have mentioned previously that our SSG team is looking at a number of opportunities right now. We would expect that to continue. There are some other opportunities we are looking at with respect to specialty vehicles that involve different teams than the refuse team or the mineral extraction team. M&A over the long run will continue to play a critical part in our growth, but we will meter according to bandwidth. Michael Shlisky: Okay. Outstanding. I will pass it along. Thank you. Operator: Our next question is from Christopher Paul Moore with CJS. Christopher Paul Moore: Good morning. Great quarter as always. You guys were obviously ahead of the curve early in COVID, expanding capacity, and certainly it depends on mix. But just trying to get a sense of roughly how much annual revenue Federal Signal Corporation can currently handle with the existing infrastructure. Ian A. Hudson: Yes. So we are currently running at about 70%. I would highlight that we added some additional capacity with New Way and MEGA, particularly New Way. We are excited about that capacity with some organic growth initiatives that we are incubating right now that we expect will have multiyear benefits into 2027 and 2028. I will say what I say all the time: we are continuously tweaking our capacity at various facilities, where we might do something that is less than $5,000,000 type expansion. The teams have done a super job in terms of 80/20, which—one of the many benefits of 80/20—is freeing up additional capacity. We have been able to add some additional capacity. We are leveraging some of the opportunities in New Way. I can give a great example in our dump truck body business. We had excess capacity in Pennsylvania. We are now producing dump trucks in a particular facility there. I think we are in pretty good shape right now as we sit here to support our growth initiatives going forward. Christopher Paul Moore: Got it. Helpful. Maybe just one on New Way. So you have talked about the New Way acquisition being neutral to EPS in 2026, potentially adding, I do not know, $0.40 to $0.45 EPS in 2028. I am assuming, based on prior conversations and prior comments, that that would be pretty back-end loaded for 2028. Is that the way we should be looking at that and also the margin progression from EBITDA margins from 14% to 15% to the 20% range? Ian A. Hudson: Yes. I think we talked about the $15,000,000 to $20,000,000 of synergies by 2028, kind of evenly split between cost and revenue synergies. We would expect those cost synergies to be more evenly split as we move through the three-year period, with the revenue synergies to be more back-end loaded. They take some time. If you think about that particular team, a good example is we are very focused on new product development. We have a number of products in the works, and it will take some time to get traction, for example, on those particular initiatives. Christopher Paul Moore: Got it. That makes sense. And just any thoughts on the current tariff discussions? Ian A. Hudson: Yes. I think that we are fortunate because, as we talked about last year, we are in country for country, so they had a nominal impact. USMCA is important to us, particularly given the importance of our Canadian businesses. But we are not baking any meaningful impact into the guidance that we provided earlier today. Christopher Paul Moore: Fair enough. I will leave it there. Thanks, guys. Jennifer L. Sherman: Thank you, Chris. Operator: Our next question is from Gregory John Burns with Sidoti & Company. Jennifer L. Sherman: Good morning, Greg. Gregory John Burns: Good morning. The adjusted pro forma order number of $64,000,000—how much of that is organic, and what is the contribution from acquisitions in that adjusted number? Ian A. Hudson: Yes. I mean, I think what we have done, Greg, is we have stripped out the acquired backlog at the time of the acquisition. So that is the 14% year-over-year growth from Q4. The vast majority of that is organic. Gregory John Burns: Okay. Perfect. And then in your municipal, publicly funded markets, I know there was a lot of federal money coming post-pandemic into that market. I assume a lot of that has been allocated and spent. So is there any concern that we might see a slowdown in those end markets? Ian A. Hudson: Yes. I will start with—as we have talked about before—we did not see any meaningful contributions in 2024 or in 2025 from those pandemic programs. Infrastructure projects are still ongoing. We expect those to be ongoing for several years. Again, within that publicly funded revenue bucket, water taxes are an important part of that. That is our largest single product line, which supports purchases of sewer cleaners and other types of municipal vacuum trucks. We find that to be a growing revenue stream. Our general municipal exposure would really be around street sweepers, some of our multipurpose tractors, a small portion of our public safety systems, and then a portion of refuse. As we talked about in the prepared remarks, we saw strong orders in Q4 for sewer cleaners and street sweepers. Again, we feel we have baked this into our outlook, and it is really, frankly, the diversification within that publicly funded revenue stream that is important to look at with respect to the order trends. Gregory John Burns: Okay. Thank you. Operator: Thank you. There are no further questions at this time. I would like to turn the floor back over to Jennifer L. Sherman for any closing remarks. Jennifer L. Sherman: Thank you. Again, we would like to express our thanks to our shareholders, customers, employees, distributors, and dealers for their continued support. Thank you for joining us today, and we will talk to you next quarter. Operator: This concludes today's conference. We thank you for your participation. You may disconnect your lines.
Operator: Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Adecco Group Q4 and Full Year 2025 Results. [Operator Instructions] I would now like to turn the call over to Benita Barretto, Head of Investor Relations. Please go ahead. Benita Barretto: Good morning. Thank you for joining our conference call today. I'm Benita Barretto, the group's Head of Investor Relations. And with me are the Adecco Group's CEO, Denis Machuel; and CFO, Valentina Ficaio. Before we begin, please take note of the disclaimer on Slide 2. Today's presentation will reference both GAAP and non-GAAP financial results and operating metrics. This conference call will include forward-looking statements, which are based on current assumptions and, as always, present opportunities as well as risks and uncertainties. With that, I will now hand over to Denis. Denis Machuel: Thank you, Benita, and a warm welcome to all of you who joined the call today. And let me open with the full year highlights on Slide 4. The group has consistently delivered on its ambitions and targets in 2025. In terms of market share, the group gained 245 basis points relative to key competitors with ongoing positive momentum. On a full year basis, the group's revenues were up 1.3% year-on-year, gross profit was stable, and the group delivered an industry-leading 19.2% gross margin, evidence of the benefits of its diversification strategy. The group has managed costs and capacity with discipline. G&A overheads were further reduced by EUR 23 million, bringing our total net savings to nearly EUR 200 million when compared to 2022's baseline. And productivity increased 3% year-on-year. In turn, the group generated EUR 693 million of EBITA and stayed within the EBITA margin corridor on a full year basis at 3%. Cash generation was strong with 102% cash conversion ratio, operating cash flow of EUR 613 million and free cash flow of EUR 483 million. Importantly, the group improved its leverage ratio, ending the year at 2.4x net debt-to-EBITDA, down 0.2x year-on-year and down 0.6x sequentially. Let's turn now to Slide 5. And on the left side, we highlight our consistent outperformance relative to key competitors across the past 3 years. And the chart on the right side shows volumes steadily improved throughout the year with flexible placement and outsourcing volumes in the Adecco GBU rebounding from decline to growth. Management's focus on customer satisfaction, digital innovation and recruiter productivity, integral to our strategy, is driving strong top line and volume momentum ahead of market trends. Let's move to Slide 6, where we set out the progress we are making with the run-and-change agenda, strengthening execution muscle across operations day by day, while investing in digital solutions and new services to drive future growth. There are many points on this slide, so let me highlight only a few. Beginning with the Strengthen Run priorities. The group has made significant progress in 2025. The Adecco North American turnaround gained traction. Full year revenues were up 12% and the EBITA margin expanded 230 basis points year-on-year. In line with the group's digital strategy, Adecco further expanded its Talent Supply Chain approach to 144 large clients, adding 42 in Q4 alone. By centralizing, automating and digitizing processes effectively, the Talent Supply Chain delivered a meaningful 550 basis points year-on-year improvement in fill rates. In Akkodis, restructuring in Germany has locked in EUR 58 million run rate savings. And LHH's Career Transition business continued to successfully expand in the SME segment, increasing the number of companies served by 17%. The group's Change agenda also progressed. Adecco now has 6 recruiter agents live within the Talent Supply Chain structure in the U.K. and in France. The U.K. agents have achieved approximately 15% time savings in recruiting processes, and this is an encouraging start. And we will roll out agents across key markets in 2026 to scale these benefits. And while there is further work to be done in Akkodis Consulting, France's value creation plan improved performance with the unit growing ahead of market and achieved a 7% margin run rate, up 160 basis points year-on-year. And in LHH, targeted investments in Ezra digital coaching platform drove 42% revenue growth and a record pipeline at year-end. Moving to Slide 7. On this slide, we detail the firm progress made in the turnaround of Akkodis Germany. Management took decisive restructuring action in 2025, achieving EUR 58 million in annual cost savings on a run rate basis by year-end. This included reducing the cost of sales by EUR 43 million and SG&A expenses by EUR 15 million, with EUR 8 million saved through real estate consolidation across 26 locations. Last wave of rightsizing effort is in flight, lowering headcount by approximately 600 in total. In addition, select noncore assets were exited, eliminating approximately EUR 3 million of negative EBITA. The program incurred onetime charges of EUR 46 million in 2025 but has already delivered around EUR 15 million of in-year P&L benefit. As a result, Akkodis Germany achieved a healthy 5.4% EBITA margin run rate at year-end. The group expects incremental savings to crystallize in the P&L during 2026, in particular during H1. With the organization being rightsized, management's focus in 2026 will shift to rebuilding the top line, supported by encouraging new client wins across sectors such as aerospace, defense and life sciences. In short, the group has made strong progress in stabilizing Akkodis Germany, positioning it for sustainable profitable growth going forward. Slide 8 sets out the Board of Directors' dividend proposal. We are retaining our attractive shareholder remuneration with a dividend of CHF 1 per share for fiscal year 2025. This represents a 46% payout ratio, in line with our established dividend policy of paying out 40% to 50% of adjusted earnings per share. Shareholders will have the option to receive the dividend either in cash or in newly issued shares. With this proposal, the group provides attractive returns to shareholders, including the option for qualifying shareholders to participate in the group's future growth in a tax-efficient way. The optional scrip dividend aligns with and supports the group's capital allocation priorities, which remain unchanged. It allows shareholders to increase their investment in the Adecco Group while enabling the company to retain cash for growth and prioritize deleveraging. Now let me hand over to Valentina for the Q4 results. Valentina Ficaio: Thank you, Denis, and a warm welcome from my side. Let's begin with Slide 10 and an overview of the group's strong Q4 results. The group delivered further significant market share gains, leading key competitors by 395 basis points. Revenues reached EUR 6 billion, rising 3.9%, our best quarterly performance this year. Gross profit grew 4% to EUR 1.1 billion with a healthy 19.1% margin, stable on an organic basis. Our disciplined execution drove good operating leverage. We were pleased to see a strong productivity improvement of 11% and to deliver a strong drop down ratio of over 80%. In turn, the group's EBITA was EUR 225 million, up 20%, with a 3.8% margin, up 60 basis points. Let's now discuss the GBU developments, beginning with Adecco on Slide 11. Adecco delivered a strong performance with revenues at EUR 4.8 billion, up 4.9% and improved sequentially. Flexible placement revenues increased by 4%. Outsourcing was very strong, up 14%, and MSP was up 6%. Permanent placement, however, was 6% lower. Adecco's healthy gross margin was driven by firm pricing, client mix and lower permanent placement volumes, and productivity improved 6%. The EBITA margin improved 40 basis points to 4%, mainly reflecting higher volumes and strong operating leverage, supported by G&A savings and agile capacity management. Adecco's drop down ratio this quarter was robust at over 50%. Let's now move to Adecco at the segment level on Slide 12. In Adecco France, revenues were 2% lower, stable sequentially and ahead of the market. Logistics continued to weigh, while autos and manufacturing were strong. The EBITA margin of 4.4%, up 10 basis points, mainly reflects client mix and benefit from SG&A savings plans. Revenues in Adecco EMEA, excluding France, were up 4% and sequentially improved. Most territories achieved good growth and outperformed competitors. Looking at the larger markets. Revenues were up 3% in Italy with solid activity in logistics, financial services and consumer goods. Revenues in Iberia were up 7%. Food and beverage, autos and financial services were strong. In the U.K. and Ireland, revenues declined 1%, a good result in a challenging market. The result was weighed by lower logistics and public sector demand despite strength in IT tech and financial services. Revenues in Germany and Austria were up 2%, well ahead of competitors, with strength in autos, consumer goods and defense. The segment's EBITA margin of 3.9% was 50 basis points higher, mainly reflecting strong operating leverage and good cost mitigation. Turning now to Slide 13. Adecco Americas delivered 21% revenue growth. North America revenues increased 23%, well ahead of the market, mainly due to strong activity from large clients. In sector terms, consumer goods, food and beverage and autos were notably strong. Latin America revenues were up 19%, led by Colombia, Peru and Brazil. By sector, logistics, financial and professional services and retail were strong. The Americas EBITA margin of 3.3% expanded 150 basis points, reflecting client mix and strong operating leverage from higher volumes. Adecco APAC remained strong with revenues up 7%. Revenues rose 6% in Japan, 14% in Asia and 7% in India. Australia and New Zealand returned to growth with revenues up 2%. APAC's EBITA margin of 4.3% mainly reflects the timing of income from FESCO. Let's now focus on Slide 14 and Akkodis' strengthened performance. Akkodis' revenue were 1% lower and sequentially improved. Consulting & Solutions revenue were up 2%, marking a return to growth for this service line. In EMEA, revenues were flat. Germany was 7% lower, driven by autos headwinds. However, revenues in France were up 3% and ahead of the market in aerospace and defense and autos. And the U.K. and Italy performed notably well. North American revenues were up 3%, ahead of market, supported by further modest improvement in tech staffing demand. And Consulting & Solutions grew 46%. Revenues in APAC were 4% lower. Japan's result was heavily influenced by trading day differences. On an adjusted basis, revenues were up 5%. Revenues in Australia were 10% lower in a tough market. Akkodis' EBITA margin of 7% was 90 basis points higher, mainly reflecting benefit from the turnaround in Germany. Let's move to Slide 15. LHH has executed well and delivered highly profitable growth. LHH's revenues were up 2%. In Professional Recruitment Solutions, revenues were 3% lower, taking share in a subdued market. Recruitment Solutions gross profit was flat with the U.S. 3% lower and Rest of World up 4%. Permanent Placement was up 4% and productivity was 8% higher. Career Transition was robust with revenues up 1%. U.S. revenues were 2% lower on a high comparison, while the U.K. and Switzerland were strong, and the pipeline remains healthy. Revenues in Coaching & Skilling rose 27%. Ezra's revenues were very strong, rising 68% while General Assembly's B2B business grew 31%. LHH's EBITA margin was 9.7%, up 510 basis points. The year-on-year development is flatted by the absence of charges recorded in Q4 '24 related to the wind down of General Assembly's B2C activities. On an underlying basis, the margin expanded 230 basis points, reflecting positive mix and volumes and strong operating leverage with productivity up 12%. Let's now turn to Slide 16. Gross margin was healthy at 19.1%, stable year-on-year on an organic basis. The group's gross margin was driven by negative FX impact of 10 basis points; 20 basis points negative impact coming from flexible placement, mainly reflecting client and country mix; 10 basis points negative impact from permanent placement, reflecting lower activity in Adecco; and a 30 basis points positive impact in Outsourcing, Consulting & Other Services, mainly driven by Akkodis Germany. Let's now look at Slide 17 and the group's EBITA bridge. At 3.8%, the EBITA margin excluding one-offs was strong, rising 60 basis points year-on-year. The result was driven by a 10 basis points negative impact from FX, a 30 basis points favorable impact from Akkodis Germany and, furthermore, excluding Akkodis Germany, a stable gross profit contribution at healthy levels, an encouraging 50 basis points positive impact from operating leverage, including G&A savings as well as strong productivity improvement, and a 10 basis points negative impact from the timing of FESCO income. Among key metrics, SG&A expenses excluding one-offs as a percentage of revenues was 15.4%, down 70 basis points, while G&A costs were just 3% of revenues. Productivity, measured as direct contribution per selling FTE, rose 11%. Moving to Slide 18 and the group's cash flow and financing structure. The last 12-month cash conversion ratio was strong at 102%. Full year operating free cash flow was EUR 613 million. Free cash flow was EUR 483 million. Both outcomes are strong given the group's continuous improvement in revenues. In Q4, operating cash flow was EUR 476 million, a modest EUR 15 million decrease from the prior year period. This outcome reflects strong collections and favorable timing of payables, partly mitigated by working capital absorption for growth. We have maintained discipline regarding payment terms and are very pleased to report that the group's DSO improved 0.4 days to 51.8 days, remaining best-in-class. Capital expenditure was EUR 50 million, and free cash flow was EUR 426 million, a modest EUR 20 million decrease from the prior year period. The group also strengthened its balance sheet. Gross debts were reduced by EUR 280 million in 2025, supported by the repayment of CHF 225 million senior bond in Q4. At the end of Q4, net debt was EUR 2.29 billion, EUR 186 million lower. Leverage ratio improved to 2.4x, down 0.2x year-on-year and down 0.6x sequentially. The group is firmly committed to bringing the net debt-to-EBITDA ratio to 1.5x or below by the end of 2027, absent any major macroeconomic or geopolitical disruption. On Slide 19, we provide our near-term outlook. The group has seen continued positive momentum in volumes this quarter to date. For Q1, the group expects gross margin and SG&A expenses, excluding one-offs, to be broadly stable sequentially. As a reminder, the prior year period benefited from the timing of FESCO income. We are rigorously executing the group's strategy and run-and-change priorities, focusing on market share gains while managing costs and capacity with discipline to drive profitable growth. And with that, I hand back to Denis. Denis Machuel: Thank you, Valentina. And let me conclude with Slide 20 and key takeaways. We launched the agility advantage value creation path and run-and-change agenda at our November Capital Markets Day. We are successfully executing against group strategy and driving momentum. During 2025, the group delivered on its full year margin commitment, captured market share and return to revenue growth. And we are encouraged to see continued positive momentum in volumes to date this quarter. Moreover, as we successfully advanced our strategic priorities, the group's financials are improving, underpinning an improvement in the year-end net debt-to-EBITDA ratio, which was down 0.2x year-on-year and 0.6x sequentially. We remain firmly committed to achieving a net debt-to-EBITDA ratio at or below 1.5x by year-end 2027. With this said, thank you for your attention, and let's open the lines for Q&A. Operator: [Operator Instructions] Our first question comes from the line of Andy Grobler with BNP Paribas. Andrew Grobler: Just a couple from me, if I may. Firstly, just on free cash. It was very strong in Q4 led by payables. Could you just talk through what you did to drive that and whether any of that is going to reverse into early 2026? And then secondly, just a slightly broader one around client behavior. Are you seeing any change in client behavior in terms of their desire for flexibility, in terms of the interactions they're having with you? Or do they remain broadly pretty cautious in those end markets? Denis Machuel: Thank you, Andy. And Valentina is going to answer the first part, and I'm going to answer your second question. Valentina Ficaio: Andy, on free cash flow, it was a very strong performance. You've seen that we landed on EUR 483 million and the conversion ratio was very strong, above 100%. And it's particularly strong, this performance, if we consider that we've done it on the back of a year and, most importantly, a Q4 where we were growing. And you know that our business absorbs working capital when we grow at this level. If I try to unpack a bit what are the most important components, fundamentally, it all goes down to very strong working capital management. We've been very diligent on collections. And you've seen how our DSO continues to be very strong. We are down year-on-year. It's not easy to keep going down on year-on-year in this market. So we're very pleased with that. And in terms of AP, yes, we did have some favorable timing on payments, but we've also done quite a lot of job in terms of carving out overbalancing, negotiating payment terms. And you really start to see how the impact of that comes through also in our AP management. So overall, we are very pleased and we continue to be laser-focused on working capital. When you think about 2026, I would -- I really think about free cash flow generation this year to -- the behavior to be similar. Just as a reminder, seasonally, our H1 is an outflow versus an H2 that is an inflow. So that's the way that I would model it. But again, laser focused on working capital because that's the key of our strong free cash flow performance this quarter. Denis Machuel: And as far as what our clients are telling us, we see pretty good momentum, particularly on flex. I must say, Adecco is firing on almost all cylinders. We have soft results in France and the U.K., but apart from that -- even though in France, we are ahead of the market. But apart from that, we're really, really strong. And we see momentum, we see demand for flexible workers across the board, across geographies. It's says something also a little bit about, of course, the uncertainty that we live in. But the economy is pretty good. So there's demand. There's work to be done. And we are surfing on that. We're surfing on that through, of course, our sales dynamism we serve because we have very strong delivery engine. And that makes me very confident. There's one sign, which is interesting, is we see a little bit of a pickup in permanent recruitment in LHH. It's 4%. It's not big yet and we start from your volumes, but it's a little bit positive. But overall, I'm very, very optimistic on the momentum that we have. We have a great momentum as well in outsourcing, you've seen double-digit growth. I think the market is there to support our development. Andrew Grobler: Can I just ask one quick follow-up? Just on LHH and in RS in particular. You noted that perm was growing, but gross profit was down in that segment. So that suggests that your kind of gross margin in your contract temp businesses is lower. Could you just talk through what's going on in that segment, please? Denis Machuel: Well, actually, you've got to look at LHH as in 2 dimensions. There is perm and flex on one side and there is the U.S. and outside of the U.S. In the U.S., we are minus 3%. In the rest of the world, we are plus 4% overall. So that says something about the geographic differences. But overall, I mean, let's be clear. We are -- the whole industry is operating at pretty low historical level. But we are -- what we do is we are outperforming the market, which matters to me. Valentina Ficaio: And I would also add that as you look overall at the performance, you see also how LHH has really worked on productivity to offset also some of these elements. And LHH productivity was up 12% in Q4 and their sales FTE was down 4%. So you see how they are acting also on what Denis just mentioned. Operator: Your next question comes from the line of James Rowland Clark with Barclays. James Clark: My first is just on the answer you just gave about good momentum. Just to be clear, I understand you've taken a lot of market share in the last few quarters. Is that momentum comment about you specifically taking share? Or do you think that's more market-based? If you could help sort of parse those two elements, that would be great. Secondly, on EBIT margins in 2026, I think consensus has got 30 to 40 bps of margin growth. Are you comfortable with that? And could you help us bridge that improvement across organic gross margin, which looks to be under pressure going into this year but also then offset by SG&A? So I'd love just to get your sense on the moving parts to achieve that margin, if you're comfortable with it. And then finally, on leverage, you're guiding to down to 2.5x by the end of '27. So you've got to lose 0.5x a year between now and then. Do you see that as a linear progression or faster in '26 and '27 or vice versa? And if so, why? Denis Machuel: Thank you, James. And I'm sure Valentina will be super happy to take the EBITA and leverage questions, and I'm going to talk about the momentum. Two things here. As much as I believe that the way we operate, the way we've put in place a very strong sales dynamic, which is -- which we adjust as per market conditions, as per the industry we are facing, et cetera, as per the geographies, and we have also put a very strong delivery engine that helps us gain share from our own merits and that makes me very confident for the future, I also believe that it's overall the market conditions that are also improving. And we have been through some difficult quarters in, I would say, end of 2024 and beginning of 2025. And we see an overall better traction on the markets. And on that, we are well positioned because we've done all the hard work to strengthen the muscle in sales, strengthen the muscle in delivery. So it's -- I would say it's a bit of both that help us grow as we do. Vale, now on EBITA? Valentina Ficaio: And I'll build on the comments that Denis just mentioned about momentum just to give you some more flavor on guidance for Q1 EBITA. So I think that what you mentioned, James, is reasonable. And the way that I think about our Q1 EBITA is the continued positive volumes behavior gives us confidence in terms of revenue outlook. And gross margin is broadly stable sequentially. If you think also about the comparison year-on-year is we have a 20 basis point headwind coming from FX. You may remember that last year in Q1 '25, this represented a tailwind. So that gives you a flavor why also year-on-year Q1 gross margin is actually broadly stable. And in terms of SG&A, our normal seasonality from Q4 to Q1 usually see SG&A going up by EUR 10 million, EUR 15 million. So the fact that we're guiding for broadly stable tells you about the cost discipline that we continue to enforce. And you saw that we've mentioned the FESCO income because we assume FESCO to continue to contribute positively on a full year basis. But the timing last year, it can vary. And last year, it happened in Q1. On a full year EBITA, we don't guide overall, but I think this gives you a bit the moving pieces that you need to model in terms of getting there, and the assumption that you mentioned are quite reasonable. Moving to leverage. I think it's -- the free cash flow generation, the performance that we had -- the trajectory of the performance that we had throughout 2025 delivered good delevering, 0.2 year-on-year and sequentially, 0.6. The path to 1.5 is clear. We don't guide specifically on '26 and '27. But clearly, the levers that we have in our hands, and we are already pulling are modest growth. You've seen how growth has dropped through in operating leverage over the past quarters. We expect that to continue throughout the next quarters. And then we have additional benefits coming from Akkodis Germany, but also other elements like the turnaround in North America, like the improvement in France that will continue to help us get there, as we've shown you in the last -- in recent quarters. Operator: Your next question comes from Suhasini Varanasi with Goldman Sachs. Suhasini Varanasi: Just one question for me, please. I just wanted to clarify the exit rate and momentum that you saw year-to-date because I think your slide on -- Slide 5 seems to suggest at least on the GBU, Adecco GBU front, the momentum is continuing to improve in year-to-date. Just at that GBU level and at the group level, can you please clarify how the exit rate has looked compared to the 3.94% growth that you reported last quarter? Valentina Ficaio: Suhasini, I'll take this one. Just to give you a sense, the exit rate was very much aligned with the quarter leverage, so at group level. So I hope that's helpful to give you a sense. Operator: Your next question comes from the line of Simon LeChipre with Jefferies. Simon LeChipre: First question. Looking at your Q4 results and if we exclude Akkodis, so gross margin was down 30 bps on an organic basis and SG&A was probably flat organically. And in prior quarters, it seems you were able to offset the gross margin pressure through cost savings. So does that mean it is no longer the case? And I mean, how should we think about the future quarters in terms of the relation between margin performance and SG&A? Secondly, in terms of your Q1 gross margin guidance, so stable sequentially. So I would assume the seasonal effect from Q4 to Q1 is negative. It seems you're also talking about like FX negative impact being a bit stronger. So how would you offset these 2 factors to get to a stable gross margin sequentially? And last thing on AI. We see more and more evidences of how AI can make the business more efficient. So I would assume this suggests some deflationary effect on top line. So how do you think about the net bottom line impact in the future? Like do you think your SG&A would continue to reduce? And would that be enough to offset this potential deflationary trend on the top line? Denis Machuel: I'll take the AI piece and Valentina will be very happy to take the gross margin question and the FX. Valentina Ficaio: So starting with your 2 questions on gross margin, Simon. I think when you think about the performance that we had in Q4 at 19.1%, it's a very healthy level. It's industry-leading. And it reflects a number of components. It's not just Akkodis, right? There's firm pricing and client mix, and there's GBUs mix that contribute positively to the gross margin buildup. Yes, Akkodis Germany is a component of it, but it's not the only one. And then there's clear added value in the gross margin that comes from the service lines that have higher gross margin profile, like outsourcing, like Ezra. You've heard us mentioning a number of service lines that have grown double digit in Q4, and will continue to do that. So there are a number of levers that we can continue to work on, Akkodis Germany is one of them, to work on our gross margin and keep it at this stable levels. When you look at -- and by the way, permanent placement continues to be subdued clearly. When permanent placement picks up, it is a further lever that we can capture because we will capture permanent placement growth when it comes, and that's another further lever we can pull. When you think about Q1, let me just take a moment to walk you through the elements. You've called out FX. It's correct. As I was mentioning before, actually it was a tailwind in Q1 last year. So you do have a 20 basis points gap when you look at it from a Q-on-Q perspective. And then we again have several pieces because there's modest impact coming from perm and flex, but there's also a modest positive impact coming from the other service lines. So that is why we continue to say it's really broadly stable even on a year-on-year basis. Because if you take out the FX, we are continuing to see how the benefits of the other service lines of Akkodis that we are implementing is affecting the modest client mix that we have in flex and perm. Simon LeChipre: Sorry, may I have just a quick follow-up on GM and also on SG&A. So it was minus 1% organically year-on-year in Q4, so I think mainly driven by Akkodis. So does that mean like the Adecco GBU, as you know, is now trending kind of flattish year-on-year? Valentina Ficaio: No. We continue to see the same performance. We call out Akkodis when we mentioned that because we want to call out the nice progress that we've done in the restructuring and the fact that most of it, it is coming through SG&A but it's broad-based. And you've seen it also in our productivity numbers. They're up in all of the GBUs, not just in Akkodis. And in our G&A over sales, that is just 3%, and that is not just Akkodis. It's broad-based. Denis Machuel: Let me take now the AI impact. And I think there is a top line impact, positive impact and also an impact in productivity that's going to help our profitability overall. On the top line, I believe that AI is really an opportunity for us. Remind you, we are in a fragmented market. So the more optimized we are in how we deliver our service through AI, the better we can gain share. And I'll give you two examples. We've embedded generative AI into our Career Studio in LHH. And when people use Career Studio with AI powered, they find a job 32 days earlier than the ones who don't. This is creating value for our clients. This has helped us penetrate bigger, faster our clients. So this has a positive impact on the top line. If I look at the way we deliver with our AI agents in the U.K. on our recruitment, we have fill rates that have improved 550 basis points, okay? So this is an impact. We have improved our time to submit by 24% quarter-on-quarter. This helps us be more efficient, deliver more. So -- but a positive impact on the top line. In doing so, we have operating leverage, as Valentina was saying. And in terms of how we optimize our cost, of course, we will progressively embed AI into our processes. We embed AI in our middle and back office, and this is going to create also efficiencies. So I believe that AI will have a positive impact both on the way we capture market share and in the way we improve our profitability. Operator: Your next question comes from the line of Remi Grenu with Morgan Stanley. Remi Grenu: Denis, Valentina, just one question remaining on my side. Focusing a little bit on North America and the very high growth there. I mean, the acceleration came in Q1 and Q2 last year, if I remember correctly. So can you help us unpack a little bit the performance there, if it's been driven by a few contracts and if we then should expect some kind of annualization of these benefits in Q1 and Q2 this year? Just trying to understand a little bit from the 20% organic growth you're currently growing out in that country, what we should expect in terms of potential normalization over the next few quarters? Denis Machuel: Yes. Thank you, Remi. Yes, if I go back to history, Q1, we were minus 1% year-on-year. Q2, we are plus 10%. Q3, we are plus 21%. And Q4, we are plus 23%. So of course, this is -- we're very pleased. This shows that all the efforts that we've put in the turnaround plan in the U.S. is delivering. We have productivity improve by 10% and we have a very strong dynamic on the large accounts. We also are positive in the SMEs, but that's the point where we need to focus our efforts because the growth in our large accounts is a bit higher than the growth on small and medium companies. So to your point, yes, I mean, we -- let's be clear, we started from a low base, okay? So we are -- I mean, this double-digit growth rates are encouraging. But as we anniversary some of the wins of the large clients, we will go more towards more market trends to sort of a bit of a normalization. Still our focus and our efforts will be to gain share, to be ahead of the market. And I'm quite positive that we can achieve that, but probably not to the extent that we've had this year. We have good traction in customer goods, in retail, in autos, in food and beverages. So I mean, there's traction in the market. The economy in the U.S. is still pretty good. So we will serve on that. We are much stronger than we were 2 years ago. And yes, you can expect growth, probably not with such a differential with the market. Remi Grenu: Understood. And just maybe building up a little bit on the question from Simon on the operating cost guidance for Q1. I mean, I'm a little bit surprised by the comment on stability. So can you help us a little bit quantify the building blocks to get there? I mean, discussing with some of your competitors, it feels like that they are forecasting some wage inflation around 2% or a little bit more than that. The higher volume of activity, the 4% organic growth and positive momentum probably would mean under a normal cycle that you need to invest a little bit more in resources. So yes, so can you help us a little bit on that stability of operating costs? And I'm just trying to understand as well if to what extent you think that stability comments and these cost efficiencies are already driven by AI initiatives, or if it's just about Adecco removing some of the inefficiencies in the cost base that you had there and had to address? Denis Machuel: Let me start by a little bit of how we strategize that growth. And you heard me say in the past that what we try is to be very, very granular in the way we inject the resources that are linked to the dynamic of the market. And if I talk markets, it's by country. It's even by region in a country. It's by industry in a particular region, a particular country. So really adjust with the -- through this empowerment that we've put in place years ago, that's what we -- we let people adjust very precisely to the market conditions. Yes, we will need to invest in some places, but we are also cautious in some others. And that's how we operate. And definitely, we will -- we have improved our cost inefficiencies. We've really readjusted our SPs. We have adjusted our G&A. So I think we are continuously optimizing the resources, and I think AI will nicely help us on that. Now on the building blocks for Q1. Valentina Ficaio: And just to give additional color, Remi. On the operating cost sequentially stable. It's all about cost discipline, right? The continuous focus on productivity and G&A gets us there. If you look for a second at Q4, I think it's also very helpful to see how we have performed. Productivity was up broad-based, plus 11 at group level. But if you look at each GBU, Adecco was plus 6, LHH was up 12 and Akkodis, even with Germany soft, capped 90% utilization rate approximately. So -- but if you look at our employee -- group employees, they are actually slightly down. So that tells you how we are combining very well growth with good cost discipline and good productivity. And that gives you a sense of why we guide for this to continue to be stable as we continue building on these 2 clear levers that has been key to the operating leverage that you've seen in our results. Denis Machuel: And just to complement on AI. Yes, we see a 30 bps improvement when we serve the clients by -- through AI initiatives. But it's not at the scale that I want to see. We said that we would cover 60% of our revenues by agentic AI over time by the end of 2026. I mean, it's progressing. We yet have to fully scale. So more to come. We'll keep you updated on the progress. I remain prudent in the impact of AI because there is no magic in AI. It's hard work. You need to scale it. I think we have all the levers and the foundations, but let's see how it goes. But the trend is positive. Remi Grenu: Okay. And the last question is on the SME, which you referred to, Denis, I think, in one of your previous answers, saying that you need to address this segment better. Is the issue market related? Is just the momentum between the 2 markets, if you see separate them between SME and large enterprise, is still very, I mean, diverging a lot in terms of volume of activity? Or is there any initiative at Adecco's level which you need to implement to be better at serving this cohort of client? Because it has implication, obviously, for gross margin and profitability, I guess. Denis Machuel: Yes. Well, actually, we've really doubled down in the past couple of years in how we serve the large clients and enhance Talent Supply Chain and enhance all that. We still have a pretty good dynamic in SMEs. But this is a place where we accelerate our efforts because we know, to your point, that it's very accretive to our margin. So I think we are in a good place in how we roll out all our technology into our Talent Supply Chain, and we are also rolling out progressively the technology through our branches. I believe that the strength of branch network is that proximity, that deep understanding of the local ecosystems. And that's one of the top priorities for 2026 is to inject as much energy and technology into the SME segment as we have done in the large accounts. Operator: Your next question comes from the line of Simon Van Oppen with Kepler Cheuvreux. Simon Van Oppen: I have a question on margins. We see margins in all divisions strengthening in Q4, most significantly in Akkodis and LHH, especially on an underlying basis. Can you unpack a little bit the main drivers for the strengthening of your margins by division? And what do you expect in terms of margin for each division in 2026? And in extension to that, should we expect more one-offs in 2026? And if so, roughly by how much by division? Denis Machuel: Valentina? Valentina Ficaio: Thank you, Simon. So let me explain a bit around each GBU and how they evolved in terms of margin, and then we can also quickly touch on formal one-offs guidance. I think what is the common denominator among the 3 GBUs improvement is volumes up, operating leverage drop through. That is clearly -- and if I take for a moment Akkodis out, it's a clear denominator, right? And then if I take one GBU apart, you have Adecco that grew materially, right? You've seen how in Q4, it's up almost 5% with pockets that are even double digits. And clearly, the Adecco story is a story around strong operating leverage but also diversification with service lines like outsourcing that grew double digits, to give you a sense. And it always comes on the back of good cost discipline, healthy operating leverage and the improvement in margins. In LHH, you've seen us mention that there's an element of the improvement year-on-year that is because we had headwinds last year. So it is a 500 basis point improvement, but in fact, underlying is half of it, 250, which is still a very significant improvement. And it's mainly coming from CT continuing to performing very well, but also the contribution of other lines like Ezra and like the B2B business in GA that have grown double digits, and they come with very healthy high gross margins. And then finally in Akkodis, clearly, the main driver of the improvement in performance is Akkodis Germany and the fact that we are progressing well in the turnaround. In terms of one-off costs, the guidance that we're giving you is down from EUR 60 million this year to EUR 40 million next year. The EUR 60 million clearly this year is mainly coming from the Akkodis Germany turnaround. And so we're basically guiding next year to be lower in one-offs, mainly because Akkodis Germany is basically completed. Operator: Your next question comes from the line of Gian-Marco Werro with ZKB. Gian Werro: Two questions from my side. The first one is on the gross profit margin in flexible placement. I would appreciate if you can dive there a little bit deeper into this development of 20 basis point decline year-over-year. Can you maybe elaborate, please, on the gross margin dynamics in the temporary staffing, especially in your key markets like France, Germany and also the U.S., please, just to grab a little bit there the dynamics, how is it evolving, still increasing, stable or declining? And then second question is on AI also. Denis, I appreciate your optimistic tone about the opportunities lying here. But very frankly speaking, don't you also see also, of course, some headwinds here of jobs that become redundant, like many operations of warehouses, IT, white collar back-office work that, in my view, is certainly also affecting your top line negatively. I would appreciate if you can just talk briefly about the dynamics that you observe in the industry. Denis Machuel: So I'm going to start by answering your questions on AI, Gian-Marco, and then Valentina will talk about the gross margin. Fundamentally, we don't see any impact of AI at this stage. We know that as all technology evolutions that are happening, some jobs are going to be impacted, some destroyed, but so many are going to be created. That's what history tells us, okay? And for the moment, if you look at the numbers coming from Career Transition, okay, which is the world leader in outplacement, 1.4% of the people are telling us that they've been laid off due to AI. That's it, okay? And 12% say, yes, there was a bit of AI coming in. So to date, there's no massive impact, no impact of AI. And let's be clear, and I'm not the only one to say that, a lot of companies are doing layoff plans pretending that is coming from AI because it makes them look good, okay? But fundamentally, this is not the case, okay? So now nobody knows within 3 or 5 years what's the relationship between the jobs destroyed and the jobs created, okay? If you look back 10 years ago, nobody was talking about cloud architects, nobody was talking about content moderation. And these jobs have been created because of the digital world, et cetera. So this is going to come as well with AI, okay? So I believe that because of this, I'd say, massive reshuffling of the labor market, this is a massive opportunity for us to upskill, reskill, move people around, accompanying people in their agility. That's what we are here for. And AI is not new. It has been now around for more than a couple of years. And look at our numbers, okay? So we are trending nicely in this world of AI. We are reshaping the future of work in this AI era, And we are well placed to accompany our clients on their agility that is necessary with AI. So that makes me very confident. Now on the gross margin. Valentina Ficaio: So the year-on-year development you were asking about, Gian-Marco on flex. First of all, it's a modest impact. Overall, the flex gross margin remains quite healthy. We are happy with pricing. It stays firm. We have a positive spread bill-to-pay rate. And so the modest impact that you see is fundamentally client and country mix. And just to build on the question that you were asking about, what about countries, France, U.S.? It is really all about how do we grow, right? So sometimes in some countries, but also in some industry, we may see one client segment growing faster than the other. It's the case right now, as Denis was mentioning, in France and North America. But what is really important is that, as that happens, we also operate on cost base, right? Because these are also clients that come with a lower cost to serve. So the most important thing when we think about margin, yes, it's the gross margin, but it's also the mix that we have between SMEs and large and the drop-through on the overall margin. Gian Werro: Okay. But no specific comments you want to make here on the 3 countries I mentioned, about the development of the gross margin? If it's stable or you mentioned that most probably... Denis Machuel: The trends in these 3 countries are aligned with the overall trend of the GBUs, yes. Operator: Your next question comes from the line of Karine Elias with Barclays. Karine Elias: I just had a quick one on the hybrid. I believe on your third quarter conference call, you mentioned your intention to refinance at the time the hybrid. Just wondering whether that's still the case. Valentina Ficaio: Thank you, Karine. Yes, so the refinancing, you're correct. We are refinancing the hybrid. We are in progress of doing that. We are constantly in the market to understand when is the right moment to execute. But you should expect that to be happening. Operator: Your next question comes from the line of Andy Grobler with BNP Paribas. Andrew Grobler: Just one follow-up, if I may. Just on the dividend. You moved to the option of the scrip. What drove that decision? And to what extent is that part of the plan for getting to 1.5x leverage by the end of next year? Denis Machuel: Thanks, Andy. So let me put the overall perspective. The group has a very clear framework on capital allocation and a clear dividend policy. Every year, of course, depending upon the results, the annual performance, the Board evaluates all options within that framework and within dividend policy to provide what the Board believes as the best outcome for shareholders. And this year, the decision has been made to propose the choice between the payment in shares or payment in cash, which we believe is the right balance between our deleveraging priority on one side and also retaining cash for growth. So we also felt that this is an optionality that is financially attractive for our shareholders, for qualifying shareholders on the tax side. So I think it's a pretty good decision for shareholders. Now on the... Valentina Ficaio: On the leverage. Denis Machuel: The leverage, yes. Valentina Ficaio: As Denis mentioned, the scrip is an option, completely independent from the path that we've discussed to reach our 1.5. That path is based on performance, growth, operating leverage, the turnarounds that we're doing. The scrip is an option and it's independent from that. Operator: I will now turn the call back over to Denis Machuel, CEO, for closing remarks. Denis Machuel: Thank you very much, everyone. We really appreciate your presence today. So just to wrap up, I think our 2025 results make me very confident for the future. I must tell you that our teams are energized and they are focused on delivering performance. So yes, we still have a lot to do. But the momentum that we've created and which continues at the beginning of 2026, as we said, puts us in a very good place, in a very good place to deliver profitable growth moving forward and to delever. With that, thanks a lot for having been with us today, and speak to you next time. Have a great day. Thank you. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Welcome to the HSBC Holdings plc Investor and Analyst Presentation for the 2025 annual results. We will begin in 2 minutes. [Operator Instructions] Please note that it will not be possible to ask a question if you are joining via the webcast link on the HSBC website. Ladies and gentlemen, welcome to HSBC Holdings plc's 2025 annual results webinar for investors and analysts. For your information, today's webinar is being recorded. At this time, I will hand the call over to Georges Elhedery, Group CEO. Georges Elhedery: Welcome, everyone. Thank you for joining us. As we celebrate the year of the horse, [Foreign Language]. Our 2025 full year performance was strong. It was a year in which we performed, transformed, invested for growth. I will discuss our strong strategic progress today. First, the strong momentum in our 2025 performance. Second, the execution of our 3 strategic priorities where we are progressing at pace and with discipline. And third, the new growth and return targets we are setting out today for 2026, '27 and '28. So first, the full year earnings. My comments will exclude notable items and the comparisons will be year-on-year on a constant currency basis. In 2025, there were $6.7 billion of notable items. You are already aware of these from prior quarters. They are set out on appendix Slide 36. So first, we delivered strong earnings. Group revenues grew 5%. Profit before tax rose 7%, reaching a record $36.6 billion. Return on tangible equity was 17.2%. And we delivered 3% cost growth on a target basis in 2025, in line with our cost target. Second, we delivered strong growth. Our deposit balances grew 5% with deposit growth in each of our 4 businesses. Our deposit base is a core strength. It contributes the lion's share of our banking NII. We also grew fee and outcome. In Transaction Banking, it grew by 4%. Elevated market activity demonstrating the power of our deep international network, which gives access to 86% of world trade flows, alongside our product and service expertise. In Wealth, it grew by 24%, reflecting our leadership position in the world's fastest-growing wealth markets and continued investment in our products and proposition. And we are investing for strategic long-term growth. We completed the $13.7 billion privatization of Hang Seng Bank. This brings together to 255 years of history and heritage, combining global reach and local depth. It reflects our confidence and conviction in Hong Kong's future growth. And third, we delivered strong returns to our shareholders. We announced a full year ordinary dividend per share of $0.75, up 14% on 2024. Let's turn straight to the progress we are making on strategy execution. In October 2024, I set out a clear agenda to unlock HSBC's full potential. To do so, we now run the bank on 4 core complementary businesses, 2 home market businesses, U.K. and Hong Kong, and 2 international network businesses, Corporate and Institutional Banking and International Wealth and Premier Banking. Each business is growing. Each is generating above mid-teens return on tangible equity and each is building on a strong foundation for future growth. We are focused on 3 clear priorities, and we are moving at pace with each one, be simple and agile; two, drive customer centricity and three, deliver focused sustainable growth. Now let's look at each priority in turn and our progress. First, simple and agile. The first step in unlocking HSBC's full potential is reengineering to reduce complexity and cost. Structure and strategy are now aligned. Accountability is sharpened and roles deduplicated. In 2025, we reduced net managing director positions by circa 15%. We are taking $1.5 billion of annualized simplification saves straight to the bottom line with immaterial revenue impact. We expect to have taken action to deliver these saves by the first half of 2026, 6 months ahead of plan. We are also making positive progress with the reallocation of circa $1.5 billion from nonstrategic or low-returning businesses. The medium-term intent being to reallocate these costs to areas of competitive strength and generate accretive returns. In 2025, we announced 11 business or market exits. Completed and announced exits account for $0.7 billion in annualized cost savings with around $1 billion of associated revenue $0.6 billion remains an active execution, including those under strategic review. Then following the privatization of Hang Seng Bank, we are increasing reallocation costs to $1.8 billion, reflecting an additional $0.3 billion of reported basis cost synergies across HSBC and Hang Seng Bank. We will direct this $0.3 billion to growth opportunities in Hong Kong. We are also streamlining and upgrading our operating model by simplifying the bank at scale and retiring nonstrategic applications. And we are reengineering whilst focusing on resilience and risk management. Next, priority number two, drive customer centricity. Our 4 businesses are built on customer trust. Our investments to improve customer proposition and experience are yielding results. Net Promoter Scores have improved or remained top ranked in our home markets. In Hong Kong, we added 1.1 million new to bank customers. Taking the total number of customers to more than 7 million. Our U.K. business lending -- our U.K. business banking lending grew 13% year-on-year, excluding COVID loan runoff. In CIB, corporate surveys have positioned us as a market leader in trade, in payments and in foreign exchange. In IWPB, we attracted net new invested assets of $80 billion. Next, priority #3, investing to deliver focused, sustainable growth. Our Hong Kong home market is a dynamic economy, a top 3 global financial center and a thriving trade gateway. It is the super connector between Mainland China and the world. And it is set to become the world's leading cross-border wealth hub by 2029. The privatization of Hang Seng Bank enables us to scale capabilities and drive growth across both banks for all customers. We have the ambition, and we have comprehensive plans to deliver $0.9 billion of benefits through reported synergies and unlock of opportunities by 2028. It is an investment for growth. And if we move beyond Hong Kong and look at HSBC's other core strength, we are in Asia, Middle East powerhouse. Asia and the Middle East are increasingly central to global trade and capital flows. Global trade is being rewarded. Asia's growth is increasingly powered by intra-Asia demand. Asia is buying Asia. The Middle East is scaling as a global capital trade and investment hub. Its integration with Asia is accelerating. The Asia-Middle East corridor is becoming a defining access of global growth. Wealth creation across Asia and the Middle East is also structurally strong. That is why we are investing to consolidate our powerhouse position and capture these growth opportunities. We are also investing to connect the world, scaling our capabilities, building new capabilities and supporting customers secure commercial advantage from real-time services. Our customers are making real-time 24/7 payments across 35 markets. They're also using frictionless tokenized deposits and payments in 4 markets, including the U.K. with more to follow. And we are pioneering the future of finance. Last month, the U.K. Treasury selected HSBC's distributed ledger technology as its preferred platform for its U.K. Digital Gilt pilot. Next, our people and technology. We see innovation and culture that's core to our competitiveness, and we are investing in both. We are scaling AI adoption first, to empower our colleagues second for end-to-end process engineering and third, to enhance customer experience. Our customer relationships are built on trust. AI strengthens how we act on that trust, personalizing service at scale. The strong culture turns a clear strategy into results, and we are investing to nurture a high-performance culture. All our senior leaders and the broader managing director cohort have attended our new group-wide leadership training. Finally, let's turn to our new targets for 2026, '27 and '28. 2025 has been a year in which we have performed, transformed and invested for growth. This gives us the confidence to set out new growth targets. We will target revenues growing year-on-year every year, rising to 5% in 2028, excluding notable items. We will target return on tangible equity of 17% or better in each year from 2026 to 2028, excluding notable items and a dividend payout ratio of 50% for each year, excluding material notable items. To conclude, we are creating a simple, agile, growing bank built to generate high returns. We are executing our strategy with discipline and precision. We are delivering growth, we are investing for growth and we are confident we can navigate uncertainty from a position of strength. That is why we are confident in setting these new targets and in our ability to continue delivering for our shareholders. Let me now hand over to Pam. Thank you. Manveen Kaur: Thank you, Georges. Thank you, everyone, for joining. We have had another strong quarter, which reflects the positive progress we are making towards creating a simple, more agile growing HSBC. We are investing for growth. Throughout this presentation, I will exclude notable items and focus on the fourth quarter numbers compared to the same period last year on a constant currency basis. Let's turn straight to the highlights. In the fourth quarter, revenues grew 6% and to $17.7 billion. This was driven by broad-based growth in banking NII and fee and other income. Profit before tax was $8.6 billion, up 17%. Our customer deposit balances stand at $1.8 trillion, an increase of $78 billion when we include held-for-sale balances. Full year return on tangible equity was 17.2%, achieving our mid-teens or better target. In 2025, we maintained tight cost discipline, managing target basis cost growth to 3%, in line with our cost growth target. Turning to capital and distributions. Our CET1 capital ratio was 14.9%, up 40 basis points in the quarter, reflecting our organic capitalization and expectation not to initiate any further buybacks for up to 3 quarters following October's announcement of our intention to privatize Hang Seng Bank. As Georges said, this strong performance allows us to announce ordinary dividends for the year of $0.75 per share, an increase of $0.04 on the prior year. Turning to our business segment performance. We grew full year revenue by 5% to $71 billion. Each of our 4 businesses grew revenues. Each grew deposits, deepening customer relationships. Each returned a mid-teens or better return on tangible equity, excluding notable items. We are pleased to be making such positive progress firm-wide. Moving next to our privatization of Hang Seng Bank. On 9th October, we announced our intention to privatize Hang Seng Bank. We are pleased to have completed on 26th January, sooner than our initial expectation of the first half of 2026. This slide explains the financial rationale. Let's walk through it, starting with a $13.7 billion purchase price. The removal of the $3.8 billion minority capital inefficiency takes you to the $9.9 billion of common equity Tier 1 consumption. The removal of the capital inefficiency is around 1/4 of the purchase price. The $9.9 billion CET1 consumption is equivalent to buying back 4% of group shares at the point of announcement. Next, we show the $0.8 billion minority interest in the P&L and the $0.5 billion of pretax synergies from the privatization. Together, the minority interest and the synergies contribute more than 4% to our profit, beating the buyback threshold. On top of this, we see potential, further revenue and cost upside of $0.4 billion enabled by the privatization. Then on the right of the slide, we see good growth in Hong Kong in the years ahead. Having 2 fully owned banks positions us well to capture this growth. As we said in October, we are acquiring a business with structurally high pre-impairment margins. And while we are not calling the credit cycle, we believe it is a cycle. Let's now turn to banking NII. Our full year banking NII was $44.1 billion. In the fourth quarter, banking NII of $11.7 billion grew $0.7 billion. $0.4 billion of this growth was in Hong Kong, including the recovery of HIBOR during the quarter. Banking NII in the fourth quarter included a positive benefit of around $100 million for items that we do not expect to repeat. We expect full year 2026 banking NII of at least $45 billion with the impact of expected lower rates more than offset by deposit growth and the tailwind from our structural hedge. Next, to wholesale transaction banking. This year has really validated the strength of our franchise in a range of economic market and tariff situations. We have deepened customer relationships, and our global network has helped our customers navigate volatility and uncertainty. In the quarter, security services grew fee and other income 6%, reflecting higher market valuations and new mandates. Payments grew 3%, driven by new mandates and payment volumes. In particular, international payments. Foreign exchange increased by 1%, reflecting strong client flows and higher levels of volatility. This was a good performance given the strong prior year comparison. Trade was down 5% in the quarter, but it was stable over the full year. I would note the first half was particularly strong, given advanced ordering as we supported clients to navigate a fast-changing landscape. We continue to see growth in volumes, and strong client engagement. Let's now turn to Wealth, including the new disclosures we are setting out today. We are very pleased with the 20% year-on-year fee and other income growth to $2.1 billion. And we are very encouraged that this was driven by all 4 income areas, which shows the sharpening of our strategy is working. Asset Management grew 14% and Private Banking grew 8%. Investment Distribution also performed well, up 14%, reflecting strength in our customer franchise in Hong Kong. Our Insurance CSM balance was $14.6 billion, up 21% versus the prior year. We continue to attract net new invested assets with $7 billion in the fourth quarter. Today, we are giving you new disclosures, which you will see through on this slide. These better show the strength of our relationship with our customers, including both their deposits and invested assets. We are focused on capturing the full wealth opportunity, and we will now report Wealth balances and net new money. I appreciate that the Wealth balance figure is similar to the invested assets. But I would highlight two changes to note. You will see these set out on Appendix Slides 31, 32 and 33. We have added $608 billion of Premier and Private Bank deposits to the invested assets. That is offset by taking out $580 billion of asset management, third-party distribution assets. This is a good business, but it does not reflect our wealth customers. Adjusting our disclosure in this way also means our Wealth business is more easily comparable to the broader peer group. These new disclosures will replace the existing ones from the first quarter of 2026. We saw net new money in the quarter of $26 billion, of which $19 billion was in Asia. And Wealth is not just a Hong Kong story. It runs across our Asia and Middle East franchise with double-digit invested asset growth in Singapore, Mainland China, India and the UAE. Next to credit. Our ECL charge this quarter was $0.9 billion. There was no material impact from Hong Kong commercial real estate in the quarter. On Slide 29, you will see we have updated the commercial real estate disclosures. Movements in the fourth quarter were in line with our expectations. of a full year 2026 ECL guidance is around 40 basis points. This is at the higher end of our typical range, reflecting the economic outlook and remaining pressures in parts of retail and office commercial real estate in Hong Kong. Let's now turn to costs. We delivered 3% target basis cost growth in the full year, hitting our cost goals while making the space to invest in the bank was a key theme of 2025. It will be again in 2026. We have taken actions to realize $1.2 billion of annualized simplification savings with immaterial revenue impact. This is ahead of our original time line of $1 billion by the year-end 2025. On a realized basis, we have taken $0.6 billion of the simplication saves into the full year 2025 P&L. Together with ongoing discipline, this allows us to guide for 1% cost growth on a target basis for 2026 while reinvesting in the business. Next, to customer deposits and loans. We had another strong quarter with deposit growth of $50 billion. We saw good growth in each of our 4 businesses. Loans increased by $5 billion. The U.K. was again the standout with another quarter of growth in mortgages and commercial lending. Our U.K. business is well positioned to support growth in the U.K. economy. We are particularly pleased with the momentum in our commercial loan book where we see significant potential, particularly in infrastructure, innovation, social housing and mid-market direct lending. Now turning to capital. Our CET1 ratio is up strongly to 14.9%, primarily reflecting good organic capital generation. Although after the balance sheet date, I draw your attention to the impact of the Hang Seng Bank privatization which is 110 basis points in addition to the 10 basis points already incurred in the fourth quarter. We have set this out in the appendix Slide 27. As a reminder, we said when announcing the offer on 9th October that we expected to suspend buybacks for up to the next 3 quarters. That is, of course, dependent on underlying capital generation. With strong profitability and current modest loan growth we remain highly capital generative. A decision on future share buybacks will be taken quarterly, subject to a non-buyback considerations. Let's next turn to the full year defaults. Excluding notable items, and at constant currency, revenues grew 5% to $71 billion. Profit before tax was $36.6 billion, up 7% year-on-year to a record high. Return on tangible equity was 17.2%, achieving our mid-teens or better target. Our strong performance allows us to announce ordinary dividends for the year of $0.75 per share or $12.9 billion. Let's briefly return to the new targets Georges set out earlier before I close on guidance. We made clear and positive progress in 2025. That is why we are now raising our ambition to target 17% return on tangible equity or better, excluding notable items in each year from 2026 to 2028. We will also target year-on-year revenue growth in each year over the period, rising to 5% in 2028 compared to 2027, excluding notable items. And as you would expect, we maintain our discipline of a 50% dividend payout ratio, excluding material notable items and related impacts. Finally, to guidance. This slide gives you our guidance mainly for 2026. We saw revenue momentum continue in January, including in Wealth. On the slide, you see banking NII of at least $45 billion. Our revenue ambitions for our Wealth business are contained within our revenue target. We have, therefore, removed grow fee and other income at a double-digit percentage CAGR from our guidance. We see an ECL charge of around 40 basis points, broadly stable on 2025. We expect to constrain cost growth to 1% on a target basis. This benefits from our organizational simplification and allows us to continue to invest in the business. There is no change to our CET1 target range of 14% to 14.5%. In 2026, we will deliver the $1.5 billion of savings from the reorganization. We are well on track with the $1.5 billion of reallocation costs which will be redirected towards priority growth areas. We are now adding the expected $0.3 billion of Hang Seng Bank cost synergies to the original $1.5 billion of reallocation costs, taking this to circa $1.8 billion. On Hang Seng Bank specifically, we see $0.5 billion of revenue and cost synergies to be achieved by year-end 2028 as well as an additional $0.4 billion of potential further upside enabled by the privatization. To achieve this $0.9 billion, we will incur a restructuring charge of $0.6 billion from the Hang Seng privatization which will be a material notable item. To close, as I said to you last year, I am fully focused on discipline, performance and delivery. Discipline means prioritizing with precision, maintaining strong cost control and ensuring investment rigor for growth. Performance means gearing our financial strategy towards achieving our new returns target. Delivery means ensuring we remain agile and resilient, enhance operating leverage and are always well positioned to support our customers. This is exactly how we will continue to run the bank. With that, we are happy to take your questions. Alastair? Alastair Ryan: Thank you, Georges. We'll take any questions from the room here in Hong Kong first. If I can ask you to introduce you to your company, and there's been the hard part, constrain yourself to two questions each, please. That goes for people on Zoom as well as people in the room. Anyone would like to ask a first question here? Yes, we'll take a question from Nick. Nicholas Lord: It's Nick Lord from Morgan Stanley. I'll put it in one question in two parts, if that's okay. I'm just interested in your revenue target by 2028 of achieving 5% revenue growth. And I just wonder if you could talk about some of the components of how you would get there. Presumably, Wealth is part of that. And so maybe you could talk about the Wealth trajectory and how sustainable that is. Presumably, at some stage, we're going to see sort of a kick in of sort of the development of markets in Asia, and that market's business can grow more. So I wonder if you could talk a little bit about how you want to grow that markets business in Asia. Georges Elhedery: Thank you, Nick, for the question. I'm going to share some high-level comments as we are looking at the growth opportunities, and Pam can take you through the various components. The first thing is we have delivered growth in 2025. And we have delivered growth, as we mentioned, across all our businesses and all our key metrics, including deposits, loans, including fee income and Transaction Banking and Wealth and this is reflected in our revenues growing at 5%, 2025. The second item to call out is if you look at our footprint. We're actually basically aligned to the strong structural growth opportunities. Hong Kong, we've called it out, and we are basically consolidating our leadership position to capture these growth opportunities with the privatization of Hang Seng among other. Asia and Middle East, structural growth opportunities in Wealth, but also Asia and Middle East hitting record volumes and shipments for trade, Asia is buying Asia and we are -- our footprint allows us to capture these growth opportunities. The U.K., we've seen the strongest loan growth in 2025, and we have indicators to believe that there is a possibility for this trend to carry on. This is the strongest loan growth we've seen in the U.K. for many years, but it's also the strongest store growth we've seen across all our businesses that we have seen in the U.K. And then the last thing I would put, we are investing for all these growth opportunities. We're putting now investment from within our cost base. We're putting investment from the additional costs we are taking in 2026. And we will be putting even further investments from the reallocation of the $1.8 billion as we free up these costs back into those core areas where we can grow. And this is what's giving us this confidence to give you the growth targets of revenue growing year-on-year every year rising to 5% in 2028. Pam? Manveen Kaur: Thanks, Georges. So firstly, in 2026, we expect broad-based growth in revenue across all our businesses, but just unbundling a little. In banking NII, as we have said, we expect a low single-digit growth fundamentally driven through deposits. Yes, there are pockets of growth in loans, but so far, we've just seen in the U.K. market. Overall, we expect that growth in Wealth and Transaction Banking and our fee-generating businesses will continue to be very positive. As we go beyond '26, we do expect balance sheet growth should again in Asia and other markets, not just in the U.K. Of course, we are seeing growth in the U.S. already, but we are not a big player in the U.S. market, domestic growth. And we are continuing to invest in our fee businesses and our investment plans are multiyear plans. So it's not just for growth for 1 year. It's a very strong building block for growth through the period we have called out and beyond. Particularly in markets like Hong Kong, in the U.K. and other key markets for us in Asia and the Middle East. Alastair Ryan: Thank you, Nick. Thank you. Any further questions in Hong Kong. We'll go straight to Zoom. The first question on the Zoom then, please, is with Joe Dickerson at Jefferies. Actually I've announced yourself, Joe. Joseph Dickerson: Good set of results, guys. Just a quick question on the costs. If you look at the 2026 number that you've given the kind of 1% growth. I know you've got your recycling how do you think about when you peel that back and what's the metabolic rate of growth in costs, particularly coming from investments because you clearly have some global peers who have accelerated their investments around AI. So I was just curious how you think about that. And then secondly, a nitpicky question, but what rate of HIBOR have you assumed in the banking NII guide of greater than $45 billion? Georges Elhedery: Okay. Thank you very much, Joe, for your questions. On let me make some high-level considerations how we look at costs, and I'll ask Pam to comment then on cost and then on hypo rates. And I shared a bit earlier, but I want to emphasize, first, within our workspace, there's a proportion set aside for investments for change the bank, investments, digital capabilities, additional people, hires, relationship managers, wealth advisory, et cetera, of course, generative AI efficiencies. That's within our cost base. Second, the fact that we're adding costs adjusted for these savings, half of that additional cost will go towards payroll inflation, but the other half will go towards additional investments. And then third, the recycling of those $1.8 billion, which is commensurate to about 5%, 6% of our cost base will go back into those areas of investment for growth. So we believe we have ample capacity to invest and deliver the growth that we are setting ourselves, setting targets to deliver against. Then the next thing I would say about cost is that it's important, Joe, to -- we are committed to cost discipline, we are confident in our ability to deliver cost discipline. And as you've seen for our 2025 results, we have met our cost target. So I think that's an important guide also as you look at our cost guidance for 2026. Pam? Manveen Kaur: Thank you, Georges. So firstly, I would note that we are ahead on our simplification saves because the plan and the actions we have taken have come through sooner than what we had originally outlined. This gives us incremental saves of $700 million in full year '26. So that has been a consideration in the overall 1% cost growth envelope. And as Georges said, as we have divestments happening, we are continuously redeploying those -- reallocating those costs to our priority growth areas. What's really important for us is that our investment rigor is focused on our strategic priorities. That's what we've done in 2025. That's what we will do going forward. And these are committed plans, which are multiyear plans. They don't go back and forth every year. So that's all part of the overall cost envelope guidance we have given for this year. And again, we're only giving guidance for this year only, but we expect to maintain a cost rigor on a continuous basis. In terms of assumptions, we have used the end January forward rate curve for our banking NII guidance for all major currencies. So in terms of HIBOR just to note a couple of points. Our HIBOR volatility that we saw in Q2 and Q3 when HIBOR is at 1% has an impact of about $100 million on banking NII. The moment HIBOR sort of stabilizes as it did in Q4 and indeed this year, although it has fluctuated a little bit around the 2.5% mark, that is captured in our guidance. And we look at a few plausible downside scenarios as well before we give a full guidance. Alastair Ryan: Thank you. Our next question on the Zoom is from Ben Toms at RBC. Benjamin Toms: Firstly, on your RoTE guidance of greater than 17%. I'm just looking for some commentary about how sustainable you feel that guidance is beyond the announced planning horizon. So how much do you feel this guidance isn't all weather guidance post all the investments that you've been making into the business? And then secondly, on the Hang Seng synergies on Slide 13, can you mind just talking a little bit around why you've adopted 2 buckets that you've labeled synergies and upside. Is the upside bucket basically where there's a lower degree of certainty over the synergies? So what type of synergies fall into each bucket would be useful. And presumably, there's no incremental restructuring costs associated with the upside bucket on top of the $0.6 billion. Georges Elhedery: Thank you very much, Ben. On the Hang Seng guidance, what I will share is we do have the management ambition, and we do have comprehensive sets of plans to achieve the full $0.9 billion upside with the restructuring costs that we've called out. I'll let Pam give you the details. On the RoTE guidance, we are not guiding beyond our horizon, but you should always assume that we are ambitious. Pam? Manveen Kaur: Thank you, Georges. And just to say on our RoTE guidance, we continue to see a positive momentum in our businesses. And as we said earlier, we are investing for growth. But of course, the targets are only for 3 years. So in terms of the Hang Seng synergies, you're quite right, the $500 million is what I would call the reported synergies following accounting rules. The $400 million synergies are depending to some extent of markets and customer behavior. So there is some degree of uncertainty, and they don't strictly fall between what is considered to be accounting reported synergies. So that's the reason why they're too separate. Both these synergies, the plan to get that $900 million benefit is by the end of '28. And the restructuring cost of $600 million covers the benefits across both buckets. And now beyond that, we actually believe, as it says on the slide that at some stage, the credit cycle will be normalized. So there will be some benefit coming from there. There will be more growth in lending as well as overall Hong Kong growth, which we will continue to be very well positioned for because of the redeployment of the cost allocation that we have, there will be a fair chunk that obviously goes into Hong Kong, which is a core market on our strategy. Alastair Ryan: Yes, we have a question in the room next, Melissa. Sorry, you're allowed to introduce yourself fully. Melissa Kuang: I'm Melissa from Goldman Sachs. Just two questions. In terms of the strategy that you have, the rising to 5% revenue growth. Just wanted to see if you can give about CAGR growth instead. So we can understand the pathway there. In terms of that, I suppose, will it be coming largely from the nonbanking NII portion? Or will it be from the banking and NII? So that's my first question. On the second question, perhaps on the restructuring cost at HSP of $0.6 billion. Can you just give a little flavor about what is it that we are doing in terms of the restructuring that we need such a cost focusing on in terms of delivery and then how we will see the revenue synergies. And in terms of the revenue synergies can it be as quick as next year? Or will it be more heavy into 2028 as per your 3-year guidance rising to 5%? Georges Elhedery: Thank you very much, Melissa, and Pam can address both questions. Manveen Kaur: Thank you, Georges. So firstly, we've said that revenue growth is positive each year, but it's also progressive and reaching out to 5% by '27 to '28. In terms of the underlying building blocks we said to you that in 2026, where we have given the guidance on banking NII, it's a low single digit. So therefore, similar to the prior year, we will see more positive growth momentum on the fee-generating businesses. And beyond 2026, Banking NII, of course, we look and see where the guidance is, where it is, where the rates are and what's the timing of the rate cuts as we go into '26, but we are continuing to invest in our fee-generating businesses so we see that momentum in those businesses, including Wealth, which really underpins this revenue growth and wholesale transaction banking to continue. And I'm hoping that at some stage, we'll see a little bit more of growth on the balance sheet in terms of lending beyond U.K. that we have already seen. Now in terms of the restructuring costs. There are a couple of elements that drive it. One is there's some organizational alignment. So there will be some roles, which will evolve and teams that will be realigned, but a large chunk of this is really in terms of technology. So the investment in technology so that we can better harmonize our technology and better get results from the technology investment we have across both the Green and the Red brand. And this is really quite critical for us in order to achieve the overall ambition of the $900 million because it's the $900 million ambition just to reiterate, it's not just a cost story. It's a revenue and a cost story, and this is an investment for growth, and that's how we look at it. And we plan to spend restructuring costs of $600 million across the 3 years. And of course, this will be spread through these 3 years, we are not saying any more. In terms of revenue synergies, we strongly believe that by the privatization of Hang Seng Bank, our ability to be able to provide a broader product proposition into the Green band is highly enhanced. So we'll have better Wealth products for our retail customers. We have capital markets and broader wholesale transaction banking products for the wholesale customers, but more importantly, we will be able to have access for the same international network that we have for the Red brand also within the Green brand. And last but not least, we will have more balance sheet flexibility in terms of how we leverage our treasury capabilities, but also in terms of upstreaming and downstream capital, and this will all be done over the next 3 years. Alastair Ryan: Thank you. We'll go back to the Zoom. The next question will be from Aman Rakkar at Barclays. Aman Rakkar: I had two questions, please. So one is around capital. It looks like a decent chance that you'll be within your target CET1 range in Q1 based on historical and perhaps projected capital generation kind of estimates. Obviously, it raises the prospect as to whether you might be able to reintroduce buyback earlier than planned. I don't know if you're able to kind of comment on whether that's a realistic or plausible scenario. But I guess more specifically, just interested in the capital allocation thought process from here? Clearly, your stock is trading at a level now where the return on investment around buyback might be beaten by alternative uses of uses of capital. Obviously, you did it with Hang Seng, but should we be thinking about inorganic growth as well as the compelling organic growth within your footprint? And then I just wanted to ask around banking NII, please. Clearly, that kind of Q4 jumping off point is flattered by $100 million. I don't know if there's anything else that you direct us to kind of strip out of that number in terms of deposit catch-up or the impact of HIBOR. And I was particularly interested in what your deposit growth assumption is that sits behind the guidance you've given '26, please, because I think that could be a sensitivity around the ultimate outturn of banking NII in '26. Georges Elhedery: Thank you, Aman. Pam is best placed to answer both, but I want to share a few thoughts about our philosophy on capital. First, we remain capital-generative as you've seen from our targets, but also as we've experienced over the first 1.5 months in the year in 2026. So we're very pleased to see that our capital generation is strong. But our first priority is now restoring the CET1 ratio following the privatization of Hang Seng, which we estimated to take us 3 quarters. But of course, we do that assessment quarter-by-quarter. But I don't want to point out to the increased dividend we are paying this year, $0.75, $0.45 on the fourth quarter, which is on a full year basis, 14% higher than last year. So we are distributing through dividends. What I wanted to share about the discipline how we use capital, we've shared it in February 2025 Aman, we've set ourselves 4 key criteria. They are a high bar, and we strictly adhere to them in the way we look at inorganic opportunities. In so far, that these 4 criteria are met like in the case of Hang Seng privatization, then we will consider inorganic. But if one of these criteria is defeated, then our preference will be to utilize or return any excess capital back to our shareholders in the form of share buyback. Pam? Manveen Kaur: Thank you, Georges, and thank you, Aman, for your questions. So firstly, as Georges said, we continue to remain highly capital generative. We've had a good start to the year, as I called out earlier in my remarks. But as you know, we look at our share buyback decisions on a quarterly basis, and that will be a quarterly process. The starting point is clearly our target operating range, which we are working hard so that we can replenish capital that has been deployed in the Hang Seng Bank privatization. That's the first priority, as Georges said, and that CET1 operating range remains 14% to 14.5%. That's the one which underpins all the targets and guidance we have given today. Just to clarify, in terms of our priorities from there on, of course, the priorities are 50% is the dividend payout ratio, which we have again reaffirmed. We would like to see balance sheet growth, and we want to invest for growth. That's if we can have growth at the right return levels. Our distribution priorities hence have not changed, and share buyback remains for us a useful tool to deploy surplus capital irrespective of where the share price is. So I think that's an important consideration for us going forward. Next question. On banking NII, you're right, there was a $100 million non-repeat items. So if you take that out for modeling purposes, you come to $11.6 billion. There are no other one-offs. There was a higher HIBOR quarter-on-quarter, and HIBOR also stabilized. And that's why, as you remember, third quarter when we gave a more cautious outlook because we don't know where HIBOR would be. But having seen HIBOR stabilize, it gave us the upbeat on our banking NII results. We also saw low betas on saving accounts in Hong Kong. And very importantly, we saw strong deposit growth, and we do expect this strong deposit growth to continue to be a key driver in 2026 along with the tailwinds of the structural hedge similar to last year and redeployment at higher rates. The only thing to bear in mind is that for this year, clearly, in Q1, given that there will be 2 days less there will be a headwind of $300 million in Q1. We have assumed, obviously, the rate changes, both that we've seen to date as well as projected for the year. But a lot depends on, as you can imagine, the timing of those rate changes, particularly in the U.S. dollar and sterling. Alastair Ryan: So we'll take the next question back on Zoom, Amit Goel at Mediobanca. Amit Goel: So two for me. The first one, just coming back on the upgraded RoTE targets. the 17% plus. I just want to check in terms of how you're thinking about that on a kind of year-on-year-on-year basis for '27 and '28. I mean are you thinking that RoTE kind of continues to improve? Or are you thinking more 17% is kind of a very acceptable and a good level and so any additional upside you would look to reinvest? And within that, I kind of note that on the LTIP, you've kind of brought up the lower end of the kind of the boundary performance to, I think, to 16.5% from 14%, but the 18% of the top end hasn't changed. So I appreciate that's done by the compensation committee. But I'm just kind of curious how you're thinking about what appropriate or sustainable level of return is. And then secondly, again, just coming back, maybe more clarification on the Hang Seng Bank kind of benefit and restructuring charge. So I mean, I guess, I was curious, really, for a bit more detail on the $0.4 billion of additional benefit, I guess, from an accounting standpoint, can't be treated as a synergy what exactly that is? And within the restructuring charge, I think previously you said that there's actually going to be more of a less staff, natural -- there will be more natural attrition and redeployment. So there'd be very limited kind of day kind of costs. So I'm just curious what you're spending that money on? Georges Elhedery: Perfect. Thank you, Amit, very much for your two questions. Pam can address them, but just to talk about LTIP briefly. This is indeed the remuneration committee consideration. It reflects the performance that we will achieve in '26, '27, '28, which aligns to the guidance we're giving you. So there isn't more we can say at this stage. Apart from that, it is more ambitious and reflects our ambition to the business. Manveen Kaur: Thank you, Jordan. Thank you for your question. So firstly, yes, we have ambitions and our target is 17% plus each year. We are not giving a trajectory, whether it's the same or progressive but of course, we continue to grow our business and invest in it diligently, but the target is just 17% plus each year. In terms of our -- the Hang Seng, firstly to call out, these are both benefits we are getting from a cost perspective but also a revenue perspective. So classically, what you would see in terms of cost synergies and all the restructuring is actually severance costs, that is not the case here. Because there is so much focus on revenue as well, a lot of the restructuring will be in terms of investment from a technology perspective. The cost synergies themselves, of course, there will be some realignment and evolution of roles and individual areas. It's not something which is going to lead to severance or staff reductions. There could be some rule changes, clearly. There will be some scale in product manufacturing and there'll be some technology harmonization. Now when we think in terms of the 2 bits with the $500 million, the $400 million and why it so, clearly, from a cost synergies perspective, it's easier to call out. Revenue synergies, there are greater haircuts, but we do have very detailed comprehensive plans on how we are going to drive these revenue synergies. And those plans underpin the $400 million even though they were a haircut in the $500 million and just in total, to reiterate because there are lots of numbers going around. I appreciate that. Think of it as a $900 million benefit in those 2 buckets with different degrees of accounting rules and different probability of expectations and then an overall restructuring cost of $600 million to achieve that total. Georges Elhedery: And Amit, we are a net investor in people in Hong Kong. We are also investing in technology in Hong Kong to capture all these growth opportunities we have been talking about. Therefore, we do not expect, anticipate or plan any program of redundancies. We do, though, expect that some roles may need to evolve, and we are basically committing to training, reskilling to make sure that our own colleagues have these growth opportunities, career opportunities to be able to capture these roles in which we will be investing over the duration of our program of 3 years. Manveen Kaur: That's a meaningful number that we have already included in that $600 million restructuring costs for training and reskilling of our colleagues as their roles change and evolve. Alastair Ryan: Thank you. Will stay on the Zoom with Kian Abouhossein from JPMorgan. Kian? Kian Abouhossein: First of all, Georges, congratulations. I have to say you really driving the bank to a better process and discipline. We haven't seen in HSBC before, if I may say so. To the questions, tech stack, can you go a little bit more into detail? You gave a number in 2022 that you're spending about 20% on IT as a percentage of expenses. Wondering if we should think about similar ballpark. Within that, can you go a little bit under the hood and discuss where are you on cloud transmission are you done? Where are we on platforms? Are you done? Or what platforms still have to be produced new or integrated data management? So I really want to understand a little bit what you're doing on the tech side. And then CRE, this is still an area where I'm a little bit uncomfortable. Stage 3, CRE China 18% coverage, 16% on Hong Kong -- 14% sorry, on Hong Kong, stage 3. Can you talk a little bit where you want to drive that to? And clearly, I heard Pam's remarks about provisions and CRE was mentioned. Georges Elhedery: Perfect. Thank you, Kian, for your two questions and for your feedback. I'm going to take your tech question. Pam will cover the Hong Kong CRE. And I think it's a very important question. Thank you for asking it. We're indeed driving both performance and transformation with discipline, with precision, and we are doing it at pace. And we're very glad to see that the results of both performing, growing and transforming is delivering at pace, as you've seen in our 2024 numbers. So in terms of tech, you could broadly assume that 20% is the cost that we are spending on technology. But the way we're talking technology now is, number one, we are thinking about all those legacy or nonstrategic applications, which are consumers of run-the-bank costs, consumers of maintenance costs, patching costs, license fees that we are going to very proactively demise at scale. And we're very pleased to be able to say that we've demised more than 1,100 applications this year -- well, in 2025, this is more than 1/3 of the about 3,000 applications that we have deemed nonstrategic and looking to demise. Just to give you a perspective, we run about 10,000 applications, 9,000 actually, of which 3,000 are flagged to demise over the horizon between now and 2028, and we're moving at pace for that. Now that demise will allow us to free up investment capacity to put it in new technology and new capabilities in tech space. Cloud transformation, I think we are quite mature on cloud. I think we've moved from a cloud-first strategy where we moved many of our applications to cloud to now a more mature and therefore, more sophisticated approach to cloud by looking at optimization of hosting of applications. And therefore, we would look at any new applications or our existing stack, where it is better at. If it is on cloud where the majority is, then it will be on cloud, and then we will look at portability capabilities and resilience capabilities. And if it is on-premise, then or in the private cloud, then we will look at that. So I think we have matured our cloud approach, and we're already in a place where we want to be, but of course, we'll continuously evolve it. If you ask me where is the biggest investment going into the new technology today, it is definitely going into generative AI. I want to just take a minute to explain how we're thinking about generative AI because that's quite important. We're looking at generative AI in 3 work streams. They're on the Slide 8 of the pack. The first work stream is we're making generative AI available to all our colleagues in time, 85% mostly now enabled to make sure that we are helping our colleagues upgrade themselves and become future-ready. The first thinking is how can we bring our whole colleague population with us in becoming future-ready, generative AI enabled. They will have generative AI tools that they can use. They will have coding assistance or vibe coding assistance for those among our engineers, 31,000 already enabled, and we are seeing immediate productivity gains. We're seeing 60% speeding up in our unit testing. We're seeing 5x faster patching of code, patching of vulnerabilities and code, thanks to all these capabilities. This is our first mission. All our colleagues to benefit, to be trained, to be upskilled, to become future-ready, better version of themselves, more productive, better outcome for our customers. The second work stream in generative AI is fundamental reengineering of our processes end-to-end. 50 of those processes are already under review. Some of them have already delivered and finished, such as onboarding and KYC, but all sorts of processes, including fraud detection and prevention, credit applications, capital allocations and what have you data -- visas and what have you to allow generative AI to help us redesign the process in a much simpler way and also allow gen AI to be integrated in the process to process data in a much more efficient way. The result of which is a more productive bank, more efficient bank and a safer bank with stronger controls, and more importantly, a very simple bank that will be able to ultimately deliver to our customers closer to near real time or real time at the highest possible standard that's available for us. And that is an ongoing journey. The third work stream we're taking in generative AI is how we enhance customer experience at the customer touch points. So this is our relationship managers, wealth advisers, contact center operators. As they engage with customers, generative AI tools already rolled out, as you can see on the slide, will allow them to personalize at scale, to tailor-make, to customize at scale at the highest possible standards for our customers close to real time in a way that can allow us to deliver our capabilities to customers in a much more seamless, faster, better way. Customer experience will be materially enhanced. Now today, we will have operators using this generative AI at the service of our customers, but you can envisage that in a few years' time, we could possibly put these generative AI tools straight for utilization by our customers. Those are the 3 work streams. What I want to say though is that we're doing this with safety and security at the forefront. We're doing this in a way that we can review, monitor and audit everything we're doing in the space as a critical standard, and we're doing this in a way to keep control, resilience and human accountability always there because we are a regulated industry and our customers' trust is the most important asset, and we will do everything to make sure customers trust is always protected and nurtured. Thank you for that question. I'll hand over to Pam on Hong Kong. Manveen Kaur: Thank you, Kian. So just looking overall in our guidance, around 40 basis points guidance for 2026 considers all our portfolios. And of course, Hong Kong commercial real estate as well as the very small residual amount of China commercial real estate, and we look at a range of plausible downside scenarios before we give you this guidance. So just unbundling a bit. The China commercial real estate portfolio has really come down. It's now less than $1.5 billion, and our ECLs this year for this was below $200 million. So in that context, the names that have left that portfolio that's left, we feel much better about it compared to where the other portfolio was when we first started with it. Now when you think in terms of Hong Kong commercial real estate, firstly, I'm going to give you a bit of an update on the 3 segments within this Hong Kong commercial real estate portfolio and then how we look at the names, particularly the credit impaired names. Now the first one, we've been calling it for a year, and now I'm very pleased to say that the residential component of Hong Kong commercial real estate is near normalized. And I say that because whether I look at in terms of price increases, HPI has been up 5% year-on-year in 2025. But more importantly, we've seen a 10% growth and also sales volume. Rentals have already stabilized both in terms of the rental demand as well as the rental pricing. Now when we look at retail and the office space, of course, there are pockets of distress in it. But just as a broader context, we saw retail sales also in Hong Kong in May turn into positive. And they are now up year-on-year at 6.6%. But of course, this alone is not going to solve the problems of the retail sector because peoples retail shopping patterns have changed. They don't necessarily need to go to shops on malls, et cetera. Having said that, as there is more consumption in Hong Kong, we are seeing this shift from shopping places being changed into more food and beverage and so on, but there will be pockets of stress in it, and that will be coming from mainly oversupply at this point of time. Now office is the sector we are watching very carefully, because recently, we have seen both in terms of rental demand and in transactions for the best properties with the best spec in central in the best areas, there are some green shoots. But the downside is, at this point of time, vacancy rates starts are still around 17%. So that's what we will be managing through and following up very, very carefully. Having said that, in Hong Kong, we are not a distressed seller. It's a market we are deeply embedded in. We really understand well. But we are very resilient in terms of how we do our valuations. So we go and look at valuations, including distressed valuations. And we look at with our collateral position, and we stay well collateralized. And we've been following through this very closely over the last couple of years. The one metric, which I personally follow, though my job has changed now, is what happens to credit impaired names. And the exposure that you need to focus on is credit impaired names, which have an LTV over 70%. Now this number has grown and it now stands at $1.9 billion. But the ECLs against it have also grown, and they have grown to around $900 million. And if you go back quarter-on-quarter, that differential between the ECL number and the exposure sits around $1 billion number. So that's where you think your risk is. And of course, you have to see if some of the substandard names don't fall down and so on. So overall, I would say, given what we are seeing and particularly to notice that in this quarter, we had a stage 3 against one name, but the macro environment in Hong Kong was positive. And as a consequence, through IFRS 9 calculation, those 2 almost offset each other. So in that broader picture, we feel very comfortable with the 40 basis point guidance. Alastair Ryan: We will take Rob Noble at Deutsche Numis next. Robert Noble: Just on net -- sorry, noninterest income in 2026, what are the negatives in noninterest income for next year? So if you were to grow the same level, which was, I think, the low teens in 2025, you would blow through 5% revenue growth in '26, let alone in 2028. So why aren't you -- why are we much more positive on revenues than you're kind of sat now? And then secondly, just on Hang Seng, what's the difference in the local capital requirements in Hong Kong and the U.K.? Does the transaction change anything in terms of minimum group regulatory requirements and how we manage capital through the group? Georges Elhedery: Okay. Rob, thank you very much. Let me address your first question, and Pam may add to it and address definitely the Hang Seng capital question. So the 90% or more of our noninterest income, and therefore, our fee or other income is driven by transaction banking and Wealth. So looking at the dynamic in these 2 will give you a good perspective of how our non-NII is evolving. Transaction banking, we've reported full year growth of 4% year-on-year. We are seeing continued momentum in this space. We are a leader in practically all the aspects of transaction banking that we prosecute with our clients. We've been voted by 30,000 of businesses as the leader in payments, both in products, services and technology. We've been 9 years consecutively a leader in trade. We've been voted by corporates using foreign exchange as the leader in servicing them with foreign exchange. We continue investing in this space. We continue expecting resilience in this space, in particular in trade. And I can talk more to trade if desired. As you look at Wealth, Wealth remain unequivocally one of the strongest growth opportunities, in particular, one, given our footprint, where we are focusing on Asia and the Middle East and the underlying growth in Asia and the Middle East of Wealth is very strong and our ability to capture more market share is very strong. We're already a leader in Wealth in Asia, if you look at Wealth balances. And that's an area where we can benefit from this underlying structural growth opportunity. And second, Wealth because we are also accelerating our investments in this space. You've seen we've launched 26 or 27 wealth centers in 2025, taking the total to 64. We're hiring relationship managers, wealth advisers. We're empowering ourselves with generative AI wealth capabilities. We're building technology. We're creating a comprehensive set of products, and we continue investing in this space. So we do believe they remain -- Wealth remains a very strong growth opportunity, albeit we have dropped the guidance on that. And the idea is to give you an overall revenue guidance, which is better encompassing the overall opportunities and probably more relevant for your forecasting. Pam? Manveen Kaur: Thank you, Georges. So firstly, the only comment I'll make on Wealth is, as Georges said, we are very comfortable in our broad-based product proposition. But the only thing we need to remember is that this year, with how the markets have performed, therefore, on some of the Wealth that is generated through transactional kind of activity, we just have to see how that progresses in next year. We're not going to make a call out on how volatile or otherwise markets are going to be in 2026. So if there's anything that's what would have been a good consideration because we have to look at plausible downsides clearly in giving our guidance as opposed to just a base case or an optimistic case. So that's all I would say on that. Now from a Hang Seng capital perspective, we have already got the $3.8 billion benefit, which comes from the disallowed minority capital, which we don't need to have an impact on our CET1 anywhere. So that's a positive straight on. But generally, in a broader picture, across all our subsidiaries, which are 100% owned, we do have more flexibility in terms of how we move our capital, whether it's upstreaming or downstreaming, obviously, subject to what we consider the mark-to-market outlook is, where our portfolio is and subject to sort of regulatory discussions. So all in all, it does give us a better ability to move capital around the group and be more efficient in the deployment of capital. Alastair Ryan: The next question we will take again from the Zoom is [ Chen Li ] at China Securities. Unknown Analyst: I have a question about preservation of Hang Seng Bank. Could you provide further information about the growth opportunities? I want to know that in which aspects of the Wealth Management business will have more -- stronger synergies with Hang Seng Bank? And what are other outlooks for the Wealth balances and the Wealth Management margins? Georges Elhedery: Okay. Chen, thank you very much. I'll hand over to Pam, but remember what we said at the announcement on the 9th of October of our intent to privatize Hang Seng is these are commitments we are holding. Hang Seng Bank will retain its own authorized institution and governance. It will retain its own brand in Hong Kong, of course, as a major community bank and the largest local bank. It will retain an independent customer proposition that will compete in the market for all customers. It will retain its branch network. And that proposition will remain intact with a distinctive cultural strength and customer proposition, customer experience strength that Hang Seng has been known for, for practically a century in Hong Kong. What we are driving through these privatizations is better efficiencies in cross-selling or better efficiencies in aligning back office or manufacturing capabilities that are not related to the customer proposition. Pam? Manveen Kaur: Thank you, Georges. So firstly, as Georges has said, that the positioning of Hang Seng Bank as an iconic community bank in Hong Kong stays. What we will endeavor to do is that post the privatization, we don't have that arm's length relationship restriction that prevents us to do more in terms of product proposition offerings and cross referral to our customers and also in terms of the investment dollars that we spend, we can't spend them if it's on the same product, on the same customer journeys seamlessly across both the Red brand and the Green brand. So that gives us a very good position that as these 2 stand-alone brands, our ability to lean into the growth in Hong Kong and the macro opportunities, including cross-border will be available to the broadest customer base while maintaining that community element of service for those customers. So that's how we are looking at it. And we will look at, obviously, Wealth products as well as pricing margins so that we can really make them more easily available for our customers. Georges Elhedery: Chen, we are the market. We are the market leader in Hong Kong, undisputed. We are consolidating and cementing this leadership. Hang Seng Bank privatization will allow us to consolidate that leadership even further in all sorts of a broad range of products and services. And we have a leadership position in capturing these growth opportunities that Pam was talking about in Hong Kong as a super connector between the Mainland and the world, as poised to become the leading cross-border wealth hub on the planet before the end of the decade. And it's really a privilege to be in the position we are in to be able to capture this with the full HSBC and Hang Seng propositions. Thank you, Chen. Alastair Ryan: So I will take the next question from Ed Firth at KBW. Edward Hugo Firth: I just had two questions. One, just talking about the HIBOR benefit in Q4 for your net interest income. I think one of your peers talked about it as a temporary benefit. And I guess I'm not close enough to the franchises and how you price, et cetera, domestically. But I guess, do you know -- is there anything peculiar about you or some of the peers about the way you repriced CASA accounts or something in Q4, which would mean that yours should be sustained, but somebody else's might be temporary. So I guess that's the first question. And then the second question is, I guess, it's slightly an extension of Rob's question. I'm not quite sure what is so specific about 2028 that means you can get 5% revenue growth there, but I assume you don't feel you can before then. And I know that at the moment, in '26, we've got some headwinds from interest rates, but you've also got a very strong tailwinds around things like Wealth Management, Pam highlighted that. And '27, I guess, should be a reasonably normal year. So I'm just wondering, is there something that I need to think about that you can see that is happening from '28 and beyond that will make your revenue growth better that we're not seeing today? Georges Elhedery: Okay. Thank you very much, Ed, for your two questions. Pam, do you want to address that? Manveen Kaur: Yes. So let me just unbundle the situation with regard to HIBOR. So in the fourth quarter, HIBOR stabilized. And we had called out in the prior quarters that in 20 -- and I'll come to Q1 in a second. That in Q2 and Q3, HIBOR was very volatile. And we were looking at the comparison for a HIBOR close to a 1% where it has an impact of about $100 million in terms of banking NII on a monthly basis and then stabilizing to something which is in the 2% mark. We look at HIBOR on a 1-month HIBOR basis. We feel very comfortable as long as HIBOR is around 2.25%, 2.5% and so on. I fully recognize that in -- and I don't know what other peers would say, like what tenor of HIBOR rate is most relevant for them. I'm just telling you from our perspective. Now in Q1, HIBOR has fallen, but we have to see the context. There's been a range of IPOs that normally happens. When there's that demand for HIBOR fluctuation, but it has fluctuated within a narrow range. So the impact isn't there. Also, last year, in Q4, there was a benefit of lower betas. So when HIBOR went up, the same impact wasn't there on the savings rates. Of course, we'll have to look at betas, how they evolve. And then we have a very strong deposit franchise. And I think that's a differentiator in terms of the CASA level that we have, in terms of our accounts. And therefore, we have a good positioning where that deposit base helps us on the banking NII more than most of our peers. Obviously, in terms of both banking NII this year and also our ambition, it's the rate headwinds. And as I said earlier, it's the timing of the rate headwinds. If they're delayed, of course, it becomes less of a headwind. If they are earlier, then there is more sensitivity to it. So I would say from a Wealth business, as I also alluded to earlier, yes, the growth is very strong whether its asset management, Wealth products, insurance, it's broad-based growth. But last year, there was a great advantage or a tailwind coming from markets, which gave us a lot of uplift on the transactional-based fee income. We can't assume that for this year. Of course, if markets stay well and that happens, then that's a positive tailwind. So that's how I would look at it. Georges Elhedery: Yes. And I would look at '28, not specifically as the year '28, but as what would we believe our long-term structural opportunity to grow. It's our guidance for '28, but we've delivered 5% revenue growth in '25. We've delivered 4% in '24. So it's just the footprint we are in and the capabilities for us to capture the growth is there. Manveen Kaur: And we like to be cautious to we have to consider downside scenarios as well. We don't always take the best case. That's all I would add. Alastair Ryan: Many thanks. We have probably time for a couple more questions. We'll take Alastair Warr at Autonomous next. Alastair Warr: Two questions. Back to Hang Seng Bank, I'm afraid. You touched on potential upside from asset quality improving. I just wondered if that's something you're thinking about in terms of maybe more active steps? Or is this just about being patient with the property cycle? And then just on the Wealth side for a second question. It looks like there's a bit of a slowdown in the new account opening in the fourth quarter if you've got 1.1 million for the year and you were running at about 300,000 a quarter. Is that just seasonal or anything changing there that we should be aware of? Georges Elhedery: Thank you, Alastair. Pam, you can. Manveen Kaur: So just in terms of the asset quality, the comment I made was that if you look at Hang Seng's pre-impairment margins, they've been very strong. If you look at what Hang Seng's ECL charges have been prior to '22 versus in '24, '25 and even the run rate for the first half of the year and then what's consolidated for the full year, that's what I meant by the overall improvement, and that would be both for Hang Seng Bank as it would be for HSBC Red brand, and that's the only way to look at it. In terms of our own policies or processes and how we manage exposures, both for the Red brand and Green brand, they are highly aligned, how the rigor we follow through them, I don't expect any of that to give us either a tailwind or a headwind. So in terms of the new-to-bank customers, yes, it was 1.1 million, just to clarify for the Red brand. And the fourth quarter also had a good number. We believe that this new-to-bank customers is a huge growth opportunity for us. However, we are trying to be now a little bit more selective on the acquisition because we have now had a 3-year trend on how the acquisition has happened in between the lower end of the customer base and the more premier. We have added a fee for the new-to-bank customers who have a balance less than HKD 10,000. And because of that, we expect that there would be slightly slower acquisition in 2026. But the focus on our affluent customers is going to continue. The focus of the improvement in our overall income, whether it's through deposits, Wealth products, insurance is very healthy coming from these new-to-bank customers. So we don't see any change. We just don't want people to say that every month is going to be like 100,000 number because it's like almost like a ticker number because that's what the trend was. There will be fluctuations and changes month-to-month and quarter-to-quarter, but nothing material to call out as such. Alastair Ryan: We'll take Kendra Yan at CICC. Jiahui Yan: My question is kind of related to micro side. As the newly nominated U.S. Federal Reserve Chair has proposed interest rate cuts and balance sheet reduction. Could you please share your macro assumption behind the future 3 years guidance? And are there any risks that we need to pay attention to? Georges Elhedery: Yes. Thank you, Kendra. We can do that, Pam? Manveen Kaur: Yes. So just as I said earlier, Kendra, when we look at our guidance, we look at plausible downside scenarios. That include interest rate cuts, both quantum as well as duration. This time around, as we said, the starting point for the guidance for this year was the January year-end cuts, but we also stress test our portfolios on a regular basis for a range of scenarios. And we consider those and the impact on ECLs also on a weighted average basis when we look at our overall portfolios. We have looked at the -- some of the macro I would say, recent news, whether it's to do with private credit or otherwise because as I said earlier, we look at second and third order risks that may come from some sort of a macro event or issue, even though our own underwriting practices are very stringent and very rigorous in this respect. What I will say is that despite the evolving scenarios that you are facing on tariffs and trade, our business has been really quite resilient. And that has -- overall, it is up 2% year-on-year in 2025. In a complex market as this landscape evolves, our relationships and engagement with clients gets even stronger. We have taken market share in corridors through -- in Hong Kong, U.K., Asia overall as supply chains are moving and corridors are shifting. So I would say, overall, if I think in a macro sense, there are headwinds and tailwinds as well as for the world at large, but also for HSBC. We look at specific idiosyncratic factors that could impact us, any risk concentrations we may have in our home markets, and that's all part of our guidance. And that's why I said to you earlier or to the earlier question that when we give our guidance and our targets, we like to be rightfully conservative. But the most important thing is through this period, we have made an assumption that we will continue to invest for growth. We have the right strategy. We have the right priorities. We have the focus to retain and win market share and we will continue to do that with the basic underlying principle that Georges called out earlier, we are here to serve our customers, and it's the strength of our relationship with our customers that gives us the confidence for our guidance and targets. Alastair Ryan: Yes. Thank you, Georges. So we'll just take a final question today from Katherine Lei at JPMorgan. Katherine Lei: Okay. My question is still on revenue side, right? I think the 5% revenue growth in 2028 and then the above 17% RoTE guidance, I think there's 2 key drivers. One will be on NII and then the other will be on Wealth. But my question is that on NII, what is -- like what gives HSBC the confidence that on the sustainability of the deposit growth? Because one trend we noted is that, say, for example, in China, with RMB appreciation and also China start to taxing its citizen globally, will that actually slow down, say, for example, Chinese nationals coming to Hong Kong to open new accounts and then the money flow movement? So can we be more a bit specific on what are the key drivers and then the key path on the deposit growth? This is number one. Number two, I think is still on -- number two is on Wealth and on that trend, right? So what do you think that will have an impact on our Wealth as well? Georges Elhedery: Okay. Thank you very much, Katherine. Let me address them in reverse order. I'll speak a little bit about Wealth, and I'll share some thoughts about deposits and Pam can give you additional granularity to address your question. Wealth remains structurally a very important growth opportunity for HSBC, as we said specifically that we are aligning our Wealth footprint, Asia and Middle East to where the Wealth is growing fastest in the world in Asia and the Middle East. Also our ability to capture wealth all the way from the premier customer base, which is the affluent middle class all the way to the high net worth means we have a better catchment of all these opportunities. We're also present in a number of onshore markets such as China onshore. We are the leading international wealth manager in China, Mainland China onshore, which is not dependent to flows outside China, for instance. We're investing in India. We, of course, have big wealth hubs in places such as Hong Kong, of course, Singapore, the UAE and a number of other markets. The challenges possibly to anticipate is there is a turnaround or a change in the overall outlook of investment because inevitably, wealth will depend on the underlying performance of the invested markets. And if there is -- today, there is a strong resilience in these markets, which is what we -- our customers are also looking at. But that is, of course, always a risk that we need to be watchful of. We're also investing to gain share. We're investing to diversify the product offering and to diversify the wrapper offering all the way from insurance to asset management to other forms of brokerage, et cetera. So that we are able to meet the varying wealth customers' needs in how they look at their investment requirements. Finally, we're also investing in generational wealth, specifically supporting transfer to the youth or the next generation or transfer between wealth centers in a way our footprint allows us to do that is competitively very strong compared to a number of our peers who are offering wealth from very, very few number of hubs, okay? That's the wealth. Now with regards to deposits, Pam will give you a better answer in the details you're asking for, but let me tell you one thing about deposit. It is the foundational product on which our customers' trust is expressed with HSBC, and this is how we look at it. Customers trust us with their deposits. That's the starting point of any possible service and proposition in transaction banking, payment, financing and otherwise. So we cherish this asset class. We have always cherished it, through thick and through thin, in good rates and bad rates, and we will always focus on what it takes to make sure our customers trust us, the financial strength, the level of service so that we earn their trust with their deposits. When you look at our deposit base, it has grown in every business. It has grown, and we are highly surplus liquidity in every currency, every major currency, in every major geography. So there is a deep rooted across our 4 businesses and across all the geographies where we operate. a deep-rooted trust, which we nurture to support customers giving us their deposits and using us as their deposit bank by preference or by excellence that can support, if you want, our outlook on our deposit growth. Pam? Manveen Kaur: Thank you, Georges. And Katherine, a really good question to close on. We have seen deposit growth, as you've seen in our new disclosures on Wealth across the spectrum of our customer base, premier, private bank, retail in every market, in every jurisdiction, even when there isn't a home market, and that really underpins the growth that we are seeing in our banking NII. We have taken very conservative trajectory on loan growth. I'm hopeful at some stage, loan growth will also pick up, which will then also support the banking NII if from an interest rate perspective, the timing of the interest rate becomes a headwind in one of those plausible downside scenarios. We have a structural hedge, which is continuing to be a tailwind given all the work we did a few years ago. We will also continue to build on the structural hedge, even though the largest increases we have done are -- have been behind us now. So if I look at all of these things in the round, and I look at the momentum of the business that we have seen in the first sort of 7 weeks of this year, that gives us confidence for our banking NII guidance for 2026. If you underpin that just based on the fourth quarter, obviously, it will give you a number of [ $46 billion ]. But we are not calling that out because we are very cognizant of the headwinds on interest rates. And you're right, the interest rates in the U.S. is down 50 basis points, U.K., 25 basis points just year-to-date with further 2 to 3 rate cuts to happen. So with that, I think in the round, we feel very confident that the banking NII, which is, again, the trust of our customers and what we are doing everything to preserve that trust and to build on those relationships, because I'll just end with one thing. We are fundamentally a relationship bank. We have a full-service suite of products we offer to our customers. So for our guidance, for our targets, we look at that full range. We are not a product proposition-based bank, in which case, some of the comments you made will obviously be a bigger headwind. Georges Elhedery: Perfect. Thank you, Pam, and thank you, Katherine, for your last question. Thank you, everyone, for joining us. We are pleased to report strong revenues, strong profit, strong returns and strong distribution to our shareholders. We are confident we can navigate the challenges ahead of us from a position of strength, and this has allowed us to put ambitious targets about our revenue growing every year for '26, '27, '28 rising to 5% in '28 as well as our return on tangible equity delivering 17% or better every year over that period with a 50% dividend payout ratio, all excluding notable item. Thank you very much for joining us this morning or this afternoon, and I hope you have a good day. Manveen Kaur: Thank you. Operator: Thank you, ladies and gentlemen, for joining today's webinar. You may now disconnect.
Operator: Welcome to the HSBC Holdings plc Investor and Analyst Presentation for the 2025 annual results. We will begin in 2 minutes. [Operator Instructions] Please note that it will not be possible to ask a question if you are joining via the webcast link on the HSBC website. Ladies and gentlemen, welcome to HSBC Holdings plc's 2025 annual results webinar for investors and analysts. For your information, today's webinar is being recorded. At this time, I will hand the call over to Georges Elhedery, Group CEO. Georges Elhedery: Welcome, everyone. Thank you for joining us. As we celebrate the year of the horse, [Foreign Language]. Our 2025 full year performance was strong. It was a year in which we performed, transformed, invested for growth. I will discuss our strong strategic progress today. First, the strong momentum in our 2025 performance. Second, the execution of our 3 strategic priorities where we are progressing at pace and with discipline. And third, the new growth and return targets we are setting out today for 2026, '27 and '28. So first, the full year earnings. My comments will exclude notable items and the comparisons will be year-on-year on a constant currency basis. In 2025, there were $6.7 billion of notable items. You are already aware of these from prior quarters. They are set out on appendix Slide 36. So first, we delivered strong earnings. Group revenues grew 5%. Profit before tax rose 7%, reaching a record $36.6 billion. Return on tangible equity was 17.2%. And we delivered 3% cost growth on a target basis in 2025, in line with our cost target. Second, we delivered strong growth. Our deposit balances grew 5% with deposit growth in each of our 4 businesses. Our deposit base is a core strength. It contributes the lion's share of our banking NII. We also grew fee and outcome. In Transaction Banking, it grew by 4%. Elevated market activity demonstrating the power of our deep international network, which gives access to 86% of world trade flows, alongside our product and service expertise. In Wealth, it grew by 24%, reflecting our leadership position in the world's fastest-growing wealth markets and continued investment in our products and proposition. And we are investing for strategic long-term growth. We completed the $13.7 billion privatization of Hang Seng Bank. This brings together to 255 years of history and heritage, combining global reach and local depth. It reflects our confidence and conviction in Hong Kong's future growth. And third, we delivered strong returns to our shareholders. We announced a full year ordinary dividend per share of $0.75, up 14% on 2024. Let's turn straight to the progress we are making on strategy execution. In October 2024, I set out a clear agenda to unlock HSBC's full potential. To do so, we now run the bank on 4 core complementary businesses, 2 home market businesses, U.K. and Hong Kong, and 2 international network businesses, Corporate and Institutional Banking and International Wealth and Premier Banking. Each business is growing. Each is generating above mid-teens return on tangible equity and each is building on a strong foundation for future growth. We are focused on 3 clear priorities, and we are moving at pace with each one, be simple and agile; two, drive customer centricity and three, deliver focused sustainable growth. Now let's look at each priority in turn and our progress. First, simple and agile. The first step in unlocking HSBC's full potential is reengineering to reduce complexity and cost. Structure and strategy are now aligned. Accountability is sharpened and roles deduplicated. In 2025, we reduced net managing director positions by circa 15%. We are taking $1.5 billion of annualized simplification saves straight to the bottom line with immaterial revenue impact. We expect to have taken action to deliver these saves by the first half of 2026, 6 months ahead of plan. We are also making positive progress with the reallocation of circa $1.5 billion from nonstrategic or low-returning businesses. The medium-term intent being to reallocate these costs to areas of competitive strength and generate accretive returns. In 2025, we announced 11 business or market exits. Completed and announced exits account for $0.7 billion in annualized cost savings with around $1 billion of associated revenue $0.6 billion remains an active execution, including those under strategic review. Then following the privatization of Hang Seng Bank, we are increasing reallocation costs to $1.8 billion, reflecting an additional $0.3 billion of reported basis cost synergies across HSBC and Hang Seng Bank. We will direct this $0.3 billion to growth opportunities in Hong Kong. We are also streamlining and upgrading our operating model by simplifying the bank at scale and retiring nonstrategic applications. And we are reengineering whilst focusing on resilience and risk management. Next, priority number two, drive customer centricity. Our 4 businesses are built on customer trust. Our investments to improve customer proposition and experience are yielding results. Net Promoter Scores have improved or remained top ranked in our home markets. In Hong Kong, we added 1.1 million new to bank customers. Taking the total number of customers to more than 7 million. Our U.K. business lending -- our U.K. business banking lending grew 13% year-on-year, excluding COVID loan runoff. In CIB, corporate surveys have positioned us as a market leader in trade, in payments and in foreign exchange. In IWPB, we attracted net new invested assets of $80 billion. Next, priority #3, investing to deliver focused, sustainable growth. Our Hong Kong home market is a dynamic economy, a top 3 global financial center and a thriving trade gateway. It is the super connector between Mainland China and the world. And it is set to become the world's leading cross-border wealth hub by 2029. The privatization of Hang Seng Bank enables us to scale capabilities and drive growth across both banks for all customers. We have the ambition, and we have comprehensive plans to deliver $0.9 billion of benefits through reported synergies and unlock of opportunities by 2028. It is an investment for growth. And if we move beyond Hong Kong and look at HSBC's other core strength, we are in Asia, Middle East powerhouse. Asia and the Middle East are increasingly central to global trade and capital flows. Global trade is being rewarded. Asia's growth is increasingly powered by intra-Asia demand. Asia is buying Asia. The Middle East is scaling as a global capital trade and investment hub. Its integration with Asia is accelerating. The Asia-Middle East corridor is becoming a defining access of global growth. Wealth creation across Asia and the Middle East is also structurally strong. That is why we are investing to consolidate our powerhouse position and capture these growth opportunities. We are also investing to connect the world, scaling our capabilities, building new capabilities and supporting customers secure commercial advantage from real-time services. Our customers are making real-time 24/7 payments across 35 markets. They're also using frictionless tokenized deposits and payments in 4 markets, including the U.K. with more to follow. And we are pioneering the future of finance. Last month, the U.K. Treasury selected HSBC's distributed ledger technology as its preferred platform for its U.K. Digital Gilt pilot. Next, our people and technology. We see innovation and culture that's core to our competitiveness, and we are investing in both. We are scaling AI adoption first, to empower our colleagues second for end-to-end process engineering and third, to enhance customer experience. Our customer relationships are built on trust. AI strengthens how we act on that trust, personalizing service at scale. The strong culture turns a clear strategy into results, and we are investing to nurture a high-performance culture. All our senior leaders and the broader managing director cohort have attended our new group-wide leadership training. Finally, let's turn to our new targets for 2026, '27 and '28. 2025 has been a year in which we have performed, transformed and invested for growth. This gives us the confidence to set out new growth targets. We will target revenues growing year-on-year every year, rising to 5% in 2028, excluding notable items. We will target return on tangible equity of 17% or better in each year from 2026 to 2028, excluding notable items and a dividend payout ratio of 50% for each year, excluding material notable items. To conclude, we are creating a simple, agile, growing bank built to generate high returns. We are executing our strategy with discipline and precision. We are delivering growth, we are investing for growth and we are confident we can navigate uncertainty from a position of strength. That is why we are confident in setting these new targets and in our ability to continue delivering for our shareholders. Let me now hand over to Pam. Thank you. Manveen Kaur: Thank you, Georges. Thank you, everyone, for joining. We have had another strong quarter, which reflects the positive progress we are making towards creating a simple, more agile growing HSBC. We are investing for growth. Throughout this presentation, I will exclude notable items and focus on the fourth quarter numbers compared to the same period last year on a constant currency basis. Let's turn straight to the highlights. In the fourth quarter, revenues grew 6% and to $17.7 billion. This was driven by broad-based growth in banking NII and fee and other income. Profit before tax was $8.6 billion, up 17%. Our customer deposit balances stand at $1.8 trillion, an increase of $78 billion when we include held-for-sale balances. Full year return on tangible equity was 17.2%, achieving our mid-teens or better target. In 2025, we maintained tight cost discipline, managing target basis cost growth to 3%, in line with our cost growth target. Turning to capital and distributions. Our CET1 capital ratio was 14.9%, up 40 basis points in the quarter, reflecting our organic capitalization and expectation not to initiate any further buybacks for up to 3 quarters following October's announcement of our intention to privatize Hang Seng Bank. As Georges said, this strong performance allows us to announce ordinary dividends for the year of $0.75 per share, an increase of $0.04 on the prior year. Turning to our business segment performance. We grew full year revenue by 5% to $71 billion. Each of our 4 businesses grew revenues. Each grew deposits, deepening customer relationships. Each returned a mid-teens or better return on tangible equity, excluding notable items. We are pleased to be making such positive progress firm-wide. Moving next to our privatization of Hang Seng Bank. On 9th October, we announced our intention to privatize Hang Seng Bank. We are pleased to have completed on 26th January, sooner than our initial expectation of the first half of 2026. This slide explains the financial rationale. Let's walk through it, starting with a $13.7 billion purchase price. The removal of the $3.8 billion minority capital inefficiency takes you to the $9.9 billion of common equity Tier 1 consumption. The removal of the capital inefficiency is around 1/4 of the purchase price. The $9.9 billion CET1 consumption is equivalent to buying back 4% of group shares at the point of announcement. Next, we show the $0.8 billion minority interest in the P&L and the $0.5 billion of pretax synergies from the privatization. Together, the minority interest and the synergies contribute more than 4% to our profit, beating the buyback threshold. On top of this, we see potential, further revenue and cost upside of $0.4 billion enabled by the privatization. Then on the right of the slide, we see good growth in Hong Kong in the years ahead. Having 2 fully owned banks positions us well to capture this growth. As we said in October, we are acquiring a business with structurally high pre-impairment margins. And while we are not calling the credit cycle, we believe it is a cycle. Let's now turn to banking NII. Our full year banking NII was $44.1 billion. In the fourth quarter, banking NII of $11.7 billion grew $0.7 billion. $0.4 billion of this growth was in Hong Kong, including the recovery of HIBOR during the quarter. Banking NII in the fourth quarter included a positive benefit of around $100 million for items that we do not expect to repeat. We expect full year 2026 banking NII of at least $45 billion with the impact of expected lower rates more than offset by deposit growth and the tailwind from our structural hedge. Next, to wholesale transaction banking. This year has really validated the strength of our franchise in a range of economic market and tariff situations. We have deepened customer relationships, and our global network has helped our customers navigate volatility and uncertainty. In the quarter, security services grew fee and other income 6%, reflecting higher market valuations and new mandates. Payments grew 3%, driven by new mandates and payment volumes. In particular, international payments. Foreign exchange increased by 1%, reflecting strong client flows and higher levels of volatility. This was a good performance given the strong prior year comparison. Trade was down 5% in the quarter, but it was stable over the full year. I would note the first half was particularly strong, given advanced ordering as we supported clients to navigate a fast-changing landscape. We continue to see growth in volumes, and strong client engagement. Let's now turn to Wealth, including the new disclosures we are setting out today. We are very pleased with the 20% year-on-year fee and other income growth to $2.1 billion. And we are very encouraged that this was driven by all 4 income areas, which shows the sharpening of our strategy is working. Asset Management grew 14% and Private Banking grew 8%. Investment Distribution also performed well, up 14%, reflecting strength in our customer franchise in Hong Kong. Our Insurance CSM balance was $14.6 billion, up 21% versus the prior year. We continue to attract net new invested assets with $7 billion in the fourth quarter. Today, we are giving you new disclosures, which you will see through on this slide. These better show the strength of our relationship with our customers, including both their deposits and invested assets. We are focused on capturing the full wealth opportunity, and we will now report Wealth balances and net new money. I appreciate that the Wealth balance figure is similar to the invested assets. But I would highlight two changes to note. You will see these set out on Appendix Slides 31, 32 and 33. We have added $608 billion of Premier and Private Bank deposits to the invested assets. That is offset by taking out $580 billion of asset management, third-party distribution assets. This is a good business, but it does not reflect our wealth customers. Adjusting our disclosure in this way also means our Wealth business is more easily comparable to the broader peer group. These new disclosures will replace the existing ones from the first quarter of 2026. We saw net new money in the quarter of $26 billion, of which $19 billion was in Asia. And Wealth is not just a Hong Kong story. It runs across our Asia and Middle East franchise with double-digit invested asset growth in Singapore, Mainland China, India and the UAE. Next to credit. Our ECL charge this quarter was $0.9 billion. There was no material impact from Hong Kong commercial real estate in the quarter. On Slide 29, you will see we have updated the commercial real estate disclosures. Movements in the fourth quarter were in line with our expectations. of a full year 2026 ECL guidance is around 40 basis points. This is at the higher end of our typical range, reflecting the economic outlook and remaining pressures in parts of retail and office commercial real estate in Hong Kong. Let's now turn to costs. We delivered 3% target basis cost growth in the full year, hitting our cost goals while making the space to invest in the bank was a key theme of 2025. It will be again in 2026. We have taken actions to realize $1.2 billion of annualized simplification savings with immaterial revenue impact. This is ahead of our original time line of $1 billion by the year-end 2025. On a realized basis, we have taken $0.6 billion of the simplication saves into the full year 2025 P&L. Together with ongoing discipline, this allows us to guide for 1% cost growth on a target basis for 2026 while reinvesting in the business. Next, to customer deposits and loans. We had another strong quarter with deposit growth of $50 billion. We saw good growth in each of our 4 businesses. Loans increased by $5 billion. The U.K. was again the standout with another quarter of growth in mortgages and commercial lending. Our U.K. business is well positioned to support growth in the U.K. economy. We are particularly pleased with the momentum in our commercial loan book where we see significant potential, particularly in infrastructure, innovation, social housing and mid-market direct lending. Now turning to capital. Our CET1 ratio is up strongly to 14.9%, primarily reflecting good organic capital generation. Although after the balance sheet date, I draw your attention to the impact of the Hang Seng Bank privatization which is 110 basis points in addition to the 10 basis points already incurred in the fourth quarter. We have set this out in the appendix Slide 27. As a reminder, we said when announcing the offer on 9th October that we expected to suspend buybacks for up to the next 3 quarters. That is, of course, dependent on underlying capital generation. With strong profitability and current modest loan growth we remain highly capital generative. A decision on future share buybacks will be taken quarterly, subject to a non-buyback considerations. Let's next turn to the full year defaults. Excluding notable items, and at constant currency, revenues grew 5% to $71 billion. Profit before tax was $36.6 billion, up 7% year-on-year to a record high. Return on tangible equity was 17.2%, achieving our mid-teens or better target. Our strong performance allows us to announce ordinary dividends for the year of $0.75 per share or $12.9 billion. Let's briefly return to the new targets Georges set out earlier before I close on guidance. We made clear and positive progress in 2025. That is why we are now raising our ambition to target 17% return on tangible equity or better, excluding notable items in each year from 2026 to 2028. We will also target year-on-year revenue growth in each year over the period, rising to 5% in 2028 compared to 2027, excluding notable items. And as you would expect, we maintain our discipline of a 50% dividend payout ratio, excluding material notable items and related impacts. Finally, to guidance. This slide gives you our guidance mainly for 2026. We saw revenue momentum continue in January, including in Wealth. On the slide, you see banking NII of at least $45 billion. Our revenue ambitions for our Wealth business are contained within our revenue target. We have, therefore, removed grow fee and other income at a double-digit percentage CAGR from our guidance. We see an ECL charge of around 40 basis points, broadly stable on 2025. We expect to constrain cost growth to 1% on a target basis. This benefits from our organizational simplification and allows us to continue to invest in the business. There is no change to our CET1 target range of 14% to 14.5%. In 2026, we will deliver the $1.5 billion of savings from the reorganization. We are well on track with the $1.5 billion of reallocation costs which will be redirected towards priority growth areas. We are now adding the expected $0.3 billion of Hang Seng Bank cost synergies to the original $1.5 billion of reallocation costs, taking this to circa $1.8 billion. On Hang Seng Bank specifically, we see $0.5 billion of revenue and cost synergies to be achieved by year-end 2028 as well as an additional $0.4 billion of potential further upside enabled by the privatization. To achieve this $0.9 billion, we will incur a restructuring charge of $0.6 billion from the Hang Seng privatization which will be a material notable item. To close, as I said to you last year, I am fully focused on discipline, performance and delivery. Discipline means prioritizing with precision, maintaining strong cost control and ensuring investment rigor for growth. Performance means gearing our financial strategy towards achieving our new returns target. Delivery means ensuring we remain agile and resilient, enhance operating leverage and are always well positioned to support our customers. This is exactly how we will continue to run the bank. With that, we are happy to take your questions. Alastair? Alastair Ryan: Thank you, Georges. We'll take any questions from the room here in Hong Kong first. If I can ask you to introduce you to your company, and there's been the hard part, constrain yourself to two questions each, please. That goes for people on Zoom as well as people in the room. Anyone would like to ask a first question here? Yes, we'll take a question from Nick. Nicholas Lord: It's Nick Lord from Morgan Stanley. I'll put it in one question in two parts, if that's okay. I'm just interested in your revenue target by 2028 of achieving 5% revenue growth. And I just wonder if you could talk about some of the components of how you would get there. Presumably, Wealth is part of that. And so maybe you could talk about the Wealth trajectory and how sustainable that is. Presumably, at some stage, we're going to see sort of a kick in of sort of the development of markets in Asia, and that market's business can grow more. So I wonder if you could talk a little bit about how you want to grow that markets business in Asia. Georges Elhedery: Thank you, Nick, for the question. I'm going to share some high-level comments as we are looking at the growth opportunities, and Pam can take you through the various components. The first thing is we have delivered growth in 2025. And we have delivered growth, as we mentioned, across all our businesses and all our key metrics, including deposits, loans, including fee income and Transaction Banking and Wealth and this is reflected in our revenues growing at 5%, 2025. The second item to call out is if you look at our footprint. We're actually basically aligned to the strong structural growth opportunities. Hong Kong, we've called it out, and we are basically consolidating our leadership position to capture these growth opportunities with the privatization of Hang Seng among other. Asia and Middle East, structural growth opportunities in Wealth, but also Asia and Middle East hitting record volumes and shipments for trade, Asia is buying Asia and we are -- our footprint allows us to capture these growth opportunities. The U.K., we've seen the strongest loan growth in 2025, and we have indicators to believe that there is a possibility for this trend to carry on. This is the strongest loan growth we've seen in the U.K. for many years, but it's also the strongest store growth we've seen across all our businesses that we have seen in the U.K. And then the last thing I would put, we are investing for all these growth opportunities. We're putting now investment from within our cost base. We're putting investment from the additional costs we are taking in 2026. And we will be putting even further investments from the reallocation of the $1.8 billion as we free up these costs back into those core areas where we can grow. And this is what's giving us this confidence to give you the growth targets of revenue growing year-on-year every year rising to 5% in 2028. Pam? Manveen Kaur: Thanks, Georges. So firstly, in 2026, we expect broad-based growth in revenue across all our businesses, but just unbundling a little. In banking NII, as we have said, we expect a low single-digit growth fundamentally driven through deposits. Yes, there are pockets of growth in loans, but so far, we've just seen in the U.K. market. Overall, we expect that growth in Wealth and Transaction Banking and our fee-generating businesses will continue to be very positive. As we go beyond '26, we do expect balance sheet growth should again in Asia and other markets, not just in the U.K. Of course, we are seeing growth in the U.S. already, but we are not a big player in the U.S. market, domestic growth. And we are continuing to invest in our fee businesses and our investment plans are multiyear plans. So it's not just for growth for 1 year. It's a very strong building block for growth through the period we have called out and beyond. Particularly in markets like Hong Kong, in the U.K. and other key markets for us in Asia and the Middle East. Alastair Ryan: Thank you, Nick. Thank you. Any further questions in Hong Kong. We'll go straight to Zoom. The first question on the Zoom then, please, is with Joe Dickerson at Jefferies. Actually I've announced yourself, Joe. Joseph Dickerson: Good set of results, guys. Just a quick question on the costs. If you look at the 2026 number that you've given the kind of 1% growth. I know you've got your recycling how do you think about when you peel that back and what's the metabolic rate of growth in costs, particularly coming from investments because you clearly have some global peers who have accelerated their investments around AI. So I was just curious how you think about that. And then secondly, a nitpicky question, but what rate of HIBOR have you assumed in the banking NII guide of greater than $45 billion? Georges Elhedery: Okay. Thank you very much, Joe, for your questions. On let me make some high-level considerations how we look at costs, and I'll ask Pam to comment then on cost and then on hypo rates. And I shared a bit earlier, but I want to emphasize, first, within our workspace, there's a proportion set aside for investments for change the bank, investments, digital capabilities, additional people, hires, relationship managers, wealth advisory, et cetera, of course, generative AI efficiencies. That's within our cost base. Second, the fact that we're adding costs adjusted for these savings, half of that additional cost will go towards payroll inflation, but the other half will go towards additional investments. And then third, the recycling of those $1.8 billion, which is commensurate to about 5%, 6% of our cost base will go back into those areas of investment for growth. So we believe we have ample capacity to invest and deliver the growth that we are setting ourselves, setting targets to deliver against. Then the next thing I would say about cost is that it's important, Joe, to -- we are committed to cost discipline, we are confident in our ability to deliver cost discipline. And as you've seen for our 2025 results, we have met our cost target. So I think that's an important guide also as you look at our cost guidance for 2026. Pam? Manveen Kaur: Thank you, Georges. So firstly, I would note that we are ahead on our simplification saves because the plan and the actions we have taken have come through sooner than what we had originally outlined. This gives us incremental saves of $700 million in full year '26. So that has been a consideration in the overall 1% cost growth envelope. And as Georges said, as we have divestments happening, we are continuously redeploying those -- reallocating those costs to our priority growth areas. What's really important for us is that our investment rigor is focused on our strategic priorities. That's what we've done in 2025. That's what we will do going forward. And these are committed plans, which are multiyear plans. They don't go back and forth every year. So that's all part of the overall cost envelope guidance we have given for this year. And again, we're only giving guidance for this year only, but we expect to maintain a cost rigor on a continuous basis. In terms of assumptions, we have used the end January forward rate curve for our banking NII guidance for all major currencies. So in terms of HIBOR just to note a couple of points. Our HIBOR volatility that we saw in Q2 and Q3 when HIBOR is at 1% has an impact of about $100 million on banking NII. The moment HIBOR sort of stabilizes as it did in Q4 and indeed this year, although it has fluctuated a little bit around the 2.5% mark, that is captured in our guidance. And we look at a few plausible downside scenarios as well before we give a full guidance. Alastair Ryan: Thank you. Our next question on the Zoom is from Ben Toms at RBC. Benjamin Toms: Firstly, on your RoTE guidance of greater than 17%. I'm just looking for some commentary about how sustainable you feel that guidance is beyond the announced planning horizon. So how much do you feel this guidance isn't all weather guidance post all the investments that you've been making into the business? And then secondly, on the Hang Seng synergies on Slide 13, can you mind just talking a little bit around why you've adopted 2 buckets that you've labeled synergies and upside. Is the upside bucket basically where there's a lower degree of certainty over the synergies? So what type of synergies fall into each bucket would be useful. And presumably, there's no incremental restructuring costs associated with the upside bucket on top of the $0.6 billion. Georges Elhedery: Thank you very much, Ben. On the Hang Seng guidance, what I will share is we do have the management ambition, and we do have comprehensive sets of plans to achieve the full $0.9 billion upside with the restructuring costs that we've called out. I'll let Pam give you the details. On the RoTE guidance, we are not guiding beyond our horizon, but you should always assume that we are ambitious. Pam? Manveen Kaur: Thank you, Georges. And just to say on our RoTE guidance, we continue to see a positive momentum in our businesses. And as we said earlier, we are investing for growth. But of course, the targets are only for 3 years. So in terms of the Hang Seng synergies, you're quite right, the $500 million is what I would call the reported synergies following accounting rules. The $400 million synergies are depending to some extent of markets and customer behavior. So there is some degree of uncertainty, and they don't strictly fall between what is considered to be accounting reported synergies. So that's the reason why they're too separate. Both these synergies, the plan to get that $900 million benefit is by the end of '28. And the restructuring cost of $600 million covers the benefits across both buckets. And now beyond that, we actually believe, as it says on the slide that at some stage, the credit cycle will be normalized. So there will be some benefit coming from there. There will be more growth in lending as well as overall Hong Kong growth, which we will continue to be very well positioned for because of the redeployment of the cost allocation that we have, there will be a fair chunk that obviously goes into Hong Kong, which is a core market on our strategy. Alastair Ryan: Yes, we have a question in the room next, Melissa. Sorry, you're allowed to introduce yourself fully. Melissa Kuang: I'm Melissa from Goldman Sachs. Just two questions. In terms of the strategy that you have, the rising to 5% revenue growth. Just wanted to see if you can give about CAGR growth instead. So we can understand the pathway there. In terms of that, I suppose, will it be coming largely from the nonbanking NII portion? Or will it be from the banking and NII? So that's my first question. On the second question, perhaps on the restructuring cost at HSP of $0.6 billion. Can you just give a little flavor about what is it that we are doing in terms of the restructuring that we need such a cost focusing on in terms of delivery and then how we will see the revenue synergies. And in terms of the revenue synergies can it be as quick as next year? Or will it be more heavy into 2028 as per your 3-year guidance rising to 5%? Georges Elhedery: Thank you very much, Melissa, and Pam can address both questions. Manveen Kaur: Thank you, Georges. So firstly, we've said that revenue growth is positive each year, but it's also progressive and reaching out to 5% by '27 to '28. In terms of the underlying building blocks we said to you that in 2026, where we have given the guidance on banking NII, it's a low single digit. So therefore, similar to the prior year, we will see more positive growth momentum on the fee-generating businesses. And beyond 2026, Banking NII, of course, we look and see where the guidance is, where it is, where the rates are and what's the timing of the rate cuts as we go into '26, but we are continuing to invest in our fee-generating businesses so we see that momentum in those businesses, including Wealth, which really underpins this revenue growth and wholesale transaction banking to continue. And I'm hoping that at some stage, we'll see a little bit more of growth on the balance sheet in terms of lending beyond U.K. that we have already seen. Now in terms of the restructuring costs. There are a couple of elements that drive it. One is there's some organizational alignment. So there will be some roles, which will evolve and teams that will be realigned, but a large chunk of this is really in terms of technology. So the investment in technology so that we can better harmonize our technology and better get results from the technology investment we have across both the Green and the Red brand. And this is really quite critical for us in order to achieve the overall ambition of the $900 million because it's the $900 million ambition just to reiterate, it's not just a cost story. It's a revenue and a cost story, and this is an investment for growth, and that's how we look at it. And we plan to spend restructuring costs of $600 million across the 3 years. And of course, this will be spread through these 3 years, we are not saying any more. In terms of revenue synergies, we strongly believe that by the privatization of Hang Seng Bank, our ability to be able to provide a broader product proposition into the Green band is highly enhanced. So we'll have better Wealth products for our retail customers. We have capital markets and broader wholesale transaction banking products for the wholesale customers, but more importantly, we will be able to have access for the same international network that we have for the Red brand also within the Green brand. And last but not least, we will have more balance sheet flexibility in terms of how we leverage our treasury capabilities, but also in terms of upstreaming and downstream capital, and this will all be done over the next 3 years. Alastair Ryan: Thank you. We'll go back to the Zoom. The next question will be from Aman Rakkar at Barclays. Aman Rakkar: I had two questions, please. So one is around capital. It looks like a decent chance that you'll be within your target CET1 range in Q1 based on historical and perhaps projected capital generation kind of estimates. Obviously, it raises the prospect as to whether you might be able to reintroduce buyback earlier than planned. I don't know if you're able to kind of comment on whether that's a realistic or plausible scenario. But I guess more specifically, just interested in the capital allocation thought process from here? Clearly, your stock is trading at a level now where the return on investment around buyback might be beaten by alternative uses of uses of capital. Obviously, you did it with Hang Seng, but should we be thinking about inorganic growth as well as the compelling organic growth within your footprint? And then I just wanted to ask around banking NII, please. Clearly, that kind of Q4 jumping off point is flattered by $100 million. I don't know if there's anything else that you direct us to kind of strip out of that number in terms of deposit catch-up or the impact of HIBOR. And I was particularly interested in what your deposit growth assumption is that sits behind the guidance you've given '26, please, because I think that could be a sensitivity around the ultimate outturn of banking NII in '26. Georges Elhedery: Thank you, Aman. Pam is best placed to answer both, but I want to share a few thoughts about our philosophy on capital. First, we remain capital-generative as you've seen from our targets, but also as we've experienced over the first 1.5 months in the year in 2026. So we're very pleased to see that our capital generation is strong. But our first priority is now restoring the CET1 ratio following the privatization of Hang Seng, which we estimated to take us 3 quarters. But of course, we do that assessment quarter-by-quarter. But I don't want to point out to the increased dividend we are paying this year, $0.75, $0.45 on the fourth quarter, which is on a full year basis, 14% higher than last year. So we are distributing through dividends. What I wanted to share about the discipline how we use capital, we've shared it in February 2025 Aman, we've set ourselves 4 key criteria. They are a high bar, and we strictly adhere to them in the way we look at inorganic opportunities. In so far, that these 4 criteria are met like in the case of Hang Seng privatization, then we will consider inorganic. But if one of these criteria is defeated, then our preference will be to utilize or return any excess capital back to our shareholders in the form of share buyback. Pam? Manveen Kaur: Thank you, Georges, and thank you, Aman, for your questions. So firstly, as Georges said, we continue to remain highly capital generative. We've had a good start to the year, as I called out earlier in my remarks. But as you know, we look at our share buyback decisions on a quarterly basis, and that will be a quarterly process. The starting point is clearly our target operating range, which we are working hard so that we can replenish capital that has been deployed in the Hang Seng Bank privatization. That's the first priority, as Georges said, and that CET1 operating range remains 14% to 14.5%. That's the one which underpins all the targets and guidance we have given today. Just to clarify, in terms of our priorities from there on, of course, the priorities are 50% is the dividend payout ratio, which we have again reaffirmed. We would like to see balance sheet growth, and we want to invest for growth. That's if we can have growth at the right return levels. Our distribution priorities hence have not changed, and share buyback remains for us a useful tool to deploy surplus capital irrespective of where the share price is. So I think that's an important consideration for us going forward. Next question. On banking NII, you're right, there was a $100 million non-repeat items. So if you take that out for modeling purposes, you come to $11.6 billion. There are no other one-offs. There was a higher HIBOR quarter-on-quarter, and HIBOR also stabilized. And that's why, as you remember, third quarter when we gave a more cautious outlook because we don't know where HIBOR would be. But having seen HIBOR stabilize, it gave us the upbeat on our banking NII results. We also saw low betas on saving accounts in Hong Kong. And very importantly, we saw strong deposit growth, and we do expect this strong deposit growth to continue to be a key driver in 2026 along with the tailwinds of the structural hedge similar to last year and redeployment at higher rates. The only thing to bear in mind is that for this year, clearly, in Q1, given that there will be 2 days less there will be a headwind of $300 million in Q1. We have assumed, obviously, the rate changes, both that we've seen to date as well as projected for the year. But a lot depends on, as you can imagine, the timing of those rate changes, particularly in the U.S. dollar and sterling. Alastair Ryan: So we'll take the next question back on Zoom, Amit Goel at Mediobanca. Amit Goel: So two for me. The first one, just coming back on the upgraded RoTE targets. the 17% plus. I just want to check in terms of how you're thinking about that on a kind of year-on-year-on-year basis for '27 and '28. I mean are you thinking that RoTE kind of continues to improve? Or are you thinking more 17% is kind of a very acceptable and a good level and so any additional upside you would look to reinvest? And within that, I kind of note that on the LTIP, you've kind of brought up the lower end of the kind of the boundary performance to, I think, to 16.5% from 14%, but the 18% of the top end hasn't changed. So I appreciate that's done by the compensation committee. But I'm just kind of curious how you're thinking about what appropriate or sustainable level of return is. And then secondly, again, just coming back, maybe more clarification on the Hang Seng Bank kind of benefit and restructuring charge. So I mean, I guess, I was curious, really, for a bit more detail on the $0.4 billion of additional benefit, I guess, from an accounting standpoint, can't be treated as a synergy what exactly that is? And within the restructuring charge, I think previously you said that there's actually going to be more of a less staff, natural -- there will be more natural attrition and redeployment. So there'd be very limited kind of day kind of costs. So I'm just curious what you're spending that money on? Georges Elhedery: Perfect. Thank you, Amit, very much for your two questions. Pam can address them, but just to talk about LTIP briefly. This is indeed the remuneration committee consideration. It reflects the performance that we will achieve in '26, '27, '28, which aligns to the guidance we're giving you. So there isn't more we can say at this stage. Apart from that, it is more ambitious and reflects our ambition to the business. Manveen Kaur: Thank you, Jordan. Thank you for your question. So firstly, yes, we have ambitions and our target is 17% plus each year. We are not giving a trajectory, whether it's the same or progressive but of course, we continue to grow our business and invest in it diligently, but the target is just 17% plus each year. In terms of our -- the Hang Seng, firstly to call out, these are both benefits we are getting from a cost perspective but also a revenue perspective. So classically, what you would see in terms of cost synergies and all the restructuring is actually severance costs, that is not the case here. Because there is so much focus on revenue as well, a lot of the restructuring will be in terms of investment from a technology perspective. The cost synergies themselves, of course, there will be some realignment and evolution of roles and individual areas. It's not something which is going to lead to severance or staff reductions. There could be some rule changes, clearly. There will be some scale in product manufacturing and there'll be some technology harmonization. Now when we think in terms of the 2 bits with the $500 million, the $400 million and why it so, clearly, from a cost synergies perspective, it's easier to call out. Revenue synergies, there are greater haircuts, but we do have very detailed comprehensive plans on how we are going to drive these revenue synergies. And those plans underpin the $400 million even though they were a haircut in the $500 million and just in total, to reiterate because there are lots of numbers going around. I appreciate that. Think of it as a $900 million benefit in those 2 buckets with different degrees of accounting rules and different probability of expectations and then an overall restructuring cost of $600 million to achieve that total. Georges Elhedery: And Amit, we are a net investor in people in Hong Kong. We are also investing in technology in Hong Kong to capture all these growth opportunities we have been talking about. Therefore, we do not expect, anticipate or plan any program of redundancies. We do, though, expect that some roles may need to evolve, and we are basically committing to training, reskilling to make sure that our own colleagues have these growth opportunities, career opportunities to be able to capture these roles in which we will be investing over the duration of our program of 3 years. Manveen Kaur: That's a meaningful number that we have already included in that $600 million restructuring costs for training and reskilling of our colleagues as their roles change and evolve. Alastair Ryan: Thank you. Will stay on the Zoom with Kian Abouhossein from JPMorgan. Kian? Kian Abouhossein: First of all, Georges, congratulations. I have to say you really driving the bank to a better process and discipline. We haven't seen in HSBC before, if I may say so. To the questions, tech stack, can you go a little bit more into detail? You gave a number in 2022 that you're spending about 20% on IT as a percentage of expenses. Wondering if we should think about similar ballpark. Within that, can you go a little bit under the hood and discuss where are you on cloud transmission are you done? Where are we on platforms? Are you done? Or what platforms still have to be produced new or integrated data management? So I really want to understand a little bit what you're doing on the tech side. And then CRE, this is still an area where I'm a little bit uncomfortable. Stage 3, CRE China 18% coverage, 16% on Hong Kong -- 14% sorry, on Hong Kong, stage 3. Can you talk a little bit where you want to drive that to? And clearly, I heard Pam's remarks about provisions and CRE was mentioned. Georges Elhedery: Perfect. Thank you, Kian, for your two questions and for your feedback. I'm going to take your tech question. Pam will cover the Hong Kong CRE. And I think it's a very important question. Thank you for asking it. We're indeed driving both performance and transformation with discipline, with precision, and we are doing it at pace. And we're very glad to see that the results of both performing, growing and transforming is delivering at pace, as you've seen in our 2024 numbers. So in terms of tech, you could broadly assume that 20% is the cost that we are spending on technology. But the way we're talking technology now is, number one, we are thinking about all those legacy or nonstrategic applications, which are consumers of run-the-bank costs, consumers of maintenance costs, patching costs, license fees that we are going to very proactively demise at scale. And we're very pleased to be able to say that we've demised more than 1,100 applications this year -- well, in 2025, this is more than 1/3 of the about 3,000 applications that we have deemed nonstrategic and looking to demise. Just to give you a perspective, we run about 10,000 applications, 9,000 actually, of which 3,000 are flagged to demise over the horizon between now and 2028, and we're moving at pace for that. Now that demise will allow us to free up investment capacity to put it in new technology and new capabilities in tech space. Cloud transformation, I think we are quite mature on cloud. I think we've moved from a cloud-first strategy where we moved many of our applications to cloud to now a more mature and therefore, more sophisticated approach to cloud by looking at optimization of hosting of applications. And therefore, we would look at any new applications or our existing stack, where it is better at. If it is on cloud where the majority is, then it will be on cloud, and then we will look at portability capabilities and resilience capabilities. And if it is on-premise, then or in the private cloud, then we will look at that. So I think we have matured our cloud approach, and we're already in a place where we want to be, but of course, we'll continuously evolve it. If you ask me where is the biggest investment going into the new technology today, it is definitely going into generative AI. I want to just take a minute to explain how we're thinking about generative AI because that's quite important. We're looking at generative AI in 3 work streams. They're on the Slide 8 of the pack. The first work stream is we're making generative AI available to all our colleagues in time, 85% mostly now enabled to make sure that we are helping our colleagues upgrade themselves and become future-ready. The first thinking is how can we bring our whole colleague population with us in becoming future-ready, generative AI enabled. They will have generative AI tools that they can use. They will have coding assistance or vibe coding assistance for those among our engineers, 31,000 already enabled, and we are seeing immediate productivity gains. We're seeing 60% speeding up in our unit testing. We're seeing 5x faster patching of code, patching of vulnerabilities and code, thanks to all these capabilities. This is our first mission. All our colleagues to benefit, to be trained, to be upskilled, to become future-ready, better version of themselves, more productive, better outcome for our customers. The second work stream in generative AI is fundamental reengineering of our processes end-to-end. 50 of those processes are already under review. Some of them have already delivered and finished, such as onboarding and KYC, but all sorts of processes, including fraud detection and prevention, credit applications, capital allocations and what have you data -- visas and what have you to allow generative AI to help us redesign the process in a much simpler way and also allow gen AI to be integrated in the process to process data in a much more efficient way. The result of which is a more productive bank, more efficient bank and a safer bank with stronger controls, and more importantly, a very simple bank that will be able to ultimately deliver to our customers closer to near real time or real time at the highest possible standard that's available for us. And that is an ongoing journey. The third work stream we're taking in generative AI is how we enhance customer experience at the customer touch points. So this is our relationship managers, wealth advisers, contact center operators. As they engage with customers, generative AI tools already rolled out, as you can see on the slide, will allow them to personalize at scale, to tailor-make, to customize at scale at the highest possible standards for our customers close to real time in a way that can allow us to deliver our capabilities to customers in a much more seamless, faster, better way. Customer experience will be materially enhanced. Now today, we will have operators using this generative AI at the service of our customers, but you can envisage that in a few years' time, we could possibly put these generative AI tools straight for utilization by our customers. Those are the 3 work streams. What I want to say though is that we're doing this with safety and security at the forefront. We're doing this in a way that we can review, monitor and audit everything we're doing in the space as a critical standard, and we're doing this in a way to keep control, resilience and human accountability always there because we are a regulated industry and our customers' trust is the most important asset, and we will do everything to make sure customers trust is always protected and nurtured. Thank you for that question. I'll hand over to Pam on Hong Kong. Manveen Kaur: Thank you, Kian. So just looking overall in our guidance, around 40 basis points guidance for 2026 considers all our portfolios. And of course, Hong Kong commercial real estate as well as the very small residual amount of China commercial real estate, and we look at a range of plausible downside scenarios before we give you this guidance. So just unbundling a bit. The China commercial real estate portfolio has really come down. It's now less than $1.5 billion, and our ECLs this year for this was below $200 million. So in that context, the names that have left that portfolio that's left, we feel much better about it compared to where the other portfolio was when we first started with it. Now when you think in terms of Hong Kong commercial real estate, firstly, I'm going to give you a bit of an update on the 3 segments within this Hong Kong commercial real estate portfolio and then how we look at the names, particularly the credit impaired names. Now the first one, we've been calling it for a year, and now I'm very pleased to say that the residential component of Hong Kong commercial real estate is near normalized. And I say that because whether I look at in terms of price increases, HPI has been up 5% year-on-year in 2025. But more importantly, we've seen a 10% growth and also sales volume. Rentals have already stabilized both in terms of the rental demand as well as the rental pricing. Now when we look at retail and the office space, of course, there are pockets of distress in it. But just as a broader context, we saw retail sales also in Hong Kong in May turn into positive. And they are now up year-on-year at 6.6%. But of course, this alone is not going to solve the problems of the retail sector because peoples retail shopping patterns have changed. They don't necessarily need to go to shops on malls, et cetera. Having said that, as there is more consumption in Hong Kong, we are seeing this shift from shopping places being changed into more food and beverage and so on, but there will be pockets of stress in it, and that will be coming from mainly oversupply at this point of time. Now office is the sector we are watching very carefully, because recently, we have seen both in terms of rental demand and in transactions for the best properties with the best spec in central in the best areas, there are some green shoots. But the downside is, at this point of time, vacancy rates starts are still around 17%. So that's what we will be managing through and following up very, very carefully. Having said that, in Hong Kong, we are not a distressed seller. It's a market we are deeply embedded in. We really understand well. But we are very resilient in terms of how we do our valuations. So we go and look at valuations, including distressed valuations. And we look at with our collateral position, and we stay well collateralized. And we've been following through this very closely over the last couple of years. The one metric, which I personally follow, though my job has changed now, is what happens to credit impaired names. And the exposure that you need to focus on is credit impaired names, which have an LTV over 70%. Now this number has grown and it now stands at $1.9 billion. But the ECLs against it have also grown, and they have grown to around $900 million. And if you go back quarter-on-quarter, that differential between the ECL number and the exposure sits around $1 billion number. So that's where you think your risk is. And of course, you have to see if some of the substandard names don't fall down and so on. So overall, I would say, given what we are seeing and particularly to notice that in this quarter, we had a stage 3 against one name, but the macro environment in Hong Kong was positive. And as a consequence, through IFRS 9 calculation, those 2 almost offset each other. So in that broader picture, we feel very comfortable with the 40 basis point guidance. Alastair Ryan: We will take Rob Noble at Deutsche Numis next. Robert Noble: Just on net -- sorry, noninterest income in 2026, what are the negatives in noninterest income for next year? So if you were to grow the same level, which was, I think, the low teens in 2025, you would blow through 5% revenue growth in '26, let alone in 2028. So why aren't you -- why are we much more positive on revenues than you're kind of sat now? And then secondly, just on Hang Seng, what's the difference in the local capital requirements in Hong Kong and the U.K.? Does the transaction change anything in terms of minimum group regulatory requirements and how we manage capital through the group? Georges Elhedery: Okay. Rob, thank you very much. Let me address your first question, and Pam may add to it and address definitely the Hang Seng capital question. So the 90% or more of our noninterest income, and therefore, our fee or other income is driven by transaction banking and Wealth. So looking at the dynamic in these 2 will give you a good perspective of how our non-NII is evolving. Transaction banking, we've reported full year growth of 4% year-on-year. We are seeing continued momentum in this space. We are a leader in practically all the aspects of transaction banking that we prosecute with our clients. We've been voted by 30,000 of businesses as the leader in payments, both in products, services and technology. We've been 9 years consecutively a leader in trade. We've been voted by corporates using foreign exchange as the leader in servicing them with foreign exchange. We continue investing in this space. We continue expecting resilience in this space, in particular in trade. And I can talk more to trade if desired. As you look at Wealth, Wealth remain unequivocally one of the strongest growth opportunities, in particular, one, given our footprint, where we are focusing on Asia and the Middle East and the underlying growth in Asia and the Middle East of Wealth is very strong and our ability to capture more market share is very strong. We're already a leader in Wealth in Asia, if you look at Wealth balances. And that's an area where we can benefit from this underlying structural growth opportunity. And second, Wealth because we are also accelerating our investments in this space. You've seen we've launched 26 or 27 wealth centers in 2025, taking the total to 64. We're hiring relationship managers, wealth advisers. We're empowering ourselves with generative AI wealth capabilities. We're building technology. We're creating a comprehensive set of products, and we continue investing in this space. So we do believe they remain -- Wealth remains a very strong growth opportunity, albeit we have dropped the guidance on that. And the idea is to give you an overall revenue guidance, which is better encompassing the overall opportunities and probably more relevant for your forecasting. Pam? Manveen Kaur: Thank you, Georges. So firstly, the only comment I'll make on Wealth is, as Georges said, we are very comfortable in our broad-based product proposition. But the only thing we need to remember is that this year, with how the markets have performed, therefore, on some of the Wealth that is generated through transactional kind of activity, we just have to see how that progresses in next year. We're not going to make a call out on how volatile or otherwise markets are going to be in 2026. So if there's anything that's what would have been a good consideration because we have to look at plausible downsides clearly in giving our guidance as opposed to just a base case or an optimistic case. So that's all I would say on that. Now from a Hang Seng capital perspective, we have already got the $3.8 billion benefit, which comes from the disallowed minority capital, which we don't need to have an impact on our CET1 anywhere. So that's a positive straight on. But generally, in a broader picture, across all our subsidiaries, which are 100% owned, we do have more flexibility in terms of how we move our capital, whether it's upstreaming or downstreaming, obviously, subject to what we consider the mark-to-market outlook is, where our portfolio is and subject to sort of regulatory discussions. So all in all, it does give us a better ability to move capital around the group and be more efficient in the deployment of capital. Alastair Ryan: The next question we will take again from the Zoom is [ Chen Li ] at China Securities. Unknown Analyst: I have a question about preservation of Hang Seng Bank. Could you provide further information about the growth opportunities? I want to know that in which aspects of the Wealth Management business will have more -- stronger synergies with Hang Seng Bank? And what are other outlooks for the Wealth balances and the Wealth Management margins? Georges Elhedery: Okay. Chen, thank you very much. I'll hand over to Pam, but remember what we said at the announcement on the 9th of October of our intent to privatize Hang Seng is these are commitments we are holding. Hang Seng Bank will retain its own authorized institution and governance. It will retain its own brand in Hong Kong, of course, as a major community bank and the largest local bank. It will retain an independent customer proposition that will compete in the market for all customers. It will retain its branch network. And that proposition will remain intact with a distinctive cultural strength and customer proposition, customer experience strength that Hang Seng has been known for, for practically a century in Hong Kong. What we are driving through these privatizations is better efficiencies in cross-selling or better efficiencies in aligning back office or manufacturing capabilities that are not related to the customer proposition. Pam? Manveen Kaur: Thank you, Georges. So firstly, as Georges has said, that the positioning of Hang Seng Bank as an iconic community bank in Hong Kong stays. What we will endeavor to do is that post the privatization, we don't have that arm's length relationship restriction that prevents us to do more in terms of product proposition offerings and cross referral to our customers and also in terms of the investment dollars that we spend, we can't spend them if it's on the same product, on the same customer journeys seamlessly across both the Red brand and the Green brand. So that gives us a very good position that as these 2 stand-alone brands, our ability to lean into the growth in Hong Kong and the macro opportunities, including cross-border will be available to the broadest customer base while maintaining that community element of service for those customers. So that's how we are looking at it. And we will look at, obviously, Wealth products as well as pricing margins so that we can really make them more easily available for our customers. Georges Elhedery: Chen, we are the market. We are the market leader in Hong Kong, undisputed. We are consolidating and cementing this leadership. Hang Seng Bank privatization will allow us to consolidate that leadership even further in all sorts of a broad range of products and services. And we have a leadership position in capturing these growth opportunities that Pam was talking about in Hong Kong as a super connector between the Mainland and the world, as poised to become the leading cross-border wealth hub on the planet before the end of the decade. And it's really a privilege to be in the position we are in to be able to capture this with the full HSBC and Hang Seng propositions. Thank you, Chen. Alastair Ryan: So I will take the next question from Ed Firth at KBW. Edward Hugo Firth: I just had two questions. One, just talking about the HIBOR benefit in Q4 for your net interest income. I think one of your peers talked about it as a temporary benefit. And I guess I'm not close enough to the franchises and how you price, et cetera, domestically. But I guess, do you know -- is there anything peculiar about you or some of the peers about the way you repriced CASA accounts or something in Q4, which would mean that yours should be sustained, but somebody else's might be temporary. So I guess that's the first question. And then the second question is, I guess, it's slightly an extension of Rob's question. I'm not quite sure what is so specific about 2028 that means you can get 5% revenue growth there, but I assume you don't feel you can before then. And I know that at the moment, in '26, we've got some headwinds from interest rates, but you've also got a very strong tailwinds around things like Wealth Management, Pam highlighted that. And '27, I guess, should be a reasonably normal year. So I'm just wondering, is there something that I need to think about that you can see that is happening from '28 and beyond that will make your revenue growth better that we're not seeing today? Georges Elhedery: Okay. Thank you very much, Ed, for your two questions. Pam, do you want to address that? Manveen Kaur: Yes. So let me just unbundle the situation with regard to HIBOR. So in the fourth quarter, HIBOR stabilized. And we had called out in the prior quarters that in 20 -- and I'll come to Q1 in a second. That in Q2 and Q3, HIBOR was very volatile. And we were looking at the comparison for a HIBOR close to a 1% where it has an impact of about $100 million in terms of banking NII on a monthly basis and then stabilizing to something which is in the 2% mark. We look at HIBOR on a 1-month HIBOR basis. We feel very comfortable as long as HIBOR is around 2.25%, 2.5% and so on. I fully recognize that in -- and I don't know what other peers would say, like what tenor of HIBOR rate is most relevant for them. I'm just telling you from our perspective. Now in Q1, HIBOR has fallen, but we have to see the context. There's been a range of IPOs that normally happens. When there's that demand for HIBOR fluctuation, but it has fluctuated within a narrow range. So the impact isn't there. Also, last year, in Q4, there was a benefit of lower betas. So when HIBOR went up, the same impact wasn't there on the savings rates. Of course, we'll have to look at betas, how they evolve. And then we have a very strong deposit franchise. And I think that's a differentiator in terms of the CASA level that we have, in terms of our accounts. And therefore, we have a good positioning where that deposit base helps us on the banking NII more than most of our peers. Obviously, in terms of both banking NII this year and also our ambition, it's the rate headwinds. And as I said earlier, it's the timing of the rate headwinds. If they're delayed, of course, it becomes less of a headwind. If they are earlier, then there is more sensitivity to it. So I would say from a Wealth business, as I also alluded to earlier, yes, the growth is very strong whether its asset management, Wealth products, insurance, it's broad-based growth. But last year, there was a great advantage or a tailwind coming from markets, which gave us a lot of uplift on the transactional-based fee income. We can't assume that for this year. Of course, if markets stay well and that happens, then that's a positive tailwind. So that's how I would look at it. Georges Elhedery: Yes. And I would look at '28, not specifically as the year '28, but as what would we believe our long-term structural opportunity to grow. It's our guidance for '28, but we've delivered 5% revenue growth in '25. We've delivered 4% in '24. So it's just the footprint we are in and the capabilities for us to capture the growth is there. Manveen Kaur: And we like to be cautious to we have to consider downside scenarios as well. We don't always take the best case. That's all I would add. Alastair Ryan: Many thanks. We have probably time for a couple more questions. We'll take Alastair Warr at Autonomous next. Alastair Warr: Two questions. Back to Hang Seng Bank, I'm afraid. You touched on potential upside from asset quality improving. I just wondered if that's something you're thinking about in terms of maybe more active steps? Or is this just about being patient with the property cycle? And then just on the Wealth side for a second question. It looks like there's a bit of a slowdown in the new account opening in the fourth quarter if you've got 1.1 million for the year and you were running at about 300,000 a quarter. Is that just seasonal or anything changing there that we should be aware of? Georges Elhedery: Thank you, Alastair. Pam, you can. Manveen Kaur: So just in terms of the asset quality, the comment I made was that if you look at Hang Seng's pre-impairment margins, they've been very strong. If you look at what Hang Seng's ECL charges have been prior to '22 versus in '24, '25 and even the run rate for the first half of the year and then what's consolidated for the full year, that's what I meant by the overall improvement, and that would be both for Hang Seng Bank as it would be for HSBC Red brand, and that's the only way to look at it. In terms of our own policies or processes and how we manage exposures, both for the Red brand and Green brand, they are highly aligned, how the rigor we follow through them, I don't expect any of that to give us either a tailwind or a headwind. So in terms of the new-to-bank customers, yes, it was 1.1 million, just to clarify for the Red brand. And the fourth quarter also had a good number. We believe that this new-to-bank customers is a huge growth opportunity for us. However, we are trying to be now a little bit more selective on the acquisition because we have now had a 3-year trend on how the acquisition has happened in between the lower end of the customer base and the more premier. We have added a fee for the new-to-bank customers who have a balance less than HKD 10,000. And because of that, we expect that there would be slightly slower acquisition in 2026. But the focus on our affluent customers is going to continue. The focus of the improvement in our overall income, whether it's through deposits, Wealth products, insurance is very healthy coming from these new-to-bank customers. So we don't see any change. We just don't want people to say that every month is going to be like 100,000 number because it's like almost like a ticker number because that's what the trend was. There will be fluctuations and changes month-to-month and quarter-to-quarter, but nothing material to call out as such. Alastair Ryan: We'll take Kendra Yan at CICC. Jiahui Yan: My question is kind of related to micro side. As the newly nominated U.S. Federal Reserve Chair has proposed interest rate cuts and balance sheet reduction. Could you please share your macro assumption behind the future 3 years guidance? And are there any risks that we need to pay attention to? Georges Elhedery: Yes. Thank you, Kendra. We can do that, Pam? Manveen Kaur: Yes. So just as I said earlier, Kendra, when we look at our guidance, we look at plausible downside scenarios. That include interest rate cuts, both quantum as well as duration. This time around, as we said, the starting point for the guidance for this year was the January year-end cuts, but we also stress test our portfolios on a regular basis for a range of scenarios. And we consider those and the impact on ECLs also on a weighted average basis when we look at our overall portfolios. We have looked at the -- some of the macro I would say, recent news, whether it's to do with private credit or otherwise because as I said earlier, we look at second and third order risks that may come from some sort of a macro event or issue, even though our own underwriting practices are very stringent and very rigorous in this respect. What I will say is that despite the evolving scenarios that you are facing on tariffs and trade, our business has been really quite resilient. And that has -- overall, it is up 2% year-on-year in 2025. In a complex market as this landscape evolves, our relationships and engagement with clients gets even stronger. We have taken market share in corridors through -- in Hong Kong, U.K., Asia overall as supply chains are moving and corridors are shifting. So I would say, overall, if I think in a macro sense, there are headwinds and tailwinds as well as for the world at large, but also for HSBC. We look at specific idiosyncratic factors that could impact us, any risk concentrations we may have in our home markets, and that's all part of our guidance. And that's why I said to you earlier or to the earlier question that when we give our guidance and our targets, we like to be rightfully conservative. But the most important thing is through this period, we have made an assumption that we will continue to invest for growth. We have the right strategy. We have the right priorities. We have the focus to retain and win market share and we will continue to do that with the basic underlying principle that Georges called out earlier, we are here to serve our customers, and it's the strength of our relationship with our customers that gives us the confidence for our guidance and targets. Alastair Ryan: Yes. Thank you, Georges. So we'll just take a final question today from Katherine Lei at JPMorgan. Katherine Lei: Okay. My question is still on revenue side, right? I think the 5% revenue growth in 2028 and then the above 17% RoTE guidance, I think there's 2 key drivers. One will be on NII and then the other will be on Wealth. But my question is that on NII, what is -- like what gives HSBC the confidence that on the sustainability of the deposit growth? Because one trend we noted is that, say, for example, in China, with RMB appreciation and also China start to taxing its citizen globally, will that actually slow down, say, for example, Chinese nationals coming to Hong Kong to open new accounts and then the money flow movement? So can we be more a bit specific on what are the key drivers and then the key path on the deposit growth? This is number one. Number two, I think is still on -- number two is on Wealth and on that trend, right? So what do you think that will have an impact on our Wealth as well? Georges Elhedery: Okay. Thank you very much, Katherine. Let me address them in reverse order. I'll speak a little bit about Wealth, and I'll share some thoughts about deposits and Pam can give you additional granularity to address your question. Wealth remains structurally a very important growth opportunity for HSBC, as we said specifically that we are aligning our Wealth footprint, Asia and Middle East to where the Wealth is growing fastest in the world in Asia and the Middle East. Also our ability to capture wealth all the way from the premier customer base, which is the affluent middle class all the way to the high net worth means we have a better catchment of all these opportunities. We're also present in a number of onshore markets such as China onshore. We are the leading international wealth manager in China, Mainland China onshore, which is not dependent to flows outside China, for instance. We're investing in India. We, of course, have big wealth hubs in places such as Hong Kong, of course, Singapore, the UAE and a number of other markets. The challenges possibly to anticipate is there is a turnaround or a change in the overall outlook of investment because inevitably, wealth will depend on the underlying performance of the invested markets. And if there is -- today, there is a strong resilience in these markets, which is what we -- our customers are also looking at. But that is, of course, always a risk that we need to be watchful of. We're also investing to gain share. We're investing to diversify the product offering and to diversify the wrapper offering all the way from insurance to asset management to other forms of brokerage, et cetera. So that we are able to meet the varying wealth customers' needs in how they look at their investment requirements. Finally, we're also investing in generational wealth, specifically supporting transfer to the youth or the next generation or transfer between wealth centers in a way our footprint allows us to do that is competitively very strong compared to a number of our peers who are offering wealth from very, very few number of hubs, okay? That's the wealth. Now with regards to deposits, Pam will give you a better answer in the details you're asking for, but let me tell you one thing about deposit. It is the foundational product on which our customers' trust is expressed with HSBC, and this is how we look at it. Customers trust us with their deposits. That's the starting point of any possible service and proposition in transaction banking, payment, financing and otherwise. So we cherish this asset class. We have always cherished it, through thick and through thin, in good rates and bad rates, and we will always focus on what it takes to make sure our customers trust us, the financial strength, the level of service so that we earn their trust with their deposits. When you look at our deposit base, it has grown in every business. It has grown, and we are highly surplus liquidity in every currency, every major currency, in every major geography. So there is a deep rooted across our 4 businesses and across all the geographies where we operate. a deep-rooted trust, which we nurture to support customers giving us their deposits and using us as their deposit bank by preference or by excellence that can support, if you want, our outlook on our deposit growth. Pam? Manveen Kaur: Thank you, Georges. And Katherine, a really good question to close on. We have seen deposit growth, as you've seen in our new disclosures on Wealth across the spectrum of our customer base, premier, private bank, retail in every market, in every jurisdiction, even when there isn't a home market, and that really underpins the growth that we are seeing in our banking NII. We have taken very conservative trajectory on loan growth. I'm hopeful at some stage, loan growth will also pick up, which will then also support the banking NII if from an interest rate perspective, the timing of the interest rate becomes a headwind in one of those plausible downside scenarios. We have a structural hedge, which is continuing to be a tailwind given all the work we did a few years ago. We will also continue to build on the structural hedge, even though the largest increases we have done are -- have been behind us now. So if I look at all of these things in the round, and I look at the momentum of the business that we have seen in the first sort of 7 weeks of this year, that gives us confidence for our banking NII guidance for 2026. If you underpin that just based on the fourth quarter, obviously, it will give you a number of [ $46 billion ]. But we are not calling that out because we are very cognizant of the headwinds on interest rates. And you're right, the interest rates in the U.S. is down 50 basis points, U.K., 25 basis points just year-to-date with further 2 to 3 rate cuts to happen. So with that, I think in the round, we feel very confident that the banking NII, which is, again, the trust of our customers and what we are doing everything to preserve that trust and to build on those relationships, because I'll just end with one thing. We are fundamentally a relationship bank. We have a full-service suite of products we offer to our customers. So for our guidance, for our targets, we look at that full range. We are not a product proposition-based bank, in which case, some of the comments you made will obviously be a bigger headwind. Georges Elhedery: Perfect. Thank you, Pam, and thank you, Katherine, for your last question. Thank you, everyone, for joining us. We are pleased to report strong revenues, strong profit, strong returns and strong distribution to our shareholders. We are confident we can navigate the challenges ahead of us from a position of strength, and this has allowed us to put ambitious targets about our revenue growing every year for '26, '27, '28 rising to 5% in '28 as well as our return on tangible equity delivering 17% or better every year over that period with a 50% dividend payout ratio, all excluding notable item. Thank you very much for joining us this morning or this afternoon, and I hope you have a good day. Manveen Kaur: Thank you. Operator: Thank you, ladies and gentlemen, for joining today's webinar. You may now disconnect.
Leroy Mnguni: Good morning, ladies and gentlemen. I'm Leroy Mnguni, Head of Investor Relations for Volterra Platinum. Thank you for taking the time to join us for our 2025 final results, both in person and online. Let me start by welcoming our Board members who are here with us in the room today as well as our executive leadership team. From a housekeeping perspective, we do not have any fire drill planned for today. Therefore, if you hear an alarm, we request that you exit the venue safely through the doors at the back. For those of you that are near the front, please note that there are exits on either side of the venue on the lower level as well. Our fire marshals and security officials will be stationed outside the venue and will escort us to a designated assembly point. To draw your attention to the cautionary statement, I would encourage you to read it carefully in your own time. Now for the agenda for today. Craig Miller, our CEO, will take you through a brief overview of the significant milestones achieved during 2025, followed by a review of our operational and market performance. Sayurie Naidoo, our CFO, will then take you through the financial results. Finally, Craig will wrap up the presentation. As usual, we've allocated time for Q&A at the end of the presentation. I'll now hand over to Craig. Craig Miller: So thank you, Leroy. Good morning, everybody. And once again, thank you for joining us. I'd like to begin by reflecting on safety. So tragically, we lost 2 of our colleagues in work-related fatalities during 2025. Mr. Felix Kore at Unki Mine on the 20th of April and Mr. William Nkenke at Amandelbult's Dishaba mine on the 22nd of July. We extend our sincerest condolences to their families, friends and colleagues. The lessons learned from these tragic incidents are being implemented across our organization. And while we mourn these losses, we also recognize that we've made good progress on safety overall, and we've achieved a number of milestones at our operations, including 14 years without of fatality at Mototolo, 13 years at Mogalakwena and 9 years at Amandelbult's Dishaba mine. We've also improved our total recordable injury frequency rate by 11% to the lowest level in our history, placing us in the leading quartile amongst our peers. Safety remains our highest priority with our unwavering focus on achieving zero harm. Our teams are committed to proactively preventing injuries, and we will not compromise on safety under any circumstances. We're also fully dedicated to delivering on the commitments that we have made. And with that in mind, I'm delighted to say that 2025 was an exceptional year for Valterra Platinum despite navigating a challenging external environment. Some of the progress highlighted here reflects discipline in action from strengthening our operational excellence to executing consistently across all of our strategic priorities. Most significantly, we launched as an independent company, having successfully completed the demerger from Anglo American plc as well as our secondary listing on the London Stock Exchange. Subsequently, Anglo American plc sold their remaining minority interest, fully completing their divestment from Volterra Platinum. Our simplified organization structure has been well embedded with a reconstituted executive committee focused on the delivery of the strategy with clearly understood accountability lines. We've reinforced our operational capabilities through the recruitment of critical skills and services, and we will have exited all of the transitional arrangements with Anglo American by the end of 2026. Our reconstituted Board comprising of 11 nonexecutive directors and 2 executive directors brings the required diversity of experience and expertise. Our relentless pursuit of operational excellence has delivered a really good performance, having exceeded our production guidance despite the weather-related impacts experienced in the first half of the year. Financially, we exceeded our targeted cost savings in 2025, which has brought our total cost and capital savings delivered over the last 24 months to ZAR 18 billion. I'm particularly pleased with this result given the macroeconomic factors impacting our cost base. Our entire organization is focused on maintaining this cost and capital discipline, notwithstanding the higher commodity price environment. And as we've previously said, each of our assets plays a well-defined role in the portfolio, and I'm glad to report that they have all contributed to the progress during 2025. Our extensive endowment of mineral resources provides an exciting growth prospects for Valterra Platinum, and I'll take you through the progress that we've made developing these projects, particularly Sandsloot and Der Brochen in just a few slides. We continue to actively seek opportunities with industry players to drive demand to ensure the long-term success of our industry. Over the past year, we've maintained our focus on enhancing PGM usage in mobility, jewelry and investment. And on the industrial front, the recently announced partnership with Johnson Matthey and Sibanye-Stillwater is evidence of our commitment to working with industry players to grow industrial demand. And we would certainly welcome other producer peers to join us in this venture and of course, not to preclude us from working with other fabricators in other areas. And finally, the recognition of Mogalakwena by the initiative for Responsible Mining Assurance with a 50 accreditation means all of our mining operations are now accredited. This is a rare global feat that sets us apart in the mining industry and reaffirms our commitment to embed sustainability into absolutely everything that we do. So now let's dive into the detail of our performance. I am encouraged to see the delivery of our strategy has led to an improvement in our underlying performance. While we've obviously benefited from the increase in the PGM basket price, the drivers of which I'll walk through a little bit later, the 68% increase in EBITDA is substantially supported by our internal actions as well as that macroeconomic price environment. And consistent with our commitment to drive down our all-in sustaining costs in real terms, we've consistently driven down that all-in sustaining cost and have maintained this at below $1,000 per 3E ounce. Our balance sheet has strengthened materially over the second half from a ZAR 4.5 billion net debt position at the end of June to an ZAR 11.5 billion net cash position at the end of the year, reflecting the outstanding free cash flow generation. This has allowed us to pay a special dividend on top of our base dividend, bringing the total dividends for the year to approximately ZAR 12 billion. It's certainly not just our shareholders who are benefiting from the additional value that we are creating. As you can see, Valterra Platinum continues to be a significant contributor to both our local communities and the broader South African economy through the combination of local procurement, capital investment, social investment and of course, salaries, wages, taxes and royalties. All in all, we've contributed more than ZAR 83 billion to our stakeholders. Valterra Platinum is truly playing its part in sharing value to better our world. So turning to a bit more detail on our operational performance. We outperformed on operational delivery this year due predominantly to the improved performance in the second half of 2025 when our operations demonstrated far greater stability and efficiency underpinned by our focus on safe and responsible mining. A record number of tonnes were milled at Mogalakwena, which helped to more than offset the weather-related decline at Amandelbult, resulting in total tonnes milled increasing 1% year-on-year. Amandelbult's strong second half performance, aided by the faster-than-anticipated ramp-up to steady-state volumes exceeded guidance with total production at 484,000 ounces. Our mass pull improved by 9% compared to 2024, underpinned by notable improvements at Mogalakwena as well as Amandelbult. Overall, our refined production, which was supplemented by inventory optimization, exceeded our 3.4 million ounce guidance. Sales volumes included refined margin -- refined inventory destocking totaling close to 3.5 million ounces. So delving now into the performance of some of our assets. Mogalakwena's pit optimization efforts led to a clear improvement in its operational performance. Our strip ratio has declined 22% to 4.5x. This means that we mined 15% more volumes despite an 8% reduction in total tonnes mined. The efficiency improvements have allowed us some flexibility in the selection of ore grades. So in line with our value over volume strategy, we've been able to process some of the lower-grade stockpiles while still reducing unit costs. This has resulted in the lower head grade, which was offset by higher tonnes milled, delivering similar ounces to what we achieved in the prior year. I'd like to take a brief moment to really emphasize that these developments provide a significant value-enhancing opportunity for Mogalakwena. We can mine fewer tonnes and supplement the expert ore with surface level lower-grade ore stockpiles, resulting in lower operating cash costs, while our volumes are maintained within our guided range. But most importantly, we can keep this Tier 1 asset anchored in the bottom quartile of the cost curve. Other operational excellence initiatives at Mogalakwena have resulted in notable improvements in both mining and in concentrating activities. We've seen a 9% advance in drilling efficiencies and a 15% improvement in redrills, while our load and haul efficiencies have improved 24% and 18% year-on-year, respectively. These positive developments have started to materialize in lower operating costs and together with the benefits of higher co-product revenues has resulted in an 8% reduction in our all-in sustaining cost to $835 per 3E ounce. And so no doubt, you're all keen for an update on the Sandsloot underground, not only because it's genuinely exciting, but because it has the potential to truly move the needle. Here's a reminder of why this project has the potential to be a significant strategic catalyst for Valterra Platinum. Our declines begin at the base of the Sandsloot open pit, providing close access to the reef. This substantially reduces project lead time and lowers capital intensity compared to other projects in the industry. Unlike other Bushveld complex reefs, its height is between 40 and 120 meters with a 45-degree dip on average, characteristics well suited for bulk underground mechanized mining. At 4 to 6 grams per tonne, the reef is materially richer than other mechanized mines in the PGM industry. Growth uplift is driven by higher grades rather than increasing volumes, enabling us to leverage the existing concentrator and tailings facilities. This approach will save us billions in upfront CapEx and costs. And this year, we plan to commence trial mining, which will provide critical inputs to our comprehensive feasibility study. The conclusion of the prefeasibility study has reinforced our confidence in the 10% to 50% uplift in Mogalakwena PGM volumes and a 10% to 20% reduction in costs that we've previously communicated, numbers that we believe will truly move that needle. With the scale of the opportunity in mind, over the past year, we've made great progress in bringing this closer to reality. The team has completed a further 30 kilometers of exploration drilling, which has informed the total upgrade of 13 million ounces to measured and indicated mineral resources, which is available for future ore reserve conversion. The underground development has advanced a further 3.2 kilometers, while the team also successfully completed the pass for the ventilation shaft 1. Trial processing of the bulk ore stockpile is underway, which has accumulated to approximately 80,000 tonnes by year-end. And we've invested about ZAR 1.4 billion in CapEx to advance the project, while over the medium term, our CapEx guidance remains unchanged. I really hope that you're as excited about this as we are given the potential of this opportunity for Valterra. So moving on to Amandelbult. I am incredibly proud of how our teams responded to the flooding. Not only did their decisive actions ensure safe and responsible evacuation of all of our employees, they also accelerated the dewatering well ahead of plan and enabled a faster-than-expected ramp-up to normalized production. So a huge thank you to everyone that was involved. And as I've mentioned, this has enabled Amandelbult to exceed its revised guidance in the second half of the year with the second half performance outperforming that of what we achieved in 2024 despite Tumela mine only reaching steady state by September. This performance highlights the strong operating potential of this asset with our 2026 guidance indicating an approximately 25% recovery. Despite the severe flooding impacts, Amandelbult delivered positive free cash flow, further supported by the insurance proceeds. The resilience of the quality of this ore body with its favorable prill split and rich chrome products driving the highest basket price in the PGM sector at around $3,000 per 3E ounce at current spot levels. So moving on to Mototolo. The Der Brochen project development has progressed well through 2025 with all development ends successfully intersecting the reef having navigated the [indiscernible] zone. Total develop more than doubled, reinforcing the long-term optionality and sustainability of the operation. We also achieved a 9% increase in immediately available ore reserves, enhancing near-term operational flexibility. At Mototolo, our operational excellence initiatives delivered a 12% productivity uplift. Despite the dilution from the development tonnes, production remained consistent with that of the prior year. So looking ahead, the ramp-up of the new, more efficient Der Brochen mine with the continued improvement in chrome recoveries and further optimization of the 3 declines are expected to drive Mototolo's cost further down the cost curve. Our processing operations have also seen improvements beginning with our upstream performance. We achieved a 1% to 2% improvement in concentrator recoveries at both Amandelbult and Mototolo, aligned with our strategic objective to enhance recoveries and improve margins. At Mototolo, recoveries -- sorry, beg your pardon, at Mogalakwena, recoveries remained flat, a notable achievement given the 13% reduction in our mass pull. Amandelbult's 7% reduction in mass pull also contributed to the reduction across the business. And I have already mentioned Mogalakwena's record milled tonnes were supported by the ongoing improvements in plant availability and proactive investment into reliability. And so now for the much anticipated update on the Jameson Cells. Sorry, that was like really dramatic, I'll take a sip. We have optimized the plant to further deliver improvements following the first half commissioning. And we are expecting additional improvements at the Mogalakwena concentrators on top of the 13% I've just mentioned as optimization continues and the plant's annualized impact is realized. We're also really encouraged by the almost 1 percentage point improvement in the adjusted North concentrator recoveries since the commissioning. And while the recovery uplift was not the primary objective of the introduction of the Jameson Cells, the team is optimistic that further improvements may follow. So to put that impact into perspective, volumes at the Mogalakwena North concentrator declined 14%, while concentrate grade increased 16%. Importantly, there are many wider benefits to the mass pull reduction. In 2025, we saw a 21% reduction in trucks transporting concentrates, a 4% decrease in smelter electricity consumption and a corresponding 5% reduction in CO2 emissions, delivering an estimated cost saving of about ZAR 123 million with additional savings expected in 2026, commensurate with further improvements in mass pull. So now turning to our markets. There were several positive developments in the PGM markets during 2025. While we've all seen the overall increase in the basket price, it's important to note that there were multiple factors that contributed to the increases with a few dominant drivers standing out. Firstly, the year began with moderate price gains owing to a weaker U.S. dollar. Prices accelerated as the market tightened over concerns about tariffs and weaker mine supply. And although primary supply normalized in the second quarter, stronger price gains followed from May onwards with a large price differential with gold prompting strong Chinese buying. This was then accentuated in June and July by renewed tariff concerns, prompting further sizable U.S. imports. The second half of the year benefited from strong investor purchasing, driven by the debasement trades and the launch of the Guangzhou Futures Exchange. Specific factors also contributed, such as a robust hard disk purchasing in ruthenium and the recovery of rhodium demand, particularly in the fiberglass applications. And while price movements were dynamic, they were firmly underpinned by market fundamentals; tightening supply, stronger-than-expected demand as automotive sales prospects improved and inventories that proved less abundant or more tightly held than many had anticipated. The second half of 2025 was an exceptional period for PGM prices. The full basket price ended the year 86% higher than at the start of 2025. All metals contributed to this increase with platinum, palladium and rhodium being the largest contributors. There are 2 potential bullish drivers already making an impact. You may remember that we called these out specifically at our Capital Markets Day last year. Firstly, BEV penetration forecasts have been revised downwards, particularly in Europe and the U.S.A., markets where vehicles are heavily loaded with PGMs. Political developments in both regions have further supported the internal combustion engine vehicle demand. Meanwhile, the price of platinum rose considerably, but it is still trading at a substantial discount to gold. This has enabled platinum jewelry to gain market share in several key geographies and heightened interest in substituting PGMs for gold in various industrial applications. Our total supply and demand outlook for PGM markets points to continued tightness in the medium term. We expect global car sales to continue growing alongside an expanding world economy. Downward revisions to BEV growth in key markets are also supportive. Mine supply is expected to decline over the medium to long term, though at a slower pace than previously anticipated due to higher prices. Elevated prices will also encourage recycling volumes, but still face headwinds. And importantly, even at current price levels, new mine projects are unlikely to come online soon nor will vehicles be scrapped any earlier. Structural constraints to materially higher supply, therefore, remain. Our outlook is broadly consistent with prior expectations. And in 2026, we anticipate a sizable deficit in platinum, while palladium's anticipated surplus again fails to materialize. Beyond that, platinum should remain well supported, while palladium and rhodium will shift more to balance, but at an uncertain pace. These balances exclude investor demand, which enjoyed strong tailwinds in 2026. PGMs are increasingly recognized not only as critical minerals, but a safe haven assets, reinforcing their strategic appeal. I'll now hand you over to Sayurie to take you through the financials. Sayurie Naidoo: Thank you, Craig, and good morning, everyone. I am pleased to be reporting a strong set of financial results for 2025. Despite the demerger activities and headwinds faced during the year, our performance underscores the robustness of our business and the strength of our operating model in driving long-term value creation. To summarize our performance, revenue increased 7% year-on-year to ZAR 116 billion, driven by the uplift in the PGM basket price. This was partially offset by lower sales volumes, reflecting reduced M&C production, mainly from Amandelbult and the prior year's larger release of built-up work-in-progress inventories. Our disciplined cost management approach delivered a further ZAR 5 billion of operational and corporate savings, more than offsetting inflationary pressures. As a result, EBITDA increased 68%. And on the back of this, the company generated sustaining free cash flow of ZAR 20 billion. This meant we ended the year with a strong net cash position of ZAR 11.5 billion, boosted by a stronger second half. In line with our disciplined and balanced capital allocation framework, the Board has declared all net cash as a final dividend, equating to ZAR 43 per share. The company delivered a solid EBITDA performance despite the operational challenges in the first half of the year. EBITDA was supported by a 26% stronger PGM dollar price of $1,852 per ounce, partially offset by the strengthening of the rand. Input cost inflation of 5.4% reduced earnings by ZAR 2.8 billion, while royalty expenses reduced earnings by a further ZAR 1.1 billion, in line with higher revenue. Our success in delivering on our cost-out initiatives made a significant contribution to the uplift in earnings. As you are aware, earnings were also affected by the one-off demerger-related expenses, which have been largely completed and the impact of the Amandelbult flooding event, although insurance proceeds mitigated the majority of that impact. Mining operations contributed ZAR 29 billion to EBITDA at a mining margin of 38%, while POC and toll contracts contributed ZAR 9 billion at a margin of 21%. Since launching our operational excellence drive, we have delivered a decisive reset of our controllable cost base, which is down 18% since 2023. The ZAR 5 billion saved in 2025 was achieved across several areas, including consumables optimization of ZAR 2.2 billion, ZAR 1.4 billion from labor and contractors, reflecting the flow-through benefits of the operational restructuring undertaken in 2024 and a further ZAR 1.4 billion as a result of the simplified operating model post the demerger and other corporate cost reductions. As a result of our cost-out program, we achieved a cash operating unit cost of ZAR 19,488 per PGM ounce, in line with our revised guidance. Guidance for 2026 is ZAR 19,000 to ZAR 20,000 per PGM ounce, reflecting a partial inflation offset from ongoing cost-saving initiatives and increased production from Amandelbult. We are also targeting a further ZAR 1 billion to ZAR 1.5 billion in cost savings for 2027 as a result of the demerger with some of these benefits expected to materialize in 2026. Full year capital expenditure amounted to ZAR 17 billion, at the lower end of our guidance. Sustaining capital expenditure was ZAR 12.5 billion with a primary focus on asset maintenance, furnace rebuilds and mining equipment replacement. Sustaining capital also includes capitalized waste stripping, which declined ZAR 1 billion from 2024 due to lower waste tonnes mined, consistent with our value over volume strategy. Discretionary capital of ZAR 4.5 billion was directed to Sandsloot underground development and drilling as well as surface infrastructure and development at Der Brochen. We also commenced work on the repurposing of the Mortimer smelter. As we move into 2026, total capital expenditure is expected to remain broadly in line with 2025 at ZAR 17 billion to ZAR 18 billion. This is ZAR 1 billion to ZAR 2 billion lower than our previous guidance of ZAR 19 billion, again, reiterating our continued commitment to cost and capital efficiency. Of this, ZAR 12.5 billion will be incurred in sustaining capital to maintain asset integrity and ZAR 4.5 billion to ZAR 5 billion on discretionary capital. Turning to the impact of our cost and capital efficiency on all-in sustaining cost, which was $987 per 3E ounce, below guidance and flat year-on-year. Notably, this represents a 13% decrease from 2023, underscoring our cost control. I would like to highlight that going forward, we have revised our calculation methodology for all-in sustaining cost to include life extension capital to align with our updated capital definitions. On this basis, the all-in sustaining cost for 2025 was $1,039 per 3E ounce. Looking at the cost curve on the right-hand side of the slide, all of our own mine assets are firmly in the first half of the cost curve. Amandelbult's strong co-product credits, together with the benefits of the insurance proceeds have contributed to its positioning in the second quarter despite the impacts of the flooding. Our 2026 all-in sustaining cost guidance is around $1,050 per 3E ounce, assuming an exchange rate of ZAR 17 to the dollar. The company closed the year with a robust balance sheet, ending in a net cash position of ZAR 11.5 billion. Since 30th June 2025, the company generated cash from operations of ZAR 28 billion. And of the total ZAR 17 billion capital expenditure, ZAR 9 billion was incurred in the second half of the year, alongside the payment of the interim dividend. I have already talked to the one-off cash impacts relating to the demerger, which had an impact of ZAR 2.9 billion in the second half. We also received ZAR 2.5 billion in insurance proceeds. The flood claim is now in its final stages, having reached the end of the indemnity period, and we anticipate receiving the final payment during the first half of 2026. Liquidity headroom at the end of the period was ZAR 43 billion. Our banking group remains broad and strong, comprising both local and international institutions with committed facilities in both rand and the U.S. dollar. 2025 marked a major milestone for our stand-alone journey as we secured our inaugural global credit rating from S&P, achieving investment-grade status. In addition, we established a domestic medium-term note program, enabling us to issue listed debt in the South African bond market. This will provide an opportunity to diversify our debt funding sources and potentially lower our cost of borrowing. And in line with our capital allocation framework, the Board has declared a final dividend of ZAR 11.5 billion or ZAR 43 per share, comprising a base dividend of ZAR 23 per share or ZAR 6.2 billion, in line with our policy of 40% payout of headline earnings and a special dividend of ZAR 20 per share or ZAR 5.3 billion. This brings our total 2025 dividend to ZAR 12 billion or ZAR 45 per share. This marks our 17th consecutive dividend since reinstatement in 2017, affirming our commitment to industry-leading and consistent shareholder returns. I will now hand you back to Craig to wrap up. Craig Miller: Thanks very much, Sayurie. And to conclude, so our strategy remains clear and disciplined, maintain capital efficiency, drive cost reduction and maximize cash generation to enhance shareholder returns. Over the last number of years, we have invested consistently to maintain both asset integrity and reliability, which will enable us to sustain and grow our own mine production, improving margins. And as a result of the new ways of working and our discipline in terms of capital efficiency, we expect medium-term capital, as Sayurie has said, to stabilize at between ZAR 17 billion and ZAR 18 billion, inclusive of growth investments. This does position us distinctly from our peers who are raising CapEx guidance to arrest declining production profiles. With a stable capital base, our leverage to free cash flow at spot prices is significantly enhanced. So to illustrate, had current spot prices prevailed throughout 2025, free cash flow would have been about 240% higher. We have consistently demonstrated the delivery of our strategy and disciplined capital framework, returning excess cash to shareholders through dividends. The track record speaks for itself. Over the past 5 years, we have returned almost twice as much in dividends as our peer group combined. And so that you are left in no doubt, we offer a distinct investment proposition. Our substantial resource endowment provides exceptional longevity across our Tier 1 operations. With a high-quality, reliable and efficient processing infrastructure, our ability to create value throughout the value chain sets us apart within the sector. Our strategy is clear. Our experienced leadership team is well positioned to continue optimizing the business, unlocking value and delivering strong operational outcomes. And we remain firmly committed to disciplined cost and capital management to safeguard the integrity and sustainability of our assets while executing our growth agenda effectively. And with a robust balance sheet and strong cash flow generation, we're well placed to sustain those industry-leading returns to shareholders. I think it's fair to say that Valterra Platinum has certainly demonstrated in its first year of independence that we are a company that delivers. In 2025, we delivered on all our strategic priorities. We reinforced our skills and technical capabilities across the business and executed operational excellence activities with discipline and set the company up to accelerate those growth projects. I'am truly excited about the momentum that we have brought into 2026 and our unwavering focus on value creation for all of our stakeholders. That concludes our presentation. So thank you once again for joining us. I hand you back to Leroy to facilitate the questions and answers. Leroy Mnguni: Thank you, Craig. I think we'll start in the room. There are a couple of revolving mics. The first hand was Chris. If you could please introduce yourself before you ask your question as well, please. Christopher Nicholson: It's Chris Nicholson from RMB Morgan Stanley. I've got a couple of questions around volumes, and I think Mogalakwena in particular. I noticed that you trimmed your production guidance for your own mines for 2027. Could you just chat to what's driven that trim? Second question might be linked to that. At your Capital Markets Day last year, you were talking about grades at Mogalakwena from the open pit getting back to 3 grams a tonne, supporting 1 million ounce profile. We're still a little bit below that. Is it still your expectation that you get back to 3 grams a tonne? And then final one, also probably linked to that. I see you put a comment there on the lease on the Baobab plant expiring at the end of '25. I think we did know about that. So it's not a surprise. But I just wondered at these prices and just with the profitability of Mogalakwena, whether it made sense to try and extend that in any way, even if you had to put more CapEx into the tailings dam or incentivize Sibanye to do so. Craig Miller: Thanks, Chris. I'll answer some of the questions, and I'll ask perhaps Willie and Agit also just to comment on and reemphasize that value over volume strategy that we have in Mogalakwena and then also Agit, if we can just talk through the Baobab and the improvements that we've seen through North concentrator, improved recoveries and why we've sort of -- well, we've ended the Baobab contract. I think certainly, as we've said around our M&C volumes for next year between 3 million, 3.4 million ounces and into 2027, slightly lower. And that is on the back of us maintaining Mogalakwena's production at between 900,000 and 1 million ounces. And that's really our focus. And I've touched on that value over volume strategy, and I think Willie can articulate that in more detail. But that's what we fundamentally believe is the right sort of approach for us because it really drives that all-in sustaining cost. And we need to maintain that throughout the journey of Mogalakwena, sort of certainly in the lower half of the cost curve. And that's what really enables us to be able to do that. We've also maintained our production at Amandelbult at that sort of 580, 650 sort of mark. And that's what we'll sort of maintain. That continues to keep the longevity of Amandelbult intact, particularly from a Tumela and Dishaba perspective. And that's really what those sort of the 2 sort of revisions are there. But you'll see that we've guided now. We've moved away from guiding around the grade. So we've given you guidance around the actual production profile. And so that then enables us to be able to manage just how we extract the value through processing some of those lower-grade ore stockpiles, reducing the amount of volume that we actually mine, particularly at Mogalakwena and therefore, continue to drive its all-in sustaining cost to where we fundamentally believe it should be for this Tier 1 asset. So Willie, I don't know if you want to add anything in terms of the sort of the approach in terms of how we think through the grade. Kimi has got your mic ready. Willie Theron: Good morning, everybody, and thanks for the question, Chris. I think I'm not going to belabor the point on the all-in sustaining cost that Craig has already spelled out. I think a big component, if you look at Mogalakwena in particular, is the low-grade ore stockpile. It's sitting roughly on 5 million tonnes. That is a key deliverable aspect that we have stripped in essence, waste, where we stockpiled the low-grade ore. And our approach in terms of this value over volume is to, over time, for the next few years, and [indiscernible] made the percentage right about 35% to use that as part of the blend into the concentrators. But even at about 35% on average that we use it as a blend into the concentrators, we maintain a 5 million tonne stockpile on the low-grade ore. And this is why this value over volume and driving the all-in sustaining cost to maintain that position. And also from what I've spoken now, that's only from an open pit point of view. That is not taking into consideration anything that we do at Sandsloot. So the 900,000 to 1 million that Craig is referring to is open pit and with a 35% on low-grade ore stockpile as part of the blend and maintaining that at about 5 million tonnes. It's significant differentiator in terms of that ore body. Craig Miller: Thanks, Willie. Agit, do you want to just comment on Baobab and just how we're thinking North and South. Agit Singh: Yes. Thanks for the question, Chris. So obviously, we did consider Baobab with regards to the future of Mogalakwena with regards to milling. But first of all, Baobab was not the cheapest concentrator in our portfolio. And North concentrator and South concentrator has got a significant amount of effort over the last couple of maybe 1 to 1.5 years. And that effort has come through significantly around the way we operate the plant from a throughput point of view. So the more throughput we can get through North or South, the better it is for us from a unit cost point of view. It links back directly to what Willie and Craig has been speaking about with regards to the blending strategy and keeping the ounce profile. So we're very confident that with the North and South concentrator and the work that we've done with regards to the feed that we're putting into North and South, the work that we're going to be doing at the South concentrator around the refurbishment, the work we've already done at the North concentrator with regards to the Jameson cells and optimizing that flotation circuit that we will be able to deliver what we need to deliver with regards to the blending strategy that we have coming through from Willie and the team. So it's a very well-integrated thought process that we've taken from mining all the way down through the concentrators. Leroy Mnguni: I think the next hand was Gerhard and Arnold. Gerhard Engelbrecht: Gerhard Engelbrecht from Absa. Maybe just two questions is, how do you think about your debt levels at this point in the cycle? So do you have a targeted debt range or debt-to-equity or net debt-to-EBITDA? Or how can we think about debt going forward and how you then utilize cash? And then maybe if you can just remind us of the insurance payment, the quantum of that, that you expect in this half. Sayurie Naidoo: So we've guided in terms of our net debt-to-EBITDA at about 1x -- less than 1x through the cycle. However, at current prices, as we've declared our dividend of ZAR 11.5 billion, that gets us to a cash-neutral balance sheet. And we believe that, that is actually the prudent approach, which will actually strengthen our balance sheet and ensure that we can even sustain it in a lower price environment. Craig Miller: And then the insurance. Sayurie Naidoo: On the insurance proceeds, as we said, we've received ZAR 2.5 billion so far. However, we are still in discussions in terms of what the total quantum of that insurance proceeds will be, but we expect to receive that in the first half of the year. Arnold Van Graan: It's Arnold Van Graan from Nedbank. Two questions for Sayurie. The one is on your cost savings. I mean that's a phenomenal number, saving ZAR 5 billion and then ZAR 1.5 billion going forward. So I guess my question is, where is that coming from? And how sustainable is it? I know we've talked about this before, but I guess my question or concern is that some of this comes back into the system over time. So that's the one question. Second question relates to Unki. It looks like there's a bit of a cash lockup there currently. It doesn't matter now given where prices are. But yes, just give us a sense of how you're addressing that and how you see that playing out? That's it for me. Sayurie Naidoo: Sure. So just in terms of our cost savings, so it's really in 3 broad categories. So the first one, if I look at the total ZAR 12 billion, about ZAR 5 billion of that is from supply chain and procurement benefits. So we've reviewed all our supply chain contracts over the last 2 years, we've been able to get lower pricing. A lot of this is from prior to COVID or during COVID, where we had escalated pricing in some of the consumables, we were able to reduce a lot of that. So these are sustainable pricing. Obviously, they would increase with inflation going forward. But from an operating perspective, that's where we found a lot of the efficiencies. The labor and contractor reductions. So we undertook a restructuring in 2024. So that was about 2,700 people at Amandelbult. So that is a sustainable reduction in labor. We've also reviewed all our contracting companies, and we took out about 450 contracting companies. So that's sustainable reductions. We also did some review of our corporate costs. And as I said earlier, there were some demerger-related cost savings that we were able to realize as well. But a lot of the savings that we've also achieved is as a result of the operational excellence work that we've done. So the mass pull benefit that Agit has been working on in processing, the pit optimization at Mogalakwena, all of that has been sustainable cost reductions. So mass pull, for example, a ZAR 250 million annualized cost benefit that we'll realize from that. The pit optimization, we've been able to bring down waste stripping costs by about ZAR 1 billion so far and another ZAR 1 billion going forward. And then the demerger-related costs, the ZAR 1 billion to ZAR 1.5 billion that we expect to come, that is really from the simplified operating model as a stand-alone company, simplification of some of the systems that we've got, our IT systems, for example, moving to an outsourcing arrangement for some of our shared services. So that's where we're seeing some of the reductions that we expect to realize in the next 2 years. So really sustainable cost savings. Going forward, as we've guided, you expect -- we will continue to look for initiatives to offset inflation, again, mass pull, renewables that will come through from the Envusa project this year. So that will offset about -- that will give us about a 10% reduction on the current Eskom tariffs that we're getting. So there will be continued cost optimization initiatives to ensure that we maintain that cost discipline as a business. So as you see, our cost is relatively flat over the next year. And then in terms of the Unki, so we do have -- so as part of operating in Zimbabwe, our export proceeds is a retention mechanism. So 30% of our export proceeds are retained in local currency. In the last year, we haven't been able to access some of that. So it's about $100 million that hasn't been able to be accessed by us. However, and you'll see that we've obviously recognized a provision on that. But we have been engaging with the Reserve Bank as well as the Ministry of Finance, and we are receiving some funds in 2026 so far, and we do expect to receive that over the next couple of months. Leroy Mnguni: There's a question from David. Unknown Analyst: David [indiscernible] from Phoenix research. I would just like to, first of all, congratulate the technical and the mining people. First of all, congratulations on getting Amandelbult up and running so quickly. Very impressive, very impressive. And secondly, also, congratulations on the Jameson Cells. When I saw that number of 40% reduction in mass pull, that's quite amazing. So if I may lead my first question on that one is, is that in any way transferable to the other concentrators? I mean, obviously, I know that the metal mix is very different, but is that at all transferable? And then just a very general question. On the Merensky Reef, are there any plans to mine more Merensky Reef at all? I mean, it's now UG2. I'm talking about the East and West Limb, are there any plans to mine Merensky projects? Craig Miller: Thanks, David. Thanks very much for the question. I'm going to try my best to answer them, and that will be my team members giving me a report card in terms of whether I've been paying attention. So in respect of the Jameson Cells, so clearly, they've been really successful at Mogalakwena, at the North concentrator. Agit referenced the refurbishment of South. And so we will look to see whether we can install the Jameson Cells at the South concentrated Mogalakwena. So that process is underway, and we're evaluating it. I think it's less impactful at Amandelbult, particularly just given the scale of Amandelbult and the installed capacity. But our real primary focus is really then driving that efficiency at Mogalakwena. That looks to be our biggest opportunity at the moment. Did I get that right? Good. And then on Merensky, I think our primary focus is really around continuing on the UG2 routes. There's not a great deal of Merensky that we have immediately available, just given sort of what we've mined out at Amandelbult and in particular focus for us at Der Brochen and Mototolo on the Eastern Limb. Those are sort of -- our key focus will be around the UG2. Leroy Mnguni: We've got Steve in the back. Steven Friedman: It's Steve Friedman from UBS. Firstly, congrats on the strong results. Maybe just a follow-up on the capital allocation framework question and more regarding the prepayment, specifically around the remaining duration. I know this is something that's been extended previously. But if you could sort of give us some indication on that. And understanding this is a volume-based contract. So very much that value will be linked to PGM prices and FX, if you could give us some sort of sensitivity on what that means in the current environment? Sayurie Naidoo: Sure. So our customer prepayment at this point, it's about ZAR 12.8 billion. You're correct, it is linked to price and FX. So it's probably increased about ZAR 1 billion since 2024 as a result of that and volumes were relatively stable on that. In terms of the renegotiation, so it comes to an end in 2027. However, we are in negotiations with the customer, and we don't have any reason to believe that we won't be able to extend the customer prepayment. It may be on different volumes and different period, but it's still something that we firmly include in our working capital numbers. Leroy Mnguni: I see no further hands in the room. Can we please go to the conference call and see if there are any questions there? Operator: We have a question from Adrian Hammond of SBG Securities. Adrian Hammond: Yes, well cone on solid results and outlook, Craig, your payout was significantly higher, I think, than the market expected. So give us some guidance on how we should expect future payout of dividends. I noticed 70% is what you used to pay in the last bull market. And is this something we should be expecting going forward? For Sayurie, you've been quite explicit on the cost savings for another ZAR 1 billion to ZAR 1.5 billion over the next 2 years. But I do note you're certainly seeing more benefits from the Jameson Cells. And should there be other benefits as well that perhaps your ZAR 1 billion, ZAR 1.5 billion is still a conservative number. And I just want to clarify when you mentioned earlier that the Mogalakwena pit optimization on waste stripping was banked at ZAR 1 billion, but a further ZAR 1 billion going forward. Just correct me if I'm wrong, if that's further ZAR 1 billion is in your current guidance. And then Hilton, perhaps premature to ask that your customer prepayment with Toyota is still being negotiated. But do you foresee additional volume offtake in that agreement going forward? And perhaps you just give us an update on customer flows and orders for PGM autocat businesses and as well as the minor metals. Craig Miller: Thanks, Adrian, for the questions. So I'll take the easy one. So I think, Adrian, as we've indicated, just once again, quality of the assets that we have, our focus around operational delivery, investing in the assets that we have and really maintaining that asset integrity and reliability really sets us up well. And as a consequence of that, that enables us to be really deliberate and focused around how we return value to shareholders. And so in line with that discipline and our capital allocation, any excess cash that we generate, we would look to return that to shareholders. And so as Sayurie said, we've done it for 17 consecutive periods where we've paid a dividend and we've paid specials. And I think you can expect a continuation of that discipline for periods to come. And so we'll wait to see what happens in July when we report the half year results. Sayurie Naidoo: Adrian, on the waste stripping, yes, that's already in our guidance in the ZAR 17 billion to ZAR 18 billion in the medium term. And then just in terms of cost savings, so the ZAR 1 billion to ZAR 1.5 billion, that's coming from corporate cost reduction. And as we've mentioned, there will be continued benefits from operational excellence. So your mass pull initiatives, the renewables. We're looking at some low-cost country sourcing, so alternative sources of some consumables from a supply chain perspective. So all of that will partially offset inflation. So input cost inflation, about 6% we're forecasting for 2026, but we expect that our costs should be below the 6%. So yes, there will be some more operational initiatives that will offset inflation. Hilton Ingram: Yes, Adrian, on the prepayment, as Sayurie indicated earlier, right, in the middle of negotiations. So we're going to be as quiet on the subject as we can be, but we expect to see volumes at least in line with what you'd expect given the pressures in the automotive industry and increases in recycling. But we'll work hard at that. And so more news to follow later. In terms of -- what are we seeing in terms of customer flows? You've seen the duty announcements out of the U.S. That means there's some rebalancing of portfolios going on in amongst customers. And so we're seeing changes in geographic flows as a result of that and inquiries that you'd expect us to be seeing in line with those geographic flows. But we expect that to balance themselves out around the globe and not have a material impact on supply-demand balances. And then minor PGM demand, we've seen healthy demand for contracts in that space, and we're still seeing good flows. Leroy Mnguni: Any further questions on the call? Operator: We have a question from Nkateko Mathonsi of Investec Bank. Nkateko Mathonsi: Well done from my side on a very good set of numbers, especially I concur with Adrian, especially on the dividend, that was a surprise versus what the market was expecting. Another congratulations on inventory optimization that has allowed you to continue liquidating inventory from your processes. I mean, my first question is how much room do you still have to squeeze the pipeline going forward? At this point in time, it looks like it is creating [indiscernible] in the processing infrastructure, but that has been very positive for at least the past 2 years. I just want to know how should we think about it going forward? And then my second question is on Sandsloot and the prefeasibility study. Is there any indicated CapEx that we should work on as far as Sandsloot is concerned from that prefeasibility study? And then also on the better terms on the extension of the tolling contract by 5 years. Are you able to give us a bit of an indication as to the increment on that contract and how we should look at it going forward? Craig Miller: Thanks, Nkateko. Thanks very much. At least you like the dividend. So let me start on the inventories. I couldn't agree with you more that the processing team seems to find additional ounces. But I really do think that we've really optimized the pipeline now, and that's really sort of come through in terms of the optimization and the higher refined ounces that we achieved in 2025. We have indicated previously that we do have some inventory that is sitting in what we term wax. So that's material that has -- that you'll know better than me, comes out of the converter plant and that we haven't been able to treat to date. And as a consequence of that, we are repurposing Mortimer to be able to treat that material in addition to be able to just processing normal ongoing concentrate. So we do have some inventory and you'll see that come through in our 2027 number. So if you -- to Chris' earlier point, you've seen that slight reduction in our M&C volumes. But actually, our refined volumes in 2027 are maintained at 3 million to 3.4 million ounces. And so you see that liquidation coming through there as a result of Mortimer. So that's really where that will come through. But I think more broader in terms of do we have [indiscernible] and all the rest of it of inventory. We haven't found it, but we'll certainly keep looking. But genuinely, I think, we've optimized as much as we can at the moment. In terms of the feasibility study for Sandsloot, that continues, and that's underway. And so our capital guidance for the expenditure around that to ramp up Sandsloot to around about that 2 million, 2.5 million tonnes is maintained at that sort of ZAR 1.5 billion to ZAR 2.5 billion. Just remember, there might be some years that we'll spend slightly more because we need to build workshops, we need to purchase some equipment or something. But that broad range of between ZAR 1.5 billion and ZAR 2.5 billion is maintained from what we shared with you back in the middle of last year. And on the tolling contract, yes, we have extended the tolling contract with Sibanye. So that would have come to a conclusion at the end of 2026. We have extended that by another 5 years. Both parties have the opportunity to end that after 3 years. And I think to use Richard's words, I think it's on materially better terms than what they're currently paying at the moment. Leroy Mnguni: Operator. Are there any further questions? Operator: We have a question from Benjamin Davis of RBC Capital Markets. Benjamin Davis: Great set of results. Just a couple of questions from me. One on the CapEx guidance, very much going against the grain in terms of going down. I was just wondering if you could give any kind of what drove that delta from ZAR 19 billion to the ZAR 17 billion, ZAR 18 billion? And also given the price environment, is there any upside risk to that number in terms of kind of additional projects that are under evaluation, smaller projects? And then second question, just wondering if there is any evolution in the thinking around Modikwa? Craig Miller: Thanks, Ben. Do you want to do CapEx? Sayurie Naidoo: Yes, sure. So our previous CapEx guidance was around ZAR 19 billion. But there's a few aspects. So the one is once we concluded the feasibility study -- the prefeasibility on Mogalakwena underground, we were able to just redefine that CapEx. So that's where we got to the ZAR 1.5 billion to ZAR 2.5 billion. Due to the value over volume strategy, our waste stripping, as I mentioned, that's been reduced. So you see lower tonnes -- waste tonnes mined. As a result of that, you have lower HME replacement capital as well that will be required. So that's the other area. There's been some further optimization, for example, on the Mortimer repurposing project that has done more optimization as well at Amandelbult and Unki in terms of some of the capital spend there. The other area that's also benefited us is as a stand-alone company, how we actually execute on our projects. So we've been able to build in quite a bit of efficiencies there just in terms of using internal teams as opposed to third parties, just in terms of scoping and defining our scopes and being quite focused around that. So that's also been able to contribute towards that reduction, and that's how we were able to achieve the lower end of our guidance this year as well. Craig Miller: So yes, we agree, Ben, that's certainly sort of countercyclical, as I pointed out in terms of what we're seeing elsewhere. But yes, I think we will certainly maintain that cost and that capital guidance and it's important that we maintain that through the cycle. So very much focused around making sure that we operate within that envelope. I think specifically as it relates to Modikwa, to your question, I think one of Sayurie's slides actually illustrated just in terms of where our all-in sustaining cost was and where we're all positioned on the cost curve. The one outlier in the second half of the cost curve is Modikwa. And so we're not particularly happy, and I know our partners are not in terms of the performance of Modikwa and just how that sort of -- where it sits on the cost curve. And so therefore, we need to continue to evaluate how we improve its performance, how we rethink through what the operating structure is there, and we'll continue to evaluate our options, specifically as it regards to Modikwa in the coming months. Operator: We have a question from Ian Rossouw of Barclays. Ian Rossouw: Two questions. Just first one on the Sandsloot project. If you do go ahead and approve the project in 2027, how can we expect the CapEx to change in '28, I guess, versus current guidance? And then just wanted to talk about the working capital just in the second half, I guess there was still some build in inventories if you strip out the prepayment and obviously, the receivables sort of based on prices. But how should we think about the working capital this year outside of probably the inflows you'll see from the prepayment due to higher prices? Craig Miller: Okay. Do you want to do working capital and then... Sayurie Naidoo: Yes. So in terms of working capital, so the customer prepayment, as I did indicate, that is influenced by price and FX. So as prices increase, you will see an increase in the customer prepayment. On the other one that's influenced by price and FX is your purchase of concentrate. So that's your inventory as well as your creditor. So those should offset each other because -- so from a price impact, so that should be relatively flat. So it's really just your customer prepayment where you'll see an increase in working capital. Craig Miller: And then just on Sandsloot. I think from our perspective, so the investment is taken -- the decision to invest in Sandsloot is taken in the first half of next year. Our expectation is that you'll continue to see that ZAR 1.5 billion to ZAR 2.5 billion expenditure sort of take place for us to ramp up to that sort of 2 million, 2.5 million tonnes. So that's what you can expect to sort of see in terms of annual CapEx associated with the Sandsloot development. Clearly, obviously, as I said, you might see 1 year a little bit higher than that ZAR 2.5 billion because we've got to spend on the workshops and all the rest of it. But I think importantly, as we then start to position that, whatever that capital profile looks for Sandsloot is then -- you could see then a reduction in our waste stripping capital and some of the capital associated with the open pit at Mogalakwena. So that's where the real benefit starts to play itself out. So you process this higher-grade ore, and then we're able to reduce the amount of material that we have to move in the open pit. And so you'll see that benefit coming through as part of the decision to invest in Sandsloot. But that ZAR 1.5 billion to ZAR 2.5 billion, if you take that, you model that, that will be great. Please just make sure that you model that 10% to 20% uplift in production as well. Ian Rossouw: Okay. That's great. And maybe just coming back. So any shift in inventories expected this year? Or is that broadly stable now just on working capital? Craig Miller: Yes. No, I think your inventories, we've sweated that drag. So yes, I think your inventories are more or less sort of back to normal levels. Leroy Mnguni: Any further questions? Operator: We have no further questions. Leroy Mnguni: Right. There's a few questions that have come through online. Rene from NOA Capital says ZAR 11.5 billion net cash. I really believe you would do it a year ago. So thank you, Rene. He's got a question for Hilton. He's asking, what is your pick for the best performing PGM in 2026? And then sorry, Hilton, while you answer that, we've had a couple of questions on recycling. If you could please elaborate on some of the headwinds to a recovery in recycling, what are some of our expectations are in an increase in recycled supply given the higher PGM prices as well, please? Hilton Ingram: Thanks, Rene. I think the right answer to your question is it starts with an R as in Rene. Yes. So I'm going to go with it starts with an R. And then on recycling, we all know that recycling rates are driven by scrappage rates of vehicles. We know that vehicle prices are high. We know that cars are lasting longer than people would expect. We know that there's sort of technological or technology uncertainty in terms of do I replace my car with another ICE vehicle? Do I replace it with a PHV? Do I replace it with ICE? Or do I just hang on to what I have. So those are all playing out through the market, right? And yes, the value of an auto catalyst is up. It's not up to the same extent as it was in 2022. And the value of the auto catalyst isn't a player in people's decisions to recycle cars. So we think scrappage rates are unaffected by the value of the catalyst. What is affected by the value of the catalyst is the pull-through of inventory, right? So if people had scrapped cars, cars were sitting in the junkyard and they hadn't taken the catalyst off straight away. Now you're incentivized to go and get that catalyst off the cars and pull that inventory through. And as a result of that, we do have recycling numbers up last year and likely up this year. But there will be payback for that over time with reduced growth rates in recycling. So hopefully, that answers both of those questions, Leroy. Leroy Mnguni: Thank you. There is -- we've had a similar question, but I think it's worth asking this again just to emphasize the point. So it says the Board has paid out 71% of headline earnings in 2025, well above the 40% policy. How should investors think about the balance between sustaining market-leading dividends and funding growth projects like Sandsloot underground ahead of the H1 2027 investment decision? Sayurie Naidoo: Sure. So I mean, as Craig said, I'll reiterate it. So there's been no change to our dividend policy. That's still at 40% of headline earnings. However, as part of our capital allocation framework, if we've got excess cash after we've actually invested in sustaining CapEx after we've paid our base dividend, after we've invested in the Mogalakwena underground and all our discretionary projects, whatever cash is there, we'll look to return to shareholders. So there's been no change to the policy. But we'll balance growth and we'll balance returns to shareholders. Craig Miller: But I think it's important that we also just emphasize that the CapEx that we have that we've given that ZAR 17 billion to ZAR 18 billion, that includes the ZAR 1.5 billion to ZAR 2.5 billion for Mogalakwena for the underground, yes. So that is our capital envelope. Leroy Mnguni: Thanks, Craig. And then I just got to filter through all the requests for trucking contracts, even though we're reducing the amount of trucks on. We've got a question from Shashi from Citibank. How much is the benefit of mass pull reduction on FY '26 operating cost guidance? Can we expect a further benefit into 2027 as well? Sayurie Naidoo: Yes. So on an annualized basis, it's about ZAR 250 million. Leroy Mnguni: Thank you. I think a lot of other questions are just repetitions of what we've already had. So maybe do one last call in the room. Anything on the conference call? Operator: No questions from the conference call. Leroy Mnguni: Over to you, my leader. Craig Miller: Is it me again? So once again, thank you very much for joining us today. Really, I think it's fair to say that we've really had a really transformative year in 2025 on a number of fronts. And we have a great deal of excitement and opportunity within our business in terms of continuing to really be that leading PGMs producer. And so the important thing for us is as we execute on what we need to do, that we do maintain that cost and that capital discipline. And that's exactly what my team and I are focused around. So if I can also just express my sincere thanks not only to the Board for helping us navigate what was 2025, but also to the executive team in terms of how they've showed up and really helped make a change to our business, but most importantly, to the whole team of Valterra Platinum for their enormous efforts and diligence last year and really turning last year into a really successful year and onwards and upwards from here. Thank you.
Leroy Mnguni: Good morning, ladies and gentlemen. I'm Leroy Mnguni, Head of Investor Relations for Volterra Platinum. Thank you for taking the time to join us for our 2025 final results, both in person and online. Let me start by welcoming our Board members who are here with us in the room today as well as our executive leadership team. From a housekeeping perspective, we do not have any fire drill planned for today. Therefore, if you hear an alarm, we request that you exit the venue safely through the doors at the back. For those of you that are near the front, please note that there are exits on either side of the venue on the lower level as well. Our fire marshals and security officials will be stationed outside the venue and will escort us to a designated assembly point. To draw your attention to the cautionary statement, I would encourage you to read it carefully in your own time. Now for the agenda for today. Craig Miller, our CEO, will take you through a brief overview of the significant milestones achieved during 2025, followed by a review of our operational and market performance. Sayurie Naidoo, our CFO, will then take you through the financial results. Finally, Craig will wrap up the presentation. As usual, we've allocated time for Q&A at the end of the presentation. I'll now hand over to Craig. Craig Miller: So thank you, Leroy. Good morning, everybody. And once again, thank you for joining us. I'd like to begin by reflecting on safety. So tragically, we lost 2 of our colleagues in work-related fatalities during 2025. Mr. Felix Kore at Unki Mine on the 20th of April and Mr. William Nkenke at Amandelbult's Dishaba mine on the 22nd of July. We extend our sincerest condolences to their families, friends and colleagues. The lessons learned from these tragic incidents are being implemented across our organization. And while we mourn these losses, we also recognize that we've made good progress on safety overall, and we've achieved a number of milestones at our operations, including 14 years without of fatality at Mototolo, 13 years at Mogalakwena and 9 years at Amandelbult's Dishaba mine. We've also improved our total recordable injury frequency rate by 11% to the lowest level in our history, placing us in the leading quartile amongst our peers. Safety remains our highest priority with our unwavering focus on achieving zero harm. Our teams are committed to proactively preventing injuries, and we will not compromise on safety under any circumstances. We're also fully dedicated to delivering on the commitments that we have made. And with that in mind, I'm delighted to say that 2025 was an exceptional year for Valterra Platinum despite navigating a challenging external environment. Some of the progress highlighted here reflects discipline in action from strengthening our operational excellence to executing consistently across all of our strategic priorities. Most significantly, we launched as an independent company, having successfully completed the demerger from Anglo American plc as well as our secondary listing on the London Stock Exchange. Subsequently, Anglo American plc sold their remaining minority interest, fully completing their divestment from Volterra Platinum. Our simplified organization structure has been well embedded with a reconstituted executive committee focused on the delivery of the strategy with clearly understood accountability lines. We've reinforced our operational capabilities through the recruitment of critical skills and services, and we will have exited all of the transitional arrangements with Anglo American by the end of 2026. Our reconstituted Board comprising of 11 nonexecutive directors and 2 executive directors brings the required diversity of experience and expertise. Our relentless pursuit of operational excellence has delivered a really good performance, having exceeded our production guidance despite the weather-related impacts experienced in the first half of the year. Financially, we exceeded our targeted cost savings in 2025, which has brought our total cost and capital savings delivered over the last 24 months to ZAR 18 billion. I'm particularly pleased with this result given the macroeconomic factors impacting our cost base. Our entire organization is focused on maintaining this cost and capital discipline, notwithstanding the higher commodity price environment. And as we've previously said, each of our assets plays a well-defined role in the portfolio, and I'm glad to report that they have all contributed to the progress during 2025. Our extensive endowment of mineral resources provides an exciting growth prospects for Valterra Platinum, and I'll take you through the progress that we've made developing these projects, particularly Sandsloot and Der Brochen in just a few slides. We continue to actively seek opportunities with industry players to drive demand to ensure the long-term success of our industry. Over the past year, we've maintained our focus on enhancing PGM usage in mobility, jewelry and investment. And on the industrial front, the recently announced partnership with Johnson Matthey and Sibanye-Stillwater is evidence of our commitment to working with industry players to grow industrial demand. And we would certainly welcome other producer peers to join us in this venture and of course, not to preclude us from working with other fabricators in other areas. And finally, the recognition of Mogalakwena by the initiative for Responsible Mining Assurance with a 50 accreditation means all of our mining operations are now accredited. This is a rare global feat that sets us apart in the mining industry and reaffirms our commitment to embed sustainability into absolutely everything that we do. So now let's dive into the detail of our performance. I am encouraged to see the delivery of our strategy has led to an improvement in our underlying performance. While we've obviously benefited from the increase in the PGM basket price, the drivers of which I'll walk through a little bit later, the 68% increase in EBITDA is substantially supported by our internal actions as well as that macroeconomic price environment. And consistent with our commitment to drive down our all-in sustaining costs in real terms, we've consistently driven down that all-in sustaining cost and have maintained this at below $1,000 per 3E ounce. Our balance sheet has strengthened materially over the second half from a ZAR 4.5 billion net debt position at the end of June to an ZAR 11.5 billion net cash position at the end of the year, reflecting the outstanding free cash flow generation. This has allowed us to pay a special dividend on top of our base dividend, bringing the total dividends for the year to approximately ZAR 12 billion. It's certainly not just our shareholders who are benefiting from the additional value that we are creating. As you can see, Valterra Platinum continues to be a significant contributor to both our local communities and the broader South African economy through the combination of local procurement, capital investment, social investment and of course, salaries, wages, taxes and royalties. All in all, we've contributed more than ZAR 83 billion to our stakeholders. Valterra Platinum is truly playing its part in sharing value to better our world. So turning to a bit more detail on our operational performance. We outperformed on operational delivery this year due predominantly to the improved performance in the second half of 2025 when our operations demonstrated far greater stability and efficiency underpinned by our focus on safe and responsible mining. A record number of tonnes were milled at Mogalakwena, which helped to more than offset the weather-related decline at Amandelbult, resulting in total tonnes milled increasing 1% year-on-year. Amandelbult's strong second half performance, aided by the faster-than-anticipated ramp-up to steady-state volumes exceeded guidance with total production at 484,000 ounces. Our mass pull improved by 9% compared to 2024, underpinned by notable improvements at Mogalakwena as well as Amandelbult. Overall, our refined production, which was supplemented by inventory optimization, exceeded our 3.4 million ounce guidance. Sales volumes included refined margin -- refined inventory destocking totaling close to 3.5 million ounces. So delving now into the performance of some of our assets. Mogalakwena's pit optimization efforts led to a clear improvement in its operational performance. Our strip ratio has declined 22% to 4.5x. This means that we mined 15% more volumes despite an 8% reduction in total tonnes mined. The efficiency improvements have allowed us some flexibility in the selection of ore grades. So in line with our value over volume strategy, we've been able to process some of the lower-grade stockpiles while still reducing unit costs. This has resulted in the lower head grade, which was offset by higher tonnes milled, delivering similar ounces to what we achieved in the prior year. I'd like to take a brief moment to really emphasize that these developments provide a significant value-enhancing opportunity for Mogalakwena. We can mine fewer tonnes and supplement the expert ore with surface level lower-grade ore stockpiles, resulting in lower operating cash costs, while our volumes are maintained within our guided range. But most importantly, we can keep this Tier 1 asset anchored in the bottom quartile of the cost curve. Other operational excellence initiatives at Mogalakwena have resulted in notable improvements in both mining and in concentrating activities. We've seen a 9% advance in drilling efficiencies and a 15% improvement in redrills, while our load and haul efficiencies have improved 24% and 18% year-on-year, respectively. These positive developments have started to materialize in lower operating costs and together with the benefits of higher co-product revenues has resulted in an 8% reduction in our all-in sustaining cost to $835 per 3E ounce. And so no doubt, you're all keen for an update on the Sandsloot underground, not only because it's genuinely exciting, but because it has the potential to truly move the needle. Here's a reminder of why this project has the potential to be a significant strategic catalyst for Valterra Platinum. Our declines begin at the base of the Sandsloot open pit, providing close access to the reef. This substantially reduces project lead time and lowers capital intensity compared to other projects in the industry. Unlike other Bushveld complex reefs, its height is between 40 and 120 meters with a 45-degree dip on average, characteristics well suited for bulk underground mechanized mining. At 4 to 6 grams per tonne, the reef is materially richer than other mechanized mines in the PGM industry. Growth uplift is driven by higher grades rather than increasing volumes, enabling us to leverage the existing concentrator and tailings facilities. This approach will save us billions in upfront CapEx and costs. And this year, we plan to commence trial mining, which will provide critical inputs to our comprehensive feasibility study. The conclusion of the prefeasibility study has reinforced our confidence in the 10% to 50% uplift in Mogalakwena PGM volumes and a 10% to 20% reduction in costs that we've previously communicated, numbers that we believe will truly move that needle. With the scale of the opportunity in mind, over the past year, we've made great progress in bringing this closer to reality. The team has completed a further 30 kilometers of exploration drilling, which has informed the total upgrade of 13 million ounces to measured and indicated mineral resources, which is available for future ore reserve conversion. The underground development has advanced a further 3.2 kilometers, while the team also successfully completed the pass for the ventilation shaft 1. Trial processing of the bulk ore stockpile is underway, which has accumulated to approximately 80,000 tonnes by year-end. And we've invested about ZAR 1.4 billion in CapEx to advance the project, while over the medium term, our CapEx guidance remains unchanged. I really hope that you're as excited about this as we are given the potential of this opportunity for Valterra. So moving on to Amandelbult. I am incredibly proud of how our teams responded to the flooding. Not only did their decisive actions ensure safe and responsible evacuation of all of our employees, they also accelerated the dewatering well ahead of plan and enabled a faster-than-expected ramp-up to normalized production. So a huge thank you to everyone that was involved. And as I've mentioned, this has enabled Amandelbult to exceed its revised guidance in the second half of the year with the second half performance outperforming that of what we achieved in 2024 despite Tumela mine only reaching steady state by September. This performance highlights the strong operating potential of this asset with our 2026 guidance indicating an approximately 25% recovery. Despite the severe flooding impacts, Amandelbult delivered positive free cash flow, further supported by the insurance proceeds. The resilience of the quality of this ore body with its favorable prill split and rich chrome products driving the highest basket price in the PGM sector at around $3,000 per 3E ounce at current spot levels. So moving on to Mototolo. The Der Brochen project development has progressed well through 2025 with all development ends successfully intersecting the reef having navigated the [indiscernible] zone. Total develop more than doubled, reinforcing the long-term optionality and sustainability of the operation. We also achieved a 9% increase in immediately available ore reserves, enhancing near-term operational flexibility. At Mototolo, our operational excellence initiatives delivered a 12% productivity uplift. Despite the dilution from the development tonnes, production remained consistent with that of the prior year. So looking ahead, the ramp-up of the new, more efficient Der Brochen mine with the continued improvement in chrome recoveries and further optimization of the 3 declines are expected to drive Mototolo's cost further down the cost curve. Our processing operations have also seen improvements beginning with our upstream performance. We achieved a 1% to 2% improvement in concentrator recoveries at both Amandelbult and Mototolo, aligned with our strategic objective to enhance recoveries and improve margins. At Mototolo, recoveries -- sorry, beg your pardon, at Mogalakwena, recoveries remained flat, a notable achievement given the 13% reduction in our mass pull. Amandelbult's 7% reduction in mass pull also contributed to the reduction across the business. And I have already mentioned Mogalakwena's record milled tonnes were supported by the ongoing improvements in plant availability and proactive investment into reliability. And so now for the much anticipated update on the Jameson Cells. Sorry, that was like really dramatic, I'll take a sip. We have optimized the plant to further deliver improvements following the first half commissioning. And we are expecting additional improvements at the Mogalakwena concentrators on top of the 13% I've just mentioned as optimization continues and the plant's annualized impact is realized. We're also really encouraged by the almost 1 percentage point improvement in the adjusted North concentrator recoveries since the commissioning. And while the recovery uplift was not the primary objective of the introduction of the Jameson Cells, the team is optimistic that further improvements may follow. So to put that impact into perspective, volumes at the Mogalakwena North concentrator declined 14%, while concentrate grade increased 16%. Importantly, there are many wider benefits to the mass pull reduction. In 2025, we saw a 21% reduction in trucks transporting concentrates, a 4% decrease in smelter electricity consumption and a corresponding 5% reduction in CO2 emissions, delivering an estimated cost saving of about ZAR 123 million with additional savings expected in 2026, commensurate with further improvements in mass pull. So now turning to our markets. There were several positive developments in the PGM markets during 2025. While we've all seen the overall increase in the basket price, it's important to note that there were multiple factors that contributed to the increases with a few dominant drivers standing out. Firstly, the year began with moderate price gains owing to a weaker U.S. dollar. Prices accelerated as the market tightened over concerns about tariffs and weaker mine supply. And although primary supply normalized in the second quarter, stronger price gains followed from May onwards with a large price differential with gold prompting strong Chinese buying. This was then accentuated in June and July by renewed tariff concerns, prompting further sizable U.S. imports. The second half of the year benefited from strong investor purchasing, driven by the debasement trades and the launch of the Guangzhou Futures Exchange. Specific factors also contributed, such as a robust hard disk purchasing in ruthenium and the recovery of rhodium demand, particularly in the fiberglass applications. And while price movements were dynamic, they were firmly underpinned by market fundamentals; tightening supply, stronger-than-expected demand as automotive sales prospects improved and inventories that proved less abundant or more tightly held than many had anticipated. The second half of 2025 was an exceptional period for PGM prices. The full basket price ended the year 86% higher than at the start of 2025. All metals contributed to this increase with platinum, palladium and rhodium being the largest contributors. There are 2 potential bullish drivers already making an impact. You may remember that we called these out specifically at our Capital Markets Day last year. Firstly, BEV penetration forecasts have been revised downwards, particularly in Europe and the U.S.A., markets where vehicles are heavily loaded with PGMs. Political developments in both regions have further supported the internal combustion engine vehicle demand. Meanwhile, the price of platinum rose considerably, but it is still trading at a substantial discount to gold. This has enabled platinum jewelry to gain market share in several key geographies and heightened interest in substituting PGMs for gold in various industrial applications. Our total supply and demand outlook for PGM markets points to continued tightness in the medium term. We expect global car sales to continue growing alongside an expanding world economy. Downward revisions to BEV growth in key markets are also supportive. Mine supply is expected to decline over the medium to long term, though at a slower pace than previously anticipated due to higher prices. Elevated prices will also encourage recycling volumes, but still face headwinds. And importantly, even at current price levels, new mine projects are unlikely to come online soon nor will vehicles be scrapped any earlier. Structural constraints to materially higher supply, therefore, remain. Our outlook is broadly consistent with prior expectations. And in 2026, we anticipate a sizable deficit in platinum, while palladium's anticipated surplus again fails to materialize. Beyond that, platinum should remain well supported, while palladium and rhodium will shift more to balance, but at an uncertain pace. These balances exclude investor demand, which enjoyed strong tailwinds in 2026. PGMs are increasingly recognized not only as critical minerals, but a safe haven assets, reinforcing their strategic appeal. I'll now hand you over to Sayurie to take you through the financials. Sayurie Naidoo: Thank you, Craig, and good morning, everyone. I am pleased to be reporting a strong set of financial results for 2025. Despite the demerger activities and headwinds faced during the year, our performance underscores the robustness of our business and the strength of our operating model in driving long-term value creation. To summarize our performance, revenue increased 7% year-on-year to ZAR 116 billion, driven by the uplift in the PGM basket price. This was partially offset by lower sales volumes, reflecting reduced M&C production, mainly from Amandelbult and the prior year's larger release of built-up work-in-progress inventories. Our disciplined cost management approach delivered a further ZAR 5 billion of operational and corporate savings, more than offsetting inflationary pressures. As a result, EBITDA increased 68%. And on the back of this, the company generated sustaining free cash flow of ZAR 20 billion. This meant we ended the year with a strong net cash position of ZAR 11.5 billion, boosted by a stronger second half. In line with our disciplined and balanced capital allocation framework, the Board has declared all net cash as a final dividend, equating to ZAR 43 per share. The company delivered a solid EBITDA performance despite the operational challenges in the first half of the year. EBITDA was supported by a 26% stronger PGM dollar price of $1,852 per ounce, partially offset by the strengthening of the rand. Input cost inflation of 5.4% reduced earnings by ZAR 2.8 billion, while royalty expenses reduced earnings by a further ZAR 1.1 billion, in line with higher revenue. Our success in delivering on our cost-out initiatives made a significant contribution to the uplift in earnings. As you are aware, earnings were also affected by the one-off demerger-related expenses, which have been largely completed and the impact of the Amandelbult flooding event, although insurance proceeds mitigated the majority of that impact. Mining operations contributed ZAR 29 billion to EBITDA at a mining margin of 38%, while POC and toll contracts contributed ZAR 9 billion at a margin of 21%. Since launching our operational excellence drive, we have delivered a decisive reset of our controllable cost base, which is down 18% since 2023. The ZAR 5 billion saved in 2025 was achieved across several areas, including consumables optimization of ZAR 2.2 billion, ZAR 1.4 billion from labor and contractors, reflecting the flow-through benefits of the operational restructuring undertaken in 2024 and a further ZAR 1.4 billion as a result of the simplified operating model post the demerger and other corporate cost reductions. As a result of our cost-out program, we achieved a cash operating unit cost of ZAR 19,488 per PGM ounce, in line with our revised guidance. Guidance for 2026 is ZAR 19,000 to ZAR 20,000 per PGM ounce, reflecting a partial inflation offset from ongoing cost-saving initiatives and increased production from Amandelbult. We are also targeting a further ZAR 1 billion to ZAR 1.5 billion in cost savings for 2027 as a result of the demerger with some of these benefits expected to materialize in 2026. Full year capital expenditure amounted to ZAR 17 billion, at the lower end of our guidance. Sustaining capital expenditure was ZAR 12.5 billion with a primary focus on asset maintenance, furnace rebuilds and mining equipment replacement. Sustaining capital also includes capitalized waste stripping, which declined ZAR 1 billion from 2024 due to lower waste tonnes mined, consistent with our value over volume strategy. Discretionary capital of ZAR 4.5 billion was directed to Sandsloot underground development and drilling as well as surface infrastructure and development at Der Brochen. We also commenced work on the repurposing of the Mortimer smelter. As we move into 2026, total capital expenditure is expected to remain broadly in line with 2025 at ZAR 17 billion to ZAR 18 billion. This is ZAR 1 billion to ZAR 2 billion lower than our previous guidance of ZAR 19 billion, again, reiterating our continued commitment to cost and capital efficiency. Of this, ZAR 12.5 billion will be incurred in sustaining capital to maintain asset integrity and ZAR 4.5 billion to ZAR 5 billion on discretionary capital. Turning to the impact of our cost and capital efficiency on all-in sustaining cost, which was $987 per 3E ounce, below guidance and flat year-on-year. Notably, this represents a 13% decrease from 2023, underscoring our cost control. I would like to highlight that going forward, we have revised our calculation methodology for all-in sustaining cost to include life extension capital to align with our updated capital definitions. On this basis, the all-in sustaining cost for 2025 was $1,039 per 3E ounce. Looking at the cost curve on the right-hand side of the slide, all of our own mine assets are firmly in the first half of the cost curve. Amandelbult's strong co-product credits, together with the benefits of the insurance proceeds have contributed to its positioning in the second quarter despite the impacts of the flooding. Our 2026 all-in sustaining cost guidance is around $1,050 per 3E ounce, assuming an exchange rate of ZAR 17 to the dollar. The company closed the year with a robust balance sheet, ending in a net cash position of ZAR 11.5 billion. Since 30th June 2025, the company generated cash from operations of ZAR 28 billion. And of the total ZAR 17 billion capital expenditure, ZAR 9 billion was incurred in the second half of the year, alongside the payment of the interim dividend. I have already talked to the one-off cash impacts relating to the demerger, which had an impact of ZAR 2.9 billion in the second half. We also received ZAR 2.5 billion in insurance proceeds. The flood claim is now in its final stages, having reached the end of the indemnity period, and we anticipate receiving the final payment during the first half of 2026. Liquidity headroom at the end of the period was ZAR 43 billion. Our banking group remains broad and strong, comprising both local and international institutions with committed facilities in both rand and the U.S. dollar. 2025 marked a major milestone for our stand-alone journey as we secured our inaugural global credit rating from S&P, achieving investment-grade status. In addition, we established a domestic medium-term note program, enabling us to issue listed debt in the South African bond market. This will provide an opportunity to diversify our debt funding sources and potentially lower our cost of borrowing. And in line with our capital allocation framework, the Board has declared a final dividend of ZAR 11.5 billion or ZAR 43 per share, comprising a base dividend of ZAR 23 per share or ZAR 6.2 billion, in line with our policy of 40% payout of headline earnings and a special dividend of ZAR 20 per share or ZAR 5.3 billion. This brings our total 2025 dividend to ZAR 12 billion or ZAR 45 per share. This marks our 17th consecutive dividend since reinstatement in 2017, affirming our commitment to industry-leading and consistent shareholder returns. I will now hand you back to Craig to wrap up. Craig Miller: Thanks very much, Sayurie. And to conclude, so our strategy remains clear and disciplined, maintain capital efficiency, drive cost reduction and maximize cash generation to enhance shareholder returns. Over the last number of years, we have invested consistently to maintain both asset integrity and reliability, which will enable us to sustain and grow our own mine production, improving margins. And as a result of the new ways of working and our discipline in terms of capital efficiency, we expect medium-term capital, as Sayurie has said, to stabilize at between ZAR 17 billion and ZAR 18 billion, inclusive of growth investments. This does position us distinctly from our peers who are raising CapEx guidance to arrest declining production profiles. With a stable capital base, our leverage to free cash flow at spot prices is significantly enhanced. So to illustrate, had current spot prices prevailed throughout 2025, free cash flow would have been about 240% higher. We have consistently demonstrated the delivery of our strategy and disciplined capital framework, returning excess cash to shareholders through dividends. The track record speaks for itself. Over the past 5 years, we have returned almost twice as much in dividends as our peer group combined. And so that you are left in no doubt, we offer a distinct investment proposition. Our substantial resource endowment provides exceptional longevity across our Tier 1 operations. With a high-quality, reliable and efficient processing infrastructure, our ability to create value throughout the value chain sets us apart within the sector. Our strategy is clear. Our experienced leadership team is well positioned to continue optimizing the business, unlocking value and delivering strong operational outcomes. And we remain firmly committed to disciplined cost and capital management to safeguard the integrity and sustainability of our assets while executing our growth agenda effectively. And with a robust balance sheet and strong cash flow generation, we're well placed to sustain those industry-leading returns to shareholders. I think it's fair to say that Valterra Platinum has certainly demonstrated in its first year of independence that we are a company that delivers. In 2025, we delivered on all our strategic priorities. We reinforced our skills and technical capabilities across the business and executed operational excellence activities with discipline and set the company up to accelerate those growth projects. I'am truly excited about the momentum that we have brought into 2026 and our unwavering focus on value creation for all of our stakeholders. That concludes our presentation. So thank you once again for joining us. I hand you back to Leroy to facilitate the questions and answers. Leroy Mnguni: Thank you, Craig. I think we'll start in the room. There are a couple of revolving mics. The first hand was Chris. If you could please introduce yourself before you ask your question as well, please. Christopher Nicholson: It's Chris Nicholson from RMB Morgan Stanley. I've got a couple of questions around volumes, and I think Mogalakwena in particular. I noticed that you trimmed your production guidance for your own mines for 2027. Could you just chat to what's driven that trim? Second question might be linked to that. At your Capital Markets Day last year, you were talking about grades at Mogalakwena from the open pit getting back to 3 grams a tonne, supporting 1 million ounce profile. We're still a little bit below that. Is it still your expectation that you get back to 3 grams a tonne? And then final one, also probably linked to that. I see you put a comment there on the lease on the Baobab plant expiring at the end of '25. I think we did know about that. So it's not a surprise. But I just wondered at these prices and just with the profitability of Mogalakwena, whether it made sense to try and extend that in any way, even if you had to put more CapEx into the tailings dam or incentivize Sibanye to do so. Craig Miller: Thanks, Chris. I'll answer some of the questions, and I'll ask perhaps Willie and Agit also just to comment on and reemphasize that value over volume strategy that we have in Mogalakwena and then also Agit, if we can just talk through the Baobab and the improvements that we've seen through North concentrator, improved recoveries and why we've sort of -- well, we've ended the Baobab contract. I think certainly, as we've said around our M&C volumes for next year between 3 million, 3.4 million ounces and into 2027, slightly lower. And that is on the back of us maintaining Mogalakwena's production at between 900,000 and 1 million ounces. And that's really our focus. And I've touched on that value over volume strategy, and I think Willie can articulate that in more detail. But that's what we fundamentally believe is the right sort of approach for us because it really drives that all-in sustaining cost. And we need to maintain that throughout the journey of Mogalakwena, sort of certainly in the lower half of the cost curve. And that's what really enables us to be able to do that. We've also maintained our production at Amandelbult at that sort of 580, 650 sort of mark. And that's what we'll sort of maintain. That continues to keep the longevity of Amandelbult intact, particularly from a Tumela and Dishaba perspective. And that's really what those sort of the 2 sort of revisions are there. But you'll see that we've guided now. We've moved away from guiding around the grade. So we've given you guidance around the actual production profile. And so that then enables us to be able to manage just how we extract the value through processing some of those lower-grade ore stockpiles, reducing the amount of volume that we actually mine, particularly at Mogalakwena and therefore, continue to drive its all-in sustaining cost to where we fundamentally believe it should be for this Tier 1 asset. So Willie, I don't know if you want to add anything in terms of the sort of the approach in terms of how we think through the grade. Kimi has got your mic ready. Willie Theron: Good morning, everybody, and thanks for the question, Chris. I think I'm not going to belabor the point on the all-in sustaining cost that Craig has already spelled out. I think a big component, if you look at Mogalakwena in particular, is the low-grade ore stockpile. It's sitting roughly on 5 million tonnes. That is a key deliverable aspect that we have stripped in essence, waste, where we stockpiled the low-grade ore. And our approach in terms of this value over volume is to, over time, for the next few years, and [indiscernible] made the percentage right about 35% to use that as part of the blend into the concentrators. But even at about 35% on average that we use it as a blend into the concentrators, we maintain a 5 million tonne stockpile on the low-grade ore. And this is why this value over volume and driving the all-in sustaining cost to maintain that position. And also from what I've spoken now, that's only from an open pit point of view. That is not taking into consideration anything that we do at Sandsloot. So the 900,000 to 1 million that Craig is referring to is open pit and with a 35% on low-grade ore stockpile as part of the blend and maintaining that at about 5 million tonnes. It's significant differentiator in terms of that ore body. Craig Miller: Thanks, Willie. Agit, do you want to just comment on Baobab and just how we're thinking North and South. Agit Singh: Yes. Thanks for the question, Chris. So obviously, we did consider Baobab with regards to the future of Mogalakwena with regards to milling. But first of all, Baobab was not the cheapest concentrator in our portfolio. And North concentrator and South concentrator has got a significant amount of effort over the last couple of maybe 1 to 1.5 years. And that effort has come through significantly around the way we operate the plant from a throughput point of view. So the more throughput we can get through North or South, the better it is for us from a unit cost point of view. It links back directly to what Willie and Craig has been speaking about with regards to the blending strategy and keeping the ounce profile. So we're very confident that with the North and South concentrator and the work that we've done with regards to the feed that we're putting into North and South, the work that we're going to be doing at the South concentrator around the refurbishment, the work we've already done at the North concentrator with regards to the Jameson cells and optimizing that flotation circuit that we will be able to deliver what we need to deliver with regards to the blending strategy that we have coming through from Willie and the team. So it's a very well-integrated thought process that we've taken from mining all the way down through the concentrators. Leroy Mnguni: I think the next hand was Gerhard and Arnold. Gerhard Engelbrecht: Gerhard Engelbrecht from Absa. Maybe just two questions is, how do you think about your debt levels at this point in the cycle? So do you have a targeted debt range or debt-to-equity or net debt-to-EBITDA? Or how can we think about debt going forward and how you then utilize cash? And then maybe if you can just remind us of the insurance payment, the quantum of that, that you expect in this half. Sayurie Naidoo: So we've guided in terms of our net debt-to-EBITDA at about 1x -- less than 1x through the cycle. However, at current prices, as we've declared our dividend of ZAR 11.5 billion, that gets us to a cash-neutral balance sheet. And we believe that, that is actually the prudent approach, which will actually strengthen our balance sheet and ensure that we can even sustain it in a lower price environment. Craig Miller: And then the insurance. Sayurie Naidoo: On the insurance proceeds, as we said, we've received ZAR 2.5 billion so far. However, we are still in discussions in terms of what the total quantum of that insurance proceeds will be, but we expect to receive that in the first half of the year. Arnold Van Graan: It's Arnold Van Graan from Nedbank. Two questions for Sayurie. The one is on your cost savings. I mean that's a phenomenal number, saving ZAR 5 billion and then ZAR 1.5 billion going forward. So I guess my question is, where is that coming from? And how sustainable is it? I know we've talked about this before, but I guess my question or concern is that some of this comes back into the system over time. So that's the one question. Second question relates to Unki. It looks like there's a bit of a cash lockup there currently. It doesn't matter now given where prices are. But yes, just give us a sense of how you're addressing that and how you see that playing out? That's it for me. Sayurie Naidoo: Sure. So just in terms of our cost savings, so it's really in 3 broad categories. So the first one, if I look at the total ZAR 12 billion, about ZAR 5 billion of that is from supply chain and procurement benefits. So we've reviewed all our supply chain contracts over the last 2 years, we've been able to get lower pricing. A lot of this is from prior to COVID or during COVID, where we had escalated pricing in some of the consumables, we were able to reduce a lot of that. So these are sustainable pricing. Obviously, they would increase with inflation going forward. But from an operating perspective, that's where we found a lot of the efficiencies. The labor and contractor reductions. So we undertook a restructuring in 2024. So that was about 2,700 people at Amandelbult. So that is a sustainable reduction in labor. We've also reviewed all our contracting companies, and we took out about 450 contracting companies. So that's sustainable reductions. We also did some review of our corporate costs. And as I said earlier, there were some demerger-related cost savings that we were able to realize as well. But a lot of the savings that we've also achieved is as a result of the operational excellence work that we've done. So the mass pull benefit that Agit has been working on in processing, the pit optimization at Mogalakwena, all of that has been sustainable cost reductions. So mass pull, for example, a ZAR 250 million annualized cost benefit that we'll realize from that. The pit optimization, we've been able to bring down waste stripping costs by about ZAR 1 billion so far and another ZAR 1 billion going forward. And then the demerger-related costs, the ZAR 1 billion to ZAR 1.5 billion that we expect to come, that is really from the simplified operating model as a stand-alone company, simplification of some of the systems that we've got, our IT systems, for example, moving to an outsourcing arrangement for some of our shared services. So that's where we're seeing some of the reductions that we expect to realize in the next 2 years. So really sustainable cost savings. Going forward, as we've guided, you expect -- we will continue to look for initiatives to offset inflation, again, mass pull, renewables that will come through from the Envusa project this year. So that will offset about -- that will give us about a 10% reduction on the current Eskom tariffs that we're getting. So there will be continued cost optimization initiatives to ensure that we maintain that cost discipline as a business. So as you see, our cost is relatively flat over the next year. And then in terms of the Unki, so we do have -- so as part of operating in Zimbabwe, our export proceeds is a retention mechanism. So 30% of our export proceeds are retained in local currency. In the last year, we haven't been able to access some of that. So it's about $100 million that hasn't been able to be accessed by us. However, and you'll see that we've obviously recognized a provision on that. But we have been engaging with the Reserve Bank as well as the Ministry of Finance, and we are receiving some funds in 2026 so far, and we do expect to receive that over the next couple of months. Leroy Mnguni: There's a question from David. Unknown Analyst: David [indiscernible] from Phoenix research. I would just like to, first of all, congratulate the technical and the mining people. First of all, congratulations on getting Amandelbult up and running so quickly. Very impressive, very impressive. And secondly, also, congratulations on the Jameson Cells. When I saw that number of 40% reduction in mass pull, that's quite amazing. So if I may lead my first question on that one is, is that in any way transferable to the other concentrators? I mean, obviously, I know that the metal mix is very different, but is that at all transferable? And then just a very general question. On the Merensky Reef, are there any plans to mine more Merensky Reef at all? I mean, it's now UG2. I'm talking about the East and West Limb, are there any plans to mine Merensky projects? Craig Miller: Thanks, David. Thanks very much for the question. I'm going to try my best to answer them, and that will be my team members giving me a report card in terms of whether I've been paying attention. So in respect of the Jameson Cells, so clearly, they've been really successful at Mogalakwena, at the North concentrator. Agit referenced the refurbishment of South. And so we will look to see whether we can install the Jameson Cells at the South concentrated Mogalakwena. So that process is underway, and we're evaluating it. I think it's less impactful at Amandelbult, particularly just given the scale of Amandelbult and the installed capacity. But our real primary focus is really then driving that efficiency at Mogalakwena. That looks to be our biggest opportunity at the moment. Did I get that right? Good. And then on Merensky, I think our primary focus is really around continuing on the UG2 routes. There's not a great deal of Merensky that we have immediately available, just given sort of what we've mined out at Amandelbult and in particular focus for us at Der Brochen and Mototolo on the Eastern Limb. Those are sort of -- our key focus will be around the UG2. Leroy Mnguni: We've got Steve in the back. Steven Friedman: It's Steve Friedman from UBS. Firstly, congrats on the strong results. Maybe just a follow-up on the capital allocation framework question and more regarding the prepayment, specifically around the remaining duration. I know this is something that's been extended previously. But if you could sort of give us some indication on that. And understanding this is a volume-based contract. So very much that value will be linked to PGM prices and FX, if you could give us some sort of sensitivity on what that means in the current environment? Sayurie Naidoo: Sure. So our customer prepayment at this point, it's about ZAR 12.8 billion. You're correct, it is linked to price and FX. So it's probably increased about ZAR 1 billion since 2024 as a result of that and volumes were relatively stable on that. In terms of the renegotiation, so it comes to an end in 2027. However, we are in negotiations with the customer, and we don't have any reason to believe that we won't be able to extend the customer prepayment. It may be on different volumes and different period, but it's still something that we firmly include in our working capital numbers. Leroy Mnguni: I see no further hands in the room. Can we please go to the conference call and see if there are any questions there? Operator: We have a question from Adrian Hammond of SBG Securities. Adrian Hammond: Yes, well cone on solid results and outlook, Craig, your payout was significantly higher, I think, than the market expected. So give us some guidance on how we should expect future payout of dividends. I noticed 70% is what you used to pay in the last bull market. And is this something we should be expecting going forward? For Sayurie, you've been quite explicit on the cost savings for another ZAR 1 billion to ZAR 1.5 billion over the next 2 years. But I do note you're certainly seeing more benefits from the Jameson Cells. And should there be other benefits as well that perhaps your ZAR 1 billion, ZAR 1.5 billion is still a conservative number. And I just want to clarify when you mentioned earlier that the Mogalakwena pit optimization on waste stripping was banked at ZAR 1 billion, but a further ZAR 1 billion going forward. Just correct me if I'm wrong, if that's further ZAR 1 billion is in your current guidance. And then Hilton, perhaps premature to ask that your customer prepayment with Toyota is still being negotiated. But do you foresee additional volume offtake in that agreement going forward? And perhaps you just give us an update on customer flows and orders for PGM autocat businesses and as well as the minor metals. Craig Miller: Thanks, Adrian, for the questions. So I'll take the easy one. So I think, Adrian, as we've indicated, just once again, quality of the assets that we have, our focus around operational delivery, investing in the assets that we have and really maintaining that asset integrity and reliability really sets us up well. And as a consequence of that, that enables us to be really deliberate and focused around how we return value to shareholders. And so in line with that discipline and our capital allocation, any excess cash that we generate, we would look to return that to shareholders. And so as Sayurie said, we've done it for 17 consecutive periods where we've paid a dividend and we've paid specials. And I think you can expect a continuation of that discipline for periods to come. And so we'll wait to see what happens in July when we report the half year results. Sayurie Naidoo: Adrian, on the waste stripping, yes, that's already in our guidance in the ZAR 17 billion to ZAR 18 billion in the medium term. And then just in terms of cost savings, so the ZAR 1 billion to ZAR 1.5 billion, that's coming from corporate cost reduction. And as we've mentioned, there will be continued benefits from operational excellence. So your mass pull initiatives, the renewables. We're looking at some low-cost country sourcing, so alternative sources of some consumables from a supply chain perspective. So all of that will partially offset inflation. So input cost inflation, about 6% we're forecasting for 2026, but we expect that our costs should be below the 6%. So yes, there will be some more operational initiatives that will offset inflation. Hilton Ingram: Yes, Adrian, on the prepayment, as Sayurie indicated earlier, right, in the middle of negotiations. So we're going to be as quiet on the subject as we can be, but we expect to see volumes at least in line with what you'd expect given the pressures in the automotive industry and increases in recycling. But we'll work hard at that. And so more news to follow later. In terms of -- what are we seeing in terms of customer flows? You've seen the duty announcements out of the U.S. That means there's some rebalancing of portfolios going on in amongst customers. And so we're seeing changes in geographic flows as a result of that and inquiries that you'd expect us to be seeing in line with those geographic flows. But we expect that to balance themselves out around the globe and not have a material impact on supply-demand balances. And then minor PGM demand, we've seen healthy demand for contracts in that space, and we're still seeing good flows. Leroy Mnguni: Any further questions on the call? Operator: We have a question from Nkateko Mathonsi of Investec Bank. Nkateko Mathonsi: Well done from my side on a very good set of numbers, especially I concur with Adrian, especially on the dividend, that was a surprise versus what the market was expecting. Another congratulations on inventory optimization that has allowed you to continue liquidating inventory from your processes. I mean, my first question is how much room do you still have to squeeze the pipeline going forward? At this point in time, it looks like it is creating [indiscernible] in the processing infrastructure, but that has been very positive for at least the past 2 years. I just want to know how should we think about it going forward? And then my second question is on Sandsloot and the prefeasibility study. Is there any indicated CapEx that we should work on as far as Sandsloot is concerned from that prefeasibility study? And then also on the better terms on the extension of the tolling contract by 5 years. Are you able to give us a bit of an indication as to the increment on that contract and how we should look at it going forward? Craig Miller: Thanks, Nkateko. Thanks very much. At least you like the dividend. So let me start on the inventories. I couldn't agree with you more that the processing team seems to find additional ounces. But I really do think that we've really optimized the pipeline now, and that's really sort of come through in terms of the optimization and the higher refined ounces that we achieved in 2025. We have indicated previously that we do have some inventory that is sitting in what we term wax. So that's material that has -- that you'll know better than me, comes out of the converter plant and that we haven't been able to treat to date. And as a consequence of that, we are repurposing Mortimer to be able to treat that material in addition to be able to just processing normal ongoing concentrate. So we do have some inventory and you'll see that come through in our 2027 number. So if you -- to Chris' earlier point, you've seen that slight reduction in our M&C volumes. But actually, our refined volumes in 2027 are maintained at 3 million to 3.4 million ounces. And so you see that liquidation coming through there as a result of Mortimer. So that's really where that will come through. But I think more broader in terms of do we have [indiscernible] and all the rest of it of inventory. We haven't found it, but we'll certainly keep looking. But genuinely, I think, we've optimized as much as we can at the moment. In terms of the feasibility study for Sandsloot, that continues, and that's underway. And so our capital guidance for the expenditure around that to ramp up Sandsloot to around about that 2 million, 2.5 million tonnes is maintained at that sort of ZAR 1.5 billion to ZAR 2.5 billion. Just remember, there might be some years that we'll spend slightly more because we need to build workshops, we need to purchase some equipment or something. But that broad range of between ZAR 1.5 billion and ZAR 2.5 billion is maintained from what we shared with you back in the middle of last year. And on the tolling contract, yes, we have extended the tolling contract with Sibanye. So that would have come to a conclusion at the end of 2026. We have extended that by another 5 years. Both parties have the opportunity to end that after 3 years. And I think to use Richard's words, I think it's on materially better terms than what they're currently paying at the moment. Leroy Mnguni: Operator. Are there any further questions? Operator: We have a question from Benjamin Davis of RBC Capital Markets. Benjamin Davis: Great set of results. Just a couple of questions from me. One on the CapEx guidance, very much going against the grain in terms of going down. I was just wondering if you could give any kind of what drove that delta from ZAR 19 billion to the ZAR 17 billion, ZAR 18 billion? And also given the price environment, is there any upside risk to that number in terms of kind of additional projects that are under evaluation, smaller projects? And then second question, just wondering if there is any evolution in the thinking around Modikwa? Craig Miller: Thanks, Ben. Do you want to do CapEx? Sayurie Naidoo: Yes, sure. So our previous CapEx guidance was around ZAR 19 billion. But there's a few aspects. So the one is once we concluded the feasibility study -- the prefeasibility on Mogalakwena underground, we were able to just redefine that CapEx. So that's where we got to the ZAR 1.5 billion to ZAR 2.5 billion. Due to the value over volume strategy, our waste stripping, as I mentioned, that's been reduced. So you see lower tonnes -- waste tonnes mined. As a result of that, you have lower HME replacement capital as well that will be required. So that's the other area. There's been some further optimization, for example, on the Mortimer repurposing project that has done more optimization as well at Amandelbult and Unki in terms of some of the capital spend there. The other area that's also benefited us is as a stand-alone company, how we actually execute on our projects. So we've been able to build in quite a bit of efficiencies there just in terms of using internal teams as opposed to third parties, just in terms of scoping and defining our scopes and being quite focused around that. So that's also been able to contribute towards that reduction, and that's how we were able to achieve the lower end of our guidance this year as well. Craig Miller: So yes, we agree, Ben, that's certainly sort of countercyclical, as I pointed out in terms of what we're seeing elsewhere. But yes, I think we will certainly maintain that cost and that capital guidance and it's important that we maintain that through the cycle. So very much focused around making sure that we operate within that envelope. I think specifically as it relates to Modikwa, to your question, I think one of Sayurie's slides actually illustrated just in terms of where our all-in sustaining cost was and where we're all positioned on the cost curve. The one outlier in the second half of the cost curve is Modikwa. And so we're not particularly happy, and I know our partners are not in terms of the performance of Modikwa and just how that sort of -- where it sits on the cost curve. And so therefore, we need to continue to evaluate how we improve its performance, how we rethink through what the operating structure is there, and we'll continue to evaluate our options, specifically as it regards to Modikwa in the coming months. Operator: We have a question from Ian Rossouw of Barclays. Ian Rossouw: Two questions. Just first one on the Sandsloot project. If you do go ahead and approve the project in 2027, how can we expect the CapEx to change in '28, I guess, versus current guidance? And then just wanted to talk about the working capital just in the second half, I guess there was still some build in inventories if you strip out the prepayment and obviously, the receivables sort of based on prices. But how should we think about the working capital this year outside of probably the inflows you'll see from the prepayment due to higher prices? Craig Miller: Okay. Do you want to do working capital and then... Sayurie Naidoo: Yes. So in terms of working capital, so the customer prepayment, as I did indicate, that is influenced by price and FX. So as prices increase, you will see an increase in the customer prepayment. On the other one that's influenced by price and FX is your purchase of concentrate. So that's your inventory as well as your creditor. So those should offset each other because -- so from a price impact, so that should be relatively flat. So it's really just your customer prepayment where you'll see an increase in working capital. Craig Miller: And then just on Sandsloot. I think from our perspective, so the investment is taken -- the decision to invest in Sandsloot is taken in the first half of next year. Our expectation is that you'll continue to see that ZAR 1.5 billion to ZAR 2.5 billion expenditure sort of take place for us to ramp up to that sort of 2 million, 2.5 million tonnes. So that's what you can expect to sort of see in terms of annual CapEx associated with the Sandsloot development. Clearly, obviously, as I said, you might see 1 year a little bit higher than that ZAR 2.5 billion because we've got to spend on the workshops and all the rest of it. But I think importantly, as we then start to position that, whatever that capital profile looks for Sandsloot is then -- you could see then a reduction in our waste stripping capital and some of the capital associated with the open pit at Mogalakwena. So that's where the real benefit starts to play itself out. So you process this higher-grade ore, and then we're able to reduce the amount of material that we have to move in the open pit. And so you'll see that benefit coming through as part of the decision to invest in Sandsloot. But that ZAR 1.5 billion to ZAR 2.5 billion, if you take that, you model that, that will be great. Please just make sure that you model that 10% to 20% uplift in production as well. Ian Rossouw: Okay. That's great. And maybe just coming back. So any shift in inventories expected this year? Or is that broadly stable now just on working capital? Craig Miller: Yes. No, I think your inventories, we've sweated that drag. So yes, I think your inventories are more or less sort of back to normal levels. Leroy Mnguni: Any further questions? Operator: We have no further questions. Leroy Mnguni: Right. There's a few questions that have come through online. Rene from NOA Capital says ZAR 11.5 billion net cash. I really believe you would do it a year ago. So thank you, Rene. He's got a question for Hilton. He's asking, what is your pick for the best performing PGM in 2026? And then sorry, Hilton, while you answer that, we've had a couple of questions on recycling. If you could please elaborate on some of the headwinds to a recovery in recycling, what are some of our expectations are in an increase in recycled supply given the higher PGM prices as well, please? Hilton Ingram: Thanks, Rene. I think the right answer to your question is it starts with an R as in Rene. Yes. So I'm going to go with it starts with an R. And then on recycling, we all know that recycling rates are driven by scrappage rates of vehicles. We know that vehicle prices are high. We know that cars are lasting longer than people would expect. We know that there's sort of technological or technology uncertainty in terms of do I replace my car with another ICE vehicle? Do I replace it with a PHV? Do I replace it with ICE? Or do I just hang on to what I have. So those are all playing out through the market, right? And yes, the value of an auto catalyst is up. It's not up to the same extent as it was in 2022. And the value of the auto catalyst isn't a player in people's decisions to recycle cars. So we think scrappage rates are unaffected by the value of the catalyst. What is affected by the value of the catalyst is the pull-through of inventory, right? So if people had scrapped cars, cars were sitting in the junkyard and they hadn't taken the catalyst off straight away. Now you're incentivized to go and get that catalyst off the cars and pull that inventory through. And as a result of that, we do have recycling numbers up last year and likely up this year. But there will be payback for that over time with reduced growth rates in recycling. So hopefully, that answers both of those questions, Leroy. Leroy Mnguni: Thank you. There is -- we've had a similar question, but I think it's worth asking this again just to emphasize the point. So it says the Board has paid out 71% of headline earnings in 2025, well above the 40% policy. How should investors think about the balance between sustaining market-leading dividends and funding growth projects like Sandsloot underground ahead of the H1 2027 investment decision? Sayurie Naidoo: Sure. So I mean, as Craig said, I'll reiterate it. So there's been no change to our dividend policy. That's still at 40% of headline earnings. However, as part of our capital allocation framework, if we've got excess cash after we've actually invested in sustaining CapEx after we've paid our base dividend, after we've invested in the Mogalakwena underground and all our discretionary projects, whatever cash is there, we'll look to return to shareholders. So there's been no change to the policy. But we'll balance growth and we'll balance returns to shareholders. Craig Miller: But I think it's important that we also just emphasize that the CapEx that we have that we've given that ZAR 17 billion to ZAR 18 billion, that includes the ZAR 1.5 billion to ZAR 2.5 billion for Mogalakwena for the underground, yes. So that is our capital envelope. Leroy Mnguni: Thanks, Craig. And then I just got to filter through all the requests for trucking contracts, even though we're reducing the amount of trucks on. We've got a question from Shashi from Citibank. How much is the benefit of mass pull reduction on FY '26 operating cost guidance? Can we expect a further benefit into 2027 as well? Sayurie Naidoo: Yes. So on an annualized basis, it's about ZAR 250 million. Leroy Mnguni: Thank you. I think a lot of other questions are just repetitions of what we've already had. So maybe do one last call in the room. Anything on the conference call? Operator: No questions from the conference call. Leroy Mnguni: Over to you, my leader. Craig Miller: Is it me again? So once again, thank you very much for joining us today. Really, I think it's fair to say that we've really had a really transformative year in 2025 on a number of fronts. And we have a great deal of excitement and opportunity within our business in terms of continuing to really be that leading PGMs producer. And so the important thing for us is as we execute on what we need to do, that we do maintain that cost and that capital discipline. And that's exactly what my team and I are focused around. So if I can also just express my sincere thanks not only to the Board for helping us navigate what was 2025, but also to the executive team in terms of how they've showed up and really helped make a change to our business, but most importantly, to the whole team of Valterra Platinum for their enormous efforts and diligence last year and really turning last year into a really successful year and onwards and upwards from here. Thank you.
Operator: Good morning, and welcome to the Owens Corning Q4 FY '25 earnings call -- '26. My name is Carla, and I will be coordinating your call today. [Operator Instructions] I will now hand you over to Amber Wohlfarth to begin. Please go ahead when you're ready, Amber. Amber Wohlfarth: Good morning. Thank you for taking the time to join us for today's conference call and review of our business results for the fourth quarter and full year 2025. Joining us today are Brian Chambers, Owens Corning's Chair and Chief Executive Officer; and Todd Fister, our Chief Financial Officer. Following our presentation this morning, we will open this 1-hour call to your questions. [Operator Instructions] Earlier this morning, we issued a news release and filed a 10-K that detailed our financial results for the fourth quarter and full year 2025. For the purposes of our discussion today, we have prepared presentation slides summarizing our performance and results, and we'll refer to these slides during this call. You can access the earnings press release, Form 10-K and the presentation slides at our website, owenscorning.com. Refer to the Investors link under the Corporate section of our homepage. A transcript and recording of this call and the supporting slides will be available on our website for future reference. Please reference Slide 2, where we offer a few reminders. First, today's remarks will include forward-looking statements that are subject to risks, uncertainties and other factors that could cause our actual results to differ materially. We undertake no obligation to update these statements beyond what is required under applicable securities laws. Please refer to the cautionary statements and the risk factors identified in our SEC filings for more detail. Second, the presentation slides and today's remarks contain non-GAAP financial measures. Explanations and reconciliations of non-GAAP to GAAP measures may be found in our earnings press release and presentation available on the Investors section of our website, owenscorning.com. Third, Financials and metrics for current and historical periods discussed on this call will be for continuing operations, except for 2025 capital expenditures and cash flow measures, which include amounts related to glass reinforcement. For those of you following along with our slide presentation, we will begin on Slide 4. And now opening remarks from our Chair and CEO, Brian Chambers. Brian? Brian Chambers: Thanks, Amber. Good morning, everyone, and thank you for joining us today. During our call this morning, I'll provide a brief overview of our fourth quarter and full year 2025 results and then highlight the actions we've taken throughout the year to deliver consistently strong performance while positioning Owens Corning for future growth. Todd will discuss our fourth quarter and full year financial results in more detail, and I'll come back to share our outlook for the first quarter and end market expectations for the full year. 2025 was a year of progressively more challenging market conditions with weakening U.S. residential trends and distribution destocking in the back half of the year. This included a uniquely quiet storm season in the second half with no major storms making landfall in the U.S. for the first time in a decade which weighed heavily on nondiscretionary roofing repair demand. Despite this backdrop, our team continued to successfully execute our enterprise strategy. delivering strong margins and making great progress on key initiatives to enhance our operational efficiency and accelerate our organic growth. I'll share more about our financial performance and strategic highlights in a moment. But first, I'll begin with our unconditional commitment to safety. Throughout 2025, we delivered improved results through our Safer Together operating framework. Our recordable incident rate for the year was 0.60, which is industry-leading among U.S. manufacturers. Notably, more than half of our sites operated injury-free, a reflection of the deep personal commitment our employees bring to working safely every day. Turning to our financial performance. We delivered fourth quarter results consistent with our enterprise guidance with revenue of $2.1 billion and adjusted EBITDA of $362 million with an adjusted EBITDA margin of 17%. For the full year, we generated revenue of $10.1 billion and adjusted EBITDA of $2.3 billion with an adjusted EBITDA margin of 22%. Through a combination of our strong market positions, improved operating efficiencies and favorable product mix shifts, we are generating higher margins on lower market volumes. Our higher earnings profile and working capital focus also enables us to generate significant operating and free cash flow. And through our disciplined capital allocation strategy, we returned $1 billion through dividends and share repurchases in 2025 and have returned over $4 billion of cash to shareholders since 2020. In December, we announced a 15% dividend increase, tripling our quarterly per share payout compared to 5 years ago. This marks our 12th consecutive year of dividend growth and supports our Investor Day commitment of returning another $1 billion of cash to shareholders by the end of 2026. In the near term, we are proving that the structural improvements and strategic choices made over the past few years to reshape Owens Corning into a leading building products company are delivering significantly better financial results within weaker markets. At the same time, we are also creating multiple paths for revenue and earnings growth as market conditions improve, and we see the benefits of our capacity additions and growth initiatives. As part of our effort to reshape and focus the company. We have made major strategic moves to shift into more residential product categories that leverage our customer and channel expertise and further strengthen our long-term financial performance. This includes completing the sale of our business in China and Korea which streamlined our geographic footprint and announcing the divestiture of our glass reinforcements business, which serves industrial markets. We've made steady progress in advancing regulatory approvals towards closing, which we expect to take place in the next few months. We also continue to make good progress integrating our new Doors business. As we have discussed on previous calls, the market environment has been challenging for Doors, with lower housing starts and softer discretionary R&R activity pressuring demand with the added disruption from tariffs. Despite this environment, our team has executed well, streamlining operations, reducing costs and increasing our share of wallet with customers through a more integrated market approach aligned with our commercial strategy. We are exceeding the $125 million in run rate enterprise cost synergies we committed to by mid-2026, and are on track to deliver an additional $75 million of structural cost improvements within our operations including our recent decision to sell a small distribution business to a major customer. While near-term results are being weighed down by weak market demand, our team is strengthening the business in ways that will significantly grow the earnings and cash flow of the company as markets recover. Moving forward, we see additional opportunities across the enterprise to grow revenue and earnings as we begin to realize more benefits from a broader residential product offering with an increased repair and remodel focus that now accounts for more than 50% of our revenue including a significant portion from nondiscretionary reroofing. With an attractive set of complementary building products, we are unlocking the full power of the enterprise to accelerate our performance by leveraging a set of capabilities that are truly unique to Owens Corning and create the OC Advantage. Our iconic brand, unparalleled commercial strength, leading technology and winning cost position, all of which combined to strengthen our market leadership and create multiple paths to deliver revenue and earnings growth. Owens Corning has industry-leading brand awareness and favorability with homeowners and contractors. This creates exciting pull-through opportunities for our products as we invest to expand its use and impact. Our iconic brand, recognizable by the color pink and The Pink Panther and supported by 90 years of history in building products, provides a high-quality, trustworthy platform for customers that creates loyalty and differentiates us in the market. This brand trust has been highlighted through several recognitions, including being named America's most trusted insulation brand and receiving the Women's Choice Award as a most trusted and recognized roofing brand for 9 consecutive years. Our unparalleled commercial strength is driven by deep channel expertise, unmatched customer partnerships and a downstream engagement model that helps our contractors, builders and dealers win and grow in the market, while creating pull-through demand for our distribution partners. One example of this is our Pink Advantage Dealer Program, which supports growing the estimated 4,000 privately owned lumber and building materials dealers across the U.S. In 2025, we grew program enrollments 38% by leveraging the learnings from our roofing contractor engagement model and utilizing a more integrated product and marketing offering, featuring our residential insulation, roofing and doors. In 2026, we expect to continue increasing enrollments, creating more loyalty to OC products and significantly increasing our revenues. Applying a similar model to homebuilders, we are also realizing new opportunities to grow our business through the use of our integrated product offering and enhanced marketing tools. Our leading technology continues to fuel growth through customer-focused innovation and process improvements. In 2025, we launched over 30 new or improved products, maintaining our 20% plus product vitality index by continuing to expand our R&D capabilities to bring new solutions to the market faster to meet customer needs. To help accelerate the pace of innovation even further, in the fourth quarter, we announced the promotion of José Méndez-Andino to the roll of Chief Innovation Officer. He will lead a center of excellence in innovation, reflecting our focus on product and process leadership to drive organic growth. Last, our winning cost position reflects best-in-class execution, network optimization and vertical integration to drive cost efficiency and productivity gains supporting our commitment to deliver a mid-20% adjusted EBITDA margin profile over the long term. Through our factory modernization initiative, we continue to improve our manufacturing cost position and increase capacity through targeted capital-efficient investments in our manufacturing network, several of which came online in 2025. In Roofing, we started up our new highly efficient laminate shingle line in Ohio and a high-speed nonwovens line in Arkansas. In Insulation, we expanded our capabilities to serve the growing demand for XPS foam insulation with a new low-cost plant in Arkansas. And in Doors, we are applying our enterprise operational playbook to drive significant structural cost improvements through network optimization actions, including the closure and consolidation of five manufacturing and fabrication facilities as well as focused automation and productivity investments. We are also enhancing our winning cost position through the use of advanced analytics and AI to drive efficiency, support customer growth and strengthen market leadership. For example, we are applying AI through the use of supply chain optimization agents that help us respond quickly to network adjustments and maintain strong service levels at reduced cost. This capability is being used in our North American fiberglass insulation business today, but will be scaled to our other businesses throughout the year. To accelerate our digital efforts, Annie Baymiller was recently promoted to the role of Executive Vice President and Chief Information Officer. She will lead the advancement of our digital technology capabilities and next-generation tools, including generative and agentic AI that will be instrumental to unlocking new capabilities and generating additional value. Before I turn it over to Todd, I want to thank our team for their outstanding efforts in 2025. Owens Corning was again named one of Wall Street Journal's top 250 Best-Managed Companies, ranking 73rd overall and 10th in customer satisfaction. This recognition reflects the dedication of our team to support our customers and drive the success of our company. In summary, while 2025 was a challenging year for our markets, our performance demonstrated the strength of the company we have built. Our team stayed focused, working safely, controlling our costs, helping our customers win and grow and delivering on our capital allocation commitments. Through disciplined execution, we generated market-leading financial results and continued investing in the growth of the enterprise. As we begin 2026, we are excited by the opportunities we see to continue growing the company and creating value for our customers and shareholders through the execution of our enterprise strategy and implementation of the OC Advantage. With that, I'll turn the call over to Todd. Todd Fister: Thank you, Brian, and good morning, everyone. As Brian shared, we are navigating soft end markets in all three businesses while demonstrating the resilience of our earnings, cash flows and return of cash to shareholders. Despite near-term market headwinds, we have multiple paths to deliver strong results by leveraging the OC Advantage, delivering on the multiple organic growth investments in new highly efficient manufacturing plants and executing our strategic plans to deliver the full potential of the Doors business. The impact of these structural improvements and investments will be amplified as residential markets recover later in 2026 and into 2027. I'll begin with Slide 5 and review our results for continuing operations for the quarter and full year. In the fourth quarter, we executed well despite weaker market demand in each of our three businesses. We continue to outperform prior cycles in Roofing and Insulation while delivering overall results in line with guidance. For the full year, we delivered adjusted EBITDA of $2.3 billion at a margin of 22%, marking our fifth consecutive year of 20% plus EBITDA margins. For the year, adjusting items totaled $1.2 billion, primarily due to $1.1 billion of noncash goodwill impairment charges in our Doors business during the third and fourth quarters. These impairments were driven by updated macroeconomic assumptions in our valuation model, given near-term market softness that continued to weaken and do not reflect a change in our longer-term expectations for the earnings potential of the business. Acquisitions with goodwill are particularly sensitive to impairment when market conditions worsen as we have seen in Doors. Turning to Slide 6. For the year, we generated $1.8 billion of operating cash flow and returned $1 billion of cash to shareholders. Free cash flow for the fourth quarter was $333 million, and free cash flow for the full year was $962 million, down $283 million from last year, primarily due to higher capital additions. Full year capital additions were $824 million, with roughly half of our capital focused on long-term cost efficiency and growth. Our return on capital is 12% for the 12 months ending December 31, 2025. As a reminder, at our Investor Day last year, we gave a long-term target of mid-teens or better return on capital. While currently below mid-teens, there is no change to our long-term target. Year-end debt-to-EBITDA was 2.1x at the low end of our targeted 2 to 3x range. At year-end, the company had liquidity of $1.8 billion, consisting of $345 million of cash and $1.5 billion of availability under our bank debt facilities. During the fourth quarter, we returned $286 million to shareholders through share repurchases and dividends. Throughout the year, we repurchased 5.9 million shares supporting our Investor Day commitment of $2 billion in cash returned to shareholders in 2025 and 2026. In December, the Board declared a cash dividend of $0.79 per share, an increase of approximately 15%. Our capital allocation strategy remains centered on generating strong free cash flow, delivering mid-teens return on capital, returning cash to shareholders and maintaining an investment-grade balance sheet while investing in high-return growth opportunities. Now turning to Slide 7. I'll provide additional details on our segment results. Starting with our Roofing business. We benefited from the strength of our commercial team and their work with our contractors which allowed us to outperform the market in 2025, although the market slowed significantly in the back half of the year. Fourth quarter sales were $774 million, down 27% from the prior year primarily due to lower shingle volumes. The U.S. asphalt shingle market declined a similar percentage year-over-year, driven by unusually low second half storm activity and a reduction in inventory levels at distribution. Our volumes were in line with the market. The significant decline in volume resulted in EBITDA for the quarter of $199 million, down from prior year. While pricing remained relatively flat in the quarter, inflation continued, resulting in negative price/cost. Additionally, due to the weaker markets, we took production curtailments to manage inventory and perform maintenance. We recognized some impact of the curtailment in Q4 and will have a bigger impact in Q1 as we sell through the higher cost inventory. Despite the significant decline in the market, EBITDA margins for the quarter were 26%. For the full year, Roofing delivered sales of $4.4 billion, down 4%. The U.S. asphalt shingle market declined approximately 10% for the year, with a strong first half followed by a much weaker second half as a result of very weak storm demand. Our contractor engagement model continued to support demand, resulting in volumes that outperformed the market overall. Full year EBITDA was $1.4 billion with strong EBITDA margins of 32%, supported by positive pricing that more than offset inflation and curtailment. Turning to Slide 8. The Insulation business delivered another strong year, achieving its fifth consecutive year of 20% plus EBITDA margins. Fourth quarter revenues were $916 million, down 7%, driven by the sale of our building materials business in China as well as lower volumes in North American residential and nonresidential markets. Europe remained stable and benefited from currency tailwinds. Insulation generated fourth quarter EBITDA of $186 million, down $42 million year-over-year. Slightly negative pricing and modest inflation resulted in negative price/cost for the quarter, and we continue to curtail assets to manage inventory levels. EBITDA margins were 20%. For the year, Insulation delivered net sales of $3.7 billion, down 6% compared to prior year. The decline was primarily due to lower North American residential demand and the divestiture in China. Positive pricing and strong manufacturing performance partially offset inflation and downtime. Full year EBITDA was $848 million with a margin of 23%. Moving to Slide 9, I'll provide an overview of the Doors business. Throughout the year, the Doors market continued to be extremely challenged due to the weakness in both new construction and unusually low existing home sale that negatively impacted remodeling activity. The business generated fourth quarter revenue of $486 million, down 14% from the prior year, driven by lower volumes across both new construction and discretionary repair/remodel. Additionally, the previously announced sale of a non-core components facility in Oregon resulted in a $13 million revenue headwind in the quarter. On an annual basis, this business generated revenues of approximately $50 million. EBITDA was $33 million with EBITDA margins of 7%. Price/cost remained negative as modestly positive price was more than offset by continued inflation, particularly due to tariffs. For the full year, Doors net sales were $2.1 billion, and EBITDA was $232 million with an 11% margin. Despite market headwinds, the integration continues to progress well. We have achieved our $125 million enterprise run rate synergy commitment to date, with approximately 40% captured within Doors and 60% captured across the broader enterprise. Demonstrating our ability to scale the OC Advantage through the same playbook that has structurally improved Roofing and Insulation over time. Additionally, as Brian shared, we've taken a number of actions to improve the network efficiency of the business to drive an additional $75 million of cost improvements. These are just starting to show in our earnings. Across the company, our gross tariff exposure in 2025 was approximately $110 million that was mitigated to a net tariff impact of approximately $30 million, primarily in the Doors business. Our sourcing and supply chain teams continue to demonstrate agility in mitigating tariff exposure and preserving margins. Looking ahead to Q1, based on tariffs in place at the start of the quarter, we anticipate approximately $20 million of gross tariff exposure that will net to an impact of roughly $10 million after mitigating actions, primarily in the Doors business. We are monitoring the dynamic tariff environment due to the recent Supreme Court decision which could have an impact on our overall tariff exposure as the situation evolves. Moving on to Slide 10, I will discuss our full year 2026 outlook for key financial items, all of which exclude the impacts of our glass reinforcement business. General corporate EBITDA expenses are expected to be approximately $245 million to $255 million. We expect our 2026 effective tax rate to be 24% to 26%. Depreciation and amortization is expected to be approximately $680 million. Capital additions are expected to be approximately $800 million in 2026. Over half of this capital will be deployed in strategic investments we are making to expand capacity and improve efficiency. We expect CapEx to remain elevated in the near term as we work towards completing the high-return capital-efficient projects underway. We remain optimistic about our ability to return significant cash to shareholders as markets recover and our results show the benefits of recent investments and structural improvements. I'll now turn the call back to Brian to discuss our outlook in more detail. Brian Chambers: Thank you, Todd. Our results in 2025 continue to demonstrate the strength of the company. Our strong commercial positions, improved operating efficiencies and favorable product mix shifts positioned us to deliver market-leading financial performance as we work through a weaker demand environment. For 2026, we expect the near-term market environment to remain challenging with conditions improving in the second half of the year. Even within these market conditions, we are confident in our ability to generate strong financial results with multiple levers to pull to outperform the market. Turning to our first quarter outlook for the market. We expect North American residential new construction and discretionary repair and remodel activity to remain soft, reflecting the lowest level of quarterly housing starts in the past 6 years and unusually low existing home sales. Within Roofing, we expect to see weaker manufacturing shipments resulting from lower storm carryover and delayed restocking activity. Nonresidential construction activity in North America is expected to be relatively stable. With softness in certain commercial categories, offset by strength in institutional and infrastructure-related projects. And in Europe, market conditions are anticipated to remain stable, while volumes remain below mid-cycle levels. stable market trends and favorable currency tailwinds are supporting improvement, particularly in Insulation. As Todd shared, we remain disciplined in our inventory management with lower demand. As a result, we will see the production curtailment we took in Q4, work its way through the P&L in Q1, most notably in Roofing as we sell through higher cost inventory. Given this market outlook, we anticipate first quarter revenue from continuing operations of approximately $2.1 billion to $2.2 billion, in line with Q4. We expect to generate adjusted EBITDA margin from continuing operations in the mid-teens. While the near-term environment remains challenged, we expect to see improvements in many of our end markets as the year progresses. Overall, for the full year, we expect North American residential new construction activity to be relatively flat versus 2025. And with a favorable mix shift toward single-family homes. For discretionary repair and remodeling activity in North America, we anticipate demand to be up slightly with a more challenging comp through Q2 that improves in the back half of the year. In Roofing, we expect the slow start in Q1 to continually improve throughout the year with full year demand in line with historical averages, reflecting a more normal level of in-year storm activity. For nonresidential construction in North America, we expect to see activity improve throughout the year. And in Europe, we anticipate market conditions to gradually improve with currency benefits throughout the year. Based on this view of our end markets for 2026, our full year outlook for revenue and adjusted EBITDA is largely aligned with current consensus estimates. Now consistent with prior calls, I'll provide a more detailed business-specific outlook for the first quarter. Starting with Roofing, we anticipate ARMA market shipments to be down low 20% versus the prior year, reflecting a historically quiet second half 2025 storm season, which reduced storm-related repair demand carried into 2026. Delayed distributor restocking activity and more severe winter weather in many parts of the country, impacting repair and remodel as well as new construction activity early in the year. We anticipate our roofing shingle volumes to be down in line with the market in Q1. And resulting in a revenue decline of low 20% versus prior year. While near-term demand is pressured, we expect nondiscretionary reroofing demand to improve throughout the year with more normalized weather patterns. In components and nonwovens, we anticipate volumes to decline with reduced shingle demand. Pricing is expected to be down slightly to start the year, while inflation continues to pressure price cost. Earlier this month, we announced an April price increase for our roofing products, which we would expect to see realization on in Q2. From a cost standpoint, we anticipate production curtailment costs carried over from Q4 and incurred in Q1 to result in roughly $30 million of headwind as we see higher cost inventory flow through the P&L. Additionally, we expect to incur modest inflation, including some tariff headwind that we are starting to see for the roofing underlayments we produce and import from India. Overall for Roofing, we expect first quarter EBITDA margin of low 20%, down from Q4, primarily due to the curtailment cost carryover. In Insulation, we anticipate first quarter revenue to be down mid- to high single digits versus the prior year. This is primarily driven by lower residential volumes and the sale of our building materials business in China. As a reminder, this business had approximately $130 million of revenue annually and we completed the sale midyear 2025. In our North American residential insulation business, we expect revenue to be down low double digits year-over-year, reflecting a step down in housing starts and continued market uncertainty. For North American nonresidential, we expect revenue to be largely in line with prior year. And in Europe, we anticipate revenue to increase, driven by relatively stable demand and continued currency tailwinds. Overall, for the Insulation business, we expect price to be down slightly year-over-year, driven primarily by targeted actions in the North American residential market made last year partially offset by positive price in our nonresidential business. While inflation and production curtailments persist, strong operational performance and prior structural cost actions position the business to deliver EBITDA margins just below the 20% level achieved in Q4, even in a softer demand environment. Turning to our Doors business. We expect the market to remain challenged to start the year with continued weakness in discretionary repair and remodel spending and low levels of new residential construction. We anticipate first quarter revenue to be down mid-teens versus prior year, driven primarily by lower volume and the strategic sale of our Oregon components facility and company-owned distribution business, which combined had annual revenues of approximately $150 million. Pricing is expected to be down slightly, while inflation, including tariffs continues to pressure price cost. Importantly, we are realizing the impact of our enterprise synergies and expect to begin seeing the benefits of our network optimization scale throughout the year, which will help offset market headwinds. As a result, we expect EBITDA margin in the first quarter to be in line to the 7% we delivered in Q4 on similar demand. With that review of our businesses, I want to close out by recognizing the strong results our team delivered in 2025, while positioning Owens Corning for 2026 and beyond. The actions we have taken over the last few years and are continuing to take today are setting the stage for meaningful earnings and cash flow growth as markets improve. We continue to expect secular trends including pent-up demand for new housing, the growing need to renovate and remodel older existing housing, and the demand for more energy-efficient homes to create meaningful growth opportunities for OC. And with our attractive set of complementary building products we will leverage an integrated go-to-market strategy and unique set of capabilities within the OC Advantage to deliver strong financial results and strengthen our market-leading positions. We have built multiple paths to drive revenue growth and achieve 20% or more adjusted EBITDA margins, mid-teen returns on invested capital and significant cash flow. The new OC is built to outperform in today's market and in the future. With that, we would like to open the call up for questions. Operator: [Operator Instructions] And our first question comes from John Lovallo with UBS. John Lovallo: I guess how comfortable are you with your visibility into 2Q to 4Q? I believe that you're on track to meet the consensus estimates? And then which estimates are you referring to specifically? Brian Chambers: John, I'd say the visibility is kind of a ramp-up based on the market expectations that I just spoke about. I think we expect as I kind of walk through the businesses, the roofing demand profile to continue to increase throughout the year as we get to a more kind of normalized roofing year with weather patterns in the back half that represents kind of more normal storm demand. So we're assuming that kind of market progression. I think in the discretionary repair/remodel, we expect a challenging first half that gets better in the back half, as we see kind of continuing improvements there, and hopefully, more people investing in repair and remodeling of their homes. And then on the new construction front, we expect a pretty flat environment year-over-year with a little bit of opportunity on the single-family front, which creates a little bit more volume with both our Doors and our Insulation business. So I think our outlook in the near term is pretty clear to start the quarter. We're seeing volume progression improve throughout the quarter in all three of our businesses. So that gives us confidence. We're seeing the cost improvements coming through the P&L. So near term, we feel very confident. Over the longer term, I think we're going to see and expect to see some market improvements that are going to help drive some of the volumes and overall environment for us. So I think that's our view as we kind of come into the year and why we wanted to give visibility to a guide of kind of this general consensus estimate. So if we look across all the estimates that have been created for the company. We think the average is right in line with kind of how we see the year playing out on a full year basis. Even though it's a little weaker start, we expect that to progressively improve quarter-over-quarter throughout the rest of the year. Operator: And the next question comes from Michael Rehaut with JPMorgan. Michael Rehaut: I wanted to focus actually on the CapEx guide for $800 million. I wanted to understand, particularly given the divestiture of the glass reinforces business, which was a more capital-intensive business. What types of investments are contemplated in the $800 million that sounded to be a little bit more growth-oriented or productivity-oriented. And also how you think about an ongoing normalized annual run rate for CapEx in 2027 and beyond? Todd Fister: Mike, this is Todd. I'll take this one. So when you look at the $800 million, you're correct, that does exclude the impact of the glass reinforcements business. So this is across the Roofing, Insulation and Doors, building products core. When you look at what's in the $800 million, it's largely the previously announced projects for Roofing and for Insulation in Prattville and Kansas City that are driving that number to be higher than it has been historically. When we look at both of those investments, there are investments that support growth, especially in the Roofing business, but also in Insulation. And there are investments that support ongoing cost efficiency and productivity as we upgrade the overall fleet of assets that we have. Those are really temporary, though. I mean we're making those investments. They're onetime investments in our business in both Roofing and in Insulation. So when we look at the long term, we go back to the guide that we gave at our Investor Day that we would expect to return to about 4% CapEx as a percentage of revenue on a structural basis going forward. We've got a couple of years of stepped-up CapEx in '26 and '27 to get us through some of these major projects that we've already announced. But on an ongoing basis, we end up with a fleet of assets that have lower structural capital requirements on an ongoing basis than what we have today. So we're confident in that step down back that we guided to at Investor Day. But to your point, a slight step-up in '26 and '27. Operator: And the next question comes from Stephen Kim with Evercore ISI. Stephen Kim: Yes, I guess first question would be -- I guess, the question would be on your D&A kind of surprised us, it looks like it kind of missed your targets. Could you just talk a little bit about where that upside surprise occurred? What drove it? And then you mentioned in Roofing that your price -- you put a price increase through in April or effective April and should benefit in 2Q. So I just want to make sure I'm clear. Are you assuming that, that price increase or some part of it sticks in your guidance for the full year? Todd Fister: Thanks, Stephen. I appreciate the question. I'll take the D&A question and then turn it over to Brian for the Roofing price context. So when we looked at D&A, there's a few things that came in a bit higher on capital projects as we think about completing those and having that come through into our results for the year. Largely, we were in line with the guide that we gave overall for D&A. So there's not a whole lot of news there really. There's always some normal noise in D&A on a quarter-to-quarter basis. But our view would be we're in line with the guide, and we would expect to be in line with the guide that we just gave on today's call for 2026 as well. Brian Chambers: And then, Stephen, on Roofing pricing, you saw in our guide, we expect pricing to be down slightly to start the year. But I'd say overall, pricing has held up relatively well to start the year. We've made some targeted moves just to address some of the competitive gaps as we start the year, but nothing dramatic. And I'd say nothing unusual to the moves that we make to start the year given some of the regional variations we see in our price points and some of the product demand. So nothing unusual there to start the year and relatively good pricing visibility and stability. So in terms of the outlook, yes, we've announced a price increase for April 1. I would say we do expect to see some realization beginning in Q2 and moving through the rest of the year, historically, where we see a constructive roofing market, and we expect that to occur this year with Roofing volumes kind of in historical 10-year average ranges, more normalized seasonal weather patterns. And then when we do expect to see continued inflation in the business. So historically, we've been able to get some realization from a spring price increase where we've seen good demand trends and inflationary trends that we're able to offset with price increases. So we would expect to see some realization from that increase as we go through the year. Operator: The next question comes from Anthony Pettinari with Citi. Anthony Pettinari: In Roofing, given we had kind of a strange year last year with no storms and weak demand in the second half. Is it possible to talk a little bit more about sort of where channel inventories are? Have those been kind of completely drawn down? Or are they kind of maybe more seasonally normal? And I'm wondering, related question, if you could talk about the impact of maybe severe weather in December and year-to-date, if that is near-term negative, long-term positive or any view on that? Brian Chambers: Yes. So maybe I'll start with that one first. Yes, I think some of the restocking delays is tied to just a really rough start and a lot of winter weather throughout the country which is impacting the ability to get on the roof and do any work, particularly in southern areas of the country, but also impacting the ability for distributors to buy inventory and bring it in. So that has impacted some of the restocking activity to start the year. But I would say, over the course of the year, generally a tough winter results into some additional repair and reroofing activity as the year goes along. So it could potentially give us some volume upside as we take through the year. You're right, and last year was a very different kind of pattern of demand throughout the year. We saw a pretty significant drop off in the back half of the year to our guide that we gave in the fourth quarter. And on last call, I did indicate that I thought that would kind of spill over into this year in terms of a slower start. But to answer your question on destocking, now we think that destocking was really at an end of the year phenomenon for just distribution to kind of reset their inventory levels to close out the year. And I said I expected that restocking to kind of come back. Last quarter, we talked about half of that volume decline in Q4 tied to lower out-the-door sales, weaker storm demand, about half tied to destocking, we thought that would come back. And we still expect that in terms of our guide. But I do think that's going to be kind of a Q1, Q2 ramp-up on the restocking efforts. But we've not seen any permanent kind of changes in inventory levels that distribution is holding. We think that's going to be a ramp-up to get to seasonal inventory levels that they're going to want to carry to service demand, and we expect that to really increase again in the back half of Q1 to close out Q1 and then really to start Q2. Operator: The next question comes from Matthew Bouley with Barclays. Matthew Bouley: I wanted to ask about this contractor pull-through opportunities you were speaking about. Obviously, that's been a hallmark of the Roofing business. It sounded like you're speaking to leveraging that across the rest of the company and maybe doing the same with homebuilders. So I'm curious if you can lay out, I mean, is this really specifically a change or an enhancement to what you've been previously doing? And then kind of remind us what the benefits were in Roofing that you would be looking to replicate elsewhere. Brian Chambers: Yes. This is a big area that we're very excited about. When we talk about unparalleled commercial strength, and it's been a focus and a hallmark of our ability to create downstream demand with contractors, builders, dealers that create pull-through then for our distribution partners. And so we've had a very successful contractor engagement model. We've talked about it a number of times. We increased that contractor network. We did that so in 2025 as well. And it's really based on not just a product offering, but training, merchandising, marketing, co-branding, digital support services. So it's a full suite of services that really help our contractors win and grow in the market with our products and our brand. And so we've leveraged those learnings to say, how can we take that then to lumber and building material dealers, more than 4,000. These are family run, generally smaller dealer networks that will service rural areas with a broad product offering. Roofing, Insulation and Doors. So the engagement model, we've taken some of the parts of training and merchandising and co-branding from our roofing contractor engagement. We brought that over to the dealer side and have brought that into the market this year with really a lot of interest and a lot of support and a significant increase in enrollments of dealers now that are committing to the OC brand and the full suite of products, because they're very complementary to what they're taking into the market. So 38% increase in enrollments. We think that we can continue that kind of double-digit rate of enrollment increase in '26. That creates a lot of pull-through and some significant revenue opportunities for us. So I think we're excited about that. It's kind of a green shoot. If I go back to John's earlier question, when we think about the progression of the year playing out for us as well, clearly, we want to see some market improvements but there are a lot of self-help initiatives on both the commercial and operational front that are going to kind of roll through the rest of the year. This would be one of them. As these enrollments engage as we start to see product demand pull through when we get into the season, we think that's going to drive some incremental revenue for us. And then I also commented on the builder front, we're kind of taking that model as well now and taking that to homebuilders. Again, a full suite of residential products, Insulation, Roofing and Doors, valuable iconic brand that the builders can use to co-brand some merchandising capabilities. So we're excited on how this downstream and pull-through model is really growing, and we're starting to see some early indications through enrollments that we think are going to lead to product pull-through and additional revenue as we go through the rest of the year and beyond. Operator: And the next question comes from Trevor Allinson with Wolfe Research. Trevor Allinson: The question is on the full year potential for Roofing. 1Q is going to be down pretty significantly, as you've articulated, but you've got some pretty easy comps in the back half of the year. Just with that in mind, how are you thinking about full year revenue potential in Roofing? Is a flat year still on the table? Or does it really weak 1Q due to lack of storms here set you back too far for that to be a realistic scenario in 2026? Brian Chambers: Yes. Not sure if we get back all the way to a full year kind of depends on how the dynamics play out. But I'd say from a volume standpoint, again, we think it's going to be a weaker start. But I would say it's pretty consistent with what we saw emerging in Q4. So when I talked about our guide in Q4 stepping down and a weaker Q1. So I would say there is nothing new in our near-term market outlook that has changed from when we were on the last call. I think we expected a slower ramp up to start the year. So I think that wouldn't impact. I think if you think about the volume progression, we would expect to see, I think you would see Q2, Q3, Q4 more in line with 10-year averages. That would be our expectation as we go through the year after a slower start. And that is going to lead to some revenue growth opportunities sequentially throughout the year, but not sure if it will get us all the way back. I think that's going to depend largely on the market dynamics, if we see a stronger storm season, some higher opportunities there, and a little bit on the pricing dynamic and see how that plays out through the rest of the year. Operator: And the next question comes from Philip Ng with Jefferies. Philip Ng: You called out some targeted pricing action in Insulation and Doors. Brian, perhaps you can give us a little more perspective on size and the magnitude? Were there price gaps that you want to close out? And from here on, increasing demand is still a little murky. Should we expect price stability? And were there any share gain opportunities as a result of this? Brian Chambers: Yes. I'd start, and maybe I can have Todd come in on some of the Insulation pricing. On Doors, again, I'd say pricing has held up relatively well in a pretty challenging demand environment, which is, I think, a positive sign in terms of the value of the doors and how that can progress going forward with a little bit of upside volume and some potential pricing opportunities later in the year and into next. So I'd say that they are very targeted moves, very regional moves on the Doors front and nothing terribly dramatic, but really responding to more competitive pressures to start the year and to reset some programs to start the year with some of the growth initiatives we have in place. But I would say, overall, fairly stable to finish the year and to start the year, some targeted moves to address some of those competitive gaps and program adjustments we were going to make. But I think it gives us a platform for growth potentially as we go forward and we get into a more constructive demand environment, the opportunity for some pricing going forward. Todd Fister: And Phil, I'll give a little more color on the Insulation side. When we look at the non-res part of insulation, we're still in a fairly constructive pricing environment, where we're able to get price in parts of that business that you see coming through our results in Q4 and our guide in Q1. When we look at res, I would describe these targeted actions is fairly normal targeted competitive responses that we have in the market. Nothing really unusual. Despite the weakness that we've seen in single-family starts and lagged starts overall. It's been a relatively stable pricing environment overall in res. But we're still absorbing significant inflation. So we are seeing margin compression in that business, as a result of some of the targeted price actions that we've taken, but also the inflation in labor and materials that we continue to absorb in the business. But overall, I'd describe it as a relatively stable pricing environment in res and still positive and constructive in non-res. Operator: The next question comes from Sam Reid with Wells Fargo. Richard Reid: I believe on the prepared remarks, you alluded to some asset curtailment on the Insulation side. So maybe just characterize and perhaps quantify the level of curtailment there that you might have undertaken in Q4 and maybe early Q1? And then also, any views on industry capacity utilization and not to be greedy, but perhaps a split on how that might look in that batts and rolls versus loosefill. Todd Fister: Thanks, Sam. I appreciate the question. So let me start with how we're operating the business right now on the assets, and then I'll give color on capacity utilization. So we previously announced we curtailed one of our manufacturing plants in Utah already. We did that relatively early in the process to get that production out to manage our inventory levels. And we've been continuing to manage inventory levels carefully through the end of the year. The back half of '25 was a bit of a catch-up, though, because the market did decline in the back half versus the first half. So we were sitting on more inventory than we wanted coming out of Q2 that we then work down progressively in Q3 and Q4, and then we anticipate working down inventory again with curtailment in first quarter. Now we do have some normal seasonal build that we do in the first quarter to support the season. So we're also contemplating that. The curtailment that we're taking, it tends to be more hot idle curtailment versus cold idle curtailments. In Nephi, we took completely cold. We furloughed employees in the manufacturing plant. And other plants were taking hot idle, which means we're not producing, but we're leaving the furnaces operational so we can start up when the market recovers. When we look at the overall magnitude of this, I mean it's a big impact for us. It was a big impact in the back half of last year including the catch-up that we had to do from the first half where we built a bit of inventory. And it's also a significant impact for us in Q1 of '26 in the guide. When we look at capacity utilization for the industry, it is different for batts and rolls then loosefill. Loosefill is tight right now. We've seen a couple of our competitors have some operational challenges that we've been able to take advantage of in Q4 and into Q1. But it also means our inventory levels are low because we did everything we could to support customers in that period. We are in free supply for batts and rolls. So there is available supply in that space. Overall, for the industry, what we've said historically is we think industry capacity can support 1.4 million to 1.5 million starts. When you look at the mix of single-family and multifamily, single-family has been fairly weak. Multifamily has been a little better. A single-family start has about 30% more pounds of insulation than a multifamily start. So we're probably at the higher end of that 1.4 million to 1.5 million range in terms of what the industry could support today. So you can do the math based on the housing starts and where we landed in Q4 and Q1, it's below the 90% level which historically has been more constructive for price in res, but we're probably somewhere in the 80s based on that math. Operator: And the next question comes from Mike Dahl with RBC Capital Markets. Michael Dahl: I just want to go back to Roofing, a 2-part question. On the volume declines, is that what you're seeing already year-to-date? Because I appreciate the weather has been difficult and there's still some carryover dynamic, but our sense is that sell-through volumes haven't been down quite that much broadly speaking. And then the second one being kind of dovetailing that into price that you do expect to get price realization on the April increase, how quickly do you need to see volumes come back in March or April to see that in your view? Because it seems like it would be a tough setup with a little sequential price fade and volumes down 20-plus for two straight quarters to get a lot on that. Brian Chambers: Yes. No, I appreciate the question. Just in terms of the volume side, just on the -- some of this is going to be a little bit of a year-over-year comp. So I would agree, I think everything that we talk about with our customers, I think the sell-through is down, but not down as much. But if you look at kind of the restocking activity last year versus what we're seeing the pace of restocking this year, that is down a little more. So it's a combination of lower out-the-door sales and then a little bit on a year-over-year comp of just less inventory restocking that we're seeing in the quarter. Now again, I don't think that's a permanent issue, I think that flows into some higher volumes in Q2. I think it's a little bit of just timing. And the rough weather to start has actually kind of slowed that restocking activity down in the northern parts of the country. It's tough to even start that in January and here in early February. So we think it's going to be more loaded into March to close out the quarter and then to start April. So when we look at our order entry and our backlogs, they continue to grow throughout the quarter. We expect to have a pretty good March shipping pattern emerge. And then we think that's going to continue into April and early May. So I think the setup to restock is in place. It's just being a little delayed, and that's why it's impacting a little bit more of the year-over-year decline from our manufacturing shipments. But again, I think that environment sets us up where we think it would be constructive to realize some incremental pricing as we expect demand to improve. And as I said, I think as we go through Q2, Q3, we expect that to continue to improve. We're seeing inflationary pressures that we need to overcome. So I think that's something that we would expect to start to get some realization into Q2 and beyond with the pricing announcement. Operator: The next question comes from Brian Biros with Thompson Research. Brian Biros: Can you just revisit the synergies from the Doors acquisition? It sounds like you're still on track to realize those even in a tough environment that probably wasn't factored in at the time of the purchase. So maybe just remind us how those synergy targets are being achieved in the absence of growth or even in the absence of a flat environment for that business? Brian Chambers: Yes, happy to kind of walk that through. So at the time of the acquisition, we said that we expected about $125 million of cost synergies through the acquisition. Those are going to be primarily OpEx-related synergies as we brought the businesses together. We expected about 40% of that to realize in the Doors P&L, about 60% throughout the rest of the enterprise. And in my comments, Todd's comments, we're on track to achieve that and actually exceed that by mid-2026. We probably see now visibility to maybe even $10 million to $15 million more upside to that as we go through the first half of the year. So I think the team has done great work finding those operational cost synergies and with respect to a weaker demand environment, that has not slowed us down in terms of looking for those operational cost efficiencies, and we've been able to drive those and realize those through the P&L. I think in addition to that, we talked about another $75 million of operational cost synergies really tied to our manufacturing network. So about 1/3 of that tied to network optimization, about 1/3 tied to automation, about 1/3 to kind of general productivity initiatives that we have in place. And we've announced some closure consolidations. So we're right on track to delivering on that $25 million to $30 million of additional operational cost improvements through network optimization. We think that feathers in through the year, but we think we finished the year on that run rate. And then we still have opportunities around productivity, automation, some of those other efficiency gains that we're applying that we think, again, scale through the rest of the year. So disappointed in the market opportunity, and we certainly have been challenged by market volumes and the volume deleverage. But from an operational cost and the structural cost improvements we expected to put into the business, those are in place and actually, I think, exceeding what we thought we could achieve, which gives us a really great cost platform as we see market volumes improve. We see our organic growth initiatives increase. We really think we see some great incremental operating leverage as we take the business forward. Operator: The next question comes from Susan Maklari with Goldman Sachs. Susan Maklari: My question is around your commitment to shareholder returns. Can you talk about how you're thinking of that given the environment that we are all in, the target you set out at your Investor Day for $2 billion over 2025, 2026. And I guess within that, are there any potential divestitures that you're thinking about today as you look across the entire business? Anything else that you think of that could be non-core in there? Todd Fister: Thanks. I appreciate the question. So we remain committed to the $2 billion return of cash to shareholders in '25 and '26. We returned about $1 billion last year in markets that are similar to what we expect to see in '26. We increased our dividend 15% in December to also support continued growth in our dividend, as Brian highlighted earlier in his comments. So we remain committed to what we said at Investor Day. We're in a very good spot from a leverage standpoint at 2.1x EBITDA at year-end. So we have ample capacity both in terms of the really strong operating cash flows we continue to see in the business even in these down market conditions as well as our balance sheet. When we look at divestitures, as Brian highlighted, we have a small divestiture. We just completed in our Doors business, the Doors distribution business. We also are continuing to work on the glass reinforcements divestiture. So both sides are working actively through regulatory work to get clearances as well as all the work to make sure we're set up for a successful day 1 post close on glass reinforcements. Operator: And our final question comes from Adam Baumgarten with Vertical Research Partners. Adam Baumgarten: Just curious on the Insulation side, how long you plan to curtail production given the weakness in the markets? And then switching gears to the non-res side, maybe where you're seeing strength, where you're seeing maybe relative weakness and positioning in terms of the data center construction wave and how you can kind of share in that. Todd Fister: Thanks, Adam. Let me start with the second part of that on the non-res side. We do continue to see strength in data centers as well as in industrial process applications for our insulation materials. So when you look at some of the pipe and mechanical insulation that we sell, when you look at the FOAMGLAS product line globally, those are really nice products for us. We're seeing strength in some institutional markets as well. There are some pockets of weakness. Some of it is related to just overall economic uncertainty and some project delays that are occurring, in particular, in our Latin America business, which is part of our North American non-res. But overall, we would describe that as good demand for our products, especially on the data center side and the industrial side. When we look at curtailment, we're matching our production to what we anticipate needing for the peak season that we have. So we're going to be disciplined in our management of inventory and working capital to make sure we're managing cash flows appropriately through the year. But we also want to make sure we have an eye towards supporting our customers in the market when the market does come back. And we're balancing both of those when we think about the curtailment choices that we're making today. Operator: And being conscious of time, we will conclude the question-and-answer session. And I will hand back over to you now, Brian, for any final comments. Brian Chambers: Thanks, Carla. Well, I want to thank everyone for making time to join us on today's call and for your ongoing interest in Owens Corning, and we look forward to speaking to you again on our first quarter call. Thanks, and have a safe day. Operator: This concludes today's call. Thank you, everyone, for joining. You may now disconnect. Have a great rest of your day.
Operator: Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to the Adecco Group Q4 and Full Year 2025 Results. [Operator Instructions] I would now like to turn the call over to Benita Barretto, Head of Investor Relations. Please go ahead. Benita Barretto: Good morning. Thank you for joining our conference call today. I'm Benita Barretto, the group's Head of Investor Relations. And with me are the Adecco Group's CEO, Denis Machuel; and CFO, Valentina Ficaio. Before we begin, please take note of the disclaimer on Slide 2. Today's presentation will reference both GAAP and non-GAAP financial results and operating metrics. This conference call will include forward-looking statements, which are based on current assumptions and, as always, present opportunities as well as risks and uncertainties. With that, I will now hand over to Denis. Denis Machuel: Thank you, Benita, and a warm welcome to all of you who joined the call today. And let me open with the full year highlights on Slide 4. The group has consistently delivered on its ambitions and targets in 2025. In terms of market share, the group gained 245 basis points relative to key competitors with ongoing positive momentum. On a full year basis, the group's revenues were up 1.3% year-on-year, gross profit was stable, and the group delivered an industry-leading 19.2% gross margin, evidence of the benefits of its diversification strategy. The group has managed costs and capacity with discipline. G&A overheads were further reduced by EUR 23 million, bringing our total net savings to nearly EUR 200 million when compared to 2022's baseline. And productivity increased 3% year-on-year. In turn, the group generated EUR 693 million of EBITA and stayed within the EBITA margin corridor on a full year basis at 3%. Cash generation was strong with 102% cash conversion ratio, operating cash flow of EUR 613 million and free cash flow of EUR 483 million. Importantly, the group improved its leverage ratio, ending the year at 2.4x net debt-to-EBITDA, down 0.2x year-on-year and down 0.6x sequentially. Let's turn now to Slide 5. And on the left side, we highlight our consistent outperformance relative to key competitors across the past 3 years. And the chart on the right side shows volumes steadily improved throughout the year with flexible placement and outsourcing volumes in the Adecco GBU rebounding from decline to growth. Management's focus on customer satisfaction, digital innovation and recruiter productivity, integral to our strategy, is driving strong top line and volume momentum ahead of market trends. Let's move to Slide 6, where we set out the progress we are making with the run-and-change agenda, strengthening execution muscle across operations day by day, while investing in digital solutions and new services to drive future growth. There are many points on this slide, so let me highlight only a few. Beginning with the Strengthen Run priorities. The group has made significant progress in 2025. The Adecco North American turnaround gained traction. Full year revenues were up 12% and the EBITA margin expanded 230 basis points year-on-year. In line with the group's digital strategy, Adecco further expanded its Talent Supply Chain approach to 144 large clients, adding 42 in Q4 alone. By centralizing, automating and digitizing processes effectively, the Talent Supply Chain delivered a meaningful 550 basis points year-on-year improvement in fill rates. In Akkodis, restructuring in Germany has locked in EUR 58 million run rate savings. And LHH's Career Transition business continued to successfully expand in the SME segment, increasing the number of companies served by 17%. The group's Change agenda also progressed. Adecco now has 6 recruiter agents live within the Talent Supply Chain structure in the U.K. and in France. The U.K. agents have achieved approximately 15% time savings in recruiting processes, and this is an encouraging start. And we will roll out agents across key markets in 2026 to scale these benefits. And while there is further work to be done in Akkodis Consulting, France's value creation plan improved performance with the unit growing ahead of market and achieved a 7% margin run rate, up 160 basis points year-on-year. And in LHH, targeted investments in Ezra digital coaching platform drove 42% revenue growth and a record pipeline at year-end. Moving to Slide 7. On this slide, we detail the firm progress made in the turnaround of Akkodis Germany. Management took decisive restructuring action in 2025, achieving EUR 58 million in annual cost savings on a run rate basis by year-end. This included reducing the cost of sales by EUR 43 million and SG&A expenses by EUR 15 million, with EUR 8 million saved through real estate consolidation across 26 locations. Last wave of rightsizing effort is in flight, lowering headcount by approximately 600 in total. In addition, select noncore assets were exited, eliminating approximately EUR 3 million of negative EBITA. The program incurred onetime charges of EUR 46 million in 2025 but has already delivered around EUR 15 million of in-year P&L benefit. As a result, Akkodis Germany achieved a healthy 5.4% EBITA margin run rate at year-end. The group expects incremental savings to crystallize in the P&L during 2026, in particular during H1. With the organization being rightsized, management's focus in 2026 will shift to rebuilding the top line, supported by encouraging new client wins across sectors such as aerospace, defense and life sciences. In short, the group has made strong progress in stabilizing Akkodis Germany, positioning it for sustainable profitable growth going forward. Slide 8 sets out the Board of Directors' dividend proposal. We are retaining our attractive shareholder remuneration with a dividend of CHF 1 per share for fiscal year 2025. This represents a 46% payout ratio, in line with our established dividend policy of paying out 40% to 50% of adjusted earnings per share. Shareholders will have the option to receive the dividend either in cash or in newly issued shares. With this proposal, the group provides attractive returns to shareholders, including the option for qualifying shareholders to participate in the group's future growth in a tax-efficient way. The optional scrip dividend aligns with and supports the group's capital allocation priorities, which remain unchanged. It allows shareholders to increase their investment in the Adecco Group while enabling the company to retain cash for growth and prioritize deleveraging. Now let me hand over to Valentina for the Q4 results. Valentina Ficaio: Thank you, Denis, and a warm welcome from my side. Let's begin with Slide 10 and an overview of the group's strong Q4 results. The group delivered further significant market share gains, leading key competitors by 395 basis points. Revenues reached EUR 6 billion, rising 3.9%, our best quarterly performance this year. Gross profit grew 4% to EUR 1.1 billion with a healthy 19.1% margin, stable on an organic basis. Our disciplined execution drove good operating leverage. We were pleased to see a strong productivity improvement of 11% and to deliver a strong drop down ratio of over 80%. In turn, the group's EBITA was EUR 225 million, up 20%, with a 3.8% margin, up 60 basis points. Let's now discuss the GBU developments, beginning with Adecco on Slide 11. Adecco delivered a strong performance with revenues at EUR 4.8 billion, up 4.9% and improved sequentially. Flexible placement revenues increased by 4%. Outsourcing was very strong, up 14%, and MSP was up 6%. Permanent placement, however, was 6% lower. Adecco's healthy gross margin was driven by firm pricing, client mix and lower permanent placement volumes, and productivity improved 6%. The EBITA margin improved 40 basis points to 4%, mainly reflecting higher volumes and strong operating leverage, supported by G&A savings and agile capacity management. Adecco's drop down ratio this quarter was robust at over 50%. Let's now move to Adecco at the segment level on Slide 12. In Adecco France, revenues were 2% lower, stable sequentially and ahead of the market. Logistics continued to weigh, while autos and manufacturing were strong. The EBITA margin of 4.4%, up 10 basis points, mainly reflects client mix and benefit from SG&A savings plans. Revenues in Adecco EMEA, excluding France, were up 4% and sequentially improved. Most territories achieved good growth and outperformed competitors. Looking at the larger markets. Revenues were up 3% in Italy with solid activity in logistics, financial services and consumer goods. Revenues in Iberia were up 7%. Food and beverage, autos and financial services were strong. In the U.K. and Ireland, revenues declined 1%, a good result in a challenging market. The result was weighed by lower logistics and public sector demand despite strength in IT tech and financial services. Revenues in Germany and Austria were up 2%, well ahead of competitors, with strength in autos, consumer goods and defense. The segment's EBITA margin of 3.9% was 50 basis points higher, mainly reflecting strong operating leverage and good cost mitigation. Turning now to Slide 13. Adecco Americas delivered 21% revenue growth. North America revenues increased 23%, well ahead of the market, mainly due to strong activity from large clients. In sector terms, consumer goods, food and beverage and autos were notably strong. Latin America revenues were up 19%, led by Colombia, Peru and Brazil. By sector, logistics, financial and professional services and retail were strong. The Americas EBITA margin of 3.3% expanded 150 basis points, reflecting client mix and strong operating leverage from higher volumes. Adecco APAC remained strong with revenues up 7%. Revenues rose 6% in Japan, 14% in Asia and 7% in India. Australia and New Zealand returned to growth with revenues up 2%. APAC's EBITA margin of 4.3% mainly reflects the timing of income from FESCO. Let's now focus on Slide 14 and Akkodis' strengthened performance. Akkodis' revenue were 1% lower and sequentially improved. Consulting & Solutions revenue were up 2%, marking a return to growth for this service line. In EMEA, revenues were flat. Germany was 7% lower, driven by autos headwinds. However, revenues in France were up 3% and ahead of the market in aerospace and defense and autos. And the U.K. and Italy performed notably well. North American revenues were up 3%, ahead of market, supported by further modest improvement in tech staffing demand. And Consulting & Solutions grew 46%. Revenues in APAC were 4% lower. Japan's result was heavily influenced by trading day differences. On an adjusted basis, revenues were up 5%. Revenues in Australia were 10% lower in a tough market. Akkodis' EBITA margin of 7% was 90 basis points higher, mainly reflecting benefit from the turnaround in Germany. Let's move to Slide 15. LHH has executed well and delivered highly profitable growth. LHH's revenues were up 2%. In Professional Recruitment Solutions, revenues were 3% lower, taking share in a subdued market. Recruitment Solutions gross profit was flat with the U.S. 3% lower and Rest of World up 4%. Permanent Placement was up 4% and productivity was 8% higher. Career Transition was robust with revenues up 1%. U.S. revenues were 2% lower on a high comparison, while the U.K. and Switzerland were strong, and the pipeline remains healthy. Revenues in Coaching & Skilling rose 27%. Ezra's revenues were very strong, rising 68% while General Assembly's B2B business grew 31%. LHH's EBITA margin was 9.7%, up 510 basis points. The year-on-year development is flatted by the absence of charges recorded in Q4 '24 related to the wind down of General Assembly's B2C activities. On an underlying basis, the margin expanded 230 basis points, reflecting positive mix and volumes and strong operating leverage with productivity up 12%. Let's now turn to Slide 16. Gross margin was healthy at 19.1%, stable year-on-year on an organic basis. The group's gross margin was driven by negative FX impact of 10 basis points; 20 basis points negative impact coming from flexible placement, mainly reflecting client and country mix; 10 basis points negative impact from permanent placement, reflecting lower activity in Adecco; and a 30 basis points positive impact in Outsourcing, Consulting & Other Services, mainly driven by Akkodis Germany. Let's now look at Slide 17 and the group's EBITA bridge. At 3.8%, the EBITA margin excluding one-offs was strong, rising 60 basis points year-on-year. The result was driven by a 10 basis points negative impact from FX, a 30 basis points favorable impact from Akkodis Germany and, furthermore, excluding Akkodis Germany, a stable gross profit contribution at healthy levels, an encouraging 50 basis points positive impact from operating leverage, including G&A savings as well as strong productivity improvement, and a 10 basis points negative impact from the timing of FESCO income. Among key metrics, SG&A expenses excluding one-offs as a percentage of revenues was 15.4%, down 70 basis points, while G&A costs were just 3% of revenues. Productivity, measured as direct contribution per selling FTE, rose 11%. Moving to Slide 18 and the group's cash flow and financing structure. The last 12-month cash conversion ratio was strong at 102%. Full year operating free cash flow was EUR 613 million. Free cash flow was EUR 483 million. Both outcomes are strong given the group's continuous improvement in revenues. In Q4, operating cash flow was EUR 476 million, a modest EUR 15 million decrease from the prior year period. This outcome reflects strong collections and favorable timing of payables, partly mitigated by working capital absorption for growth. We have maintained discipline regarding payment terms and are very pleased to report that the group's DSO improved 0.4 days to 51.8 days, remaining best-in-class. Capital expenditure was EUR 50 million, and free cash flow was EUR 426 million, a modest EUR 20 million decrease from the prior year period. The group also strengthened its balance sheet. Gross debts were reduced by EUR 280 million in 2025, supported by the repayment of CHF 225 million senior bond in Q4. At the end of Q4, net debt was EUR 2.29 billion, EUR 186 million lower. Leverage ratio improved to 2.4x, down 0.2x year-on-year and down 0.6x sequentially. The group is firmly committed to bringing the net debt-to-EBITDA ratio to 1.5x or below by the end of 2027, absent any major macroeconomic or geopolitical disruption. On Slide 19, we provide our near-term outlook. The group has seen continued positive momentum in volumes this quarter to date. For Q1, the group expects gross margin and SG&A expenses, excluding one-offs, to be broadly stable sequentially. As a reminder, the prior year period benefited from the timing of FESCO income. We are rigorously executing the group's strategy and run-and-change priorities, focusing on market share gains while managing costs and capacity with discipline to drive profitable growth. And with that, I hand back to Denis. Denis Machuel: Thank you, Valentina. And let me conclude with Slide 20 and key takeaways. We launched the agility advantage value creation path and run-and-change agenda at our November Capital Markets Day. We are successfully executing against group strategy and driving momentum. During 2025, the group delivered on its full year margin commitment, captured market share and return to revenue growth. And we are encouraged to see continued positive momentum in volumes to date this quarter. Moreover, as we successfully advanced our strategic priorities, the group's financials are improving, underpinning an improvement in the year-end net debt-to-EBITDA ratio, which was down 0.2x year-on-year and 0.6x sequentially. We remain firmly committed to achieving a net debt-to-EBITDA ratio at or below 1.5x by year-end 2027. With this said, thank you for your attention, and let's open the lines for Q&A. Operator: [Operator Instructions] Our first question comes from the line of Andy Grobler with BNP Paribas. Andrew Grobler: Just a couple from me, if I may. Firstly, just on free cash. It was very strong in Q4 led by payables. Could you just talk through what you did to drive that and whether any of that is going to reverse into early 2026? And then secondly, just a slightly broader one around client behavior. Are you seeing any change in client behavior in terms of their desire for flexibility, in terms of the interactions they're having with you? Or do they remain broadly pretty cautious in those end markets? Denis Machuel: Thank you, Andy. And Valentina is going to answer the first part, and I'm going to answer your second question. Valentina Ficaio: Andy, on free cash flow, it was a very strong performance. You've seen that we landed on EUR 483 million and the conversion ratio was very strong, above 100%. And it's particularly strong, this performance, if we consider that we've done it on the back of a year and, most importantly, a Q4 where we were growing. And you know that our business absorbs working capital when we grow at this level. If I try to unpack a bit what are the most important components, fundamentally, it all goes down to very strong working capital management. We've been very diligent on collections. And you've seen how our DSO continues to be very strong. We are down year-on-year. It's not easy to keep going down on year-on-year in this market. So we're very pleased with that. And in terms of AP, yes, we did have some favorable timing on payments, but we've also done quite a lot of job in terms of carving out overbalancing, negotiating payment terms. And you really start to see how the impact of that comes through also in our AP management. So overall, we are very pleased and we continue to be laser-focused on working capital. When you think about 2026, I would -- I really think about free cash flow generation this year to -- the behavior to be similar. Just as a reminder, seasonally, our H1 is an outflow versus an H2 that is an inflow. So that's the way that I would model it. But again, laser focused on working capital because that's the key of our strong free cash flow performance this quarter. Denis Machuel: And as far as what our clients are telling us, we see pretty good momentum, particularly on flex. I must say, Adecco is firing on almost all cylinders. We have soft results in France and the U.K., but apart from that -- even though in France, we are ahead of the market. But apart from that, we're really, really strong. And we see momentum, we see demand for flexible workers across the board, across geographies. It's says something also a little bit about, of course, the uncertainty that we live in. But the economy is pretty good. So there's demand. There's work to be done. And we are surfing on that. We're surfing on that through, of course, our sales dynamism we serve because we have very strong delivery engine. And that makes me very confident. There's one sign, which is interesting, is we see a little bit of a pickup in permanent recruitment in LHH. It's 4%. It's not big yet and we start from your volumes, but it's a little bit positive. But overall, I'm very, very optimistic on the momentum that we have. We have a great momentum as well in outsourcing, you've seen double-digit growth. I think the market is there to support our development. Andrew Grobler: Can I just ask one quick follow-up? Just on LHH and in RS in particular. You noted that perm was growing, but gross profit was down in that segment. So that suggests that your kind of gross margin in your contract temp businesses is lower. Could you just talk through what's going on in that segment, please? Denis Machuel: Well, actually, you've got to look at LHH as in 2 dimensions. There is perm and flex on one side and there is the U.S. and outside of the U.S. In the U.S., we are minus 3%. In the rest of the world, we are plus 4% overall. So that says something about the geographic differences. But overall, I mean, let's be clear. We are -- the whole industry is operating at pretty low historical level. But we are -- what we do is we are outperforming the market, which matters to me. Valentina Ficaio: And I would also add that as you look overall at the performance, you see also how LHH has really worked on productivity to offset also some of these elements. And LHH productivity was up 12% in Q4 and their sales FTE was down 4%. So you see how they are acting also on what Denis just mentioned. Operator: Your next question comes from the line of James Rowland Clark with Barclays. James Clark: My first is just on the answer you just gave about good momentum. Just to be clear, I understand you've taken a lot of market share in the last few quarters. Is that momentum comment about you specifically taking share? Or do you think that's more market-based? If you could help sort of parse those two elements, that would be great. Secondly, on EBIT margins in 2026, I think consensus has got 30 to 40 bps of margin growth. Are you comfortable with that? And could you help us bridge that improvement across organic gross margin, which looks to be under pressure going into this year but also then offset by SG&A? So I'd love just to get your sense on the moving parts to achieve that margin, if you're comfortable with it. And then finally, on leverage, you're guiding to down to 2.5x by the end of '27. So you've got to lose 0.5x a year between now and then. Do you see that as a linear progression or faster in '26 and '27 or vice versa? And if so, why? Denis Machuel: Thank you, James. And I'm sure Valentina will be super happy to take the EBITA and leverage questions, and I'm going to talk about the momentum. Two things here. As much as I believe that the way we operate, the way we've put in place a very strong sales dynamic, which is -- which we adjust as per market conditions, as per the industry we are facing, et cetera, as per the geographies, and we have also put a very strong delivery engine that helps us gain share from our own merits and that makes me very confident for the future, I also believe that it's overall the market conditions that are also improving. And we have been through some difficult quarters in, I would say, end of 2024 and beginning of 2025. And we see an overall better traction on the markets. And on that, we are well positioned because we've done all the hard work to strengthen the muscle in sales, strengthen the muscle in delivery. So it's -- I would say it's a bit of both that help us grow as we do. Vale, now on EBITA? Valentina Ficaio: And I'll build on the comments that Denis just mentioned about momentum just to give you some more flavor on guidance for Q1 EBITA. So I think that what you mentioned, James, is reasonable. And the way that I think about our Q1 EBITA is the continued positive volumes behavior gives us confidence in terms of revenue outlook. And gross margin is broadly stable sequentially. If you think also about the comparison year-on-year is we have a 20 basis point headwind coming from FX. You may remember that last year in Q1 '25, this represented a tailwind. So that gives you a flavor why also year-on-year Q1 gross margin is actually broadly stable. And in terms of SG&A, our normal seasonality from Q4 to Q1 usually see SG&A going up by EUR 10 million, EUR 15 million. So the fact that we're guiding for broadly stable tells you about the cost discipline that we continue to enforce. And you saw that we've mentioned the FESCO income because we assume FESCO to continue to contribute positively on a full year basis. But the timing last year, it can vary. And last year, it happened in Q1. On a full year EBITA, we don't guide overall, but I think this gives you a bit the moving pieces that you need to model in terms of getting there, and the assumption that you mentioned are quite reasonable. Moving to leverage. I think it's -- the free cash flow generation, the performance that we had -- the trajectory of the performance that we had throughout 2025 delivered good delevering, 0.2 year-on-year and sequentially, 0.6. The path to 1.5 is clear. We don't guide specifically on '26 and '27. But clearly, the levers that we have in our hands, and we are already pulling are modest growth. You've seen how growth has dropped through in operating leverage over the past quarters. We expect that to continue throughout the next quarters. And then we have additional benefits coming from Akkodis Germany, but also other elements like the turnaround in North America, like the improvement in France that will continue to help us get there, as we've shown you in the last -- in recent quarters. Operator: Your next question comes from Suhasini Varanasi with Goldman Sachs. Suhasini Varanasi: Just one question for me, please. I just wanted to clarify the exit rate and momentum that you saw year-to-date because I think your slide on -- Slide 5 seems to suggest at least on the GBU, Adecco GBU front, the momentum is continuing to improve in year-to-date. Just at that GBU level and at the group level, can you please clarify how the exit rate has looked compared to the 3.94% growth that you reported last quarter? Valentina Ficaio: Suhasini, I'll take this one. Just to give you a sense, the exit rate was very much aligned with the quarter leverage, so at group level. So I hope that's helpful to give you a sense. Operator: Your next question comes from the line of Simon LeChipre with Jefferies. Simon LeChipre: First question. Looking at your Q4 results and if we exclude Akkodis, so gross margin was down 30 bps on an organic basis and SG&A was probably flat organically. And in prior quarters, it seems you were able to offset the gross margin pressure through cost savings. So does that mean it is no longer the case? And I mean, how should we think about the future quarters in terms of the relation between margin performance and SG&A? Secondly, in terms of your Q1 gross margin guidance, so stable sequentially. So I would assume the seasonal effect from Q4 to Q1 is negative. It seems you're also talking about like FX negative impact being a bit stronger. So how would you offset these 2 factors to get to a stable gross margin sequentially? And last thing on AI. We see more and more evidences of how AI can make the business more efficient. So I would assume this suggests some deflationary effect on top line. So how do you think about the net bottom line impact in the future? Like do you think your SG&A would continue to reduce? And would that be enough to offset this potential deflationary trend on the top line? Denis Machuel: I'll take the AI piece and Valentina will be very happy to take the gross margin question and the FX. Valentina Ficaio: So starting with your 2 questions on gross margin, Simon. I think when you think about the performance that we had in Q4 at 19.1%, it's a very healthy level. It's industry-leading. And it reflects a number of components. It's not just Akkodis, right? There's firm pricing and client mix, and there's GBUs mix that contribute positively to the gross margin buildup. Yes, Akkodis Germany is a component of it, but it's not the only one. And then there's clear added value in the gross margin that comes from the service lines that have higher gross margin profile, like outsourcing, like Ezra. You've heard us mentioning a number of service lines that have grown double digit in Q4, and will continue to do that. So there are a number of levers that we can continue to work on, Akkodis Germany is one of them, to work on our gross margin and keep it at this stable levels. When you look at -- and by the way, permanent placement continues to be subdued clearly. When permanent placement picks up, it is a further lever that we can capture because we will capture permanent placement growth when it comes, and that's another further lever we can pull. When you think about Q1, let me just take a moment to walk you through the elements. You've called out FX. It's correct. As I was mentioning before, actually it was a tailwind in Q1 last year. So you do have a 20 basis points gap when you look at it from a Q-on-Q perspective. And then we again have several pieces because there's modest impact coming from perm and flex, but there's also a modest positive impact coming from the other service lines. So that is why we continue to say it's really broadly stable even on a year-on-year basis. Because if you take out the FX, we are continuing to see how the benefits of the other service lines of Akkodis that we are implementing is affecting the modest client mix that we have in flex and perm. Simon LeChipre: Sorry, may I have just a quick follow-up on GM and also on SG&A. So it was minus 1% organically year-on-year in Q4, so I think mainly driven by Akkodis. So does that mean like the Adecco GBU, as you know, is now trending kind of flattish year-on-year? Valentina Ficaio: No. We continue to see the same performance. We call out Akkodis when we mentioned that because we want to call out the nice progress that we've done in the restructuring and the fact that most of it, it is coming through SG&A but it's broad-based. And you've seen it also in our productivity numbers. They're up in all of the GBUs, not just in Akkodis. And in our G&A over sales, that is just 3%, and that is not just Akkodis. It's broad-based. Denis Machuel: Let me take now the AI impact. And I think there is a top line impact, positive impact and also an impact in productivity that's going to help our profitability overall. On the top line, I believe that AI is really an opportunity for us. Remind you, we are in a fragmented market. So the more optimized we are in how we deliver our service through AI, the better we can gain share. And I'll give you two examples. We've embedded generative AI into our Career Studio in LHH. And when people use Career Studio with AI powered, they find a job 32 days earlier than the ones who don't. This is creating value for our clients. This has helped us penetrate bigger, faster our clients. So this has a positive impact on the top line. If I look at the way we deliver with our AI agents in the U.K. on our recruitment, we have fill rates that have improved 550 basis points, okay? So this is an impact. We have improved our time to submit by 24% quarter-on-quarter. This helps us be more efficient, deliver more. So -- but a positive impact on the top line. In doing so, we have operating leverage, as Valentina was saying. And in terms of how we optimize our cost, of course, we will progressively embed AI into our processes. We embed AI in our middle and back office, and this is going to create also efficiencies. So I believe that AI will have a positive impact both on the way we capture market share and in the way we improve our profitability. Operator: Your next question comes from the line of Remi Grenu with Morgan Stanley. Remi Grenu: Denis, Valentina, just one question remaining on my side. Focusing a little bit on North America and the very high growth there. I mean, the acceleration came in Q1 and Q2 last year, if I remember correctly. So can you help us unpack a little bit the performance there, if it's been driven by a few contracts and if we then should expect some kind of annualization of these benefits in Q1 and Q2 this year? Just trying to understand a little bit from the 20% organic growth you're currently growing out in that country, what we should expect in terms of potential normalization over the next few quarters? Denis Machuel: Yes. Thank you, Remi. Yes, if I go back to history, Q1, we were minus 1% year-on-year. Q2, we are plus 10%. Q3, we are plus 21%. And Q4, we are plus 23%. So of course, this is -- we're very pleased. This shows that all the efforts that we've put in the turnaround plan in the U.S. is delivering. We have productivity improve by 10% and we have a very strong dynamic on the large accounts. We also are positive in the SMEs, but that's the point where we need to focus our efforts because the growth in our large accounts is a bit higher than the growth on small and medium companies. So to your point, yes, I mean, we -- let's be clear, we started from a low base, okay? So we are -- I mean, this double-digit growth rates are encouraging. But as we anniversary some of the wins of the large clients, we will go more towards more market trends to sort of a bit of a normalization. Still our focus and our efforts will be to gain share, to be ahead of the market. And I'm quite positive that we can achieve that, but probably not to the extent that we've had this year. We have good traction in customer goods, in retail, in autos, in food and beverages. So I mean, there's traction in the market. The economy in the U.S. is still pretty good. So we will serve on that. We are much stronger than we were 2 years ago. And yes, you can expect growth, probably not with such a differential with the market. Remi Grenu: Understood. And just maybe building up a little bit on the question from Simon on the operating cost guidance for Q1. I mean, I'm a little bit surprised by the comment on stability. So can you help us a little bit quantify the building blocks to get there? I mean, discussing with some of your competitors, it feels like that they are forecasting some wage inflation around 2% or a little bit more than that. The higher volume of activity, the 4% organic growth and positive momentum probably would mean under a normal cycle that you need to invest a little bit more in resources. So yes, so can you help us a little bit on that stability of operating costs? And I'm just trying to understand as well if to what extent you think that stability comments and these cost efficiencies are already driven by AI initiatives, or if it's just about Adecco removing some of the inefficiencies in the cost base that you had there and had to address? Denis Machuel: Let me start by a little bit of how we strategize that growth. And you heard me say in the past that what we try is to be very, very granular in the way we inject the resources that are linked to the dynamic of the market. And if I talk markets, it's by country. It's even by region in a country. It's by industry in a particular region, a particular country. So really adjust with the -- through this empowerment that we've put in place years ago, that's what we -- we let people adjust very precisely to the market conditions. Yes, we will need to invest in some places, but we are also cautious in some others. And that's how we operate. And definitely, we will -- we have improved our cost inefficiencies. We've really readjusted our SPs. We have adjusted our G&A. So I think we are continuously optimizing the resources, and I think AI will nicely help us on that. Now on the building blocks for Q1. Valentina Ficaio: And just to give additional color, Remi. On the operating cost sequentially stable. It's all about cost discipline, right? The continuous focus on productivity and G&A gets us there. If you look for a second at Q4, I think it's also very helpful to see how we have performed. Productivity was up broad-based, plus 11 at group level. But if you look at each GBU, Adecco was plus 6, LHH was up 12 and Akkodis, even with Germany soft, capped 90% utilization rate approximately. So -- but if you look at our employee -- group employees, they are actually slightly down. So that tells you how we are combining very well growth with good cost discipline and good productivity. And that gives you a sense of why we guide for this to continue to be stable as we continue building on these 2 clear levers that has been key to the operating leverage that you've seen in our results. Denis Machuel: And just to complement on AI. Yes, we see a 30 bps improvement when we serve the clients by -- through AI initiatives. But it's not at the scale that I want to see. We said that we would cover 60% of our revenues by agentic AI over time by the end of 2026. I mean, it's progressing. We yet have to fully scale. So more to come. We'll keep you updated on the progress. I remain prudent in the impact of AI because there is no magic in AI. It's hard work. You need to scale it. I think we have all the levers and the foundations, but let's see how it goes. But the trend is positive. Remi Grenu: Okay. And the last question is on the SME, which you referred to, Denis, I think, in one of your previous answers, saying that you need to address this segment better. Is the issue market related? Is just the momentum between the 2 markets, if you see separate them between SME and large enterprise, is still very, I mean, diverging a lot in terms of volume of activity? Or is there any initiative at Adecco's level which you need to implement to be better at serving this cohort of client? Because it has implication, obviously, for gross margin and profitability, I guess. Denis Machuel: Yes. Well, actually, we've really doubled down in the past couple of years in how we serve the large clients and enhance Talent Supply Chain and enhance all that. We still have a pretty good dynamic in SMEs. But this is a place where we accelerate our efforts because we know, to your point, that it's very accretive to our margin. So I think we are in a good place in how we roll out all our technology into our Talent Supply Chain, and we are also rolling out progressively the technology through our branches. I believe that the strength of branch network is that proximity, that deep understanding of the local ecosystems. And that's one of the top priorities for 2026 is to inject as much energy and technology into the SME segment as we have done in the large accounts. Operator: Your next question comes from the line of Simon Van Oppen with Kepler Cheuvreux. Simon Van Oppen: I have a question on margins. We see margins in all divisions strengthening in Q4, most significantly in Akkodis and LHH, especially on an underlying basis. Can you unpack a little bit the main drivers for the strengthening of your margins by division? And what do you expect in terms of margin for each division in 2026? And in extension to that, should we expect more one-offs in 2026? And if so, roughly by how much by division? Denis Machuel: Valentina? Valentina Ficaio: Thank you, Simon. So let me explain a bit around each GBU and how they evolved in terms of margin, and then we can also quickly touch on formal one-offs guidance. I think what is the common denominator among the 3 GBUs improvement is volumes up, operating leverage drop through. That is clearly -- and if I take for a moment Akkodis out, it's a clear denominator, right? And then if I take one GBU apart, you have Adecco that grew materially, right? You've seen how in Q4, it's up almost 5% with pockets that are even double digits. And clearly, the Adecco story is a story around strong operating leverage but also diversification with service lines like outsourcing that grew double digits, to give you a sense. And it always comes on the back of good cost discipline, healthy operating leverage and the improvement in margins. In LHH, you've seen us mention that there's an element of the improvement year-on-year that is because we had headwinds last year. So it is a 500 basis point improvement, but in fact, underlying is half of it, 250, which is still a very significant improvement. And it's mainly coming from CT continuing to performing very well, but also the contribution of other lines like Ezra and like the B2B business in GA that have grown double digits, and they come with very healthy high gross margins. And then finally in Akkodis, clearly, the main driver of the improvement in performance is Akkodis Germany and the fact that we are progressing well in the turnaround. In terms of one-off costs, the guidance that we're giving you is down from EUR 60 million this year to EUR 40 million next year. The EUR 60 million clearly this year is mainly coming from the Akkodis Germany turnaround. And so we're basically guiding next year to be lower in one-offs, mainly because Akkodis Germany is basically completed. Operator: Your next question comes from the line of Gian-Marco Werro with ZKB. Gian Werro: Two questions from my side. The first one is on the gross profit margin in flexible placement. I would appreciate if you can dive there a little bit deeper into this development of 20 basis point decline year-over-year. Can you maybe elaborate, please, on the gross margin dynamics in the temporary staffing, especially in your key markets like France, Germany and also the U.S., please, just to grab a little bit there the dynamics, how is it evolving, still increasing, stable or declining? And then second question is on AI also. Denis, I appreciate your optimistic tone about the opportunities lying here. But very frankly speaking, don't you also see also, of course, some headwinds here of jobs that become redundant, like many operations of warehouses, IT, white collar back-office work that, in my view, is certainly also affecting your top line negatively. I would appreciate if you can just talk briefly about the dynamics that you observe in the industry. Denis Machuel: So I'm going to start by answering your questions on AI, Gian-Marco, and then Valentina will talk about the gross margin. Fundamentally, we don't see any impact of AI at this stage. We know that as all technology evolutions that are happening, some jobs are going to be impacted, some destroyed, but so many are going to be created. That's what history tells us, okay? And for the moment, if you look at the numbers coming from Career Transition, okay, which is the world leader in outplacement, 1.4% of the people are telling us that they've been laid off due to AI. That's it, okay? And 12% say, yes, there was a bit of AI coming in. So to date, there's no massive impact, no impact of AI. And let's be clear, and I'm not the only one to say that, a lot of companies are doing layoff plans pretending that is coming from AI because it makes them look good, okay? But fundamentally, this is not the case, okay? So now nobody knows within 3 or 5 years what's the relationship between the jobs destroyed and the jobs created, okay? If you look back 10 years ago, nobody was talking about cloud architects, nobody was talking about content moderation. And these jobs have been created because of the digital world, et cetera. So this is going to come as well with AI, okay? So I believe that because of this, I'd say, massive reshuffling of the labor market, this is a massive opportunity for us to upskill, reskill, move people around, accompanying people in their agility. That's what we are here for. And AI is not new. It has been now around for more than a couple of years. And look at our numbers, okay? So we are trending nicely in this world of AI. We are reshaping the future of work in this AI era, And we are well placed to accompany our clients on their agility that is necessary with AI. So that makes me very confident. Now on the gross margin. Valentina Ficaio: So the year-on-year development you were asking about, Gian-Marco on flex. First of all, it's a modest impact. Overall, the flex gross margin remains quite healthy. We are happy with pricing. It stays firm. We have a positive spread bill-to-pay rate. And so the modest impact that you see is fundamentally client and country mix. And just to build on the question that you were asking about, what about countries, France, U.S.? It is really all about how do we grow, right? So sometimes in some countries, but also in some industry, we may see one client segment growing faster than the other. It's the case right now, as Denis was mentioning, in France and North America. But what is really important is that, as that happens, we also operate on cost base, right? Because these are also clients that come with a lower cost to serve. So the most important thing when we think about margin, yes, it's the gross margin, but it's also the mix that we have between SMEs and large and the drop-through on the overall margin. Gian Werro: Okay. But no specific comments you want to make here on the 3 countries I mentioned, about the development of the gross margin? If it's stable or you mentioned that most probably... Denis Machuel: The trends in these 3 countries are aligned with the overall trend of the GBUs, yes. Operator: Your next question comes from the line of Karine Elias with Barclays. Karine Elias: I just had a quick one on the hybrid. I believe on your third quarter conference call, you mentioned your intention to refinance at the time the hybrid. Just wondering whether that's still the case. Valentina Ficaio: Thank you, Karine. Yes, so the refinancing, you're correct. We are refinancing the hybrid. We are in progress of doing that. We are constantly in the market to understand when is the right moment to execute. But you should expect that to be happening. Operator: Your next question comes from the line of Andy Grobler with BNP Paribas. Andrew Grobler: Just one follow-up, if I may. Just on the dividend. You moved to the option of the scrip. What drove that decision? And to what extent is that part of the plan for getting to 1.5x leverage by the end of next year? Denis Machuel: Thanks, Andy. So let me put the overall perspective. The group has a very clear framework on capital allocation and a clear dividend policy. Every year, of course, depending upon the results, the annual performance, the Board evaluates all options within that framework and within dividend policy to provide what the Board believes as the best outcome for shareholders. And this year, the decision has been made to propose the choice between the payment in shares or payment in cash, which we believe is the right balance between our deleveraging priority on one side and also retaining cash for growth. So we also felt that this is an optionality that is financially attractive for our shareholders, for qualifying shareholders on the tax side. So I think it's a pretty good decision for shareholders. Now on the... Valentina Ficaio: On the leverage. Denis Machuel: The leverage, yes. Valentina Ficaio: As Denis mentioned, the scrip is an option, completely independent from the path that we've discussed to reach our 1.5. That path is based on performance, growth, operating leverage, the turnarounds that we're doing. The scrip is an option and it's independent from that. Operator: I will now turn the call back over to Denis Machuel, CEO, for closing remarks. Denis Machuel: Thank you very much, everyone. We really appreciate your presence today. So just to wrap up, I think our 2025 results make me very confident for the future. I must tell you that our teams are energized and they are focused on delivering performance. So yes, we still have a lot to do. But the momentum that we've created and which continues at the beginning of 2026, as we said, puts us in a very good place, in a very good place to deliver profitable growth moving forward and to delever. With that, thanks a lot for having been with us today, and speak to you next time. Have a great day. Thank you. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good morning. My name is Ludy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Topaz Energy Corp. Fourth Quarter and 2025 Results Conference Call. [Operator Instructions] Thank you. Mr. Staples, you may begin your conference. Marty Staples: Thank you, Ludy, and welcome, everyone, to our discussion of Topaz Energy Corp. results as at and for the period ended December 31, 2025. My name is Marty Staples, and I'm the President and CEO of Topaz. With me today is Cheree Stephenson, CFO and VP Finance. Before we get started, I refer you to the advisories on forward-looking statements contained in the news release as well as the advisories contained in the Topaz annual information form and within our MD&A available on SEDAR and our website. I also draw your attention to the material factors and assumptions in those advisories. We will start this morning by speaking to some of the recent and fourth quarter 2025 highlights. After these opening remarks, we will be open for questions. 2025 marked another year of impressive growth for Topaz, highlighted by a 17% increase to royalty production, 20% higher infrastructure revenue and a 10% increase to our year-end 2025 reserves. Topaz's fourth quarter royalty production averaged 23,400 boe per day and increased 15% from the prior year, which was driven by record oil and liquids production of 6,900 barrels per day in the quarter. Full year 2025 royalty production of 22,400 boe per day increased 17% over 2024, which was driven by 11% higher liquids production and 19% higher natural gas production. In 2025, we saw an estimated $2.8 billion of operated capital invested on our acreage, which led to a record 694 gross wells drilled, or 25.3 net, which is 10% higher than 2024 and represents a meaningful record 17% share of total Western Canadian Sedimentary Basin 2025 drilling activity. We also saw a 22% increase in total wells brought onstream in 2025 over 2024. This operator-funded development was demonstrated through our annual reserve report, which evaluates Topaz's proved developed producing and probable developed reserves before any future undeveloped locations Topaz's year-end 2025 total proved plus probable reserve of 55.7 million boe increased 10% from 2024 driven by 50% and 10% growth in the Clearwater and Northeast BC Montney. Operator-funded drilling extensions and improved recovery generated 11.9 million boe of additions, which replaced our 2025 royalty production volume of 8.2 million boe by a peer-leading 1.5x at no cost to Topaz. In the Clearwater specifically, operator-funded activity replaced royalty production by 3x in 2025. Over the past 2 years, we have seen our Clearwater reserve life index double as a result of waterflood performance that continues to enhance heavy oil recovery. During the quarter, drilling activity on our acreage remained strong as 190 gross wells, 6.8 net, were drilled and 17 gross wells were reactivated. In total, 248 gross wells were brought on production during Q4 2025, which represents a 7% increase over Q4 2024. Based on our operator drilling plans, we expect that the current 27 to 30 active drilling rigs on our royalty acreage will be maintained through the first quarter of 2026. In Q4, topaz generated royalty production revenue of $62.5 million, representing 72% of Topaz's total revenue with 28% or $24.2 million contributed by our infrastructure assets. Topaz generated fourth quarter cash flow of $80.6 million or $0.52 per share, 6% higher than Q4 2024, and free cash flow of $79.7 million or $0.52 per share, which increased 11% from Q4 2024. Our Q4 2025 net income of $32.7 million was 64% higher than Q4 2024 driven by 15% higher royalty production, 10% higher processing revenue and other income, 4% lower cash expenses and a 47% higher realized hedging gain. During 2025, Topaz realized a $19.8 million hedging gain driven by a $15.1 million natural gas hedging gain equivalent to $0.44 per Mcf. Topaz distributed $52.4 million of dividends at $0.34 per share during the quarter, which represented a 65% payout ratio and a 5.1% trailing annualized yield to the fourth quarter average share price. Through the full year, topaz paid $207.7 million in dividends at a 66% payout ratio, which represents a 4% increase on a per share basis over 2024. Since our inaugural dividend during the first quarter of 2020, Topaz has paid $6.62 per share in dividends. We have announced our 2026 guidance estimates of 23,500 to 23,900 boe per day of average royalty production and $92 million to $94 million of processing revenue and other income. Topaz expects to exit 2026 with net debt-to-EBITDA of 1.2x and generate a 68% payout ratio, which remains sustainable through the end of 2026 at $0 AECO and USD 55 WTI attributed to the fixed revenue provided by our infrastructure portfolio and hedging contracts in place, which are available in our most recently filed MD&A, as well as the quality and strength of our diversified asset portfolio. At this time, we're pleased to answer any questions. Back to you, operator. Operator: [Operator Instructions] Your first question comes from the line of Jeremy McCrea with BMO Capital Markets. Jeremy McCrea: Marty, quick questions here on M&A. Can you describe what the market looks like now versus where it has been in the last couple of years? And why -- like part of your growth has been through M&A, and what makes you confident that you could see a lot of deals potentially this year? And just kind of a bit of a follow-up here. Where do you think those deals may occur actually? Marty Staples: Yes. Jeremy, thank you for the question. I think like most years, it seems like it starts out fairly soft until the quarters get done. People understand what maybe their budgets might look like. We did complete a deal in the latter part of December in 2025, smaller deal, $8 million on a fee royalty acquisition. Have seen some leasing on that acquisition already so we're pretty confident that there's probably more to do there. It was about 30,000 acres of land kind of right in the heart of the Duvernay play. Overall, we're very proactive on deals right now. I think what kind of we see into Q1, Q2 is probably some reactive ideas where maybe some bank-led processes start to kind of appear. And so overall, I think we're going to continue to be active this year. On most years, we look at about $2 billion in opportunities. We've been very active already in 2026 looking at some different opportunities. And we're fairly agnostic to whether it's infrastructure or royalty opportunities. I think the win for us has been a combination of both of them. So we'll continue to look where we can be useful. And if we see some capital cuts start to happen into Q1, we think that there's probably some opportunity on the infrastructure side. But like I said, we're open to either sides of those M&A opportunities. Operator: [Operator Instructions] We do have our next question coming from the line of Jamie Kubik with CIBC. James Kubik: Can you just talk a little bit about the reserves and the changes that you saw this year? How much more is there left to be booked on the waterflood improvements in the Clearwater? And how much was, I guess, derived from just delineation in that play? Can you just talk about some of the shifts on that side, Marty? Cheree Stephenson: Jamie, it's Cheree. I'll take this one. Marty can chime in. But we definitely saw some significant bookings. We do think that within the Clearwater specifically, there was some catch-up from prior as the reserve evaluators really now have enough years of data in order to sort of acknowledge and back up the waterflood results. I wouldn't say they booked what they're seeing in full effect. There's still some room for further adds and reflection of the results to date. But we were definitely pleased with the recognition and the performance of the assets. Obviously, our reserve report is a bit limited as it does not include undeveloped future locations. So we don't get the full effect of what's going on with the waterflood. But we do believe there is incremental value attributed to what's been done to date for future years. And we do see the operators continuing to extend more and more of their budgets into the waterflood because it's working as we expect to see, maybe not quite this type of effect, that 50% increase within our Clearwater reserves next year, but definitely something that's in excess and positive. As a takeaway, when we think of our reserve book and the reserve replacement we were able to achieve this year, it was about 1.5x on the entire portfolio. Within Clearwater specifically, it was at 3x reserve replacement. And over the last 2 years, we've seen a doubling of the reserve life index. So 3 years went to 6 years. And remember, again, that's just the developed wedge of the reserves. Marty Staples: If you think about our two main operators, Headwater and Tamarack, coming out with some very positive revisions to, I would say, the 2P numbers in excess of 50% on both of them, it really paints a nice road map for us for the future. And so I think you saw Headwater around 52% on a 2P reserve uptick. And then this morning, Tamarack came out with 56%, replacing 534% of production. That looks really positive for Topaz. And so we're excited to see those results and get an indication of what the future brings for our future bookings. Operator: [Operator Instructions] And we currently have no further questions at this time. I would like to turn it back to Mr. Staples for closing remarks. Marty Staples: Thanks, everyone. Great 2025. And look forward to chatting with you on the Q1 call in May. Take care. Operator: Thank you, presenters. And ladies and gentlemen, this now concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Good morning, good afternoon all, and thank you for joining us today for Aena Full year '25 Results Presentation. My name is Sami and I'll be coordinating your call today. [Operator Instructions] I'll now hand over to your host, Carlos to begin. Please go ahead, Carlos. Carlos Gallego: Good afternoon, and welcome to our 2025 results presentation. This is Carlos Gallego, Head of Investor Relations. It's a pleasure to be with you again following our conference call last week regarding the regulatory proposal. Today, we are presenting our 2025 results, our Chairman and CEO, Maurici Lucena, will be hosting this session, together with our CFO, Ignacio Castejon and myself, who will review the main highlights of the results presentation, which you can already find both on our website and on the CNMV website. After that, we will open the floor to your questions. [Operator Instructions] Without further delay, I will now hand the call over to Maurici Lucena. Thank you. Maurici Betriu: Thank you very much, Carlos. Good afternoon, everybody. Thank you for joining us for the presentation of our annual 2025 financial results. It is a very important satisfaction for the top management to present these results because as you have seen in the communication to the market, they are record financial results. And it's our 3 year in a row that we achieved this record. And as Carlos said, this presentation follows the presentation we did last week regarding the DORA III Aena's proposal. So as usual, I will start with traffic. 2025 was also in terms of volume, the third year in a row with the highest traffic ever in Spain. We are very proud of this achievement and not only because of the volume, but also because we know it's very difficult to manage with a high quality of airport services such record volume, and we achieved both, the record of volume and I would say, a high-quality service -- airport services, excuse me. So in total, Aena Group traffic reached almost 385 million passengers. And in Spain, in the Spanish airports that belong to Aena, the figure was more than 321.5 million passengers. And as you also know, our traffic estimate for the present year for 2026 in Spain is an increase of 1.3% and to us, this is a natural estimate because we think that we have overcome the, let's say, overshooting phase of the traffic evolution after the pandemic. And now we enter into, let's say, more normal phase of traffic -- of airport traffic. And it's a combination of -- the way we see the economy, the way we see not only the Spanish economy, but very -- especially the economies of our principal foreign markets. I'm referring to the U.K., Germany, France and so on. And also that in 2026 and especially in DORA III, we will, in certain days in certain aspects, face constraints because the infrastructure -- because Aena's airports are approaching its -- or many Aena's airports are approaching its technical limits, and this is the strong reason why we propose within DORA III to enter into a very strong new phase of investment. I don't want to be dramatic in the sense that I think that these constraints on the side of our airports. I mean, they will exist, but they will not be very important. They just introduce subtleties in the way we are calculating our estimates for the future. If I now move to Brazil and to the U.K., you know that in 2025, our traffic in Luton was 17.6 million passengers. In Brazil, in one concession, almost 29 million passengers, in the other concession, almost 17 million passengers. And in terms of financial performance, I will just -- I would like just to highlight that our total revenue in 2025 was almost or reached almost EUR 6.4 billion. Our EBITDA was close to EUR 3.8 billion. And all in all, the net profit exceeds or exceeded in 2025, EUR 2.1 billion, which is a record. And as consequently, you know that the Board of Directors it was yesterday, proposed the payment of a gross dividend of EUR 1.09 per share. And on the commercial side, we experienced a very robust growth last year. I would like to stress that in the duty-free business line, for example, 3 lots, Canary Islands, the North of Spain and Andalusia-Mediterranean. These 3 lots ended 2025 above the contractual MAGs, and this is a very important achievement because this makes feel both very comfortable Aena and the duty-free companies. And as you know, we have just started the complete renovation of the food and beverage activity in Barcelona, in the Barcelona Airport. And on the real estate side, total revenue grew by 20 -- by 10.5% in 2025. And in the international arena, I think that we are -- we are satisfied because we are -- we would like to, if possible, to increase a little bit more the contribution of the international activity in the total EBITDA. But so far, we have achieved an EBITDA that in the consolidated figure was close to EUR 400 million. And I think that this is a significant EBITDA, and this is a satisfaction but because you know that we would like in the long-term to have a better balance between Spain and the rest of our international markets. And also concerning the international activity, I would like to highlight that by the end of last year, Aena obtained the most financing in the Brazilian airport sector. This will allow us to finance the CapEx of the new concession, the BOAB concession. And also internationally, you know that in December 2025, we acquired a significant participation in the U.K. in the -- respectively, in Leeds and Newcastle Airports. This is an achievement because we naturally feel very comfortable both expanding our activity in Brazil and in the U.K. because if we expand our activity, we set in motion our, let's say, extraordinary efficiency because of the functioning in the network. Okay. Now I move to financial issues. Last month, in January 2026, we launched a second bond valued at EUR 500 million with a maturity of 10 years. We are very satisfied with the financial conditions because I think that they demonstrate that in the bond markets where Aena was relatively virgin, we have very rapidly achieved the confidence of the market. And I think that the conditions of this second bond reflect the -- well, I would say that the financial assets of Aena. In terms of ESG, I would like only to mention that in 2025, Aena achieved a reduction of almost 75% of emissions of Scope 1 and 2 compared to 2019. And finally, I would like to just refresh the main messages associated to our DORA III proposal that we communicated last week. You know that the government of Spain through the Council of Ministers, they have a deadline in September 2026 to approve the definitive DORA III. And you know that our aim has been to translate into volume of investment, distribution among airports, the evolution of tariffs, OpEx, WACC and so on. We have translated, I was saying, our new cycle of investment in terms of the regulatory scheme. And this is -- this will be a complete different phase for Aena. It will be the first time in the last 20, 25 years that we enter into a very strong investment cycle. I would like to remind that in pure financial terms, this is good news because we will significantly increase our WACC, our regulated assets base in more than EUR 5.5 billion. And this is -- this should be the increase in the enterprise value. Of course, taking into account that the WACC, the OpEx, the risks and so on, they all are, let's say, reasonable. In other words, if the figures of the final DORA III approval by the government, along with the real Aena performance during DORA III, if all this makes sense, we will significantly increase the enterprise value. And this is good news, knowing that we face some risks, but we are very confident that the experience and our past performance demonstrate that we are a reliable company that will develop and materialize DORA III successfully. And you know that the key projects in DORA III, they cover the airports of Madrid, Barcelona, Malaga, Alicante, Tenerife Sur, Valencia, Ibiza, Lanzarote, Bilbao, Tenerife Norte, Menorca and Melilla. And in terms of the OpEx that I know very well that worries you, in my opinion, too much. But this regulated OpEx it is -- is just a consequence of how the economy is moving and the new phase in which Aena will -- into which Aena will enter. What do I mean by this statement? Well, I'm referring that the new OpEx is -- reflects the inflation, experience but experienced by the Spanish economy and by the way, by the world economy, the increase in the minimum wage and very specifically, the new resources we require to address the investment challenge, the increased traffic. The increased traffic also implies a little bit more OpEx, more regulatory requirements in terms of safety, maintenance and quality of airport services. This also costs money. And finally, you know that many of our airports are aging. They are aging well, but they are aging, and this means more open -- more OpEx to maintain them. And again, we have said this many times, but we are convinced that when you enter into a phase with important investment and important expansions of many airports, we have to compatibilize the new traffic, new record volumes of traffic in the future with the investment. So to compatibilize successfully these both very important ingredients, this future record traffic with the CapEx, the expansion of the infrastructures, we need a little bit more of OpEx. And for Aena, it's been, let's say, a lesson what has happened in recent years in Palma de Mallorca. The renovation, the whole renovation of the airport has been a success, but we have learned that will be -- that all the rest of things being equal, we need to spend a little bit more money to ensure that the passenger experience is better than it has been in Palma de Mallorca. In Palma de Mallorca, we will finish the renovation before expected. It will cost a little bit less than expected, but one lesson learned has been that for the future expansions of airports, we will need a little bit more money, just a little bit more to increase the passenger experience. And finally, you know that our WACC is simply a consequence of the turn of the monetary policy across the world. And finally, our average increase proposed all in all, is just EUR 0.43 every year. This regardless of the -- this boring and I don't know how to describe is noise that made by the airlines. When you compare the increase we propose with the increase in the prices of flight tickets, well, I think that this is perfectly eloquent of the difference. And regardless of this very modest increase we propose in terms of airport charges to cover this complete transformation of Spanish airports that will endure 3 decades, these new airports. I think that they will be used in the coming 3 decades. Regardless of this increase, the charges of Aena's airports in Spain will remain highly competitive. And particularly, they will remain the most competitive aeronautical charges in Europe. And this is very good news, and this is a commitment that we will accomplish. And thank you very much, and we will join you back in the Q&A session. Ignacio Hernandez: Thank you very much, Maurici. Hi, everyone. This is Ignacio Castejon speaking. Let me go through some of the information that we have included in the presentation shared with all of you earlier today. Let's go to Slide 8 on traffic, on the Spanish platform, I would like to share with all of you that the traffic is mainly explained -- traffic growth, sorry, is mainly explained by the growth rates of the international markets. International markets grow at circa 6%, while the domestic market decreased by 0.3%. There might be many reasons related to supply and demand considerations impacting the domestic market, but that decrease is what has happened this year. With respect to the 6% growth in the international market, I would like to share that, as you know, long-haul market is still a much smaller segment than European or Spanish markets. However, Asia, Africa, Middle East and South America, LatAm have delivered growths of 41%, 19.5%, 13% and 7.4%, respectively. So very impressive growth rates in the long-haul market arena. If we look at Europe, our largest market, excluding Spain, our main 4 markets grow as follows: the U.K. at 4%; Germany, 1.8%; Italy at 9.2%; and France at 3.1%. Let's go to slide -- let's keep sorry on Slide 8, but let's have a look at the financial performance of the company in the following minutes. As mentioned by the Chairman, total revenue rise to -- by 9.5% up to EUR 6.4 billion Compared to 2024, thanks to the positive evolution of passenger traffic as discussed earlier, the continued improvement in the commercial activity, especially the revenue per pax growing to EUR 6.43 per pax and also the contribution coming from the international activity, especially one related to the construction services on the IFRIC 12, that is neutral of [indiscernible] standpoint. Excluding these IFRIC 12 accounting adjustment, revenue for the group would have grown at 7%. Let's move to Slide 9 on the cost. As we have been informing all of you through the year, total operating expenses have been going up, growing at a higher rate than traffic or even traffic plus inflation. Total operating expenses at group level grew by 11.1%, up to EUR 2,650 million with personnel expenses increasing by 8.8% and other operating expenses going up by 13.1%. If we exclude the impact of IFRIC 12 in Brazil, the increase would be materially different, would be 4.9% for the whole group. If we look at the Spanish network, total OpEx, total operating expenses grew by 6%, reaching EUR 2052.4 million. The increase, as in the case for the group, was driven by the increase in staff costs and also in other operating expenses. In the following slides, I will devote more time to other operating expenses for the Spanish network. But let me go to Slide 10 before in order to speak about EBITDA. EBITDA level reached EUR 3,785 million, sorry, representing an increase of 7.8% compared to 2024. This resulted in an EBITDA margin of 59.3%, 90 basis points lower than in 2024. The margin has been impacted because of the IFRIC 12 accounting rules. So excluding this impact, the EBITDA margin for the whole group -- for the consolidated group would have improved by 50 basis points to 61.4%. All in all, the net profit of the group rose to EUR 2,136 million. That's an increase higher than 10% compared to 2024, reflecting, sorry, the strong operating performance, the EBITDA growth, but also the impact coming from the new estimate and a change, therefore, in the useful lives of some of the fixed assets in Spain that has resulted into a more reduced or a lower amortization -- and depreciation and amortization expenditure of around EUR 68.5 million. Net cash generated from operating activities increased by 1.5%. However, this comparison is affected by the positive tax effect that we had in 2024 related to the offsetting of the losses from a tax standpoint, of course, coming from the COVID. The consolidated net debt to EBITDA ratio of the group stood at 1.46 well below the 1.57 recorded in 2024. In this sense, please let me recall that back in September, Moody's Rating Agency upgraded Aena long-term issuer rating and senior unsecured rating to A2 from A3. And 7 weeks ago, Fitch Ratings affirm Aena rating at single A. Let's move to Slide 11. If we look at the performance of the group by the different business lines, and let's start with the total aero revenue. This total aero revenue increased by circa 5% to EUR 3,346 million. The dilution, you know the revenue that we are not able to get basically comparing the rate that we are able to charge in 2025 has been EUR 100.4 million, so lower than the 1 in 2024. This dilution will be recovered in a couple of years, as you know, further our regulation. On the commercial activities contribution, please let me share with you a good first -- a good set of news because this is the first year in which we were able to exceed -- sorry, the EUR 2 billion figure in revenues for the commercial and the real estate revenues. On the international front, the contribution in terms of EBITDA coming from the international activities was EUR 383 million. Let's go to -- let's analyze in more detail the commercial performance. So let's move to Slide 16 and 17, if that's okay for all of you. So the Chairman and CEO have already highlighted the significant growth in sales that the company has had. Let me have a look at the ordinary revenue figures that have had an increase of circa 10%, 9.9%, with commercial revenue going up by 9.6% in the real estate business by 14.3%. As I was saying earlier, this increase is explained by traffic, but also by the unit revenue coming from the commercial and real estate activities, that has gone up from EUR 6.1 to EUR 6.4 per pax. There are several reasons why we think we are delivering this performance. Basically, the growth has been driven mainly by the material progress in the remodeling works and the additional commercial surface that we have added to our activities, especially in duty-free, where most of the works in Madrid and Barcelona are done. Also the introduction of new business concepts, the arrival of new brands that fit with our passenger profile, the more lucrative conditions of the latest contract that we have awarded, we'll cover that point later. The strong performance of the mobility-related services, car rental and parking, as you know, the continued increase in demand for VIP lounges and also the development of many real estate initiatives, especially in cargo and hangars. Let's discuss in more detail some of these business lines on the commercial front. If we look at duty-free, sales in this business line raised by 15 -- sorry, 0.3% with the total revenue for this business line, reaching EUR 535 million. Variable rents plus MAGs increased by 7.7% to EUR 433 million. As the Chairman was explaining earlier, we are very satisfied with the performance because we have 3 lots that have already exceeded the minimum annual guarantee rents. And we were short by around 10% in another lot. So hopefully, in 2026, once most of the commercial activities in the Palma Airport are finished, as explained by our Chairman earlier, we should be able to get closer to that MAG in that specific lot of the [ Valaris ]. If we look at the F&B activity, sales increased by 6.1% and unit sales by 2.1%. Total revenue grew by 8.5% to EUR 352 million, thanks to higher penetration rates, average and higher average ticket prices and also with having more commercial service available to our passengers. If we have a look at the mobility activity, car park total business grow -- revenue grew by 8.7% to EUR 221 million. And this is a very interesting piece of information because as we were saying earlier, domestic traffic have been going down. So all this performance is mainly related to the company making available more parking spaces and also how we are managing the ticket prices in this business activity. If we look at the car rental activity, sales increased by 6.7% and total business revenue by 23.9%, up to EUR 256 million. This fantastic performance is driven by the new contract that, as you now enter in operation in November 2024. If you look at the commercial performance in the last quarter of the year, I have read some of your opinions this morning, we are already taking into account the last weeks of 2024 with the new car rental activity, and that would explain why the car rental activity in the last quarter, mainly the last weeks of the year, the performance 2025 versus 2024 has shown a lower growth rate. And the main reason is because in those weeks, months of 2024, we were already -- the new contract were already binding and was already being taken into account in the -- in our accounts. VIP services, an amazing trend has continued through the whole year with total business revenue rising by 31.5%, reaching to EUR 104 million. The income per passenger has gone up by 26.6%. VIP lounges that account for 82% of the total revenue of the business line basically managed to deliver an increase in the number of our clients by 16% and the average ticket growth by 13%. Real estate, as I was saying earlier, an increase of about 41%, mainly driven by cargo hangars, but also the new contract terms and conditions related to our FBOs activity. Let's go to Slide 18, where we show the minimum annual guaranteed rents that the company has secured by contract. Please, let me remind all of you that we are not taking into account any renewal of contracts in this information. That's why you see a decrease in trend once we sign -- once that contract expires, all the MAGs related to that contract are removed from this information, but not the new contracts that might replace those future contracts. You can also see in this slide, information related to all the new awards that took place in 2025 related to Specialty shops and F&B, where you can read the material increases proposed and signed by our operators and concessionaires in those activities. Material increases are therefore expected in -- because of those units in 2026 according to the information coming from these tenders. Let's go to Slide 19 and 20. There, you can see some further information on the other operating expenses related to the Spanish network. As the Chairman was explaining earlier and as we explained last week, the trend related to other operating expenses in Spain is a trend in which those expenditures are going up, especially related to maintenance, security and PRM services. You will see that in the last quarter of this year, there have been some increases a bit higher in some of these categories than the one that you have seen in the first part of the year -- in the first 9 months of the year. And for example, in the case of PRM, they are related to contractual arrangements related to the whole year, not only to this specific quarter. If we move on to financial consideration, Slide 21, you will see some further information on the net debt and gross debt position and cash position of Aena, the mother company, but also the consolidated position. On the consolidated position, gross debt, gross financial debt have moved up. The reason behind that is basically the financial -- the financing that we have raised in Brazil, mentioned by the Chairman earlier, BRL 5.7 billion. And with respect to the ratio that I have also seen some of your notes earlier this morning, that you can see the net debt to EBITDA in the mother company has gone down materially from 1.59 to 13.1. That ratio in the consolidated group has gone down, has gone down to 1.46. And some of you were saying that, that was a reduction lower than the one that you were expecting. Please let me share with all of you that there is a significant amount of cash that has been invested in very short-term deposits in Brazil. So all that financing that we have raised. And according to accounting rules, we -- that -- and how we calculate this ratio, that cash is not part of this ratio. It's a short-term financial asset that because we are not planning to use in the next 90 days, from an accounting standpoint is not part of the item cash and cash equivalents. If we were taking into account all that cash, short-term financial assets, sorry, as part of our cash position, the ratio of 1.46 would be around 1.35, 1.36. I hope that now is more clear with respect to that item. Let me move on to the financial -- sorry, to the international platform. So I'm moving to Luton and Brazil, Slide 20 -- 22 for Luton. Luton Airport traffic grew by circa 5%. So 17.6 million passengers went through our facilities in the U.K. EBITDA stood at EUR 186.8 million, an increase of 20.3%. If we were removing the impact coming from a compensation related to the reconstruction of the parking structure, EBITDA would have grown by 11.1% at our Luton facility, still a double-digit increase in our London airport. Let's go to Slide 23 and 24 to talk about ANB and BO or BOAB. Passenger traffic in ANB increased by 5.7%, circa to 16.8 million passengers. EBITDA at that airport increased by 19%, high -- a very material increase with the margin also going up from 43.2% to 57.4%. This margin takes into account the IFRIC 12 accounting adjustment. If we were removing that adjustment, the EBITDA margin for 2025 would be 61%, a very high margin for our ANB activities in. If we go to Slide 24, passenger growth was 5.1%, reaching circa 29 million passengers in our concession in Brazil, in our BOAB concession in Brazil, with EBITDA growing by 13.1% to BRL 678 million. EBITDA margins are materially impacted because of the IFRIC 12 accounting rules. If we were removing that impact, EBITDA margin could be at 63.4%. You know that we keep executing our mandatory CapEx in that concession, especially in the Congonhas Airport, and we are planning to deliver all those construction works in June 2028 for that airport further to our obligations in our concession agreement. And please let me remind all of you that we managed to attract circa EUR 400 million from our international activities from BOAB and also from Luton coming from repayment of shareholder loans, but also coming from dividends and fees. And that would be at the end of my presentation. So I think we are ready to start the Q&A session of the conference call. Thank you very much. Operator: [Operator Instructions] Our first question comes from Tobias [ Froom ] from Bernstein. Unknown Analyst: Beyond what you've just said, could you remind us which other commercial contracts will be open for tender in the short to medium term, just to gauge the upside for commercial? Maurici Betriu: Thank you very much, Tobias, for your question. On the commercial front, as you know, we launched the advertising tender some weeks ago. The tender is moving on. The financial impact of the new contracts that would be signed following that tender would really happen in 2028 because as the advertising existing or the current advertising contracts for most of the -- our airports are expiring that year, except for the Palma Airport that is expiring, terminating this year. That's why we are launching this advertising lot altogether in this year. With respect to other commercial activities that we are planning to launch in the following weeks, there are some airports such as Malaga and Gran Canaria in which we are planning to renovate the commercial offer, and that will be happening through the year. Let me finish just stating or making the Chairman refer to the Barcelona F&B activity. That's a process that is -- has been awarded recently. And the financial impact of that process will be seen in 2026 because of all the MAGs that have been contracted for that activity. On the real estate activity, we are very active, as mentioned by the Chairman and also in my summary in cargo, in hangars, also other real estate actions that the company is launching. So there might be some financial improvement coming from that activity as well. And I think that would be a fair summary of what you might expect on the commercial front in the following months, Tobias. Operator: Our next question comes from Luis Prieto from Kepler. Luis Prieto: My question is the following. There is now full visibility on the CapEx plans for the next 5 years domestically. But could you please give us an overview of what this CapEx should amount to over the same period of time internationally, given the relevance of BOABs works and potentially Luton's expansion? Ignacio Hernandez: Luis, this is Ignacio speaking. With respect to Luton Airport, well, at this moment in time, the contractual committed CapEx that is mandatory to Aena Group through that subsidiary is mainly maintenance CapEx because the -- as you know, we are the concession holder in that airport, and our concession is expiring in 2032. So limited CapEx on that front. Having said that, Luis, as all of you know, there is a DCO that has been granted to the Luton Borough through the company called Luton Rising that DCO grants the possibility to expand that airport and the expansion could be material, taking into account the maximum level of capacity that has been granted according to that DCO. But that CapEx, as a result of that DCO is CapEx that wouldn't be mandatory or committed CapEx for that subsidiary of Aena Group. So at that moment in time, that is not CapEx that is part of our forecast. With respect to our willingness to participate in that expansion, as we have always seen -- said, sorry, getting involved in the expansion of Luton for Aena is something attractive, but always subject to the attractive terms and conditions. We are hopeful that, that will be the case because it would be a win-win situation for Luton, for Luton shareholders and for the Luton Borough. But that's still something that is ongoing and it has not been resolved yet. We are always available to discuss and try to reach a positive agreement with the grantor in that respect. But so far, that has not happened yet. With respect to our Brazilian assets, as we have been disclosing on ANB, most of the CapEx -- most of the material CapEx has been delivered, has been constructed by our subsidiary. That's why you can see in the presentation a material decrease in the slide, I think it's 23, CapEx figures for that subsidiary are very limited because most of the construction activity that was mandatory according to the concession sign has been done. However, in the case of Congonhas, as you were highlighting in your question, there has been an increase in CapEx, EUR 250 million in 2025. Total CapEx figure for that portfolio for all the construction activity, if I remember, well the figure, was a bit north of BRL 4 billion -- BRL 4.4 billion, around 50% was related to Congonhas and the other 50% related to the other portfolio of airports that are part of that subsidiary. Mandatory CapEx milestones, we have to deliver most of the activity of the construction activity, sorry, excluding Congonhas through 2026 and the one related to Congonhas, the milestone according to our concession agreement is by 2028. Sorry for my long answer, but that should provide all of you a good picture on the CapEx for the whole group. Operator: Our next question comes from Cristian Nedelcu from UBS. Cristian Nedelcu: My question is on the DORA III traffic forecast. Having in mind that some of the investor community out there has concerns regarding the risk of AI disruption leading to potential increases in unemployment rates on white collar. It seems to me that it's harder than usual to forecast the next 5 years of traffic. So having this in mind, could you tell us a bit how you are thinking about this risk in your traffic forecast? And is this a topic of discussion with CNMC or DGAC? Does this come up at all when talking about the traffic forecast? Maurici Betriu: Cristian, thank you very much for the question. That's an interesting topic that and we could be talking for hours on the different types of impacts that AI may have in airports, in the economy and in governments. So it's difficult for me when you are seeing those movements in the equity and debt capital markets impacting technology companies, software companies and many other industries to be specific about how that might impact traffic at Aena. And we have some impacts, some of them will be positive, other negatives. But at this moment in time, it is something that as a company, we are following as a senior management, management in the IT teams and of course, that we will take into account. Depends on the week and depends on the day of the week, you can see that one specific industry is impacted in one way or the other. These days, it seems that companies like Aena are being positively impacted because we are considered a hard asset company, transport company, but that might change next week because of how the sentiment evolves in the market these days. With respect to our conversations on this topic with the regulators, all the discussions with the regulators, as you know, are confidential because our consultation process with the regulators and the airlines is confidential. So apart from the information that we have disclosed about the CAGR on traffic and our general views on that evolution explained by the team last week -- by the senior team last week, we cannot disclose further details discussed with the regulators. Operator: Our next question comes from Elodie Rall from JPMorgan. Elodie Rall: So my question would be on OpEx. So clearly, you're guiding for OpEx to rise in particular in DORA III, but also in '26. It'd be helpful to have a magnitude or an idea of the magnitude of the increase in OpEx. Maybe you can start with a bit of a split in the different OpEx group like staff, supplies or the OpEx, that would be helpful to understand the moving parts. Ignacio Hernandez: Hi, Elodie. This is Ignacio. Thank you for your question. And of course, we can devote some time to the performance of OpEx for 2025, and we can also share some views and -- our views, sorry, on the future further to the information disclosed to the market last week on the DORA. If we look at 2025, and I'm referring to, for example, the evolution, the performance of staff costs or HR cost that we have delivered a growth of around 9%, if I am not wrong. Basically, what is behind that growth is what we have been trying to share with all of you. The company is adding more people. So the number of FTEs is going up, has been going up this year. And given the new cycle that the company is about to start in the following months, sorry, we will keep adding more FTEs to the company in many different fronts, operational, headquarters so that we can ensure that the delivery of our DORA III plans and our future strategic plan is -- happens in a positive manner for everyone. We are not only adding FTEs, but also the cost from a pure monetary standpoint is going up. Payrolls are going up. And the main reason is basically agreements affecting all of the staff of Aena. That's public information. That has gone up by around 2%. But also the company has signed a new collective agreement with the unions, and there are a number of initiatives that have been agreed by the company with the agreement of the unions, and that is also impacting our staff cost line at Aena level. And that's mainly what is behind the increase of that 10%. There are other elements that we don't control, such as the increase in the social security cost that this country and therefore, Spain has approved and because of all the increases in salary FTEs and the removing -- removal, sorry, of the caps on the social security front that are also impacting our line in this specific cost item. So this trend is something that has happened in 2025 that you have seen through all the quarters, and we don't expect a different change in this trend in the following months, Elodie. If we look at the other operating expenses that is the other big cost item and we look at 2025, you have information in the Slide 26 that we are projecting, but you also have the information on other operating expenses for quarter -- for the last quarter and for the first 9 months of 2025. And as we said some months ago, some cost items such as maintenance, security, PRM services, all these cost items because of growth in traffic, because of implementation of new regulatory requirements, because of increasing costs that we are seeing and that will be higher in the future in order to maintain the quality levels that we want to maintain and that are mandatory to us because of our regulation and that will be mandatory to us because of the DORA III, because of the congested infrastructure that we are managing in some cases, and that will be even more difficult in the future. Because of trends that we are seeing in the context of our industry, PRM, penetration rates of PRM, passengers per plane, per flight are going up. So the number of people that are requiring these services are materially going up, and therefore, that's impacting that activity. And finally, VIP lounges, we are -- as we were discussing through my remarks -- my earlier remarks, this business line has been one of the main reasons of the growth in the commercial revenues, but we are very serious about maintaining the quality standards that our passengers demand. And therefore, we are improving the service there. That's why you are seeing the increase in that cost item for the whole year about 32%. In this specific quarter, 38%. Why? Because of a new contract that has been awarded, if I remember well, in Madrid -- in our Madrid facilities. There have been a couple of positive movements in the last quarter -- one in this quarter and one in the third quarter of the year. That's why you can see there a decrease of EUR 28 million. If we were removing that trend, the increasing of our other operating expenses this year would have been a bit higher. So the trend is there. This trend, sorry, is there. I want to be very frank and transparent. The company is doing its best to be the most efficient company in the industry, and that is confirmed by the OpEx per pax levels that we disclosed last week and that we -- and that they are available if you want to have a chat with us. If you compare our OpEx per pax levels with any other airport operator that is comparable to us, we are the lowest by far. EBITDA margins are still on the very high side of the industry. So the commitment of the management is there. But we cannot neglect as a management team that the trends in the industry are changing, legislation is more demanding. The company is going to manage and is starting to manage big construction projects, and that's impacting and will be impacting the cost items, the OpEx cost items of the company has impacted and will be impacted in the near future. Operator: Our next question comes from Harishankar from Deutsche Bank. Harishankar Ramamoorthy: Just one on the change in the policy on useful lives, if I may. When I look at the tables that you've provided in the reports, I think the one visible change is on other installations and housing, but that's probably not the key driving factor here. Maybe is it that you've moved the needle within the broader range of useful lives in each category, and that's what is prompting the EUR 6 million to EUR 9 million of reduced amortization. Maybe if you could give us some color there on what prompted this and how material is this in the context of different categories of assets? And also, how much of this EUR 6 million to EUR 9 million goes towards the regulated segment? Ignacio Hernandez: Thank you, Hari. This is Ignacio speaking. Happy to clarify your question on -- related to the assets. The company manages and monitors all the asset lives. Basically, our infra team is monitoring those asset lives. And when we identify potential deviations between the accounting tax lives of the assets versus reality, we launched a specific report with the support normally of third parties in order to confirm that what we are seeing in reality is an industry -- is also happening in the industry. So that has been the case this year. We have seen that in some of our assets, useful lives were longer than the ones that we are using for accounting and tax reasons. With respect to the assets, sorry, that have had the largest contribution in terms of reduction of the depreciation expenditure has been the one related to surface access and also the ones related to aprons and the pavements in the air side. Those have been the ones that have moved the needle. So I will check the annual accounts, but I think that was clear. Sorry, it was not clear from your reading, Hari. With respect to the asset regulated base, basically, asset regulated base follows -- generally speaking, follows accounting rules. So this potential reduction in the depreciation expenditure this specific year, this might be resulting into a higher asset regulated base at the end of the year than the one that we were expecting before this adjustment. Taking into account that this adjustment this year is getting -- has been -- has accounted for EUR 68 million, next year will be a bit lower. So it will not be an adjustment that -- will not be a recurring adjustment as material as the one that we have seen this year because it will get lower and lower in the following years. Thank you for your question, Hari. Operator: Our next question comes from Andrew Lobbenberg from Barclays. Andrew Lobbenberg: This one, I suspect, is for the bus and not meaning to excite you. But if we can look back to the episode at the end of last year where there was the effort by the PP to put through this legal case through the Senate that was going to stop your tariffs increasing, but then it was cut off and it didn't get passed through the Congress, which makes complete sense to me. I mean, watching that whole episode, I was bewildered. How did it happen? Why did it happen? Why were you being treated as a political football, at least that's what it looked like to me. And I mean, why did it happen? And how much confidence can you have that you're not going to have some random regulatory or political intervention in the coming year as we work through the DORA process? Sorry if it's a bit vague, but I think you get the question, I hope. Maurici Betriu: Thank you for the question. This is Maurici Lucena. Well, probably this is a very good question. I just think that the general sentiment in Spain is that airports work very well. And regardless of the noise, especially the noise that comes from the airlines, I think that the politicians agree with this good functioning of the airports. You know that in Spain, the air -- well, the airports and the air activity is even more important than in other countries because of its very high weight in terms of the economy because we are a very touristic country. And as a single sector, tourism is the most important sector within the Spanish economy. So -- and everybody knows that for the tourism to function well, they need planes and they need airports. So I think that this ultimately protects the airport model. The PP -- the Popular Party initiative was very weird and bewildering as you've said, because the Popular Party is the father of the regulatory framework. So this is what really surprised me. And we have -- and I personally, we have publicly acknowledged the -- well, let's say, the good decision that this new framework signified back in 2014. So I think that now that it is clear that Aena is entering a very important CapEx cycle with the renovation expansion of many, many airports I think that everybody is, let's say, more aware that the model needs to be robust because Aena, and I personally, we have said that we need this model to be robust, solid, protected because otherwise, we could not enter into this new investment phase. I think that we have had strong reminders by our private shareholders, especially TCI. We publicly answered the concern of TCI. We were crystal clear. So all in all, answering directly your question, I'm very confident that this won't happen again because I think that saying it, in other words, too much is at risk. And I think that this risk is now more clear than it was when the Popular Party surprisingly launched this political initiative. So -- and the government, the Ministry of Transport, the President, the government, they are all very aware that the model functions well, that Aena is a very good company and that it means we need trust, we need stability because what we will do in the coming 10 years is very important, both for Aena, but especially for Spain. Thanks. Operator: Our next question comes from Dario Maglione from BNP Paribas. Dario Maglione: Just a quick one, a follow-up. So it's a bit technical. On the D&A, you mentioned the EUR 69.6 million lower D&A. Most of it is in the Aviation segment. So D&A for the Aviation segment for the full year was EUR 557 million for 2025. What shall we expect in 2026? Ignacio Hernandez: Dario, this is Ignacio speaking. I think we are -- if you are referring to the savings on the depreciation expenditure in 2026, that's a number that we have estimated. That's a number that we know is lower than the EUR 68 million, significantly lower. And that's how I would answer your question, Dario. Dario Maglione: Okay. So it should be a lower depreciation compared to 2025? Ignacio Hernandez: You are referring to the total amount of amortization, Dario? Sorry, based on your follow-up, I just want to confirm. You are referring to the total amount of the expenditure or the impact that we had this year, just to clarify Dario and avoid confusion. Dario Maglione: The total amount in 2026 for D&A. What should we expect? Ignacio Hernandez: Okay. Sorry, my answer was related to the specific impact that I was explaining in my previous question. Dario, I would assume a very similar level of depreciation and amortization for 2026 to the one that we have had in the 2025. Operator: Our next question comes from Marcin Wojtal from Bank of America. Marcin Wojtal: Yes. My question is again on DORA III, if you allow me, what are the next steps, if you could remind us? And should we specifically expect any feedback from a CNMC or DGAC on your DORA III submission before the summer, perhaps like a draft determination or some commentary that would be released publicly? Or we are essentially waiting for the final publication in September, and there is essentially one publication and nothing comes before that. Ignacio Hernandez: Marcin, this is Ignacio speaking. Sorry, I was on mute. Well, the company has been working in a very diligent manner in order to speed up the process as much as possible with a very long consultation process that started right after the summer of last year. So it has been a long consultation process, but our goal has been putting all the information about our proposal available to the different stakeholders and regulators as early as possible. There is a deadline for the cabinet that is the end of September. That's a formal deadline included in the regulation and that's the date that is there. With respect to other reactions coming from supervisors or regulators, in the previous DORA process, in the previous DORA II process, there was a non-binding report, if I remember well, published by the CNMC discussing a number of items related to the proposal that became publicly available. I understand that, that is going to be the process this time as well. With respect to specific days, publication dates of that report, let's -- I cannot be definitive in that matter. Let's wait. Let's be hopeful that given that we have shared that information a bit earlier than the previous year, we can have those report -- those non-binding reports becoming available a bit earlier than in the previous process. You were also asking about next steps or next milestones. As explained by the Chairman in his opening remarks, there will be a process now of setting information with the different regional coordination committees or discussion about the specific projects that will impact and will benefit the regions. Thank you, Marcin. Operator: Our next question comes from Jose Arroyas from Santander. José Arroyas: I wanted to ask you about the commercial revenue per pax trends in connection with the information you provide on Slide 32. In the presentation or throughout your presentation, you explained that the reason for the slowdown in Q4 was largely due to car rental, and that was very clear. But I wanted to ask you specifically about the slowdown in the revenue per pax trends in duty-free and in specialty shops, any trend you can highlight to us? Maurici Betriu: Thank you, Jose Manuel. And thank you for the question. With respect to specialty shops, I think that's a business line within the retail arena that is the one that has been, I would say, the most impacted because of disruption of e-commerce, et cetera. And also because within that business line, we have some activities that are, for example, exchange -- currency exchange, sorry, I was thinking in Spanish, apologies for that. And that is being impacted a lot as well. So the trend is there. What we are trying to do is also providing a hybrid concept. So mixing the retail concept of duty-free F&B and specialty shops to avoid or to try to maximize the return coming from the 2 business lines that we are seeing the most exciting or the most promising ones such as F&B and duty-free in that front. With respect to duty-free activities, it's true that this quarter, the performance has been a bit lower than in other quarters. There might be some accounting adjustment because this is the month, the end of the year when we take advantage in order to adjust the 12-month minimum annual guaranteed rent for the whole year, and there are some adjustment there. Also, the months of the year -- this quarter of the year is not the summer part of the year. So the trend is also a bit more negative. Having said all that, if I look at the sales in the duty-free activity still at double digit. If I remember well, Jose Manuel, was around 13% of sales increase that compared to traffic or compared to other activity levels of the company has been very, very high. Let's see how 2026 evolves. We are confident that a duty-free line for 2026 should reflect the new openings in Palma. This news -- this summer season for Palma for duty-free now that all the duty-free units will be opening that airport will be positively contributing to this business line. And that has not been the case in 2025, regardless of the very last weeks of the year that are very low season for Palma. Thank you for your question, Jose Manuel. Operator: We currently have no further questions. So I'd like to hand back to Carlos for some closing remarks. Carlos Gallego: Thank you, Sami. As there are no further questions, we would like to conclude today's call. The Investor Relations team remains at your disposal for any additional information or clarification you may require. Thank you very much to all of you, and have a great afternoon. Thank you. Operator: This concludes today's call. We thank everyone for joining. You may now disconnect your lines.
Operator: Greetings. Welcome to the Atlanta Braves Holdings Fourth Quarter and Year-end 2025 Earnings Call. [Operator Instructions] 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. Cameron Rudd: Before we begin, we'd like to remind everyone that on today's call, 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. A number of factors could cause actual results to differ materially from those anticipated, 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-K and earnings press release available on the company's website. Now I'd like to turn the call over to Terry McGuirk, Chairman, President and CEO of Atlanta Braves Holdings. 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've been to our North Port, Florida spring training facility over the past two weeks and I'm pleased with the progress of the team and the pieces we have in place. Walt Weiss, our new manager is working hard in building team momentum as we look towards opening day. We believe we are well positioned with a strong roster in 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 off-season and adding some key free agents to the team. To that end, we're excited about the addition of Robert Suarez, who was just named by ESPN as the believer 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 Dubón, 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 entry. 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 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 towards 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. And we're not alone in that belief. Fan graphs picked us to compete for a World Series title and named us the #2 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 broadcast. 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 in directly handling the distribution, production and revenue generation of the full season of gains 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 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, BravesVision, introducing our fans to the new platform for Braves broadcast. 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'll 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 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 BravesVision, a multimedia platform owned and operated by the team, which will serve as the official home of our local television broadcast beginning this season. And bringing our broadcast back under control, our initial focus in 2026 will be our pregame show, our in-game presentation and post-game 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. BravesVision 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, Braves will partner with Gray Media to simulcast a selection of regular season games alongside BravesVision. These free over-the-air telecasts will be available on Peachtree TV's Atlanta's 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 broadcast, the team will appear in nationally televised games this season with various MLB broadcast partners, including FOX, FS1, ESPN, TVS, 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'd like to turn now to last season and what we're taking it from 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're encouraged by strong ticket demand, having already sold more than 1.9 million tickets across seasons, groups, hospitality packages and single game inventory. Our premium clubs continue to be sold out, and there is a robust wait list on all seasoned 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 leverage for revenue quality. Looking ahead, we are focused on improving our on-field competitives, while also building momentum in the Battery Atlanta as a multi-use 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 multi-use destination and our strategy centered on diversifying demand drivers and broadening our calendar to increase repeat 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 in Truist Park events. This breadth of year-round events is another shining example of why we believe we operate one of the most unique partnerships in professional sports. To that point, we continue to expand our nongame day schedule events throughout the season. As an example, after a successful 2-game series last year, we're 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, Ella Langley, Ernest and Mackenzie Carpenter, among others. And in addition, Noah Kahan will be performing at Truist Park on July 27. These examples then 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 on 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 BravesVision 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 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'll turn it over to Mike to provide updates on the Battery and our real estate strategy. Mike Plant: 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 million visitors to the Battery mostly in line with our levels from 2024, even as baseball attendance was softer last season. For us, that's a strong indicator that our awareness is increasing, given all the events we've hosted and other offerings we've 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 million 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 Sports Bistro and Shake Shack, among others. We are excited about J. Alexander 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 markets supported by demand, engagement and performance. Tenant engagement also remains 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'm 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 million 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'll now turn over the call to Jill to walk through our financials in detail. Jill 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 million, this was an increase of nearly $70 million from $663 million 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 million in 2025, up from $595 million in 2024. This revenue increase was driven by a combination of increased event, broadcasting and other revenue. Baseball event revenue was $358 million in 2025, up from $348 million 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 million in 2025, up from $166 million in 2024. Other revenue was up by $8 million to $42 million in 2025 compared to $34 million in 2024, primarily due to events held at Truist Park, including two Savannah Bananas games. Next, our mixed-use development revenue was $97 million in 2025, a $30 million increase from $67 million in 2024. This was primarily driven by a $27 million 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 million in 2025, an increase of nearly $70 million from $40 million in 2024. This improvement was driven by an increase of $44 million in baseball adjusted OIBDA and an increase of $23 million 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 million in 2025 compared to a loss of $40 million in 2024. This improvement was primarily due to increased revenue, partially offset by a $30 million noncash impairment expense associated with the termination of the long-term local broadcasting agreement, and increased depreciation and amortization. As of December 31, 2025, the company had $100 million 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's open the line for questions. Operator: [Operator Instructions] Your first question today comes from the line of David Joyce from Seaport Research Partners. David Joyce: Congratulations on standing up BravesVision. I was wondering what sort of OpEx or CapEx was reflected in your financials before sort of 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 and streaming opportunities. I know that your press release mentioned that there was some no blackout issues. But just remind us of that, please. Jill Robinson: David, this is Jill. In response to your first question about OpEx and CapEx for the broadcasting business, historically, we haven't shared information at that level in our financial statements. We do share with you broadcast revenue. So I really can't speak to that at this time. Looking forward, as we launch BravesVision, you should expect to see more detail about the financial results of this new operation starting in Q2. Derek Schiller: Yes. And I'll take the second one. It's Derek. The blackout rules and the way that we referenced them really pertain primarily to the streaming platform. So as we launch Braves.TV, which is in partnership with Major League Baseball. In effect, if you are a subscriber of Braves.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, our five, six state area. So long as you're 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 Joyce: Appreciate it. 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 your updated thoughts on how things are evolving? And what's the probability that Major League Baseball would want to perhaps negotiate back these local media rights from you later on since they are handling a number of other teams? Terence McGuirk: This is Terry responding. Yes. As you know, our next national media opportunity is 1/1/29. 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 our best opportunity to possible -- best opportunity would be to aggregate all of our rights like the NBA, like the NFL, like CACI. And that is still a strategy that is not clear yet as to how we'll play that. But the commissioner will be leading that negotiation and that strategy discussion among the owners, and we will surely keep our shareholders and our analysts up to speed when that happens. Operator: [Operator Instructions] Your next question comes from the line of Barton Crockett from Rosenblatt Securities. Barton Crockett: Let me see, one of the things that I -- just stepping back, I'm just kind of curious about in terms of the financial cash flow profile of the Braves this year versus years past. In this year, you just reported, you -- the free cash flow was, I guess, a negative $25 million or so, if I've got that right. And when you look ahead to '26, there's $100 million-ish or so of local broadcast revenue that might be somewhat less as you go through this transition, maybe, maybe not. And then you've got some incremental tax impacts that could be coming up from the tax laws that limit kind of deductibility of salaries to high-paid employees like your star baseball players. And so I was just wondering if you could talk a little bit about how you see free cash flow trending going forward? And if there's a deficit, how you see kind of financing that? And given your position as kind of a public company versus others where you've got the pockets of billionaires to kind of finance it, does this put any pressure on you guys competitively, do you think? Jill Robinson: Yes. 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've said on a few occasions is that our goal is always to reinvest the profits 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's generally what our focus is. Now that said, over the past couple of years, we have launched master planning project across the stadium, we're 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're 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'll begin to see a little bit more of how that plays out when the business really begins to operate in Q2. Barton Crockett: Okay. But I guess I'll leave some of that aside. Maybe just one more kind of detailed question. I think there's been some discussion about the changes in tax laws around deductibility of high salary kind of employees and that being a new kind of tax impact for maybe a publicly traded sports franchise like the Braves that the privately owned franchises don't face. I was wondering if you could talk about the materiality of that for you guys. And given that there are -- there is at least maybe another corporate enterprise out there that has some teams that's 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 Schiller: It's Derek. I'll jump in on this one. We're obviously aware of the 162(m) issue that you're referencing. We've looked into it. We understand what's out there, and we're working on that. I don't think it's appropriate at this point in time to comment on that because we're still in the midst of those discussions and what we're trying to do with that. But certainly aware of what's out there and what we need to do to try to figure that out. 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 Schiller: So I'll close it out. It's 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 -- hearing from you again soon. We're 30 days from opening day. I hope you're all paying attention. We're excited to get the season started and look forward to seeing you on March 27 for our opener. Bye-bye. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning, everyone, and welcome to the United Therapeutics Corporation Fourth Quarter 2025 Corporate Update Conference Call. My name is Jamie, and I will be your conference operator today. [Operator Instructions] Please also note today's event is being recorded. At this time, I'd like to turn the webcast over to Harry Silvers, Investor Relations Manager at United Therapeutics. Harrison Silvers: Thank you, Jamie. Good morning. It is my pleasure to welcome you to the United Therapeutics Corporation Fourth Quarter 2025 Corporate Update Webcast. Remarks today will include forward-looking statements representing our expectations or beliefs regarding future events. These statements involve risks and uncertainties that may cause actual results to differ materially. Our latest SEC filings, including Forms 10-K and 10-Q, contain additional information on these risks and uncertainties. We assume no obligation to update forward-looking statements. Today's remarks may discuss the progress and results of clinical trials or other developments with respect to our products. These remarks are intended solely to educate investors and are not intended to serve as the basis for medical decision-making or to suggest that any products are safe and effective for any unapproved or investigational uses. Full prescribing information for the products is available on our website. Accompanying me on today's call are Dr. Martine Rothblatt, our Chairperson and Chief Executive Officer; Michael Benkowitz, our President and Chief Operating Officer; James Edgemond, our Chief Financial Officer and Treasurer; Dr. Leigh Peterson, our Executive Vice President of Product Development and Xenotransplantation; and Pat Poisson, our Executive Vice President of Strategic Development. Note that Michael Benkowitz, James Edgemond and I will participate in a fireside chat and one-on-one meetings at the TD Cowen 46th Annual Healthcare Conference in Boston on March 2. Additionally, Martine Rothblatt, James and I will be at the Leerink Global Healthcare Conference in Miami on March 9 for a fireside chat and one-on-one meetings. Finally, James and I will also participate in one-on-one meetings at the UBS Biotech Summit in Miami on March 10. Our scientific, commercial and medical affairs teams will be present at the 21st Annual John Vane Memorial Symposia in London, March 13 and 14, and at the International Society for Heart & Lung Transplantation in Toronto, April 22 to 25. Now I will turn the webcast over to Martine for an overview of our development pipeline and business activities. Martine? Martine Rothblatt: Thank you, Harry. Good morning, everyone. Today, I'm going to share with you news that transforms the fields of pulmonary hypertension and IPF. This news is our unsheathing of a category killer product called [ Tresmi. ] This product is a revolutionary proprietary drug device formulation of treprostinil into a soft mist inhaler. It will reduce the #1 side effect of dry powder inhalers, which is coughing by up to 90% based on the human studies we've done so far. And we intend to file for its approval in PAH and ILD this year and commercially launch it next year. The days of people discontinuing their PAH or ILD therapy due to cough will be over. Anyone would rather have soft mist than dry powder. Also transformative for our markets will be the unblinding of our outcome study next week. We are optimistic that this unblinding will usher in a new era of once-a-day treatments for pulmonary hypertension. The reason we can promise once-a-day treatment is because the new medicine is a super prostacyclin. It is a super prostacyclin because it lasts much longer and binds molecules much more efficiently than all other approved forms of prostacyclin. Hence, between our super prostacyclin once-daily pill and our cough less soft mist inhaler, or SMI, we have solved the two biggest problems in our diseases, cough and dose frequency. Also very exciting is our unblinding next month of our second pivotal trial of Tyvaso for IPF. You'll recall from last quarter that our first pivotal trial showed Tyvaso to be much better than any other IPF drug the FDA has ever approved. With confirmation of those results next month, we'll quickly file for approval and commercially launch into IPF not later than June of 2027. In summary, for 2027, we should have three disease transformative paradigm-shattering commercial launches: one, a once-daily super prostacyclin for PAH; two, a category crushing [ Tresmi ] coughless inhaler for ILD; and three, a better than everything new treatment for IPF. Hell, yes, we are pumped. Now let me review some of the other major management areas that I track as CEO. We are religious about revenue growth at UT. And Mike Benkowitz... Michael Benkowitz: Good morning, everyone. 2025 marked another year of record-breaking revenue, driven by double-digit percent revenue growth from Tyvaso and Orenitram, leading to [ 11% ] total revenue growth over full year 2024 and surpassing $3 billion in total revenue for the first time in our history. For the fourth quarter, we recorded $790 million in total revenue, representing 7% growth from the fourth quarter of 2024. We have pointed out in the past and continue to remind investors of our historical seasonal revenue trends where the first quarter and fourth quarter tend to be lighter ordering quarters, while the second quarter and third quarter tend to be heavier ordering quarters. As such, sales in the short term can vary depending on the timing and magnitude of orders from our specialty pharmaceutical distributors and may not precisely reflect patient demand or changes in patient census. Turning to Tyvaso. Total revenue for the fourth quarter was $464 million, a 12% increase over the previous year, underpinned by robust 24% year-over-year growth in Tyvaso DPI. This impressive trajectory reflects our strategic positioning in a large and growing addressable but uncaptured market in PAH and PH-ILD, where we are steadily increasing our share of voice and expect to continue delivering double-digit growth. Through mid-February of this year, our rate of referrals for total Tyvaso was at its highest level in two years. Notably, the referral rate in 3 of the last 4 months was at or above where we were heading into a competitive launch early summer of last year. This continued strength in the underlying fundamentals reflects the disciplined execution of our teams who continue to reinforce our message. And we expect this momentum to continue throughout the year as the many attributes of Tyvaso DPI position the device for sustainable long-term growth. We are constantly striving to enhance our Tyvaso DPI platform, which we believe will help us solidify and grow our position as the preferred inhaled prostacyclin therapy. We recently introduced 80-microgram cartridges, which enable delivery of the equivalent of 15 nebulized treprostinil breaths in a single DPI breath as well as 96 and 112-microgram combination kits. This advancement strengthens Tyvaso DPI's differentiation in the pulmonary hypertension market by improving convenience and expanding dosing flexibility, which we believe can support broader adoption and longer-term growth while streamlining access and affordability for patients with more advanced dosing needs. Moreover, we believe the consistency of flow rate and delivery with our DPI device and its low inspiratory flow requirements further differentiates our platform. Turning to Orenitram and Remodulin. Last month at the Pulmonary Vascular Research Institute Annual Congress in Dublin, our medical affairs teams presented data from the ongoing [ ARTISAN ] study, examining the effect of early and rapid treprostinil therapy on mean pulmonary arterial pressure, or mPAP, and the reduction to improve right ventricular function in PAH. Preliminary data suggests that early initiation of high-dose treprostinil therapy represents a feasible strategy for reducing mPAP and improving right ventricular structure and function. These data further reinforce the significant benefits that can be achieved from Orenitram and Remodulin, which remain backbones to treprostinil-based therapy in treating pulmonary hypertension and are strong foundational pieces to our commercial business. To close, we are proud of the exceptional drive and relentless focus of our teams who remain deeply committed to making a real difference for the patients we serve. Building on the strength of this past year, we expect this foundation will continue to support durable double-digit growth and ongoing success over the long term. With that, I'll turn things back to Martine to run the Q&A. Martine Rothblatt: Michael, thanks so much for that great review of our religious dedication to strong revenue growth... Harrison Silvers: Operator, maybe we could go to the first question in the queue. Operator: [Operator Instructions] Our first question today comes from Ash Verma from UBS. Ashwani Verma: So just on TETON 1 data coming up, I wanted to understand your level of confidence here in a positive study for IPF. I know you're very confident ahead of the TETON 2 study, but just in terms of how you're thinking about for this second study, I would love to get your thoughts. And then secondly, it seems like this question keeps coming up, just the impact from Yutrepia. I know previously, you talked about that this is -- there was a give it a try dynamic. But just what are you seeing latest in terms of the patient adds for DPI or nebulizer and if there is any impact from the competitor? Leigh Peterson: Yes. I'll go ahead. This is Leigh Peterson, and I will go ahead and answer the first question about expectations for TETON 1 and yes, just to reinforce that we are extremely encouraged by the TETON 2 results. And we're really optimistic that we can show a treatment effect in the TETON 1 study as well, particularly since we did see such a robust effect in TETON 2 and that the TETON 1 and TETON 2 study population are relatively similar with regards to the baseline characteristics. So we're confident that the TETON 2 results will translate to a second successful study. Harrison Silvers: Operator, it seems like we lost Martine and Michael. Operator: We have Martine rejoining. Martine, this is the conference operator. You joined into the live conference. Your line just dropped here recently. We rejoined you back in. Your line is live. Martine Rothblatt: Okay. I'm sorry, everybody, the conference operator messed up the conference call. And I think, Mike, were you able to get your entire presentation through before you got dropped? Michael Benkowitz: I think so. I'm not sure if anybody heard me. Martine Rothblatt: Okay. Well, why don't we start back up? We'll go over 9:30. And why don't we start back up around the time I think that was dropped. And then Mike, if you don't mind redoing your presentation after I continue. Is that okay? Michael Benkowitz: Yes, Martine, I think I just -- we just confirmed that everybody heard my presentation. Martine Rothblatt: Okay. Good. Well, I'll pick up from when I was dropped then. So everyone has just heard Mike's presentation. And I think it confirms what we've been saying to everybody is our commitment to double-digit revenue growth. I'm going to continue from the point that I got dropped by the call to say, in addition to all of the fantastic success that Mike and his team have delivered in terms of revenues that we at UT are also fanatical about new product development because we never like to rest on laurels. And Dr. Peterson, who is also on this call, is doing a superb job of product development, including the amazing new super prostacyclin and IPF medicines that I mentioned at the start. Before I dive into these new products, let me just take a moment due to the conference call error earlier, just to double check with Harry and Michael that my remarks are coming through. Are they coming through? Harrison Silvers: Yes, we got you, Martine. Martine Rothblatt: Okay. Sorry for the interruption, but like trust but verify kind of thing. All right. So other areas that I focus on in addition to new product development are Investor Relations and business development. With regard to business development, we are now in fruitful discussions with three great pharmaceutical companies. And this is really driven by their keen interest in the proven predictive power of our AI-enabled digital lung model. Our model can run hundreds of accurate in silico Phase III trials in way less time than it takes for a single in vivo trial. No one else has this advanced and lung-specific computational biology technology. It is great to know that the outcome of a pulmonary trial can be known before spending hundreds of millions of dollars to run it, not to mention the many years saved or gained. Transplantation is another major management focus for me, and it too is firing on all thrusters. I'm just going to -- before I go into transplantation, just let me take a moment to check again with Harry and Mike and make sure the line remains active. Harrison Silvers: Yes, we have you. Martine Rothblatt: Okay. Great. The first thruster is Xeno, which has now two patients transplanted and doing well in our FDA-approved phase less clinical trial. We are on schedule to fully enroll the full 6-patient cohort by this summer. Then we'll enroll the full balance of the trial needed for registration as decided by the FDA in 2027. At this rate, we should have a commercial Xeno product on the market in 2030. The second transplant thruster is Miromatrix. We've now fully enrolled and successfully completed the first manufactured liver clinical trial ever. We expect FDA guidance on how to take this liver failure recovery product and also our mirokidney implanted product to regulatory approval during the course of this year. Instead of me going through all of our multiple other transplant thrusters such as, for example, 3D bioprinting of kidneys and lungs, let me simply say that I felt honored to be chosen by Forbes team of experts and AIs as the eighth most innovative person in America. I feel an obligation to live up to that, and there is no company in the world manufacturing as many transplantable organs in as many different ways with as many or for that matter, any in human clinical trials as my teams at United Therapeutics. This is life-saving innovation with very, very large. A final area of major management focus for me is our strategic clinical development group, also known as our Skunkworks or Stealth division. It is in this group that the revolutionary new [ Tresmi ] product was birthed as described at the start of the call. This is the product that will totally transform our markets by all but eliminating treprostinil's #1 reason for patient discontinuation, harsh coughing. We are unsheathing this product today because it will be filed this year for commercial launch next year. The immense power of this product is summarized in its name. Few will want to continue inhaling a dry powder when instead they can breathe a soft mist. Other products that you'll soon see emerging from our Skunkworks division include: one, a once-daily inhaler two, PRN inhalers; three, even better pills than the once-daily ralinepag; and four, more IPF and PAH products than I can really discuss in a mass call like this because they are deeper in stealth mode. But all of these products have long IP. In summary, UT is committed to using relentless innovation and our AI-enabled digital lung model to keep producing the best, most convenient, most effective and safest products in the PAH and IPF space. Operator, you can now open up the line for additional questions. Operator: Our first question once again will be from Ash Verma from UBS. Ashwani Verma: Great. Sorry about what happened earlier. Just on like the TETON 1 data coming up, I wanted to get an understanding of the level of confidence you have in the IPF study outcome versus how you're feeling about TETON 2. And secondly, just wanted to get the latest on impact from Yutrepia if you're starting to see any type of patient add or competitive dynamic on the DPI or the nebulizer. Martine Rothblatt: Okay. Thank you, Ash. Thanks for the question. So the first part of your question about TETON 1, we will have answered by Dr. Leigh Peterson. She is in charge of product development and in charge of the team that's running the TETON trials. And then after she finishes answering your question, then the second part of your question will be answered by Mike Benkowitz relating to marketplace dynamics between us and Yutrepia. Dr. Peterson, could you please start? Leigh Peterson: Yes, sure. So I don't know if you all heard me the first time I said this, but I'll add a little bit more detail this time. So just to reiterate, we're extremely enthusiastic about the TETON 2 results. And we have great confidence that these results are going to be translated to a second successful study, in particular, TETON 1. The baseline characteristics of both studies are similar, relatively similar. So the possibility of the translation is really high. And again, the robust results that we saw in TETON 2 also give us confidence. I mean, we not only saw a very good, very positive statistically significant basically primary endpoint with regard to FVC, we saw the -- as everyone know, we saw an improvement in absolute forced vital capacity of 95.6 milliliters. And we also saw significant improvements in our secondary endpoints. And so again, given these really good results, we expect similar results from TETON-1. Martine Rothblatt: Perfect, Dr. Peterson. Thank you so much. Mike, I'm not sure how much they heard of the earlier discussion. So if you could just respond to Ash's question as you think. Michael Benkowitz: Yes. So Ash, I think you were asking about just kind of the competitive dynamics between us and Liquidia. So what I'd say is Tyvaso remains the well-entrenched market leader for inhaled therapy in pulmonary hypertension. The health care providers consistently affirm UT's leadership position in this space. As we said, there was initial curiosity to evaluate a new market entrant, but the doctors are recognizing that the advantages of Tyvaso DPI is easy and importantly, consistent delivery in just one breath is important. Our primary market research insights and underlying demand trends support this. What we're hearing and seeing is that the belief in Liquidia's unsubstantiated claims of higher dosing, less cough, better lung deposition, lower effort is definitely weighing. Our referrals have been at pre-Liquidia launch level -- at pre-Liquidia launch levels in 3 of the last 4 months. Our prescriber breadth and depth and patient retention is at or better to where it was before Liquidia launched. Now what we have seen is the patient starts have lagged these trends a little bit. I think that's primarily due to the typical Q4 seasonality we see as well as just kind of the cross-country severe weather we experienced in January; however, that log jam really seems to have broken in February based on what we've seen in the last 3 to 4 weeks. And I would say if these trends continue, you'd expect to see us return to sequential revenue growth no later than Q2. Operator: Our next question comes from Roanna Ruiz from Leerink Partners. Roanna Clarissa Ruiz: So I thought it was a really interesting update on the soft mist inhaler product. And I was curious if you could talk a bit more about the human-based studies you've done so far and what additional features you've been optimizing for this product? And how you think physicians will react in terms of prescribing it if it's fully available and commercialized? Martine Rothblatt: Yes. Thanks for your question. I think physicians will be super happy about it. It is -- as it says right in the name, it's soft mist versus dry powder. So I think physicians will be happy about it because patients will be happy about it. I think it will be equivalently effective. So why not have something that works just as good, but is easier for the patient to tolerate. We have just brought this out of stealth mode today on this call. So this is totally really exciting news. And so many of the details we are not going to share openly. But I did want everybody to know that it was going to be filed for approval this year and then launch next year. So given the proximity of all of that, it was important to -- for us to unsheathe the product, but the -- all of the various competitive advantages of this product will remain undisclosed until we end up seeing the FDA approval. Operator: Our next question comes from Roger Song from Jefferies. Jiale Song: Great. Congrats for the progress and exciting to see those three launches. Maybe the team, so I think you confirmed the double-digit growth this year. I think, Martine, you mentioned the $4 billion run rate by 2027 -- the end of 2027. Can you also comment on that kind of soft guidance? And also given those three new product launches next year, so how much contribution from those launches will contribute to the long-term growth, including the $4 billion run rate? Martine Rothblatt: Yes, it's a really insightful question. So first of all, we can clearly double down on our commitment to hit that $4 billion revenue run rate next year. So it will be in the back half of the year. But if you just take our double-digit revenue growth and you roll it forward from the levels that we are at right now, you'll see that we would be hitting that $1 billion a quarter by the tail end of next year. So we're doubling down on that. It does not require the contribution of these three new product launches. So all of that is, you could say, gravy, whip cream, whatever is your favorite metaphor. But definitely, these three product launches are going to bend the curve upwards in terms of our revenue levels beyond the $4 billion annualized rate because we were growing double digit with the great products that we currently have, the Tyvaso DPI, Orenitram, Remodulin, all of these -- Unituxin, all of these products. So above and beyond that, we've now got three more products, and these aren't just like me-too products. These are [ truly ] category crusher products. I mean the first one that can like slash way down the cough, a cough less inhaler, that's amazing. A once-a-day super prostacyclin, that's amazing. And an IPF treatment that's better than anything the FDA has ever approved for IPF since the beginning of IPF. It does not get better than that. So like I said, we're super pumped. And I think the $4 billion revenue run rate, it's just to be the point at which the revenue curve bends even more sharply upwards. Operator: Our next question comes from Joseph Thome from TD Cowen and Company. Joseph Thome: Congrats on the progress. Maybe given your excitement for ralinepag, what are the most important outcomes that we should be looking at when we see those data? Is it on PVR, 6-minute walk, time to worsening event? Kind of what do you think will resonate most with physicians in addition to the dosing benefit to drive adoption there? Martine Rothblatt: Yes. That's -- we love these kind of scientific questions. Dr. Peterson, the Head of Product Development, she has lived this trial for 7 years because this trial like started before COVID and persevered through COVID. So I don't think anybody knows the whole panorama of positive therapeutic benefits from this super prostacyclin than she does. So Leigh, if you could give kind of your stream of consciousness of what we can expect from this super prostacyclin and what do you think physicians will appreciate? Leigh Peterson: Yes. Sure. Happy to. So obviously, what Martine said is the most important with regard to this being a very, very potent drug. It binds the receptors, the IP receptor very tightly and has a really long half-life. And so this translates to the once-a-day dosing and potentially more tolerability. So that's definitely a bonus. But also, we're looking to -- I mean, we're looking to see the statistically significant and clinical meaningful benefit on top of that in clinical worsening versus placebo. And as you all know from our other studies as well as this one, clinical worsening is defined with specific parameters and seeing a benefit in the number of hospitalizations as well as mortality would be a super effect to see in this product. So as Martine says, we are unblinding next week, and we are really, really looking forward to that and happy to put those results out there. Martine Rothblatt: Thank you so much, Leigh. Really appreciate it. Operator, I'm getting inputs that other people are being dropped on the call, so we can close the call at this time. Operator: Ladies and gentlemen, at this time, we will close today's conference call. We thank you for participating in today's United Therapeutics Corporation earnings webcast. A rebroadcast of this webcast will be available for replay for one week by visiting the Events and Presentations section of the United Therapeutics Investor Relations website at ir.unither.com. We thank you for joining. You may now disconnect your lines.
Operator: Welcome to Hayward Holdings Fourth Quarter 2025 Earnings Call. My name is Carrie, and I will be your operator for today's call. [Operator Instructions]. Please note that this conference is being recorded. I will now turn the call over to Kevin Maczka, Vice President, Investor Relations and FP&A. Mr. Maczka, you may begin. Kevin Maczka: Thank you, and good morning, everyone. We issued our fourth quarter and full-year 2025 earnings press release this morning, which has been posted to the Investor Relations section of our website at investor.hayward.com. There, you can also find the earnings slide presentation referenced during this call. I'm joined today by Kevin Holleran, President and Chief Executive Officer; and Eifion Jones, Senior Vice President and Chief Financial Officer. Before we begin, I would like to remind everyone that during this call, the company may make certain statements that are considered forward-looking in nature, including management's outlook for 2026 and future periods. Such statements are subject to a variety of risks and uncertainties, including those discussed in our most recent Forms 10-K and 10-Q filed with the Securities and Exchange Commission that could cause actual results to differ materially. The company does not undertake any duty to update such forward-looking statements. During today's call, the company will discuss non-GAAP measures. Reconciliations of historical non-GAAP measures discussed on this call to the comparable GAAP measures can be found in our earnings release and the appendix to the slide presentation. All comparisons will be made on a year-over-year basis unless otherwise indicated. Additionally, I'd like to highlight a change in accounting principle. During the fourth quarter of 2025, we changed to a preferred presentation of warranty costs from SG&A to cost of sales. This change has no impact on net sales, operating income, net income or adjusted EBITDA. The change has been applied retrospectively to all periods presented and affects cost of sales, gross profit and SG&A expense. Tables outlining this presentation change are included in our earnings press release and in the appendix to the earnings slide presentation. I will now turn the call over to Kevin Holleran. Kevin Holleran: Thank you, Kevin, and good morning, everyone. It's my pleasure to welcome all of you to Hayward's fourth quarter earnings call. I'll begin on Slide 4 of our earnings presentation with today's key messages. Hayward delivered strong fourth quarter and full year 2025 results, outperforming expectations and extending our momentum. Our team executed at a high level across the organization, translating into sales and earnings growth, continued gross margin expansion and robust cash flow generation. I'm pleased to report that our net sales increased 7% in the fourth quarter against a very strong prior year comparison. Gross margin expanded and adjusted EBITDA increased 4%, demonstrating our ability to drive profitability even as we continue to invest in the business. Our full year performance was strong across all key financial metrics. Net sales increased 7%. Gross margin achieved a record 48% and adjusted EBITDA grew 8%. These results underscore the success of our business development strategies and the durability of our aftermarket-driven model. Cash flow generation was exceptional, enabling a further meaningful reduction in net leverage to 1.9x by year-end. At the same time, we're executing on our strategic priorities. We're investing in innovation, operational excellence and customer experience while maintaining a strong financial profile. These actions are strengthening our competitive position and supporting long-term value creation. 2025 also marked the 100-year anniversary of Hayward's founding in 1925, a remarkable milestone and testament to our resilience. It was important to us that we honor that legacy with strong performance in our centennial year, and I'm proud to say we did exactly that. As we enter our next century, we do so with a solid foundation for future growth and an unwavering commitment to our customers. Looking ahead, we enter the new year with confidence in the strength of our business and our ability to execute our strategic growth initiatives. For the full year, we expect continued sales and earnings growth with net sales increasing approximately 4% and adjusted diluted EPS increasing approximately 6% to 12%. Turning now to Slide 5, highlighting the results of the fourth quarter and full year. Net sales in the fourth quarter increased 7% to $349 million against a strong prior year comparison of 17% growth. Gross profit margins continued to expand and adjusted EBITDA increased 4%. Adjusted EBITDA margin of 29.4% was reduced largely due to the increased variable compensation costs associated with better-than-expected performance. Adjusted diluted EPS increased 7% to $0.29. For the full year 2025, net sales increased 7% to $1.122 billion and adjusted EBITDA increased 8% to $299 million, each exceeding our most recent guidance. Profitability was strong with gross margin increasing to 48% and adjusted EBITDA margin increasing to 26.7%. Adjusted diluted EPS increased 15% to $0.77. Overall, this performance reflects solid growth and margin expansion, balanced against targeted strategic investments in the business to support long-term value creation. Turning now to Slide 6. I'd like to share some strategic accomplishments from the year. 2025 was an important and successful year for Hayward, our centennial year and one in which we delivered on our financial commitments while further strengthening our position as a premier company in the industry. I'm extremely proud of our team's performance, and I want to thank all of our valued customers and vendor partners for their efforts throughout the year. Our aftermarket model focused on serving a large installed base of existing pools with regular equipment replacements and upgrades represents roughly 85% of our total sales and continues to prove its resilience. We generated another year of solid growth and profitability through a challenged macroeconomic backdrop in which new pool construction in the U.S. approached post-GFC lows. From a financial standpoint, we delivered robust growth in sales and double-digit increases in both adjusted diluted EPS and free cash flow, enabling a meaningful reduction in net leverage to 1.9x. At the segment level, North America delivered record margins. Canada continued its strong performance, and we were very pleased with the performance of ChlorKing in the first full year of ownership, strengthening our position in commercial pool equipment. Europe and Rest of World showed a solid recovery in sales and margins, reflecting the benefits of our organizational realignment and operational focus. As I reflect on the post-pandemic period for the industry, we have now delivered 2 consecutive years of top line growth aligned with our long-term algorithm, 6% in 2024 and 7% in 2025, alongside meaningful margin expansion and balance sheet delevering. Further, looking back to before the pandemic, our 6-year CAGRs from 2019 to 2025 are approximately 7% for net sales and 10% for adjusted EBITDA, underscoring the sustainable organic growth trajectory we believe our business can deliver over time despite some year-to-year variability. Beyond our financial results, we executed on key strategic growth initiatives to further strengthen the foundation for Hayward's next century of growth. As a technology leader, we increased our disciplined investments in research, development and engineering to support growth-enhancing innovation. We launched several differentiated products during the year, including the introduction of OmniX automation ecosystem. I'll discuss this in more detail on the following slide. Hayward has a long-standing culture of operational excellence and continuous improvement, and we demonstrated our capabilities again in 2025. We successfully mitigated the impact of tariffs, realigned our supply chain and continue to derisk our sourcing footprint while making strategic investments in automation and productivity. We also continue to elevate the customer experience. We recently expanded the network of Hayward hubs, opening one in California in the fourth quarter, and our fifth hub is scheduled to open in Florida soon. We also increased training and support for dealers and trade professionals. After a successful pilot program, we are now scaling up the use of AI-enabled technical service agents to improve efficiency and service quality for our customers. These efforts are supporting successful dealer conversions and share gains. Turning now to Slide 7. Last year, we first introduced you to OmniX, an industry-first automation platform providing wireless connectivity and app control for a suite of products without the need for central controller. This strategy directly addresses the need of the approximately 3.5 million U.S. pools with little or no automation, offering a seamless path to modernization. Today, I'm excited to share another key step in building out the OmniX ecosystem. Now every new Hayward variable speed pump and gas heater is OmniX-enabled. As homeowners replace older equipment, they will get automation as standard, lowering the barrier of large upfront cost and making aftermarket upgrades more accessible. With more OmniX-enabled products on the horizon, our ecosystem will continue to offer robust aftermarket upgrade options, driving further growth and giving pool owners even more ways to enhance and enjoy their pools over time. Additionally, our new OmniX products feature a common intuitive universal display. For pumps, this also includes universal communications, supporting seamless aftermarket integration with existing non-Hayward automation systems. On Slide 8, innovation in the aftermarket remains core to our strategy given the large addressable market for efficient connected products. Here, we showcase several new products, each designed to unlock significant aftermarket upgrade opportunities for Hayward either by providing access into new product categories or by broadening compatibility with competitive systems. Starting on the left-hand side of the slide, we've expanded our variable speed pump line with superior performing OmniX-enabled 4-horsepower models for large residential and small commercial pools. This is a key established segment of the pump market not previously served by Hayward. Our new ColorLogic LED landscape lights allow homeowners to create coordinated custom color effects across the pool, spa, water features and now their surrounding landscape. The TracJet pressure cleaner shares many of the same performance elements as our successful TracVac suction cleaner, fast cleaning and improved access to hard-to-reach spaces. Entering the pressure cleaner category opens up another segment of the automatic cleaner space for new and replacement installations. In Europe, new pumps have been introduced as direct drop-in replacements for the extensive installed base of competing products, presenting a promising opportunity to increase market share. Finally, we've also expanded our pool lighting product line. These lights present an excellent aftermarket alternative for trade professionals seeking robust lighting solutions compatible with non-Hayward systems. Collectively, these new products unlock incremental aftermarket opportunities by enabling easier upgrades, replacements and conversions across both Hayward and non-Hayward pool pads. Turning now to Slide 9. I'd like to briefly revisit the strategy we're executing to drive growth and value creation in 2026 and beyond. Hayward is fundamentally a growth company built on a strong and reliable organic growth engine complemented by disciplined inorganic opportunities. On the organic side, our product management and engineering road maps are focused on delivering innovative, energy-efficient and highly automated solutions that elevate the pool ownership experience. This includes industry-leading technology platforms like OmniX, positioning us at the forefront of connected intelligent pool solutions. We continue to enhance the overall customer experience through investments in sales and marketing programs, additional Hayward hubs as well as hosting premier industry events that reinforce our leadership and deepen engagement across the channel. Our commercial pool and industrial flow control businesses, though smaller in scale, are high-quality, high potential contributors to our portfolio. We are experts in water movement and treatment solutions, focused on accelerating profitable growth in these attractive categories that scale our core capabilities. We have a proven track record of expanding margins from already strong levels. Over the past 6 years, our gross profit margin has expanded more than 700 basis points from 41% to 48%. We continue to see long-term margin upside supported by 4 pillars: productivity gains, a richer mix of higher-margin technology products, operating leverage from increased capacity utilization and proactive price/cost management. Finally, as we've emphasized, we maintain a balanced and disciplined approach to capital allocation, prioritizing organic growth investments while pursuing strategic acquisitions that enhance our product portfolio, expanding our geographic reach and strengthening customer relationships. In summary, we are confident that our strategy positions Hayward to deliver sustainable, profitable growth and compelling shareholder returns in the years ahead. With that, I'd like to turn the call over to Eifion to discuss our financial results in more detail. Eifion Jones: Thank you, Kevin, and good morning. Turning to Slide 10. We're pleased with our quarter 4 financial results. Net sales rose 7% to $349 million against a strong prior year comparison of 17% growth, mostly on price gains to offset inflation. Gross profit grew 10% to $169 million. Gross margin improved 160 basis points year-over-year and 70 basis points sequentially to 48.5%. As discussed, we changed warranty accounting, moving costs from SG&A to cost of sales, lowering gross profit and SG&A, but not affecting net sales, net income or adjusted EBITDA. Under the prior presentation method, gross profit margin would have been 52.1% for the quarter. Adjusted EBITDA increased 4% to $103 million with a margin of 29.4%, a decrease of 80 basis points year-over-year. During the quarter, we incurred increased variable compensation, reflecting strong annual performance, onetime legal expenses and further investments into our sales and advanced engineering teams. The effective tax rate was 9%, down from 14%. Adjusted diluted EPS rose 7% to $0.29. Turning to Slide 11. For fiscal 2025, net sales increased 7% to $1.12 billion and were ahead of expectations. Growth came from 5% price gains and 1% from ChlorKing acquisition. Gross profit rose 11% to $539 million. Margin was up 170 basis points to a record 48%. Under the prior presentation method, gross margin would have shown 51.5%. We increased research, development and engineering spending by 6% to $27 million. Sales, general and administrative expenses grew 14% to $247 million, mainly from higher compensation expenses, the execution of our sales and customer care investment plans and the integration of ChlorKing. Adjusted EBITDA rose 8% to $299 million, and the margin increased 30 basis points to 26.7%. The effective tax rate was 18%. Adjusted diluted EPS grew 15% to $0.77. Moving to Slide 12 for a discussion of our quarter 4 segment results. North America sales were up 8% to $309 million, mainly from price gains. U.S. sales were up 8%, Canada was up 10%. We saw a strong in-quarter and early buy demand for 2026. Gross margin was up 80 basis points to 50.1%. Europe and Rest of World sales held approximately steady at $41 million, 5% FX gain offset lower prices and volume. Europe sales up 7%, Rest of World down 9%. Gross margin was up 590 basis points to 35.8%. Adjusted segment income margin up 350 basis points to 16.3%. On Slide 13 for a review of our full year segment results. North America sales were up 7% to $959 million with 6% higher pricing and ChlorKing's contribution. U.S. and Canada up 7% and 6%, respectively. We were pleased to see the Canadian performance continue to improve. Gross margin was up 150 basis points to 49.9%. Adjusted segment income margin was consistent with the prior year at 32.4%. Europe and Rest of World sales were up 4% to $163 million, driven by 2% volume and 2% FX gains. Europe up 5%, Rest of World up 3%. Gross margin was up 230 basis points to 36.7%. Adjusted segment income margin up 280 basis points to 17.4%. Commercial and operational actions improved performance across the segment. Turning to Slide 14 for a review of our balance sheet and cash flow. Free cash flow increased 20% as a result of improved profitability and working capital management, reducing net leverage to 1.9x and increasing liquidity by $164 million. This strengthens our ability for continued organic investment, strategic M&A opportunity pursuit, capital return while maintaining disciplined leverage. Moving to Slide 15. For capital allocation, we balance strategic growth investment with shareholder returns while maintaining prudent leverage. As an OEM, we prioritize organic investment into our manufacturing and supply chain footprint, followed by strategic M&A while remaining opportunistic for share repurchases. In the fourth quarter, we made a modest anti-dilutive repurchase of $4 million. Turning to Slide 16 to discuss our outlook for 2026. Net sales are expected to increase approximately 4%, and we're introducing adjusted diluted EPS guidance of $0.82 to $0.86. We expect free cash flow in the region of $200 million, exceeding 100% of net income, inclusive of modest working capital improvement, net interest expense of approximately $45 million a normalized effective tax rate around 24% and increased CapEx of approximately $40 million as we continue to focus on upgrading our operational capabilities. We're confident in our ability to execute in the current climate and remain positive on pool industry growth given the strength of the aftermarket. With that, I'll turn the call back to Kevin. Kevin Holleran: Thanks, Eifion. I'll pick back up on Slide 17. Before closing, I want to thank the team again for their performance. Hayward delivered another strong quarter and year. We've achieved 2 consecutive years of solid growth and 6-year CAGRs of 7% for net sales and 10% for adjusted EBITDA, underscoring the strength and resiliency of our model. At the same time, we delevered the balance sheet to under 2x while investing in the business. As the macro environment evolves, our unwavering confidence in the fundamentals of our aftermarket-focused business and our proven ability to execute positions Hayward to capitalize on emerging opportunities and deliver substantial long-term value for our shareholders. We concluded our first 100 years with momentum, and we're energized by the many opportunities that lie ahead for Hayward. With that, we're now ready to open the line for questions. Operator: [Operator Instructions] Our first question will come from Ryan Merkel with William Blair. Ryan Merkel: Nice job this quarter. I want to start with the fourth quarter beat. Can you just talk about what the source of the upside surprise was in 4Q? And then secondarily, can we use normal seasonality as we think about modeling first quarter '26? Kevin Holleran: Ryan, I'll turn it over to Eifion to talk about the seasonality. But as for the fourth quarter, there were a lot of positives and for the full year for that matter. Notably, early buy, it turned out well for us. We received incremental orders year-on-year. And overall, we shipped a lower percentage of those orders in the fourth quarter because of stronger in-quarter demand despite comping off a heavy prior year due to the weather and the hurricanes in Q4 of '24. Obviously, that would result in carrying over a larger order file into Q1 of 2026. I think when you look at how the orders or how fourth quarter played out, we were pleased to see high single digit or even in the case of Canada, low double-digit year-on-year growth with U.S. up 8%, Europe up 7% and again, Canada up 10%. So those are 3 really big markets, important markets for us. And then posting record gross margin in fourth quarter at 48.5% on the operating performance are things that I think we're real proud of. But like any year, when you close out fourth quarter, it gives you the opportunity to reflect on the full year. And with 2025 being our 100th year, something that very few companies get to experience, it's allowed me to step back and take some perspective. And overall, I would just say the resilient performance of the organization is something that I'm really proud of, and I want to thank all my colleagues for inside of Hayward. The market is not giving much right now, but the team really did deliver across all major financial and strategic metrics last year. As you well know, new construction has been down 4 consecutive years, and it's really been cut in half from the 2021 high, yet net sales were up 7% last year and a similar 7% for the 6 years ending 2025, delivering record gross margins at 48% is a real highlight. Adjusted EBITDA, 10% CAGR, as I said in the prepared remarks, delivering 300 basis points over that 6-year period. And I don't want to leave out free cash flow last year. It represented nearly 150% of net income from profit performance and working capital improvements around specifically receivables and inventory. So strategically, the team has done a great job around innovation. I spent quite a bit of time in prepared remarks talking about some of those great products that are finding their way into the market. Investments around sales and service and not to be left out derisking the supply chain, all posted positive outcomes for us. So as I put a bow on 2025, our Centennial, I really think it does affirm Hayward's core strengths around disciplined execution, cycle-tested business model that's tied to the installed base and aftermarket demand as well as implementing a growth strategy that's delivering results. So a lot to be proud of. And again, I applaud the team for such strong performance. Around seasonality? Eifion Jones: Seasonality, Ryan, we expect a normal year. I mean, as you know, Q1 and Q3 are the lower top and bottom line result periods for us and Q2 and Q4 are the high result periods. Gross margins -- we expect to modestly expand in 2026 with greater gains, I would say, in the second half based on the cumulative effects of the operational improvements we will deliver in the year. So a normal seasonal year with Q1 and Q3 being lower, Q2, Q4 being higher. Ryan Merkel: Got it. All right. That's great. And then just a quick follow-up on the guide. Can you just talk about your assumptions for aftermarket, new pool and if there's any channel dynamics we need to think about, that would be helpful. Kevin Holleran: Yes. From a channel standpoint, I don't think there's anything really to note there. We felt good about year-ending inventory levels from a days on hand standpoint across our largest channel partners, no shadow inventory from what we can tell. And I just think that we've all gotten much better about managing those inventory levels coming through the COVID experience a few years back. As for demand that's informing the guide, I would say it's fairly normal demand for what we've seen in 2025. We're not calling for new construction to necessarily get better. I don't think that would be prudent at this point with what we see. And we continue to see the aftermarket or we expect the aftermarket to continue to perform, particularly with some of the new products that we're bringing that I think can offer solutions to the aftermarket for upgrade and automating their pad. Operator: Our next question comes from Rob Wertheimer with Melius Research. Since we don't have a response, we'll go next to Jeff Hammond with KeyBanc. Sorry, we'll go to Nigel Coe with Wolfe Research. Nigel Coe: Okay. maybe just going back to the 1Q comment. Just wondering if there's any -- obviously, we've had some pretty severe weather in the Northeast and a bit colder in the South as well. So any impacts to note there and maybe good or bad impacts to note? And I just want to confirm, Kevin, you mentioned that there's a bit more weighting on the early buy program in 1Q versus 4Q this year? Kevin Holleran: Yes. What I had said to Ryan's question, Nigel, was that we -- as a percent of what was received or collected through the early buy program last year that a smaller percentage of that was shipped in Q4. As for Q1, we're not going to get too granular on it. But yes, it's been a rough winter. I would say several weeks ago, there were some frozen conditions in some markets that aren't accustomed to that. By and large, the team is seeing very little in terms of equipment replacement coming from that. I don't think a great deal of work is done this time of year in the Northeast, but very little will be done until this storm passes -- so it's -- I would say, overall, the winter has been more severe through the first 2 months of 2026 than what we have seen in prior years. Nigel Coe: Okay. And then maybe just a quick update on the tariff situation. There's obviously been some changes ongoing. And then just bring up to speed on the supply chain realignment as well. Eifion Jones: Sure. I mean, look, tariffs in '25, it was a challenging year. I think at this point, we are declaring victory on that specific battle, but obviously, a new year potentially new challenges. What I would say, though, before I get the fullness of the answer here is we have to call out just how extremely proud Kevin and I are of the entire Hayward team on the way they handled, I'd say, tariffs in 2025. It took the entire team to deliver success here. A lot of moving pieces, and we declared victory with a record gross margin at the end of 2025. But getting back to the question, look, we've demonstrated we can manage offsetting tariffs with price increases and then aggressively focusing on operational improvements. We have reduced our dependency on China from 10% entering 2025 down to approximately 3% by the end of the year in terms of U.S. cost of sale exposure to China. It comes with the cost. We do recognize that moving out of China comes with an incremental cost. It's probably costing us incrementally $5 million to $6 million or about a 1.5% price cost increase in cost of sales. We're still digesting, I would say, the recent SCOTUS ruling and the response from the President. But based on initial view of how tariffs are looking from those comments, we believe we've covered the exposure in our guidance and don't see any additional threat -- there's some puts and takes by country, but we believe on a net basis, we're fully covered within the guidance that we've given. I think what we've demonstrated, Nigel, is tariffs have become for us a managed variable and not a year-by-year structural headwind. We can deal with it. We've previously mentioned how we're handling our Chinese operation. We'll downsize that facility. Folks there are listening to this call. They're a great team, and we'll recalibrate that facility to service our rest of world business. Operator: We'll go next to Mike Halloran with Baird. Michael Pesendorfer: It's Pez on for Mike. I wanted to talk a little bit about the increased investments here. Obviously, a notable step-up in CapEx. You talked about the increased investment in RD&E, talked about the increased investment in customer success and operations. Maybe just give us a little bit more color, where is the spending going, particularly on the CapEx side? It's a pretty notable jump. And then any color you can give on the raised investments that you're spending broadly at the centralized level. Eifion Jones: Yes. Let me take the CapEx and then turn it over to Kevin. We've communicated Pez over the last couple of years that we're likely to step our CapEx investment program. Historically, it's been 2% to 3% of revenue. We've communicated we have ambition to upgrade our U.S. manufacturing footprint, and we're doing that. We're doing it sequentially around the 3 sites that we have. We took a step up in 2025 with CapEx just tipping over $30 million. We've communicated $40 million in terms of 2026. This reflects upgrading, automation, modernizing and a little bit of onboarding of assets as we come out of Asia. We think it's a good step forward for these facilities. More to come as we step through 2026 in how we communicate success around what we're doing here. But at the end of the day, we still remain a very light CapEx business even at these slightly increased levels. So it's not going to be a large consumer of cash. And as we made in our prepared remarks, cash flow for 2026 is still going to be above 100% of net income, approximately $200 million. So it's not a large consumption of cash here, but it's a great step forward in the operational capabilities of our U.S. footprint. Kevin Holleran: As for the investment, Pez, yes, we've really been consciously investing back into the business, I'd say, over the last, call it, 18 months or so, specifically around a few key areas around R&D and then around the customer experience, sales and marketing. We think it's the right decision to invest in the downturn. So we're better positioned to benefit when the market recovers. As for early indications in terms of feedback and payback, you saw in the prepared remarks a long list of new products that are hitting the market that are really innovation breakthroughs as well as specifically targeting the established aftermarket out there. Some of these are new category entrants for us. A 4-horsepower is not a product that we participated in. So that's kind of blue sky opportunity for us. And we've really been out of the pressure cleaner market for some time as well. On top of that, though, more drop-in replacement for competitive product in the aftermarket is all the result of that investment. As for the front end, we have some great feedback coming out of the field around some dealer conversions around product training. You heard me talk in the prepared remarks about the establishment of the hubs, which are fit-for-purpose training centers in large markets. So we believe that this is reinforcing our innovation reputation and it's having the service trade out there best trained to handle Hayward product and install Hayward product into the marketplace. Michael Pesendorfer: Great. That's super helpful. And then just following up on the new product. Where do we stand from a vitality index perspective? Where are we looking to go? And then how does the making of OmniX and automation standard impact the ASP of the product portfolio? Eifion Jones: Yes, Pez, I'll touch on the vitality index. We continue to make improvements there. As we mentioned in our prepared remarks, we have a lot of good new products on the slate that will contribute to revenue and profitability in 2026, and it will elevate up our vitality index year-over-year. We remain focused on investing. We've stepped our RD&E investment protocol inside the income statement as well as on the balance sheet, supporting our facilities with the necessary assets to get after some of these new product platforms. So we're very encouraged now with the momentum that we're gaining in terms of products that have been introduced in the last 3 years, which are in our revenue profile for 2026. Kevin Holleran: As for OmniX and how it plays into a fully connected pad out there, we believe that majority of new builds will continue to go to fully wired, fully connected with an omni control panel installed at that time. But I think that OmniX also plays to the affordability concern out there that if someone wants to still have an automated pad at time of new build that they can do that a bit more affordably than maybe the fully connected product pad out there. So we love bringing new products into this ecosystem and bringing automation to the -- what we estimate to be about 3.5 million in-ground pools in the U.S. that don't have any form of connectivity or automation to it, and that's an enormous TAM expansion opportunity for us and for the whole industry to bring automation. Operator: And moving next to Brian Lee with Goldman Sachs. Tyler Bisset: This is Tyler Bisset on for Brian. Just first, on your 4% sales growth guidance for the year, how much of that is predicated on a return to positive volume growth versus continued price increases? Eifion Jones: Yes. I mean we've assumed in terms of guidance approximately 3% global net price gain year-over-year and modest volume growth. The pricing will be a little bit higher inside the United States than outside the United States, where we see more modest price increases. As you know, we don't realize all the price given discounts, but plus 3% price and modest volume growth year-on-year with FX being somewhat neutral. Tyler Bisset: Super helpful. And while you guys expanded gross margins in the quarter, adjusted EBITDA margins declined a bit, and you partially attributed that to targeted strategic growth investments. Should we expect these investments to persist throughout '26? And then I also noticed you didn't provide any EBITDA guidance for the year. Do you plan to provide that later in the year? Or directionally, are you expecting EBITDA to increase year-over-year? Eifion Jones: Let me address the first part -- well, let me address almost the entirety of the question. Inside Q4, the majority of the dilution to the margin on adjusted EBITDA was attributable to higher variable compensation for both management bonus and sales incentives following a great close to the year. We beat top line, we beat bottom line, and we beat our balance sheet targets for the full year. So this higher variable compensation, I would say, diluted margins in the queue by approximately 130 basis points. That won't necessarily repeat as we step into the year. Targets are reset and therefore, variable compensation is reset. Also in the quarter, we recorded costs associated with the settlement of certain litigation. And then as you mentioned, we have continued to invest in our research development and engineering and our sales team infrastructure, and we do expect to leverage that cost base in 2026. I would say in terms of the guidance, we have matured here as an organization. We do believe the adjusted diluted EPS metric is a more complete and accountable measure for us. But I do want to be clear. We've guided adjusted diluted EPS up 6% to 12% at the midpoint, 9% growth. It is squarely driven on operational performance. We're not assuming any material changes in the capital structure. It's about execution, efficiency and margin delivery inside the income statement. And the aggregation of depreciation, interest expense and tax in absolute dollars is fairly comparable year-over-year with 2025. Depreciation is higher given we're investing in our facilities. Interest expense is lower given the accretion of cash onto the balance sheet and the interest earnings on that and our tax charge on the business in dollar-wise will be higher, but the effective tax rate will be lower. Operator: Moving on to Saree Boroditsky with Jefferies. Unknown Analyst: This is James on for Saree. I got dropped during the call, so sorry if this has been already asked. But can you kind of update us on what you're hearing from dealers out there? Like how much backlog do they hold? And what do they tell you about kind of Early Buy season for 2027 since one of your competitors kind of talked about like no recovery into 2027 as well. So kind of just wanted to hear your thoughts on it. Kevin Holleran: We -- in the first quarter, we do have a lot of interactions with dealers, regional trade shows, the big one in Atlantic City. There are several dealer buying group shows, some of the distributors have retail summits, et cetera. I would say that there's cautious optimism I'm not in a position to aggregate overall what kind of an order file or backlog they're carrying into 2026. But I would say, in general, those that I spoke to, I really felt there was -- we weren't assuming any step level change from year ending '25 into 2026. But in terms of leads, it was prompting some general cautious optimism heading into 2026. I wasn't quite clear on the question around 2027 or... Unknown Analyst: Yes. It was more so like what does like your discussion with like dealers tell you about potential like 2027 Early Buy season, but I think you kind of answered it. Kevin Holleran: Yes. I'm not sure that I would have good insight into 2027 at this point with so much of 2026 yet to play out. Unknown Analyst: Right, right. And I guess on the pool mix here, can you kind of provide what higher end versus lower end pool mix is currently looking like versus like historical average? And if lower-end pool comes back in 2026 or 2027, should we expect some pressure on margins? Or would volume incremental like offset that? Kevin Holleran: I would say, in general, in terms of new construction, the whole industry is pretty aligned with the fact that, call it the 60,000, I'm rounding up from what the current estimates are in terms of U.S. in-ground construction that the makeup of that build count last year was largely kind of mid- to higher end, and that's been the case for a few years as we see with the ticket value of those builds. We would like to think that with some economic macro improvement that more of that entry-level pool would become a part of the mix. I would say content from our perspective might be a bit less. But in terms of margin, I would say the equipment that goes on that entry-level pool has a similar margin profile to the higher end. So I wouldn't assume that, that would throw off margin pressure when that segment of the new build market rebounds. Eifion Jones: Yes, I'll just add to that. I mean most of our products have similar structural gross margins. And then with the additional volume, if and when this business does return, we'd expect to get leverage across the fixed cost base within the business, but within the factories and across the installed SG&A base. Operator: We'll take our next question from Rob Wertheimer with Melius. Robert Wertheimer: So question is just a little bit on technology connected pools, benefits and so on. So was there anything in technology development and competitive front and your own data that made this a good moment to invest a little bit more in OmniX in specific? And then more generally, could you just talk, obviously, as a consumer, the benefits to having automated pools are great. But maybe just recap the differences between a fully wired, fully connected automated pool and what maybe OmniX could do and what benefits that has for you? Kevin Holleran: Yes, sure. I mean we're very proud of the ratings that our omni system receives online. And I think that's really reinforced from voice of customer that we get back. We do believe, I think as an industry in total, we have identified this upgrading and automating of the installed base as an opportunity that's available. And we really felt it's time for us to give the marketplace more tangible opportunities, more affordable opportunities to do that and really doing it one piece at a time as natural break fix occurs through the natural course of enjoying your pool. I think that's a great entry point to get in and bring automation. Frankly, having -- up until very recently, we had a single variable speed pump, which is now the funnel has broadened, Rob with all variable speed pumps now having the OmniX capability and that Universal comms, which I spoke about, which allows you to drop in onto a competitive pad that -- and it can talk across the equipment that is on that pad. So there was a second part of your question, which I if you could remind me the second part of the question. Robert Wertheimer: I think you touched on it. Was there anything that made this the right moment for investment? And then just in general, what the benefits to you are because consumers see huge benefits, you get maybe more pull-through, more share, more dealer engagement. I'm just looking for a general overview of how you benefit from that technology. Kevin Holleran: Yes. I really do think this is an opportunity to upgrade that aftermarket. And I think the way that we've positioned the universal comms capability in our variable speed pump really broaden the funnel that it doesn't just have to be a Hayward pad that could take on that variable speed pump in the future that it's a more wide open aftermarket opportunity for us. And we're going to continue talking in future earnings calls about additional products that will be bringing the OmniX capability that you can, again, build piece at a time, build out the network or the ecosystem to have full-fledged automation in a pool that may be 10 years old or older. Operator: And moving on to Jeff Hammond with KeyBanc Capital Markets. Jeffrey Hammond: I noticed in your investments internal and external, you mentioned kind of industrial flow, which is a small piece of your business. And just it's not a business you talk about much, but just wondering how you're leaning in on that? And should we expect some external growth focus there? Kevin Holleran: It's a great question, and I'm glad you picked up on it because it's a business that we're spending a lot more time understanding what it can become. We spent a lot of time in 2025, understanding how that could grow. When we look at it broadly, Jeff, we see ourselves as experts in water management, whether it's filtration, whether it's filtering, treating, et cetera. And for our first 100 years, we've really focused that capability around residential and commercial pools. And we are trying to determine how that could be leveraged potentially into some other end markets. Nothing really to debut at this point but it is getting more of more of the leadership team's time. And we're seeing if this, call it, roughly $50 million business that's extremely profitable, by the way, can become something bigger and more important. Obviously, broader flow control, fluid management operates in much larger TAMs than the pool industry. So those are the things that have grabbed our attention and that we're spending time determining can it be a bigger platform inside of our business. Jeffrey Hammond: Great. Great. And then just back on the 4-horsepower pump and the pressure cleaner. Can you just talk about the TAM for those markets and what you think entitlement is in terms of kind of market share once you mature in those spaces? Kevin Holleran: Yes. I mean we have -- I'll keep our ambitions maybe to myself, but I will identify what we believe the -- those TAMs to be, not necessarily in dollars, but in the 4-horsepower range. We believe somewhere around 1/4 of all pumps are 3.5 horsepower or larger. And so it's a meaningful segment of the pump market. And frankly, up until now, we were unable to participate in because our largest pump was about 2.7 horsepower before this 4 horsepower. So it's an enormous opportunity in an established market. We're really proud of the performance that we have with this new introduction, and we're spending a lot of time educating the marketplace on this new product. As for pressure cleaners, I'll use a round number of -- in U.S., it's roughly 100,000 units per year. That's about a $50 million. I'm using round numbers here, Jeff, but it's an opportunity that we don't have in either of these 2 product categories, any real volume in our current financials. So that's what has me so excited for us. We brought great performing product to the marketplace. And now it's our job to get it promoted and educate the marketplace on some of the features and benefits of these new products that we've introduced. Operator: And moving next to Andrew Carter with Stifel. Andrew Carter: I wanted to ask, first off, just to confirm, your adjusted EPS guidance for the year does not include any share repurchase. And also, our math suggests your leverage will drop into the low 1s in 2026. Is that correct? So I guess could you refresh -- could you remind us of kind of your cash flow priorities beyond organic investment? Eifion Jones: Yes. Andrew, yes, absolutely. Our adjusted diluted EPS guidance of 6 to 12 does not contemplate any material change in the capital structure of the business. This is about execution of operating performance of the business, top line growth of 4%, modest gross margin expansion, further SG&A leverage, good operating profitability growth in the business. In terms of the second part of your question, the -- yes, look, the signaling that we're putting out here with $200 million worth of cash flow in the year [Audio Gap] will the balance sheet right now. Kevin has been mentioning throughout the call, opportunities that exist inside M&A. Nothing imminent there. We'll continue to update you as we go through the year. We've got a little bit higher CapEx. But yes, we're delevering the balance sheet into a really healthy position absent any other deployment. And then the very last part of the question, Andrew? Andrew Carter: I know what it was. It was about the priorities for cash flow beyond organic investment. Eifion Jones: Yes. So look, I mean, capital allocation remains, as we previously communicated, we're always going to put first dollar back into the business in terms of upgrading our facilities through CapEx and making sure that they're well maintained. Second dollar will go to M&A opportunities. And with the balance sheet in the position it is right now, we feel good. We have a lot of optionality. And as Kevin mentioned, we've done really good here with the commercial business. We'll continue to look at tack-on opportunities in pool, and we're beginning to look a little bit into the flow control space, where we see very credible large TAMs that align with our core competencies. So a lot of great optionality when it comes to M&A. And then we remain opportunistic around share repurchases. We instituted a $450 million share repurchase program toward the end of last year. We've executed a little bit of that in Q4 in terms of anti-dilutive share repurchases. And again, we remain opportunistic there. But first dollar will be back into the business, second dollar to M&A. And while I'm on this topic, I just want to come back and reaffirm to Tyler, look, adjusted EBITDA is an important metric for us, and we will continue to report adjusted EBITDA as we step through the year, but we're anchoring on adjusted diluted EPS as our guidance metric. We believe that holds us to a higher standard as an organization, but we will continue to report adjusted EBITDA inside our earnings materials as we step through the year. Andrew Carter: Second question, for your 10-K, there's a pretty notable shipment difference between your top 2 customers. Some of that being market share. But I guess I would ask in terms of inventory levels, is there a big difference in approach? And I guess, could you also kind of comment overall where channel inventory levels are today? Kevin Holleran: I would say we don't see any major difference in terms of inventory approach between the two large partners that you're referring to. And if I'm -- the second part of the question, broadening it to more distribution and channel partners that we get data from, we would say that we feel that our inventory exiting 2025 is in a very healthy spot to be able to serve the upcoming season, Andrew. I did just want to circle back because a colleague here pointed out to me when I was answering Jeff Hammond's question around the 4-horsepower. I think I said all pumps installed. What I meant to say was all variable speed pumps because there's still a number of single-speed pumps out there that I wanted to make sure I clarified on. So thanks for that. Operator: And this now concludes our question-and-answer session. I would like to turn the floor back over to Kevin Holleran for closing comments. Kevin Holleran: Thanks, Carrie. I want to thank all our employees and partners around the world. Your dedication and hard work have been essential, not just in closing out a strong year, but in helping us conclude Hayward's first 100 years with real momentum. We're excited for what's ahead as we begin our next century. If you have any follow-up questions, please reach out to our team. We appreciate your continued interest in Hayward and look forward to speaking with you again on our next earnings call. Carrie, you may now end the call. Operator: Thank you. Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.
Operator: Good day, everyone, and welcome to CCU's Fourth Quarter 2025 Earnings Conference Call on the 25th of February 2026. Please note that today's call is being recorded. At this time, I'd like to turn the conference call over to Claudio Las Heras, the Head of Investor Relations. Please go ahead, sir. Claudio Heras: Welcome and thank you for attending CCU's Fourth Quarter 2025 Conference Call. Today with me are Mr. Felipe Dubernet, Chief Financial Officer; and Carolina Burgos, Senior Investor Relations Analyst. You have received a copy of the company's consolidated fourth quarter 2025 results. As usual, the call will start by reviewing our overall results, and then we will then move to our Q&A session. Before we begin, please take note of the following statements. The statements made in this call that relate to CCU's future financial results are forward-looking statements which involve known and unknown risks and uncertainties that could cause that outperformance or results could materially differ. This segment as well should be taken in conjunction with the additional information about risks and uncertainties set forth in CCU's annual report in Form 20-F filed with the U.S. Securities and Exchange Commission, and also at the annual report submitted at the CMF. It is now my pleasure to introduce to Mr. Felipe Dubernet. Felipe Dubernet: Thank you, Claudio, and thank you, you all for joining the call today. During 2025, CCU posted a strong set of results in its main operating segment while it faced a particularly challenging year in Argentina and in the wine business, especially during the second half of this year. Isolating the nonrecurring gain from the sale of a portion of land in Chile in 2024, consolidated EBITDA decreased 2.9%. On pricing segment, Chile posted a robust 7.8% EBITDA growth, which was diluted by the 29.5% contraction in International Business operating segment and a 14.9% drop in the wine operating segment. In addition, net income was down 16.3%. Under the same criteria and isolating Argentina, consolidated EBITDA would have grown mid-single digits in 2025. In terms of business scale, consolidated volumes reached 36.2 million hectoliters, expanding 7.3% versus 2024. Organic volumes increased 0.6%, fully driven by the Chile operating segment, which expanded 1.1%, recovering growth after 3 consecutive years of contraction. In terms of our strategy, during the year, we moved forward in our strategic 2025-2027, a strategic plan and its 3 pillars: Profitability, Growth and Sustainability. Regarding profitability, as mentioned, our core operating segment, Chile expanded EBITDA by 7.8%, well above inflation and EBITDA margin grew 48 basis points, while we keep growing in high-margin innovation and the dividend efficiencies in every aspect of the business. Regarding our Growth pillar, we strengthened our regional footprint by successfully integrated in Paraguay, PepsiCo's beverage portfolio and snacks distribution. Furthermore, we posted volume growth in our water business in Argentina in a tough business scenario and increased our [ beer scale ] in Colombia. Also to meet evolving consumer trends, we posted double-digit growth in low alcohol and ready-to-drink beverage products in Chile, innovating and consolidating our leadership in this high growing cost category segment, which involves beer, wine and spirits in the context of soft industries. Regarding Brand Equity, we recorded a solid performance in Chile, increasing brand equity levels being key to expand overall market share. Finally, as of sustainability in our Juntos por un Mejor Vivir strategy within the [ current ] pillar, we kept reducing industrial water consumption. Regarding the [ profitability ] pillar of our strategy and in the year that we celebrated 175 years of history, we reached important milestones. We obtained a high level of employee satisfaction, got certified in Chile and Argentina as a Top Employer by the Top Employers Institute, moving up in cadet ranking of citizen brands and got rewarded as one of the companies with best practices in corporate governance by the survey La Voz del Mercado 2025. From a quarterly perspective, Consolidated volumes rose 0.6% fully driven by the Chile operating segment. Our financial results were below last year, mostly explained by a challenging business scenario in Argentina, together with a high comparison base in [indiscernible] country and headwinds in the wine operating segment. This was partially compensated by our main operating segment, Chile, which continued in a positive part of results. Consolidated EBITDA contracted 17.2% where the 6% expansion in the Chile operating segment was more than offset by the 44.5% and 45.2% EBITDA contraction in the international business and wine operating segment, respectively. Net income contracted 25.7%. Consolidated EBITDA isolating Argentina would have expanded low single-digit in the quarter. In terms of our segment performance, in quarter 4 2025, the Chile operating segment top line expanded by 5.5% as a result of 4.1% increase in volumes and 1.3% higher average prices. Volumes were boosted by non alcoholic categories. Average prices were driven by the revenue management efforts, offset by negative mix effects. EBITDA has reached 6% mostly due to a 9.1% gross profit expansion, partially offset by 10.1% higher MSD&A expenses. Regarding gross profit, the rise was driven by higher volumes, lower cost pressures related to favorable prices in some raw materials with the exception of [ our NIM ] and the appreciation of the Chilean peso against the U.S. dollar which is positive on U.S. dollar linked costs, partially compensated by higher costs from our PET recycling plant [ circular ]. On the other side, MSD&A expenses funded mostly associated with higher distribution expenses [indiscernible] larger marketing expenses to support revenue. In International Business Operating segment, net sales recorded a 36.3% decrease, mostly driven by lower average prices and a 4.6% volume contracts, highly driven by a high single-digit contraction in the beer industry in Argentina. The decrease in average prices in Chilean pesos was driven by Argentina, impacted by negative translation effect, pricing below inflation through the year and negative mix effect. The later was partially compensated by efficiencies. [ In all ], EBITDA dropped 44.5%. The Wine Operating segment posted a top line contraction of 16.8% driven by 9.7% drop in volumes, together with 7.9% decrease in average prices. Lower sales was driven by both exports and domestic markets. The weaker average prices were mostly explained by stronger Chilean peso and its negative impact on export revenues and negative mix effects in the portfolio, partially compensated with the revenue management initiatives. EBITDA contracted 45.2% also impacted by the higher cost of wine. Regarding our main joint venture and associated business. In Colombia, volumes reached 2.4 million hectoliters in 2025, increasing 6.1%. We continue to build a robust brand portfolio and sales execution in Colombia which is the path to long-term volume and financial [indiscernible]. Now I will be glad to answer any questions you may have. Operator: [Operator Instructions] So our first question is from Fernando Olvera from Bank of America. Fernando Olvera Espinosa de los Monteros: The first one is regarding the volume growth seen in Chile this quarter, if you can comment if this was favored by the alliance with Nestle highlighted in the press release. And some additional questions, sir, if you can share what was the performance of beer during the quarter and also how these low alcohol products that you have mentioned will favor volume performance in 2026. Felipe Dubernet: Yes. We -- thank you, Fernando, for your question. Yes, we have a robust growth in Chile growing 4.1% driven, as we highlighted, by the non-iconic category. However, our spirits unit view a mid-single digit thanks to a very good performance on all the non-alcohol ready-to-drink flavored products of that category. So it was a very good quarter where we do overall market check in the quarter. So -- and this drove good growth in the overall set. Regarding the year -- the quarter, in general terms was good. We experienced flat volumes against the same quarter of 2024. And seasonally adjusted, was a bigger quarter than quarter 3, let's say, seasonally adjusted. So experiencing seasonally adjusted growth the [ beer category ]. You are asking a more overall question regarding alcohol consumption. The capital alcohol consumption decreased mid-single digits something like 4%. We are still calculating because it depends on the population estimates. So -- but overall, decreased 4%. Regarding, specifically, in beer, we come back to 2019 per capita consumption. But following, as we highlighted consumer trends we are delighted of the growth, and we are experiencing in all our low-alcohol ready to drink flavored products portfolio, which grew [indiscernible] the 20%, more than 20% and reaching in the Chile operating segment, practically 7% of the mix. And this encompasses proposition on beer as mixers. We are very satisfied of the growth we are experiencing in the [ Stone ] brand and all these different labors. And also in the spirits, where all the low-alcohol flavored products are growing practically 25%. So the consumer is moving towards these products. And fortunately, we have a high innovation grade on that specific category and where CCU has more than 80% of market share of the overall market. Operator: Our next question is from Felipe Ucros from Scotiabank. Felipe Ucros Nunez: Thanks, operator. [Foreign language] Thanks for the space. A couple of questions on my side. One, a little more short term and the other one a little more long term in nature. So the first one on SG&A in Chile, you've been generally posting improvements in your SG&A to sales ratio over the last couple of years. So I was a bit surprised to see you back track this quarter. SG&A grew a little bit faster than sales, and you did mention in the release that it came partly from investments in marketing. So can you comment on this and whether you expect to continue this investment at a higher level? And also, if you could talk to us a little bit about where that investment is going? Perhaps it's just additional spending to give some impulse to the [ RTD ] category that is new for you? Or perhaps it's something you're having to do in beer to keep it at neutral volumes? And then the second question, a little bit longer term, it has to do with the fact that beer has been lagging nonalcoholic beverages for quite some time at this point, right? And there's probably more than one thing at play here. So just wondering if you can comment about the different rates of volume growth that you expect there. In a tough environment, it's expected beer would underperform because it's more discretional. But there's also this structural migration from consumers away from alcoholic beverages. So just wondering if you can comment on the difference between those two factors and how it's impacting you looking ahead. Felipe Dubernet: Felipe, thank you for your question. Regarding the marketing investment, it was mainly driven by the year. As also we had a low comparison base in quarter 4. So it was a temporary -- [ more ] investment in quarter 4 2025 compared to quarter 4 2024, and essentially went to support our premium portfolio. So I think this is to build a stronger premium portfolio because at the same time, price growth in beer was in the quarter in line with inflation, which is very good, a little bit above inflation. So it's a different combination on the P&L, but nothing to worry about. Regarding your question more on the long term, we think in the future, our winning non-alcoholic portfolio will continue to grow with especially water business in both a pure -- plain water. We had a tremendous success on [indiscernible] strong gas proposition. Also, we continue to grow at a high rate on our favored or enhanced water portfolio with [ brand mass ]. So all of these is driving the growth on our colleague that should grow in line with private consumption in our view. And especially the category where we did. Regarding alcohol, the situation, as I mentioned in the previous question, in the year, specifically, we come back to the per capita consumption in 2025 that we had in 2019. But bear in mind that 20 years ago, per capita consumption in Chile in 2014 was 44 liters per capita, in 2019, 52 liters per capita and in '25, 52 liter. So I think overall, this category, we cannot forecast the future, but should stabilize the overall beer category around 0% to 1% growth and would be driven by the low alcohol beer propositions. We recently launched in January with great success Cristal Ultra but also we lead specifically the low alcohol ready-to-drink portfolio of flavored products or mixers, which I mentioned in the previous question, growing a lot. So this would certainly sustain growth in the near future. But again, these are projections and -- but we are following consumers closely all the consumer trends. That's [indiscernible]. Felipe Ucros Nunez: If I could do a quick follow-up on the first one. Do you expect this higher marketing spend? I know there was a comparison base, but should we expect it to grow at more historical levels going forward? Or do you expect a higher marketing spend going forward? Felipe Dubernet: No. The marketing range would be the same. Operator: Our next question is from [ Guilherme ] [indiscernible] from [ Apple Capital ]. What is your pricing strategy in Chile going into 2026 for alcoholic and for non-alcoholic beverages? To what extent do you plan to raise prices or do you plan to take advantage of lower cost pressure to be more aggressive in gaining share? Felipe Dubernet: Overall, the company historically is aiming to grow prices in line with inflation. As in the last years, you know our input cost inflation was much higher than inflation. We have some lag in terms of recovering profitability that we have in the past. Still, we have this lag. So overall, our aim is to take every revenue management initiative. But this could be by rising prices, which is the less sophisticated answer to your question in terms of pricing, but also launching higher-margin innovation. In fact, the portfolio that is growing, the low alcohol ready to drink flavored products are at a premium in the case of beer compared to the mainstream beer. So you could increase prices or your revenue per hectoliter in different ways. But bottom line, the aim is not gaining share to pricing or promotions, more sustaining the market share in the long term through brand equity and marketing investments and high-quality produce rather than trying to gain share with aggressive promotions. So the aim is to increase prices. But always, you have a market of competition, but the aim is to increase prices in line with inflation. Operator: Our next question is from Constanza Gonzalez from Quest Capital. Constanza González Muñoz: I have two questions. The first one regarding the environment in Argentina. Could you give us more detail about the trend in construction that you are expecting for this year? Some recovery in the volumes? And secondly, I would like to ask you about the CapEx for this year. Thank you. Felipe Dubernet: Thank you, Constanza, for your question. Hope you are doing well. Yes. Regarding Argentina, the alcoholic industry was very soft, I would say, declining industry we are in the year have affected specifically also beer and not -- even wine was more dramatic but in beer, we have a decline in this. And the thing is that towards the end of the year, we saw some runway improvement. During the quarter, we had a terrible November in terms of weather because every weekend we have rain. So with rain, you don't do barbecues, you don't drink beer. So at the end, we have this terrible weather. Despite this terrible November, seasonality adjusted volumes in quarter 4 compared to quarter 3 improved 4%. This is what sustained my statement that we saw a gradual improvement. We don't know, we don't have clarity if we exclude the weather we had in November, maybe this would be an improvement of high single-digit seasonally adjusted. Today, we are seeing, let's say, a gradual recovery in terms of volume in Argentina. It was -- two questions -- second question [indiscernible]. Costa, could you repeat the second question because I had a sound problem. Constanza González Muñoz: Sure. I asked you about the CapEx that you are expecting for this year. Felipe Dubernet: Yes. Regarding CapEx, we will be investing depreciation. No more than appreciation. Operator: Our next question is from Aldo Morales from BICE Inversiones. Can you please explain if this negative inflection point in Argentina in ARS seems to continue over the next quarters. Also, can you please explain how persistent could be this negative pricing scenario in wine [ VSPT ]? Felipe Dubernet: Aldo [indiscernible] you. So Aldo, yes, 2025 -- yes, in a broader perspective, in 2023, our prices, our beer prices in Argentina were above inflation. In 2024, slightly above inflation. We saw big numbers. And in 2025, we were below inflation. So 2025 in terms of price was not a good year for beer in Argentina. Although, looking at the future, we have increased prices in December, effective in January so that this would lead some improvement in profitability in the near future, along with gradual improvement. I mentioned that we saw towards the end of last month. Regarding the other question regarding why, this is due to mix effects mainly in exports. As in the domestic market, we increased prices above inflation. So it was mostly due as export prices and was due to mix effects. Operator: Our next question is from Thiago Bortoluci from Goldman Sachs. Thiago Bortoluci: Thanks, Felipe, for the presentation and for the questions. I would just like to move back to the discussion on pricing in Chile, right? During your remarks, you mentioned that essentially beer prices are growing with inflation. Your headline prices are growing a bit below inflation, which suggests all else equal that your price mix for nonalcoholic is negative, right? Obviously, there are a lot of moving parts here. I would just like to understand how much of this is mix, how much of this is like-for-like and more importantly, particularly for non-alcoholic, what's the strategy going forward? Felipe Dubernet: Overall prices -- the Chile operating segment increased price by 3.5% in the year. Price effect was something like 4.3% and mix effect something like 0.8% that was the impact of mix [indiscernible] product. In the last quarter, we have more mix effect due, as I said, accelerated water sales during the quarter. Regarding specifically in non-alcoholic, as I mentioned, the pricing strategy would be to at least increase prices in line with inflation. Operator: Our next question is from Martin Zetzsche from Fundamenta Capital. How should we think about margins in Chile finishing in 2026, given the favorable levels for the Chilean peso? Felipe Dubernet: Martin, I will not provide a specific number for margin or during 2026 is forward-looking. But as you mentioned in your question, we are facing favorable effects in Chile, which would certainly impact positively our raw material and this would come more in effect in quarter 1 of this year because we carry out some inventory in quarter 4 of specific raw materials such as [indiscernible] because this is why you didn't see, as a full extent, the benefit of having a lower exchange rate in Chile. However, there are also some [ signals ] in some raw materials, specifically aluminum, where we are seeing high, very high prices, above $3,000 per tonne aluminum comparable of what we saw in 2022. So that's a bit of concern, but this should be more than compensated by exchange rate, as you pointed out. So taking into account this, we should be seeing a favorable EBITDA margin, positive expansion of EBITDA in 2026. But again, this is based on assumptions that could change during the year. Operator: Our next question is from Alvaro Garcia from BTG. Alvaro Garcia: Felipe, I was wondering if you can maybe comment on the nonalcoholic front in Chile, on the performance of Pepsi Max, maybe how it's positioned relative to Coke Zero or to other competitors in China. So maybe specific commentary on maybe some of the better-performing products in Chile would be helpful. Felipe Dubernet: Yes. In Chile, we do have Pepsi Zero, we do not have Pepsi much. To highlight, Pepsi Zero is doing very well, tremendous success in Chile. In fact, the coverage of soft drink category grew in the last quarter low single digit, which for this category of being Chile, a high cost -- high consumption level of [ CSP ] is a very good growth in Chile. And of course, Pepsi has been increasing brand equity and market share in the last few years. So overall, but what is really driving the category, the water business, especially enhanced water products are growing double digit during the quarter and other products such as ready to -- specifically functional brings growing mid-single digits. Operator: Our next question is from Nicol Helm from MetLife Investments. Can you elaborate on your financial policy going forward in terms of net leverage and capital allocation? S&P has maintained the company on negative outlook for some time. Do you expect to preserve the current rating? And are there any specific measures you're taking for this? Felipe Dubernet: Thank you, Nicol, for your questions. If I understood well, you are asking about net financial debt EBITDA ratio? Yes, the aim is to maintain the notch that we are having with the risk [indiscernible] so it's something below a ratio of 2. Today, we are finishing with 2. In terms of net financial debt to EBITDA is to maintain or even decrease if the business do better. But we don't have a specifically policy on that. But however, the aim is to maintain the specific notch that we have within the risk announced. Operator: We'll now move on to our final question from Santiago Petri from Franklin Templeton. Hello. Thanks for the presentation. could you guide us on your raw material cost expectations for 2026? What impact would that have on your margins? Felipe Dubernet: Santiago, yes, specifically, we'll answer the question more for Chile. Starting by the -- what has been positive today, as we mentioned in previous question, is the appreciation of the Chilean peso. We have some sensitivity on that, that each 1% appreciation is something about [ to CLP 4,000 million ] of better results at the consolidated basis because it's also considering the offset we would have in the export revenues we had in the wine business. So is positive on that, but I would not predict, of course, the exchange rate scenario. But if this is maintained, we are talking about a significant amount of money. Last year, the average rate was CLP 953 on this year, now the spot is CLP 960. So we are talking about 10% of significant amount of money. But this, as always, is being compensated by higher aluminum prices that we are suffering and higher PET recycling prices. As you know, we have a loan in Chile where 15% of the plastic bottles should have reached the local recycling PET and prices on that are the higher in Latin America. So to answer your question, we are seeing, overall, a positive scenario on input cost, thanks to exchange rates. Operator: Thank you. We would like to thank everyone for the participation today. I will now hand it to the CCU team for the closing remarks. Felipe Dubernet: Okay. Thank you. Same to you all for attending today. To conclude, in 2025 in context of soft industries, we posted solid performance in our main operating segment, Chile, recovering volume growth after 3 years of volume contraction and expanded EBIT and EBITDA margin. However, consolidated results were weaker due to a difficult macroeconomic scenario in Argentina, together with the contraction in the beer industry in this country and strong headwind in the wine business. We look to the future with optimism as CCU's core strength remain solid. Our focus will be on continue developing our 2025-2027, the strategic plan reinforcing our three strategic pillars, profitability, growth and sustainability with a special focus on profitability through revenue management efforts and efficiency and high-margin innovation growth. Finally, I would like to send my gratitude to all our more than 10,000 employees in a special year for our company as we celebrated our 175-year anniversary. Their dedication and commitment with the said CCU principles: Excelencia, Entrega, Integridad [indiscernible] have been key to navigate challenging times. We will continue to work to ensure sustainable and profitable growth for CCU. Thank you all, and I wish you a wonderful afternoon. Operator: That concludes the call for today. We'll now be closing on the lines. Thank you, and have a nice day.
Operator: Good morning, good afternoon all, and thank you for joining us today for Aena Full year '25 Results Presentation. My name is Sami and I'll be coordinating your call today. [Operator Instructions] I'll now hand over to your host, Carlos to begin. Please go ahead, Carlos. Carlos Gallego: Good afternoon, and welcome to our 2025 results presentation. This is Carlos Gallego, Head of Investor Relations. It's a pleasure to be with you again following our conference call last week regarding the regulatory proposal. Today, we are presenting our 2025 results, our Chairman and CEO, Maurici Lucena, will be hosting this session, together with our CFO, Ignacio Castejon and myself, who will review the main highlights of the results presentation, which you can already find both on our website and on the CNMV website. After that, we will open the floor to your questions. [Operator Instructions] Without further delay, I will now hand the call over to Maurici Lucena. Thank you. Maurici Betriu: Thank you very much, Carlos. Good afternoon, everybody. Thank you for joining us for the presentation of our annual 2025 financial results. It is a very important satisfaction for the top management to present these results because as you have seen in the communication to the market, they are record financial results. And it's our 3 year in a row that we achieved this record. And as Carlos said, this presentation follows the presentation we did last week regarding the DORA III Aena's proposal. So as usual, I will start with traffic. 2025 was also in terms of volume, the third year in a row with the highest traffic ever in Spain. We are very proud of this achievement and not only because of the volume, but also because we know it's very difficult to manage with a high quality of airport services such record volume, and we achieved both, the record of volume and I would say, a high-quality service -- airport services, excuse me. So in total, Aena Group traffic reached almost 385 million passengers. And in Spain, in the Spanish airports that belong to Aena, the figure was more than 321.5 million passengers. And as you also know, our traffic estimate for the present year for 2026 in Spain is an increase of 1.3% and to us, this is a natural estimate because we think that we have overcome the, let's say, overshooting phase of the traffic evolution after the pandemic. And now we enter into, let's say, more normal phase of traffic -- of airport traffic. And it's a combination of -- the way we see the economy, the way we see not only the Spanish economy, but very -- especially the economies of our principal foreign markets. I'm referring to the U.K., Germany, France and so on. And also that in 2026 and especially in DORA III, we will, in certain days in certain aspects, face constraints because the infrastructure -- because Aena's airports are approaching its -- or many Aena's airports are approaching its technical limits, and this is the strong reason why we propose within DORA III to enter into a very strong new phase of investment. I don't want to be dramatic in the sense that I think that these constraints on the side of our airports. I mean, they will exist, but they will not be very important. They just introduce subtleties in the way we are calculating our estimates for the future. If I now move to Brazil and to the U.K., you know that in 2025, our traffic in Luton was 17.6 million passengers. In Brazil, in one concession, almost 29 million passengers, in the other concession, almost 17 million passengers. And in terms of financial performance, I will just -- I would like just to highlight that our total revenue in 2025 was almost or reached almost EUR 6.4 billion. Our EBITDA was close to EUR 3.8 billion. And all in all, the net profit exceeds or exceeded in 2025, EUR 2.1 billion, which is a record. And as consequently, you know that the Board of Directors it was yesterday, proposed the payment of a gross dividend of EUR 1.09 per share. And on the commercial side, we experienced a very robust growth last year. I would like to stress that in the duty-free business line, for example, 3 lots, Canary Islands, the North of Spain and Andalusia-Mediterranean. These 3 lots ended 2025 above the contractual MAGs, and this is a very important achievement because this makes feel both very comfortable Aena and the duty-free companies. And as you know, we have just started the complete renovation of the food and beverage activity in Barcelona, in the Barcelona Airport. And on the real estate side, total revenue grew by 20 -- by 10.5% in 2025. And in the international arena, I think that we are -- we are satisfied because we are -- we would like to, if possible, to increase a little bit more the contribution of the international activity in the total EBITDA. But so far, we have achieved an EBITDA that in the consolidated figure was close to EUR 400 million. And I think that this is a significant EBITDA, and this is a satisfaction but because you know that we would like in the long-term to have a better balance between Spain and the rest of our international markets. And also concerning the international activity, I would like to highlight that by the end of last year, Aena obtained the most financing in the Brazilian airport sector. This will allow us to finance the CapEx of the new concession, the BOAB concession. And also internationally, you know that in December 2025, we acquired a significant participation in the U.K. in the -- respectively, in Leeds and Newcastle Airports. This is an achievement because we naturally feel very comfortable both expanding our activity in Brazil and in the U.K. because if we expand our activity, we set in motion our, let's say, extraordinary efficiency because of the functioning in the network. Okay. Now I move to financial issues. Last month, in January 2026, we launched a second bond valued at EUR 500 million with a maturity of 10 years. We are very satisfied with the financial conditions because I think that they demonstrate that in the bond markets where Aena was relatively virgin, we have very rapidly achieved the confidence of the market. And I think that the conditions of this second bond reflect the -- well, I would say that the financial assets of Aena. In terms of ESG, I would like only to mention that in 2025, Aena achieved a reduction of almost 75% of emissions of Scope 1 and 2 compared to 2019. And finally, I would like to just refresh the main messages associated to our DORA III proposal that we communicated last week. You know that the government of Spain through the Council of Ministers, they have a deadline in September 2026 to approve the definitive DORA III. And you know that our aim has been to translate into volume of investment, distribution among airports, the evolution of tariffs, OpEx, WACC and so on. We have translated, I was saying, our new cycle of investment in terms of the regulatory scheme. And this is -- this will be a complete different phase for Aena. It will be the first time in the last 20, 25 years that we enter into a very strong investment cycle. I would like to remind that in pure financial terms, this is good news because we will significantly increase our WACC, our regulated assets base in more than EUR 5.5 billion. And this is -- this should be the increase in the enterprise value. Of course, taking into account that the WACC, the OpEx, the risks and so on, they all are, let's say, reasonable. In other words, if the figures of the final DORA III approval by the government, along with the real Aena performance during DORA III, if all this makes sense, we will significantly increase the enterprise value. And this is good news, knowing that we face some risks, but we are very confident that the experience and our past performance demonstrate that we are a reliable company that will develop and materialize DORA III successfully. And you know that the key projects in DORA III, they cover the airports of Madrid, Barcelona, Malaga, Alicante, Tenerife Sur, Valencia, Ibiza, Lanzarote, Bilbao, Tenerife Norte, Menorca and Melilla. And in terms of the OpEx that I know very well that worries you, in my opinion, too much. But this regulated OpEx it is -- is just a consequence of how the economy is moving and the new phase in which Aena will -- into which Aena will enter. What do I mean by this statement? Well, I'm referring that the new OpEx is -- reflects the inflation, experience but experienced by the Spanish economy and by the way, by the world economy, the increase in the minimum wage and very specifically, the new resources we require to address the investment challenge, the increased traffic. The increased traffic also implies a little bit more OpEx, more regulatory requirements in terms of safety, maintenance and quality of airport services. This also costs money. And finally, you know that many of our airports are aging. They are aging well, but they are aging, and this means more open -- more OpEx to maintain them. And again, we have said this many times, but we are convinced that when you enter into a phase with important investment and important expansions of many airports, we have to compatibilize the new traffic, new record volumes of traffic in the future with the investment. So to compatibilize successfully these both very important ingredients, this future record traffic with the CapEx, the expansion of the infrastructures, we need a little bit more of OpEx. And for Aena, it's been, let's say, a lesson what has happened in recent years in Palma de Mallorca. The renovation, the whole renovation of the airport has been a success, but we have learned that will be -- that all the rest of things being equal, we need to spend a little bit more money to ensure that the passenger experience is better than it has been in Palma de Mallorca. In Palma de Mallorca, we will finish the renovation before expected. It will cost a little bit less than expected, but one lesson learned has been that for the future expansions of airports, we will need a little bit more money, just a little bit more to increase the passenger experience. And finally, you know that our WACC is simply a consequence of the turn of the monetary policy across the world. And finally, our average increase proposed all in all, is just EUR 0.43 every year. This regardless of the -- this boring and I don't know how to describe is noise that made by the airlines. When you compare the increase we propose with the increase in the prices of flight tickets, well, I think that this is perfectly eloquent of the difference. And regardless of this very modest increase we propose in terms of airport charges to cover this complete transformation of Spanish airports that will endure 3 decades, these new airports. I think that they will be used in the coming 3 decades. Regardless of this increase, the charges of Aena's airports in Spain will remain highly competitive. And particularly, they will remain the most competitive aeronautical charges in Europe. And this is very good news, and this is a commitment that we will accomplish. And thank you very much, and we will join you back in the Q&A session. Ignacio Hernandez: Thank you very much, Maurici. Hi, everyone. This is Ignacio Castejon speaking. Let me go through some of the information that we have included in the presentation shared with all of you earlier today. Let's go to Slide 8 on traffic, on the Spanish platform, I would like to share with all of you that the traffic is mainly explained -- traffic growth, sorry, is mainly explained by the growth rates of the international markets. International markets grow at circa 6%, while the domestic market decreased by 0.3%. There might be many reasons related to supply and demand considerations impacting the domestic market, but that decrease is what has happened this year. With respect to the 6% growth in the international market, I would like to share that, as you know, long-haul market is still a much smaller segment than European or Spanish markets. However, Asia, Africa, Middle East and South America, LatAm have delivered growths of 41%, 19.5%, 13% and 7.4%, respectively. So very impressive growth rates in the long-haul market arena. If we look at Europe, our largest market, excluding Spain, our main 4 markets grow as follows: the U.K. at 4%; Germany, 1.8%; Italy at 9.2%; and France at 3.1%. Let's go to slide -- let's keep sorry on Slide 8, but let's have a look at the financial performance of the company in the following minutes. As mentioned by the Chairman, total revenue rise to -- by 9.5% up to EUR 6.4 billion Compared to 2024, thanks to the positive evolution of passenger traffic as discussed earlier, the continued improvement in the commercial activity, especially the revenue per pax growing to EUR 6.43 per pax and also the contribution coming from the international activity, especially one related to the construction services on the IFRIC 12, that is neutral of [indiscernible] standpoint. Excluding these IFRIC 12 accounting adjustment, revenue for the group would have grown at 7%. Let's move to Slide 9 on the cost. As we have been informing all of you through the year, total operating expenses have been going up, growing at a higher rate than traffic or even traffic plus inflation. Total operating expenses at group level grew by 11.1%, up to EUR 2,650 million with personnel expenses increasing by 8.8% and other operating expenses going up by 13.1%. If we exclude the impact of IFRIC 12 in Brazil, the increase would be materially different, would be 4.9% for the whole group. If we look at the Spanish network, total OpEx, total operating expenses grew by 6%, reaching EUR 2052.4 million. The increase, as in the case for the group, was driven by the increase in staff costs and also in other operating expenses. In the following slides, I will devote more time to other operating expenses for the Spanish network. But let me go to Slide 10 before in order to speak about EBITDA. EBITDA level reached EUR 3,785 million, sorry, representing an increase of 7.8% compared to 2024. This resulted in an EBITDA margin of 59.3%, 90 basis points lower than in 2024. The margin has been impacted because of the IFRIC 12 accounting rules. So excluding this impact, the EBITDA margin for the whole group -- for the consolidated group would have improved by 50 basis points to 61.4%. All in all, the net profit of the group rose to EUR 2,136 million. That's an increase higher than 10% compared to 2024, reflecting, sorry, the strong operating performance, the EBITDA growth, but also the impact coming from the new estimate and a change, therefore, in the useful lives of some of the fixed assets in Spain that has resulted into a more reduced or a lower amortization -- and depreciation and amortization expenditure of around EUR 68.5 million. Net cash generated from operating activities increased by 1.5%. However, this comparison is affected by the positive tax effect that we had in 2024 related to the offsetting of the losses from a tax standpoint, of course, coming from the COVID. The consolidated net debt to EBITDA ratio of the group stood at 1.46 well below the 1.57 recorded in 2024. In this sense, please let me recall that back in September, Moody's Rating Agency upgraded Aena long-term issuer rating and senior unsecured rating to A2 from A3. And 7 weeks ago, Fitch Ratings affirm Aena rating at single A. Let's move to Slide 11. If we look at the performance of the group by the different business lines, and let's start with the total aero revenue. This total aero revenue increased by circa 5% to EUR 3,346 million. The dilution, you know the revenue that we are not able to get basically comparing the rate that we are able to charge in 2025 has been EUR 100.4 million, so lower than the 1 in 2024. This dilution will be recovered in a couple of years, as you know, further our regulation. On the commercial activities contribution, please let me share with you a good first -- a good set of news because this is the first year in which we were able to exceed -- sorry, the EUR 2 billion figure in revenues for the commercial and the real estate revenues. On the international front, the contribution in terms of EBITDA coming from the international activities was EUR 383 million. Let's go to -- let's analyze in more detail the commercial performance. So let's move to Slide 16 and 17, if that's okay for all of you. So the Chairman and CEO have already highlighted the significant growth in sales that the company has had. Let me have a look at the ordinary revenue figures that have had an increase of circa 10%, 9.9%, with commercial revenue going up by 9.6% in the real estate business by 14.3%. As I was saying earlier, this increase is explained by traffic, but also by the unit revenue coming from the commercial and real estate activities, that has gone up from EUR 6.1 to EUR 6.4 per pax. There are several reasons why we think we are delivering this performance. Basically, the growth has been driven mainly by the material progress in the remodeling works and the additional commercial surface that we have added to our activities, especially in duty-free, where most of the works in Madrid and Barcelona are done. Also the introduction of new business concepts, the arrival of new brands that fit with our passenger profile, the more lucrative conditions of the latest contract that we have awarded, we'll cover that point later. The strong performance of the mobility-related services, car rental and parking, as you know, the continued increase in demand for VIP lounges and also the development of many real estate initiatives, especially in cargo and hangars. Let's discuss in more detail some of these business lines on the commercial front. If we look at duty-free, sales in this business line raised by 15 -- sorry, 0.3% with the total revenue for this business line, reaching EUR 535 million. Variable rents plus MAGs increased by 7.7% to EUR 433 million. As the Chairman was explaining earlier, we are very satisfied with the performance because we have 3 lots that have already exceeded the minimum annual guarantee rents. And we were short by around 10% in another lot. So hopefully, in 2026, once most of the commercial activities in the Palma Airport are finished, as explained by our Chairman earlier, we should be able to get closer to that MAG in that specific lot of the [ Valaris ]. If we look at the F&B activity, sales increased by 6.1% and unit sales by 2.1%. Total revenue grew by 8.5% to EUR 352 million, thanks to higher penetration rates, average and higher average ticket prices and also with having more commercial service available to our passengers. If we have a look at the mobility activity, car park total business grow -- revenue grew by 8.7% to EUR 221 million. And this is a very interesting piece of information because as we were saying earlier, domestic traffic have been going down. So all this performance is mainly related to the company making available more parking spaces and also how we are managing the ticket prices in this business activity. If we look at the car rental activity, sales increased by 6.7% and total business revenue by 23.9%, up to EUR 256 million. This fantastic performance is driven by the new contract that, as you now enter in operation in November 2024. If you look at the commercial performance in the last quarter of the year, I have read some of your opinions this morning, we are already taking into account the last weeks of 2024 with the new car rental activity, and that would explain why the car rental activity in the last quarter, mainly the last weeks of the year, the performance 2025 versus 2024 has shown a lower growth rate. And the main reason is because in those weeks, months of 2024, we were already -- the new contract were already binding and was already being taken into account in the -- in our accounts. VIP services, an amazing trend has continued through the whole year with total business revenue rising by 31.5%, reaching to EUR 104 million. The income per passenger has gone up by 26.6%. VIP lounges that account for 82% of the total revenue of the business line basically managed to deliver an increase in the number of our clients by 16% and the average ticket growth by 13%. Real estate, as I was saying earlier, an increase of about 41%, mainly driven by cargo hangars, but also the new contract terms and conditions related to our FBOs activity. Let's go to Slide 18, where we show the minimum annual guaranteed rents that the company has secured by contract. Please, let me remind all of you that we are not taking into account any renewal of contracts in this information. That's why you see a decrease in trend once we sign -- once that contract expires, all the MAGs related to that contract are removed from this information, but not the new contracts that might replace those future contracts. You can also see in this slide, information related to all the new awards that took place in 2025 related to Specialty shops and F&B, where you can read the material increases proposed and signed by our operators and concessionaires in those activities. Material increases are therefore expected in -- because of those units in 2026 according to the information coming from these tenders. Let's go to Slide 19 and 20. There, you can see some further information on the other operating expenses related to the Spanish network. As the Chairman was explaining earlier and as we explained last week, the trend related to other operating expenses in Spain is a trend in which those expenditures are going up, especially related to maintenance, security and PRM services. You will see that in the last quarter of this year, there have been some increases a bit higher in some of these categories than the one that you have seen in the first part of the year -- in the first 9 months of the year. And for example, in the case of PRM, they are related to contractual arrangements related to the whole year, not only to this specific quarter. If we move on to financial consideration, Slide 21, you will see some further information on the net debt and gross debt position and cash position of Aena, the mother company, but also the consolidated position. On the consolidated position, gross debt, gross financial debt have moved up. The reason behind that is basically the financial -- the financing that we have raised in Brazil, mentioned by the Chairman earlier, BRL 5.7 billion. And with respect to the ratio that I have also seen some of your notes earlier this morning, that you can see the net debt to EBITDA in the mother company has gone down materially from 1.59 to 13.1. That ratio in the consolidated group has gone down, has gone down to 1.46. And some of you were saying that, that was a reduction lower than the one that you were expecting. Please let me share with all of you that there is a significant amount of cash that has been invested in very short-term deposits in Brazil. So all that financing that we have raised. And according to accounting rules, we -- that -- and how we calculate this ratio, that cash is not part of this ratio. It's a short-term financial asset that because we are not planning to use in the next 90 days, from an accounting standpoint is not part of the item cash and cash equivalents. If we were taking into account all that cash, short-term financial assets, sorry, as part of our cash position, the ratio of 1.46 would be around 1.35, 1.36. I hope that now is more clear with respect to that item. Let me move on to the financial -- sorry, to the international platform. So I'm moving to Luton and Brazil, Slide 20 -- 22 for Luton. Luton Airport traffic grew by circa 5%. So 17.6 million passengers went through our facilities in the U.K. EBITDA stood at EUR 186.8 million, an increase of 20.3%. If we were removing the impact coming from a compensation related to the reconstruction of the parking structure, EBITDA would have grown by 11.1% at our Luton facility, still a double-digit increase in our London airport. Let's go to Slide 23 and 24 to talk about ANB and BO or BOAB. Passenger traffic in ANB increased by 5.7%, circa to 16.8 million passengers. EBITDA at that airport increased by 19%, high -- a very material increase with the margin also going up from 43.2% to 57.4%. This margin takes into account the IFRIC 12 accounting adjustment. If we were removing that adjustment, the EBITDA margin for 2025 would be 61%, a very high margin for our ANB activities in. If we go to Slide 24, passenger growth was 5.1%, reaching circa 29 million passengers in our concession in Brazil, in our BOAB concession in Brazil, with EBITDA growing by 13.1% to BRL 678 million. EBITDA margins are materially impacted because of the IFRIC 12 accounting rules. If we were removing that impact, EBITDA margin could be at 63.4%. You know that we keep executing our mandatory CapEx in that concession, especially in the Congonhas Airport, and we are planning to deliver all those construction works in June 2028 for that airport further to our obligations in our concession agreement. And please let me remind all of you that we managed to attract circa EUR 400 million from our international activities from BOAB and also from Luton coming from repayment of shareholder loans, but also coming from dividends and fees. And that would be at the end of my presentation. So I think we are ready to start the Q&A session of the conference call. Thank you very much. Operator: [Operator Instructions] Our first question comes from Tobias [ Froom ] from Bernstein. Unknown Analyst: Beyond what you've just said, could you remind us which other commercial contracts will be open for tender in the short to medium term, just to gauge the upside for commercial? Maurici Betriu: Thank you very much, Tobias, for your question. On the commercial front, as you know, we launched the advertising tender some weeks ago. The tender is moving on. The financial impact of the new contracts that would be signed following that tender would really happen in 2028 because as the advertising existing or the current advertising contracts for most of the -- our airports are expiring that year, except for the Palma Airport that is expiring, terminating this year. That's why we are launching this advertising lot altogether in this year. With respect to other commercial activities that we are planning to launch in the following weeks, there are some airports such as Malaga and Gran Canaria in which we are planning to renovate the commercial offer, and that will be happening through the year. Let me finish just stating or making the Chairman refer to the Barcelona F&B activity. That's a process that is -- has been awarded recently. And the financial impact of that process will be seen in 2026 because of all the MAGs that have been contracted for that activity. On the real estate activity, we are very active, as mentioned by the Chairman and also in my summary in cargo, in hangars, also other real estate actions that the company is launching. So there might be some financial improvement coming from that activity as well. And I think that would be a fair summary of what you might expect on the commercial front in the following months, Tobias. Operator: Our next question comes from Luis Prieto from Kepler. Luis Prieto: My question is the following. There is now full visibility on the CapEx plans for the next 5 years domestically. But could you please give us an overview of what this CapEx should amount to over the same period of time internationally, given the relevance of BOABs works and potentially Luton's expansion? Ignacio Hernandez: Luis, this is Ignacio speaking. With respect to Luton Airport, well, at this moment in time, the contractual committed CapEx that is mandatory to Aena Group through that subsidiary is mainly maintenance CapEx because the -- as you know, we are the concession holder in that airport, and our concession is expiring in 2032. So limited CapEx on that front. Having said that, Luis, as all of you know, there is a DCO that has been granted to the Luton Borough through the company called Luton Rising that DCO grants the possibility to expand that airport and the expansion could be material, taking into account the maximum level of capacity that has been granted according to that DCO. But that CapEx, as a result of that DCO is CapEx that wouldn't be mandatory or committed CapEx for that subsidiary of Aena Group. So at that moment in time, that is not CapEx that is part of our forecast. With respect to our willingness to participate in that expansion, as we have always seen -- said, sorry, getting involved in the expansion of Luton for Aena is something attractive, but always subject to the attractive terms and conditions. We are hopeful that, that will be the case because it would be a win-win situation for Luton, for Luton shareholders and for the Luton Borough. But that's still something that is ongoing and it has not been resolved yet. We are always available to discuss and try to reach a positive agreement with the grantor in that respect. But so far, that has not happened yet. With respect to our Brazilian assets, as we have been disclosing on ANB, most of the CapEx -- most of the material CapEx has been delivered, has been constructed by our subsidiary. That's why you can see in the presentation a material decrease in the slide, I think it's 23, CapEx figures for that subsidiary are very limited because most of the construction activity that was mandatory according to the concession sign has been done. However, in the case of Congonhas, as you were highlighting in your question, there has been an increase in CapEx, EUR 250 million in 2025. Total CapEx figure for that portfolio for all the construction activity, if I remember, well the figure, was a bit north of BRL 4 billion -- BRL 4.4 billion, around 50% was related to Congonhas and the other 50% related to the other portfolio of airports that are part of that subsidiary. Mandatory CapEx milestones, we have to deliver most of the activity of the construction activity, sorry, excluding Congonhas through 2026 and the one related to Congonhas, the milestone according to our concession agreement is by 2028. Sorry for my long answer, but that should provide all of you a good picture on the CapEx for the whole group. Operator: Our next question comes from Cristian Nedelcu from UBS. Cristian Nedelcu: My question is on the DORA III traffic forecast. Having in mind that some of the investor community out there has concerns regarding the risk of AI disruption leading to potential increases in unemployment rates on white collar. It seems to me that it's harder than usual to forecast the next 5 years of traffic. So having this in mind, could you tell us a bit how you are thinking about this risk in your traffic forecast? And is this a topic of discussion with CNMC or DGAC? Does this come up at all when talking about the traffic forecast? Maurici Betriu: Cristian, thank you very much for the question. That's an interesting topic that and we could be talking for hours on the different types of impacts that AI may have in airports, in the economy and in governments. So it's difficult for me when you are seeing those movements in the equity and debt capital markets impacting technology companies, software companies and many other industries to be specific about how that might impact traffic at Aena. And we have some impacts, some of them will be positive, other negatives. But at this moment in time, it is something that as a company, we are following as a senior management, management in the IT teams and of course, that we will take into account. Depends on the week and depends on the day of the week, you can see that one specific industry is impacted in one way or the other. These days, it seems that companies like Aena are being positively impacted because we are considered a hard asset company, transport company, but that might change next week because of how the sentiment evolves in the market these days. With respect to our conversations on this topic with the regulators, all the discussions with the regulators, as you know, are confidential because our consultation process with the regulators and the airlines is confidential. So apart from the information that we have disclosed about the CAGR on traffic and our general views on that evolution explained by the team last week -- by the senior team last week, we cannot disclose further details discussed with the regulators. Operator: Our next question comes from Elodie Rall from JPMorgan. Elodie Rall: So my question would be on OpEx. So clearly, you're guiding for OpEx to rise in particular in DORA III, but also in '26. It'd be helpful to have a magnitude or an idea of the magnitude of the increase in OpEx. Maybe you can start with a bit of a split in the different OpEx group like staff, supplies or the OpEx, that would be helpful to understand the moving parts. Ignacio Hernandez: Hi, Elodie. This is Ignacio. Thank you for your question. And of course, we can devote some time to the performance of OpEx for 2025, and we can also share some views and -- our views, sorry, on the future further to the information disclosed to the market last week on the DORA. If we look at 2025, and I'm referring to, for example, the evolution, the performance of staff costs or HR cost that we have delivered a growth of around 9%, if I am not wrong. Basically, what is behind that growth is what we have been trying to share with all of you. The company is adding more people. So the number of FTEs is going up, has been going up this year. And given the new cycle that the company is about to start in the following months, sorry, we will keep adding more FTEs to the company in many different fronts, operational, headquarters so that we can ensure that the delivery of our DORA III plans and our future strategic plan is -- happens in a positive manner for everyone. We are not only adding FTEs, but also the cost from a pure monetary standpoint is going up. Payrolls are going up. And the main reason is basically agreements affecting all of the staff of Aena. That's public information. That has gone up by around 2%. But also the company has signed a new collective agreement with the unions, and there are a number of initiatives that have been agreed by the company with the agreement of the unions, and that is also impacting our staff cost line at Aena level. And that's mainly what is behind the increase of that 10%. There are other elements that we don't control, such as the increase in the social security cost that this country and therefore, Spain has approved and because of all the increases in salary FTEs and the removing -- removal, sorry, of the caps on the social security front that are also impacting our line in this specific cost item. So this trend is something that has happened in 2025 that you have seen through all the quarters, and we don't expect a different change in this trend in the following months, Elodie. If we look at the other operating expenses that is the other big cost item and we look at 2025, you have information in the Slide 26 that we are projecting, but you also have the information on other operating expenses for quarter -- for the last quarter and for the first 9 months of 2025. And as we said some months ago, some cost items such as maintenance, security, PRM services, all these cost items because of growth in traffic, because of implementation of new regulatory requirements, because of increasing costs that we are seeing and that will be higher in the future in order to maintain the quality levels that we want to maintain and that are mandatory to us because of our regulation and that will be mandatory to us because of the DORA III, because of the congested infrastructure that we are managing in some cases, and that will be even more difficult in the future. Because of trends that we are seeing in the context of our industry, PRM, penetration rates of PRM, passengers per plane, per flight are going up. So the number of people that are requiring these services are materially going up, and therefore, that's impacting that activity. And finally, VIP lounges, we are -- as we were discussing through my remarks -- my earlier remarks, this business line has been one of the main reasons of the growth in the commercial revenues, but we are very serious about maintaining the quality standards that our passengers demand. And therefore, we are improving the service there. That's why you are seeing the increase in that cost item for the whole year about 32%. In this specific quarter, 38%. Why? Because of a new contract that has been awarded, if I remember well, in Madrid -- in our Madrid facilities. There have been a couple of positive movements in the last quarter -- one in this quarter and one in the third quarter of the year. That's why you can see there a decrease of EUR 28 million. If we were removing that trend, the increasing of our other operating expenses this year would have been a bit higher. So the trend is there. This trend, sorry, is there. I want to be very frank and transparent. The company is doing its best to be the most efficient company in the industry, and that is confirmed by the OpEx per pax levels that we disclosed last week and that we -- and that they are available if you want to have a chat with us. If you compare our OpEx per pax levels with any other airport operator that is comparable to us, we are the lowest by far. EBITDA margins are still on the very high side of the industry. So the commitment of the management is there. But we cannot neglect as a management team that the trends in the industry are changing, legislation is more demanding. The company is going to manage and is starting to manage big construction projects, and that's impacting and will be impacting the cost items, the OpEx cost items of the company has impacted and will be impacted in the near future. Operator: Our next question comes from Harishankar from Deutsche Bank. Harishankar Ramamoorthy: Just one on the change in the policy on useful lives, if I may. When I look at the tables that you've provided in the reports, I think the one visible change is on other installations and housing, but that's probably not the key driving factor here. Maybe is it that you've moved the needle within the broader range of useful lives in each category, and that's what is prompting the EUR 6 million to EUR 9 million of reduced amortization. Maybe if you could give us some color there on what prompted this and how material is this in the context of different categories of assets? And also, how much of this EUR 6 million to EUR 9 million goes towards the regulated segment? Ignacio Hernandez: Thank you, Hari. This is Ignacio speaking. Happy to clarify your question on -- related to the assets. The company manages and monitors all the asset lives. Basically, our infra team is monitoring those asset lives. And when we identify potential deviations between the accounting tax lives of the assets versus reality, we launched a specific report with the support normally of third parties in order to confirm that what we are seeing in reality is an industry -- is also happening in the industry. So that has been the case this year. We have seen that in some of our assets, useful lives were longer than the ones that we are using for accounting and tax reasons. With respect to the assets, sorry, that have had the largest contribution in terms of reduction of the depreciation expenditure has been the one related to surface access and also the ones related to aprons and the pavements in the air side. Those have been the ones that have moved the needle. So I will check the annual accounts, but I think that was clear. Sorry, it was not clear from your reading, Hari. With respect to the asset regulated base, basically, asset regulated base follows -- generally speaking, follows accounting rules. So this potential reduction in the depreciation expenditure this specific year, this might be resulting into a higher asset regulated base at the end of the year than the one that we were expecting before this adjustment. Taking into account that this adjustment this year is getting -- has been -- has accounted for EUR 68 million, next year will be a bit lower. So it will not be an adjustment that -- will not be a recurring adjustment as material as the one that we have seen this year because it will get lower and lower in the following years. Thank you for your question, Hari. Operator: Our next question comes from Andrew Lobbenberg from Barclays. Andrew Lobbenberg: This one, I suspect, is for the bus and not meaning to excite you. But if we can look back to the episode at the end of last year where there was the effort by the PP to put through this legal case through the Senate that was going to stop your tariffs increasing, but then it was cut off and it didn't get passed through the Congress, which makes complete sense to me. I mean, watching that whole episode, I was bewildered. How did it happen? Why did it happen? Why were you being treated as a political football, at least that's what it looked like to me. And I mean, why did it happen? And how much confidence can you have that you're not going to have some random regulatory or political intervention in the coming year as we work through the DORA process? Sorry if it's a bit vague, but I think you get the question, I hope. Maurici Betriu: Thank you for the question. This is Maurici Lucena. Well, probably this is a very good question. I just think that the general sentiment in Spain is that airports work very well. And regardless of the noise, especially the noise that comes from the airlines, I think that the politicians agree with this good functioning of the airports. You know that in Spain, the air -- well, the airports and the air activity is even more important than in other countries because of its very high weight in terms of the economy because we are a very touristic country. And as a single sector, tourism is the most important sector within the Spanish economy. So -- and everybody knows that for the tourism to function well, they need planes and they need airports. So I think that this ultimately protects the airport model. The PP -- the Popular Party initiative was very weird and bewildering as you've said, because the Popular Party is the father of the regulatory framework. So this is what really surprised me. And we have -- and I personally, we have publicly acknowledged the -- well, let's say, the good decision that this new framework signified back in 2014. So I think that now that it is clear that Aena is entering a very important CapEx cycle with the renovation expansion of many, many airports I think that everybody is, let's say, more aware that the model needs to be robust because Aena, and I personally, we have said that we need this model to be robust, solid, protected because otherwise, we could not enter into this new investment phase. I think that we have had strong reminders by our private shareholders, especially TCI. We publicly answered the concern of TCI. We were crystal clear. So all in all, answering directly your question, I'm very confident that this won't happen again because I think that saying it, in other words, too much is at risk. And I think that this risk is now more clear than it was when the Popular Party surprisingly launched this political initiative. So -- and the government, the Ministry of Transport, the President, the government, they are all very aware that the model functions well, that Aena is a very good company and that it means we need trust, we need stability because what we will do in the coming 10 years is very important, both for Aena, but especially for Spain. Thanks. Operator: Our next question comes from Dario Maglione from BNP Paribas. Dario Maglione: Just a quick one, a follow-up. So it's a bit technical. On the D&A, you mentioned the EUR 69.6 million lower D&A. Most of it is in the Aviation segment. So D&A for the Aviation segment for the full year was EUR 557 million for 2025. What shall we expect in 2026? Ignacio Hernandez: Dario, this is Ignacio speaking. I think we are -- if you are referring to the savings on the depreciation expenditure in 2026, that's a number that we have estimated. That's a number that we know is lower than the EUR 68 million, significantly lower. And that's how I would answer your question, Dario. Dario Maglione: Okay. So it should be a lower depreciation compared to 2025? Ignacio Hernandez: You are referring to the total amount of amortization, Dario? Sorry, based on your follow-up, I just want to confirm. You are referring to the total amount of the expenditure or the impact that we had this year, just to clarify Dario and avoid confusion. Dario Maglione: The total amount in 2026 for D&A. What should we expect? Ignacio Hernandez: Okay. Sorry, my answer was related to the specific impact that I was explaining in my previous question. Dario, I would assume a very similar level of depreciation and amortization for 2026 to the one that we have had in the 2025. Operator: Our next question comes from Marcin Wojtal from Bank of America. Marcin Wojtal: Yes. My question is again on DORA III, if you allow me, what are the next steps, if you could remind us? And should we specifically expect any feedback from a CNMC or DGAC on your DORA III submission before the summer, perhaps like a draft determination or some commentary that would be released publicly? Or we are essentially waiting for the final publication in September, and there is essentially one publication and nothing comes before that. Ignacio Hernandez: Marcin, this is Ignacio speaking. Sorry, I was on mute. Well, the company has been working in a very diligent manner in order to speed up the process as much as possible with a very long consultation process that started right after the summer of last year. So it has been a long consultation process, but our goal has been putting all the information about our proposal available to the different stakeholders and regulators as early as possible. There is a deadline for the cabinet that is the end of September. That's a formal deadline included in the regulation and that's the date that is there. With respect to other reactions coming from supervisors or regulators, in the previous DORA process, in the previous DORA II process, there was a non-binding report, if I remember well, published by the CNMC discussing a number of items related to the proposal that became publicly available. I understand that, that is going to be the process this time as well. With respect to specific days, publication dates of that report, let's -- I cannot be definitive in that matter. Let's wait. Let's be hopeful that given that we have shared that information a bit earlier than the previous year, we can have those report -- those non-binding reports becoming available a bit earlier than in the previous process. You were also asking about next steps or next milestones. As explained by the Chairman in his opening remarks, there will be a process now of setting information with the different regional coordination committees or discussion about the specific projects that will impact and will benefit the regions. Thank you, Marcin. Operator: Our next question comes from Jose Arroyas from Santander. José Arroyas: I wanted to ask you about the commercial revenue per pax trends in connection with the information you provide on Slide 32. In the presentation or throughout your presentation, you explained that the reason for the slowdown in Q4 was largely due to car rental, and that was very clear. But I wanted to ask you specifically about the slowdown in the revenue per pax trends in duty-free and in specialty shops, any trend you can highlight to us? Maurici Betriu: Thank you, Jose Manuel. And thank you for the question. With respect to specialty shops, I think that's a business line within the retail arena that is the one that has been, I would say, the most impacted because of disruption of e-commerce, et cetera. And also because within that business line, we have some activities that are, for example, exchange -- currency exchange, sorry, I was thinking in Spanish, apologies for that. And that is being impacted a lot as well. So the trend is there. What we are trying to do is also providing a hybrid concept. So mixing the retail concept of duty-free F&B and specialty shops to avoid or to try to maximize the return coming from the 2 business lines that we are seeing the most exciting or the most promising ones such as F&B and duty-free in that front. With respect to duty-free activities, it's true that this quarter, the performance has been a bit lower than in other quarters. There might be some accounting adjustment because this is the month, the end of the year when we take advantage in order to adjust the 12-month minimum annual guaranteed rent for the whole year, and there are some adjustment there. Also, the months of the year -- this quarter of the year is not the summer part of the year. So the trend is also a bit more negative. Having said all that, if I look at the sales in the duty-free activity still at double digit. If I remember well, Jose Manuel, was around 13% of sales increase that compared to traffic or compared to other activity levels of the company has been very, very high. Let's see how 2026 evolves. We are confident that a duty-free line for 2026 should reflect the new openings in Palma. This news -- this summer season for Palma for duty-free now that all the duty-free units will be opening that airport will be positively contributing to this business line. And that has not been the case in 2025, regardless of the very last weeks of the year that are very low season for Palma. Thank you for your question, Jose Manuel. Operator: We currently have no further questions. So I'd like to hand back to Carlos for some closing remarks. Carlos Gallego: Thank you, Sami. As there are no further questions, we would like to conclude today's call. The Investor Relations team remains at your disposal for any additional information or clarification you may require. Thank you very much to all of you, and have a great afternoon. Thank you. Operator: This concludes today's call. We thank everyone for joining. You may now disconnect your lines.
Operator: Good morning. My name is Annis, and I'll be your conference call facilitator today. At this time, I would like to welcome everyone to the BTB Real Estate Investment Trust 2025 Fourth Quarter and Annual Results Conference Call for which management will discuss the quarter ended December 31, 2025. [Operator Instructions] Should you wish to follow presentation in great detail; management has made a presentation available on BTB's website at www.btbreit.com/investors/presentations/quarterly meeting presentation. [Operator Instructions] Before turning the meeting over to management, please be advised that some of the statements that made during this call may be forward-looking in nature. Such statements involve numerous factors and assumptions and are subject to inherent risks and uncertainties, both general and specific, which give rise to the possibility that predictions, forecasts, projections and other forward-looking statements will not be achieved. Several important factors could cause BTB Real Estate Investment Trust's actual results to differ materially from the expectations expressed or implied by such forward-looking statements. These risks and uncertainties and other factors that could influence actual results are described in BTB Real Estate Investment Trust management discussion, analysis and its annual information form, which were filed on SEDAR+ and on BTB's website at www.btbreit.com/investors/reports. I would like to remind everyone this conference is being recorded. Thank you. I will now turn the conference over to Mr. Michel Leonard, President and Chief Executive Officer, accompanied today by Mr. Marc-Andre Lefebvre, Vice President and Chief Financial Officer; Mr. Charles Dorais, Vice President of Finance; and Ms. Stephanie Leonard, Senior Director of Leasing. Mr. Leonard, you may begin the conference. Michel Léonard: Thank you very much. The year at a glance, we own $1.2 billion of real estate. Close to 60% of our value of the real estate was externally appraised in 2025. Regarding our investment activity, obviously, we're still focused on industrial assets with strong fundamentals, and we do have a pipeline in order to create opportunities to maximize the value of our portfolio. During the year, we disposed of 3 non-core assets, the first one in Quebec City, the second one in Saskatoon and the last one, a 50% interest in a retail property located in Terrebonne, Quebec. When we look at our leasing activity, the total amount of square footage under lease renewals and new leases concluded during the year is 742,000 square feet, of which 470,000 square feet represents the lease renewals with an increase in rent -- average rent value of 10.6% and new leases at 268,000 square feet. We concluded the year with an occupancy rate of 91.3%, a little bit lower than the year before and mostly caused, and Stephanie is going to get into this, but mostly caused by the fact that we weren't able to re-lease the property that is 132,000 square feet located in Laval, representing a little bit more than 2% of our occupancy. Regarding the densification, we're still active in changing zoning for certain sites that we own. And regarding the mortgage debt ratio, it lowered at 51.3% and the total debt ratio lowered again at 57%. Our payout ratio on FFO basis is 73.9% and on AFFO basis is 77.3%. ESG, we did release our ESG report, the second ESG report back in June '25, reporting on the activities for the year 2024, and our full report on ESG is available on our website. We did obtain during the year certification -- 13 certifications for BOMA BEST for the properties -- our properties located in the province of Quebec. It's not that we weren't active in the other provinces. It's just that the other provinces, the certifications were not up for renewal. So with this, I'd like to turn the conversation to Stephanie to go through the report on the leasing activity. Stephanie Leonard: All right. Good morning, everyone. For those of you joining us online on our online presentation, we are currently at Page 8 of the presentation. So as Michel mentioned, our total leasing activity, which is the combination of new leases and lease renewals, totaled 472,000 (sic) [ 742,162 ] square feet for the year, of which 260,000 were new lease transactions and 474,000 are attributed to new lease renewals -- to lease renewals. Just to note that I am rounding up or rounding down on these numbers. Out of our new lease activity, 116,000 were concluded in our suburban office segment, 110,000 square feet were concluded in our Industrial segment, and 42,000 square feet were concluded in our necessity-based retail segment. Out of our most noteworthy transactions this year, so for 2025, we concluded a new lease with Kraft Heinz Company, representing 80,000 square feet in our Industrial segment located in Montreal, a 30,000 square foot transaction concluded with Value Village in our necessity-based retail segment also in Montreal, in addition to a 30,000 square foot lease signed with XCMG Canada in our Industrial segment located in Edmonton, Alberta. It's important to note that all 3 of these tenants' leases came into effect the day after the previous tenant's lease ended, therefore, not affecting our occupancy rate in the sense that the transactions kept our occupancy rate stable. We swiftly replaced the departing tenants without any downtime, therefore, creating no new vacancy. In addition, these replacements resulted in an increased NOI for their respective properties. During the year, we also did see a couple of tenants that elected to expand their premises in our portfolio. For instance, the Government of Canada increased their office footprint with us by roughly 14,000 square feet in Quebec City, bringing their total occupancy just shy of 23,000 square feet over a 15-year lease with us. In addition, the City of Saint-Jean-sur-Richelieu, more specifically the local police station, increased their footprint by just under 4,000 square feet, bringing their occupancy to 23,000 square feet with us. And lastly, Field Effect software company increased their footprint by 3,000 square feet, resulting in a 19,000 square foot total footprint with us in Ottawa and in our suburban office segment. Our lease renewal -- our total lease renewal activity for the year amounted to 474,000 square feet renewed for the year, of which 252,000 square feet were renewed in our suburban office segment, 214,000 square feet were renewed in our necessity-based retail segment and 400 -- sorry, 7,422 square feet were renewed in our Industrial segment for the year. It's important to note that our lease renewal activity not only included leases coming to maturity during the year, but also lease renewals signed with tenants whose leases come to maturity in the years 2026 and thereafter. Therefore, we're actively working to solidify our tenancies prior to their expiry. Important lease renewals were concluded during the year with Aubainerie for 30,000 square feet in our necessity-based retail segment in Montreal. With Hewlett Packard for roughly 30,000 square feet in our suburban office segment in Montreal. Again, with the Government of Quebec for a CLSC representing roughly 27,000 square feet in our suburban office segment in Montreal. And finally, with Canada Post for our suburban office segment located in Quebec City, representing roughly 22,000 square feet. In terms of our rental spreads for the quarter, we achieved a 6.7% average increase in our renewal rate or 10.6% for the year, which outshines our yearly performance since 2023. We were able to increase rents in our suburban office segment by 5.8% for the quarter or 12.4% for the year. And for an necessity-based retail segment, we increased rents by 7.8% for the quarter and 6.4% for the year. And it's important to note that there was no industrial lease renewals concluded during the quarter. Our occupancy rate, as Michel mentioned, at the end of the year stood at 91.3% a 20-basis point decrease compared to Q3 2025. As mentioned, the tenant replacements that we did conclude do not impact our occupancy rate. Although our occupancy rate does not decrease, we do not see the impact of these transactions through occupancy. Therefore, our occupancy rate is not always indicative of the quarterly or yearly leasing efforts concluded. In addition, we're still carrying that 2.2% impact of our 132,000 square foot vacancy in Montreal. During last quarter, we announced that we were in discussions with the group for the entire premises. Since last quarter, we are still working with the client, but their scope is ever changing. And you'll understand by this, this is a large international tenant. In addition to this client, we do have others in the pipeline that are interested for part of the space. So at this time, we're still working with the client and working with new clients. The other impact on our occupancy rate can be noted by a 28,000 square foot vacancy that we recorded in Ottawa. This was a known departure by a Government-based tenant whose funding was unfortunately not renewed. Leasing efforts are well underway for their space, which is easily subdividable, which creates better opportunities in the market. The second impact to our occupancy rate is due to a 24,000 square foot vacancy in Edmonton in our Industrial segment. Avison Young is currently mandated to lease the space, and we do have traction on it. It's important to note that the tenant that was departing, they were building their own building. Therefore, that's why they ended up leasing. And lastly, we have another 33,000 square foot space in Edmonton, which the previous tenant was in recurring default of the lease. And in order to mitigate our risks, we elected to terminate the tenant's lease. These events are unfortunate, and sometimes we do have to make decisions to terminate leases, therefore, creating vacancies that we don't necessarily want but we need to in order to protect the REIT and to protect our rights as well. Overall, coming out of 2025, we were able to seize opportunities to protect our occupancy rate, increase and align our properties and solidify good tenancies for our portfolio. As 2026 is underway and with the return to office mandates, we're seeing sustained activity in our respective markets with good opportunities within the financial sectors as well, which we do hope to be able to capitalize on. And on this note, I would like to turn the presentation over to Marc-Andre for a financial overview. Marc-Andre Lefebvre: Thank you, Stephanie. Good morning, everyone. So the results for the year reflect healthy leasing activity and stable rental income, demonstrating the resilience of our business. For the fourth quarter, rental revenue stood at $32.3 million, a decrease of 1% compared to the same quarter last year. NOI and cash NOI both decreased by 4.4% and 5.1%, respectively, compared to the same quarter last year. Looking at cash same-property NOI, it decreased by 3.3% for the quarter compared to the same period last year. The quarterly decrease is driven by the industrial and office segments. The industrial segment was impacted by a planned departure at the end of Q3 of a tenant occupying over 24,000 square feet in Edmonton, also by free rent granted to a new tenant, XCMG in the industrial segment again and based in Edmonton and the impact of the new lease negotiated with the group of investors who purchased Lion Electric. Regarding the Office segment, the quarterly decrease is due to free rent granted to new tenants during the quarter in Ottawa and non-recoverable one-time expenses. Now looking for the year, NOI remained stable compared to 2024, while cash NOI increased by 1.9%. The increase in cash NOI is related to several factors, including: #1, a $1.1 million lease cancellation payment received by an industrial tenant with a planned departure at the end of the first quarter of 2026, a partial lease cancellation payment of $1 million recorded in the first quarter of the year from a tenant in the suburban office segment, and that space has already been re-leased. #3, a higher lease renewal rental rates; and four, a decrease of $0.7 million as a result of the dispositions concluded during the year. FFO adjusted per unit was $0.097 for the quarter, a decrease of $0.012 compared to the same quarter last year. This reduction was mainly driven by a decrease of $0.8 million in NOI. Adjusted -- AFFO adjusted per unit was $0.088 for the quarter, a decrease of $0.013 compared to the same quarter last year. For the year, AFFO adjusted per unit was $0.388, an increase of $0.007 compared to last year. The increase is mainly explained by a $1.5 million increase in cash NOI, a $0.5 million decrease in administrative expenses, a $0.3 million increase in expected credit losses and lastly, a $0.5 million increase in accretion of non-derivatives liability component of the convertible debentures. We maintain our distribution to unitholders at $0.075 per unit for the fourth quarter, which represents an annualized distribution of $0.30 per unit. The AFFO adjusted payout ratio was 77% for the year, a decrease of 1.4% from 2024. As previously mentioned by Michel, the value of our investment properties remained stable at $1.2 billion at the end of the quarter. BTB externally appraised 58% of its properties based on fair market value. So this exercise resulted in a loss of $4.7 million or 0.4% of the total portfolio value. The weighted average cap rate for the entire portfolio remained stable at 6.7% compared to the year-end 2024. During 2025, BTB disposed of 3 properties for gross proceeds of almost $20 million. Net proceeds were close to $14 million. This amount takes into account the balance of sale of $1 million related to the disposition of 1170 Lebourgneuf Boulevard, an office property located in Quebec City. We concluded the quarter with a total debt ratio of 57%. The weighted average term and average interest rate on our mortgage portfolio was 2.3 years and 4.5%, respectively. Finally, at the end of the quarter, we held over $5 million in cash and $25 million was available under our credit facilities for total liquidity over $30 million. So this completes our presentation, and we will now open the call to questions. Operator: [Operator Instructions] Your first question comes from Matt Kornack with National Bank. Matt Kornack: Just with regards to the industrial lease in the Montreal area, could you give us a sense as to what you think the potential timing would be as to whether you go with someone new or this existing international tenancy? Michel Léonard: It's a little bit difficult because what we find is that decision-making process is very, very long these days, especially with this international tenant. And so we've been very patient. And it's like -- it would be wrong for me to give you a date or a moment in which we believe that the property would be leased. But we do believe that during 2026, the property will be -- will find a user. Matt Kornack: Okay. And then maybe just more broadly for the portfolio as you look out over this coming year, obviously, the macro is always volatile. But do you have a sense as to whether there are any kind of known larger nonrenewals, any known larger potential leases, how we should think about kind of occupancy and your leasing spreads trending for the balance of the year? Michel Léonard: For the balance of the year, in our radar, there's only one lease that we know is not going to be renewed. It's in Ottawa. It's with the federal government. It's a department of the federal government that is basically consolidating somewhere else. And we haven't heard from the government whether they have another user in mind for the space. So the lease is up in -- at the end of August. And so we haven't begun any discussion regarding a user for that space. So the address of the building is 2204 Walkley Road, and it's roughly 100,000 square feet. And this would be the only -- so far, this would be the only known departure that -- of significant traction that we know. Matt Kornack: Okay. And then, I mean, the stock has obviously traded quite well. There's various things that work there. But can you give us a sense as to whether your capital allocation outlook has changed? I think, obviously, you still trade at a discount to NAV -- to your NAV, but it's maybe a little tighter than it has been. Would you look at equity as a potential way to grow the portfolio? Or kind of how are you thinking about growing BTB and making it a relevant or more relevant entity? Michel Léonard: Relevant or more relevant. That's nice. Thank you. The -- I mean, crystal balling this is, I think that you have a better crystal ball than we do on that front regarding public markets. But it is obvious that if we -- if the stock continues gaining momentum, we would be in a position that we could raise capital and finally continue on our growth after COVID. And this would be very important to us. And so we're hopeful that this opportunity may occur in '26 or in '27 for sure. And we've always stated that our goal was to be at 60% industrial and raising capital would definitely help us purchase industrial assets in order to get closer to our goal of being 60% industrial. So it's very -- your question is difficult to answer in the sense that it's crystal balling the market. But yes, you're right. We do enjoy good traction right now in the market. I think that money that was kept aside in -- for the last 4 years is probably jumping into real estate these days. And so we're hopeful that investors will recognize our value and that will help us, as you use the term to become more significant. Matt Kornack: Fair. And then just on the industrial focus. Obviously, the markets changed. Montreal, I think, in particular, is a little bit more challenging these days given some new supply and maybe weaker demand with Amazon and some of the other changes that have taken place there. But necessity-based retail seems to be exceptionally strong. Does that change where you'd want to be today? Or is it now the pricing to buy retail? So industrial is looking still kind of interesting from a scaling standpoint? Michel Léonard: Well, we've looked at 3 opportunities on the retail front in the course of 2025. And as you just stated, the cap rates are going down in the -- in acquisitions in the sense that what we thought that we could purchase at a 6.5% cap rate is now at 5.5% or maybe closer to 6% or one opportunity was at 5%. We sold the retail property that we owned at a 50%, interest at a 5.6% or 5.8% cap rate. I'm just going from memory, so please don't quote me on that cap rate. But I know it was -- the first number is a 5%. So we do -- I mean, we would look at acquiring more retail. We will not look at acquiring more office. On the contrary, we're disposing, but we're still focused on looking at industrial assets. And I know that right now, the -- and you're right in saying that they've built a lot of brand-new properties in the Montreal area, Greater Montreal area and -- causing availability. But we understand that some of those are being leased. So that's -- it is -- it seems to be performing. I don't think that the rents are in accordance with the pro forma rents that they forecast when it was time to put the shovel in the ground. I think that they've come down, and it's probably hurting the developer or developers. So overall, I think that given our cost of capital and so on, it's probably the right time for us to jump into industrial. If you remember a few years back, there are some properties that were sold at a 3.5% cap rate in the Montreal area. And those are no longer in existence because the 3.5% was something that like a ship on the ocean. So overall, I think that the market is coming back for us in allowing us to purchase industrial assets. Unfortunately, we need to reduce our cost of capital in order to jump into necessity base. And as you're probably aware or have read that necessity base were under retailed, whether in the Greater Montreal area or Ottawa or even overall in Canada. So that becomes a difficult segment to invest in when your cost of capital is as high as ours. Matt Kornack: That's fair. I mean, I guess, would it make sense then maybe to monetize if you can get something with a 5 in front of it from a retail standpoint and deploy that into maybe, call it, 6% to 7% stabilized industrial cap rate for good new product and do that accretively if you can't necessarily access the equity markets today? Is that a consideration? Or do you like maintaining that retail component? Michel Léonard: It is definitely a consideration, Matt. Operator: Your next question comes from Pammi Bir with RBC. Pammi Bir: Just a couple of maybe quick ones for me. Just on the Walkley building, have you started the re-leasing process there? And -- or is the federal government potentially looking to find another, I guess, department, as you kind of mentioned. So just kind of curious on that property. Michel Léonard: The answer is yes to both outcomes in the sense that we have mandated Colliers in order to seek new tenancy. We have tenants that have already walked the building, potential tenants. And in this case, we're -- as I mentioned, it's 100,000 square feet. And right now, we have a tenant that walked the property for 50,000 square feet. Regarding the federal government, they don't necessarily want to speak about it until 6 months prior to the end of their term. So we're getting close to it. And so we're hopeful that we'll have a conversation on that front. We read the papers as much as everybody on the call reads the paper in the sense that it seems that they're lacking space, that they don't know where to go back to their office space as a result of the mandate that the federal government has given to its employees. So we're reasonably confident that -- and we know that our property meets the criteria of the federal government as far as office taking. And so we're quite hopeful that they will look at seriously at our building. Pammi Bir: Yes. I guess it sounds like there's some optionality there or maybe some potential to get it back. But it is a rather large building. What would sort of be the ballpark impact to NOI if it is fully vacated, I think you mentioned at the end of August? Michel Léonard: I think an easy number to put is roughly $30 a square foot on a gross basis as the impact. Pammi Bir: Okay. And how would you sort of characterize the vacancy in that particular segment of the market? Michel Léonard: From what we understand from the brokers is that we are well located in order to find a new tenancy within the property. Stephanie Leonard: If I could also add, Pammi, our zoning for the building is quite generous. So it kind of opens up the landscape for us to be able to think about other users than a traditional, let's say, private sector office building. Operator: At this time, there are no further questions. Please go ahead, Mr. Leonard. Michel Léonard: Thank you very much for attending our Q4 '25 conference call. As you could see, we do have a good traction in '25, recording a good increase in rents regarding our lease renewals and the new leases concluded as well. The necessity-based segment is performing extremely well, as we've discussed on this call. The industrial assets, I mean, are very stable for us. But as far as leasing, we had some challenges, and we talked about it. And we saw that our SPNOI for the year has increased by 2%, which is still a good increase. And -- however, we saw that our necessity-based segment, we saw that the SPNOI increased by 6.9%. So overall, I think that we're on the right footing in order to go through 2026, and we are addressing our vacancies, and we definitely are hopeful that we are going to end the year on a higher note than the end of 2025. So thank you very much for attending this call this morning. We appreciate your support, and we'll see you really soon on our reporting of the first quarter of 2026. Thank you. Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect.
Operator: Good day, everyone, and welcome to CCU's Fourth Quarter 2025 Earnings Conference Call on the 25th of February 2026. Please note that today's call is being recorded. At this time, I'd like to turn the conference call over to Claudio Las Heras, the Head of Investor Relations. Please go ahead, sir. Claudio Heras: Welcome and thank you for attending CCU's Fourth Quarter 2025 Conference Call. Today with me are Mr. Felipe Dubernet, Chief Financial Officer; and Carolina Burgos, Senior Investor Relations Analyst. You have received a copy of the company's consolidated fourth quarter 2025 results. As usual, the call will start by reviewing our overall results, and then we will then move to our Q&A session. Before we begin, please take note of the following statements. The statements made in this call that relate to CCU's future financial results are forward-looking statements which involve known and unknown risks and uncertainties that could cause that outperformance or results could materially differ. This segment as well should be taken in conjunction with the additional information about risks and uncertainties set forth in CCU's annual report in Form 20-F filed with the U.S. Securities and Exchange Commission, and also at the annual report submitted at the CMF. It is now my pleasure to introduce to Mr. Felipe Dubernet. Felipe Dubernet: Thank you, Claudio, and thank you, you all for joining the call today. During 2025, CCU posted a strong set of results in its main operating segment while it faced a particularly challenging year in Argentina and in the wine business, especially during the second half of this year. Isolating the nonrecurring gain from the sale of a portion of land in Chile in 2024, consolidated EBITDA decreased 2.9%. On pricing segment, Chile posted a robust 7.8% EBITDA growth, which was diluted by the 29.5% contraction in International Business operating segment and a 14.9% drop in the wine operating segment. In addition, net income was down 16.3%. Under the same criteria and isolating Argentina, consolidated EBITDA would have grown mid-single digits in 2025. In terms of business scale, consolidated volumes reached 36.2 million hectoliters, expanding 7.3% versus 2024. Organic volumes increased 0.6%, fully driven by the Chile operating segment, which expanded 1.1%, recovering growth after 3 consecutive years of contraction. In terms of our strategy, during the year, we moved forward in our strategic 2025-2027, a strategic plan and its 3 pillars: Profitability, Growth and Sustainability. Regarding profitability, as mentioned, our core operating segment, Chile expanded EBITDA by 7.8%, well above inflation and EBITDA margin grew 48 basis points, while we keep growing in high-margin innovation and the dividend efficiencies in every aspect of the business. Regarding our Growth pillar, we strengthened our regional footprint by successfully integrated in Paraguay, PepsiCo's beverage portfolio and snacks distribution. Furthermore, we posted volume growth in our water business in Argentina in a tough business scenario and increased our [ beer scale ] in Colombia. Also to meet evolving consumer trends, we posted double-digit growth in low alcohol and ready-to-drink beverage products in Chile, innovating and consolidating our leadership in this high growing cost category segment, which involves beer, wine and spirits in the context of soft industries. Regarding Brand Equity, we recorded a solid performance in Chile, increasing brand equity levels being key to expand overall market share. Finally, as of sustainability in our Juntos por un Mejor Vivir strategy within the [ current ] pillar, we kept reducing industrial water consumption. Regarding the [ profitability ] pillar of our strategy and in the year that we celebrated 175 years of history, we reached important milestones. We obtained a high level of employee satisfaction, got certified in Chile and Argentina as a Top Employer by the Top Employers Institute, moving up in cadet ranking of citizen brands and got rewarded as one of the companies with best practices in corporate governance by the survey La Voz del Mercado 2025. From a quarterly perspective, Consolidated volumes rose 0.6% fully driven by the Chile operating segment. Our financial results were below last year, mostly explained by a challenging business scenario in Argentina, together with a high comparison base in [indiscernible] country and headwinds in the wine operating segment. This was partially compensated by our main operating segment, Chile, which continued in a positive part of results. Consolidated EBITDA contracted 17.2% where the 6% expansion in the Chile operating segment was more than offset by the 44.5% and 45.2% EBITDA contraction in the international business and wine operating segment, respectively. Net income contracted 25.7%. Consolidated EBITDA isolating Argentina would have expanded low single-digit in the quarter. In terms of our segment performance, in quarter 4 2025, the Chile operating segment top line expanded by 5.5% as a result of 4.1% increase in volumes and 1.3% higher average prices. Volumes were boosted by non alcoholic categories. Average prices were driven by the revenue management efforts, offset by negative mix effects. EBITDA has reached 6% mostly due to a 9.1% gross profit expansion, partially offset by 10.1% higher MSD&A expenses. Regarding gross profit, the rise was driven by higher volumes, lower cost pressures related to favorable prices in some raw materials with the exception of [ our NIM ] and the appreciation of the Chilean peso against the U.S. dollar which is positive on U.S. dollar linked costs, partially compensated by higher costs from our PET recycling plant [ circular ]. On the other side, MSD&A expenses funded mostly associated with higher distribution expenses [indiscernible] larger marketing expenses to support revenue. In International Business Operating segment, net sales recorded a 36.3% decrease, mostly driven by lower average prices and a 4.6% volume contracts, highly driven by a high single-digit contraction in the beer industry in Argentina. The decrease in average prices in Chilean pesos was driven by Argentina, impacted by negative translation effect, pricing below inflation through the year and negative mix effect. The later was partially compensated by efficiencies. [ In all ], EBITDA dropped 44.5%. The Wine Operating segment posted a top line contraction of 16.8% driven by 9.7% drop in volumes, together with 7.9% decrease in average prices. Lower sales was driven by both exports and domestic markets. The weaker average prices were mostly explained by stronger Chilean peso and its negative impact on export revenues and negative mix effects in the portfolio, partially compensated with the revenue management initiatives. EBITDA contracted 45.2% also impacted by the higher cost of wine. Regarding our main joint venture and associated business. In Colombia, volumes reached 2.4 million hectoliters in 2025, increasing 6.1%. We continue to build a robust brand portfolio and sales execution in Colombia which is the path to long-term volume and financial [indiscernible]. Now I will be glad to answer any questions you may have. Operator: [Operator Instructions] So our first question is from Fernando Olvera from Bank of America. Fernando Olvera Espinosa de los Monteros: The first one is regarding the volume growth seen in Chile this quarter, if you can comment if this was favored by the alliance with Nestle highlighted in the press release. And some additional questions, sir, if you can share what was the performance of beer during the quarter and also how these low alcohol products that you have mentioned will favor volume performance in 2026. Felipe Dubernet: Yes. We -- thank you, Fernando, for your question. Yes, we have a robust growth in Chile growing 4.1% driven, as we highlighted, by the non-iconic category. However, our spirits unit view a mid-single digit thanks to a very good performance on all the non-alcohol ready-to-drink flavored products of that category. So it was a very good quarter where we do overall market check in the quarter. So -- and this drove good growth in the overall set. Regarding the year -- the quarter, in general terms was good. We experienced flat volumes against the same quarter of 2024. And seasonally adjusted, was a bigger quarter than quarter 3, let's say, seasonally adjusted. So experiencing seasonally adjusted growth the [ beer category ]. You are asking a more overall question regarding alcohol consumption. The capital alcohol consumption decreased mid-single digits something like 4%. We are still calculating because it depends on the population estimates. So -- but overall, decreased 4%. Regarding, specifically, in beer, we come back to 2019 per capita consumption. But following, as we highlighted consumer trends we are delighted of the growth, and we are experiencing in all our low-alcohol ready to drink flavored products portfolio, which grew [indiscernible] the 20%, more than 20% and reaching in the Chile operating segment, practically 7% of the mix. And this encompasses proposition on beer as mixers. We are very satisfied of the growth we are experiencing in the [ Stone ] brand and all these different labors. And also in the spirits, where all the low-alcohol flavored products are growing practically 25%. So the consumer is moving towards these products. And fortunately, we have a high innovation grade on that specific category and where CCU has more than 80% of market share of the overall market. Operator: Our next question is from Felipe Ucros from Scotiabank. Felipe Ucros Nunez: Thanks, operator. [Foreign language] Thanks for the space. A couple of questions on my side. One, a little more short term and the other one a little more long term in nature. So the first one on SG&A in Chile, you've been generally posting improvements in your SG&A to sales ratio over the last couple of years. So I was a bit surprised to see you back track this quarter. SG&A grew a little bit faster than sales, and you did mention in the release that it came partly from investments in marketing. So can you comment on this and whether you expect to continue this investment at a higher level? And also, if you could talk to us a little bit about where that investment is going? Perhaps it's just additional spending to give some impulse to the [ RTD ] category that is new for you? Or perhaps it's something you're having to do in beer to keep it at neutral volumes? And then the second question, a little bit longer term, it has to do with the fact that beer has been lagging nonalcoholic beverages for quite some time at this point, right? And there's probably more than one thing at play here. So just wondering if you can comment about the different rates of volume growth that you expect there. In a tough environment, it's expected beer would underperform because it's more discretional. But there's also this structural migration from consumers away from alcoholic beverages. So just wondering if you can comment on the difference between those two factors and how it's impacting you looking ahead. Felipe Dubernet: Felipe, thank you for your question. Regarding the marketing investment, it was mainly driven by the year. As also we had a low comparison base in quarter 4. So it was a temporary -- [ more ] investment in quarter 4 2025 compared to quarter 4 2024, and essentially went to support our premium portfolio. So I think this is to build a stronger premium portfolio because at the same time, price growth in beer was in the quarter in line with inflation, which is very good, a little bit above inflation. So it's a different combination on the P&L, but nothing to worry about. Regarding your question more on the long term, we think in the future, our winning non-alcoholic portfolio will continue to grow with especially water business in both a pure -- plain water. We had a tremendous success on [indiscernible] strong gas proposition. Also, we continue to grow at a high rate on our favored or enhanced water portfolio with [ brand mass ]. So all of these is driving the growth on our colleague that should grow in line with private consumption in our view. And especially the category where we did. Regarding alcohol, the situation, as I mentioned in the previous question, in the year, specifically, we come back to the per capita consumption in 2025 that we had in 2019. But bear in mind that 20 years ago, per capita consumption in Chile in 2014 was 44 liters per capita, in 2019, 52 liters per capita and in '25, 52 liter. So I think overall, this category, we cannot forecast the future, but should stabilize the overall beer category around 0% to 1% growth and would be driven by the low alcohol beer propositions. We recently launched in January with great success Cristal Ultra but also we lead specifically the low alcohol ready-to-drink portfolio of flavored products or mixers, which I mentioned in the previous question, growing a lot. So this would certainly sustain growth in the near future. But again, these are projections and -- but we are following consumers closely all the consumer trends. That's [indiscernible]. Felipe Ucros Nunez: If I could do a quick follow-up on the first one. Do you expect this higher marketing spend? I know there was a comparison base, but should we expect it to grow at more historical levels going forward? Or do you expect a higher marketing spend going forward? Felipe Dubernet: No. The marketing range would be the same. Operator: Our next question is from [ Guilherme ] [indiscernible] from [ Apple Capital ]. What is your pricing strategy in Chile going into 2026 for alcoholic and for non-alcoholic beverages? To what extent do you plan to raise prices or do you plan to take advantage of lower cost pressure to be more aggressive in gaining share? Felipe Dubernet: Overall, the company historically is aiming to grow prices in line with inflation. As in the last years, you know our input cost inflation was much higher than inflation. We have some lag in terms of recovering profitability that we have in the past. Still, we have this lag. So overall, our aim is to take every revenue management initiative. But this could be by rising prices, which is the less sophisticated answer to your question in terms of pricing, but also launching higher-margin innovation. In fact, the portfolio that is growing, the low alcohol ready to drink flavored products are at a premium in the case of beer compared to the mainstream beer. So you could increase prices or your revenue per hectoliter in different ways. But bottom line, the aim is not gaining share to pricing or promotions, more sustaining the market share in the long term through brand equity and marketing investments and high-quality produce rather than trying to gain share with aggressive promotions. So the aim is to increase prices. But always, you have a market of competition, but the aim is to increase prices in line with inflation. Operator: Our next question is from Constanza Gonzalez from Quest Capital. Constanza González Muñoz: I have two questions. The first one regarding the environment in Argentina. Could you give us more detail about the trend in construction that you are expecting for this year? Some recovery in the volumes? And secondly, I would like to ask you about the CapEx for this year. Thank you. Felipe Dubernet: Thank you, Constanza, for your question. Hope you are doing well. Yes. Regarding Argentina, the alcoholic industry was very soft, I would say, declining industry we are in the year have affected specifically also beer and not -- even wine was more dramatic but in beer, we have a decline in this. And the thing is that towards the end of the year, we saw some runway improvement. During the quarter, we had a terrible November in terms of weather because every weekend we have rain. So with rain, you don't do barbecues, you don't drink beer. So at the end, we have this terrible weather. Despite this terrible November, seasonality adjusted volumes in quarter 4 compared to quarter 3 improved 4%. This is what sustained my statement that we saw a gradual improvement. We don't know, we don't have clarity if we exclude the weather we had in November, maybe this would be an improvement of high single-digit seasonally adjusted. Today, we are seeing, let's say, a gradual recovery in terms of volume in Argentina. It was -- two questions -- second question [indiscernible]. Costa, could you repeat the second question because I had a sound problem. Constanza González Muñoz: Sure. I asked you about the CapEx that you are expecting for this year. Felipe Dubernet: Yes. Regarding CapEx, we will be investing depreciation. No more than appreciation. Operator: Our next question is from Aldo Morales from BICE Inversiones. Can you please explain if this negative inflection point in Argentina in ARS seems to continue over the next quarters. Also, can you please explain how persistent could be this negative pricing scenario in wine [ VSPT ]? Felipe Dubernet: Aldo [indiscernible] you. So Aldo, yes, 2025 -- yes, in a broader perspective, in 2023, our prices, our beer prices in Argentina were above inflation. In 2024, slightly above inflation. We saw big numbers. And in 2025, we were below inflation. So 2025 in terms of price was not a good year for beer in Argentina. Although, looking at the future, we have increased prices in December, effective in January so that this would lead some improvement in profitability in the near future, along with gradual improvement. I mentioned that we saw towards the end of last month. Regarding the other question regarding why, this is due to mix effects mainly in exports. As in the domestic market, we increased prices above inflation. So it was mostly due as export prices and was due to mix effects. Operator: Our next question is from Thiago Bortoluci from Goldman Sachs. Thiago Bortoluci: Thanks, Felipe, for the presentation and for the questions. I would just like to move back to the discussion on pricing in Chile, right? During your remarks, you mentioned that essentially beer prices are growing with inflation. Your headline prices are growing a bit below inflation, which suggests all else equal that your price mix for nonalcoholic is negative, right? Obviously, there are a lot of moving parts here. I would just like to understand how much of this is mix, how much of this is like-for-like and more importantly, particularly for non-alcoholic, what's the strategy going forward? Felipe Dubernet: Overall prices -- the Chile operating segment increased price by 3.5% in the year. Price effect was something like 4.3% and mix effect something like 0.8% that was the impact of mix [indiscernible] product. In the last quarter, we have more mix effect due, as I said, accelerated water sales during the quarter. Regarding specifically in non-alcoholic, as I mentioned, the pricing strategy would be to at least increase prices in line with inflation. Operator: Our next question is from Martin Zetzsche from Fundamenta Capital. How should we think about margins in Chile finishing in 2026, given the favorable levels for the Chilean peso? Felipe Dubernet: Martin, I will not provide a specific number for margin or during 2026 is forward-looking. But as you mentioned in your question, we are facing favorable effects in Chile, which would certainly impact positively our raw material and this would come more in effect in quarter 1 of this year because we carry out some inventory in quarter 4 of specific raw materials such as [indiscernible] because this is why you didn't see, as a full extent, the benefit of having a lower exchange rate in Chile. However, there are also some [ signals ] in some raw materials, specifically aluminum, where we are seeing high, very high prices, above $3,000 per tonne aluminum comparable of what we saw in 2022. So that's a bit of concern, but this should be more than compensated by exchange rate, as you pointed out. So taking into account this, we should be seeing a favorable EBITDA margin, positive expansion of EBITDA in 2026. But again, this is based on assumptions that could change during the year. Operator: Our next question is from Alvaro Garcia from BTG. Alvaro Garcia: Felipe, I was wondering if you can maybe comment on the nonalcoholic front in Chile, on the performance of Pepsi Max, maybe how it's positioned relative to Coke Zero or to other competitors in China. So maybe specific commentary on maybe some of the better-performing products in Chile would be helpful. Felipe Dubernet: Yes. In Chile, we do have Pepsi Zero, we do not have Pepsi much. To highlight, Pepsi Zero is doing very well, tremendous success in Chile. In fact, the coverage of soft drink category grew in the last quarter low single digit, which for this category of being Chile, a high cost -- high consumption level of [ CSP ] is a very good growth in Chile. And of course, Pepsi has been increasing brand equity and market share in the last few years. So overall, but what is really driving the category, the water business, especially enhanced water products are growing double digit during the quarter and other products such as ready to -- specifically functional brings growing mid-single digits. Operator: Our next question is from Nicol Helm from MetLife Investments. Can you elaborate on your financial policy going forward in terms of net leverage and capital allocation? S&P has maintained the company on negative outlook for some time. Do you expect to preserve the current rating? And are there any specific measures you're taking for this? Felipe Dubernet: Thank you, Nicol, for your questions. If I understood well, you are asking about net financial debt EBITDA ratio? Yes, the aim is to maintain the notch that we are having with the risk [indiscernible] so it's something below a ratio of 2. Today, we are finishing with 2. In terms of net financial debt to EBITDA is to maintain or even decrease if the business do better. But we don't have a specifically policy on that. But however, the aim is to maintain the specific notch that we have within the risk announced. Operator: We'll now move on to our final question from Santiago Petri from Franklin Templeton. Hello. Thanks for the presentation. could you guide us on your raw material cost expectations for 2026? What impact would that have on your margins? Felipe Dubernet: Santiago, yes, specifically, we'll answer the question more for Chile. Starting by the -- what has been positive today, as we mentioned in previous question, is the appreciation of the Chilean peso. We have some sensitivity on that, that each 1% appreciation is something about [ to CLP 4,000 million ] of better results at the consolidated basis because it's also considering the offset we would have in the export revenues we had in the wine business. So is positive on that, but I would not predict, of course, the exchange rate scenario. But if this is maintained, we are talking about a significant amount of money. Last year, the average rate was CLP 953 on this year, now the spot is CLP 960. So we are talking about 10% of significant amount of money. But this, as always, is being compensated by higher aluminum prices that we are suffering and higher PET recycling prices. As you know, we have a loan in Chile where 15% of the plastic bottles should have reached the local recycling PET and prices on that are the higher in Latin America. So to answer your question, we are seeing, overall, a positive scenario on input cost, thanks to exchange rates. Operator: Thank you. We would like to thank everyone for the participation today. I will now hand it to the CCU team for the closing remarks. Felipe Dubernet: Okay. Thank you. Same to you all for attending today. To conclude, in 2025 in context of soft industries, we posted solid performance in our main operating segment, Chile, recovering volume growth after 3 years of volume contraction and expanded EBIT and EBITDA margin. However, consolidated results were weaker due to a difficult macroeconomic scenario in Argentina, together with the contraction in the beer industry in this country and strong headwind in the wine business. We look to the future with optimism as CCU's core strength remain solid. Our focus will be on continue developing our 2025-2027, the strategic plan reinforcing our three strategic pillars, profitability, growth and sustainability with a special focus on profitability through revenue management efforts and efficiency and high-margin innovation growth. Finally, I would like to send my gratitude to all our more than 10,000 employees in a special year for our company as we celebrated our 175-year anniversary. Their dedication and commitment with the said CCU principles: Excelencia, Entrega, Integridad [indiscernible] have been key to navigate challenging times. We will continue to work to ensure sustainable and profitable growth for CCU. Thank you all, and I wish you a wonderful afternoon. Operator: That concludes the call for today. We'll now be closing on the lines. Thank you, and have a nice day.
Operator: Good morning, and welcome to Sila Realty Trust's Fourth Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions] I will now turn the conference over to your host, Miles Callahan, Senior Vice President of Acquisitions, Capital Markets Research and Credit for Sila. You may begin. Miles Callahan: Good morning, and welcome to Sila Realty Trust's Fourth Quarter 2025 Earnings Conference Call. Yesterday evening, we issued our earnings release and supplement, which are available on the Investor Relations section of our website at investors.silarealtytrust.com. With me today are Michael Seton, President and Chief Executive Officer; and Kay Neely, Executive Vice President and Chief Financial Officer. Before we begin, I would like to remind you that today's comments will include forward-looking statements under federal securities laws. Forward-looking statements are identified by words such as will, be, intend, believe, expect, anticipate and other comparable words and phrases. Statements that are not historical facts such as statements about expected financial performance, are also forward-looking statements. Actual results may differ materially from those contemplated by such forward-looking statements. A discussion of the factors that could cause a material difference in our results compared to these forward-looking statements is contained in our SEC filings. Please note that on today's call, we will be referring to non-GAAP measures. You can find the reconciliation of these historical non-GAAP measures to the most directly comparable GAAP measures in our fourth quarter earnings release and our earnings supplement both of which can be found on the Investor Relations section of our website and in the Form 8-K we filed with the SEC. With that, I will now turn the call over to Michael Seton, our President and Chief Executive Officer. Michael Seton: Thank you, Miles, and good morning to everyone joining us today. As we begin a new year, I look back on 2025, our first full calendar year as a publicly traded company as one during which we faithfully executed our strategy of growing Sila Realty Trust in a skillful and thoughtful manner. Sila was added to several prominent equity indices during the year including the RMZ and the Russell 2000, and our shareholder base has continued to evolve to larger institutional investors from an entirely retail ownership at onetime prior. We believe our ownership transition reflects the market's recognition of what we have been building at Sila for many years, a high-quality, necessity-based health care real estate portfolio designed to deliver predictable, durable and growing income streams through any market cycle. During 2025, we acquired 6 healthcare facilities for an aggregate purchase price of approximately $150 million, which equated to 241,000 rentable square feet. Each of these new facilities fits well within what we call the Sila mold, exhibiting the characteristics that we see in new opportunities, modern construction, high utilization, favorable market demographics and quality tenant sponsorship. After the year-end, we closed on another purpose-built, state-of-the-art inpatient rehabilitation facility in Oklahoma City for $43.1 million. This well utilized facility further expands our relationship with Nobis rehabilitation partners a well-respected and strong operator in the post-acute space. The property was originally constructed in 2022 and has experienced such strong demand since opening that has recently undergone an expansion, increasing its licensed bed count from 40 to 58 beds. With the support of a long-term lease with contractual lease escalators, strong EBITDARM coverage, experienced sponsorship and limited competition, we believe this facility aligns firmly within our objective to deliver lasting value to Sila and its shareholders. Sila's ownership of high-quality, diverse healthcare assets with best-in-class tenancy creates opportunities to invest additional capital in existing properties which experienced outsized demand for health care services within current building envelopes. Over the past year, we have completed over $7 million of redevelopment opportunities at compelling risk-adjusted returns. We are readily prepared to provide capital to our strong and growing tenant base when it aligns with our mutual interest to address market-driven demand requirements with minimal operating execution risk. Consistent with this approach, we have already committed to providing additional capital at our Dover Healthcare Facility as previously disclosed during our third quarter earnings call and intend to execute a similar investment at our Overland Park Healthcare Facility, both of which are inpatient rehabilitation facilities leased to PAM Health, our largest tenant and one of the strongest and most respected post-acute operators. We foresee additional expansion opportunities in the near future, which typically offer more favorable returns compared to recent acquisition opportunities frequently yielding 150 to 200 basis points higher than going in capitalization rates. Turning to an update on the Stoughton Healthcare Facility. I'm pleased to report that the building demolition has been completed and the removal of building debris is well underway which work we currently expect to be entirely finished by the end of the first quarter of 2026. The decision to raze the existing building structures has allowed us to already significantly reduce carrying costs of the property which will be reduced to approximately $35,000 per month from as much as $120,000 per month during the middle of last year. I would like to bring your attention to a few planned dispositions in 2026 and our continued pursuit to optimize our portfolio construction. Toward year-end 2025, we executed purchase and sale agreements on 3 properties: our Henderson, Las Vegas II and Saginaw Healthcare facilities. After year-end, we closed on the sale of the Saginaw Healthcare facility for gross sales proceeds of $14.5 million, while the Henderson and Las Vegas II Healthcare facilities are estimated to close in the first quarter of 2026. We also recently executed a purchase and sale agreement to sell the Alexandria Healthcare Facility which became vacant in December of 2025 with the departure of our ASC tenant. Subject to the typical due diligence process, we would expect this sale to close around the end of the first quarter or beginning of the second quarter. We had approximately 4.8% of total gross leasable area scheduled to expire in 2025. Our leasing team successfully retained 90% of scheduled expiring tenancy on a square foot basis, while the 10% of tenants who did not renew represented only 0.5% of ABR. The Alexandria Healthcare Facility, which I just mentioned, accounted for 60% of that 10% nonrenewal. In addition, the tenant which had a lease expiry in 2025 at our Tampa Healthcare Facility did not fully vacate its space. It simply reduced its footprint in the building due to the departure of a subtenant. This available space is only 2,100 square feet and has seen strong interest due to the facilities location in a bustling medical corridor in Tampa in close proximity to BayCare St. Joseph Hospital in BayCare's newly planned Health Hub. Our lease renewal activity and proactive early lease extensions at our other properties resulted in an increase to our weighted average remaining lease term from 9.7 years at the end of the third quarter of 2025 to 10 years by year-end. For leases scheduled to expire in 2026, we have already completed renewals for 34.8% of the 4.1% of total gross leasable area expiring in the year. For the renewal pipeline for 2026, we have a known conversion of a single-tenant property into a multi-tenant property. With this change, the legacy tenancy will renew approximately 60% of the total space leaving the balance of 40%, which represents approximately 0.3% of company ABR to be relet to new tenants. We have already engaged a well-known broker and are actively marketing the anticipated available space. Our portfolio continues to demonstrate significant strength, while our high credit quality remains a critical factor in ensuring Sila's sustained success. Notably, there have been meaningful improvements in our tenant credit quality during 2025, which have aided the growth in our investment grade-rated tenant guarantor an affiliate percentage by 2.3% on a year-over-year basis to 40.6%. As an example of credit quality upgrade in the fourth quarter of 2025, Washington Regional Medical Center, an investment-grade rated best-in-class regional hospital system, executed a lease and took occupancy of our Fayetteville Healthcare facility from Community Health Systems. This transition moves Community Health Systems from being our third largest tenant to our seventh largest tenant at year-end, further diversifying our tenant concentration and upgrading our overall sponsorship profile. In addition, subsequent to year-end, Community Health Systems completed the divestiture of its 3 Pennsylvania hospitals, including our Wilkes-Barre Healthcare Facility to Tenor Health Foundation effective February 1, 2026, which will further reduce our CHS exposure going forward. In the fourth quarter, our tenant at our Savannah Healthcare facility was successfully sold through the bankruptcy process to select medical, an existing tenant in Sila's portfolio, moving Select up to be our fourth largest tenant and providing operational strength and stability to the Savannah asset going forward. Lastly, on the tenant sponsorship front. Late in the fourth quarter of 2025, Cencora, one of the largest Fortune 500 companies announced that it has entered into a definitive agreement to acquire the majority of the outstanding equity interest that it does not already own in OneOncology. Cencora with over $300 billion in annual revenue will be the common control at our 7 former GenesisCare master leased properties. As we look ahead to the full year 2026, I see Sila as a company in prime position to continue executing on its strategy. We have the balance sheet strength, pipeline, team members and discipline to continue to allocate capital skillfully and thoughtfully. The Silver tsunami is imminent with the entire baby boomer generation reaching 65 or older by 2030 which is expected to increase total outpatient health care spending to nearly $2 trillion. We continue to believe that this demographic shift should drive increasing patient volumes in case acuity supporting stronger operator revenues and therefore, more durable income streams for Sila. As we know, health care is nondiscretionary, which means health care real estate is vital social infrastructure. Today, Sila owns over $2 billion worth of institutional quality health care facilities with high utilization, which, along with the triple net lease structures, that we have in place at 99.9% of our properties provides a powerful combination for long-term success. I will now turn the call over to Kay to discuss our financial performance. Kay Neely: Thank you, Michael, and good morning, everyone. I'm pleased to report that our disciplined approach to operational integrity and capital allocation drove strong financial results throughout 2025. For the year ended 2025, cash NOI was $169.9 million compared to $168.6 million for the year ended 2024, representing a 0.8% increase. This increase was largely driven by acquisition activity and an increase in same-store cash NOI of 0.9%, partially offset by dispositions and the impact of the vacancy of the Stoughton Healthcare Facility. Year-over-year cash NOI growth was also impacted by the collection of over $6 million in onetime lease termination and lease severance fees in 2024 compared to less than $300,000 in termination fees in 2025. If we were to exclude these onetime fees from cash NOI in 2025 and 2024, cash NOI and same-store cash NOI growth would have been 4.4% and 1.1%, respectively. Turning now to our earnings metrics. FFO per share for the full year was $2.16 or a 3.6% increase from the previous year, while AFFO per share for the full year was $2.18 or 5.8% decrease from the previous year. In addition to the cash NOI items just discussed, our increase in FFO per share was driven by several items, an increase in straight-line rent which was largely driven by the new lease amendments that we entered into in connection with our PAM Health properties in December 2024. Prior year write-off of above-market rent related to the GenesisCare bankruptcy in 2024. Higher revenue from interest income on our 2 outstanding mezzanine loans and a reduction in G&A and other costs in 2025 stemming from the incurrence of onetime separation pay and higher personnel costs in 2024 and $3 million in onetime listing fees in relation to our New York Stock Exchange listing. The FFO per share increase was partially offset by an increase in interest expense, largely related to new swaps that we entered into at the end of 2024 due to the expiration of prior swap maturities. Our decrease in AFFO per share was driven by the increase in interest expense, partially offset by the cash NOI items previously discussed, lower G&A costs due to lower personnel costs and an increase in interest income related to our fully funded mezzanine loans. As Michael mentioned earlier in the call, the strength and resilience of our tenant base continued as demonstrated by the company's strong financial results. We now have 75.6% of our portfolio ABR reporting financial results at either the tenant or guarantor level. We generated a portfolio-wide EBITDARM rent coverage ratio of 5.9x in 2025 as compared to 5.3x in 2024. The tenant at our Saginaw Healthcare facility, which we sold in late January 2026, was the tenant with an outsized EBITDARM coverage ratio that we described last quarter and drove our average up meaningfully. Without the Saginaw tenant included, our portfolio-wide EBITDARM rent coverage was 5.7x in 2025, still well above 2024 levels. Moving to our balance sheet. Net debt to EBITDAre was a conservative 3.9x at year-end, remaining below our targeted leverage range of 4.5x to 5.5x. Our leverage level translates into over $200 million of debt capital we can readily deploy to reach the midpoint of our targeted leverage range. Total liquidity at year-end exceeded $480 million, providing substantial dry powder for acquisitions and growth initiatives. As of December 31, 2025, we had $676 million of outstanding debt under our unsecured credit facilities at a weighted average interest rate of 4.7%. Our capital allocation philosophy remains unchanged, we will deploy capital in a manner that creates the most long-term value for our shareholders, be that through acquisitions, investment in existing properties in need of expansion, share repurchases or other means. With that, we look forward to taking your questions. Operator: [Operator Instructions] Your first question comes from Michael Lewis of Truist. Michael Lewis: If this first one is too specific, I can follow up, but I was wondering how much rent you collected on the Alexandria building that you're selling? I think they had some holdover rent and then also the 2 redevelopments placed in service. I think they were placed in later in the quarter. I was wondering if they contributed significant rent in the quarter as well. Michael Seton: Michael, this is Michael. Thank you for joining the call today. Great to hear from you. On the Alexandria property, we -- their scheduled rent was essentially $40,000 per month. Their lease expired in August, and they paid holdover rent through November. The holdover rent was at 125% of the scheduled rent. So they ultimately ended up essentially if you count it this way, paying full rent for the year due to the holdover rent. So they paid total rent in the fourth quarter of $120,000. Michael Lewis: Okay. And the redevelopments, I guess I'll tag on to that. Is there a material difference between the leased percentage you show in the supplemental versus what's commenced? In other words, do you have some rent that may be on the come that we can't see from that lease number? Michael Seton: You mean our lease status at year-end? Michael Lewis: Yes. I think we -- you had 2 redevelopment projects placed in service during the quarter. Those were listed, I think, as leased last quarter but they started paying, yes... Michael Seton: Yes. So specifically, for instance, the El Segundo property, which has UCLA is a tenant has a free rent period. So they're still in that free rent period, but they are considered -- the building is considered leased as of the year-end. That one specifically comes to mind. Michael Lewis: Okay. And my next question is about -- I guess, it's about acquisition yields, but I think you'll see where I'm going with this. When you acquire assets that are similar to what's in your portfolio or you see similar assets trade in the market, what's the pricing like for the types of assets you own? Michael Seton: The pricing for the type of assets that we own today, consistent, I think, with what we've done on the acquisition side is we generally see rehabs kind of in the -- this is subject to performing assets, longer-term leases, good national sponsors on the operational side in the high 6s to, I would say, generally speaking, the low 7s to mid-7s. So generally speaking, 7, 7.25 can be a little tighter, it can be a little wider depending upon circumstances. And the MOB outpatient, call it ASC-type assets, we can see those get fairly tight and those can get to as low as 6 or low 6s to, I would say, generally not the high 6s so I'll say mid-6s, but MOB assets, again, 6 to 6.5. On the LTAC side, because we do own some LTACs, we frankly don't see them trade much at all. So I can't tell you the last time we saw an LTAC trade. We don't own too many, but we do own some surgical hospitals. We've seen, I would say, over the last, I would say, 12 months kind of interest, we saw call pre-2022. A lot of interest in surgical hospitals, and we've seen that kind of renewed interest, particularly over the last 12 months. And we will see those trade depending again on the credit circumstance, the lease term, anywhere from the high 6s to around 7. So I think when we think about the portfolio of assets that we own, on a blended basis, we do see it somewhere in the 7 cap range, cash cap rate going in. Michael Lewis: Okay. So it was a little bit of a leading question to my last question. So on our calc at least, we have the stock a little bit north of an 8% implied cap rate. It's been moving in the right direction. But the question is, as you sell some of these assets and you're below leverage, what's kind of the -- I know you've gotten this question before about potential stock repurchases. I also wonder to the extent you could answer if you get inbounds from institutions or private equity about the company at this price. Michael Seton: So as it relates specifically to stock repurchases, I'll tell you what we've always said, which is it's a tool in the toolbox. I will also say that one thing that makes us particularly cautious about stock repurchases is as we're trying to build our institutional investor base, it does pull liquidity for our stock out of the market. So that's where it causes us pause particularly. As it relates to inbounds, I would say, over time, we've certainly had interest in our company, even pre-listing, by the way, up to listing. The goal of our listing was, of course, to bring liquidity to our stockholders, which I think we've done. We have seen our shareholder base rotate, as I said in my remarks, from 100% retail to really what is now 70% institutional and so we've seen that occur. We do see that disconnect, Michael, that you're referring to. I would say it makes us cautious on the acquisition side. We are poised for growth, but we are also conscious of others out there who have run up leverage and find themselves in a box, and we're definitely not in a box today because we've got a lot of liquidity, and we're not going to find ourselves in that box, but we would like to see a higher share price fairly significantly higher in order to raise equity. Operator: Your next call comes from John Kilichowski from Wells Fargo. William John Kilichowski: Can you hear me? Michael Seton: John, I can hear you. William John Kilichowski: Perfect. Sorry, I just barred from another call. So forgive me, I'm a little bit late, and I hope I didn't miss anything. But just kind of following up on that last question. I guess it felt like I got part of the answer there. My question is at what point here -- and maybe we can start with remaining leverage capacity and where you're comfortable taking that, what that buying power means for 2026. And then my second part of the question is going to be at what point do you start to -- not that maybe you're not taking it seriously today, but at what point do you get a little bit more aggressive if maybe that incremental growth doesn't get the stock working that you start to look for other ways to realize NAV? Michael Seton: Sure. Just in terms of liquidity, ability to buy more, we essentially to reach the midpoint of our targeted leverage, which is would be 5x because we've given some indications of between 4.5x and 5.5x, we could see investing about $225 million, roughly speaking. If we were to reach the high end of our leverage, it could be as much as $375 million. But again, we're being very discerning with the acquisitions. There is competition in the marketplace. I think our -- we have a good brand in the marketplace on the acquisition front with the developer, with the brokerage community, et cetera, with the tenant community. In terms of us looking at other ways to bring opportunity for our shareholders. I think we're always looking at that. In terms of timing, I can't really give you an indication of timing. We think the company is very solid right now. It's been stronger than it's ever been before in terms of our portfolio. And I think you can see that in the results that we reported last evening. And when we think about the opportunities also within the portfolio to really get greater yield, which I mentioned in my remarks as well, those opportunities are coming more and more. So we mentioned some there are actually additional ones that we have where we can get yields north of -- you heard Michael Lewis talk about where he evaluates where we're trading at an implied cap rate basis, north of that. So we're going to take advantage of those opportunities within our portfolio that only exists when you own the existing real estate and have those existing direct tenant relationships so we're going to continue to be forward-footed as it relates to taking advantage of opportunity in deploying our capital, but we're going to do it cautiously and thoughtfully. William John Kilichowski: And in that same vein, if you think about the $375 million of capacity that you mentioned to the high end, what's a fair cadence for that as we look at maybe the incremental opportunities that are starting to come to you, yields have been relatively steady. Transaction markets seem to have improved for most. I'm curious, is there an improved cadence relative to what we've seen in the past that could maybe accelerate AFFO growth from here? Michael Seton: I think the market will drive the cadence. That being said, I think that gives us about 24 months of buying capacity. So from an indication perspective, I would expect volume this year to be similar to what it would be last year. And of course, we already made an acquisition this year. It could be more at the -- towards the end of this year as opposed to the beginning of this year, particularly as we're focused on investing capital in these development opportunities with our existing tenancy and existing assets. Operator: There are no further questions at this time. I will now turn the call back over to Michael Seton, CEO. Please continue. Michael Seton: I would like to once again extend my sincere thanks to the entire Sila team, their hard work, dedication and commitment to excellence continue to drive our success. We deeply appreciate the support and confidence of our shareholders and remain excited about the opportunities that lie ahead in 2026. Thank you for joining today's call. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.