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Operator: Good morning, and welcome to Ionis' Fourth Quarter and Full Year 2025 Financial Results Conference Call. As a reminder, this call is being recorded. At this time, I would like to turn the call over to Wade Walke, Senior Vice President of Investor Relations, to lead off the call. Please begin. D. Walke: Thank you, Keith. Before we begin, I encourage everyone to go to the Investors section of the Ionis website to view the press release and related financial tables we will be discussing today, including a reconciliation of GAAP to non-GAAP financials. We believe non-GAAP financial results better represent the economics of our business and how we manage our business. We've also posted slides on our website to accompany today's call. With me on the call this morning are Brett Monia, our Chief Executive Officer; Holly Kordasiewicz, Chief Development Officer; Kyle Jenne, Chief Global Product Strategy Officer; and Beth Hougen, Chief Financial Officer. Eugene Schneider, Chief Clinical Development Officer; and Eric Swayze, Executive Vice President of Research will also join us for the Q&A portion of the call. I would like to draw your attention to Slide 3, which contains our forward-looking language statement. During this call, we will be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. I encourage you to consult the risk factors contained in our SEC filings for additional detail. With that, I'll turn the call over to Brett. Brett Monia: Thanks, Wade. Good morning, everybody, and thanks for joining us today. 2025 was a defining year for Ionis, marked by the successful execution of our first 2 independent launches and multiple positive data readouts across our rich pipeline. These achievements, together with our expectation for multiple additional value-driving events this year positions Ionis for continued success through 2026 and beyond. TRYNGOLZA, the first FDA-approved treatment for familial chylomicronemia syndrome, or FCS, exceeded expectations in its first year on market. TRYNGOLZA's excellent performance was driven by a compelling clinical profile and strong launch execution. TRYNGOLZA was also launched in Europe late last year, and we're pleased to see our partner, Sobi, bring this transformational medicine to more patients. In August, we kicked off our second independent launch with the FDA approval of DAWNZERA, prophylactic treatment for hereditary angioedema or HAE. As the first and only RNA-targeted medicine for HAE, DAWNZERA offers a compelling profile that is resonating with prescribers and patients. And just last month, DAWNZERA received European approval, enabling our partner Otsuka to bring important medicines to patients across the region. In 2025, we accelerated the strong momentum with the olezarsen pivotal results in severe hypertriglyceridemia, a broad patient population with high unmet need. Further extending our leadership in the development of innovative treatments for diseases associated with high triglycerides. Olezarsen showed highly significant and substantial reductions in triglycerides in an acute pancreatitis attacks establishing olezarsen as the first medicine to demonstrate a benefit in reducing acute pancreatitis risk in this patient population. Based on these groundbreaking Phase III results, we were pleased to receive breakthrough therapy designation from the FDA. Additionally, late last year, we submitted the sNDA and anticipate receiving acceptance very soon. Importantly, we are on track to be launch ready by June. We also delivered positive Phase III results for our innovative medicine, zilganersen, the first to demonstrate a disease-modifying benefit in Alexander's disease, a rare and orphan fatal neurodegenerative disease. We submitted our NDA in January, and we anticipate approval and launch in the second half of this year. Assuming approval, zilganersen will be our first independent launch from our leading neurology franchise. Together, these groundbreaking results meaningfully expand Ionis' commercial opportunity and showcase our commitment to innovation and the power of our platform to deliver first-in-class RNA targeted medicines for patients with serious diseases. Complementing our rich wholly owned pipeline is our partnered pipeline, which targets both rare and highly prevalent life-threatening diseases. We expect multiple Phase III data readouts this year from our partner pipeline. In January, we announced the first of these results with positive top line data for Bepirovirsen, a potential first-in-class medicine for chronic hepatitis B that demonstrated clinically meaningful and unprecedented functional cure rates in the Phase III program. GSK is preparing global regulatory submissions and assuming approval, expects to begin bringing Bepirovirsen to the millions of people living with chronic HBV later this year. Looking ahead, we anticipate results from 2 major cardiovascular outcome trials, the pelacarsen Lp(a) HORIZON trial midyear and the Eplontersen CARDIO-TTRansform trial in the second half of 2026. In addition, sefaxersen for IgA nephropathy and Ulefnersen for FUS-ALS are also positioned for Phase III readouts later this year. If positive, these outcomes position our partner pipeline to deliver 4 key additional launches by the end of next year, driving a meaningful increase in our total revenue through royalties and milestone payments for many years to come. With strong momentum across our business, including our first 2 independent launches and advancing wholly owned pipeline and a robust partner portfolio, Ionis is well positioned to deliver a steady stream of transformational medicines for patients thereby driving substantial value and sustained growth. In addition to our very important recent commercial and pipeline achievements, 2025 was also a strong year of financial performance for Ionis. Revenue increased more than 30% over 2024 with growing contributions from our marketed medicines. This significant revenue growth combined with disciplined investment enabled us to exceed our financial guidance and as Beth will discuss later in the call, this momentum underpins our strong 2026 financial outlook. Importantly, we remain on track to achieve our goal of reaching cash flow breakeven by 2028. Now before I turn it over to Holly, I'd like to take a moment to formally introduce her in her new role as Chief Development Officer. Since joining Ionis, Holly has played a central role in building and expanding our R&D neurology franchise, resulting in the creation of an industry-leading pipeline of RNA-targeted therapies for a broad range of rare and common neurological disorders. Holly has also played a strategic role more broadly in creating Ionis' leading research and development organization and brings a deep understanding of our technology. We are pleased to have Holly in her new role and confident she will continue to drive substantial value and continued success for Ionis and all Ionis stakeholders. Now over to you Holly. Holly Kordasiewicz: Thank you, Brett. I'm honored to lead our world-class development team, which has recently delivered multiple concept data readouts. I've had the privilege of working closely with many members in the development team over the years, and I look forward to building on that strong foundation. Looking ahead, our focus remains on innovation and ensuring strong execution to enable Ionis to continue delivering a steady cadence of transformational medicines to people with serious diseases for years to come. Olezarsen is a clear example of our leadership in discovering and developing transformational medicines. The ground breaking Phase III data generated from the CORE and CORE2 trials position Olezarsen to a new standard of care for the broad sHTG patient population. As previously presented and published, our pivotal studies evaluated Olezarsen and people with sHTG who had triglyceride levels substantially higher than the 500 mg per deciliter despite being on standard of care with the lowering therapies that they find, putting them at risk of life-threatening acute pancreatitis. In CORE and CORE2, olezarsen demonstrated highly statistically significant and clinically meaningful mean reductions of up to 72% and placebo-adjusted fasting triglycerides at 6 months, the primary end point. Olezarsen also significantly reduced acute pancreatitis events, making it the first and fully treatment to achieve this positive outcome in people with sHTG. Olezarsen achieved a highly statistically significant 85% reduction in adjudicated acute pancreatitis events. It's important to remember that the main goal of triglyceride management in sHTG is to prevent AP attacks and olezarsen is the first medicine to demonstrate it can do just that. This remarkable reduction in AP attack rate was also reflected in the number of patients needed to treat to prevent a potentially fatal pancreatitis attack. Just 4 patients needed to be treated with olezarsen for only 12 months to prevent 1 AP attack in the highest risk subgroup. For context, statins used for primary prevention have a number needed to treat in a range of 500 to 100 to prevent 1 cardiovascular event over 5 years. We believe these unprecedented results position olezarsen to meet the substantial unmet need of people with sHTG. We submitted the sNDA at the end of 2025 and it is currently within the FDA filing review period. We requested priority review and expect a decision from the FDA shortly. As Kyle will highlight, launch preparations are already well underway, and we look forward to bringing olezarsen to people with sHTG later this year. In addition to olezarsen, we're poised for another independent launch later this year. We plan to bring to zilganersen to patients with Alexander disease an ultra-rare leukodystrophy that profoundly impacts patients and families who today have no approved disease-modifying therapies. Our positive Phase III results for zilganersen mark the first time any therapy demonstrated a disease-modifying impact in this condition. We recently submitted our NDA based on these groundbreaking data. In the interim, we have initiated an expanded access program to provide eligible patients with access to zilganersen while the review is ongoing. We expect zilganersen to be the first of the numerous additional independent launches from our leading neurology pipeline. Underscoring Ionis' ability to consistently translate scientific leadership into important medicines for our patients. Turning now to our Phase III program for Obudanersen, previously referred to as ION582, our investigational medicine for Angelman Syndrome. Late last year, we received breakthrough therapy designation from the FDA. In recognition of Obudanersen promising mid-stage data and the serious unmet need in this disorder. Angelman Syndrome is a rare neuro developmental disorder that causes profound and lifelong physical and cognitive impairment. Estimated effect more than 100,000 people globally. Obudanersen is advancing in the Phase III REVEAL study with full enrollment expected this year and data next year. In addition to zilganersen and obudanersen, we have a rich neurology pipeline advancing in development, including ION464 for multiple system atrophy and ION717 for Prion disease. We're evaluating both investigational medicines and ongoing studies in patients. Based on the data generated to date, we're encouraged by the level of target engagement in the safety and tolerability profile. As a result, we plan to add additional dose cohort student programs to fully explore the therapeutic potential of these medicines. With these expansions, we now expect to report data from both programs next year. As we look to key upcoming events, in addition to those highlighted by Brett, we're looking forward to the anticipated approval of high-dose SPINRAZA, which has a PDUFA date of April 1. We're also evaluating -- we're also looking forward to the Phase III study start of Salanersen evaluating annual dosing for SMA and Sapablursen for polycythemia vera. We're over 3 mid-stage partner programs are set to read out this year, which in addition to multiple regulatory milestones position 2026 to be another catalyst-rich year. And with that, I'll turn it over to Kyle. Kyle Jenne: Thank you, Holly. With a strong first year for TRYNGOLZA, an encouraging start for DAWNZERA and 2 more anticipated independent launches this year, our commercial team remains focused on flawless execution to continue bringing our important medicines to patients. In the fourth quarter, TRYNGOLZA continued to gain momentum, generating $50 million in net product sales, reflecting a 56% increase in revenues quarter-over-quarter. And notably, December was our strongest month of 2025 underscoring continued growing demand. This performance drove full year revenue to $108 million. The efforts of our team, together with our innovative initiatives to identify patients continue to deliver positive results. We saw quarter-over-quarter expansion in both the breadth and depth of physicians prescribing TRYNGOLZA reflecting positive experiences among clinicians and patients. Q4 was a strong quarter of adding new prescribers who span a broad mix of specialties, including cardiologists, endocrinologists and lipidologists. Overall, approximately 75% of prescriptions came from these specialists. This provider mix and growing prescriber base positions us well as we prepare to expand into the broader sHTG population. Our leadership in establishing FCS access and coverage continues to benefit FCS patients and elevate TRYNGOLZA performance. Patients are gaining access to TRYNGOLZA quickly with time from prescription to first fill consistently exceeding our aggressive expectations. The current payer mix is approximately 60% commercial and 40% government and both clinically diagnosed and genetically confirmed patients continued to secure coverage. All the strong momentum we saw from TRYNGOLZA in 2025 has carried into the first part of 2026. There has been no meaningful impact on cancellation or discontinuation rates following a new market entrant. In fact, TRYNGOLZA continues to deliver strong growth in referrals and patient starts. Physicians continue to report very high satisfaction with both their prescribing experience and TRYNGOLZA's overall product profile, including efficacy, safety, tolerability and convenience. At the same time, pricing dynamics in the market are evolving. We are effectively managing these changes and preserving broad access and coverage for FCS patients. We are building on our leadership position in FCS as we prepare for the anticipated sHTG approval and launch later this year. Many people with sHTG struggle to manage to triglyceride levels with current treatments. In the U.S. alone, more than 1 million people have high-risk sHTG, defined as individuals with triglyceride levels above 880 milligrams per deciliter or above 500 milligrams per deciliter with a history of acute pancreatitis, or other high-risk comorbidities, including progressive cardiovascular disease and type 2 diabetes. Following our groundbreaking Phase III results, we conducted robust HCP demand research that confirmed strong enthusiasm for olezarsen and its potential to address patient unmet needs. HCPs found the low number needed to treat to prevent one potentially fatal acute pancreatitis attack, especially compelling. With the anticipated upcoming sHTG launch, we are continuing to engage with payers ahead of our planned price adjustment for the broader sHTG patient population. This work is anchored in olezarsen's compelling clinical profile and includes educating on the clinical and economic burden of disease and associated budget impact considerations. Ultimately, our goal is to provide the broadest access possible to patients and maximize the value of olezarsen. I am pleased to share that we now have our full field organization in place with approximately 200 field team members hired, trained and deployed. Our field team expansion materially increases share of voice and expands our reach to HCPs. Today, the team is actively supporting access to TRYNGOLZA for people with FCS. With our expanded team, we are positioned to effectively engage approximately 20,000 high-volume sHTG prescribers across the U.S., providing the scale and reach required for a successful launch in the larger indication. As we shared last month, based on the positive Phase III data and strength of olezarsen's product profile, we increased our annual fee revenue estimates for olezarsen to more than $2 billion. And today, we're even more confident in the blockbuster opportunity of olezarsen. Our groundbreaking data, strong HCP enthusiasm and first-mover advantage position olezarsen to realize its full potential as the new standard of care for people with severe hypertriglyceridemia. Turning to DAWNZERA. The launch is off to an encouraging start. We're seeing early adoption across all patient segments, including patients switching from prior prophylactic therapies patients previously using on-demand therapy only and treatment-naive patients. And we have seen strong participation in our free trial program with 100% conversion to paid therapy to date. Initial feedback from both physicians and patients shows high enthusiasm for DAWNZERA's differentiated mechanism of action, strong efficacy and patient-friendly profile, including a self-administered auto-injector and potential for the longest dosing interval, which is translating into increasing demand. Notably, we are also seeing a growing number of repeat prescribers due to the positive experience prescribers and patients are having with DAWNZERA. Additionally, we are seeing an extremely high conversion from referral to patient start. While it will take time to transition patients from other HAE therapies as we educate patients and physicians about the attractive profile DAWNZERA offers, we are confident we have the right drug, the right strategy and the right team to successfully bring DAWNZERA to people with HAE. Importantly, with strong launch fundamentals today, we expect DAWNZERA to meaningfully contribute to our growing commercial revenue this year and we reaffirm annual peak sales potential in excess of $500 million. Turning now to zilganersen for Alexander disease. We expect it to be the first independent launch from our neurology portfolio. Based on the Phase III results, zilganersen offers a potentially meaningful advance for patients and caregivers in a disease with no approved disease-modifying treatments. With the NDA submitted and acceptance expected soon, we are preparing to launch in the second half of this year. Ahead of launch, we are leveraging our strong relationships with the neurology community and patient advocacy groups to support awareness and diagnosis. Our medical affairs team is working with top leukodystrophy centers. Our marketing team is in place, and we will bring the customer-facing team on board ahead of approval. At launch, our priorities will include ensuring continued access for clinical trial participants, facilitating timely access for diagnosed patients, improving patient identification and ensuring availability. Importantly, we believe zilganersen could be the first of many first-in-class disease-modifying treatments from Ionis' industry-leading neurology pipeline. 2025 was marked by strong commercial execution. Looking ahead to 2026, the commercial organization is well positioned to build on this momentum. We remain focused on maximizing the full potential of TRYNGOLZA's in FCS, and DAWNZERA in HAE while preparing to execute 2 additional launches this year, further expanding Ionis' reach to even more patients in need of our medicines. With that, I'll now turn it over to Beth. Elizabeth L. Hougen: Thank you, Kyle. 2025 was a defining year for Ionis across our business, resulting in our impressive financial performance. We exceeded our guidance across all metrics through exceptional execution and disciplined financial management. This performance was underpinned by accelerating revenue growth from our marketed medicines, alongside sustained progress across our pipeline. We generated $944 million in revenue in 2025, representing a 34% increase year-over-year. Revenue was split between commercial products, which generated $436 million or 46% of our total revenue and R&D collaborations, which generated $508 million or 54% of our total revenue. These results underscore the value of our diversified revenue streams. Our marketed medicines provide growing recurring revenue and increasing operating leverage. While revenue from R&D collaborations acts as a financial accelerator. Together, our diversified revenue streams mitigate risk, enhance financial flexibility and create multiple pathways to sustained growth. 2025 was a strong first year for the TRYNGOLZA launch in which we earned $108 million in product sales with quarter-over-quarter growth throughout the year. This included $50 million of product sales in the fourth quarter, representing a 56% increase over the third quarter. We earned $8 million in DAWNZERA product sales in 2025 from the initial few months of launch. Since launch, we have been offering a free trial program, which has seen strong participation and 100% conversion to paid therapy to date. While still early, this provides encouraging visibility into anticipated DAWNZERA revenue growth. Royalty revenues increased 11% to $285 million in 2025. And anchored by meaningful contributions from SPINRAZA and growing royalties from WAINUA. Our R&D revenue also increased generating more than 20% growth year-over-year. driven by progress across multiple partner programs. The largest contributor was the Sapablursen license fee, underscoring our ability to monetize noncore assets to support our ongoing and planned launches and our pipeline. As planned, total non-GAAP operating expenses increased modestly year-over-year, highlighting our commitment to disciplined investment. The increase was primarily driven by investments related to the U.S. launch of TRYNGOLZA and DAWNZERA and accelerated investments to prepare for the sHTG launch following the groundbreaking Phase III data. Our excellent progress last year, coupled with disciplined financial management positions us well for accelerating growth and value creating. Our financial guidance for this year reflects Ionis' evolution to a commercial stage biotechnology company launching multiple medicines while remaining steadfast in our commitment to drive operating leverage as we advance our high-value pipeline. We project to earn revenue in the range of $800 million to $825 million from numerous sources, this represents an increase of approximately 20% over last year after adjusting for the onetime $280 million Sapablursen license fee. We expect the year-over-year increase to be driven by commercial revenue growth. As Holly mentioned, the sNDA is still within the review period. As a result, our guidance assumes a standard review for olezarsen which sets us up for anticipated sHTG approval in the fourth quarter. If we achieve priority review, we expect our guidance to improve. Since we are awaiting acceptance of the sNDA for olezarsen, we plan to provide TRYNGOLZA and DAWNZERA product level revenue guidance at our first quarter earnings call. So today, we will share some high-level perspective and directional insights to help frame expectations. We continue to see strong demand for TRYNGOLZA with FCS patients, and we expect continued patient growth this year. At the same time, we have been actively engaging with payers to ensure FCS patients continue to have broad access to TRYNGOLZA ahead of the anticipated sHTG approval. As a result, we expect a meaningful decline in TRYNGOLZA revenues throughout the year ahead of the sHTG launch, followed by accelerating growth as uptake build. As we prepare for the sHTG launch, we are establishing a reimbursement strategy designed to achieve broad access while maximizing the value of olezarsen drive sustainable long-term growth. Following anticipated approval, we expect to launch quickly with momentum building as we begin to bring olezarsen to this much larger patient population. And importantly, as Kyle highlighted, we are more confident than ever in the multibillion dollar opportunity for olezarsen. For DAWNZERA, we expect product sales to meaningfully contribute to total commercial revenue growth and to grow steadily as the launch progresses throughout the year. Given that HAE is primarily a switch market, and we remain in the early stages of launch, we expect patient conversion from existing therapies to take some time. That said, with strong launch fundamentals, including increasing demand, a high referral to start conversion rate positive patient-reported outcomes and rapid uptake of our free trial program, we are confident we have the elements in place to drive substantial growth. from our partnered commercial programs, we anticipate earning substantial royalties for medicines on the market today. We expect SPINRAZA to remain resilient and WAINUA to continue its upward trajectory this year. Collectively, our expanding commercial portfolio positions us for robust revenue growth and is expected to represent an increasing share of total revenue year-over-year. Our R&D revenue from existing collaborations remains a meaningful contributor to our total revenue guidance. As such, it's an important financial accelerator. With a rich pipeline and many partnered programs advancing, we have the potential to earn numerous milestone payments throughout the year. So far this quarter, we've already earned $65 million including $15 million for the EU approval of DAWNZERA and $50 million when Roche initiated a Phase I trial for an investigational medicine for Alzheimer's disease. Additionally, we are eligible to earn milestone payments for the Phase III initiations of Salanersen and Sapablursen as well as numerous regulatory milestone payments for Bepirovirsen and pelacarsen. Overall, our 2026 revenue outlook reflects the strength of our unique financial profile which includes numerous commercial and R&D revenue streams that enable us to achieve growing revenue through multiple pathways. We project our 2026 operating expenses to increase in the low-teen percentage range compared to last year, with revenue growing faster than expenses, driving improved operating leverage. This modest increase reflects our commitment to financial discipline as we bring multiple medicines directly to patients and advance their pipeline. Our planned expense growth will continue to be driven by our sales and marketing expenses as we invest to support the success of our multiple ongoing and planned launches. 2026 will be an important year of disciplined commercial investment as we prepare for our first launch in a broad indication with annual peak sales projected to exceed $2 billion. We expect our R&D expenses to remain steady this year, similar to last year. As late-stage studies reach completion, we are redeploying our resources for the drugs in our pipeline that we expect to fuel our next phase of growth. With sizable revenues and modest expense growth, we are projecting a non-GAAP operating loss between $500 million and $550 million. This represents a similar level compared to 2025, excluding the onetime sapablursen license fee last year and assuming a standard review for olezarsen. Importantly, we project to end the year with a well-capitalized balance sheet, including cash and investments of approximately $1.6 billion. The projected year-over-year change in cash reflects the use of $433 million earmarked to repay the remaining 2026 convertible notes. In addition, it reflects our prudent fiscal management as we make strategic investments to bring our medicines directly to patients, including inventory build for the anticipated sHTG launch and continued advancement of our wholly owned medicines in development. Looking beyond this year with 2 launches underway and more planned for this year and next, Ionis remains well positioned to achieve our goal of accelerating revenue growth and achieving cash flow breakeven by 2028, driving long-term value creation. And with that, I'll turn the call back over to Brett. Brett Monia: Thank you, Beth. 2025 was indeed a defining year for Ionis. We successfully transitioned into a fully integrated commercial stage company. Our first 2 independent launches were initiated, highlighted by TRYNGOLZA for FCS, which drove significant revenue growth. Importantly, we delivered multiple landmark data readouts that position us to continue driving accelerating value. We expect growth in 2026 to be driven by several key catalysts this year, some of which we've already achieved. Notably, we are on track for 3 additional launches, 2 of which are independent, including Ionis' first launch in a broad patient population sHTG. We are also on track for 5 late-stage data readouts across our partnered portfolio with 1 positive readout already achieved. With strong commercial momentum and advancing high-value pipeline and a clear path to cash flow breakeven by 2028, we believe Ionis is exceptionally well positioned to deliver transformational medicines for patients and accelerating value for shareholders for years and years to come. And with that, we'll open the call up for questions. Operator: [Operator Instructions] And this morning's first question comes from Yaron Werber with TD Cowen. Yaron Werber: Congrats really a lot of solid progress. Maybe just one question, Beth, for you on the guidance. I mean, so it sounds like you're not -- your guidance right now is not assuming any sHTG sales. You're assuming really not a lot of new royalty income from all the potential milestone payments and you're expecting that TRYNGOLZA will get impacted, it sounds like you're potentially matching the price of REDEMPLO. Is that correct? And then if you don't mind, I have a quick follow-up more on WAINUA on the study coming up. Elizabeth L. Hougen: So let me kind of -- there were a few things in there, so let me see if I can break it all down. So we are assuming sales and revenue from olezarsen in the sHTG patient population. But with the assumption of standard review, that would be in really just the fourth quarter of the year. So it will be a FCS driven revenues for TRYNGOLZA between now and the launch of SHTG after approval. Obviously, priority review would improve that guidance we expect. We do anticipate that WAINUA will continue to grow. We do anticipate that there could be revenues from bepirovirsen for example, once it were to get to market. Right now, that's going to be late in the year most likely. So there's not a lot of contribution in that in our guidance. We're really focused on the regulatory initiatives, the acceptance of the NDA as well as the approvals to drive R&D revenues for bepirovirsen as well as the potential NDA acceptance for pelacarsen assuming positive Phase III data. So I think overall, looking at a really strong guidance given that we're assuming standard review. It's a 20% or so increase year-over-year on a like-for-like basis by taking the sapablursen out of the equation. That puts us on an apples-to-apples basis. And I think that 20% increase is really strong. Kyle Jenne: And as it relates to pricing for this year, we are continuing to actively engage with payers. Obviously, those are confidential discussions. But really, what we want to make sure first and foremost is that we continue to ensure broad access for TRYNGOLZA prior to the sHTG approval. Those discussions are going very well. Based on those discussions, we do expect a meaningful decline in TRYNGOLZA revenues throughout the year ahead of the sHTG launch, as Beth reflected in her comments. But post the approval in sHTG, we expect accelerating growth, as you would expect, right, as that launch progresses throughout the balance of the year. Really, our focus remains on balancing the broad patient access with long-term value realization for this program. And so we're continuing to do that work. We're on track to deliver on that work, and we'll announce price when we conclude that work later this year. Eugene Schneider: Yaron you had a question about... Yaron Werber: Yes. Just on the cardio transform as we're now beginning to really kind of focus on that next everybody. Can you give us a sense of what percentage of patients are honest, a stabilizer at baseline because it was mostly an add-on strategy? And maybe what percent will only be on WAINUA alone essentially head-to-head against placebo, if you can, any color. Brett Monia: I'll start. Eugene, please jump in if you want to add anything. So Yaron what we've been saying and is playing out very nicely is that we have a good balance at baseline of patients not on stabilizer tafamidis versus patients on tafamidis at baseline. It's not quite 50-50, we have more patients on tafamidis than naive at baseline, but it's well balanced. It's not capped, but we do not have -- but that's where we ended up. We have had some drop-ins during the course of the study, but it's not meaningful. It hasn't been that many. And we are working on a baseline presentation. We don't know the timing of that presentation yet. But we are working on it, and we'll be able to share that data hopefully at some point soon. Eugene, anything more to add? Eugene Schneider: No, great one Brett. Operator: And the next question comes from Salveen Richter with Goldman Sachs. Salveen Richter: Just maybe help us understand what you're seeing for reimbursement in FCS given the competitors' lower price. And then just help us understand kind of this end pricing dynamic between the competitor and yourselves for sHTG and how that would essentially provide broader population access for yourselves. But I'm just trying to understand how to think about the differential there. Kyle Jenne: Yes. So let me first say, again, what a strong year that we had last year, $108 million in total, $50 million in Q4, a 56% increase quarter-over-quarter. We continue to see very, very strong patient demand, even as we kick off 2026. So there's been no meaningful impact from a competitive standpoint, and we continue to have very broad access for our patients in FCS today. The work is ongoing. The goal that we have, as I mentioned, is to maximize the value, so the highest price possible, but also provide the broadest access possible when we get to sHTG. So we're having the right conversations today. We're leading the way with payers in those engagements. We did a great job in 2025 to execute that. We're doing the same in 2026. But it will take us a little bit more time before we complete the conversations and our research with the payers so that we come to a final decision on pricing. Brett Monia: And I'll just add to that, Salveen, again, as Kyle mentioned in his prepared remarks, we've had no meaningful impact of a new market entrant on the demand for TRYNGOLZA. The demand for TRYNGOLZA continues to be very, very strong. Patients are doing very well on the medicine and we're seeing reauthorizations over and over and over again. So we're very pleased with the performance of TRYNGOLZA, but we're in that period right now in which we -- we're preparing to transition for the sHTG launch. Operator: And the next question comes from Jason Gerberry with Bank of America. Chi Meng Fong: This is Chi on for Jason. I want to go back to a comment that you made, Kyle. You said you -- obviously, you guys have recently increased the peak revenue for olezarsen to over $2 billion. And I recall is based on higher volume assumption. And today, Kyle, you mentioned you're even more confident in the blockbuster opportunity. Is it more confident in hitting that $2 billion number? Or is it more confident in hitting a potentially higher peak number? What drove the higher confidence? Is it based on any reason research? And is it high assumption on price or volume? And if I may squeeze in a quick one on the second question. I wanted to ask about ION532, which was licensed to AstraZeneca for APOL1-mediated kidney disease. Curious your thoughts about the market opportunity there, target profile of PS relative to competition? And lastly, when might we see Phase II data? Kyle Jenne: Yes. On the $2 billion, Chi, we shared this last month, we had these conversations. That $2 billion is really based on the strength of the product profile and the positive Phase III data. In addition to that, we've done extensive prescriber demand research, and that's what drove us to increase to greater than $2 billion. I think what's increasing our confidence is the strong underlying demand trends that we're seeing that I just explained, not only ending last year, but also that are continuing here early in 2026. Brett Monia: And your second question, Chi, I'll take is really best ask for AstraZeneca. It's a program that we've been working on for quite some time. We published on preclinical data for targeting APOL1 for FSG, particularly for people with mutations in the APOL1 gene across kidney disease. The preclinical data is very strong. The unmet need is very significant. There's a potential to go after patient populations that do not have -- that are not APOL1 carriers if the APOL1 carrier data is strong enough to go in that direction. So it's a significant market opportunity for renal disease. The decision by AZ to go to Phase II after we licensed it to them was based on day-to-day conducted in Phase I that showed strong target engagement and, of course, with good safety. So they advance it to Phase II. And as for time of data, that's a question for AZ. Operator: And the next question comes from Michael Ulz with Morgan Stanley. Michael Ulz: Congratulations on all the progress as well. Maybe just one related to the sHTG filing. Just wondering if you can give us any color on any recent FDA interactions there? And then secondly, has your thinking on the potential for a priority review changed at all recently? Brett Monia: I'll start with the second one and I'll ask Eugene to talk about how things are going. So for priority review, we can't speak for the FDA, but we believe that based on the unmet medical need and the compelling product profile, for olezarsen and sHTG that it deserves priority review designation, but we're in that window, we're in that evaluation window right now. And of course, again, I will remind you, we did receive breakthrough therapy designation. As far as regulatory interactions been on track, right? Eugene Schneider: So far, so good. It's early days, of course, as you said. Brett Monia: Yes. We're within that window, Mike. Operator: And the next question comes from Luca Issi with RBC Capital. Luca Issi: I don't want to maybe just double down here on this prior review versus standard review. I think in the past, you came across as pretty confident about prior overview, but obviously, you're now guiding assuming a standard review. So just wondering kind of hinting has changed? Or maybe this is just kind of standard conservatism? Like any thoughts there, I'd be much appreciated. And then maybe on Angelman, Holly, I think when I go on clinicaltrial.gov, I don't see any European sites there for your program, I think, except for the U.K., so versus, I think, your competitor Ultragenyx has many European sites. So is that because the European regulators prefer sham controlled trials? Is that a placebo-controlled trial? Or is that kind of more complex than that? Any thoughts much appreciated. Brett Monia: I'll let Holly address the Angelman in a moment, Luca. But as far as priority review, there's not really much more to add beyond the answer that we described from the previous question. We're in the evaluation period by the FDA. We submitted our supplemental NDA late last year. We're in that window. We believe the medicine deserves priority review, but we can't speak for the FDA. And the FDA usually takes the time that they need to draw a conclusion and I think we'll just leave it there. And as far as assuming standard review for guidance, we think that's the responsible thing to do at this stage. As Beth mentioned, we will adjust guidance if we receive priority review, and we'll inform everybody. Holly? Holly Kordasiewicz: For Angelman, you hit on it. So we have submitted to Europe. We're waiting to hear back from them for that and we need that approval of spending forward with those sites. But we do plan to open up sites in Europe as soon as that approval comes through. Operator: And the next question comes from [indiscernible] with Guggenheim Securities. Moritz Reiterer: This is Moritz on for Debjit. First, a quick follow-up on TRYNGOLZA sHTG pricing. You previously said that you're expecting to price TRYNGOLZA at approximately 20,000 net price should that still be our base case assumption at this point? And then secondly, a question on the blood brain barrier penetrating platforms. During your Innovation Day, you highlighted both the VHH and the bicycle delivery systems to potentially cross the blood-brain barrier. When can we expect updates on those platforms? Kyle Jenne: On the pricing question, we're finalizing the payer research. We'll provide those details once we finalize everything and get that out. But 20,000 net is what we had assumed in the greater than $2 billion peak sales revenue number that we've been using. So that's still consistent. We haven't updated that at this point in time. Brett Monia: And as far as the BBB work, it continues to go exceptionally well. I think as we mentioned previously, we selected our first BBB wholly owned molecule that's now in manufacturing. It does utilize the VHH technology. We're making great progress on bicycle as well for BBB overcoming the BBB for CNS diseases. We anticipate initiating IND supporting toxicology studies later this year for the VHH BBB molecule. And although we have not laid out definitive plans yet, I expect you'll get an update in the second half of this year on where we are with our BBB strategy. Operator: And the next question comes from Joseph Stringer with Needham & Company. Joseph Stringer: A quick one on the GSK partnered HBV program. When can we see functional cure rates from the Phase III program? And what are your GSK's expectations for potential peak sales as a functional cure? And maybe more directly, what net revenue assumptions to Ionis are baked into your projected peak royalty revenues from this partner program. Brett Monia: Yes. Sure. Beth will take the peak sales estimates because I can't keep them all straight from our partners and the revenue what they're projecting. But as far as the presentation, yes, the data is will impress. The data shows it's unprecedented functional cure rates in this massive patient population with very high unmet medical need, millions of people. And GSK plans to present the data at EASL in May, the European Association for the Study of the Liver. And what they've said is that the functional cure rates are clinically meaningful. Beth? Elizabeth L. Hougen: So GSK has talked about peak sales in the about USD 2.5 billion range. We've got a royalties that go from 10% to 12% in addition to the regulatory milestones, many of which we anticipate earnings this year as they move through the regulatory filing acceptance and approval process in multiple countries. So we've baked their peak sales estimate with our royalty tiers 10% to 12% into our overall peak royalties from -- from sorry. We've baked their peak sales and our royalties into our estimated peak royalties, which are about, I think, several billion dollars. Operator: Next question comes from Andy Chen with Wolfe Research. Andy Chen: So I know you talked about Alexander quite a bit today. So just curious how fast that ramp would be or how big the eventual opportunity would be? And if you can compare the opportunity to other rare diseases, such as DAWNZERA or FCS, that would be great. Brett Monia: I'd let Holly just talk about what she's hearing from the community first with Zilganersen. It's really exciting. And that, of course, affects the ramp like what we're hearing. And then Kyle to take on how he anticipates expectations for the launch. Holly Kordasiewicz: Just quick to remind everybody, last year, we read out our Phase III study, and we hit statistical significant clinical meaningful differences on our primary endpoint, which is a motor functional test. And then we also, in key secondary endpoints had favorable results all favoring Zilganersen. The community, of course, has been overwhelmingly positive. They are excited for the drug. We've opened up an early access program. We already have folks coming into that as well. And so it's very encouraging to see how the response has been from the community that they're just waiting for that medicine. Kyle Jenne: Yes. And related to the launch, there are approximately 300 people living with Alexander disease in the United States today. We believe that about 50% of those have been identified. There are about a dozen or so major leukodystrophy centers that we'll focus on at the launch. So we can do that with a very modest-sized team. Our medical affairs group is already out. We have a neurology-focused group that's been working in this area for quite some time, that and on other programs that we have. We'll add some account specialists and then some of our patient education managers to help the reimbursement and transition on to treatment and keep patients taken care of, et cetera, through the process. We have guided to greater than $100 million in peak revenue for this program. And we'll work on that launch later this year with an expected approval sometime towards the fourth quarter. We'll get the team in place and get launched. And so it will be modest this year and then grow into 2027. Brett Monia: The Zilganersen opportunity, of course, is incredibly meaningful for the patient community. It's going to provide meaningful revenue for Ionis once we get there. But also, it's really important to understand and recognize the strategic value for our neurology wholly owned pipeline Zilganersen is the first coming from Ionis that we're going to deliver to patients, commercialize ourselves. Behind that is our Angelman's program and then we have a rich pipeline of medicines that are wholly owned for neurology, not just for rare diseases, but also from broad disease indications. So it really gets us started. Operator: And the next question comes from Akash Tewari with Jefferies. Manoj Eradath: This is Manoj on for Akash. Just one from our end. Can you provide some color on your expectations around the upcoming HORIZON Lp(a) Phase III? What could be a commercial viable risk reduction bar in the setting do you consider any potential deeper risk reduction in the other near-term Lp(a) readouts could change the commercial outlook for pelacarsen? And also, can you comment on the current status of your next-gen or like full on Lp(a) targeting asset. Brett Monia: Yes. I'll let Eric talk about the next gen and why we're so excited about its profile. With respect to the HORIZON trial, I mean we remain quite confident in the outcome, recognizing the risk of doing something for the first time, it's Ionis tradition. It's in our DNA to be first. We've done it so many times and for Lp(a) will be the first to test the Lp(a) CBD hypothesis. But based on the epidemiology based on the conduct of the study, based on the clearance of 2 interim analyses very positively already and based on everything we're seeing from our partner, Novartis, in the trial, we remain confident. Of course, the risk is that no one's ever done this before. But that's an enormous opportunity as well. The patient -- the mean Lp(a) levels in the study have been reported already. I believe they're the median, I should say, 109 milligrams per deciliter. So it's quite a sick patient population. The vast majority of patients with prior cardiovascular disease, more than 80% have had myocardial infarction. The rest are stroke or serious peripheral artery disease to be qualified for the study. It's a very well-conducted study. It's going to give the answer to the Lp(a) hypothesis. And as far as competition goes, it's -- pelacarsen has a meaningful first-mover advantage in this massive market opportunity. And we've seen no drug profile out there that we believe will be superior to the Lp(a) lowering effects that we saw -- that we're seeing for pelacarsen. So stay tuned, midyear this year, we'll get an answer. Eric, what about the follow on? Eric Swayze: Yes, sure. Because we believe in the market opportunity and the indication and that lowering LP(a) can give value for patients with cardiovascular disease. Some years ago, we started looking for drugs that extend the dosing interval. And that really was the goal of our program was to extend the interval of dosing. We've been working with siRNA technology for some time now. We recently reported some nice positive data on ION775 with siRNA that extends dosing frequency in -- for lowering ApoC-III and triglycerides in humans. And we've been making equal better progress on LP(a) with our siRNA platform. Goal is to get it to 6 months extended dosing or perhaps a year depending on how the drugs perform. We're very encouraged by the ION775 performance. And preclinically, the LP(a) siRNA looks better. So hopefully, we can demonstrate that in humans soon. Brett Monia: We have several programs coming forward into the clinic that are offering strong durability twice a year, once a year dosing 775, of course, is the olezarsen follow-on for ApoC-III, we reported data last year in Phase I. It looked excellent, and we're going to be in sHTG patients in Phase II this year. And we believe that, that will be replicated with the pelacarsen follow-on, which is now in IND supporting toxicology studies. Operator: And the last question comes from Jay Olson with Oppenheimer. Oppenheimer has dropped off the line. That does conclude the question session. So I would like to turn the floor back over to Brett Monia for any closing comments. Brett Monia: Great. Thank you for all the great questions. Thanks for everybody's participation. Obviously, we are incredibly proud of the pivotal year we had in 2025 for Ionis, and we're building on that momentum to set us up for an even more pivotal, more exciting year for Ionis in 2026. We've already achieved a great deal and we're well positioned to achieve a great deal more. And with that, we'll close the call. Thank you again for your participation. We look forward to providing further updates throughout the year. Goodbye for now. Operator: Thank you. And as much the conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Operator: Ladies and gentlemen, welcome to the Q4 2025 Results Conference Call. I'm Moritz, your Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Anja Siehler. Please go ahead. Anja Siehler: Thanks, Moritz, and also a very warm welcome from the Nordex team in Hamburg. Thank you for joining the Q4 2025 and full year results management call. As always, we take -- we ask you to take notice of our safe harbor statements. With me are our CEO, Jose Luis Blanco; and our CFO, Dr. Ilya Hartmann, who will lead you through the presentation. Afterwards, we will open the floor for your questions. And now I would like to hand over to our CEO, Jose Luis. Jose Luis Blanco: Thank you very much for the introduction, Anja. As said, on behalf of the Management Board, a very warm welcome to all of you joining us today for the Q4 and full year 2025 results. Results that conclude a transformational period and a transformational year for Nordex. 2025 has been a landmark year. We delivered and exceeded our medium-term margin target ahead of schedule, generated positive free cash flow, achieved record order intake and strengthened our balance sheet. This very much sets the tone for the years ahead of us. Let's now walk you through what drove this performance and how it prepared Nordex for the next phase of profitable growth. Let's start with a short recap of how we were able to deliver as promised or on the upper end of the promise. Over the past 3 years, we have made consistent progress in strengthening the business and our profitability. 2025 is the year in which Nordex demonstrated that the operational and financial improvements we have been working on over the past 3 years are now full translating into our numbers. We delivered robust growth across all major KPIs, increased profitability substantially, generated strong free cash flow and strengthened our financial foundation. Combined, these achievements set a strong tone for our longer-term strategic ambitions. Moving on, 2025 was a milestone year for Nordex. We delivered record order intake of 10.2 gigawatts, reached an 8.4% EBITDA margin and generated EUR 863 million of free cash flow, all well above last year and ahead of our original plan. These results show that our strategy is working and that our business is now consistently delivering strong margins and is cash generative. Based on this track record, we now aim to set the tone for what is ahead of us. First, 2026 guidance, continued sustainable improvement, capital allocation, the introduction of our first shareholders' return policy; and third, our new strategic midterm target and upgraded EBITDA margin of 10% to 12%. Before we go into more details on the mentioned aspects, let's look at how we performed in terms of market position in 2025 first. 2025 was also a year in which our market position strengthened further. We were again able to keep our #2 position globally, improving, not in the relative position, but in the market share of the global position. In Europe, we continue our strong momentum and achieved leadership position for the fourth year in a row. And this clearly reflects our competitive product range and our strong customer relationship and ability to deliver in our core region. The Americas, we continue to rebuild our market position, mainly driven that year by Canadian orders reaching an 11% market share in 2025, a solid step forward after the reset in previous years. Let's now start the usual chapters regarding the operational and financial highlights. Let me start with an overview of the fourth quarter and the full year. Q4 was another strong quarter operational. Our combined order book grew to EUR 16 billion with the turbine order book up 30% year-on-year to over EUR 10.1 billion and the service order book rising 20% to nearly EUR 6 billion. Financially, we closed the year with EUR 307 million EBITDA in Q4, an increase of 188% compared to the same period of 2024. Our EBITDA margin in Q4 reached 12.1%, up more than 7 percentage points year-on-year. Service EBIT margin increased further to 19%, marking another quarter of consistent increase. Free cash flow in Q4 reached EUR 565 million, more than doubling last year's level. And finally, our net cash position exceeded EUR 1.6 billion at year-end. We also successfully reached our medium-term EBITDA margin target of 8% already in 2025 and we believe we can deliver further margin improvements based on the levers we see. And with this, let me walk you through the operational performance in more detail. In Q4, we record EUR 3.2 billion of turbine order intake, an increase of around 10% compared to Q4 last year. This corresponds to 3.6 gigawatts, representing 9% growth versus Q4 2024. A few important aspects to highlight. First orders came from 12 different countries, demonstrating continued strong diversification. ASP remained stable at EUR 0.89 million per megawatt comparable to last year level. The largest markets in Q4 were Germany, Canada and France, supported by steady demand in our focus regions and countries. On a full year basis, turbine order intake reached 10.2 gigawatts, representing a record EUR 9.3 billion in order value, an increase of 25% year-on-year. Let's move to the next slide, the order book. Our turbine order book ended the year at EUR 10.1 billion, up 30% versus the same period of 2024. On the service side, our order book increased to almost EUR 6 billion, up 20% year-on-year. We now have almost 14,000 turbines covered by long-term service contracts, representing 48.3 gigawatts under term service contracts. And the combination of structurally larger projects order book and a steadily growing service base provides a strong visibility for revenue and margin delivery in 2026 and beyond. Let's talk about the service business. Our service business continued its predictable trajectory in 2025. In Q4, service revenue reached EUR 240 million. Service EBIT reached EUR 46 million, corresponding to 19% EBIT margin. This marks the eighth consecutive quarter of margin expansion in the service business, driven by improved efficiency, strong availability levels in our installed base and disciplined execution. Let me also highlight a few key operational KPIs. The average availability of our wind turbines under service remain high at around 97% and the average tenure of our service contracts continues to be around 13 years. Let's move to the next slide, our installation and production figures. Installations were up by 25% year-on-year, reaching around 2.1 gigawatts in the fourth quarter of 2025. In Q4, we installed 376 turbines, up from 283 in the same period of 2024. Full year installations reached 7.663 megawatts -- or gigawatts, compared to 6,641 megawatts in 2024. Turbine production increased to 519 turbines in Q4 compared to 445 last year. Paid production remained stable despite temporary delays at one of our suppliers in Turkey. And now I would like to hand over to Ilya for the financials. Ilya Hartmann: Thank you, Luis, and a warm welcome also from my side. So before I start with my usual slides, let's take a brief look at the past fiscal year and the achievements of our goals or targets. So the slides on the screen illustrates the highlights of the past year. Following the initial publication of our guidance for 2025, we made strong progress in our operational performance throughout the year. Jose Luis has talked about that. And as a result, we were able to further strengthen our profitability, which led us to upgrade our full year EBITDA margin guidance in last October. By year-end, we achieved and in some areas, even exceeded all of the targets we had. So let me use this opportunity to thank Team Nordex for their tireless efforts worldwide. We're very proud of you. And with that, let's move on to the next page, where I would like to share a few insights on the development of our income statement. After sales were temporarily affected by project mix and scheduling effects earlier in the year, we saw a significant rebound in the fourth quarter. Sales increased by 16% to around EUR 2.5 billion compared with EUR 2.2 billion in Q4 of the year before. Main contributors were Germany, Turkey, North America and Spain. For the full year, sales reached approximately EUR 7.6 billion, and so fully in line with our internal planning and almost right in the middle of our guided range despite some impacts from Turkey that we discussed with you last year. We continue to strengthen our gross margins, reaching 27.8% in the fourth quarter, up from 23% in the same period last year. For the full year, gross margin improved to 27% compared with 21% in the previous year. This corresponds to an EBITDA margin of 12.11% in Q4 2025, up from 4.9% in Q4 of 2024 and of 8.4% for the full year '25 compared to the 4.1% in the year before. Building on this operating performance, we ended the quarter with a net profit of EUR 184 million, compared to EUR 18 million in the fourth quarter of 2024. For the full year 2025, the net profit amounted to EUR 274 million, a significant improvement over the EUR 9 million recorded in 2024. With this, let's move on to the balance sheet. As we can see, our overall financial position at year-end remained solid and has further strengthened compared to the end of 2024, a reflection of the operational and financial performance throughout the year. Cash position at the end of the fourth quarter was around EUR 1.9 billion. Working capital came in at minus 12.4%, significantly better than our guided number of below minus 9%. Equity ratio improved steadily through the year and reached 19% at the end of the fourth quarter compared with 17.7% at the year-end 2024. This positive development is largely driven by the strong increase in our net profit. And now let's have a closer look how the other balance sheet KPIs have developed in the last quarter. Overall, all balance sheet figures continue to develop positively in the fourth quarter, continuing the trend we had already seen throughout the entire year. The operating performance in the fourth quarter led to a further increase in our net liquidity, which reached a record year-end level of EUR 1.625 billion. Again, the working capital ratio at the end of the fourth quarter was minus 12.4% or minus EUR 935 million in absolute terms. This improvement is largely attributable to the very strong order momentum we experienced in the final month of 2025. And now let's go to the cash flow and CapEx slide. Cash flow from operating activities amounted to EUR 631 million at the end of the fourth quarter, previous year was EUR 318 million and to over EUR 1 billion for the full year, previous year, EUR 430 million. And one more time, this development reflects our consistently robust operational performance throughout the year and especially the very strong fourth quarter. So in the fourth quarter of 2025, positive free cash flow totaled EUR 565 million compared to Q4 of the prior year of EUR 271 million. Full year, we closed with a positive free cash flow of EUR 863 million versus the EUR 271 million in 2024, supported, of course, by our order intake and further improvements in working capital. CapEx increased to EUR 72 million in the fourth quarter compared with EUR 42 million in the prior year quarter. And for the full year, CapEx totaled EUR 169 million, higher than last year's EUR 153 million, though still below our full year guidance of around EUR 200 million. And with that, I would now like to hand back to Jose Luis for the final chapter, our guidance and strategic outlook. Jose Luis Blanco: Thank you very much, Ilya, for walking us through the financials. Based on the strong foundations we established in 2025, we expect profitable growth to accelerate in 2026. Our guidance for '26 is as follows: sales will be between EUR 8.2 billion and EUR 9 billion, meaning a top line growth between 9% to 19% year-on-year. EBITDA margin is in the range of 8% to 11%. Again, as in previous years, we believe the midpoint is the most likely outcome as of today. Working capital ratio below minus 9% and CapEx approx EUR 200 million. This reflects continued margin expansion, steady volume growth and disciplined capital allocation. Regarding free cash flow, we don't provide formal guidance. However, based on the building blocks we have shared, you can likely conclude that we are positioned to deliver another solid free cash flow year. As mentioned at the beginning, today is not only about presenting our 2025 results and guidance, it's also about setting the tone for the years ahead of us. With that in mind, let me now walk you through the capital allocation policy we are introducing. Over the past years, many of you have asked for greater clarity on how we think about capital deployment once Nordex returns to a more normalized financial position. Let me summarize our approach. First, we remain fully committed to maintaining financial flexibility and a strong balance sheet and ample liquidity are essential to navigate market cycles in our industry. And this discipline will not change. Second, we continue to prioritize operational and strategic growth opportunities. That includes funding core organic investments across our supply chain, product enhancements and key research and development initiatives. We also want to retain the ability to pursue selective strategic opportunities, enhance our supply chain resilience and leverage opportunities to look in turbines via supporting our customers in advancing their project development pipeline. Third, with these foundations in place, we will consider returning cash to shareholders in a sustainable way. Today, we are introducing Nordex's first shareholder return policy. Under this framework, Nordex will target a minimum annual shareholder return of EUR 50 million to be delivered either through dividends or share buybacks and always subject to regulatory approvals, our capital structure priorities and stable market conditions. As many of you know, under German HEV rules, distributable profits sit within the stand-alone Nordex SE entity, and this will catch up in 2026 due to difference in local GAAP and IFRS. Therefore, we plan the first payout in 2027. This policy reflects our commitment to a disciplined, predictable and sustainable approach to capital allocation, balancing the needs of the business with attractive returns for our shareholders. And importantly, this is a first step. We remain open to refining the framework over time, always guided by the principle of maximizing shareholders' return. And moving on, let me now talk about our core markets and why we remain confident about the overall environment and our position within it. According to third-party researchers, onshore wind installation are expected to grow steadily throughout the decade. This growth is driven by 3 main factors: one, strong fundamentals in Europe and North America, which remain the core regions for Nordex; second, increasing electrification and industrial demand, which supports long-term renewables build-out. And third, selective upsides in markets such as Australia. And with this, given the structural improvements in our business and the visibility provided by our order book and the service portfolio, we are upgrading our midterm EBITDA margin ambition to 10% to 12%. The key levers here include: first, continued volume growth in Europe and the Americas and operating leverage from revenue growth. Second, higher service profitability with EBIT margin crossing the 20% mark. And third, further margin improvement via efficiency measures across production, logistics and fixed costs due to the bigger volume. As we had mentioned before, we have been working tirelessly to make this company much stronger over the last 3 years and 2025 shows the results of these efforts. And like Ilya, I really like to take this opportunity to thank our people for their tremendous efforts. Of course, our customers for their trust, support, banks and analysts and shareholders for the continued trust in Nordex, especially in difficult times. We believe we now have a good platform to deliver more profitable growth with the support of all of our stakeholders and remain committed to further strengthening the business in the years to come. And with this, let me hand over to Anja for Q&A. Anja Siehler: Thank you, Jose Luis, and thank you, Ilya, for leading us through the presentation. I would now like to hand over to the operator to open the Q&A session. Operator: [Operator Instructions] And the first question comes from John Kim from Deutsche Bank. John-B Kim: One question and a follow-up, if I may. First, congrats on the numbers. I wanted to understand when you think about capacity expansion and investment, I'd like you to speak a little bit about how we should think about factory loads. Any pinch points on supply chain? And I have a quick follow-up, if I may. Jose Luis Blanco: Yes. No, thank you very much for the question, John. I think we have provided you a view of EUR 200 million CapEx that should be sufficient to deal with the volume growth, even with the upper end of the volume growth considering in the guidance, and keeping our supply chain diversification strategy. We plan to keep Europe, eventually small growth. We plan to keep and grow India, and we plan to keep and grow China. At the same time, we are ramping up and growing U.S. So we don't plan major disruptions in supply chain, keeping the flexibility to shift volumes from region to region if needed. And we are confident and well equipped and provided for in the guidance. John-B Kim: Okay. And as a quick follow-up, can you just update us on the situation in Turkey, please, with blade supply? Jose Luis Blanco: Yes. I think we made substantial progress in derisking our situation in Turkiye. And we are, as we speak, ramping up blade production in Turkiye. We are committed with long-term investments in the market. We have been very successful in [GECA 4]. We hope to be equally successful or almost equally successful in [GECA 5] and we are ramping up the capacity to deliver our commitment to our customers and the government is, of course, happy with our commitment to the country. Operator: And the next question comes from Alex Jones from Bank of America. Alexander Jones: Two, if I can. The first one on the new capital return policy. Could you outline for us why you chose the EUR 50 million number rather than something smaller or bigger? I guess when I think about the midterm profits and therefore, cash flow of the group, I imagine they'll be substantially larger. So is there something constraining that number in the short term, be that German GAAP profits or whatever else? Jose Luis Blanco: No, thank you for the question. I think we try to share with you what our view is about the priorities, which is having a balance sheet fortress, if you will, to deal with cycles, but as well to deal with opportunities. And we think we will find opportunities to deploy capital at reasonable return, supporting our customers to make their projects through and consequently helping the company to grow further in the top line and in the profitability and achieve our midterm EBITDA target. And this is what we are -- where we are focusing now. Ilya? Ilya Hartmann: I think you said -- I would add maybe 2 thoughts. One is, first, this is an idea of a minimum EUR 50 million. So we'll always then decide in the given year if a different number if appropriate. And other than the point you mentioned of deployment is not only a fortress of the balance sheet, which I think is one of the key priorities, but also the flexibility of Jose Luis to help execution, derisking supply chain changes whenever needed to react that we have also the resources to do that. I think that's our set of priorities. Alexander Jones: That's very clear. Understood. And then if I can, on the installations in 2026. Can you give us any idea? The order intake has been very strong, above 10 gigawatts in '25. Some of that will take a while to come through, but could we see a year with installations above 9, for example, growing from the 7.6 you did last year? Jose Luis Blanco: I think we prefer to guide you in revenue and margin without going too much specific into the underlying operational figures. But definitely, we see growth in production and installation in '26. But remain that the year is very young, so we still need to sell a lot to contribute to PoC revenue and margin for 2026, and we need to grow the company in production and installation. Hopefully, the customers will not delay. Hopefully, we will not see major disruptions. We are prepared for that within a reasonable range. And I will say this is as far as I can go today. But growth is definitely expected in production and installation. Operator: And the next question comes from Sebastian Growe from BNP Paribas. Sebastian Growe: My 2 questions would be around Germany and then also the margin trajectory that you have updated. So let's start on Germany then. Apparently, we are seeing the German Economy Ministry planning to make changes to the support scheme for renewables, both from a grid access point of view, but also then from a pricing perspective with the move to CFDs. Can you comment on how that might impact turbine pricing? And what is your most important single market at this point? How has your customer base reacted to the current draft that has been linked to the public. If we could start there and then continue on the margin part later. Jose Luis Blanco: Let's do this together with you. So I know that there is a lot of -- or a slight unrest about the situation in Germany. I tend to see it quite positive. I mean the German market is going to deliver 10 years -- 10 gigawatts a year for the years to come. And this is amazing. This is record high historical volumes for the next couple of years ahead of us. Yes, 10 is not 13 or 14, fine, but it's 10. It's going to be maybe the biggest worldwide market second to China. And we have a fantastic market positioning in this market, just to set our view. Then like in any changes in system, this is -- could bring uncertainty and could slow down the market. We had a very bad experience in 2017 in Germany. So hopefully, all stakeholders learn from the mistakes, and we do the transition in a smart way that the volumes are not affected. Third, regarding the new system, I think wind onshore is by far the cheapest energy solution for Central Europe. And so we are part of the solution. We can help countries and societies to deal with affordability with energy independence, if they procure Western with technology independence and to foster electrification. Of course, the enabler for all those things is grid deployment. So I tend to think that we are in a great momentum, in a great momentum for our sector and for our company within the sector in a very important market despite some challenges that policymakers need to address in order to make this transition in the best possible way. And regarding the leak, I don't think we should comment on leaks. But my take is that wind onshore and our customers, we are part of the solution to lower electricity prices and to deliver society needs. And electrification is a must to deal with the competitiveness of Europe and Germany. And grid is the bottleneck that governments across Europe needs to address to make electrification a really powerful tool to address competitiveness. Ilya Hartmann: Yes. I mean, had anything to add, and that's really not much, I would say, agreeing with you, Jose Luis, not to comment on leakages of draft. However, I would probably remind all of us that this is a government of 2 parties. And 1 of the 2 parties was part of the previous government and has heavily supported the Wind industry. And that also led to what you were saying, Jose Luis, to the reconfirmation by this current government of the 10 gigawatt annual target in Germany. So let's see what comes out of the process. To the broader question, Sebastian, I'd say, for me, Germany with that is becoming a more normal market because now auctions from a system perspective start to work. And Germany will find a new normal across the value chain, the auction tariffs, the land leases, the developer fees, the equipment of BOP turbines. So after all, we're going to deal with a market that is very, very similar to many other markets in the world with similar economics. And then I think if anything to add, Jose Luis, that is something we have been considering when giving you this new midterm target. That is already considered. Sebastian Growe: That's a good segue indeed to my next question. In that chart on the margin walk to the 10% to 12% in the midterm, you haven't touched on the impact from price. So the question that I then would have around this is, am I right to assume that this very 10% to 12% range is a through cycle ambition? And as such, the strong volume visibility at attractive gross margin that you are enjoying right now might even result in a higher margin than this 10% to 12% range in a given moment. And it would rather than cater for if we did see this structural transition towards what is then a market price and not so much, say, determined price by a system, that this would then sort of be a normalized margin, but you would exclude at this point that you might even come out at a higher level. Is that the right way to think about it? Jose Luis Blanco: The way to think -- of course, we have made our view of what midterm prices could be and what the midterm market shares could be and what midterm volumes could be for our sector. And we are sharing with you our view and you are spot on. So we think that across the cycle, across the cycle margin. And let's not forget that the volume in Germany is going to be massive and the Central European price forward-looking 10 years for electricity are in the 70s. So -- and the best tool for lowering electricity is more wind onshore. So we are operating in a region that has certain price level in the -- for the final electricity pool. So I don't expect or we don't expect that the Central European electricity prices will drop like Finland or like any other countries like Spain in the medium term. And based on that, what we have from our view and guided you to that midterm target across the cycle. Ilya Hartmann: And maybe to the second question of Sebastian, I think your answer is perfectly in my view that this is exactly what we want to calibrate you for. Could it be better in a given year? I would not exclude it. Operator: Then the next question comes from Richard Dawson from Berenberg. Richard Dawson: Two from me. Firstly, on the U.S. market, I'm just wondering if your view in that market has changed at all. You secured the contract at the end of '25 for over 1 gigawatt. So it suggests that order momentum is picking up. But how do you see the opportunity in 2026? And where could your market share go in the U.S.? And then second question is on the EBITDA margin bridge up to that 10% to 12%. You mentioned in the presentation an opportunity to streamline costs further. You've obviously done a lot of this in the past, but could you provide some more details just on specific initiatives you have in mind for streamlining those costs? And I ask this against the backdrop of a business which is clearly growing both on the project side and the service side. Jose Luis Blanco: Thank you very much, Richard, for the questions. The U.S., let me share with you. I was 2 weeks ago there meeting customers. And I'm very pleased with the turnaround of the brand in the U.S. market after facing certain difficulties that you were aware with the former legacy platforms and quality issues. This is all behind us. So we managed to turn around this quality situation. We managed to turn around the stakeholders' relationships of the brand. Nordex brand is amazingly well perceived now by U.S. stakeholders. Current Delta for housing platform in U.S. is delivering market availability. And the team did a terrific job as well in restarting the West Branch facility and start to produce certain turbines for reservation orders we have. So we see momentum in the U.S. market. So customers are willing to keep investing in developments. Unfortunately, projects are pending, permits from the federal government. And this is something that honestly, nobody has a view of when those permits are going to flow. It's not that the permits or the determinations will not get to our customers to make their projects, it's a question of when. So there is no structural issue to reject those permits. It's a question of when those permits will be cleared, which reinforces our strategic decision to invest in that market long term. That market is facing a super cycle energy electricity increase demand cycle. And yes, maybe most of it is going to be delivered by gas, but wind plays a fantastic role to fit more with the demand profile of data centers, which is what is mainly driven electricity demand increase in U.S. So I'm without having firm orders, without having a clear view of when the firm orders are going to land to Nordex, I'm convinced that this was a very good strategic decision for Nordex. And I'm very pleased with the positioning of the plan in the marketplace. Second, talking about the EBITDA bridge margin regarding cost further improvements. I mean the key thing here is stay lean and let's make sure that we keep our overhead as lean as possible and definitely grow substantially less the overhead than the revenue to untap profitability improvement, number one. And number two, the volume brings always efficiencies, a little bit on the cost side, but as well in the underutilization. So we still run the company with certain level of underutilization. We want to have optionality to have 3 or 4 supply chain options. And the more volume we grow, the more we reduce the underutilization, the more we support the profitability improvement. Operator: The next question comes from Constantin Hesse from Jefferies. I'm sorry, it looks like the question was just withdrawn, then we go on with Ajay Patel from Goldman Sachs. Ajay Patel: Congratulations on the results. I have 2 questions, please. Firstly, I just want to focus on capital allocation again. I'm not sure I'm fully appreciating everything here. So it looks like over the course of '26, you're going to be towards EUR 2 billion in net cash. And you're not going to be really distributing too much on the dividend side until '27 and then that will ramp. It therefore, still implies there's going to be a lot of cash on the balance sheet. And I just wonder how should we be thinking about that? Like when you talk about the potential for opportunities to invest, are we talking manufacturing sites? Are we talking maybe adjacent types of business activities? I'm just trying to understand how that capital allocation thought works. And then if the cash is not being utilized maybe for distributions in at least the shorter term, could it be paying down debt or reducing use of facilities that we see a meaningful impact to interest costs? And if that's the case, what kind of improvement could we see? And then the second sort of set of questions is around the midterm target, the one on Page 23. The chart set up in a way that it looks at these 3 variables that gets us to the new midterm target, and it has it evenly distributed. And I'm wondering in my head, well, how much is actually in your own hands already and that you have enough visibility of auctions that have gone through Germany that eventually will convert to orders. You have enough of a pipeline in the U.S. You have a viewpoint on the efficiencies you're taking out of the business that are good amount of the targets under control? Or how much is it just dependent on market activity going forward? So I was just trying to understand how robust this is. Jose Luis Blanco: So let's start with the second question, Ajay. And so the year '26 is still very young. And we haven't sold what we need to sell to make the '26 guidance. So we still need to sell a lot of volume in Q1 and Q2. So definitely, this midterm target is subject to volume. Our assumption in this midterm target is that we will grow with the market. Some markets will grow, some markets will decrease. Germany long term will be an amazing market, but will be an amazing market of 10 gigawatts, not an amazing market of 14 gigawatts. Eventually, this will be compensated by U.S. picking up or other geographies. So this is a long-term view across the cycle, taking into account that we will grow with the market. So we are not taking the assumptions that we will grow market share. But of course, before talking midterm, we need to still deliver the '26 guidance for which we still need to sell. So we are exposed to the market dynamics for the midterm. With that being said, I think things don't change radically year-on-year. I mean the old product, if it's super competitive today, should remain at least competitive in the next year. So the market shares don't change dramatically over time year-on-year and markets given the capillarity we have and the number of countries where we operate, we should be able to compensate some markets with us. Regarding capital allocation, let's put this together, Ilya, I think the first priority, I mean, we need to have sufficient headroom to deal with situations like the one in Turkey last year or eventually more to come. We don't want to lose any opportunity to derisk the company, to further grow the company, to further improve the profitability of the company and some of those potential opportunities might require investments above the guidance that we have given to you, and we want to be prepared for that. Not saying that we have a concrete plan for that. Otherwise, we should share it with you, but we want to retain the option. And the first and foremost important thing is support our customers to make the projects reality. I think Germany, we heard that there are difficulties, and we want to use the liquidity of our shareholders because this company is the company of our shareholders to further invest this liquidity, supporting our customers, helping the company to further grow and to further improve profitability. Ilya Hartmann: Yes. And this is -- I think the recount of the priorities, maybe just -- I mean, very good question, Ajay. The point here is there is not much debt to pay for the company because there's only really a convert out there. And our interest is largely determined by the bond line, which is not debt that you repay with cash. And we've been working a lot on bringing the interest on the bond line down. So we will have positives there, but that's not done with the cash. And maybe to kind of support Jose Luis, thinking there is, I mean, for Nordex, that's the first time ever that in the history when it's as a listed company of more than 3 decades that it moves into the territory of those shareholder returns. And I think we should not forget that and where the company comes from. And on the other side, I'll repeat what I said maybe 10, 15 minutes ago, we're setting here a minimum. So when seeing the actual cash levels, the other opportunities that Jose Luis was describing, I think we will then come back with a more specific number. But that was to set the tone and introduce that shareholder return policy for the first time. So that would be my comment. Ajay Patel: May I just follow up on something? Just talking about the cash profile. Is it fair to say, look, these are very broad numbers, and I'm not asking you to sort of say these are right. But I think previously, we talked about 9 gigawatts of installations in the future, which effectively would move about EUR 10 billion of revenue on these types of margins, it would broadly imply EUR 1 billion to EUR 1.2 billion of EBITDA. And actually massive increase in EBITDA relative to what you've just delivered in '25. I just wonder if CapEx follows or actually the pace of which CapEx increases in this type of picture in broad terms isn't going to be as fast. And therefore, there's a much stronger picture of free cash flow developing. Jose Luis Blanco: Yes. I think the CapEx is going to depend a lot if we need to do one-off things, which we are not planning to do, and the rest building blocks, you can do the math of cash to EBITDA conversion more normalized levels than this exceptional year. But it's fair to say that '26, we expect to generate a good cash flow. Ilya? Ilya Hartmann: I will only add -- and I think, Ajay, your rough math is fully right when you say that in our core business, provide the unforeseen CapEx growth rate might be slower than the other building blocks you gave us. So yes. But then, of course, again, Jose Luis, listed a few priorities on where money might be deployed, always strengthening the core business, strengthening the balance sheet and helping our customers where needed to get projects over the hurdle in a bit of a difficult environment in some markets like the U.S. and others. And then second, yes, on the cash flow -- on the free cash flow, I probably to calibrate you, yes. If you plug an EBITDA to cash conversion rate of 50% to 60% into your models without guiding and the caveat and all that, I think then you get a -- you get a good picture of what we expect. Operator: Then the next question comes from Constantin Hesse from Jefferies. Constantin Hesse: Sorry, guys before I had some technical issues. I've got 3 questions on my side. One is, look, I think there's obviously one question mark that is basically being created around this potential risk of Germany updating their renewable energy target. But thinking about the order intake outlook into 2026, if you could maybe just provide some commentary on what you're seeing in Q1. And then I'm trying to think about the building blocks for '26. And unless -- I haven't seen any markets that have announced any kind of slowdown. I mean, Italy confirmed their numbers. Germany is doing 11%. U.K. is accelerating. Baltics continue to be good. Australia, Canada relatively fine. So is there -- are there any markets currently that you see as potential risks that could slow down orders? That's my first question. Jose Luis Blanco: Thank you, Constantin. Great to get your questions. Regarding order intake in '26, I think you know we don't guide for order intake and the year is starting. So it's very young. The quarter is not that so young. So we see a weaker quarter compared to the same period of last year. Let's see. But so far, we are presenting to you a guidance and a midterm target with our view. And on a quarterly basis, it could be changes depending timing, but we don't see substantial disruptions altogether. And markets that might be [indiscernible] which for us is important, is U.S. that this might or might not come. And we have certain contribution from U.S. in our order intake planning, not from a guidance perspective and P&L, but from an order intake planning for midterm target. Other than that, I tend to agree with you. I don't see any major crisis in markets for order intake. Constantin Hesse: Understood. And second question, just around the medium-term margin. I mean, most of my questions have been answered there, but one that remains is, I just saw an article that came out about 30 minutes ago, so Luis, where you comment on potentially having to negotiate prices down in Germany if auctions continue to come down. So when we look at the medium-term margin outlook, the 10% to 12% that you gave, are any potential cuts to pricing in Germany already included in that? Jose Luis Blanco: I think how can I phrase it? We don't plan or I think it's advisable to enter here into a price war. That's not the point. I think -- and we need to see this from a different angle. I think it's a huge volume in Germany and prices for Central Europe are at high levels, which might be reduced the more renewables you introduce. And this is what we consider into our midterm target. Of course, we need to support our customers to make the projects through. And this might somehow have a slight effect where, as Ilya mentioned, everybody needs to contribute their part to develop the land leases, the construction work and the turbine. I think we have sufficient action plan in-house to be able to contribute our part without deteriorating the margin. Constantin Hesse: Understood. But any price decreases are still -- I mean, some decreases are still included in the medium-term target is what I understood. Lastly, on capacity. I mean, you just booked 10.2 gigawatts of orders. Looking at installations over the next couple of years, it's pretty obvious that things continue to move up quite significantly. What is the current nameplate capacity of Nordex? Where do you get to the point where you would have to start building more space, more capacity? Jose Luis Blanco: That depends a lot product to product. And of course, on the 175, which is the product that over time will take over 163, we are building up capacity, and we might need to do more or less depending the timing of the installations on 163, I think we have sufficient capacity. It depends a lot about what type of capacity, assembly capacity. I think we are well -- we are running with flexibility and overcapacity structurally because of 2 reasons. First reason is derisking single geography dependency. Second is having optionality. Third is managing working capital. If you run too short in capacity, then you need to preproduce a lot and then you need a lot of working capital investment there, which we don't want to do. So we run with overcapacity. It means higher underutilization cost, which I think is the right investment to do versus flexibility and risk. In blade this is slightly different. But long history short, for this volume and for this additional volume that we put in the building block for the midterm target, I think we can do that within the range of CapEx that we gave to you in the guidance. Operator: And the next question comes from William Mackie from Kepler Cheuvreux. William Mackie: A couple of larger picture and some specific. First of all, focusing on supply chain and gross margin, but supply chain broadly, I think that ahead of the Chinese 15th 5-year plan, they have announced or declared a grand intention for wind installation domestically, which sort of looks in the region of a 40% increase in installation volumes. The impact of that, of course, is on their -- or the local manufacturing and supply chain. You have always been flexible and seeking partnership and qualifying suppliers from around the world to optimize your cost base and gross margin. So within the longer-term thinking and perhaps in the context of your chancellor in Germany, what is your thinking about the future relationship with China and how you can leverage that supply base to your benefit? Jose Luis Blanco: Thank you very much, William. I think that's a super, super good question. And we thought a lot about that many years ago. I think we -- as an industry, we need to leverage and as a company, we need to leverage on hardware economies of scale of Chinese supply chain. Software, we want to keep in Europe. Software and control, we want to keep in Europe. And within the hardware despite Europe is -- cannot be competitive in the current setup, we decided to keep a foot in Europe and support the policy about made in Europe and Net-Zero Industry Act. So depending how geopolitics works, we might need to ramp up Europe or not, but we want to have the possibility to do so. And we want as well to grow India as a balancing act for our supply chain strategy. So -- but fully committed with China, with our team in China, with our suppliers and partners in China, and they are part of our trajectory. And if geopolitics play a different role, we will adapt accordingly. William Mackie: You put together in your assumptions, input costs, tariffs, changing supply base, how do you see gross margins developing? Your gross margins, I think, exclude your direct labor costs. So it's effectively a direct input cost impact. So they seem to be plateauing. Is this a normalized level for your business? Do you envisage the scope for growth or expansion? Jose Luis Blanco: It's going to depend a lot of make or buy strategy, how much you do internal, how much you procure. But all things being equal, in the make or buy strategy or in the make or buy share on the make or buy strategy, that's a fair assumption. plateauing is a fair assumption. William Mackie: My second, I know we've been trying to understand your capacities from your internal capability. My question is more thinking about installation capability. I think historically, you've delivered maybe above 1,600 turbines or installed over 1,600 turbines in a year in the recent past, but with a different geographic mix. As we look forward, the mix is biased towards Western Europe and Germany and your installation partners, do you see sufficient capacity, whether it's crane lift, install, EPC completion, which enables you to run at higher rates as Germany and these other markets begin to increase their installation rates? Jose Luis Blanco: I think that's a super good question. And the answer is we have a plan for that but is not without risk, let's put it that way, because the record levels is going to put challenges everywhere from police escorts, to transportation permits, to building permits to all the supply chain needs to stay tuned and in focus and all government, federal and states and municipalities needs to support the journey, which so far, I think it's the case because it's a country mission, what we are discussing here, but it's not without challenges. I mean the volumes that we are going to install in Germany are massive and the number of special permits and the disruption in the highways at night, and this is going to be a challenge for the whole industry indeed. William Mackie: Super. The final question maybe for Ilya is financial. Just rounding back on an earlier question for clarification. I mean you're running an increasing level of bonding lines or project bonding lines. I think historically, you've used a number of sources for that capital, but your historic weak capital structure has resulted in higher costs. I think you were in negotiations to syndicate with new banks. Looking forward, as your capital structure increases, how could we expect your bonding line costs to change? Ilya Hartmann: Yes. Thank you. That's indeed a very good question. I alluded to it earlier a bit also when I was answering to Ajay's third question. I mean, without going to these other structure. Right now, we have been in the past year '25 ramping up a lot of bonding lines already on a bilateral basis with banks, whether that goes into syndication or continues to be bilateral. I think that is a matter of choice and terms and conditions. But for both concepts, fortunately, true is that now the costs for those bonds have come down significantly from those high levels you were talking about in the times of a weaker financial standing of Nordex. So in a like-for-like volume, at the end of this ride, they could almost half from the peak. So we could talking about half the cost, maybe even better than that. Of course, we're doing now more volumes. So we're using more bonds. Germany requires more bonds than other countries. So in absolute terms, the decrease might not be that much. But in relative terms, it would be almost 50% of the peak values. And if you want to do this for '26, and we've traditionally given you values of something like EUR 90 million to EUR 100 million of those interest costs. I think if you plug in for this year, again, we're still on the journey to recycle all those bonds. If you're talking more 70-ish number, I think this year, it's a good calibration. And then we hope to improve this further, as I said, during this year and then for the years to come. Operator: And the next question comes from Sean McLoughlin from HSBC. Sean McLoughlin: Congratulations from me also. Just coming back to German auctions, it sounds from your comments like we have seen pressure on turbine pricing as a result of the price compression in the latest onshore bids. So it sounds like this is not all getting competed out at the developer level. Just to understand what kind of change are you seeing in conversations with your developer customers in thinking of bidding at the next auctions? And how you're planning on remaining margin neutral? That's my first question. Jose Luis Blanco: I think our take there is -- and let's do this together, Ilya, is that Wind is an amazing part to solve the problem of competitiveness of Europe and Germany and lower electricity prices. The floor price of the auction is substantially lower than the 10-year forward prices of Central Europe. So we somehow wish that our customers take that into consideration. And we can support equally the German ambition without doing unnecessary or unsustainable changes in that. Ilya Hartmann: I subscribe to that. I think the one and probably many people here on the call as well have been following this industry for quite some time, and you and I have been in this industry for 20 or in some cases, 20-plus years. And we've seen a few cases where systems start to get into auctions. And Germany has officially started that in 2017, but since it was undersubscribed, it never really was an auction system. Now with the oversubscription really taking only place since '24 and really since last year, I probably see that '26 is one of those transition years. And in those markets we've been working with [indiscernible] in the past, be it in the U.S., be it in Latin America or South Africa, people need to find a new normal. And sometimes they take somewhat irrational decisions. But after a not so long time, markets normalize. And I would say, Jose to your point about the electricity pricing in Europe, sooner or later, we will see that new normal. So I wouldn't take the '26 auctions for too much. Let's see 3, 4 auctions down the road where the final pricing of electricity in these auctions has leveled out. Jose Luis Blanco: And especially after the new policy next year, let's figure out. I think I tend to see it positively in a way that is big volume, 10 gigawatts for the foreseeable future is big volume and the ultimate price in Central Europe is a decent price for everybody to be profitable. Sean McLoughlin: Just another question, just to understand a little bit the bottom end of the guidance range. You're implying a margin fall despite roughly 8% higher revenue. So just to understand what are your bearish assumptions to get to that bottom end of the range? Jose Luis Blanco: The biggest -- I mean, there are 2 or 3. I mean, one is substantial delay on the order intake. We still need to sell order intake this year for percentage of completion of products that we plan to manufacture this year. If the order intake doesn't come, we don't produce to stock. We produce to orders. Even if we produce to stock, if we don't have the orders, we cannot recognize revenue and margin. So this is the biggest risk. Second bigger risk is delays, either due to us or to our customers or to permits, installation delays, construction delays. And the third is disruptions in supply chain that we have factored certain minor disruptions if there is -- this will depend how much this disruption will affect your supply chain. Ilya Hartmann: And I think it's a very good question. We haven't mentioned it before because if we give you a range for both revenues and for EBITDA margin, of course, we shouldn't fail to calibrate you and also to mention it here, we would like to calibrate you for both those ranges from what we see today in the midpoint on the revenues. And in the EBITDA margin, it's a midpoint view and Jose Luis -- looking at you... Jose Luis Blanco: Midpoint plus. Ilya Hartmann: Midpoint plus. If you ask something, it's midpoint, but if you ask us is it's another midpoint minus or midpoint plus. I think our answer is this is a midpoint plus view on the EBITDA margin guidance. Jose Luis Blanco: And the rest is the scenarios, scenarios that we need to plan for. Hopefully, those downside scenarios will not materialize. But in case those materialize, we don't want to surprise you. Operator: And the next question comes from Vivek Midha from Citi. Vivek Midha: Congratulations again for myself as well. I have a few follow-ups, if I may. The first on the market. You mentioned that the U.S. is contributing to your order intake assumptions underpinning the midterm guidance. Could you help us understand what you have to share your assumption around that U.S. market volume within that guidance? Jose Luis Blanco: I mean you know that we don't discuss order intake guidance nor distribution of the markets within that, even in the year. So I feel we cannot be very specific there. But our ambition for U.S. was returning to our previous market share. And our view, and we might be completely right or wrong is that we don't see reasons why U.S. medium term is not a sizable market as Germany. Do we see that short term? We don't. But that's our assumption medium term that U.S. should be a sizable market as Germany and that we should be able to deliver there in our traditional 20% market share. Vivek Midha: Helpful. My other follow-up was on the cash flow side, following up on your comment, Ilya, around the sort of cash conversion, how we can think about that going into free cash flow. If I look at the key building blocks of EBITDA, working capital and the CapEx, that would appear to imply around EUR 450 million, in line with that view of 50%, 60%. That doesn't include any changes around the warranty provision topic. Should we expect any cash outflows from that? Is that material at all? Ilya Hartmann: Thanks. Very good question. I'm afraid I do my caveat one more time that I don't want to guide you for the free cash flow. But if I was accepting your number for a second, and you're always doing very well, the building blocks for us, then I would say that includes all potential outflows from anything on our provisions. Operator: And we do have a follow-up question from John Kim from Deutsche Bank. John-B Kim: More of a conceptual question. I'm wondering if you had a view as to longevity of the Delta4000 platform. As the market evolves, you tend to need to refresh. How should we think about a new platform in the next 3 to 5 years? Jose Luis Blanco: Let me see how I think our current platform with minor evolutions are very good to deliver what the market needs in the markets where we operate in Europe, where you have no restriction, logistical challenges, same applies to Canada, to U.S. So we are not going to be the ones first to launch a new platform to the marketplace. So in the horizon of what we see in the medium term, we don't see the need. Nonetheless, we need to be prepared in case our competitors do so. But I don't see the need because we can deliver the cheapest electricity source of energy in Central Europe with the current products, and there is no need for that. So let's see what the market does. And in our view, the best way for all stakeholders in the marketplace is reliable products. And reliability comes from testing, from field experience for operational platform and from taking the time to ramp up and staying at nominal capacity as many years as reasonably possible. That's the key for profitability and sustainability. So hope that the market remains that way as this has happened with Delta4000. John-B Kim: Okay. Helpful. If I can ask an unrelated question. Can you just comment on price cost dynamics in your service business? You had very strong sales. You have a very strong backlog here. But I'm wondering how we should think about cost to serve given the growth in the fleet and what levers you're throwing to kind of optimize that? Jose Luis Blanco: I mean, on our midterm target, we are considering that the service business should contribute with the growth and with slightly profitability improvement and the profitability improvement comes especially from more reliable turbines with less problems in the field to replace and repair. And then if the growth is coming as is expected in areas where you have a strong service business fleet, you don't need to grow up overheads and new capacity, but you take certain efficiency from the growth in existing geographies. And those are the levers. Our target, I mentioned in the speech, we should hit someday the 20%. Is this going to be a profitable business as the market leader? No, because we don't have the size of that business for the time being. Long term, maybe. But medium term, no, but definitely crossing the 20% is something that we are ambitioning. Operator: And we do have one more follow-up question from Constantin Hesse from Jefferies. Constantin Hesse: Just one quick follow-up on tax. Ilya, can you just remind us, I mean, after so many years of pretty substantial losses, you must have built quite a good portfolio of some tax loss carryforwards. How do you think about tax over the next few years? Ilya Hartmann: Yes, good question. As a company now that makes profit, so we need to think about taxes even in a more intense way than before. So of course, ultimately, the applicable tax rate, and that's what we're giving you on the P&L side is that German 30% rate. But when you think about cash taxes, you should more think about a 15% to 20% cash tax rate. I mean we're working on this. So take it as a very early nonguided number, but to give you an order of magnitude, that's where we're going using the losses from the past, and let's see how optimal we can get that. Constantin Hesse: And can I just ask you in terms of how long can this last for in terms of that range that you just discussed? Ilya Hartmann: I mean it will depend. I mean, according to our midterm target and now we're really entering a territory where we're typically on a public call. But of course, if we go at that rhythm and we're talking midterm, maybe of a common understanding here in 3 to 4 years, we might have absorbed and consumed all of those past losses. Operator: So it looks like there are no further questions at this time. So I would like to turn the conference back over to Jose Luis Blanco for any closing remarks. Jose Luis Blanco: Thank you. Thank you very much for the very good and intense Q&A session. Let us conclude with our key messages for today. First, '25 was a record year with a strong operational performance and major financial and operational improvements. Second, strong free cash flow and net cash position above EUR 1.6 billion, strengthening our strategic flexibility. Third, we are well positioned for 2026 and beyond. Fourth, our shareholder return policy is an important milestone in Nordex development in its first time ever. And finally, we reached our midterm EBITDA target ahead of plan, and now we are setting up to improve it further towards 10% to 12% across the cycle. Thank you very much for your time and wish you a wonderful day ahead. Operator: Ladies and gentlemen, the conference is now over. Thank you for joining, and have a pleasant day. Goodbye.
Operator: Greetings, and welcome to the LTC Properties, Inc. Fourth Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions]. As a reminder, this conference is being recorded. [Operator Instructions]. It's now my pleasure to introduce Pam Kessler, Co-President and Co-CEO. Pam, please go ahead. Pamela Shelley-Kessler: Good morning, and thank you for joining us. Eight months after launching our SHOP initiative, we are almost halfway through our transformation from a lower growth triple-net REIT into a faster-growing SHOP-focused REIT a transformation that will lead to higher multiyear, internal and external SHOP and earnings growth and to superior shareholder returns. This transformation has included substantial investment in people, systems and technology, which will continue to be a focus to support our aggressive growth plans. We have made great progress growing our seniors housing portfolio through SHOP reflecting successful execution across every aspect of the business. Today, we are guiding to $600 million in acquisitions at the midpoint for 2026, all of which we anticipate will be in SHOP. This acquisition guidance is nearly 70% higher than SHOP acquisitions in 2025. 2026 started off strong with $108 million in SHOP acquisitions already completed and another $160 million on schedule to close in the second quarter, which takes us nearly halfway to our $600 million midpoint investment guidance for the year. Throughout our transformation, we have continued to maintain a strong balance sheet with well-laddered debt maturities and a FAD payout ratio below 80%. Since launching SHOP last May, we grew it to 25% of our investment portfolio by year-end. Based on our 2026 acquisition guidance, we expect to end this year with SHOP growing to 45% of our investment portfolio and 40% of our NOI capitalizing on LTC's ability to accelerate our growth through acquisitions. By launching SHOP at a small-cap REIT, we are leveraging the denominator effect to our advantage. LTC's smaller initial footprint provides the power to capture outsized growth, where even modest investments have a meaningful and visible impact. Additionally, after the prepayment of the $180 million Prestige loan expected later this year, loans should be reduced to less than 10% of our portfolio, and skilled nursing investments will represent less than 30% by the end of 2026. This strategic portfolio transformation reflects our SHOP launch and rapid growth within a targeted 18-month period. With our transformation complete at the end of 2026, we see the opportunity for continued accelerated internal and external growth powered by SHOP in 2027. Now I'll turn the call over to Gibson to discuss our portfolio and strong SHOP performance. J. Satterwhite: Thank you, Pam. We've undertaken the transformation to increase the organic growth and new investment growth profile of our portfolio and maximize risk-adjusted returns for our shareholders. To that end, we have focused over the last 1.5 years to develop and enhance our platform to position LTC and our operators for success, and we'll continue to make further investments going forward to position LTC for profitable growth. In addition to adding accounting, FP&A and data analytics resources, we recently welcomed 2 Vice Presidents to our asset management team, both with extensive experience in systems development and seniors housing asset management. Our SHOP portfolio results support our 2025 strategy by outperforming our expectations. The original 13 properties converted to SHOP grew NOI over 2024 pro forma NOI by 22% and produced $16.2 million of combined rent and NOI in 2025 compared to $12.3 million of rent in 2024. The remainder of the SHOP portfolio outperformed expectations in the fourth quarter by contributing $5.9 million of NOI, about $700,000 above the midpoint of guidance. Our 2026 SHOP NOI guidance includes 13 properties we originally converted and 14 properties acquired to date. Our guidance for these 27 properties assumes 14% NOI growth at the midpoint for full year 2026 over pro forma 2025. This subset of properties realized occupancy of 89.7% in 2025, which we are projecting will grow by about 150 basis points in 2026. We further project that RevPOR will grow by approximately 5% and EXPOR will grow by 2.5%. We do want to note that the 2025 results for the 14 properties we have acquired include occupancy and performance as reported by the prior owners adjusted for the current management fee structure. We will continue changing the mix of our portfolio in 2026. Prestige Healthcare has delivered notice of their intent to prepay on or about July 1, the $180 million loan, which is currently yielding approximately 11%. Additionally, we expect to sell 5 skilled nursing properties and have certain loan payoffs totaling $90 million in the next 60 days. These transactions, together with our external growth through SHOP will meaningfully reduce our skilled nursing and loan exposure. With that, I'll turn things over to Dave for an update on our growth strategy. David Boitano: Thank you, Gibson. In 2025, we put $360 million to work through SHOP acquisitions. By the end of the second quarter of this year, we will have added an additional $270 million moving us rapidly towards our $600 million midpoint acquisition guidance and making 2026 our most active investment year yet as we accelerate our growth towards an increasingly SHOP weighted portfolio. LTC's relationship-focused culture is the foundation of our success. In 2025, we closed 2 follow-on transactions with existing operating partners and our momentum is continuing in 2026 with another follow-on deal completed and 2 more and the $160 million we expect to close shortly. At the same time, we are in active conversations with operating partners new to LTC and are evaluating acquisitions to kick off those relationships. In a competitive senior housing acquisitions environment, our smaller asset base and personal relationship-driven strategy are competitive advantages. We find opportunities in both single and multi-property investments and do not need to chase overpriced large on-market transaction. We are keenly focused on every deal and every LTC operator relationship, each of which directly contributes to our growth and furthers our transformation into a SHOP growth engine. Existing and prospective operators desiring to grow their portfolios or retain assets when an investor wishes to exit, seek LTC because we listen, we collaborate and we engage. The evidence of this success can be seen in our accelerating year-to-date external growth that in addition to the $160 million previously mentioned, includes an acquisition pipeline of over $500 million in deals under review and consists entirely of SHOP. Our acquisition strategy is to partner with experienced, regionally focused operating teams and add newer communities with lower CapEx requirements. These are stabilized assets, but that does not equate to low growth. We are buying assets with strong pricing power, high incremental margins and durable contributions to earnings growth. Our expanding SHOP platform is positioned to perform over time, and we expect to achieve unlevered IRRs in the low to mid-teens. I'll now pass the call to Cece for a review of our financial results. Caroline Chikhale: Thank you, Dave. For the end of the year, we bolstered our growth capacity by expanding our credit facility to $800 million, including $200 million of term loans. We anticipate receiving nearly $270 million in asset sales and loan payoffs in 2026, which will be used to fund future investments using multiple levers, including proceeds from our ATM program, borrowings under our revolving line of credit and asset sales where attractive pricing provides a better cost of capital, we feel very confident in our financial strength, which will support our ability to fuel our SHOP growth. With the $270 million of expected proceeds, our liquidity stands at $810 million on a pro forma basis. We have minimal near-term debt maturities, giving us virtually no refinancing risk. At year-end, our debt to annualized adjusted EBITDA for real estate was 4.5x, and our annualized adjusted fixed charge coverage ratio was 4.4x. While we are well within our stated leverage target of 4 to 5x, we believe we can reduce that further over time. Compared with the same quarter last year, core FFO per share improved $0.05 to $0.70 and core FAD per share improved $0.07 to $0.73. These results represent core FFO per share and core FAD per share growth of 8% and 11%, respectively. The increases were primarily due to new SHOP acquisitions and triple-net conversions to SHOP, partially offset by an increase in interest expense and decreased rents related to asset sales. Our 2026 guidance for core FFO per share is projected to be in the range of $2.75 to $2.79 and core FAD per share in the range of $2.82 to $2.86. For the first quarter, we expect core FFO per share in the range of $0.66 to $0.68 and core FAD in the range of $0.68 to $0.70. Our 2026 guidance includes $400 million to $800 million of SHOP acquisitions with SHOP NOI in the range of $65 million to $77 million and FAD CapEx of approximately $5 million. Additionally, our guidance includes the $270 million of proceeds from asset sales and loan payoffs. Other assumptions underpinning this guidance are detailed in yesterday's earnings press release and supplemental, which are posted on our website. Now I'll turn the call over to Clint for some closing comments. Clint B. Malin: Thanks, Cece. 2026 will complete LTC's transformation from a triple-net skilled nursing and seniors housing REIT, fueling our growth through idea to become a larger SHOP focused REIT. Increased NOI growth will come organically through our existing portfolio and through new SHOP acquisitions. With our investment guidance of $600 million at the midpoint in 2026, SHOP will exceed $1 billion of assets and represent 45% of our portfolio by year-end. Including the SHOP acquisitions under contract, the average age of our SHOP portfolio will be 9 years, reflecting our strategy of investing in newer SHOP communities that are best positioned to compete against future new development. We will drive strong organic SHOP NOI and per share growth through aligned operator relationships and the quality of the assets. In fact, we believe that organic NOI growth will double by the end of this year compared with our pre-transformation to SHOP. We have made rapid progress in executing on our SHOP strategy. So most importantly, on behalf of the entire LTC team, I want to extend a sincere thank you to the operators who have placed their trust in us, helping us establish and grow our SHOP platform. We have 8 SHOP operator relationships in our portfolio, 6 new to LTC since our launch. And in Q2, we will be adding 2 more. Each one of these operator relationships represents a huge opportunity to continue driving LTC SHOP growth through management agreements that align interest to deepen our relationships. We have a simplified and compelling investment thesis, which we are executing upon with speed, determination and conviction to power future growth by optimizing risk-adjusted returns to our shareholders while increasing our organic and investment growth profile. This success is made possible by a talented group of tenured employees and new professionals recently joining our team, all coalescing around a transforming LTC that is standing out in the industry and is well positioned for tremendous growth. With that, we are ready to take your questions. Operator: [Operator Instructions] Our first question today is coming from John Kilichowski from Wells Fargo. William John Kilichowski: This pivot is happening relatively quickly, and it sounds like messaging has been it's not if but when something happens to the SNF funding landscape. I'm curious in your minds, like what are the nearest 1 or 2 greatest threats to SNF today that could cause some sort of re-rating the market isn't expecting? Clint B. Malin: From a SNF perspective, John, I would say that there's a tremendous amount of private capital, I think, that's driving prices in skilled nursing. So that's one element that could have a change. And then just as we've generally seen over the years, I mean, skilled nursing at cap rates that it has, it has a stroke of the pen risk and things tend to happen when you least expect it. And we do see much more organic growth from investing in newer assets with a better growth profile. So that's really our thesis and why we're aggressively growing into SHOP. William John Kilichowski: Okay. Well, the 14% same-store growth is a great starting point. I'm curious, is this sort of like a 3- to 4-year run rate as the business remains immune, likely immune to supply shocks and demand is relatively known? Or do you forecast that moderating slightly as occupancy fully stabilized at these assets? J. Satterwhite: It's a fair question. John, this is Gibson. It's a fair question. We are -- it is a relatively new portfolio for us. And so we're comfortable with the guidance. I think the way to think about this is that, that pro forma occupancy that I gave in my prepared remarks, 89.7% that's pretty close to stabilized levels. And so we're encouraged to see that this year, our expectations are in that mid-teens growth rate. So we really just don't want to get into the out years right now. Operator: Our next question is coming from Austin Wurschmidt from KeyBanc Capital Markets. Austin Wurschmidt: Just going back to SHOP for a minute. Gibson, you had highlighted that the 13 original assets grew NOI by 22% last year on a pro forma basis versus '24. Can you give us a sense how the 14% on the 27 assets compares to how that trended in 2025 or just versus the fourth quarter? J. Satterwhite: Let me see if I can answer this in another way and see if that scratches your heard, Austin. If you look at our projections, '25 over '24 and you pull out that original 13, our growth rate of 14% isn't going to materially change. Austin Wurschmidt: Got it. That's helpful. And then maybe just going back to John's question a little bit differently here. I mean you mentioned the 89% is nearing stabilization, but this portfolio does continue to evolve as you layer on additional acquisitions. I mean, what are your latest thoughts for the portfolio today as to where stabilized occupancy levels are? And what sort of the right feeling on where you can kind of send out in-place rent increases or drive RevPOR in the coming years? Pamela Shelley-Kessler: Austin, this is Pam. For stabilized occupancy, given the lack of supply that we see over the next few years, we feel occupancy can climb into the 90s. We did not project that in our 2026 guidance. But it is possible. And it's always a fine balance between occupancy and rate growth, and we feel that this portfolio has the opportunity for both. Clint B. Malin: And this also -- this is a key of what we're focused on, what we're investing in. It's newer assets, and we've emphasized that in our comments about the average age. We feel those are going to be best positioned to compete against new development. That will happen. And we think in the interim, they'll have pricing power to be able to drive growth. And we've done that by design, on intention, looking long term to have assets that can effectively compete in the future. Austin Wurschmidt: And then what was the in-place rent increases now for this year? J. Satterwhite: Well, the RevPOR guidance we gave is around the 5%. And so that ranges across the portfolio from 4.5% up to 7%. But a lot of the hay is in the barn with respect to year-end increases or increases that went into effect in January. But then we have some more that increase on anniversary. And then we have to see what happens with the Street rate. So I think we're comfortable with our all-in like RevPOR assumption of that 5% range. Operator: Next question is coming from Juan Sanabria from BMO Capital Markets. Juan Sanabria: I'm just hoping you could talk a little bit about the pipeline of investments and the year 1 yields you're underwriting for SHOP. And then on the flip side, how we should be thinking about some of the disposition yields for some of the SNF that you're selling. You've already given us the loan piece. David Boitano: Juan, this is Dave. I'll take the first half, and I think Gibson will take the second half. So from an acquisition pipeline perspective, you saw in our remarks that we have 160,000 -- $160 million under LOI and in process. We are looking at generally what we looked at last year in terms of sort of going in year 1 yields about 7% or so with good growth headroom beyond that. Clint B. Malin: Also one thing to think about on what we're looking at for deals, as Pam mentioned in her prepared remarks, mean the size of LTC really we're using to our advantage to be able to grow because we can look at smaller transactions, which have better price points to be able to drive those initial yields. So we think that's a huge opportunity for us as we're growing this portfolio and are projecting on gross book to be a 45% SHOP by the end of the year since we launched this midyear in '25. J. Satterwhite: And then Juan, this is Gibson on the dispositions. I think the Prestige loan is a unique case where that, we had a heavy concentration with one operator in one state that caused some disruption a couple of years back because of that state's specific reimbursement program. And so that was a strategic decision to derisk the portfolio and reduce operator concentration. We still have investments to for Prestige, and it's not a Prestige thing. It's just an overall operator concentration thing. On the rest, if you blend it together, we're selling at about an 8.2% cap. And so there, if you think about that in terms of swapping out of older skilled nursing assets as we've been doing on an opportunistic basis over the last 1.5 years or so, and 8.2% with 2.5% anywhere from 2% to 2.5% escalators, and we can recycle that into newer seniors housing assets that are really built and will be competitive over the long term. We feel like that's a good risk/reward trade for our shareholders. Juan Sanabria: And then I just wanted to ask ALG, there was previously some discussion about some change in that portfolio going forward and some options they had. So just curious how we should be thinking about piece of your exposure longer term? Clint B. Malin: I think for ALG, Juan, I think that they do have purchase options. We talked previously about -- it's really more interest rate sensitive for them to look at probably bond financing to take this out. So we look at this probably will be in 2027. We have 3 different or 4 different investments with them. There can be a small -- one of the small portfolios could trade maybe towards the end of this year possibly. But I would really think of it more as a '27 event. Juan Sanabria: Got it. And then if I could just be greedy, one more question. For the incremental financing, like if you hit the top end of your acquisition guidance, how should we think about that? It sounds like you said leverage could go down. I'm not sure if that's a product of EBITDA growing or if we should assume that maybe the goal would be to over-equitize positions over and above kind of the dispositions you've laid out or loan repayments. So just curious on the funding for the pipeline at kind of the different -- either the midpoint or the high end in particular. Pamela Shelley-Kessler: Yes. Thanks, Juan. It's Pam. Yes, I think you're thinking about it right. I mean the beauty of a higher growing portfolio is that your deleveraging happens naturally a lot faster through EBITDA growth. But we would also look to overequitize acquisitions if the pricing is right. Operator: [Operator Instructions] Our next question is coming from Michael Carroll from RBC Capital Markets. Michael Carroll: Clint or Dave, can you guys provide some more color on the competitive landscape for seniors housing deals right now? I mean, how difficult is it for you to find deals that you want to own that meets your underwriting? And then when you do find those transactions, I guess, where have cap rates trended? I know you've been talking about that 7% range for some time. I mean, are we starting to see that take a little bit lower? Is it hard to find yields at that 7% yield? David Boitano: So this is Dave. On our -- I mean Clint hit on this nicely in terms of the importance of a deal to LTC and how our scale works for us. So we do a good job of finding transactions that are probably in that onesie-twosie time frame and our size, and our customers, our sellers know that they're important to us. So one great benefit here, it's been sort of in fashion to have buyer interviews. So I can bring a C-suite, bring my CEOs onto those calls to sort of underscore how important the deal is. And as you know, with any seller, certainty of execution matters an awful lot. So we can give a transaction a lot of attention and hyper focus. We've continued to see a pretty good stream of opportunities. And generally in that first year, underwriting of around 7% or so, it doesn't mean that there's not pressure, but our whole world is looking at a lot of transactions to find a few that are worthy of underwriting and progression through the process. So we're seeing a good flow of potential opportunities, and we feel good that we'll find the right ones for LTC out of that stream. Clint B. Malin: And so with that backdrop, we've guided to $600 million at the endpoint for investments for '26 and with deals closed under contract, we're almost halfway through that. So although it's a competitive landscape, we feel that we've been able to be at the table on transactions. And a lot of the deals that we have, as Dave mentioned previously, are operators bringing us into transactions, which with having -- soon to have 10 operative relationships in our portfolio. We think that's going to help drive continued access to deals. And when we're looking at them on onesie-twosie transactions, it can be helpful. And another thing that we're seeing also on one of the transactions we're working on is the seller is looking at a tax-efficient transaction. And so we're looking at a down REIT structure. So when you look at financing transactions and utilizing equity, pricing through a down REIT structure, it can be an attractive option for us. Michael Carroll: So then, in this type of environment, if you look at the 7 yields, I mean, do you see -- foresee like if you kind of get back to the end of this year, you might have to go below that? Or is there enough transactions at that level that you think at least through this year, you can still achieve that 7% target? David Boitano: So as Clint mentioned, right, we have $270 million in the door, right? So those are set. So we've got another $300 million plus to go. Nothing is easy if you're going to do it well. So we'll be working hard to find the right deals all year long. But we are steadfast in working to maintain that kind of year 1 yield of 7%. But definitely, there will be pressure in the industry. A lot of people are discovering senior housing or people showing up at the table. We still feel like we've got a good opportunity kind of given our relationship focus and our style of execution to find the deals that make sense for LTC. Pamela Shelley-Kessler: And Mike, I have one more thing to add to that. Last year, when we talked about our projected underwriting and being at 7%, very conservative. Our 2026 guidance is already a year 1 over 7.5%, it's like 7.7%. So we're already beating that. So we've created value there just in a few short months and expect to create more. Michael Carroll: Okay. Great. No, that's helpful. And then just last for me. Related to Prestige on the remaining loans that LTC is holding after, if they potentially pay them off in July or half of them. I mean, is there a desire to have them pay off those loans too? Or should we think about that as a longer-term hold that LTC plans to continue to maintain? Clint B. Malin: We should think of it as a long-term hold. Right now, we -- after the payoff of $180 million, we'll have $90 million remaining with them. So they will be reducing concentration as Gibson spoke about, and they would probably fall outside of our top 5 operator relationships. Pamela Shelley-Kessler: And they don't have an option to prepay those. Operator: Next question is coming Rich Anderson from Cantor Fitzgerald. Richard Anderson: So I just want to make this sort of crystal clear. Is your expectation on a go-forward basis, 2027 and beyond for your SHOP business to be producing sort of low mid-teens type of same-store NOI growth? Is that the target you're going after? Or is it something lower than that? J. Satterwhite: We're going to see how this year plays out. We're excited about what we're seeing as we go into this year and as we get into later in the year, Rich, we'll update that. I mean I think going in a few calls ago, we said that we were targeting -- we're going in at 7% and targeted low teens IRRs. And so that's basically telling you we expect mid-single-digit growth over the long term. But I think as we work through the process. We just acquired a lot of this, getting to really understand the portfolio. We're excited. And as Pam mentioned, in our projections, we're assuming higher yields on the initial purchase price than we did an acquisition. So I think we're excited about the opportunity in 2026, and we hope that continues on. But we'll update you as we get to the end of the year -- throughout the year. Michael Carroll: But the 22% NOI in the 13, that's really apples-to-oranges from a previous net lease structure, correct? Just so I understand that correctly. J. Satterwhite: Yes. That's fair, yes. Clint B. Malin: And that was intended just to give visibility in regard to what we had under our rent structure and what we had to for comparable metrics what it looked like under SHOP. So that was why we broke that out separately. J. Satterwhite: That's right. And that was in -- sorry, go ahead. Richard Anderson: No, you go ahead. J. Satterwhite: I was just going to say, yes, but I mean, that was -- we were in the structure able to capture the upside in those properties. And that's something strategically as we thought about entering RIDEA, really started talking about seriously 18 months ago, how to go about doing that. And we're just really excited that we're able to do that and be able to capture the upside and do so in a way that aligns our interest with our operators to incentivize them to drive performance. But yes, your comment that we're comparing that increase in NOI or the triple-net structure is fair. But I will say that as we did that, we were able to capture the upside because there was -- the coverage on that Anthem portfolio was pretty close to where the rents we were collecting. Richard Anderson: Right. Understood. Got that. Okay. In terms of the CapEx, I see your guidance is $0.10, a little less than $5 million a year on whatever you own average -- weighted average wise for the year. I don't know, $5 million just feels low to me for a $1 billion portfolio. Is that a function of its age? I wonder what do you think the CapEx burden might be for LTC going forward when you're kind of fully built out $1 billion or so of assets? J. Satterwhite: Yes, that's a fair question. I guess I'll answer it this way. So we've assumed basically about $1,500 a unit. So for the portfolio that we currently have, the 30 properties, we did go through those recurring CapEx budgets, and we feel pretty comfortable with those given the age of the assets. So I don't -- we didn't feel like we were really stretching or deferring anything and felt like that was what was requisite to keep the buildings competitive. So we'll have to see how that evolves. I'll say the overall number includes assumption kind of a weighted average of that $1,500 a unit for acquisitions going forward. Pamela Shelley-Kessler: Yes. And I don't think you can compare our CapEx budget to our peers just because the makeup of our SHOP portfolio is so different. I mean with an average age of 9 years, that's really young, really new buildings that don't have a lot of CapEx requirements. Clint B. Malin: That was strategic on our part because as we were introducing this portfolio, to simplify the integration of this and have assets that can compete against potential new development. I mean, we do see that over time, that will increase. But for the interim and short-term period, that's why you're seeing a lower spend. Richard Anderson: Yes. Okay. Yes, I was going to say young does become old unfortunately, over time. Clint B. Malin: And we'll see... Pamela Shelley-Kessler: We all age, Rich. We all age. J. Satterwhite: But -- Rich, I will say as we work through the budgets, we're not deferring things that we're not targeting a number. We're committed to invest in the portfolio to keep it competitive. And so if that number drifts up to drive NOI growth, that's what we'll do. But we did try to look at this from a holistic perspective. And when we certainly weren't looking to trim number out of those maintenance CapEx budgets going forward. Richard Anderson: Okay. Last for me. You call yourself done at the end of 2026 with this transformation, 45% essentially SHOP. Is that your version of the efficient frontier? Or will you expect the SHOP exposure to sort of trickle up from that point forward? Or is it like a 50% exposure to SHOP sort of your kind of your sweet spot? Pamela Shelley-Kessler: No, we don't have a target on it, Rich. It really -- transformation versus evolution, I mean, transformation. This is something that we've done quickly. And to Clint's prepared remarks point, 18 months. That's really, really fast to change the complexion of a company. After this year, it's an evolution. We will continue to invest where we see the best return for our shareholders, which in our crystal ball looks like it will continue to be SHOP. But if it's not, we'll pivot to the investment that drive shareholder value the best. But for right now, it will be an evolution more towards SHOP than a transformation at the -- after this year. Operator: Next question is coming from Okusanya Omotayo from Deutsche Bank. Omotayo Okusanya: Given the RevPOR, EXPOR spread you guys saw in the quarter, how confident are you that the SHOP portfolio can deliver the growth you're guiding to? And can you walk us through kind of the key operational levers that you kind of are relying on to get you guys there? J. Satterwhite: I think the key levers are laid out there in the supplemental on our guidance page. So I think that if you zoom out and with occupancy growth, our EXPOR expectations are just slightly below what people would expect for inflation. I don't think that that's a particularly aggressive assumption. But I think some may point to the top line occupancy growth of 150 bps is maybe a little conservative. So we're really trying to -- it's a 29 property -- sorry, it's a 30-property portfolio. The 27 that we guided to, which the 27 being, 13 we converted and then everything that we've acquired since. So everything is kind of at or near stabilization. But it's really hard to -- what the portfolio of that size really zoom in more than the detail that we've given you on the operational levers. I mean, we feel like that's appropriate. And just with 29 -- or sorry, with 27 properties you're going to have more variance than you would in a 500 property portfolio. But I think Again, we feel good about the RevPOR assumptions going forward. We think it's achievable. We don't think it's a layup. EXPOR, same thing. So we try to put the goldilocks level of guidance out there that stretches our operators, but it's achievable. Richard Anderson: Right. That makes sense. I guess the second question I have is, I know you guys have talked about -- and we all know like suppliers have really been an issue, but have you anything around that changed at all? Clint B. Malin: I would say not really supply. Now we haven't seen -- what you do see though more is that operators that have a track record in development are talking more about gearing up for development. So I think that's where you're hearing more talk. It's not so much shovels in the ground. It's more of -- they see that there's going to be a need for supply in the future. And they have experience in doing it, and they're trying to prepare to be -- to participate in that when the time does come. J. Satterwhite: And I think what specifically within our SHOP portfolio construction activity is very light. There may be 1 under construction, 1 under consideration and some expansions here and there around the edges, but it's very light. Operator: We reached end of our question-and-answer session. Before I turn the call back to management, please note that today's comments, including the question-and-answer session may have included forward-looking statements subject to risks and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties are detailed in the LTC Properties filings with the Securities and Exchange Commission from time to time, including the company's most recent 10-K dated December 31, 2025. LTC undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances after the date of this presentation. I'd now like to turn the floor back over to management for any further or closing comments. Pamela Shelley-Kessler: Thank you, operator. And thanks to everyone for your thoughtful questions. We appreciate your continued interest, and we look forward to updating you on our progress next quarter. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.
Hinda Gharbi: Good morning, good afternoon, and good evening to everyone. Thank you for joining us for our full year 2025 results. I'm joined by Francois Chabas, our Group CFO. In keeping with our solid plan execution, 2025 delivered sector-leading organic growth and strong margin progression. In the second year of our LEAP 28 strategy, we delivered results fully aligned with our ambition to accelerate growth and enhance returns. During the year, we implemented our new organization, which is now accelerating strategy execution across our geographic platforms and product lines. Our results reflect the strengthened portfolio, the tangible impact of our performance programs and efficient capital allocation. I'm proud of our leaders and their team's contributions across the world and of the consistency in delivery in a fast-changing market. Let me start with our financial highlights for the year. 2025 was the second year of our LEAP 28 strategy, and we continue to gain traction across all pillars. We delivered 6.5% organic revenue growth, including 6.3% in the last quarter of the year. Adjusted operating margin of 16.3%, up 32 basis points year-on-year and 51 basis points at constant currency. Adjusted earnings per share is up 2.8% on a reported basis and 9.2% at constant currency. Free cash flow of EUR 824 million with a very strong 107% cash conversion. At constant currency, we delivered double-digit shareholder returns. For 2025, we will propose a cash dividend of EUR 0.92 per share, up 2% versus last year. It is fully in line with our 65% payout ratio. Finally, as we have done in the last 2 years, we will be issuing a new EUR 200 million share buyback program to increase shareholder returns. Moving now to our revenue performance by business and geography. Across the portfolio, our organic growth was supported by strong momentum in energy, the continued buildup of digital infrastructure and rising demand for corporate and risk -- enterprise risk assessment solutions. This sector-leading growth reflects the attractive mix of our strengthened portfolio. Industry, Certification and Marine & Offshore delivered the strongest performance, growing from high single digit to double digit organically. The rest of the portfolio grew in the mid-single-digit range with some activities benefiting from very powerful structural drivers. In B&I and Infrastructure, data centers were up 30% organically year-on-year. In Industry, energy-related activities were up 13.9%. In Commodities, Metals & Minerals were up 9.2%. From a geographical perspective, strong organic growth across all regions. The Americas grew by 4%, supported by sustained energy spend and expanding data centers. Our momentum in Europe continues with 4.1% organic growth, largely above GDP growth. Asia Pacific reported 8.2% organic growth with broad-based expansion across Asia and Australasia. And our fastest-growing region was the Middle East and Africa, up 16.6%, benefiting from major infrastructure programs and sustained energy investments. I would like to report now on the progress of CSR -- of our CSR programs. In health and safety, continuous prevention programs further reduced our accident rate versus last year. On decarbonization, we further reduced our Scope 1 and 2 emissions by 7% year-on-year. This is fully in line with our science-based target initiative expectations. For gender diversity, steady progress with our ongoing program. In 2025, we improved or maintained all our major nonfinancial ratings, confirming Bureau Veritas's leadership. We raised our EcoVadis score to 80 out of 100 and obtained the top 5% distinction in the S&P Global Sustainability Yearbook 2026. Let's now move to the business highlights. I will start with Marine & Offshore. The division delivered a very strong performance in '25 with 14.3% organic growth. This marks the third year in a row of double-digit organic revenue growth. These results were driven by the ongoing renewal and modernization of the global fleet and the expansion of specialized vessels. Looking at it by segment, new construction delivered high double-digit growth from accelerated shipyard deliveries and capacity expansion, particularly in China and Korea. In 2025, we secured 14.4 million gross tons of new orders, bringing the backlog to 33.5 million gross tons, up 23% year-on-year. Core In-service achieved mid- to high single-digit growth, largely driven by increased volumes and some pricing. At year-end, we serviced more than 12,300 ships. Marine & Offshore continues to invest in new solutions to support our clients' energy transition. In Qatar, we opened a global gas center of excellence, supporting LNG projects worldwide through our global technical network. Looking at our Agri-Food & Commodities. This business delivered 3.7% organic growth this year. In Oil and Petrochemicals, performance remained resilient in challenging market conditions. Non-trade activities grew strongly, supported by increased demand for biofuels, marine fuels and sustainable aviation fuel and also from new lab capabilities. Metals & Minerals delivered high single-digit organic growth, driven by increasing projects in copper and gold and by the expansion of our lab network, specifically in Chile. In Agri-Food, we are completing the pivot of our portfolio with the sale of our food testing business in 2025. This divestment will be accretive to the divisional margin on a 12-month basis. In Industry, the division delivered 8.9% organic growth in 2025. We are a key player in the industry segment, a [ EUR 1.4 billion ] division, predominantly exposed to energy and energy adjacent sectors. This performance reflects robust market dynamics, supported by strong energy sector investments as countries continue to secure energy supply, decarbonize and transform their energy mix. The evolution of the portfolio is ongoing with acquisitions supporting the new strongholds of renewable and low-carbon energy services. By segment, Oil & Gas delivered double-digit organic growth, driven by new projects, particularly in gas and in major resource holding regions. Geographically, the Middle East, Africa and Asia have sustained investments in new oil and gas fields. Power & Utilities maintained double-digit growth. This was supported by investments in renewables and nuclear as electricity demand accelerates on the back of data center expansions and national electrification programs. Geographically, strong momentum across North America, Asia Pacific and the Middle East. In terms of transition services and green objects revenue streams, in the Middle East, we entered into a memorandum of understanding with Masdar, an Abu Dhabi clean energy company to help shape renewables and green energy standards in the region. We were also awarded a contract to support a client's first renewable energy project, combining solar generation and battery energy storage in the United States. Moving on to Buildings & Infrastructure. We delivered 5.2% organic growth in 2025, including a strong 8% in the fourth quarter. Today, B&I represents EUR 2 billion in revenue, a clear leader in the sector. 2025 was a strong year for our portfolio expansion with successful integrations, particularly the APP Group in Australia and further portfolio streamlining, including the divestment of noncore construction technical supervision business in China. Growth for B&I at constant currency was at a high 11.6%. Our CapEx activities delivered high single-digit growth, fueled by data center commissioning projects across the U.S., Europe and Asia and supported by recent acquisitions that are already accelerating organic growth. OpEx activities remained resilient, underpinned by the structural need for environmental measurements and energy efficiency audits. Infrastructure delivered steady growth. It now represents 20% of the divisional revenue. This was supported by government-led spending in Europe and major rail and terminal programs in North America. Major infrastructure investments are also ongoing in Asia Pacific and the Middle East. We are expanding our services for green objects in B&I. We secured a multiyear contract for a new battery gigafactory in Spain. In transition services for this division, we delivered a large-scale decarbonization program for a European fitness chain. Moving to Certification. In this division, we delivered a strong performance in 2025 with 7.9% organic growth for the year, with an acceleration at 8.4% in the fourth quarter. The certification business benefits from increased needs for assurance, decarbonization, supply chain resilience and cybersecurity solutions. This business represents many opportunities to innovate and create new schemes for customers as they pursue their own business plans. A number of acquisitions were completed in the last 18 months are expanding this portfolio in sustainability and cyber. Growth at constant currency in certification was up double digit. Looking by segment, QHSE, quality, health, safety and the environment and Specialized schemes grew at a high single-digit rate, supported by robust activity in most regions and very strong demand for food safety certifications. Sustainability and digital certification recorded double-digit organic growth. This was fueled by rising demand for carbon and greenhouse gas verification, supply chain ESG audits and upcoming regulatory requirements such as the Carbon Border Adjustment Mechanism. During the year, we secured several important transition services contracts ranging from large-scale ESG audits for a global aerospace manufacturer to a decarbonization road map for a major Middle Eastern energy company. We also secured a contract to support the cybersecurity work stream for autonomous military land vehicles for the European Commission. Lastly, looking at Consumer Products Services. The division delivered 3.7% organic growth in 2025, including 2.6% in the fourth quarter against very tough comparable. Performance was supported by accelerated sourcing shifts away from China with South and Southeast Asia leading growth, while Latin and Central America began to benefit from recent investments. This division is navigating a diversification strategy for the last 2 years, culminating in the acquisition of 9 companies. These additions contributed to the expansion of our services in new geographies, in new sectors and with new services, helping essentially pivot the portfolio circa 10% towards higher growth elements. In January, we completed the acquisition of SPIN360 in Italy, strengthening our sustainability, testing and certification capabilities for luxury brands. By segment, Softlines, Hardlines & Toys delivered low to mid-single-digit organic growth with a front-loaded first half of the year and a normalized half 2 as sourcing shifts gradually took place. Supply Chain and Sustainability Services achieved double-digit organic growth, driven by strong demand for supply chain resilience services and social audits amid sourcing changes in Asia. For the Technology segment, it delivered stable organic growth, supported by diversification with contribution from acquired companies offsetting softer wireless and automotive activities. On the electrical consumer goods and appliances front, sourcing shifts enabled growth in our Central and South American business, contributing to a robust performance. Finally, transition services continued to expand as we supported client sustainability programs, including full decarbonization support for a leading sportswear brand and a large-scale social audit program for a global technology company, therefore, reinforcing transparent and responsible supply chains. I will now hand over to Francois for the financial review. Francois? François Chabas: Thank you, Hinda. Thank you very much. Good afternoon to everyone. So let me now turn to our financial performance and to the sustained momentum we delivered in growth and in returns. So as it has been already briefly presented to you, 2025 was once again a solid year for the group, marked by robust and broad-based organic revenue growth, 6.5% across the year. This growth translated into strong profitability with a reported adjusted operating margin of 16.3%, up 32 basis points in a reported manner. At constant currency, we expanded our adjusted operating margin by 51 basis points. We take the advantage of higher operating leverage programs and continued progress on functional scalability initiatives. Bottom line, the adjusted EPS reached EUR 1.42, up 9.2% at constant currency. The company will propose as a consequence, a further increase in its dividend at EUR 0.92. It is payable in full in cash as usual. Turning to cash generation. Free cash flow amounted to EUR 824 million. It includes a couple of one-off effects linked to the disposal of our food testing business, notably the tax cash out on the capital gain. Excluding this transaction, free cash flow increased even by close to 4% year-on-year. On the next page, we sum up a little bit the last few years when it comes to -- since the start of our plan. So as you've seen, we continue to deliver consistently on the long-term objective. For several years in a row, we have delivered consistently at or above high single-digit revenue growth at constant currency each and every year. This is a mix of organic growth and a positive net scope effect from acquisition and divestment together. It reflects our commitment to active portfolio management. Since the start of the plan, we have rotated almost 10% of our portfolio, taking into account both acquisition and divestment combined. In terms of profitability, the ongoing execution of our program produced measurable improvement in operating leverage and functional scalability. This led to meeting expectations for both reported adjusted operating margin as well as constant currency margins. On the cash front, right below, cash conversion exceeded expectations, reaching 107% this year, mainly driven by a further reduction of working capital as a percentage of revenue by another 100 basis points compared to 2024. And as you see, we've delivered 3.7% at the end of '25. Returns now expressed at constant currency, including dividends, adjusted earnings per share and the benefit coming from the EUR 200 million share buyback program have met or exceeded projections each and every year. Including negative foreign exchange impact, returns were maintained at high single-digit level. Let me now deep dive into the revenue for '25. We delivered almost EUR 6.5 billion in '25, corresponding to a 3.6% growth on a reported basis. Organic stood at 6.5%, supported by strong business fundamentals and increased demand in energy, digital infrastructure and risk assessment solutions. Bolt-on acquisition closed in past quarters contributed 2.9%, almost 3% to the growth. This was partially offset by the divestment of the food testing business as part of our active portfolio management. Factoring in those M&A component together, the net scope effect was 0.8% on a full year basis. Currency fluctuations negatively impacted revenue by 3.7%, mainly due to the euro strength against most currency, especially U.S. dollar, Australian dollar, Canadian dollar and the renminbi. Now if we take a closer look at our business and how they perform in '25, you see here both the organic growth and the scope component of the growth. All divisions grew well with several delivering very strong performance. Including scope effect, 4 businesses posted double-digit growth, reflecting both solid organic traction and the impact of our disciplined M&A bolt-on executions. Let me briefly walk through those segments. M&O, Marine Offshore delivered double-digit organic revenue growth. Industry grew high single digits, powered by strong global demand for energy solutions. Oil and gas, renewable, nuclear all delivered double-digit growth in 2025. Building & Infrastructure and Certification also reached double-digit growth at constant currency, boosted by last year and this year acquisitions in sustainability, cybersecurity and infrastructure, which contributed, respectively, 6% and 3% to the growth of each segment. Consumer Products, we just touched upon, delivered mid-single-digit growth at constant currency with a solid organic performance of 3.7% and a scope contribution at 1.7%. Finally, Agri-Food & Commodities posted low to mid-single-digit organic growth, mainly driven by Metals & Minerals, partially offset by the divestment of our food testing activity, which is now fully completed. So overall, this broad-based performance highlights the strength and the active pivoting of our portfolio. It's part and parcel of our LEAP 28 strategy and commitment to the investors. If we now turn to the margin bridge, -- before going to the basis points and the percentage, let me share with you that for the first time in [ Veritas ] history, we crossed the EUR 1 billion adjusted operating profit mark, which we are all very proud collectively. On a reported basis, we delivered a strong 32 basis point margin improvement, closing the year at 16.3%. It is another year of disciplined execution and operational leverage. Organically, we delivered a strong 74 basis point improvement, driven by operating leverage, the benefit of our 2024 restructuring and tight cost discipline. Scope had a negative impact of 23 basis points, reflecting the investment made to scale our newly acquired businesses. At constant currency, our 51% margin uplift is very solid. Aligned with our LEAP commitment, we aim at delivering consistent margin progression year-on-year. If we look now at our divisional margin performance for the year '25, -- starting with Marine & Offshore. We held a strong margin at 23.4%, essentially stable year-on-year with organic improvement bringing 67 basis points of improvement and offset by currency headwinds. Agri-Food & Commodities delivered a notable uplift to 15.1% of margin, up more than 100 basis points, driven essentially by very strong organic improvement, plus 122 basis points and the continued dynamic of our Metals & Minerals segment. Scope-wise, we expect the full benefit of the food testing divestment to positively impact 2026 as this actually divestment took place throughout the year 2025 in different momentum. Building & Infrastructure posted a strong increase to 13.6%, up 81 basis points. Robust organic leverage, plus 138 and the first sign of our performance programs are starting here to materialize. On the same note, Consumer Products continued to strengthen, reaching 22.4% of margin, here again, supported by 55 basis points of improvement on an organic manner. On the other side, Certification ended at 18.2%, down 138 basis points, reflecting investment to scale our sustainability and cybersecurity acquisitions. Organically, however, margins remained broadly stable. And finally, Industry closed at 13.9%, down 52 basis points, with organic decline limited to 21 basis points. So it is mainly driven by a change of mix due to project delays at year-end. Looking now at other financial metrics. On the bottom line, our adjusted earnings per share continued to grow regularly. It was up 9% at constant currency. This evolution has been driven by the incremental operating profit, up 11.2% at constant currency as well. Net financial expenses increased year-on-year, reaching EUR 116 million in '25 compared to roughly EUR 70 million in the prior year. This evolution is mainly driven by lower income on cash and cash equivalents, reflecting the change in cash levels and decrease in interest rates versus 2024. On the tax front, our adjusted effective tax rate continues to normalize downwards. We closed the year now at 30%, 50 basis points below last year despite for the specialist, the exceptional [ French ] corporate tax contribution that we've supported in '25. Turning to cash generation. Another year of reduction of our working capital needs of our revenue, as you can see on the chart on the right-hand side, [ Veritas ] is now well set below the 5% threshold. Let's remember that not so long ago, the working cap of our revenue used to be at 9% and above. So it reflects our constant attention to free cash generation and to cash discipline in general. Overall, free cash flow amounted to EUR 824 million, slightly below the record level achieved last year. It takes into account some one-off effects linked to the disposal of the food testing business, notably the tax cash out and the capital gain. As I mentioned in introduction, this -- excluding this transaction, free cash increased by close to 4% year-on-year. Now I would like to summarize for you what we have done in terms of capital allocation in '25. First, on M&A, we've invested EUR 162 million in 9 acquisitions and completed 2 divestments in line with our strategy to optimize the [ Veritas ] portfolio. Year-to-date, 2026 this time, we have already added 3 more acquisitions. On CapEx, we stayed very disciplined with a ratio of 2% of our revenue. In 2026, we expect to remain within the LEAP 2028 range and get somewhat closer to the 2.5% to 3% that we had announced during the Capital Market Day. Our leverage is at 1.1x at the low end of our guidance, as you can see. We have significant headroom to accelerate our M&A agenda while returning cash to shareholders at the same time. Speaking of returns, after completing our EUR 200 million share buyback in '25, we are now launching a new EUR 200 million program. This reflects both our confidence in the prospects of the company and the resilience of the business model of Bureau Veritas. So overall, [ Veritas ] delivered another year of strong financial results, and I want to thank all our team for their continued commitment and performance quarter after quarter. With that, I'll hand it over back to Hinda for an update on our LEAP 28 strategy. Hinda Gharbi: Thank you, Francois. I'll start with a few highlights on the major secular trends shaping our markets. From early on in this decade, megatrends included urbanization. We talked about connectivity and digitalization, energy transition, increased ESG compliance expectations and the gradual evolution at the time of supply chains following the COVID shock. You fast forward to last year, 2025, the picture has evolved. The technology race we are witnessing in this age of intelligence will have a profound impact on reindustrialization and urbanization. In addition, the rapid development of AI and the associated needs in computing capacity and data storage are feeding a massive buildup phase for data centers and all related ships and equipment to take a few examples. This is also creating an unprecedented demand for electrical power. Therefore, energy supply worries are mounting, driving developments of all energy sources from fossil fuels to new forms of energy. Finally, we are seeing a shift for organizations, both private and public, from a compliance-driven approach to sustainability to a risk-based approach that aims to protect their reputation, their brand and their competitive advantage. I believe that these developing trends support a consistently growing and accessible market for our services and solutions. Now from a LEAP 28 strategy execution angle, looking at the portfolio. If you recall, our portfolio strategy is about refocusing on key leadership markets, both existing ones and future ones. It is about an active portfolio management approach. Here, we are gaining traction. Since the start of the plan in '24, we have acquired businesses totaling EUR 279 million in annualized revenue and divested EUR 202 million of noncore activities. These transactions are progressively reshaping our revenue stream. Overall, and Francois mentioned it, after 2 years, we have pivoted circa 10% of our original portfolio mix. From a mix perspective, new strongholds is leading the growth with 19.8% revenue growth at constant currency, supported by both organic momentum and targeted M&A. We're scaling capabilities in renewables and cybersecurity. Second, our expand leadership stream covering our activities in Certification and B&I delivered 9.4% growth at constant currency since we onboarded significant acquisitions in B&I and some in certification as well. Finally, as expected, the optimized value and impact businesses are growing at an aggregate rate of 3.1% at constant currency, reflecting the divestment of our noncore food testing activities. These businesses continue to constitute half of our portfolio today and are essential to our cash generation and baseline growth. Turning now to the performance. And on the performance-led execution side, our performance programs are progressing well, both in terms of creating operating leverage and getting some functional scalability. In line with LEAP 28 road map, our margins have continuously improved over the last 2 years, both at constant currency and as reported. In '24, we improved our adjusted operating margin by 38 basis points. And in '25, we improved again with an additional 51 basis points, both at constant currency. This steady year-on-year improvement is also enabling investments in new production systems and digitalization programs. So in summary, we're pleased with the progress with our performance -- of our performance programs, and we intend to continue on this structural margin improvement path. A third update I would like to share is about our new operating model implementation that is essentially taking -- took place early this year from January 2026. This organization intends to simplify our operating model through the rationalization of our geographical platforms. It will also integrate and connect product lines into the regions. The intention is very clear. It is to better leverage our client proximity to maximize our sales as we consistently scale our product line services and solution. This new structure will allow us to take advantage of our company scale, both from a geographical and expertise perspective. We will also speed up decision-making, capturing additional opportunities and accelerating innovations. We intend to make a step change in growth and performance through increased cross-selling and global coordination of opportunities. To ensure the success of this organization, we have also introduced a new short-term incentive package for managers that formalizes common objectives between different parts of the new operating model. I would like now to spend some time exploring our approach to AI. The role of a third-party independent and impartial organization like Bureau Veritas remains critical to secure trust in any commercial or trade transaction. Bureau Veritas builds on its equity of almost 200 years of trust brokerage. The value proposition of our company resides in its ability to assess physical assets to test actual products in accredited labs and to certify projects and systems with no interference. This is achieved through qualified and accredited experts within a regulatory or quality infrastructure framework. Now we believe AI represents multiple opportunities for the company. We look at them in 2 ways. On the one hand, there are opportunities in existing services. On the other hand, others exist through our new ways of working and new services. First, let me start with the existing services and markets. The buildup of the infrastructure ecosystem to feed AI needs is spurring unprecedented investments in data centers and specialized manufacturing. Bureau Veritas is uniquely positioned to benefit from these investments. We have established a leadership position in data center commissioning and quality assurance and control, working with leading hyperscalers and other growing data center players around the world. The insatiable need for electrical power from data centers is triggering increased investments in all types of energy sources and energy infrastructure. We will benefit from this trend as we build on our unmatched global footprint and capabilities in oil and gas and other forms and expand it into renewables and low-carbon energy. This AI dynamic is also contributing to the development of new supply chains that need to be deployed fast and that must be assessed to manage and mitigate risks. Bureau Veritas has robust expertise in supporting customers as they shift their sourcing and redesign their supply chain. Let me now to the second part and where we see the opportunities. And those are in our ways of working and in creating new services. First, the rapidly developing capabilities of LLM models and Agentic AI are opening new possibilities to transform our ways of working, creating substantial gains in efficiency and productivity. Additionally, these technologies will impact customer service quality, profoundly changing their experience and increasing the stickiness of our services. In Bureau Veritas, we are accelerating the implementation of such technologies. We have been rolling out a new production system and certification since mid-2025. This will be the first product line to be transformed. Second, the integration of AI into customer workflows and organizations requires them to verify and validate that these AI models are fully aligned with their values and policies, compliant with their legal frameworks and respond to their customers and other stakeholders' expectation. Bureau Veritas today is building capabilities for AI assurance to address these needs, especially as the regulatory landscape around AI assurance evolves every day. Finally, Bureau Veritas conducts over 10,000 inspections or assessment of assets, products, projects or systems every single day, generating hundreds of terabytes of data per year. In addition, our experts have a full understanding of our customers' equipment, workflows and assets life cycle. Through this knowledge, we believe there is an opportunity to help them impact their performance. As an example, for our industrial customers, maximizing the uptime of their operating facilities is a major challenge. They manage equipment from different manufacturers and juggle with maintenance priorities. They must optimize the fully integrated system. In combining our deep knowledge of their facilities with the data collected, we can integrate AI technologies to pinpoint vulnerabilities that can then optimize their uptime and their facility performance. This is an exciting journey for us, one we are starting with a sense of positive urgency, and we will be reporting on our progress regularly. Moving now to the outlook and looking ahead to 2026. We entered the third year of LEAP 28 with confidence. Our markets are strong, supported by increased energy investments, rapidly urbanizing countries and a massive digital infrastructure buildup. The ongoing technology and defense race and increasing risk management and mitigation needs are acceleration factors. Continuing our sector-leading trajectory of growth, we expect to deliver in 2026 mid- to high single-digit organic revenue growth, continued adjusted margin improvement at constant currency. As usual, we remain committed to a strong cash flow generation while we deploy our capital allocation program. We will be expanding our capabilities through acquisitions. We will accelerate the integration of AI in our workflows, and we will deploy CapEx in growth markets. Moving to summarize. 2025, our second year of LEAP 28, shows the impact of our strategy and the consistent execution of our plans. We delivered sector-leading growth and strong margin expansion, underpinned by structural performance programs and the ongoing transformation of our portfolio. The secular trends I have discussed earlier are structurally supporting our served markets growth. The energy sector massive transformation, the ongoing and rapidly moving urbanization, the AI-driven buildup of the intelligence infrastructure and the evolving supply chains are feeding sustained demand for our services in this period of rapid change. Our portfolio rotation is also accelerating. Since the start of the plan, we have already rotated around 10% of the portfolio. And in line with our LEAP 28 strategy, we intend to double that in the next 12 months. This is a shift toward businesses with higher growth, higher margin and stronger strategic relevance while exiting noncore activities with limited potential. At the same time, we continue to invest in innovation and in capabilities that enhance differentiation and enable long-term growth. Finally, we remain committed to superior shareholder returns with the dividend increase and the launch of our third share buyback since the start of the plan, we are demonstrating both confidence in our strategy and efficient capital allocation. Before opening the queue for the Q&A session. I wanted to share that we will be looking forward to welcoming you to our Capital Market Day on September 22 in Paris. We will update you on the next phase of our LEAP 28 strategy. Thank you. And now Francois and I are actually are happy to take your questions. Operator: [Operator Instructions] Our first question today is coming from Annelies Vermeulen of Morgan Stanley. Annelies Vermeulen: I have 2 questions, please. So firstly, on data centers, which I think saw a strong acceleration in Q4. Was that mainly in the U.S.? Or was it relatively broad-based? And perhaps could you talk a little bit about how you estimate your market share of new data center commissioning? Do you think you have a #1 position in most of your end markets? And how your expectations for data center growth are shaping your growth outlook for B&I in 2026, i.e., can we expect further acceleration? And then second question was just on AI. So thank you for the additional color on AI for Bureau Veritas. I was just wondering if we could put some numbers around this. So when you look at Slide 21, for example, when you talk about performance improvements, where do you think that, that comes through? Do you think it means you can keep headcount flat while continuing to grow mid- to high single-digit organic through productivity improvements? And if you could talk about which divisions or sort of service lines you see the biggest opportunity for those efficiency gains driven by AI, that would be helpful. Hinda Gharbi: Thank you, Annelies. Thank you for the questions. Look, the data centers, the market itself, the spend, if you look at the spend of the hyperscalers and others, is actually growing double digit in the low teens. We have been growing, and we made no secret about it, double digit, a strong or a high double digit. So the growth has been actually global. The U.S., of course, there's a major spend in the U.S. Europe is also growing. Asia Pacific is also growing. So I would say those are the key top regions with the U.S., of course, having the lion's share of the growth. So data center expectation that it will continue to grow, I would say, double digit on the high end, really high double digit. And I'm expecting that, of course, that will carry part of the growth in B&I. Now B&I, it's no surprise that data centers are boosting the growth in B&I. We were very explicit in LEAP28 strategy, and we made it very clear that part of our expansion of portfolio is to develop capabilities in essentially activities in complex buildings like data centers, like other specialized manufacturing. So it's not a surprise that a lot of that growth is carried by those, and we continue to hunt for such activities. So B&I will continue to benefit from that. But there are also other growth areas for B&I. Infrastructure is growing healthily. We are growing geographically in newer regions, what we call -- what we tend to call emerging markets. The United States is also growing in different activities. And there is a dynamic between the different regions that is contributing to the B&I growth. On the AI side, sorry, you had also another question there. You have multiple questions in the first one, at least. So on the commissioning position, look, we are -- there are very few specialists commissioning and doing QA/QC on data centers. We are the largest player. There are, of course, others who in-source the work, very few and tend to be some EPCs mostly. Very few really data center owners do that because they really need the expertise. So I would say, conservatively say we're the top player in the specialists serving the market. The second question is on AI. Look, we really are very, very, very committed to implement AI and benefit from the efficiency and productivity gain. We think this is -- these are use cases that are very clear. It's a matter of implementing them and scaling them consistently, and I would say, quickly. So in terms of performance improvement, I'm not going to be able to give you specifically right now the numbers, but this is something we are looking at and working on very closely. And the reason we are very, in a way, strong and bullish about the value is the fact that today, we're seeing many use cases that are very clear, right? On a baseline level of AI, you can automate so many tasks that our people spend time on. That's gains in personal productivity. It's also gains in full-on productivity and that can actually benefit the customer in terms of turnaround time on their request or on their service. So the productivity and the efficiency we are envisaging today could apply to many businesses. I gave you an example of certification only because it's a business that we have profound -- we're profoundly changing how we will work there by massively investing in a new production system and reviewing systematically all the workflows and automating them. We are, for example, today, we have a very, I would say, near-term to midterm target to have over half of our certification admin work essentially automated, right? So there are many, many things we're working on. But certification is an example. I can give you many others. Inspection services is a great example where we can use AI for efficiency and productivity. And the intention here is because we're pursuing growth, -- this is about doing more with our people. It's really about freeing our people so they can spend more of their time on productive tasks so we can grow our business, grow our volumes very, very efficiently. Operator: [Operator Instructions] We'll now move to Suhasini Varanasi of Goldman Sachs. Suhasini Varanasi: Just a couple for me, please. One is on margins. Given that you've completed the disposal of the food business, can you help us understand the scale of the margin benefit in that particular division for 2026? And similarly, when we think about the drag from M&A scope effect in certification, how should we think about the drag from that scope effect in '26? When does it, let's say, fall away the effects in that particular division? That would be the first one. And I think just on your Marine division, -- can you help us understand what your expectations are for 2026, please? You've obviously had a very strong double-digit growth year in '25. I know we've talked a lot about normalization of growth. Just wanted to get the latest sense here. Hinda Gharbi: Good to hear from you, Suhasini. I'm going to let Francois comment on the margins, and then I'll answer you on Marine. François Chabas: Suhasini, so on the food testing that we've divested, so this business was having a margin lower than the group average. I could answer to you very simply, but actually, the answer is a bit more tricky. We've divested this business in tranches. We've had actually 11 different divestments, 11 different countries, to speak plainly that we sold between December '24 and August '25. So the exact number will be tough to assess, but one, it is positive to group margin, and we could say a couple of basis points, a bit more at group margin level for 2026. So not a step change. It is more positive on the division, of course, group-wise, a few basis points. When it comes to the second question on the M&A dilutive or the scope dilutive contribution to certification, I think it's important to come back to what we said in March '24. The LEAP plan is not only a plan of a pure financial performance is financial performance and investment at the same time. And in this segment, certification, what we are building, we are building solution we are supposed to and capable to scale beyond the domestic market. So we've made a couple of acquisitions with strong position in their native market, home market, and we actually grow them outside their comfort zone to be within a wider area, whether it is Europe for one or all of the U.S. for the other. And this come with a cost, and I think we make no mystery that we are investing. So this is what is happening in 2025 that will resolve in 2026, of course, as it will be payback time. Hinda Gharbi: Yes. Thanks, Francois. On the Marine division, Suhasini, on the growth, you're absolutely correct. We had expectation that the growth would have moderated probably from last year, simply on the assumption that the shipyards would have taken longer time to reach basically maximum, I would say, throughput. Usually, when you -- particularly if you open shipyards that were mothballed for a while, it does take time for them to come up to speed. And the capacity was building up gradually for the last few years, right? Actually, we were pleasantly surprised that they were much, much better at ramping up than in past, if you like, in past times or in past years. And therefore, the throughput was much faster. And that's really where that growth came in. It really came for the new construction, very, very good cadence that allowed us to convert our backlog very quickly. Now -- as we look forward, first of all, our backlog, I mentioned earlier, is 35 -- over 30 million gross tons, 23% year-on-year growth. We have a very comfortable and solid backlog. We have a very good team in place that has been doing all these great work. Really, we have everything with us and the shipyards are progressing, but we have reached that capacity. Now I am not necessarily able to say will there be many new shipyards that can open and come up to speed very quickly or not. And therefore, with everything we know today, we think there will be moderation of the growth from -- essentially from the 14% you have seen to something in the high single digit. This is how we think about mid- to high single digit. It all depends whether the shipyards can move much faster or can be much more productive than what we thought. But today, that's the, I guess, the limited visibility we have. It's the one time that I will say, I hope I'm wrong on this one, but we'll see. Operator: We'll now go to Geoffroy Michalet of ODDO BHF. Geoffroy Michalet: Congratulations for those very nice results. Three questions for me. First one would be for Francois maybe. What is your unspeakable target for working cap since it is always improving now. You haven't set a formal threshold you would like to reach or flow, let's say. The second question is on your M&A pipeline. Do you have confidence it could accelerate on, let's say, larger transaction? And the third question is on AI again, but maybe on another angle, the angle of potential threat or newcomers or new solutions that you are seeing on the market? Hinda Gharbi: Absolutely. Thank you, Geoffroy. Francois, do you want to address the working capital. François Chabas: Geoffroy, it's a difficult question. Just to remind everyone, you don't come from a 10% working cap of revenue to 3.4% with magic. It's been done the good old way, just making sure our clients are paying on time. And from a situation that where somewhat -- somehow the cash element was a bit less considered, less regretted as what it should have been. So we've put back the discipline in place each and every year. I'm very pleased with having gone below the 4% leverage threshold. I'm not -- I will not commit to a further downside. We still have options, by the way, we still have the option to further improve. But I would say, I think it's no mystery. We are getting very close to some kind of natural threshold the bulk of our business, 70% of our business is inspection related. So by definition, you work a week or 2 or 3 and then you invoice. So contrary to our lab segment of our business, which operate on a daily basis and where working cap can go as low as 0% inspection, you reach a threshold. So I would say I would be very happy if we stay for the coming year around the 4% working cap of revenue. We have ammunition to go a bit below, but it's too early to commit. I'll let you know perhaps more when we cross the June line on how we progress. Hinda Gharbi: Thanks, Francois. On the second question, Geoffroy, on the M&A. Look, the M&A pipeline is there. We have several multiple midsized or bigger than the bolt-ons you have seen recently targets that we are follow looking at in very specific markets that are of interest to us. So it's not an issue of pipeline. It's a matter of finding the right target that can be not only response to our strategic needs, but also can be integrated and scaled in an optimum way, allowing us to actually deliver the returns we want. So it's an equation that needs to balance all that. And that's why we could say with confidence that within 12 months, we'll be able to continue to rotate the portfolio. I think our M&A program is going in a way, is addressing what we need. There are a number of things we would have liked to do slightly faster, but not at any price. And that's very important that we have that balance between delivering what we need for the portfolio so we can progress with our growth agenda, but also making sure that our returns fit within the parameters that we have fixed for ourselves. So no concerns there in terms of availability of targets. Now looking at the AI question, look, I think 2 things. I think it's very important to step back and say, and that's something I tried to address earlier in my remarks on the AI, what do we do and why we are needed. I am not concerned today that we will be completely replaced by AI for a very simple reason. We have we are necessary for that trust. And what does it mean? It means that you have an entity, a structure that can actually be in the loop to, in a way, assess whatever decision or whatever transaction or whatever asset is being built or reconstructed and needs to validate that. That will require a human in the loop, a human in the lead. Now that is not a license to be complacent and not do anything. I think the biggest threat today for us is to essentially be too slow to adopt AI. I think the urgency, and I tried to say it earlier, is to adopt AI very quickly because that is the catalyst, the turbo factor, if you will, to be able to grow faster. And I think with the technology movement, with the cadence of innovation, you cannot adopt this technology in the way we have -- we may have adopted other technologies before. So urgency is important. We believe strongly that our brand, the fact that you need the human judgment on many, many of the decisions we actually participate in to support customers and to protect them, to protect their risks and their liabilities gives us that moat today. But again, not a license for complacency. It's very important that we adopt the technologies very quickly. Now you mentioned whether there are newcomers and others. There will always be players who would want to find space like the TIC sector where you have lots of people and lots of data. But what a lot of these natives miss is that there is domain expertise and there is the brand that is actually necessary for our customers to secure their risk and to secure themselves against liabilities and show that there is actually a third party who has confirmed what they're doing and has assessed what they're doing. So I hope that answers your question. But I think the key thing probably to retain is we need to remain paranoid, so we can move very fast. And we'll come back to you with progress in the coming publications. Operator: Next question will be coming from Virginia Montorsi of Bank of America. Virginia Montorsi: I just had 2 quick ones. On the margin side, could you help us understand a little bit how to think about industry margins specifically into next year? I think we've touched on all other divisions, but this one. And then just one last question on AI. What are -- I think one of the questions we get sometimes from investors is the ability of testers to maintain pricing power as you guys adopt AI and whether or not customers could potentially ask to be charged less as they know you incorporate AI. So I just wanted to ask how do you think you can leverage your kind of organization and maintain good pricing? And how should we think about that? Hinda Gharbi: Thank you, Virginia. Francois, do you want to comment on this. François Chabas: Yes, sure. So industry, if you again, contextualize a little bit, we had a couple of years with a good momentum from a margin point of view on industry. 2025 have been somewhat a bit disappointing if you look at it on a full year basis. I made some comment about it, but the last -- the second half of the year, we had a bit of a change of mix of service because some of the contracts we were expected to render or to deliver, sorry, in H2 have been moved to Q1 and Q2 2026. These are big shutdowns without going into details. But to give you an idea, if you are running a refinery, you need to shut down your refinery for 2, 3 weeks to make the necessary checks, during which we sent 70 to 100 people. And obviously, the decision on when these shutdowns happen is in the hands of the customers. To some extent, you have ranges during which they can do it. And we were actually expecting more of them to be done in H2. It happens that it will be more in H1 2026 instead. So we do not consider the 2025 margin as a normative one. We should see incremental in 2026 on that segment. I don't know if that answer your question. Hinda Gharbi: All right. Thanks, Francois. Look, on the AI implementation and the so-called deflationary risk, I think it's very important to step back and think about what is really our business model and how we operate. The bulk of our businesses are service fee models. Yes, of course, there are people doing the work, but it's a service fee model. And the way we think about AI integration into our workflows and into our work is it's very important that we articulate the value for the customer from efficiency. If efficiency is only about reducing people, that's not really a value proposition for the customer. So we consider that the integration of AI not only will bring in that efficiency in how people work, but it also will add value to the customer. I'll give you a couple of very specific examples. If you go to high-risk environments, when you send people to high-risk environments, you're actually creating a burden for your customer, whether it's a mining site, an oil and gas [indiscernible], a ship, anywhere there are risks, you're requesting logistics, you're requesting actually -- this is an exposure of people in their facilities, it's time it takes and so on. So less time is actually value for customers. And that's very, very important to be clear on. So we consider that because the bulk of our work is actually in service fee model, we will price differently as we progress. We will have to think of pricing in a different way and really value price. Of course, it's a massive change management in our -- in an industry that is used in a very specific way to price, but that's how we think about it. We don't think it's a fatal kind of risk. We think it's a risk if we don't act on it and we don't really value price, but we think it's manageable. Now of course, there is a small piece that is billable hour. And when you have billable hour, the customer will be even more insistent that they want you to reduce their price. And this is where service quality, customer experience will come in. You have to flip the equation, if you will. You have to make sure that you're not actually only focusing on that number of people that you're going to pull out. You have to think about how you're doing the work and what does it mean for the customer in terms of essentially service quality, turnaround time, whatever parameter will be valuable for them in their own sector and their own circumstance. Operator: Ladies and gentlemen, due to time constraints, we have time for one question. And the last question today will be coming from Allen Wells of Jefferies. Allen Wells: Three quick ones from me, please. Firstly, just on the balance sheet and capital allocation. Obviously, balance sheet leverage is in a good place at the lower end of your 1 to 2x range. Free cash flow was strong. The buyback was obviously in line with what you announced last year. But how should we read into this in relation to capital allocation? How should we think about the cadence and size of bolt-ons versus the potential for further buybacks over the next year or 2? That's my first question. Second question, just circling back on AI. But from the other side, how do we think about the level of investment that's going on internally at [ BVI ]? How should we think about that from a CapEx and OpEx perspective and where we may start to see that in the numbers? And then finally, and apologies if I missed it, just on the consumer margins were strong, up 55 bps, I think, organically in the year. Just looking for a little bit more detail about what's driving that and how we should think about the cadence of further margin progression on the consumer product business into 2026? Hinda Gharbi: Right. Thank you, Allen. Francois, you want to address the margins for... François Chabas: So for consumer, I think you're right to point out, it's been -- you had good incrementals. I think this is coming -- first, it's here to stay. It's not a one-off or any exceptional event. And it's based on 2 very deliberate action we've led now for 2 years, one which is rather visible. I mean, I think in that mentioned this division, Consumer Products has today -- is operating today 10% of its revenue coming from a totally new business compared to what it was at the end of 2023. So we have -- here, we have made very little divestment. Here, we have made add-on, and we've purchased 10% of the current revenue compared to where it stands. So -- and obviously, we've made some bets in terms of acquisition, which are paying off with good margins, good incrementals. So the M&A or the portfolio reshape again -- and actually, to be very fair and transparent with you, this has started even before we announced the plan. We went to the market in March 2024. We had designed the plan with the -- our consumer product team in the if I remember, was back in Hong Kong somewhere in September '23. So this -- they are a bit ahead of the game, I would say, in terms of deploying capital to reshape the portfolio. So that's one to say, a good half of the explanation. The second half of the explanation is we have been working over the last 2 years to in practical term, exit, reduce, limit our exposure to some distressed segment of the tech part. So you remember, you have the consumer -- the traditional product testing, [ softlines ] like toys, 2/3 of the business and 1/3 is tech. In this tech division, subdivision, we had some weak parts there that we discontinued. So I think some of you have noticed that the top line momentum in '23 -- in '24, '20 and early '25 was somewhat weak on tech. It is as well because of those actions we took. And obviously, when those businesses are out, then the margin is back up. And that's why I'm saying it's a sustainable improvement, and we expect this improvement to continue in 2026. Hinda Gharbi: Thanks, Francois. On the balance sheet, Allen, I mean, we have headroom in the balance sheet is very clear. You mentioned it. For us, as we said, we're very clear on what we need. We're monitoring the market. We have pipelines we're working on, and we will balance when we buy. And when we buy, we have that room in the balance sheet, which means that any consideration for additional shareholder return, we'll have to take that into account. Of course, it's very important that we continue to execute our portfolio agenda, growth agenda, and that entails continuing to do bolt-ons, but also very specific M&As in very specific sectors. We have the room. And then when the time is right and we can also do shareholder share buybacks, we will consider that. And that's really what we just did this year, just now when we announced it today. On the -- and the other thing I think is very important to mention is -- the -- I mentioned earlier, we mentioned it a few times. We said we have rotated already circa 10% of our portfolio, and we will double that in the next 12 months. I think that gives you an indication that we have a number of things we will be working on -- we are working on for the next 12 months. All right. The third question is on AI. The investments. Look, we said investments will be between 2.5% and 3% in 2026. We were below that in 2025, as mentioned by Francois. And we have already slotted in investments for AI. And digital, I would say we have a program ongoing, which was always part of our performance programs from the get-go that part of our operating leverage and functional scalability gain will be reinvested in the business as we modernize our product line. So do you want to give anything else on the investments? François Chabas: On the investment, I think today, we maintain what we've said during the Capital Market Day in terms of CapEx intensity, anywhere between 2.5% and 3%. That's where we intend to stay. However, as Hinda mentioned, it's somewhat of an increase compared to the very disciplined approach we had in the first 2 years of the plan. But we don't derail from this. There may be, however, some -- indeed some need in the next year within this range. Hinda Gharbi: Absolutely. All right. I hope that answers your question, Allen. I understand this was the last question. So just a few things to say prior to closing. First of all, I'm very, very pleased with the results that our team have delivered in 2025. It has been, I would say, quite an interesting year to say the least, 2025, but the team have delivered very well. It's fully in line with our LEAP 28. 2026 is our third year. We're looking to accelerate a number of programs. And I think our guidance give you confidence that we have very solid plans to support our growth and performance ambitions. Thank you very much. François Chabas: Thank you.
Hinda Gharbi: Good morning, good afternoon, and good evening to everyone. Thank you for joining us for our full year 2025 results. I'm joined by Francois Chabas, our Group CFO. In keeping with our solid plan execution, 2025 delivered sector-leading organic growth and strong margin progression. In the second year of our LEAP 28 strategy, we delivered results fully aligned with our ambition to accelerate growth and enhance returns. During the year, we implemented our new organization, which is now accelerating strategy execution across our geographic platforms and product lines. Our results reflect the strengthened portfolio, the tangible impact of our performance programs and efficient capital allocation. I'm proud of our leaders and their team's contributions across the world and of the consistency in delivery in a fast-changing market. Let me start with our financial highlights for the year. 2025 was the second year of our LEAP 28 strategy, and we continue to gain traction across all pillars. We delivered 6.5% organic revenue growth, including 6.3% in the last quarter of the year. Adjusted operating margin of 16.3%, up 32 basis points year-on-year and 51 basis points at constant currency. Adjusted earnings per share is up 2.8% on a reported basis and 9.2% at constant currency. Free cash flow of EUR 824 million with a very strong 107% cash conversion. At constant currency, we delivered double-digit shareholder returns. For 2025, we will propose a cash dividend of EUR 0.92 per share, up 2% versus last year. It is fully in line with our 65% payout ratio. Finally, as we have done in the last 2 years, we will be issuing a new EUR 200 million share buyback program to increase shareholder returns. Moving now to our revenue performance by business and geography. Across the portfolio, our organic growth was supported by strong momentum in energy, the continued buildup of digital infrastructure and rising demand for corporate and risk -- enterprise risk assessment solutions. This sector-leading growth reflects the attractive mix of our strengthened portfolio. Industry, Certification and Marine & Offshore delivered the strongest performance, growing from high single digit to double digit organically. The rest of the portfolio grew in the mid-single-digit range with some activities benefiting from very powerful structural drivers. In B&I and Infrastructure, data centers were up 30% organically year-on-year. In Industry, energy-related activities were up 13.9%. In Commodities, Metals & Minerals were up 9.2%. From a geographical perspective, strong organic growth across all regions. The Americas grew by 4%, supported by sustained energy spend and expanding data centers. Our momentum in Europe continues with 4.1% organic growth, largely above GDP growth. Asia Pacific reported 8.2% organic growth with broad-based expansion across Asia and Australasia. And our fastest-growing region was the Middle East and Africa, up 16.6%, benefiting from major infrastructure programs and sustained energy investments. I would like to report now on the progress of CSR -- of our CSR programs. In health and safety, continuous prevention programs further reduced our accident rate versus last year. On decarbonization, we further reduced our Scope 1 and 2 emissions by 7% year-on-year. This is fully in line with our science-based target initiative expectations. For gender diversity, steady progress with our ongoing program. In 2025, we improved or maintained all our major nonfinancial ratings, confirming Bureau Veritas's leadership. We raised our EcoVadis score to 80 out of 100 and obtained the top 5% distinction in the S&P Global Sustainability Yearbook 2026. Let's now move to the business highlights. I will start with Marine & Offshore. The division delivered a very strong performance in '25 with 14.3% organic growth. This marks the third year in a row of double-digit organic revenue growth. These results were driven by the ongoing renewal and modernization of the global fleet and the expansion of specialized vessels. Looking at it by segment, new construction delivered high double-digit growth from accelerated shipyard deliveries and capacity expansion, particularly in China and Korea. In 2025, we secured 14.4 million gross tons of new orders, bringing the backlog to 33.5 million gross tons, up 23% year-on-year. Core In-service achieved mid- to high single-digit growth, largely driven by increased volumes and some pricing. At year-end, we serviced more than 12,300 ships. Marine & Offshore continues to invest in new solutions to support our clients' energy transition. In Qatar, we opened a global gas center of excellence, supporting LNG projects worldwide through our global technical network. Looking at our Agri-Food & Commodities. This business delivered 3.7% organic growth this year. In Oil and Petrochemicals, performance remained resilient in challenging market conditions. Non-trade activities grew strongly, supported by increased demand for biofuels, marine fuels and sustainable aviation fuel and also from new lab capabilities. Metals & Minerals delivered high single-digit organic growth, driven by increasing projects in copper and gold and by the expansion of our lab network, specifically in Chile. In Agri-Food, we are completing the pivot of our portfolio with the sale of our food testing business in 2025. This divestment will be accretive to the divisional margin on a 12-month basis. In Industry, the division delivered 8.9% organic growth in 2025. We are a key player in the industry segment, a [ EUR 1.4 billion ] division, predominantly exposed to energy and energy adjacent sectors. This performance reflects robust market dynamics, supported by strong energy sector investments as countries continue to secure energy supply, decarbonize and transform their energy mix. The evolution of the portfolio is ongoing with acquisitions supporting the new strongholds of renewable and low-carbon energy services. By segment, Oil & Gas delivered double-digit organic growth, driven by new projects, particularly in gas and in major resource holding regions. Geographically, the Middle East, Africa and Asia have sustained investments in new oil and gas fields. Power & Utilities maintained double-digit growth. This was supported by investments in renewables and nuclear as electricity demand accelerates on the back of data center expansions and national electrification programs. Geographically, strong momentum across North America, Asia Pacific and the Middle East. In terms of transition services and green objects revenue streams, in the Middle East, we entered into a memorandum of understanding with Masdar, an Abu Dhabi clean energy company to help shape renewables and green energy standards in the region. We were also awarded a contract to support a client's first renewable energy project, combining solar generation and battery energy storage in the United States. Moving on to Buildings & Infrastructure. We delivered 5.2% organic growth in 2025, including a strong 8% in the fourth quarter. Today, B&I represents EUR 2 billion in revenue, a clear leader in the sector. 2025 was a strong year for our portfolio expansion with successful integrations, particularly the APP Group in Australia and further portfolio streamlining, including the divestment of noncore construction technical supervision business in China. Growth for B&I at constant currency was at a high 11.6%. Our CapEx activities delivered high single-digit growth, fueled by data center commissioning projects across the U.S., Europe and Asia and supported by recent acquisitions that are already accelerating organic growth. OpEx activities remained resilient, underpinned by the structural need for environmental measurements and energy efficiency audits. Infrastructure delivered steady growth. It now represents 20% of the divisional revenue. This was supported by government-led spending in Europe and major rail and terminal programs in North America. Major infrastructure investments are also ongoing in Asia Pacific and the Middle East. We are expanding our services for green objects in B&I. We secured a multiyear contract for a new battery gigafactory in Spain. In transition services for this division, we delivered a large-scale decarbonization program for a European fitness chain. Moving to Certification. In this division, we delivered a strong performance in 2025 with 7.9% organic growth for the year, with an acceleration at 8.4% in the fourth quarter. The certification business benefits from increased needs for assurance, decarbonization, supply chain resilience and cybersecurity solutions. This business represents many opportunities to innovate and create new schemes for customers as they pursue their own business plans. A number of acquisitions were completed in the last 18 months are expanding this portfolio in sustainability and cyber. Growth at constant currency in certification was up double digit. Looking by segment, QHSE, quality, health, safety and the environment and Specialized schemes grew at a high single-digit rate, supported by robust activity in most regions and very strong demand for food safety certifications. Sustainability and digital certification recorded double-digit organic growth. This was fueled by rising demand for carbon and greenhouse gas verification, supply chain ESG audits and upcoming regulatory requirements such as the Carbon Border Adjustment Mechanism. During the year, we secured several important transition services contracts ranging from large-scale ESG audits for a global aerospace manufacturer to a decarbonization road map for a major Middle Eastern energy company. We also secured a contract to support the cybersecurity work stream for autonomous military land vehicles for the European Commission. Lastly, looking at Consumer Products Services. The division delivered 3.7% organic growth in 2025, including 2.6% in the fourth quarter against very tough comparable. Performance was supported by accelerated sourcing shifts away from China with South and Southeast Asia leading growth, while Latin and Central America began to benefit from recent investments. This division is navigating a diversification strategy for the last 2 years, culminating in the acquisition of 9 companies. These additions contributed to the expansion of our services in new geographies, in new sectors and with new services, helping essentially pivot the portfolio circa 10% towards higher growth elements. In January, we completed the acquisition of SPIN360 in Italy, strengthening our sustainability, testing and certification capabilities for luxury brands. By segment, Softlines, Hardlines & Toys delivered low to mid-single-digit organic growth with a front-loaded first half of the year and a normalized half 2 as sourcing shifts gradually took place. Supply Chain and Sustainability Services achieved double-digit organic growth, driven by strong demand for supply chain resilience services and social audits amid sourcing changes in Asia. For the Technology segment, it delivered stable organic growth, supported by diversification with contribution from acquired companies offsetting softer wireless and automotive activities. On the electrical consumer goods and appliances front, sourcing shifts enabled growth in our Central and South American business, contributing to a robust performance. Finally, transition services continued to expand as we supported client sustainability programs, including full decarbonization support for a leading sportswear brand and a large-scale social audit program for a global technology company, therefore, reinforcing transparent and responsible supply chains. I will now hand over to Francois for the financial review. Francois? François Chabas: Thank you, Hinda. Thank you very much. Good afternoon to everyone. So let me now turn to our financial performance and to the sustained momentum we delivered in growth and in returns. So as it has been already briefly presented to you, 2025 was once again a solid year for the group, marked by robust and broad-based organic revenue growth, 6.5% across the year. This growth translated into strong profitability with a reported adjusted operating margin of 16.3%, up 32 basis points in a reported manner. At constant currency, we expanded our adjusted operating margin by 51 basis points. We take the advantage of higher operating leverage programs and continued progress on functional scalability initiatives. Bottom line, the adjusted EPS reached EUR 1.42, up 9.2% at constant currency. The company will propose as a consequence, a further increase in its dividend at EUR 0.92. It is payable in full in cash as usual. Turning to cash generation. Free cash flow amounted to EUR 824 million. It includes a couple of one-off effects linked to the disposal of our food testing business, notably the tax cash out on the capital gain. Excluding this transaction, free cash flow increased even by close to 4% year-on-year. On the next page, we sum up a little bit the last few years when it comes to -- since the start of our plan. So as you've seen, we continue to deliver consistently on the long-term objective. For several years in a row, we have delivered consistently at or above high single-digit revenue growth at constant currency each and every year. This is a mix of organic growth and a positive net scope effect from acquisition and divestment together. It reflects our commitment to active portfolio management. Since the start of the plan, we have rotated almost 10% of our portfolio, taking into account both acquisition and divestment combined. In terms of profitability, the ongoing execution of our program produced measurable improvement in operating leverage and functional scalability. This led to meeting expectations for both reported adjusted operating margin as well as constant currency margins. On the cash front, right below, cash conversion exceeded expectations, reaching 107% this year, mainly driven by a further reduction of working capital as a percentage of revenue by another 100 basis points compared to 2024. And as you see, we've delivered 3.7% at the end of '25. Returns now expressed at constant currency, including dividends, adjusted earnings per share and the benefit coming from the EUR 200 million share buyback program have met or exceeded projections each and every year. Including negative foreign exchange impact, returns were maintained at high single-digit level. Let me now deep dive into the revenue for '25. We delivered almost EUR 6.5 billion in '25, corresponding to a 3.6% growth on a reported basis. Organic stood at 6.5%, supported by strong business fundamentals and increased demand in energy, digital infrastructure and risk assessment solutions. Bolt-on acquisition closed in past quarters contributed 2.9%, almost 3% to the growth. This was partially offset by the divestment of the food testing business as part of our active portfolio management. Factoring in those M&A component together, the net scope effect was 0.8% on a full year basis. Currency fluctuations negatively impacted revenue by 3.7%, mainly due to the euro strength against most currency, especially U.S. dollar, Australian dollar, Canadian dollar and the renminbi. Now if we take a closer look at our business and how they perform in '25, you see here both the organic growth and the scope component of the growth. All divisions grew well with several delivering very strong performance. Including scope effect, 4 businesses posted double-digit growth, reflecting both solid organic traction and the impact of our disciplined M&A bolt-on executions. Let me briefly walk through those segments. M&O, Marine Offshore delivered double-digit organic revenue growth. Industry grew high single digits, powered by strong global demand for energy solutions. Oil and gas, renewable, nuclear all delivered double-digit growth in 2025. Building & Infrastructure and Certification also reached double-digit growth at constant currency, boosted by last year and this year acquisitions in sustainability, cybersecurity and infrastructure, which contributed, respectively, 6% and 3% to the growth of each segment. Consumer Products, we just touched upon, delivered mid-single-digit growth at constant currency with a solid organic performance of 3.7% and a scope contribution at 1.7%. Finally, Agri-Food & Commodities posted low to mid-single-digit organic growth, mainly driven by Metals & Minerals, partially offset by the divestment of our food testing activity, which is now fully completed. So overall, this broad-based performance highlights the strength and the active pivoting of our portfolio. It's part and parcel of our LEAP 28 strategy and commitment to the investors. If we now turn to the margin bridge, -- before going to the basis points and the percentage, let me share with you that for the first time in [ Veritas ] history, we crossed the EUR 1 billion adjusted operating profit mark, which we are all very proud collectively. On a reported basis, we delivered a strong 32 basis point margin improvement, closing the year at 16.3%. It is another year of disciplined execution and operational leverage. Organically, we delivered a strong 74 basis point improvement, driven by operating leverage, the benefit of our 2024 restructuring and tight cost discipline. Scope had a negative impact of 23 basis points, reflecting the investment made to scale our newly acquired businesses. At constant currency, our 51% margin uplift is very solid. Aligned with our LEAP commitment, we aim at delivering consistent margin progression year-on-year. If we look now at our divisional margin performance for the year '25, -- starting with Marine & Offshore. We held a strong margin at 23.4%, essentially stable year-on-year with organic improvement bringing 67 basis points of improvement and offset by currency headwinds. Agri-Food & Commodities delivered a notable uplift to 15.1% of margin, up more than 100 basis points, driven essentially by very strong organic improvement, plus 122 basis points and the continued dynamic of our Metals & Minerals segment. Scope-wise, we expect the full benefit of the food testing divestment to positively impact 2026 as this actually divestment took place throughout the year 2025 in different momentum. Building & Infrastructure posted a strong increase to 13.6%, up 81 basis points. Robust organic leverage, plus 138 and the first sign of our performance programs are starting here to materialize. On the same note, Consumer Products continued to strengthen, reaching 22.4% of margin, here again, supported by 55 basis points of improvement on an organic manner. On the other side, Certification ended at 18.2%, down 138 basis points, reflecting investment to scale our sustainability and cybersecurity acquisitions. Organically, however, margins remained broadly stable. And finally, Industry closed at 13.9%, down 52 basis points, with organic decline limited to 21 basis points. So it is mainly driven by a change of mix due to project delays at year-end. Looking now at other financial metrics. On the bottom line, our adjusted earnings per share continued to grow regularly. It was up 9% at constant currency. This evolution has been driven by the incremental operating profit, up 11.2% at constant currency as well. Net financial expenses increased year-on-year, reaching EUR 116 million in '25 compared to roughly EUR 70 million in the prior year. This evolution is mainly driven by lower income on cash and cash equivalents, reflecting the change in cash levels and decrease in interest rates versus 2024. On the tax front, our adjusted effective tax rate continues to normalize downwards. We closed the year now at 30%, 50 basis points below last year despite for the specialist, the exceptional [ French ] corporate tax contribution that we've supported in '25. Turning to cash generation. Another year of reduction of our working capital needs of our revenue, as you can see on the chart on the right-hand side, [ Veritas ] is now well set below the 5% threshold. Let's remember that not so long ago, the working cap of our revenue used to be at 9% and above. So it reflects our constant attention to free cash generation and to cash discipline in general. Overall, free cash flow amounted to EUR 824 million, slightly below the record level achieved last year. It takes into account some one-off effects linked to the disposal of the food testing business, notably the tax cash out and the capital gain. As I mentioned in introduction, this -- excluding this transaction, free cash increased by close to 4% year-on-year. Now I would like to summarize for you what we have done in terms of capital allocation in '25. First, on M&A, we've invested EUR 162 million in 9 acquisitions and completed 2 divestments in line with our strategy to optimize the [ Veritas ] portfolio. Year-to-date, 2026 this time, we have already added 3 more acquisitions. On CapEx, we stayed very disciplined with a ratio of 2% of our revenue. In 2026, we expect to remain within the LEAP 2028 range and get somewhat closer to the 2.5% to 3% that we had announced during the Capital Market Day. Our leverage is at 1.1x at the low end of our guidance, as you can see. We have significant headroom to accelerate our M&A agenda while returning cash to shareholders at the same time. Speaking of returns, after completing our EUR 200 million share buyback in '25, we are now launching a new EUR 200 million program. This reflects both our confidence in the prospects of the company and the resilience of the business model of Bureau Veritas. So overall, [ Veritas ] delivered another year of strong financial results, and I want to thank all our team for their continued commitment and performance quarter after quarter. With that, I'll hand it over back to Hinda for an update on our LEAP 28 strategy. Hinda Gharbi: Thank you, Francois. I'll start with a few highlights on the major secular trends shaping our markets. From early on in this decade, megatrends included urbanization. We talked about connectivity and digitalization, energy transition, increased ESG compliance expectations and the gradual evolution at the time of supply chains following the COVID shock. You fast forward to last year, 2025, the picture has evolved. The technology race we are witnessing in this age of intelligence will have a profound impact on reindustrialization and urbanization. In addition, the rapid development of AI and the associated needs in computing capacity and data storage are feeding a massive buildup phase for data centers and all related ships and equipment to take a few examples. This is also creating an unprecedented demand for electrical power. Therefore, energy supply worries are mounting, driving developments of all energy sources from fossil fuels to new forms of energy. Finally, we are seeing a shift for organizations, both private and public, from a compliance-driven approach to sustainability to a risk-based approach that aims to protect their reputation, their brand and their competitive advantage. I believe that these developing trends support a consistently growing and accessible market for our services and solutions. Now from a LEAP 28 strategy execution angle, looking at the portfolio. If you recall, our portfolio strategy is about refocusing on key leadership markets, both existing ones and future ones. It is about an active portfolio management approach. Here, we are gaining traction. Since the start of the plan in '24, we have acquired businesses totaling EUR 279 million in annualized revenue and divested EUR 202 million of noncore activities. These transactions are progressively reshaping our revenue stream. Overall, and Francois mentioned it, after 2 years, we have pivoted circa 10% of our original portfolio mix. From a mix perspective, new strongholds is leading the growth with 19.8% revenue growth at constant currency, supported by both organic momentum and targeted M&A. We're scaling capabilities in renewables and cybersecurity. Second, our expand leadership stream covering our activities in Certification and B&I delivered 9.4% growth at constant currency since we onboarded significant acquisitions in B&I and some in certification as well. Finally, as expected, the optimized value and impact businesses are growing at an aggregate rate of 3.1% at constant currency, reflecting the divestment of our noncore food testing activities. These businesses continue to constitute half of our portfolio today and are essential to our cash generation and baseline growth. Turning now to the performance. And on the performance-led execution side, our performance programs are progressing well, both in terms of creating operating leverage and getting some functional scalability. In line with LEAP 28 road map, our margins have continuously improved over the last 2 years, both at constant currency and as reported. In '24, we improved our adjusted operating margin by 38 basis points. And in '25, we improved again with an additional 51 basis points, both at constant currency. This steady year-on-year improvement is also enabling investments in new production systems and digitalization programs. So in summary, we're pleased with the progress with our performance -- of our performance programs, and we intend to continue on this structural margin improvement path. A third update I would like to share is about our new operating model implementation that is essentially taking -- took place early this year from January 2026. This organization intends to simplify our operating model through the rationalization of our geographical platforms. It will also integrate and connect product lines into the regions. The intention is very clear. It is to better leverage our client proximity to maximize our sales as we consistently scale our product line services and solution. This new structure will allow us to take advantage of our company scale, both from a geographical and expertise perspective. We will also speed up decision-making, capturing additional opportunities and accelerating innovations. We intend to make a step change in growth and performance through increased cross-selling and global coordination of opportunities. To ensure the success of this organization, we have also introduced a new short-term incentive package for managers that formalizes common objectives between different parts of the new operating model. I would like now to spend some time exploring our approach to AI. The role of a third-party independent and impartial organization like Bureau Veritas remains critical to secure trust in any commercial or trade transaction. Bureau Veritas builds on its equity of almost 200 years of trust brokerage. The value proposition of our company resides in its ability to assess physical assets to test actual products in accredited labs and to certify projects and systems with no interference. This is achieved through qualified and accredited experts within a regulatory or quality infrastructure framework. Now we believe AI represents multiple opportunities for the company. We look at them in 2 ways. On the one hand, there are opportunities in existing services. On the other hand, others exist through our new ways of working and new services. First, let me start with the existing services and markets. The buildup of the infrastructure ecosystem to feed AI needs is spurring unprecedented investments in data centers and specialized manufacturing. Bureau Veritas is uniquely positioned to benefit from these investments. We have established a leadership position in data center commissioning and quality assurance and control, working with leading hyperscalers and other growing data center players around the world. The insatiable need for electrical power from data centers is triggering increased investments in all types of energy sources and energy infrastructure. We will benefit from this trend as we build on our unmatched global footprint and capabilities in oil and gas and other forms and expand it into renewables and low-carbon energy. This AI dynamic is also contributing to the development of new supply chains that need to be deployed fast and that must be assessed to manage and mitigate risks. Bureau Veritas has robust expertise in supporting customers as they shift their sourcing and redesign their supply chain. Let me now to the second part and where we see the opportunities. And those are in our ways of working and in creating new services. First, the rapidly developing capabilities of LLM models and Agentic AI are opening new possibilities to transform our ways of working, creating substantial gains in efficiency and productivity. Additionally, these technologies will impact customer service quality, profoundly changing their experience and increasing the stickiness of our services. In Bureau Veritas, we are accelerating the implementation of such technologies. We have been rolling out a new production system and certification since mid-2025. This will be the first product line to be transformed. Second, the integration of AI into customer workflows and organizations requires them to verify and validate that these AI models are fully aligned with their values and policies, compliant with their legal frameworks and respond to their customers and other stakeholders' expectation. Bureau Veritas today is building capabilities for AI assurance to address these needs, especially as the regulatory landscape around AI assurance evolves every day. Finally, Bureau Veritas conducts over 10,000 inspections or assessment of assets, products, projects or systems every single day, generating hundreds of terabytes of data per year. In addition, our experts have a full understanding of our customers' equipment, workflows and assets life cycle. Through this knowledge, we believe there is an opportunity to help them impact their performance. As an example, for our industrial customers, maximizing the uptime of their operating facilities is a major challenge. They manage equipment from different manufacturers and juggle with maintenance priorities. They must optimize the fully integrated system. In combining our deep knowledge of their facilities with the data collected, we can integrate AI technologies to pinpoint vulnerabilities that can then optimize their uptime and their facility performance. This is an exciting journey for us, one we are starting with a sense of positive urgency, and we will be reporting on our progress regularly. Moving now to the outlook and looking ahead to 2026. We entered the third year of LEAP 28 with confidence. Our markets are strong, supported by increased energy investments, rapidly urbanizing countries and a massive digital infrastructure buildup. The ongoing technology and defense race and increasing risk management and mitigation needs are acceleration factors. Continuing our sector-leading trajectory of growth, we expect to deliver in 2026 mid- to high single-digit organic revenue growth, continued adjusted margin improvement at constant currency. As usual, we remain committed to a strong cash flow generation while we deploy our capital allocation program. We will be expanding our capabilities through acquisitions. We will accelerate the integration of AI in our workflows, and we will deploy CapEx in growth markets. Moving to summarize. 2025, our second year of LEAP 28, shows the impact of our strategy and the consistent execution of our plans. We delivered sector-leading growth and strong margin expansion, underpinned by structural performance programs and the ongoing transformation of our portfolio. The secular trends I have discussed earlier are structurally supporting our served markets growth. The energy sector massive transformation, the ongoing and rapidly moving urbanization, the AI-driven buildup of the intelligence infrastructure and the evolving supply chains are feeding sustained demand for our services in this period of rapid change. Our portfolio rotation is also accelerating. Since the start of the plan, we have already rotated around 10% of the portfolio. And in line with our LEAP 28 strategy, we intend to double that in the next 12 months. This is a shift toward businesses with higher growth, higher margin and stronger strategic relevance while exiting noncore activities with limited potential. At the same time, we continue to invest in innovation and in capabilities that enhance differentiation and enable long-term growth. Finally, we remain committed to superior shareholder returns with the dividend increase and the launch of our third share buyback since the start of the plan, we are demonstrating both confidence in our strategy and efficient capital allocation. Before opening the queue for the Q&A session. I wanted to share that we will be looking forward to welcoming you to our Capital Market Day on September 22 in Paris. We will update you on the next phase of our LEAP 28 strategy. Thank you. And now Francois and I are actually are happy to take your questions. Operator: [Operator Instructions] Our first question today is coming from Annelies Vermeulen of Morgan Stanley. Annelies Vermeulen: I have 2 questions, please. So firstly, on data centers, which I think saw a strong acceleration in Q4. Was that mainly in the U.S.? Or was it relatively broad-based? And perhaps could you talk a little bit about how you estimate your market share of new data center commissioning? Do you think you have a #1 position in most of your end markets? And how your expectations for data center growth are shaping your growth outlook for B&I in 2026, i.e., can we expect further acceleration? And then second question was just on AI. So thank you for the additional color on AI for Bureau Veritas. I was just wondering if we could put some numbers around this. So when you look at Slide 21, for example, when you talk about performance improvements, where do you think that, that comes through? Do you think it means you can keep headcount flat while continuing to grow mid- to high single-digit organic through productivity improvements? And if you could talk about which divisions or sort of service lines you see the biggest opportunity for those efficiency gains driven by AI, that would be helpful. Hinda Gharbi: Thank you, Annelies. Thank you for the questions. Look, the data centers, the market itself, the spend, if you look at the spend of the hyperscalers and others, is actually growing double digit in the low teens. We have been growing, and we made no secret about it, double digit, a strong or a high double digit. So the growth has been actually global. The U.S., of course, there's a major spend in the U.S. Europe is also growing. Asia Pacific is also growing. So I would say those are the key top regions with the U.S., of course, having the lion's share of the growth. So data center expectation that it will continue to grow, I would say, double digit on the high end, really high double digit. And I'm expecting that, of course, that will carry part of the growth in B&I. Now B&I, it's no surprise that data centers are boosting the growth in B&I. We were very explicit in LEAP28 strategy, and we made it very clear that part of our expansion of portfolio is to develop capabilities in essentially activities in complex buildings like data centers, like other specialized manufacturing. So it's not a surprise that a lot of that growth is carried by those, and we continue to hunt for such activities. So B&I will continue to benefit from that. But there are also other growth areas for B&I. Infrastructure is growing healthily. We are growing geographically in newer regions, what we call -- what we tend to call emerging markets. The United States is also growing in different activities. And there is a dynamic between the different regions that is contributing to the B&I growth. On the AI side, sorry, you had also another question there. You have multiple questions in the first one, at least. So on the commissioning position, look, we are -- there are very few specialists commissioning and doing QA/QC on data centers. We are the largest player. There are, of course, others who in-source the work, very few and tend to be some EPCs mostly. Very few really data center owners do that because they really need the expertise. So I would say, conservatively say we're the top player in the specialists serving the market. The second question is on AI. Look, we really are very, very, very committed to implement AI and benefit from the efficiency and productivity gain. We think this is -- these are use cases that are very clear. It's a matter of implementing them and scaling them consistently, and I would say, quickly. So in terms of performance improvement, I'm not going to be able to give you specifically right now the numbers, but this is something we are looking at and working on very closely. And the reason we are very, in a way, strong and bullish about the value is the fact that today, we're seeing many use cases that are very clear, right? On a baseline level of AI, you can automate so many tasks that our people spend time on. That's gains in personal productivity. It's also gains in full-on productivity and that can actually benefit the customer in terms of turnaround time on their request or on their service. So the productivity and the efficiency we are envisaging today could apply to many businesses. I gave you an example of certification only because it's a business that we have profound -- we're profoundly changing how we will work there by massively investing in a new production system and reviewing systematically all the workflows and automating them. We are, for example, today, we have a very, I would say, near-term to midterm target to have over half of our certification admin work essentially automated, right? So there are many, many things we're working on. But certification is an example. I can give you many others. Inspection services is a great example where we can use AI for efficiency and productivity. And the intention here is because we're pursuing growth, -- this is about doing more with our people. It's really about freeing our people so they can spend more of their time on productive tasks so we can grow our business, grow our volumes very, very efficiently. Operator: [Operator Instructions] We'll now move to Suhasini Varanasi of Goldman Sachs. Suhasini Varanasi: Just a couple for me, please. One is on margins. Given that you've completed the disposal of the food business, can you help us understand the scale of the margin benefit in that particular division for 2026? And similarly, when we think about the drag from M&A scope effect in certification, how should we think about the drag from that scope effect in '26? When does it, let's say, fall away the effects in that particular division? That would be the first one. And I think just on your Marine division, -- can you help us understand what your expectations are for 2026, please? You've obviously had a very strong double-digit growth year in '25. I know we've talked a lot about normalization of growth. Just wanted to get the latest sense here. Hinda Gharbi: Good to hear from you, Suhasini. I'm going to let Francois comment on the margins, and then I'll answer you on Marine. François Chabas: Suhasini, so on the food testing that we've divested, so this business was having a margin lower than the group average. I could answer to you very simply, but actually, the answer is a bit more tricky. We've divested this business in tranches. We've had actually 11 different divestments, 11 different countries, to speak plainly that we sold between December '24 and August '25. So the exact number will be tough to assess, but one, it is positive to group margin, and we could say a couple of basis points, a bit more at group margin level for 2026. So not a step change. It is more positive on the division, of course, group-wise, a few basis points. When it comes to the second question on the M&A dilutive or the scope dilutive contribution to certification, I think it's important to come back to what we said in March '24. The LEAP plan is not only a plan of a pure financial performance is financial performance and investment at the same time. And in this segment, certification, what we are building, we are building solution we are supposed to and capable to scale beyond the domestic market. So we've made a couple of acquisitions with strong position in their native market, home market, and we actually grow them outside their comfort zone to be within a wider area, whether it is Europe for one or all of the U.S. for the other. And this come with a cost, and I think we make no mystery that we are investing. So this is what is happening in 2025 that will resolve in 2026, of course, as it will be payback time. Hinda Gharbi: Yes. Thanks, Francois. On the Marine division, Suhasini, on the growth, you're absolutely correct. We had expectation that the growth would have moderated probably from last year, simply on the assumption that the shipyards would have taken longer time to reach basically maximum, I would say, throughput. Usually, when you -- particularly if you open shipyards that were mothballed for a while, it does take time for them to come up to speed. And the capacity was building up gradually for the last few years, right? Actually, we were pleasantly surprised that they were much, much better at ramping up than in past, if you like, in past times or in past years. And therefore, the throughput was much faster. And that's really where that growth came in. It really came for the new construction, very, very good cadence that allowed us to convert our backlog very quickly. Now -- as we look forward, first of all, our backlog, I mentioned earlier, is 35 -- over 30 million gross tons, 23% year-on-year growth. We have a very comfortable and solid backlog. We have a very good team in place that has been doing all these great work. Really, we have everything with us and the shipyards are progressing, but we have reached that capacity. Now I am not necessarily able to say will there be many new shipyards that can open and come up to speed very quickly or not. And therefore, with everything we know today, we think there will be moderation of the growth from -- essentially from the 14% you have seen to something in the high single digit. This is how we think about mid- to high single digit. It all depends whether the shipyards can move much faster or can be much more productive than what we thought. But today, that's the, I guess, the limited visibility we have. It's the one time that I will say, I hope I'm wrong on this one, but we'll see. Operator: We'll now go to Geoffroy Michalet of ODDO BHF. Geoffroy Michalet: Congratulations for those very nice results. Three questions for me. First one would be for Francois maybe. What is your unspeakable target for working cap since it is always improving now. You haven't set a formal threshold you would like to reach or flow, let's say. The second question is on your M&A pipeline. Do you have confidence it could accelerate on, let's say, larger transaction? And the third question is on AI again, but maybe on another angle, the angle of potential threat or newcomers or new solutions that you are seeing on the market? Hinda Gharbi: Absolutely. Thank you, Geoffroy. Francois, do you want to address the working capital. François Chabas: Geoffroy, it's a difficult question. Just to remind everyone, you don't come from a 10% working cap of revenue to 3.4% with magic. It's been done the good old way, just making sure our clients are paying on time. And from a situation that where somewhat -- somehow the cash element was a bit less considered, less regretted as what it should have been. So we've put back the discipline in place each and every year. I'm very pleased with having gone below the 4% leverage threshold. I'm not -- I will not commit to a further downside. We still have options, by the way, we still have the option to further improve. But I would say, I think it's no mystery. We are getting very close to some kind of natural threshold the bulk of our business, 70% of our business is inspection related. So by definition, you work a week or 2 or 3 and then you invoice. So contrary to our lab segment of our business, which operate on a daily basis and where working cap can go as low as 0% inspection, you reach a threshold. So I would say I would be very happy if we stay for the coming year around the 4% working cap of revenue. We have ammunition to go a bit below, but it's too early to commit. I'll let you know perhaps more when we cross the June line on how we progress. Hinda Gharbi: Thanks, Francois. On the second question, Geoffroy, on the M&A. Look, the M&A pipeline is there. We have several multiple midsized or bigger than the bolt-ons you have seen recently targets that we are follow looking at in very specific markets that are of interest to us. So it's not an issue of pipeline. It's a matter of finding the right target that can be not only response to our strategic needs, but also can be integrated and scaled in an optimum way, allowing us to actually deliver the returns we want. So it's an equation that needs to balance all that. And that's why we could say with confidence that within 12 months, we'll be able to continue to rotate the portfolio. I think our M&A program is going in a way, is addressing what we need. There are a number of things we would have liked to do slightly faster, but not at any price. And that's very important that we have that balance between delivering what we need for the portfolio so we can progress with our growth agenda, but also making sure that our returns fit within the parameters that we have fixed for ourselves. So no concerns there in terms of availability of targets. Now looking at the AI question, look, I think 2 things. I think it's very important to step back and say, and that's something I tried to address earlier in my remarks on the AI, what do we do and why we are needed. I am not concerned today that we will be completely replaced by AI for a very simple reason. We have we are necessary for that trust. And what does it mean? It means that you have an entity, a structure that can actually be in the loop to, in a way, assess whatever decision or whatever transaction or whatever asset is being built or reconstructed and needs to validate that. That will require a human in the loop, a human in the lead. Now that is not a license to be complacent and not do anything. I think the biggest threat today for us is to essentially be too slow to adopt AI. I think the urgency, and I tried to say it earlier, is to adopt AI very quickly because that is the catalyst, the turbo factor, if you will, to be able to grow faster. And I think with the technology movement, with the cadence of innovation, you cannot adopt this technology in the way we have -- we may have adopted other technologies before. So urgency is important. We believe strongly that our brand, the fact that you need the human judgment on many, many of the decisions we actually participate in to support customers and to protect them, to protect their risks and their liabilities gives us that moat today. But again, not a license for complacency. It's very important that we adopt the technologies very quickly. Now you mentioned whether there are newcomers and others. There will always be players who would want to find space like the TIC sector where you have lots of people and lots of data. But what a lot of these natives miss is that there is domain expertise and there is the brand that is actually necessary for our customers to secure their risk and to secure themselves against liabilities and show that there is actually a third party who has confirmed what they're doing and has assessed what they're doing. So I hope that answers your question. But I think the key thing probably to retain is we need to remain paranoid, so we can move very fast. And we'll come back to you with progress in the coming publications. Operator: Next question will be coming from Virginia Montorsi of Bank of America. Virginia Montorsi: I just had 2 quick ones. On the margin side, could you help us understand a little bit how to think about industry margins specifically into next year? I think we've touched on all other divisions, but this one. And then just one last question on AI. What are -- I think one of the questions we get sometimes from investors is the ability of testers to maintain pricing power as you guys adopt AI and whether or not customers could potentially ask to be charged less as they know you incorporate AI. So I just wanted to ask how do you think you can leverage your kind of organization and maintain good pricing? And how should we think about that? Hinda Gharbi: Thank you, Virginia. Francois, do you want to comment on this. François Chabas: Yes, sure. So industry, if you again, contextualize a little bit, we had a couple of years with a good momentum from a margin point of view on industry. 2025 have been somewhat a bit disappointing if you look at it on a full year basis. I made some comment about it, but the last -- the second half of the year, we had a bit of a change of mix of service because some of the contracts we were expected to render or to deliver, sorry, in H2 have been moved to Q1 and Q2 2026. These are big shutdowns without going into details. But to give you an idea, if you are running a refinery, you need to shut down your refinery for 2, 3 weeks to make the necessary checks, during which we sent 70 to 100 people. And obviously, the decision on when these shutdowns happen is in the hands of the customers. To some extent, you have ranges during which they can do it. And we were actually expecting more of them to be done in H2. It happens that it will be more in H1 2026 instead. So we do not consider the 2025 margin as a normative one. We should see incremental in 2026 on that segment. I don't know if that answer your question. Hinda Gharbi: All right. Thanks, Francois. Look, on the AI implementation and the so-called deflationary risk, I think it's very important to step back and think about what is really our business model and how we operate. The bulk of our businesses are service fee models. Yes, of course, there are people doing the work, but it's a service fee model. And the way we think about AI integration into our workflows and into our work is it's very important that we articulate the value for the customer from efficiency. If efficiency is only about reducing people, that's not really a value proposition for the customer. So we consider that the integration of AI not only will bring in that efficiency in how people work, but it also will add value to the customer. I'll give you a couple of very specific examples. If you go to high-risk environments, when you send people to high-risk environments, you're actually creating a burden for your customer, whether it's a mining site, an oil and gas [indiscernible], a ship, anywhere there are risks, you're requesting logistics, you're requesting actually -- this is an exposure of people in their facilities, it's time it takes and so on. So less time is actually value for customers. And that's very, very important to be clear on. So we consider that because the bulk of our work is actually in service fee model, we will price differently as we progress. We will have to think of pricing in a different way and really value price. Of course, it's a massive change management in our -- in an industry that is used in a very specific way to price, but that's how we think about it. We don't think it's a fatal kind of risk. We think it's a risk if we don't act on it and we don't really value price, but we think it's manageable. Now of course, there is a small piece that is billable hour. And when you have billable hour, the customer will be even more insistent that they want you to reduce their price. And this is where service quality, customer experience will come in. You have to flip the equation, if you will. You have to make sure that you're not actually only focusing on that number of people that you're going to pull out. You have to think about how you're doing the work and what does it mean for the customer in terms of essentially service quality, turnaround time, whatever parameter will be valuable for them in their own sector and their own circumstance. Operator: Ladies and gentlemen, due to time constraints, we have time for one question. And the last question today will be coming from Allen Wells of Jefferies. Allen Wells: Three quick ones from me, please. Firstly, just on the balance sheet and capital allocation. Obviously, balance sheet leverage is in a good place at the lower end of your 1 to 2x range. Free cash flow was strong. The buyback was obviously in line with what you announced last year. But how should we read into this in relation to capital allocation? How should we think about the cadence and size of bolt-ons versus the potential for further buybacks over the next year or 2? That's my first question. Second question, just circling back on AI. But from the other side, how do we think about the level of investment that's going on internally at [ BVI ]? How should we think about that from a CapEx and OpEx perspective and where we may start to see that in the numbers? And then finally, and apologies if I missed it, just on the consumer margins were strong, up 55 bps, I think, organically in the year. Just looking for a little bit more detail about what's driving that and how we should think about the cadence of further margin progression on the consumer product business into 2026? Hinda Gharbi: Right. Thank you, Allen. Francois, you want to address the margins for... François Chabas: So for consumer, I think you're right to point out, it's been -- you had good incrementals. I think this is coming -- first, it's here to stay. It's not a one-off or any exceptional event. And it's based on 2 very deliberate action we've led now for 2 years, one which is rather visible. I mean, I think in that mentioned this division, Consumer Products has today -- is operating today 10% of its revenue coming from a totally new business compared to what it was at the end of 2023. So we have -- here, we have made very little divestment. Here, we have made add-on, and we've purchased 10% of the current revenue compared to where it stands. So -- and obviously, we've made some bets in terms of acquisition, which are paying off with good margins, good incrementals. So the M&A or the portfolio reshape again -- and actually, to be very fair and transparent with you, this has started even before we announced the plan. We went to the market in March 2024. We had designed the plan with the -- our consumer product team in the if I remember, was back in Hong Kong somewhere in September '23. So this -- they are a bit ahead of the game, I would say, in terms of deploying capital to reshape the portfolio. So that's one to say, a good half of the explanation. The second half of the explanation is we have been working over the last 2 years to in practical term, exit, reduce, limit our exposure to some distressed segment of the tech part. So you remember, you have the consumer -- the traditional product testing, [ softlines ] like toys, 2/3 of the business and 1/3 is tech. In this tech division, subdivision, we had some weak parts there that we discontinued. So I think some of you have noticed that the top line momentum in '23 -- in '24, '20 and early '25 was somewhat weak on tech. It is as well because of those actions we took. And obviously, when those businesses are out, then the margin is back up. And that's why I'm saying it's a sustainable improvement, and we expect this improvement to continue in 2026. Hinda Gharbi: Thanks, Francois. On the balance sheet, Allen, I mean, we have headroom in the balance sheet is very clear. You mentioned it. For us, as we said, we're very clear on what we need. We're monitoring the market. We have pipelines we're working on, and we will balance when we buy. And when we buy, we have that room in the balance sheet, which means that any consideration for additional shareholder return, we'll have to take that into account. Of course, it's very important that we continue to execute our portfolio agenda, growth agenda, and that entails continuing to do bolt-ons, but also very specific M&As in very specific sectors. We have the room. And then when the time is right and we can also do shareholder share buybacks, we will consider that. And that's really what we just did this year, just now when we announced it today. On the -- and the other thing I think is very important to mention is -- the -- I mentioned earlier, we mentioned it a few times. We said we have rotated already circa 10% of our portfolio, and we will double that in the next 12 months. I think that gives you an indication that we have a number of things we will be working on -- we are working on for the next 12 months. All right. The third question is on AI. The investments. Look, we said investments will be between 2.5% and 3% in 2026. We were below that in 2025, as mentioned by Francois. And we have already slotted in investments for AI. And digital, I would say we have a program ongoing, which was always part of our performance programs from the get-go that part of our operating leverage and functional scalability gain will be reinvested in the business as we modernize our product line. So do you want to give anything else on the investments? François Chabas: On the investment, I think today, we maintain what we've said during the Capital Market Day in terms of CapEx intensity, anywhere between 2.5% and 3%. That's where we intend to stay. However, as Hinda mentioned, it's somewhat of an increase compared to the very disciplined approach we had in the first 2 years of the plan. But we don't derail from this. There may be, however, some -- indeed some need in the next year within this range. Hinda Gharbi: Absolutely. All right. I hope that answers your question, Allen. I understand this was the last question. So just a few things to say prior to closing. First of all, I'm very, very pleased with the results that our team have delivered in 2025. It has been, I would say, quite an interesting year to say the least, 2025, but the team have delivered very well. It's fully in line with our LEAP 28. 2026 is our third year. We're looking to accelerate a number of programs. And I think our guidance give you confidence that we have very solid plans to support our growth and performance ambitions. Thank you very much. François Chabas: Thank you.
Operator: Good day, and welcome to the Royal Vopak Full Year Results 2025 Update Conference Call. [Operator Instructions] Please be advised that today's conference call is being recorded. I would now like to hand you over to your speaker of today, Fatjona Topciu. Please go ahead. Fatjona Topciu: Good morning, everyone, and welcome to our full year 2025 results analyst call. My name is Fatjona Topciu, Head of IR. Our CEO, Dick Richelle; and CFO, Michiel Gilsing, will guide you through our latest results. We will refer to the full-year 2025 analyst presentation, which you can follow on screen and download from our website. After the presentation, we will have the opportunity for Q&A. A replay of the webcast will be made available on our website as well. Before we start, I would like to refer to the disclaimer content of the forward-looking statements, which you are familiar with. I would like to remind you that we may make forward-looking statements during the presentation, which involve certain risks and uncertainties. Accordingly, this is applicable to the entire call, including the answers provided to questions during the Q&A. And with that, I would like to hand over the call to Dick. D.J.M. Richelle: Thank you very much, Fatjona, and a very good morning to all of you joining us in the call today. I would like to start with the key highlights of the year. 2025 was another year of disciplined strategy execution and sustained momentum for Vopak. We delivered record financial results, executed our growth strategy and showed our commitment to create and distribute value to our shareholders. Demand for our services remains strong, which is reflected in a healthy occupancy rate of 91.4%. Despite currency headwinds, we delivered a record level EBITDA in 2025. We further optimized the portfolio, divesting our terminals in Korea, in Barcelona and Venezuela, while establishing our footprint in Oman and completing the IPO of AVTL in India. We also made good progress on executing our growth strategy. Some of our largest projects like REEF LPG terminal in Canada and Gate 4th tank in the Netherlands are progressing well. We have now committed around EUR 1.9 billion to growth projects since 2022 and are well positioned to reach our ambition of investing EUR 4 billion through 2030. We see this not as a target to spend, but rather as an opportunity to invest in attractive growth opportunities. Finally, we showed our commitment to distribute value to our shareholders. In line with our disciplined capital allocation priorities, we are announcing a shareholder distributions program of around EUR 1.7 billion through year-end 2030. Before we dive deeper into the results, let's have a look at where we stand in the execution of our strategy. In 2022, we launched our improve, grow and accelerate strategy. And in the first phase, we significantly strengthened our foundation, applying strategic portfolio management while increasing the exposure to gas and industrial terminals that led to an improvement of the operating cash return from 10.2% in 2021 to 15.6% in 2025. Our strengthened foundation positions us well to increase the pace of our investment commitments and growth CapEx in 2025. We are focused on executing our major projects, delivering them both on time and on budget. As these assets come online from 2027, we expect them to positively contribute to our return profile. And this will further accelerate our growth strategy execution as we look for continued ways to accelerate our investments in attractive growth projects. As we execute our growth strategy, we remain committed to distribute value to our shareholders. Since 2021, we have distributed around EUR 1.2 billion in dividends and share buybacks. And in line with our disciplined capital allocation priorities, we're making a step change now by announcing a shareholder distributions program of around EUR 1.7 billion through year-end 2030. Now back to our results. As mentioned, 2025 was a strong year in terms of strategy execution. We continue to improve the performance of our portfolio, generating a record level of operating free cash flow, leading to an operating cash return of 15.6%. In addition, we completed the IPO of AVTL in India, and we added additional investment commitments during 2025, of which the majority is allocated to grow our base in gas and industrial terminals. With regards to the accelerate strategic pillar, the developments of new supply chains for CO2 and ammonia as hydrogen carrier are moving at a slower pace than we initially anticipated. At the same time, we're pleased with the investments in the Netherlands and Malaysia on low-carbon fuels and sustainable feedstock infrastructure as well as the early stages of battery developments. Now let's look at our sustainability performance, where we have safety always as our top priority. And while these metrics demonstrate best-in-class performance, they fall short of our ultimate safety ambitions. Looking at the emissions, we're making good progress in achieving our long-term goals. With regards to diversity, despite our ongoing efforts, we've not yet realized the level of gender representation to which we aspire and are committed to improving this. Looking at the financial performance for the different terminal types we operate, we see an overall strong performance with higher results compared to last year despite currency headwinds. LNG markets remained well supplied while global LPG trade was marginally higher than 2024. Mainly due to some planned out-of-service capacity and a positive one-off last year, 2024, the results of the gas segment went down year-on-year. In the Industrial segment, growth is contributing and together with the one-off in the second quarter in 2025, we see a 15% increase, notwithstanding the uncertainty in the macro environment. Chemical markets were challenging for our customers in 2025, while our terminals continue to perform relatively stable despite some locations seeing lower occupancy rates. Energy markets, which we serve with our oil terminals continue to see strong demand and performance is driven by increased throughputs, higher rates and contract indexation. All in all, this has led to an increased proportional EBITDA to EUR 1,184 million and a strong operating cash return of 15.6%. Now let's move to the execution of our growth strategy. Since the start of our Improve, Grow and Accelerate strategy, we've committed a total of EUR 1.9 billion. Around EUR 550 million of this EUR 1.9 billion has been committed since the beginning of 2025. We're well positioned to achieve our ambition of investing EUR 4 billion by 2030, supporting our long-term operating cash return ambition of 13% to 17%. During 2025, we made good progress in expanding our capacity. The construction of our LPG export terminal in Western Canada and the 4th tank at our Gate terminal in the Netherlands are progressing as planned. Also, we're expanding our capacity in Asia with multiple FIDs taken in China, India, Malaysia and Thailand. In the Latin America region, we're expanding our capacity in Brazil and in Colombia. As mentioned, we've realized strong momentum in executing our growth strategy. We've already commissioned around EUR 650 million, and these projects are contributing to our results. Around EUR 1.3 billion is still under construction, and we expect to commission around EUR 775 million around year-end 2026, and that's related mainly to Gate 4th Tank and LPG in Canada. In the period '27, '28, we expect to commission around EUR 325 million and around EUR 175 million in 2029 and beyond. The already commissioned growth projects as well as the growth CapEx under construction will further reinforce our long-term stable return profile. 70% of our revenues are generated from contracts longer than 3 years, a 10% point increase from around 60% in 2021. Currently, around 40% of our EBITDA is generated by assets in gas and industrial. Looking ahead, we expect continued strong momentum. We've shown strong business performance in the recent years. The market indicators for storage demand remain firm, supporting the delivery of our growth projects and the resilient performance of our existing business. We expect this momentum to continue, and this is reflected in our long-term ambitions. We've raised our long-term operating cash return ambition to an annual range of between 13% to 17% and are well on track to invest EUR 4 billion growth CapEx through 2030. So let's wrap it up on this slide. We have an unparalleled global infrastructure portfolio, proven to be resilient in uncertain times. We expect a robust energy demand through 2030. And through our strategic locations and the critical link they provide will support further growth opportunities leading to long-term stable returns. With our ambition to allocate EUR 4 billion growth CapEx through 2030, of which EUR 1.3 billion currently under construction, we deliver clear tangible levers for growth. And last but not least, we have a strong focus on creating and distributing value to our shareholders through cash dividends and share buybacks. With that, I'd like to hand it over to Michiel to give more details on the full year and fourth quarter numbers. Michiel Gilsing: Thank you, Dick. And also from my side, good morning to all of you. As mentioned by Dick, 2025 was a strong year for Vopak with record results. We reported a record level of operating free cash flow, driven by our continued strong profitability and EBITDA to cash conversion. On a per share basis, proportional operating free cash flow increased by 7% to EUR 7.13. We reported a 68% increase in earnings per share, driven by higher net income and a lower share count. Net income increased by EUR 228 million, mainly due to a dilution gain of EUR 113 million resulting from the listing of our AVTL joint venture and an impairment reversal of EUR 181 million in cash-generating unit of the Europoort terminal. These results highlight the strength of our well-diversified portfolio, particularly in times of increased uncertainty and volatility. Simultaneously, we continue to ramp up our investments in attractive and accretive growth projects while returning value to our shareholders, which we will discuss in more detail later in the presentation. Let's take a closer look at the performance of the portfolio. Our operating cash return improved to 15.6%, driven by an increased operating free cash flow of EUR 823 million and a slightly decreased capital employed. Demand for our services remained healthy. Adjusted for currency movements and divestments, the proportional EBITDA increased by 4.3%, which we will detail further in the next slide. Moving on to our business unit performance overview. Excluding negative currency exchange effects of EUR 33 million and EUR 2 million divestment impact, the proportional EBITDA increased by 4.3% compared to 2024. A large part of this growth can be explained by the strong EBITDA contribution of EUR 20 million from our growth projects, particularly in China and the Netherlands. The results in our Asia and Middle East business unit were primarily driven by the results of a commercial resolution in the second quarter. Across the remaining business units, the performance was relatively stable. We are continuously focused on generating predictable growing cash flows to create value for our shareholders. We achieved this by growing our revenues while improving our profitability and cash conversion. In 2025, we improved on both our EBITDA margin, reaching 58% and our cash conversion reaching 70%. Driven by revenue growth, increased profitability and increased cash conversion, we have grown our operating free cash flow by 49% since 2021. As we have funded a fair share of our growth investments by divesting assets with lower cash generation abilities, the amount of capital employed has not significantly changed since then. The significant improvement in cash generation with a stable capital employed has led to a 5.4 percentage point increase in our operating cash return. Let's take a closer look at the drivers of improvement with regards to our cash flow per share. We can clearly see that the increased profitability is the main driver of improvement since 2021, driven by strong contributions from our growth projects and the resilient performance of the existing assets, our proportional EBITDA increased by EUR 184 million. This has had a net impact of around EUR 1.50 per share. Also, our cash conversion has significantly improved, primarily driven by a decrease in operating CapEx of 28%. This has had a net impact of around EUR 0.70 per share. Finally, we have executed 2 share buyback programs since 2021 with a total value of EUR 400 million, reducing our share count by around 8%. And adding these drivers together, we increased our proportional operating free cash flow per share by 62% since 2021. Shifting from proportional figures to consolidated figures, we get a good picture of the cash flow that became available for capital allocation on the holding level in 2025. Our cash flow from operations, which includes a healthy upstreaming of dividends from our joint ventures remains strong, showing a 2% increase compared to 2024. After deducting operating CapEx and IFRS 16 lease payments from CFFO, we arrive at the consolidated operating free cash flow of EUR 691 million, an improvement of 5% versus 2024. Factoring in the taxes paid and the financing cost, we arrive at a levered free cash flow of EUR 506 million. This represents the available cash before debt financing that we can strategically allocate to pay dividends, invest in growth or buy back our own shares. Our capital allocation framework consists of 4 distinct pillars, aiming to maintain a robust balance sheet, distribute value to shareholders, invest in attractive growth opportunities and yearly evaluate share buyback programs. In the next part of the presentation, I will highlight our key capital allocation achievements. Starting at our first priority, the balance sheet. Proportional leverage, which reflects the economic share of the joint venture's debt decreased to 2.6x compared to the end of 2024 when it was at 2.67x. If we exclude the impact of assets under construction, which do not contribute yet to EBITDA, the proportional leverage is at 2.06, which is the lowest level in the last 5 years. Our ambition for the proportional leverage range is still between 2.5 and 3x. To facilitate the development of growth opportunities that enhance our operating cash return, Vopak's proportional leverage may temporarily fluctuate between 3x and 3.5x during the construction period, which can last 2 to 3 years. Additionally, we maintain control of our financing expenses by limiting the exposure to volatility in interest rates. And we achieved this by borrowing predominantly at fixed rates. As mentioned, we have the long-term ambition to generate reliable and attractive returns for our shareholders. This is why we have announced a shareholder distributions program of around EUR 1.7 billion through the year-end 2030. This program will enhance our dividend policy while introducing a multiyear share buyback program. With regards to the dividend, we have the ambition to grow our payments by 5% or more per year. Also, we will increase our dividend payment frequency to semiannual. We propose a dividend per share of EUR 1.80 over 2025, representing a 50% increase compared to the payment made in 2021. To be clear, the proposed EUR 1.80 will still be paid in full in April of this year, subject to AGM approval. The first interim payment will be announced at the publication of our 2026 first half year results. Looking at the second component of the shareholder distribution program, the share buybacks, we have the ambition to buying back EUR 500 million through the year-end 2030, of which we expect to execute the first tranche of up to EUR 100 million over the next 12 months. As shown in the graph on the right, we have distributed around EUR 1.2 billion in dividends and share buybacks in the last 5 years. The announced shareholder distribution program of around EUR 1.7 billion through the year-end 2030 marks a significant step change. Moving on to the growth. Investing in growth opportunities is a key part of our capital allocation policy. We have the ambition to invest EUR 4 billion on a proportional basis by 2030 to grow our base in gas and industrial terminals and to accelerate towards energy transition infrastructure. At this point, we have already committed around EUR 1.9 billion to growth investments since 2022, of which EUR 650 million has been commissioned and is already contributing to our results. Around EUR 1.3 billion of growth projects are currently underway with the majority of them being delivered by the end of 2026. Once these projects become operational, we expect them to further contribute to the increasing free cash flow of our portfolio. This is why we feel confident in raising our long-term ambition for the OCR to between 13% and 17%. We continue to see attractive growth opportunities in the market that we will pursue in order to grow the cash generation of the portfolio. Our ambition remains unchanged to actively support our customers with infrastructure for the ongoing energy transition and to invest when opportunities arise at returns in line with our portfolio ambition. Let's bring it together in this slide. Since 2021, we have made significant improvements. Our financial performance improved with a double-digit increase of revenue and EBITDA. On the back of increased cash conversion, this growth has boosted our cash generation. The operating free cash flow per share, our main KPI for assessing value creation has increased by 62%. It is, of course, equally important that this increased cash flow is allocated in a way that is creating long-term value for our shareholders. And as you can see, that has been clearly the case. We decreased our leverage while significantly ramping up our growth investments. At the same time, we raised our dividend and reduced our share count. All in all, we're proud of the results that we have achieved. Before we move to the outlook 2026, let's take a brief moment to address our exposure to foreign exchange. If we look at the proportional EBITDA split by currency, we can see that 28% of our EBITDA is generated in euro, which means that for the remainder of the EBITDA, we face translation risk in our P&L. To be a bit more specific, we show on this slide the sensitivity of our proportional EBITDA to changes in U.S. dollar, Sing dollar and Chinese renminbi on an annual basis. For example, a 0.10 change in euro to U.S. dollar has a full year impact on an annual EBITDA of around EUR 32 million. The translation impact that arises from recent currency volatility is something we take into account in our outlook for the remainder of the year. We have updated the currency rates at the end of the year. Based on these updated rates, we expect a negative foreign exchange impact of around EUR 20 million in 2026 compared to 2025. Furthermore, taking into account the positive one-off in the first half year of 2025, we arrived at a rebased proportional EBITDA of around EUR 1.14 billion as a base for the outlook of 2026. For 2026, we expect EBITDA to be between EUR 1.15 billion and EUR 1.2 billion, reflecting an autonomous growth rate between 1% and 5%. We also expect a proportional operating free cash flow of around EUR 800 million for 2026. Operating free cash flow is a driver of value and distribution, and hence, we will start guiding on it. For the longer term, our ambition remains unchanged with regards to our leverage and growth projects. As mentioned, we are raising our ambition for OCR to between 13% and 17%. For shareholder distributions, we have announced a shareholder distribution program of around EUR 1.7 billion through the year-end 2030. Bringing it all together in this slide, 2025 was a strong year for Vopak. We reported a record level of operating free cash flow driven by our continued strong profitability and cash conversion. We have realized a significant step change, increasing our proportional operating free cash flow per share by 62% and increasing our OCR from 10.2% to 15.6%. Simultaneously, we continue to ramp up our investments in attractive and accretive growth projects while returning value to our shareholders. And with that, I hand it over back to you, Dick. D.J.M. Richelle: Thank you, Michiel. And with that, I'd like to ask the operator to please open the line for question and answers. Operator: [Operator Instructions] And the first question is coming from Jeremy Kincaid from Van Lanschot Kempen... Jeremy Kincaid: Congrats on the results. Three questions from me. The first 2 on the share buyback. Firstly, has HAL indicated what it plans to do with regards to the share buyback? Secondly, you've obviously kept your long-term CapEx ambitions, but obviously, you've talked to some larger potential CapEx programs in the future like South Africa or Australia. I was just wondering if you could provide us a bit of an update on either of those projects and how they fit into the outlook given this new share buyback and shareholder distribution framework. And then my third question is on REEF. There's been a couple of articles recently about a dispute with the First Nations community there. I was just hoping if you could provide an update and your thoughts on that dispute and whether it could impact your REEF development. D.J.M. Richelle: Thank you, Jeremy. First question, what we announced this morning is we do not have any agreement with any of the shareholders related to the share buyback program. That's been a standard language that we've used in the last 2 programs. So that's what we know for now. So no further news on the HAL position. But obviously, we know that if we were to have an agreement with HAL, that would have been noted in the press release. An agreement, meaning that they would like to sell as part of the share buyback program. That agreement is not in place. So I think that's one related to HAL. Then the second one, the long-term CapEx outlook, I think we're pretty clear in the confidence that we have in our ability to execute our growth ambition of the EUR 4 billion. Australia and South Africa are developing, I would say, in line. So maybe first, a few things on Australia, where we moved into definitive phase to prepare for an FID hopefully in the later part of 2026. That means the FSRU is secured. That means that the permit application is submitted, that all the technical details related to the location and environmental impact assessment has all been done and is currently subject to review questions and further due process. So we're well on track, I would say, for the Australia project. South Africa, I would say, in general, an environment that is a bit more complicated in terms of the permit process. It will take -- it's always hard to make the full estimate of how long that permit process is going to take. We're here dependent as well on power plant development in the area of Richards Bay, where we are planning the site. So we are still confident on the need for the country on our role that we can play on the location. But as you can see with these projects in an early development stage, it takes a bit of time to see how they will unfold. I think whether -- there are obviously big projects in our portfolio, both especially, I would say, Australia, but also South Africa. At the same time, we can also see that the pipeline of projects that we have is a healthy pipeline and the development is healthy. And on that basis, we are indicating and guiding the market on our confidence that we have for the EUR 4 billion in 2030. I think that's hopefully giving you a bit of background on that long-term CapEx plan and where and why the confidence is. And then towards your last question related to REEF and the news on some of the First Nations comments that have been made. We are obviously aware of what's happening. We are, at the moment, focusing on delivering the project, and that is going well. So the delivery of the project to be in service end of this year within the time line that we originally set and also within the budget that we originally set that is well underway. We continue dialogue with the relevant First Nations and all the relevant stakeholders. This is not only the First Nations, but it's local court, it's the federal government to engage in a very constructive manner to see how we can find a solution that works for everyone involved, while at the same time, also protecting our legal rights. And those are linked to the fact that we are currently constructing the terminal in line with the contracts and the permits that we have. And it's based on a contract with our customer, AltaGas, who is also our partner in the development of the REEF terminal. So that's probably the best I can say for now on this. Operator: And this question is coming from Thijs Berkelder from ABN... Thijs Berkelder: Congrats on the cash return announcement. Happy to see those. First question, yes, maybe more geopolitical. Can you indicate what is currently happening at your terminals in Fujairah? Looking at the JV result in Q4, it was clearly higher and also your proportional occupancy in Middle East, Asia has jumped to 96%. Secondly, can you maybe describe what 1 year with the Trump government. Can you describe what's the impact on your U.S. terminals business of the governmental change maybe? And thirdly, what grip can we have on the timing of, let's say, the new contracts for EemsEnergy? And what kind of costs are you assuming for EemsEnergy in '26? D.J.M. Richelle: Thanks, Thijs. Maybe first on VHFL -- on Fujairah, results overall continue to be healthy. The reason that the fourth quarter was significantly better than the third had to do with a contract that we started in the fourth quarter, in tanks that were empty in the third quarter. So that -- and it was quite a large capacity. It was planned to be taken up by the customer, but that was the reason that the results went up, but also occupancy-wise, it was sizable and therefore, had an immediate impact on the occupancy. I wouldn't say it's something that is linked to a structural change that happened from the third to the fourth quarter. You should look at it much more as a, I would almost say, a natural rollover from one party to another party that takes up capacity. And sometimes it's a few months without occupancy and then it's picked up again by the customer. So this was more or less planned and has nothing to do with geopolitical developments in that area. In general, as you know, Fujairah is -- has a very strategic location outside of the Strait of Hormuz. And that's one of the reasons that it remains a very attractive location, and that's what we expect also going forward. Your second question, we could spend the rest of this call on probably, but not related to the Vopak position, but just in more generic terms. Let's stick maybe to the pure Vopak position. Zooming in, I would say, on the U.S., just to put it in perspective, our U.S. position currently is 8 terminals and roughly, give or take, 15% of our EBITDA. And that continues to be relatively stable going forward. You have to kind of dive into the detail of it. The role of the terminals is either industrial, Corpus Christi or the Via terminals, ex Dow sites. So that's 4 out of the 8, and that's long-term contracts, yes, with a bit of variability, but long-term contracts and relatively stable. Then we have Deer Park that has a strong position and also quite some industrial connectivity to the production sites around. And a lot of what Deer Park is doing is actually local distribution in the U.S. There's not so much import happening over there. So yes, there's a bit of export that happens, but we haven't seen a big impact in 2025 on our Deer Park facility. And last but not least, we have a position on the West Coast, and that is supporting very specifically trade and bunker fuels with airports, or air travel in Los Angeles and the environment. So also there, we see a relatively normal demand for our services. So by and large, I would say, specifically to your question on what the impact of the Trump administration in the U.S. has been, this is the picture. I think if you look at it from a more broader perspective, obviously, the uncertainty that especially the tariffs are creating does not necessarily help create stability for investment and big investment decisions does not necessarily create a lot of stability around product flows around the world. So we've seen changes, and we've commented on that also during 2025 that we sometimes see changes in product flows. But I think the strength of our global portfolio and the diversification of the portfolio means that sometimes you see a bit of a drop in one location being picked up at another location. So I would almost say, by and large, it has -- it did not have in the short term, a big impact on what we see. For the longer term, it's probably -- well, you see how our outlooks are for the investment program, but also the return profile of the company towards 2030 and the announcement we make today. So we feel our position, strategic locations, diversified strong resilient network gives us confidence that the demand for our services will remain quite healthy in the coming period. Then your last comment on EET, a few things to mention over there. We indicated in '25 that we were working on that technical solution related to minimum send-out capacity of the terminal. That solution is now in place, still runs into the first quarter with minimum compensation to the impact of our customers, but then we run into a steady-state situation until '27. That's one. And then second, we're currently going -- as we are indicating in the press release, we're currently going through the process of the renewal of the terminal in 2028, and that process is ongoing. And that's too early to comment on it, but we expect in the coming months to be able to indicate what the next steps are going to be. And that's -- we're just in the middle of all of that at the moment. So I hope that gives you a bit of sense, yes. Thijs Berkelder: Yes. One add-on question on Asia and Middle East results. So the JV results and the proportional occupancy rates spiked because of what you described. But why is the proportional EBITDA then in Q4 down versus Q3? Is that something in Malaysia or so or India? D.J.M. Richelle: It's probably an element in Australia. It's a claim that we booked in Australia. That's the only thing I can probably indicate, Thijs. There's nothing fundamental. So it's more of a one-off element that we saw in Q4 in our oil terminal in Sydney coming up. But that has been. Thijs Berkelder: How large was that claim? Michiel Gilsing: Yes, that was quite sizable, so around EUR 2 million. And then we had in Darwin, we had the long-term contract came to an end in end of September. And then you see effectively, we have a drop in income in Darwin of around EUR 2 million as well. So those 2 together. So one is structural and the other one is more incidental. Operator: [Operator Instructions] And the next question in the queue is coming from David Kerstens from Jefferies. David Kerstens: I've got 3 questions as well, please. Maybe first of all, you indicated the phasing of the commissioning. And I think you said that in 2026, you expect EUR 775 million of growth projects to be commissioned. What is baked into your guidance in terms of EBITDA contribution for 2026? And what do you expect this EUR 775 million will start contributing in 2027? And I think you said EUR 650 million has so far already been committed. What is the EBITDA contribution related to what's currently already operational? And then my second question is on the oil storage market in the Port of Rotterdam. Can you explain what's happening there that triggered such a large reversal of the impairment? And is this only limited to the Port of Rotterdam? Or do you see the market conditions improving elsewhere as well? And then finally, maybe also a follow-up on the HAL question. I think HAL so far has not participated in the share buyback program. And as a result, their stake has increased. Can you update us on the ownership percentage following the latest share buyback that you carried out in 2025, please? Michiel Gilsing: Sure. Yes, on the phasing of growth CapEx, indeed, we don't disclose all the EBITDA contributions in terms of, let's say, exactly what has been contributed by which project, so not on an individual basis. We have given indications to the market on what gas infrastructure and infrastructure energy is going to contribute. So this 5x to 7x EBITDA then on new energy infrastructure, 6x to 8x, and on conversions of existing capacity, 4x to 6x. So the EUR 650 million, which has been commissioned is contributing in line with those multiples. So -- but we don't disclose each and every project. So you could take an average and think EUR 650 million, well, divided by whatever you think would be the average. That's one. And then the contributions going forward, yes, obviously, we don't give any specific guidance, but at least what we do is we give guidance on the strength of, let's say, the cash flow of the company by also announcing, let's say, confidence in our shareholder distribution program. So that means that these projects have to start contributing in line with, let's say, the expectations we have given to the market. Part of it indeed '26, but the bigger part of it in '27 because then the REEF project and the Gate project here in Rotterdam are going to contribute in full. So that is the guidance we're giving. And we're also giving guidance that by bringing these projects on stream, our cash return is not going to be diluted. So effectively, we've now upgraded the above 13% range to 13% to 17%. There's obviously always a bit of volatility in our existing business. But with bringing growth projects on stream, we should be able to be in that bracket of 13% to 17%. So that's what you may expect from us. And you also know, let's say, which kind of capitals we are allocating to the growth CapEx. So -- so in other words, things could be worked backwards from a lot of numbers we have given to the market, but we don't give any specific indications on the projects. That's on the first question. The second question, yes, the oil market in Rotterdam is much stronger than we thought a few years ago. And remember, when we took the impairment, it was the Russian invasion into Ukraine. The business was really down at that moment in time. We had quite a hard landing in the first half of 2022. Since then, we have recovered quite well in the Europoort. So we continuously look at the performance. We have updated our business plans for the Europoort, you see effectively in the coming years, we still expect strong results there. In the long, long, longer run, so obviously, there will be an energy transition impact, but we still think that the Europoort is well positioned to also be a viable terminal in an energy transition world. So overall, we came to the conclusion there is no other way than that we should reverse this impairment. And effectively, that means that all impairments, the significant impairments we took in 2022, which were related to SPEC, the Botlek terminals and Europoort are all being reversed now because we had a book profit on the Botlek. We reversed the SPEC one last year, and we reversed now the Europoort. So that's an indication that the business is relatively strong, and you see that back, obviously, in our cash flows of the company. And then the third question, yes, the ownership of HAL is presently at 52%. There is no -- as I said, there's no agreement, like Dick already mentioned, there's no agreement with anybody related to the upcoming EUR 100 million tranche. So you may expect that as a result of that, the HAL percentage will increase above the 52%. And then to be seen what will happen for the rest of the share buyback program because we will announce it tranche by tranche. Operator: Okay. We're going to carry on with the next question in the queue. And this question is coming from Kristof Samoy from KBC. Kristof Samoy: Yes. Congrats on the results and the improved cash distribution policy. A few questions, if I may. Regarding alternative energies, the fact that you've been revising your cash distribution policy considerably, can we read into that, that we shouldn't expect any major FIDs there in the coming years? And then I had also a question on Antwerp. We saw the news that Maersk will not continue with it plans to open a green plastic factory in Antwerp. Does this have any impact on your business plan for Vopak Antwerp Energy? And then finally, on REEF, could you elaborate a little bit deeper into the court ruling that has been made? And was it a ruling in substance, and is there still now a court case running or is there potential to open up a new case? D.J.M. Richelle: Thanks, Kristof. Maybe first one on the alternatives. So on the Accelerate pillar, I think we made it very clear in the release today, and I can only reconfirm it now that for the overall program of EUR 4 billion that we announced, we are confident that we can execute that program and to realize that ambition between now and 2030. I think that's the first part. The second part is related then, and we are also vocal about that. We see that in the -- our Accelerate bucket, so that's the infrastructure investments to support the energy transition that consists of 4 elements. It's low carbon fuels and feedstocks -- it's the CCS value chain and supply chain and it's the hydrogen supply chain, mainly with ammonia investment. And the fourth one is batteries. So if you take the second and the third, so CO2 and ammonia, we definitely -- well, we continue to see a slowdown in some of the developments over there and delay in some of the major decisions that we are dependent on to set up those supply chains. At the same time, we are still confident that batteries as well as low carbon fuels and feedstocks give us sufficient opportunities to realize the ambition that we set for ourselves in the Accelerate bucket. So it's a bit of a long answer, but the conclusion is the fact that we come up with an increased share buyback program or a share buyback program over the period of time is independent of the developments that we see in a specific segment where we identified growth opportunities. So confident with the overall growth portfolio and pipeline that we have and that we can execute that side-by-side the share buyback program that we announced today. I think that's the first part. And the second is related to Antwerp and Vioneo that is backed by A.P. Moller.So disappointing to see that they were not able to make a case for their big investment in Antwerp, disappointing for us, but I think even more so for Antwerp and to a bigger extent to Europe. It's a product that is in need in Europe, green plastics. There's a whole lot of logic on why it would make sense to do it over there, but they couldn't make it work despite the fact that they put a lot of effort in it had a lot of discussion with all the relevant stakeholders, but they unfortunately could not make it work and now are potentially shifting the production to China, which is a pity to say the least. I think for our plans in Antwerp, we had hoped that this would be a start in the Antwerp development, but we're not singly or single-handedly dependent only on the Vioneo development. We're happy with the developments on the land, making it ready for construction. We have a few other leads that we have been vocal about that we are following, and we're confident that, that location and the plans that we have will lead to an attractive development in the middle of the Port of Antwerp. So we will continue to inform you about the main steps there. And then last but not least, on REEF, I think the court ruling has been an interim ruling to get something dismissed in the court and the court basically said, no, it's not going to be dismissed. So the court case will still be held as originally planned, and that will have its course in '26 and '27. So only if the court would have said we would dismiss the case, then the whole case would have been gone now. That is not the case. So the court has basically said, as originally planned, we will hear the case in '26, '27. It will take some time. I think that's a bit more detail on the court case itself. Operator: Okay. And maybe as a follow-up, can you give us an update on Veracruz? D.J.M. Richelle: In what sense of the capacity over there? Kristof Samoy: Yes. And the reconversion plans. D.J.M. Richelle: Well, maybe a few things that we're still looking for parties to fill up the capacity in Veracruz. In 2025, second part of 2025, we've not been able to find that particular customer. We're working through getting the permits of making the change from the fuel distribution capacity to fill it up with chemicals. That is going according to plan, but will take some time in '26. I don't expect any capacity to be filled from the conversion in '26, and we continue to engage with a number of parties in this year to find someone that will occupy the tanks in -- for fuel distribution. There's definitely a logic for it, but it's not that easy. So we continue to push for that. Operator: We're now going to the last question in the line, and this line is coming from Quirijn Mulder from ING. Quirijn Mulder: So I have a couple of questions. My first question is about chemicals in China. You're now traveling on in this country for, I think, for 4 years now in the suffering from the chemical decrease or whatsoever, how you call it. So what are your plans with regard to Zhangjiagang for example, and your, or let me say, trading terminals? That's my first question. And my second question is about Eemshaven. So you expect for Eemshaven to have somewhat better results in 2026 compared to 2025. And the open season was closed, as we understand, there is a consideration to expand the capacity with an FLNG conversion of an FLNG transport vessel into an FSRU. Can you maybe comment on that sort of message we have heard about this? And then my final question about the share buyback program. If I make a comparison with SBM, for example, they have also a program, but they have left some room depending on the growth and the developments there with regard to the cash flow. Is that something you have also taken into account into your program? Or you -- let me say you are saying this is EUR 500 million, that's it, we don't have any upside here left. D.J.M. Richelle: All right. Maybe Zhangjiagang, specifically, no big change indeed in the situation of the terminal, relatively low occupancy in Zhangjiagang. Remember, that's the only wholly owned terminal. So that's the one that is in the occupancy also coming up and therefore, is being flagged. In terms of pure result and result contribution, it's minimal because let's not forget our China business, all the other terminals is in joint venture and is ITL, so industrial terminals with long-term contracts have developed strongly. So we've divested a few of the relatively smaller distribution facilities in that area, we've now also divested, although not China, but South Korea, we've divested Ulsan terminal at the end of '25. So the dependency on, as you call it, the distribution facilities has been reduced. And yes, we need to continue to look at Zhangjiagang and do everything that we have in our ability to make Zhangjiagang more attractive for the group. But again, it's not the one who has the main impact on our China business. I think the second question, EET, does it have better results expected to be in 2026? The answer is yes, probably because the MSO impact in '25 was there, and that is expected to be much less in 2026. The expansion and the fact that we've announced an agreement to change an LNG vessel and FSU into an FSRU basically allows us to -- for the expansion in -- or the expansion, I should say, in Eemshaven to basically have 2 FSRU vessels from the same FSRU owner and to actually adjust that second new vessel better to what the market services are that we want to offer. So it's actually a bit of an upgrade of the terminal, and we're happy with that opportunity. And as I said earlier to one of the earlier questions, we're currently going through the motions of the results from the open season and follow-up discussions that we're having with customers. So more to follow in the course of '26. And on the [indiscernible], Michiel will comment. Michiel Gilsing: Yes. On the share buyback, yes, we're confident that we can combine the share buyback, the dividend distributions with our growth ambition at the EUR 4 billion proportional CapEx, we would like to invest up to 2030. What we have tried to do is at least show that confidence by also announcing the shareholder distributions up to and including 2030 so that there is a good match. Yes, what there might always be reasons to change, let's say, the share buyback program, of course, but that wouldn't be the case if the EUR 4 billion is becoming the EUR 4 billion. But it could, for example, be the case if we do a major acquisition, but then we still need to prove to the market that, that acquisition is better than buying back our own share. And similar, if we would go far beyond, let's say, the EUR 4 billion, if we find growth opportunities, which are reaching a next level, but then obviously, we also need to update the market on a revised growth plan going forward. And we don't see that yet. But yes, those might be reasons to change our share buyback program over time. But as long as we stick to the EUR 4 billion, we will also have -- we also are confident that we can execute the share buyback program. Quirijn Mulder: However, if I look at what you said about your leverage at 3, 3.5x in periods of construction, if you look at 2026, then the construction of REEF is finished, and that means, of course, that you need something for 2027 quite big when you -- or '28 is quite big if you're going to reach that 3 to 3.5x in my view. Michiel Gilsing: Yes. But if you would think about an Australia project, that's going to be a sizable project. So that will drive up the leverage again. And obviously, we will have -- this year, we will do an increased dividend, but we also do an interim dividend, which is also going to increase the leverage. Then obviously, you have a few more investments which we could take maybe on the energy transition infrastructure, maybe on the battery side. So there's definitely new investments coming into play. And there's always a bit of volatility, of course, in our existing business. So it's not like -- of course, our cash flows are much more sustainable than what they were. But there's still volatility in the business, and that's what we also take into account. So yes, we still may reach, at a certain moment in time, somewhere between 3x and 3.5x for a certain time. And we gave an indication like up to maybe 2 or 3 years. But yes, that is to be seen still. That's also very much dependent on timing of growth -- big growth CapEx projects. Operator: Okay. Thank you very much. This concludes today's conference call. Thank you for participating. You may now disconnect. Thijs Berkelder: Thank you. Michiel Gilsing: Thank you.
Operator: Hello, and welcome, everyone, joining today's AMC Entertainment Holdings, Inc. Fourth Quarter and Full Year 2025 Earnings webcast. [Operator Instructions] Please note this call is being recorded. [Operator Instructions] It is now my pleasure to turn the meeting over to John Merriwether, Vice President, Capital Markets. Please go ahead. John Merriwether: Thank you, Stephanie. Good afternoon. I'd like to welcome everyone to AMC's Fourth Quarter and Full Year 2025 Earnings Webcast. With me this afternoon is Adam Aron, our Chairman and CEO; and Sean Goodman, our Chief Financial Officer. Before I turn the webcast over to Adam, I'd like to remind everyone that some of the comments made by management during this webcast may contain forward-looking statements that are based on management's current expectations. Numerous risks, uncertainties and other factors may cause actual results to differ materially from those that might be expressed today. Many of these risks and uncertainties are discussed in our most recent public filings, including our most recently filed 10-K and 10-Q. Several of the factors that will determine the company's future results are beyond the ability of the company to control or predict. In light of the uncertainties inherent in any forward-looking statements, listeners are cautioned against relying on these statements. The company undertakes no obligation to revise or update any forward-looking statements, whether as a result of new information or future events. On this webcast, we may reference non-GAAP financial measures such as adjusted EBITDA and constant currency, among others. For a full reconciliation of our non-GAAP measures to GAAP results, please see our earnings release posted in the Investor Relations section of our website. After our prepared remarks, there will be a question-and-answer session. This afternoon's webcast is recorded -- is being recorded, and a replay will be available in the Investor Relations section of our website at amctheatres.com later today. With that, I'll turn the call over to Adam. Adam Aron: Before I begin today's call, I'd like to make a personal comment, if I can. As you undoubtedly know, in early December, upon my return to AMC's home base in Kansas City, I put out a press release, which advise you all that just before Thanksgiving, during a business trip to London, I suffered a minor stroke. Fortunately for me, I got immediate care at a superb London hospital run by the United Kingdom's National Health Service, and it was envisioned that I would have a speedy and full recovery. There was no cognitive problem at the time of the stroke, no issue with reasoning or logic or decision-making or memory other than that for a day or so, I completely lost my ability to speak. That was 14 weeks ago. You can hear for yourselves my voice today. My voice is back. I am delighted to report to you all that I am in fighting shape and fully ready to do battle. Speaking of which, let's talk about AMC. As we close the books on 2025, one thing is clear. This was a year of meaningful progress with AMC, both operationally and financially. While it is frustrating for us that the industry recovery unfolded at a much more measured pace than many, including ourselves, originally expected or hoped, even so, the trajectory clearly remained positive, and AMC once again distinguished itself through consistent outperformance, exceeding the expectations of many who guided us. Even in a softer industry environment for the fourth quarter, of 2025, where the North American box office declined by some 4.4%, AMC nonetheless demonstrated strength and resilience. For the fourth quarter, AMC generated approximately $1.29 billion in total revenue, $134 million of adjusted EBITDA and notably, $127 million of cash from operating activities. Along the way, especially our domestic U.S. theaters once again delivered with a 140 basis points of industry outperformance as we continued to capture increased market share. That's a testament to the strength of the marketing and loyalty platforms at AMC, the growing consumer preference for our industry-leading premium large-format and extra large-format offerings and our commitment to deliver the very best in theatrical entertainment experiences. We believe that AMC has a powerful and commanding market lead. Our market share confirms that AMC represents more than 1 out of 4 of all the box office dollars generated in the United States. AMC is about 50% larger in size than the second or the third largest U.S. players. And everyone else in our highly fragmented industry has only a 1% or 2% market share or even less than that. Sean will discuss our full year financial results in more detail, but let me point you to this. In 2025, continuing an improvement trend that has been the case for several years now, we worked so hard at AMC to make our company more efficient. Globally, our attendance in the full year was down 2.1%, but our adjusted EBITDA was up 12.7%. That's a striking contrast. And there's so much operating leverage in our company. I cannot emphasize this point enough. The operating leverage in our company is meaningful. Approximately 2/3 of the incremental revenue dollar drops down to the adjusted EBITDA line. So if and when our revenues are growing, our adjusted EBITDA at AMC can grow and do so meaningfully. That's our expectation for 2026. No one's crystal ball is perfect, but most knowledgeable forecasters have the 2026 movie slate being considerably richer than that of the past 3 years -- the past 6 years. And that is so vital because candidly, the economic levels that we experienced in 2025 are simply not sufficient to carry the day. But we are optimistic and we are confident. Disney and Universal have what looked to be fabulous movie slates. Warner Bros says that it will be releasing more movies in 2026. Paramount says that it will be releasing more movies in 2026. Amazon MGM says that it will be releasing more movies in 2026. Theatrically, even Netflix has the capability to be releasing more movies and smaller operations like A24 and Angel Studios, among others, also seem poised to embrace theatrical exhibition with ambition. With an increased count of widely released film titles coming out in 2026, it is our firm expectation at AMC that the industry box office will grow markedly in 2026, that AMC's market share will remain compelling and that the very real operating leverage inherent in our business will kick in, in such a way that it can cause dramatic improvement in AMC's financial results. 2026 has only just begun, but encouragingly, January was off to a strong start with the North American box office up approximately 16% compared to last year and growth in the European market has been even more significant. Across the 12-month year ahead, the film slate is shaping up to be one of the most compelling in recent memory, anchored by an extraordinary lineup of films that can only be described as a parade of juggernauts that are ideally suited to AMC's industry-leading network of highly productive, high-grossing theaters. Based on the strength of the upcoming release slate, we believe that the North American box office in 2026 could increase by approximately $500 million to as much as more than $1 billion greater than was the case in 2025. And as I just articulated, and as previously reported AMC financial results prove out to be true with rising revenues, the growth in AMC's adjusted EBITDA can be substantial. I'm not going to take you through the list of 2026 movies title by title. That impressive cavalcade should play out during the year. Suffice it to say, though, that we expect to see a rising industry-wide box office in 2026, the biggest since 2019. And with the operating leverage of incremental revenues translating to incremental adjusted EBITDA, rising 2026 revenues bode well to engender a material and positive impact on AMC. I do want to be clear, though, that we will likely need at least a strong 2027 film slate as well, which we do expect, by the way, for AMC to be cash flow positive in outer years, but the considerable progress that we expect to make in this year, 2026, should fill us all with heightened confidence as to our future. Now let's turn from operating leverage to financial leverage and the improvements taking place within the AMC balance sheet. Strengthening the AMC balance sheet remains an extremely important strategic priority for this company. Since the end of 2020, AMC has reduced total debt by approximately $1.8 billion, including a $1.4 billion reduction in the principal balance of our outstanding debt and an additional $420 million repayment of COVID-related theater rental lease deferrals. During 2025, AMC continued to take capital markets actions to strengthen our balance sheet and prepare for the anticipated box office recovery that we think is coming this year. In July of 2025, we closed a series of transformative transactions, including receiving more than $240 million in cash from new debt issuance and the equitization of $183 million in debt with the potential to equitize even more up to a total of approximately $337 million. These transactions address all, I repeat, all of our 2026 debt maturities, pushing them out to 2029. In addition, just last week, we launched yet another transaction to refinance another approximately $2.4 billion of our debt. If successful, that refinancing will extend the maturity of that debt from 2027 and 2029, all the way out to 2031. Simply put, at AMC, we continue to do exactly what we said we would do, take decisive action for AMC Entertainment to fortify our financial foundation, to bolster our cash reserves and to enhance our flexibility. With that, I'll now turn the call over to Sean Goodman, our CFO. Sean? Sean Goodman: Thanks, Adam, and good afternoon to everyone. As Adam noted, 2025 did represent a year of meaningful operational and financial progress. Although the industry box office did fall short of expectations, AMC performed exceedingly well in the areas that are within our direct control. For the full industry box office increased by a modest 1.5% and industry attendance in the European markets in which we operate declined by approximately 3% versus 2024. Nonetheless, at AMC, we grew consolidated revenue by 4.6% versus 2024 to more than $4.8 billion as we welcomed more than 219 million guests to our theaters across the globe and we grew adjusted EBITDA to approximately $388 million, a nearly 13% year-over-year improvement, all of this in an essentially flat industry box office environment. We achieved these consolidated financial results with record-setting per patron revenue and per patron profit metrics. Admissions revenue per patron grew 5.9% to a record of $12.09. Food and beverage revenue per patron grew 5.1% to a record of $7.62, and total revenue per patron grew 6.8% to another record of $22.10. Importantly, our contribution margin per patron, this is defined as total revenue less film exhibition and food and beverage costs divided by attendance, this metric grew 7.2% to yet another record-setting $14.80. This measure of per patron profitability is now 51% higher than in pre-pandemic 2019, underscoring the meaningful improvements that we have made to the business over the last few years. Breaking down our results by segment, starting with U.S. operations, we outperformed the North American box office, growing our admissions revenue by 3.9%, 240 basis points in excess of the overall industry growth. This outperformance helped drive total revenue growth of 4.6%, along with a nearly 15% increase in adjusted EBITDA. And consistent with the overall consolidated trends I referenced earlier, our U.S. theaters delivered record-breaking per patron metrics for admissions, food and beverage and total revenue with total revenue per patron growing 5.3% to $23.79. In addition, the business generated a record per patron contribution margin of $15.69, a 5.7% improvement over the prior year. Domestic total revenue per patron is now 48% -- is now up 48% versus pre-pandemic 2019 and domestic contribution margin per patron is now up 56% compared to pre-pandemic 2019. Now turning to our international operations. Note that the results are impacted by an increase in foreign currency exchange rates of approximately 4.5% year-over-year. With attendance at our international theaters down 5.5% versus the prior year, revenue grew by 4.6% or was flat in constant currency, and adjusted EBITDA declined by 2.1% or 10% in constant currency. Our international theaters also delivered record-breaking per patron metrics for admissions, food and beverage and total revenue with total revenue per patron growing 10.6% or 5.8% in constant currency to a record-setting $17.97 and contribution margin per patron growing 11.3% or 6.4% in constant currency to a record-setting $12.61. Total international revenue per patron is now up 32% versus 2019, and international contribution margin per patron is up 37% compared to pre-pandemic 2019. Our results for 2025 reflect the effectiveness of our industry-leading loyalty programs, innovative pricing strategies, leadership in premium formats and innovative food and beverage offerings, complemented by a relentless focus on the efficiency of our operations and optimization of our theater footprint. In that regard, we continue to execute a transformation of our theater portfolio, negotiating more favorable lease economics, exiting underperforming locations and selectively acquiring high-quality theaters that enhance our network. During 2025, we closed 21 locations, and we opened 3. Since 2020, we've now closed 213 locations and opened 65 locations for a net reduction of 148 theaters or roughly 15% of our portfolio. This ongoing reshaping of our footprint reflects our commitment to improve asset productivity, expand margins and position AMC for sustainable long-term growth. Now let's move to the balance sheet. We ended the year with $428 million of cash. This excludes restricted cash. Our free cash flow for the year was a use of cash equal to $366 million. It's very important to note that this negative free cash flow was entirely related to the first quarter of 2025, and that for the 9 months ending December 31, 2025, we generated positive free cash flow of $51 million. As you may recall, our traditional working capital cycle is closely tied to the seasonality of the box office. Generally, this has resulted in a positive cash impact from working capital in the second and fourth quarters with a negative cash impact in the first and third quarters, the first quarter typically representing the largest negative cash impact. This pattern held true in 2025. And assuming similar box office seasonality, we would expect this cadence to exist in 2026. As Adam said, strengthening our balance sheet has been and will continue to be a top priority. This includes maintaining robust liquidity and continuing to pursue opportunities to extend debt maturities, reduce debt servicing costs and decrease the principal balance of our debt. As Adam noted as well, we recently launched a refinancing transaction targeting our $2 billion term loan due in 2029 and our $400 million Odeon notes due in 2027. This new debt offering, if successful, will address the vast majority of our 2027 debt maturities, extend a significant portion of our debt maturities to 2031, simplify our capital structure and reduce our debt servicing costs. In addition, we're also in the market with an at-the-market equity offering. Proceeds from the offering will be used to strengthen our balance sheet and also allow us to continue to invest in our core business to elevate and differentiate the moviegoing experience for our guests. As of last Friday, we received $26.2 million of gross proceeds from this equity offering. Our capital allocation priorities are clear and consistent. First, maintain robust liquidity and strengthen the balance sheet; and second, invest in our core business to elevate the guest experience. This disciplined approach to capital allocation reflects our commitment to building an increasingly strong and resilient company to deliver long-term shareholder value. From a capital expenditure standpoint, our 2025 CapEx net of lease incentives totaled $200 million, exactly at the midpoint of our previously communicated $175 million to $225 million range. And we expect 2026 CapEx net of lease incentives to be between the same range of $175 million to $225 million. Looking ahead, we see an exceptionally strong film slate in 2026 and beyond. And the operating leverage inherent in our business, coupled with continued success in growing that per patron revenue and per patron profit metrics means that we are very well positioned to meaningfully increase adjusted EBITDA, improve free cash flow and strengthen our balance sheet with the box office growth that is anticipated in 2026 and beyond. And with that, I'll turn this call back over to Adam. Adam Aron: Thank you, Sean. Our 2025 results and our optimism for 2026 underscore that AMC remains firmly playing on offense, focused on bold strategic initiatives that elevate the moviegoing experience and reinforce AMC's position as the clear leader in theatrical exhibition. One year into our forward-looking AMC Go Plan, the results are both tangible and encouraging as AMC continues to delight our guests and AMC continues to position ourselves for sustained growth in 2026 and beyond. As one example, laser projection with its brighter, sharper screen images now exists in fully half of our U.S. theater circuit. And how can we not revel in the leadership position that AMC enjoys in the availability of premium large-format and extra large-format screens. As you know, they command sizable price premiums, and they're about 3x more productive than a standard screen. It's no accident that AMC has more premium large-format screens and more extra large-format screens than any other exhibitor on earth. So it's obvious why we are so glad that our count of IMAX screens and our count of upgraded IMAX with laser screens is growing, that our count of ever so popular Dolby Cinema screens is growing. You know that with CJ's ScreenX and 4DX offerings as well as for increases to the numbers of our PRIME and iSense house brand PLF offerings. I am especially pleased to by the story surrounding AMC's XL or extra large-format screens. They were created out of thin air and piloted by our Odeon team in Europe less than 2 years back. And given their success, we now are expanding the reach of XL broadly across our U.S. theaters as well. We now have just right around 170 or so XL screens globally, and I would expect that, that number will literally double by the end of 2026. Moving beyond the auditorium, our world-class AMC marketing and loyalty programs continue to evolve smartly in 2025. In January 2025, we introduced a new successful AMC Stubs loyalty tier called AMC Premiere GO that allows consumers to trade up to Premier status or a modified Premier status through increased patronage at our chain without having to pay an added fee. That's taken our member enrollments all the way up to some 39 million households in the United States accounting for an impressive 51% of our total U.S. attendance during the year playing for points in our frequent moviegoer loyalty program. That level of engagement not only deepens guest loyalty, but also provides valuable insights given our extensive database containing as it is a myriad of purchase transactions guest by guest that enable us to smartly and more targeted basis, create marketing efforts to our best customers on an ongoing basis. Another important pricing action within the scheme of our loyalty program was price increases, considerable price increases in our A-List loyalty program -- subscription program that occurred in the month of May. And while those are examples of price rises with a keen focus for having raised prices during peak demand periods and to the most frequent of our guests, it is also true that AMC simultaneously has remained committed to appealing to the value-conscious consumer as well. So in July of 2025, our marketing team reimagined our long-standing discount Tuesdays program by launching an intriguing and attention getting new 50% off Tuesdays and Wednesdays initiative. Importantly, our analysis shows that the incremental attendance generated on these 2 weekdays now has not cannibalized our weekend attendance and to the contrary, has increased the business generated in our theaters midweek, an outcome that benefits both AMC and our studio partners and of course, benefits the movie going public in addition. And we did not stop there. At the end of 2025, we introduced the AMC Popcorn Pass to our loyalty members an innovative annual offering that allows AMC Stubs members to enjoy 50% off pricing all year long on a large AMC Perfectly Popcorn for a onetime fee of $29.99 plus tax per year. In only the first 2 months after launch, more than 120,000 guests have already paid us this $30 fee for a Popcorn Pass. Beyond delivering exceptional value to the guest, the Popcorn Pass also encourages more frequent theater visits and deeper guest engagement. If those were things that we did in 2025, I would like to tease you today with one of what I think will be one of AMC's best new marketing ideas for 2026. Later this year, AMC will introduce preferred so-branded premier seating where we will block and reserve the best seats in the house in our theaters to be accessed first only by our A-List and our Stubs premier members. That's the 2 VIP tiers within our Stubs program. At no added charge at AMC, we will assure that the best seats in our auditoriums are held out only, at first anyway, for our best customers. We think it will be a considerable consumer benefit that our most frequent guests will notice and greatly appreciate, further cementing their brand loyalty to AMC. There are 2 other things I'd like to highlight before turning this call over to your questions. First, you may recall that a few months ago, AMC and Netflix made the joint decision to partner together. This was a significant departure from our 2 companies staying at arm's length from each other over a period of many years. That effort started in bringing Netflix's popular K-Pop Demon Hunters to AMC theaters over the Halloween weekend. That collaboration between AMC and Netflix proved highly successful with AMC delivering to Netflix approximately 35% of the film's total attendance during that holiday weekend time frame. Building quickly on that momentum, our dialogue with Netflix continued, resulting in AMC's hosting the series finale of Stranger Things in some 231 AMC theaters across the United States over New Year's Eve and New Year's Day. The response to that AMC Netflix offering in theaters wildly exceeded all of our expectations. We initially only put on sale about 105,000 seats or so, but one with all done a month later, AMC had the privilege to welcome more than 753,000 Stranger Things fans, collecting approximately $15 million in cash from Netflix fans watching the Netflix product in an AMC theater. In just 2 days, it was a powerful demonstration of the demand for shared theatrical experiences tied to culturally significant content. The success of our recent collaboration with Netflix highlights the strategic opportunity that lies ahead, and I am certain that we'll have more adventures together cooperatively with Netflix. With roughly 2/3 of AMC Stubs loyalty members also subscribing to Netflix, the audience overlap between our 2 companies is both significant and compelling. As a result, our companies -- our 2 companies should be the best of friends. And I can confirm to you that AMC is enthusiastic about the prospects of expanding our relationship with Netflix. We look forward to working together to create innovative, mutually beneficial theatrical events that drive value for both companies. The second thing that I like to mention before closing, with the recent meteoric rise in the share price of Hycroft Mining Company, I could not be more pleased to report to you that our investment in Hycroft has met and exceeded attractive financial hurdle returns. In November of 2025, we monetized just more than $24 million from a partial sale of our Hycroft stake. But importantly, at the time, we said that we would retain a significant number of shares and warrants to continue to experience upside. Those remaining shares and warrants in Hycroft are worth right about $39 million at today's market closing price. So that $63 million or so in total compares quite favorably to the $29 million that we invested in Hycroft 4 years ago. For those of you who scoffed at our Hycroft investment at that time, and there were many of you, you were wrong and we were right. As we conclude, AMC's resilience continues to set us apart. While the industry recovery has progressed more gradually than anyone might have originally anticipated or wished to see it the curve. Even so, AMC has remained agile, disciplined and firmly focused on long-term value creation. AMC has demonstrated our ability to navigate a dynamic environment. Some would say an extremely difficult and challenging environment, but all the while we did so, we also strengthened our competitive position, and we emerged poised to capture gain from the opportunities that we believe are ahead. That opportunity is now at hand. We expect the box office to rise in 2026. And please remember from this call, the 2 most important words that are relevant to AMC, operating leverage. An increase in our revenues in 2026 has the prospect of leading to many a smile as we watch our adjusted EBITDA levels as the year unfolds. As we have had to say far too many times over the past 6 years, we are not out of the woods yet, and there are challenges ahead still, but the signposts for 2026 are indicating a significantly strengthened year ahead. With that, let's turn the call over to our operator to pull analysts for their questions from equity research analysts. And then Sean, I'll give the podium to you, and you and I will review some questions submitted by our retail investors. Operator: [Operator Instructions] Our first question comes from Chad Beynon with Macquarie. Chad Beynon: Adam, great to hear that you're feeling and sounding much better here. I wanted to ask, I know, Sean, in the prepared remarks, you talked about the screen or the theater count reduction in '25 and in the past couple of years. How are we thinking about your fleet or portfolio at this point given the strong outlook for content in '26? And then related to that, are there expected to be any new builds that are in that CapEx number? Sean Goodman: Chad, as I've said in my prepared remarks, we've done significant activity, closing over 200 theaters over the last 6 years and opening around 65-odd. We will continue to take actions to close theaters, to reduce leases as we go forward. About 10% of our leases come up for renewal each year. So that's about 85 leases coming up for renewal. And each time these leases come up for renewal, we have that opportunity to improve our overall theater economics. The portfolio has improved significantly over the last 6 years. It's one of the reasons that our per patron metrics and our per patron profitability is so much higher than it was before. But we believe there continues to be a very significant opportunity. Like most organizations or companies with a retail footprint, our theaters are a kind of normal distribution, and there is a tail of underperforming or loss-making theaters. And we see an opportunity to close those theaters or renegotiate leases and then take on new theaters that are significantly -- very significantly more profitable. So I think you're going to see the similar sort of pace going forward. We'll be closing more theaters than we open, but the new ones that we opened are generating significantly more profit than the ones that we closed. And to your question about sort of the CapEx level, there'll be a small number of new theater locations in 2026 and going forward, and that is included in our CapEx projections in the $175 million to $225 million range. Adam Aron: I might add that look, everything we've been doing smartly over the past few years, we've been capital-light. So you specifically used the phrase new build theaters. New build theaters are considerably more expensive than what we call spot acquisitions, where we can take over a theater where most of the capital has already been spent, and we maybe pop $500,000 to $1 million just to upgrade it and bring it into the AMC fleet and apply our marketing programs and our product experiences and expertise. And when we've done this in the past, we've seen substantial rises in the revenues of the theater and the efficiencies of the theater that we've taken over. So as Sean said, I'm sure we'll close some underperformers, which makes us money. It doesn't cost us money. And we'll probably add a handful of spot theaters -- spot acquisitions as well. Sean Goodman: And maybe it's worth pointing out the example of the growth, right, which in Los Angeles that we took over as a spot acquisition. And that theater used to be #28 in the country in terms of annual box office receipts. Now we're adding the AMC secret sauce that theater is now #5 in the country in terms of receipts. And that's just one small example of the benefits that we bring and the attractiveness of AMC as a tenant for landlords in their developments. Chad Beynon: Okay. Great. And then my unrelated follow-up. I think you mentioned most are expecting the U.S. box office to be up somewhere between $500 million and $1 billion. I think that's where most analysts are in this high single-digit, low double-digit growth rate. International is a little harder for, I think, us in the industry to pinpoint. Do you have a gut feel if international admission revenues could be higher or lower than kind of what we're seeing in North America this year? Adam Aron: Well, we've completed 7 weeks or 8 weeks of -- almost 8 weeks of '26, and we know already that Europe is recovering faster than the United States from the 2025 box office. So if I had to be a betting man, we'd say Europe is going to be stronger than the U.S. And some of you like to report in constant currency and some of you like to report as the dollars come in. The dollar has been pretty weak, which means that our overseas revenues and overseas EBITDA is coming back in U.S. dollars in even stronger levels. So this could be -- year-over-year, this could be Europe's best year of the last 6. Operator: I'm showing no additional questions at this time. I'd like to now turn it back to Sean Goodman for retail shareholder questions. Sean Goodman: Thank you, operator. Adam, we have a couple of questions here. Firstly, relating to the food and beverage business. As you and I both know, our food and beverage per patron numbers have just been spectacular post pandemic. And I think there's really exciting opportunities for us ahead there. But the question is sort of what future changes of innovations can people expect on the food and beverage side? Adam Aron: This is really important because if you look at why this company has been able to navigate really turbulent waters over the past half decade. Our strength in food and beverage sales has been a big reason. If you look at our contribution per patron, it's up not quite 50%, but almost 50%, which means that we don't actually need the box office to recover all the way back to 2019 pre-COVID levels. And that's a direct result in part because of our food and beverage success. I think at this point, there's a lot of finessing that's going on within our food and beverage operation where we're using menu experimentation to please the guests and help our bottom line. As one example, we just introduced in the fourth quarter of '25, freshly baked chocolate chip cookies, which not only taste great, but smell great in the theater lobbies, and they replaced doughnut holes, which we're not selling as well at our concession stands. We just introduced at our dine-in theaters a much better pizza than we've had in modern memory. It looks like real pizza. It tastes like real pizza. It is real pizza, and it's really good. I've tested it myself in the kitchens, and I'm a pizza buff. But -- so those are 2 examples. Another thing that's really important, though, of what's happened in our concession stands is not what you eat, but what you buy 3 years ago, AMC didn't sell essentially any movie-themed merchandise. And our movie-themed merchandise now has become a sizable business for us. In 2025, it was $65 million in the United States, another $10 million to $15 million in Europe. This was a business that didn't drive literally $0.01 of revenue or EBITDA 3 years ago, and it's now doing $80-ish million of business today and the profit margins in this thing are -- it's about 50% or so margin business, like that's substantial. And I think that this movie-themed merchandise business is poised to grow again dramatically in 2026. I wouldn't be surprised if it grows by 20% or more as we enter our fourth year of successful effort in and around our concession stands in our theaters. Sean Goodman: So there's a lot going on in the industry at the moment. And there's questions about -- just for you to comment on our relationships and relations with studios, what's going on with windows, update on union negotiations and the potential for a strike later this year? Adam Aron: Sure. When you talk about what's our relationship with studios, it sure helps when you sell more movie theater tickets for every single studio than anybody else on earth, especially if you combine the ticket selling in quantity with the amount of effort that AMC devotes to our studio interactions. I can say with confidence that AMC enjoys a very strong special relationship with each and every studio, every single one, we think highly of them because our lifeblood depends on it. And I believe that they think highly of us because that they know at the end of the day, we're going to outperform for them above everybody else. So in terms of studio relations, it's all great. An interesting development when I think of studios is not just the traditional studios, the majors, but we've had surprisingly good interactions of late with some of the streamers who historically were not major theatrical exhibitors. Last year, we had real success with Apple in their film F1. We leaned into it in a big way. We were very successful with the film. They were very successful with the film. We appreciate our relationship with them. I know they appreciated the support that we put forward. I'm looking forward to big things coming from Apple original films going forward. Amazon is now telling us that their goal is to release 15 theatrical movies in 2027 and that they'll probably get up to 10 to 13 theatrical movies on their slate in 2026. That's news. Amazon MGM was only good for a movie or two 5 years ago. They've become a real player in Hollywood. And then there's Netflix. We had this September meeting where we sorted through how we could work together and that it would be advisable to work together. And the first 2 efforts out of the shoot were extraordinarily positive. I know that we're excited about doing more with them, and I know that they were pleased with AMC's effort on their behalf towards the end of 2025. You mentioned in your question, union negotiations. For good or for bad, we're not a party to those union negotiations. We have a vested interest in their outcome, but we're not at the table. I do know that the studios have taken these negotiations seriously. They've started the negotiation process earlier than they did last time around. I think the general consensus is that the 2 strikes a couple of years back were devastating to everyone connected to the movie business, devastating to the members of the union, have devastated -- devastating to movie makers. I would sure hope that we don't have to repeat anything like that and that the union studio negotiations transpire in such a way that deals are met and that the production of movies goes along without interruption. Sean Goodman: And then our final question here is on CapEx spend. We've guided to $175 million to $225 million a year, which is the same in 2026 as it was in 2025. Just questions on how we're allocating our CapEx spend, sort of what are the focus areas for our CapEx spend? Adam Aron: Well, very round numbers, right, very round numbers. $150 million of that number is what I'll call maintenance capital to keep our theaters in good shape. Roofs aren't leaking, HVAC systems working, IT systems being overhauled as needed to continue to have AMC be a strong player from an IT standpoint. AI is capturing some of our money now because there are ways to make our company more efficient through the adoption of AI techniques. Beyond that, though, in a capital-light way, we continue to be very committed to upgrading the theater experience. And we're going to add more IMAXs. We're going to add more Dolby Cinemas. We're going to add more PRIMEs and iSenses. We're going to double the number of XL screens. This is all good. At the same time, a decade ago, AMC was quite experienced and practice in renovating whole theaters expensively, ripping out seats, putting in the so-called recliner seats, which are very popular with guests. But we have a problem. And the problem is we have a number of theaters that -- where the volumes are so high that we can't afford the seat loss of pulling a lot of seats out of the auditoriums. It reminds me of the old Yogi Bear quote, "Nobody goes there anymore because it's so crowded," as he once said. So there's -- it was easy to decide how do you renovate a theater if you got to rip everything down to the studs and put them in recliner seats with 6 feet of leg room for row. But now we're at a point where that's pretty much behind us. And we're looking at how do we keep the product top flight in some of our highest volume theaters where more traditional seating is going to be the norm. And we came up with what we think is the answer. And interestingly, Sean, it's also a capital-light solution. We had a theater in Burbank that was the single highest grossing theater in the United States, but it was in kind of ratty condition 2.5 years ago. The seats were tired and old and stained. And we knew we had to replace all the seats, the Burbank Theater, but we also knew that we -- the volumes were so high at the theater, we were going to need a similar seat count to what we have at the time. So we -- a lot of studies, we investigated dozens and dozens of different potential seats. And we came up with what is now -- if you look at our website and app, is branded as the AMC Club Rocker. It's a very comfortable seat and much superior than anything that's in our traditional seating theaters today. It's kind of a leathery look. I'm not sure it's actually leather, but looks like an leather, it feels like leather, it smells like leather. It's got a lot of padding and cushioning. It's wider than the older seats, and it rocks. It moves around a little bit, so people can adjust the seat to their own comfort. And it was a massive hit when we put it in Burbank 16. So we took that same exact seat, and we put it into our Empire Theater in Manhattan -- in our Lincoln Square theater in Manhattan. And week after week after week, I was seeing in our reports that of our 550-ish theaters in the country, the 3 highest grossing for AMC were Burbank, Empire and Lincoln Square, week after week after week. What is them common, the Burbank seat. We have since put it into some of our other theaters. For those of you who are knowledgeable about a theater on the upper East side in Manhattan called Orpheum 6, we're going to put that seat into Orpheum 6 sometime this year. We're going to greatly expand the legroom to 48-inch seat pitch, which is a lot. I love to say 4 feet for your 2 legs. And the combination of a lot of legroom and that very comfortable new club rocker seat is going to turn that theater into what is now a tired substandard old Loews theater from ages ago into a real powerhouse on the Upper East side. And we're also going to look to take that club rocker seat into others of our theaters as well. And it's a very inexpensive effort to redo a theater and make it nice, but do so in a smart capital-light way. So those are examples of where the money is going. There was an earlier question about will we just crack theaters or will we add some? We will do both. So when we take over a theater, we might spend $0.5 million or $1 million to bring the theater into our system if it's in relatively good shape. If it needs a little bit of renovation money, maybe we work with the theater landlord to jointly put up $2 million, $3 million, $4 million to bring some theaters into our fleet in very good condition. Hopefully, the landlord would pay a significant chunk of that cost through tenant allowances and the like. So that's another thing that's going on within the CapEx budget. But as you said, we've got a fairly tight constraint. A couple of years ago, we were spending $400 million, $450 million, $500 million of CapEx. We believe that rounding to the $200 million range is something that we can -- plus or minus $25 million is something that we can do going forward in the near term. So that's the update. Sean Goodman: And that concludes the retail investor questions. Adam Aron: So let me just end the call by thank you all for listening to us today and participating with us. It is going to be the strongest slate of moviegoing that this industry has seen since 2019. The year is starting up in double digits, which is a nice way to start. And I leave you with this one thought that's dominating our thinking and my comments on this call, that notion of operating leverage, as revenues rise, EBITDA rises, and it does so at a geometric pace. So we won't be all the way to where we need to be at the end of '26, but we expect to make a dramatic amount of progress. So this should be a year that makes us all smile. Thank you for joining us today. See you at the movies. Operator: Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.
Operator: Good afternoon, and welcome to Navitas Semiconductor's Fourth Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today, Tuesday, February 24, 2026. I would now like to turn the conference over to Brett Perry of Shelton Group Investor Relations. Brett, please go ahead. Brett Perry: Thank you, operator. Good afternoon, and welcome to Navitas Semiconductor's Fourth Quarter 2025 Financial Results Conference Call. Joining us on today's call are Navitas President and CEO, Chris Allexandre; CFO, Todd Glickman. I'd like to remind our listeners that the results announced today are preliminary, as they are subject to the company finalizing its closing procedures and customary quarterly review by the company's independent registered public accounting firm. As such, these results are unaudited and subject to revision until the company files its Form 10-K for its year ended December 31, 2025. In addition, management's prepared remarks contain forward-looking statements, which are subject to risks and uncertainties, and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today, and therefore, we refer you to a more detailed discussion of the risks and uncertainties in the company's filings with the Securities and Exchange Commission, including Form 10-K and Form 10-Q. In addition, any projections as to the company's future performance represent management's estimates as of today, February 24, 2026. Navitas assumes no obligation to update these projections in the future as market conditions may or may not change, except to the extent required by applicable law. Additionally, in the company's press release and management's statements during this conference call will include discussions of certain measures and financial information in both GAAP and non-GAAP terms. Included in the company's press release are definitions and reconciliations of GAAP to non-GAAP items, which provide additional details. For those of you unable to listen to the entire call at this time, a recording will be available via webcast for 90 days in the Investor Relations section of Navitas' website at www.navitassemi.com. And now, it's my pleasure to turn the call over to Navitas' President and CEO. Chris, please go ahead. Chris Allexandre: Good afternoon, and we appreciate you joining us today. I'm pleased to be hosting my second quarterly conference call as Navitas CEO. We closed out the year with a productive fourth quarter, as we continue to accelerate our pivot to Navitas 2.0 and align the entire organization to focus on addressing high-power markets. In fact, it has been energizing 5 months since I joined the company, and my conviction in our industry-leading GaN and the high-voltage SiC solution has only grown stronger and that our strategic pivot is on the right path to successfully scale the company to the next level. Before providing comments and updates specific to the quarter, I want to briefly reiterate several key elements on our previously communicated strategic transformation and our vision to what we call Navitas 2.0. First, we're accelerating our pivot away from the company's historical mobile and low-end consumer business to focus on high-power markets, where our GaN and high-voltage SiC products can deliver real differentiation and value through higher density, efficiency and reliability. We are laser-focused on 4 high-growth, high-value market segments: AI data center, energy and grid infrastructure, performance computing and industrial electrification. Collectively, this segment represents a serviceable addressable market of $3.5 billion by 2030, split roughly 50-50 between GaN and high-voltage SiC with a combined CAGR of more than 60%. Although the largest portion of this $3.5 billion SAM are within AI data centers and grid and energy infrastructure, I want to emphasize that AI is a shared underlying catalyst across our 4 target markets, driving a rapid acceleration in terms of re-architecture infrastructure, customer expectation and the adoption of the new high-voltage technology. We're leveraging our proven 10-year track record as a pioneer of GaN at scale, having shipped over 300 million unit GaN devices, coupled with a deep expertise in system and application as well as our leadership in high-voltage SiC through our GeneSiC technology. The end goal of Navitas 2.0 strategic transformation is straightforward, to rapidly penetrate, secure expanded customer engagement and achieve scale, resulting in a more sustainable, consistent and future profitable growth for Navitas. Turning to a brief recap of our fourth quarter results. As initial progress of our pivot to Navitas 2.0, we've completed a realignment of the entire organization, both in terms of skills and geography to focus on addressing high-power markets. This includes fully redeploying organizational resources, road map and focus accordingly. Revenue in the fourth quarter came at the high end of our guidance range at $7.3 million, coupled with the fourth quarter being the first time that high-power market represent the majority of our total revenue. We remain confident that the fourth quarter was the bottom. Notably, our Mobile business declined sequentially from a majority of revenue in Q3 to less than 25% of total revenue in Q4. We expect Mobile to continue going down as a percentage of quarterly revenue and become insignificant by the end of '26. Also, consistent with our comment last quarter, we're guiding to quarter-over-quarter growth for Q1 and anticipate continued sequential growth throughout '26, driven by increasing sales traction in the high-power market. Over the last several months, as part of my expanded meetings with customers and partners, I've seen numerous proof points that the new technology adoption is accelerating. AI is a catalyst, changing the game across markets. Existing technologies and architecture are no longer sufficient. The industry is moving faster than it ever has in terms of technology adoption with customers clearly moving in to take advantage of GaN and high-voltage SiC technology. As previously mentioned, AI is a primary catalyst that's driving momentum and broadening the adoption of high-power solutions across all 4 of our target high-power markets. Every interaction with customers has confirmed the market is undergoing secular change and that AI is sparkling revolution we're focused on. This impelling inflection point in architecture, design and technology adoption is highly favorable to GaN and high-voltage SiC, putting Navitas 2.0 at the center of this revolution. As outlined in our last call, the Navitas 2.0 transformation to a high-power company is being backed by decisive actions and grounded in 4 pillars that include market focus, technology leadership, operational efficiency and financial discipline. Let me now review with you the major progress that we've made in each of these areas since our last earnings call. Starting with market focus. As I mentioned earlier, we're sharply focused on the high-power market of AI data center, energy and grid infrastructure, performance computing and industrial electrification. In AI data center specifically, Navitas is uniquely positioned as one of the leaders in GaN and high-voltage SiC, supporting all major AI data center architectures. The density of compute power will require the higher efficiency and power density. It's driving the acceleration of GaN in next-generation data center. During the quarter, we've accelerated sampling of product and solution delivery with our 100-volt GaN and 650-volt GaN targeted at AI data center, 800-volt HVDC and 48-volt IBC HV buck architecture. Samples are currently available in different package sites and are being evaluated by more than a dozen customers. More recently, on February 9, we announced our breakthrough 10-kilowatt DC-DC design platform. This is an all GaN 10-kilowatt 800-volt to 50-volt DC-DC platform, which employs advanced 650-volt and 100-volt GaNFast FETs in a 3-level half-bridge architecture with synchronous electrification. This platform has delivered a 98.5% peak efficiency, which we believe is the best in the industry so far. This full-brick package design platform achieved leading power density and support plus or minus 400-volt VDC standard for AI data centers. This is a great example on how Navitas is able to leverage our 10 years of GaN and system expertise. We're setting the benchmark for scalable, high-performance AI infrastructure. Our product portfolio enabled unprecedented power density to support rapid large-scale expansion of AI data center while also allowing hyperscalers and OEMs the ability to maximize compute density and reduce energy loss in support of deploying next-generation AI workload. On the SiC front, we are very active supporting customers in their AC-DC PSU designs for current AI data center architecture with our latest 1.2 kV SiC devices, leveraging our latest fifth-generation GeneSiC technology announced earlier this month. This product brings improved figures of merit and best-in-class thermal behavior, the topside cooling Q-DPAK package that are being well received by customers. In the grid and energy infrastructure market, the energy grid is in the process of a major transformation and modernization to support the AI catalyst, but also overall growth in energy demand. This is not a short cycle, but rather a multi-decade secular and sustainable trend that will transform grid and energy infrastructure. As a result, we are seeing an acceleration in the design cycles here as well. We are leading this effort with our new ultra-high voltage 2.3 kV and 3.3 kV SiC modules and road map to even higher voltage. We are now in evaluation with over 15 OEMs globally, mostly in the U.S. and Europe with notable acceleration in the U.S. In performance computing, we continue to see increased GaN adoption in high-power chargers and power units for high-end computing and AI notebooks replacing silicon. We have more than 15 projects in production and approximately twice that number in designing across 170-watt, 200-watt, 250-watt, 240-watt and up to 360 watts with leading global computing companies. We expect to continue gaining momentum in the performance computing market throughout '26. And lastly, in industrial electrification, we're starting to see GaN and high-voltage SiC action in high-performance applications spanning industrial pumps and heavy equipment electrification like DC-DC converters and megawatt chargers. Turning to our second pillar, technology leadership. We continue to prioritize innovation across GaN and high-voltage SiC technology, including both product and solutions, supported by expanding customer engagement and co-development projects. One example of this innovation and system expertise was our breakthrough 10-kilowatt DC-DC platform that I just discussed previously. Another highlight was our announcement during the last quarter of our 2,300-volt and 3,300-volt ultra-high-voltage SiC module portfolio, which we have accelerated sampling to more customers. These modules feature proprietary Trench-Assisted Planar technology for AI scalability, advanced robustness and performance in mission-critical applications across grid-tied infrastructure, energy storage and megawatt scale fast charging. These products are available in SiCPAK G-plus power modules, discrete packages and known good die format with extended AEC-plus reliability testing. As mentioned earlier, we announced last week our Gen 5 technology and upcoming new 1.2 kV SiC Q-DPAK product targeting PSU AC-DC for AI data centers. Our new Gen 5 SiC technology continues to improve the figure of merits of our leading GeneSiC technology. It leveraged our Trench-Assisted Planar TAAP architecture, best-in-class thermal behaviors and topside cooling in Q-DPAK. We're now sampling our first new 1.2 kV Gen 5 SiC product to multiple OEM and ODMs designing high-power PSUs and AC-DC for AI data center. On our third pillar, operational efficiency, we have taken actionable steps to create a more streamlined and rebalanced geographically deployed organization. We have been receiving strong employee buy-in and seeing tangible benefits from these efforts. Also, on November 20, we were pleased to announce a long-term strategic technology and manufacturing partnership with GlobalFoundries to accelerate GaN technology design and manufacturing in the United States. This partnership enables secure, scalable solution for our target high-power market and ensures that Navitas can deliver the performance, efficiency and scale our customer demand. It also provides Navitas the opportunity to manufacture our solution in critical and national security applications in U.S. Development began a few weeks ago, and both companies are deeply collaborating with production expected to begin later in the year and accelerate in 2027. Over time, we expect to transition to 8-inch in order to lower product costs and increase scale. Also, during the quarter, we executed actions to restructure and optimize our go-to-market strategy. This included significant consolidation of distribution channel partners from approximately 40 to less than 10 distributors. We have the ability to scale and are well suited for serving high-power market while removing previously mobile-centric distributors. And our fourth pillar, financial discipline, centers on resource realignment in support of our focus on high-power market. This includes a very targeted 19% reduction in headcount in the fourth quarter, offset by realignment action to support the Navitas 2.0 shift, including hiring new employees well equipped for high-power markets, in particular within the United States. As evidenced by our fourth quarter revenue mix, we have made tremendous progress. We also brought in new additional leaders with skills in sales and marketing, R&D and operations with a focus on enabling stronger execution. These collective actions focus the entire company on the high-power market and provide a foundation for efficient and effective execution going forward. Even with a larger market opportunity, our resource realignment allows us to efficiently focus our quarterly spend on the high-power market. As a result, we're targeting to maintain operating expenses flat throughout the coming year. We also expect to drive gradual margin expansion throughout '26 through improving scale and mix of high-power business. Lastly, to further strengthen our balance sheet and fund future operations, we completed a private placement of common stock in November with net proceeds of approximately $96 million, contributing to a quarterly end cash balance of $237 million. These proceeds further support our Navitas 2.0 strategy, accelerating our transformation and funding working capital for scalable growth and long-term value creation. In closing, I am very pleased with the overall progress we achieved in a relatively short period of time. Speed is a financial element of our company's culture, and it's clearly working. We are positioning Navitas 2.0 as a high-power company, sharpening our focus on execution to enable scalable growth. Looking ahead, we anticipate a return to top line sequential growth starting in the first quarter, fueled by increased revenue from high-power markets. When combined with the benefit of our optimized cost structure, streamlined go-to-market approach and accelerated product roadmap, we're also positioned to achieve gradual improvement in gross margin and bottom line results over the coming year. I'm incredibly proud of the team's dedication, hard work and agility in pivoting to Navitas 2.0 vision. I also want to thank our customers for their support to our new strategic direction as well as ongoing contribution to mutually beneficial collaboration and partnership. With that, I'll turn the call over to Todd to review our fourth quarter and full year results as well as our first quarter guidance. Todd Glickman: Thank you, Chris. In my comments today, I will take you through our fourth quarter and full year 2025 financial results. And then, I'll walk you through some of the important Q4 achievements and market dynamics as well as our outlook for the first quarter 2026. I will then return it to Chris for final remarks before we take questions. Revenue in the fourth quarter of 2025 exceeded the high end of guidance at $7.3 million compared to $10.1 million in the third quarter of 2025. As expected, revenue for the quarter reflects our strategic decision to deprioritize our low-power, lower-profit China mobile and consumer business as well as our efforts to streamline our distribution network to align our focus on high-power markets. As Chris mentioned, our high-power markets represented a majority of our quarterly revenue for the first time in the company's history, with mobile declining to less than 25%. This is a very important milestone and representative of our strategic shift. As mentioned before, we believe that Q4 represented the bottom for revenue, as our strategic actions support driving increased contribution from our high-power business going forward. Before addressing gross profit and expenses, I'd like to refer you to the GAAP to non-GAAP reconciliations in our press release. In the rest of my commentary, I will refer to non-GAAP measures. I would also like to point out that our GAAP results for the fourth quarter included a $16.6 million restructuring and impairment charge that consisted of approximately $10 million of distribution contract terminations, $4 million of fixed asset impairments and $2 million of workforce reduction expenses associated with realigning the entire organization and distribution channel to focus on addressing high-power markets. Of the $16.6 million restructuring and impairment charge in the quarter, $3.8 million was noncash related items. Gross margin in the fourth quarter was $38.7 million, which was flat sequentially with the prior quarter, reflecting the ability to maintain our margin profile despite the lower quarterly revenue. At these revenue levels, we do not yet have the leverage to overcome our fixed costs, but we expect this to improve as we further grow revenue from high-power markets. As mentioned in our last earnings call, we expect to deliver expanded margins, as we pursue a mix change towards higher power markets and away from mobile and low-end consumer. During the fourth quarter, we executed on a 19% workforce reduction, mostly deployed to mobile and consumer and an organizational realignment towards U.S. high-power customers and markets, thereby reducing operating expenses sequentially from $15.4 million to $14.9 million. This is part of our strategic plan to realign the company's resources to the Navitas 2.0 focus. Operating expenses were comprised of SG&A expenses of $6.8 million and R&D expenses of $8.1 million. These expense levels align with our cost reduction targets. The fourth quarter of 2025 loss from operations was $12.1 million compared to $11.5 million in the third quarter of 2025, as the reduction in operating expenses did not fully offset the decrease in revenue. Our weighted average share count for the fourth quarter was approximately 222 million shares. For the full year 2025, revenue was $45.9 million compared to $83.3 million in 2024. Gross margin for the full year was 38.4% compared to 40.4% last year. 2025 operating expenses were $63.6 million compared to $83.4 million in 2024. The full year loss from operation was $46 million versus $49.7 million last year. As Chris mentioned, the fourth quarter represented the bottom in quarterly revenue, and we expect to return to top line sequential growth throughout 2026, as we continue our transition to high-power markets. Turning to the balance sheet. Accounts receivable was down to $3.6 million from $9.8 million in the third quarter, reducing our DSOs to 45 days. Inventory decreased to $13.3 million from $14.7 million last quarter. Cash and cash equivalents at quarter end were approximately $237 million, reflecting net proceeds of approximately $96 million from our completed private placement of common stock in November 2025. The company continues to carry no debt. Our balance sheet remains very strong as we exit the year with a high level of liquidity and improved working capital position. Moving to guidance for the first quarter of 2026. We expect revenue to increase sequentially to between $8 million and $8.5 million. This represents the first quarter-over-quarter growth since the company's pivot. As I just mentioned, we expect sequential growth to continue throughout the year, driven by increasing revenue contribution from high-power markets. Gross margin for the first quarter is expected to be 38.7%, plus or minus 25 basis points. We continue to anticipate the technological innovations to bring to high-power, high-growth markets will result in progressive expansion of future gross margins. Turning to operating expenses. We anticipate operating expenses to remain approximately $15 million for the first quarter. We expect to continue to allocate resources and expenses, as we redeploy company resources towards higher power customer end markets, particularly within the U.S. This redeployment of resources is expected to offset the strategic downsizing of our facilities to result in flat operating expenses. For the first quarter, we expect our weighted average share count to be approximately 230 million shares. In closing, we are pleased with our initial progress and accelerated pivot to Navitas 2.0, as evidenced by high-power products representing the majority of our quarterly revenue for the first time. We expect to increasingly benefit from the broadening adoption of our GaN and high-voltage SiC products in targeted high-power markets. Together, with our recent actions to reallocate resources, optimize operational efficiencies and restructure distribution channels, we believe that Navitas is on a path to deliver improving margins and bottom line results. I'd now like to turn the call back to Chris for some final comments before opening the call to questions. Chris Allexandre: As we close today's call, I want to address one additional matter. After an extraordinary 10 years of dedicated service, Todd has decided to step down as CFO to pursue other opportunities. He has been an invaluable partner to everyone in the company, bringing financial discipline, strategic insight and weathering integrity that helped steer us through periods of both growth and challenges. Todd has also been a great partner over the last 6 months, helping to pivot and transition the company to Navitas 2.0. On behalf of the entire Board and executive team, I want to extend our gratitude for all of his contribution over the past decade. We have strong financial organization in place, and Todd is fully committed to assisting in a seamless transition until his successor has been made. We expect to communicate in the coming weeks regarding Todd's replacement and Navitas' new CFO. We enter in this new chapter with confidence in our strategy, our momentum and our ability to continue delivering long-term value for our shareholders. Thank you again for joining us today. Operator, we might now open the call to questions. Operator: [Operator Instructions] And our first question comes from the line of Kevin Garrigan with Jefferies. Kevin Garrigan: Chris and Todd, congrats on the results. And Todd, best of luck on your next path forward. Can you guys just walk us through how each of the high-power end markets performed in Q4? And how we should think about the trajectory for each of those markets in Q1? Todd Glickman: Yes. Well, obviously, our quarter-on-quarter growth in revenue was due to the high-power markets. So they are performing well. We're not going to sort of break out the high-power markets at this time, but we do expect all of them to be performing on a go-forward basis as mobile becomes immaterial, as we move through the year. Kevin Garrigan: Okay. Got it. And then as a follow-up, can you just update us on the progress of the 800-volt architecture opportunity? And can you give us a sense of a timeline on customer decisions? Chris Allexandre: Kevin, this is Chris. As we talked last time, there's a lot of work going on between us and the hyperscalers, not only one, but multiple of them on the adoption of the 800-volt HVDC. We sampled, as we mentioned in the press release and in the script, some of the new products that will be used in this type of architecture. We also announced a leading-edge 800-volt to 50-volt DC-DC brick that demonstrates the performance we can get with those products. So there's a continuation of collaboration. It's a bit too early to kind of tell you when this will be confirmed, but I think we are getting closer and closer with our customers. Kevin Garrigan: Okay. Great. Congrats again on the results. Chris Allexandre: The one thing I would add, Kevin, is everybody refers to the 800-volt HVDC as a step function for power content in the AI data center, and this is true, especially with the adoption of GaN replacing silicon as you move to the 800-volt HVDC, right? But I would outline that in AI DC, and you heard it from multiple vendors, is that there is an acceleration of demand also in using the classic architecture, which is AC-DC, right, using SiC. And we see a growth throughout the year ahead of the step function with GaN in HVDC. Operator: Our next question comes from the line of Kevin Cassidy with Rosenblatt. Kevin Cassidy: Congratulations on the progress. Just as you mentioned you're working with the hyperscalers. Is this -- are you working directly with them? Would they be building their own power supplies? Or is that going to be a pull to -- from the current power supplies -- suppliers to the hyperscalers? Chris Allexandre: Kevin, it's actually all of the above, okay? So the hyperscalers, partly 2, are driving the new architecture, right, both in terms of what they expect in terms of density and power level in the AC-DC PSUs as well as the 800-volt either 50-volt or even lower voltage HVDC architecture, right? Now, we don't work only with the hyperscalers. If you think about PSU, which is clearly designed in OEMs and ODMs that are serving those hyperscalers, and if you look at the HVDC, a lot of these that are classic merchant power companies serving the hyperscalers, are also doing designs on this new architecture. So we work with everybody. I would tell you that the driver of the change of the architecture comes from the U.S. and the hyperscalers, but a lot of the OEM and ODM in Taiwan, in China, but also in the U.S. are driving that. And as you know, we just announced this board, right, which I mentioned, which was basically a co-development with the customer. And that's basically to showcase the level of efficiency you can get by using GaN on the primary side and GaN on the secondary side in 800-volt to 50-volt DC-DC brick. And you're going to see more of those reference implementation in the future as well. Kevin Cassidy: Okay. Great. And have any of your customers or the hyperscalers giving you an idea of when that inflection point would be of when they start doing the installations? Chris Allexandre: I mean, the thing I would say is, as I said just earlier on Kevin's question, there are 2 stream, if you prefer, of the AI data center growth. Number one is more data centers, more power, and that drives more PSUs, higher-power PSUs and that drives the growth in SiC, which we are seeing throughout '26. When it comes to the 800-volt HVDC, which I think is your question, when there is a discontinuity and you cannot use silicon anymore on the primary side because you're 800-volt and you have to move to high-voltage GaN. This is really driven by not the GPU change, but the rack architecture change. As you compact more GPUs into a single rack and you get to megawatt rack, you cannot get the power density and the efficiency with silicon. And that's this discontinuity. I would say, as we said before, this is really about '27. Will GaN be used slightly earlier? It could. There is a case where you can use GaN in the 48-volt IBC replacing silicon, as I mentioned in the script, where GaN brings higher efficiency. You can do it with silicon, but you get higher efficiency. And this might be the first time you see GaN in data centers. But the real step function is really coming from the 800-volt DC, which is really kind of linked to the Kyber rack, which is the higher integration of GPUs in '27. Kevin Cassidy: And also I'll give my best wishes to Todd, pleasure working with you. Todd Glickman: Thanks, Kevin. Operator: Next question comes from the line of Quinn Bolton with Needham. Quinn Bolton: Congratulations on the progress on the transformation to Navitas 2.0, and best wishes to you, Todd. I guess, Chris, I wanted to come back on the 800 HVDC solution, especially as you think about the primary side of that 800-volt rail. There are still a lot of folks in the industry that I think are talking about using silicon carbide in that 800-volt conversion step. You guys are obviously pushing the GaN solution. But I guess, can you say -- what are you seeing from the leading GPU and hyperscaler vendors that are looking at the 800-volt or the 400 plus/minus rack architectures? Are they pushing more for GaN? Are they open to both GaN and silicon carbide solutions? Just how do you see this playing out from a technology perspective between GaN and silicon carbide? Chris Allexandre: Thank you, Quinn. It's a very good question actually because I think there is some level of confusion. First of all, I would tell you that we are not pushing anything. We have both SiC and GaN, and we welcome SiC being used on the primary side if it's needed and GaN being used on the primary side if that's needed. So we're not pushing anything. We are being pulled. We've not seen any significant use case of board implementation of customer evaluation using SiC on the primary side. SiC is being used widely at 1.2 kilovolt, as I mentioned, in the classic AC-DC, right, which is basically prior to the 800-volt DC. But when it comes to 800-volt DC, we've been pulled by customers. And I'm talking about hyperscalers to Kevin's question here that are really driving the GaN adoption because it's more efficient and more driving higher density. Quinn Bolton: Okay. And then, Chris, you also talked about your 10-kilowatt all GaN brick solution. Can you give us a sense is that more of a reference platform? Or would that be a solution that Navitas would look to source that entire brick level product? Because I imagine it includes a fair amount of additional componentry. And so just thinking about to the extent you're selling the full brick solution, I imagine that might be pretty high-dollar content. So could you just talk about whether you would really just sell the GaN solutions as part of that brick? Would you sell the entire brick? And if you did sell the entire brick, what would the margin implications be? Chris Allexandre: So, of course, it's a very good question. Thank you, Quinn. We view this as an enabling solution enabling technology for the customers. So first of all, as I mentioned, this is something we've done with the customer. We have not done that in a vacuum on our own, right? This is something that we've co-developed with a leading customer, number one. Number two is we don't compete with customers, okay? At this stage, we don't see a path where we're going to sell the modules. Now, that design is shared with our customers and the hyperscalers as well as the ODM and OEM that are looking at how we've been able to achieve that high level of efficiency, right, 98.5%, which we believe, based on what we've seen and some of our competitors' feedback on top of customers, are one of the best in the industry, right? So I would tell you, this is for us -- this is what we've done in GaN historically. We pioneered GaN in mobile by demonstrating and helping customers to get to highest level of efficiency, lowest EMI, highest level of density. And we are doing the same in AI data center. And this is what I talk about -- when we talk about 2.0, we're leveraging the benefit and the skills of 1.0, right? And this system expertise makes a difference. At the end of the day, we are in the business of selling GaN and silicon carbide and enabling our customers. As a matter of fact, on that board, we're using some of our competitors in our silicon and other technologies and products that we don't have. But the focus is how to show and help the customers to accelerate the adoption of GaN in HVDC. Operator: Next question comes from the line of Jon Tanwanteng with CJS Securities. Jonathan Tanwanteng: And I'll join the queue in wishing Todd well wishes on his journey. If you could start, maybe talk a little bit about the competitive landscape in supplying the 800-volt data center. What are you seeing just in terms of who you're bidding against in these sockets, if they're outpricing you or doing better in technology? And on top of that, how is your partnership with Infineon evolving in that space as well? Chris Allexandre: So thank you for your question, Jon. So I'll start with the end. We continue our partnership with Infineon. We have a cross license, as you know, and we share the same vision, which is to enable the accelerated adoption of GaN and silicon carbide in the AI DC, right, so SiC as the traditional architecture and GaN in the 800-volt DC, right? So there's a lot of dialogue between the 2 companies on that front, right? Number two, you all have seen that there are multiple vendors having been listed on the 800-volt AI factory kind of ecosystem. As a matter of fact, I think it's up to 13 vendors today. But we don't see all of them in each of the socket we target. So I would recommend that you look at how many of those 13 are actually in the high-voltage GaN, so how many of them have a 650-volt GaN in the right package to be able to enable 800-volt HVDC, how many of them have mid-voltage GaN to enable the 50-volt secondary side. Some of them are listed as a silicon vendor, okay? We are listed as a GaN vendor. The other thing is, as we talked about SiC being used on the AC-DC as well, there is a natural pull on more SiC as we get to higher voltage, and also outside of data center, to do the 800-volt HVDC, you need to enable a change of the grid architecture. This is a pure high-voltage, ultra-voltage SiC play. So what I will tell you is there's a lot of competition, but not everybody is competing on the same thing. And there are not many of the vendors being listed that have both high-voltage SiC or ultra-voltage SiC, either competing in the AC-DC with 1.2 kV or in the grid with 2 kV and above and having high-voltage and mid-voltage GaN. So this competition pool is actually being reduced. That's why we are very clear about what we do. We don't play in the silicon. We play in the GaN, high-voltage, mid-voltage and in the high voltage and high-voltage SiC. Jonathan Tanwanteng: Got it. And then second, could you update us on the incremental margin of either this 800-volt data center products or high-power products in general, especially as you roll out new suppliers? Chris Allexandre: So first of all, as Todd said, right, we expect continuous gross margin expansion. So remember that the growth this year is coming from all high-power markets and basically mobile going down, right, being less than 25%. What I would tell you is the scale is going to help more gross margin. As we grow revenue, some of our fixed costs absorb that and that drives margin expansion. Number two is the high-power products in the high-power market are coming at a higher margin than mobile was, okay? And that mix is going to change. And the third one is we are very active in ramping new suppliers, particularly on the package side that will help us to reduce costs, right? So there's multiple aspects of how we are confident to see gross margin expansion, as we clearly outlined for the rest of '26, right? And as we scale further in '27, we expect that to continue. Operator: [Operator Instructions] Next question comes from the line of Jack Egan with Charter Equity Research. Jack Egan: I had kind of a follow-up on the gross margin question before me. So as mobile is getting smaller and smaller, I'm kind of curious about the longer-term outlook. Are your gross margins more so going to be driven by mix as in data center and non-data center end market mix? Or is it more kind of the technological innovation, I guess, that Todd mentioned that -- it sounds like it's referring to new products with higher ASPs? So I guess I'm trying to look at what the driver of the margins -- that margin expansion is, whether it's end market mix or better product margins? Todd Glickman: So it's actually going to be a combination of both. So definitely end product mix, right? As mobile decreases, the high-power markets are going to give us higher margin. Those are more based on reliability and performance. But then on -- as we sort of scale and as these new products come into the high-power markets, we do expect like further expansions through like optimized process, yields and packaging costs, which will help drive our product cost down, thereby driving our margins up as well. Chris Allexandre: The one thing I would add, Jack, is, okay, scale, cost reduction and basically higher-margin product, right, as Todd said. But the one thing I would say is that, again, the growth this year, and I think we've been very clear that we are very confident that Q4 was the bottom, we are guiding up for Q1, and we said we're going to grow quarter-over-quarter throughout the year with margin expansion, I would reemphasize again that the growth is coming from whole high-power markets. Yes, AI data center is a big part of the future outlook. And if you look at the SAM that we shared just a few weeks ago, it's nearly half of the SAM that we see for us in 2030. But I would outline that performance computing is growing this year, okay? It will continue to grow and also help on the margin mix. Grid infrastructure is really accelerating. And I think you're going to see higher ASP products, higher-margin products coming in play there, where it's more about reliability and performance and less about cost. Of course, costs matter. And then, as we talked about in AI data center, which is a cost-sensitive market, it's all about efficiency right now, okay? And I think you're going to see all those markets contributing to the growth expansion in gross margins, right? So I just wanted to kind of calibrate a little bit your question to make sure that we don't see the gross margin expansion only coming from AI data center. Jack Egan: Sure, Chris. No, that's super helpful then. And then I guess, kind of from a higher level, I know you're not supplying as much into some of the automotive and industrial type markets, but silicon carbide has gone through -- just broadly speaking, has gone through a period of pretty significant oversupply. And so I was just kind of curious, what are your expectations on when that supply and demand in some of the other markets might balance out, whether for Navitas or whether the industry as a whole? I know that you're dealing with some large volume wins that so it might not apply to you as much, but just any commentary there would be helpful. Chris Allexandre: I mean, to be honest with you, John (sic) [ Jack ], I think, first of all, as an industry veteran, I would say it's going to take some time, but I think you should ask that to the vendors that are supplying into EV. We don't. We don't play in the same league of SiC, okay? You've seen me being very clear about the fact that we compete and focus on 1.2 kV for the PSUs for AI data center and 2 kV and above up to 5 kV and even more for the grid. This is where -- this is not about scale of supply, this is about how reliable and efficient and high performance is your technology. So I think for some of the SiC vendors operating at 450-volt, 650-volt, 800-volt focusing on EV, that's a valid concern. For us, it's about scaling with the ultra-high voltage, okay, which is nothing really related to supply at this stage. Operator: Next question comes from the line of Richard Shannon with Craig-Hallum. Richard Shannon: Apologies to ambient noise, I just jumped off the plane here and I missed a bit of the call here. So I hope I don't repeat any questions here. But Chris, one thing I'd love to ask you is in the AI data center opportunity here. To what degree are your opportunities coming from your partnership and kind of drafting behind, if you will, from Infineon versus other ways? And then also, are there any -- is there any cross-fertilization of wins within the rack between point of load and the 800-volt down? Do those kind of cross-fertilize and give you additional benefit at all? Chris Allexandre: So -- a very good question. As I mentioned, we partner with Infineon. We have a cross-license. We've done that a couple of years ago. We continue to drive collaboration to enable GaN adoption, both the high-voltage and mid-voltage. I would say that we don't leverage or benefit from Infineon. What you will see is -- I think I got a question earlier from Kevin, who are you bumping into most of the time? I would say it's probably Infineon and surely Infineon because they have the same vision. They have the same technology, high-voltage GaN, mid-voltage GaN and SiC and ultra-high-voltage SiC as well for the grid infrastructure. So there are very similarities. So we bump into each other. We follow each other, but I would not say that we leverage Infineon, right? Now, interestingly enough, when we released the package, we found that we -- because we talk to the same customers, we think the same way is we end up seeing the technology the same way. That's what I would say. On your question about expansion of portfolio, that's something we are looking at. My focus right now was to pivot the company, okay, and put every eggs we have, every engineer we have, every focus we have on the 4 high-power markets and the high-voltage GaN and GaN in high-voltage SiC. But we are looking at opportunity to expand the portfolio. As you get higher voltage in the data center, you're going to need circuit protection, and that's something we're going to look at in the future, right? But for now, we are laser-focused on execution with the product we have and we just released. Richard Shannon: Okay. Fair enough. And the second question probably for Todd, just on the gross margins. If I caught the end of his prepared remarks, talked about not having enough scale to really drive leverage on gross margins quite yet here. Is there a revenue level by which that happens here? And kind of what's that fall-through margin when you start to see that trajectory? Todd Glickman: Yes. That's a great question. As our mix changes, obviously, our margins will grow. But right now, we have that scale issue. We do see margins starting to expand again in Q2 and beyond. So that's sort of the tipping point right now. Chris Allexandre: What I would tell you, Jack, is the high-power markets and the high-power product in the high-power market are coming at higher margins. The mobile is going down. We said that in Q4, it was 25%, and we said it's going to continue to go down and get insignificant by the end of '26, right? So I think we are very confident that the mix of the mix change, the higher power product in the high-power market increase as a percentage of the company and the new product and the cost reduction we have will yield to gross margin expansion. So you'll see it right and clear, okay, starting not very far from now. Richard Shannon: Okay. Appreciate that detail. And, Todd, good luck on your next endeavor. Operator: Our last question comes from the line of Quinn Bolton with Needham. Quinn Bolton: Chris, you spent a lot of time talking about the high -the 800-volt data center opportunity. But you also talked about needing to re-architect the grid. And I just wondered if you could spend a second talking about the opportunity for the high-voltage silicon carbide and the solid-state transformers, sort of where are you in the design process for some of those solid-state transformers? And is there a way you can ballpark like what's the dollar content opportunity? I don't know if it's on a per megawatt basis or a per unit basis, but is there a way to size what the amount of high-voltage SiC that goes into a solid-state transformer, as they start to be deployed as the grid is re-architected? Chris Allexandre: Thank you, Quinn, for this follow-up question. Actually, I'm glad you asked that question because everybody focused on AI DC data center, and everybody is focusing on the 800-volt HVDC architecture, which is important because it's a discontinuity in the architecture. It's a replacement of silicon by GaN, right, or by high-voltage technology. But none of this is possible if the grid is not changing. And this is not just about getting a more efficient grid, it's a change of the architecture. And you refer to SSTs, which is basically getting from 35,000-volt AC super-high-power, high-voltage lines down to 800-volt DC at the highest level of reliability. That drives the change. And I tell you, I've never seen the grid infrastructure changing that fast. So you asked me, and I think we said it in the script and in the press release, we are accelerating the sampling of our 2.3 kV and 3.2 kV. Applications are any grid type application, SST, of course, but battery energy system, megawatt chargers, solar farm at the grid type level. Any of those applications are in accelerated designs, we are very busy talking to all those customers. That's why I said it's 2 legs, okay? We have 4 high-power market. But if I look at the future, those 2 legs, the AI DC and the grid are equally important. And this is a pure high-voltage SiC play. And to the earlier question about EV, this is not the same technology because what you have to deliver is high reliability technology, high reliable modules. So it's a different play, right? So I'm glad you asked the question. We see an accelerated design momentum. Of course, it's going to take time. This is longer design cycle than computing. It's longer design cycle than AI DC. But I think you'll start to see a significant revenue growth starting '27. To your question about content, in the last investor meeting we had, we basically referred to $25,000 to $35,000 per megawatt of total content for Navitas as a SAM, which is based again on ultra-high voltage, high-voltage SiC, so 1.2 kV and 2 kV and above and GaN and about $10,000 to $12,000 is actually outside of data center. So you think about $25,000 to $35,000, $10,000 to $12,000 of this is outside of data center, which is purely SST, BESS and all those application, right? So -- and again, inside data center, you have a share between SiC for PSUs and GaN as you move to 800-volt DC. But we should not underestimate the importance and the potential of the grid infrastructure. As a matter of fact, we released a couple of weeks ago a detailed SAM analysis that shows that both GaN and SiC are 50%-50%, okay, in 2030 in terms of the potential for Navitas to the $3.5 billion that we referred earlier. And you can see that the grid is not far off the SAM of data center. And the other thing I would say is this is just the beginning. So if you think about grid, this is a multiple-decade transformation that will drive higher voltage continuously. We started with 2 kV. We're getting to 3 kV. We're going to get to 5 kV and above. And that's going to drive transformation for the next multiple decades. Operator: That concludes the question-and-answer session. I would now like to turn the call back over to the management team for closing remarks. Chris Allexandre: Thank you, everybody, for attending this call. As you could tell, we are very proud of the progress we are making. The first 5 months and 6 months since I joined was about pivoting the company and being clear about where we are going. I think we've done that. We are focusing on accelerating samples of our technology. We have 4 pillars of the transformation, which I mentioned: market focus, technology leadership, operational efficiency and financial discipline. And we'll continue to update you on how we make progress. And I think we have a bright future ahead of us. Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining in. You may now disconnect.
Operator: Good morning, and welcome to the BMO Financial Group's Q1 2026 Earnings Release and Conference Call for February 25, 2026. Your host for today is Christine Viau. Please go ahead. Christine Viau: Thank you, and good morning, everyone. We will begin today with remarks from Darryl White, BMO's CEO; followed by Rahul Nalgirkar, our Chief Financial Officer; and Piyush Agrawal, our Chief Risk Officer. Also present today to answer questions are our group heads, Matt Mehrotra, Canadian Personal Business Banking; Sharon Haward-Laird, Canadian Commercial Banking; Aron Levine U.S. Banking; Alan Tannenbaum, BMO Capital Markets; Deland Kamanga, Wealth Management; and Darrel Hackett, BMO U.S. CEO. As noted on Slide 2, forward-looking statements may be made during this call, which involve assumptions that have inherent risks and uncertainties. Actual results could differ materially from these statements. I would also remind listeners that the bank uses non-GAAP financial measures to arrive at adjusted results. Management measures performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. Darryl and Rahul will be referring to adjusted results in their remarks unless otherwise noted as reported. And I will now turn the call over to Darryl. Darryl White: Thank you, Christine, and good morning, everyone. First quarter results were very strong, building on our momentum from last year. We're executing on our commitment to deliver higher returns and profitable earnings growth. Adjusted EPS were $3.48, up 15% from last year and included a previously announced severance charge of $202 million that reduced EPS by $0.21. And we saw continued momentum in our ROE improvement. The bank achieved record pre-provision pretax earnings of $4.1 billion, powered by record revenue in each of our operating segments. Strong fee growth in our market-driven businesses and margin expansion in our Canadian and U.S. banking businesses from deposit growth and mix optimization positions us particularly well for when loan growth resumes. Our commitment to expense management and operational efficiency continues to enable strategic investments in technology and talent. Underlying expense growth was well managed, and we continue to target positive operating leverage again this year. Credit performance remains in line with our expectations, and our CET1 ratio of 13.1% remains strong and above our target even as we continue to buy back 6 million shares during the quarter. We're executing against a consistent strategy outlined back in Q4 of 2024 towards achieving and sustaining ROE of 15%. The progress we made last year and this quarter strengthens my conviction that we can achieve that goal as we exit 2027. We delivered peer-leading ROE improvement in 2025 of 150 basis points, and that momentum continued into the first quarter. Underlying ROE reached 13.1%, up 180 basis points from a year ago and 130 basis points from Q4. Consistent with last year, this reflected strong core operating performance across our businesses, including in U.S. Banking, where underlying ROE was up 150 basis points from Q1 of last year. Broad-based line of business operating performance contributed to strong underlying EPS growth of 21% and momentum is growing. Turning to our operating segments. In Canadian P&C, we're attracting more customers with deeper relationships, leading to consistent growth in core operating deposits, a key driver of earnings growth, which was up 8% from last year. Canadian Commercial Banking revenue grew 10%. New client acquisition is healthy and trending higher than last year. Clients continue to adopt our innovative treasury and payment solutions, driving 9% growth in operating deposits and 13% increase in TPS fees. Our One Client approach is key to our success and client referrals between commercial and wealth increased to 34%, resulting in a 75% increase in referral revenue. In Canadian retail, we continue to see above-market growth in checking accounts and operating deposits as well as strong growth in mutual fund sales of 13%, leveraging our personal bankers and our digital capabilities to drive fuller customer relationships. Our strategy to deepen engagement and loyalty will be further strengthened as we transition from AIR MILES to our reimagined Blue Rewards loyalty program this summer. Available to all Canadians, this program delivers personalized benefits, new partnerships and an intuitive digital platform, giving millions of members a simple, flexible way to earn and redeem rewards and will be fully integrated into the BMO mobile app. In U.S. Banking, we continue to execute on our strategy to accelerate performance and delivered record revenue and strong margin expansion. We're seeing momentum in personal account acquisition and net client growth over last year with a solid 3% growth in noninterest-bearing deposits. By the end of next quarter, we will be effectively complete with our balance sheet optimization efforts and expect to see positive commercial loan growth in the second half of the year, supported by currently strong pipelines. With the U.S. economy expected to outpace Canada for a fourth straight year and with our business mix, we're well positioned to capture growth opportunities as business activity expands. Wealth Management earnings were up 16% on stronger markets and net new asset growth. We successfully integrated Burgundy Asset Management, and we're seeing good client and employee retention and engagement. Our distinctive strength in innovation and speed to market continued to drive momentum across global asset management with the launch of BMO's broad commodity ETF and expansion of our European CDR lineup. Our commitment to delivering high-quality solutions for investors was recognized at the 2025 Fundata Fundgrade A+ Awards, where BMO ETFs and mutual funds earned a combined 27 awards, reinforcing BMO's position as one of Canada's leading investment managers. Capital Markets had a very strong quarter with PPPT of $893 million, driven by strong trading activity and higher advisory fee revenue. Our performance reflects continued strength in market-leading franchises, including a #1 ranking in ECM and a #2 position in investment banking share of wallet in Canada and robust equities trading and M&A activity in the U.S. Record results in our commodities trading business this quarter reflects our leadership position in the sector. We've been consistently ranked as the world's Best Metals and Mining Investment Bank by Global Finance Magazine now for the 17th year. And this week, we hosted our 35th Global Conference, the world's leading forum on this topic. Looking ahead, BMO is uniquely positioned to serve our clients playing leading roles in the AI infrastructure cycle and those in industries at the center of economic change. We have highly competitive and differentiated strengths across areas critical to future economic growth, including our metals and mining franchise, our leadership position in the Canadian energy sector and robust infrastructure, power and utilities capabilities. We're proud to be the official bank of the Canadian Defence Community, serving members of the military, reservists and their families. Across our Canadian Capital Markets and Commercial Banking businesses, we're supporting efforts to help growing defense industries, including participating in the development group for the Defence, Security and Resilience Bank. As we evolve our own AI journey across BMO, our digital-first AI-powered strategy is focused on scaling rapidly, advancing capabilities to deliver world-class client experiences and drive business value. We're creating a responsible AI-enabled ecosystem of tools where innovation supports human insight. Building on last year's launch of our generative AI-powered digital assistant in personal banking, we've introduced the same capabilities for the Canadian Commercial Bank, enabling our teams to quickly access policy and lending information. These are examples of how we're scaling AI-enabled intelligent tools to make every interaction faster and more confident, augmenting our teams and streamlining workflows to enhance client experience. In closing, our performance this quarter demonstrates momentum and progress. We're delivering value for our clients through world-class One Client experiences and for our shareholders through significant ROE and earnings growth since we outlined our clear path 5 quarters ago, and we're not done yet. We look forward to sharing further insights into our strategy and progress at the upcoming all-bank Investor Day on the 26th of March. And before I turn the call to Rahul, I would like to welcome him to his first quarterly call as our CFO. Rahul joined BMO in 2022 as CFO for our U.S. operations and Commercial Banking and brings deep experience across leading organizations with a strong focus on execution. Rahul, over to you. Rahul Nalgirkar: Thank you, Darryl. Good morning, everyone, and thank you for joining us. My comments will start on Slide 8. The bank delivered strong operating performance this quarter. The first quarter reported EPS was $3.39 and net income was $2.5 billion. Adjusting items are shown on Slide 42, and the remainder of my comments will focus on adjusted results. EPS was $3.48, up 15% from last year on record PPPT of $4.1 billion and lower PCL. Net income was $2.6 billion, up 11% from last year. As previously announced, our results include a charge of severance costs of $202 million or $147 million after tax related to advancing operational efficiencies across the bank and recorded in each operating segment. Excluding the charge, we delivered positive operating leverage of 1.1% and strong PPPT growth of 8% with ROE of 13.1%, up 180 basis points and ROTCE of 17.1%, up 220 basis points, reflecting continued momentum to enhance returns and accelerate growth. Revenue increased 6% or 8% on a constant currency basis, with broad-based growth across all businesses, including strong fee growth in Capital Markets and Wealth and NIM expansion in both P&C businesses. Expenses increased 9% or 5% excluding the charge. Total PCL decreased to $746 million with lower impaired and performing provisions. Piyush will speak to that in his remarks. Moving to Slide 9. Excluding the impact of the weaker U.S. dollar this quarter, average loans and deposits were relatively flat year-over-year and quarter-over-quarter. In Canada, residential mortgage and commercial loan growth of 2% remains muted, reflecting the softer economy and was offset by lower U.S. commercial loans due to the impact of optimization activities. These activities are now 90% complete, and we are beginning to see positive signs in the portfolio with underlying loan balances as at the end of January, up approximately 1% from the end of October. On deposits, we continue to manage decrease in term deposits, largely offset by growth in core personal and commercial operating deposits to enhance our deposit mix. Turning to Slide 10. Starting this quarter, we have enhanced disclosure of all bank NII and NIM to exclude Global Markets and Insurance to focus on core banking margins and exclude volatility associated with all global market activities. Prior periods have been reclassified to this basis. NII ex Markets was up 5% from the prior year or up 7% on a constant currency basis, driven primarily by continued margin expansion in Canadian P&C and U.S. Banking as well as higher NII in Corporate Services. Maintaining good NII growth despite muted loan growth reflects success of our initiatives to improve deposit mix in both countries. NIM ex Markets was 233 basis points, up 20 basis points year-over-year and up 3 basis points sequentially as we continue to benefit from higher ladder reinvestment rates, deliberate actions to improve deposit mix and disciplined pricing, partially offset by lower NII in Corporate Services compared with the prior quarter. In Canadian P&C, NIM was up 6 basis points sequentially, primarily due to the higher deposit margins from improving mix. U.S. Banking NIM increased a strong 13 basis points sequentially, driven by higher deposit margins as our deposit mix continues to shift to core deposits in both P&BB and commercial businesses as well as higher loan margins. Our guiding principle is to manage all bank NIM stability through the cycle. There are several factors which impact our margins every quarter. We expect tailwinds from ladder reinvestments and our deposit margin initiatives to continue to benefit us in the near term, and we are closely monitoring deposit pricing as the competitive landscape evolves. Moving on to noninterest revenue on Slide 11. NIR increased 9% from the prior year with strong growth in wealth, including Burgundy acquisition, higher advisory fees and stronger trading revenues as client activity and market performance remains robust. Card fees in Canadian P&C were elevated this quarter due to the impact of revised future reward redemption assumptions. Turning to Slide 12. Expenses grew 9% and were up 4%, excluding FX, the severance charge and higher performance-based compensation. Expenses are well managed as we continue to optimize cost to reinvest in talent and technology to drive future growth. Excluding the charge, operating leverage was 1.1% and our efficiency ratio improved to 55.8%. We expect to realize annualized savings of approximately $250 million from the charge with half realized in 2026 and the remainder in 2027. These savings will both support continued efficiency improvements and reinvestment in strategic growth initiatives. Expenses were up 8% sequentially or up 4% excluding the severance charge and represent seasonal uptick from employee benefits and stock-based compensation for employees eligible to retire. Turning to Slide 13. Our CET1 ratio remained strong at 13.1%. The ratio declined approximately 20 basis points sequentially with continued good internal capital generation more than offset by share repurchases and growth in source currency RWA, including the impact of ongoing methodology and model refinement of 17 basis points. We repurchased 6 million shares during the quarter and expect to continue repurchases while supporting deployment for growth and maintaining a strong capital position as we navigate towards our target of 12.5%. Moving to operating segments, starting on Slide 14. Canadian P&C net income was up 8%, reflecting solid PPPT growth of 4% and lower performing PCLs. Revenue was up 7% from higher NII, reflecting both balance growth and margin expansion. Higher NIR was driven by the above trend card fees, higher commercial TPS fees, investment gains as well as stronger mutual fund distribution fees. Expense growth of 11% reflected the severance charge and the higher technology costs. Turning to U.S. Banking slide on Slide 15, which speaks to the U.S. dollar performance. Net income was up 18%, primarily reflecting lower impaired and performing PCL. Revenue was up 2% from margin expansion, offsetting lower balances, reflecting continued disciplined optimization as well as higher Wealth Management and Commercial TPS fees. Expense growth of 4% reflected the severance charge as well as investments in talent and technology. Excluding the charge, PPPT increased 1%. Moving to Slide 16. Wealth Management net income was up 16% from last year and includes Burgundy results starting this quarter. Strong performance was driven by higher Wealth and Asset Management revenue, up 17%, reflecting higher markets, continued growth in net sales and strong balance sheet growth. Expenses were up 15% due to employee-related expenses, including higher revenue-based costs and the severance charge in the quarter. Turning to Slide 17. Capital Markets net income was up 11% from a strong first quarter performance last year, driven by strong PPPT growth of 8% and lower PCLs. Revenue was up 7%. Global Markets revenue increased 6%, driven by higher equities and commodities trading revenue, partially offset by lower interest rate trading. Investment and Corporate Banking revenue increased 9%, driven by higher advisory fees and equity underwriting, partially offset by lower debt underwriting activity. Expenses were up 6%, mainly driven by higher employee-related costs, including severance, partly offset by the impact of the weaker U.S. dollar. Turning now to Slide 18. Corporate Services net loss was $242 million and included the impact of the severance charge as well as seasonal employee benefit-related costs in the first quarter. In summary, we continue to build on last year's momentum with strong core operating performance across all our businesses. We delivered record revenue and at the same time, took actions to optimize our structural cost base to support investments and drive future efficiencies. These results reflect successful execution on the 4 strategic levers of our ROE journey over the last 5 quarters. I'm confident our businesses are well positioned to drive further growth and enhance returns. With that, I will now turn it over to Piyush. Piyush Agrawal: Thank you, Rahul, and good morning, everyone. We continue to operate in an environment of modest economic growth across North America with the U.S. economy maintaining its outperformance relative to Canada. After a year marked by lingering trade uncertainty, we see an environment of measured expansion, underpinned by resilient consumer spending and stabilizing inflation. In Canada, economic momentum remains constrained by softer labor and housing markets. Within this, we continue to see dispersion across sectors and borrowers with pressure more pronounced among higher leverage borrowers. Our approach remains disciplined. We are prioritizing proactive client engagement, balance sheet resilience and maintaining strong reserve coverage. The credit performance this quarter was largely in line with our expectations and reflective of the environment. As shown on Slide 20, total provision for credit losses was stable quarter-over-quarter at 44 basis points or $746 million with impaired provisions declining $11 million to $739 million. By operating segment, Canadian Personal and Commercial impaired losses were $497 million, stable to prior quarter. We continue to see higher delinquencies in certain segments of our consumer portfolio, particularly in parts of the GTA where unemployment remains elevated. U.S. Banking losses were $202 million, down $7 million lower compared to prior quarter. U.S. Commercial Banking losses of $128 million declined $32 million. Capital Markets impaired losses also decreased $8 million to $29 million. Turning to Slide 21. The $7 million performing provision reflects stability and strength in our existing reserve position. The $4.6 billion performing allowance continues to provide strong coverage at 69 basis points over performing loans, and we remain well reserved. On Slide 22, gross impaired loans decreased $228 million to $6.9 billion or 102 basis points, driven by lower formations in our commercial businesses, which decreased $403 million compared to prior quarter. We are seeing positive momentum in our wholesale businesses with lower formations to both our watch list and impaired loans. Looking ahead, trade issues between Canada and the U.S. remain unresolved and the USMCA renegotiation presents significant uncertainty. Given these factors, we continue to anticipate a softer economic environment in Canada. In the U.S., expansionary fiscal policies, supportive monetary policy and AI investments should support growth as we go through the year. These dynamics are playing out for our customers and reflected in our portfolios with a gradual improvement in the U.S. geography and elevated risks in Canada. As we look forward, we expect these to have somewhat a balancing effect and impaired provisions to remain in the mid-40 basis points range with quarterly variability. Our performance continues to be supported by the diversification of our portfolio and risk management capabilities, underscored by a strong risk culture. We remain disciplined and well positioned to support clients with our strong balance sheet and liquidity levels. I will now turn the call back to the operator for the Q&A portion of this call. Operator: [Operator Instructions] And our first question comes from Gabriel Dechaine from National Bank Financial. Gabriel Dechaine: I think the ROE performance this quarter, especially after some of the comments you made earlier this year is a standout, and that's a good thing, great progress there. But I don't want to be that guy, but the U.S. looks to be a little bit flatter. And we saw more ROE expansion in Canada and capital markets, whereas it was a bit more flat in the U.S. I guess my question is, do you still have confidence presumably in hitting that 15%, but the way you get there might be a bit different than the original plan because the U.S. was almost half of that expansion plan. Darryl White: Yes, Gabe, it's Darryl. I'll give you a topper on your answer, and then I might ask Aron to kick in, who's effectively executing the plans in the U.S. No, I would actually say in all facets, we're very much on track. When I look at the total company on the March up to 15%. If you go back to when we called out our objective in the fourth quarter of 2024, we were at 9.8% that year. If you look at how many quarters it will take us to get there, I'd sort of think about it as a total company, we're about 60% of the way there and 40% of the time. So in one way, if it were linear, which is not necessarily going to be linear, we're ahead of schedule. The U.S. was always going to come in a little bit later than the improvement in Canada as it evolves. And that's on track as well as we move to -- I would say, we're 90% through our optimization work in the U.S., and we'll be effectively complete on that, as we've said we would in the second quarter of this year. And then we should see some good acceleration there as well. We have -- I will point out before kicking it over to Aron here, we are up 150 basis points year-over-year in the U.S. ROE. So there's some nice contribution to the total bank ROE already with a lot more to go. But Aron, over to you on where we go from here. Aron Levine: Yes. Thanks, Darryl. Thanks, Gabriel. I think what you're seeing is the U.S. is really at this inflection point. As we've talked a lot about the optimization work now that we're 90% of the way complete. But loans and deposits are down about 3% to 5% as a result of that work. Of course, ROE up, as Darryl said, as our margins, and revenue is actually up 2% year-over-year. So we've seen really good progress, whether it be fee income on commercial TPS, M&A or noninterest checking. So now what you're seeing is this translation into the momentum we're starting to build in our pipelines. We're starting to see progress across the commercial. We have some areas like commercial real estate that are starting to show some growth. So all the things are pointing to exactly how we had said would operate in the first quarter and the first half of the year with real opportunity for growth in the second half and keep us on track to contribute to the overall ROE play. Gabriel Dechaine: Okay. Great. And then to be clear, I was talking about linked sequential quarter there. But sticking with the U.S., I look at the margin at 4%, that's definitely peak-ish. But as I look ahead, I actually want to see that go down because that means you're going to be deploying more balance sheet, loan lending and raising more deposits, which might result in a lower NIM, but more top line momentum. And I just want to get more, I guess, the outlook for loan growth, what are some of the pillars for that confidence, I guess? Is the breakdown of private credit a little bit of a tailwind for you, maybe? Aron Levine: No, my confidence comes from a couple of areas. One, if you look at the actions we've taken, right, the talent that we've built, especially on the West Coast has been impressive coming from lots of other areas of the industry, the way we've realigned the organization and the investments we've made in the business. If you look at all of those actions in addition to now the optimization work coming to completion and these pipelines growing, we feel like that's what's going to drive our growth. So the relationships we have with our -- with the clients, the way we provide industry expertise, we have momentum, and it's really been built off of all the work we've done over the last 5 quarters. So I think what you're going to see is a compounding effect of those investments we've made and the changes we've made over the rest of this year and into 2027. Operator: Our next question comes from Ebrahim Poonawala from Bank of America. Ebrahim Poonawala: I guess maybe first question, just following up, Rahul, on Slide 10 in terms of the net interest margin, I guess, as all of us think about the ROE improvement from here, you break down the 3 buckets, deposit margins, loan margins and the mix for the U.S. and CAD NIM. Maybe just unpack that for us as we think about the outlook for here, what's the level of margin expansion you expect on both sides of the border? And how should we think about the 3 components that you lay out in that slide? Rahul Nalgirkar: Sure. Thanks, Ebrahim, for the question. This is Rahul. Ebrahim, as we have seen last couple of quarters, we do recognize that we've had a nice NIM expansion. And while we have our guiding principle to manage NIM stability through the cycle, this expansion speaks to the success of our optimization and mix improvement efforts. And also, we've been opportunistic about ladder reinvestments when we saw the right opportunity. So as we now fast forward that where we are heading, the ladder reinvestments and the mix will continue to benefit us, perhaps to a lesser extent. And we are also closely monitoring how the competitive landscape evolves in both the countries, both for loans and deposits. So when you put it all together, we are still thinking about a relatively stable outlook in the near term for NIM. Ebrahim Poonawala: Got it. So you don't expect material expansion from here? Obviously, balance sheet growth is going to pick up and you expect the margin to be relatively stable? Rahul Nalgirkar: Yes. I mean if you think about it, Ebrahim, we have a lot of efforts going on, on our strategic initiatives to improve our mix, but also as loan growth picks up in both sides of the countries, pricing and margin will behave differently. So we are putting it all together as a package to say relatively stable. Ebrahim Poonawala: Got it. And I guess on that point on the loan growth, maybe, Aron, we've seen like Fed H8 data looks pretty good on C&I year-to-date, like commentary from the regional banks have been strong. Just talk to us if there's been a discernible change in sort of customer behavior in the U.S. around like wanting to invest and that's driving loan demand or not? You talked about CRE inflecting a little bit. And then maybe on the other side of the border, just the level of optimism, caution on the Canadian macro as we look out over the next 6 to 12 months. Darryl White: Yes. Thanks, Ebrahim. Yes, there's no question. We're hearing it from our clients. We're seeing it in the way the pipelines are building and the activity and the conversations we're having across both the commercial bank and the corporate bank with Alan, there's a lot of enthusiasm building across the businesses, and we're seeing that play out. Again, the optimization work we do sort of mute some of that excitement in the first quarter. But as that comes to an end, we'll see that come through the rest of the year. But in terms of client sentiment, we're hearing a lot of people that are feeling a little more comfortable again with some of the uncertainty and how to handle it and starting to invest again, and we're right there with them. Sharon Haward-Laird: And then Ebrahim. In Canada, I think the story is very much the same with 2 maybe main differences. The first being we don't have an optimization program. So that's not a headwind for us. And then the Canadian macro is maybe a little more uncertain as both Darryl and Piyush covered in their comments. But we have a lot of confidence in quarter-over-quarter momentum from here. And just to give you a sense of where that confidence comes from, it's increasing pipelines. We're starting to see acceleration in the middle market. And we've seen increased closings of deals for the first time since the tariff uncertainty arose. And so based on that, we've invested in people, we've invested in AI tools. And with the strong deposit growth, the TPS fees and our great revenue, we feel like we're really well set up as we move into the end of the year and importantly, into fiscal '27 as well. Operator: Our next question comes from Doug Young from Desjardins Capital Markets. Doug Young: Just going to the U.S. commercial loan growth. You talked a lot about optimization and various items, but maybe we can dig a little bit down into it. So can you quantify the portfolio optimization and what impact it had in the quarter? And what does 90% mean? And what impact will it have in the next quarter? Just to give some sense around that. And then I think there was mention of new -- record new client acquisitions in the U.S. Can you maybe flesh this out because it seems like you are kind of winning new business when we kind of pull out the optimization impact. Just hoping to get down into a little bit more detail around that. Darryl White: Thanks, Doug. So I think from an optimization standpoint, probably the best number is around $6 billion of sort of balance sheet loans reduction over the course of the last 4 quarters. Our loans are down about 5% across U.S. Banking. Remember, our optimization work is both on the deposit side as we've rolled off higher-priced CDs and are repositioning ourselves, both in the commercial business and the consumer business on higher quality, lower cost deposits. So you have optimization work that covers both sides, loans and deposits. And where you're seeing real momentum, again, if you look at our commercial TPS fees, up 23% year-over-year, up 17% quarter-over-quarter. That is this idea of we have great client relationships that we are now deepening with them. We're driving more high-quality cash for those clients. You look again at our noninterest checking, an important benchmark for us in terms of how we're doing on the consumer side of the business, creating primary relationships that we can then, over time, grow both on the wealth side and more. So everything we are doing in the U.S. now comes down to how we operate in our markets that are, a, very focused on markets; B, we're very focused on being a unified organization so that our wealth business, our commercial business and our personal business are going to market together. We're seeing that in higher referrals. We're seeing that in more closed business, and that's really important. And of course, the discipline that we're showing now on both risk and pricing, the goal for us is to not just grow but to grow in a sustainable way so that we do achieve our long-term targets of ROE. So it's all coming together. We feel very good about the progress we've made. We've got work to do, but we feel confident about where the momentum is pointing to over the next couple of quarters. Doug Young: And the evolution of growth being more in the back end, that outlook hasn't changed. Darryl White: Yes, the outlook is the same. We think there'll be mid-single-digit loan growth from here. And again, the execution from here really comes down to we've put great talent in the field. We've built an organizational alignment where we are working very well in the industries that we serve across both with our treasury partners and our capital market partners, and we're delivering the kind of industry expertise that ultimately wins clients and relationships, and that's what you're seeing. Doug Young: Okay. And then second question, maybe, Piyush, how do we think about the evolution of performing loan ACLs? I mean, Canada looks like it's a little bit more challenged. U.S. looks like it's a little bit better outlook in terms of -- from a macro perspective, you haven't been growing much, some loan book so like the performing loan. PCL hasn't been much because of that as well. So how do we think about that? And the macro outlook seems to be improving even though we have a lot of geopolitical uncertainty. So I know there's a lot that goes into the performing loan side, but how can you give us comfort around that and the evolution of that? Piyush Agrawal: Yes. Sure. Thanks, Doug. So we've ended the quarter at $4.6 billion, and it's a strong coverage of 69 basis points. As you know, our allowance goes through the rigorous process, reflects a range of downside scenarios, including some of the trade-related stresses. I think the question going forward is not whether uncertainty exists, it does, whether that's translated into observable changes in our portfolio. And so when I break that down between U.S., Canada, wholesale, retail, the U.S. is on a better footing. Our risk rating migration are drivers of what we are seeing in portfolio quality for flows into formations into watch list and embeds has been improving. So that's a good positive sign across in the U.S. And I would say also it's stable in Canadian Commercial. Now the Canadian Commercial macros are a little bit more softer. And so where we expect to see is until some of this uncertainty comes down, I don't expect any releases. At the same time, I think some of the performing provision will be consumed by what you're hearing on the call of the momentum on loan growth that's going to pick up. So again, when all of this bring back together, I'm not expecting any releases in the near term. I also don't see any large builds unless there's a big shift in the environment. And so loan growth is going to be the big driver for us going forward, especially as quality is stabilizing. So I'll leave it to exactly where we've ended the quarter in the same range as we go forward. Operator: Our next question comes from Paul Holden from CIBC. Paul Holden: So I want to continue sort of the line of questioning on the U.S. segment, but instead of talking about the loan growth, which is being well covered. Maybe talk about the deposit growth because I think the NIM, which you've also got a question on, is an important component of that. So if loan growth resumes, obviously, you're going to have to resume deposit growth and low-cost deposit growth. So maybe talk a little bit about the outlook there and how that will be achieved. Darryl White: Yes. Thanks. I'll hit a couple of comments, and then I think important that we will have more opportunity at Investor Day to go into a lot more detail, especially on this topic. But when you think about where we are on the consumer side, what driving to, again, being the primary relationship with clients is critical, right? And we do this with -- we have a whole series of different segments that we can work with clients. We have a great bank at work program that we work with sort of small business owners, both on their business and personal relationship. That program, we can expand to commercial clients, and we'll talk more about that again in a couple of weeks. We certainly have a big opportunity with our mass affluent segment where we can grow that deposits substantially. So across the board, we have a whole series of places that we can grow. Obviously, as we densify in regional coverage, certainly out West, there's opportunity there, and we're kind of pursuing that program as we've talked about in the past through our de novo. So right now, the key is we're showing 3% net checking growth. So as always, when you talk about deposit growth, it's both how you acquire and equally important is how you retain. And we're putting a lot of initiatives in place to make sure that we retain our clients and give them the client experience that makes them stay with us longer. So we'll talk more about that and other things as we get to our March Investor Day. Paul Holden: Okay. Fair enough. Second question is on Capital Markets. Obviously, a very strong quarter. So wondering if you can provide us sort of any thoughts on how that momentum may carry forward, particularly with investment banking, like Darryl has highlighted the strength of mining, and I think deals there continue to flow. Darryl White: Thanks, Paul. I appreciate both the question and the recognition. As you would imagine, we also feel very good about our performance this quarter and really view it as reflective of strength across our franchise with, as you point out, outperformance in very specific areas. To deliver $2 billion plus of revenue, it means that most of our businesses are doing well, and we did have areas of outperformance, specifically in Global Markets, it was our equity and equity derivative businesses as well as commodities. And then in investment banking, it's the advisory and ECM businesses that were led by our mining franchise that both you and Darryl point out, but it was also broad-based across our franchise. So the outcome is that this quarter's PPPT is above our trailing 5-quarter average of roughly [ $750 million ]. And as we look forward, the environment in markets continues to be constructive with volatility creating opportunities. And we have a very strong pipeline, yes, in the mining space, particularly, but across our franchises. So we are optimistic in our outlook. That said, we wouldn't necessarily extrapolate Q1 outperformance for the full year. And our focus on as a team is to exceed our trend line on a consistent basis. Operator: Our next question comes from Mario Mendonca from TD Securities. Mario Mendonca: Can I have you look at, I believe it's Slide 27. What stands out for me first is the credit card impaired rate at about 6%. I mean I suspect that relates to your exposure to the mass market, but that's just not a number I'm used to seeing at a Canadian bank. But secondary, it looks like it's stabilized here. So what I'm -- the question I'm asking is, what are we seeing here? Are we're seeing the exposure... Christine Viau: Mario, we lost you for a second. Could you just -- could you just repeat your question? Mario Mendonca: Sure. Can you hear me okay now, Christine? Christine Viau: Yes. Can hear you good now? Mario Mendonca: Yes, the credit cards, the loss rate there, the impaired PCL rate on credit cards, it's not a number you see too often at a Canadian bank at 6%, but it has stabilized. So what I'm getting at now is what is your outlook for the unsecured consumer? I'm thinking personal lending credit cards for BMO specifically in the near term. Do things look like they're improving somewhat as you heard from another bank yesterday? What's your outlook there? Mathew Mehrotra: Mario, it's Matt speaking. I'd go back to my comments on the last call. You've captured it well. We see stress at the lower end of the market. That's a broad phenomenon in the country. It is more visible for us. That's showing up in the losses that you're pointing up right now. We have, of course, made adjustments where we've seen risks elevate. We try to manage that risk. And on the flip side, we're focused on growth in our premium business, which is showing really good momentum. Premium account growth is up 13% year-over-year. Our quarter partnership is a part of that, but it's broad-based beyond that. We do see this business, obviously, it does ebb and flow with the macro environment. And so our outlook is tied pretty closely to unemployment and improvement in the Canadian economy overall. This quarter, your comments on the stability, we did see a good insolvency performance. That's a little bit hard to predict over time, but we do see this stabilizing for the most part. Mario Mendonca: All right. Just looking at the U.S., I acknowledge the $6 billion reduction in RWA over the last 4 quarters. Is there room to take the U.S. RWA still lower? Or are you essentially at the end there? Darryl White: Yes, I'll take it, Mario. It's Darryl. I mean, I think all -- optimization is a big word that's come up, to my liking, way too often with all of you as it goes through because it's kind of coming to the end, and we're going to be effectively complete on this on the end of the second quarter, as we've said. But it is, as you know, an ongoing BAU thing that everybody does. Do we see further significant reductions in the "program"? No. I think when we say we're kind of getting to the end, we're getting to the end. What you should see from here is the low-return stuff that still exists from time to time rolls off and better return assets roll on, and we'll continue to manage the mix, both on the loan side and the deposit side, as we said earlier, as we go forward. And if you kind of look out to where the market performs over the course of the rest of 2026 and '27 and then beyond, frankly, our expectation is that we'll perform and we'll protect market share, and we'll perform at the market or better as we go through that. Mario Mendonca: All right. One final quick thing. U.S. NIM, up 13 basis points in the quarter, the shift to core deposits from term, all these are positive things. That sounds contrary, however, to the guidance that U.S. NIM should be stable from here. That just doesn't seem -- I'm not sure I understand how that can be true. Both things can be true, the shift to core and stable at the same time. Rahul Nalgirkar: So Mario, primarily -- this is Rahul. So primarily, our guidance on stable is more at a bank core level. We will see variability within the businesses depending upon the strategic initiatives, especially like in U.S., Aron talked about mass affluent and checking and savings account growth there and depending upon also how the competitive landscape evolves. So at least in the near term, we do expect some more strength in the U.S. And then also as loan growth picks up, things would look different. So when you bring it all together, that's how we think about the U.S. But when I mentioned relative stability, that is at the bank -- all bank level. Operator: Our next question comes from Mike Rizvanovic from Scotiabank. Mehmed Rizvanovic: First one, maybe for Sharon. Just wanted to get a bit more color on the NIR in Canadian Personal and Commercial Banking. And I saw the comment on Slide 14 about above-trend card fees due to revised future redemption assumptions. Can you just give me a bit more granularity? I'm just trying to understand if that -- is that like a one-off on this quarter? Or is this like a new run rate? Because I noticed the card fees, $261 million in the quarter for the bank overall was pretty elevated versus historical. Mathew Mehrotra: Mike, I'll take that one. So on the card fees overall, the above trend that you're noting, we go through an ongoing process to evaluate our accrual rates relative to customer behavior. In this particular case, we saw accrual rates that were above reward redemption rates. And obviously, that's the gain that you're seeing in our fees. For fees overall, though, acknowledging that above trend item and a couple of other ones, we are seeing really good momentum in our commercial business, double-digit NIR growth and our mutual fund fees as well are doing -- are performing really well in line with the sales comments that Darryl made earlier. So overall, the outlook is solid on NIR acknowledging those above-trend items for this quarter. Mehmed Rizvanovic: So that is specific to the quarter. It's not like necessarily a new run rate. Is that fair? Mathew Mehrotra: No. You'll see a marginal benefit of that in the quarters to come, but nothing in line with what we've seen for this quarter. Mehmed Rizvanovic: Okay. So a bit elevated this quarter. It could come back now. Okay. Okay. That's helpful, Matthew. And then maybe just one for Piyush. I just wanted to get your thoughts on Canada's housing market. I know it's always very topical. And just some of the recent trends, things just don't seem to be getting better. And I know there's a lot of moving parts that make up your ECLs and all the assumptions that go into that. But do you have any concerns, any real concerns that a weak housing market, we're seeing inventories rise, sales volumes very, very weak. Are you concerned that if it just continues to move along this trend line that maybe it's more meaningful of a hit to the Canadian economy, not directly on the mortgage book per se, but just more broadly speaking. Any thoughts you could offer would be helpful. Piyush Agrawal: Yes, I can begin. I mean, broadly, the housing market, obviously, is a structural strength in the overall Canadian economy, and we have seen the softness in Canadian housing. You can see that in the offtake and new sales. Inventory has been up a bit. Some of this might be the winter effect. Some of this might be the impact of just the news uncertainty. But at some point, the backlog has to clear, and I think it will kick start as spring comes around. More in terms of our own portfolio, you're beginning to -- you're seeing higher delinquencies, and Matt touched on this. This is some of the stress in the Canadian consumer. We see that in consumer spend. We see this in other places. So that's the softness we've generally talked about. But I don't see that broadly for us or the Canadian market translate into higher losses. The LTVs are strong even with the refresh of the HPI decline, they remain strong and FICOs are good. And the behavior we've seen from renewals in the last few quarters has actually been very good. Delinquency levels of renewing customers, 1/3 of them at lower rates, some at a higher rate are actually comparable to the rest of the portfolio. So this will take some time, but I'm hopeful for the spring to come around and actually reinvigorate the market. Operator: And our last question will come from Darko Mihelic from RBC. Darko Mihelic: I wanted to circle back on the net interest margin discussion as well. And this may be a topic for the Investor Day and happy to defer to them. But I am just curious on one thing with respect to what we're seeing specifically in Canada. We saw some good deposit margin improvement. One of the things that I often do is I try and look and sort of see what banks are doing differently. And there is one place where you stand out very different from the crowd, and it's been for quite some time now, wherein the deposit market and particularly in term, your rates that you're offering are materially lower than your big bank peers, but very -- almost 100 basis points this morning, lower on term in the brokered deposit market. And so the question is, how long do you think this persists -- and how impactful has this been in terms of running off term deposits? And are you more or less running them off in the brokered market? And how long can this persist? And are we seeing any level of deposit competition heating up yet in Canada? Mathew Mehrotra: Yes. Thanks for the question, Darko. The overall story on deposits in Canadian P&C and Retail overall is we've been seeing really strong operating deposit growth, and that's been driven by really strong net customer growth. So we're getting primary relationships in the market at a faster rate than our competitors, and that's giving us the opportunity to optimize our term business. We think about our term business in 2 different parts. There's obviously the term that we sell to our own clients in our branches, digital channels, in our contact center as well as the broker term, which are the rates that you're looking at. Our optimization obviously focuses on first an operating deposit as needed, then term with our existing clients and third-party as sort of the final area where we'd look. And as the operating deposit performance continues to be strong and in line with the company's liquidity needs, we haven't really focused on driving that channel. And so it will sort of trend in line with our overall loan growth outlook for the company. Darko Mihelic: Okay. I'd imagine there'll be more follow-up when I see all bank results at your Investor Day, but I appreciate that. I guess where I'm going with this is if the outlook for margin is somewhat stable, I'm just wondering how has this sort of run its course on the term side in terms of deposit mix? Mathew Mehrotra: I would say it has not totally run its course. There's still some tailwinds that we'll see on this. It won't be at the rate that you've seen up to this point, but it will continue. Again, the underlying drivers of this are strong operating deposit growth and the opportunity that, that presents. And we expect that to continue, but of course, not to the same degree as you've seen. Operator: We have no further questions. I would like to turn the call back over to Darryl White for any closing remarks. Darryl White: Well, thank you, operator, and thank you all for your questions this morning. Look, to sum up, I would reemphasize that we had a very strong start to 2026. The momentum is continuing to build as we're focusing on what we've told you we would, which is improving our ROE and driving profitable growth. And as I said earlier, my conviction in achieving this outcome against our ROE objectives is very strong and on time. So with that, we look forward to speaking with all of you again on the 26th of March at our Investor Day. Thank you very much. Operator: This concludes the BMO Financial Group's Q1 2026 Earnings Release and Conference Call. Thank you for your participation. You may now disconnect.
Operator: Good morning to all participants, and welcome to Grupo Comercial Chedraui's Fourth Quarter 2025 Commercial Conference Call. [Operator Instructions] Participating in the conference call today will be Mr. Jose Antonio, Chedraui's -- CEO of Grupo Comercial Chedraui; Mr. Carlos Smith, CEO of Chedraui USA; Humberto Tafolla, CFO; and Arturo Velazquez, IRO for the company. We will begin the call with the initial comments on Grupo Comercial Chedraui's fourth quarter financial results by the company's CEO, Mr. Jose Antonio Chedraui; and Chedraui's USA CEO, Carlos Smith. Thank you. You may begin. Jose Antonio Chedraui Eguia: Good morning to all, and welcome to our presentation of Grupo Comercial Chedraui's Fourth Quarter 2025 Results. I want to begin by sincerely thanking our valued customers for choosing to shop at our stores, especially during this challenging economic environment, both in Mexico and the U.S. Your continued trust inspires every day. I also want to probably recognize our employees unwavering dedication to advancing our 3 strategic pillars throughout 2025, their commitment to delivering a unique shopping experience, providing the best assortment at the lowest prices and consistently exceeding expectations has been crucial to strengthening our customers' loyalty. In Mexico, our same-store sales have once again outperformed ANTAD's self-service segment by 164 basis points, making an outstanding 22nd consecutive quarter of outperformance. For the full year, our same-store sales growth exceeded ANTAD's self-service by 140 basis points, making this the fifth consecutive year of remarkable achievement. At Chedraui USA, although sales were impacted by continued immigration enforcement and the U.S. government shutdown in October and November, EBITDA margin improved by 178 basis points to 8.6% and by 6 basis points to 6.9% when including additional noncash accruals made for general liability and workers' compensation claims in the quarter. This was supported by rigorous expense management and efficiencies from our Rancho Cucamonga distribution center. Finally, I'm pleased to note that we completed the most aggressive store opening year in Chedraui's history, and we surpassed our store openings target. In Mexico, we opened 65 stores during the quarter for a total of 142 stores in 2025. As such, we ended 2025 with a total of 1,067 stores in Mexico and the U.S. Our organic expansion will continue throughout 2026 as we expect to open 147 stores in Mexico, of which 17 of these are larger store formats and the remaining are Supercito. While in the U.S., we expect to open 5 stores, 4 El Super and 1 Fiesta. Now to start our presentation, please turn to Slide 4, where I will highlight key achievements of the quarter. Chedraui Mexico's same-store sales grew 3% in the fourth quarter of 2025 and surpassed ANTAD's 1.4% growth for the 22nd consecutive quarter. Chedraui Mexico's total sales increased 6.9% due to higher same-store sales and a 4.4% sales floor expansion. Consolidated EBITDA increased 101 basis points to 8.6% and 7 basis points to 7.7%, including extraordinary items in the quarter. Chedraui Mexico's EBITDA margin stood 8.7% and 8.5%, including an extraordinary payment to fiscal authorities from prior fiscal years. Chedraui USA's EBITDA margin increased by 178 basis points to 8.6% and 6 basis points to 6.9%, including extraordinary noncash accruals for claim liabilities. Net cash to EBITDA improved to minus 0.28x in the fourth quarter of '25 compared to the minus 0.18x in the fourth quarter of '24. We accelerated our organic growth in Mexico by opening 65 stores in the quarter for a total of 142 stores in 2025, above target. In the following slides, I will comment in more detail about our fourth quarter results. Turn to Slide 5, please. During the fourth quarter, consolidated sales declined 3% compared to the fourth quarter of 2024, primarily reflecting the currency translation effect for Chedraui USA sales from a 10% appreciation of the Mexican peso against the U.S. dollar. Consolidated EBITDA increased by 9.7% and EBITDA margin stood at 8.6%, a 101 basis point improvement. If extraordinary items for the quarter are included, EBITDA declined 2.2% to MXN 5,793 million, and EBITDA margin rose by 7 basis points to 7.7%. This performance reflects effective inventory and promotional management as well as a disciplined expense control across all business units. On Slide 6, our strategic M&A investments and organic growth strategy have continued to support the positive long-term trend in consolidated net income. Over the past 4 years, net income has achieved a compounded annual growth rate of 17.4%, highlighting the effectiveness of our growth strategy and disciplined financial management. Our return on equity has recently been affected by RCDC transition costs and nonrecurring items for the quarter. However, even after considering these factors, our long-term strategic focus drove 167 basis points increase in ROE in 2025 compared to 2021. This demonstrates our commitment to creating long-term value for our shareholders. In the following slides, we will review the main highlights of our businesses in Mexico and in the U.S. On Slide 7, our continued commitment to offer the lowest prices and targeted customer promotions with an assortment of products that our clients prefer and a unique shopping experience enabled us to achieve a 3% increase in same-store sales, outperforming ANTAD's self-service segment by 164 basis points in the quarter. During the last several months, we have focused on enhancing our e-commerce strategy to give customers diverse shopping options. As such, our e-commerce sales penetration increased by 70 basis points to 3.9% in the fourth quarter of '25 in Mexico compared to the same quarter in 2024. This performance was driven by higher customer satisfaction and stronger repeat purchase rates across our digital channels, in addition to our strong third-party partnerships with platforms such as Uber, Rappi, DiPi and Rappi Turbo, which have continued to enhance our growth. Please turn to Slide 8. Despite a weaker-than-expected consumption environment in Mexico, total sales in the quarter increased 6.9% compared to the fourth quarter of 2024, supported by a 3% increase in same-store sales and a 4.4% expansion in sales floor area. As commented, Chedraui Mexico incurred an extraordinary onetime payment to tax authorities corresponding to the revision of prior fiscal years, which impacted EBITDA margin by 20 basis points. EBITDA in the fourth quarter of 2025 increased 8.2% and EBITDA margin expanded by 11 basis points to 8.7%, driven by strict expense control, along with enhanced inventory and strategic promotional management, which was able to offset higher labor costs. If the extraordinary item for the quarter is included, Chedraui Mexico's EBITDA grew 5.8% year-over-year to MXN 3,271 million, while EBITDA margin declined 9 basis points to 8.5% of sales. I will now turn the meeting over to Carlos Smith, CEO of Chedraui USA, for his comments on our U.S. operations. Carlos, please go ahead. Carlos Matas: Thank you, Antonio. Good morning, everyone. Chedraui USA continues to operate in an environment with stricter immigration enforcement, and this quarter was further impacted by the U.S. government shutdown that occurred in October and November. Although we were able to increase our average sales ticket, these events negatively impacted the number of transactions at our stores, bringing our same-store sales negative for the quarter. As we stated on last quarter's call, we implemented strict expense controls to help navigate these headwinds, which were effective in mitigating our loss of operating leverage in the quarter. As Antonio referenced earlier, it's important to note that operating expenses were affected by additional noncash accruals made during the quarter relating to general liability and workers' compensation claims, which impacted EBITDA margin by 171 basis points. While the number of new claims is trending down, the cost to resolve these claims has increased, not only for us but across the retail industry. We continue to take actions to reduce the frequency and cost of these claims. I would like to highlight our commitment to delivering solid long-term results despite short-term challenges. Despite current trends, both El Super and Fiesta same-store sales have grown considerably over the last 4 years. When comparing 2025 data with 2021, the same-store sales compounded annual growth rate for El Super is 6.2% and 6.6% for Fiesta. Also, EBITDA margins over the same period increased by nearly 41 basis points for El Super and 310 basis points for Fiesta, even when considering the headwinds we faced in this fourth quarter. Now we will review the results of the fourth quarter. Please turn to Slide 9. Chedraui USA same-store sales declined by 2.8% in U.S. dollar terms compared to the same quarter of last year. This is explained by a decline in transactions at El Super and Fiesta due to immigration enforcement, the delay and partial release of SNAP benefits as a result of the government shutdown and a high same-store sales base comparison to the prior year. At Smart & Final, same-store sales decreased 0.9% in U.S. dollar terms, primarily due to lower transactions in Southern California, where immigration enforcement has been stricter than in other regions, coupled with the impact on SNAP benefits due to the government shutdown. Overall, Chedraui USA's total sales decreased by 2.2% in U.S. dollar terms. Additionally, the 10% appreciation of the Mexican peso against the U.S. dollar contributed to a sales decline of 11.6% in Mexican pesos. Please turn to Slide 10. EBITDA increased 11.4% in Mexican pesos while EBITDA margin rose 178 basis points to 8.6% as a result of disciplined expense control across the organization. If accrued noncash claim provisions are included, Chedraui USA's EBITDA in Mexican pesos declined 10.8% less than sales and EBITDA margin of 6.9% increased 6 basis points compared to the fourth quarter of 2024. The combined El Super and Fiesta EBITDA margin reached 8.5% compared to 8.9% in the fourth quarter of '24, mainly explained by the pressure on transaction count experienced at El Super. When accrued noncash claim provisions are included, EBITDA margin stood at 7.2% in the quarter. Finally, Smart & Final's EBITDA margin of 8.7% improved 379 basis points compared to the same quarter of 2024 and 171 basis points, including additional claim accruals. This is explained by the improvements in the RCDC operations and the aggressive perishable pricing campaign in the fourth quarter of 2024. This concludes our report on the U.S. operations. Jose Antonio Chedraui Eguia: Thank you, Carlos. Now we turn to the consolidated financial results on Slide 11. Consolidated sales of MXN 75,221 million declined 3% compared to the fourth quarter of '24, mainly explained by a 10% appreciation of the Mexican peso when consolidating Chedraui USA sales. Gross profit rose 2.9% due to favorable inventory and promotion management in Mexico, reduced RCDC costs at Chedraui USA and Smart & Final's price campaign in the fourth quarter of 2024. Gross profit as a percentage of sales stood at 23.2% in the quarter compared to the 21.8% in the prior comparative quarter. Consolidated operating expenses, excluding depreciation and amortization, decreased by 0.8% as a result of a strict expense control. When including extraordinary items in the quarter, operating expenses, excluding depreciation and amortization, increased 5.5% compared to the fourth quarter of '24. Consolidated operating income increased 19%, with operating margin increasing 101 basis points to 5.5%. If extraordinary items are included, operating income of MXN 3,403 million declined 1.4% compared to the fourth quarter of '24 with an operating margin of 4.5% at similar levels to that of the fourth quarter of 2024. Consolidated EBITDA increased 9.7% and EBITDA margin was up 101 basis points to 8.6%. When including extraordinary items, EBITDA declined 2.2% and represented 7.7% of sales, a 7 basis points increase compared to the prior comparative quarter. Financial expenses remained flat, explained by lower interest expense on Chedraui USA's debt and the appreciation of the Mexican peso against the U.S. dollar in the last 12 months. The prior was partially offset by lower financial income in Mexico, driven by lower interest rates. Consolidated net income amounted to MXN 1,846 million and MXN 1,344 million if extraordinary items are included. Finally, please move to Slide 12. We closed the year with a net cash position of MXN 6,923 million, and our net cash-to-EBITDA ratio improved to minus 0.28x from minus 0.18x in the same period last year. CapEx for the 2025 totaled MXN 8,549 million, representing 2.9% of sales and coming in below the prior year due to the significant investment in RCDC in 2024. Now please allow us to move on to the question-and-answer section. Operator: [Operator Instructions] The first question comes from Bob Ford with Bank of America. Robert Ford: Antonio, given the difficult economic environment in Mexico and the U.S., how are key value drivers evolving? And how are you thinking about differentiation and retention strategies? And then also, how are you thinking about channel opportunities over the intermediate term, particularly when it comes to small box and e-commerce in Mexico? And then lastly, with respect to the labor claims, I was curious if these are for cumulative trauma, right, something like a repetitive stress issue? And what steps you can take to protect against frivolous lawsuits, particularly in California? Jose Antonio Chedraui Eguia: Thank you, Bob. Well, I will comment about Mexico and then Carlos can talk about the U.S. Well, in Mexico, as you've seen, we're seeing a slowdown in consumption, ANTAD reported very low growth in sales. So we believe that what we're doing is trying to increase our penetration in every market within the formats that we already have put in place. We believe that there are still room in certain cities for the big boxes, which are very efficient and profitable. And then in other areas, we're going with the smaller boxes, mainly Super Chedraui and Supercitos. So we believe that with the formats that we have for physical stores, we are just in the right place where we want to be. On the other hand, as you mentioned, we're focusing a lot on the e-commerce side. We believe that we can increase our sales penetration closer to 5% this year. We're being very successful with our own platform as well as with the third-party operators. That includes Turbo, where we have a lot of expectations in the near future. delivering customers in less than 15 minutes. So that's a huge opportunity, not only to penetrate the markets where we have presence at the moment but even going to other markets without having to open a physical store. So we feel that we have the right physical formats and the focus in the e-commerce to reach our sales projections for this year, Bob. Carlos, maybe you can... Carlos Matas: Yes. Bob, Carlos here. Yes, the adjustment that we made is really related mostly to general liability claims in our stores, which is customer accidents, slip and falls and things like that. And as you probably know, this has been an industry-wide issue as it relates to the increase in costs as it relates to closing a claim. So if a claim cost us $10 4 years ago, those claims today are costing us 3x that. And this has been an industry-wide problem, as you can see through everyone's reporting. And the key for us is really to address frequency, frequency at our stores. What are we doing to make sure that our stores are -- that we're providing a safe environment for our customers. And the second portion of it is to be very aggressive in our claims handling process. So we've invested quite a bit of money internally to ensure that we sniff out what you call fraudulent claims, which there's always some. But our position is we take every single claim extremely, extremely seriously, and we try and process it as quickly as possible. So the key here moving forward is ensure that our frequency is down through our operations team and that once we do have a claim that, that claim gets closed as quickly as possible. Operator: The next question comes from Rahi Parikh with Barclays. The next question comes from Antonio Hernandez with Actinver. Antonio Hernandez: Just wanted to know how are you seeing consumer trends so far this year? I mean you already provided some guidance some weeks ago but wanted to get a clear picture on whether so far this year in both Mexico and the U.S. looks like what you expected previously or any changes in that? Jose Antonio Chedraui Eguia: Antonio, I barely heard your question but I understand that it's basically consumer trends, what you're asking about Mexico and the U.S. Is that correct? Antonio Hernandez: Exactly. So far this year in both Okay. Jose Antonio Chedraui Eguia: Okay. Well, consumption, we believe -- I'll talk about Mexico. We believe Mexico will continue to be slow in consumption, even though we have the soccer World Cup, which will help for sure. We still see that there is no reason why to think that consumption will pick up strong in the coming months, except for this particular reason of the World Cup. Being that said, we believe that we can achieve our guidance to be able to grow at least 3% same-store sales. We believe that's achievable. We are prepared for that. We have a strategy for every format of our physical stores as well as focusing in the e-commerce segment where we believe we can grow double digit. So we believe we're prepared for that. We're adjusting the assortment. We are being very aggressive in our pricing strategy and the new stores and the remodeling stores, we're making sure that the atmosphere, the service involved in those particular stores meet the expectations of the customer segments that we are trying to serve. So that would be about Mexico. Carlos Matas: Antonio, in the U.S., obviously, we operate in areas of high Hispanic densities, and that consumer is still a little bit weary through all of the immigration enforcement activity. So we're very aware of that dynamic in our markets. But in general, I will tell you that the consumer is stretched thin. Things are more expensive. And our customers are willing to shop in multiple places. So as they look for value to stretch their dollars. So it's imperative for us to execute properly on our strategy with our pricing, with our perishable assortment in order to provide that value that they're looking for. Operator: The next question comes from Froylan Mendez with JPMorgan. Fernando Froylan Mendez Solther: Can you hear me? Jose Antonio Chedraui Eguia: Yes, we hear you. Fernando Froylan Mendez Solther: First question is on the U.S. on the margin expansion on Smart & Final. It was really amazing to see the margin expansion. I know there are some benefits from RCDC. But should we think of this margin level as a sustainable one going forward? And if that is the case, should we think that there is some phase on the guidance for next year in terms of margin expansion in the U.S. That's my first question. And second, on -- more on Mexico regarding your first comment on the formats and how you are extending. Is there a very big difference in profitability between the big box and the smaller box formats? Color on that would be great. Carlos Matas: Froylan, this is Carlos. Yes, we had a very nice result in terms of margin expansion at Smart & Final. Last year, we started a very aggressive price campaign at Smart & Final. Our buying gross margin grew significantly quarter-over-quarter. A lot of that is related to now starting to see the benefits of our RCDC materializing but our team has done a fabulous job in other areas to lower cost of goods. And we've been able to maintain that aggressiveness in pricing, not only in our produce departments but also in other perishable categories as well as center store where our pricing indices versus our competitors are very, very strong. So we feel very good about our pricing position at Smart & Final. And yes, these are not only sustainable margins but we still see an opportunity to increase them. Jose Antonio Chedraui Eguia: And well, about format profitability, even though all formats meet our goals in return on invested capital and that it's quite similar in every format. The smaller formats tend to -- due to a lower investment tend to be more profitable. So we're always trying to focus on the opportunities that we have, the land opportunities and the customer we are trying to meet. If we could, we would maintain the combination of expanding a little bit faster in the smaller formats but maintaining the big boxes growing because they are profitable as well. Operator: The next question comes from Ulises Argote with Banco Santander. Ulises Argote Bolio: A quick one from my side. I was wondering if you could help us quantify there out of the 133 basis points improvement we saw in the gross margin. Can you help us understand a little bit with how much of that came from the RCDC benefits and how much of that was kind of other impacts that we had there in the quarter? Carlos Matas: Ulises, yes, the majority of the benefit comes from our gross margin line, which is a combination of improvements in our buying gross margin. I mentioned a little bit about that at Smart & Final. But if you look at Smart -- Super, I'm sorry, on an annualized basis, our purchasing gross margin grew 124 basis points. So you can really start seeing now the benefits of the RCDC materializing in cost of goods, which is great. And the second portion of that is that we are seeing great operating stability at our RCDC. Our productivity is improving every day. We're not exactly where we want to be. So we still have some room to grow, but we're happy with our progress. And our freight charges are continuing to come down. So the things that we mentioned as benefits of the RCDC are beginning to flow through, which is what we expected. Jose Antonio Chedraui Eguia: And in Mexico, well, I think we are getting better managing inventory but it's also important to mention that focusing on the customer base of MiChedraui customers and being able to promote more efficiently has benefited us lowering the cost of promotional activities that we would have in the past. Remember that we have almost 40 million customers in our loyalty program, and we are starting to do particular promotions to sets of customers. And we believe that in the near future, we can even go deeper and do particular promotions to every customer with the participation of our vendors, which is very important in this program. Operator: The next question comes from Renata Cabral with Citigroup. Renata Fonseca Cabral Sturani: The first one, I would like to ask if you could shed some light in the initiatives that the company is doing to mitigate the potential impact of the labor reform related to the reduction of working hours per week. We know that will be gradual. Just to understand the main initiatives here. And my second question is related to the announcement of the government in terms of investment in the country, the Plan Mexico. And how do you see those investments going towards the -- especially the south of the country where Chedraui has a big presence and the opportunity there? Jose Antonio Chedraui Eguia: Renata, well, about the labor hours reduction, we have been working already on it using our workforce more efficiently. We have already 3 programs going on where we believe we can become more efficient using the hours of our team at the store level. And we believe that we will suffer very little from this gradual reduction that will start in 2027. On the other hand, the investment that the government has announced for sure, benefits us when it reaches the cities and the areas where we participate. We saw what happened with the Tren Maya or with the Dos Bocas investment. And if that happens in our particular cities in the coming months or years, for sure, we will benefit from that. Thank you, Renata. Operator: The next question with Rahi Parikh with Barclays. Rahi Parikh: Can you hear me now? Jose Antonio Chedraui Eguia: Yes, we can hear you clearly. Rahi Parikh: Great. Great. I'm sorry for the issue earlier. So my question is kind of for the RCDC. What new technologies and AI are built now there versus the tour that we attended last year and what's remaining? So kind of just what's the goals in terms of technologies to include there, AI to help inventory management? Like what tools are out there for you to implement? And then I know you mentioned somewhat on like how RCDC helps margin a bit but do you have any estimate on cost savings going forward? Carlos Matas: Yes. So the initial start-up of our RCDC was relatively vanilla. So our second phase will include some more automated areas, et cetera. But our -- the first launch is really very vanilla. Most of the AI support that we're getting is within the tools that we use to forecast and determine demand at the stores. So that's obviously connected to our supply chain, and it's helped us quite a bit in terms of reducing our inventory levels at the RCDC as well as our stores. So the real use for us is an inventory management and assortment planning. Like I mentioned, we've got great stability currently at the RCDC but we still think that we've got some improvement in labor productivity as well as in more efficiencies related to our transportation function. Makes. Rahi Parikh: Sense. And then one other follow-up for this immigration for U.S. Do you see that you kind of have to raise wages to retain workers? I know you mentioned tougher there in terms of sales but just looking on the cost side. Carlos Matas: No, I don't think that we -- I don't think we're in an environment where we've got wage pressure. I think our wage structures at all 3 banners are very, very competitive. And we see that in our turnover numbers, which are probably just below industry average. So I think we're in good shape there. Operator: The next question comes from Alvaro Garcia with BTG. Alvaro Garcia: I have 2. One on Mexico. I was wondering if you can speak about the importance of assortment in your smaller formats. So we recently saw sort of Walmart talking about lowering or reducing their assortment size of Bodega Express. So I was wondering if you could talk about the strategic relevance of having the necessary assortment for your customers at Chedraui in your smaller formats in Supercito. And then my second question is on the dividend. You obviously have a net cash position. I know you're very much excited about growth, both organic and potentially inorganic in the future. But any sort of comments on what drove the decision to sort of increase it in line with inflation would be helpful. Jose Antonio Chedraui Eguia: Thank you, Alvaro. Well, about the assortment in Supercitos, even though we are trying to manage more efficiently inventory and SKU reductions always produce that. We are focusing that Supercito and every format fulfills their mission towards their customers. We are very aware that we want to be a proximity store and not a hard discount. We don't want to be a hard discounter. We want to differentiate for that. And we want to accomplish the mission of replenishment of a full basket. Therefore, the reduction possibilities in SKUs are limited to this strategy that we have put in place. To give you an idea, we have a little bit the double of assortment that we have against a typical hard discounter, for example. And we will continue with the assortment that fulfills the mission that we believe our proximity format is set for. On the other hand, the dividend, well, we have enough cash that we're not being able to use in our expansion program. And therefore, we just believe that there is better opportunity to use that cash for our investors than just having that cash sitting in our company invested in other investment opportunities rather than stores. If we cannot use the cash in stores or technology to become better or more efficient, we'll just increase dividends. Operator: Thank you. There are no further questions in queue at this time. I would like to turn the call back to management for closing comments. Jose Antonio Chedraui Eguia: Well, I just want to thank everyone for joining and hope to be talking to you at the end of this first quarter of 2026. Thank you again. Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.
Marta Campos Martinez: Hello, everyone. This is Marta Campos, Head of Finance for ROVI. Welcome to our company's review of business results for the full year 2025. Before we begin, let me remind you that today's presentation and associated documentation are available on the Investor Relations section of ROVI's website. Please note that the information presented in this call contains forward-looking statements based on our current beliefs and expectations. Actual results could materially differ due to known and unknown risks, uncertainties and other factors, and we undertake no obligation to update or revise any of the statements. Moving to today's agenda. Juan Lopez-Belmonte, ROVI's Chairman and CEO, will discuss on business performance for the full year 2025 as well as our outlook for 2026. Javier Lopez-Belmonte, ROVI's Chief Financial Officer, will then review full year financial results and provide an overview of our cash and debt position. The presentation will be followed by a Q&A session. Therefore, if you want to ask any questions during the presentation, please do not hesitate to send them through the question button on the platform. With that, I thank you for your presence today, and I will now turn the call over to Juan. Juan Encina: Thank you, Marta. Good morning, everyone, and thank you for joining us today. 2025 was a transition year for ROVI, but also one characterized by strong execution and solid performance. We operated with clear strategic priorities and delivered our financial commitments. In this context, our total revenue in 2025 amounted to EUR 756.1 million, a 1% decrease compared with 2024. Operating revenue reached EUR 743.5 million, representing a 3% decrease versus 2024. This evolution was better than expected and was mainly driven by the performance of our contract development and manufacturing organization business. This increase was partially offset by the strong performance of our specialty pharmaceutical business. Our gross margin reached 66.5% in 2025, an improvement of 3.9 percentage points compared to 2024. It was also a strong year in terms of profitability. EBITDA increased by 4%, and our EBITDA margin expanded by 1.9 percentage points, reaching 29.1% in 2025. With the visibility we have today, we reaffirm our 2026 guidance and ROVI expects operating revenue to grow by high single-digit to low double-digit rates compared with 2025. I'm very pleased with the progress we've made in executing transformative initiatives that continue to strengthen our company. Let me begin with our execution in the CDMO business. In November, we announced a collaboration with Roche for the manufacture of a new medicine in development. This agreement reflects the strong momentum we are seeing in new business and the continued expansion of our partnership base. In September, we announced the acquisition of an injectable drug product manufacturing site in Phoenix, Arizona. We are now integrating the facility, ROIS Phoenix into our network. As part of the transaction, we signed a drug manufacturing agreement with an initial 5-year term, including minimum annual payments of USD 50 million. We're extremely excited about this opportunity as it enhances our value proposition for biopharma partners by providing U.S.-based manufacturing capabilities and adding highly competitive, high potent OEB5 cytotoxic capacities. Turning to our Specialty Pharma business. In July, the Technological Development and Innovation Center confirmed the final approval of the EUR 36.3 million aid granted to ROVI for the LAISOLID project, covering the period from January 2023 to August 2026. In the second half of the year, we collected the full amount and recognized the revenue associated with expenses incurred between January 2023 and December 2025. And finally, in January 2025, we advanced meaningfully in the field of artificial intelligence. We acquired a majority stake in Cells IA Technologies, a pioneer in AI-assisted diagnostic in pathological anatomy, an area with significant potential from transformation to emerging digital technologies. Looking ahead, we expect these actions to translate into strong financial performance over the coming years and give us confidence in our long-term outlook. And now let me begin a quick overview of the 2025 financial results. Total revenues fell 3% to EUR 743.5 million versus 2024, mainly due to the behavior of the CDMO business. Notwithstanding sales of the specialty pharmaceutical business were up 11% to EUR 473.9 million, positively impacted by low-molecular-weight-heparins, Okedi, Neparvis and the contrast agents and other hospital product division. I will touch upon their performance later on the presentation. Moving on to one of our main pillars of growth and specialty pharma area. Sales of prescription-based pharmaceutical products increased by 11% in 2025, reaching EUR 414.1 million, driven mainly by the solid performance of our heparin division, which grew 7% in the year. Within the division, enoxaparin was the main growth contributor. Sales rose 9%, supported by higher order volumes from our international partners. Bemiparin also delivered a strong performance. Sales increased 4% in 2025, driven by a very strong fourth quarter with sales increasing 53% compared with the third quarter. This growth was supported by the strength of our international, where revenues rose 15% to EUR 43.6 million, mainly driven by strong performance in China, Greece and Turkey. We remain focused on becoming a global leader in the heparin field with both bemiparin and our enoxaparin biosimilar. In line with this ambition, we continue to invest in achieving self-sufficiency in crude heparin sourcing, moving to our full vertical integration across all manufacturing stages of low-molecular-weight heparins. Enoxaparin biosimilar continued to strengthen its global position in 2025 with out-licensing agreements covering 82 territories. Sales performance was solid throughout the year, driven by stronger demand from international partners. Sales increased 9%, reaching EUR 157.7 million, reflecting higher order volumes and sustained momentum in markets where the product is already well positioned. Additionally, the year closed with a particularly strong fourth quarter, the strongest of the year, with sales up 36% versus the previous quarter. Growth from the specialty pharmaceutical business was also driven by Okedi, Neparvis and the contrast agents and other hospital products. Okedi, the first ROVI product based on its leading-edge drug delivery technology, ISM for the treatment of schizophrenia in adults, delivered another year of strong growth. Sales reached EUR 56.7 million in 2025, an increase of 97% compared to 2024 and 84% rise compared to the fourth quarter of 2024. Sales of Neparvis, as specialty product from Novartis, indicated for the treatment of adult patients with symptomatic chronic heart failure and reduced ejection fraction, increased 10% in 2025. Finally, sales of contrast imaging agents and other hospital products increased by 11% in 2025. Moving on to our CMO business. Performance in 2025 evolved in line with our expectations. Sales declined 20%, reaching EUR 269.5 million, mainly due to 2 factors: minimal revenue recognition related to the activities carried out in the year to prepare the plant for Moderna vaccine production; and second, lower production revenues from Moderna during that same period. Despite this temporary contraction, our confidence in the year and long-term potential of our CDMO platform remains very strong. We operate in a highly dynamic market where ROVI holds a clear competitive position. To fully capture this opportunity, we are making significant investments to reinforce our global leadership in a sterile fill and finish capacity and services. These investments will enable us to continue benefiting from the structural imbalance between the growing demand for injectable products and the limited supply of high-quality manufacturing capacity worldwide. With expansions underway, ROVI is on track to become one of the largest and most experienced pharmaceutical groups in Spain, operating 8 fully integrated manufacturing sites, 5 of which are dedicated exclusively to contract development and manufacturing activities. This positions us exceptionally well for future growth. We continue to progress on our 2 innovative formulations based on our ISM technology platform. Today, I will provide an update across both programs. First, Letrozole SIE, our quarterly prolonged release formulation of Letrozole for the treatment of hormone-dependent breast cancer. We obtained positive Phase I results at the beginning of 2025 and demonstrated superior estrogen suppression compared with Femara. November 2025, we submitted the investigational new drug application to the U.S. FDA, and we expect to begin recruitment for the first clinical trial in the second quarter of 2026. Second, Risperidone QUAR, our quarterly prolonged release Risperidone injection for the treatment of schizophrenia in adults. It's unique PK profile is capable of providing clinically relevant plasma concentrations from day 1 onwards. The clinical program intends to achieve the same indications as Okedi and to demonstrate that unlike all the other quarterly formulations, patients being attended for an acute episode can be treated with a single quarterly injection of Risperidone QUAR without previous stabilization with monthly medication. We also reported positive Phase I results early in 2025. And the Phase III clinical program will follow a design similar to the one successfully executed for Okedi. Both programs represent meaningful innovation and reinforce the potential of our ISM platform to deliver long-acting treatments that improve patient outcomes and others. To conclude, let's turn to our outlook for 2026. As we've highlighted throughout today's presentation, 2025 was a strong year in terms of execution, and we have led solid foundations for our next phase of growth. In 2026, we expect to return to revenue growth. As I mentioned earlier, 2026 guidance remains unchanged, and we expect operating revenue to increase by between a high single-digit percentage and a low double-digit percentage in comparison with 2025. This outlook reflects several factors. The potential revenue from the manufacturing agreement signed with Bristol-Myers Squibb, closing still pending, as part of the transaction announced on the 29th of September 2025. Revenue arising from other agreements related to the contract manufacturing activity and lastly, the current competitive pressure on pricing in the heparin division. To conclude, we are executing strongly across the business, successfully advancing Okedis' rollout, progressing our clinical programs and delivering solid performance in our CDMO operations. At the same time, we are making the strategic investments required to support sustainable growth over the long term. The progress we've made this year, combined with the momentum we are carrying forward, reinforces our ability to serve patients effectively while building lasting value for our shareholders. Thank you for your presence again today, and I will now turn the call to Javier. Javier López-Belmonte Encina: Thank you, Juan. Good morning to everyone. As Juan noted in 2025, we made meaningful progress on building long-term value for the company. Total revenue in 2025 amounted to EUR 756.1 million, a 1% decrease compared with 2024. Likewise, operating revenue for 2025 totaled EUR 743.5 million, a decrease of 3% on 2024 numbers. This decline was better than expected and mainly driven by the performance of the CDMO business. This decrease was partially offset by the strong performance of our specialty pharma business, which was driven by our heparin division, Okedi, Neparvis and contract agents and other hospital products. I will now walk you through the remainder of our P&L. Gross profit increased 3% to EUR 494.7 million in 2025 compared to 2024. Gross margin was up 3.9 percentage points to 66.5% in 2025. This increase was mainly impacted by the recognition of revenue associated with the R&D aid awarded by the CDTI for the LAISOLID project, which is recorded under the other income line. Excluding the impact of other income, gross margin would have increased by 2.3 percentage points to 64.8%, mainly due to 2 factors: One, first, the increased contribution of Okedi sales, which added high margins; and second, the decrease in low-molecular-weight heparin raw material prices, which had a positive impact on gross margin. ROVI continues to be committed to innovation. R&D expenses increased 47% to EUR 37.8 million in 2025 due to the completion of the Phase I clinical trials for Letrozole SIE and quarterly Risperidone ISM and also for the preparation for the development of Letrozole SIE's Phase III clinical trial. SG&A expenses decreased by 2% to EUR 240.7 million in 2025 compared to 2024, mainly due to an 8% reduction in other operating expenses, excluding R&D. This item, however, includes nonrecurring expenses associated with the strategic projects undertaken in 2024 and 2025. When excluding these nonrecurring strategic projects and other operating expenses, excluding R&D, would have decreased by 4% in 2025, underscoring the continued effectiveness of the company's cost-containment initiatives. These efficiencies offset the 4% increase in employee benefit expenses, always excluding R&D, in 2025 versus 2024, driven primarily by a 3% wage increase due to the entry into force of the 21st Collective Agreement of The Chemical Industry, '24-'26 in the fourth quarter of '24 and also by the hiring of additional CDMO personnel. EBITDA totaled EUR 216.2 million in 2025, an increase of 4% compared to 2024, reflecting a 1.9 percentage point increase in the EBITDA margin, which increased to 29.1% in '25. EBIT increased 4% to EUR 185.8 million in 2025, reflecting a 1.5 percentage point increase in the EBIT margin, which increased to 25% in 2025. Net profit increased 3% to EUR 140.4 million in 2025. If we now perform a pre-R&D analysis, EBITDA pre-R&D calculated excluding R&D expenses in '25 increased by 9%, reflecting a 3.6 percentage point increase in the EBIT (sic) [ EBITDA ] margin to 34.2% in 2025. Likewise, EBIT pre-R&D increased by 9%, reflecting a 3.2 percentage point increase in the EBIT margin to 30.1% in 2025. Net profit pre-R&D in the same way, increased by 8% in 2025. Moving on to the evolution of CapEx and cash generation. Let me say first that we view CapEx as a key enabler for ROVI's future growth and is a key focus for our organization. This way, last year, ROVI invested EUR 67.8 million. Of this amount, EUR 46.2 million relates to investment CapEx related to our facilities, including key important projects such as the new filling lines and the operations expansion, Glicopepton, our joint venture for the construction of a plant dedicated to the production of compounds of high biological value from the intestinal mucosa of pigs and finally, the industrialization of our ISM platform. Lastly, we invested EUR 21.6 million in maintenance and other CapEx. In 2025, we increased cash flow from operating activities by 35% to EUR 187.1 million. Increase is mainly explained by 2 factors: the collection of the CDTI grant from the LAISOLID project and the improvement in inventory resulting from lower prices of heparin raw materials. Our cash generation capacity has also evolved positively with free cash flow reaching EUR 120 million, 57% higher than in 2024. Regarding our debt. As of 31st December '25, ROVI's total debt increased to EUR 121.8 million. So December '25, ROVI had a gross cash position of EUR .9 million and a net debt of only EUR 21.9 million. Let me end this section with our dividend policy, which we consider a key priority for ROVI. ROVI's Board of Directors will propose to the General Shareholders' Meeting, a dividend distribution of over EUR 49 million. This is equivalent to EUR 0.9594 per share entitled to receive it, charged to the '21 profit -- 2025 profit, sorry. This would entail distribution to an amount equivalent to approximately 35% of the consolidated net profit for 2025 attributed to the parent company. So moving to the news flows for '26. Let me say that, first of all, ROVI delivered in 2025, and we are entering 2026 in a very strong position, ready to capture the next wave of growth. The year ahead brings a very attractive news flow across all parts of our business. In specialty Pharma, we expect to strengthen the heparin division as we advance towards becoming a fully vertically integrated company, securing our supply chain and improving competitiveness. In CDMO business, 2026 will be a pivotal year with the full integration of ROIS Phoenix into our network and the continued execution of our capital investments, which will expand capacity, enhance capabilities and support future commercial opportunities. And in R&D, our ISM platform continues to represent a significant value driver with important milestones expected across our later-stage pipeline. Phase III trial of Letrozole SIE and the Phase III program of our quarterly Risperidone formulation. Altogether, '26 is set to be a commercially rich year supported by strong execution, meaningful catalysts across the portfolio and the actions we are taking to position ROVI for sustainable long-term growth. That's all regarding our full year financial results. We can now start the Q&A session, and I will pass the floor to Marta. Marta Campos Martinez: Thanks, Javier. [Operator Instructions] The first question is for Javier, and it comes from Pablo De Renteria Kepler Cheuvreux. Javier, I understand it may still be early to comment, but could you share any indication on your clients' intentions regarding the 100 million dose capacity expected to be operational this year? Specifically, the agreement is expected to contribute between EUR 80 million and EUR 180 million. Do you have any sense of whether the client is likely to utilize this capacity fully or whether it is intended more as a backup option? And as a follow-up, has there been any change to the time line for commissioning the line? Or does September still look like the official target date? Javier López-Belmonte Encina: Thanks, Pablo. We cannot comment much on specific contracts for -- I mean, for confidentiality reasons. To provide some context anyway, we are carrying out a technology transfer works, and that will imply regulatory approvals this year. And again, commercial production is expected to commence probably or likely most likely in the second part of the year. With this contract, the client has, at their disposal, a filling line in San Sebastián de los Reyes [indiscernible] plant up to we normally assess 100 million units of prefilled syringes. And the expectations remain the same. '27 is expected to be the first full year manufacturing year, I mean recurrent from full year, from beginning to end. And if we take into account this potential first full year or this full recurrent manufacturing revenue, the impact in our accounts will range between 20% and 45% over '23 year -- sales year. If you remember that was the guidance that we provided when we announced the contract, and we don't have different views as today. Marta Campos Martinez: Thanks, Javier. The next question comes from Guilherme Sampaio from CaixaBank, and Juan, it's for you. Could you comment on the latest trends regarding heparin raw material cost evolution and to what extent this should be able to offset potential pressures in prices in 2026? Juan Encina: Thank you. Thank you, Guilherme. There's not that much info we can share with you at this moment of time regarding heparin prices. What we are seeing really is a real aggressive price strategies from -- mostly from the Chinese players. What we are right now working is really on executing our plans to improve cost efficiency and to be able to deliver higher gross margins to make our position in the market more competitive. In this regard, it's going to be very critical, the kick of our operations of our new manufacturing plant with the vertical integration of our supply chain. So really, we do believe that we have very positive trends in the future once we can in-house source the crude heparin manufacturing. But right now, really our goal and what it is taking most of our time right now is to make sure that we deliver all our execution plans in terms of making sure that we can make the most of our -- in terms of cost efficiency in our supply chain. Marta Campos Martinez: Thanks, Juan. Javier, Guilherme also wants to know, what is your view on SG&A evolution in 2026? Javier López-Belmonte Encina: Thanks, Guilherme. As we guided the market on '26, we expect to expand the sales of the company. And that will mean that probably we are having an inflection turning point in our CDMO operations compared to the previous year. So that will mean that we'll need to expand -- that we are expanding our operations. And for sure, this is linked to an increase in people and some expenditure. I want to highlight the tremendous performance that the company did on SG&A last year on '25, where we reduced SG&A. I think this is very difficult to replicate because as long as we are fortunate and happy to increase salaries to our people by the collective agreement, the trend normally is to increase at least as an inflection -- as the inflation levels. You know our policy is to be very strict on cost expansion. So probably -- I mean, what I foresee that we will expand our operations, and that will mean that we will need to expand probably our SG&A, but hopefully in a very moderate way. Marta Campos Martinez: Thanks, Javier. The next question comes from Sergio [indiscernible]. Could you talk about reaching Phase III for quarterly Letrozole in 2026? And what do you think the Phase III would last? Juan Encina: I mean that's really our plan as both Javier and myself we have shared with you earlier in our presentations, our target to start recruitment in second quarter this year of Letrozole quarterly injection. The time lines are pretty much already being shared with the market. I mean this is going to be a long execution Phase III clinical trial. I mean the design is extremely attractive. We are targeting superiority versus the comparative drug. And we don't expect to be the clinical trial finalized before 2030, 2031. But definitely, this is going to be one of the major milestones of the company. And I think it's the best signal how do we -- how are we trying to execute the long-term perspective of the company. I think we have tremendous, very interesting short-term drivers of growth while we are already establishing the foundations of the growth of the company for the next decade. Marta Campos Martinez: Thanks, Juan. Francisco Ruiz from BNP has 2 questions. The first one is for you, Juan. After the excellent year on heparins, what are your expectations for 2026? Juan Encina: Thank you, Francisco. Really, as I mentioned to you before, we expect -- I mean, 2025 was a great year. I mean, sales grew 9% on enoxaparin. Bemiparin performance was also solid, especially in international markets. For 2026, we expect a decline in terms of sales basically because the last quarters of last year were very strong in international markets. So that means that our partners right now, they have sufficient stock. So we expect a slowdown in that part of the business. And secondly, we are seeing -- as I mentioned before in a previous question, we're seeing a tremendous price aggressive strategy from mainly our Chinese competitors. So altogether, we expect that for 2026 sales decline for low-molecular-weight heparin. We are -- as I mentioned before, we're investing heavily in making sure that we improve our cost efficiency in our supply chain. And we remain -- I mean, very much excited that we can still become a global player. We're investing heavily. We -- hopefully, Glicopepton will be very soon works finalized, and we will be able to be fully integrated in the supply chain of the heparin production. And definitely, I believe that great things are to be delivered by ROVI on this field. We are experts on heparin, and we have demonstrated in the past that we do have the skills, the products and expertise, and we're just working on the long term to make sure that we continue increasing our sales. Marta Campos Martinez: Thanks, Juan. The second question from Francisco. This goes for you, Javier. After the lower R&D in 2025 versus expectations, could you update if in 2026, it should go above the range of EUR 40 million, EUR 60 million commented? Javier López-Belmonte Encina: Yes. Thank you, Francisco, for the question. I mean probably you are right. Last year was a lower R&D expenditure than expected. At the end of the day, the expenditure of R&D is linked to the evolution of the clinical trials. And as we've been mentioning in today's call, we are expecting to start recruiting patients this year, very soon. And probably recruiting patients in this phase of the clinical trials are the most expensive one. And therefore, we could expect this year to be very intensive on R&D expenditure. At the end of the day, what we -- the guidance that we provided on the Capital Market Day last year around the R&D expenditure for this 5-year terms program from '26 to 2030 don't change at all. So probably we'll be spending EUR 300 million on this year. So overall, that amount will not change. Probably '26 will be one of the years that we'll spend most on R&D. That's also clear. And we are also looking and pushing to spend as much as possible, but that will mean that we are progressing in the right direction. On the other hand and on the positive front, let me remind all of you that on '26, we will account the second part of this aid from this Spanish organization, CDTI that will give us or we will account extra income, let's say, that way, that will be in a substantial amount. So that probably will offset any extra expenditure for the year on R&D. So we are very happy that we were able to collect that grant that will help us to smooth the expenditure on R&D. Marta Campos Martinez: Thanks, Javier. Juan, Álvaro Lenze from Alantra Equities asks, can you provide some detail on Neparvis prospects and the timing of the loss of exclusivity? Juan Encina: Thank you for the question. I mean Neparvis has been a tremendous success. I mean, it has proven the skills of our commercial capabilities in Spain. Unfortunately, the product will lose its patent around November this year. But it has proven really the benefits of the combination in terms of commercialization of Entresto and Neparvis, and this has not proven or is not on the market. So it's been a tremendous success. But unfortunately, I mean, November, last quarter this year, the product will go off patent. Marta Campos Martinez: Thanks, Juan. The next question, Javier, comes from Joaquin Garcia-Quiros and is related to CapEx. CapEx consensus for 2026 is at around EUR 62 million. Are you comfortable with this number? Javier López-Belmonte Encina: Thanks, Joaquin, for the question. As we highlighted during the presentation, we are investing heavily for us on CapEx this year because for us, these investments are setting the foundations to achieve the goals that we internally have for 2030. So as you know, we are expanding our San Sebastián de los Reyes plant. And this year, also, we will set up a new line in ROIS, Phoenix. Apart from that, we are still investing on Glicopepton, which is the JV for the vertically integration heparin plant. So EUR 62 million is similar to the amount that we spend or invest on '25. Depending on how these investments -- the investments that I was sharing with you evolve on '26, depending on how they fall on '26, '27, this figure could be similar to last year figure to EUR 60 million CapEx or it could be slightly even above that figure. So '26 is going to be a key year for the investments of the company. We are acquiring ROIS Phoenix and probably this acquisition, coupled with the current CapEx projects ongoing, will make '26 very, very intensive on CapEx. That's what I would say right now. Marta Campos Martinez: Thanks, Javier. The next question comes from [ Tim Jack ] from Entrepreneurial Investment. Juan or Javier, can you comment on the public information regarding the smaller pipeline and lower R&D spending of Moderna? How does this affect the plant utilization of the established production capabilities? Juan Encina: Thank you, Tim, for your question. Go ahead, Javier. Go ahead. Javier López-Belmonte Encina: No, no. What I was going to say that, I mean, in a public conference like this, we don't comment on other companies' performance. But I could say that the outlook for Moderna for '26 and '27 is better than before. So we are truly excited about our partnership with Moderna and take into account that the last -- past years for Moderna has not been the best for them, and that's public knowledge. If according to their latest comments, they have an uplift of revenues for the coming years. I think that this can only be positive for us. But Juan, please add whatever you want. Juan Encina: No, just reinforcing what Javier has mentioned, I don't think it's up to us to comment on Moderna's guidance. But the only thing that we can express is that the partnership is as strong as ever. And again, we still feel that there is going to be a tremendous important collaboration between ROVI and Moderna in the future. Marta Campos Martinez: The next question comes from Patricia Cifuentes from Bestinver. When do you expect to advance with the Risperidone QUAR trials? Juan Encina: I mean [indiscernible] very similar to those of Letrozole. Our idea is to start recruitment as well in 2026 and to kick off. And again, this is already very much in place. I mean the clinical trial is extremely interesting, and it's going to as well to lay the foundation for tremendous growth for the company probably in the next 4, 5 years once we got the results. I mean we are targeting something that will provide us a commercial competitive advantage is the fact that patients could start right away with our quarterly injection instead of being stabilized with a monthly treatment. And I think that will give us a unique differentiation in the market, in the long-acting injectable market. And again, it's already on the execution mode. And hopefully, if we could just open the window once the clinical trial is finished, there is going to be a tremendous growth and it's a tremendous life cycle management of the existing Okedi, which is doing extremely good as well. Marta Campos Martinez: Thanks, Juan. Javier, the next question comes from Jaime Escribano from Santander. Regarding BMS integration, when do you expect BMS to start contributing in P&L? Javier López-Belmonte Encina: Thanks, Jaime, for your question. The BMS potential revenue for the year, it is linked to the acquisition of ROIS Phoenix. Basically, we signed the acquisition of the plant in Phoenix last year. There is an interim period, and it will be a closing day. This closing day depends on several conditions and things that both companies or both parties have to perform. We are extremely optimistic that this is going to be easy, and we don't expect that much delay on the acquisition of ROIS Phoenix. However, it's still early to predict when this acquisition will take place or will this closing take place. We've been -- I think we can understand that at least we'll have 6 years from BMS contribution during '26, at least. And we are working to sign the -- to have the closing as soon as possible so we can take over ROIS Phoenix and start producing for BMS. And more important than that, start -- we want to start deploying all the investments in ROIS Phoenix to be able to produce to other customers as soon as possible. Marta Campos Martinez: Okay. Thanks, Javier. Jaime also asks about gross margin. What is your expectation for 2026? Javier López-Belmonte Encina: I mean, we don't provide accurate guidance for gross margin for '26. What we are saying that is with the different drivers that we handle at the company, I think we are positive around gross margin for next year. So again, Okedi is growing. We have commented several times that Okedi is a high added value product for us. So meaning that we have higher gross margin in Okedi than in the rest of the portfolio. So this is a very positive contribution. We try to comment also that the CDMO business is highly gross margin driven, too. So positively, if we are increasing the sales of CDMO business on '26, probably this will also contribute in a positive way to the gross margin. And finally, the heparin franchise, as commented, we are having positive tailwinds on the raw material front. So in this area, it will depend on the competitive pricing pressure on the selling side. And depending how the market evolves, we could even have a positive tailwinds on the heparin franchise from a gross margin perspective. But again, that will depend on very much how the pricing pressure will evolve on the different markets. Marta Campos Martinez: Thanks, Javier. And the last question from Jaime is, what is ROVI's base case scenario for the EUR 80 million, EUR 180 million revenue contract range in 2007 -- 2027, sorry, low, mid or high end of the range? Javier López-Belmonte Encina: Well, up to now, what we can tell you is that we are working very hard to hit all the different time lines. We started this project back in '24. And I would say that the contract negotiation was even earlier. So it's been a lot of time, what the team is very focused and at least is what we can do right now is to work on this tech transfer to execute as efficient as possible, to be executed as efficient as possible. So we are more focused on those tasks. I believe that so far, we've been extremely efficient. The line was deployed on time. The different work streams has been hitting the different milestones. And look, we are more focused on this year, trying to get the regulatory approvals to start a routine manufacturing rather than thinking on next year. As any CDMO contract, that will depend on the customer needs. The good thing about this agreement is that we have some important, as we discussed several times, minimum commitments. In this case, it's a full line, and that's what is really key for us. And at the end of the day, what is important for us is that we deliver the best service to the customer, and this turns into the most profitable scenario to us. And again, we need just to wait a few months and see how this contract evolves. Marta Campos Martinez: Thanks, Javier. The next question comes from Javier [indiscernible]. Juan, it's for you. A question for Juan about Letrozole, Please. To better understand the commercialization strategy, are you planning to launch it with a partner to reduce risk? Are you already in negotiations? Or when would you begin negotiating now that Phase III is starting? Juan Encina: Thank you for your question. Really, I mean, I think it's too early to really provide a clear strategy of how we're going to move to the market with Letrozole. I think what we can share with you is that we have -- what we have done with Okedi that definitely we are setting up our commercial capabilities in Europe. And obviously, the obvious case forward would be to leverage those commercial capabilities in Europe. With Okedi, we have shown that we -- we like partnerships as we have shown with the rollout of bemiparin, enoxaparin and lately Okedi with the latest launches in Canada, Australia or Taiwan through partnerships. Right now, we are focusing on really getting the clinical trial moving forward. Our scope is global. We want to get the approval in the U.S. in Europe. And it will depend on how on the results of the clinical trials that will define our final strategy. The market is extremely attractive as we have shared to the market in several occasions. We are talking in terms of treatment close to 3 million treatments. So the market can be between $2 billion, $3 billion to $7 billion, depending on the price strategy. So again, this is a unique opportunity. We really want to hit perfectly. And that's the reason why we have been aggressive on the clinical trial design. We are targeting superiority, which provide a tremendous competitive advantage if the product finally gets approved. And I think it will be once that the clinical trial advance once we start getting some data that we will start defining which is the strategy to follow. But I think Okedi an example of our previous way of doing things could be taken as an example of what is our thoughts in terms of the commercialization study. Marta Campos Martinez: Thanks, Juan. The last question comes from Christian Schmidt from [indiscernible]. What is the likelihood of signing an additional CDMO contract in 2026? This one is for you, Javier. Javier López-Belmonte Encina: Thank you for your last question. I mean we are truly excited about the business. And again, I know that we reiterate sometimes the same message. We are signing contracts on an important way or in a very recurrent way, I would say. The only thing is that we do not publish or do not make public these contracts because they are private and our partners don't want them to be public anyway, unless they are very key for us, and we are forced to publish because it's material for our accounts on a stock exchange regulation or mainly is that -- I think the momentum is still there. Now we are acquiring ROIS Phoenix, and I'm sure that will speed up closing agreements in the next coming months. As I said before, we are really, really excited about the momentum of the business. We are getting there to be known as one of the largest injectable CDMO player in the world. And I think that the pipeline is full of opportunities. Marta Campos Martinez: Thank you very much, Javier. So thank you very much for your participation. The ROVI IR team will answer the pending questions as soon as possible. Let me now turn the floor over to our CFO, Javier Lopez-Belmonte, for the closure of the presentation. Javier López-Belmonte Encina: Well, thank you, Marta. This concludes our presentation of the full year results. As Marta was saying, if there are further questions, which I believe there are, our Investor Relations team will answer them in a one-to-one mode. Thank you very much for joining with us for the full year presentations call, and wishing you a pleasant day. Bye-bye.
Operator: Good morning. Welcome, everyone, to the Tamarack Valley Energy Limited Conference Call and Webcast on Wednesday, February 25, 2026, discussing the recent Q4 2025 results press release. I would like to introduce today's speakers, Steve Buytels, President; Kevin Johnston, CFO; and Ben Stoodley, Vice President, Engineering. [Operator Instructions] Mr. Buytels, you may begin your conference. Steve Buytels: Thank you, Joanne. Good morning, and welcome, everybody, to the call to discuss the fourth quarter and full year operating and financial results for 2025 as well as our year-end reserve report. My name is Steve Buytels. I'm the President of Tamarack Valley. And today, I'm joined by Kevin Johnston, Chief Financial Officer; and Ben Stoodley, our VP Engineering. This morning, we announced our Q4 and full year 2025 results and our '25 year-end reserves and an operational update. 2025 was a record-setting year for Tamarack with a focus on continued rate of change in the business to further enhance the overall profitability and maximize shareholder value and per-share results. We completed our multiyear transformation into a Clearwater and Charlie Lake oil producer, and our asset portfolio is now exclusively focused on some of the most profitable conventional oil plays in North America, as evidenced by our strong financial and reserve results. The team delivered an exceptional '25 from an operational standpoint, which resulted in 2 positive guidance revisions through the year with capital coming in at the low end of our guidance through efficiency gains, while production significantly outperformed even after adjusting for M&A through the year on the back of strong drilling results in both the Clearwater and Charlie Lake and strong response across our waterflood program in the Clearwater. Further, corporate costs came in below guidance, highlighted by a 17% year-over-year reduction of net operating expenses as we continue to execute margin enhancement opportunities across the business. The combination of these efforts drove free cash flow of approximately $390 million in the year. Shareholder returns were a key focus with the company repurchasing approximately 36 million shares or 6.9% of the 2024 year-end share count at an average price of approximately $5 per share. In addition, we increased the dividend by 5%. In total, we returned $262 million to shareholders in 2025 between share buybacks and the base dividend. When we add the buybacks, the base dividend, production growth and debt repayment together, we delivered a total return for shareholders of approximately 19% in the year. Portfolio optimization and the continued investment in waterflood has had several material benefits to Tamarack. If we compare our 2023 midpoint -- or 2023 to the midpoint of our 2026 guidance, our corporate base decline rate is 13 percentage points lower. The sustaining capital to keep production flat is approximately 30% lower and our net operating expenses on a dollar per BOE basis is approximately 25% lower. Collectively, we estimate this has reduced our U.S. dollar WTI breakeven price by approximately $8 per barrel since 2023, with our 2026 corporate sustaining free funds flow breakeven of less than USD 40 a barrel WTI, excluding hedges or approximately USD 35 per barrel WTI, including our hedge program. We have positioned ourselves as the largest public Clearwater producer with over 12 billion barrels of original oil in place. We continue to expand our land holdings in the play, which grew by 25% in 2025 to now over 850 net sections, and they hold over 2,100 primary locations across our land base. This implies greater than 25 years of drilling inventory across the stacked horizons, not accounting for any future success in Wabiskaw formation in the Pelican region. In addition, the waterflood provides significant recovery upside in the Clearwater, where we see the application doubling, if not tripling primary recovery. We currently have between 10% to 15% of our Clearwater acreage under waterflood with a significant runway remaining. We believe we have an advantaged business model that stands out across commodity cycles, given the unique ability to show top-line production growth while at the same time, reducing our corporate decline through waterflood, which in turn lowers our reinvestment requirements. This allows us to compound and grow free funds flow through the plan even at low prices. I'll now turn it over to Ben Stoodley, our VP Engineering, to walk through our 2025 year-end reserves report. Benjamin Stoodley: Thank you, Steve. I'll begin with a summary of Tamarack's 2025 year-end corporate reserve performance, followed by a discussion of our Clearwater reserves and resources. To start at a corporate level, Tamarack delivered meaningful and capital-efficient reserves growth across all categories in 2025. proved developed producing or PDP reserves increased by 31% year-over-year. Total proved reserves grew by 26%, while total proved plus probable reserves increased by 18%. When excluding reserves and production associated with acquisitions and divestitures completed during the year, total proved plus probable reserves increased by 30%, resulting in 413% production replacement. This performance was driven by the continued successful deployment of secondary recovery in the Clearwater, combined with strong repeatable results in the Charlie Lake. These operational outcomes were further enhanced by our ongoing share buyback program and continued net debt reduction. On a per share basis, debt-adjusted reserve volumes also showed strong growth, increasing 42% on a PDP basis and 28% on a total proved plus probable basis year-over-year. From a cost perspective, 2025 PDP finding and development costs were $8.09 per BOE. Total proved costs were $8.01 per BOE and total proved plus probable costs were $7.93 per BOE. With a 2025 field netback of $41.71 per BOE, Tamarack generated corporate recycle ratios exceeding 5x across all reserve categories. Turning now to the Clearwater. Reserve growth in 2025 was particularly strong. PDP reserves increased by 63%, total proved reserves grew by 64% and total proved plus probable reserves increased by 56% year-over-year. Finding and development costs across all reserve categories averaged approximately $7 per BOE, enabling the Clearwater assets to generate recycle ratios of approximately 6x across each category. Reserves replacement was 256% on a PDP basis, 401% on a total proved basis and 534% on a total proved plus probable basis. Notably, waterflood-related PDP reserve additions achieved finding and development costs of less than $3 per BOE. PDP reserves under waterflood expanded by 300% in 2025, while only 37% of total Clearwater reserves are currently assigned to waterflood development. Collectively, these results underscore the scale, quality and long-term value of Tamarack's Clearwater asset base. In addition to booked reserves, Tamarack continues to expand its resource inventory. As of December 31, 2025, the company held 115 million barrels of best estimate gross unrisked contingent resources in the Clearwater, representing an 8% increase from year-end 2024. Gross unrisked prospective resources totaled 104 million barrels, a 6% increase year-over-year. As Steve mentioned, Tamarack has identified approximately 2,100 net drilling locations, of which 520 are net booked locations. And at our current pace of primary development, this represents more than 25 years of drilling inventory. Operationally, activity in the Clearwater remained robust throughout 2025. During the year, Tamarack drilled 94.3 net horizontal heavy oil wells for primary development in the Clearwater fairway. In support of waterflood expansion, we also drilled 25 water injection wells, drilled 2 source water wells and converted 16 producing wells to water injectors. Waterflood response continues to build with heavy oil production uplift now estimated at more than 5,000 barrels per day, representing approximately 10% of total Clearwater production. Tamarack exited 2025 with water injection rates exceeding 40,000 barrels per day, nearly 3x the rate at the end of 2024. Looking ahead, we plan to increase water injection to approximately 60,000 barrels per day by the end of 2026 with roughly 35% of Clearwater oil production under waterflood compared to approximately 24% today. Waterflood capital expenditures in 2026 are forecasted at $100 million, representing a doubling relative to our capital expenditures in 2025. In addition, Tamarack plans to drill 2 derisked wells in the Pelican area in 2026, one targeting the Wabiskaw and one targeting the Clearwater. Finally, turning to the Charlie Lake. In 2025, Tamarack drilled 13.8 net wells and brought 16.8 net wells on stream across the Wembley and Pipestone areas. The Charlie Lake generated approximately $190 million in asset level operating netback and $70 million in asset level free net operating income during the year. Tamarack's recently drilled 114 of 9 well in Wembley, has achieved -- or in Pipestone has achieved an IP rate of 1,400 barrels per day of oil and 2,000 barrels of oil equivalent per day. During the fourth quarter, Tamarack successfully redirected production to a new third-party CSV Albright gas plant and the AltaGas Pipestone II gas plant expansion. With access to both owned and third-party processing and egress capacity, Tamarack retained significant capital allocation flexibility to support ongoing operations, sustain production and enable potential future growth in the Charlie Lake. For 2026, we plan to maintain a flat exit rate production profile of a 1-rig program, drilling approximately 10 wells across Pipestone and Wembley. Kevin Johnston, our CFO and VP Finance, will talk through some of our 2025 operational and financial highlights in more detail. Kevin Johnston: Thank you, Ben. 2025 was a very strong year for Tamarack. Fourth quarter production averaged 68,635 BOE per day. This represents a 4% increase over the fourth quarter of 2024 and a 9% increase if we exclude the impact of 4,000 BOE per day of non-core production that we divested in mid-October. Clearwater production was approximately 50,000 BOE per day in the quarter, a 16% increase compared to the same period in the prior year. Charlie Lake produced 17,600 BOE per day, a 4% increase from the same period in the prior year. Average corporate production for the full year of 2025 was 68, 176 BOE per day, which represents growth of 6% from the prior year. This was in line with our revised 2025 guidance of 67,000 to 69,000 BOE per day of average annual production and was above our initial 2025 guidance of 65,000 to 67,000 BOE per day, which we had provided when we released our budget in December 2024. This is notable because Tamarack's collective A&D activity throughout the year resulted in a net disposition of production volumes, and our original capital program was decreased by over 10%. In the fourth quarter, Tamarack delivered adjusted funds flow of $172 million, capital expenditures of $99 million and free funds flow of $71 million. For the full year 2025, Tamarack generated $390 million of free funds flow or $0.78 per basic share. Free funds flow per share increased by 10% year-over-year despite WTI prices averaging 14% lower in 2025. Tamarack returned $262 million to shareholders in 2025 through base dividends and share buybacks. Long-term share buybacks allow us to compound organic free funds flow growth into per share returns. Tamarack invested $400 million in capital expenditures in 2025 at the low end of our revised guidance of $400 million to $420 million, and that was an 11% reduction from 2024. This reduction reflects the impact of capital efficiencies from multi-well pad development, improved run times and reduced sustaining capital from strong base and waterflood performance. Net operating expenses declined 17% year-over-year to $7.43 per BOE, reflecting the impact of infrastructure investments, lower water handling costs and waterflood reinjection, higher production volumes and portfolio optimization from the divestment of higher-cost non-core assets over the last 2 years. Tamarack made 2 positive revisions to guidance for net operating expenses in 2025 and full year expenses of $7.43 was still below our revised guidance of $7.75 to $8 per BOE. Tamarack is forecasting a run-rate net operating expense of $7 per BOE in 2026 at midpoint, which represents a 25% decrease compared to 2023. Tamarack achieved its net debt target of 1x net debt-to-EBITDA at USD 50 WTI oil price in Q4 2025. Tamarack will focus on allocating additional free funds flow to shareholder returns through share buybacks in 2026. Long-term share buybacks continue to be the preferred mechanism for returning capital to shareholders. We repurchased over 32 million shares in 2025 and reduced our share count by 6.9% from the previous year-end. Since beginning the share buyback NCIB program, Tamarack has repurchased over 12% of its 2023 year-end share count with over 70 million shares bought back at the end of January 2026. Our President, Steve Buytels, will provide our closing remarks for the call. Steve Buytels: Thanks, Kevin. Tamarack continues to be differentiated by the scale and quality of our assets and our ability to generate growing per share returns even at modest commodity prices. With a breakeven WTI oil price of less than USD 40 per barrel WTI, a corporate base decline rate of 22%, a low-cost structure and low sustaining reinvestment requirements, Tamarack is very well positioned to generate sustainable shareholder returns. As we look to 2026, we remain focused on maximizing shareholder value through a combination of organic growth, further waterflood investment, share buybacks and continued debt repayment. Our mantra of delivering more for less and the continued focus on driving growth and free funds flow per share through lower reinvestment requirements, organic growth and the compounding elements of the buyback positions us in a unique way to drive outsized returns. On behalf of both Brian and myself, I would like to congratulate our team on a truly remarkable year. We would like to thank our Board of Directors, employees, stakeholders and shareholders for their continued support. Thank you. I will now turn it back to the moderator for questions. Operator: [Operator Instructions] The first question comes from Jeremy McCrea from BMO Capital Markets. Jeremy McCrea: Two questions here. The first one is, when you look at all your waterflood responses so far, how many are coming in above expectations versus -- or if any are coming in below? And I'd be curious actually if something comes in below, but how does this impact the way we should think about your guidance here going forward? Benjamin Stoodley: Yes. Thanks, Jeremy. The -- I would say, of course, there's some outsized responses in the short term here where we see these very dramatic IP rates coming in. We've held our EURs pretty standard, though through that period tying to the simulation results. So I think in general, we're really in line on an EUR and reserves basis with where we would expect outside of these really outlier kind of quick response, high response wells. Jeremy McCrea: Okay. And maybe just a bit more of a follow-up question here just on some of the new land and exploration. Is any of those potential well results in your guidance? I'm just thinking if there's some success with the Wabiskaw and there's -- you decide to go for some quick follow-up wells. Is that in potential guidance? Like I'm trying to think of where we could see some upside here related to what you've put out for guidance here for today. Steve Buytels: Yes. No, thanks, Jeremy. It's Steve here. I think following on what Ben talked about, we obviously simulate on our flood results. I think we've been pretty consistent with what we've seen in aggregate with recoveries there. But to Ben's point, we are seeing in certain circumstances, more in the Marten Hills area with the stack patterns and even those W patterns with the results that are coming through the public data, those are probably a little bit ahead in terms of some of that response to IP. So I would say that's one place we continue to see some positive momentum. The other place, too, that we didn't talk a lot about today was even just on the primary well results, and we put it in our presentation, we did see a nice increase in the base outperformance of those primary wells in certain areas as well. So you're seeing lower primary declines or you're just seeing some of these wells with time outperform what our recovery and our reserves estimates would have been. So there are those things that I think are still going on, and that's one of the beautiful things about being in the core and the heart of the play within Marten Hills and West Marten Hills and Nipisi. When you ask about what's not in the plan or some other potential upside, we have the capital in our plan with respect to going to drill a Wabiskaw well at Pelican as well as testing the Clearwater there. You saw that we added incremental acreage in Q4. We really like that area as we build that out to be potentially another core focus for us where you could drive -- I'm going to use a wide range here depending on how things go, but that could be 5,000, 6,000, 7,000 to 10,000 barrel a day development plan potentially with success over time. So we'll drill these wells in the second half of the year. And then there's a lot of competitor activity also going on that will help derisk some of those lands and provide some more color on those lands in terms of what that upside could be. But I just want to make sure we're clear that we don't bake any of that upside into our current plan here today. That would all be on top of it. Operator: We have no further questions on the phone. I will turn the call back over to Tamarack for online questions. Unknown Executive: Our first question online is for Mr. Steve Buytels. Congrats on a great year and exciting upcoming activity. For the Pelican area, are the 2 derisking wells in 2026 going to be drilled on the newly acquired lands or legacy lands? Steve Buytels: Yes, that's a good question. So we will drill 1 well on our legacy lands, and then we will drill one well or our plan is to drill 1 well on our newly acquired lands. And again, what I would preface that with is there is a lot of competitor activity, both in the Wabiskaw and in the Clearwater that is around us there. So we'll look to build off some of that and see some of that data through the first half of the year, and then that will help inform exactly what we're going to do here in the second half and which locations we choose to go after. Unknown Executive: Our next question is for Mr. Stoodley. Tamarack quotes 12 billion barrels of oil in place in the Clearwater with potential reserves and resources at approximately 400 million BOE, implying a roughly 3% recovery factor. What could see this recovery factor increase? And what have analog heavy oil resources typically recovered? Benjamin Stoodley: Yes. I think our like purpose of showing the reserves and resource report and is to show how we've been successful in growing that -- both those -- or all 3 of those categories, doing that through inventory additions as well as delineation of our inventory and the waterflood and promoting it through those categories. It is a relatively low number there as far as recovery goes on that, that will continue to grow as we delineate. When speaking about other heavy oil resources, especially under waterflood, we see about 70% of our OIP sitting in areas that are currently proven for waterflood. And when I look to other pools and other examples, they typically have a tremendously long life. There's many examples that started in the '50s and '60s that are still producing today and recovery factors there get 25% to 40% in a lot of cases in the successful cases. We see the Clearwater as being a very successful case at this time, but we're in the early innings of actually being able to predict where this goes in the long term. So we see it as there's quite a bit of upside on that recovery factor as we go forward. Steve Buytels: Thanks, Ben. And one thing I would add here, it's Steve, I talked about it in my opening remarks. When we think about -- we talked about OIP there and the recovery factors associated with that in terms of the waterflood. I think the other thing that we should talk about, too, and make sure we're clear on is when we think of our total land base that's amenable to flood that we know works today, and this doesn't include the areas of the South Clearwater or Pelican or things like that. That would all be incremental to this. We only have between 10% to 15% of our lands under flood. So when you think about the runway, Ben talked about recovery factors, but we're still so early just in terms of building out the runway and the duration of really where we're going to take this flood through the core areas of Nipisi, West Marten Hills and Marten Hills. So that's another thing to think about, too, when we look at this aside from the recovery factors just in terms of the amount of runway that we still have in front of us and have to get after. Unknown Executive: Our next question is for Mr. Steve Buytels. On your waterflood projects in the Clearwater, have you seen any areas or patterns that have demonstrated water breakthrough thus far? When would you expect it to occur? And might it mean for oil rates in the play? Steve Buytels: Yes. One thing I want to be clear on, breakthrough should not be a surprise when it comes to heavy oil waterfloods, and Ben can add here when I get done, but it's going to happen. This is factored into our simulation and our decline estimates that we've put out for everybody. So I want to make sure that, that's clear. There is no surprise there. The other thing, most heavy floods when we think of the analog floods that we would use here, 60% of the recovery happens at high water cuts or post breakthrough. So we got to remember that we're still -- Ben talked about being in the early innings. You're going to see water cut increases and all of those things. It's more about are you set up and able to handle that. And when you think about it, over the last couple of years, we've put a lot of investment into infrastructure. Kevin talked about what that's done for our OpEx, but it's also about being ready to handle incremental water volumes and water cuts at our facilities. And this year, in Q3, we're expanding and putting in a bigger water plant at our 15-15 facility in West Marten Hills. We've expanded and continue to do work at our 15-22 facility in Nipisi to handle the growth of the waterflood there in terms of we're going to be putting in a bigger free water knockout treaters, et cetera. And then last year, in the third quarter, we went through and expanded our water handling facilities and our water plant at our Marten Hills 11-4 facility. So we are ready to handle when they come, bigger cuts. But again, this should not be panic, and this should not be any surprise to anybody. The other element of it is when you do see incremental water cuts, what do you do and how do you handle it? We have a lot of experience with heavy floods within our technical team here, and you're going to look at upsizing pumps and managing fluid rates. And there are good examples of where we've seen higher water cut patterns in the Clearwater, where then you're upsizing pumps, you might be reducing injection for a point in time to get your oil rate back up. We do not see it as an issue, and there's lots of cases and experience here through the other heavy floods where you continue to be able to produce at a good rate and a very low decline for a long, long time. You just are dealing with higher water cuts. And the last thing that I maybe have Ben talk on is we are designing our patterns for waterflood. So when we think about spacing and we think about managing the different viscosities and so forth in the play, we are setting up our patterns and our well designs to maximize the recovery and obviously deal with the injection and what we see there ultimately in terms of how we're going to handle that. So Ben, maybe I don't know if you want to touch on anything further there, but... Benjamin Stoodley: Yes. No, I think the only thing -- a couple of things I would add is when you do start to see more water show up, you see incremental total fluid show up as well and the actual oil production really sustains a plateau or a very shallow decline through a long stretch. Some of the analog heavy oil stuff that I spoke about, especially the longer-dated stuff, they would have seen breakthrough back in like the early 1960s and have declined 5% to 7% for a long stretch following that. So that's, I think, what you can expect following the breakthrough as it comes through the field is just sustained shallow decline production there as we start to process more fluid. Unknown Executive: Our next question is for Mr. Kevin Johnston. With your 2026 budget press release in December, Tamarack mentioned it was going to allocate additional free funds flow to share buybacks now that Tamarack had reached its debt target. Under the previous framework, Tamarack was allocating 60% of free funds flow to shareholders. Going forward, approximately what percent of free funds flow should we expect to be allocated to shareholder returns? Kevin Johnston: Yes. Our guiding principles are to maximize per share value and total shareholder returns across the commodity cycle. These principles give us greater flexibility to allocate capital depending on the environment, especially now that we've hit our debt target of 1x debt-to-EBITDA at a USD 50 WTI oil price. In the current environment, we're modeling kind of greater than 60%, so 70% to 90% this year, but we are going to be flexible depending on the environment we're in. Unknown Executive: We have no more questions online, and I'll pass it back to Steve Buytels to end the call. Steve Buytels: Thanks. I would, again, just like to reiterate our true appreciation to our team here internally for what a year they had. It really truly was an outstanding year here for us, both from a financial and operating standpoint, but then that really was culminated through what the reserve report was able to demonstrate in terms of the overall profitability of the business. So with that, again, we'd like to thank everybody. We appreciate everybody's time and support, and I will pass it back to the moderator to close off the call. Thank you. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.
Operator: Good day, everyone, and welcome to the Pinnacle West Capital Corporation 2025 Fourth Quarter Earnings Conference Call. [Operator Instructions] It is now my pleasure to hand the floor over to your host, Amanda Ho. Ma'am, the floor is yours. Amanda Ho: Thank you, Matthew. I would like to thank everyone for participating in this conference call and webcast to review our fourth quarter and full year 2025 Earnings, Recent Developments and Operating Performance. Our speakers today will be our Chairman, President and CEO, Ted Geisler; and our CFO, Andrew Cooper. Jacob Tetlow, COO; and Jose Esparza SVP of Public Policy, are also here with us. First, I need to cover a few details with you. The slides that we will be using are available on our Investor Relations website, along with our earnings release and related information. Today's comments and our slides contain forward-looking statements based on current expectations, and actual results may differ materially from expectations. Our annual 2025 Form 10-K was filed this morning. Please refer to that document for forward-looking statements cautionary language as well as the risk factors and MD&A sections, which identify risks and uncertainties that could cause actual results to differ materially from those contained in our disclosures. A replay of this call will be available shortly on our website for the next 30 days. It will also be available by telephone through March 4, 2026. I will now turn the call over to Ted. Theodore Geisler: Thank you, Amanda, and thank you all for joining us today. In 2025, our team demonstrated strong results and made significant progress on our strategic objectives. We serve record levels of demand with top quartile reliability, provided customers with top quartile customer experience and managed our grid expansion plans with discipline. Although we made solid progress in 2025, our efforts are ongoing, and we remain committed to executing our strategy. Looking ahead to 2026, we will continue this approach with a particular focus on processing our rate case, executing our grid expansion plans, keeping rates affordable for customers and finalizing commercial opportunities with new large customers. Turning to operations. I want to recognize the outstanding safety execution by our team. Safety remains our most important priority, and I'm proud of our team's relentless focus on providing safe, reliable service particularly through the third hottest summer on record. In 2025, APS set a new system peak of 8,648 megawatts on August 7, more than 400 megawatts higher than the prior year. Our generating fleet performed exceptionally well, and Palo Verde operated at 100% summertime capacity factor. Palo Verde remains the largest producing nuclear plant in the United States and recently received a 2025 INPO excellence award for achieving the highest levels of safety, reliability and operational performance. This level of consistency underscores the strength of our team's operational excellence. Customer experience remains a key focus. In 2025, we made meaningful progress toward achieving industry-leading satisfaction. For example, we developed and deployed an AI-powered high bill analyzer to help customers better understand their billing and energy usage and efficiently address ways they can save on their energy bill. These improvements are resonating. We ended the year in top quartile nationally among our peers for residential overall customer satisfaction and then the second quartile for business customers as measured by Escalent. We also ranked in the first quartile nationally in J.D power's Utility Digital Experience study. Our customer base is also becoming increasingly diverse, reflecting Arizona's evolving economy. Growth among commercial and industrial customers, including chip manufacturing and data centers continues to drive strong economic activity across the state. These large load customers continue to accelerate their ramp schedules as evidenced by our long-term sales growth of 5% to 7% through 2030. The U.S. Department of Commerce and Taiwan recently announced agreements expected to spur at least $250 billion of additional semiconductor investment in the United States. In Arizona, TSMC continues to expand their footprint with its second fab moving to full production in 2027, a third fab under construction already, a fourth fab and advanced packaging facility in early development and 900 additional acres recently acquired for future expansion and growth. We look forward to working with TSMC and the broader chip manufacturing sector as we expand grid infrastructure to support their rapid growth. At the same time, residential growth remained strong across our service territory. For the second consecutive year, we installed more than 34,000 new meters, the highest level in 20 years. We're ready to meet demand growth and our strong execution is showing results. We finished over 400 megawatts of APS-owned resources ahead of schedule, including new gas units at Sundance, the Agave battery storage facility and Ironwood Solar. The Red Hawk gas expansion remains on track for completion in 2028 with ongoing preparations to support additional gas capacity of up to 2 gigawatts commencing in 2030. In parallel, we're closely monitoring progress of Transwestern's Southwest Desert Pipeline expansion, which has recently been upsized from 42 to 48 inches due to strong regional demand. These investments are critical to supporting Arizona's economic and population growth while maintaining strong reliability for our customers. Turning to regulatory matters. Our rate case remains on track, staff and intervener testimony is expected next month with hearings scheduled to begin in May. We value our ongoing collaboration with commission and stakeholders and continue to work together to support Arizona's growth, reduce regulatory lag, and ensure appropriate cost allocation so that growth pays for growth. In closing, 2025 was a strong year of execution by our team. We're meeting rising demand, investing for our customers and positioning the company for long-term value creation. Our priorities for the year ahead remain clear: executing our mission to deliver safe, reliable and affordable service to our customers, invest in baseload generation and transmission to serve growth and achieve a constructive regulatory outcome that protects customer affordability while reducing regulatory lag. With that, I'll turn it over to Andrew to discuss our financial results and outlook going forward. Andrew Cooper: Thanks, Ted, and thanks again to everyone for joining us today. Earlier this morning, we released our fourth quarter and full year 2025 financial results. I'll walk through our performance for the period highlight the key drivers and then review our 2026 financial guidance, which we initially provided on our third quarter call. Starting with the fourth quarter, we earned $0.13 per share compared with a $0.06 loss in the fourth quarter of 2024. The fourth quarter result reflects the continued vitality of our service territory, our strong operational execution and sustained cost management. Key drivers included favorable O&M versus last year as well as continued robust sales growth. These positives were partially offset by milder than normal weather, higher financing costs and pension and OPEB expenses. For the full year, we delivered earnings of $5.05 per share, landing in the upper half of our updated guidance range. While this compares to $5.24 per share in 2024, a the year-over-year decline was primarily weather-driven, a $0.71 year-over-year drag. The prior year benefited from an extremely hot summer that extended into the fall, whereas 2025 experienced, on average, closer to normal weather. Additional headwinds included financing costs, higher pension OPEB expense, depreciation and amortization and O&M. Importantly, these headwinds were largely offset by strong underlying growth in our business. In the fourth quarter, we experienced 6.8% weather-normalized sales growth, driving full year weather-normalized sales growth of 5%. This included 2% residential growth and 7.5% commercial and industrial growth for the year, reflecting continued economic expansion across our service territory. In addition, customer growth remains a durable multiyear trend. In 2025, total customer growth was 2.4% at the high end of our guidance range as new businesses and new residents continue to decide to call Arizona home. This consistent, diversified customer and load growth provides a strong foundation for our long-term outlook. Looking ahead, we are reiterating all aspects of 2026 guidance provided on our third quarter 2025 call. including our annual earnings range of $4.55 to $4.75 per share. Our weather-normalized sales growth guidance for 2026 remains unchanged at 4% to 6% and with extra high load factor, C&I customers expected to contribute 3% to 5% of that growth. Our longer-term sales growth guidance also remains unchanged at 5% to 7% through 2030 and recognizing the robust growth in our service territory. We continue to be laser-focused on cost efficiencies and our goal of declining O&M per megawatt hour. In 2025, we successfully achieved a 3.3% year-over-year decrease and expect to further reduce our O&M per megawatt hour in 2026. Cost management is a priority and we will continue to strive for operational excellence and efficiency through our lean culture and initiatives. We are also reaffirming our capital and financing plans. Our capital program remains firmly focused on reliability grid resiliency and meeting the growing needs of our customers. Consistent with that strategy, our rate base growth guidance remains unchanged at 7% to 9% through 2028. From a financing standpoint, we continue to execute a disciplined and balanced approach aligned with our balance sheet targets. Our capital spending is supported by a thoughtful mix of debt and equity. Importantly, our 2026 equity needs are largely derisked with nearly $500 million already priced. We have also diligently focused on expanding our liquidity and to ensure we can most effectively take advantage of financing opportunities throughout the year as our capital investment program continues to grow. To that end, we recently closed on the extension of our core credit facilities to 2031 and expansion of revolving borrowing capacity by $550 million. In closing, we delivered solid results in 2025, underpinned by strong execution and durable growth. We are excited about the opportunities ahead in 2026 and confident in our ability to execute our financial and operational plan with discipline. We look forward to progressing through our rate case with continued engagement with all stakeholders to support safe, reliable and affordable service for our customers. This concludes our prepared remarks. I will now turn the call over to the operator for questions. Operator: [Operator Instructions] Your first question is coming from Nick Campanella from Barclays. Fei She: This is Fei for Nick today. Thanks. Just really wanted to touch on the capacity growth, if I can here. Can you just update us on the latest thinking on the IRP planning, including timing this year? And generally, how should we think about the incremental transmission and gas generation opportunities I guess, compared to what you disclosed here on Slide 21. Theodore Geisler: Yes. Thanks for joining us. Midyear, we'll expect to file an updated 15-year integrated resource plan. So that will be a snapshot of our most recent thinking in terms of load and demand forecast and the resource plan to be able to meet that. Of course, the near term in the action plan window, it will be a bit more specific with respect to technology resources and locations. And then when you get beyond that, sort of near-term 5-year window, then it's more directional in nature. But the key is, it will continue to show the robust and strong growth over the long term and the amount of generation and transmission needed to be able to serve this growth. Of course, our capital plan right now only goes out through 2028. And so a lot of the growth to support TSMC's build-out as well as data center ramping goes beyond that period, and the resource plan should be able to indicate the amount of generation still needed to be able to serve even what we've already committed to. But then above and beyond that, we are still negotiating to be able to serve incremental data center demand from our subscription queue, which we talked about last quarter. That's not in the capital plan. And to the extent that we're able to secure an agreement for incremental load to be able to serve a portion of that queue, that would be resources that would need to be built above and beyond what we've talked about. And then in addition to that, any further expansion for TSMC would also need to be considered and would drive further generation or transmission expansion beyond what we've shown in the 3-year window within the current capital forecast. Fei She: Great. That's super clear. Maybe just a quick one on the credit metric update and the HoldCo debt percentage of total debt. Can you discuss the cadence to reach that mid-teens level target and where you 2025 year end metric landed? Andrew Cooper: Sure, Fei, it's Andrew. We're committed to keeping our HoldCo debt at a judicious level and that mid-teens level. I believe if you calculated at year-end, it was at 17%. So kind of within the range that we're targeting. And as you look at the financing plan for 2026, the HoldCo debt levels are intended to be quite modest and stay within that bandwidth. Operator: Your next question is coming from Shar Pourreza from Wells Fargo. Alexander Calvert: It's actually Alex on for Shar. So just on the future sales growth of the 5% to 7% annually over the next 5 years, can you just remind us how sticky that number is over the long term? And also, what are you assuming in your forecast? Is that just sort of the minimum take agreements you have in your large low contracts. So if you were sort of think it this way, if customers sort of ramp faster more power on over time, would that be accretive opportunity to that 5% to 7% forecast? Theodore Geisler: Yes, Alex. I think the way to think about that is that load forecast is based on existing demand that we have certainty in being developed are already in service within the service territory that we expect to grow as well as projects that are already in development or under construction. Therefore, there's upside to the extent that there's anything incremental added to that from either our uncommitted queue, further TSMC expansion or other projects that haven't been announced yet. But the growth forecast that we've outlined is really based on projects that we have a high degree of confidence and certainty in developing, and we track that very closely. Andrew Cooper: And just to add to that, it's Andrew. The cadence of that committed queue that we've got in our sales force goes sales forecast goes through into the 2030s. So while we've given you the 5%, 7% through 2030 the full build out of that existing capacity does have a runway beyond that. And you should also keep in mind that, that ramp and the cadence between now and is borne out of kind of our experience with these customers over the last several years and represents a pretty educated view of what that ramp looks like over the next several years. Alexander Calvert: Got it. That's helpful. And just on the -- just the EPS and the rate base CAGR you have out there. So as you sort of just look out to '27 and beyond, how should we be thinking about the delta between the two is sort of the 200 basis points the right figure? Or could you see those two converge over time just given the amount of opportunities you're seeing? Andrew Cooper: Yes, Alex, for sure, as we get out through the rate case, I think we'll be looking at both the capital plan itself. And we met the financing plan and therefore, what our EPS trajectory looks like. And so if you think about the rate base CAGR is going through 2028 right now, and we rolled that forward in the third quarter call. You're really just beginning to see the impact of some of the projects that are in our long lead kind of execution window. You heard Ted talk about Red Hawk on the call. It's a good example. A lot of the transmission projects in our strategic transmission plan also represent that. And so as we continue to consider how to provide more transparency for longer around the capital plan, what that means for the rate base CAGR. That will then trickle through the rate case and our expectations around the formula rate that allows us more prompt recovery. to give you more detail on what that means for financing and ultimately, for the trajectory of our EPS. But ultimately, our goal remains to create a more linear trajectory there borne out of the formula rate. Operator: Your next question is coming from Julien Dumoulin-Smith from Jefferies. Julien Dumoulin-Smith: Nicely done. I appreciate it. A couple of things to just wanted to talk quickly implications from the UNS case of late, especially the formula rate decision, being set. Any thoughts, reactions on your front in terms of readthrough, a two or three critical points that you'd flag here as it reads the APS, I know it's delicate. It's a comment here, but I want to make sure we're all line on the same reads here. If you can comment both on the concept of formula as well as the fair value piece. Theodore Geisler: Yes, of course, Julien, No, fair question. Look, I think the headline from our read as it was generally constructive. But there are material differences between the situation for the UNS gas case and then APS. But I'll just step through a few points on how we think about it. I mean, first, look, they got about 86% of their original revenue requirement ask which results in over a 14% rate increase. That's pretty healthy. They got a formula rate with a post-test year plan the commission rightfully recognize that through all the good work at the workshops last year, there is no need for a pilot. So it's a secure formula rate for perpetuity. And they have an ROE similar to their current. That said, we do disagree with the notion that you should have an ROE reduced at all as a result of the formula rate, and we'll continue to make that argument. But they still got a fairly healthy ROE consistent with what they've had before plus the formula rate. But Jeff, to recognize some of the differences, it's a gas utility in an area that doesn't experience near as much growth as what we're seeing. It's been 16 years since the last rate case filing, so a little bit difficult to make the argument that regulatory lag is impacting our ability to fund growth like we see. They certainly have a different risk profile. And the formula rate schedule was a little different than what we are proposing or would expect to work with the commission on securing. But what was proposed work for UNS, they agreed to it, and maybe that works for their service territory. So again, I think the headline is generally constructive. It secures the first formula rate within the state and shows the direction that the state is heading, which is great. But there are some differences between our service territories that we'll continue to advocate for. Julien Dumoulin-Smith: Yes, absolutely. Appreciate it. And then just if I can keep going here in as much as you guys have this interesting 20 gigawatts of uncommitted load, the 4.5 have committed relative to the '25 system peak. So just an incredible backdrop. With that said, can you comment and reconcile a little bit against the IRP? I know -- look, I know it's coming midyear. I get that we're trying to jump ahead of it a little bit. But just trying to like decompose, especially the 4.5 committed against what's already in the forecast or even beyond the core forecast, but what would be incremental in that again, it's all kind of coming back to an eventual roll forward of your plan as well as like what's truly incremental to the plan relative to the current years that you have disclosed. Just trying to zero in, it seems like a material update here. Theodore Geisler: Yes. I appreciate the question, Julien. The way I would characterize it is the IRP will consider known and committed customer demand. So it will reflect with a longer-range forecast, what we expect the 4.5 gigawatts of committed load to materialize into over the 15-year period as well as our, I'll call it, organic load growth that's above and beyond that 4.5 gigawatts of committed high load factor demand. It will also include our latest thinking in terms of TSMC and the related chip manufacturing schedule for both timing and potential expansion. What it will not include is any portion of the uncommitted queue that is in negotiation or yet to be contracted. So that will all still remain as incremental demand above and beyond what we show in the IRP. So I guess just summing it up, the IRP will give us the best line of sight for how the 4.5 gigawatts of high load factor demand will materialize over the 15-year period, plus our view on the organic load growth such as residential, et cetera. And then anything that we contract from the uncommitted queue, which we're actively working on will be incremental to that even above and beyond what we show in IRP. Julien Dumoulin-Smith: Right. Absolutely. And then just to close the loop on that, I mean, where are you in terms of what's in the committed or uncommitted? I imagine the bulk of the committed is TSMC, but can you break that down a little bit? And maybe you can comment a little bit on where you stand on kind of translating further uncommitted into the committed bucket? Any potential that, that moves from one bucket to the other prior to that IRP even? Theodore Geisler: Yes. I'd say the majority of that committed is still a healthy amount of high load factor customers that are data centers or related that we have committed to over the past a couple of years and are actively and build out a ramping. TSMC is certainly a material portion of that, but the 4.5 gigawatts does not include any potential expansion of TSMC and we'll continue to work with them on their plans for any acceleration or expansion. So that would be above and beyond the 4.5 gigawatts. But as we said in the last quarter, we did bring forward an opportunity to uncommitted to evaluate through our subscription model. Those negotiations are ongoing. To the extent that, that is finalized ahead of the IRP, it may be included, but there's also a likelihood that it would be incremental to the we would aim to be able to file an agreement with our commission for any successful negotiations of that subscription model this year. Operator: Your next question is coming from Paul Patterson from Glenrock Associates. Paul Patterson: So just I know we've got staff and intervener testimony coming up here. But I'm wondering, given all the discussions sort of happening there in Arizona and what have you, is there -- are there any thoughts about maybe -- and given the fact that we've got now the ARM from the formula stuff from UNS, what -- are you any thoughts about maybe potentially a settlement on the case. I mean, I know, like I said, we have staff coming up and intervenors. But just any thoughts about that? Has there been any thought about that or discussion with that? Theodore Geisler: Yes, Paul, I appreciate the question. I'd say at this point, we're focused on processing the case in the traditional manner. We always remain open to settlements, and the company actually has a long track record of successful settlements in this jurisdiction. But this case has some unique aspects to it. One is making sure that we align on the mechanics of implementing the formula rate. And two, is the importance of getting the rate design changes agreed to for the new high load factor tariff. And those would be well served in the traditional hearing process. We've demonstrated successfully to be able to achieve a constructive outcome in the last rate case through the hearing process. And so we think that's a viable path for us to once again achieve a constructive outcome. So at this point, we're focused on the traditional format. We always remain open to settlement, but that's not something I would count on for this case. Paul Patterson: Okay. Fair enough. And then just finally on -- there was a Nuclear Conference yesterday or hearing what have you at the commission. And I wasn't able to listen to a lot of that, frankly, but it sounds like there's a lot of kind of excitement for -- in the context of utilities. In terms of this resource and I was just wondering if you guys, any thoughts about what the -- if there's anything in the near term that we might see on that? Or just any thoughts on that? Theodore Geisler: Yes, Paul, I mean, we're fortunate that the broader community policymakers and community leaders remain very supportive for nuclear. Obviously, that's important to us given the fact that we operate the largest producing nuclear plant in the country today. But there's also a lot of interest in whether there's an opportunity for new nuclear in Arizona going forward. We've been very clear with stakeholders and our customers that while we remain constructively supportive of the nuclear for our country and potentially Arizona in the future that, that's not something that you would expect in the near term, but it's something that we want to pay close attention to and work collaboratively with stakeholders to identify what those opportunities could look like over the medium and long term for our state. And so that's a big part of what the workshop was about yesterday. And we really appreciate the commission taking time to learn and explore what these opportunities could be. It's a great dialogue. But we've been very clear that there's a lot of capital required. You need constructive policy and importantly, you need the supply chain and the trades to be able to have the capacity to be able to build out these projects. So we're actively involved in the industry. We're actively involved in the state and supporting what new nuclear could look like in the future, but we view that as more of a medium and long-term opportunity. Operator: Your next question is coming from Steve D'Ambrisi from RBC Capital Markets. Stephen D’Ambrisi: Just a quick one. Slide 20 on the sales growth. I mean I think the first bullet says at all 9 consecutive quarters of growth exceeding the guidance range. And just obviously, 4Q looks like it's accelerating. Maybe there's some art versus science of weather normalization in a weak weather quarter. But can you just talk a little bit about what the sales growth trend looks like versus kind of the 4% to 6%, '26 sales growth that you've given in the long-term guidance as well? Andrew Cooper: Sure, Steve, it's Andrew. We've continued to see very diversified and very consistent sales growth. For the year, residential came in at really at the top end of where we've ever forecasted because that 4% to 6% that we've forecasted for last year that we forecast for this year represents largely the ramp-up of our extra high load factor customers. So to see that level of residential growth driven by nearly 2.5% customer growth remains strong. What we expect in 2026 is kind of reversion to the normal dynamics where the ramp-up of the extra high load factor customers is the dominant part of the sales mix. But one of the, I think, tailwinds that we've seen that we'll just have to continue to monitor in 2026. ,[indiscernible] generation produced pretty small offsets to residential sales. And I think that's what drove it to the upside and kind of continue to drive that tailwind into Q4 of last year. And so we'll just have to continue to monitor as those reductions in applications we're seeing for new rooftop installations translate potentially into support for our residential sales growth numbers. But in the near term, 2026 is driven by the known customers in that queue that we see ramping and see coming online, including as the fabs of TSMC continue to move ahead. And then over the longer term, through 2030, that step up is really related to, again, those known customers and where we expect them to be in their ramps. And having worked with the data centers for a long time, I think our forecasting has gained a good balance of understanding where these customers are what the intent of their facilities are and how that drives those ramp rates year-to-year. But fundamentally, the runway that we have with these customers and combined with the semiconductor space and then the residential growth gives us pretty strong confidence in those numbers through the end of the decade. Stephen D’Ambrisi: Okay. That's helpful. And just -- I don't know if -- do you have a sensitivity or a rule of thumb on like -- to the extent, I know you're guiding back down to the normal average for resi customer growth. But to the extent it's back at the top end and outperformance by 50 basis points or 100 basis points, like what that means for like an EPS sensitivity. Andrew Cooper: Yes. On a gross margin basis, we typically say that 1% of residential growth is somewhere north of $25 million, whereas 1% related to extra high load factor could be more in the $5 million to $10 million range. So that's kind of the distinction. Of course, all of it gives us operating leverage as we continue to focus on reducing our costs. across the system. But that's the rule of thumb that we think about in terms of residential hours just being more clustered around the peak and the [ HLS ], of course, delivering 90-plus percent load factors across peak, off-peak hours. Operator: Your next question is coming from Ryan Levine from Citi. Ryan Levine: Any color you could share around the pace of the large load commitments in the uncommitted bucket that you're considering to be ready for? I mean do you think this should all come together for a lot of these large customers around the same time? Or kind of how do you manage the kind of cadence of potential movement from the uncommitted to the committed bucket? Theodore Geisler: Yes, Ryan, the way we are treating that is as we identify infrastructure and projects to be able to offer to that uncommitted queue at a volume that is worthy of gaining their interest, so call it a gigawatt or more roughly. Then we'll offer that to the uncommitted generate or gauge interest based on the location and the timing of that infrastructure and ultimately work with counterparties on the best fit for that infrastructure opportunity and negotiate an agreement. We made our first offer through the subscription model in the latter part of last year. And as a result, we're actively in discussions right now with those counterparties that are interested with the intent to try to finalize an agreement and file it with the commission this year. And then in parallel to that, we're working on a pipeline of generation and transmission infrastructure projects that would create incremental capacity that could then go back and be offered to that in committed queue. So we'd expect that to be on somewhat of a repeatable basis going forward. And again, as mentioned before, I think when Julien was asking the question, that all of that for uncommitted demand would be incremental to the current plan. We wait until we have a secured contract with a definitive project before we add it to the plan, both from a capital and rate base standpoint. And then the load growth associated with those uncommitted projects would also be incremental to the plan. So we're actively working on that now. But importantly, we want to make sure that we identify the infrastructure capacity first. and do this prudently. And then secondly, it will be important in parallel to work with our commission on modernizing the rates to ensure the growth base for growth. Ryan Levine: Great. And then is the company looking to finance some of the transmission build out with some of the DOE energy dominance financing as we've seen with some of your peers around the country. And how are you thinking about the transmission funding start? Andrew Cooper: Yes, Ryan, it's Andrew. We'll look at all financing sources for the CapEx plan. in particular, we are interested in looking at sources of capital that are outside the traditional. I think it starts with our customers and ensuring that as part of this growth base for growth conception, that they're putting capital to work given the size of some of the balance sheets and the urgency with which they want to come online. So looking at customer financing, certainly looking at any financing alternatives out there. And so we'll continue to evaluate grants and other opportunities that come out of the federal government, as well as we go along. But fundamentally right now, the financing plan you see is our base plan today, which really allows us to rely on traditional funding sources. But certainly, as we look at some of these large projects and more on a temporal basis, look at doing a bunch of large stuff at once, we'll look at all kinds of alternatives to take it off balance sheet during construction. I think really, it starts with ensuring that we're aligned with our customers and through the subscription model to the extent that we can get capital upfront from our customers to buy down their price over time, that helps us as well from a balance sheet perspective. Operator: Your next question is coming from Anthony Crowdell from Mizuho. Anthony Crowdell: Just two quick questions. One is where did you end the year on an FFO to debt basis? And will you be at 14% to 16% throughout the entire forecast period? And then I have one follow-up. Andrew Cooper: Yes. So Moody's is really the limiting constraint given their downward the threshold is 14%. So we really focus there. And we were north of 14%. We won't get their official calculations until Q1. But if you do it on the basis as we understand it, we're high 14s from a Moody's perspective. So feel good about that. Our aspirational goal is to ensure that we're always maintaining 100 basis points of cushion. If you look at the regulatory lag that we're going to continue to go through in 2026, I think it really points to why the dialogue we're having and its rate case is so important. That the debt, the further you get away from any rate relief, it starts to come under some pressure. And so while we know that the rating agencies don't take a short-term perspective, and we've maintained pretty consistent dialogue with them about the improvements that we're seeing and the potential for cost recovery, particularly through the formula if you look at our earnings trajectory in '26 versus '25. That is all regulatory lag related and that should translate into the top line on an FFO to debt numerator perspective as well. Ultimately, I think our goal is to grow that numerator. And that, I think, will go a long way to shore up the credit metrics and allow us to deliver that 14% to 16% for the long term with sufficient cushion within that range. Anthony Crowdell: Great. And then I think, Ted, it was to earlier -- one of the earlier questions on transparency. You hope to get earnings, I believe once the formula rate plan is in effect. You started talking about maybe more linear or more linearity with the earnings. Is it -- you hope with the formula rate plan if it -- once it gets passed and enacted that we get a more linear trajectory of earnings longer trajectory of earnings or both? Theodore Geisler: Yes, Anthony, I think we fully recognize that a more standard disclosure would be able to match earnings rate base and capital plan out to that 5-year mark. And so we would like to be able to give longer visibility and also include within that a more consistent linear trajectory. But given the current construct within our jurisdiction, of the lumpy nature of these rate cases, that's just been challenging to do while maintaining precision with that forecast. And so we'll take the opportunity once this case is processed to be able to step back and reflect on the best disclosures we can develop and release and our aim would be to be more consistent with our peers in that regard. So once we conclude the case, we'll prepare a new set of disclosures and forecasts and our goal would be to be able to provide that in the longer term and be able to achieve more linearity as a result of the more regular nature in which the formula will work. Operator: [Operator Instructions] Your next question is coming from Chris Ellinghaus from Siebert Williams Shank. Christopher Ellinghaus: Just a follow-up. I was thinking the same thing about the disclosure and how formula rates will change that. But just to be clear, is it just the formula rates being effective or do you also need to have some greater clarity on, say, what's in the committed queue as well as having some better sense of where TSMC is going with their next expansions to give you adequate data to do that sort of extension? Theodore Geisler: Yes, Chris, the way we think about it is it really is almost entirely about the timing consistency of cost recovery. We've got a pretty good view of our committed demand, and it's robust. But due to the substantial regulatory lag in the jurisdiction, the ability to consistently on a linear basis, translate that top line growth and the bottom line growth is challenged by the lumpy nature of our rate case process. When you evolve to a formula rate, you've got more steady gradual rate changes for our customers, and it also allows us to have a bit more of a predictable and consistent recovery method to be able to recover those costs. And that's really the biggest change. Christopher Ellinghaus: Okay, sure. Andrew, in terms of looking at particularly the RES DSM component of O&M. How should we think about that going forward relative to where you are for 2026? Andrew Cooper: Yes. So I think the most important thing to keep in mind, Chris, is that those are regulatory programs that we recover through rates, and so they basically show up in both our gross margin number and then they show up offsetting nearly dollar for dollar on the O&M side. At the end of last year, the commission determined to discontinue some of those regulatory programs. And so the size of the overall DSM program condensed. And so you've seen that condensing both on the gross margin side and on the O&M side. And so while there is a great overall story around our O&M cost management as a company, when you look at our waterfall from '25 to '26, a considerable portion of that O&M related benefit is tied directly to an offsetting decrease in revenue received on the gross margins, that RES DSM PSA chemicals line items. So while the programs that we have in place today, we feel really good about the commission made that determination. And so those programs have been condensed in the meantime. And... Christopher Ellinghaus: I understand that there's an offset, but what I'm trying to figure out is sort of given the cost pressures for -- particularly for residential sort of across the board. Do you think that there -- I guess, the right way to put it, is there appetite for those programs is permanently reduced? Or do you think there could be some return to those programs given just sort of cost of living pressures for consumers? Theodore Geisler: Yes. Chris, this is Ted. I guess the way I would look at it is I think the commission and staff really took a thoughtful approach to reviewing all the programs and saying, which of those programs have the greatest positive impact for the customers that need them the most and let's focus the funding on those programs. While retiring the programs that are a bit legacy in nature that have less effectiveness and may not be worth the investment any longer. A lot of those programs have been in place for many years, they did a lot of good work, but they also started to reach a saturation point. And so really, the programs that are remaining are the ones that benefit the customers that need it the most and have the greatest impact and I think this commission is focused on just continuously reviewing those programs to ensuring that they're using the dollars wisely and they're maximizing impact for the investment made. The commission is also very focused on affordability. They recognize the need to allow utilities to recover costs as a result of inflation as a result of the investments needed to secure a reliable grid due to growth. But in parallel, look for any opportunity possible to be able to reduce cost for customers and the rightsizing of the DSM plan resulted in a meaningful savings to all our customers. But just to echo what Andrew said, we need to do our part as well, which is why we're going on 3 years now of flat to declining O&M, declining O&M per kilowatt hour. We continue to be focused on modernizing the rates in this rate case to ensure that the extra high load factor customers are paying their fair share of growth, which has a net benefit to residential customers. And we remain competitive from a rate standpoint where residential rates are below the national average, and we'll do everything we can to be able to keep them affordable. Christopher Ellinghaus: That helps. Lastly, the additional TSMC expansions, how much vision do you have into them at this point? And when do you have -- expect to have more perfect clarity on what that's going to look like for you? Theodore Geisler: TSMC is a very important customer, obviously, with a substantial build-out ongoing. And so we're in active discussions with them. Both the timing of the fabs that they've announced and committed to as well as any potential expansion that they may have. So when they're ready to solidify their plans, then we'll be ready to articulate what that means from a utility infrastructure standpoint. Operator: Thank you. That completes our Q&A session. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.
Marta Campos Martinez: Hello, everyone. This is Marta Campos, Head of Finance for ROVI. Welcome to our company's review of business results for the full year 2025. Before we begin, let me remind you that today's presentation and associated documentation are available on the Investor Relations section of ROVI's website. Please note that the information presented in this call contains forward-looking statements based on our current beliefs and expectations. Actual results could materially differ due to known and unknown risks, uncertainties and other factors, and we undertake no obligation to update or revise any of the statements. Moving to today's agenda. Juan Lopez-Belmonte, ROVI's Chairman and CEO, will discuss on business performance for the full year 2025 as well as our outlook for 2026. Javier Lopez-Belmonte, ROVI's Chief Financial Officer, will then review full year financial results and provide an overview of our cash and debt position. The presentation will be followed by a Q&A session. Therefore, if you want to ask any questions during the presentation, please do not hesitate to send them through the question button on the platform. With that, I thank you for your presence today, and I will now turn the call over to Juan. Juan Encina: Thank you, Marta. Good morning, everyone, and thank you for joining us today. 2025 was a transition year for ROVI, but also one characterized by strong execution and solid performance. We operated with clear strategic priorities and delivered our financial commitments. In this context, our total revenue in 2025 amounted to EUR 756.1 million, a 1% decrease compared with 2024. Operating revenue reached EUR 743.5 million, representing a 3% decrease versus 2024. This evolution was better than expected and was mainly driven by the performance of our contract development and manufacturing organization business. This increase was partially offset by the strong performance of our specialty pharmaceutical business. Our gross margin reached 66.5% in 2025, an improvement of 3.9 percentage points compared to 2024. It was also a strong year in terms of profitability. EBITDA increased by 4%, and our EBITDA margin expanded by 1.9 percentage points, reaching 29.1% in 2025. With the visibility we have today, we reaffirm our 2026 guidance and ROVI expects operating revenue to grow by high single-digit to low double-digit rates compared with 2025. I'm very pleased with the progress we've made in executing transformative initiatives that continue to strengthen our company. Let me begin with our execution in the CDMO business. In November, we announced a collaboration with Roche for the manufacture of a new medicine in development. This agreement reflects the strong momentum we are seeing in new business and the continued expansion of our partnership base. In September, we announced the acquisition of an injectable drug product manufacturing site in Phoenix, Arizona. We are now integrating the facility, ROIS Phoenix into our network. As part of the transaction, we signed a drug manufacturing agreement with an initial 5-year term, including minimum annual payments of USD 50 million. We're extremely excited about this opportunity as it enhances our value proposition for biopharma partners by providing U.S.-based manufacturing capabilities and adding highly competitive, high potent OEB5 cytotoxic capacities. Turning to our Specialty Pharma business. In July, the Technological Development and Innovation Center confirmed the final approval of the EUR 36.3 million aid granted to ROVI for the LAISOLID project, covering the period from January 2023 to August 2026. In the second half of the year, we collected the full amount and recognized the revenue associated with expenses incurred between January 2023 and December 2025. And finally, in January 2025, we advanced meaningfully in the field of artificial intelligence. We acquired a majority stake in Cells IA Technologies, a pioneer in AI-assisted diagnostic in pathological anatomy, an area with significant potential from transformation to emerging digital technologies. Looking ahead, we expect these actions to translate into strong financial performance over the coming years and give us confidence in our long-term outlook. And now let me begin a quick overview of the 2025 financial results. Total revenues fell 3% to EUR 743.5 million versus 2024, mainly due to the behavior of the CDMO business. Notwithstanding sales of the specialty pharmaceutical business were up 11% to EUR 473.9 million, positively impacted by low-molecular-weight-heparins, Okedi, Neparvis and the contrast agents and other hospital product division. I will touch upon their performance later on the presentation. Moving on to one of our main pillars of growth and specialty pharma area. Sales of prescription-based pharmaceutical products increased by 11% in 2025, reaching EUR 414.1 million, driven mainly by the solid performance of our heparin division, which grew 7% in the year. Within the division, enoxaparin was the main growth contributor. Sales rose 9%, supported by higher order volumes from our international partners. Bemiparin also delivered a strong performance. Sales increased 4% in 2025, driven by a very strong fourth quarter with sales increasing 53% compared with the third quarter. This growth was supported by the strength of our international, where revenues rose 15% to EUR 43.6 million, mainly driven by strong performance in China, Greece and Turkey. We remain focused on becoming a global leader in the heparin field with both bemiparin and our enoxaparin biosimilar. In line with this ambition, we continue to invest in achieving self-sufficiency in crude heparin sourcing, moving to our full vertical integration across all manufacturing stages of low-molecular-weight heparins. Enoxaparin biosimilar continued to strengthen its global position in 2025 with out-licensing agreements covering 82 territories. Sales performance was solid throughout the year, driven by stronger demand from international partners. Sales increased 9%, reaching EUR 157.7 million, reflecting higher order volumes and sustained momentum in markets where the product is already well positioned. Additionally, the year closed with a particularly strong fourth quarter, the strongest of the year, with sales up 36% versus the previous quarter. Growth from the specialty pharmaceutical business was also driven by Okedi, Neparvis and the contrast agents and other hospital products. Okedi, the first ROVI product based on its leading-edge drug delivery technology, ISM for the treatment of schizophrenia in adults, delivered another year of strong growth. Sales reached EUR 56.7 million in 2025, an increase of 97% compared to 2024 and 84% rise compared to the fourth quarter of 2024. Sales of Neparvis, as specialty product from Novartis, indicated for the treatment of adult patients with symptomatic chronic heart failure and reduced ejection fraction, increased 10% in 2025. Finally, sales of contrast imaging agents and other hospital products increased by 11% in 2025. Moving on to our CMO business. Performance in 2025 evolved in line with our expectations. Sales declined 20%, reaching EUR 269.5 million, mainly due to 2 factors: minimal revenue recognition related to the activities carried out in the year to prepare the plant for Moderna vaccine production; and second, lower production revenues from Moderna during that same period. Despite this temporary contraction, our confidence in the year and long-term potential of our CDMO platform remains very strong. We operate in a highly dynamic market where ROVI holds a clear competitive position. To fully capture this opportunity, we are making significant investments to reinforce our global leadership in a sterile fill and finish capacity and services. These investments will enable us to continue benefiting from the structural imbalance between the growing demand for injectable products and the limited supply of high-quality manufacturing capacity worldwide. With expansions underway, ROVI is on track to become one of the largest and most experienced pharmaceutical groups in Spain, operating 8 fully integrated manufacturing sites, 5 of which are dedicated exclusively to contract development and manufacturing activities. This positions us exceptionally well for future growth. We continue to progress on our 2 innovative formulations based on our ISM technology platform. Today, I will provide an update across both programs. First, Letrozole SIE, our quarterly prolonged release formulation of Letrozole for the treatment of hormone-dependent breast cancer. We obtained positive Phase I results at the beginning of 2025 and demonstrated superior estrogen suppression compared with Femara. November 2025, we submitted the investigational new drug application to the U.S. FDA, and we expect to begin recruitment for the first clinical trial in the second quarter of 2026. Second, Risperidone QUAR, our quarterly prolonged release Risperidone injection for the treatment of schizophrenia in adults. It's unique PK profile is capable of providing clinically relevant plasma concentrations from day 1 onwards. The clinical program intends to achieve the same indications as Okedi and to demonstrate that unlike all the other quarterly formulations, patients being attended for an acute episode can be treated with a single quarterly injection of Risperidone QUAR without previous stabilization with monthly medication. We also reported positive Phase I results early in 2025. And the Phase III clinical program will follow a design similar to the one successfully executed for Okedi. Both programs represent meaningful innovation and reinforce the potential of our ISM platform to deliver long-acting treatments that improve patient outcomes and others. To conclude, let's turn to our outlook for 2026. As we've highlighted throughout today's presentation, 2025 was a strong year in terms of execution, and we have led solid foundations for our next phase of growth. In 2026, we expect to return to revenue growth. As I mentioned earlier, 2026 guidance remains unchanged, and we expect operating revenue to increase by between a high single-digit percentage and a low double-digit percentage in comparison with 2025. This outlook reflects several factors. The potential revenue from the manufacturing agreement signed with Bristol-Myers Squibb, closing still pending, as part of the transaction announced on the 29th of September 2025. Revenue arising from other agreements related to the contract manufacturing activity and lastly, the current competitive pressure on pricing in the heparin division. To conclude, we are executing strongly across the business, successfully advancing Okedis' rollout, progressing our clinical programs and delivering solid performance in our CDMO operations. At the same time, we are making the strategic investments required to support sustainable growth over the long term. The progress we've made this year, combined with the momentum we are carrying forward, reinforces our ability to serve patients effectively while building lasting value for our shareholders. Thank you for your presence again today, and I will now turn the call to Javier. Javier López-Belmonte Encina: Thank you, Juan. Good morning to everyone. As Juan noted in 2025, we made meaningful progress on building long-term value for the company. Total revenue in 2025 amounted to EUR 756.1 million, a 1% decrease compared with 2024. Likewise, operating revenue for 2025 totaled EUR 743.5 million, a decrease of 3% on 2024 numbers. This decline was better than expected and mainly driven by the performance of the CDMO business. This decrease was partially offset by the strong performance of our specialty pharma business, which was driven by our heparin division, Okedi, Neparvis and contract agents and other hospital products. I will now walk you through the remainder of our P&L. Gross profit increased 3% to EUR 494.7 million in 2025 compared to 2024. Gross margin was up 3.9 percentage points to 66.5% in 2025. This increase was mainly impacted by the recognition of revenue associated with the R&D aid awarded by the CDTI for the LAISOLID project, which is recorded under the other income line. Excluding the impact of other income, gross margin would have increased by 2.3 percentage points to 64.8%, mainly due to 2 factors: One, first, the increased contribution of Okedi sales, which added high margins; and second, the decrease in low-molecular-weight heparin raw material prices, which had a positive impact on gross margin. ROVI continues to be committed to innovation. R&D expenses increased 47% to EUR 37.8 million in 2025 due to the completion of the Phase I clinical trials for Letrozole SIE and quarterly Risperidone ISM and also for the preparation for the development of Letrozole SIE's Phase III clinical trial. SG&A expenses decreased by 2% to EUR 240.7 million in 2025 compared to 2024, mainly due to an 8% reduction in other operating expenses, excluding R&D. This item, however, includes nonrecurring expenses associated with the strategic projects undertaken in 2024 and 2025. When excluding these nonrecurring strategic projects and other operating expenses, excluding R&D, would have decreased by 4% in 2025, underscoring the continued effectiveness of the company's cost-containment initiatives. These efficiencies offset the 4% increase in employee benefit expenses, always excluding R&D, in 2025 versus 2024, driven primarily by a 3% wage increase due to the entry into force of the 21st Collective Agreement of The Chemical Industry, '24-'26 in the fourth quarter of '24 and also by the hiring of additional CDMO personnel. EBITDA totaled EUR 216.2 million in 2025, an increase of 4% compared to 2024, reflecting a 1.9 percentage point increase in the EBITDA margin, which increased to 29.1% in '25. EBIT increased 4% to EUR 185.8 million in 2025, reflecting a 1.5 percentage point increase in the EBIT margin, which increased to 25% in 2025. Net profit increased 3% to EUR 140.4 million in 2025. If we now perform a pre-R&D analysis, EBITDA pre-R&D calculated excluding R&D expenses in '25 increased by 9%, reflecting a 3.6 percentage point increase in the EBIT (sic) [ EBITDA ] margin to 34.2% in 2025. Likewise, EBIT pre-R&D increased by 9%, reflecting a 3.2 percentage point increase in the EBIT margin to 30.1% in 2025. Net profit pre-R&D in the same way, increased by 8% in 2025. Moving on to the evolution of CapEx and cash generation. Let me say first that we view CapEx as a key enabler for ROVI's future growth and is a key focus for our organization. This way, last year, ROVI invested EUR 67.8 million. Of this amount, EUR 46.2 million relates to investment CapEx related to our facilities, including key important projects such as the new filling lines and the operations expansion, Glicopepton, our joint venture for the construction of a plant dedicated to the production of compounds of high biological value from the intestinal mucosa of pigs and finally, the industrialization of our ISM platform. Lastly, we invested EUR 21.6 million in maintenance and other CapEx. In 2025, we increased cash flow from operating activities by 35% to EUR 187.1 million. Increase is mainly explained by 2 factors: the collection of the CDTI grant from the LAISOLID project and the improvement in inventory resulting from lower prices of heparin raw materials. Our cash generation capacity has also evolved positively with free cash flow reaching EUR 120 million, 57% higher than in 2024. Regarding our debt. As of 31st December '25, ROVI's total debt increased to EUR 121.8 million. So December '25, ROVI had a gross cash position of EUR .9 million and a net debt of only EUR 21.9 million. Let me end this section with our dividend policy, which we consider a key priority for ROVI. ROVI's Board of Directors will propose to the General Shareholders' Meeting, a dividend distribution of over EUR 49 million. This is equivalent to EUR 0.9594 per share entitled to receive it, charged to the '21 profit -- 2025 profit, sorry. This would entail distribution to an amount equivalent to approximately 35% of the consolidated net profit for 2025 attributed to the parent company. So moving to the news flows for '26. Let me say that, first of all, ROVI delivered in 2025, and we are entering 2026 in a very strong position, ready to capture the next wave of growth. The year ahead brings a very attractive news flow across all parts of our business. In specialty Pharma, we expect to strengthen the heparin division as we advance towards becoming a fully vertically integrated company, securing our supply chain and improving competitiveness. In CDMO business, 2026 will be a pivotal year with the full integration of ROIS Phoenix into our network and the continued execution of our capital investments, which will expand capacity, enhance capabilities and support future commercial opportunities. And in R&D, our ISM platform continues to represent a significant value driver with important milestones expected across our later-stage pipeline. Phase III trial of Letrozole SIE and the Phase III program of our quarterly Risperidone formulation. Altogether, '26 is set to be a commercially rich year supported by strong execution, meaningful catalysts across the portfolio and the actions we are taking to position ROVI for sustainable long-term growth. That's all regarding our full year financial results. We can now start the Q&A session, and I will pass the floor to Marta. Marta Campos Martinez: Thanks, Javier. [Operator Instructions] The first question is for Javier, and it comes from Pablo De Renteria Kepler Cheuvreux. Javier, I understand it may still be early to comment, but could you share any indication on your clients' intentions regarding the 100 million dose capacity expected to be operational this year? Specifically, the agreement is expected to contribute between EUR 80 million and EUR 180 million. Do you have any sense of whether the client is likely to utilize this capacity fully or whether it is intended more as a backup option? And as a follow-up, has there been any change to the time line for commissioning the line? Or does September still look like the official target date? Javier López-Belmonte Encina: Thanks, Pablo. We cannot comment much on specific contracts for -- I mean, for confidentiality reasons. To provide some context anyway, we are carrying out a technology transfer works, and that will imply regulatory approvals this year. And again, commercial production is expected to commence probably or likely most likely in the second part of the year. With this contract, the client has, at their disposal, a filling line in San Sebastián de los Reyes [indiscernible] plant up to we normally assess 100 million units of prefilled syringes. And the expectations remain the same. '27 is expected to be the first full year manufacturing year, I mean recurrent from full year, from beginning to end. And if we take into account this potential first full year or this full recurrent manufacturing revenue, the impact in our accounts will range between 20% and 45% over '23 year -- sales year. If you remember that was the guidance that we provided when we announced the contract, and we don't have different views as today. Marta Campos Martinez: Thanks, Javier. The next question comes from Guilherme Sampaio from CaixaBank, and Juan, it's for you. Could you comment on the latest trends regarding heparin raw material cost evolution and to what extent this should be able to offset potential pressures in prices in 2026? Juan Encina: Thank you. Thank you, Guilherme. There's not that much info we can share with you at this moment of time regarding heparin prices. What we are seeing really is a real aggressive price strategies from -- mostly from the Chinese players. What we are right now working is really on executing our plans to improve cost efficiency and to be able to deliver higher gross margins to make our position in the market more competitive. In this regard, it's going to be very critical, the kick of our operations of our new manufacturing plant with the vertical integration of our supply chain. So really, we do believe that we have very positive trends in the future once we can in-house source the crude heparin manufacturing. But right now, really our goal and what it is taking most of our time right now is to make sure that we deliver all our execution plans in terms of making sure that we can make the most of our -- in terms of cost efficiency in our supply chain. Marta Campos Martinez: Thanks, Juan. Javier, Guilherme also wants to know, what is your view on SG&A evolution in 2026? Javier López-Belmonte Encina: Thanks, Guilherme. As we guided the market on '26, we expect to expand the sales of the company. And that will mean that probably we are having an inflection turning point in our CDMO operations compared to the previous year. So that will mean that we'll need to expand -- that we are expanding our operations. And for sure, this is linked to an increase in people and some expenditure. I want to highlight the tremendous performance that the company did on SG&A last year on '25, where we reduced SG&A. I think this is very difficult to replicate because as long as we are fortunate and happy to increase salaries to our people by the collective agreement, the trend normally is to increase at least as an inflection -- as the inflation levels. You know our policy is to be very strict on cost expansion. So probably -- I mean, what I foresee that we will expand our operations, and that will mean that we will need to expand probably our SG&A, but hopefully in a very moderate way. Marta Campos Martinez: Thanks, Javier. The next question comes from Sergio [indiscernible]. Could you talk about reaching Phase III for quarterly Letrozole in 2026? And what do you think the Phase III would last? Juan Encina: I mean that's really our plan as both Javier and myself we have shared with you earlier in our presentations, our target to start recruitment in second quarter this year of Letrozole quarterly injection. The time lines are pretty much already being shared with the market. I mean this is going to be a long execution Phase III clinical trial. I mean the design is extremely attractive. We are targeting superiority versus the comparative drug. And we don't expect to be the clinical trial finalized before 2030, 2031. But definitely, this is going to be one of the major milestones of the company. And I think it's the best signal how do we -- how are we trying to execute the long-term perspective of the company. I think we have tremendous, very interesting short-term drivers of growth while we are already establishing the foundations of the growth of the company for the next decade. Marta Campos Martinez: Thanks, Juan. Francisco Ruiz from BNP has 2 questions. The first one is for you, Juan. After the excellent year on heparins, what are your expectations for 2026? Juan Encina: Thank you, Francisco. Really, as I mentioned to you before, we expect -- I mean, 2025 was a great year. I mean, sales grew 9% on enoxaparin. Bemiparin performance was also solid, especially in international markets. For 2026, we expect a decline in terms of sales basically because the last quarters of last year were very strong in international markets. So that means that our partners right now, they have sufficient stock. So we expect a slowdown in that part of the business. And secondly, we are seeing -- as I mentioned before in a previous question, we're seeing a tremendous price aggressive strategy from mainly our Chinese competitors. So altogether, we expect that for 2026 sales decline for low-molecular-weight heparin. We are -- as I mentioned before, we're investing heavily in making sure that we improve our cost efficiency in our supply chain. And we remain -- I mean, very much excited that we can still become a global player. We're investing heavily. We -- hopefully, Glicopepton will be very soon works finalized, and we will be able to be fully integrated in the supply chain of the heparin production. And definitely, I believe that great things are to be delivered by ROVI on this field. We are experts on heparin, and we have demonstrated in the past that we do have the skills, the products and expertise, and we're just working on the long term to make sure that we continue increasing our sales. Marta Campos Martinez: Thanks, Juan. The second question from Francisco. This goes for you, Javier. After the lower R&D in 2025 versus expectations, could you update if in 2026, it should go above the range of EUR 40 million, EUR 60 million commented? Javier López-Belmonte Encina: Yes. Thank you, Francisco, for the question. I mean probably you are right. Last year was a lower R&D expenditure than expected. At the end of the day, the expenditure of R&D is linked to the evolution of the clinical trials. And as we've been mentioning in today's call, we are expecting to start recruiting patients this year, very soon. And probably recruiting patients in this phase of the clinical trials are the most expensive one. And therefore, we could expect this year to be very intensive on R&D expenditure. At the end of the day, what we -- the guidance that we provided on the Capital Market Day last year around the R&D expenditure for this 5-year terms program from '26 to 2030 don't change at all. So probably we'll be spending EUR 300 million on this year. So overall, that amount will not change. Probably '26 will be one of the years that we'll spend most on R&D. That's also clear. And we are also looking and pushing to spend as much as possible, but that will mean that we are progressing in the right direction. On the other hand and on the positive front, let me remind all of you that on '26, we will account the second part of this aid from this Spanish organization, CDTI that will give us or we will account extra income, let's say, that way, that will be in a substantial amount. So that probably will offset any extra expenditure for the year on R&D. So we are very happy that we were able to collect that grant that will help us to smooth the expenditure on R&D. Marta Campos Martinez: Thanks, Javier. Juan, Álvaro Lenze from Alantra Equities asks, can you provide some detail on Neparvis prospects and the timing of the loss of exclusivity? Juan Encina: Thank you for the question. I mean Neparvis has been a tremendous success. I mean, it has proven the skills of our commercial capabilities in Spain. Unfortunately, the product will lose its patent around November this year. But it has proven really the benefits of the combination in terms of commercialization of Entresto and Neparvis, and this has not proven or is not on the market. So it's been a tremendous success. But unfortunately, I mean, November, last quarter this year, the product will go off patent. Marta Campos Martinez: Thanks, Juan. The next question, Javier, comes from Joaquin Garcia-Quiros and is related to CapEx. CapEx consensus for 2026 is at around EUR 62 million. Are you comfortable with this number? Javier López-Belmonte Encina: Thanks, Joaquin, for the question. As we highlighted during the presentation, we are investing heavily for us on CapEx this year because for us, these investments are setting the foundations to achieve the goals that we internally have for 2030. So as you know, we are expanding our San Sebastián de los Reyes plant. And this year, also, we will set up a new line in ROIS, Phoenix. Apart from that, we are still investing on Glicopepton, which is the JV for the vertically integration heparin plant. So EUR 62 million is similar to the amount that we spend or invest on '25. Depending on how these investments -- the investments that I was sharing with you evolve on '26, depending on how they fall on '26, '27, this figure could be similar to last year figure to EUR 60 million CapEx or it could be slightly even above that figure. So '26 is going to be a key year for the investments of the company. We are acquiring ROIS Phoenix and probably this acquisition, coupled with the current CapEx projects ongoing, will make '26 very, very intensive on CapEx. That's what I would say right now. Marta Campos Martinez: Thanks, Javier. The next question comes from [ Tim Jack ] from Entrepreneurial Investment. Juan or Javier, can you comment on the public information regarding the smaller pipeline and lower R&D spending of Moderna? How does this affect the plant utilization of the established production capabilities? Juan Encina: Thank you, Tim, for your question. Go ahead, Javier. Go ahead. Javier López-Belmonte Encina: No, no. What I was going to say that, I mean, in a public conference like this, we don't comment on other companies' performance. But I could say that the outlook for Moderna for '26 and '27 is better than before. So we are truly excited about our partnership with Moderna and take into account that the last -- past years for Moderna has not been the best for them, and that's public knowledge. If according to their latest comments, they have an uplift of revenues for the coming years. I think that this can only be positive for us. But Juan, please add whatever you want. Juan Encina: No, just reinforcing what Javier has mentioned, I don't think it's up to us to comment on Moderna's guidance. But the only thing that we can express is that the partnership is as strong as ever. And again, we still feel that there is going to be a tremendous important collaboration between ROVI and Moderna in the future. Marta Campos Martinez: The next question comes from Patricia Cifuentes from Bestinver. When do you expect to advance with the Risperidone QUAR trials? Juan Encina: I mean [indiscernible] very similar to those of Letrozole. Our idea is to start recruitment as well in 2026 and to kick off. And again, this is already very much in place. I mean the clinical trial is extremely interesting, and it's going to as well to lay the foundation for tremendous growth for the company probably in the next 4, 5 years once we got the results. I mean we are targeting something that will provide us a commercial competitive advantage is the fact that patients could start right away with our quarterly injection instead of being stabilized with a monthly treatment. And I think that will give us a unique differentiation in the market, in the long-acting injectable market. And again, it's already on the execution mode. And hopefully, if we could just open the window once the clinical trial is finished, there is going to be a tremendous growth and it's a tremendous life cycle management of the existing Okedi, which is doing extremely good as well. Marta Campos Martinez: Thanks, Juan. Javier, the next question comes from Jaime Escribano from Santander. Regarding BMS integration, when do you expect BMS to start contributing in P&L? Javier López-Belmonte Encina: Thanks, Jaime, for your question. The BMS potential revenue for the year, it is linked to the acquisition of ROIS Phoenix. Basically, we signed the acquisition of the plant in Phoenix last year. There is an interim period, and it will be a closing day. This closing day depends on several conditions and things that both companies or both parties have to perform. We are extremely optimistic that this is going to be easy, and we don't expect that much delay on the acquisition of ROIS Phoenix. However, it's still early to predict when this acquisition will take place or will this closing take place. We've been -- I think we can understand that at least we'll have 6 years from BMS contribution during '26, at least. And we are working to sign the -- to have the closing as soon as possible so we can take over ROIS Phoenix and start producing for BMS. And more important than that, start -- we want to start deploying all the investments in ROIS Phoenix to be able to produce to other customers as soon as possible. Marta Campos Martinez: Okay. Thanks, Javier. Jaime also asks about gross margin. What is your expectation for 2026? Javier López-Belmonte Encina: I mean, we don't provide accurate guidance for gross margin for '26. What we are saying that is with the different drivers that we handle at the company, I think we are positive around gross margin for next year. So again, Okedi is growing. We have commented several times that Okedi is a high added value product for us. So meaning that we have higher gross margin in Okedi than in the rest of the portfolio. So this is a very positive contribution. We try to comment also that the CDMO business is highly gross margin driven, too. So positively, if we are increasing the sales of CDMO business on '26, probably this will also contribute in a positive way to the gross margin. And finally, the heparin franchise, as commented, we are having positive tailwinds on the raw material front. So in this area, it will depend on the competitive pricing pressure on the selling side. And depending how the market evolves, we could even have a positive tailwinds on the heparin franchise from a gross margin perspective. But again, that will depend on very much how the pricing pressure will evolve on the different markets. Marta Campos Martinez: Thanks, Javier. And the last question from Jaime is, what is ROVI's base case scenario for the EUR 80 million, EUR 180 million revenue contract range in 2007 -- 2027, sorry, low, mid or high end of the range? Javier López-Belmonte Encina: Well, up to now, what we can tell you is that we are working very hard to hit all the different time lines. We started this project back in '24. And I would say that the contract negotiation was even earlier. So it's been a lot of time, what the team is very focused and at least is what we can do right now is to work on this tech transfer to execute as efficient as possible, to be executed as efficient as possible. So we are more focused on those tasks. I believe that so far, we've been extremely efficient. The line was deployed on time. The different work streams has been hitting the different milestones. And look, we are more focused on this year, trying to get the regulatory approvals to start a routine manufacturing rather than thinking on next year. As any CDMO contract, that will depend on the customer needs. The good thing about this agreement is that we have some important, as we discussed several times, minimum commitments. In this case, it's a full line, and that's what is really key for us. And at the end of the day, what is important for us is that we deliver the best service to the customer, and this turns into the most profitable scenario to us. And again, we need just to wait a few months and see how this contract evolves. Marta Campos Martinez: Thanks, Javier. The next question comes from Javier [indiscernible]. Juan, it's for you. A question for Juan about Letrozole, Please. To better understand the commercialization strategy, are you planning to launch it with a partner to reduce risk? Are you already in negotiations? Or when would you begin negotiating now that Phase III is starting? Juan Encina: Thank you for your question. Really, I mean, I think it's too early to really provide a clear strategy of how we're going to move to the market with Letrozole. I think what we can share with you is that we have -- what we have done with Okedi that definitely we are setting up our commercial capabilities in Europe. And obviously, the obvious case forward would be to leverage those commercial capabilities in Europe. With Okedi, we have shown that we -- we like partnerships as we have shown with the rollout of bemiparin, enoxaparin and lately Okedi with the latest launches in Canada, Australia or Taiwan through partnerships. Right now, we are focusing on really getting the clinical trial moving forward. Our scope is global. We want to get the approval in the U.S. in Europe. And it will depend on how on the results of the clinical trials that will define our final strategy. The market is extremely attractive as we have shared to the market in several occasions. We are talking in terms of treatment close to 3 million treatments. So the market can be between $2 billion, $3 billion to $7 billion, depending on the price strategy. So again, this is a unique opportunity. We really want to hit perfectly. And that's the reason why we have been aggressive on the clinical trial design. We are targeting superiority, which provide a tremendous competitive advantage if the product finally gets approved. And I think it will be once that the clinical trial advance once we start getting some data that we will start defining which is the strategy to follow. But I think Okedi an example of our previous way of doing things could be taken as an example of what is our thoughts in terms of the commercialization study. Marta Campos Martinez: Thanks, Juan. The last question comes from Christian Schmidt from [indiscernible]. What is the likelihood of signing an additional CDMO contract in 2026? This one is for you, Javier. Javier López-Belmonte Encina: Thank you for your last question. I mean we are truly excited about the business. And again, I know that we reiterate sometimes the same message. We are signing contracts on an important way or in a very recurrent way, I would say. The only thing is that we do not publish or do not make public these contracts because they are private and our partners don't want them to be public anyway, unless they are very key for us, and we are forced to publish because it's material for our accounts on a stock exchange regulation or mainly is that -- I think the momentum is still there. Now we are acquiring ROIS Phoenix, and I'm sure that will speed up closing agreements in the next coming months. As I said before, we are really, really excited about the momentum of the business. We are getting there to be known as one of the largest injectable CDMO player in the world. And I think that the pipeline is full of opportunities. Marta Campos Martinez: Thank you very much, Javier. So thank you very much for your participation. The ROVI IR team will answer the pending questions as soon as possible. Let me now turn the floor over to our CFO, Javier Lopez-Belmonte, for the closure of the presentation. Javier López-Belmonte Encina: Well, thank you, Marta. This concludes our presentation of the full year results. As Marta was saying, if there are further questions, which I believe there are, our Investor Relations team will answer them in a one-to-one mode. Thank you very much for joining with us for the full year presentations call, and wishing you a pleasant day. Bye-bye.
Operator: Good day, ladies and gentlemen, and welcome to the FrontView REIT, Inc. Q4 2025 Earnings Conference Call [Operator Instructions] This call is being recorded on Wednesday, 25th of February 2026. I would now like to turn the conference over to Pierre Revol, CFO of FrontView. Please go ahead. Pierre Revol: Thank you, operator, and thank you, everyone, for joining us for FrontView's Fourth Quarter and Year-end 2025 Earnings Call. I will be joined on the call by Steve Preston, Chairman and CEO. In addition, Drew Ireland, our Chief Operating Officer, will be available for Q&A. Before we get started, I would like to remind everyone that this presentation contains forward-looking statements. Although we believe these forward-looking statements are based on reasonable assumptions, they are subject to known and unknown risks and uncertainties that can cause actual results to differ materially from those currently anticipated due to several factors. I refer you to the safe harbor statement in our most recent filings with the SEC for a detailed discussion of the risk factors relating to these forward-looking statements. This presentation also contains certain non-GAAP financial metrics. Reconciliation of non-GAAP financial metrics to most directly comparable GAAP metrics is included in the exhibits furnished to the SEC under Form 8-K, which include our earnings release, supplemental package and investor presentation. These materials are available on the Investor Relations page of our company website. With that, I'm now pleased to introduce Steve Preston. Steve? Stephen Preston: Great. Thank you, Pierre, and good morning, everyone. I am very pleased to discuss our fourth quarter and full year results. Today, FrontView is operationally stronger, financially more resilient and strategically better positioned than at any point since becoming public. Our portfolio has been refined. Our balance sheet remains conservative. We have secured capital to fund accretive growth opportunities consistent with our real estate first philosophy. As a reminder, our portfolio is built around a real estate-centric strategy, focusing on acquiring fungible frontage-based assets typically located in front of major retail nodes in the top 100 MSAs nationwide. Our strong real estate provides critical advantages and quicker outcomes when recycling, re-tenanting or repositioning tenants. For example, we owned one Tricolor auto dealership that closed in early Q4 due to the widely reported Tricolor bankruptcy. Due to the quality of our real estate and our experienced management team, we quickly re-leased the property to Avis in the same quarter, resulting in a substantial credit upgrade and an approximately 24% increase in value for our shareholders. Historically, since founding the REIT in 2016, our experience has been that we have achieved, on average, over 110% of prior rent when leasing to a new tenant. Results like these cannot happen without top-tier real estate quality and a top-tier management team. Our tenant base remains heavily diversified across necessity and service-based industries. Today, we have 321 leases with the top 10 accounting for only 24% of ABR and our largest tenant contributing just 3.5%. In addition to our real estate first philosophy, diversification has been part of our strategy from day 1 and serves as another risk mitigant, keeping exposure to any single tenant low as credits come and go over time. During the fourth quarter, we acquired 7 properties for approximately $41.3 million at an average cap rate of 7.5% with a weighted average remaining lease term of approximately 13.1 years. In 2025, we acquired 32 properties for approximately $124.1 million at an average cash cap rate of 7.74% and a weighted average remaining lease term of approximately 12.4 years. Since the IPO in October of 2024, we have added 61 properties and increased the initial asset base by nearly 30%. Starting this quarter and going forward, to help you better understand our real estate strategy, we will highlight one quarterly acquisition on the cover of our investor presentation and briefly discuss it during our calls. This quarter, we are highlighting a 7 Brew in Jacksonville, Florida. 7 Brew is a rapidly growing drive-thru coffee chain founded in 2017, known for its high energy, double drive-thru model and offering over 20,000 unique drink combinations. It received a growth equity investment from Blackstone in 2024 and has over 600 locations today and is working with some of the most experienced franchisee operators in the country. We like their business model and have 3 properties leased to them in the portfolio, which is about 0.6% of ABR. We acquired this property at approximately an 8% cap rate, well above the low 6 cap rate we believe a new 7 Brew would typically trade at today. The property is very well located within a top 100 MSA. It features direct frontage on a major retail node. The land provides tenant flexibility, and the lease has a 15-year term annual rental escalators. It is triple net and has a modest rent of $168,000 annually, which we believe other tenants could afford to pay in this desirable Florida location. We achieved a higher cap rate due to liens associated with the recent construction, which limited the buyer pool. We resolved the liens directly, cleared title and ultimately closed on the transaction, being known in the marketplace as a buyer who can identify and resolve problems during an acquisition further strengthens our position as a buyer of choice. Our largest acquisition during the quarter was a DICK's House of Sports located in Durham, North Carolina, adjacent to the Streets at Southpoint, a Brookfield-owned mall that does just over $900 per square foot in sales and is rated an A+ mall in Green Street's Advisors Mall Database. We are excited about the real estate location and are very familiar with this flagship concept and owning select larger boxes. We already own a few larger format assets with strong frontage such as Walmart, Lowe's, Best Buy, et cetera, and we'll continue to own more of these assets when the opportunities present themselves. We are always seeking to acquire assets with value creation opportunities that fit our investment criteria, and we placed this asset under control earlier in 2025, while the project was under construction to take advantage of attractive pricing. As a result, we believe we have created about 100 basis points of value based upon our purchase price cap rate in the mid-7s. The acquisition market remains open to us with our competitive advantages intact, we believe we can materially increase our acquisition pace as our cost of capital improves. We expect acquisition cap rates for Q1 '26 to settle around 7.5% with volumes generally in line with guidance. As previously reported, on the capital side, we have our net acquisitions funded for the year with our $75 million convertible preferred investment from May 1 with our first $25 million draw completed already in February. With respect to dispositions, we sold 11 properties for $20.4 (sic) [ $17.8 ] million during the quarter at an average cash cap rate of approximately 6.82% for the occupied assets with a weighted average lease term of 6.9 years. For the calendar year, we sold 36 properties for $78 million at an average cash cap rate of approximately 6.79% for the occupied assets with a weighted average lease term of 7.9 years. For the year, the disposition cap rate range was 5.4% to 8%, with a median cap rate on sales at 6.9%. In the fourth quarter, the lowest cap rate were the Twin Peaks in Irving, Texas, where we achieved a 5.8% cap rate. The assets we have disposed of are less optimal concepts compared to the balance of our portfolio or they could be concepts we just want to reduce exposure to. We expect to continue optimizing the portfolio through 2026, but we expect the pace of dispositions to decline materially as most of our portfolio optimization occurred in 2025. Since our IPO, the 2025 dispositions reduced the asset base by 11%. During the quarter, we sold the following concepts: Red Robin, Sonic, Twin Peaks, which is now bankrupt, Adams Auto, and the [ Dark ] PNC, Bojangles and First Bank. These asset sales clearly demonstrate the desirability and liquidity of our well-located real estate portfolio. They highlight the disconnect between our stock price and the implied 8.1% capitalization rate on existing NOI. Interestingly, our implied cap rate is higher than what we sold a dark Bojangles in Alabama for with less than 4 years remaining on the lease term, our highest cap rate sale for the quarter and year and 160 basis points above the average disposition cap rate for properties sold in Q4. I would draw your attention to Page 23 of our investor presentation, where we show our dislocated NAV relative to the entire portfolio being valued at the same level as the assets we sold in the quarter, along with the average implied cap rate of our peers. Switching gears to the portfolio. We closed the quarter with occupancy approaching 99% with just 4 vacant assets. We currently have 2 tenants in bankruptcy, Smokey Bones and Twin Peaks, each with 1 unit, representing a combined 0.56% of ABR. With Smokey Bones, we have already received multiple offers to purchase the asset during the year, so we believe we can maximize value by re-leasing the asset. So we waited until the bankruptcy went through to obtain control of the property. With respect to our remaining Twin Peaks, we have understood Twin Peaks financial condition for some time and got ahead of their bankruptcy, selling 1 property in the quarter at a 5.8% cap rate and already re-leasing the second property to 2 tenants, Panda Express and Jaggers. The combined rent for both of these leases is $265,000 versus Twin Peaks rent of approximately $138,000 resulting in a 92% increase in rent and approximately a 3x increase in value from our original basis. This is an excellent outcome and another example of why our real estate-focused approach, combined with our seasoned management team continues to deliver value for our investors. Historically, we achieved an average recovery rate of approximately 90% when combining both vacant sales and new leases, though just our new leases alone has exceeded 110%. As a result, when an asset comes back, we will initially spend more time pursuing re-lease options rather than quickly selling an asset in order to maximize long-term value for our shareholders, for example, our current Smokey Bones. As we have continued to optimize the portfolio through Q4, we don't see any material additions to our watch list at this point. And for clarity, we believe bad debt should be approximately 50 basis points in 2026. In closing, FrontView is stronger today than at any point since our IPO. We have optimized our portfolio. We have demonstrated the fungibility and desirability of our well-located real estate. We have shown our top-tier management team's capability of proactively creating value for shareholders through creative asset management activities and capital structuring. We beat earnings and raised guidance throughout 2025 while disposing of assets, demonstrating the strength of our operations. We have a low dividend payout ratio below 70%, low leverage, and we are fully funded to acquire $100 million of net assets and grow AFFO per share 4% in 2026 at the midpoint of our guidance. All the while, our share price remains dislocated relative to a much higher NAV, especially given that we can meaningfully accelerate our already strong growth with a lower cost of capital. We believe that our real estate focused strategy, coupled with our developer DNA, will deliver AFFO growth and drive outsized returns for our shareholders. With that, I'll turn the call over to Pierre to review the quarterly numbers and guidance. Pierre Revol: Thanks, Steve. Before turning to quarterly results, I want to briefly highlight some enhancements we made to our disclosures. We now provide 100% of ABR by concept, along with key location data, including average daily traffic, Placer.ai performance and population metrics. Our properties are located in retail nodes with average daily traffic exceeding 24,000 cars. 78% are located within top 100 MSAs and the average 5-mile population is 184,000. Placer.ai ranks retail locations from 1 to 100, with one being the highest rank based on number of visits by retail subcategory within the state. Our locations have a median score of 26.8 placing them in the top third of retail locations. And for our upcoming lease expirations in '26 and '27, our stores have a median Placer score of 22.5% and 15.5% respectively, both in the top 25%. Finally, on our website, we disclosed 100% of our property addresses, including direct legal map links that showcases the trade area. This detailed disclosure allows investors to independently evaluate the quality of our assets and their locations. Publishing every address affirms our real estate first strategy, the assets we own and will acquire in the future. Turning to the quarter. We exited the quarter with annualized base rent of $62.9 million or $1.6 million higher than Q3, reflecting net acquisitions of $21 million for the quarter. This equates to approximately $15.7 million in stabilized quarterly base rent on a go-forward basis. In addition to base rent in the quarter, we generated $186,000 in interest income and $76,000 in percentage rent and other cash income. At quarter end, our run rate cash revenue is $16 million or $64 million annualized. Our annualized adjusted cash NOI was $61.3 million or a 96% margin on the in-place portfolio. As we move into 2026, we expect NOI cash margin to expand to 97% or roughly $62 million on a normalized basis. This improvement is driven by higher occupancy, strong recoveries on insurance and lower other property costs. Thus, as we start 2026, our run rate quarterly cash NOI is $15.5 million. G&A expense for the period was $3.7 million, which included $534,000 of nonrecurring charges and $763,000 of stock-based compensation. Nonrecurring items were primarily legal expenses related to amendments to the credit facilities and corporate structure. Excluding stock-based compensation and nonrecurring items, cash G&A was $2.4 million for the quarter, which is approximately the run rate for the year. Interest expense declined by $256,000 quarter-over-quarter to $4.3 million. The decrease was primarily driven by amendments to our credit facilities, which reduced the spread on both the term loan and revolver by 15 basis points. As a result, the borrowing rate on our term loan declined to 4.81%, and our savings from the spread adjustment is over $450,000 on our debt outstanding. We ended the quarter with $115.5 million outstanding on the revolving credit facility, of which $100 million is hedged. Based on the hedges we put in place last September, the effective SOFR rate on the $100 million steps down from 3.86% to 2.97% over the course of 2026, resulting in an average rate of 3.35% for the year. Total available liquidity was $223 million, inclusive of cash, revolver capacity and $75 million of undrawn preferred equity. We ended the quarter at 5.6x net debt to annualized adjusted EBITDAre and our loan-to-value was 34.5%. On February 10, we drew down $25 million of the convertible preferred equity and expect to draw the remaining $50 million throughout the year to fund our $100 million net acquisition target. We expect our net debt to adjusted annualized EBITDAre to end the year below 5.5x. AFFO per share for the fourth quarter and full year achieved the high end of guidance with $0.31 for the quarter and $1.25 for the year. Looking ahead to 2026, we are revising our AFFO per share guidance range upwards to $1.27 to $1.32, representing 4% growth at the midpoint and 6% at the high end. The increase reflects faster-than-expected resolutions of Tricolor, benign credit issues to date relative to our assumptions and continued execution of our capital deployment strategy with near-term acquisitions in the mid-7 cap rate range. Our objective is clear: to build the best-in-class net lease REIT differentiated by a truly real estate-first investment strategy. We believe that credits evolve over time and what drives long-term value is the location, rent basis and the box. Closing our current GAAP NAV starts with performance. We intend to execute on our capital deployment plan, continue delivering strong operating results and maintain a conservatively levered balance sheet. With that, I'll turn the call back over to the operator to open up for Q&A. Operator: [Operator Instructions] Your first question comes from John Kilichowski from Wells Fargo. William John Kilichowski: My first question is on the AFFO guide, Pierre. Thanks for walking us through the adjustments there. Maybe could you help us understand what gets us to that $1.32 versus that $1.27? Pierre Revol: Yes, sure, John. Thanks for the question. It really is portfolio performance is a component of it in terms of if the portfolio continues to do as well as it's been doing, there's opportunity to go on the high end because our assumptions are -- they do have some assumptions sort of what the reserves will be. So I think number one is portfolio performance. Two is the timing of acquisitions and dispositions, assuming that we do more in the front half versus the back half that impacts it. As we talked last quarter, I said that the 7.25% would be the cap rate guidance, but we're still seeing mid-7s right now, so that helps a bit. So it really comes down to portfolio continue to execute well and the timing and cap rate on acquisitions and dispositions. William John Kilichowski: Got it. And then one for Steve. I believe in the opening remarks, you made a comment about the implied cap rate of the business trading outside of where you sold a dark Smokey Bones. I hope I said that correctly, I heard that correctly. I guess given the persistent discount to NAV, have you received any outside interest? And if so, where is that interest coming in at because there's clearly a disconnect? Stephen Preston: Yes. No, we certainly see that discount. I think it's pretty obvious and evident certainly from that one sale and then certainly from the other sales that we made disposing of about $80 million of property and then averaging about 6.79% cap rate throughout the year. With respect to inbounds, that's been quite at this point. Pierre Revol: I would just add, John, like the portfolio and the disclosures, I think, kind of can help people understand that in terms of the discount. I think that people are -- obviously, there's a big market there of people that are looking for portfolios and qualities, and it's very hard to replicate what's been created. I will make a correction. It was a dark Bojangles. It wasn't a Smokey Bones that got sold. But when that gets sold at an 8% cap and if you think about -- there was a lot of dispositions this year, including Twin Peaks that was sub-6 and the median cap rate on dispositions of 6.9. It's pretty -- the portfolio quality is there. I think we just have to execute, and I think that will drive the performance to get closer to NAV. If there was interest, now you can see through our website, through the disclosures, there's enough information for people to come up with what this company could be worth. Operator: Your next question comes from Anthony Paolone from JPMorgan. Anthony Paolone: Just maybe following up on the last point there around your asset value. As you think about just growing the portfolio over time, you have the pref you could draw down. But how do you think about just incremental capital looking at it as either an AFFO yield versus, say, NAV? Because I think those are -- you end up with 2 pretty different numbers, I think, in terms of when you would seem to have access to capital accretively. Pierre Revol: Thanks, Tony. It's true. Like if you think about our NAV and the discount, like we're trading like roughly like low 8% implied cap rate. And -- but if you think about the weighted average cost of capital, it has improved meaningfully. What's important to note is that for 2026, it's not an issue because we're fully funded with the equity that we put in place. And so we think that, that gives us time to just execute on the $17 equity that we got through the preferred. But even if you think about where our stock is today in the mid-16s going to 17, you're talking about an AFFO yield that ranges from mid-7s to mid- to high 7s. With debt costs, I think we can probably do debt costs that are 5% or lower if you think about where 7-year term loans might price. And that translates to a weighted average cost of capital that is between 75 to 125 basis points below where we're seeing acquisitions. So that does put us in the strike zone to continue to execute. But fortunately, the equity question is solved for this year. It's more about when you think about what you go into next year, how that translates. I'd also highlight, I made the comment in my remarks is that we are delevering this year. We're only using $25 million of debt on the $75 million of equity. So if we end below 5.5x, we do actually have capacity to grow into 2027 without really needing the market for a bit of time. But it is nice that from a weighted average cost of capital and growing AFFO per share, which is what we intend to do, we are well set up to do that even if we're not quite at the NAV. Now I'd point to you, if we do get to -- I think if you do get to the NAV or the NAV premium, which you look at the net lease comp set, 98% of the market cap is above NAV. If we get to that point where we're doing -- where our cost of capital gets there, just the math of being a smaller company will allow us to grow faster than any of our peers. And that's something that I think is an advantage that we will see over time. But first, we have to get to the NAV. Anthony Paolone: Okay. Great. That's a lot of good color. And then just my second one relates to the deal activity as you look into the market. How are you prioritizing like initial yield versus contractual bumps versus lease length? Like when I look in the quarter, you had good yield and long lease lengths. The bumps were a little on the lower side. I guess, is there a priority there? Or you're just looking at the totality of the transactions? Stephen Preston: Yes. Yes, generally, good question. Certainly, the totality is an equation. But certainly, for us, we're focusing on the location, and we're focusing on sort of that size of the land track. And then what's also very important for sure is the market rent and making sure that anything that we're acquiring also has rent that's replaceable. And then, of course, we look at and we're focusing on the credit and then the term and the escalations as well. And with respect to the escalations, I think they came in about 1.2% for the quarter. We -- it just sort of ebbs and flows on when bumps take place. Typically, it's -- you get a 5% or 10% bump every -- or 1% to 2% bump every 5 years. And so it's in line with our 1% to 2% overall, which sort of averaged about 1.5%... Operator: Your next question comes from Ronald Kamdem from Morgan Stanley. Ronald Kamdem: Just 2 quick ones. I wanted to dig back in on sort of the acquisition pipeline. I think you said mid-7s cap rate, if I remember that correctly. Maybe could you just talk through some of these deals are off market? Are there special situations? And really, how large do you think that pipeline can get to the extent that you get the cost of capital? Stephen Preston: Yes. No, good question. Certainly, the market is fluid. We have acquired -- we expect to acquire through Q1 sort of in that 7.5% range. We see that cap rates could come in a little bit into Q2, but we are a circumstantial buyer. And we have seen in the marketplace a little bit of increased institutional interest just generally in net lease, which is kind of setting the tone for the marketplace. And then sort of in the market that we play in, leverage is a little bit easier now for other buyers to obtain. So there's just a tiny bit more competition. But we play in this very large, very liquid market. There is a lot of opportunity for us to choose. Again, we don't -- we're not competing with institutions or other REITs really due to property size. And we have a very strong pipeline that can build. Remember, we bought about $100 million of acquisitions during Q4, so we can sort of expand and build on that pipeline. And then we have these competitive advantages that we've demonstrated, which is we get to close quickly and then see outside returns because of that. So as a result, there are circumstances that allow us to achieve higher cap rates, especially with respect to like the 7 Brew as an example, buying an elevated cap rate because there were issues with an acquisition that others just can't fix. And that's another very big strength for us is that we can come in and makes us this buyer of choice in the marketplace where we close quickly all cash without sort of financing contingencies. And then at the same time, we can fix problems. Pierre Revol: I would say one more point there is also that a lot of the transactions that we're targeting, if they're below $5 million, $6 million, it's very fragmented in that market where we can play and there's a lot of opportunities within that market. When you get to larger deal sizes, that's where you see more people step in. But we are dealing with a highly fragmented market where if you're viewed as a buyer that can solve problems and can find solutions, you get a lot of opportunities, and that's something that's been helpful for the types of assets that we target. Stephen Preston: Yes. We've got -- just to add on that, deep brokerage relationships, and we see a lot of deals just being that repeat buyer that performs and closes quickly. Ronald Kamdem: That's really helpful. My second question is we appreciate the disclosures on the traffic count, population sort of place very high scores as you're sort of putting it all together, I think you talked about 50 basis points of bad debt for this year. Is the thinking that through sort of the asset management functions that you've done, like that's sort of the right run rate going forward as you're thinking about the portfolio and the watch list? Stephen Preston: Yes. Yes, I would say so. The portfolio is performing pretty well. 50 basis points is pretty in line with what we've seen historically. And as we've said, as you heard earlier this morning, we're going to be expecting well over 100% recovery on the current 2, the Smokey Bones and then certainly the Twin Peaks. So yes, I think that's a good run rate. Also sort of with respect to the watch list, that is pretty minimal right now. I don't really see any material changes or adds to the watch list. It seems pretty healthy, pretty quiet. Obviously, you've got a Smokey Bones. You've got a small GoHealth. There's a couple of sleep numbers on there and maybe a couple of gas stations. But all in all, it feels pretty good and pretty small. I know there's some tenants that there's a little bit of noise in the marketplace on today. For example, there's Wendy's. They're in the news. We have 5 Wendy's, and we've got sales on most of them. We've already proactively replacing 2 of them, that would take us down to 3. Our Wendy's have average rents of about $120,000. And so we feel that those are pretty good. And again, the sales volumes show that they're performing well. Just kind of another tenant that's been in the space and people have been talking about is Advanced Auto. We have 7 of those represents about 1.3%, 1.4% of ABR. We were proactive with that group as well, extended several of ours into the 10-year mark. Our average remaining [indiscernible] our remaining is about 8 years. And again, we've only got an average rent of $120,000, $122,000 across all of our advance. So we don't want to take a look at selling those at any discount and we've got great basis in great markets. And if any one of those comes back to us, we've got the team in place. We've got the experience in place. We've got the expertise in place. We've demonstrated that already that we can re-lease and create value for any problem that comes our way, onesie, twosies or whatever it may be. Operator: Your next question comes from Jana Galan from Bank of America. Unknown Analyst: This is Dan [indiscernible] for Jana. I was wondering if you could provide any color or expectations around non-reimbursed property and operating expenses and cash G&A for the year? I know you guys used to guide for that. Pierre Revol: Yes. So that was part of the remarks. We think it came in a little bit elevated with the 96% margin. There were some taxes that we took related to vacancies earlier in 2025. We think that, that number comes down. And so we do believe that the NOI margin is going to increase about 100 basis points. If you run that through, it's like $450,000, $500,000 on a quarterly basis in terms of how you should think about that. And if the portfolio continues to do well. It's a big focus area and adds value, but I think that, that should come in. Unknown Analyst: Got it. And then for my follow-up, could you talk about maybe the potential to do more preferred convertible capital raising in the future? Pierre Revol: So what's interesting about the preferred equity, it's been hugely successful and a lot of -- there's been a lot of interest in inbounds to do more and people are curious about that. I think that right now, our mandate is to deploy it, do well. And I think that the alignment with Maewyn has been helpful, and we will continue to execute on the plan. Our plan right now is to pursue that path. It's an option if we wanted it. It would not be -- the conversion price would not be -- it was a 30% premium at the time. Now it's under 10% premium. So we're pretty close to what it is. We plan to probably just go back to more traditional funding going forward, assuming that our stock price improves as we think it will. Operator: Your next question comes from Daniel Guglielmo from Capital One Securities. Daniel Guglielmo: In the past, I think you all had mentioned that the elevated renewals over the next few years could be a potential benefit with current rents below market. You probably have a good line of sight into the 2026 renewals. So are you seeing kind of a rent catch-up benefit with some of these older vintage leases? Stephen Preston: Yes. Good question. The short answer to that is yes. What I'll say is that I think we all know this, but sort of continue to hit it home that we've got extremely good quality real estate. It's very desirable, it's fungible. And then ultimately, the portfolio is also exceptionally diversified, which certainly is helpful. From a data standpoint, pure data standpoint, which gets to your point, since 2016, we have had 53 lease expirations. We've had 44 renewing to the same tenant and 3 renewing to a new tenant. That recovery rate has been about a little over 105%. And so that is an approximately 90% renewal rate. So we do expect that with any of these leases coming off that we'll have those similar historical recoveries for '26 and '27. And I'd also like to point out, too, that the leases that are coming out in '26 and '27, you've got some of the top Placer scores. So I think we're like about 25% to 30% of top Placer scores for those tenants coming up. Pierre Revol: I would just add to that point. It's a great point, but one thing to point out is that as we spend more time working on properties, and we leased retenanting. So if you think about what's going on with Twin Peaks and getting a 92% rent increase, that's going to show up later this year. There's -- as you work vacant properties and you retenant them, new rents that are coming in higher is a benefit that is on top of the normal course expiration. That's a little bit unique within the net lease space. A lot of net lease REITs just sell properties when they go vacant. By doing this approach, you are creating some tailwinds as we retenant those and they come on next year. Daniel Guglielmo: Great. Yes. No, I appreciate all that color. And that's a testament to the quality properties. Just as a follow-up, at REITworld around kind of U.S. consumer health, I think you had mentioned potential for less dollars for older concepts. Have you kind of seen that continue into 2026? Or has it generally been healthier than you expected? Pierre Revol: I'm sorry, can you -- I'm not sure I totally follow the question. So are you saying that the concept concerns on certain concepts? Is that the question? Daniel Guglielmo: Yes. Just U.S. consumer health, I think just overall kind of less dollars from U.S. consumers concept... Stephen Preston: Yes. No, listen, I think we see that throughout the space, unfortunately. We certainly got a strong stock market and -- but you do see the consumer that is struggling a little bit, certainly with inflation. And so we want to stick to those concepts. We certainly like the essential. We like the service tenants. And again, I'll just highlight that we're focusing on great real estate, replaceable rents, and the concepts that we have, now you can see all of our concepts throughout the entire portfolio. These are known strong national, regional brands and that apply to a real diverse demographic. Pierre Revol: And I'd point out that even in terms of the dispositions, if you think about which industries have moved [Technical Difficulty] sorry. One other thing just to add on that one question was that we've actually reduced our casual dining quite a bit this year. We still like sort of casual dining concepts like Texas Roadhouse is doing great. We have a good percentage there. But if you think about where we were in the beginning of last year versus today, that also has come down a little bit. But our... Operator: Your next question comes from Matthew Erdner from Jones Trading. Matthew Erdner: You mentioned that most of the optimization of the portfolio has kind of occurred throughout 2025. What are you guys thinking from a gross net investment, net disposition level, I guess, gross for both? Stephen Preston: Yes. Coming into '26, you're right. In '25, we sold off about $80 million, optimize that portfolio. I think it certainly goes without saying that we were certainly not selling off our best assets. We were selling assets that were strategically selling concepts that we thought that could come under pressure, maybe less optimal concepts, they had lower [ wealth ] possibly or just concepts we wanted to reduce exposure to. And we've done a lot of that optimization throughout the year. So I would expect that we were doing about $80 million run rate in the $30 million to $40 million of disposition, continue to prune that portfolio coming into '26. And again, I think hopefully, we'll expect that similar cap rate. But those asset sales throughout '25, were in that upper 6s -- 6.79%, 6.8% cap rate, median about 6.9% against where we're trading today in the low 8s, 8.1%. So I think it's a pretty good proof in the pudding demonstration of the dislocation too of the marketplace. We're not selling any of our Raising Cane’s. We're not selling our Walmarts, not selling our Chipotle, our Lowe's, et cetera. So those are sitting at much, much, much lower cap rates available in the portfolio. Matthew Erdner: Right, right. That makes sense, and that's helpful. And then I think you mentioned it a little earlier, the capital was deployed kind of towards the early half of the year, that will lead to the high end of guidance. What are you guys expecting in terms of pace of deployment? Obviously, the $75 million is going to be kind of spread out across the year. But I guess just what does the first quarter kind of look like to project the first half? Pierre Revol: So the first quarter is looking like pretty much in line. Like we have -- it's going to be $25 million net, maybe I think it's closer to $35 million of acquisitions with some dispositions behind it. And the second quarter, we're building it right now. My expectation in terms of what we're forecasting is it will be close to $25 million net as well. But there are a few deals that we're looking at that could bump it either way. That is a driver, but there's a lot of different drivers in terms of just the portfolio acting well that will help us achieve the high end of that number. Operator: There are no further questions at this time. I will now turn the call over to Steve Preston for closing remarks. Please go ahead. Stephen Preston: Great. Yes. Thank you, everyone. Please be safe. Please be healthy, and we look forward to seeing you at the Citi event in early March. Until then, thanks. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you all for your participation. You may now disconnect.
Operator: Good morning, and welcome to the Camping World Holdings conference call to discuss financial results for the fourth quarter and year ended December 31, 2025. [Operator Instructions] Please be advised that this call is being recorded, and the reproduction of this call in whole or in part is not permitted without the written authorization from the company. Joining on the call today are Matthew Wagner, Chief Executive Officer and President; Tom Kirn, Chief Financial Officer; Lindsey Christen, Chief Administrative and Legal Officer; and Brett Andress, Senior Vice President, Investor Relations. I will now turn the call over to Ms. Christen to get us started. Lindsey Christen: Thank you, and good morning, everyone. A press release covering the company's fourth quarter and year ended December 31, 2025, financial results was issued yesterday afternoon, and a copy of that press release can be found in the Investor Relations section on the company's website. Management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These remarks may include statements regarding macroeconomic industry and customer trends, business plans and goals, future reductions in SG&A, future growth of operations, future deleveraging activities, inventory management objectives, investments in customer experience, future capital allocation and future financial performance. Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the Risk Factors section in our Form 10-K, our Form 10-Qs and other reports on file with the SEC. Any forward-looking statements represent our views only as of today, and we undertake no obligation to update them. Please also note that we will be referring to certain non-GAAP financial measures on today's call, such as EBITDA, adjusted EBITDA and adjusted earnings per share diluted, which we believe may be important to investors to assess our operating performance. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial statements are included in our earnings release and on our website. All comparisons of our 2025 fourth quarter and full year results are made against the 2024 fourth quarter and full year results, unless otherwise noted. I'll now turn the call over to Matt. Matt Wagner: Thank you, Lindsey. Good morning, and thank you for joining our full year 2025 earnings call. I am proud to report that our team made significant progress in 2025. We achieved full year adjusted EBITDA growth of over 35%. Our same-store unit sales improved over 14%. Good Sam generated record revenue and the parts, service and other category experienced a strong improvement in gross margins. This performance demonstrates the strength of our model and the hard work of our team. In the fourth quarter, we saw encouraging signs of momentum with same-store sales volume for new and used vehicles increasing by 4% and our combined market share holding firm at 13%. Our 2025 results provide a solid foundation, and we have only just begun to realize our full potential. Since assuming this position, I've spent considerable time with our teams, our customers and many of you in the investor community. My message has been simple. We are focused on disciplined execution to drive greater profitability. To that point, the first half of January started strong with short-term trends indicating positive new and used same-store sales. Towards the end of January, weather across the country forced the temporary closure of over 60 of our locations for at least 1 day. This widespread weather disruption, which persisted through the first week of February, resulted in a year-to-date estimated miss of about 1,500 new and used unit sales or about $13.5 million of gross profit. This weather interruption in combination with broader industry performance, forced us to reassess our sales expectations and broader industry retail and wholesale shipment expectations. Our execution amid these short-term challenges gives us confidence in our 3 strategic priorities: grow new and used RV sales, create greater SG&A cost efficiency and accelerate Good Sam's growth. Let's start with RV sales. Our strategy to grow new and used RV sales this year is multifaceted, including the expansion of exclusive RV brands, improved efficiency of used RV procurement, partnerships with organizations like Costco and the acceleration of inventory turnover rates. Looking beyond the immediate term, we see some significant positive industry catalysts on the horizon. We believe the 4.1 million customers who purchased new and used RVs during the 2020 to 2022 peak are approaching a manageable equity position in their vehicle. We anticipate this will create a substantial wave of trade-in demand over the next several years. We are taking decisive action in 2026 to cleanse and optimize our inventory portfolio to prepare us for this trade-in opportunity. By improving our inventory turnover rate, we will increase working capital efficiency with fresher inventory. To put it even more simply, we will do more with less and position ourselves to generate higher revenue and greater earnings power with less inventory. This will require a strict and at times, aggressive approach to move through certain aged and noncore RV assets. While this strategy is essential to reset our foundation and enhance future cash flows, we expect it will create a near-term negative impact on our gross profit per unit for both new and used vehicles. This proactive strategy is a key driver behind our outlook for the year. During our Q3 call, we set a minimum expectation of $310 million in adjusted earnings for 2026. Given our decision to accelerate the cleansing of our inventory, we believe this strategy could negatively impact EBITDA by about $35 million in 2026, particularly in the front half of the year. This leads me to our second priority, optimizing SG&A. In the last couple of months, we have completed about $25 million of annualized expense reductions. A large portion of these savings are expected to offset some of the gross margin impact from the acceleration of our inventory turnover. We will continue to pursue systems and processes to further centralize our business and remove costs to ensure we hit our targets. Now let me turn to our final priority, accelerating the growth of Good Sam. For nearly 60 years, Good Sam has been the bedrock of the RV community dedicated to protecting, enabling and empowering the adventures of every RV enthusiast. For our company, Good Sam is the cornerstone of our future growth, driving high margins and best-in-class customer service. We are confident in our ability to execute upon all of these management objectives in 2026. Last evening, we established an adjusted EBITDA range of $275 million to $325 million for the full year 2026. This range encompasses the high and low end of expected industry retail sales, plus it includes the expected impact of inventory corrections and cost savings to prepare this business for the next trading cycle. Lastly, as a Board, we changed our capital allocation strategy to prioritize the long-term health of the balance sheet. As such, we've elected to pause the dividend and retain operating free cash flow to reduce the net debt leverage and keep growth capital within the business. With that, I'll turn the call over to Tom to discuss the financial results in more detail. Thomas Kirn: Thanks, Matt. For the fourth quarter, we recorded revenue of $1.2 billion, driven by a 14% increase in used unit volumes, partially offset by a 7% decline in new unit volumes. New ASPs improved from the trends we experienced earlier in the year and were only down slightly compared to the fourth quarter of 2024 as we expected. Vehicle gross margins and GPUs were primarily impacted by the strategic clearing of aged inventory beginning in December. We expect this margin pressure to persist during the first half of 2026. Within Good Sam, the business continued to post positive top line momentum with services and plans revenue increasing by about 3% in the quarter. The organization remains positioned for margin improvement in 2026 as we expect to begin to yield returns on several of the significant investments we've made over the last 12 to 18 months. Our Q4 adjusted EBITDA loss of $26.2 million compares to a loss of $2.5 million in Q4 of 2024. As we think about the drivers of the delta in our fourth quarter results versus our own expectations, the largest was the December hit to vehicle margins as we accelerated the cleansing of our inventory, along with dealer insurance product cancellation reserves. Our 2026 guidance calls for adjusted EBITDA in the range of $275 million to $325 million, with just over 50% of the annual adjusted EBITDA expected to occur in the first half of the year. Lastly, our liquidity position is solid, ending the quarter with $215 million of cash on the balance sheet. In an effort to further fortify the balance sheet, the Board of Directors made the decision to pause the company's quarterly dividend. Our Up-C structure was designed to require distributions out of the operating company to cover the taxes of our members including CWH. This historically generated excess cash trapped at the public company, which was the primary source of cash for the dividend. We've reached a point where this pool of trapped cash has been returned to shareholders. And while we could choose to fund the dividend out of incremental distributions from operations, we've elected instead to focus in the near term on net debt deleverage and dry powder for growth. As a step toward improving our net debt leverage, we have already repaid an additional $50 million of long-term debt to date so far in 2026. I'll turn the call back over to Matt. Matt Wagner: Thanks, Tom. Before we flip to Q&A, I want to leave you with one final thought. This business is ultimately about bonding people with each other and the outdoors [indiscernible] as a next steward of this company, my goal is to become the most trusted RV company in the world by providing exceptional customer service and experiences. It is through this lens that I intend to lead this company through our next phase of growth with the goal of returning meaningful value to our shareholders. We'll now turn the call over to Q&A. Operator: [Operator Instructions] Our first question comes from Craig Kennison of Baird. Craig Kennison: Matt, you mentioned perhaps 1,500 units that were lost as a result of weather. In your experience, would you expect to get these units back as the season unfolds? Or do you think they're truly lost? Matt Wagner: Craig, that's a debate that we constantly have internally. And the brutal reality is that a large portion of those are oftentimes just lost, and then it just gets caught into the jet stream of whatever the annualized outcomes are. But whenever you have an instance like this, it just forces you to change the calculus of what the short-term versus long-term projections are of the business. And that was a painful what you could argue is almost about a 17-day stretch of just weather impacts that were sprawling across the Atlantic region all the way over to the Midwest down to Texas and back over to Florida, which when you think of the whole quadrant of the country, that's where we have a pretty tremendous density of dealerships. And if customers, for whatever reason, just didn't choose to buy within that period, we do hope that some of them will come back in March. But we certainly aren't banking on that, and we're doing everything within our power to continue to solicit more customers to come back in to at least make up for whatever the shortfall was. Craig Kennison: Yes. And sort of as a follow-up, there has been this expectation that tax refund season might provide a lift to the RV demand curve this year. I'm wondering if -- I know it's early, but in the last couple of weeks, if you've seen any improvement in demand that you could tie to that dynamic? Matt Wagner: Craig, I think it's still a little too early. I mean we're looking at the same things, obviously, looking at some of the reports you've been putting out weekly just as well, keeping a watchful eye on what these tax refunds are. We anticipate -- if we did see any sort of improvement, it'd be probably over the next couple of weeks, where we anticipate a number of refunds starting to hit the end of February and then starting to accelerate throughout March. So I believe more to come there. We think in certain cohorts of consumers that could yield a significant benefit for us. I can tell you right now, we've been performing very well in certain categories like new fifth wheels and new entry-level motorized, but there is some softness admittedly on new travel trailer sales and used travel trailer sales remarkably. So when we think of the potential benefits of that refund, I think that would enable more of these potential travel trailer consumers to come back into the market, which would then make up for some of that gap that exists today. Operator: Our next question comes from Joe Altobello of Raymond James. Joseph Altobello: Matt, just -- you started to do a little bit of this, but maybe if you could bridge the gap between the low end of your EBITDA guidance of $275 million with the prior floor of $310 million. I mean, obviously, inventory cleansing is the biggest part of that, and then you've had weather, but you also have cost savings and the Costco relationship, I think, is incremental as well. So maybe kind of walk us through those steps, if you could. Matt Wagner: Yes. Very fair question, Joe. So I'll keep it as simple as possible. When we went through that $310 million base case on our Q3 call, there was a number of elements that were contemplated there. Since that time, what has transpired is we removed about $25 million of annualized SG&A savings for our business. So take that $310 million number and now go up to $335 million of potential upside. But we also realized over the last 45 days is we need to start to improve our inventory turnover rate to prepare for what will be this trade-in cycle, but also just to operate in a healthier environment. When we ended the year with about a 1.7 turn on new inventory, that wasn't satisfactory for us for a number of different reasons. Historically, we like to operate at about a 2.2 to 2.4 turn. And on the used side, it wasn't satisfactory for us then with about a 3.1 turn. We like to operate typically at about a 3.4 to 3.5 turn. There's a variety of different reasons why you want to accelerate turnover. But as a dealership business, generally, your inventory is your greatest risk, but also your greatest opportunity for growth. So when explaining this turnover number, I've oftentimes spoken about how inventory is like an ice cube sitting on your lot. With every day that it sits, you have different profitability as well as cost of mass and your profitability starts to melt with each day that passes and it starts to evaporate. So we know we need to accelerate that inventory turnover. And as such, that's where you start to take what is that $335 million EBITDA number and you start to reduce that back down to $300 million because we believe that there could be about a $35 million EBITDA hit by means of accelerating that inventory turnover. This is the right thing for the business over the long term, especially in preparation for what will be this trade-in cycle. You're correct, though, Joe, that we haven't contemplated what truly the upside will be of Costco. If we end up selling upwards of 3,000, 4,000 or 5,000 more units as a result of the Costco relationship, that would push more towards the outer end. But using that $300 million as a base case, I would say really the biggest input for the downside case of $275 million versus the upside of $325 million is simply going to be how the new and used industry trends in terms of retail sales. And we're factoring in right now that our retail expectations for the new side of the business in the industry will be about 325,000 annualized sales to maybe upwards of 350,000. And on the used side of the business, we believe that the used retail environment could yield maybe anywhere from 715,000 used sales to upwards of 750,000 which there's a wide range of outcomes in there, which is why like we're in such a business where the average sale price on new assets is going to be about $40,000. If there's a 3,000 or 4,000 unit difference from the high side to low side, that represents pretty material differences in the earnings expectations. Joseph Altobello: Very helpful. I appreciate that. Maybe to follow up on the balance sheet. I think you're at 5.7x leverage. Could you kind of walk us through where you see that number going by the end of this year and maybe by the end of '27? Thomas Kirn: Yes. Sure, Joe. I think our -- this is Tom. Our goal for this year is to get as far below 4.7 as possible. So that's ultimately our goal for this year and then to set us up to try to get below 4 in 2027 as we continue to improve earnings. Operator: Our next question comes from James Hardiman of Citi. James Hardiman: So I was hoping we could dig a little bit deeper into sort of the inventory cleansing that seems to be the focal point of a lot of what we're talking about here. I guess, a, when did we get to a place where sort of the trajectory was just a turnover level that now feels like it's unacceptable. I think a lot of the commentary in previous quarters was that we were in a pretty good inventory place. And then how does it play out over the course of the year? I think there were some -- I think the expectation is first half headwind, maybe a tailwind or at least less of a headwind in the second half. But maybe walk us through some of the puts and takes. I'm assuming that ordering activity is going to come down pretty meaningfully and that gross margins are going to be negatively impacted as we maybe get a little bit more promotional to clear out some of those units. I didn't know if there's an SG&A impact to all of that, but maybe walk us through some of the moving pieces there. Matt Wagner: James, fair questions all around. Really, the simplest way to even answer your first question is this is my inventory philosophy of simply hitting those elevated inventory turnover rates because inventory turnover really is important for 3 specific reasons. Number one, there's carrying costs associated with inventory. Every single day that it sits on our lot, you ultimately are hit with floor plan carrying costs. Number two, all these inventory assets are depreciable assets. With every day that it sits on our lot, you're going to lose more and more value. And number three, if you're locking up these assets on your lot, you're ultimately losing some opportunities elsewhere. So for example, we'd rather have a travel trailer that we're going to sell 6 times a year for a $2,000 profit versus having a travel trailer that we're only going to sell twice a year for a $5,000 profit. We know that we can redeploy that capital over and over again. And that truly starts to quantify bottom line improvement. So for example, our turnover rate to end 2025 on the new side was about 1.7. If we're to improve that to about 1.8, that's an additional $7 million of straight gross profit. We believe that we should be operating on the new side with a turnover rate somewhere in that range of 2.2 to 2.4. And by the way, that's just historically being healthier there. So when you think about just philosophically how we'd like to operate moving forward and then also in connection with the reality that there is a massive opportunity that we believe will start to brew in the back half of this year in terms of trade-ins. And we do believe that this will be a longer tail that will continue to materialize with greater and greater magnitude over the ensuing years. We wanted to make sure that we set ourselves up. And most of this impact to selling through the inventory on both the new and used side would be in the front half of the year. And there's some possibility that it could bleed a little bit more into Q3 because we have to be relatively judicious in terms of our approach into how fast we want to sell through those assets. But we wanted to reset the stage to say, okay, if we want to cleanse our inventory, which you could argue, it's still relatively healthy. We'll still make good margins. We're just not going to make margins to the same extent that we wanted. So I would expect that our margins for the collective 2026 could maybe be down year-over-year like 120 basis points to maybe upwards of 130 basis points on the new and used side combined over the course of the year because of the pressure on the front half of the year. James Hardiman: Got it. That's helpful. And then to this point about the better equity position for consumers. I just want to be clear here. It seems like in the context of the guidance, we're factoring in the costs associated to being in a better place to take advantage of that, but it doesn't seem like we're necessarily factoring in that positive inflection that it seems like you anticipate starting in the second half of the year. Just want to make sure that's the right way to think about this. Matt Wagner: No, I would argue that we are factoring in what will be that improvement in the second half of the year in terms of the volume opportunity, which is why you can make a case that the front half of the year just based upon perhaps just like limited replenishment in certain categories of certain orders, which you alluded to, that is a distinct possibility. You're going to see more dealerships inclusive of ourselves re-up in anticipation of a model year '27 changeover, in which case, I think we set ourselves up very nicely to take advantage of an uptick in general demand and trade-ins in the back half of the year. James Hardiman: Okay. But maybe the disconnect, I mean, as we think about sort of your assumption for industry retail, does that factor in that positive inflection? Or is that more you think maybe specific to you guys rather than the broader industry? Brett Andress: James, it's Brett. So when you think about how we're factoring in that trade-in cycle this year into those retail outlooks, it's fairly minimal. I mean the way we see this trade cycle playing out is pretty long duration. I mean we're talking very, very early innings at the end of 2026 potentially, building itself into '27 going all the way out to 2030 when you think about having to replace 3 years of RVs that normally are on a 3- to 5-year trade-in cycle that essentially got elongated by at least 3 years based on what we see from those cohorts. So minimal expectations as we think about '26 because it's much more of a longer tail event for the industry. Operator: Our next question comes from Scott Stember of ROTH Capital. Jack Edwin Weisenberger: This is Jack Weisenberger on for Scott. Just moving into the parts and services segment. I mean, we have seen a decline in '25 compared to used sales rising. I assume you attribute that to prioritizing the space for used reconditioning. But is there any way you could give some detail kind of on that underlying business there? Matt Wagner: Jack, you broke up for a moment there, but I think I captured the general essence of your question. Yes, last year, we generally were impacted in terms of reallocation of our internal work, so that necessarily was a detriment to the overall external service work in PS&O category. Heading into this year, though, this is one of our focal points, which we internally have been working through diligently, and we don't speak about it too much extensively in a public setting. But we know we have a lot of work to do to expand our service capabilities and our service network. Yes, we have more days and more service technicians than any other entity within this industry. But we do believe we're not getting as much in the external space as we should. So for this upcoming year, we have focused pretty extensively on our tech training, which is really the people component of the business. Within the process side of the business, we're launching a service CRM here, which will be live over the next 60 days, which we've been focused on for the last 60 days. So this has been a sprint for us to try to stand up a proper CRM. And then finally, what we're also working on with manufacturing partners, especially Thor, is creating a more streamlined parts process for reordering and reducing the repair event cycle time for consumers. That last component is perhaps the most important. So I can tell you that is a pain point in our industry of just that repair event cycle time and how long it takes to get parts to actually satisfy consumer needs. So we'll continue to keep the group posted. I know, in particular, you, Jack and Scott have maintained a focus on this category. So we'll do a better job out speaking about this publicly. But we're quite excited about the opportunity there. And then while it's not going to be huge revenue, we do believe it's really good gross profit because the margins within our service business are oftentimes going to be pushing upwards of about 60% in service, whereas collectively in that parts, service and other, it's going to be a little bit less than that. Jack Edwin Weisenberger: Great. And then kind of focusing on pausing the dividend and M&A. So just kind of what are you seeing in the M&A environment going into 2026? And does kind of pausing the dividend allow you to look any more aggressively for deals? Or does it kind of get put in the back seat kind of ahead of leverage? Brett Andress: Yes, Jack, it's Brett. So as we think about the M&A environment today and the pipeline we're seeing, it continues to lean more on the, I'd say, the stress side, if you look at the assets available and coming to market. We are continuing to be extremely prudent, extremely disciplined when we think about deploying any incremental capital towards M&A. We do have one that we have currently signed up that we plan to close in March that fits all of the criteria when we think about having a low rent factor, having a manageable small goodwill bite-size number and having incremental brands to add to the portfolio. But outside of that, I would say our criteria is very, very tight. And we're going to continue to allocate and deploy that capital much more towards that repayment. But we will always be in the market for it. Operator: Our next question comes from Noah Zatzkin of KeyBanc Capital Markets. Noah Zatzkin: I guess maybe just to kind of follow up on kind of improving inventory turnover. Is the decision there really driven by kind of aged mix or optimization of kind of unit type? Just trying to kind of understand like maybe the puts and takes to kind of repositioning the inventory here. Matt Wagner: Yes. optimization, number one, Noah. Flexibility number two. And really the driving factor behind that all is the flexibility is being limited by the fact that we're locked up in some noncore assets that we'd ideally like to redeploy that capital into better turning assets. So as we sit here today, about 18% of our new assets are model year 2025, which inherently those are going to be 1 model year too old. And we're on the shot clock right now where model year '27s are going to be debuted somewhere in that June, July time frame. So we want to position ourselves to be completely out of those assets to take advantage of the opportunity of a newer model year. Never mind, on the used side, we were relatively aggressive in pursuing expansion of our used inventory investment in the second half of last year. We just want to make certain that we turn through that product as fast as possible. There's a general rule of thumb in operating a dealership. I mean your first loss is your best loss or simply put in another more positive light is your first opportunity to sell something is probably your best opportunity to sell it. So while in the case of used margins, we still think that they'll be healthy in the context of the general like dealership business. We think that there could be a little bit more pressure on used margins more holistically on the front half of the year compared to the back half. So I wouldn't be surprised if our used blended margin for the entire year ended up in that like 17.5% range, maybe even a little lighter. Whereas on the new side, we'll again be under some pressure on the front half of the year, paving the way very nicely for the back half of the year, where I could see our new blended margin for the entire year being somewhere in that like 12.5% range. So collectively, though, this is all about optimization and flexibility. And some of that flexibility is being hindered by means of just having some noncore assets today. Noah Zatzkin: Got it. That's really helpful. Maybe just one housekeeping question. I think you mentioned kind of thinking about retail in a range of 325,000 to 350,000 units. Is it too simplistic to kind of assign the ends of those ranges to the EBITDA guidance range, meaning like the $275 million would be associated with 325,000 industry units? And then just any other color on the top and the bottom of the range. Matt Wagner: No, I think that's a pretty constructive way to look at it. And obviously, there's going to be some weird variables in there in terms of like general SG&A as a percent of growth and then ultimately, is there market share gains, and that's where you get caught in this trick bag. But I think if you were to bracket it just holistically, that's a helpful place to start. And then we're giving you a range where you can then figure out your puts and takes of what is that bull versus bear case. We think that $300 million is a really helpful place to start at the midpoint. And then there's going to be different opportunities that arise throughout the balance of the year. I mean we're sitting here only about 55 days into the year and 55 days into a different management change, where there's a different amount of possibilities and range of outcomes here as we go through the balance of the year. Operator: Our next question comes from Tristan Thomas-Martin of BMO Capital Markets. Tristan Thomas-Martin: When you talk about noncore RV assets, what are you referring to specifically? Matt Wagner: So when I think of noncore on the new side, I'm thinking of floor plans that are no longer being built or in the case of like Thor, Thor has consolidated some of their manufacturing businesses from like a Heartland into a Jayco. And some of those older Heartland units, while still a relevant brand, they're no longer in production. And while it's still a good product and while we still will make a margin on it, we can't expect to make that same elevated margin that we would on our fresher product. And when we look at the used side of the business, once a used asset generally hits about 120 to 150 days, there's a high likelihood that unless you sell in that ensuing 30-day time period that it's going to start to hit an age bucket of like 210 to 280 days. We want to avoid that at all costs. Used especially is one of those categories where you need to move quickly through those assets because every 60 to 90 days, there's going to be some sort of depreciation hit associated with NADA at a minimum. And NADA, unfortunately, is going to be relevant because that's a determining factor of advance rates for financing capabilities. So to put that in simpler terms, when a customer comes in and they want to buy an asset, it doesn't matter what the fair market value is of that asset, they're going to be limited by that financing advance rate on the front end and back end based upon an NADA valuation. We, as a dealership, have 2 options. We either ask that customer for an increase in their deposits, their down payment to reduce that overall advance or that financing amount. Or number two, you have to cut margins to actually satisfy that. And unfortunately, we're in a period on some of those older assets. We just might have to have a willingness to cut some margin to ensure that, that customer could buy that asset because there's a significant amount of credit available. It's just a matter of consumers having a willingness to actually put the down payment and actually afford that monthly payment. Tristan Thomas-Martin: Okay. And then another question kind of around like this new industry inventory strategy, I'm sorry. How does that impact your ordering with the OEMs? And then also have OEMs kind of handle this change plus the weather and their production schedules? Matt Wagner: This is like a [ fishing ] question. We will continue to reorder with manufacturers at the same pace we always have on the best-selling products. What we have gotten into a nice cadence on is actually ordering more frequently, so with greater frequency and with shorter lead times. So in other words, like we'll place orders this week, and we'll be focusing largely on April orders. Whereas historically, there's been time periods where we've had to order out in excess of like 3, 4 months, and we have to project out then the following 3 or 4 months of sales, which is playing a dangerous game of like what are the various outcomes of retail sales activity and what sort of ending inventory balances do you want and need. So I would argue we're in a really nice pull-through environment as opposed to a push environment where demand is truly being pulled through, and we're having to just modify orders on an as-needed basis based upon short-term trends. So the best-selling brands products will continue to order in mass. And I can tell you, we work extensively with all of our partners at Thor, Forest River, Winnebago, and we make sure that they have as much visibility into our real-time demand so they can also modify whatever sort of parts materials they're ordering up in the verticals. Operator: Our next question comes from Patrick Buckley of Jefferies. Patrick Buckley: Could you talk a bit about the trends you're seeing in the market? Operator: Hello can you hear me? Our next question comes from Patrick Buckley of Jefferies. Matt Wagner: We're having some technical difficulties. We're chatting with the operator right now to try to get you, Patrick Buckley up next to ask another question. Operator: Patrick, could you please speak into the line? Patrick Buckley: Can you guys hear me out? Operator: Pardon me, it seems there's an issue with your line, if you could dial back in. Our next question comes from Brandon... Matt Wagner: Patrick, we're going to dial back in. I know we have queue -- more individual sitting in the queue with Brandon and Jim. So give us one moment, I'll try to get back to you. Operator. I believe we have the speakers back on the line. [Technical Difficulty] Operator: This is the operator. I do believe we have the speakers back on the line. Matt Wagner: Sorry about that. And Ariel, thanks for reconnecting us. We are available for the next question. Operator: Our next question comes from Brandon Rollé of Loop Capital. Brandon Rollé: First, just on weather. Obviously, there's been some weather in the Northeast over the past weekend. Any early takes on maybe impacts to lost unit sales or location closures for that area? Matt Wagner: So we were largely impacted in particular, across that Atlantic region. So really beginning in Virginia all the way down to Florida. And then if you span it over into that Midwest down to Texas. So almost that entire expansive quadrant, where there are certain areas in the country like, for example, in Arkansas, where kids were home from school for upwards of 2 weeks or in like Nashville, where the power was out for 5 straight days. So there is varying levels of magnitude of impacts, but we have a pretty tremendous amount of density of dealerships within that general quadrant. So it's tough to say, obviously, what sort of true miss sales exist out there versus what the opportunity will be for March. But that's really been our focus, in particular, in the short term is how do we just take back what we feel like we've lost over that prior 17-day time period or so. Brandon Rollé: Okay. And just on the retail front, obviously, it seems like the RV shows have gone pretty well. But just in the normalized retail environment, can you talk about maybe trends you've seen year-to-date outside of the shows and outside of where weather is impacting demand? Matt Wagner: Yes. So it shows we performed very well from a volume perspective at every show that we participated in. However, what's been lost in that is some of the actual gross profit generation has been down year-over-year. So that suggests with the fact that there was just more pressure across the board in certain categories, in particular, on the travel trailer category this year. But more broadly, if we take a step back, if you look at both the new and used segments, travel trailers, in particular, are not performing as well as they were last year. Within the new side of the business, we're doing really well on fifth wheels and entry-level motorized. When I say really well, like new fifth wheels on a same-store basis, we're up in excess of 25% and have been year-to-date in both January and month-to-date in February. And then on the used side of the business, we're performing really well in the context year-over-year in every category. What's lost in that, though, Brandon, is travel trailers often account for on the new side of the business in excess of 70% of our sales and on the used side of the business in excess of about 60% of our sales. So we, as a company, have still a heavy dependency upon that category. And we're going to be working extensively to try to see what we could do to turn that fortune around that short-term pain to ensure that we're picking up more benefit here as we enter into the selling season. But we feel good with the general demand out there, especially the void of this weather event, where if you look at the front half of January, we did really well, and we are putting up really positive results across the country. And then in certain pockets like out West, like in Arizona, Denver, the Northwest, we've consistently performed well across the board. Mind you, it's been unseasonably warm out there in that general region. And while there are some industries that have suffered like the skiing industry, for example, in Colorado, we've actually benefited from that this entire winter. Brandon Rollé: Okay. Great. And just one last question on the strength in fifth wheels. It seems like the private label products are really gaining some traction at the shows. And I think a supplier last week had mentioned it seems like demand is trending towards good, maybe not better, best. Is private label fifth wheels really where the demand is centered around right now? Matt Wagner: We are seeing our most material improvement within all the exclusive brands that we've launched across the board. So that's where I would argue our fifth wheel improvement is truly idiosyncratic to us. And I would be shocked if the entire industry was seeing the amount of gains that we're seeing year-over-year. So I'd assume that within each of these categories of fifth wheels and entry-level motorized, we're picking up material market share because we just had a more creative strategy heading into this year. Operator: [Operator Instructions] Our next question comes from Jim Chartier of Monness, Crespi, Hardt. James Chartier: Can you hear me? Matt Wagner: Yes. James Chartier: Okay. So historical used gross margin was in the low 20% range, new kind of 13% to 14%. What are -- what is kind of the new gross margin target for new and used under the kind of the more strict inventory turn targets? Matt Wagner: I'd say for this year, Jim, we anticipate over the balance of the entire 2026 year that new margins will probably settle into that like 12.5% range and used margins probably in that 17.5% range. But once we get into a more balanced environment of just redeployment of capital and maintaining just standard steady-state turnover rates, I'd expect that our margins will structurally be higher and we'll get closer to what have been those historical norms. So I would hope that by 2027, if we're seeing improvement in turnover, we feel really good with our deployment of capital and a replenishment of inventory that our new margins should be settling into that like 13% to 13.5% range. And then on the used side, I wouldn't be surprised if we start to settle into that like 18% to maybe pushing upwards of like 18.75% range. But I do believe on the used side that it will be really difficult for us to rationalize sitting in at that 20% margin range because I do believe we'll be giving up opportunities in terms of just raw gross profit generation. I think I'd argue over time and over a longer tail that used margins settling anywhere from like 18% to 19% is probably a better way to approach it, especially in connection with turnover rates being more elevated than the new side. That's still a much better gross margin return on investment for us on the used side. So we'd rather be aggressive there even if we start to just like tap down some of that new side a little bit more. James Chartier: And so how does that translate then if used is going to be lower than it was historically by a couple of points, is a 7% EBITDA margin for the business still realistic? Just SG&A to gross target change? How do you kind of get back to a historical operating EBITDA margin? Matt Wagner: Yes. I think that it definitely is possible, but this speaks more to just how do we optimize our footprint. You've seen us make a lot of tough decisions over the last year in terms of shutting down locations that were underperforming, making certain that we're eliminating some of the fixed cost structure that exists in this business. And we're less in this cost-cutting mode to get closer to that EBITDA margin and that SG&A as a percent of gross. It's more of this cost optimization mode where we do believe that we'll be able to accelerate our used business that much more and come up with a more predictable GPU model compared to the straight gross margin model, which becomes a lot easier for us to then rationalize what our fixed cost structures are to start to drive that EBITDA margin back up to historical norms and ideally in a mid-cycle hitting that 7%. And then also on the SG&A side, we know we still have some work to do to get closer to that 80% or better SG&A as a percent of gross. Never mind, get back to some of the levels that we experienced in 2016, 2017, which I think we have a lot more work to get down to that like 72% to 74% SG&A as a percent of gross. James Chartier: And then just on the new side, where do you think the ASP is going to shake out for the full year? Matt Wagner: I could see new ASPs for the full year shaking out at like that like $39,000 to $40,000 range. And on the used side, I could see it being in that like $31,500 range. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Matthew Wagner for any closing remarks. Matt Wagner: Thank you very much for everyone's time this morning. As you can tell, we're very excited for the opportunity that lays before us, but we know we have quite a bit of work to do in the short term to pave the way for a much brighter future. We look forward to speaking with all of you again in another couple of months. Operator: This conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, ladies and gentlemen. Thank you for standing by, and welcome to 5N Plus Fourth Quarter 2025 Results Conference Call. [Operator Instructions] And I would now like to turn the conference over to your speaker today, Richard Perron, President and Chief Financial Officer. Please go ahead. Richard Perron: Good morning, everyone, and thank you for joining us for our Q4 and full year 2025 results conference call and webcast. We'll begin with a short presentation, followed by a question period with financial analysts. Joining me this morning is Gervais Jacques, our CEO. We issued our financial results yesterday and posted a short presentation on the Investors section of our website. I would like to draw your attention to Slide 2 of this presentation. Information in this presentation and remarks made by the speakers today will contain statements about expected future events and financial results that are forward-looking and therefore, subject to risks and uncertainties. A detailed description of the risk factors that may affect future results is contained in our management's discussion and analysis of 2025 dated February 24, 2026, available on our website and in our public filings. In the analysis of our quarterly results, you will note that we use and discuss certain non-IFRS measures, which definitions may differ from those used by other companies. Further information, please refer to our management's discussion and analysis. I would now turn the conference over to Gervais. Gervais Jacques: Thank you, Richard, and thank you all for joining us today. 2025 was truly record-setting year for 5N Plus. By leaning on our strength, we navigated a complex macroeconomic and geopolitical environment with agility and delivered phenomenal growth. This was driven by our strategic focus on value-added products in key end markets, our flexible global sourcing and manufacturing capabilities and strong customer relationships. Customers recognize our expertise. They trust us to deliver reliability and quality in demanding advanced material applications. In 2025, we also reached new heights in our financial performance, far exceeding the objectives we set for ourselves when we started the year. This includes accelerated revenue growth, record adjusted EBITDA and significant margin expansion, and it was made possible by contributions from both of our segments. In Specialty Semiconductors, our strong performance across the board once again confirm our status of -- as a supplier of choice in the high-growth renewable energy and SPACE Solar Power sectors. Starting with renewable energy. The new and expanded agreement for the supply of thin-film semiconductor materials with our strategic customer announced last August was an important milestone, providing visibility on a multiyear growth path. Under the new agreement, we increased volumes by 33% for the 2025 and '26 period underway and by another 25% for the subsequent term, taking us to the end of 2028. This agreement supports our customers' U.S. manufacturing growth plans as the leading American solar technology company. It also reinforces our critical supplier role within this value chain. SPACE Solar Power is another key end market with a clear and multiyear path for growth. After a strong year, our project pipeline at AZUR is very robust, extending beyond 2028. By the end of 2025, we successfully increased solar cell production capacity by 30% as planned. We are also now working towards an additional 25% capacity increase, which we expect to start gradually coming online in the second half of 2026, in line with customer demand. Whether in Montreal or in Germany, our sites are focused on scaling production and pursuing capacity expansion with discipline, unlocking productivity improvements and operational efficiencies along the way. Earlier this year, we also announced that we received a USD 18.1 million award from the American government to expand germanium recycling and refining capacity at our St. George, Utah facility. This investment aims to strengthen domestic supply chains for optics and SPACE Solar applications. Once again, it is a recognition of our expertise in reliability in a strategic sector. Finally, in performance materials, our intentional focus on key products in the health, pharmaceuticals and technical materials sectors has been the right one. In 2025, we capitalized on favorable pricing conditions and delivered strong results despite lower volumes. And this was no accident. As the leading supplier of bismuth-based chemicals and compounds, we took full advantage of our flexible sourcing and manufacturing capabilities to realize improved margins. Looking ahead, while the operating environment is expected to remain complex, the underlying growth trends across our key end markets remain clear. Strategically, 5N Plus sits at the intersection of utility scale and space-based renewable energy infrastructure. We supply advanced materials that enable critical sought-after technologies. As we previously discussed, solar energy remains a key component of the U.S. energy mix despite policy shifts. One of the driver is the fast adoption of AI technology, which required large data centers with significant power needs. At the same time, structural expansion in the space industry continues at elevated levels, where we are the go-to partner to the main players in this sector, thanks to our leadership in solar cell technology. Medium term, we also anticipate growth opportunities in imaging and sensing, both on the security and the medical imaging front. In performance materials, we remain a key partner for health and technical materials with growth expected to remain broadly in line with GDP, consistent with historical trends. With strong foundations, a clear growth path and a proven strategy, we are well positioned to level up our performance in 2026 and deliver long-term value for our shareholders. With that, I will now turn it over to Richard for a detailed review of our financial results and outlook. Richard Perron: Thank you, Gervais, and good morning, everyone. We are very pleased with our record financial performance of 2025. What you're seeing today is the result of strategic choices. Over the past several years, we have made a concerted effort to grow our specialty semiconductor business and to increase the proportion of revenue and earnings coming from high-end and high-growth sectors. At the same time, we have streamlined our performance materials activities, increasing the resilience of our highly complementary business. We have accomplished this by adjusting our footprint and investing in operations over the years, streamlining our product portfolio with a focus on growing or solidifying our position in key end markets and prioritizing client partnerships built over the long term. Our results speak for themselves and validate our strategy. In full year 2025, total revenue increased by 35% year-over-year, reaching $391.1 million with $285.4 million of those revenues coming from specialty semiconductors. Adjusted gross margin increased 44% year-over-year to reach $131.8 million in full year 2025. This translated into a robust adjusted gross margin as a percentage of sales of 33.7% for the year. This was boosted by an exceptional adjusted gross margin of 42.4% of sales for full year 2025 in performance materials. Finally, full year 2025 adjusted EBITDA increased by 73% over last year to a record $92.4 million. This includes a $70.1 million contribution from specialty semiconductors, helping us exceed the high end of our twice increased annual guidance range of between $85 million and $90 million. With our increased cash flow generation and prudent balance sheet management, we have significantly reduced net debt from $100.1 million at the end of 2024 to $50.3 million at the end of 2025. This brings our net debt-to-EBITDA ratio at year-end to 0.5x. Let's now take a closer look at our segments. Starting with our Q4 performance in Specialty Semiconductors. Revenue increased by 47% compared to Q4 last year to reach $76.2 million, supported by higher volumes in renewable energy and space solar. Adjusted gross margin increased by 27% in dollar terms. As a percentage of sales, adjusted gross margin was lower year-over-year coming in at 25.5% because of a less favorable product mix and higher planned maintenance expenses. As discussed on our last conference calls, we completed incremental preventive maintenance in full year 2025 to support our operational objectives for the full year 2026. Adjusted EBITDA in Q4 2025 increased by 12% to reach $14.2 million, supported by higher volumes, partially offset by the same factors mentioned before. Quarterly variations aside, the segment's performance for the year was excellent with a 41% increase in revenue to $285.4 million and a 59% increase in adjusted EBITDA to $70.1 million, while maintaining a robust annual adjusted gross margin of 30.8% of sales. Backlog also continues to be maxed out at 265 days as per our definition, with strong demand and orders in our strategic sectors booked several years out. Turning now to performance materials with the story in Q4 consistent with what we've delivered all year. Revenue increased by 36% in the quarter to $25.8 million over Q4 2024. This brought full year segment revenue to $105.7 million, up 22% over 2024. Q4 adjusted gross margin was 40.9% of sales compared to 33.5% in Q4 of last year. As mentioned, the segment's full year adjusted gross margin came in at an impressive 42.4% of sales. Adjusted EBITDA in Q4 increased by 108% to reach $7.8 million for the full year adjusted EBITDA increased by 59% to $35.1 million. The segment's overall performance was driven by a favorable inventory position coming into the year and improved product mix, higher prices net of inflation and higher metal input costs. Turning now to outlook. As the geopolitical and economic backdrop continues to evolve, we expect our operating environment in 2026 to remain complex. The underlying growth fundamentals and structural expansions in our key end markets remain very strong, providing a long runway for growth. However, we must also contend with rising input and operating costs that will pressure our margins, especially after the exceptional performance of 2025. From an operational perspective, we are laser-focused on the execution of our growth plans. This includes scaling production and increasing capacity in strategic sectors in order to meet customer demand. We have that called all of those key projects. Driving productivity and operational efficiency in 2026 is also key to help mitigate anticipated margin pressures. With our strong balance sheet, we will continue to invest in our operations, while also pursuing external growth opportunities to further strengthen our advanced materials leadership in key markets. Taking into account this environment and what we have in the pipeline, we anticipate generating adjusted EBITDA of between $100 million and $105 million in full year 2026 with a higher contribution in the second half of the year. This reflects a measured and disciplined approach to build on what we have achieved last year. Our focus is on solidifying our expanded earnings base and investing selectively in capacity to generate a sustainable performance. This approach positions us to further strengthen our standing as a supplier of choice in strategic sectors and to deliver continued value creation for our shareholders. That concludes our formal remarks. I will now turn the call back over to the operator for the Q&A with our financial analyst. Operator: [Operator Instructions] Your first question comes from Baltej Sidhu from National Bank. Baltej Sidhu: Congratulations on the quarter. First one for me is on the back of the results of America's largest solar technology manufacturer, which saw its guidance coming in below expectations and some strategic underutilization of international facilities. Just given the Trump administration's new countervailing duties for Southeast Asian imports on solar cells and panels and if this stick, we think that its U.S. operation should be a benefactor. Any comment you can provide as it relates to that, but also the pressure on international sales and any impact to BNP, if you were looking to gain more market share in that realm? Gervais Jacques: Well, thanks for the question. I believe that the emphasis that they are doing on reshoring and supply chain resilience that they've been talking about, I think it's all favorable for 5N Plus, and it's positioning us as the supplier of choice for them. Baltej Sidhu: Fantastic. And now turning to your 2026 guidance. The midpoint currently aligns with consensus and implies roughly 11% year-on-year growth. Just given the underlying momentum in the business, along with the recently announced capacity expansions for Cad Tell and AZUR, can you walk us through the key drivers underpinning that 11% growth at the midpoint? And if there's any details that you can shed on puts and takes that are embedded in the guidance? Richard Perron: Okay. Essentially behind the guidance in terms of growth, Bal. In the case of our renewable energy, I think we've been -- it's all out there and following our press release of last year. So we have confirmed volume for 2026 and further increase in volumes to '27 and '28. That's essentially -- this is locked in, and that's by default, a solid assumption to use in our guidance. As for space, it follows also our most recent press releases in terms of capacity expansion. So more recently, we announced capacity expansions for -- in '26 with benefits in '27. But if you go back to previous announcements of last year, all of that extra capacity on a full year basis is also embedded in our guidance numbers for this year. That's for the space business. Everything else, we -- from a guidance perspective, we keep our assumptions as I'm going to use the term with conservatism, and small growth. And obviously, we're applying ourselves to do always better. So first 2 sectors is backed up by orders and capacity expansion projects. And on FV, we remain prudent. Baltej Sidhu: Okay. That's great detail. And another one for me is just on the performance materials outperformance and the margin normalization that you noted just given the anticipated cost pressures that was noted. Could you provide more detail on your assumptions around business pricing? Margins have continued to remain elevated. What visibility are you seeing on pricing trends? And what are you hearing in conversations with your suppliers and the offtakers? Richard Perron: The metals we play with, it's always extremely hard to forecast any movement in prices. So we essentially -- the way we work is through our commercial contracts. That's how we protect ourselves forward. But by default, because we hold a certain inventory on hand, we have to be more prudent than less. So again, from a guidance perspective, we tend to use either stable or decreasing prices in order to face any -- in order to plan for any, let's say, unfavorable movement from notations. But if you recall, we've made so many changes to our product portfolio and footprint that actual variations in notations, they don't have as much, impact as they had in the past. So -- but we commercially hedge ourselves to protect us against any variations rather than guess where the nations will go in time. So we don't have a public opinion as to where bismuth prices will go in the future. We tend to manage any variation in limitations through commercial hedging and making sure that we hold on to products that have the smallest percentage of metal as possible. So value -- deliver value-added products. Operator: Your next question comes from Amr Ezzat from Ventum Capital Markets. Amr Ezzat: Congrats to you and the 5N team on an incredible year. Maybe I should start with the margins on Specialty Semi. They stepped down meaningfully in Q4, which I think we all expected given your comments in Q3. But I'm just wondering how much of that step down is structural or product mix versus like the maintenance that you guys sort of spoke to? And what should we read as the right sort of normalized margin range heading into '26 for Specialty Semi? Richard Perron: Okay. Most of the key factors behind this lower margin expressed as a percentage of revenue is essentially from accelerated or definitely us applying ourselves at getting ready -- accelerated preventive maintenance expenses and us getting ready to start 2026 on solid grounds, okay? So the vast majority of that lower margin, again, expressed as a percentage of revenue due to that. There's a little bit of product mix, and there's a little bit by default of the usual slowdown that comes in, in December. Then going forward, I think you can hold on to the full year gross margin in order to modelize your -- the business. Amr Ezzat: Fantastic. No, that's helpful. Just another one on your EBITDA guide for fiscal '26. I appreciate your remarks in the -- in your prepared commentary on the gating factors there and the inflation of input costs. But can you speak to what assumptions you guys are using or are embedded in your model for inflation for the different input costs, like just at a very high level, then you did mention that you're being conservative as well, which is always good. So should we be expecting another 2 increases in 2026? Richard Perron: Yes. Look, it's not a perfect science. Obviously, labor costs, we come up with assumptions that are based on external data. When it comes to energy and consumables, we tend to anticipate a bit more than what is the market consensus right from the start. Then the tough part remains the input metal that we use, okay? Obviously, we're using much less metal than everything we're manufacturing and selling today, but it starts with a piece of metal. There are 2, we tend to look back and assume that similar increase will happen in the following year, okay? That's our approach, which is an approach that is more -- that shows more conservatism than less. But again, the best way for us to protect us against input metal increases is through our commercial aging practices and everything else. Amr Ezzat: Okay. I appreciate that. Then maybe if we could dig into space a little bit. Can you speak to the pricing dynamics you're seeing? Should investors expect any erosion whatsoever once competitor capacity arrives or from your vantage point, demand absorption is strong enough to keep pricing rational? Richard Perron: Well, if you remember, the way this business works, you earn contracts today to be delivered later on. So the backlog that we have for '26, '27 and '28, all of that is based on the most recent favorable pricing environment, okay? So everything that you're describing is more on a way forward-looking basis. But have in mind that we're producing more and more and we have economies of scale going forward that allow us to maintain margins independent of where pricing will go to. Amr Ezzat: Fantastic. That's always good to hear. Then maybe one last one, Richard. It will be your first year as CEO, then as Gervais as Chairman. What changes, if any, should we expect in strategic priorities? Richard Perron: Look, it's a transition where there's -- we're making sure that there's continuity in our strategy. So don't expect anything more than us applying ourselves to go further the business on everything that we've built so far. Operator: Your next question comes from Yuri Lynk from Canaccord Genuity. Yuri Lynk: You called out in your outlook section, I think, for the first time, some medium-term opportunities in Security and Defense. Just wondering if you can provide a little more detail on that line. Gervais Jacques: Well, as you may know, we've been working really hard in developing new products for this product line. And we know all these -- the shift to photon counting detector is starting to happen, and we can feel it, we can see it. And this will have an impact going forward. This year, quite limited, but in 2027 and '28, that's going to start to be something significant. And we also -- we're developing all sorts of detectors that are being used both for Medical and Defense application. And today, being a Western world producer being able to do that is now definitely a key attribute that position 5N favorably. Richard Perron: Over the past few months, many of the big names associated with the Defense industry have come up to us and they're pretty impressed and interested in our capabilities to grow crystals, make substrates, lenses, recycle and refine strategic minerals and health. So all of that is giving us a lot of comfort that the whole topic of Defense will play favorably for us in time. Yuri Lynk: And does that Defense reference in the outlook, does that specifically tie back to the upstream expansions at St. George? Richard Perron: It's one of the factor, but it's the equation -- what is favorable -- what is playing favorably for us is the equation of us starting from piece of metal all the way to fancy semiconductor products. That's really the full integration that we can offer to the industry, obviously, based out of China, which is a definite -- it's a prerequisite. Yuri Lynk: Okay. And it reads to me that those security and Defense applications might show up in your revenue line before the sensing and imaging opportunity that you've talked about previously. Is that the correct way to read that? Richard Perron: No, it's going to -- we -- as you know, the way -- like we have this segment and we have those sectors that we serve under those segments, Defense is actually kind of spread out in between space and sensing and imaging today and to some extent, technical materials as well. Yuri Lynk: Okay. Switching gears, really nice cash generation in the quarter, balance sheet in fantastic shape. Can you talk a little bit about the M&A pipeline, if we want to call it that, and how that might have evolved over the last, say, 6 to 9 months? Richard Perron: We continue to look at many different files. Yes, we have what you call -- what you refer to as a pipeline, but it still requires a fair bit of work on our side before coming out to the market and say, here's the target and here's why it's a good target. But we're actively revving many different files, meeting people, making what choose and out. We're very serious about completing a transaction this year, highly motivated as we say. But can we give you more details this morning as to the exact materials and/or markets that it came for? It's a bit hurry. Yuri Lynk: Yes. No, I understand that. I mean you say you expect to do something this year. I mean, sometimes these things aren't in your control. I mean, are you okay, if nothing -- if you can't do an acquisition this year, you're okay with that? I mean, how do we think about other ways to put the balance sheet to use? Richard Perron: We have a lot of internal growth to manage. This year, we're focusing on execution and deliver a strong pipeline of order that we have. And we have -- the backlog is more than 365 days. But if you look at it segmented by sectors in renewable, it's more than 3 years. Then what we're doing now is looking at M&A, but without pressure because we want the right deal. We don't want to do an acquisition. We want to do the right one, like we did successfully with AZUR 3.5 years ago. Operator: Your next question comes from Michael Glen from Raymond James. Michael Glen: Maybe just to start, CapEx in '25, including intangibles, was just below $21 million for the full year. Can you provide an outlook for 2026 on CapEx? Richard Perron: It's going to be in a similar range. Michael Glen: Similar range. Okay. And then working back to the germanium investment or alignment with the U.S. Department of War. What should we think about in terms of revenue impact in 2026 and 2027 from that specific agreement? Richard Perron: For 2026, very little. 2027, we will start to realize some benefits out of it, but it's more a '28, '29 perspective because it takes some time to install it all and get going, and we expect it's going to take at least a year, like we have already a plan with a short list of equipment and feeds to treat, but all of that will take most likely all of this year to at least get the initial stuff in place and get going. So it's more of an horizon '28, '29, but there will be some benefit this year and next year associated with recycling and refining complex feeds that contain germanium and from that germanium additional businesses associated with lenses, detectors and else. Michael Glen: Okay. And then just circling back to the First Solar-related business. So I get that a lot of what they're speaking about during the conference calls related to low capacity utilization internationally. Can you remind us or speak to your -- what level of capacity increases you've put in Canada and Germany, maybe since the end of 2024, like how much has capacity increased for you? And speak to or remind us of the -- some of the higher level contract terms associated with First Solar volumes? Richard Perron: Essentially, since the end or close to the end of 2024, we must have at least doubled our capacity. And this year, we continue to add a bit capacity, and we're adding new and we're adding new equipment, brand-new capacity associated with this additional thin-film PV materials that we're going to be supplying for Solar, Cadmium [ selenide ] as we presented in our press release last August. Michael Glen: Okay. And are you able to remind us just the contract like pricing or volume commitments? Like how do we think about those? Richard Perron: Well, the volume for '25 and '26 is 33% higher than '24. And for '27 and '28, it's an additional 25%... Gervais Jacques: Over 25%, 26%. Richard Perron: Yes. Michael Glen: And that's -- we can characterize that as take-or-pay in nature. Gervais Jacques: It is. Richard Perron: And it is back with their capacity and most of their growth has been happening in the U.S. with their Louisiana and Alabama facility. And as you know, Petersburg has been also optimizing their production. Then what they said and what they continue to do is trying to refocus, recenter their production in North America. Michael Glen: Okay. And just final one. How do you think about -- are you able to give us -- I know you guide on EBITDA, but not on revenue. Are you able to give us any indication? Should we expect that revenue will -- should meaningfully outpace EBITDA growth next year? Richard Perron: Yes. Based on our current assumptions and again, being prudent, we're very prudent as to the actual gross margin expressed as a percentage of revenue. So you see where our guidance goes from our current 2025 EBITDA. So yes, revenue should -- as a percentage increase, should outpace a little bit the growth in EBITDA. Operator: Your next question comes from Frederic Tremblay from Desjardins. Frederic Tremblay: Just wanted to dig a bit deeper on the '26 guidance. In your comments, you did mention that you expect a higher contribution in the second half of 2026. Wondering if you can maybe provide a bit more color on the factors that are driving that? Is it just business seasonality or some of the capacity increase is coming online? Richard Perron: As you know, as I explained in order to build or compile our guidance, we have renewable energy and our space solar business essentially all under contract. So it's just the actual anticipated release date of those contracts that makes it -- that makes the second half a bit -- anticipated to be a bit stronger than the first half. Obviously, releases can change from clients. We occasionally can move things around. But based on the current releases communicated by clients, assuming a stable allocation of the rest of our businesses throughout the quarter, we can anticipate the second half to be stronger. But all of that is -- I mean, it's still early stage, but it's based -- what's behind it are communicated releases from clients. Frederic Tremblay: Okay. And you mentioned a bit stronger. So it's in terms of quantifying it, it's not -- it's not really a huge. Richard Perron: It's a bit stronger, exactly. But as I said, the full year is always committed under contract, but it may change from one quarter to another depending on confirmed releases from clients, but we start the year with a first plan discussed with clients, and that's what we have modelized and built up from a bottom-up forecast perspective. Frederic Tremblay: Yes. Understood. Okay. And then you did mention your intention to drive productivity and operational efficiencies across the business. Wondering if you could provide some high-level examples of what you guys are working on, on that front? Gervais Jacques: Well, as you know, we've been adding capacity. And normally, when you're adding capacity, you're hiring new employees, you're training them, you're developing new methods of working. And then second wave is you're doing optimization. And this is what we will be focusing on doing is trying to optimize, also bring more automation on board in both at AZUR, but also into our renewable energy. Then we've been successfully able to start the equipment, deliver products. Now we're now starting the wave of improvement. Frederic Tremblay: Perfect. And then last question for me. Just on the preventive maintenance that happened in Q4, did you complete everything you wanted to complete there? Or are we expecting an impact in Q1 as well? Richard Perron: It's not going to be -- we did not complete everything we wanted to complete, but it's not an impact per se because if you recall, what we've done is accelerating stuff that we typically do every year. Whatever is not done in '25 is not incremental to '26. It's rather the other way around. Gervais Jacques: It's a burden to '25 that's what he said so... Operator: [Operator Instructions] Your next question comes from Kaelan Purdie from Cormark. Kaelan Purdie: It's Kaelan Purdie here filling in for Nick. Great clarity there on the maintenance strategy. Could you also maybe just speak to the pipeline for AZUR given the incremental capacity at Heilbronn, has the uptick in capacity come with any new contracts, both commercially and on behalf of government? Richard Perron: Well, if you recall, our approach to capacity expansion, more specifically to our SPACE Solar business is that as comes a point in time when the backlog for the following reaches the previous year's capacity level, that's when we trigger capacity expansion. So what we have announced a month or so ago is aligned with that approach, meaning that we see 2027 at level -- confirmed contracts at level of our most recent capacity and it goes on, and then we trigger those investments. So the same will likely -- the same assessment will likely be done late '26, early '27 for '28 and so on and so forth. So to answer your question, when we increase capacity because we have the contracts. Kaelan Purdie: Okay. Understood. So nothing in terms of significant pipeline without the contracts? Richard Perron: But the pipeline is by itself significant because the whole satellite industry continues to grow and there are more and more opportunities. It's still on a fast-growing mode today. But again, the key for us is not to bring too much capacity too earlier in time. That's where it comes to discipline that we have. Gervais Jacques: Every other week, we're bidding on projects. And when we are winning a contract, then we need to question ourselves, do we have the right capacity for -- in 2 years in time, then it's triggering decision. Then this is why we've been announcing the third expansion of AZUL might not be the last one. Kaelan Purdie: Great. Understood. One last one for me. You previously identified that medical imaging is a pretty promising catalyst. I think we chat about it in the call a bit earlier here. Can you just maybe provide a quick update on the commercialization time line for the detectors? Is it still 2027? Gervais Jacques: Yes. Well, we have now one customer who is manufacturing PCBs at industrial scale. What we expect is later this year and starting next year, you will have more than one customer doing it. Then the demand will be increasing. We will play an important role. We're not the only one we're competing against China, but we will play an important role in securing the supply chain for these new products. And that's something we've been developing for many, many years. Then I think the change is happening. We see the industry moving from scintillators to photon counting detectors. It takes time. But when it's done, it's going to be there for a long period of time. Operator: Your next question comes from Baltej Sidhu from National Bank. Baltej Sidhu: Just a quick one for me. Just given we've spoken about the cadence of contribution from the recent U.S. government investment to expand domestic germanium refining. And appreciating that it's still early days, could you share any details on how we should think about the CapEx deployment cadence? Richard Perron: Okay. The CapEx deployment, essentially that grant pays for CapEx. That's what's behind it ultimately. It covers also some of our own development costs, our engineers' time [indiscernible] to that. The actual deployment -- if it's for modelizing him, again, keep in mind, it's all backed up by grant, it's for your model. It's to anticipate the business that will come out of it by default, there's a little bit of CapEx in the first year, but most of it comes in, in the second and third year by default because what's behind it is for us to finalize developing the processes and put the capabilities and capacity in place to treat various feeds that contain germanium, where by default, we will start with the easier feed and then more complex feed and even more complex feed and keep towards the end, like the real complex done, okay? So the CapEx will also be linked to the complexity of the feeds in time. So it's going to be gradual with the most important CapEx to be realized somewhere in the middle of the project by default. But again, if your question is around helping you to modalize CapEx, there's a grant behind it. Baltej Sidhu: Yes, yes. No, I was just looking at kind of backing into the cadence of the realization for that. Operator: And there are no further questions at this time. I will turn the call back over to Richard Perron for closing remarks. Richard Perron: Okay. Well, we would like to thank you all for joining us this morning, and we wish you a great day. Gervais Jacques: Thank you. Richard Perron: Thank you. Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect.
Operator: Good morning to all participants, and welcome to Grupo Comercial Chedraui's Fourth Quarter 2025 Commercial Conference Call. [Operator Instructions] Participating in the conference call today will be Mr. Jose Antonio, Chedraui's -- CEO of Grupo Comercial Chedraui; Mr. Carlos Smith, CEO of Chedraui USA; Humberto Tafolla, CFO; and Arturo Velazquez, IRO for the company. We will begin the call with the initial comments on Grupo Comercial Chedraui's fourth quarter financial results by the company's CEO, Mr. Jose Antonio Chedraui; and Chedraui's USA CEO, Carlos Smith. Thank you. You may begin. Jose Antonio Chedraui Eguia: Good morning to all, and welcome to our presentation of Grupo Comercial Chedraui's Fourth Quarter 2025 Results. I want to begin by sincerely thanking our valued customers for choosing to shop at our stores, especially during this challenging economic environment, both in Mexico and the U.S. Your continued trust inspires every day. I also want to probably recognize our employees unwavering dedication to advancing our 3 strategic pillars throughout 2025, their commitment to delivering a unique shopping experience, providing the best assortment at the lowest prices and consistently exceeding expectations has been crucial to strengthening our customers' loyalty. In Mexico, our same-store sales have once again outperformed ANTAD's self-service segment by 164 basis points, making an outstanding 22nd consecutive quarter of outperformance. For the full year, our same-store sales growth exceeded ANTAD's self-service by 140 basis points, making this the fifth consecutive year of remarkable achievement. At Chedraui USA, although sales were impacted by continued immigration enforcement and the U.S. government shutdown in October and November, EBITDA margin improved by 178 basis points to 8.6% and by 6 basis points to 6.9% when including additional noncash accruals made for general liability and workers' compensation claims in the quarter. This was supported by rigorous expense management and efficiencies from our Rancho Cucamonga distribution center. Finally, I'm pleased to note that we completed the most aggressive store opening year in Chedraui's history, and we surpassed our store openings target. In Mexico, we opened 65 stores during the quarter for a total of 142 stores in 2025. As such, we ended 2025 with a total of 1,067 stores in Mexico and the U.S. Our organic expansion will continue throughout 2026 as we expect to open 147 stores in Mexico, of which 17 of these are larger store formats and the remaining are Supercito. While in the U.S., we expect to open 5 stores, 4 El Super and 1 Fiesta. Now to start our presentation, please turn to Slide 4, where I will highlight key achievements of the quarter. Chedraui Mexico's same-store sales grew 3% in the fourth quarter of 2025 and surpassed ANTAD's 1.4% growth for the 22nd consecutive quarter. Chedraui Mexico's total sales increased 6.9% due to higher same-store sales and a 4.4% sales floor expansion. Consolidated EBITDA increased 101 basis points to 8.6% and 7 basis points to 7.7%, including extraordinary items in the quarter. Chedraui Mexico's EBITDA margin stood 8.7% and 8.5%, including an extraordinary payment to fiscal authorities from prior fiscal years. Chedraui USA's EBITDA margin increased by 178 basis points to 8.6% and 6 basis points to 6.9%, including extraordinary noncash accruals for claim liabilities. Net cash to EBITDA improved to minus 0.28x in the fourth quarter of '25 compared to the minus 0.18x in the fourth quarter of '24. We accelerated our organic growth in Mexico by opening 65 stores in the quarter for a total of 142 stores in 2025, above target. In the following slides, I will comment in more detail about our fourth quarter results. Turn to Slide 5, please. During the fourth quarter, consolidated sales declined 3% compared to the fourth quarter of 2024, primarily reflecting the currency translation effect for Chedraui USA sales from a 10% appreciation of the Mexican peso against the U.S. dollar. Consolidated EBITDA increased by 9.7% and EBITDA margin stood at 8.6%, a 101 basis point improvement. If extraordinary items for the quarter are included, EBITDA declined 2.2% to MXN 5,793 million, and EBITDA margin rose by 7 basis points to 7.7%. This performance reflects effective inventory and promotional management as well as a disciplined expense control across all business units. On Slide 6, our strategic M&A investments and organic growth strategy have continued to support the positive long-term trend in consolidated net income. Over the past 4 years, net income has achieved a compounded annual growth rate of 17.4%, highlighting the effectiveness of our growth strategy and disciplined financial management. Our return on equity has recently been affected by RCDC transition costs and nonrecurring items for the quarter. However, even after considering these factors, our long-term strategic focus drove 167 basis points increase in ROE in 2025 compared to 2021. This demonstrates our commitment to creating long-term value for our shareholders. In the following slides, we will review the main highlights of our businesses in Mexico and in the U.S. On Slide 7, our continued commitment to offer the lowest prices and targeted customer promotions with an assortment of products that our clients prefer and a unique shopping experience enabled us to achieve a 3% increase in same-store sales, outperforming ANTAD's self-service segment by 164 basis points in the quarter. During the last several months, we have focused on enhancing our e-commerce strategy to give customers diverse shopping options. As such, our e-commerce sales penetration increased by 70 basis points to 3.9% in the fourth quarter of '25 in Mexico compared to the same quarter in 2024. This performance was driven by higher customer satisfaction and stronger repeat purchase rates across our digital channels, in addition to our strong third-party partnerships with platforms such as Uber, Rappi, DiPi and Rappi Turbo, which have continued to enhance our growth. Please turn to Slide 8. Despite a weaker-than-expected consumption environment in Mexico, total sales in the quarter increased 6.9% compared to the fourth quarter of 2024, supported by a 3% increase in same-store sales and a 4.4% expansion in sales floor area. As commented, Chedraui Mexico incurred an extraordinary onetime payment to tax authorities corresponding to the revision of prior fiscal years, which impacted EBITDA margin by 20 basis points. EBITDA in the fourth quarter of 2025 increased 8.2% and EBITDA margin expanded by 11 basis points to 8.7%, driven by strict expense control, along with enhanced inventory and strategic promotional management, which was able to offset higher labor costs. If the extraordinary item for the quarter is included, Chedraui Mexico's EBITDA grew 5.8% year-over-year to MXN 3,271 million, while EBITDA margin declined 9 basis points to 8.5% of sales. I will now turn the meeting over to Carlos Smith, CEO of Chedraui USA, for his comments on our U.S. operations. Carlos, please go ahead. Carlos Matas: Thank you, Antonio. Good morning, everyone. Chedraui USA continues to operate in an environment with stricter immigration enforcement, and this quarter was further impacted by the U.S. government shutdown that occurred in October and November. Although we were able to increase our average sales ticket, these events negatively impacted the number of transactions at our stores, bringing our same-store sales negative for the quarter. As we stated on last quarter's call, we implemented strict expense controls to help navigate these headwinds, which were effective in mitigating our loss of operating leverage in the quarter. As Antonio referenced earlier, it's important to note that operating expenses were affected by additional noncash accruals made during the quarter relating to general liability and workers' compensation claims, which impacted EBITDA margin by 171 basis points. While the number of new claims is trending down, the cost to resolve these claims has increased, not only for us but across the retail industry. We continue to take actions to reduce the frequency and cost of these claims. I would like to highlight our commitment to delivering solid long-term results despite short-term challenges. Despite current trends, both El Super and Fiesta same-store sales have grown considerably over the last 4 years. When comparing 2025 data with 2021, the same-store sales compounded annual growth rate for El Super is 6.2% and 6.6% for Fiesta. Also, EBITDA margins over the same period increased by nearly 41 basis points for El Super and 310 basis points for Fiesta, even when considering the headwinds we faced in this fourth quarter. Now we will review the results of the fourth quarter. Please turn to Slide 9. Chedraui USA same-store sales declined by 2.8% in U.S. dollar terms compared to the same quarter of last year. This is explained by a decline in transactions at El Super and Fiesta due to immigration enforcement, the delay and partial release of SNAP benefits as a result of the government shutdown and a high same-store sales base comparison to the prior year. At Smart & Final, same-store sales decreased 0.9% in U.S. dollar terms, primarily due to lower transactions in Southern California, where immigration enforcement has been stricter than in other regions, coupled with the impact on SNAP benefits due to the government shutdown. Overall, Chedraui USA's total sales decreased by 2.2% in U.S. dollar terms. Additionally, the 10% appreciation of the Mexican peso against the U.S. dollar contributed to a sales decline of 11.6% in Mexican pesos. Please turn to Slide 10. EBITDA increased 11.4% in Mexican pesos while EBITDA margin rose 178 basis points to 8.6% as a result of disciplined expense control across the organization. If accrued noncash claim provisions are included, Chedraui USA's EBITDA in Mexican pesos declined 10.8% less than sales and EBITDA margin of 6.9% increased 6 basis points compared to the fourth quarter of 2024. The combined El Super and Fiesta EBITDA margin reached 8.5% compared to 8.9% in the fourth quarter of '24, mainly explained by the pressure on transaction count experienced at El Super. When accrued noncash claim provisions are included, EBITDA margin stood at 7.2% in the quarter. Finally, Smart & Final's EBITDA margin of 8.7% improved 379 basis points compared to the same quarter of 2024 and 171 basis points, including additional claim accruals. This is explained by the improvements in the RCDC operations and the aggressive perishable pricing campaign in the fourth quarter of 2024. This concludes our report on the U.S. operations. Jose Antonio Chedraui Eguia: Thank you, Carlos. Now we turn to the consolidated financial results on Slide 11. Consolidated sales of MXN 75,221 million declined 3% compared to the fourth quarter of '24, mainly explained by a 10% appreciation of the Mexican peso when consolidating Chedraui USA sales. Gross profit rose 2.9% due to favorable inventory and promotion management in Mexico, reduced RCDC costs at Chedraui USA and Smart & Final's price campaign in the fourth quarter of 2024. Gross profit as a percentage of sales stood at 23.2% in the quarter compared to the 21.8% in the prior comparative quarter. Consolidated operating expenses, excluding depreciation and amortization, decreased by 0.8% as a result of a strict expense control. When including extraordinary items in the quarter, operating expenses, excluding depreciation and amortization, increased 5.5% compared to the fourth quarter of '24. Consolidated operating income increased 19%, with operating margin increasing 101 basis points to 5.5%. If extraordinary items are included, operating income of MXN 3,403 million declined 1.4% compared to the fourth quarter of '24 with an operating margin of 4.5% at similar levels to that of the fourth quarter of 2024. Consolidated EBITDA increased 9.7% and EBITDA margin was up 101 basis points to 8.6%. When including extraordinary items, EBITDA declined 2.2% and represented 7.7% of sales, a 7 basis points increase compared to the prior comparative quarter. Financial expenses remained flat, explained by lower interest expense on Chedraui USA's debt and the appreciation of the Mexican peso against the U.S. dollar in the last 12 months. The prior was partially offset by lower financial income in Mexico, driven by lower interest rates. Consolidated net income amounted to MXN 1,846 million and MXN 1,344 million if extraordinary items are included. Finally, please move to Slide 12. We closed the year with a net cash position of MXN 6,923 million, and our net cash-to-EBITDA ratio improved to minus 0.28x from minus 0.18x in the same period last year. CapEx for the 2025 totaled MXN 8,549 million, representing 2.9% of sales and coming in below the prior year due to the significant investment in RCDC in 2024. Now please allow us to move on to the question-and-answer section. Operator: [Operator Instructions] The first question comes from Bob Ford with Bank of America. Robert Ford: Antonio, given the difficult economic environment in Mexico and the U.S., how are key value drivers evolving? And how are you thinking about differentiation and retention strategies? And then also, how are you thinking about channel opportunities over the intermediate term, particularly when it comes to small box and e-commerce in Mexico? And then lastly, with respect to the labor claims, I was curious if these are for cumulative trauma, right, something like a repetitive stress issue? And what steps you can take to protect against frivolous lawsuits, particularly in California? Jose Antonio Chedraui Eguia: Thank you, Bob. Well, I will comment about Mexico and then Carlos can talk about the U.S. Well, in Mexico, as you've seen, we're seeing a slowdown in consumption, ANTAD reported very low growth in sales. So we believe that what we're doing is trying to increase our penetration in every market within the formats that we already have put in place. We believe that there are still room in certain cities for the big boxes, which are very efficient and profitable. And then in other areas, we're going with the smaller boxes, mainly Super Chedraui and Supercitos. So we believe that with the formats that we have for physical stores, we are just in the right place where we want to be. On the other hand, as you mentioned, we're focusing a lot on the e-commerce side. We believe that we can increase our sales penetration closer to 5% this year. We're being very successful with our own platform as well as with the third-party operators. That includes Turbo, where we have a lot of expectations in the near future. delivering customers in less than 15 minutes. So that's a huge opportunity, not only to penetrate the markets where we have presence at the moment but even going to other markets without having to open a physical store. So we feel that we have the right physical formats and the focus in the e-commerce to reach our sales projections for this year, Bob. Carlos, maybe you can... Carlos Matas: Yes. Bob, Carlos here. Yes, the adjustment that we made is really related mostly to general liability claims in our stores, which is customer accidents, slip and falls and things like that. And as you probably know, this has been an industry-wide issue as it relates to the increase in costs as it relates to closing a claim. So if a claim cost us $10 4 years ago, those claims today are costing us 3x that. And this has been an industry-wide problem, as you can see through everyone's reporting. And the key for us is really to address frequency, frequency at our stores. What are we doing to make sure that our stores are -- that we're providing a safe environment for our customers. And the second portion of it is to be very aggressive in our claims handling process. So we've invested quite a bit of money internally to ensure that we sniff out what you call fraudulent claims, which there's always some. But our position is we take every single claim extremely, extremely seriously, and we try and process it as quickly as possible. So the key here moving forward is ensure that our frequency is down through our operations team and that once we do have a claim that, that claim gets closed as quickly as possible. Operator: The next question comes from Rahi Parikh with Barclays. The next question comes from Antonio Hernandez with Actinver. Antonio Hernandez: Just wanted to know how are you seeing consumer trends so far this year? I mean you already provided some guidance some weeks ago but wanted to get a clear picture on whether so far this year in both Mexico and the U.S. looks like what you expected previously or any changes in that? Jose Antonio Chedraui Eguia: Antonio, I barely heard your question but I understand that it's basically consumer trends, what you're asking about Mexico and the U.S. Is that correct? Antonio Hernandez: Exactly. So far this year in both Okay. Jose Antonio Chedraui Eguia: Okay. Well, consumption, we believe -- I'll talk about Mexico. We believe Mexico will continue to be slow in consumption, even though we have the soccer World Cup, which will help for sure. We still see that there is no reason why to think that consumption will pick up strong in the coming months, except for this particular reason of the World Cup. Being that said, we believe that we can achieve our guidance to be able to grow at least 3% same-store sales. We believe that's achievable. We are prepared for that. We have a strategy for every format of our physical stores as well as focusing in the e-commerce segment where we believe we can grow double digit. So we believe we're prepared for that. We're adjusting the assortment. We are being very aggressive in our pricing strategy and the new stores and the remodeling stores, we're making sure that the atmosphere, the service involved in those particular stores meet the expectations of the customer segments that we are trying to serve. So that would be about Mexico. Carlos Matas: Antonio, in the U.S., obviously, we operate in areas of high Hispanic densities, and that consumer is still a little bit weary through all of the immigration enforcement activity. So we're very aware of that dynamic in our markets. But in general, I will tell you that the consumer is stretched thin. Things are more expensive. And our customers are willing to shop in multiple places. So as they look for value to stretch their dollars. So it's imperative for us to execute properly on our strategy with our pricing, with our perishable assortment in order to provide that value that they're looking for. Operator: The next question comes from Froylan Mendez with JPMorgan. Fernando Froylan Mendez Solther: Can you hear me? Jose Antonio Chedraui Eguia: Yes, we hear you. Fernando Froylan Mendez Solther: First question is on the U.S. on the margin expansion on Smart & Final. It was really amazing to see the margin expansion. I know there are some benefits from RCDC. But should we think of this margin level as a sustainable one going forward? And if that is the case, should we think that there is some phase on the guidance for next year in terms of margin expansion in the U.S. That's my first question. And second, on -- more on Mexico regarding your first comment on the formats and how you are extending. Is there a very big difference in profitability between the big box and the smaller box formats? Color on that would be great. Carlos Matas: Froylan, this is Carlos. Yes, we had a very nice result in terms of margin expansion at Smart & Final. Last year, we started a very aggressive price campaign at Smart & Final. Our buying gross margin grew significantly quarter-over-quarter. A lot of that is related to now starting to see the benefits of our RCDC materializing but our team has done a fabulous job in other areas to lower cost of goods. And we've been able to maintain that aggressiveness in pricing, not only in our produce departments but also in other perishable categories as well as center store where our pricing indices versus our competitors are very, very strong. So we feel very good about our pricing position at Smart & Final. And yes, these are not only sustainable margins but we still see an opportunity to increase them. Jose Antonio Chedraui Eguia: And well, about format profitability, even though all formats meet our goals in return on invested capital and that it's quite similar in every format. The smaller formats tend to -- due to a lower investment tend to be more profitable. So we're always trying to focus on the opportunities that we have, the land opportunities and the customer we are trying to meet. If we could, we would maintain the combination of expanding a little bit faster in the smaller formats but maintaining the big boxes growing because they are profitable as well. Operator: The next question comes from Ulises Argote with Banco Santander. Ulises Argote Bolio: A quick one from my side. I was wondering if you could help us quantify there out of the 133 basis points improvement we saw in the gross margin. Can you help us understand a little bit with how much of that came from the RCDC benefits and how much of that was kind of other impacts that we had there in the quarter? Carlos Matas: Ulises, yes, the majority of the benefit comes from our gross margin line, which is a combination of improvements in our buying gross margin. I mentioned a little bit about that at Smart & Final. But if you look at Smart -- Super, I'm sorry, on an annualized basis, our purchasing gross margin grew 124 basis points. So you can really start seeing now the benefits of the RCDC materializing in cost of goods, which is great. And the second portion of that is that we are seeing great operating stability at our RCDC. Our productivity is improving every day. We're not exactly where we want to be. So we still have some room to grow, but we're happy with our progress. And our freight charges are continuing to come down. So the things that we mentioned as benefits of the RCDC are beginning to flow through, which is what we expected. Jose Antonio Chedraui Eguia: And in Mexico, well, I think we are getting better managing inventory but it's also important to mention that focusing on the customer base of MiChedraui customers and being able to promote more efficiently has benefited us lowering the cost of promotional activities that we would have in the past. Remember that we have almost 40 million customers in our loyalty program, and we are starting to do particular promotions to sets of customers. And we believe that in the near future, we can even go deeper and do particular promotions to every customer with the participation of our vendors, which is very important in this program. Operator: The next question comes from Renata Cabral with Citigroup. Renata Fonseca Cabral Sturani: The first one, I would like to ask if you could shed some light in the initiatives that the company is doing to mitigate the potential impact of the labor reform related to the reduction of working hours per week. We know that will be gradual. Just to understand the main initiatives here. And my second question is related to the announcement of the government in terms of investment in the country, the Plan Mexico. And how do you see those investments going towards the -- especially the south of the country where Chedraui has a big presence and the opportunity there? Jose Antonio Chedraui Eguia: Renata, well, about the labor hours reduction, we have been working already on it using our workforce more efficiently. We have already 3 programs going on where we believe we can become more efficient using the hours of our team at the store level. And we believe that we will suffer very little from this gradual reduction that will start in 2027. On the other hand, the investment that the government has announced for sure, benefits us when it reaches the cities and the areas where we participate. We saw what happened with the Tren Maya or with the Dos Bocas investment. And if that happens in our particular cities in the coming months or years, for sure, we will benefit from that. Thank you, Renata. Operator: The next question with Rahi Parikh with Barclays. Rahi Parikh: Can you hear me now? Jose Antonio Chedraui Eguia: Yes, we can hear you clearly. Rahi Parikh: Great. Great. I'm sorry for the issue earlier. So my question is kind of for the RCDC. What new technologies and AI are built now there versus the tour that we attended last year and what's remaining? So kind of just what's the goals in terms of technologies to include there, AI to help inventory management? Like what tools are out there for you to implement? And then I know you mentioned somewhat on like how RCDC helps margin a bit but do you have any estimate on cost savings going forward? Carlos Matas: Yes. So the initial start-up of our RCDC was relatively vanilla. So our second phase will include some more automated areas, et cetera. But our -- the first launch is really very vanilla. Most of the AI support that we're getting is within the tools that we use to forecast and determine demand at the stores. So that's obviously connected to our supply chain, and it's helped us quite a bit in terms of reducing our inventory levels at the RCDC as well as our stores. So the real use for us is an inventory management and assortment planning. Like I mentioned, we've got great stability currently at the RCDC but we still think that we've got some improvement in labor productivity as well as in more efficiencies related to our transportation function. Makes. Rahi Parikh: Sense. And then one other follow-up for this immigration for U.S. Do you see that you kind of have to raise wages to retain workers? I know you mentioned tougher there in terms of sales but just looking on the cost side. Carlos Matas: No, I don't think that we -- I don't think we're in an environment where we've got wage pressure. I think our wage structures at all 3 banners are very, very competitive. And we see that in our turnover numbers, which are probably just below industry average. So I think we're in good shape there. Operator: The next question comes from Alvaro Garcia with BTG. Alvaro Garcia: I have 2. One on Mexico. I was wondering if you can speak about the importance of assortment in your smaller formats. So we recently saw sort of Walmart talking about lowering or reducing their assortment size of Bodega Express. So I was wondering if you could talk about the strategic relevance of having the necessary assortment for your customers at Chedraui in your smaller formats in Supercito. And then my second question is on the dividend. You obviously have a net cash position. I know you're very much excited about growth, both organic and potentially inorganic in the future. But any sort of comments on what drove the decision to sort of increase it in line with inflation would be helpful. Jose Antonio Chedraui Eguia: Thank you, Alvaro. Well, about the assortment in Supercitos, even though we are trying to manage more efficiently inventory and SKU reductions always produce that. We are focusing that Supercito and every format fulfills their mission towards their customers. We are very aware that we want to be a proximity store and not a hard discount. We don't want to be a hard discounter. We want to differentiate for that. And we want to accomplish the mission of replenishment of a full basket. Therefore, the reduction possibilities in SKUs are limited to this strategy that we have put in place. To give you an idea, we have a little bit the double of assortment that we have against a typical hard discounter, for example. And we will continue with the assortment that fulfills the mission that we believe our proximity format is set for. On the other hand, the dividend, well, we have enough cash that we're not being able to use in our expansion program. And therefore, we just believe that there is better opportunity to use that cash for our investors than just having that cash sitting in our company invested in other investment opportunities rather than stores. If we cannot use the cash in stores or technology to become better or more efficient, we'll just increase dividends. Operator: Thank you. There are no further questions in queue at this time. I would like to turn the call back to management for closing comments. Jose Antonio Chedraui Eguia: Well, I just want to thank everyone for joining and hope to be talking to you at the end of this first quarter of 2026. Thank you again. Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.
Operator: Good morning, and thank you for joining us today for Hovnanian Enterprise's Fiscal 2026 First Quarter Earnings Conference Call. An archive of the webcast will be available after the completion of the call and run for 12 months. This conference is being recorded for rebroadcast [Operator Instructions]. Management will make some opening remarks about the first quarter results and then open the line for questions. The company will also be webcasting a slide presentation along with the opening comments from management. The slides are available on the Investors page of the company's website at www.khov.com. Those listeners who would like to follow along should now log on to the website. I would like to turn the call over to Jeff O'Keefe, Vice President, Investor Relations. Jeff, please go ahead. Jeffrey O'Keefe: Thank you, Michelle, and thank you all for participating in this morning's call to review the results for our first quarter. All statements on this conference call that are not historical facts should be considered as forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Such forward-looking statements include, but are not limited to, statements related to the company's goals and expectations related to its financial results for future financial periods. Although we believe that our plans, intentions and expectations reflected and are suggested by such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. By their nature, forward-looking statements speak only as of the date they are made are not guarantees of future performance or results and are subject to risks, uncertainties and assumptions that are difficult to predict or quantify. Therefore, actual results could differ materially and adversely from those forward-looking statements as a result of a variety of factors. Such risks, uncertainties and other factors are described in detail in the sections entitled Risk Factors and Management's Discussion and Analysis, particularly the portion of MD&A entitled Safe Harbor Statement in our annual report on Form 10-K for the fiscal year ended October 31, 2025, and subsequent filings with the Securities and Exchange Commission. Except as required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason. Joining me today are Ara Hovnanian, Chairman and CEO; Brad O'Connor, CFO; David Mitrisin, Vice President, Corporate Controller; and Paul Eberly, Vice President, Finance and Treasurer. I'll now turn the call over to Ara. Ara, go ahead. Ara Hovnanian: Thanks, Jeff. I'll start by highlighting our first quarter performance and sharing insights into how we're navigating the current housing market. Brad will then dive deeper into our results and our strategy and followed by an opportunity for your questions. Let me begin with Slide 5. Here, we share our first quarter results alongside the guidance we provided earlier. Even with ongoing challenges both in the U.S. and around the world, our team consistently delivered, meeting or exceeding guidance across all the metrics for the quarter. Beginning at the top of the slide, total revenues reached $632 million, approaching the high end of our guidance range. Adjusted gross margin came in at 13.4% in the quarter, which was just shy of the midpoint of our expectations. Our SG&A came in at 13.3% better than the low end of our guidance. Income from unconsolidated joint ventures totaled $3 million, this was slightly below the midpoint of our expectations, although income from consolidation of certain joint ventures exceeded our expectations as we'll discuss in a moment. We're satisfied to report that both of the profit figures we guided to beat expectations. Adjusted EBITDA for the quarter was $63 million, which was significantly higher than our guidance range. Adjusted pretax income was $31 million, also significantly above the range we forecasted. We'll discuss this more later in our presentation. On Slide 6, we show the first quarter results compared to last year's first quarter. The comparison is difficult mainly because we've offered even greater incentives this year to maintain sales pace which has driven much of the year-over-year decline in profit. In addition, deliveries were lower due to slower market conditions. In the upper left-hand section of the slide, you can see that our total revenues fell by 6% compared to last year. We delivered 12% fewer homes, which was the main reason for the decrease but the land sale in the first quarter helped offset some of that decline. Turning to adjusted gross margin, we saw a year-over-year decline, primarily due to the additional incentives provided to help buyers manage affordability and challenges, a theme you'll hear throughout our presentation. Our current approach emphasizes maintaining steady sales and clearing older lower-margin lots and older QMIs. Looking ahead, as we open new communities where these incentive costs are already factored in during land acquisition, we anticipate stronger gross margins provided the market doesn't require further increases in incentives. But based on our recent sales, which we'll share in a moment, we don't anticipate that to happen. In this year's first quarter, incentives accounted for 12.6% of the average sales price. The majority of this cost was attributed to mortgage rate buydowns and essential tool for unlocking affordability and driving demand. This represents an increase of 40 basis points from the fourth quarter of '25. The quarter-to-quarter increases are beginning to level off, although it's still up 290 basis points compared to the same quarter a year ago and higher by 960 basis points versus the full fiscal year in '22, which was before the mortgage rates spiked began affecting margins on our deliveries. Offsetting the year-over-year increases in incentives, our base construction and option costs per square foot on delivered homes decreased 2% year-over-year in the first quarter. Additionally, our cycle times for single-family detached homes decreased 17 days to 133 calendar days in the first quarter of '26 compared to the same quarter a year ago. Looking at the bottom left section you'll see that our total SG&A expenses as a percentage of total revenue went up a bit in the first quarter. This was due to our revenue decreasing more than our SG&A costs even though we managed to reduce absolute SG&A expenses compared to last year. At the corporate level, we're investing more heavily in technology and processes for the future. While this should yield savings in the future, it is adding to SG&A in the current periods. Moving to the bottom right-hand section of the slide, while our profit exceeded our guidance, it declined 24% year-over-year primarily due to higher levels of incentives used this year. Our approach remains focused on efficiently turning over existing inventory advancing sales of quick moving homes and emphasizing a steady sales pace. At the same time, we're positioning ourselves to capitalize on new land opportunities that are expected to deliver improved margins and returns. Now looking at the sales environment on Slide 7. We're still using mortgage rate incentives to help boost sales, we had a reduction of only 35 contracts in a significantly slower delivery home environment. We think the drop would have been larger without the incentives we're offering. The decline mainly reflects ongoing market challenges and low consumer confidence by offering incentives, we're able to ease some of these difficulties and especially affordability and keep sales activity steady. On the encouraging side, if you turn to Slide 8, you'll see monthly traffic per community from August through January. Compared to last year, traffic increased significantly in 5 of the 6 months shown. The percentage increases grew steadily over the last 4 months with January showing the largest jump on the slide, an impressive 40% increase compared to the same month last year. The trend of increased traffic has continued in February. We're seeing encouraging sign of increased buyer engagement compared to last year. That said, continued economic and global uncertainties are causing some prospective buyers to remain cautious about committing to a purchase. As shown on Slide 9, a contracts over the past 12 months have fluctuated from month to month, reflecting ongoing shifts in a volatile housing market and consumer confidence and sentiment. January's 11% gain stands out as the highest year-over-year increase on the slide. And while 1 month does not make a trend, it's a promising sign. As of yesterday, our month-to-date contracts in February of '26, which is almost over, are up 13% over the prior year, gaining a little momentum. On Slide 10, you can see that the first quarter contracts per community have held fairly steady at about 9.5 contracts per community for the past 3 years. Notably, this year's first quarter was higher than the '97 through '02 levels that we consider a normal sales environment. On Slide 11, a we provide a closer look at monthly contracts per community comparing each month in the first quarter to the same month last year. For the first 2 months of the quarter, the sales pace was lower than the same month last year. But the January '26 sales pace was better than a year ago, so we're off to a better start than a year ago. This was the third metric for the month of January that showed significant improvements year-over-year, giving us hope that the spring selling season this year could be better than last year. Further, our contracts per community for February of '26 are on track to be higher than the same month a year ago. As shown on Slide 12, the value of incentives and mortgage rate buydowns has increased significantly over the past 4 years. The most notable surge occurred in early '23 when incentives rose sharply from 3.9% in the fourth quarter of '22 to 7.4% in the very next quarter, the first quarter of '23. Since then, incentives have continued to climb almost every quarter to the current level of 12.6% in this year's first quarter. While these higher incentives have put short-term pressure on our margins, they've been essential for maintaining steady sales and moving inventory. As I said earlier, happily, the amount of incentives seems to be reducing from quarter-to-quarter in the recent months. To further support buyers, we continue to offer a strong selection of quick move in homes or QMIs, as we call them. This approach allows buyers to take advantage of available incentives and purchase homes quickly and affordably. It's important to note that our new land acquisitions build in these levels of incentives and still meet our return requirements. This should lead to much better margins in the future as these new communities begin delivering. On Slide 13, we show that at the end of the first quarter, we had 5.7 QMIs per quarter. This marks the fourth quarter in a row where the number of QMIs per community has gone down, reflecting our ability to align starts with sales pace and optimize inventory levels. QMIs are homes that we've started framing but have not yet sold. As shown on Slide 14, the number of QMIs fell from 1,163 at the end of January '25 and to 742 at the end of January '26, that represents a 30% decrease in 1 year. In the first quarter, QMI sales comprised 71% of our total sales down from a record 79% in prior quarters, but still well above our historical norms of above 40%. The corollary is that our to-be-built home sales homes that are built to customers orders increased from 21% to 29%. Assuming these trends continue, our percentage of to-be-built deliveries will be higher in the second half of '26. To-be-built margins in communities that had both to-be-built and QMI deliveries in the first quarter were 780 basis points higher than QMI margins. Having more to-be-built deliveries in the second half of the year will be beneficial to our gross margins and overall profitability. We feel we can meet the current level of demand with the 742 QMIs that we have. We'll make appropriate adjustments up or down to our starts to ensure that we have enough QMIs to satisfy demand and not get ahead of ourselves at the same time. By focusing on QMIs, we sign and deliver more contracts within the same quarter. This approach means that we have fewer homes in backlog at the end of each quarter but a higher rate of converting backlog to deliveries. In the first quarter of '26, 41% of the homes we delivered were both sold and closed within the same quarter, the highest percentage we've recorded since we began tracking this metric in '23. While this makes it a bit harder to predict next quarter's results, it led to a backlog conversion ratio of 88%, much higher than our historical average of 56% for the first quarter since '98. We continue to closely manage our QMIs for each community, making sure the rate at which we start these homes matches the rate at which we sell them. Try to sell the QMIs before they are finished. Over the past year, our finished QMIs decreased 22% from 319 at the end of last year's first quarter to 248 finished QMIs at the end of the first quarter of '26. If you look at Slide 15, you'll see that despite higher mortgage rates and a slower sales pace nationwide, we managed to increase net prices in 32% of our communities during the first quarter. More than half of these price increases happened in Delaware, Maryland, New Jersey, South Carolina, Virginia and West Virginia, some of our stronger markets. In summary, our strategy continues to prioritize the swift turnover of inventory, maintaining robust sales of quick move-in homes ensuring a consistent sales pace and burning through our lower-margin land. At the same time, we're preparing to take advantage of emerging land opportunities that should result in stronger margins and returns. In addition, we've shifted our focus on new land acquisitions away from lower-margin entry-level homes on the periphery to more move-up homes in the A and B locations as well as focusing on more active adult communities. By staying disciplined in these areas, we're well positioned to adapt to market shifts and drive substantial growth in the future. I'll now turn it over to Brad O’Connor, our Chief Financial Officer. Brad O'Connor: Thank you, Ara. Before I get to the next slide, I want to comment on the other income line on our income statement. In the first quarter of fiscal '26, we took full control of 2 joint ventures that were previously not consolidated. For one of these joint ventures, this happened after our partners received their final cash distributions, which met their preferred return goals slightly earlier than anticipated because of the solid performance of the communities. For the other, it happened when we acquired a controlling interest in a previously unconsolidated joint venture in the Kingdom of Saudi Arabia. We then added the remaining assets and liabilities of both of these joint ventures to our balance sheet at fair value resulting in a gain of $27 million recorded as other income. Importantly, the individual communities from these joint ventures continue to meet our standard return metrics even after the step-up to fair value and after current incentives. As a reminder, this has become a normal part of the life cycle of our joint ventures as we have had other income from JV-related transactions 5x in the past 11 quarters. Before commenting further on our U.S. results, I want to briefly touch on our international operations. Although our operations in the kingdom of Saudi Arabia are not expected to contribute materially in the near term, the country's growing need for housing and the scale of the opportunity reinforces our confidence in the long-term prospects of this market. For fiscal '26, we only expect about 300 deliveries from the Kingdom of Saudi Arabia demonstrating the minor impact it will have on operations this year. Turning to Slide 16. We finished the quarter with 151 communities open for sale, up slightly compared to a year ago. We continue to see steady progress in increasing our community count as we focus on growing revenue. While challenging market conditions remain a hurdle, our expanding number of communities is helping us maintain overall home delivery levels. Looking ahead, we believe our newer communities are well positioned to deliver stronger results than older ones, supporting our ongoing growth plans. Slide 17 details our land position. We ended the first quarter with 35,560 domestic controlled lots, equivalent to a 6.7-year supply. Including joint ventures, we now control 38,764 lots. Our consolidated domestic lot count decreased 18% year-over-year, reflecting disciplined land acquisition and a willingness to walk away from or postpone less attractive opportunities. You can see our land control position has begun to stop the steep decline and flatten as land sellers are getting more realistic on values in many markets, and we were able to replace our deliveries and walkaways with new acquisitions that meet our return criteria, even with today's incentives. Also of note on this slide is the steady decline in owned lots. It has decreased sequentially in almost all of the quarters shown in alignment with our land-light strategy. Slide 18 shows the age of our lot position, both owned and optioned, broken down by the year each lot was controlled. The number in each bar represents the total lots that were controlled in that year, the number below each bar indicates the percentage of incentives used on homes delivered during that year. This slide illustrates that by the first quarter of '26 almost 23,000 of our owned or option lots were initially controlled in either fiscal '24, '25 or '26, by which time we are assuming more significant incentives in our underwriting of land acquisitions. In the first quarter, a majority of our home deliveries came from lots acquired in 2023 or earlier. These older lots present more margin challenges since they were originally purchased with much lower incentives than we're currently offering. As we move forward, we're steadily transitioning away from these less profitable lots to newer land that aligns better with the day's incentive environment, though the shift is gradual. At the same time, we're collaborating with some land sellers under option agreements to find solutions that help us share the market challenges and ease the impact. Our strategy remains clear. We're intentionally selling through lower-margin lots to free up capacity for new acquisitions that support our margin and IRR goals. The good news is we're still finding new land opportunities that meet our underwriting criteria even with current high incentives and the current sales pace. On Slide 19, we show our land and land development spend for each of the past 5 quarters and the quarterly average for all of 2024. Land and development spend has decreased in response to market conditions reflecting disciplined capital allocation and rigorous evaluation of every acquisition, factoring in current prices, incentive levels, construction cost and sales pace. We continue to identify compelling opportunities in our markets and remain laser-focused on revenue and profit growth for the long term. Our commitment to disciplined underwriting and strategic investment will drive continued success. In line with our evolving strategy, we're prioritizing the acquisition of land for move-up homes and prime A and B locations and expanding our focus on active adult communities, moving away from lower-margin entry-level developments on the outskirts. Turning to Slide 20. We ended the first quarter with $471 million in liquidity, well above our target range even after spending $181 million on land and land development and $9 million on stock repurchases. Usually, our liquidity decreases sequentially during the first quarter. However, thanks to our disciplined approach to land management, we saw the opposite, liquidity actually increased in the first quarter of '26 compared to the fourth quarter of '25, as a matter of fact, it is the second highest liquidity for any quarter on the slide. Slide 21 shows our current maturity ladder as of January 31, 2026. This reflects the refinancing we completed last fall. For the first time since 2008, all of our debt, aside from our revolving credit facility is now unsecured. This shift enhances our overall financial strength by increasing our flexibility, lowering our risk profile and positioning us well for long-term expansion. This refinancing is the most recent step in a decade-long process that illustrates our disciplined financial management and reinforces our ongoing commitment to a robust stable capital structure. On Slide 22, we highlight how we've successfully increased our equity and reduced our debt over the past few years. Over that time, equity has grown by $1.3 billion and the debt has been reduced by $754 million. Net debt to capital is now 41.4%, a substantial improvement from 146.2% at the start of fiscal 2020. While we still have work to do, we remain on track toward our 30% net debt to cap target. With $223 million in deferred tax assets, we will not pay federal income taxes on approximately $700 million of future pretax earnings, enhancing cash flow and supporting growth. Given the current volatility and challenges with predicting margins, we are only providing financial guidance for the next quarter. Our outlook assumes that marketing conditions remain stable with no major increases in mortgage rates, tariffs, inflation, cancellation rates or construction cycle times. As we rely more on QMI sales forecasting profit is tougher, while we performed at the top of our guidance for many quarters. Our goal is to provide realistic guidance that we can meet or beat if conditions are favorable. Our forecast includes ongoing use of mortgage rate buydowns and similar incentives but it does not include any changes to SG&A expense from phantom stock cost tied to stock price changes from the $112.65 closing price at the end of the first quarter of fiscal '26. Slide 23 shows our guidance for the second quarter of fiscal '26. Our expectation for total revenues for the second quarter is between $625 million and $725 million. Adjusted gross margin is expected to be in the range of 13% to 14%. We expect the range of our SG&A as a percentage of total revenues to be between 12.5% and 13.5%, which is still higher than usual. One of the reasons the SG&A ratio is running a little high is that we are making significant investments to improve processes and technology in many areas to significantly increase our efficiency in future years. We expect income from joint ventures to be between breakeven and $10 million, and our guidance for adjusted EBITDA is between $30 million and $40 million. Our expectation for adjusted pretax income for the second quarter is between breakeven and $10 million. Our second quarter guidance includes proceeds from a land sale that has already closed in the second quarter. While our second quarter profit outlook remains modest, we anticipate a rebound in adjusted pretax income during the latter half of fiscal 2026. Historically, our earnings have shown a tendency to strengthen as the year progresses and recent trends, including improved contract activity in January and February support this expectation. Additionally, the upcoming delivery of homes from our newer, higher-margin communities should further enhance results primarily in the fourth quarter. On Slide 24, we show 86% of our lots controlled via option up from 44% in fiscal 2015, reflecting our strategic focus on land light. Looking at Slide 25. we remain strong compared to our peers in controlling land through options. In fact, we have the fourth highest percentage of option lots, placing us well above the industry median of 57%. On Slide 26, we have the second highest inventory turnover rate among our peers. This is an important part of our strategy because it means we sell and replace our inventory more quickly than most competitors, demonstrating a more efficient use of our capital. This reflects many other factors in addition to land light. We see more opportunities to use land options as well as reduced lot purchase to construction start and construction start to completion cycle times, which would further help us improve our inventory turnover. On Slide 27, we show that compared to our midsize peers, we have the second highest adjusted EBIT return on investment at 17.2%. On Slide 28, we show our price to book value compared to our peers. We are trading slightly above book value and right at the median for all the peers shown on this slide. Given our high return on investment, combined with our rapidly improving balance sheet, we believe our stock continues to be undervalued. I'll now turn it back to Ara for some brief closing comments. Ara Hovnanian: Thanks, Brad. Despite a challenging housing environment, marked by affordability pressures and continued economic uncertainty, we delivered a first quarter that met or exceeded our guidance. While profitability declined year-over-year primarily due to higher incentives to support our sales in a very tough market, our focus on steady sales pace and efficient inventory turnover is paying off. We continue to prioritize sales pace over price, utilizing mortgage rate buydowns and other incentives to help drive demand and help more buyers overcome affordability challenges. Although, our recently -- our recent to-be-built contracts are yielding higher margins and they've begun to increase as a percentage of our total sales. On the topic of affordability, we appreciate any support from the federal government that could make homes more affordable and encourage more buyers to enter the market. Our strategy, while pressuring near-term margins enables us to clear older lower margin loss and position us for improved profitability as newer margin -- newer communities come online, communities that were already underwritten with today's higher incentive environment in mind. As we look ahead, we expect adjusted pretax income to improve in the latter half of '26 supported by stronger contract activity in the early months of the year, more higher-margin to-be-built homes and the anticipated contribution from our newer communities. While second quarter profits may be muted, we remain confident in our trajectory. We believe the delivery of higher-margin homes will bolster results as we transition to the back half of the year and grow our home deliveries and revenues. Operationally, we've made significant progress in aligning our inventory with current demand. The number of quick move in homes per community has declined for 4 straight quarters demonstrating our ability and agility and strong execution. Our backlog conversion ratio hit 88%, well above historical averages for the first quarter and we remain confident in our ability to meet homebuyer demand going forward. We feel like we're making great progress in burning through some of our lower-margin land and older QMIs, setting us up for a solid future. On the land side, we exercised discipline by walking away from less attractive properties, primarily during the entitlement process and reducing our lot count by 18% year-over-year. We continue to secure new opportunities that meet our margin and return targets. Our land light strategy with 86% of our lots controlled via options combined with one of the highest inventory turnover rates in the industry ensures that we remain nimble and capital efficient. We remain confident that we have sufficient land control to produce solid growth as the housing market returns to normal. Financially, our balance sheet and liquidity are strong, we ended the quarter with $471 million in liquidity, increased equity and further reduced net debt. With a net debt-to-capital ratio that has improved dramatically over the past few years, we're well positioned for long-term growth. Our recent refinancing moves have enhanced our flexibility and lowered our risk profile. Looking ahead, we expect that gross margins in the second half of '26 will gradually improve as we transition to newer, higher-margin communities. Our guidance for the second quarter assumes a steady market and continued focus on sales pace with prudent expense management and ongoing investment in process and technology improvements. Finally, as we've seen in the past, we expect significant volume in the latter half of the year. In summary, we're navigating a tough market with discipline and agility and a strategic focus on sales pace, inventory efficiency and land-light operations that should deliver tangible results. We remain committed to sustainable growth and value for our shareholders as the market conditions evolve. That concludes our formal comments, and I'll be happy to turn it over to any questions. Operator: [Operator Instructions] Our first question is going to come from Alex Barron with Housing Research Center. Alex Barrón: Yes, I guess on the topic of incentives and their pressure on margins. I'm kind of wondering if you guys feel there's going to be an opportunity this year to -- or is it worth the trade-off to maybe offer less incentives and maybe get slightly high -- lower sales pace but higher margins. How are you guys thinking or navigating through that right now? Ara Hovnanian: Well, Alex, that's a good question, and it's certainly one that all homebuilders are looking at. Some of our peers have clearly made the decision to offer less incentives, seek higher gross margins even with the slower volume that it usually translates to. In our case, we'd rather focus on pace versus price, so we'll keep up the incentives. We really want to burn through some of our lower-margin land. And you can't do that if you're trying to squeeze every last dollar of profit. The market has shifted since we contracted for some of the land parcels years ago. So we just want to burn through those, clear our balance sheet as we've been doing drive liquidity. We're at the second highest we've been in many, many years, most of it just sitting in cash and prepare ourselves for the land opportunities that are clearly showing up now as land sellers are becoming a little more realistic given the incentives that most are offering. Alex Barrón: Got it. And in terms of your percentage of specs QMI versus built-to-order, I know in the last few years, you guys have shifted more towards specs. What percentage are you doing of each? And are you thinking of doing something more balanced? Ara Hovnanian: Well, as we mentioned in the call, QMI sales actually dropped from 79% to 71% and that wasn't actually part of a conscious strategy to do that. It just so happens that some of our offerings really drove -- we often offer both QMIs and to-be-built, and it just so happens that the demand for to-be-built in our markets has been growing recently, again, not through a specific strategy, but it's just the markets of the reality. And the good news is they have significantly higher profit margins and less incentives. Customers that want what they want are willing to pay for what they want. So that's been a beneficial trend. Operator: [Operator Instructions] I am showing no further questions at this time. I would now like to turn the call back to Ara for closing remarks. Ara Hovnanian: Thanks so much. We're satisfied with our results exceeding. Meeting and exceeding our guidance is not easy in this environment. So we look forward to giving better results yet in the following quarters in the remainder of the year. Thank you so much. Operator: This concludes our conference call for today. Thank you all for participating, and have a nice day. All parties may now disconnect.
Operator: Good day, and welcome to the New Mountain Finance Corporation Fourth Quarter 2025 Earnings Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. John Kline. Please go ahead. John Kline: Thank you, and good morning, everyone. Welcome to New Mountain Finance Corporation's Fourth Quarter 2025 Earnings Call. On the line here with me today are Steve Klinsky, Chairman of NMFC and CEO of New Mountain Capital; Laura Holson, COO of NMFC; and Kris Corbett, CFO and Treasurer of NMFC. Steve is going to make some introductory remarks, but before he does, I'd like to ask Kris to make some important statements regarding today's call. Kris Corbett: Thanks, John. Good morning, everyone. Before we get into the presentation, I would like to advise everyone that today's call and webcast are being recorded. Please note that they are the property of New Mountain Finance Corporation and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available on our February 24 earnings press release. I would also like to call your attention to the customary safe harbor disclosure in our press release on Pages 2 and 3 of the slide presentation regarding forward-looking statements. Today's conference call and webcast may include forward-looking statements and projections, and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from those statements and projections. We do not undertake to update our forward-looking statements or projections unless required to by law. To obtain copies of our latest SEC filings and to access the slide presentation that we will be referring to throughout this call, please visit our website at www.newmountainfinance.com. At this time, I'd like to turn the call over to Steve Klinsky, NMFC's Chairman, who will give some highlights beginning on Page 7 of the slide presentation. Steve? Steven Klinsky: Thanks, Kris. It's great to be able to address you all today, both as NMFC's Chairman and as a major fellow shareholder. My belief is that NMFC is in a good position overall relative to general market conditions and particularly relative to where our stock trades today. Adjusted net investment income for the fourth quarter was $0.32 per share covering our $0.32 per share dividend that was paid in cash on December 31. Our net investment income and dividend were supported by consistent recurring income from our loan portfolio, full utilization of the dividend protection program, which reduces our performance fee to 15% until the end of 2026, plus an additional and voluntary fee waiver by the manager of $2.4 million. Looking forward to Q1, we would like to announce a $0.32 dividend payable on March 31 to shareholders of record as of March 17. Again, we as managers will reduce the performance fee to 15% pursuant to our pledge under the dividend protection program. We have also volunteered to make an additional optional waiver in order to fully cover this dividend. Our December 31, 2025, net asset value declined to $11.52 per share compared to $12.06 per share, chiefly due to a lower valuation on the common equity piece of Edmentum. For broader perspective, Edmentum is actually a company that has grown well under NMFC's leadership participation. We inherited the keys to Edmentum when the company defaulted in 2015. We and other partners subsequently improved the business over the course of the next 5 years and then sold a majority stake to another sponsor and monetized a significant portion of our stake. We retained approximately a 10% common equity ownership stake after the sale, which reached a peak in value during the COVID years when Edmentum's virtual learning solutions were most in demand and which has since given back its value as earnings normalize post COVID and as noncash pay interest and dividends have accrued ahead of our common equity. Altogether, NMFC historically invested $29 million into Edmentum's first lien, which was fully repaid at par with interest. NMFC has also invested $174 million into Edmentum related to our initial second lien investment from inception to date. We've realized back $166 million of cash proceeds to date against that $174 million comprised of $131 million of principal repayments and $36 million of interest and fees collected for nearly a onetime cash recovery. We've now reduced the valuation of the equity piece to just $5 million, but we also still hold $27 million in subordinated notes and $9 million of the most senior preferred equity tranche, which are valued at par. So while the Edmentum position is down from last quarter, we do believe that business building has made the position more valuable than it might have been when it was one of our few defaults. Our goal is to help build back enterprise value and potential equity from here. More generally, approximately 95% of NMFC's loan portfolio is ranked green on our heat map, approximately 5% is yellow or orange, and no names are ranked red. Approximately $17 million of positions improved in rating last quarter and no positions worsened. New Mountain Capital itself as a firm has grown from 0 in assets under management in 2000 to approximately $60 billion today with a team of 300 people. Our private equity portfolio companies have produced over $100 billion of enterprise value gains for all shareholders while we have owned them while minimizing losses. More than ever, we see opportunities to use our expertise as owners and builders of businesses to select great credit investments. Regarding the market's particular issues around software loans, I would make these personal observations. My career began in 1981 when the 10-year treasury rate was at a record high of 15.84%. And I have lived through multiple technology shifts including the introduction of personal computers, the Internet, the cloud and now AI. As a private equity firm, New Mountain has successfully owned, managed and built a number of software companies as a control shareholder. We have experienced successfully adding AI and machine learning to the product offerings of the businesses we own. For many years, New Mountain private equity has been generally cautious in acquiring software companies because of the risk of enterprise value multiple compression from the roughly 20x EBITDA type averages to something lower as may, in fact, be occurring now. However, this is exactly why we have liked software loans where we can be under 40% of loan to value and some great performing names and therefore, sheltered for multiple compression. Also, all software companies and loans are not the same. The best software companies have thousands of repeat customers in place and therefore, may be in the best position to add AI agents and upgrades for their client base as these innovations come just as we added AI to certain of New Mountain's owned businesses. These companies often also provide services or data far beyond pure software code in a way that AI simply cannot duplicate. We believe NMFC software loan portfolio fits this general description for high quality overall. So looking forward, what guidance can we give about NMFC's long-term performance? As a major shareholder myself, I believe there are a number of positive factors that justify NMFC shares trading back towards book value, and significantly higher than the roughly $8 or so level where they trade today. First, as promised, we will continue to utilize the full dividend protection program, where we have pledged to reduce our incentive fee from 20% to 15% to the end of 2026. Further, we are now announcing that after the dividend protection period ends, we intend to voluntarily and permanently reduce our incentive fee to the same 15% level from its long-standing 20% level to show alignment with our shareholders. Second, we have now signed an agreement to sell approximately $477 million of many of our hardest to value assets at a price meaningfully above where our stock trades. This sale is scheduled to close in March and will include a sizable piece of our Benevis term loan, several PIK and subordinated positions and some of our other most concentrated and illiquid assets, all at a price of 94% of our 12/31/25 marks, which we believe is essentially par less a normal transaction discount for a large concentrated block of this sale. The 6% discount on this sale will initially take our book value down by another approximately $0.35 to $11.17 per share, but with a more diversified and improved asset mix going forward. And again, at a level that is very meaningfully above where the stock market values us. At the 15% performance fee rate, the long-term sustainable dividend rate for NMFC is now expected to be roughly $0.25 per share per quarter beginning in Q2 2026, due to continued base rate compression, lower market spreads and a reduction in some of our higher earning PIK securities. This assumes around $0.27 per share of quarterly net investment income, which will allow us to perhaps over-earn our dividend and build book value. A $1 per year dividend equates to a 9% yield on our pro forma book value and a 12% yield on our current share price. There are then potential paths to try to improve earnings and book value from there. The company will have more cash available for accretive stock buybacks. There is the chance for equity appreciation at companies like UniTek that are now projected by company management to be growing at a good rate. We also see opportunities to lend at slightly higher spreads and in some cases, to purchase specifically well-chosen loans at attractive discounts given this more uncertain environment in the debt markets. I and my fellow NMC executives remain the largest shareholders of NMFC stock and our ownership position has been increasing over time. NMFC itself repurchased approximately $52 million of shares in 2025, approximately $15 million worth of shares thus far in 2026, and we have board authorization in place to buy approximately $80 million more. We thank you, as always, for your ownership and partnership, and we are working diligently to serve your interest in the months and years ahead. With that, let me turn the call over to John for more details and comments. John Kline: Thank you, Steve. I would like to begin by offering more details on the $477 million asset sale, which we believe meaningfully diversifies our portfolio, reduces PIK income and enhances NMFC's financial flexibility. Starting on Page 9, you'll find a pie chart with the positions that we sold to a newly formed vehicle backed by Coller Capital. The portfolio is comprised of many of our largest positions, including Benevis, Dealer Tire, Alliance Animal Health and iCIMS. Overall, we sold 15 positions in the sale and reduced exposure to 7 of our 10 largest names. Subordinated positions represented nearly 25% of the value of the secondary portfolio. 37% of these assets generate PIK income, including Benevis and Dealer Tire. 60% of the loans were originated in 2021 or earlier, and 33% of the portfolio are software-related companies. It's important to note that we believe these names are high-quality loans, but in nearly all cases, they had characteristics that were scrutinized by the market for reasons such as PIK interest, seniority, industry type or concentration. Page 10 provides an overall update on the progress we have made on our strategic initiatives. Pro forma for the sale, our top 5 positions are now just 14% of NMFC's portfolio value. We expect this percentage to decrease as we redeploy proceeds from the sale primarily in first lien assets. Our senior oriented assets will now represent 81% of NMFC's portfolio up from 75% in the prior year. Our post-sale leverage will decrease to 0.9x from 1.21x at the end of Q4. And during the quarter, we repaid our higher-cost convertible notes with proceeds from lower-cost credit lines. Overall, PIK income is expected to decrease by 20% to 25% as we redeploy the cash proceeds. It's worth noting that approximately 41% of our pro forma PIK income will be generated by Benevis and UniTek, which are performing very well. Benevis is in the midst of an impressive turnaround and UniTek can be an AI winner with good execution in 2026 and '27. Both are companies where New Mountain has control or co-control with another investor. Finally, as we consider our non-yielding positions, we see opportunities to monetize 1 or 2 other equity positions in coming quarters. On Page 11, we show a pie chart of our industry exposure to our defensive growth-oriented sectors. We provide industry-specific classifications, including some new classifications so that our stakeholders have a clear understanding of our end markets, which we believe is particularly important in today's environment where there is heightened scrutiny on certain sectors. We want to continue to be a leader in providing investors with transparency on our investment exposures. As always, these sectors are areas of the economy where New Mountain private equity owns businesses and has differentiated insights and resources. As we consider industry exposure, the impact of AI has been a major topic of conversation in the investing community, particularly as it relates to the software end market. On Page 12, we offer more details on our approach to AI at New Mountain. First and foremost, we acknowledge that there is an increased level of risk across various sectors related to AI, but there will also be great opportunities for well-informed lenders. We have consistently highlighted that the pace of technological change is one of our biggest focus areas as it relates to underwriting credit, constructing our portfolio and controlling risk. Our specific focus on AI is not new. In fact, we have had a firm-wide task force consisting of many of our both tech forward leaders and executive partners in place since the early days of ChatGPT. Within the credit business, we have a standardized system for evaluating new investments and existing portfolio companies for AI-driven disruption. And as Steve highlighted, as a firm, we have 20-plus years of industry experience managing and owning software businesses. When we consider the capital structures of software loans within NMFC, it's important to remember that these positions have significantly higher sponsor equity contributions and lower loan to values than both our non-software loans and the marketplace in general. If we apply a 25% discount to the enterprise value of every software loan in our portfolio, the capital structures remain in line with the rest of the portfolio and the market in general. As it relates to the underlying characteristics of our software portfolio companies, we believe that most of our investments sell sticky solutions at a fair price to a large and diversified set of customers. Additionally, many of our portfolio companies offer compelling expertise in specific industry verticals and hold valuable proprietary data that serves underlying customers or have material network effects. In some cases, shorter maturities can be a catalyst for near-term takeouts on certain of our performing positions. As shown on Page 13, the internal risk ratings remain consistent with approximately 95% of the portfolio green rated. We had 2 investments migrate positively on our rating scale due to improved capital structure and outlook. Importantly, there are no names in the portfolio rated in the red category, and our most challenged names, marked orange represent only 3.2% of NMFC's fair value, making them a small portion of the portfolio. Turning to Page 14. We provide a graphical analysis of NAV changes during the quarter, resulting in a book value of $11.52, a $0.54 decline compared to last quarter. The main drivers of the decline this quarter were Edmentum and Affordable Care, partially offset by a handful of unrealized gains and accretive share repurchases. Biggest mover representing 2/3 of the Q4 book value decline was in Edmentum, which was covered by Steve earlier in the call. While we have reduced the value of the common equity meaningfully, we are maintaining consistent valuations on the subordinated debt and preferred equity, which are meaningfully more senior in the capital structure. The other material valuation change representing approximately 20% of the Q4 decline was Affordable Care, a specialty dental practice management business that has been orange on our heat map for a while. Due to the continuing operating underperformance, combined with a highly leveraged capital structure, we expect this business to restructure in the near term. While performance has been challenged, we are hopeful that a debt for equity swap could be a catalyst for improved overall prospects. Page 15 addresses NMFC's non-accrual performance. During the quarter, we completed the restructuring of Beauty Industries, reinstating a portion of the debt on full accrual and equitizing the rest providing us with a significant ownership stake and an opportunity to achieve upside over time. Offsetting this, we moved our preferred equity investment in Affordable Care and our first lien debt position in DCA to nonaccrual status. We expect DCA to be back on accrual in Q2. Overall, non-accruals continue to be very low, comprising just 1.4% of the portfolio at fair value. On the right side of the page, we show our cumulative credit performance since IPO. During that time, NMFC has made nearly $10.4 billion of investments while realizing losses, net of realized gains of $24 million. On Page 16, we present NMFC's consistent returns over the last 15 years. Cumulatively, NMFC has earned $1.5 billion in net investment income while generating $24 million of cumulative net realized losses and $211 million of cumulative net unrealized depreciation, resulting in approximately $1.3 billion of value created for shareholders. While the realized loss rate remains very strong, we, as a management team, are focused on reversing the unrealized depreciation within the existing portfolio. I will now turn the call over to our Chief Operating Officer, Laura Holson, to discuss the current market environment and provide more details on NMFC's quarterly performance. Laura Holson: Thanks, John. As previewed on last quarter's call, we saw a flurry of deal activity at the end of 2025. The backlog of potential private equity exits remains full and there is ongoing pressure to deploy private equity dry powder. That said, the recent AI-induced market volatility will likely impact M&A activity for the foreseeable future. We continue to believe direct lending remains an attractive asset class in today's market and provides good risk-adjusted returns and enhanced yield relative to other asset classes. We also think the value proposition of direct lending, particularly resonates with sponsors during periods of volatility. Direct lending spreads were reasonably stable in 2025, albeit at the tighter end of spreads over the course of unitranche history. We are starting to see signs of some spread widening as well as an increase in pricing dispersion. We are excited about the prospect of having some dry powder from the portfolio sale to deploy into these conditions. However, our underwriting bar remains higher than ever, and our pass rate on deals has increased. The more challenging environment underscores the importance of our differentiated underwriting strategy, which allows us to go deeper on diligence and identify the most compelling credit opportunities. Page 18 presents an interest rate analysis that provides insight into the effect of base rates on NMFC's earnings. As of 12/31, the NMFC loan portfolio was 85% floating rate and 15% fixed rate, while our liabilities were 65% floating rate and 35% fixed rate. Pro forma for the anticipated refinancing activity in 2026, we expect our mix will shift meaningfully to approximately 79% floating and 21% fixed. This will more closely align us with our target of matching our percent of liabilities that float with the percent of our assets that float. As shown in the bottom table, while we would expect to see earnings pressure in the scenarios where base rates decrease, the ongoing evolution of our liability structure helps to alleviate some of that pressure. Moving on to Page 19, despite the active Q4 across New Mountain's credit platform overall, NMFC saw modest originations in the fourth quarter. As previewed on our last call, we remain reasonably fully invested and therefore, originated just $30 million of assets during the quarter, which was offset by $195 million of repayments and sales. Repayment velocity remains strong, and we have line of sight into some additional expected repayments in the coming quarters. As mentioned earlier, the portfolio sale provides meaningful capacity for us to deploy in the coming quarters. Turning to Page 20. Pro forma for the portfolio sale approximately 81% of our investments, inclusive of first lien, SLPs and net lease or senior in nature, up from 75% in the prior year period. The secondary sale provides meaningful capacity for deployment, which we anticipate investing primarily in first lien assets. Approximately 4% of the portfolio is comprised of our equity positions, the largest of which are shown on the right side of the page. We continue to dedicate meaningful time and resources to business building at these companies, as Steve discussed earlier. Finally, as illustrated on Page 21, pro forma for the portfolio sale with a meaningfully more diversified portfolio across 113 companies. Excluding our investments in the SLPs and net lease funds, the top 10 single name issuers account for just 22.8% of total fair value, down from 25.6% last quarter. As we redeploy the secondary sale proceeds, we anticipate the diversification of the portfolio to improve further. I will now turn the call over to our Chief Financial Officer, Kris Corbett, to discuss our financial results. Kris Corbett: Thank you, Laura. For more details, please refer to our quarterly report on Form 10-K that was filed yesterday with the SEC. As shown on Slide 22, the portfolio had $2.8 billion of investments at fair value on December 31 and total assets of $2.9 billion. Total liabilities were $1.7 billion, of which total statutory debt outstanding was $1.5 billion. Net asset value of $1.2 billion or $11.52 per share was down 4.5% compared to prior quarter. At quarter end, our net debt-to-equity ratio was 1.21:1 and pro forma for the secondary sale, our net debt-to-equity ratio decreases to approximately 0.9x. On Slide 23, we show our quarterly income statement results. For the current quarter, we earned total investment income of $77 million, a 4% decrease compared to prior quarter. Total net expenses of $44 million, decreased 5% versus prior quarter, inclusive of the fee waiver previously mentioned. Our adjusted net investment income for the quarter was $0.32 per weighted average share, which covered our Q4 dividend. Our earnings were driven by our strong core income and effective incentive fee rate of 8.4% and the share repurchase program. Slide 24 highlights that 97% of our total investment income is recurring in the fourth quarter. On the following page, you can see that 77% of our investment income was paid in cash and 15% was PIK income from positions that included PIK from inception to best enable these borrowers to execute on their strategic growth plans. Only 4% of investment income is driven by modified PIK from an amendment or restructuring. Importantly, investments generating noncash income during the fourth quarter are marked at a weighted average fair market value of approximately 98% of par and approximately 94% of this income is generated from our green rated names. In addition, 2025 year-to-date, we collected approximately $35 million of previously accrued PIK income in cash. Turning to Slide 26. The red line shows the coverage of our dividend. For Q1 2026, our Board of Directors has again declared a dividend of $0.32 per share. On Slide 27, we highlight our various financing sources and diversified leverage profile. As John noted, during the quarter, we repaid the 7.5% convertible notes. And subsequent to year-end, we also repaid the 2021 unsecured bond using our lower-cost revolver and holdings credit facilities. Taking into account, SBA guaranteed debentures, we have $2.3 billion of total borrowing capacity with approximately $650 million available on our revolving lines subject to borrowing base limitations as of January 30. This more than covers our unfunded commitments of $210 million as well as our near-term bond maturity. Finally, on Slide 28, we show our leverage maturity schedule. We continue to ladder our maturities and has sufficient liquidity to manage upcoming maturities. Notably, 65% of our debt matures in or after 2028. We remain focused on continuing to access the unsecured market. With that, I would like to turn the call back over to John. John Kline: Thank you, Kris. In closing, we would like to thank all of our stakeholders for the ongoing partnership and look forward to speaking to you again on our first quarter 2026 earnings call in May. I will now turn things back to the operator to begin Q&A. Operator? Operator: [Operator Instructions] And the first question will come from Finian O'Shea with Wells Fargo. Finian O'Shea: Just to start with a couple on the portfolio sale. One is the 94% discount inclusive of an advisory fee or might that be an extra sort of income statement hit next quarter. And then from the sound of it, it sounds like mostly redeployment, maybe buyback less so than delevering, if I heard that right? Or will there be any updated leverage posture? John Kline: Thanks for the question. The 94% of par was the purchase price of the assets. There will be fees and expenses associated with that transaction. And those are expected to be about $7 million. On the overall posture around the leverage target that we have, we're maintaining our target between 1 and 1.25. The sale puts us under our stated leverage target. And going forward, we expect to operate within the target that we've always operated within. What we're excited about is that we have the opportunity to deploy the proceeds of the sale into what we think will be a better market to invest in credit and direct lending. And we also have the opportunity to buy back stock to the extent we feel the stock is cheap. And I think we've made statements that we do feel like the stock is undervalued. So we want to -- our strategy remains unchanged, and we plan to deploy the proceeds of the sale in different ways that serve our shareholders. Finian O'Shea: Okay. That's helpful. And just a follow-up. Looking at the portfolio, there's a couple of names that most of us are probably happy to see go. Benevis, that was a big restructuring. It has overall deeper vintage, so more good than bad. But it wasn't, say, totally the group of names that were more likely really holding you down on a stock price perspective. So I guess sort of question is, did you try to sell any of the more struggling depressed, so forth assets? Or was this more of a, hey, let's move the clean, easy to explain kind of stuff? John Kline: Sure. Thanks for that. I mean, overall, we like our portfolio. We think we have a lot of good assets. Steve talked about some assets that -- where we have hopes for equity gains in the future. I spoke about the same thing. So our portfolio is roughly 95% green. So we like our portfolio. We don't think there are a lot of terrible assets we're looking to unload on someone. That's not the mindset we have. The mindset around this transaction, and we previewed this for many, many quarters is that we feel, if we're self-critical, we feel like we have a little bit too much concentration in this, in NMFC. Our biggest positions are way too big. They're bigger than we want them to be. And we have PIK income that is higher than what our targets are. So we just felt like the sale overnight enables us to deliver on our strategic initiatives very quickly. And I think in some ways, Benevis has been a position that's probably been scrutinized by a lot of investors because it is a restructuring. It's gotten very big. In a lot of ways, I think this is extremely validating of the value and the progress we've made on Benevis. So we're quite pleased with that. And it's important to note that we retain all the upside and Benevis to the extent we can continue to steer that company in what we think is a good direction. So it's really driven by the fact that we can reduce our PIK. We can reduce subordinated positions. We talked about how we did that. And there is some earlier vintage assets, which isn't necessarily a bad thing. But again, I think it's very much scrutinized by the market. So that's the way we think about the sale. I think it's worth noting as well that in an environment where software is heavily scrutinized, we did sell a bunch of software loans. Now we think they're good software loans. But the margin, I'm sure there are some investors that feel better about the fact that we're slightly lower in our software exposure. So that's just an additional point I want to make to you. Operator: [Operator Instructions] Our next question will come from Ethan Kaye with Lucid Capital Markets. Ethan Kaye: Congrats on the asset sales. Just a couple of questions on, I guess, specifics. Curious whether I guess, specific to the process here, curious whether there were multiple bidders here? Was it kind of an auction-type process? How are the assets selected and priced? Any kind of information you can give on kind of that process would be helpful. John Kline: Sure. It was a competitive process that was led by a bank that we hired, Evercore. And we went out to a number of bidders, and we did get multiple bids. This -- the overall bid from Coller was the most attractive overall solution for us. And we feel good about the completion of that sale. As it relates to the way we selected assets, it really ties back to the comments that I just made to Fin, which is we really wanted to reduce PIK income and we wanted to get a lot more diversified amongst our top positions. So if you look at a lot of the biggest, most important names that we sold in the sale, they were our largest positions and we thought it was particularly important to get Benevis, which is on an improving track down from over 5% of the portfolio to -- in the 3s. We thought that was very important. Just from a portfolio management perspective. So that was the thinking around how we pick the names. It was really our over concentrated names with high PIK and in some cases, subordinated names. Ethan Kaye: Got it. Okay. So it was more of a -- you selected the assets and shopped them as opposed to more of a, I guess, bilateral type process. John Kline: Yes, that's a good point. I mean, it wasn't -- it was very much driven by our goals and desires, which we've talked about very openly. So that's a great point. I'm happy you helped us clarify that is that we really chose the assets that we felt were the most concentrated or in some cases, had the PIK characteristics. It wasn't that people were reverse inquiring to us on the assets that they wanted to buy. The other final thing I'd say, I think this was talked about in our comments is some of these assets are just I think in the eyes of our shareholders, tougher to value, tougher to have transparency into. And so again, we feel like on some of these tougher to value assets or -- I don't want to say opaque, but these assets that are a little bit less obvious and in some cases, in assets that have had a material turnaround, we thought it was incredibly validating to have a third party come in and price those assets at a price that is very supportive of our marks. Ethan Kaye: Yes. That actually is a good kind of segue into kind of my next question. I wanted to get some thoughts on like how you interpret the pricing of these assets relative to the internal marks? Obviously, on one hand, the assets are being sold at a slight discount. On the other hand, as you mentioned, there are some characteristics to these assets like PIK and software that we know investors are going to discount and extensively, there's some sort of deal discount that is kind of regular way here. But -- can you just kind of help us think about how you see the 94% kind of valuation here? John Kline: Look, we think it was a fair deal for both sides. The buyer got some great assets at a slight discount, and that's very commercially normal in this market. And we feel like we were able to, as I said, validate our remarks and reduce concentration and improve the overall portfolio composition of our vehicle, of our company. And we're doing it. And again, Steve made this point, we're doing it in an environment where our stock price trades at, I don't know, under 70% of book or so. And so we just feel like this was the right move given the implicit scrutiny on NMFC. Okay. It looks like there are no more questions in the queue. We'll conclude today's call. Thank you for everyone's participation, and we look forward to speaking to you again very soon. Operator: Goodbye.